EXHIBIT 10.1


 


NEITHER THIS DEBENTURE NOR THE SECURITIES
INTO WHICH THIS DEBENTURE IS CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION
OF ANY STATE. THESE SECURITIES HAVE BEEN SOLD 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.


 


WESTPORT
ENERGY HOLDINGS INC.


 


Secured
Convertible Debenture


 


Principal Amount: $1,080,000.00



Debenture Issuance Date: February 5, 2014


Debenture Number: CICS-28


 


FOR VALUE RECEIVED,
WESTPORT ENERGY HOLDINGS INC., a Delaware corporation (the “Company”), hereby promises to pay to the order of
YA Global Master SPV, Ltd, or its registered assigns (the “Holder”) the amount set out above as the Principal
Amount (as reduced pursuant to the terms hereof pursuant to redemption, conversion or otherwise, the “Principal”)
when due, whether upon the Maturity Date (as defined below), acceleration, redemption or otherwise (in each case in accordance
with the terms hereof) and to pay interest (“Interest”) on any outstanding Principal at the applicable Interest
Rate from the date set out above as the Debenture Issuance Date (the “Issuance Date”) until the same becomes
due and payable, whether upon an Interest Date (as defined below), the Maturity Date or acceleration, conversion, redemption or
otherwise (in each case in accordance with the terms hereof). This Secured Convertible Debenture (including all debentures issued
in exchange, transfer or replacement hereof, this “Debenture”) was originally issued pursuant to the Securities
Purchase Agreement dated February 5, 2014, (the “Securities Purchase Agreement”) between the YA Global Investments,
L.P. (“YA Global”) and the Company. Certain capitalized terms used herein are defined in Section 17.


 




    	 



    	 



    


 


(1) GENERAL TERMS


 


(a) Payment of Principal.
The Company shall pay to the Holder in cash all outstanding Principal in twelve consecutive and equal monthly installments (each
in the amount equal to one twelfth of the original Principal Amount of this Debenture), no later than the fifteenth day of each
month, commencing on February 1, 2015. Notwithstanding the foregoing, on a monthly basis the Company shall allocate fifty percent
of the net cash flow from the Allocated Wells towards the repayment of this Debenture and all other Debentures issued in connection
with the Securities Purchase Agreement (on a pro-rata basis based on the amount outstanding under each Debenture at the time each
payment is allocated), and shall pay to the Holder its pro-rata share on the first business day of each calendar month during which
there is positive cash flow from the Allocated Wells, which payment shall applied by the Holder to the outstanding obligations
under this Debenture in the following order: (i) costs incurred by the Holder in connection with collection under this Debenture
(if applicable), (ii) accrued and unpaid interest, and (iii) Principal (to be applied to the most recent Principal installments
first). The “Maturity Date” shall be February 4, 2016, as may be extended at the option of the Holder (i) in
the event that, and for so long as, an Event of Default (as defined below) shall have occurred and be continuing on the Maturity
Date (as may be extended pursuant to this Section 1) or any event shall have occurred and be continuing on the Maturity Date (as
may be extended pursuant to this Section 1) that with the passage of time and the failure to cure would result in an Event of Default.
The Company may prepay or redeem any portion of the outstanding Principal without the prior written consent of the Holder provided
that any such payments are made on a pro rata basis to all holders of the debentures issued pursuant to the Securities Purchase
Agreement that are outstanding at the time of each such payment.


 


(b) Interest Rate and
Payment of Interest. Interest shall accrue on the outstanding principal balance hereof at an annual rate equal to twelve percent
(“Interest Rate”). Interest shall be calculated on the basis of a 365-day year and the actual number of days
elapsed, to the extent permitted by applicable law. Interest hereunder shall be paid in eighteen consecutive monthly payments,
no later than the fifteenth day of each month, commencing on August 15, 2014 (or sooner as provided herein) to the Holder or its
assignee in whose name this Debenture is registered on the records of the Company regarding registration and transfers of Debentures
in cash, or, provided that the Equity Conditions are then satisfied, and with the consent of the Holder, converted into Common
Stock at the Conversion Price on the Trading Day it is paid.


 


(c) Security. This
Debenture is secured by a grant of a security interest as set forth in the Securities Purchase Agreement.


 


(2) EVENTS OF DEFAULT.



