Document:

EXHIBIT
10.46

      
 

      SECURITIES PURCHASE AGREEMENT

       

      THIS
SECURITIES PURCHASE AGREEMENT (“Agreement”) is made as of the 13th day of May,
2009 by and among Medgenics, Inc. a Delaware corporation (the “Company”), and
the Investors set forth on the signature pages affixed hereto (each an
“Investor” and collectively the “Investors”).

       

      Recitals

      

      A.            
The Company and the Investors are executing and delivering this Agreement in
reliance upon the exemption from securities registration afforded by the
provisions of Regulation D (“Regulation D”), as promulgated by the U.S.
Securities and Exchange Commission (the “SEC”) under the Securities Act of 1933,
as amended; and

      

      B.            
The Investors wish to purchase from the Company, and the Company wishes to sell
and issue to the Investors, upon the terms and conditions stated in this
Agreement, (i) up to $5,000,000 of convertible debentures (the “Debentures”) in
the form attached as Annex A to the PPM (as hereinafter defined),
convertible under certain circumstances into shares of the Company’s Common
Stock, par value $0.0001 per share (together with any securities into which such
shares may be reclassified the “Common Stock”), such maximum amount may be
increased up to $7,000,000 by the mutual agreement of the Company and the
Placement Agent (as hereinafter defined) and (ii) warrants (the “Warrants”) to
purchase additional shares of Common Stock (subject to adjustment) at an
exercise price equal to 110% of the Qualified Transaction Price (as hereinafter
defined) in the form attached as Annex C to the PPM; and

       

      C.            
Contemporaneous with the sale of the Debentures and Warrants, the parties hereto
will execute and deliver a Registration Rights Agreement (the “Registration
Rights Agreement”) in the form attached as Annex D to the PPM, pursuant to which the
Company will agree to provide certain registration rights under the Securities
Act of 1933, as amended, and the rules and regulations promulgated thereunder,
and applicable state securities laws.

       

      D.            
The Company has engaged Newbridge Securities Corporation as its non-exclusive
placement agent (the “Placement Agent”) for the offering of the Debentures and
the Warrants on a “best efforts” basis.

       

      In
consideration of the mutual promises made herein and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:

       

      1.           
Definitions.    In addition to those terms
defined above and elsewhere in this Agreement, for the purposes of this
Agreement, the following terms shall have the meanings set forth
below:

      
        
           

        

        
          
          

          
            

          

        

        
           

        

      

       

      “Affiliate”
means, with respect to any Person, any other Person which directly or indirectly
through one or more intermediaries Controls, is controlled by, or is under
common control with, such Person.

       

      “AIM
Filings” means the regulatory and other filings made by the
Company with AIM pursuant to the AIM Rules.

       

      “AIM
Rules” means the AIM Rules for Companies, governing admission to
and the operation of AIM, as published by the London Stock Exchange
plc.

       

      “Business
Day” means a day, other than a Saturday or Sunday, on which banks
in both New York City and Israel are open for the general transaction of
business.

       

      “Company’s
Knowledge” means the actual knowledge of the executive officers
(as defined in Rule 405 under the 1933 Act) of the Company after due
inquiry.

       

      “Confidential
Information” means trade secrets, confidential information and
know-how (including but not limited to ideas, formulae, compositions, processes,
procedures and techniques, research and development information, computer
program code, works of authorship, performance specifications, support
documentation, drawings, technical data, specifications, designs, business and
marketing plans, and customer and supplier lists and related
information).

       

      “Control”
(including the terms “controlling”, “controlled by” or “under common control
with”) means the possession, direct or indirect, of the power to direct or cause
the direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract or
otherwise.

       

      “Debenture
Shares” means the shares of Common Stock issuable upon conversion
of the Debentures.

       

      “Intellectual
Property” means all of the following: (i) patents, patent
applications, patent disclosures and inventions (whether or not patentable and
whether or not reduced to practice); (ii) trademarks, service marks, trade
dress, trade names, corporate names, logos, slogans and Internet domain
names, together with all goodwill associated with each of the foregoing;
(iii) copyrights and copyrightable works; (iv) registrations, applications and
renewals for any of the foregoing; and (v) proprietary computer software
(including but not limited to data, data bases and
documentation).

       

      “Material
Adverse Effect” means a material adverse effect on (i) the assets,
liabilities, results of operations, condition (financial or otherwise),
business, or prospects of the Company and its Subsidiaries taken as a whole, or
(ii) the ability of the Company to perform its obligations under the Transaction
Documents.

       

      “Person”
means an individual, corporation, partnership, limited liability company, trust,
business trust, association, joint stock company, joint venture, sole
proprietorship, unincorporated organization, governmental authority or any other
form of entity not specifically listed herein.

      
        
           

        

        
          -2-

          
            

          

        

        
           

        

      

       

      “PPM”
means the confidential private placement memorandum dated May 13, 2009,
including the exhibits thereto, delivered to Investors in connection with the
offering of the Debentures, as the same may be supplemented or
amended.

       

      “Press
Releases” means the press releases released by the Company through
a regulatory information service approved by London Stock Exchange plc for the
distribution to the public of announcements by companies admitted to
AIM.

       

      “Proposals”
has the meaning set forth in Section 7.9.

       

      “Purchase
Price” means the original principal amount of Debentures being
purchased hereunder.

       

      “Qualified
Acquisition” has the meaning set forth in Section
7.6.

       

      “Qualified
Merger” has the meaning
set forth in Section 7.6.

       

      “Qualified
Transaction” has the meaning set forth in Section
7.6.

       

      “Qualified
Transaction Price” shall mean the per share price paid in the
Qualified Transaction (or per share value of merger consideration in a Qualified
Merger).

       

      “Registration
Statement” has the meaning set forth in the Registration Rights
Agreement.

       

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

       

      “Subsidiary”
of any Person means another Person, an amount of the voting securities, other
voting ownership or voting partnership interests of which is sufficient to elect
at least a majority of its Board of Directors or other governing body (or, if
there are no such voting interests, 50% or more of the equity interests of
which) is owned directly or indirectly by such first
Person.

       

      “Transaction
Documents” means this Agreement, the Debentures, the Warrants and
the Registration Rights Agreement.

       

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

       

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

      
        
           

        

        
          -3-

          
            

          

        

        
           

        

      

       

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

      

      2.            
Purchase and Sale of
the Debentures and Warrants. Subject to the terms and conditions of this
Agreement, on the applicable Closing Date, each of the Investors shall
severally, and not jointly, purchase, and the Company shall sell and issue to
the Investors, the Debentures in the respective amounts set forth opposite the
Investors’ names on the signature pages attached hereto in exchange for the
Purchase Price as specified in Section 3 below. Upon conversion of the
Debentures, each Investor shall also be entitled to receive, and the Company
shall issue to such Investor, Warrants to purchase a number of shares equal to
the product of (x) the number of Debenture Shares issued upon conversion of such
Investor’s Debenture, multiplied by (y) 0.35; subject to the following sentence.
In the event that the Qualified Transaction Price is less than $0.07, then the
number of shares for which the Warrants shall be exercisable as set forth in the
previous sentence shall be doubled.

      

      3.           
Closing.

      

       3.1            Upon
confirmation that the other conditions to closing specified herein have been
satisfied or duly waived by the Investors of the Company, as may be applicable,
the initial purchase and sale of the Debentures (the “First Closing”) shall take
place upon the receipt by the Company of at least $250,000 in Purchase Price.
Additional closings of purchases and sales of the Debentures shall take place,
as and when the Company and the Placement Agent may determine, upon receipt by
the Company of additional Purchase Price up to the maximum amount of the
offering; provided that the last Closing Date shall occur on or before July 15,
2009, or at such later date as the Company and the Placement Agent mutually
agree not to exceed September 15, 2009. Each of the First Closing and such
additional closings shall be sometimes be referred to as a “Closing” or
collectively as the “Closings”. The date on which a Closing occurs shall
sometimes be referred to as a “Closing Date”.

      

       3.2            All
payments of Purchase Price shall be held by U.S. Bank National Association, a
national banking association (“Escrow Agent”), in escrow pursuant an escrow
agreement of even date herewith between the Escrow Agent, the Placement Agent
and the Company (the “Escrow Agreement”), pending the applicable Closing. At
each applicable Closing, upon presentation of the required notices under the
Escrow Agreement, the Company shall arrange for overnight/courier delivery to
the Investors in such Closing, at the addresses set forth on the signature pages
to this Agreement, certificate representing the Debentures in applicable
original principal amount, registered in such name or names as the applicable
Investors may designate, upon release by the Escrow Agent to the Company of an
amount representing the original principal amount of the Debentures being
purchased by such Investors as set forth on the signature pages to this
Agreement. The Closings shall take place at the offices of Lowenstein Sandler
PC, 1251 Avenue of the Americas, 18th Floor, New York, New York 10020, or at
such other location and on such other date as the Company and the Investors
shall mutually agree.

       

      4.   
         Representations and
Warranties of the Company. The Company makes no other representations and
warranties to the Investors except as expressly set forth in this Section 4 and
the other Transaction Documents. The Company hereby represents and warrants to
the Investors and the Placement Agent that, except as set forth in the schedules
delivered herewith (collectively, the “Disclosure Schedules”):

       

      
        
          
          

        

        
          -4-

          
            

          

        

        
          
          

        

      

      

      4.1            Organization, Good Standing
and Qualification. Each of the Company and its Subsidiaries is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation and has all requisite corporate power
and authority to carry on its business as now conducted and to own its
properties. Each of the Company and its Subsidiaries is duly qualified to do
business as a foreign corporation and is in good standing in each jurisdiction
in which the conduct of its business or its ownership or leasing of property
makes such qualification or leasing necessary unless the failure to so qualify
has not had and could not reasonably be expected to have a Material Adverse
Effect. The Company’s Subsidiaries are listed on Schedule 4.1
hereto.

      

      4.2            Authorization. The
Company has full power and authority and, except for approval of the Proposals
by its stockholders as contemplated in Section 7.9, has taken all requisite
action on the part of the Company, its officers, directors and stockholders
necessary for (i) the authorization, execution and delivery of the Transaction
Documents, (ii) the authorization of the performance of all obligations of the
Company hereunder or thereunder, and (iii) the authorization, issuance (or
reservation for issuance) and delivery of the Securities. The Transaction
Documents constitute the legal, valid and binding obligations of the Company,
enforceable against the Company in accordance with their terms, subject to (i)
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability, relating to or affecting creditors’
rights generally; (ii) equitable limitations on the availability of specific
remedies; (iii) principles of equity (regardless of whether such enforcement is
considered in a proceeding in law or in equity); and (iv) to the extent rights
to indemnification and contribution may be limited by federal securities laws or
the public policy underlying such laws.

      

      4.3            Capitalization. Schedule 4.3 sets
forth as of the date hereof (a) the authorized capital stock of the Company; (b)
the number of shares of capital stock issued and outstanding; (c) the number of
shares of capital stock issuable pursuant to the Company’s stock plans; and (d)
the number of shares of capital stock issuable and reserved for issuance
pursuant to securities (other than the Debentures and the Warrants) exercisable
for, or convertible into or exchangeable for any shares of capital stock of the
Company. Except as described on Schedule 4.3, all of the issued and
outstanding shares of the Company’s capital stock have been duly authorized and
validly issued and are fully paid, nonassessable and, assuming approval of the
Proposals which will be obtained prior to any Closing, free of pre-emptive
rights and were issued in full compliance with applicable state and federal
securities law and any rights of third parties. Except as described on Schedule 4.3, all of the issued and outstanding shares of
capital stock of each Subsidiary have been duly authorized and validly issued
and are fully paid, nonassessable and free of pre-emptive rights, were issued in
full compliance with applicable state and federal securities law and any rights
of third parties and are owned by the Company, beneficially and of record,
subject to no lien, encumbrance or other adverse claim. Except as described on
Schedule 4.3, assuming approval of the Proposals which will
be obtained prior to any Closing, no Person is entitled to pre-emptive or
similar statutory or contractual rights with respect to any securities of the
Company. Except as described on Schedule 4.3, there
are no outstanding warrants, options, convertible securities or other rights,
agreements or arrangements of any character under which the Company or any of
its Subsidiaries is or may be obligated to issue any equity securities of any
kind and, except as contemplated by this Agreement, neither the Company nor any
of its Subsidiaries is currently in negotiations for the issuance of any equity
securities of any kind. Except as described on Schedule 4.3, and except for the Registration Rights
Agreement, there are no voting agreements, buy-sell agreements, option or right
of first purchase agreements or other agreements of any kind among the Company
and any of the securityholders of the Company relating to the securities of the
Company held by them. Except as described on Schedule 4.3 and
except as provided in the Registration Rights Agreement, no Person has the right
to require the Company to register any securities of the Company under the 1933
Act, whether on a demand basis or in connection with the registration of
securities of the Company for its own account or for the account of any other
Person.

      
        
           

        

        
          -5-

          
            

          

        

        
           

        

      

      

      Except as
described on Schedule
4.3, the issuance and sale of the
Securities hereunder will not obligate the Company to issue shares of Common
Stock or other securities to any other Person (other than the Investors) and
will not result in the adjustment of the exercise, conversion, exchange or reset
price of any outstanding security.

      

      Except as
provided in Article XI of the Company’s Amended and Restated Certificate of
Incorporation or as described on Schedule 4.3, the Company does not have outstanding
stockholder purchase rights or “poison pill” or any similar arrangement in
effect giving any Person the right to purchase any equity interest in the
Company upon the occurrence of certain events.

      

      4.4            Valid Issuance. The Debentures have been duly and validly
authorized and shall be free and clear of all encumbrances and restrictions
(other than those created by the Investors), except for restrictions on transfer
set forth in the Transaction Documents or imposed by applicable securities laws.
The Warrants have been duly and validly authorized. Upon the conversion of the
Debentures and the due exercise of the Warrants, the Debenture Shares or the
Warrant Shares, as the case may be, will be validly issued, fully paid and
non-assessable, free and clear of all encumbrances and restrictions, except for
restrictions on transfer set forth in the Transaction Documents or imposed by
applicable securities laws and except for those created by the Investors. The
Company has reserved a sufficient number of shares of Common Stock for issuance
upon the conversion of the Debentures and the exercise of the
Warrants.

      

      4.5            Consents. Except for approval of the Proposals by its
stockholders as contemplated in Section 7.9, the execution, delivery and
performance by the Company of the Transaction Documents and the offer, issuance
and sale of the Securities require no consent of, action by or in respect of, or
filing with, any Person, governmental body, agency, or official other than
filings that have been made pursuant to applicable state securities laws and
post-sale filings pursuant to applicable state and federal securities laws which
the Company undertakes to file within the applicable time periods. Subject to
the accuracy of the representations and warranties of each Investor set forth in
Section 5 hereof, the Company has taken all action necessary to exempt (i) the
issuance and sale of the Securities, (ii) the issuance of the Warrant Shares
upon due exercise of the Warrants, and (iii) the other transactions contemplated
by the Transaction Documents from the provisions of any stockholder rights plan
or other “poison pill” arrangement, any anti-takeover, business combination or
control share law or statute binding on the Company or to which the Company or
any of its assets and properties may be subject and any provision of the
Company’s Amended and Restated Certificate of Incorporation (other than Article
XI set forth therein) or Bylaws that is or could reasonably be expected to
become applicable to the Investors as a result of the transactions contemplated
hereby, including without limitation, the issuance of the Securities and the
ownership, disposition or voting of the Securities by the Investors or the
exercise of any right granted to the Investors pursuant to this Agreement or the
other Transaction Documents.

      
        
           

        

        
          -6-

          
            

          

        

        
           

        

      

      

      4.6            Delivery of AIM Filings;
Compliance with AIM Rules. The Company has made available to the
Investors, true and complete copies of the Company’s most recent public filings
required to be made by the Company pursuant to the AIM Rules. For so long as the
Common Stock has been admitted to trading on the AIM Market operated by London
Stock Exchange plc (“AIM”), the Company has complied in all material respects
with all relevant laws and resolutions including (i) the Companies Act 1985 (as
amended) and the Companies Act 2006, (ii) the AIM Rules, (iii) the Financial
Services and Markets Act 2000, (iv) the Code of Market Conduct published by the
Financial Services Authority, (v) the Criminal Justice Act 1993 and (vi) any
other obligations imposed from time to time by the London Stock Exchange on
companies whose securities have been admitted to trading on AIM.

