Document:

Exhibit 10.1

 

AMENDMENT NO. 2

 

TO

 

CREDIT AGREEMENT

 

AMENDMENT NO. 2, dated as of January 26, 2012 (this “Amendment”), to the Credit Agreement dated as of May 10, 2010 (as amended pursuant to that certain Amendment No. 1 dated as of March 21, 2011 and as the same may be further amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”) by and among LANTHEUS MEDICAL IMAGING, INC., a Delaware corporation (“Borrower”), LANTHEUS MI INTERMEDIATE, INC. (“Lantheus MI”) and LANTHEUS MI REAL ESTATE, LLC (“Lantheus Real Estate” and together with Lantheus MI, the “Guarantors”), Bank of Montreal, as administrative agent (in such capacity, the “Administrative Agent”), Harris N.A., as collateral agent (in such capacity, the “Collateral Agent”), the Lenders from time to time party thereto and the other parties thereto.

 

W I T N E S S E T H:

 

WHEREAS, the Loan Parties, the Lenders, the Collateral Agent and the Administrative Agent wish to make certain amendments to the Credit Agreement on the terms and subject to the conditions herein provided;

 

NOW, THEREFORE, in consideration of the premises and the agreements, provisions and covenants herein contained, the parties hereto agree as follows:

 

SECTION 1.           DEFINITIONS

 

Capitalized terms used but not defined in this Amendment shall have the meanings that are set forth in the Credit Agreement.

 

SECTION 2.           AMENDMENTS

 

Effective as of the Second Amendment Effective Date (as defined below) and subject to the satisfaction (or due waiver) of the conditions set forth in Section 3 of this Amendment, the Credit Agreement is hereby amended as follows:

 

(a)           Subsection (a) of the definition of “Consolidated EBITDA” in Section 1.01 of the Credit Agreement is hereby amended and restated in its entirety to read as follows:

 

“(a)         the Consolidated Net Income of such Person and its Subsidiaries for such period, (i) plus without duplication, the sum of the following amounts of such Person and its Subsidiaries for such period and to the extent deducted in determining Consolidated Net Income of such Person for such period:  (A) Consolidated Net Interest Expense and, to the extent not included therein, agency fees paid to the Administrative Agent or the Collateral Agent,

 

 

(B) taxes based on income or profits, (C) depreciation expense (excluding depreciation of prepaid cash expenses that were paid in a prior period and added back), (D) amortization expense (excluding amortization of prepaid cash expenses that were paid in a prior period and added back), (E) up to $4,000,000 (as such amount may be increased from time to time by the Administrative Agent in its sole discretion)  of legal costs incurred by the Borrower in any trailing twelve month period in connection with the Borrower making a claim under its policy of business interruption insurance, (F) to the extent actually paid during such period, any reasonable, non-recurring, out-of-pocket expenses or charges incurred in connection with any issuance (or proposed issuance) of debt or equity or any refinancing transaction (or proposed refinancing transaction) or any amendment or other modification (or proposed amendment or modification) of any debt instrument, in each case to the extent such transaction is permitted under this Agreement, (G) to the extent actually paid upon or prior to the consummation of an investment pursuant to Section 7.02(e)(xi) hereof or a Permitted Acquisition, any reasonable, non-recurring out-of-pocket fees and expenses directly related to such investment or Permitted Acquisition, but excluding consideration paid for the Capital Stock or other assets acquired in any such investment or Permitted Acquisition, (H) to the extent actually paid during such period, the amount of management, monitoring, consulting and advisory fees and related expenses paid to the Sponsor pursuant to the Management Services Agreement as in effect on the date hereof, to the extent permitted to be paid by this Agreement, (I) any impairment charge or asset write-off pursuant to Financial Accounting Standards Board Statement No. 142 or No. 144 and any amortization of intangibles arising pursuant to such Statement No. 141, (J) any non-cash tax losses attributable to the early extinguishment of any Indebtedness or other derivative instruments of the Borrower or any of its Subsidiaries, (K) the aggregate amount of all other non-cash charges reducing Consolidated Net Income, including stock-based compensation expense (excluding any such non-cash charge to the extent that it represents an accrual or reserve for potential cash items in any future period) for such period, (L) nonrecurring, reasonable, out-of-pocket expenses for the severance and recruitment of senior executives of the Parent and its Subsidiaries so long as the aggregate amount of all such expenses described in this clause (L) does not exceed $5,000,000, and (M) internal and external costs and expenses incurred to relocate, qualify and commence manufacturing operations of the Borrower from existing suppliers (including, without limitation, Ben Venue Laboratories) to new third party manufacturers and suppliers, up to an aggregate amount that does not exceed (I) $15,000,000 during any measurement period through and including the measurement period ending September 30, 2012 or (II) $17,500,000 during any measurement period thereafter, and (ii) minus (without duplication) (A) to the extent included in Consolidated Net Income, all interest income, (B) to the extent not deducted as an expense in the calculation of Consolidated Net Income, the aggregate amount paid as dividends pursuant to

 

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Section 7.02(h)(A), and (C) the aggregate amount of all other non-cash items increasing Consolidated Net Income (other than (I) the accrual of revenue or recording of receivables in the ordinary course of business and (II) any non-cash item to the extent it represents the reversal of an accrual or reserve for a potential cash item in any prior period) for such period.”

 

(b)           Section 7.03(a) of the Credit Agreement is hereby amended and restated in its entirety to read as follows:

 

“(a)         Consolidated Total Leverage Ratio.  Permit the Consolidated Total Leverage Ratio of the Parent and its Subsidiaries as of the last day of each period of four (4) consecutive fiscal quarters of the Parent and its Subsidiaries to be greater than the applicable ratio set forth below:

 

	
Fiscal Quarter End
    	
 
    	
Consolidated Total Leverage

Ratio
    
	
 
    	
 
    	
 
    
	
The end   of the last fiscal quarter in Fiscal Year 2011
    	
 
    	
5.00:1.00
    
	
 
    	
 
    	
 
    
	
The end   of the first fiscal quarter in Fiscal Year 2012
    	
 
    	
6.80:1.00
    
	
 
    	
 
    	
 
    
	
The end   of the second fiscal quarter in Fiscal Year 2012
    	
 
    	
7.55:1.00
    
	
 
    	
 
    	
 
    
	
The end   of the third fiscal quarter in Fiscal Year 2012
    	
 
    	
6.70:1.00
    
	
 