 


(a) An “Event
of Default”, wherever used herein, means any one of the following events (whatever the reason and whether it 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) the Company’s
failure to pay to the Holder any amount of Principal, Interest, or other amounts when and as due under this Debenture or any other
Transaction Document;


 




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(ii) The Company or any
subsidiary of the Company shall commence, or there shall be commenced against the Company or any subsidiary of the Company under
any applicable bankruptcy or insolvency laws as now or hereafter in effect or any successor thereto, or the Company or any subsidiary
of the Company commences any other proceeding under any reorganization, arrangement, adjustment of debt, relief of debtors, dissolution,
insolvency or liquidation or similar law of any jurisdiction whether now or hereafter in effect relating to the Company or any
subsidiary of the Company or there is commenced against the Company or any subsidiary of the Company any such bankruptcy, insolvency
or other proceeding which remains undismissed for a period of 61 days; or the Company or any subsidiary of the Company is adjudicated
insolvent or bankrupt; or any order of relief or other order approving any such case or proceeding is entered; or the Company or
any subsidiary of the Company suffers any appointment of any custodian, private or court appointed receiver or the like for it
or any substantial part of its property which continues undischarged or unstayed for a period of sixty one (61) days; or the Company
or any subsidiary of the Company makes a general assignment for the benefit of creditors; or the Company or any subsidiary of the
Company shall fail to pay, or shall state that it is unable to pay, or shall be unable to pay, its debts generally as they become
due; or the Company or any subsidiary of the Company shall call a meeting of its creditors with a view to arranging a composition,
adjustment or restructuring of its debts; or the Company or any subsidiary of the Company shall by any act or failure to act expressly
indicate its consent to, approval of or acquiescence in any of the foregoing; or any corporate or other action is taken by the
Company or any subsidiary of the Company for the purpose of effecting any of the foregoing;


 


(iii) The Company or any
subsidiary of the Company shall default in any of its obligations under any other debenture or 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
of the Company or any subsidiary of the Company in an amount exceeding $100,000, whether such indebtedness now exists or shall
hereafter be created and such default shall result in such indebtedness becoming or being declared due and payable;


 


(iv) The Common Stock
shall cease to be quoted or listed for trading, fail to have a bid price or VWAP, or fail to maintain a trading market on any Primary
Market, for a period of five (5) consecutive Trading Days;


 


(v) The Company or any
subsidiary of the Company shall be a party to any Change of Control Transaction (as defined in Section 6) unless in connection
with such Change of Control Transaction this Debenture is retired;


 


(vi) the Company’s
(A) failure to cure a Conversion Failure by delivery of the required number of shares of Common Stock within five (5) Business
Days after the applicable Conversion Failure or (B) notice, written or oral, to any holder of the Debentures, including by way
of public announcement, at any time, of its intention not to comply with a request for conversion of any Debentures into shares
of Common Stock that is tendered in accordance with the provisions of the Debentures, other than pursuant to Section 4(c);


 


(vii) The Company shall
fail for any reason to deliver the payment in cash pursuant to a Buy-In (as defined herein) within three (3) Business Days after
such payment is due;


 




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(viii) The Company shall
fail to observe or perform any other covenant, agreement or warranty contained in, or otherwise commit any breach or default of
any provision of this Debenture (except as may be covered by Section 2(a)(i) through 2(a)(vii) hereof) or any Transaction Document
(as defined in Section 17) which is not cured within the time prescribed.


 


(b) During the time that
any portion of this Debenture is outstanding, if any Event of Default has occurred, the full unpaid Principal amount of this Debenture,
together with interest and other amounts owing in respect thereof, to the date of acceleration shall become at the Holder’s
election, immediately due and payable in cash. Furthermore, in addition to any other remedies, the Holder shall have the right
(but not the obligation) to convert this Debenture at any time after (x) an Event of Default or (y) the Maturity Date at the Conversion
Price. The Holder need not provide and the Company hereby waives any presentment, demand, protest or other notice of any kind,
(other than required notice of conversion) 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 declaration may
be rescinded and annulled by Holder at any time prior to payment hereunder. No such rescission or annulment shall affect any subsequent
Event of Default or impair any right consequent thereon.


 


(3) RESERVED. 


 


(4) CONVERSION OF DEBENTURE. This
Debenture shall be convertible into shares of the Company’s Common Stock, on the terms and conditions set forth in this Section
4.


