Exhibit 10.9


 


EXHIBIT
A


 


FORM
OF DEBENTURE


 


NEITHER
THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO,
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. THIS SECURITY AND
THE SECURITIES ISSUABLE UPON CONVERSION OF THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT WITH A REGISTERED
BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL INSTITUTION THAT IS AN “ACCREDITED INVESTOR” AS DEFINED IN RULE 501(a)
UNDER THE SECURITIES ACT OR OTHER LOAN SECURED BY SUCH SECURITIES.


 


Original
Issue Date: January 30, 2017


Original
Conversion Price (subject to adjustment herein): $0.50


 


Principal
Amount: $8,584,000


 


8%
SENIOR SECURED CONVERTIBLE DEBENTURE


DUE
JANUARY 1, 2019


 


This
8% SENIOR SECURED CONVERTIBLE DEBENTURE is one of a series of duly authorized and validly issued 8% Senior Secured Convertible
Debentures of ABT HOLDINGS, INC., an Idaho corporation (the “Company”), having its principal place of business
at 225 S. Lake Avenue, Suite 300, Pasadena, California 91101, designated as its 8% Senior Secured Convertible Debenture due January
1, 2019 (this debenture, the “Debenture” and, collectively with the other debentures of such series, the “Debentures”).


 


FOR
VALUE RECEIVED, the Company promises to pay to Hillair Capital Investments L.P. or its registered assigns (the “Holder”),
or shall have paid pursuant to the terms hereunder, the principal sum of $8,584,000 on January 1, 2019 (the “Maturity
Date”) or such earlier date as this Debenture is required or permitted to be repaid as provided hereunder, and to pay
interest to the Holder on the aggregate unconverted and then outstanding principal amount of this Debenture in accordance with
the provisions hereof. This Debenture is subject to the following additional provisions:


 






     


     


    

 


Section
1.Definitions. For the purposes hereof, in addition to the terms defined elsewhere in this Debenture, (a) capitalized
terms not otherwise defined herein shall have the


meanings
set forth in the Purchase Agreement (as defined below) and (b) the following terms shall have the following meanings:


 


“Alternate
Consideration” shall have the meaning set forth in Section 5(e).


 


“Bankruptcy
Event” means any of the following events: (a) the Company or any Significant Subsidiary (as such term is defined in
Rule 1-02(w) of Regulation S-X) thereof commences a case or other Proceeding under any bankruptcy, reorganization, arrangement,
adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction relating to the
Company or any Significant Subsidiary thereof, (b) there is commenced against the Company or any Significant Subsidiary thereof
any such case or Proceeding that is not dismissed within sixty (60) days after commencement, (c) the Company or any Significant
Subsidiary thereof is adjudicated insolvent or bankrupt or any order of relief or other order approving any such case or Proceeding
is entered, (d) the Company or any Significant Subsidiary thereof suffers any appointment of any custodian or the like for it
or any substantial part of its property that is not discharged or stayed within sixty (60) calendar days after such appointment,
(e) the Company or any Significant Subsidiary thereof makes a general assignment for the benefit of creditors, (f) the Company
or any Significant Subsidiary thereof calls a meeting of its creditors with a view to arranging a composition, adjustment or restructuring
of its debts, (g) the Company or any Significant Subsidiary thereof admits in writing that it is generally unable to pay its debts
as they become due, (h) the Company or any Significant Subsidiary thereof, by any act or failure to act, expressly indicates its
consent to, approval of or acquiescence in any of the foregoing or takes any corporate or other action for the purpose of effecting
any of the foregoing.


 


“Beneficial
Ownership Limitation” shall have the meaning set forth in Section 4(d).


 


“Buy-In”
shall have the meaning set forth in Section 4(c)(v).


 


“Change
of Control Transaction” means the occurrence after the date hereof of any of (a) an acquisition after the date hereof
by an individual or legal entity or “group” (as described in Rule 13d-5(b)(1) promulgated under the Exchange Act)
of effective control (whether through legal or beneficial ownership of capital stock of the Company, by contract or otherwise)
of in excess of forty percent (40%) of the voting securities of the Company (other than by means of conversion or exercise of
the Debentures and the Securities issued together with the Debentures), (b) the Company merges into or consolidates with any other
Person, or any Person merges into or consolidates with the Company and, after giving effect to such transaction, the stockholders
of the Company immediately prior to such transaction own less than sixty percent (60%) of the aggregate voting power of the Company
or the successor entity of such transaction, (c) the Company sells or transfers all or substantially all of its assets to another
Person and the stockholders of the Company immediately prior to such transaction own less than sixty percent (60%) of the aggregate
voting power of the acquiring entity immediately after the transaction, (d) a replacement at one time or within a three (3) year
period of more than one-half of the members of the Board of Directors which is not approved by a majority of those individuals
who are members of the Board of Directors on the Original Issue Date (as defined below) (or by those individuals who are serving
as members of the Board of Directors on any date whose nomination to the Board of Directors was approved by a majority of the
members of the Board of Directors who are members on the date hereof), or (e) the execution by the Company of an agreement to
which the Company is a party or by which it is bound, providing for any of the events set forth in clauses (a) through (d) above.


 






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“Conversion
Date” shall have the meaning set forth in Section 4(a).


 


“Conversion
Price” shall have the meaning set forth in Section 4(b).


 


“Conversion
Schedule” means the Conversion Schedule in the form of Schedule 1 attached hereto.


 


“Conversion
Shares” means, collectively, the shares of Common Stock issuable upon conversion of this Debenture in accordance with
the terms hereof.


 


“Debenture
Register” shall have the meaning set forth in Section 2(c).


 


“Equity
Conditions” means, during the period in question, (a) the Company shall have duly honored all conversions and redemptions
scheduled to occur or occurring by virtue of one or more Notices of Conversion of the Holder, if any, (b) the Company shall have
paid all liquidated damages and other amounts owing to the Holder in respect of this Debenture, (c) all of the Conversion Shares
issuable pursuant to the Transaction Documents (and shares issuable in lieu of cash payments of interest) may be resold pursuant
to Rule 144 without volume or manner-of-sale restrictions or current public information requirements as determined by the counsel
to the Company as set forth in a written opinion letter to such effect, addressed and acceptable to the Transfer Agent and the
Holder, (d) the Common Stock is trading on a Trading Market and all of the shares issuable pursuant to the Transaction Documents
are listed or quoted for trading on such Trading Market (and the Company believes, in good faith, that trading of the Common Stock
on a Trading Market will continue uninterrupted for the foreseeable future), (e) there is a sufficient number of authorized but
unissued and otherwise unreserved shares of Common Stock for the issuance of all of the shares then issuable pursuant to the Transaction
Documents, (f) there is no existing Event of Default and no existing event which, with the passage of time or the giving of notice,
would constitute an Event of Default, (g) the issuance of the shares in question (or, in the case of an Optional Redemption or
Periodic Redemption, the shares issuable upon conversion in full of the Optional Redemption Amount or Periodic Redemption Amount)
to the Holder would not violate the limitations set forth in Section 4(d) herein, (h) there has been no public announcement of
a pending or proposed Fundamental Transaction or Change of Control Transaction that has not been consummated, (i) the applicable
Holder is not in possession of any information provided by the Company that constitutes, or may constitute, material non-public
information and (j) the number of shares of Common Stock proposed to be issued in respect of such redemptions at issue, in each
case as attributable to all holders of Debentures, is less than 20% of the aggregate number of shares of Common Stock traded on
the principal Trading Market during the 20 Trading Days immediately prior to such payment date.


 






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“Event
of Default” shall have the meaning set forth in Section 8(a).


 


“Fundamental
Transaction” shall have the meaning set forth in Section 5(e).


 


“Interest
Payment Date” shall have the meaning set forth in Section 2(a).


 


“Late
Fees” shall have the meaning set forth in Section 2(c).


 


“Mandatory
Default Amount” means the sum of (a) the greater of (i) the outstanding principal amount of this Debenture, plus all
accrued and unpaid interest hereon, divided by the Conversion Price on the date the Mandatory Default Amount is either (A) demanded
(if demand or notice is required to create an Event of Default) or otherwise due or (B) paid in full, whichever has a lower Conversion
Price, multiplied by the VWAP on the date the Mandatory Default Amount is either (x) demanded or otherwise due or (y) paid in
full, whichever has a higher VWAP, or (ii) one hundred thirty percent (130%) of the outstanding principal amount of this Debenture,
plus all accrued and unpaid interest hereon, and (b) all other amounts, costs, expenses and liquidated damages due in respect
of this Debenture.


