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 OR OTHER
LOAN SECURED BY SUCH SECURITIES.


 


Original
Issue Date: November 2, 2016


Exchange
Date: May __, 2017


Initial
Conversion Price (subject to adjustment herein): $0.20


 


$_________


 


7.5%
ORIGINAL ISSUE DISCOUNT SENIOR SECURED CONVERTIBLE

 DEBENTURE


DUE
MAY 9, 2018


 


THIS
7.5% ORIGINAL ISSUE DISCOUNT SENIOR SECURED CONVERTIBLE DEBENTURE of ADVANCED MEDICAL ISOTOPE CORPORATION, a Delaware
corporation, (the “Company”), having its principal place of business at 719 Jadwin Avenue, Richland,
WA 99352 designated as its 7.5% Original Issue Discount Senior Secured Convertible Debenture due May 9, 2018 (the “Debenture”).
This Debenture is being issued in connection with that certain Exchange Agreement pursuant to which the Company exchanged certain
then outstanding indebtedness that was issued by the Company on November 2, 2016 for this Debenture.


 


FOR
VALUE RECEIVED, the Company promises to pay to _________. or its registered assigns (the “Holder”), or shall
have paid pursuant to the terms hereunder, the principal sum of $___________ on May 9, 2018 (the “Maturity Date”)
or such earlier date as this Debenture is required or permitted to be repaid as provided hereunder. 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, capitalized
terms that are not otherwise defined herein have the meanings given to such terms in the Exchange Agreement and the following
terms shall have the following meanings:


 




    	 	1 	 



    	 	 



    

 


“Affiliate”
means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common
control with a Person, as such terms are used in and construed under Rule 405 under the Securities Act.


 


“Agent”
shall have the meaning ascribed to such term in the Security Agreement.


 


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


 


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


 


“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 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 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.


 


“Base
Conversion Price” shall have the meaning set forth in Section 5(b).


 


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


 


“Board
of Directors” means the board of directors of the Company.


 


“Business
Day” means any day except any Saturday, any Sunday, any day which is a federal legal holiday in the United States or
any day on which banking institutions in the State of New York are authorized or required by law or other governmental action
to close.


 


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


 




    	 	2 	 



    	 	 



    

 


“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 33% of the voting securities of the Company (other than by means of conversion of the Debenture or the debentures
issued to the Holder pursuant to a securities purchase agreement of even date herewith), (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 66% 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 66% of the aggregate voting power
of the acquiring entity immediately after the transaction, (d) a replacement at one time or within a three 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 Exchange Date (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.


 


“Commission”
shall mean the Securities and Exchange Commission.


 


“Common
Stock” means the common stock of the Company, par value $0.001 per share, and any other class of securities into which
such securities may hereafter be reclassified or changed.


 


“Common
Stock Equivalents” means any securities of the Company (or any direct or indirect subsidiaries the Company may obtain
or form in the future) which would entitle the holder thereof to acquire at any time Common Stock, including, without limitation,
any debt, preferred stock, right, option, warrant or other instrument that is at any time convertible into or exercisable or exchangeable
for, or otherwise entitles the holder thereof to receive, Common Stock.


 


“Conversion”
shall have the meaning ascribed to such term in Section 4.


 


“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
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(d).


 




    	 	3 	 



    	 	 



    

 


“Dilutive
Issuance” shall have the meaning set forth in Section 5(b).


 


“Dilutive
Issuance Notice” shall have the meaning set forth in Section 5(b).


 


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


 


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


 


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


 


“Exchange
Agreement” means the Exchange Agreement, dated as of May 9, 2017 among the Company and the original Holders, as amended,
modified or supplemented from time to time in accordance with its terms.