 


(a) Conversion Right.
Subject to the provisions of Section 4(c), at any time or times on or after the Issuance Date, the Holder shall be entitled to
convert any portion of the outstanding and unpaid Conversion Amount (as defined below) into fully paid and nonassessable shares
of Common Stock in accordance with Section 4(b), at the Conversion Rate (as defined below). The number of shares of Common Stock
issuable upon conversion of any Conversion Amount pursuant to this Section 4(a) shall be determined by dividing (x) such Conversion
Amount by (y) the Conversion Price (the “Conversion Rate”). The Company shall not issue any fraction of a share
of Common Stock upon any conversion. If the issuance would result in the issuance of a fraction of a share of Common Stock, the
Company shall round such fraction of a share of Common Stock up to the nearest whole share. The Company shall pay any and all transfer,
stamp and similar taxes that may be payable with respect to the issuance and delivery of Common Stock upon conversion of any Conversion
Amount.


 


(i) “Conversion
Amount” means the portion of the Principal and accrued Interest to be converted, redeemed or otherwise with respect to
which this determination is being made.


 


(ii) “Conversion
Price” means, as of any Conversion Date (as defined below) or other date of determination 90% of the lowest daily VWAP
during the 10 consecutive Trading Days immediately preceding the Conversion Date or other date of determination (the “Conversion
Price”). The Conversion Price shall be adjusted from time to time pursuant to the other terms and conditions of this
Debenture.


 




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(b) Mechanics of Conversion.


 


(i) Optional Conversion.
To convert any Conversion Amount into shares of Common Stock on any date (a “Conversion Date”), the Holder shall
(A) transmit by facsimile (or otherwise deliver), for receipt on or prior to 11:59 p.m., New York Time, on such date, a copy of
an executed notice of conversion in the form attached hereto as Exhibit I (the “Conversion Notice”) to
the Company and (B) if required by Section 4(b)(iv), surrender this Debenture to a nationally recognized overnight delivery service
for delivery to the Company (or an indemnification undertaking reasonably satisfactory to the Company with respect to this Debenture
in the case of its loss, theft or destruction). On or before the third Business Day following the date of receipt of a Conversion
Notice (the “Share Delivery Date”), the Company shall (X) if legends are not required to be placed on certificates
of Common Stock and provided that the Transfer Agent is participating in the Depository Trust Company’s (“DTC”)
Fast Automated Securities Transfer Program, credit such aggregate number of shares of Common Stock to which the Holder shall be
entitled to the Holder’s or its designee’s balance account with DTC through its Deposit Withdrawal Agent Commission
system or (Y) if the Transfer Agent is not participating in the DTC Fast Automated Securities Transfer Program, issue and deliver
to the address as specified in the Conversion Notice, a certificate, registered in the name of the Holder or its designee, for
the number of shares of Common Stock to which the Holder shall be entitled which certificates shall not bear any restrictive legends
unless required pursuant to rules and regulations of the Commission. If this Debenture is physically surrendered for conversion
and the outstanding Principal of this Debenture is greater than the Principal portion of the Conversion Amount being converted,
then the Company shall as soon as practicable and in no event later than three (3) Business Days after receipt of this Debenture
and at its own expense, issue and deliver to the holder a new Debenture representing the outstanding Principal not converted. The
Person or Persons entitled to receive the shares of Common Stock issuable upon a conversion of this Debenture shall be treated
for all purposes as the record holder or holders of such shares of Common Stock upon the transmission of a Conversion Notice.


 


(ii) Company’s
Failure to Timely Convert. If within three (3) Trading Days after the Company’s receipt of the facsimile copy of a Conversion
Notice the Company shall fail to issue and deliver a certificate to the Holder or credit the Holder’s balance account with
DTC for the number of shares of Common Stock to which the Holder is entitled upon such holder’s conversion of any Conversion
Amount (a “Conversion Failure”), and if on or after such Trading Day the Holder purchases (in an open market
transaction or otherwise) Common Stock to deliver in satisfaction of a sale by the Holder of Common Stock issuable upon such conversion
that the Holder anticipated receiving from the Company (a “Buy-In”), then the Company shall, within three (3)
Business Days after the Holder’s request and in the Holder’s discretion, either (i) pay cash to the Holder in an amount
equal to the Holder’s total purchase price (including brokerage commissions and other out of pocket expenses, if any) for
the shares of Common Stock so purchased (the “Buy-In Price”), at which point the Company’s
obligation to deliver such certificate (and to issue such Common Stock) shall terminate, or (ii) promptly honor its obligation
to deliver to the Holder a certificate or certificates representing such Common Stock and pay cash to the Holder in an amount equal
to the excess (if any) of the Buy-In Price over the product of (A) such number of shares of Common Stock, times (B) the Closing
Bid Price on the Conversion Date.