 


“New
York Courts” shall have the meaning set forth in Section 9(d).


 


“Notice
of Conversion” shall have the meaning set forth in Section 4(a).


 


“Optional
Redemption” shall have the meaning set forth in Section 6(a).


 


“Optional
Redemption Amount” means the sum of (a) one hundred twenty percent (120%) of the then outstanding principal amount of
the Debenture, (b) accrued but unpaid interest and (c) all liquidated damages and other amounts due in respect of the Debenture.


 


“Optional
Redemption Date” shall have the meaning set forth in Section 6(a).


 


“Optional
Redemption Notice” shall have the meaning set forth in Section 6(a).


 






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“Optional
Redemption Notice Date” shall have the meaning set forth in Section 6(a).


 


“Optional
Redemption Period” shall have the meaning set forth in Section 6(a).


 


“Original
Issue Date” means the date of the first issuance of the Debentures, regardless of any transfers of any Debenture and
regardless of the number of instruments which may be issued to evidence such Debentures.


 


“Periodic
Redemption” means the redemption of this Debenture pursuant to Section 6(b)(i) hereof.


 


“Periodic
Redemption Amount” means the sum of (i) as to each Periodic Redemption Date, $2,146,000, and (ii) accrued but unpaid
interest, liquidated damages and any other amounts then owing to the Holder in respect of this Debenture.


 


“Periodic
Redemption Date” means April 1, 2018, July 1, 2018, October 1, 2018 and January 1, 2019.


 


“Permitted
Indebtedness” means (a) the indebtedness evidenced by the Debentures, (b) the indebtedness existing on the Original
Issue Date and set forth on Schedule 1, (c) lease obligations and purchase money indebtedness of up to $50,000, in the aggregate,
incurred in connection with the acquisition of capital assets and lease obligations with respect to newly acquired or leased assets,
(d) accounts payable to trade creditors and current operating expenses (other than for borrowed money) which are not aged more
than 120 calendar days from the billing date or more than 30 days from the due date, in each case incurred in the ordinary course
of business and paid within such time period, unless the same are being contested in good faith and by appropriate and lawful
proceedings and such reserves, if any, with respect thereto as are required by GAAP and deemed adequate by Company’s independent
accountants shall have been reserved, and (e) borrowings incurred in the ordinary course of business and not exceeding $50,000
individually or in the aggregate outstanding at any one time provided, however, that such Indebtedness shall be on an unsecured
basis, subordinated in right of repayment and remedies to all of the payments owed to Holder hereunder and to all of Holder’s
rights pursuant to a subordination agreement in form and substance satisfactory to holders of at least seventy-five percent (75%)
in principal amount of the then outstanding Debentures.


 






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“Permitted
Lien” means the individual and collective reference to the following: (a) Liens for taxes, assessments and other governmental
charges or levies not yet due or Liens for taxes, assessments and other governmental charges or levies being contested in good
faith and by appropriate proceedings for which adequate reserves (in the good faith judgment of the management of the Company)
have been established in accordance with GAAP, (b) Liens imposed by law which were incurred in the ordinary course of the Company’s
business, such as carriers’, warehousemen’s and mechanics’ Liens, statutory landlords’ Liens, and other
similar Liens arising in the ordinary course of the Company’s business, and which (x) do not individually or in the aggregate
materially detract from the value of such property or assets or materially impair the use thereof in the operation of the business
of the Company and its Subsidiaries or (y) are being contested in good faith by appropriate proceedings, which proceedings have
the effect of preventing for the foreseeable future the forfeiture or sale of the property or asset subject to such Lien, (c)
Liens incurred in connection with Permitted Indebtedness under subclause (a) thereunder and, (d) Liens incurred in connection
with Permitted Indebtedness under subclause (b) thereunder, provided that such Liens are not secured by assets of the Company
or its Subsidiaries other than the assets so acquired or leased.


 


“Purchase
Agreement” means the Securities Purchase Agreement, dated as of January 30, 2017 among the Company and the original
Holders, as amended, modified or supplemented from time to time in accordance with its terms.


 


“Share
Delivery Date” shall have the meaning set forth in Section 4(c)(ii).


 


“Successor
Entity” shall have the meaning set forth in Section 5(e).


 


Section
2.  Interest.


 


a)  Payment
of Interest in Cash. The Company shall pay interest to the Holder on the aggregate unconverted and then outstanding principal
amount of this Debenture at the rate of 8% per annum, payable quarterly in arrears on January 1, April 1, July 1 and October 1,
beginning on October 1, 2017, and on each Periodic Redemption Date (as to that principal amount then being redeemed), and on each
Conversion Date (as to that principal amount then being converted), and on each Optional Redemption Date (as to that principal
amount then being redeemed) and on the Maturity Date (each such date, an “Interest Payment Date”) (if any Interest
Payment Date is not a Business Day, then the applicable payment shall be due on the next succeeding Business Day), in cash. For
the avoidance of doubt, the interest payment due on October 1, 2017 shall consist of all interest accrued from the Original Issue
Date of this Debenture through October 1, 2017.


 


b)  Interest
Calculations. Interest shall be calculated on the basis of a 360-day year, consisting of twelve thirty (30) calendar day periods,
and shall accrue daily commencing on the Original Issue Date until payment in full of the outstanding principal, together with
all accrued and unpaid interest, liquidated damages and other amounts which may become due hereunder, has been made. Interest
shall cease to accrue with respect to any principal amount converted, provided that the Company actually delivers the Conversion
Shares within the time period required by Section 4(c)(ii) herein. Interest hereunder will be paid to the Person in whose name
this Debenture is registered on the records of the Company regarding registration and transfers of this Debenture (the “Debenture
Register”).


 






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c)  Late
Fee. All overdue accrued and unpaid interest to be paid hereunder shall entail a late fee at an interest rate equal to the
lesser of fifteen percent (15%) per annum or the Maximum Rate (the “Late Fees”), which shall accrue daily from
the date such interest is due hereunder through and including the date of actual payment in full.


 


d)  Prepayment.
Except as otherwise set forth in this Debenture, the Company may not prepay any portion of the principal amount of this Debenture
without the prior written consent of the Holder.


 


Section
3.Registration of Transfers and Exchanges.


 


a)  Different
Denominations. This Debenture is exchangeable for an equal aggregate principal amount of Debentures of different authorized
denominations, as requested by the Holder surrendering the same. No service charge will be payable for such registration of transfer
or exchange.


 


b)  Investment
Representations. This Debenture has been issued subject to certain investment representations of the original Holder set forth
in the Purchase Agreement and may be transferred or exchanged only in compliance with the Purchase Agreement and applicable federal
and state securities laws and regulations.


 


c)  Reliance
on Debenture Register. Prior to due presentment for transfer to the Company 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 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 is overdue,
and neither the Company nor any such agent shall be affected by notice to the contrary.


 


Section
4.  Conversion.


 


a)  Voluntary
Conversion. At any time after the Original Issue Date until this Debenture is no longer outstanding, this Debenture shall
be convertible, in whole or in part, into shares of Common Stock at the option of the Holder, at any time and from time to time
(subject to the conversion limitations set forth in Section 4(d) hereof). The Holder shall effect conversions by delivering to
the Company a Notice of Conversion, the form of which is attached hereto as Annex A (each, a “Notice of Conversion”),
specifying therein the principal amount of this Debenture to be converted and the date on which such conversion shall be effected
(such date, the “Conversion Date”). If no Conversion Date is specified in a Notice of Conversion, the Conversion
Date shall be the date that such Notice of Conversion is deemed delivered hereunder. No ink-original Notice of Conversion shall
be required, nor shall any medallion guarantee (or other type of guarantee or notarization) of any Notice of Conversion form be
required. To effect conversions hereunder, the Holder shall not be required to physically surrender this Debenture to the Company
unless the entire principal amount of this Debenture, plus all accrued and unpaid interest thereon, has been so converted in which
case the Holder shall surrender this Debenture as promptly as is reasonably practicable after such conversion without delaying
the Company’s obligation to deliver the shares on the Share Delivery Date. Conversions hereunder shall have the effect of
lowering the outstanding principal amount of this Debenture in an amount equal to the applicable conversion. The Holder and the
Company shall maintain records showing the principal amount(s) converted and the date of such conversion(s). The Company may deliver
an objection to any Notice of Conversion within one (1) Business Day of delivery of such Notice of Conversion. In the event of
any dispute or discrepancy, the records of the Holder shall be controlling and determinative in the absence of manifest error.
The Holder, and any assignee by acceptance of this Debenture, acknowledge and agree that, by reason of the provisions of this
Section 4(a), following conversion of a portion of this Debenture, the unpaid and unconverted principal amount of this Debenture
may be less than the amount stated on the face hereof.


