2016 Securities Purchase Agreement

On March 22, 2016, the Company entered into a securities purchase agreement (the “2016 Purchase Agreement”) with Brainlab to effect a restructuring of the Brainlab Note. Under the 2016 Purchase Agreement, the parties agreed: (i) that the Company would pay to Brainlab all accrued and unpaid interest on the Brainlab Note, in the amount of approximately $740,000 (the “Interest Payment”); (ii) to amend and restate the Brainlab Note on the terms described below; (iii) to enter into a patent and technology license agreement with Brainlab, in consideration for the cancellation of $1 million of the principal amount of the Brainlab Note, for the development of software relating to the Company’s SmartFrame device; (iv) that the Company would issue to Brainlab, in consideration for the cancellation of approximately $1.3 of the principal amount of the Brainlab Note, 3,972,410 units, consisting of: (a) one share of the Company’s common stock, par value $0.01 per share (the “2016 Common Stock”); (b) warrants to purchase 0.40 shares of the 2016 Common Stock (the “2016 Series A Warrants”); and (c) warrants to purchase 0.30 shares of the 2016 Common Stock (the “2016 Series B Warrants”) (the “Units” and the issuance of the Units, the “Unit Transaction”); and (v) to enter into a Registration Rights Agreement (the “2016 Registration Rights Agreement”), pursuant to which the Company will agree to file a registration statement with the SEC covering the resale of the shares of common stock issued to Brainlab under the 2016 Purchase Agreement, as well as the shares of common stock that are issuable upon exercise of the 2016 Series A and 2016 Series B Warrants.

The 2016 Purchase Agreement contains covenants, representations and warranties by the Company and Brainlab (including indemnification from the Company in the event of breaches of its representations and warranties), which the Company believes are customary for transactions of this type. The closing is subject to certain customary closing conditions, and the Company anticipates that the closing will occur on or before April 4, 2016 (the “Closing Date”).

2016 Registration Rights Agreement

The Company will be required to file the 2016 Registration Statement within 60 calendar days following the Closing Date (the “Filing Deadline”). The Company will be required to use its best efforts to have the 2016 Registration Statement declared effective as soon as practicable. Pursuant to the 2016 Registration Rights Agreement, if: (i) the 2016 Registration Statement is not filed with the SEC on or prior to the Filing Deadline; (ii) the 2016 Registration Statement is not declared effective by the SEC on or prior to the 75th day after the Closing Date (or the 120th day after the Closing Date if the SEC determines to review the 2016 Registration Statement); or (iii) the Company fails to continuously maintain the effectiveness of the 2016 Registration Statement (with certain permitted exceptions), the Company will incur certain liquidated damages to Brainlab. The 2016 Registration Rights Agreement also contains mutual indemnifications by the Company and Brainlab, which the Company believes are customary for transactions of this type.

2016 Series A and 2016 Series B Warrants

The 2016 Series A and 2016 Series B Warrants (together, the “2016 Warrants) will be exercisable, in full or in part, at any time prior to the fifth anniversary of their issuance, at an exercise price of $0.4058 per share and $0.5275 per share, respectively. The 2016 Warrants will provide for certain adjustments that may be made to the exercise price and the number of shares issuable upon exercise due to future corporate events or otherwise. In the case of certain fundamental transactions affecting the Company, the holder of such 2016 Warrants, upon exercise of such warrants after such fundamental transaction, will have the right to receive, in lieu of shares of the Company’s common stock, the same amount and kind of securities, cash or property that such holder would have been entitled to receive upon the occurrence of the fundamental transaction, had the 2016 Warrants been exercised immediately prior to such fundamental transaction. The 2016 Warrants contain a “cashless exercise” feature that allows the holders to exercise the warrants without a cash payment to the Company upon the terms set forth in the respective 2016 Warrant agreements.

Amended and Restated Promissory Note

On the Closing Date and pursuant to the Purchase Agreement, the Company will issue Brainlab an unregistered, amended and restated secured note (the “New Brainlab Note”), which shall have the same terms and conditions as the Brainlab Note, except that: (i) the principal amount of the New Brainlab Note shall be $2 million; (ii) interest shall be paid quarterly in arrears; and (iii) the maturity date of the New Brainlab Note will be December 31, 2018.

Non-Exclusive License Agreement

On the Closing Date and pursuant to the 2016 Purchase Agreement, the Company and Brainlab will enter into a patent and technology license (the “2016 License Agreement”), allowing Brainlab to develop proprietary software to support the Company’s SmartFrame device, for use in neurosurgery. The 2016 License Agreement will not affect the Company’s ability to continue to independently develop, market and sell its own software for the SmartFrame device.