 




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(iii) Book-Entry.
Notwithstanding anything to the contrary set forth herein, upon conversion of any portion of this Debenture in accordance with
the terms hereof, the Holder shall not be required to physically surrender this Debenture to the Company unless (A) the full Conversion
Amount represented by this Debenture is being converted or (B) the Holder has provided the Company with prior written notice (which
notice may be included in a Conversion Notice) requesting reissuance of this Debenture upon physical surrender of this Debenture.
The Holder and the Company shall maintain records showing the Principal and Interest converted and the dates of such conversions
or shall use such other method, reasonably satisfactory to the Holder and the Company, so as not to require physical surrender
of this Debenture upon conversion.


 


(c) Limitations on Conversions.


 


(i) Beneficial Ownership.
The Company shall not effect any conversions of this Debenture and the Holder shall not have the right to convert any portion of
this Debenture or receive shares of Common Stock as payment of interest hereunder to the extent that after giving effect to such
conversion or receipt of such interest payment, the Holder, together with any affiliate thereof, would beneficially own (as determined
in accordance with Section 13(d) of the Exchange Act and the rules promulgated thereunder) in excess of 4.99% of the number of
shares of Common Stock outstanding immediately after giving effect to such conversion or receipt of shares as payment of interest.
Since the Holder will not be obligated to report to the Company the number of shares of Common Stock it may hold at the time of
a conversion hereunder, unless the conversion at issue would result in the issuance of shares of Common Stock in excess of 4.99%
of the then outstanding shares of Common Stock without regard to any other shares which may be beneficially owned by the Holder
or an affiliate thereof, the Holder shall have the authority and obligation to determine whether the restriction contained in this
Section will limit any particular conversion hereunder and to the extent that the Holder determines that the limitation contained
in this Section applies, the determination of which portion of the principal amount of this Debenture is convertible shall be the
responsibility and obligation of the Holder. If the Holder has delivered a Conversion Notice for a principal amount of this Debenture
that, without regard to any other shares that the Holder or its affiliates may beneficially own, would result in the issuance in
excess of the permitted amount hereunder, the Company shall notify the Holder of this fact and shall honor the conversion for the
maximum principal amount permitted to be converted on such Conversion Date in accordance with Section 4(a) and, any principal amount
tendered for conversion in excess of the permitted amount hereunder shall remain outstanding under this Debenture. The provisions
of this Section may be waived by a Holder (but only as to itself and not to any other Holder) upon not less than 65 days prior
notice to the Company. Other Holders shall be unaffected by any such waiver.


 


(d) Other Provisions.


 


(i) The Company shall
at all times reserve and keep available out of its authorized Common Stock the full number of shares of Common Stock issuable upon
conversion of all outstanding amounts under this Debenture; and within three (3) Business Days following the receipt by the Company
of a Holder’s notice that such minimum number of Underlying Shares is not so reserved, the Company shall promptly reserve
a sufficient number of shares of Common Stock to comply with such requirement.


 




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(ii) All calculations
under this Section 4 shall be rounded to the nearest $0.0001 or whole share.


 


(iii) The Company covenants
that it will at all times reserve and keep available out of its authorized and unissued shares of Common Stock solely for the 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, not less than such number of shares of
the Common Stock as shall be issuable (taking into account the adjustments and restrictions set forth herein) upon the conversion
of the 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 and validly authorized, issued and fully paid, nonassessable
and, if the Underlying Shares Registration Statement has been declared effective under the Securities Act, registered for public
sale in accordance with such Underlying Shares Registration Statement.


 


(iv) Nothing herein shall
limit a Holder’s right to pursue actual damages or declare an Event of Default pursuant to Section 2 herein for the Company
’s failure to deliver certificates representing shares of Common Stock upon conversion within the period specified herein
and such Holder shall have the right to pursue all remedies available to it at law or in equity including, without limitation,
a decree of specific performance and/or injunctive relief, in each case without the need to post a bond or provide other security.
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.