    	
 
    	
 
    
	
The end   of the last fiscal quarter in Fiscal Year 2012
    	
 
    	
5.50:1.00
    
	
 
    	
 
    	
 
    
	
The end   of the first and second fiscal quarters in Fiscal Year 2013
    	
 
    	
4.60:1.00
    
	
 
    	
 
    	
 
    
	
The end   of the third and last fiscal quarters in Fiscal Year 2013
    	
 
    	
4.25:1.00
    
	
 
    	
 
    	
 
    
	
The end   of the first fiscal quarter in Fiscal Year 2014 and the end of each fiscal   quarter thereafter
    	
 
    	
3.75:1.00”
    

 

(c)           Section 7.03(b) of the Credit Agreement is hereby amended and restated in its entirety to read as follows:

 

“(b)         Consolidated Interest Coverage Ratio.  Permit the Consolidated Interest Coverage Ratio of the Parent and its Subsidiaries as of the last day of each period of four (4) consecutive fiscal quarters of the Parent and its Subsidiaries to be less than the applicable ratio set forth below:

 

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Fiscal Quarter End
    	
 
    	
Consolidated Interest

Coverage Ratio
    
	
 
    	
 
    	
 
    
	
The end   of the last fiscal quarter in Fiscal Year 2011
    	
 
    	
2.00:1.00
    
	
 
    	
 
    	
 
    
	
The end   of the first fiscal quarter in Fiscal Year 2012
    	
 
    	
1.40:1.00
    
	
 
    	
 
    	
 
    
	
The end   of the second fiscal quarter in Fiscal Year 2012
    	
 
    	
1.30:1.00
    
	
 
    	
 
    	
 
    
	
The end   of the third fiscal quarter in Fiscal Year 2012
    	
 
    	
1.40:1.00
    
	
 
    	
 
    	
 
    
	
The end   of the last fiscal quarter in Fiscal Year 2012
    	
 
    	
1.80:1.00
    
	
 
    	
 
    	
 
    
	
The end   of the first fiscal quarter in Fiscal Year 2013
    	
 
    	
2.00:1.00
    
	
 
    	
 
    	
 
    
	
The end   of the second fiscal quarter in Fiscal Year 2013
    	
 
    	
2.10:1.00
    
	
 
    	
 
    	
 
    
	
The end   of the third and last fiscal quarters in Fiscal Year 2013
    	
 
    	
2.15:1.00
    
	
 
    	
 
    	
 
    
	
The end   of the first fiscal quarter in Fiscal Year 2014 and the end of each fiscal   quarter thereafter
    	
 
    	
2.25:1.00”
    

 

SECTION 3.           CONDITIONS PRECEDENT TO EFFECTIVENESS

 

The amendments set forth in Section 2 of this Amendment shall become effective as of the date (the “Second Amendment Effective Date”) the following conditions precedent have been satisfied:

 

(a)           The Administrative Agent shall have received counterparts of this Amendment duly executed by the Borrower, the Guarantors, the Administrative Agent, the Collateral Agent and the Required Lenders;

 

(b)           The Administrative Agent and Lenders shall have received all fees, costs and expenses due and payable under the Credit Agreement and the other Loan Documents (including without limitation the fees and out-of-pocket expenses of legal counsel to the Administrative Agent);

 

(c)           The Administrative Agent shall have received the amendment fee set forth in Section 5 below; and

 

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(d)           The representations and warranties contained in Section 4 of this Amendment shall be true and correct in all material respects as of the Second Amendment Effective Date.

 

SECTION 4.           REPRESENTATIONS AND WARRANTIES

 

On and as of the Second Amendment Effective Date, after giving effect to this Amendment and the transactions contemplated hereby, each Loan Party party hereto represents and warrants to the Administrative Agent, the Collateral Agent and the Lenders as follows:

 

4.1         Corporate Power and Authority.  Each Loan Party party hereto has all requisite power and authority to enter into this Amendment and to consummate the transactions contemplated hereby.

 

4.2         Authorization of Agreements.  The execution, delivery and performance of this Amendment have been duly authorized by all necessary action on the part of each Loan Party party hereto.

 

4.3         Incorporation of Representations and Warranties from the Credit Agreement.  The representations and warranties contained in ARTICLE VI of the Credit Agreement are true and correct in all material respects (except that such materiality qualifier shall not be applicable to any representations or warranties that already are qualified or modified as to “materiality” or “Material Adverse Effect” in the text thereof, which representations and warranties shall be true and correct in all respects subject to such qualification) on and as of the date hereof with the same effect as though made on and as of such date except to the extent that any such representation or warranty expressly relates solely to an earlier date (in which case such representation or warranty shall be true and correct in all material respects (except that such materiality qualifier shall not be applicable to any representations or warranties that already are qualified or modified as to “materiality” or “Material Adverse Effect” in the text thereof, which representations and warranties shall be true and correct in all respects subject to such qualification) on and as of such earlier date).

 

4.4         Absence of Default.  Before and immediately after giving effect to this Amendment and the transactions contemplated hereby, no Default or Event of Default has occurred and is continuing or will result therefrom.

 

SECTION 5.           AMENDMENT FEE

 

The Borrower hereby agrees to pay to Administrative Agent, for the benefit of the Lenders who execute this Amendment, an aggregate amendment fee equal to the amount derived by multiplying 0.2% by the aggregate amount of the Revolving Credit Commitments of all of the Lenders signatory hereto.  The amendment fee shall be fully earned and payable on the date hereof, nonrefundable when paid, and shared pro rata by the Lenders signatory to this Amendment in accordance with their Pro Rata Shares.

 

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SECTION 6.           MISCELLANEOUS

 

6.1         References to Credit Agreement.  On and after the Second Amendment Effective Date, each reference in the Credit Agreement to “this Agreement”, “hereunder”, “hereof”, “herein” or words of like import referring to the Credit Agreement, and each reference in the other Loan Documents to the “Credit Agreement”, “thereunder”, “thereof” or words of like import referring to the Credit Agreement shall mean and be a reference to the Credit Agreement as amended by this Amendment.

 

6.2         Effect on Credit Agreement.  Except as specifically amended by this Amendment, the Credit Agreement and the other Loan Documents shall remain in full force and effect and are hereby ratified and confirmed.

 

6.3         Headings.  Section headings herein are included herein for convenience of reference only and shall not constitute a part hereof for any other purpose or be given any substantive effect.