 


“Exempt
Issuance” means the issuance of (a) shares of Common Stock, Restricted Stock Units (RSUs) or options to eligible grantees
under 2015 Omnibus Incentive and Securities Plan, provided that issuances under this clause (a) shall not exceed an aggregate
of twenty percent (20%) of the total outstanding shares of Common Stock on an as converted primary basis as of the date hereof
in any 12 month period, (b) securities upon the exercise or exchange of or conversion of any Securities issued hereunder and/or
other securities exercisable or exchangeable for or convertible into shares of Common Stock issued and outstanding on the Exchange
Date, provided that such securities have not been amended since the Exchange Date to increase the number of such securities or
to decrease the exercise price, exchange price or conversion price of such securities (other than in connection with stock splits
or combinations) or to extend the term of such securities, (c) securities issued pursuant to acquisitions or strategic transactions
approved by a majority of the disinterested directors of the Company, provided that any such issuance shall only be to a Person
(or to the equityholders of a Person) which is, itself or through its subsidiaries, an operating company or an owner of an asset
in a business synergistic with the business of the Company and shall provide to the Company additional benefits in addition to
the investment of funds, but shall not include a transaction in which the Company is issuing securities primarily for the purpose
of raising capital or to an entity whose primary business is investing in securities, and (d) shares of Common Stock issued in
lieu of cash payment for services provided by service providers.


 


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


 


“Holding
Fee” shall have the meaning set forth in Section 9(b).


 


“Holder
Demand” shall have the meaning set forth in Section 9(d).


 


“Holder
Redemption” shall have the meaning set forth in Section 6(b).


 




    	 	4 	 



    	 	 



    

 


 


“Holder
Redemption Amount” means 105% of the then outstanding principal amount of the Debenture if on or prior to December 15,
2017 and 110% of the then outstanding principal amount of the Debenture thereafter up to fifty percent (50%) of the gross proceeds
of the financing. By way of example, if the Company raises $100,000 in a financing after August 1, 2017, but prior to December
15, 2017, and the Holder requires the Company to redeem its full Holder Redemption Amount, the Company shall pay to the Holder
$50,000 and the principal amount of the Debenture shall be reduced by $47,620.


 


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


 


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


 


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


 


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


 


“Indebtedness”
means (x) any liabilities for borrowed money or amounts owed in excess of $50,000 (other than trade accounts payable incurred
in the ordinary course of business), (y) all guaranties, endorsements and other contingent obligations in respect of indebtedness
of others, whether or not the same are or should be reflected in the Company’s consolidated balance sheet (or the notes
thereto), except guaranties by endorsement of negotiable instruments for deposit or collection or similar transactions in the
ordinary course of business; and (z) the present value of any lease payments in excess of $50,000 due under leases required to
be capitalized in accordance with United States generally accepted accounting principles.


 


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


 


“Interest
Conversion Rate” means the Conversion Price in effect on the Interest Payment Date.


 


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


 


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


 


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


 


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


 


“Liens”
means a lien, charge, pledge, security interest, encumbrance, right of first refusal, preemptive right or other restriction.


 




    	 	5 	 



    	 	 



    

 


“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) 130% of the outstanding principal amount of this Debenture, plus 100% of 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 10(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) 105% of the then outstanding principal amount of the Debenture if on or prior
to December 15, 2017 and 110% of the then outstanding principal amount of the Debenture thereafter, (b) accrued but unpaid interest
(including 12-month make-whole interest payment) 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).





 


“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 securities for which this Debenture was exchanged pursuant to
the Exchange Agreement, regardless of any transfers of those securities or any Debenture and regardless of the number of instruments
which may be issued to evidence those securities or such Debenture.


 


“Person”
means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.


 


“Required
Minimum” means, the product of 400% of the maximum aggregate number of shares of Common Stock then issued or potentially
issuable upon conversion in full of all Debentures (including Conversion Shares issuable as payment of interest on the Debentures),
ignoring any conversion or exercise limits set forth therein.


 




    	 	6 	 



    	 	 



    

 


“Rule
424” means Rule 424 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended or interpreted
from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose
and effect as such Rule.


 


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


 


“Security
Agreement” means the Security Agreement, dated the date hereof, among the Company and the Holder.


 


“Security
Documents” shall mean the Security Agreement, and any other documents and filing required thereunder in order to grant
the Holder a first priority security interest in the assets of the Company as provided in the Security Agreement, including all
UCC-1 filing receipts.