 


(5) Adjustments to Conversion Price


 


(a) Other Corporate
Events. In addition to and not in substitution for any other rights hereunder, prior to the consummation of any Fundamental
Transaction pursuant to which holders of shares of Common Stock are entitled to receive securities or other assets with respect
to or in exchange for shares of Common Stock (a “Corporate Event”), the Company shall make appropriate provision
to insure that the Holder will thereafter have the right to receive upon a conversion of this Debenture, at the Holder’s
option, (i) in addition to the shares of Common Stock receivable upon such conversion, such securities or other assets to which
the Holder would have been entitled with respect to such shares of Common Stock had such shares of Common Stock been held by the
Holder upon the consummation of such Corporate Event (without taking into account any limitations or restrictions on the convertibility
of this Debenture) or (ii) in lieu of the shares of Common Stock otherwise receivable upon such conversion, such securities or
other assets received by the holders of shares of Common Stock in connection with the consummation of such Corporate Event in such
amounts as the Holder would have been entitled to receive had this Debenture initially been issued with conversion rights for the
form of such consideration (as opposed to shares of Common Stock) at a conversion rate for such consideration commensurate with
the Conversion Rate. Provision made pursuant to the preceding sentence shall be in a form and substance satisfactory to the Required
Holders. The provisions of this Section shall apply similarly and equally to successive Corporate Events and shall be applied without
regard to any limitations on the conversion or redemption of this Debenture.


 




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(b) Whenever the Conversion
Price is adjusted pursuant to Section 5 hereof, the Company shall promptly mail to the Holder a notice setting forth the Conversion
Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment.


 


(c) In case of any (1)
merger or consolidation of the Company or any subsidiary of the Company with or into another Person, or (2) sale by the Company
or any subsidiary of the Company of more than one-half of the assets of the Company in one or a series of related transactions,
a Holder shall have the right to (A) exercise any rights under Section 2(b), (B) convert the aggregate amount of this Debenture
then outstanding into the shares of stock and other securities, cash and property receivable upon or deemed to be held by holders
of Common Stock following such merger, consolidation or sale, and such Holder shall be entitled upon such event or series of related
events to receive such amount of securities, cash and property as the shares of Common Stock into which such aggregate principal
amount of this Debenture could have been converted immediately prior to such merger, consolidation or sales would have been entitled,
or (C) in the case of a merger or consolidation, require the surviving entity to issue to the Holder a convertible Debenture with
a principal amount equal to the aggregate principal amount of this Debenture then held by such Holder, plus all accrued and unpaid
interest and other amounts owing thereon, which such newly issued convertible Debenture shall have terms identical (including with
respect to conversion) to the terms of this Debenture, and shall be entitled to all of the rights and privileges of the Holder
of this Debenture set forth herein and the agreements pursuant to which this Debentures were issued. In the case of clause (C),
the conversion price applicable for the newly issued shares of convertible preferred stock or convertible Debentures shall be based
upon the amount of securities, cash and property that each share of Common Stock would receive in such transaction and the Conversion
Price in effect immediately prior to the effectiveness or closing date for such transaction. The terms of any such merger, sale
or consolidation shall include such terms so as to continue to give the Holder the right to receive the securities, cash and property
set forth in this Section upon any conversion or redemption following such event. This provision shall similarly apply to successive
such events.


 


(6) REISSUANCE OF THIS
DEBENTURE.


 


(a) Transfer. If
this Debenture is to be transferred, the Holder shall surrender this Debenture to the Company, whereupon the Company will forthwith
issue and deliver upon the order of the Holder a new Debenture (in accordance with Section 6(d)), registered in the name of the
registered transferee or assignee, representing the outstanding Principal being transferred by the Holder (along with any accrued
and unpaid interest thereof) and, if less then the entire outstanding Principal is being transferred, a new Debenture (in accordance
with Section 6(d)) to the Holder representing the outstanding Principal not being transferred. The Holder and any assignee, by
acceptance of this Debenture, acknowledge and agree that, by reason of the provisions of Section 4(b)(iii) following conversion
or redemption of any portion of this Debenture, the outstanding Principal represented by this Debenture may be less than the Principal
stated on the face of this Debenture.