 

6.4         APPLICABLE LAW.  THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES THEREOF.

 

6.5         Counterparts.  This Amendment may be executed in any number of counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument.  Signature pages may be detached from multiple separate counterparts and attached to a single counterpart so that all signature pages are attached to the same document.  Delivery of an executed signature page of this Amendment by facsimile transmission or electronic mail shall be as effective as delivery of a manually executed counterpart hereof.

 

6.6         Loan Document.  This Amendment is a Loan Document.

 

6.7         Costs and Expenses.  The Borrower agrees to pay on demand, regardless of whether the transactions contemplated by this Amendment are consummated: all reasonable out-of-pocket costs and expenses incurred by or on behalf of each Agent, including, without limitation, reasonable fees, costs, client charges and expenses of one primary counsel for the Agents in connection with the preparation, negotiation, execution or delivery of this Amendment and any agreements contemplated hereby.

 

[Signature Pages Follow]

 

6

 

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered by their respective officers thereunto duly authorized as of the date first written above.

 

	
 
    	
BORROWER:
    
	
 
    	
 
    
	
 
    	
LANTHEUS   MEDICAL IMAGING, INC.
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   Donald R. Kiepert
    
	
 
    	
 
    	
Name:   Donald R. Kiepert
    
	
 
    	
 
    	
Title:   President
    
	
 
    	
 
    
	
 
    	
GUARANTORS:
    
	
 
    	
 
    
	
 
    	
LANTHEUS   MI INTERMEDIATE, INC.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   Donald R. Kiepert
    
	
 
    	
 
    	
Name:   Donald R. Kiepert
    
	
 
    	
 
    	
Title:   President
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
LANTHEUS   MI REAL ESTATE, LLC
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   Donald R. Kiepert
    
	
 
    	
 
    	
Name:   Donald R. Kiepert
    
	
 
    	
 
    	
Title:   President
    

 

[SIGNATURE PAGE TO AMENDMENT NO. 2 TO CREDIT AGREEMENT]

 

 

	
 
    	
COLLATERAL AGENT:
    
	
 
    	
 
    
	
 
    	
HARRIS N.A.
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ Andrew J. Pluta
    
	
 
    	
Name:
    	
Andrew J. Pluta
    
	
 
    	
Title:
    	
Director
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
ADMINISTRATIVE AGENT:
    
	
 
    	
 
    
	
 
    	
BANK OF MONTREAL
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ Andrew J. Pluta
    
	
 
    	
Name:
    	
Andrew J. Pluta
    
	
 
    	
Title:
    	
Director
    
	
 
    	
 
    	
 
    
	
 
    	
 
    
	
 
    	
LENDER:
    
	
 
    	
 
    
	
 
    	
BANK OF MONTREAL
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ Andrew J. Pluta
    
	
 
    	
Name:
    	
Andrew J. Pluta
    
	
 
    	
Title:
    	
Director
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
NATIXIS
    
	
 
    	
 
    	
 
    	
 
    
	
By:
    	
/s/ Frank H. Madden, Jr.
    	
 
    	
By:
    	
/s/ Tefta Ghilaga
    
	
Name:
    	
Frank H. Madden, Jr.
    	
 
    	
Name:
    	
Tefta Ghilaga
    
	
Title:
    	
Managing Director
    	
 
    	
Title:
    	
Director
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    
	
 
    	
JEFFERIES FINANCE LLC
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ E. Joseph Hess
    
	
 
    	
Name:
    	
E. Joseph Hess
    
	
 
    	
Title:
    	
Managing Director
    

 

[SIGNATURE PAGE TO AMENDMENT NO. 2 TO CREDIT AGREEMENT]EXHIBIT 99.1

 

THESE SECURITIES HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR OFFERED FOR SALE IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES OR AN OPINION OF COUNSEL OR OTHER EVIDENCE ACCEPTABLE TO THE
COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.

 

	No. 12-A– 	US$[_______]

 

Rosetta
Genomics Ltd.

 

10% SENIOR SECURED CONVERTIBLE DEBENTURE

DUE January 26, 2013

  

FOR VALUE RECEIVED, Rosetta
Genomics Ltd., a corporation organized and existing under the laws of the State of Israel (the "Company"), promises to
pay to [_________________], the registered holder hereof (the "Holder"), the principal sum of [______________________]
Dollars (US $[_____________]) on January 26, 2013 (the “Maturity Date”) and to pay interest on the principal sum outstanding
from time to time in arrears at the rate of 10% per annum,(the “Interest Rate”) accruing from January 27, 2012, the
date of initial issuance of this Debenture (the “Issue Date”), on the date (each, an “Interest Payment Date”)
which is the earlier of (i) the date which is six (6) months from the Issue Date and every six (6) months thereafter, or (ii) the
Maturity Date, as the case may be. Interest shall accrue monthly (pro-rated on a daily basis for any period longer or shorter than
a month) from the later of the Issue Date or the previous Interest Payment Date and shall be payable in cash (except in connection
with a conversion, if any, it shall be payable, subject to the other provisions of this Debenture, in cash or in Common Stock).
If not paid in full on an Interest Payment Date, interest shall be fully cumulative and shall accrue on a daily basis, based on
a 365-day year, until paid. Additional provisions regarding the payment of interest are provided in Section 4(D) below.

 

This Debenture is being
issued pursuant to the terms of the Secured Loan Agreement dated as of January26, 2012 (the “Loan Agreement”), to which
the Company and the Holder (or the Holder’s predecessor in interest) are parties. Capitalized terms not otherwise defined
herein shall have the meanings ascribed to them in the Loan Agreement.

 

This Debenture is subject to the
following additional provisions:

 

1.          The
Debentures will initially be issued in denominations determined by the Company, but are exchangeable for an equal aggregate principal
amount of Debentures of different denominations, as requested by the Holder surrendering the same provided that any such Debenture
shall be for an amount of not less than US$450,000. No service charge will be made for such registration or transfer or exchange.

 

	KP FINAL 1-26	Page 1

 

    	 

    	 

    

 

2.          The
Company shall be entitled to withhold from all payments of principal of, and interest on, this Debenture any amounts required to
be withheld under the applicable provisions of the United States income tax laws or other applicable laws at the time of such payments,
and Holder shall execute and deliver all required documentation in connection therewith.