 






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b)  Conversion
Price. The conversion price in effect on any Conversion Date shall be equal to $0.50 per share, subject to adjustment
herein (the “Conversion Price”).


 


c)  Mechanics
of Conversion.




 


i.  Conversion
Shares Issuable Upon Conversion of Principal Amount. The number of Conversion Shares issuable upon a conversion hereunder
shall be determined by the quotient obtained by dividing (x) the outstanding principal amount of this Debenture to be converted
by (y) the Conversion Price.


 


ii.  Delivery
of Certificate Upon Conversion. Not later than three (3) Trading Days after each Conversion Date (the “Share Delivery
Date”), the Company shall deliver, or cause to be delivered, to the Holder (A) a certificate or certificates representing
the Conversion Shares which, on or after the six (6) month anniversary of the Original Issue Date, subject to applicable law,
shall be free of restrictive legends and trading restrictions (other than those which may then be required by the Purchase Agreement)
representing the number of Conversion Shares being acquired upon the conversion of this Debenture, (B) a legal opinion of Company
counsel as may be requested by the Holder to enable Holder to deposit the Conversion Share certificates in accounts with its prime
broker (or other brokerage account), together with the instruction letter to the Transfer Agent and the resolution of the Board
of Directors authorizing the Transaction Documents and any additional supporting documentation requested by the Holder (including,
without limitation, any instruction letter to the Company’s transfer agent), and (C) a bank check in the amount of accrued
and unpaid interest. On or after the six (6) month anniversary of the Original Issue Date, subject to applicable law, the Company
shall deliver any certificate or certificates required to be delivered by the Company under this Section 4(c) electronically through
the Depository Trust Company or another established clearing corporation performing similar functions.


 






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iii.  Failure
to Deliver Certificates. If, in the case of any Notice of Conversion, such certificate or certificates and the related legal
opinion of Company counsel, the instruction letter to the Transfer Agent and the resolution of the Board of Directors authorizing
the Transaction Documents are not delivered to or as directed by the applicable Holder by the Share Delivery Date, the Holder
shall be entitled to elect by written notice to the Company at any time on or before its receipt of such certificate or certificates
to rescind such Conversion, in which event the Company shall promptly return to the Holder any original Debenture delivered to
the Company and the Holder shall promptly return to the Company the Common Stock certificates issued to such Holder pursuant to
the rescinded Conversion Notice.


 


iv.  Obligation
Absolute; Partial Liquidated Damages. The Company’s obligations to issue and deliver the Conversion Shares upon conversion
of this Debenture in accordance with the terms hereof are absolute and unconditional, irrespective of any action or inaction by
the Holder to enforce the same, any waiver or consent with respect to any provision hereof, the recovery of any judgment against
any Person or any action to enforce the same, or any setoff, counterclaim, recoupment, limitation or termination, or any breach
or alleged breach by the Holder or any other Person of any obligation to the Company or any violation or alleged violation of
law by the Holder or any other Person, and irrespective of any other circumstance which might otherwise limit such obligation
of the Company to the Holder in connection with the issuance of such Conversion Shares; provided, however, that
such delivery shall not operate as a waiver by the Company of any such action the Company may have against the Holder. In the
event the Holder of this Debenture shall elect to convert any or all of the outstanding principal amount hereof, the Company may
not refuse conversion based on any claim that the Holder or anyone associated or affiliated with the Holder has been engaged in
any violation of law, agreement or for any other reason, unless an injunction from a court, on notice to Holder, restraining and
or enjoining conversion of all or part of this Debenture shall have been sought and obtained, and the Company posts a surety bond
for the benefit of the Holder in the amount of one hundred fifty percent (150%) of the outstanding principal amount of this Debenture,
which is subject to the injunction, which bond shall remain in effect until the completion of arbitration/litigation of the underlying
dispute and the proceeds of which shall be payable to the Holder to the extent it obtains judgment. In the absence of such injunction,
the Company shall issue Conversion Shares or, if applicable, cash, upon a properly noticed conversion. If the Company fails for
any reason to deliver to the Holder such certificate or certificates and the related legal opinion of Company counsel, the instruction
letter to the Transfer Agent and the resolution of the Board of Directors authorizing the Transaction Documents and other supporting
documentation pursuant to Section 4(c)(ii) by the Share Delivery Date, the Company shall pay to the Holder, in cash, as liquidated
damages and not as a penalty, for each $1,000 of principal amount being converted, $10 per Trading Day (increasing to $20 per
Trading Day on the fifth (5th) Trading Day after such liquidated damages begin to accrue) for each Trading Day after
such Share Delivery Date until such certificates and the related legal opinion of Company counsel, the instruction letter to the
Transfer Agent, the resolution of the Board of Directors authorizing the Transaction Documents and other supporting documentation
are delivered or Holder rescinds such conversion. Nothing herein shall limit a Holder’s right to pursue actual damages or
declare an Event of Default pursuant to Section 8 hereof for the Company’s failure to deliver Conversion Shares within the
period specified herein and the Holder shall have the right to pursue all remedies available to it hereunder, at law or in equity
including, without limitation, a decree of specific performance and/or injunctive relief. The exercise of any such rights shall
not prohibit the Holder from seeking to enforce damages pursuant to any other Section hereof or under applicable law.


 






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v.  Compensation
for Buy-In on Failure to Timely Deliver Certificates Upon Conversion. In addition to any other rights available to the Holder,
if the Company fails for any reason to deliver to the Holder such certificate or certificates by the Share Delivery Date pursuant
to Section 4(c)(ii), and if after such Share Delivery Date the Holder is required by its brokerage firm to purchase (in an open
market transaction or otherwise), or the Holder’s brokerage firm otherwise purchases, shares of Common Stock to deliver
in satisfaction of a sale by the Holder of the Conversion Shares which the Holder was entitled to receive upon the conversion
relating to such Share Delivery Date (a “Buy-In”), then the Company shall (A) pay in cash to the Holder (in
addition to any other remedies available to or elected by the Holder) the amount, if any, by which (x) the Holder’s total
purchase price (including brokerage commissions and other out-of-pocket expenses, if any) for the Common Stock so purchased exceeds
(y) the product of (1) the aggregate number of shares of Common Stock that the Holder was entitled to receive from the conversion
at issue multiplied by (2) the actual sale price at which the sell order giving rise to such purchase obligation was executed
(including brokerage commissions and other out-of-pocket expenses, if any) and (B) at the option of the Holder, either reissue
(if surrendered) this Debenture in a principal amount equal to the principal amount of the attempted conversion (in which case
such conversion shall be deemed rescinded) or deliver to the Holder the number of shares of Common Stock that would have been
issued if the Company had timely complied with its delivery requirements under Section 4(c)(ii). For example, if the Holder purchases
Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted conversion of this Debenture
with respect to which the actual sale price of the Conversion Shares (including brokerage commissions and other out-of-pocket
expenses, if any) giving rise to such purchase obligation was a total of $10,000, then under clause (A) of the immediately preceding
sentence, the Company shall be required to pay the Holder $1,000. The Holder shall provide the Company written notice indicating
the amounts payable to the Holder in respect of the Buy-In and, upon request of the Company, evidence of the amount of such loss.
Nothing herein shall limit a Holder’s right to pursue any other remedies available to it hereunder, at law or in equity,
including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Company’s failure
to timely deliver certificates representing shares of Common Stock upon conversion of this Debenture as required pursuant to the
terms hereof.


 






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vi.  Reservation
of Shares Issuable Upon Conversion. The Company covenants that it will at all times reserve and keep available out of its
authorized and unissued shares of Common Stock for the sole purpose of issuance upon conversion of this Debenture and payment
of interest on this Debenture, each as herein provided, free from preemptive rights or any other actual contingent purchase rights
of Persons other than the Holder (and the other holders of the Debentures), not less than such aggregate number of shares of the
Common Stock as shall (subject to the terms and conditions set forth in the Purchase Agreement) be issuable (taking into account
the adjustments and restrictions of Section 5) upon the conversion of the then outstanding principal amount of this Debenture
and payment of interest hereunder. The Company covenants that all shares of Common Stock that shall be so issuable shall, upon
issue, be duly authorized, validly issued, fully paid and nonassessable.