 


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


 


“Successive
Release Amount” shall have the meaning set forth in Section 9(b).


 


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


 


“Termination
Fee” shall have the meaning set forth in Section 9(d).


 


“Trading
Day” means a day on which the principal Trading Market is open for trading.


 


“Trading
Market” means any of the following markets or exchanges on which the Common Stock is listed or quoted for trading on
the date in question: the NYSE MKT, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the
New York Stock Exchange, OTCQB or OTCQX (or any successors to any of the foregoing).


 


“Transaction
Documents” means the Debentures, the Security Agreement, all exhibits and schedules thereto and hereto and any other
documents or agreements executed in connection with the transactions contemplated hereunder.


 


“Transfer
Agent” means American Registrar & Transfer Co., 1234 W South Jordan Pkwy Ste B3, South Jordan, UT 84095, and any
successor transfer agent of the Company.


 


“Variable
Rate Transaction” means a transaction in which the Company (i) issues or sells any debt or equity securities that are
convertible into, exchangeable or exercisable for, or include the right to receive, additional shares of Common Stock either (A)
at a conversion price, exercise price or exchange rate or other price that is based upon, and/or varies with, the trading prices
of or quotations for the shares of Common Stock at any time after the initial issuance of such debt or equity securities or (B)
with a conversion, exercise or exchange price that is subject to being reset at some future date after the initial issuance of
such debt or equity security or upon the occurrence of specified or contingent events directly or indirectly related to the business
of the Company or the market for the Common Stock or (ii) enters into, or effects a transaction under, any agreement, including,
but not limited to, an equity line of credit, whereby the Company may issue securities at a future determined price.


 




    	 	7 	 



    	 	 



    

 


“VWAP”
means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then
listed or quoted on a Trading Market, the daily volume weighted average price of the Common Stock for such date (or the nearest
preceding date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg L.P. (based
on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)), (b) if OTCQB or OTCQX is not a Trading
Market, the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on OTCQB or OTCQX
as applicable, (c) if the Common Stock is not then listed or quoted for trading on OTCQB or OTCQX and if prices for the Common
Stock are then reported in the “Pink Sheets” published by OTC Markets, Inc. (or a similar organization or agency succeeding
to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported, or (d) in all other
cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the
Holder and reasonably acceptable to the Company, the fees and expenses of which shall be paid by the Company.


 


Section
2. Interest; Prepayment.


 


	 	a)	Payment
    of Interest in Cash or Kind; Notice; Interest Calculations and Late Fee.


 


i. .
The Company shall pay interest to the Holder on the aggregate unconverted and then outstanding principal amount of this
Debenture at the rate of 7.5% per annum, payable on each Conversion Date (as to interest accrued and payable, including
pursuant to Section 2(b) below, on the principal amount subject to such conversion) 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 or, at the Company’s option, in duly authorized,
validly issued, fully paid and non-assessable shares of Common Stock at the Interest Conversion Rate (the dollar amount to be
paid in shares, the “Interest Share Amount”) or a combination thereof; provided, however,
that payment in shares of Common Stock may only occur if (i) 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 during the 5 Trading Days
immediately prior to the Interest Payment Date (the “Interest Notice Period”), (ii) the Company shall have
given the Holder notice in accordance with the notice requirements set forth below and (iii) as to such Interest Payment
Date, the Company shall have delivered to the Holder’s account with The Depository Trust Company a number of shares of
Common Stock to be applied against such Interest Share Amount equal to the quotient of (x) the applicable Interest Share
Amount divided by (y) the lesser of the (i) then Conversion Price and (ii) the Interest Conversion Rate assuming for
such purposes that the Interest Payment Date is the Trading Day immediately prior to the commencement of the Interest Notice
Period (the “Interest Conversion Shares”).