 

(a)          If,
at any time, the Israeli tax authority (the “ITA”) advises that Company is (or was) obliged to withhold or pay taxes
on account of the payments to be made by Company to Holder under this Debenture, Company shall pay such taxes to the Israeli tax
authority and furnish Holder with satisfactory evidence of such payment. In the event that the
ITA does not advise that Company withhold or pay taxes on the payments to be made by Company to Holder under this Debenture prior
to a date that is eighteen (18) months from the Effective Date, the Parties agree and acknowledge that Company shall pay any such
taxes to the ITA, and that Holder shall have no duty to reimburse Company for any amount of the taxes so paid.

 

(b)          If
Company is advised by the ITA that it must withhold or pay taxes on account of the payments to
be made by Company to Holder under this Debenture, then before making any payment to the ITA,
Company will first attempt to obtain an exemption from the payment of such taxes or an approval
from the ITA that a reduced amount of taxes is payable in connection therewith (the “Tax Certificate”). Holder shall
assist Company and any of its legal advisors to take all reasonable actions and to execute such
reasonable documents and instruments in the name of Holder as Company deems reasonably required
or advisable in connection with obtaining such Tax Certificate. Furthermore, Holder shall give all assistance reasonably requested
by Company in connection with its efforts to obtain said Tax Certificate including taking any
action and providing Company with such documents, statements, instruments and other documents
that Company may reasonably require and any other documents and statements requested by the ITA.
Obtaining the Tax Certificate shall be at Company’s expense and accordingly Company
shall bear all its costs in connection with obtaining the Tax Certificate, including legal fees of its
legal counsel, and Holder shall not be required to reimburse Company for any of such costs. Except
as may constitute wilful misconduct or gross negligence, Rosetta shall not have or incur any
liability whatsoever by reason of any of its acts or omissions in connection with obtaining the Tax Certificate and Holder hereby
waives any and all claims against Company with respect to such acts or omissions.

 

(c)          Company
shall give reasonable assistance to Holder in obtaining documentation required by Holder to support an application for (i) an exemption
from or reduction of withholding taxes where available under applicable Law, or (ii) a foreign tax credit from the US Internal
Revenue Service (or any successor agency thereto) on account of the payment of such taxes, in each case solely to the extent that
Holder has borne the burden of such withholding taxes.

 

	KP FINAL 1-26	Page 2

 

    	 

    	 

    

 

3.          (i)This
Debenture has been issued subject to investment representations of the original purchaser hereof and may be transferred or exchanged
and only in compliance with the Securities Act of 1933, as amended (the "Act"), and other applicable state and foreign
securities laws and the terms of the Loan Agreement and subject to the provisions of Section 1 above, However, in no event can
there be more than three holders or four Holders if the License Agreement is executed with Licensee by the Definitive Agreement
Date. In the event of any proposed transfer of this Debenture, the Company may require, prior to issuance of a new Debenture in
the name of such other person, that it receive reasonable transfer documentation that is sufficient to evidence that such proposed
transfer complies with the Act and other applicable state and foreign securities laws and the terms of the Loan Agreement. Prior
to due presentment for transfer of this Debenture, the Company and any agent of the Company may treat the person in whose name
this Debenture is duly registered on the Company's Debenture Register as the owner hereof for the purpose of receiving payment
as herein provided and for all other purposes, whether or not this Debenture be overdue, and neither the Company nor any such agent
shall be affected by notice to the contrary.

 

(ii) On the Maturity Date
the Company shall pay the principal and accrued interest (through the actual date of payment) of any portion of this Debenture
which is then outstanding.

 

(iii) Upon the failure
of the Company to execute the Patent License on or prior to the Definitive Agreement Date, as defined in the Loan Agreement, the
Interest Rate shall increase to 18% per annum (the “Additional Interest Rate”) payable monthly provided that the difference
between the Additional Interest Rate and the Interest Rate may be paid, at Company’s option, in cash or shares of Common
Stock at the applicable Conversion Price.

 

4.          A.      (i)
Commencing on the earlier of the Definitive Agreement Date and February 29, 2012, and prior to the time this Debenture is paid
in full in accordance with its terms (including, without limitation, after the occurrence of an Event of Default, as defined below,
the Holder of this Debenture is entitled, at its option, subject to the following provisions of this Section 4, to convert up to
17.1429% of Total Principal of the Principal Amount of this Debenture (the “Convertible Principal Amount”), from time
to time into shares of Common Stock of the Company at the Conversion Price (as defined below). Any such conversion is referred
to as a “Voluntary Conversion.”

 

(ii) For purposes of this
Debenture, the following terms shall have the meanings indicated below:

 

“Conversion Price” means
$0.0944per share

 

“Conversion Date” means the
Business Day on which the the Company receives a Notice of Conversion; provided however, that if the Notice of Conversion is received
after 5:00 p.m. (Israel time), the Conversion Date shall be the next Business Day.

 

“Conversion Shares” has the
meaning ascribed to in Section 5(G)(ii) hereof.

 

“Exempt Issuance” means the
issuance of (a) Common Stock or options to employees, officers, directors or consultants of the Company pursuant to any stock or
option plan duly adopted for such purpose, by a majority of the non-employee members of the Board of Directors or a majority of
the members of a committee of non-employee directors established for such purpose, (b) securities issued pursuant to stock splits,
stock dividends or distributions, recapitalizations and similar events affecting the Common Stock, and (c) securities issued pursuant
to mergers, acquisitions or strategic transactions approved by a majority of the disinterested directors of the Company, provided
that any such issuance shall not include a transaction in which the Company is issuing securities primarily for the purpose of
raising capital or to an entity whose primary business is investing in securities.

 

	KP FINAL 1-26	Page 3

 

    	 

    	 

    

 

B.           A
Voluntary Conversion shall be effectuated by the Holder by faxing a notice of conversion (“Notice of Conversion”) to
the Company at 972 73 – 2220701 Attention : Chief Executive Officer as provided in this paragraph. The Notice of Conversion
shall be executed by the Holder of this Debenture and shall evidence such Holder's intention to convert, in accordance with the
terms hereof, the Convertible Principal Amount of this Debenture or a specified portion hereof (provided that such portion shall
not be less than the lower of US$50,000 or the Unconverted Convertible Principal Amount) in the form annexed hereto as Exhibit
A. Delivery of the Notice of Conversion shall be accepted by the Company by hand or courier delivery at the address specified in
said Exhibit A or at the facsimile number specified in said above (each of such address or facsimile number may be changed by notice
given to the Holder in the manner provided in the Loan Agreement).