 


vii.  Fractional
Shares. No fractional shares or scrip representing fractional shares shall be issued upon the conversion of this Debenture.
As to any fraction of a share which the Holder would otherwise be entitled to purchase upon such conversion, the Company shall
at its election, either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied
by the Conversion Price or round up to the next whole share.


 


viii.  Transfer
Taxes and Expenses. The issuance of certificates for shares of the Common Stock on conversion of this Debenture shall be made
without charge to the Holder hereof for any documentary stamp or similar taxes that may be payable in respect of the issue or
delivery of such certificates; provided that, the Company shall not be required to pay any tax that may be payable in respect
of any transfer involved in the issuance and delivery of any such certificate upon conversion in a name other than that of the
Holder of this Debenture and the Company shall not be required to issue or deliver such certificates unless or until the Person
or Persons requesting the issuance thereof shall have paid to the Company the amount of such tax or shall have established to
the satisfaction of the Company that such tax has been paid. The Company shall pay all Transfer Agent fees required for same-day
processing of any Notice of Conversion and all fees to the Depository Trust Company (or another established clearing corporation
performing similar functions) required for same-day electronic delivery of the Conversion Shares.


 






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d)  Holder’s
Conversion Limitations. The Company shall not effect any conversion of this Debenture, and a Holder shall not have the right
to convert any portion of this Debenture, to the extent that after giving effect to the conversion set forth on the applicable
Notice of Conversion, the Holder (together with the Holder’s Affiliates, and any Persons acting as a group together with
the Holder or any of the Holder’s Affiliates) would beneficially own in excess of the Beneficial Ownership Limitation (as
defined below). For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by the Holder
and its Affiliates shall include the number of shares of Common Stock issuable upon conversion of this Debenture with respect
to which such determination is being made, but shall exclude the number of shares of Common Stock which are issuable upon (i)
conversion of the remaining, unconverted principal amount of this Debenture beneficially owned by the Holder or any of its Affiliates
and (ii) exercise or conversion of the unexercised or unconverted portion of any other securities of the Company subject to a
limitation on conversion or exercise analogous to the limitation contained herein (including, without limitation, any other Debentures
or the Warrants) beneficially owned by the Holder or any of its Affiliates. Except as set forth in the preceding sentence, for
purposes of this Section 4(d), beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and
the rules and regulations promulgated thereunder. To the extent that the limitation contained in this Section 4(d) applies, the
determination of whether this Debenture is convertible (in relation to other securities owned by the Holder together with any
Affiliates) and of which principal amount of this Debenture is convertible 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 may
be converted (in relation to other securities owned by the Holder together with any Affiliates) and which principal amount of
this Debenture is convertible, in each case subject to the Beneficial Ownership Limitation. To ensure compliance with this restriction,
the Holder will be deemed to represent to the Company each time it delivers a Notice of Conversion that such Notice of Conversion
has not violated the restrictions set forth in this Section 4(d) and the Company shall have no obligation to verify or confirm
the accuracy of such determination. In addition, a determination as to any group status as contemplated above shall be determined
in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. For purposes of this
Section 4(d), in determining the number of outstanding shares of Common Stock, the Holder may rely on the number of outstanding
shares of Common Stock as stated in the most recent of the following: (i) the Company’s most recent periodic or annual report
filed with the Commission or OTC Disclosure & News Service, as the case may be, (ii) a more recent public announcement by
the Company, or (iii) a more recent written notice by the Company or the Company’s transfer agent setting forth the number
of shares of Common Stock outstanding. Upon the written or oral request of a Holder, the Company shall within two (2) Trading
Days confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding. In any case, the number
of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the
Company, including this Debenture, by the Holder or its Affiliates since the date as of which such number of outstanding shares
of Common Stock was reported. The “Beneficial Ownership Limitation” shall be 4.99% of the number of shares
of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock issuable upon conversion
of this Debenture held by the Holder. The Holder, upon not less than sixty-one (61) days’ prior written notice to the Company,
may increase or decrease the Beneficial Ownership Limitation provisions of this Section 4(d); provided, that the Beneficial
Ownership Limitation in no event shall exceed 9.99% of the number of shares of the Common Stock outstanding immediately after
giving effect to the issuance of shares of Common Stock upon conversion of this Debenture and the provisions of this Section 4(d)
shall continue to apply with respect to such increased or decreased Beneficial Ownership Limitation, as the case may be. Any such
increase or decrease will not be effective until the sixty-first (61st) day after such notice is delivered to the Company.
The Beneficial Ownership Limitation provisions of this Section 4(d) shall be construed and implemented in a manner otherwise than
in strict conformity with the terms of this Section 4(d) to correct this paragraph (or any portion hereof) which may be defective
or inconsistent with the intended Beneficial Ownership Limitation contained herein or to make changes or supplements necessary
or desirable to properly give effect to such limitation. The limitations contained in this Section 4(d) shall apply to a successor
holder of this Debenture.


 






    	 	12	 



     


    

 


Section
5.  Certain Adjustments.


 


a)  Stock
Dividends and Stock Splits. If the Company, at any time while this Debenture is outstanding: (i) pays a stock dividend or
otherwise makes a distribution or distributions payable in shares of Common Stock on shares of Common Stock or any Common Stock
Equivalents (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Company upon conversion
of, or payment of interest on, the Debentures), (ii) subdivides outstanding shares of Common Stock into a larger number of shares,
(iii) combines (including by way of a reverse stock split) outstanding shares of Common Stock into a smaller number of shares
or (iv) issues, in the event of a reclassification of shares of the Common Stock, any shares of capital stock of the Company,
then the Conversion Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock
(excluding any treasury shares of the Company) outstanding immediately before such event, and of which the denominator shall be
the number of shares of Common Stock outstanding immediately after such event. Any adjustment made pursuant to this Section 5(a)
shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend
or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or reclassification.


 






    	 	13	 



     


    

 


b)  Certain
Adjustments.


 


i.  Subsequent
Equity Sales. If, at any time while this Debenture is outstanding, the Company or any Subsidiary, as applicable, sells or
grants any option to purchase or sells or grants any right to reprice, or otherwise disposes of or issues (or announces any sale,
grant or any option to purchase or other disposition), any Common Stock or Common Stock Equivalents entitling any Person to acquire
shares of Common Stock at an effective price per share that is lower than the then Conversion Price (such lower price, the “Base
Conversion 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
are issued in connection with such issuance, be entitled to receive shares of Common Stock at an effective price per share that
is lower 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 Conversion Price shall be reduced to equal the Base Conversion Price. Such adjustment
shall be made whenever such Common Stock or Common Stock Equivalents are issued. Notwithstanding the foregoing, no adjustment
will be made under this Section 5(b) in respect of an Exempt Issuance and in no event shall the Conversion Price be reduced to
less than $0.01 pursuant to this Section 5(b). If the Company enters into a Variable Rate Transaction, despite the prohibition
set forth in the Purchase Agreement, the Company shall be deemed to have issued Common Stock or Common Stock Equivalents at the
lowest possible conversion price at which such securities may be converted or exercised. The Company shall notify the Holder in
writing, no later than the Trading Day following the issuance of any Common Stock or Common Stock Equivalents subject to this
Section 5(b), indicating therein the applicable issuance price, or applicable reset price, exchange price, conversion price and
other pricing terms (such notice, the “Dilutive Issuance Notice”). For purposes of clarification, whether or
not the Company provides a Dilutive Issuance Notice pursuant to this Section 5(b), upon the occurrence of any Dilutive Issuance,
the Holder is entitled to receive a number of Conversion Shares based upon the Base Conversion Price on or after the date of such
Dilutive Issuance, regardless of whether the Holder accurately refers to the Base Conversion Price in the Notice of Conversion.


 


ii.  Revenue
Adjustment. In the event the revenue reported in either the Company’s audited financial statements filed with the Commission
or Annual Report made available through the OTC Disclosure & News Service, as applicable, for the fiscal year ended December
31, 2016, filed by March 31, 2017, is less than $20,000,000, then the Conversion Price will be reduced by a percentage equal to
the percentage by which such reported revenue is less than $20,000,000. For example, if the Company reports revenue of $16,000,000
for fiscal year 2016, then the Conversion Price then in effect will be reduced by twenty percent (20%).