 




    	 	8 	 



    	 	 



    

 


ii.  Company’s
Election to Pay Interest in Cash or Kind. Subject to the terms and conditions herein, the decision whether to pay
interest hereunder in cash, shares of Common Stock or a combination thereof shall be at the sole discretion of the Company.
Prior to the commencement of any Interest Notice Period, the Company shall deliver to the Holder a written notice of its
election to pay interest hereunder on the applicable Interest Payment Date either in cash, shares of Common Stock or a
combination thereof and the Interest Share Amount as to the applicable Interest Payment Date, provided that the Company may
indicate in such notice that the election contained in such notice shall apply to future Interest Payment Dates until revised
by a subsequent notice. During any Interest Notice Period, the Company’s election (whether specific to an Interest
Payment Date or continuous) shall be irrevocable as to such Interest Payment Date. Subject to the aforementioned conditions,
failure to timely deliver such written notice to the Holder shall be deemed an election by the Company to pay the interest on
such Interest Payment Date in cash. At any time the Company delivers a notice to the Holder of its election to pay the
interest in shares of Common Stock, the Company shall timely file a prospectus supplement pursuant to Rule 424 disclosing
such election. The aggregate number of shares of Common Stock otherwise issuable to the Holder on an Interest Payment Date
shall be reduced by the number of Interest Conversion Shares previously issued to the Holder in connection with such Interest
Payment Date.


 


iii.
Interest shall be calculated on the basis of
a 360-day year, consisting of twelve 30 calendar day periods, and shall accrue daily commencing on the Exchange 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. Payment of interest in shares of Common Stock (other than the Interest Conversion Shares
issued prior to an Interest Notice Period) shall otherwise occur pursuant to Section 4(c)(ii) herein and, solely for purposes
of the payment of interest in shares, the Interest Payment Date shall be deemed the Conversion Date. 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”).


 




    	 	9 	 



    	 	 



    

 


iv. All
overdue accrued and unpaid interest to be paid hereunder shall entail a late fee at an interest rate equal to the lesser of 18%
per annum or the maximum rate permitted by applicable law (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. Notwithstanding anything to the
contrary contained herein, if, on any Interest Payment Date the Company has elected to pay accrued interest in the form of Common
Stock but the Company is not permitted to pay accrued interest in Common Stock because it fails to satisfy the conditions for
payment in Common Stock set forth in Section 2(a) herein, then, at the option of the Holder, the Company, in lieu of delivering
either shares of Common Stock pursuant to this Section 2 or paying the regularly scheduled interest payment in cash, shall deliver,
within three (3) Trading Days of each applicable Interest Payment Date, an amount in cash equal to the product of (x) the number
of shares of Common Stock otherwise deliverable to the Holder in connection with the payment of interest due on such Interest
Payment Date multiplied by (y) the highest VWAP during the period commencing on the Interest Payment Date and ending on the Trading
Day prior to the date such payment is actually made. If any Interest Conversion Shares are issued to the Holder in connection
with an Interest Payment Date and are not applied against an Interest Share Amount, then the Holder shall promptly return such
excess shares to the Company.


 


b)
 Interest Make Whole. In the event
that this Debenture is converted or redeemed (including via An Event of Default) prior to the Maturity Date, the Company shall
pay to the Holder, in addition to any other amounts then owed, in cash upon such conversion or redemption, an amount in interest
equal to the amount of interest that would otherwise have been payable if this Debenture had been held until the Maturity Date.


 


c)
 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 Debenture 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 Exchange Agreement and may
be transferred or exchanged only in compliance with the Exchange 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.


 




    	 	10 	 



    	 	 



    

 


Section
4. Conversion.


 


a)
 Voluntary Conversion. At any time
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, accrued but unpaid interest thereon (whether paid in cash or Interest Conversion Shares) 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. 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. The Holder, and any assignee by acceptance of this Debenture,
acknowledge and agree that, by reason of the provisions of this paragraph, 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.


 


b)
  Conversion Price; Alternate Conversion
Price.


 


i.
Conversion Price. The conversion price
in effect on any Conversion Date before December 15, 2017 shall be equal to $0.20, subject to adjustment herein (the “Initial
Conversion Price”). The conversion price in effect on any Conversion Date after December 15, 2017 shall be equal to
the lesser of (A) the Initial Conversion Price and (B) 60% of the lowest trading price of the Common Stock on the Trading Market
in the ten (10) Trading Days prior to the date of conversion (the “Alternate Conversion Price”).


