Equity Interests in Reorganized Company

Sale of 100% of the equity interests in the reorganized company. The Restructuring Transaction contemplated in the RSA and Plan Term Sheet, shall be embodied in a chapter 11 plan of reorganization, which the Debtors intend to file shortly after the Petition Date (the “Existing Plan”). Under the Existing Plan, the Portrait Innovation would transfer is Assets to a newly organized entity (the “Reorganized Company”), free and clear of all liens, claim, encumbrances, and other interests. The Noteholders would acquire the equity interests in the Reorganized Company (the “New Shares”) in exchange for the following consideration (the “Plan Consideration”): (i) acceptance of New Notes in the original principal sum of $12,000,000 on account of the Noteholder Claims; (ii) acceptance of the New Shares in exchange for the remaining portion of the Noteholder Claims; (iii) a commitment for DIP Financing of up to $5,000,000; (iv) a commitment for Exit Financing of up to $5,000,000 which will be used to repay the DIP Facility, to fund administrative claim reserves, and provide up to $250,000 (the “GUC Fund”) to be distributed to holders of Allowed General Unsecured Claims, as well as to fund the Reorganized Company’s working capital needs after the Effective Date.