      

      4.7          
 Use of
Proceeds. The net proceeds of the sale of the Debentures hereunder shall
be used by the Company for the purposes set forth in the PPM.

      

      4.8            
No Material Adverse
Change. Since June 30, 2008 except as identified and described in the AIM
Filings or the Press Releases or as described on Schedule 4.8, there
has not been:

      

          (i)           any
change in the consolidated assets, liabilities, financial condition or operating
results of the Company from that reflected in the financial statements for the
six-month period ended June 30, 2008 or when filed pursuant to the AIM Rules,
the financial statements for the fiscal year ended December 31, 2008, except for
changes in the ordinary course of business which have not had and could not
reasonably be expected to have a Material Adverse Effect, individually or in the
aggregate;

      

       
  (ii)          any
declaration or payment of any dividend, or any authorization or payment of any
distribution, on any of the capital stock of the Company, or any redemption or
repurchase of any securities of the Company;

      

       
  (iii)        any material
damage, destruction or loss, whether or not covered by insurance to any assets
or properties of the Company or its Subsidiaries;
 

         
(iv)         any waiver, not in the
ordinary course of business, by the Company or any Subsidiary of a material
right or of a material debt owed to it;

      
        
           

        

        
          -7-

          
            

          

        

        
           

        

      

       

        
 (v)          any
satisfaction or discharge of any lien, claim or encumbrance or payment of any
obligation by the Company or a Subsidiary, except in the ordinary course of
business and which is not material to the assets, properties, financial
condition, operating results or business of the Company and its Subsidiaries
taken as a whole (as such business is presently conducted and as it is proposed
to be conducted);

      

         
(vi)         any change or
amendment to the Company’s Amended and Restated Certificate of Incorporation or
Amended and Restated Bylaws, except as contemplated by the Proposals, or any
material change to any material contract or arrangement by which the Company or
any Subsidiary is bound or to which any of their respective assets or properties
is subject;

      

          (vii)        any
material labor difficulties or labor union organizing activities with respect to
employees of the Company or any Subsidiary;

      

       
  (viii)       any material
transaction entered into by the Company or a Subsidiary other than in the
ordinary course of business, other than the transactions contemplated by the
Transaction Documents and its agreements with the Placement Agent;

      

        
 (ix)         the loss of the
services of any key employee, or material change in the composition or duties of
the senior management of the Company or any Subsidiary; or

      
 

          (x)           any
other event or condition of any character that has had or could reasonably be
expected to have a Material Adverse Effect.

      

      4.9            
No Conflict, Breach,
Violation or Default. Subject to the
approval of the Proposals by its stockholders as contemplated in Section 7.9,
the execution, delivery and performance of the Transaction Documents by the
Company and the issuance and sale of the Securities will not conflict with or
result in a breach or violation of any of the terms and provisions of, or
constitute a default under (i) the Company’s Amended and Restated Certificate of
Incorporation or the Company’s Amended and Restated Bylaws, both as in effect on
the date hereof (copies of which have been made available to the Investors
through the Company’s website), or (ii)(a) any statute, rule, regulation or
order of any governmental agency or body or any court, domestic or foreign,
having jurisdiction over the Company, any Subsidiary or any of their respective
assets or properties, or (b) any agreement or instrument to which the Company or
any Subsidiary is a party or by which the Company or a Subsidiary is bound or to
which any of their respective assets or properties is subject, except with
respect to clause (ii) for any violations or breaches as would not, individually
or in the aggregate, have a Material Adverse Effect.

      
        
           

        

        
          -8-

          
            

          

        

        
           

        

      

      

      4.10           Tax Matters. Except
as set forth on Schedule 4.10, the
Company and each Subsidiary has timely prepared and filed all tax returns
required to have been filed by the Company or such Subsidiary with all
appropriate governmental agencies and timely paid all taxes shown thereon or
otherwise owed by it. The charges, accruals and reserves on the books of the
Company in respect of taxes for all fiscal periods are adequate in all material
respects, and there are no material unpaid assessments against the Company or
any Subsidiary nor, to the Company’s Knowledge, any basis for the assessment of
any additional taxes, penalties or interest for any fiscal period or audits by
any federal, state or local taxing authority except for any assessment which is
not material to the Company and its Subsidiaries, taken as a whole. All taxes
and other assessments and levies that the Company or any Subsidiary is required
to withhold or to collect for payment have been duly withheld and collected and
paid to the proper governmental entity or third party when due. There are no tax
liens or claims pending or, to the Company’s Knowledge, threatened against the
Company or any Subsidiary or any of their respective assets or property. There
are no outstanding tax sharing agreements or other such arrangements between the
Company and any Subsidiary or other corporation or entity.

      

      4.11           Title to Properties.
Except as disclosed in the AIM Filings or the Press Releases, the Company and
each Subsidiary has good and marketable title to all real properties and all
other properties and assets owned by it, in each case free from liens,
encumbrances and defects that would materially affect the value thereof or
materially interfere with the use made or currently planned to be made thereof
by them; and except as disclosed in the AIM Filings or the Press Releases, the
Company and each Subsidiary holds any leased real or personal property under
valid and enforceable leases with no exceptions that would materially interfere
with the use made or currently planned to
be made thereof by them.

      

      4.12           Certificates,
Authorities and Permits.
The Company and each Subsidiary possess adequate certificates, authorities or
permits issued by
appropriate governmental agencies or bodies necessary to conduct the
business now operated by it, and neither the Company nor any Subsidiary has
received any notice of proceedings relating to the revocation or modification of
any such certificate, authority or permit that, if determined adversely to the
Company or such Subsidiary, could reasonably be expected to have a Material
Adverse Effect, individually or in the aggregate.

      

      4.13           Labor Matters. The
Company is not a party to or bound by any collective bargaining agreements or
other agreements with labor organizations. There are no labor disputes existing,
or to the Company’s Knowledge, threatened, involving strikes, slow-downs, work
stoppages, job actions, disputes, lockouts or any other disruptions of or by the
Company’s employees. The Company is, and at all times has been, in compliance
with all applicable laws respecting employment (including laws relating to
classification of employees and independent contractors) and employment
practices, terms and conditions of employment, wages and hours, and immigration
and naturalization, except for violations that would not, individually or in the
aggregate, result in a Material Adverse Effect. Except as described on Schedule 4.13 and
except for severance obligations imposed by applicable law, the Company is not a
party to, or bound by, any employment or other contract or agreement that
contains any severance, termination pay or change of control liability or
obligation, including, without limitation, any “excess parachute
payment,” as defined in Section 280G(b) of the Internal Revenue
Code.

      
        
           

        

        
          -9-

          
            

          

        

        
           

        

      

      

      4.14           Intellectual
Property.

      

        
 (a)         All Intellectual
Property owned (and not licensed) by the Company or its Subsidiary (the “Owned
IP”) is currently in compliance with all material respects with all applicable
laws, rules, regulations, orders and decrees of all governmental authorities.
Except as set forth on Schedule 4.14(a), to the Company’s Knowledge, no Owned IP of
the Company or its Subsidiary is now involved in any cancellation, dispute or
litigation, and, to the Company’s Knowledge, no such notice of such action has
been received. No patent owned by the Company or its Subsidiary has been or is
now involved in any interference, reissue, re-examination or opposition
proceeding.

      

        
 (b)         Intellectual
Property in-licensed by the Company or its Subsidiary shall be referred to as
“Non-Owned IP” and is listed in Schedule 4.14(b). The
Company has entered into an exclusive license agreement with respect to certain
Intellectual Property with Yissum Research Development Company of the Hebrew
University of Jerusalem (“Yissum”), dated November 23, 2005 (the “Yissum License
Agreement”), which constitutes the only Non-Owned IP as of the date of this
Agreement. The Yissum License Agreement (together with any amendments thereto)
is valid and has binding obligations on the Company or its Subsidiary that are
parties thereto, and, to the Company’s Knowledge, is also binding on the other
parties thereto, and is enforceable against the Company in accordance with its
terms and, to the Company’s Knowledge, the other parties thereto, except to the
extent that enforcement thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or other similar laws
affecting the enforcement of creditors’ rights generally, and there exists no
event or condition which will result in a violation or breach of or constitute
(with or without due notice or lapse of time or both) a default by the Company
or its Subsidiary and to the Company’s Knowledge by Yissum, under the Yissum
License Agreement. In the future, the Company may license additional Non-Owned
IP which the Company might need in order to conduct its business as currently
contemplated, as set forth in Schedule 4.14(b). As of the date of this
Agreement, except as set forth in Schedule 4.14(c), the
Company and Subsidiary are not obligated based on any written agreement, nor to
the Company’s knowledge is it or any Subsidiary obligated based on any oral
agreement, to make any payments by way of royalties or fees to any (i) owner or
(ii) licensee of, or (iii) other claimant to, any Intellectual Property, in
connection with the conduct of its business as now conducted.

      

        
 (c)         Except as set
forth in Schedule
4.14(d), the Company and its Subsidiary own or have the valid right to
use, free and clear of all liens, claims and restrictions, all of the
Intellectual Property that is necessary for the conduct of the Company’s and its
Subsidiary’s respective businesses as currently conducted or to the Company’s
Knowledge as currently proposed to be conducted. To the Company’s Knowledge, the
Company and its Subsidiary have a valid and enforceable right to use all
Non-Owned IP and Confidential Information
used or in the respective businesses of the Company and its
Subsidiary.

      

        
 (d)        The consummation of the
transactions contemplated hereby and by the other Transaction Documents will not
result in the alteration, loss, impairment of or restriction on the Company’s or
its Subsidiary’s ownership or right to use any of the Owned IP or Confidential
Information which is necessary for the conduct of Company’s and of its
Subsidiary’s respective businesses as currently conducted or to the Company’s
Knowledge as currently proposed to be conducted or result in a default under the
Yissum License Agreement or any other license agreement.

      
        
           

        

        
          -10-

          
            

          

        

        
           

        

      

      

       
  (e)         The Company and
the Subsidiary have taken security measures necessary to protect the secrecy,
confidentiality and value of all the Intellectual Property, which measures are
reasonable and customary in the industry in which the Company or the Subsidiary
operates. Each of the Company’s employees and consultants have entered into
written agreements with the Company assigning to the Company or Subsidiary, as
applicable, all rights in Intellectual Property developed in the course of their
service with the Company. Except under confidentiality obligations, there has
been no material disclosure of any of the Company’s or its Subsidiary’s
Confidential Information to any third party.

      

        
 (f)         The Company has
not received any communications alleging that the Company or the Subsidiary has
violated or by conducting its business as proposed, would violate, any of the
patents, trademarks, service marks, trade names, copyrights or trade secrets or
other proprietary rights of any other person or entity.

      

      4.15           Environmental
Matters. Neither the Company nor any
Subsidiary is in violation of any statute, rule, regulation, decision or order
of any governmental agency or body or any court, domestic or foreign, relating
to the use, disposal or release of hazardous or toxic substances or relating to
the protection or restoration of the environment or human exposure to hazardous
or toxic substances (collectively, “Environmental Laws”), owns or operates any
real property contaminated with any substance that is subject to any
Environmental Laws, is liable for any off-site disposal or contamination
pursuant to any Environmental Laws, or is subject to any claim relating to any
Environmental Laws, which violation, contamination, liability or claim has had
or could reasonably be expected to have a Material Adverse Effect, individually
or in the aggregate; and there is no pending or, to the Company’s Knowledge,
threatened investigation that might lead to such a claim.

      

      4.16           Litigation. Except as described on Schedule 4.16, there
are no pending actions, suits or proceedings against the Company, its
Subsidiaries or any of its or their properties; and to the Company’s Knowledge,
no such actions, suits or proceedings are threatened or contemplated. Neither
the Company nor any Subsidiary, nor any director or officer thereof, is or since
January 1, 2007 has been the subject of any action involving a claim of
violation of or liability under federal or state securities laws or a claim of
breach of fiduciary duty. There has not been, and to the Company’s Knowledge,
there is not pending or contemplated, any investigation by the SEC involving the
Company or any director or officer of the Company.

      

      4.17           Financial
Statements. The audited,
consolidated US dollar denominated financial statements as of and for the year
ended December 31, 2008 which have been or will be delivered to the Investors
(the “Financial Statements”) are true and correct in all material respects, are
in accordance with the books and records of the Company and fairly and
accurately present, in all material respects, the consolidated financial
position of the Company as of the dates shown and its consolidated results of
operations and cash flows for the periods shown, and such financial statements
have been prepared in conformity with United States generally accepted
accounting principles applied on a consistent basis (“GAAP”) (except as may be
disclosed therein or in the notes thereto or otherwise disclosed on Schedule 4.17). The Company and its Subsidiary effectively
ceased operations on or about August 1, 2004 and restarted its operations on or
about March 31, 2006.

      
        
           

        

        
          -11-

          
            

          

        

        
           

        

      

       

      4.18           Insurance
Coverage. The Company and each
Subsidiary maintains in full force and effect insurance coverage that is
customary for comparably situated companies for the business being conducted and
properties owned or leased by the Company and each Subsidiary, there is no claim
pending under any of such policies. The Company and its Subsidiaries are current
in all premiums or other payments due under each insurance policy and have
otherwise performed in all material respects all of its respective obligations
thereunder.

      

      4.19           Brokers and
Finders. No Person will have, as a
result of the transactions contemplated by the Transaction Documents, any valid
right, interest or claim against or upon the Company, any Subsidiary or an
Investor for any commission, fee or other compensation pursuant to any
agreement, arrangement or understanding entered into by or on behalf of the
Company, other than as described in Schedule 4.19.

      

      4.20           No Directed Selling Efforts
or General Solicitation. Neither the
Company nor any Person acting on its behalf has conducted any general
solicitation or general advertising (as those terms are used in Regulation D) in
connection with the offer or sale of any of the Securities.

      

      4.21           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 Company security or
solicited any offers to buy any security, under circumstances that would
adversely affect reliance by the Company on Section 4(2) for the exemption from
registration for the transactions contemplated hereby or would require
registration of the Securities under the 1933 Act.

      

      4.22           Private
Placement. Assuming the Investors’
representations contained herein are true, correct and complete, the offer and
sale of the Securities by the Company to the Investors as contemplated hereby is
exempt from the registration requirements of the 1933 Act.

      

      4.23           Questionable
Payments. Neither the Company nor
any of its Subsidiaries nor, to the Company’s Knowledge, any of their respective
current or former stockholders, directors, officers, employees, agents or other
Persons acting on behalf of the Company or any Subsidiary, has on behalf of the
Company or any Subsidiary or in connection with their respective businesses: (a)
used any corporate funds for unlawful contributions, gifts, entertainment or
other unlawful expenses relating to political activity; (b) made any direct or
indirect unlawful payments to any governmental officials or employees from
corporate funds; (c) established or maintained any unlawful or unrecorded fund
of corporate monies or other assets; (d) made any false or fictitious entries on
the books and records of the Company or any Subsidiary; or (e) made any unlawful
bribe, rebate, payoff, influence payment, kickback or other unlawful payment of
any nature.

      

      4.24           Transactions with
Affiliates. Except as disclosed in
the AIM Filings, the Press Releases or as disclosed on Schedule 4.24, none
of the officers or directors of the Company and, to the Company’s Knowledge,
none of the employees of the Company is presently a party to any transaction
with the Company or any Subsidiary (other than as holders of stock options
and/or warrants, and for services as employees, officers and directors),
including any contract, agreement or other arrangement providing for the
furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any officer,
director or such employee or, to the Company’s Knowledge, any entity in which
any officer, director, or any such employee has a substantial interest or is an
officer, director, trustee or partner.

      
        
           

        

        
          -12-

          
            

          

        

        
           

        

      

      

      4.25           Disclosures. Neither the Company nor any Person acting on
its behalf has provided the Investors or
their agents or counsel with any information that constitutes or might
constitute material, non-public information, other than the terms of the
transactions contemplated hereby. The written materials delivered to the
Investors in connection with the transactions contemplated by the Transaction
Documents do not contain any untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements contained
therein, in light of the circumstances under which they were made, not
misleading.