 


ii.
Alternate Conversion Price Upon an Event of
Default. At any time after the occurrence of an Event of Default which has not been cured within 10 Trading Days, the Holder
may, at the Holder’s option, convert the outstanding Principal Amount plus any liquidated damages into shares of Common
Stock at price per share equal to 55% of the lowest trading price for the thirty (30) Trading Days immediately prior to date of
conversion (the “Event of Default Conversion Price”, and together with the Initial Conversion Price and the
Alternate Conversion Price, the “Conversion Price”).


 




    	 	11 	 



    	 	 



    

 


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 Conversion Shares Upon Conversion.
Not later than the earlier of (i) three (3) Trading Days and (ii) the number of Trading Days comprising the Standard Settlement
Period (as defined below) after each Conversion Date (the “Share Delivery Date”), the Company shall deliver,
or cause to be delivered, to the Holder (A) the Conversion Shares which, on or after the six month anniversary of the Original
Issue Date, shall be free of restrictive legends and trading restrictions representing the number of Conversion Shares being acquired
upon the conversion of this Debenture (including, if the Company has given continuous notice pursuant to Section 2(b) for payment
of interest in shares of Common Stock at least 20 Trading Days prior to the date on which the Notice of Conversion is delivered
to the Company, shares of Common Stock representing the payment of accrued interest otherwise determined pursuant to Section 2(a)
but assuming that the Interest Notice Period is the 20 Trading Days period immediately prior to the date on which the Notice of
Conversion is delivered to the Company and excluding for such issuance the condition that the Company deliver Interest Conversion
Shares as to such interest payment prior to the commencement of the Interest Notice Period) and (B) a bank check in the amount
of accrued and unpaid interest (if the Company has elected or is required to pay accrued interest in cash). On or after the six
month anniversary of the Original Issue Date the Company shall deliver any Conversion Shares 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. As used herein, “Standard Settlement Period” means the standard settlement period, expressed
in a number of Trading Days, on the Company’s primary Trading Market with respect to the Common Stock as in effect on the
date of delivery of the Notice of Conversion.


 


iii.
Failure to Deliver Conversion Shares.
If, in the case of any Notice of Conversion, such Conversion Shares 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 Conversion Shares, 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 Conversion Shares issued
to such Holder pursuant to the rescinded Conversion Notice.


 




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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 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 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 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 Conversion Shares 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 Conversion Shares 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 any brokerage commissions) 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 any brokerage commissions) 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 any brokerage commissions) giving rise to such
purchase obligation was a total of $10,000 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 Conversion Shares upon conversion of this Debenture as required pursuant to the terms hereof.


 


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 at least a number of shares equal to the Required Minimum. 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.


 




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viii.
Transfer Taxes and Expenses. The issuance
of Conversion Shares 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 Conversion Shares, 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 Conversion Shares upon conversion in a name other than that of the Holder of this Debenture so converted and the Company
shall not be required to issue or deliver such Conversion Shares 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.


 


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 paragraph 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, 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 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 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
exceeds 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 held by the Holder and the Beneficial Ownership Limitation provisions of this
Section 4(d) shall continue to apply. Any increase in the Beneficial Ownership Limitation will not be effective until the 61st
day after such notice is delivered to the Company. The Beneficial Ownership Limitation provisions of this paragraph 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 paragraph shall apply to a successor holder of this Debenture.


 




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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 Debenture), (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 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 re-classification.


 


b)
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 Initial 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 Initial Conversion Price, such issuance shall be deemed to have occurred for less than the Initial Conversion Price on
such date of the Dilutive Issuance), then the Initial 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. If the Company enters into a Variable Rate Transaction,
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.


 




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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).


 




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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 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.


 




    	 	18 	 



    	 	 



    

 


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.


 


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 twenty (20) calendar 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 or share exchange 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 or share exchange, 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 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 20-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.


 




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Section
6. Redemption.