 






    	 	14	 



     


    

 


c)  Subsequent
Rights Offerings. In addition to any adjustments pursuant to Section 5(a) above, if at any time the Company grants, issues
or sells any Common Stock Equivalents or rights to purchase stock, warrants, securities or other property pro rata to the record
holders of any class of shares of Common Stock (the “Purchase Rights”), then the Holder will be entitled to
acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could have acquired
if the Holder had held the number of shares of Common Stock acquirable upon complete conversion of this Debenture (without regard
to any limitations on exercise hereof, including, without limitation, the Beneficial Ownership Limitation) immediately before
the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the
date as of which the record holders of shares of Common Stock are to be determined for the grant, issue or sale of such Purchase
Rights (provided, however, to the extent that the Holder’s right to participate in any such Purchase Right
would result in the Holder exceeding the Beneficial Ownership Limitation, then the Holder shall not be entitled to participate
in such Purchase Right to such extent (or beneficial ownership of such shares of Common Stock as a result of such Purchase Right
to such extent) and such Purchase Right to such extent shall be held in abeyance for the Holder until such time, if ever, as its
right thereto would not result in the Holder exceeding the Beneficial Ownership Limitation).


 


d)  Pro
Rata Distributions. During such time as this Debenture is outstanding, if the Company shall declare or make any dividend or
other distribution of its assets (or rights to acquire its assets) to holders of shares of Common Stock, by way of return of capital
or otherwise (including, without limitation, any distribution of cash, stock or other securities, property or options by way of
a dividend, spin off, reclassification, corporate rearrangement, scheme of arrangement or other similar transaction) (a “Distribution”),
at any time after the issuance of this Debenture, then, in each such case, the Holder shall be entitled to participate in such
Distribution to the same extent that the Holder would have participated therein if the Holder had held the number of shares of
Common Stock acquirable upon complete conversion of this Debenture (without regard to any limitations on conversion hereof, including,
without limitation, the Beneficial Ownership Limitation) immediately before the date of which a record is taken for such Distribution,
or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the
participation in such Distribution (provided, however, to the extent that the Holder’s right to participate
in any such Distribution would result in the Holder exceeding the Beneficial Ownership Limitation, then the Holder shall not be
entitled to participate in such Distribution to such extent (or in the beneficial ownership of any shares of Common Stock as a
result of such Distribution to such extent) and the portion of such Distribution shall be held in abeyance for the benefit of
the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Beneficial Ownership Limitation).


 






    	 	15	 



     


    

 


e)  Fundamental
Transaction. If, at any time while this Debenture is outstanding, (i) the Company, directly or indirectly, in one or more
related transactions effects any merger or consolidation of the Company with or into another Person, (ii) the Company, directly
or indirectly, effects any sale, lease, license, assignment, transfer, conveyance or other disposition of all or substantially
all of its assets in one or a series of related transactions, (iii) any, direct or indirect, purchase offer, tender offer or exchange
offer (whether by the Company or another Person) is completed pursuant to which holders of Common Stock are permitted to sell,
tender or exchange their shares for other securities, cash or property and has been accepted by the holders of 50% or more of
the outstanding Common Stock, (iv) the Company, directly or indirectly, in one or more related transactions effects any reclassification,
reorganization or recapitalization of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is
effectively converted into or exchanged for other securities, cash or property, or (v) the Company, directly or indirectly, in
one or more related transactions consummates a stock or share 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 50% of 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 or share
purchase agreement or other business combination) (each a “Fundamental Transaction”), then, upon any subsequent
conversion of this Debenture, the Holder shall have the right to receive, for each Conversion Share that would have been issuable
upon such conversion immediately prior to the occurrence of such Fundamental Transaction (without regard to any limitation in
Section 4(d) on the conversion of this Debenture), the number of shares of Common Stock of the successor or acquiring corporation
or of the Company, if it is the surviving corporation, and any additional consideration (the “Alternate Consideration”)
receivable as a result of such Fundamental Transaction by a holder of the number of shares of Common Stock for which this Debenture
is convertible immediately prior to such Fundamental Transaction (without regard to any limitation in Section 4(d) on the conversion
of this Debenture). For purposes of any such conversion, the determination of the Conversion Price shall be appropriately adjusted
to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one (1) share of
Common Stock in such Fundamental Transaction, and the Company shall apportion the Conversion Price among the Alternate Consideration
in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration. If holders of
Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the
Holder shall be given the same choice as to the Alternate Consideration it receives upon any conversion of this Debenture following
such Fundamental Transaction. The Company shall cause any successor entity in a Fundamental Transaction in which the Company is
not the survivor (the “Successor Entity”) to assume in writing all of the obligations of the Company under
this Debenture and the other Transaction Documents (as defined in the Purchase Agreement) in accordance with the provisions of
this Section 5(e) pursuant to written agreements in form and substance reasonably satisfactory to the Holder and approved by the
Holder (without unreasonable delay) prior to such Fundamental Transaction and shall, at the option of the Holder of this Debenture,
deliver to the Holder in exchange for this Debenture a security of the Successor Entity evidenced by a written instrument substantially
similar in form and substance to this Debenture which is convertible for a corresponding number of shares of capital stock of
such Successor Entity (or its parent entity) equivalent to the shares of Common Stock acquirable and receivable upon conversion
of this Debenture (without regard to any limitations on the conversion of this Debenture) prior to such Fundamental Transaction,
and with a conversion price which applies the conversion price hereunder to such shares of capital stock (but taking into account
the relative value of the shares of Common Stock pursuant to such Fundamental Transaction and the value of such shares of capital
stock, such number of shares of capital stock and such conversion price being for the purpose of protecting the economic value
of this Debenture immediately prior to the consummation of such Fundamental Transaction), and which is reasonably satisfactory
in form and substance to the Holder. Upon the occurrence of any such Fundamental Transaction, the Successor Entity shall succeed
to, and be substituted for (so that from and after the date of such Fundamental Transaction, the provisions of this Debenture
and the other Transaction Documents referring to the “Company” shall refer instead to the Successor Entity), and may
exercise every right and power of the Company and shall assume all of the obligations of the Company under this Debenture and
the other Transaction Documents with the same effect as if such Successor Entity had been named as the Company herein.


 






    	 	16	 



     


    

 


f)  Calculations.
All calculations under this Section 5 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be.
For purposes of this Section 5, the number of shares of Common Stock deemed to be issued and outstanding as of a given date shall
be the sum of the number of shares of Common Stock (excluding any treasury shares of the Company) issued and outstanding.


 


g)  Notice
to the Holder.


 


i.  Adjustment
to Conversion Price. Whenever the Conversion Price is adjusted pursuant to any provision of this Section 5, the Company shall
promptly deliver to each Holder a notice setting forth the Conversion Price after such adjustment and setting forth a brief statement
of the facts requiring such adjustment.


 






    	 	17	 



     


    

 


ii.  Notice
to Allow Conversion by Holder. If (A) the Company shall declare a dividend (or any other distribution in whatever form) on
the Common Stock, (B) the Company shall declare a special nonrecurring cash dividend on or a redemption of the Common Stock, (C)
the Company shall authorize the granting to all holders of the Common Stock of rights or warrants to subscribe for or purchase
any shares of capital stock of any class or of any rights, (D) the approval of any stockholders of the Company shall be required
in connection with any reclassification of the Common Stock, any consolidation or merger to which the Company is a party, any
sale or transfer of all or substantially all of the assets of the Company, or any compulsory share exchange whereby the Common
Stock is converted into other securities, cash or property or (E) the Company shall authorize the voluntary or involuntary dissolution,
liquidation or winding up of the affairs of the Company, then, in each case, the Company shall cause to be filed at each office
or agency maintained for the purpose of conversion of this Debenture, and shall cause to be delivered to the Holder at its last
address as it shall appear upon the Debenture Register, at least ten (10) Trading Days prior to the applicable record or effective
date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution,
redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of the Common Stock of record
to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such
reclassification, consolidation, merger, sale, transfer, share exchange, dissolution, liquidation or winding up is expected to
become effective or close, and the date as of which it is expected that holders of the Common Stock of record shall be entitled
to exchange their shares of the Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation,
merger, sale, transfer, share exchange, dissolution, liquidation or winding up, provided that the failure to deliver such notice
or any defect therein or in the delivery thereof shall not affect the validity of the corporate action required to be specified
in such notice. To the extent that any notice provided hereunder constitutes, or contains, material, non-public information regarding
the Company or any of the Subsidiaries, the Company shall simultaneously (i) if prior to the Public Company Date, issue a press
release disclosing the material, non-public information contained in such notice, or (ii) if after the Public Company Date, file
such notice with the Commission pursuant to a Current Report on Form 8-K. The Holder shall remain entitled to convert this Debenture
during the ten (10) Trading Day period commencing on the date of such notice through the effective date of the event triggering
such notice except as may otherwise be expressly set forth herein.