      

      5. 
           Representations and
Warranties of the Investors. Each of
the Investors hereby severally, and not jointly, represents and warrants to the
Company that:

      

      5.1.          
 Organization and
Existence. Such Investor, if not a
natural person, is a validly existing corporation, limited partnership or
limited liability company and has all requisite corporate, partnership or
limited liability company power and authority to invest in the Securities
pursuant to this Agreement.

      

      5.2            Authorization. Such Investor has full power and authority and
has taken all requisite action on the part of the Investor necessary for (i) the
authorization, execution and delivery of the Transaction Documents, and (ii) the
authorization of the performance of all obligations of such Investor hereunder
or thereunder. The execution and delivery of this Agreement and each of the
other Transaction Documents, as applicable, by such Investor and the
consummation by him, her or it of the transactions contemplated hereby and
thereby have been duly authorized by such Investor, and if such Investor is not
an individual, by its Board of Directors or other appropriate governing body,
and no further consent or authorization of such Investor is required. This
Agreement and each of the other Transaction Documents have been duly executed
and delivered by such Investor. The Transaction Documents constitute the legal,
valid and binding obligations of such Investor, enforceable against such
Investor in accordance with their terms, subject to (i) bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of general
applicability, relating to or affecting creditors’ rights generally; (ii)
equitable limitations on the availability of specific remedies; (iii) principles
of equity (regardless of whether such enforcement is considered in a proceeding
in law or in equity); and (iv) to the extent rights to indemnification and
contribution may be limited by federal securities laws or the public policy
underlying such laws.

      

      5.3            Purchase Entirely for Own
Account. The Securities to be
received by such Investor hereunder will be acquired for such Investor’s own
account, not as nominee or agent, and not with a view to the resale or
distribution of any part thereof in violation of the 1933 Act, and such Investor
has no present intention of selling, granting any participation in, or otherwise
distributing the same in violation of the 1933 Act without prejudice, however,
to such Investor’s right at all times to sell or otherwise dispose of all or any
part of such Securities in compliance with applicable federal and state
securities laws. Nothing contained herein shall be deemed a representation or
warranty by such Investor to hold the Securities for any period of time. Such
Investor is not a broker-dealer registered with the SEC under the 1934 Act or an
entity engaged in a business that would require it to be so
registered.

      
        
           

        

        
          -13-

          
            

          

        

        
           

        

      

      

      5.4            Investment Experience;
Acknowledgement of Risk. Such
Investor acknowledges that it can bear the economic risk and complete loss of
its investment in the Securities and has such knowledge and experience in
financial or business matters that it is capable of evaluating the merits and
risks of the investment contemplated hereby. Such Investor understands that its
investment in the Securities involves a significant degree of risk. Such
Investor acknowledges and agrees that, subject to the terms of the Debentures,
the Company may issue, sell or agree to sell securities of the Company including
Common Stock, warrants, convertible securities and other securities, from time
to time (both before the Closing hereunder and after), that such issuances or
sales may be at prices and on terms different to the terms set forth in this
Agreement, including terms that may be more favorable to the purchaser
thereunder, and that any such issuances or sales will cause dilution to such
Investor. Such Investor understands that no United States federal or state
agency or any other government or governmental agency has passed upon or made
any recommendation or endorsement of any of the Securities.

      

      5.5            Disclosure of
Information. Such Investor has
conducted its own due diligence examination of the Company’s business, financial
condition, results of operations, and prospects and has had an opportunity to
receive all information related to the Company requested by it and to ask
questions of and receive answers from the Company regarding the Company, its
business and the terms and conditions of the offering of the Securities. Such
Investor acknowledges receipt of copies of the AIM Filings and the Press
Releases. Neither such inquiries nor any other due diligence investigation
conducted by such Investor shall modify, limit or otherwise affect such
Investor’s right to rely on the Company’s representations and warranties
contained in this Agreement.

      

      5.6            Restricted
Securities. Such Investor
understands that the Securities are characterized as “restricted securities”
under the U.S. federal securities laws inasmuch as they are being acquired from
the Company in a transaction not involving a public offering and that under such
laws and applicable regulations such securities may be resold without
registration under the 1933 Act only in certain limited circumstances. Such
Investor understands that the Securities are being offered and sold to it in
reliance upon specific exemptions from the registration requirements of the
Untied States and state securities laws and that the Company is relying upon the
truth and accuracy of, and such Investor’s compliance with, the representations,
warranties, agreements, acknowledgements and understandings of such Investor set
forth herein in order to determine the availability of such exemption and
eligibility of such Investor to acquire the Securities.

      

      5.7          
 Legends. It is understood that, except as provided
below, certificates evidencing the Securities may bear the following or any
similar legend:

      
        
           

        

        
          -14-

          
            

          

        

        
           

        

      

       

        
 (a)        “THE SECURITIES
REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE “ACT”), OR THE SECURITIES LAWS OF ANY STATE AND HAVE BEEN ISSUED IN
RELIANCE UPON EXEMPTIONS AFFORDED UNDER APPLICABLE LAWS. THE SECURITIES
REPRESENTED BY THIS CERTIFICATE MAY NOT BE OFFERED, SOLD, HYPOTHECATED,
TRANSFERRED OR OTHERWISE ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS,
OR AN APPLICABLE EXEMPTION (AS TO WHICH THE
ISSUER SHALL BE REASONABLY SATISFIED, INCLUDING RECEIPT OF AN ACCEPTABLE LEGAL
OPINION) FROM THE REGISTRATION REQUIREMENTS OF SUCH LAWS.”

       

        
 (b)         If required by the
authorities of any state in connection with the issuance of sale of the
Securities, the legend required by such state authority.

       

      5.8            
Accredited
Investor. Such Investor is an
accredited investor as defined in Rule 501(a) of Regulation D, as amended, under
the 1933 Act and remakes herein all of the representations and warranties set
forth in such Investor’s Accredited Investor Questionnaire delivered to the
Company in connection herewith.

       

      5.9           
No General
Solicitation. Such Investor did not
learn of the investment in the Securities as a result of any general
solicitation or general advertising.

       

      5.10           Brokers and
Finders. Other than the Company’s
separate agreements with the Placement Agent and other co-placement agents,
pursuant to which the applicable agent shall receive cash commissions and
warrants to purchase Common Stock as agreed between the Company and the
applicable agent, no Person will have, as a result of the transactions
contemplated by the Transaction Documents, any valid right, interest or claim
against or upon the Company, any Subsidiary or an Investor for any commission,
fee or other compensation pursuant to any agreement, arrangement or
understanding entered into by or on behalf
of such Investor.

       

      5.11           UK Investors. If an Investor has received the Transaction
Documents or any other materials or information (however imparted) relevant to
the investment to be made pursuant hereto or thereto (the “Materials and
Information”) in the United Kingdom (the “UK”) or (for whatever reason) any of
the subscription made hereunder and/or the Materials and Information are or may
be subject to the requirements of the laws and/or regulations of the UK or any
part thereof, such Investor hereby represents, warrants and/or (as appropriate)
acknowledges and declares to the Company that:

       

         
(a)        he has duly executed and delivered
to the Company a certificate in accordance with either paragraph 48 (certified
high net worth individuals) or 50(A) (self-certified sophisticated investors) of
the Financial Services and Markets Act (Markets Act (Financial Promotion) Order
2005;

      
        
           

        

        
          -15-

          
            

          

        

        
           

        

      

       

       
  (b)        the content of the
Materials and Information has not been approved by an authorised person within
the meaning of the UK’s Financial Services and Markets Act 2000 (“FSMA”) and
that reliance on the Materials and Information for the purpose of engaging in
any investment activity may expose the Investor to a significant risk of losing
all of the property or other assets invested; and

       

        
(c)        no prospectus (within the meaning
of FSMA and/or the regulations made pursuant thereto) has been prepared in
relation to the investment to be made pursuant hereto meeting with the
requirements of the UK’s Prospectus Regulations 2005 and/or approved by the UK’s
Financial Services Authority acting in its capacity as the as the competent
authority for the purposes of Part VI of FSMA.

      

      6.   Conditions to
Closing.

       

      6.1            Conditions to the Investors’
Obligations. The obligation of each
Investor to purchase the Debentures at the applicable Closing is subject to the
fulfillment to such Investor’s satisfaction, on or prior to the date of the
applicable Closing, of the following conditions, any of which may be waived by
such Investor (as to itself only):

       

        
 (a)         The representations
and warranties made by the Company in Section 4 hereof qualified as to
materiality shall be true and correct at all times prior to and on the Closing
Date, except to the extent any such representation or warranty expressly speaks
as of an earlier date, in which case such representation or warranty shall be
true and correct as of such earlier date, and, the representations and
warranties made by the Company in Section 4 hereof not qualified as to
materiality shall be true and correct in all material respects at all times
prior to and on the Closing Date, except to the extent any such representation
or warranty expressly speaks as of an earlier date, in which case such
representation or warranty shall be true and correct in all material respects as
of such earlier date. The Company shall have performed in all material respects
all obligations and covenants herein required to be performed by it on or prior
to the Closing Date.

       

        
 (b)         The Company shall
have obtained any and all consents, permits, approvals, registrations and
waivers (including, without limitation, approval of the Proposal by its
stockholders in accordance with applicable law and the applicable requirements
of any stock exchange or market on which the Common Stock is traded or quoted)
necessary or appropriate for consummation of the purchase and sale of the
Securities and the consummation of the other transactions contemplated by the
Transaction Documents, all of which shall be in full force and
effect.

       

          (c)         The
Company shall have executed and delivered to the Escrow Agent, on behalf of the
Investors, the Registration Rights Agreement.

       

       
  (d)        No judgment, writ, order,
injunction, award or decree of or by any court, or judge, justice or magistrate,
including any bankruptcy
court or judge, or any order of or by any governmental authority,
shall have been issued, and no action or proceeding shall have been instituted
by any governmental authority, enjoining or preventing the consummation of the
transactions contemplated hereby or in the other Transaction
Documents.

      
        
           

        

        
          -16-

          
            

          

        

        
           

        

      

       

          (e)        
The Company shall have delivered a Certificate, executed on behalf of the
Company by its Chief Executive Officer or its Chief Financial Officer, dated as
of the applicable Closing Date, certifying to the fulfillment of the conditions
specified in subsections (a), (b), (d), and (e) of this Section
6.1.

       

        
 (f)         The Company shall have
delivered a Certificate, executed on behalf of the Company by its Secretary,
dated as of the applicable Closing Date, certifying the resolutions adopted by
the Board of Directors of the Company approving the transactions contemplated by
this Agreement and the other Transaction Documents and the issuance of the
Securities, certifying the current versions of the Amended and Restated
Certificate of Incorporation and Amended and Restated Bylaws of the Company and
certifying as to the signatures and authority of persons signing the Transaction
Documents and related documents on behalf
of the Company.

       

       
  (h)        The Investors and the
Placement Agent shall have received an opinion from Barack Ferrazzano Kirschbaum
& Nagelberg LLP, the Company’s counsel, dated as of the First Closing Date,
in form and substance reasonably acceptable to the Investors and addressing such
legal matters as the Investors may reasonably request, together with an update
for each subsequent Closing.

       

      6.2           
Conditions to
Obligations of the Company. The Company’s obligation to sell and issue
the Shares and the Warrants at the Closing is subject to the fulfillment to the
satisfaction of the Company on or prior to the Closing Date of the following
conditions, any of which may be waived by the Company:

       

        
 (a)         The
representations and warranties made by the Investors in Section 5 hereof, other
than the representations and warranties contained in Sections 5.3, 5.4, 5.5,
5.6, 5.7, 5.8 and 5.9 (the “Investment Representations”), shall be true and
correct in all material respects when made, and shall be true and correct in all
material respects on the applicable Closing Date with the same force and effect
as if they had been made on and as of said date. The Investment Representations
shall be true and correct in all respects when made, and shall be true and
correct in all respects on the Closing Date with the same force and effect as if
they had been made on and as of said date. The Investors shall have performed in
all material respects all obligations and covenants herein required to be
performed by them on or prior to the Closing Date.

       

        
 (b)         The Investors
shall have executed and delivered to the Escrow Agent, on behalf of the Company,
the Registration Rights Agreement and Accredited Investor
Questionnaires.

       

        
 (c)         The Investors
shall have delivered the Purchase Price to the Escrow Agent.

      
        
           

        

        
          -17-

          
            

          

        

        
           

        

      

    

     

    (d)          The
Company shall have obtained the approval of the Proposals by its stockholders in
accordance with applicable law and the applicable requirements of any stock
exchange or market on which the Common Stock is traded or quoted.

     

    6.3          Termination of Obligations
to Effect Closing; Effects. The
obligations of the Company, on the one hand, and the Investors, on the other
hand, to effect the Closing shall terminate as follows:

     

    (a)          Upon
the mutual written consent of the Company and the Investors;

     

    (b)          By
the Company if any of the conditions set forth in Section 6.2 shall have become
incapable of fulfillment, and shall not have been waived by the
Company;

     

    (c)           By
an Investor (with respect to itself only) if any of the conditions set forth in
Section 6.1 shall have become incapable of fulfillment, and shall not have been
waived by the Investor; or

     

    (d)          By
either the Company or any Investor (with respect to itself only) if the Closing
has not occurred on or prior to September 15, 2009.

    

    provided,
however, that, except in the case of clause (i) above, the party seeking to
terminate its obligation to effect the Closing shall not then be in breach of
any of its representations, warranties, covenants or agreements contained in
this Agreement or the other Transaction Documents if such breach has resulted in
the circumstances giving rise to such party’s seeking to terminate its
obligation to effect the Closing.

    

    7.           Covenants and Agreements of
the Company.

     

    7.1           Reservation of Common
Stock. The Company shall at all
times reserve and keep available out of its authorized but unissued shares of
Common Stock, solely for the purpose of providing for the conversion of the
Debentures and the exercise of the Warrants, such number of shares of Common
Stock as shall from time to time equal the number of shares sufficient to permit
the conversion of the Debentures and the exercise of the Warrants issued
pursuant to this Agreement in accordance with their respective
terms.

     

    7.2           Reports. The Company will furnish to the Investors
and/or their assignees such information relating to the Company and its
Subsidiaries as from time to time may reasonably be requested by the Investors
and/or their assignees; provided, however, that the Company shall not disclose
material nonpublic information to the Investors, or to advisors to or
representatives of the Investors, unless prior to disclosure of such information
the Company identifies such information as being material nonpublic information
and provides the Investors, such advisors and representatives with the
opportunity to accept or refuse to accept such material nonpublic information
for review and any Investor wishing to obtain such information enters into an
appropriate confidentiality agreement with the Company with respect
thereto.

    
      
         

      

      
        -18-

        
          

        

      

      
         

      

    

    7.3           No Conflicting
Agreements. The Company will not
take any action, enter into any agreement or make any commitment that would
conflict or interfere in any material respect with the Company’s obligations to
the Investors under the Transaction Documents.

    

    7.4           Insurance. The Company shall not materially reduce the
insurance coverages described in Section 4.18.

    

    7.5           Compliance with
Laws. The Company will comply in all
material respects with all applicable laws, rules, regulations, orders and
decrees of all governmental authorities.