 

C.           Notwithstanding
any other provision hereof or of any of the other Transaction Agreements, in no event (except (i) as specifically provided herein
as an exception to this provision, or (ii) while there is outstanding a tender offer for any or all of the shares of the Company’s
Common Stock) shall the Holder be entitled to convert any portion of this Debenture, or shall the Company have the obligation to
convert such Debenture (and the Company shall not have the right to pay interest hereon in shares of Common Stock) to the extent
that, after such conversion or issuance of stock in payment of interest, the sum of (1) the number of shares of Common Stock beneficially
owned by the Holder and its affiliates (other than shares of Common Stock which may be deemed beneficially owned through the ownership
of the unconverted portion of the Debentures or other convertible securities or of the unexercised portion of warrants or other
rights to purchase Common Stock), and (2) the number of shares of Common Stock issuable upon the conversion of the Debentures with
respect to which the determination of this proviso is being made (such sum shall be referred to as the "Issued Shares"),
would result in beneficial ownership by Holder and its affiliates of more than 4.99% of the outstanding shares of Common Stock
(after taking into account the shares to be issued to Holder upon such conversion). For purposes of the proviso to the immediately
preceding sentence, beneficial ownership shall be determined in accordance with Section 13(d) of the Securities Exchange Act of
1934, as amended, except as otherwise provided in clause (1) of such sentence. Nothing herein shall preclude the Holder from disposing
of a sufficient number of other shares of Common Stock beneficially owned by the Holder so as to thereafter permit the continued
conversion of this Debenture. To the extent that the limitation contained in this Section 4(C) applies, the determination of whether
this Debenture may be converted shall be in the sole discretion of the Holder, and the submission of a Notice of Conversion shall
be deemed to be the Holder’s determination of whether this Debenture is convertible, and the Company shall have no obligation
to verify or confirm the accuracy of such determination and shall have no liability for conversion of this Debenture that are not
in compliance with the limitations set forth in this Section 4(C).

 

D.           Without
derogating from the provisions of Section 4(C) above and notwithstanding any other provision of this Debenture or of any other
Transaction Agreement, in no event shall the number of Issued Shares constitute more than 24.99% of the issued share capital of
the Company.

 

	KP FINAL 1-26	Page 4

 

    	 

    	 

    

 

E.           If
the Company, prior to the earlier of (A) the Maturity Date and (B) the date on which the Debenture is repaid or converted in full,
shall offer, sell, grant any option to purchase or offer, sell or grant any right to reprice its securities, or otherwise dispose
of or issue (or announce any offer, sale, grant or any option to purchase or other disposition) any Common Stock or securities
convertible into Common Stock (“Common Stock Equivalents”), at an effective price per share of Common Stock less than
the Conversion Price (such lower price, the “Base Share Price” and such issuances collectively, a “Dilutive Issuance”)
(if the holder of the Common Stock or Common Stock Equivalents so issued shall at any time, whether by operation of purchase price
adjustments, reset provisions, floating conversion, exercise or exchange prices or otherwise, or due to warrants, options or rights
per share which is issued in connection with such issuance, be entitled to receive shares of Common Stock at an effective price
per share which is less than the Conversion Price, such issuance shall be deemed to have occurred for less than the Conversion
Price on such date of the Dilutive Issuance), then, the principal amount of this Debenture shall be increased by an amount equal
to the product of (x) the number of Conversion Shares into which this Debenture is then convertible and (y) the difference between
the Conversion Price and the Base Share Price. If there are anysubsequent Dilutive Issuances at an effective price per share of
Common Stock less than the then effective Base Share Price (such lower price, the “New Base Share Price”), then, the
principal amount of this Debenture shall be further increased by an amount equal to the product of (x) the number of Conversion
Shares into which this Debenture is then convertible and (y) the difference between the Base Share Price and the New Base Share
Price. Notwithstanding the foregoing, no increase in the principal amount of this Debenture shall be made under this Section 4(E)
for an Exempt Issuance, and in no event shall the Base Share Price (or New Base Share Price, as the case may be) be below $ 0.05
per share.

 

F. (i)Anything in the other provisions
of this Debenture or any of the other Transaction Agreements to the contrary notwithstanding, the Company shall have the right
to prepay any or all of the outstanding principal of this Debenture, in whole or in part, only after (i) the execution of the Patent
License or (ii) prior thereto, only with the prior written consent of the Holder in each instance (which consent may be withheld
for any reason or no reason, in the sole discretion of the Holder). If the Company elects to redeem the Debenture, the Redemption
Percentage shall be paid in cash by the Company to the Holder.

 

(ii)         For
purposes of this Debenture, the following terms shall have the meanings indicated below:

 

“Unconverted Debenture” means
the principal amount of this Debenture which has not been converted as of the relevant date.

 

“Redemption Payment Date”
means the date on which the Company actually pays the Redemption Percentage, which shall be not less than 10 days nor more than
20 days after the delivery of a Redemption Notice .

 

	KP FINAL 1-26	Page 5

 

    	 

    	 

    

 

“Redemption Percentage” means
(i) initially, 120% of the Unconverted Debenture being redeemed by the Company pursuant to Section 4(F)(i) above, and (ii) if there
is more than one such prepayment event, 120% + 10% for each such additional Company redemption after the first one.

 

Upon each such Redemption Notice whether
from the Company or the Holder, the Holder may elect to convert all or part of the unconverted portion of the Convertible Principal
Amount (and Section 4(C) shall not apply to such conversion).

 

Failure to pay the
Redemption Percentage on the Redemption Payment Date will be an Event of Default hereunder.

 

(iii)        If
all of the Unconverted Debentures are being redeemed pursuant to this Section 4F, then, upon payment in full of the Redemption
Percentage for all of the Unconverted Debentures in accordance with the provisions of this Section 4F, the Holder shall deliver
the Debenture to the Company marked “paid in full”.

 

(iv)        If
the Redemption Percentage is not timely paid by the Company, the Redemption Percentage shall accrue interest at the Default Rate
and the Holder may declare the Redemption Percentage, together with such interest, due under this Debenture immediately due and
payable, without presentment, demand, protest or notice of any kinds, all of which are hereby expressly waived, anything herein
or in any Debenture or other instruments contained to the contrary notwithstanding, and the Holder may immediately enforce any
and all of the Holder's rights and remedies provided herein or any other rights or remedies afforded by law, including, but not
necessarily limited to, the equitable remedy of specific performance and injunctive relief.