 






    	 	18	 



     


    

 


Section
6.  Optional Redemption and Periodic Redemption.


 


a)  Optional
Redemption at Election of Company. Subject to the provisions of this Section 6(a), at any time after the six (6) month anniversary
of the Original Issue Date, the Company may deliver a notice to the Holder (an “Optional Redemption Notice”
and the date such notice is deemed delivered hereunder, the “Optional Redemption Notice Date”) of its irrevocable
election to redeem some or all of the then outstanding principal amount of this Debenture for cash in an amount equal to the Optional
Redemption Amount on the tenth (10th) Trading Day following the Optional Redemption Notice Date (such date, the “Optional
Redemption Date”, such ten (10) Trading Day period, the “Optional Redemption Period” and such redemption,
the “Optional Redemption”). The Optional Redemption Amount is payable in full on the Optional Redemption Date.
The Company covenants and agrees that it will honor all Notices of Conversion tendered within five (5) Business Days of the date
of delivery of the Optional Redemption Notice. The Company’s determination to pay an Optional Redemption in cash shall be
applied ratably to all of the holders of the then outstanding Debentures based on their (or their predecessor’s) initial
purchases of Debentures pursuant to the Purchase Agreement.


 


b)  Periodic
Redemptions.


 


i.  Mandatory
Periodic Redemption. On each Periodic Redemption Date, the Company shall redeem the Periodic Redemption Amount (the “Periodic
Redemption”). The Periodic Redemption Amount payable on each Periodic Redemption Date shall be paid in cash; provided,
however, as to any Periodic Redemption and upon 20 Trading Days’ prior written irrevocable notice (the “Periodic
Redemption Notice”), in lieu of a cash redemption payment the Company may elect to pay all or part of a Periodic Redemption
Amount in Conversion Shares based on a conversion price equal to the lesser of (i) the then Conversion Price or (ii) 90% of the
average of the VWAPs for the 20 consecutive Trading Days ending on the Trading Day that is immediately prior to the applicable
Periodic Redemption Date (subject to adjustment for any stock dividend, stock split, stock combination or other similar event
affecting the Common Stock during such 20 Trading Day period) provided, however, in the case of this clause (ii) the conversion
price shall be equal to at least a $.01 discount to the VWAP on the Trading Day immediately prior to the applicable Periodic Redemption
Date (the lowest of (i) or (ii), the “Periodic Conversion Price” and such 20 Trading Day period, the “Periodic
Conversion Period”); provided, further, that the Company may not pay the Periodic Redemption Amount in
Conversion Shares unless from the date the Holder receives the duly delivered Periodic Redemption Notice through and until the
date such Periodic Redemption is paid in full, the Equity Conditions have been satisfied, unless waived in writing by the Holder.
The Company’s determination to pay a Periodic Redemption in cash, shares of Common Stock or a combination thereof shall
be applied ratably to all of the holders of the then outstanding Debentures based on their (or their predecessor’s) initial
purchases of Debentures pursuant to the Purchase Agreement. The Holder may convert, pursuant to Section 4(a), any principal amount
of this Debenture subject to a Periodic Redemption at any time prior to the date that the Periodic Redemption Amount, plus accrued
but unpaid interest, liquidated damages and any other amounts then owing to the Holder are due and paid in full. Unless otherwise
indicated by the Holder in the applicable Notice of Conversion, any principal amount of this Debenture converted during the period
beginning on the delivery date of the applicable Periodic Redemption Notice until the date on which the Periodic Redemption Amount
is paid in full shall be first applied to the principal amount subject to the Periodic Redemption Amount. Any principal amount
of this Debenture converted during the during the period beginning on the delivery date of the applicable Periodic Redemption
Notice until the date on which the Periodic Redemption Amount is paid in full in excess of the Periodic Redemption Amount shall
be applied against the last principal amount of this Debenture scheduled to be redeemed hereunder, in reverse time order from
the Maturity Date. The Company covenants and agrees that it will honor all Notices of Conversion tendered up until such amounts
are paid in full.


 






    	 	19	 



     


    

 


ii.  Additional
Shares Issuable for certain Quarterly Redemption(s). In addition to the amounts and shares issuable pursuant to Section 6(b)(i)
above, in the event that (x) Company elects or is required to pay the Periodic Redemption Amount in cash (y) the average of the
VWAPs for the 20 consecutive Trading Days ending on the Trading Day that is immediately prior to the applicable Periodic Redemption
Date (the “Average Market Price”) is greater than the then effective Conversion Price and (z) the Equity Conditions
have not been satisfied during the Periodic Conversion Period, then on the applicable Periodic Redemption Date, the Company will
deliver to the Holder a number of shares (the “Additional Redemption Shares”) derived from the following formula:
A/B, where A equals the Average Market Price minus the then effective Conversion Price multiplied by the applicable Periodic Redemption
Amount divided by the then effective Conversion Price and B equals the then effective Conversion Price. By way of an example,
if the Quarterly Redemption Amount is $100, the Average Market Price is $1.00 and the then effective Conversion Price is $0.50,
then, in addition to the amounts issued pursuant to Section 6(b)(i), the Company would issue the Holder 200 shares of Common Stock.
In implementation of the foregoing, to the extent that an issuance of Additional Redemption Shares pursuant to this Section
6(b)(ii) would result in a Holder exceeding the Beneficial Ownership Limitation, then the Company shall initially issue only such
number of shares up to the Beneficial Ownership Limitation with the remaining Additional Redemption Shares only being issued from
time to time on the Trading Day that the Holder makes a representation to the Company that such issuance would not exceed the
Beneficial Ownership Limitation.


 






    	 	20	 



     


    

 


c)  Redemption
Procedure. The payment of cash pursuant to an Optional Redemption or a Periodic Redemption shall be payable on the Optional
Redemption Date or the Periodic Redemption Date, respectively. If any portion of the payment pursuant to an Optional Redemption
or Periodic Redemption shall not be paid by the Company by the applicable due date, interest shall accrue thereon at an interest
rate equal to the lesser of fifteen percent (15%) per annum or the Maximum Rate until such amount is paid in full. Notwithstanding
anything herein contained to the contrary, if any portion of the Optional Redemption Amount or Periodic Redemption Amount remains
unpaid after such date, the Holder may elect, by written notice to the Company given at any time thereafter, to invalidate such
Optional Redemption or Periodic Redemption, ab initio, and, with respect to the Company’s failure to honor the Optional
Redemption, the Company shall have no further right to exercise such Optional Redemption. The Holder may elect to convert the
outstanding principal amount of the Debenture pursuant to Section 4 prior to actual payment in cash for any redemption under this
Section 6 by the delivery of a Notice of Conversion to the Company.


 


Section
7.  Negative Covenants. As long as any portion of this Debenture remains outstanding, unless the holders of at least
sixty-seven percent (67%) in principal amount of the then outstanding Debentures shall have otherwise given prior written consent,
the Company shall not, and shall not permit any of the Subsidiaries to, directly or indirectly:


 


a)  other
than Permitted Indebtedness, enter into, create, incur, assume, guarantee or suffer to exist any Indebtedness for borrowed money
of any kind, including, but not limited to, a guarantee, on or with respect to any of its property or assets now owned or hereafter
acquired or any interest therein or any income or profits therefrom;


 


b)  other
than Permitted Liens, enter into, create, incur, assume or suffer to exist any Liens of any kind, on or with respect to any of
its property or assets now owned or hereafter acquired or any interest therein or any income or profits therefrom;


 


c)  amend
its charter documents, including, without limitation, its certificate of incorporation and bylaws, in any manner that materially
and adversely affects any rights of the Holder;


 


d)  repay,
repurchase or offer to repay, repurchase or otherwise acquire more than a de minimis number of shares of its Common Stock
or Common Stock Equivalents other than as to the Conversion Shares, Additional Redemption Shares, or Warrant Shares as permitted
or required under the Transaction Documents;


 


e)  repay,
repurchase or offer to repay, repurchase or otherwise acquire any Indebtedness, other than the Debentures if on a pro rata basis;


 


f)  pay
cash dividends or distributions on any equity securities of the Company;


 


g)  enter
into any transaction with any Affiliate of the Company which would be required to be disclosed in any public filing with the Commission
or made available through the OTC Disclosure & News Service, as applicable, unless such transaction is made on an arm’s-length
basis and expressly approved by a majority of the disinterested directors of the Company (even if less than a quorum otherwise
required for board approval); or


 






    	 	21	 



     


    

 


h)  enter
into any agreement with respect to any of the foregoing.