    

    7.6           Qualified
Transaction. Provided that Closings
have occurred for at least $2,500,000 of Debentures, the Company will use its
commercially reasonable efforts to consummate a Qualified Transaction no later than the date that
is 12 months after the date of the Closing in which at least $2,500,000 of
Debentures in the aggregate have been sold under this Agreement. For purposes of
this Agreement, a “Qualified Transaction” shall mean any of (i) an underwritten
public offering of the Company’s Common Stock on the NYSE, NYSE Amex or the
Nasdaq Stock Market (a “U.S. Stock Market”) resulting in gross proceeds to the
Company of not less than $5,000,000, (ii) a merger or reverse merger between the
Company and a public company the common stock of which is traded on a U.S. Stock
Market or on the OTC Bulletin Board, the survivor of which is a public company
having available cash of not less than $5,000,000 after giving effect to such
merger and any capital-raising transaction completed prior to or at the time of
such merger (a “Qualified Merger”) or (iii) the acquisition of all of the issued
and outstanding common stock of the Company by a public company the common stock
of which is traded on a U.S. Stock Market or on the OTC Bulletin Board in a
transaction where the holders of the common stock of the Company receive, in
exchange for such common stock, common stock of such public company and, after
giving effect to such transaction and any capital-raising transaction completed
prior to or at the time of such transaction, such public company has available
cash of not less than $5,000,000 (a “Qualified Acquisition”). Further, if the
Company applies to have its Common Stock or other securities traded on any U.S.
Stock Market or market, it shall include in such application the Debentures
Shares and the Warrant Shares and will take such other action as is necessary to
cause such Common Stock to be so listed.

    

    7.7          Termination of
Covenants. The provisions of
Sections 7.2 through 7.5 shall terminate and be of no further force and effect
on the date on which the Company’s obligations under the Registration Rights
Agreement to register or maintain the effectiveness of any registration covering
the Registrable Securities (as such term is defined in the Registration Rights
Agreement) shall terminate.

    
      
         

      

      
        -19-

        
          

        

      

      
         

      

    

    7.8          Removal of
Legends. In connection with any sale
or disposition of the Securities by an Investor pursuant to Rule 144 or pursuant
to any other exemption under the 1933 Act such that the purchaser acquires
freely tradable shares and upon compliance by the Investor with the requirements
of this Agreement, the Company shall or, in the case of Common Stock, shall
cause the transfer agent for the Common Stock (the “Transfer Agent”) to issue
replacement certificates representing the Securities sold or disposed of without
restrictive legends. Upon the earlier of (i) registration for resale pursuant to
the Registration Rights Agreement or (ii) the Shares becoming freely tradable by
a non-affiliate pursuant to Rule 144, then, upon the request of an Investor, the
Company shall deliver to the Transfer Agent irrevocable instructions that the
Transfer Agent shall reissue a certificate representing shares of Common Stock
without legends upon receipt by such Transfer Agent of the legended certificates
for such shares, together with either (1) a customary representation by the
Investor that Rule 144 applies to the shares of Common Stock represented thereby
or (2) a statement by the Investor that such Investor has sold the shares of
Common Stock represented thereby in accordance with the Plan of Distribution
contained in the Registration Statement. From and after the earlier of such
dates, upon an Investor’s written request, the Company shall, if permitted by
applicable law, promptly cause certificates evidencing the Investor’s Securities
to be replaced with certificates which do not bear such restrictive legends, and
Warrant Shares subsequently issued upon due exercise of the Warrants shall not
bear such restrictive legends provided the provisions of either clause (i) or
clause (ii) above, as applicable, are satisfied with respect to such Warrant
Shares.

     

    7.9           Proposals.

    

    (a)           The
Company is in the process of seeking approval of the Company’s stockholders
through written consent for (i) the repeal of Article XII of the Company’s
Amended and Restated Certificate of Incorporation and (ii) the sanction and
approval of borrowings in excess of the borrowing limit imposed by Article VIII
of the Company’s Amended and Restated By-Laws (collectively, the
“Proposals”).

    

    (b)           Subject
to their fiduciary obligations under applicable law (as determined in good faith
by the Company’s Board of Directors after consultation with the Company’s
outside counsel), the Company’s Board of Directors shall recommend to the
Company’s stockholders that the stockholders vote in favor of the Proposals (the
“Company Board Recommendation”) and take all commercially reasonable action to
solicit the written consent of the stockholders for the Proposals unless the
Board of Directors shall have modified, amended or withdrawn the Company Board
Recommendation pursuant to the provisions of the immediately succeeding
sentence. The Company covenants that the Board of Directors of the Company shall
not modify, amend or withdraw the Company Board Recommendation unless the Board
of Directors (after consultation with the Company’s outside counsel) shall
determine in the good faith exercise of its business judgment that maintaining
the Company Board Recommendation would violate its fiduciary duty to the
Company’s stockholders.

    

    8.            Survival and
Indemnification.

    

    8.1           Survival. Any covenant or agreement in this Agreement
required to be performed following the applicable Closing Date, shall survive
such Closing Date. Without limitation of the foregoing, the respective
representations and warranties given by the parties hereto shall survive each
Closing Date and the consummation of the transactions contemplated herein, but
only for a period of the earlier of (i) twenty-four (24) months following the
final Closing Date and (ii) the applicable statute of limitations with respect
to each representation and warranty, and thereafter shall expire and have no
further force and effect (including with respect to the indemnification
obligations contained herein).

    
      
         

      

      
        -20-

        
          

        

      

      
         

      

    

    8.2 
Indemnification. The Company agrees to indemnify and hold
harmless each Investor and its Affiliates and their respective directors,
officers, employees and agents from and against any and all losses, claims,
damages, liabilities and expenses (including, without limitation, reasonable
attorney fees and disbursements and other expenses incurred in connection with
investigating, preparing or defending any action, claim or proceeding, pending or threatened and the costs of
enforcement thereof) (collectively, “Losses”) to which such Person may become
subject as a result of any breach of representation, warranty, covenant or
agreement made by or to be performed on the part of the Company under the
Transaction Documents, and will reimburse any such Person for all such amounts
as they are incurred by such Person; provided, however, in no event shall the
Company’s indemnification obligations exceed the aggregate Purchase Price
received the Company hereunder.

    

    8.3           Conduct of Indemnification
Proceedings. Any person entitled to
indemnification hereunder shall (i) give prompt notice to the indemnifying party
of any claim with respect to which it seeks indemnification and (ii) permit such
indemnifying party to assume the defense of such claim with counsel reasonably
satisfactory to the indemnified party; provided that any
person entitled to indemnification hereunder shall have the right to employ
separate counsel and to participate in the defense of such claim, but the fees
and expenses of such counsel shall be at the expense of such person unless (a)
the indemnifying party has agreed to pay such fees or expenses, or (b) the
indemnifying party shall have failed to assume the defense of such claim and
employ counsel reasonably satisfactory to such person or (c) in the reasonable
judgment of any such person, based upon written advice of its counsel, a
conflict of interest exists between such person and the indemnifying party with
respect to such claims (in which case, if the person notifies the indemnifying
party in writing that such person elects to employ separate counsel at the
expense of the indemnifying party, the indemnifying party shall not have the
right to assume the defense of such claim on behalf of such person); and provided, further, that the
failure of any indemnified party to give notice as provided herein shall not
relieve the indemnifying party of its obligations hereunder, except to the
extent that such failure to give notice shall materially adversely affect the
indemnifying party in the defense of any such claim or litigation. It is
understood that the indemnifying party shall not, in connection with any
proceeding in the same jurisdiction, be liable for fees or expenses of more than
one separate firm of attorneys at any time
for all such indemnified parties. No indemnifying party will, except with the
consent of the indemnified party, consent to entry of any judgment or enter into
any settlement that does not include as an unconditional term thereof the giving
by the claimant or plaintiff to such indemnified party of a release from all
liability in respect of such claim or litigation. The Company shall not be
liable for any settlement of any proceeding effected without its written
consent, which consent shall not be unreasonably withheld or delayed, but if
settled with such consent, or if there be a final judgment for the plaintiff,
the Company shall indemnify and hold harmless such indemnified party from and
against any loss or liability (to the extent stated above) by reason of such
settlement or judgment, subject to the limitation contained in Section
8.2.1.

    
      
         

      

      
        -21-

        
          

        

      

      
         

      

    

    9.          Miscellaneous.

    

    9.1           Successors and
Assigns. This Agreement may not be
assigned by a party hereto without the prior written consent of the Company or
the Investors, as applicable, provided, however, that an Investor may assign its
rights and delegate its duties hereunder in whole or in part to an Affiliate or
to a third party acquiring some or all of its Securities in a transaction
complying with applicable securities laws without the prior written consent of
the Company or the other Investors. The provisions of this Agreement shall inure
to the benefit of and be binding upon the respective permitted successors and
assigns of the parties. Nothing in this Agreement, express or implied, is
intended to confer upon any party other than the parties hereto or their
respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.

    

    9.2           Counterparts;
Faxes. This Agreement may be
executed in two or more counterparts, each of which shall be deemed an original,
but all of which together shall constitute one and the same instrument. This
Agreement may also be executed via facsimile or electronic transmission (e.g.
Pdf/email), which shall be deemed an original.

    

    9.3           Titles and
Subtitles. The titles and subtitles
used in this Agreement are used for convenience only and are not to be
considered in construing or interpreting this Agreement.

    

    9.4           Notices. Unless otherwise provided, any notice required
or permitted under this Agreement shall be given in writing and shall be deemed
effectively given as hereinafter described (i) if given by personal delivery,
then such notice shall be deemed given upon such delivery, (ii) if given by
telecopier, then such notice shall be deemed given upon receipt of confirmation
of complete transmittal, (iii) if given by mail, then such notice shall be
deemed given upon the earlier of (A) receipt of such notice by the recipient or
(B) three days after such notice is deposited in first class mail, postage
prepaid, and (iv) if given by an internationally recognized overnight air
courier, then such notice shall be deemed given one Business Day after delivery
to such carrier. All notices shall be addressed to the party to be notified at
the address as follows, or at such other address as such party may designate by
ten days’ advance written notice to the other party:

    

    If to the
Company:

    

    Medgenics,
Inc.

    8000
Towers Crescent Drive, Suite 1070

    Vienna,
VA 22182

    Attention:
Dr. Andrew Pearlman, CEO & President

    Fax:
(561) 828-6150

    

    And
to:

    

    Medgenics,
Inc.

    Teradion
Business Park

    P.O. Box
14

    
      
         

      

      
        -22-

        
          

        

      

      
         

      

    

     

    Misgav
20179 Israel

    Attention:
Ms. Phyllis Bellin

    Fax:
+972-4-9990114

    With a
copy (not constituting notice) to:

     

    Barack
Ferrazzano Kirschbaum & Nagelberg LLP

    200 W.
Madison Street, Suite 3900

    Chicago,
Illinois 60606

    Attention:
Gretchen Anne Trofa, Esq.

    Fax No.:
(312) 984-3150

    

    If to the
Investor:

    

    To the
addresses set forth on the signature pages affixed hereto.

    

    9.5           Expenses. The parties hereto shall pay their own costs
and expenses in connection herewith, except that the Company shall pay the
reasonable fees and expenses of Lowenstein Sandler PC, counsel to the Placement
Agent, not to exceed $35,000, regardless of whether the transactions
contemplated hereby are consummated; it being understood that Lowenstein Sandler
PC has only rendered legal advice to the Placement Agent and not to the Company
or any Investor in connection with the transactions contemplated hereby, and
that each of the Company and each Investor has relied for such matters on the
advice of its own respective counsel. Such expenses shall be paid upon demand.
The Company shall reimburse the Investors upon demand for all reasonable
out-of-pocket expenses incurred by the Investors, including without limitation
reimbursement of attorneys’ fees and disbursements, in connection with any
amendment, modification or waiver of this Agreement or the other Transaction
Documents. In the event that legal proceedings are commenced by any party to
this Agreement against another party to this Agreement in connection with this
Agreement or the other Transaction Documents, the party or parties which do not
prevail in such proceedings shall severally, but not jointly, pay their pro rata
share of the reasonable attorneys’ fees and other reasonable out-of-pocket costs
and expenses incurred by the prevailing party in such proceedings.

    

    9.6           Amendments and
Waivers. Any term of this Agreement
may be amended and the observance of any term of this Agreement may be waived
(either generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the Investors
who hold at least a majority of the aggregate outstanding principal amount of
Debentures. Any amendment or waiver effected in accordance with this paragraph
shall be binding upon each holder of any Securities purchased under this
Agreement at the time outstanding, each future holder of all such Securities,
and the Company.

    

    9.7           Publicity. The Company shall be entitled to issue public
releases or announcements concerning the transactions contemplated hereby,
including, if required by the AIM Rules, identifying the Investors. No Investor
shall make any public release or announcement concerning the transaction
contemplated hereby without the prior consent of the Company (which consent
shall not be unreasonably withheld or delayed), except as such release or
announcement may be required by applicable law, rule or regulation of any
governmental authority or the applicable rules or regulations of any securities
exchange or securities market, in which case the such Investor shall allow the
Company to the extent reasonably practicable in the circumstances, reasonable
time to comment on such release or announcement in advance of such
issuance.

    
      
         

      

      
        -23-

        
          

        

      

      
         

      

    

    9.8           Severability. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof but shall be interpreted as if it
were written so as to be enforceable to the maximum extent permitted by
applicable law, and any such prohibition or unenforceability in any jurisdiction
shall not invalidate or render unenforceable such provision in any other
jurisdiction. To the extent permitted by applicable law, the parties hereby
waive any provision of law which renders any provision hereof prohibited or
unenforceable in any respect.

    

    9.9           Entire Agreement. This Agreement, including the Disclosure
Schedules, and the other Transaction Documents constitute the entire agreement
among the parties hereof with respect to the subject matter hereof and thereof
and supersede all prior agreements and understandings, both oral and written,
between the parties with respect to the subject matter hereof and
thereof.

    

    9.10         Further
Assurances. The parties shall
execute and deliver all such further instruments and documents and take all such
other actions as may reasonably be required to carry out the transactions
contemplated hereby and to evidence the fulfillment of the agreements herein
contained.

    

    9.11         Governing Law; Consent to
Jurisdiction; Waiver of Jury Trial.
This Agreement shall be governed by, and construed in accordance with, the
internal laws of the State of New York without regard to the choice of law
principles thereof, other than with respect to corporate matters which shall be
governed by the General Corporation Law of the State of Delaware. Each of the
parties hereto irrevocably submits to the exclusive jurisdiction of the courts
of the State of New York located in New York County and the United States
District Court for the Southern District of New York for the purpose of any
suit, action, proceeding or judgment relating to or arising out of this
Agreement and the transactions contemplated hereby. Service of process in
connection with any such suit, action or proceeding may be served on each party
hereto anywhere in the world by the same methods as are specified for the giving
of notices under this Agreement. Each of the parties hereto irrevocably consents
to the jurisdiction of any such court in any such suit, action or proceeding and
to the laying of venue in such court. Each party hereto irrevocably waives any
objection to the laying of venue of any such suit, action or proceeding brought
in such courts and irrevocably waives any claim that any such suit, action or
proceeding brought in any such court has been brought in an inconvenient forum.
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.

    
      
         

      

      
        -24-

        
          

        

      

      
         

      

    

    9.12         Independent Nature of
Investors’ Obligations and Rights. The obligations of each Investor under
any Transaction Document are several and not joint with the obligations of any
other Investor, and no Investor shall be responsible in any way for the
performance of the obligations of any other Investor under any Transaction
Document. The decision of each Investor to purchase Securities pursuant to the
Transaction Documents has been made by such Investor independently of any other
Investor. Nothing contained herein or in any Transaction Document, and no action
taken by any Investor pursuant thereto, shall be deemed to constitute the
Investors as a partnership, an association, a joint venture or any other kind of
entity, or create a presumption that the Investors are in any way acting in
concert or as a group with respect to such obligations or the transactions
contemplated by the Transaction Documents. Each Investor acknowledges that no
other Investor has acted as agent for such Investor in connection with making its investment hereunder and that no
Investor will be acting as agent of such Investor in connection with monitoring
its investment in the Securities or enforcing its rights under the Transaction
Documents. Each Investor shall be entitled to independently protect and enforce
its rights, including, without limitation, the rights arising out of this
Agreement or out of the other Transaction Documents, and it shall not be
necessary for any other Investor to be joined as an additional party in any
proceeding for such purpose. The Company acknowledges that each of the Investors
has been provided with the same Transaction Documents for the purpose of closing
a transaction with multiple Investors and not because it was required or
requested to do so by any Investor.

    

    9.13         No Strict
Construction. The language used in this Agreement will be deemed to be
the language chosen by the parties to express their mutual intent, and no rules
of strict construction will be applied against any party.