 

(v) If the Company shall
have its Common Stock suspended from trading on, or delisted from the Principal Trading Market for in excess of ten (10) Trading
Days., the Holder can by written notice require that the Company redeem the Unconverted Debenture in accordance with the provisions
of this Section 4 (f) , in which event the Redemption Payment Date shall be 90 days from the date of delivery of the Holder’s
Notice.

 

G.      (i)
No fractional shares of Common Stock or scrip representing fractions of shares will be issued on conversion, but the number of
shares issuable shall be rounded to the nearest whole share.

 

(ii) All shares issuable
with respect to a Conversion Date shall be deemed “Conversion Shares” for all purposes of this Debenture and the other
Transaction Agreements. Certificates representing the relevant Conversion Shares (“Conversion Certificates”) will be
delivered to the Holder at the address specified in the relevant Notice of Conversion (and if none, the Holder’s address
for notices as contemplated by the Loan Agreement, which address the Holder may change from time to time in the manner provided
therein), via express courier, by electronic transfer or otherwise, within three (3) Trading Days (such third Trading Day, the
“Delivery Date”) after the relevant Conversion Date. The Holder shall be deemed to be the holder of the shares issuable
to it in accordance with the relevant provisions of this Debenture on the Conversion Date.

 

	KP FINAL 1-26	Page 6

 

    	 

    	 

    

 

H.           Except
as may be specified in a specific provision of this Debenture, any payments under this Debenture shall be applied in the following
order of priority: (i) first to amounts due to the Holder under any provision of the Transaction Agreements other than principal
and interest due under any Debenture issued to the Holder, (ii) then to accrued but unpaid interest on this Debenture; and (iii)
then, to principal of this Debenture in the inverse order of maturity;

 

5.         A.        Subject
to the terms of the Loan Agreement, no provision of this Debenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of, and interest on, this Debenture at the time, place, and rate, and in the coin
or currency or where contemplated herein in shares of its Common Stock, as applicable, as herein prescribed. This Debenture and
all other Debentures now or hereafter issued of similar terms are direct obligations of the Company.

 

B.         Payment
of this Debenture is secured pursuant to the terms of the Security Interest Agreement, dated as of the Issue Date (the "Security
Interest Agreement") executed by the Company, as debtor, in favor of Holder, as secured party. The terms of the Security Interest
Agreement are incorporated herein by reference.

 

6.          No
recourse shall be had for the payment of the principal of, or the interest on, this Debenture, or for any claim based hereon, or
otherwise in respect hereof against any incorporator, shareholder, officer or director, as such, past, present or future, of the
Company or any successor corporation, whether by virtue of any constitution, statute or rule of law, or by the enforcement of any
assessment or penalty or otherwise, all such liability being, by the acceptance hereof and as part of the consideration for the
issue hereof, expressly waived and released.

 

7.          All
payments contemplated hereby to be made “in cash” shall be made in immediately available good funds of United States
of America currency by wire transfer to an account designated in writing by the Holder to the Company (which account may be changed
by notice similarly given). All payments of cash and each delivery of shares of Common Stock issuable to the Holder as contemplated
hereby shall be made to the Holder at the address last appearing on the Debenture Register of the Company as designated in writing
by the Holder from time to time; except that the Holder can designate, by notice to the Company, a different delivery address for
any one or more specific payments or deliveries.

 

8.          If,
for as long as this Debenture remains outstanding, the Company enters into a merger (other than where the Company is the surviving
entity) or consolidation with another corporation or other entity or a sale or transfer of all or substantially all of the assets
of the Company to another person (collectively, a "Sale"), the Company will, upon its sole discretion, either repay any
or all of the outstanding amounts of this Debenture, in accordance with the provisions of this Debenture and the Transaction Documents
or require, in the agreements reflecting such transaction, that the surviving entity expressly assume the obligations of the Company
hereunder. Notwithstanding the foregoing, if the Company enters into a Sale and the holders of the Common Stock are entitled to
receive stock, securities or property in respect of or in exchange for Common Stock and the Company did not repay all of the outstanding
amounts of this Debenture, then as a condition of such Sale, the Company and any such successor, purchaser or transferee will agree
that the unconverted portion of the Convertible Principal Amount may thereafter be converted on the terms and subject to the conditions
set forth above into the kind and amount of stock, securities or property receivable upon such merger, consolidation, sale or transfer
by a holder of the number of shares of Common Stock into which such unconverted portion of the Convertible Principal Amount might
have been converted immediately before such merger, consolidation, sale or transfer, subject to adjustments which shall be as nearly
equivalent as may be practicable. In the event of any such proposed Sale the Holder hereof shall have the right to convert by delivering
a Notice of Conversion to the Company within fifteen (15) days of receipt of notice of such Sale from the Company, except that
Section 4(C) shall not apply to such conversion.

 

	KP FINAL 1-26	Page 7

 

    	 

    	 

    

  

9.          If,
at any time while any portion of this Debenture remains outstanding, the Company spins off or otherwise divests itself of a part
of its business or operations or disposes of all or of a part of its assets in a transaction (the “Spin Off”) in which
the Company, in addition to or in lieu of any other compensation received and retained by the Company for such business, operations
or assets, causes securities of another entity to be issued to security holders of the Company, then the Company shall deliver
to the Holder at least twenty (20) calendar days prior to the Spin-Off, a notice stating the material terms of the Spin-Off and
the Holder shall have the right to convert the Convertible Principal Amount that has not yet been converted by delivering a Notice
of Conversion to the Company within fifteen (15) days of receipt of such notice from the Company, except that Section 4(C) shall
not apply to such conversion. To the extent that any notice provided hereunder constitutes, or contains, material, non-public information
regarding the Company, the Company shall notify the Holder in the notice, and the Holder agrees to keep such information confidential
and to not trade in the Company’s securities until the Company publicly discloses such information in compliance with applicable
securities laws.

 

10.         If,
at any time while any portion of this Debenture remains outstanding, the Company effectuates a stock split or reverse stock split
of its Common Stock or issues a dividend on its Common Stock consisting of shares of Common Stock, the number of unconverted Conversion
Shares (in case of a stock split or reverse stock split) or the prices used in determining the Conversion Price from dates prior
to such action or and any other fixed amounts calculated as contemplated hereby or by any of the other Transaction Agreements (in
case of a dividend), shall be equitably adjusted to reflect such action.