 


a)\
Optional Redemption at Election of Company.
Subject to the provisions of this Section 6(a) and subject to the satisfaction of the Debentures held by MEF I, L.P. and First
Fire Global Opportunities Fund LLC at any time after the Exchange 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 5th Trading Day following the Optional Redemption Notice Date (such
date, the “Optional Redemption Date”, such 5 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 may only effect an Optional Redemption if 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, during the Optional Redemption
period. If such condition shall cease to be satisfied at any time during the Optional Redemption Period, then the Holder may elect
to nullify the Optional Redemption Notice by notice to the Company within 3 Trading Days after the first day on which any such
condition has not been met in which case the Optional Redemption Notice shall be null and void, ab initio. The Company covenants
and agrees that it will honor all Notices of Conversion tendered from the time of delivery of the Optional Redemption Notice through
the date all amounts owing thereon are due and paid in full.


 




    	 	20 	 



    	 	 



    

 


b)
Optional Redemption at Election of Holder.
Subject to the satisfaction of the Debentures held by MEF I, L.P. and First Fire Global Opportunities Fund LLC, from the date
hereof until such time as this Debenture is no longer outstanding, if the Company raises cash proceeds from an equity or debt
financing, the Company shall immediately provide notice of such financing to the Holder, including the gross proceeds of such
financing. Thereafter, the Holder may deliver a notice to the Company (a “Holder Redemption Notice” and the
date such notice is deemed delivered hereunder, the “Holder Redemption Notice Date”) of its irrevocable election
to require the Company to redeem some or all of the then outstanding principal amount of this Debenture for cash in an amount
up to the Holder Redemption Amount on the 5th Trading Day following the Holder Redemption Notice Date (such date, the
“Holder Redemption Date”, such 5 Trading Day period, the “Holder Redemption Period” and such redemption,
the “Holder Redemption”). The Holder Redemption Amount is payable in full on the Holder Redemption Date. Notwithstanding
the foregoing, the Company shall be permitted to raise an aggregate of $500,000 in one or more equity or debt financings before
the Holder shall be permitted to require the Company to redeem its Debenture in accordance with this Section 6(b).


 


c)
Redemption Procedure. The payment of cash
pursuant to an Optional Redemption or Holder Redemption shall be payable on the Optional Redemption Date or Holder Redemption
Date, as applicable. If any portion of the payment pursuant to an Optional Redemption or Holder 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 18% per annum
or the maximum rate permitted by applicable law until such amount is paid in full. Notwithstanding anything herein contained to
the contrary, if any portion of the Optional Redemption Amount or Holder 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 Holder
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 Agent shall have otherwise
given prior written consent, in the event the Agent, the Company shall not, and shall not permit any of the Subsidiaries to, directly
or indirectly:


 


a)
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)
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;


 




    	 	21 	 



    	 	 



    

 


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 (i) the Conversion Shares or Warrant Shares as permitted or required under the Transaction Documents and (ii) repurchases
of Common Stock or Common Stock Equivalents of departing officers and directors of the Company, provided that such repurchases
shall not exceed an aggregate of $100,000 for all officers and directors during the term of this Debenture;


 


e)
repay, repurchase or offer to repay, repurchase
or otherwise acquire any Indebtedness, other than the Debenture, other than regularly scheduled principal and interest payments
as such terms are in effect as of the Exchange Date (which shall include the debentures issued to the Holder pursuant to a securities
purchase agreement of even date herewith), provided that such payments shall not be permitted if, at such time, or after giving
effect to such payment, any Event of Default exist or occur;


 


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


 


g)
issue any Common Stock or Common Stock Equivalents
pursuant to Section 3(a)(9) (except such transaction exclusively with the original purchasers of the securities being exchanged)
or Section 3(a)(10) of the Securities Act;


 


h)
transfer any assets of the Company or any domestic
Subsidiary to a third party (other than in the ordinary course of business);


 


i)
enter into any transaction with any Affiliate
of the Company which would be required to be disclosed in any public filing with the Commission, 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);