    

    9.14         Rights Cumulative.
Except as expressly set forth herein, each and all of the various rights, powers
and remedies of the parties shall be considered cumulative with and in addition
to any other rights, powers and remedies which such parties may have at law or
in equity in the event of the breach of any of the terms of this Agreement. The
exercise or partial exercise of any right, power or remedy shall neither
constitute the exclusive election thereof nor the waiver of any other right,
power or remedy available to such party.

    

    9.15         Lock Up. (a) Each
Investor hereby severally, and not joingly,
agrees, that, without the prior written consent of the Company, it will not (and
will cause any spouse or immediate family member of the spouse or such Investor
living in such Investor’s household, any partnership, corporation or other
entity within such Investor’s control, and any trustee of any trust that holds
Common Stock or other securities of the Company for the benefit of such Investor
or such spouse or family member not to),
during the period commencing on the date a registration statement filed by the
Company in connection with a Qualified Transaction is declared effective by the
Securities and Exchange Commission and ending on the date that is nine
months after the date of the consummation of the Qualified Transaction, (1)
offer, sell, contract to sell (including any short sale), pledge, hypothecate,
establish an open “put equivalent position” within the meaning of Rule 16a-1(h)
under the 1934 Act, grant any option, right or warrant for the sale of, purchase
any option or contract to sell, sell any option or contract to purchase, or
otherwise encumber, dispose of or transfer, or grant any rights with respect to,
directly or indirectly, any shares of Common Stock issued upon conversion of the
Debentures or issued or issuable upon the exercise of the Warrants, or (2) enter
into any swap or other arrangement that transfers to another, in whole or in
part, any of the economic consequences of ownership of shares of Common Stock.
Notwithstanding the foregoing, Such Investor shall not be restricted from
distributing any of the Company’s securities to such Investor’s equity holders
provided that prior to and as a condition to the effectiveness of any such
distribution such equity holders execute a lock-up agreement substantially in
the form hereof in favor of the Company.

    
      
         

      

      
        -25-

        
          

        

      

      
         

      

    

    (b)         Notwithstanding
the provisions of Section 9.15(a) above, such Investor may transfer
Common Stock (i) as a
bona
fide
gift or gifts, provided that prior to such transfer the donee or donees
thereof agree in writing to be bound by the restrictions set forth herein, (ii)
to any trust, partnership, corporation or other entity formed for the direct or
indirect benefit of the undersigned or the immediate family of the undersigned,
provided that prior to such transfer a duly authorized officer, representative
or trustee of such transferee agrees in writing to be bound by the restrictions
set forth herein; and provided further that any such transfer shall not involve
a disposition for value, or (iii) if such transfer occurs by operation of law,
such as rules of descent and distribution, statutes governing the effects of a
merger or a qualified domestic order; provided that prior to such transfer the
transferee executes an agreement stating that the transferee is receiving and
holding the shares subject to the provisions of this Agreement. For purposes
hereof, “immediate family” shall mean any relationship by blood, marriage or
adoption, not more remote than first cousin.

     

    (c) The
Company and its transfer agent and registrar are hereby authorized to (a)
decline to make any transfer of shares of Common Stock if such transfer would
constitute a violation or breach of this Section 9.15 and (b) place legends and
stop transfer instructions on any such shares of Common Stock owned or
beneficially owned by such Investor.

    

    [signature
pages follow]

    
      
         

      

      
        -26-

        
          

        

      

      
         

      

    

    IN
WITNESS WHEREOF, the parties have executed this Agreement or caused their duly
authorized officers to execute this Agreement as of the date first above
written.

    

    
      
        	
                The
      Company:

              	
                MEDGENICS,
      INC.

              
	 
      	 
      	 
      
	 
      	
                By:  

              	
                  

              
	 
      	
                Name:

              
	 
      	
                Title:

              

      

    

     

    
      
         

      

      
        -27-

        
          

        

      

      
         

      

    

    INVESTOR
SIGNATURE PAGE TO

    SECURITIES
PURCHASE AGREEMENT

    DATED
AS OF MAY _, 2009

    BY
AND AMONG

    MEDGENICS,
INC.

    AND

    THE
INVESTORS SIGNATORY THERETO

     

    IN
WITNESS WHEREOF, the parties have executed this Agreement or caused their duly
authorized officers to execute this Agreement as of the date first above
written.

    

    If
an entity:

     

    
      
        	 
      	
                  

              
	 
      	
                (Name
      of entity Investor)

              
	 
      	 
      
	 
      	
                By:  

              	
                  

              
	 
      	
                Name:

              
	 
      	
                Title:

              

      

    

    

    If
an individual:

    

    
      
        	 
      	
                  

              
	 
      	
                (Name
      of individual Investor)

              
	 
      	 
      
	 
      	
                  

              
	 
      	
                (Signature
      of individual Investor)

              

      

    

    

    
      
        	
                Aggregate
      Purchase Price for Debentures Purchased:

              	
                $  

              
	 
      	 
      
	
                Address
      for Notice:

              	
                  

              
	 
      	 
      
	 
      	
                  

              
	 
      	 
      
	 
      	
                  

              

      

    

    
      
         

      

      
        -28-

        
          

        

      

      
         

      

    

    Disclosure
Schedule

    to
Securities Purchase Agreement dated May ___, 2009

    between
Medgenics, Inc. and the investors signatory therein

     

    Defined
terms used herein are used as defined in the above referenced agreement. Any
disclosures made on this Disclosure Schedule shall be deemed a disclosure for
all purposes of the representations and warranties set forth in Section 4 of
this Agreement, without regard to the section reference numbers listed below.
Capitalized terms not defined herein are used herein as defined in this
Agreement.

     

    4.1          Medgenics
Medical Israel Ltd. a company formed under the laws of the State of Israel
(“MMI”), is the Company’s sole Subsidiary. The name of the Subsidiary was
changed in March 2006 from Biogenics, Ltd.

     

    4.3          The
Company has 500,000,000 authorized common shares. It has 119,282,000 common
shares outstanding. It is obligated to issue warrants to various
placements agents and finders (see disclosure at 4.19 below). The Company has
120,739,244 warrants outstanding, 17,092,227 of which have a nominal exercise
price; 68,316,649 of which have an exercise price of $0.071 per share;
21,040,113 have an exercise price of $0.117 per share; 7,127,452 of which have
an exercise price of $0.164 per share; 5,350,484 have an exercise price of
$0.194 per share; 1,218,144 have an
exercise price of $0.25 per share; and 594,175 have an exercise price of £0.10
per share. In addition, the Company has
adopted an employee stock option plan and has reserved 59,996,811 shares of
common stock for issuance thereunder.
41,071,753 options under the plan have been granted/issued. In addition the
Company has authorized 1,080,784 non plan options at an exercise price of $0.071
per share.

     

    Article
XII of the Company’s Amended and Restated Certificate of Amendment provides for
pre-emptive rights in certain circumstances, including the issuance of the
Debentures, the Warrants, the Debenture Shares and the Warrant Shares. The
Company is in the process of seeking shareholder approval to repeal Article XII
and the closing under this Agreement are contingent on receiving such
approval.

     

    The
Company has contractual obligations to issue warrants (in like tenor of the
Warrants) to the Placement Agent and the other placement agents described in the
PPM, as well as to other finders, brokers and agents that it may engage in
connection with the sale of the Debentures. In addition, the Company may be
obligated to issue warrants to those finders, brokers and agents with whom the
Company has “tail” agreements if investors referenced in those agreements
purchase Debentures. Such agreements are described in the AIM
Filings.

     

    The
Company has provided “piggyback” registration rights to purchasers of its common
stock in prior offerings. This registration rights are described in the AIM
Filings.

     

    The
Debentures will convert automatically upon the consummation of a Qualified
Transaction. The Conversion Price will be
the Qualified Transaction Price. Depending on what the Qualified Transaction
Price is, the conversion of the Debentures and the issuance of the Warrants
hereunder may result in the adjustment of the exercise price of certain of the
Company’s outstanding warrants.

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

    Article
XI of the Company’s Amended and Restated Certificate of Incorporation contains
provisions requiring shareholders who own beneficially 30% of more of the
outstanding stock of the Company to comply with certain notice and offer
provisions.

    

    4.8 (i)
As of May 13, 2009, the Company has past due account payables of $938,453, of
which $677,610 are past due 90 days or more.

    

    4.8(ii)
The Company recently instituted a Warrant Repricing Program (in December 2008
through February 2009) which gave warrant holders the opportunity to exercise
their warrants for cash at a price less than the exercise price stated in the
warrant, and to receive additional “bonus” warrants based on the total amount of
exercise price paid. The Warrant Repricing Program ended in mid-February 2009
and all currently outstanding warrants remain at
the exercise price originally stated as may be adjusted in accordance with the
terms of the particular warrant.

    

    4.8(vi)
In December 2008, the Board of Directors amended Section 6 of Article VI of its
Amended and Restated By-Laws.

    

    4.8
(viii) The Company has entered into engagement letters with the Placement Agent
and the other placement agents described in the PPM. In October 2008, the
Company entered into agreements with Capita IRG Trustees Limited and its
affiliates to provide for a system of trading depository interests representing
the Common Stock.

    

    4.10 The
Company filed 2007 taxes and has timely filed an extension with the Internal
Revenue Service with respect to its taxes for the year ended December 31,
2008.

    

    4.13
(none)

    

    4.14(a)
(none)

    

    4.14(b)
Non-Owned IP comprises those patent applications listed with Yissum as owner, in
the Medgenics Patent Portfolio.

     

    
      
        
          
            
              
                
                  
                    
                      	
                              Title

                            	 	
                              Application

                              Date/

                              Number

                            	 	
                              Owner

                            	 	
                              File Status

                            
	 
      	 	 
      	 	 
      	 	 
      
	
                              IN
      VITRO MICRO-

                            	 	
                              16-Nov-94

                            	 	 
      	 	
                              US
      5,888,720

                            
	
                              ORGANS

                            	 	
                              US
      08/341,409

                            	 	
                              Yissum

                            	 	
                              Issued

                            
	 
      	 	 
      	 	 
      	 	
                              30-Mar-99

                            
	 	 	 	 	 	 	 
	
                              IN
      VITRO MICRO-

                            	 	
                              17-Nov-94

                            	 	 
      	 	
                              Issued

                            
	
                              ORGANS

                            	 	
                              111676

                            	 	
                              Yissum

                            	 	
                              16-Mar-05

                            
	 
      	 	 
      	 	 
      	 	 
      
	
                              IN
      VITRO MICRO-

                            	 	
                              21-Dec-94

                            	 	
                              Yissum

                            	 	
                              Pending

                            
	
                              ORGANS

                            	 	
                              Europe
      03019593.7

                            	 	 
      	 	 
      
	 
      	 	 
      	 	 
      	 	 
      
	
                              IN
      VITRO MICRO-

                            	 	
                              09-Jun-00

                            	 	 
      	 	 
      
	
                              ORGANS,
      AND USES

                            	 	
                              US
      10/320,703

                            	 	
                              Yissum

                            	 	
                              Pending

                            
	
                              RELATED
      THERETO

                            	 	 
      	 	 
      	 	 
      

                    

                  

                

              

            

          

        

      

    

    

      
        
           

        

        
          
          

          
            

          

        

        
           

        

      

    

     

    
      
        
          
            
              
                
                  	
                          Title

                        	 	
                          Application

                          Date/

                          Number

                        	 	
                          Owner

                        	 	
                          File Status

                        
	 
      	 	 
      	 	 
      	 	 
      
	
                          IN
      VITRO MICRO-

                        	 	
                          2002-12-17

                        	 	 
      	 	 
      
	
                          ORGANS,
      AND USES

                        	 	
                          US
      10/320,717

                        	 	
                          Yissum

                        	 	
                          Pending

                        
	
                          RELATED
      THERETO

                        	 	 
      	 	 
      	 	 
      
	 
      	 	 
      	 	 
      	 	 
      
	
                          IN
      VITRO MICRO-

                        	 	
                          29-Oct-01

                        	 	 
      	 	 
      
	
                          ORGANS,
      AND USES

                        	 	
                          EP
      01204125.7

                        	 	
                          Yissum

                        	 	
                          Pending

                        
	
                          RELATED
      THERETO

                        	 	 
      	 	 
      	 	 
      
	 
      	 	 
      	 	 
      	 	 
      
	
                          IN
      VITRO MICRO-

                        	 	
                          03-Mar-03

                        	 	 
      	 	 
      
	
                          ORGANS,
      AND USES

                        	 	
                          US
      10/376,506

                        	 	
                          Yissum

                        	 	
                          Pending

                        
	
                          RELATED
      THERETO

                        	 	 
      	 	 
      	 	 
      
	 
      	 	 
      	 	 
      	 	 
      
	
                          IN
      VITRO MICRO-

                        	 	
                          23-Oct-01

                        	 	 
      	 	 
      
	
                          ORGANS,
      AND USES

                        	 	
                          Israel
      161472

                        	 	
                          Yissum

                        	 	
                          Pending

                        
	
                          RELATED
      THERETO

                        	 	 
      	 	 
      	 	 
      
	 
      	 	 
      	 	 
      	 	 
      
	
                          IN
      VITRO MICRO-

                        	 	
                          23-Oct-01

                        	 	 
      	 	 
      
	
                          ORGANS,
      AND USES

                        	 	
                          Canada
      2,464,460

                        	 	
                          Yissum

                        	 	
                          Pending

                        
	
                          RELATED
      THERETO

                        	 	 
      	 	 
      	 	 
      
	 
      	 	 
      	 	 
      	 	 
      
	
                          IN
      VITRO MICRO-

                        	 	
                          23-Oct-01

                        	 	 
      	 	 
      
	
                          ORGANS,
      AND USES

                        	 	
                          Japan
      2003-538352

                        	 	
                          Yissum

                        	 	
                          Pending

                        
	
                          RELATED
      THERETO

                        	 	 
      	 	 
      	 	 
      
	 
      	 	 
      	 	 
      	 	 
      
	
                          IN
      VITRO MICRO-

                        	 	
                          23-Oct-01

                        	 	 
      	 	 
      
	
                          ORGANS,
      AND USES

                        	 	
                          S.
      Korea 2004-7006068

                        	 	
                          Yissum

                        	 	
                          Pending

                        
	
                          RELATED
      THERETO

                        	 	 
      	 	 
      	 	 
      
	 
      	 	 
      	 	 
      	 	 
      
	
                          IN
      VITRO MICRO-

                        	 	
                          23-Oct-01

                        	 	 
      	 	 
      
	
                          ORGANS,
      AND USES

                        	 	
                          China
      01823906.4

                        	 	
                          Yissum

                        	 	
                          Pending

                        
	
                          RELATED
      THERETO

                        	 	 
      	 	 
      	 	 
      
	 
      	 	 
      	 	 
      	 	 
      
	
                          IN
      VITRO MICRO-

                        	 	 
      	 	 
      	 	
                          31-Jul-2008

                        
	
                          ORGANS,
      AND USES

                        	 	
                          23-Oct-01

                        	 	
                          Yissum

                        	 	
                          Issued

                        
	
                          RELATED
      THERETO

                        	 	
                          Singapore
      200402347-9

                        	 	 
      	 	
                          103757

                        
	 
      	 	 
      	 	 
      	 	 
      
	
                          IN
      VITRO MICRO-

                        	 	
                          23-Oct-01

                        	 	 
      	 	 
      
	
                          ORGANS,
      AND USES

                        	 	
                          India
      834/CHENP/2004

                        	 	
                          Yissum

                        	 	
                          Pending

                        
	
                          RELATED
      THERETO

                        	 	 
      	 	 
      	 	 
      
	 
      	 	 
      	 	 
      	 	 
      
	
                          METHOD
      OF INDUCING

                        	 	
                          22-Jun-00

                        	 	 
      	 	 
      
	
                          ANGIOGENESIS
      BY

                          MICRO-ORGANS

                        	 	
                          Canada
      2,377,541

                        	 	
                          Yissum

                        	 	
                          Pending

                        
	 
      	 	 
      	 	 
      	 	 
      
	
                          METHOD
      OF INDUCING

                        	 	 
      	 	 
      	 	 
      