 

11.         The
Holder of the Debenture, by acceptance hereof, agrees that this Debenture is being acquired for investment and that such Holder
will not offer, sell or otherwise dispose of this Debenture or the shares of Common Stock issuable upon conversion thereof except
under circumstances which will not result in a violation of the Act or any applicable state Blue Sky or foreign laws or similar
laws relating to the sale of securities.

 

12.         This
Debenture shall be governed by and construed in accordance with the laws of the State of New York for contracts to be wholly performed
in such state and without giving effect to the principles thereof regarding the conflict of laws. Each of the parties consents
to the exclusive jurisdiction of the federal courts whose districts encompass any part of the County of New York or the state courts
of the State of New York sitting in the County of New York in connection with any dispute arising under this Debenture and hereby
waives, to the maximum extent permitted by law, any objection, including any objection based on forum non coveniens, to
the bringing of any such proceeding in such jurisdictions. To the extent determined by such court, the Company shall reimburse
the Holder for any reasonable legal fees and disbursements incurred by the Holder in enforcement of or protection of any of its
rights under any of this Debenture.

 

	KP FINAL 1-26	Page 8

 

    	 

    	 

    

  

13.         JURY
TRIAL WAIVER.  The Company and the Holder hereby waive a trial by jury in any action, proceeding or counterclaim brought by
either of the Parties hereto against the other in respect of any matter arising out of or in connection with this Debenture.

  

14.         (A)         The
term "Event of Default" means the occurrence of any one or more of the following events:

 

		a.           The Company shall fail to pay
any portion of the principal or interest or any other amount due hereunder (including payment of a Redemption Percentage as defined
herein) when due and payable in accordance with the Debenture,and such failure to pay, shall continue for a period of five (5)
Trading Days; or

 

		b.           Any of the representations
or warranties made by the Company herein, in the Loan Agreement or any of the other Transaction Agreements or in any certificate
or financial or other written statements heretofore or hereafter furnished by the Company in connection with the execution and
delivery of this Debenture or the Loan Agreement shall be false or misleading in any material respect at the time made; or

 

		c.           The Company fails to authorize
or to cause its Transfer Agent to issue shares of Common Stock upon exercise by the Holder of the conversion rights of the Holder
in accordance with the terms of this Debenture (provided, however, that for purposes of this provision, such failure to cause the
Transfer Agent to issue such shares shall not be deemed to occur until five (5) Trading Days after the Delivery Date), fails to
transfer or to cause its Transfer Agent to transfer any certificate for shares of Common Stock issued to the Holder upon conversion
of this Debenture and when required by this Debenture or any other Transaction Agreement, and such transfer is otherwise lawful,
or fails to remove any restrictive legend on any certificate or fails to cause its Transfer Agent to remove such restricted legend,
in each case where such removal is lawful, as and when required by this Debenture, or any other Transaction Agreement, and any
such failure shall continue uncured for ten (10) Trading Days; or

 

		d.           The Company shall fail to perform
or observe, in any material respect, any other covenant, term, provision, condition, agreement or obligation of this Debenture
(other than a failure to pay money) and such failure shall continue uncured for a period of fifteen (15) days after the Company’s
receipt of written notice from the Holder of such failure; or

 

	KP FINAL 1-26	Page 9

 

    	 

    	 

    

 

		e.           Within nine (9) months after
the Initial Closing Date, the Company enters into a written or other agreement to effect a “reverse merger”, however
effected including a share exchange or similar transaction, with an entity , other than Licensee or its Affiliates which is not
a public company with shares trading the Principal Market without any other United States Trading Market (as defined under the
Securities Exchange Act of 1934) without the prior written consent of the Holders in each instance (such consent withheld or delayed
in the Holder’s sole discretion for any reason or no reason whatsoever); or

 

		f.            The Company shall fail
to perform or observe, in any material respect, any covenant, term, provision, condition, agreement or obligation of the Company
under any of the Transaction Agreements and such failure, if capable of being cured, shall continue uncured for a period of fifteen
(15) days after the Holder gives the Company written notice thereof; or

 

		g.           The Company shall (1) admit
in writing its inability to pay its debts generally as they mature; (2) make an assignment for the benefit of creditors or commence
proceedings for its dissolution; or (3) apply for or consent to the appointment of a trustee, liquidator or receiver for its or
for a substantial part of its property or business; or

 

		h.           A trustee, liquidator or receiver
shall be appointed for the Company or for a substantial part of its property or business without its consent and shall not be discharged
within sixty (60) days after such appointment; or

 

		i.            Any governmental agency
or any court of competent jurisdiction at the instance of any governmental agency shall assume custody or control of the whole
or any substantial portion of the properties or assets of the Company and shall not be dismissed within sixty (60) days thereafter;
or

 

		j.            Any money judgment, writ
or warrant of attachment, or similar process in excess of Two Hundred Fifty Thousand ($250000) Dollars in the aggregate shall be
entered or filed against the Company or any of its properties or other assets and shall remain unpaid, unvacated, unbonded or unstayed
for a period of sixty (60) days or in any event later than five (5) days prior to the date of any proposed sale thereunder; or

 

		k.          Bankruptcy, reorganization, insolvency
or liquidation proceedings or other proceedings for relief under any bankruptcy law or any law for the relief of debtors shall
be instituted by or against the Company and, if instituted against the Company, shall not be dismissed within sixty (60) days after
such institution or the Company shall by any action or answer approve of, consent to, or acquiesce in any such proceedings or admit
the material allegations of, or default in answering a petition filed in any such proceeding; or

 

	KP FINAL 1-26	Page 10

 

    	 

    	 

    

 

(B)         If
an Event of Default shall have occurred and is continuing, then, (x) unless and until such Event of Default shall have been cured
or waived in writing by the Holder (which waiver shall not be deemed to be a waiver of any subsequent default), at the option of
the Holder and in the Holder’s sole discretion, but without further notice from the Holder, the unpaid amount of this Debenture,
computed as of such date, will bear interest at the rate (the “Default Rate”) equal to eighteen percent (18%) per annum
or the highest rate allowed by law, whichever is lower, from the date of the Event of Default until and including the date actually
paid; and any partial payments shall be applied as provided in Section 4(H) hereof; and

 

(y) at any time thereafter, and in each
and every such case, unless such Event of Default shall have been cured or waived in writing by the Holder (which waiver shall
not be deemed to be a waiver of any subsequent default), at the option of the Holder and in the Holder's sole discretion, the Holder
may elect to redeem all or part of the Unconverted Debenture (as defined above) on the terms provided in Section 4(F) hereof.