 




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(b) Lost, Stolen or
Mutilated Debenture. Upon receipt by the Company of evidence reasonably satisfactory to the Company of the loss, theft, destruction
or mutilation of this Debenture, and, in the case of loss, theft or destruction, of any indemnification undertaking by the Holder
to the Company in customary form and, in the case of mutilation, upon surrender and cancellation of this Debenture, the Company
shall execute and deliver to the Holder a new Debenture (in accordance with Section 6(d)) representing the outstanding Principal.


 


(c) Debenture Exchangeable
for Different Denominations. This Debenture is exchangeable, upon the surrender hereof by the Holder at the principal office
of the Company, for a new Debenture or Debentures (in accordance with Section 6(d)) representing in the aggregate the outstanding
Principal of this Debenture, and each such new Debenture will represent such portion of such outstanding Principal as is designated
by the Holder at the time of such surrender.


 


(d) Issuance of New
Debentures. Whenever the Company is required to issue a new Debenture pursuant to the terms of this Debenture, such new Debenture
(i) shall be of like tenor with this Debenture, (ii) shall represent, as indicated on the face of such new Debenture, the Principal
remaining outstanding (or in the case of a new Debenture being issued pursuant to Section 6(a) or Section 6(c), the Principal designated
by the Holder which, when added to the principal represented by the other new Debentures issued in connection with such issuance,
does not exceed the Principal remaining outstanding under this Debenture immediately prior to such issuance of new Debentures),
(iii) shall have an issuance date, as indicated on the face of such new Debenture, which is the same as the Issuance Date of this
Debenture, (iv) shall have the same rights and conditions as this Debenture, and (v) shall represent accrued and unpaid Interest
from the Issuance Date.


 


(7) NOTICES. Any
notices, consents, waivers or other communications required or permitted to be given under the terms hereof must be in writing
and will be deemed to have been delivered: (i) upon receipt, when delivered personally; (ii) upon receipt, when sent by facsimile
(provided confirmation of transmission is mechanically or electronically generated and kept on file by the sending party); or (iii)
one (1) Trading Day after deposit with a nationally recognized overnight delivery service, in each case properly addressed to the
party to receive the same. The addresses and facsimile numbers for such communications shall be:


 


	If to the Company, to:	Westport Energy Holdings Inc.
	 	100 Overlook Capital, 2nd Floor
	 	Princeton, NJ 08540
	 	Attn: Chief Executive Officer
	 	Telephone: (609) 498-7029
	 	Facsimile: (609) 498-7029



 






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	If to the Holder:	YA Global Master SPV, Ltd.
	 	1012 Springfield Avenue
	 	Mountainside, NJ 07092
	 	 
	 	Attention: Mark Angelo
	 	Telephone: (201) 983-8300


 


or at such other address
and/or facsimile number and/or to the attention of such other person as the recipient party has specified by written notice given
to each other party three (3) Business Days prior to the effectiveness of such change. Written confirmation of receipt (i) given
by the recipient of such notice, consent, waiver or other communication, (ii) mechanically or electronically generated by the sender’s
facsimile machine containing the time, date, recipient facsimile number and an image of the first page of such transmission or
(iii) provided by a nationally recognized overnight delivery service, shall be rebuttable evidence of personal service, receipt
by facsimile or receipt from a nationally recognized overnight delivery service in accordance with clause (i), (ii) or (iii) above,
respectively.


 


(8) Except as expressly
provided herein, no provision of this Debenture shall alter or impair the obligations of the Company, which are absolute and unconditional,
to pay the principal of, interest and other charges (if any) on, this Debenture at the time, place, and rate, and in the coin or
currency, herein prescribed. This Debenture is a direct obligation of the Company. As long as this Debenture is outstanding, the
Company shall not and shall cause their subsidiaries not to, without the consent of the Holder, (i) amend its certificate of incorporation,
bylaws or other charter documents so as to adversely affect any rights of the Holder; (ii) repay, repurchase or offer to repay,
repurchase or otherwise acquire shares of its Common Stock or other equity securities; or (iii) enter into any agreement with respect
to any of the foregoing.


 


(9) This Debenture shall
not entitle the Holder to any of the rights of a stockholder of the Company, including without limitation, the right to vote, to
receive dividends and other distributions, or to receive any notice of, or to attend, meetings of stockholders or any other proceedings
of the Company, unless and to the extent converted into shares of Common Stock in accordance with the terms hereof.