	
                          ANGIOGENESIS
      BY

                        	 	
                          22-Jun-00

                        	 	 
      	 	 
      
	
                          MICRO-ORGANS

                        	 	
                          Europe
      00939024.6

                        	 	
                          Yissum

                        	 	
                          Pending

                        
	 
      	 	 
      	 	 
      	 	 
      
	
                          METHOD
      OF INDUCING

                        	 	 
      	 	 
      	 	 
      
	
                          ANGIOGENESIS
      BY

                        	 	
                          22-Jun-00

                        	 	
                          Yissum

                        	 	
                          Pending

                        
	
                          MICRO-ORGANS

                        	 	
                          Japan
      2001-506851

                        	 	 
      	 	 
      
	 
      	 	 
      	 	 
      	 	 
      
	
                          METHOD
      OF INDUCING

                        	 	
                          22-Jun-00

                        	 	 
      	 	 
      
	
                          ANGIOGENESIS
      BY

                        	 	
                          Europe
      03016266.3

                        	 	
                          Yissum

                        	 	
                          Pending

                        
	
                          MICRO-ORGANS

                        	 	 
      	 	 
      	 	 
      
	 
      	 	 
      	 	 
      	 	 
      
	
                          METHOD
      OF INDUCING

                        	 	
                          22-Jun-00

                        	 	 
      	 	 
      
	
                          ANGIOGENESIS
      BY

                        	 	
                          Canada
      2,435,411

                        	 	
                          Yissum

                        	 	
                          Pending

                        
	
                          MICRO-ORGANS

                        	 	 
      	 	 
      	 	 
      
	 
      	 	 
      	 	 
      	 	 
      
	
                          IN
      VITRO MICRO-

                        	 	
                          22-Jun-00

                        	 	 
      	 	 
      
	
                          ORGANS,
      AND USES

                        	 	
                          Australia
      2003271042

                        	 	
                          Yissum

                        	 	
                          Pending

                        
	
                          RELATED
      THERETO

                        	 	 
      	 	 
      	 	 
      

                

              

            

          

        

      

    

    

      
        
           

        

        
          
          

          
            

          

        

        
           

        

      

    

     

    
      
        
          
            
              
                
                  
                    
                      
                        	
                                Title

                              	 	
                                Application

                                Date/

                                Number

                              	 	
                                Owner

                              	 	
                                File Status

                              
	
                                EFFICIENT
      METHODS

                                FOR
      ASSESSING AND

                                VALIDATING

                                ECANDIDATE
      PROTEIN-

                                BASED
      THERAPEUTIC

                                MOLECULES
      ENCODED

                                BY
      NUCLEIC ACID

                                SEQUENCES
      OF

                                INTEREST

                              	 	
                                07-Ju1-02

                                US
      10/190,754

                              	 	
                                Yissum
      and Medgenics, Inc.

                              	 	
                                Pending

                              

                      

                    

                  

                

              

            

          

        

      

    

    

    4.14(c)
The Company is obligated to pay royalties and fees in connection with IP
according to the Yissum License Agreement.

    

    The
Subsidiary will be obligated to pay royalties to the Office of the Chief
Scientist of the Ministry of Industry, Trade and Labor of Israel. The royalties
are 3% of sales for the first three years and 3 1/2
% of sales thereafter. Such royalties are to be paid up to the total
amount of grants received. (The total received as of May 12, 2009 was
$3,441,562.)

    

    In
addition the Company has a non-exclusive license agreement with Baylor College
of Medicine dated January 25, 2007 for the use of its technologies BLG#03-037
“Large Scale Production of Helper-Dependent Adenoviral Vectors” and BLG#01-064,
“Bacterial Recombination for Generation of Helper-Dependent Adenoviral Vector”.
The Baylor Medical College license obligates the Company to pay an annual
maintenance fee of $20,000; a onetime payment of $75,000 upon FDA clearance or
non-US equivalent of the Biopump for therapeutic use; and $25,000 upon execution
of sublicenses that Medgenics executes for the Subject Technology.

    

    4.14(d)
The Yissum License Agreement grants the
right to use genetically modified microorgans to produce proteins except for the purpose to
cause angiogenesis, and grants the right to make microorgans from any tissue except from the pancreas,
liver or kidney.

    

    4.16 The
Company owes Hadasit Medical Services and Development, Ltd. (“Hadasit”) with which the
Company is conducting its current Phase I/II trial, approximately $193,000 under
its agreement. Hadasit has threatened to terminate the agreement as a result is
the Company’s failure to pay and pursue its other rights. To date, no litigation
proceeding has been commenced in this matter.

    

    4.17
(none)

    

    4.19 The
Company is obligated to pay the following fees and issue the following
securities in connection with the transactions contemplated by this Agreement.
We are obligated to pay a cash fee to one or more of the Placement Agents (as
defined in the PPM) equal to between 8% and 12% of the gross amount of
Debentures sold in this Private Placement and issue to the Placement Agents
warrants to purchase shares of Common Stock equal to between 4 % and 8% of the
total number of shares of Common Stock into which the Debentures
convert.

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

    4.24 The
Company uses certain office services provided
by affiliates of Joel Kanter, a director of the Company, and reimburses such
affiliates for the cost of providing such services. The Company may enter into a
lease or services agreement with such affiliates in the future. In addition, the
Company currently has obtained a letter of credit (which expires May 28, 2009)
from CIBC Trust Company (Bahamas) Limited (“CIBC”). CIBC is the trustee of
Settlement T-555 (the “CIBC
Trust”). The CIBC Trust was established for the benefit of various
descendants of (i) Helen and Henry Krakow, and (ii) Beatrice and Morris Kanter.
Joel Kanter, a director of the Company, is a discretionary beneficiary of the
CIBC Trust. The CIBC Trust provided security in
connection with such letter of credit and received Company securities as
compensation therefor.EXHIBIT 10.47

     

    
       

      FORM
OF CONVERTIBLE DEBENTURE

       

      NEITHER THE ISSUANCE AND SALE OF THIS
DEBENTURE NOR THE SECURITIES INTO WHICH THIS DEBENTURE IS CONVERTIBLE HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED
OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR
THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION
OF COUNSEL, IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED
UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID
ACT.

      

      Medgenics,
Inc.

      

      Convertible
Debenture

      

      
        
          	
                  Issuance
      Date: __________ _, 2009

                	
                  Original
      Principal Amount: U.S.
$________

                

        

      

      

      FOR VALUE RECEIVED, MEDGENICS,
INC., a Delaware corporation (the “Company”), hereby promises to pay to the order
of [NAME OF BUYER] or registered assigns (“Holder”) on the Maturity Date (as defined in
Section 1 below) the Original Principal Amount set forth above (the “Principal”) together with interest thereon (“Interest”) at the rate of ten percent (10%) per
annum (as the same may be increased pursuant to Section 3 below, the “Interest Rate”), in accordance with Section 3 below.
This Convertible Debenture (including all Convertible Debentures issued in
exchange or as a replacement for this Debenture, or upon transfer hereof, this
“Debenture”) is one of an issue of Convertible
Debentures (collectively, the “Debentures” and such other
Convertible Debentures, the “Other Debentures”) issued pursuant to the Securities
Purchase Agreement (as defined below). Certain capitalized terms are defined in
Section 23.

      

      (1)            MATURITY. Unless earlier converted in accordance with the
provisions of this Debenture, on the Maturity Date, the Holder shall surrender
this Debenture to the Company and the Company shall pay to the Holder an amount
in cash representing all outstanding Principal and accrued and unpaid Interest
thereon; provided that,
the Holder shall not be required to surrender this Debenture to the
Company and shall continue to have the right to convert this Debenture in
accordance with Section 4(a) of this Debenture (i) if a Default or Event of
Default shall exist on the Maturity Date, for so long as a Default or Event of
Default shall exist and (ii) if a Change of Control is publicly announced prior
to the Maturity Date, through the date that is ten (10) Business Days after the
consummation of a Change of Control. The “Maturity Date” shall be
________ __, 2011, as such date may be accelerated pursuant to Section
5.

      
        
           

        

        
           

          
            

          

        

        
           

        

      

       

      (2)           NO PREPAYMENT. This Debenture may not be prepaid.

      

      (3)          
INTEREST; INTEREST
RATE. Interest on this Debenture (i)
shall accrue during the period from and including the Issuance Date set forth
above (the “Issuance Date”) through and including the earlier of
the date on which (a) all outstanding Principal and accrued and unpaid Interest
thereon are paid in full and (b) this Debenture is converted in accordance with
the provisions hereof, (ii) shall be computed on the basis of a 365-day year and
actual days elapsed and (iii) shall be payable in arrears on (a) the last day of
each September, December, March and June (each, an “Interest Date”), commencing June 30, 2009, (b)
unless earlier converted in accordance with the provisions of this Debenture,
the Maturity Date and (c) if converted in accordance with the provisions of this
Debenture, as set forth in Section 4(d). Interest shall be payable in cash
(except as otherwise provided in Section 4(d)). During any period when an Event
of Default exists (the “Default
Period”), the Interest Rate
shall automatically increase by two percent (2%) per month up to a maximum of
eighteen percent (18%) per annum and all computations of interest during a
Default Period shall be based on such increased rate. In the event that such
Event of Default is subsequently cured, the Interest Rate shall revert back to
the pre-default rate effective from and after the date of such
cure.

      

      (4)           CONVERSION OF
NOTES. This Debenture shall be
convertible into shares of Common Stock of the Company, on the terms and
conditions set forth in this Section 4.

      

      (a)           Optional
Conversion. Subject to the
provisions of Section 4(d), at any time on or after the Issuance Date, the
Holder shall be entitled to convert all but not less than all of the Conversion
Amount (as defined below) into fully paid and nonassessable shares of Common
Stock in accordance with Section 4(d), at the Conversion Rate (as defined
below). The Company shall not issue any fraction of a share of Common Stock upon
any optional conversion. If the issuance would result in the issuance of a
fraction of a share of Common Stock, the Company shall round such fraction of a
share of Common Stock up to the nearest whole share. The Company shall pay any
and all taxes that may be payable with respect to the issuance and delivery of
Common Stock upon conversion of any Conversion Amount (other than taxes on or
measured by the net income of the Holder).

      

      (b)           Mandatory
Conversion. Upon the consummation of
a Qualified
Transaction at any time on or after the Issuance Date, the Holder
shall be required to convert all of the Conversion Amount (as defined below)
into fully paid and nonassessable shares of Common Stock in accordance with
Section 4(d), at the Conversion Rate (as defined below). The Company shall not
issue any fraction of a share of Common Stock upon any mandatory conversion. If
the issuance would result in the issuance of a fraction of a share of Common
Stock, the Company shall round such fraction of a share of Common Stock up to
the nearest whole share. The Company shall pay any and all taxes that may be
payable with respect to the issuance and delivery of Common Stock upon
conversion of any Conversion Amount (other than taxes on or measured by the net
income of the Holder). Upon the consummation of a Qualified Transaction, this
Debenture shall represent the right to receive Common Stock in accordance with
the provisions of this Debenture and shall cease to evidence
Indebtedness.

      

      (c)            Conversion
Rate. The number of shares of Common Stock
issuable upon conversion of any Conversion Amount pursuant to Section 4(a) or
4(b) shall be determined by dividing (x) such Conversion Amount by (y)
the Conversion Price (the “Conversion Rate”).

      
        
           

        

        
          -2-

          
            

          

        

        
           

        

      

       

      (i)          “Conversion Amount” means on
any date the outstanding Principal amount of this Debenture on such
date.

      

      (ii)       
 “Conversion Price”
shall be determined as follows: (i) prior to the consummation of a
Qualified Transaction, the Conversion Price shall be $0.12, (ii) upon the
consummation of a Qualified Transaction, (a) in the event the offering price or
merger consideration (as applicable) per share in the Qualified Transaction is
equal to or greater than $0.12, the Conversion Price shall be the lesser of
$0.12 and 40% of the offering price or merger consideration (as applicable) per
share in the Qualified Transaction, (b) in the event the offering price or
merger consideration (as applicable) per share in the Qualified Transaction is
equal to or greater than $0.07, but less than $0.12, the Conversion Price shall
be $0.07, (c) in the event the offering price or merger consideration (as
applicable) per share in the Qualified Transaction is less than $0.07, the
Conversion Price shall be the offering price or merger consideration (as
applicable) per share in the Qualified
Transaction, in each case subject to adjustment as provided
herein.

      

      (iii)       
“Qualified Acquisition”
means the acquisition of all of the issued and outstanding common stock
of the Company by a public company the common stock of which is traded on a U.S.
Stock Market or on the OTC Bulletin Board in a transaction where the holders of
the common stock of the Company receive, in exchange for such common stock,
common stock of such public company and, after giving effect to such transaction
and any capital-raising transaction completed prior to or at the time of such
transaction, such public company has available cash of not less than
$5,000,000.

      

      (iv)      
 “Qualified Merger”
means a merger or reverse merger between the Company and a public company
the common stock of which is traded on a U.S. Stock Market or on the OTC
Bulletin Board, the survivor of which is a public company having available cash
of not less than $5,000,000 after giving effect to such merger and any
capital-raising transaction completed prior to or at the time of such
merger.

      

      (v)         “Qualified Transaction” means
any of (i) an underwritten
public offering of the Company’s common stock on a U.S. Stock Market resulting
in gross proceeds to the Company of not less than $5,000,000, (ii) a Qualified
Merger or (iii) a Qualified Acquisition.

      

      (vi)        “U.S. Stock Market” means the NYSE,
the NYSE Amex or the Nasdaq Stock Market.

      
        
           

        

        
          -3-

          
            

          

        

        
           

        

      

      

      (d)         
Mechanics of
Conversion. To convert the
Conversion Amount into shares of Common Stock on any date (a “Conversion Date”), the Holder shall (A) transmit by
facsimile (or otherwise deliver) to the Company, for receipt on or prior to
11:59 p.m., Eastern Time, on such date, a copy of an executed notice of
conversion in the form attached hereto as Exhibit I (the “Conversion Notice”) and (B) surrender this Debenture to
a common carrier for delivery to the Company as soon as practicable on or
following such date (or provide to the Company an indemnification undertaking
in accordance with Section 15(b) in the case of the loss, theft or destruction
of this Debenture). On or before the second (2nd) Business Day following the date of
receipt of a Conversion Notice, the Company shall transmit by facsimile a
confirmation of receipt of such Conversion Notice to the Holder (and, if such
conversion occurs after a Qualified Transaction, the Company’s transfer agent,
(the “Transfer
Agent”)). On or before the fifth (5th) Business
Day following the date of receipt of a Conversion Notice (the “Share Delivery
Date”), the Company shall, or shall cause the
Transfer Agent to, issue and deliver to the address specified in the Conversion
Notice, a certificate, registered in the name of the Holder or its designee, for
the number of shares of Common Stock to which the Holder shall be entitled. Any
interest accrued since the Interest Payment Date immediately preceding the
Conversion Date on any Conversion Amount converted hereunder shall be added to
Principal and shall increase the Conversion Amount as of the Conversion Date.
Any other accrued and unpaid interest shall be paid to the Holder on the
Conversion Date. The Person or Persons entitled to receive the shares of Common
Stock issuable upon a conversion of this Debenture shall be treated for all
purposes as the record holder or holders of such shares of Common Stock on the
Conversion Date.

      

      (5)          
RIGHTS UPON EVENT OF
DEFAULT.