 

15.         The
Company acknowledges that if there is an Event of Default, the Holder may require the Company to immediately redeem all or any
part of the outstanding portion of this Debenture for an amount equal to the Redemption Percentage (as defined above).

 

16.         Nothing
contained in this Debenture shall be construed as conferring upon the Holder the right to vote or to receive dividends or to consent
or receive notice as a shareholder in respect of any meeting of shareholders or any rights whatsoever as a shareholder of the Company,
unless and to the extent converted in accordance with the terms hereof.

 

17.         Any
notice required or permitted hereunder shall be given in manner provided in the Section headed "NOTICES" in the Loan
Agreement, the terms of which are incorporated herein by reference.

 

18.         In
the event for any reason, any payment by or act of the Company or the Holder shall result in payment of interest which would exceed
the limit authorized by or be in violation of the law of the jurisdiction applicable to this Debenture, then ipso facto
the obligation of the Company to pay interest or perform such act or requirement shall be reduced to the limit authorized under
such law, so that in no event shall the Company be obligated to pay any such interest, perform any such act or be bound by any
requirement which would result in the payment of interest in excess of the limit so authorized. In the event any payment by or
act of the Company shall result in the extraction of a rate of interest in excess of a sum which is lawfully collectible as interest,
then such amount (to the extent of such excess not returned to the Company) shall, without further agreement or notice between
or by the Company or the Holder, be deemed applied to the payment of principal, if any, hereunder immediately upon receipt of such
excess funds by the Holder, with the same force and effect as though the Company had specifically designated such sums to be so
applied to principal and the Holder had agreed to accept such sums as an interest-free prepayment of this Debenture. If any part
of such excess remains after the principal has been paid in full, whether by the provisions of the preceding sentences of this
Section or otherwise, such excess shall be deemed to be an interest-free loan from the Company to the Holder, which loan shall
be payable immediately upon demand by the Company. The provisions of this Section shall control every other provision of this Debenture.

 

	KP FINAL 1-26	Page 11

 

    	 

    	 

    

 

 

IN WITNESS WHEREOF, the
Company has caused this instrument to be duly executed by an officer thereunto duly authorized.

 

Dated: January 27 , 2012

 

	 	ROSETTA GENOMICS LTD.
	 	 	 
	 	By: 	 
	 	 
	 	 
	 	(Print Name)
	 	 
	 	(Title)

 

	KP FINAL 1-26	Page 12

 

    	 

    	 

    

 

EXHIBIT A

 

ROSETTA
GENOMICS LTD.

 

NOTICE OF CONVERSION

OF

10% SENIOR SECURED CONVERTIBLE DEBENTURE DUE
JANUARY 26, 2013

 

(To be Executed by the Registered Holder in
Order to Convert the Debenture)

 

TO:        Rosetta Genomics Ltd.

FAX NUMBER 011 972 73 2220701

 

Attn: Chief Executive Officer

 

FROM: _________________________________________________________
(“Holder”)

 

DATE: _______________________________________________
(the “Conversion Date”)

 

	RE:	Conversion of $_________________ principal amount (the “Converted Debenture”) of
the 10% Senior Secured Convertible Debenture Due January 26, 2013, No. ______ (the “Debenture”) of ROSETTA
GENOMICS LTD. (the “Company”) into ______________________ shares (the “Principal Conversion
Shares”) of Common Stock (defined below)

 

The captioned
Holder hereby gives notice to the Company, pursuant to the Debenture of ROSETTA
GENOMICS LTD. that the Holder elects to convert the Converted Debenture into fully paid and non-assessable
ordinary shares, NIS 0.04 par value (the “Common Stock”), of the Company as of the Conversion Date specified
above. Said conversion shall be based on Conversion Price of $________________.

 

	KP FINAL 1-26	Page 13

 

    	 

    	 

    

 

As contemplated by the
Debenture, the Company should also pay all accrued but unpaid interest on the Converted Debenture to the Holder.

 

 ̈   in
cash, which should be paid as provided in the Debenture by wire transfer as follows:1

 

	 	 	 
	 	 	 
	 	 	 
	 	 	 
	 	 	 

 

Based on the relevant Conversion
Prices, the number of Principal Conversion Shares, (“Conversion Shares”) indicated above should be issued in the following
name(s):

 

	 	Name and Record Address	 	Conversion Shares	 
	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 

 

It is the intention of
the Holder to comply with the provisions of Section 4(C) of the Debenture regarding certain limits on the Holder's right to convert
thereunder. The Holder believe this conversion complies with the provisions of said Section 4(C). Nonetheless, to the extent that,
pursuant to the conversion effected hereby, the Holder would have more shares than permitted under said Section, this notice should
be amended and revised, ab initio, to refer to the conversion which would result in the issuance of shares consistent with such
provision. Any conversion above such amount is hereby deemed void and revoked.

 

As contemplated by the
Debenture, this Notice of Conversion is being sent by facsimile to the telecopier number and officer indicated above.

 

If this Notice of Conversion
represents the full conversion of the outstanding balance of the Converted Debenture, the Holder either (1) has previously surrendered
the Converted Debenture to the Company or (2) will surrender (or cause to be surrendered) the Converted Debenture to the Company
at the address indicated above by express courier within five (5) Trading Days after delivery or facsimile transmission of this
Notice of Conversion.

 

 

1 Information
should include the following:

 

All Wires:

(1) Bank Name

(2) Bank Address (including
street, city, state)

(3) ABA or Wire Routing
No.

(4) Account Name

(5) Account Number

 

If Wire is going to International (Non-US)
Bank, all of the above plus:

(6) SWIFT Number

 

	KP FINAL 1-26	Page 14

 

    	 

    	 

    

 

The certificates representing
the Conversion Shares should be transmitted by the Company to the Holder

 

 ̈    via
express courier, or

 

 ̈    by
electronic transfer

 

within the time contemplated by the Debenture
after receipt of this Notice of Conversion (by facsimile transmission or otherwise) to:

 

	 	 	 
	 	 	 
	 	 	 

 

	 	 
	 	(Print name of Holder)
	 	 	 
	 	By:	 
	 	 	(Signature of Authorized Person)
	 	 	 
	 	 
	 	(Printed Name and Title)

 

	KP FINAL 1-26	Page 15

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