 


Section
8.  Events of Default.


 


a)  “Event
of Default” means, wherever used herein, any of the following events (whatever the reason for such event and whether
such event shall be voluntary or involuntary or effected by operation of law or pursuant to any judgment, decree or order of any
court, or any order, rule or regulation of any administrative or governmental body):


 


i.  any
default in the payment of (A) the principal amount of any Debenture, including, without limitation, in connection with a Periodic
Redemption, or (B) interest, liquidated damages and other amounts owing to a Holder on any Debenture, as and when the same shall
become due and payable (whether on a Conversion Date, Periodic Redemption Date or the Maturity Date or by acceleration or otherwise)
which default, solely in the case of an interest payment or other default under clause (B) above, is not cured within three (3)
Trading Days;


 


ii.  the
Company shall fail to observe or perform any other covenant or agreement contained in the Debentures or the Purchase Agreement
(other than a breach by the Company of its obligations to deliver shares of Common Stock to the Holder upon conversion, which
breach is addressed in clause (x) below) which failure is not cured, if possible to cure, within the earlier to occur of (A) five
(5) Trading Days after notice of such failure sent by the Holder or by any other Holder to the Company and (B) ten (10) Trading
Days after the Company has become or should have become aware of such failure;


 


iii.  a
default or event of default (subject to any grace or cure period provided in the applicable agreement, document or instrument)
shall occur under (A) any of the Transaction Documents or (B) any other material agreement, lease, document or instrument to which
the Company or any Subsidiary is obligated (and not covered by clause (vi) below);


 


iv.  any
representation or warranty made in this Debenture, any other Transaction Documents, any written statement pursuant hereto or thereto
or any other report, financial statement or certificate made or delivered to the Holder or any other Holder shall be untrue or
incorrect in any material respect as of the date when made or deemed made;


 






    	 	22	 



     


    

 


v.  the
Company or any Significant Subsidiary (as such term is defined in Rule 1-02(w) of Regulation S-X) shall be subject to a Bankruptcy
Event;


 


vi.  the
Company or any Subsidiary shall default on any of its obligations under any mortgage, credit agreement or other facility, indenture
agreement, factoring agreement or other instrument under which there may be issued, or by which there may be secured or evidenced,
any Indebtedness for borrowed money or money due under any long term leasing or factoring arrangement that (a) involves an obligation
greater than $15,000, whether such Indebtedness now exists or shall hereafter be created, and (b) results in such Indebtedness
becoming or being declared due and payable prior to the date on which it would otherwise become due and payable;


 


vii.  the
Common Stock shall not be eligible for listing or quotation for trading on a Trading Market and shall not be eligible to resume
listing or quotation for trading thereon within five (5) Trading Days;


 


viii.  the
Company shall be a party to any Change of Control Transaction or Fundamental Transaction or shall agree to sell or dispose of
all or in excess of forty percent (40%) of its assets in one (1) transaction or a series of related transactions (whether or not
such sale would constitute a Change of Control Transaction);


 


ix.  the
Company does not meet the current public information requirements under Rule 144 with respect to the Securities;


 


x.  the
Company shall fail for any reason to deliver certificates to a Holder prior to the fifth (5th) Trading Day after a
Conversion Date pursuant to Section 4(c) or the Company shall provide at any time notice to the Holder, including by way of public
announcement, of the Company’s intention to not honor requests for conversions of any Debentures in accordance with the
terms hereof;


 


xi.  the
electronic transfer by the Company of shares of Common Stock through the Depository Trust Company or another established clearing
corporation is no longer available or is subject to a “chill”;


 


xii.  any
monetary judgment, writ or similar final process shall be entered or filed against the Company, any Subsidiary or any of their
respective property or other assets for more than $50,000, and such judgment, writ or similar final process shall remain unvacated,
unbonded or unstayed for a period of forty-five (45) calendar days; or


 


xiii.  a
false or inaccurate certification (including a false or inaccurate deemed certification) by the Company as to whether any Event
of Default has occurred.


 






    	 	23	 



     


    

 


b)  Remedies
Upon Event of Default. If any Event of Default occurs, the outstanding principal amount of this Debenture, plus accrued but
unpaid interest, liquidated damages and other amounts owing in respect thereof through the date of acceleration, shall become,
at the Holder’s election, immediately due and payable in cash at the Mandatory Default Amount. Commencing five (5) days
after the occurrence of any Event of Default that results in the eventual acceleration of this Debenture, the interest rate on
this Debenture shall accrue at an interest rate equal to the lesser of fifteen percent (15%) per annum or the Maximum Rate. Upon
the payment in full of the Mandatory Default Amount, the Holder shall promptly surrender this Debenture to or as directed by the
Company. In connection with such acceleration described herein, the Holder need not provide, and the Company hereby waives, any
presentment, demand, protest or other notice of any kind, and the Holder may immediately and without expiration of any grace period
enforce any and all of its rights and remedies hereunder and all other remedies available to it under applicable law. Such acceleration
may be rescinded and annulled by Holder at any time prior to payment hereunder and the Holder shall have all rights as a holder
of the Debenture until such time, if any, as the Holder receives full payment pursuant to this Section 8(b). No such rescission
or annulment shall affect any subsequent Event of Default or impair any right consequent thereon.


 


Section
9.  Miscellaneous.


 


a)  Notices.
Any and all notices or other communications or deliveries to be provided by the Holder hereunder, including, without limitation,
any Notice of Conversion, shall be in writing and delivered personally, by facsimile, by email attachment, or sent by a nationally
recognized overnight courier service, addressed to the Company at the address set forth above (or such other address as the Company
may specify for such purposes by notice to the Holder delivered in accordance with this Section 9(a)), its facsimile number or
its email address, as applicable. Any and all notices or other communications or deliveries to be provided by the Company hereunder
shall be in writing and delivered personally, by facsimile, by email attachment, or sent by a nationally recognized overnight
courier service addressed to each Holder at such Holder’s address appearing on the books of the Company (or such other address
as the Holder may specify for such purposes by notice to the Company delivered in accordance with this Section 9(a)), such Holder’s
facsimile number or email address, as applicable. Any notice or other communication or deliveries hereunder shall be deemed given
and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile at the
facsimile number or email attachment to the email address set forth on the signature pages attached hereto prior to 5:30 p.m.
(New York City time) on any date, (ii) the next Trading Day after the date of transmission, if such notice or communication is
delivered via facsimile at the facsimile number or email attachment to the email address set forth on the signature pages attached
hereto on a day that is not a Trading Day or later than 5:30 p.m. (New York City time) on any Trading Day, (iii) the second (2nd)
Trading Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service, or (iv) upon actual
receipt by the party to whom such notice is required to be given.


 






    	 	24	 



     


    

 


b)  Absolute
Obligation. Except as expressly provided herein, no provision of this Debenture shall alter or impair the obligation of the
Company, which is absolute and unconditional, to pay the principal of, liquidated damages and accrued interest, as applicable,
on this Debenture at the time, place, and rate, and in the coin or currency, herein prescribed. This Debenture is a direct debt
obligation of the Company. This Debenture ranks pari passu with all other Debentures now or hereafter issued under the
terms set forth herein.


 


c)  Lost
or Mutilated Debenture. If this Debenture shall be mutilated, lost, stolen or destroyed, the Company shall execute and deliver,
in exchange and substitution for and upon cancellation of a mutilated Debenture, or in lieu of or in substitution for a lost,
stolen or destroyed Debenture, a new Debenture for the principal amount of this Debenture so mutilated, lost, stolen or destroyed,
but only upon receipt of evidence of such loss, theft or destruction of such Debenture, and of the ownership hereof, reasonably
satisfactory to the Company.