      

      (a)         
Event of
Default. The occurrence of any one
or more of the following events (regardless of the reason therefor) shall
constitute an “Event of
Default” hereunder:

      

      (i)         
the failure of the Company to make any payment of Principal on this Debenture as
and when due and payable;

      

      (ii)         the
failure of the Company to make any payment of Interest or other amounts as and
when due and payable under this Debenture or any other Transaction Document or
any other agreement, document, certificate or other instrument delivered in
connection with the transactions contemplated hereby and thereby to which the
Holder is a party, and such failure shall continue for a period of ten (10)
Business Days;

      

      (iii)        The
failure of the Company to observe or perform any other term, covenant, or
agreement contained in this Debenture and, in the case of a failure which is
susceptible of cure, such failure shall have continued unremedied for a period
of 20 Business Days;

      

      (iv)        any
representation or warranty made by the Company in any Transaction Document shall
prove to have been incorrect or misleading (whether because of misstatement or
omission) in any material respect when made;

      

      (v)        
any event or condition occurs that results in any Material Indebtedness becoming
or being declared to be due prior to its scheduled maturity or that enables or
permits (with or without the giving of notice, the lapse of time or both) the
holder of Material Indebtedness or any trustee or agent on its or their behalf
to cause any Material Indebtedness to become due, or to require the prepayment,
repurchase, redemption or defeasance thereof, prior to its scheduled maturity
(in each case after giving effect to any applicable grace
period);

      
        
           

        

        
          -4-

          
            

          

        

        
           

        

      

      

      (vi)        the
Company or any of its Subsidiaries shall (A) make an assignment for the benefit
of creditors, (B) admit in writing its inability to pay its debts as they become
due, (C) file a voluntary petition in bankruptcy, (D) file any petition or
answer seeking for itself any reorganization, arrangement, composition,
readjustment of debt, liquidation or dissolution or similar relief under any
present or future statute, law or regulation of any jurisdiction, (E) petition
or apply to any tribunal for any receiver, custodian or any trustee for any
substantial part of its property, (F) be the subject of any such proceeding
filed against it which remains unstayed or undismissed for a period of 60 days,
(G) file any answer admitting or not contesting the material allegations of any
such petition filed against it or any order, judgment or decree approving such
petition in any such proceeding, (H) seek, approve, consent to, or acquiesce in
any such proceeding, or in the appointment of any trustee, receiver,
sequestrator, custodian, liquidator, or fiscal agent for it, or any substantial
part of its property, or, if an order is entered appointing any such trustee,
receiver, custodian, liquidator or fiscal agent, such order remains in effect
for 60 days, or (I) take any formal action for the purpose of effecting any of
the foregoing or looking to the liquidation or dissolution of the Company or any
such Subsidiary;

      

      (vii)     
 an (A) order or decree is entered by a court having jurisdiction (1)
adjudging the Company or any of its Subsidiaries bankrupt or insolvent, (2)
approving as properly filed a petition seeking reorganization, liquidation,
arrangement, adjustment or composition of or in respect of the Company or any of
its Subsidiaries under the bankruptcy or insolvency laws of any jurisdiction,
(3) appointing a receiver, liquidator, assignee, trustee, custodian,
sequestrator (or other similar official) of the Company or any of its
Subsidiaries or of any substantial part of the property of any thereof, or (4)
ordering the winding up or liquidation of the affairs of the Company or any of
its Subsidiaries, and any such decree or order continues unstayed and in effect
for a period of 60 days or (B) order for relief is entered under the bankruptcy
or insolvency laws of any jurisdiction;

      

      (viii)     
The failure of the Company to observe or perform any other term, covenant, or
agreement contained in any
Transaction Document to which it is a party and, in the case of a failure which
is susceptible of cure, such failure shall have continued unremedied for a
period of 20 Business Days after the earliest of (A) the Company’s obtaining
actual knowledge of such failure, (B) the date on which the Company in the
exercise of reasonable diligence would have obtained actual knowledge of such
failure and (C) the Company’s receipt of written notice of such failure from the
Holder or any holder of Other Debentures;

      

      (ix)       
Judgments or decrees against the Company or any of its Subsidiaries aggregating
in excess of $250,000 (unless adequately insured by a solvent unaffiliated
insurance company which has acknowledged coverage) shall remain unpaid, unstayed
on appeal, undischarged, unbonded or undismissed for a period of 30
days;

      

      (x)          any
Event of Default (as defined in the Other Debentures) occurs with respect to any
Other Debentures; and

      
        
           

        

        
          -5-

          
            

          

        

        
           

        

      

      

      (xi)        
the Company fails either to (A) register the Common Stock under the Securities
Exchange Act of 1934, as amended, and cause the Common Stock to be listed on a
U.S. Stock Market or (B) consummate a Qualified Transaction, in either case
within 12 months after the date as of which $2,500,000 in aggregate principal
amount of Debentures have been sold.

      

      (xii)     
 the Company makes any severance payments to an employee, whether pursuant
to contract, applicable law or otherwise, unless such severance payments are
adequately covered by insurance issued by a solvent unaffiliated insurance
company which has acknowledged coverage; provided that
from and after the date on which the Company shall have issued Debentures
to Investors (as defined in the Securities Purchase Agreement) in an aggregate
principal amount of at least $400,000, this clause (xii) shall terminate and be
of no further force and effect.

      

      (b)         
Remedies. Upon the occurrence of an Event of Default
(other than an event described in Section 5(a)(vi) or (vii)), and at any time
thereafter during the continuance of such event, the Holder may, by notice to
the Company, declare the Principal then outstanding to be due and payable in
whole (or in part, in which case any principal not so declared to be due and
payable may thereafter be declared to be due and payable) and thereupon the
Principal so declared to be due and payable, together with accrued Interest
thereon and all fees and other obligations of the Company accrued under the
Transaction Documents, shall become due and payable immediately , without
presentment, demand, protest or other notice of any kind, all of which are
hereby waived by the Company; and in case of any event described in Section
5(a)(vi) or (vii), the Principal then outstanding, together with accrued
Interest thereon and all fees and other obligations of the Company accrued under
the Transaction Documents shall automatically become due and payable, without
presentment, demand, protest or other notice of any kind, all of which are
hereby waived by the Company.

      

      (6)          
RIGHTS UPON
FUNDAMENTAL TRANSACTION AND CHANGE OF CONTROL. Unless otherwise consented to by the Required
Holders (which consent shall not be unreasonably withheld or delayed), the
Company shall not become party to a Fundamental Transaction unless (i) the
Successor Entity assumes in writing all of the obligations of the Company under
this Debenture and the other Transaction Documents in accordance with the
provisions of this Section 6 pursuant to written agreements approved by the
Required Holders prior to the consummation of such Fundamental Transaction (such
approval not to be unreasonably withheld or delayed), including agreements to
deliver to each holder of Debentures in exchange for such Debentures a security
of the Successor Entity evidenced by a written instrument substantially similar
in form and substance to the Debentures (which shall include having a principal
amount and interest rate equal to the principal amounts and the interest rates
of the Debentures held by such holders and having a ranking on parity with the
Debentures), and otherwise satisfactory to the Required Holders and (ii) the
Successor Entity (including its Parent Entity) is a publicly traded corporation
whose common stock is quoted on or listed for trading on an U.S. Stock Market.
Upon the occurrence of any Fundamental Transaction, the Successor Entity shall
succeed to and be substituted for, may exercise every right and power of, and
shall assume all of the obligations of, the Company under this Debenture with
the same effect as if such Successor Entity had been named as the Company
herein. Upon consummation of the Fundamental Transaction, the Successor Entity
shall deliver to the Holder confirmation that upon conversion of this Debenture
at any time after such consummation, in lieu of the shares of the Company’s
Common Stock purchasable upon the conversion of the Debentures prior to such
Fundamental Transaction, there shall be issued shares of publicly traded common
stock (or their equivalent) of the Successor Entity, as adjusted in accordance
with the provisions of this Debenture. The provisions of this Section shall
apply similarly and equally to successive Fundamental Transactions and shall be
applied without regard to any limitations on the conversion of this
Debenture.

      
        
           

        

        
          -6-

          
            

          

        

        
           

        

      

      

      (7)         
 RIGHTS UPON
OTHER CORPORATE EVENTS. In addition
to and not in substitution for any other rights hereunder, prior to the
consummation of any Fundamental Transaction pursuant to which holders of shares
of Common Stock are entitled to receive securities or other assets with respect
to or in exchange for shares of Common Stock (a “Corporate Event”), the Company shall make appropriate
provision to insure that the Holder will thereafter have the right to receive
upon a conversion of this Debenture, (i) in addition to the shares of Common
Stock receivable upon such conversion, such securities or other assets to which
the Holder would have been entitled with respect to such shares of Common Stock
had such shares of Common Stock been held by the Holder upon the consummation of
such Corporate Event (without taking into account any limitations or
restrictions on the convertibility of this Debenture) or (ii) in lieu of the
shares of Common Stock otherwise receivable upon such conversion, such
securities or other assets received by the holders of shares of Common Stock in
connection with the consummation of such Corporate Event in such amounts as the
Holder would have been entitled to receive had this Debenture initially been
issued with conversion rights for the form of such consideration (as opposed to
shares of Common Stock) at a conversion rate for such consideration commensurate
with the Conversion Rate. Provision made pursuant to the preceding sentence
shall be in a form and substance satisfactory to the Required Holders. The
provisions of this Section shall apply similarly and equally to successive
Corporate Events and shall be applied without regard to any limitations on the
conversion or redemption of this Debenture.

      

      (8)         
 ADJUSTMENT OF
CONVERSION PRICE UPON SUBDIVISION OR COMBINATION OF COMMON
STOCK. If the Company at any time on
or after the Closing Date subdivides (by any stock split, stock dividend,
recapitalization or otherwise) one or more classes of its outstanding shares of
Common Stock into a greater number of shares, the Conversion Price in effect
immediately prior to such subdivision will be proportionately reduced. If the
Company at any time on or after the Closing Date combines (by combination,
reverse stock split or otherwise) one or more classes of its outstanding shares
of Common Stock into a smaller number of shares, the Conversion Price in effect
immediately prior to such combination will be proportionately
increased.

      

      (9)          
NON-CIRCUMVENTION. The Company hereby covenants and agrees that
the Company will not, by amendment of its Certificate of Incorporation, Bylaws
or through any reorganization, transfer of assets, consolidation, merger, scheme
of arrangement, dissolution, issue or sale of securities, or any other voluntary
action, avoid or seek to avoid the observance or performance of any of the terms
of this Debenture, and will at all times in good faith carry out all of the
provisions of this Debenture and take all action as may be required to protect
the rights of the Holder of this Debenture.

      
        
           

        

        
          -7-

          
            

          

        

        
           

        

      

       

      (10)        
RESERVATION OF AUTHORIZED
SHARES.

      

      (a)         
Reservation. The Company
initially shall reserve out of its authorized and unissued Common Stock a number
of shares of Common Stock for each of the Debentures equal to at least 110% of
the Conversion Rate with respect to the Conversion Amount of each such Debenture
as of the Issuance Date. So long as any of the Debentures are outstanding, the
Company shall take all action necessary to reserve and keep available out of its
authorized and unissued Common Stock, solely for the purpose of effecting the
conversion of the Debentures, 110% of the number of shares of Common Stock as
shall from time to time be necessary to effect the conversion of all of the
Debentures then outstanding (the “Required
Reserve Amount”). The initial number of shares of Common Stock reserved
for conversions of the Debentures and each increase in the number of shares so
reserved shall be allocated pro rata among the holders of the Debentures based
on the principal amount of the Debentures held by each holder at the Closing (as
defined in the Securities Purchase Agreement) or as increased in accordance
herewith, as the case may be (the “Authorized
Share Allocation”). In the event that a holder shall sell or otherwise
transfer any of such holder’s Debentures, each transferee shall be allocated a
pro rata portion of such holder’s Authorized Share Allocation. Any shares of
Common Stock reserved and allocated to any Person which ceases to hold any
Debentures shall be allocated to the remaining holders of Debentures, pro rata
based on the principal amount of the Debentures then held by such
holders.

      

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

      

      (11)        
VOTING RIGHTS. The Holder shall
have no voting rights as the holder of this Debenture, except as required by
law, including but not limited to the General Corporation Law of Delaware, and
as expressly provided in this Debenture.

       

      (12)        
COVENANTS.

      

      (a)           Rank. The Indebtedness evidence by
this Debenture shall rank pari passu
with all Other Debentures.

      
        
           

        

        
          -8-

          
            

          

        

        
           

        

      

      

      (b)          Incurrence of Indebtedness. So long as
this Debenture is outstanding, the Company shall not, and the Company shall not
permit any of its Subsidiaries to, directly or indirectly, incur or
guarantee, assume or suffer to exist any Indebtedness, other than the (i)
Indebtedness evidenced by this Debenture and the Other Debentures and (ii) other
unsecured Indebtedness in a principal amount not to exceed $__ at any one time
outstanding.

      

      (c)         
Existence of
Liens. So long as this Debenture is
outstanding, the Company shall not, and the Company shall not permit any of its
Subsidiaries to, directly or indirectly, grant or suffer to exist any Lien on
any property or assets (including accounts and contract rights) of the Company
or any of its Subsidiaries, other than Permitted Liens.

      

      (d)         
Restricted
Payments. The Company will not, and
will not permit any of its Subsidiaries to, (i) declare or make, or agree to pay
for or make, directly or indirectly, any Restricted Payment, or (ii) be or
become liable in respect of any obligation (contingent or otherwise) to
purchase, redeem, retire, acquire or make any other payment in respect of its
equity securities or any option, warrant (other than the Warrants and other
options and warrants of the Company outstanding on the date hereof, including
the payment of cash in lieu of the issuance of fractional shares in respect of
any of the foregoing) or other right to acquire any such shares of equity
securities, except that any Subsidiary of the Company may declare and pay
dividends with respect to its equity securities to the Company.

      

      (e)          Sale of Stock. The Company shall not, so long as this
Debenture is outstanding, sell or offer for sale any Common Stock for a price of
less than $0.03 per share without the prior written consent of the Required
Holders, which consent may be withheld by them in their sole
discretion.

      

      (13)        
AMENDMENTS TO TERMS OF
DEBENTURES. The affirmative vote at
a meeting duly called for such purpose or the written consent without a meeting
of the Required Holders shall be required for any change or amendment to terms
of this Debenture or the Other Debentures. Any change or amendment so approved
shall be in writing and shall be binding upon all existing and future holders of
this Debenture and any Other Debentures.

      

      (14)        TRANSFER. Subject to compliance with all applicable
securities laws. this Debenture may be offered, sold, assigned or transferred by
the Holder without the consent of the Company. This Debenture may be transferred
in full, but not in part.

      

      (15)       
 REISSUANCE OF
THIS DEBENTURE.

      

      (a)         
Transfer. If this Debenture is to be transferred, the
Holder shall surrender this Debenture to the Company, whereupon the Company will
forthwith issue and deliver upon the order of the Holder a new Debenture (in
accordance with Section 15(c)), registered as the Holder may request,
representing the outstanding Principal being transferred by the
Holder.

      

      (b)        
 Lost,
Stolen or
Mutilated Debenture. Upon receipt by
the Company of evidence reasonably satisfactory to the Company of the loss,
theft, destruction or mutilation of this Debenture, and, in the case of loss,
theft or destruction, of any indemnification undertaking by the Holder to the
Company in customary form and, in the case of mutilation, upon surrender and
cancellation of this Debenture, the Company shall execute and deliver to the
Holder a new Debenture (in accordance with Section 15(c)) representing the
outstanding Principal.

      
        
           

        

        
          -9-

          
            

          

        

        
           

        

      

       

      (c)         
Issuance of New
Debentures. Whenever the Company is
required to issue a new Debenture pursuant to the terms of this Debenture, such
new Debenture (i) shall be of like tenor with this Debenture, (ii) shall
represent, as indicated on the face of such new Debenture, the Principal
remaining outstanding together with accrued and unpaid Interest thereon, (iii)
shall have an issuance date, as indicated on the face of such new Debenture,
which is the same as the Issuance Date of this Debenture and (iv) shall have the
same rights and conditions as this Debenture.

      

      (16)      
 CONSTRUCTION;
HEADINGS. The Company and all the
Investors (as defined in the Securities Purchase Agreement) having been
represented by counsel in connection with this Debenture and the transactions
contemplated hereby and having had adequate opportunity to negotiate the terms
hereof, the principle that agreements are to be construed against the party
drafting same shall be inapplicable. The headings of this Debenture are for
convenience of reference and shall not form part of, or affect the
interpretation of, this Debenture.

      

      (17)       
 FAILURE OR
INDULGENCE NOT WAIVER. No failure or
delay on the part of the Holder in the exercise of any power, right or privilege
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any such power, right or privilege preclude other or further
exercise thereof or of any other right, power or privilege.