 


j)
authorize, create, modify or amend any now-existing
or future-created class of equity, including series of common stock other than the Common Stock or preferred stock of the Company;
or


 


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


 




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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 the Debenture or (B) interest, liquidated damages and other amounts owing to the Holder on the Debenture, as and when
the same shall become due and payable (whether on a Conversion 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 3 Trading Days;


 


ii.  the
Company shall fail to observe or perform any other covenant or agreement contained in the Debenture, including, but not
limited to, any failure to conduct a Holder Redemption in accordance with Section 6 and any failure to remain current with
respect to Transfer Agent and legal fees relating to legal transfer and legend removal of the Securities (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 (xi) below), which failure is not cured, if possible to cure, within the earlier to occur of (A) 5 Trading Days
after notice of such failure sent by the Holder to the Company and (B) 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 shall be untrue or incorrect
in any material respect as of the date when made or deemed made;


 


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 $150,000, 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;


 




    	 	23 	 



    	 	 



    

 


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 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 33% of its assets in one transaction or a series of related transactions (whether or not such
sale would constitute a Change of Control Transaction);


 


ix. 
the Company shall fail for any reason to deliver Conversion Shares to a Holder prior to the 5rd Trading Day after a
Conversion Date pursuant to Section 4(c);


 


x. 
any Person shall breach any agreement delivered to the initial Holder pursuant to the Transaction Documents;


 


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” (i.e., the Depository Trust Company
announces that it will not accept the deposit of shares of Common Stock into its participants’ street name
accounts);


 


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 $100,000, and such judgment, writ or similar final process shall
remain unvacated, unbonded or unstayed for a period of 45 calendar days; or


 


xiii. 
The Company shall fail to maintain sufficient reserves shares equal to or above the Required Minimum.


 


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 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 18% per annum or the maximum rate permitted under applicable law. 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.


 




    	 	24 	 



    	 	 



    

 


Section
9. [Reserved]


 


Section
10. 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 facsimile number, email address, or address
as the Company may specify for such purposes by notice to the Holder delivered in accordance with this Section 10(a). 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 the
facsimile number or email address or address of the Holder appearing on the books of the Company, or if no such facsimile number
or email attachment or address appears on the books of the Company, at the principal place of business of such Holder, as set
forth in the Exchange Agreement. 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 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.


 


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.


 




    	 	25 	 



    	 	 



    

 


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 legal 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 suit, 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 suit, 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 fullest extent permitted by applicable law, any and all
right to trial by jury in any legal 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.


 


e)
Waiver; Amendment. 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 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. Any provision of this Debenture may be waived by the Holder,
which waiver shall be binding on all successors and assigns. Any provision of this Debenture may be amended by a written instrument
executed by the Company and the Holder, which amendment shall be binding on all successors and assigns.


 




    	 	26 	 



    	 	 



    

 


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 of interest permitted under
applicable law. 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 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.


 




    	 	27 	 



    	 	 



    

 


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, dated as of May 9, 2017 between the Company, the Subsidiaries of the Company
and the Secured Parties (as defined therein).


 


Section
11. 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 two (2) Business Days after such receipt or delivery publicly
disclose such material, nonpublic information on a Current Report on Form 8-K or otherwise. 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)


 




    	 	28 	 



    	 	 



    

 


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.


 


	 	ADVANCED MEDICAL ISOTOPE CORPORATION
	 	 	 
	 	By:	     
	 	Name:	Michael
    Korenko
	 	Title:	CEO


 




    	 	29 	 



    	 	 



    

 


ANNEX
A


 


NOTICE
OF CONVERSION


 


The
undersigned hereby elects to convert principal under the Original Issue Discount Senior Secured Convertible Debenture due May
9, 2018 of Advanced Medical Isotope Corporation, a Delaware 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.


 


Date
of Conversion:


 


Conversion
Price:


 


Principal
Amount of Debenture to be Converted:


 


Number of shares of Common Stock to be issued:


 


Remaining
Principal Balance Due After This Conversion: Signature:


 


Name:


 


DWAC
Instructions:


 


Broker
No:


Account
No:







 






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