 


d)  Governing
Law. All questions concerning the construction, validity, enforcement and interpretation of this Debenture shall be governed
by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles
of conflict of laws thereof. Each party agrees that all Actions or Proceedings concerning the interpretation, enforcement and
defense of the transactions contemplated by any of the Transaction Documents (whether brought against a party hereto or its respective
Affiliates, directors, officers, shareholders, employees or agents) shall be commenced in the state and federal courts sitting
in the City of New York, Borough of Manhattan (the “New York Courts”). Each party hereto hereby irrevocably
submits to the exclusive jurisdiction of the New York Courts for the adjudication of any dispute hereunder or in connection herewith
or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of any of the Transaction
Documents), and hereby irrevocably waives, and agrees not to assert in any Action or Proceeding, any claim that it is not personally
subject to the jurisdiction of such New York Courts, or such New York Courts are improper or inconvenient venue for such proceeding.
Each party hereby irrevocably waives personal service of process and consents to process being served in any such Action or Proceeding
by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at
the address in effect for notices to it under this Debenture and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process
in any other manner permitted by applicable law. Each party hereto hereby irrevocably waives, to the Action or Proceeding arising
out of or relating to this Debenture or the transactions contemplated hereby. If any party shall commence an Action or Proceeding
to enforce any provisions of this Debenture, then the prevailing party in such Action or Proceeding shall be reimbursed by the
other party for its attorneys’ fees and other costs and expenses incurred in the investigation, preparation and prosecution
of such Action or Proceeding.


 






    	 	25	 



     


    

 


e)  Waiver.
Any waiver by the Company or the Holder of a breach of any provision of this Debenture shall not operate as or be construed to
be a waiver of any other breach of such provision or of any breach of any other provision of this Debenture. The failure of the
Company or the Holder to insist upon strict adherence to any term of this Debenture on one (1) or more occasions shall not be
considered a waiver or deprive that party of the right thereafter to insist upon strict adherence to that term or any other term
of this Debenture on any other occasion. Any waiver by the Company or the Holder must be in writing.


 


f)  Severability.
If any provision of this Debenture is invalid, illegal or unenforceable, the balance of this Debenture shall remain in effect,
and if any provision is inapplicable to any Person or circumstance, it shall nevertheless remain applicable to all other Persons
and circumstances. If it shall be found that any interest or other amount deemed interest due hereunder violates the applicable
law governing usury, the applicable rate of interest due hereunder shall automatically be lowered to equal the Maximum Rate. The
Company covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, plead, or in any manner
whatsoever claim or take the benefit or advantage of, any stay, extension or usury law or other law which would prohibit or forgive
the Company from paying all or any portion of the principal of or interest on this Debenture as contemplated herein, wherever
enacted, now or at any time hereafter in force, or which may affect the covenants or the performance of this Debenture, and the
Company (to the extent it may lawfully do so) hereby expressly waives all benefits or advantage of any such law, and covenants
that it will not, by resort to any such law, hinder, delay or impede the execution of any power herein granted to the Holder,
but will suffer and permit the execution of every such as though no such law has been enacted.


 


g)  Remedies,
Characterizations, Other Obligations, Breaches and Injunctive Relief. The remedies provided in this Debenture shall be cumulative
and in addition to all other remedies available under this Debenture and any of the other Transaction Documents at law or in equity
(including a decree of specific performance and/or other injunctive relief), and nothing herein shall limit the Holder’s
right to pursue actual and consequential damages for any failure by the Company to comply with the terms of this Debenture. The
Company covenants to the Holder that there shall be no characterization concerning this instrument other than as expressly provided
herein. Amounts set forth or provided for herein with respect to payments, conversion and the like (and the computation thereof)
shall be the amounts to be received by the Holder and shall not, except as expressly provided herein, be subject to any other
obligation of the Company (or the performance thereof). The Company acknowledges that a breach by it of its obligations hereunder
will cause irreparable harm to the Holder and that the remedy at law for any such breach may be inadequate. The Company therefore
agrees that, in the event of any such breach or threatened breach, the Holder shall be entitled, in addition to all other available
remedies, to an injunction restraining any such breach or any such threatened breach, without the necessity of showing economic
loss and without any bond or other security being required. The Company shall provide all information and documentation to the
Holder that is requested by the Holder to enable the Holder to confirm the Company’s compliance with the terms and conditions
of this Debenture.


 






    	 	26	 



     


    

 


h)  Next
Business Day. Whenever any payment or other obligation hereunder shall be due on a day other than a Business Day, such payment
shall be made on the next succeeding Business Day.


 


i)  Headings.
The headings contained herein are for convenience only, do not constitute a part of this Debenture and shall not be deemed to
limit or affect any of the provisions hereof.


 


j)  Secured
Obligation. The obligations of the Company under this Debenture are secured by all assets of the Company and each Subsidiary
pursuant to the Security Agreement.


 


k)  Disclosure.
Upon receipt or delivery by the Company of any notice in accordance with the terms of this Debenture, unless the Company has in
good faith determined that the matters relating to such notice do not constitute material, nonpublic information relating to the
Company or its Subsidiaries, the Company shall within one (1) Business Day (i) if prior to the Public Company Date, issue a press
release disclosing the material, non-public information contained in such notice, or (ii) if after the Public Company Date, file
such notice with the Commission pursuant to a Current Report on Form 8-K. In the event that the Company believes that a notice
contains material, non-public information relating to the Company or its Subsidiaries, the Company so shall indicate to the Holder
contemporaneously with delivery of such notice, and in the absence of any such indication, the Holder shall be allowed to presume
that all matters relating to such notice do not constitute material, nonpublic information relating to the Company or its Subsidiaries.


 


*********************


 


(Signature
Pages Follow)


 






    	 	27	 



     


    







 


IN
WITNESS WHEREOF, the Company has caused this Debenture to be duly executed by a duly authorized officer as of the date first above
indicated.


 


	 	ABT
    HOLDINGS, inc.
	 	 	 
	 	By:	/s/
Shahan Ohanessian
	 	 	Name:
    SHAHAN OHANESSIAN
	 	 	Title:
    CEO
	 	 	 
	 	Email
    Address: shahan@abtholdings.com, 
	 	shahan@scoobeez.com


 






    	 	28	 



     


    







 


ANNEX
A


 


NOTICE
OF CONVERSION


 


The
undersigned hereby elects to convert principal under the 8% Senior Secured Convertible Debenture due January 1, 2019 of ABT Holdings,
Inc., an Idaho corporation (the “Company”), into shares of common stock (the “Common Stock”),
of the Company according to the conditions hereof, as of the date written below. If shares of Common Stock are to be issued in
the name of a person other than the undersigned, the undersigned will pay all transfer taxes payable with respect thereto and
is delivering herewith such certificates and opinions as reasonably requested by the Company in accordance therewith. No fee will
be charged to the holder for any conversion, except for such transfer taxes, if any.


 


By
the delivery of this Notice of Conversion the undersigned represents and warrants to the Company that its ownership of the Common
Stock does not exceed the amounts specified under Section 4 of this Debenture, as determined in accordance with Section 13(d)
of the Exchange Act.


 


The
undersigned agrees to comply with the prospectus delivery requirements under the applicable securities laws in connection with
any transfer of the aforesaid shares of Common Stock.


 


Conversion
calculations:


 


	 	Date
    to Effect Conversion:
	 	 
	 	Principal
    Amount of Debenture to be Converted:
	 	 
	 	Number
    of shares of Common Stock to be issued:
	 	 
	 	Signature:
	 	 
	 	Name:
	 	 
	 	Address
    for Delivery of Common Stock Certificates:
	 	 
	 	Or
	 	 
	 	DWAC
    Instructions:
	 	 
	 	Broker
    No: ______________
	 	Account
    No: ____________


 






     


     


    

 


Schedule
1


 


CONVERSION
SCHEDULE


 


The
8% Senior Secured Convertible Debentures due on January 1, 2019 in the aggregate principal amount of $8,584,000 are issued by
ABT Holdings, Inc., an Idaho corporation. This Conversion Schedule reflects conversions made under Section 4 of the above referenced
Debenture.


 


Dated:


 


	Date of Conversion 
(or for first entry, Original Issue Date)	 	 	Amount of Conversion
	 	 	Aggregate Principal Amount Remaining Subsequent to Conversion 
(or original Principal Amount)	 	Company Attest