      

      (18)         DISPUTE
RESOLUTION. In the case of a dispute
as to the arithmetic calculation of the Conversion Rate, the Company shall
submit the disputed arithmetic calculations via facsimile within two (2)
Business Days after (i) receipt of the Conversion Notice (in the case of an
optional conversion pursuant to Section 4(a)), (ii) a Qualified Transaction (in
the case of a mandatory conversion pursuant to Section 4(b)) or (iii) such other
event giving rise to such dispute, as the case may be, to the Holder. If the
Holder and the Company are unable to agree upon such determination or
calculation within one (1) Business Day thereafter, then the Company shall,
within two (2) Business Days thereafter submit via facsimile the disputed
arithmetic calculation of the Conversion Rate to the Company’s independent,
outside accountant. The Company, at the Company’s expense, shall cause the
accountant to perform the determinations or calculations and notify the Company
and the Holder of the results no later than five (5) Business Days from the time
such accountant receives the disputed determinations or calculations. Such
accountant’s determination or calculation shall be binding upon all parties
absent demonstrable error.

      

      (19)        NOTICES;
PAYMENTS.

      

      (a)        
 Notices. Whenever notice is required to be given under
this Debenture, unless otherwise provided herein, such notice shall be given in
accordance with Section 9.4 of the Securities Purchase Agreement. The Company
shall provide the Holder with prompt written notice of all actions taken
pursuant to this Debenture, including a reasonably detailed description of such
action and the reason therefor. Without limiting the generality of the
foregoing, the Company will give written notice to the Holder (i) as soon as
practicable upon any adjustment of the Conversion Price, setting forth in
reasonable detail, and certifying, the calculation of such adjustment and (ii)
at least twenty days prior to the date on which the Company closes its books or
takes a record for determining rights to vote with respect to any Fundamental
Transaction, dissolution or liquidation, provided in each case that such
information shall be made known to the public prior to or in conjunction with
such notice being provided to the Holder.

      
        
           

        

        
          -10-

          
            

          

        

        
           

        

      

      

      (b)         
Payments. Whenever any payment of cash is to be made by
the Company to any Person pursuant to this Debenture, such payment shall be made
in lawful money of the United States of America by a check drawn on the account
of the Company and sent via overnight courier service to such Person at such
address as previously provided to the Company in writing (which address, in the
case of each of the Investors, shall initially be as set forth on the applicable
signature page attached to the Securities Purchase Agreement); provided that
the Holder may elect to receive a payment of cash via wire transfer of
immediately available funds by providing the Company with prior written notice
setting out such request and the Holder’s wire transfer instructions. Whenever
any amount expressed to be due by the terms of this Debenture is due on any day
which is not a Business Day, the same shall instead be due on the next
succeeding day which is a Business Day and, in the case of any Interest Date
which is not the date on which this Debenture is paid in full, the extension of
the due date thereof shall not be taken into account for purposes of determining
the amount of Interest due on such date.

      

      (20)        
CANCELLATION. After all Principal, accrued Interest and other
amounts at any time owed on this Debenture have been paid in full, this
Debenture shall automatically be deemed canceled, shall be surrendered to the
Company for cancellation and shall not be reissued.

      

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

      

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

      

      (23)        
CERTAIN
DEFINITIONS. For purposes of this
Debenture, the following terms 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 and the nation of Israel are authorized or required by law to
remain closed.

      

      (b)         
 “Capital Lease
Obligations” of any Person means the obligations of such Person to pay
rent or other amounts under any lease of (or other arrangement conveying the
right to use) real or personal property, or a combination thereof, which
obligations are required to be classified and accounted for as capital leases on
a balance sheet of such Person under GAAP, and the amount of such obligations
shall be the capitalized amount thereof determined in accordance with
GAAP.

      
        
           

        

        
          -11-

          
            

          

        

        
           

        

      

      

      (c)         
 “Change of Control”
means any Fundamental Transaction other than (A) any reorganization,
recapitalization or reclassification of the Common Stock in which holders of the
Company’s voting power immediately prior to such reorganization,
recapitalization or reclassification continue after such reorganization,
recapitalization or reclassification to hold publicly traded securities and,
directly or indirectly, the voting power of the surviving entity or entities
necessary to elect a majority of the members of the board of directors (or their
equivalent if other than a corporation) of such entity or entities, or (B)
pursuant to a migratory merger effected solely for the purpose of changing the
jurisdiction of incorporation of the Company.

      

      (d)          
“Closing Date” shall
have the meaning set forth in the Securities Purchase Agreement, which is the
date the Company initially issued this Debenture pursuant to the terms of the
Securities Purchase Agreement.

      

      (e)          
 “Common Stock”
means the shares of common stock, par value $0.0001 per share, of the
Company.

      

      (f)           
“Default” means an event
which with the giving of notice and/or the passage of time would result in an
Event of Default.

       

      (g)          
“Event of Default” is
defined in Section 5(a).

      

      (h)          
“Fundamental Transaction”
means that the Company shall, directly or indirectly, in one or more
related transactions, (i) consolidate or merge with or into (whether or not the
Company is the surviving corporation) another Person, or (ii) sell, assign,
transfer, convey or otherwise dispose of all or substantially all of the
properties or assets of the Company to another Person, or (iii) allow another
Person to make a purchase, tender or exchange offer that is accepted by the
holders of more than the 50% of the outstanding shares of Common Stock (not
including any shares of Common Stock held by the Person or Persons making or
party to, or associated or affiliated with the Persons making or party to, such
purchase, tender or exchange offer), or (iv) consummate a stock purchase
agreement or other business combination (including, without limitation, a
reorganization, recapitalization, spin-off or scheme of arrangement) with
another Person whereby such other Person acquires more than the 50% of either
the outstanding shares of Common Stock or the outstanding shares of Common Stock
(not including any shares of Common Stock held by the other Person or other
Persons making or party to, or associated or affiliated with the other Persons
making or party to, such stock purchase agreement or other business combination)
or (v) reorganize, recapitalize or reclassify its Common Stock (other than a
reverse or forward stock split) or (vi) any “person” or “group”
(as these terms are used for purposes of Sections 13(d) and 14(d) of the
Exchange Act) is or shall become the “beneficial owner” (as defined in Rule
13d-3 under the Exchange Act), directly or indirectly, of 50% of the aggregate
ordinary voting power represented by issued and outstanding Common Stock; provided however,
that a Qualified Transaction shall not constitute a Fundamental
Transaction.

      

      (i)            “GAAP” means United States generally accepted
accounting principles, consistently applied.

      
        
           

        

        
          -12-

          
            

          

        

        
           

        

      

      

      (j)           
“Guarantee”
of or by any Person (the “guarantor”)
means any obligation, contingent or otherwise, of the guarantor guaranteeing or
having the economic effect of guaranteeing any Indebtedness or other obligation
of any other Person (the “primary
obligor”) in any manner, whether directly or indirectly, and
including any obligation of the guarantor, direct or indirect, (a) to purchase
or pay (or advance or supply funds for the purchase or payment of) such
Indebtedness or other obligation or to purchase (or to advance or supply funds
for the purchase of) any security for the payment thereof, (b) to purchase or
lease property, securities or services for the purpose of assuring the owner of
such Indebtedness or other obligation of the payment thereof, (c) to maintain
working capital, equity capital or any other financial statement condition or
liquidity of the primary obligor as to enable the primary obligor to pay such
Indebtedness or other obligation or (d) as an account party in respect of any
letter of credit or letter of guaranty issued to support such Indebtedness or
obligation, provided
that the term “Guarantee” shall not include endorsements for collection
or deposit in the ordinary course of business. The amount of any Guarantee of a
Person shall be deemed to be an amount equal to the stated or determinable
amount of the primary obligation in respect of which such Guarantee is given or,
if not stated or determinable, the maximum reasonably anticipated liability in
respect thereof as determined by such Person in good faith.

      

      (k)          
“Indebtedness” means of
any Person means, without duplication, (a) all obligations of such Person for
borrowed money or with respect to deposits or advances of any kind, (b) all
obligations of such Person evidenced by bonds, debentures, notes or similar
instruments, (c) all obligations of such Person upon which interest charges are
customarily paid, (d) all obligations of such Person under conditional sale or
other title retention agreements relating to property acquired by such Person,
(e) all obligations of such Person in respect of the deferred purchase price of
property or services (excluding current accounts payable incurred in the
ordinary course of business), (f) all Indebtedness of others secured by (or for
which the holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any Lien on property owned or acquired by such
Person, whether or not the Indebtedness secured thereby has been assumed, (g)
all Guarantees by such Person of Indebtedness of others, (h) all Capital Lease
Obligations of such Person, (i) all obligations, contingent or otherwise, of
such Person as an account party in respect of letters of credit and letters of
guaranty, and (j) all obligations, contingent or otherwise, of such Person in
respect of bankers’ acceptances. The Indebtedness of any Person shall include
the Indebtedness of any other entity (including any partnership in which such
Person is a general partner) to the extent such Person is liable therefor as a
result of such Person’s ownership interest in or other relationship with such
entity, except to the extent the terms of such Indebtedness provide that such
Person is not liable therefor.

      

      (1)          
“Lien” means any mortgage, pledge,
hypothecation, assignments deposit or preferential arrangement, encumbrance,
lien (statutory or other), or other security
agreement or security interest of any kind or nature whatsoever,
including any conditional sale or other title retention
agreement and any capital or financing lease having substantially the
same economic effect as any of the foregoing.

      

      (m)        
 “Material Indebtedness”
means, on any date, with respect to the Company, any of its Subsidiaries
or any combination thereof, Indebtedness (other than Indebtedness under the
Transaction Documents) in an aggregate principal amount exceeding
$250,000.

      
        
           

        

        
          -13-

          
            

          

        

        
           

        

      

      

       (n)         
“Parent Entity” of a
Person means an entity that, directly or indirectly, controls the applicable
Person and whose common stock or equivalent equity security is quoted or listed
on a U.S. Stock Market, or, if there is more than one such Person or Parent
Entity, the Person or Parent Entity with the largest public market
capitalization as of the date of consummation of the Fundamental
Transaction.

      

      (o)          
“Permitted Liens” means
(i) any Lien for taxes not yet due or delinquent or being contested in good
faith by appropriate proceedings diligently
conducted for which adequate reserves have been established in
accordance with GAAP, provided that
enforcement of such Lien is stayed pending such contest, (ii) landlords’,
carriers’, warehousemen’s, mechanics’,
workers’, suppliers’, materialmen’s, repairmen’s or other like Liens arising in
the ordinary course of business with respect to a liability that is not yet due
or delinquent or that are being contested in good faith by appropriate
proceedings diligently conducted and with respect to which adequate reserves
have been established in accordance with GAAP, provided that enforcement of such
Lien is stayed pending such contest, (iii) Liens (if any) securing the Company’s
obligations under the Debentures, (iv) leases or subleases and licenses and
sublicenses granted to others in the ordinary course of the Company’s business,
not interfering in any material respect with the business of the Company and its
Subsidiaries taken as a whole, (v) Liens in favor of customs and revenue
authorities arising as a matter of law to secure payments of custom duties in
connection with the importation of goods, (vi) judgment Liens in respect of
judgments that would not cause an Event of Default under Section 5(a)(ix), (vii)
Liens arising or pledges or deposits made in the ordinary course of business in
connection with workers’ compensation, unemployment insurance and other social
security or public liability laws or similar legislation, other than any Lien
imposed by the Employee Retirement Income Security Act of 1974, as amended,
(viii) customary rights of set off, bankers’ liens, refunds or charge backs,
under deposit agreements, the Uniform Commercial Code or common law, of banks or
other financial institutions where the Company or any of its Subsidiaries
maintains deposits (other than deposits intended as cash collateral) in the
ordinary course of business, (ix) Liens which arise under Article 4 of the
Uniform Commercial Code in any applicable jurisdictions on items in collection
and documents and proceeds related thereto and (x) deposits of cash with the
owner or lessor of premises leased and operated by the Company or any of its
Subsidiaries in the ordinary course of business to secure the performance by the
Company or such Subsidiary of its obligations under the terms of the lease of
such premises.

      

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

      

      (q)           “Required Holders” means the
holders of Debentures representing at least 51% of the aggregate Principal
amount of the Debentures then outstanding.

      

      (r)          
 “Restricted Payments”
means, as to any Person, any dividend or other distribution by such
Person (whether in cash, securities or other property) with respect to any
shares or units of any class of equity securities of such Person, or any payment
(whether in cash, securities or other property), including any sinking fund or
similar deposit, on account of the purchase, redemption, retirement,
acquisition, cancellation or termination of any such shares or units or any
option, warrant or other right to acquire any such shares or
units.

      
        
           

        

        
          -14-

          
            

          

        

        
           

        

      

      

      (s)         
 “SEC” means the
United States Securities and Exchange Commission.

      

      (t)           
“Securities Purchase Agreement”
means that certain securities purchase agreement by and among the Company
and the initial holders of the Debentures pursuant to which the Company issued
the Debentures.

      

      (u)          
“Successor Entity” means
the Person, which may be the Company, formed by, resulting from or surviving any
Fundamental Transaction or the Person with which such Fundamental Transaction
shall have been made, provided that
if such Person is not a publicly traded entity whose common stock or
equivalent equity security is quoted or listed for trading on a U.S. Stock
Market, Successor Entity shall mean such Person’s Parent Entity.

      

      (v)           “Transaction Documents” has
the meaning ascribed to such term in the Securities Purchase
Agreement.

      

      (w)         
“Warrants” has the
meaning ascribed to such term in the Securities Purchase Agreement, and shall
include all warrants issued in exchange therefor or replacement
thereof.

      

      [Signature
Page Follows]

      
        
           

        

        
          -15-

          
            

          

        

        
           

        

      

      

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

      

      
        
          
            	
                    MEDGENICS,
      INC.

                  
	 
      	 
      
	
                    By:

                  	 
      
	 
      	
                    Name:

                  
	 
      	
                    Title:

                  

          

        

      

      
         

        [Signature
Page to Convertible Debenture]

         

        
          
            
               

            

            
               

              
                

              

            

            
               

            

          

        

        

      

      EXHIBIT
I

      

      MEDGENICS,
INC.

      CONVERSION
NOTICE

       

      Reference
is made to the Convertible Debenture (the “Debenture”)
issued to the undersigned by Medgenics, Inc. (the “Company”).
In accordance with and pursuant to the Debenture, the undersigned
hereby elects to convert the Conversion Amount (as defined in the Debenture) of
the Debenture (as indicated below) into shares of Common Stock (as defined in
the Debenture), as of the date specified below.

       

      

      
        
          
            
              	
                      Date of Conversion:

                    	
                       

                    

            

          

        

      

       

      
        
          
            
              	
                      Aggregate Conversion Amount to be converted:

                    	
                       

                    

            

          

        

      

       

      Please confirm the following information:

      

      
        
          
            
              	
                      Conversion Price:

                    	
                       

                    

            

          

        

      

       

      
        
          
            
              	
                      Number of shares of Common Stock to be issued:

                    	
                       

                    

            

          

        

      

       

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

      

      
        
          
            
              
                
                  
                    
                      
                        	
                                Issue to:

                              	  
	 	 
	  	  
	 	 
	  	  

                      

                    

                  

                

              

            

          

        

      

      

      
        
          
            	
                    Facsimile
      Number:

                  	
                     

                  

          

        

        

        
          
            	
                    Authorization:

                  	
                     

                  

          

        

        

        
          
            	
                    By:

                  	
                     

                  

          

        

        

        
          
            	
                    Title:

                  	
                     

                  

          

        

        

        
          
            	
                    Dated:

                  	
                     

                  

          

        

      

       

      
        
          
            
              	
                      Account Number:

                    	  
	
                      (if electronic book entry transfer)

                    
	  
	
                      Transaction Code Number:

                    	  
	
                      (if electronic book entry transfer)

                    

            

          

        

      

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      ACKNOWLEDGMENT

      

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

      

      
        
          
            	
                    MEDGENICS,
      INC.

                  
	 
      
	
                    By:

                  	 
      
	 
      	
                    Name:

                  
	 
      	
                    Title:

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00180-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00180-of-00352.parquet"}]]