 


(10) No indebtedness of
the Company is senior to this Debenture in right of payment, whether with respect to interest, damages or upon liquidation or dissolution
or otherwise. Without the Holder’s consent, the Company will not and will not permit any of their subsidiaries to, directly
or indirectly, enter into, create, incur, assume or suffer to exist any indebtedness 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 there from that is senior
in any respect to the obligations of the Company under this Debenture.


 




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(11) This Debenture shall
be governed by and construed in accordance with the laws of the State of New Jersey, without giving effect to conflicts of laws
thereof. Each of the parties consents to the jurisdiction of the Superior Courts of the State of New Jersey sitting in Hudson County,
New Jersey and the U.S. District Court for the District of New Jersey sitting in Newark, New Jersey in connection with any
dispute arising under this Debenture and hereby waives, to the maximum extent permitted by law, any objection, including any objection
based on forum non conveniens to the bringing of any such proceeding in such jurisdictions.


 


(12) If the Company fails
to strictly comply with the terms of this Debenture, then the Company shall reimburse the Holder promptly for all fees, costs and
expenses, including, without limitation, attorneys’ fees and expenses incurred by the Holder in any action in connection
with this Debenture, including, without limitation, those incurred: (i) during any workout, attempted workout, and/or in connection
with the rendering of legal advice as to the Holder’s rights, remedies and obligations, (ii) collecting any sums which become
due to the Holder, (iii) defending or prosecuting any proceeding or any counterclaim to any proceeding or appeal; or (iv) the protection,
preservation or enforcement of any rights or remedies of the Holder.


 


(13) Any waiver by 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 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. Any waiver must be in writing.


 


(14) 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 shall violate applicable laws governing usury,
the applicable rate of interest due hereunder shall automatically be lowered to equal the maximum permitted rate of interest. 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 indenture, 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 impeded 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.


 


(15) 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.


 




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(16) THE PARTIES HEREBY
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT ANY OF THEM MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED
HEREON OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY TRANSACTION DOCUMENT OR ANY COURSE OF CONDUCT, COURSE
OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY. THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE PARTIES’
ACCEPTANCE OF THIS AGREEMENT.


 


(17) CERTAIN DEFINITIONS
 For purposes of this Debenture, the following terms shall have the following meanings:


 


(a) “Allocated
Wells” shall have the meaning assigned to it in the Securities Purchase Agreement.


 


(b) “Bloomberg”
means Bloomberg Financial Markets.


 


(c) “Business
Day” means any day except Saturday, Sunday and any day which shall be a federal legal holiday in the United States or
a day on which banking institutions are authorized or required by law or other government action to close.


 


(d) “Change of
Control Transaction” means the occurrence 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 fifty percent (50%) of
the voting securities of the Company (except that the acquisition of voting securities by the Holder or any other current holder
of convertible securities of the Company shall not constitute a Change of Control Transaction for purposes hereof), (b) a replacement
at one time or over time of more than one-half of the members of the board of directors of the Company which is not approved by
a majority of those individuals who are members of the board of directors on the date hereof (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), (c) the merger, consolidation or sale of fifty percent (50%) or
more of the assets of the Company or any subsidiary of the Company in one or a series of related transactions with or into another
entity, or (d) 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 above in (a), (b) or (c).


 


(e) “Closing
Bid Price” means the price per share in the last reported trade of the Common Stock on a Primary Market or on the exchange
which the Common Stock is then listed as quoted by Bloomberg.


 


(f) “Convertible
Securities” means any stock or securities (other than Options) directly or indirectly convertible into or exercisable
or exchangeable for Common Stock.


 


(g) “Commission”
means the Securities and Exchange Commission.


 




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


 


(i) “Exchange
Act” means the Securities Exchange Act of 1934, as amended.


 


(j) “Fundamental
Transaction” means any of the following: (1) the Company effects any merger or consolidation of the Company with
or into another Person and the Company is the non-surviving company (other than a merger or consolidation with a wholly owned subsidiary
of the Company for the purpose of redomiciling the Company), (2) the Company effects any sale of all or substantially all of its
assets in one or a series of related transactions, (3) any tender offer or exchange offer (whether by the Company or another Person)
is completed pursuant to which holders of Common Stock are permitted to tender or exchange their shares for other securities, cash
or property, or (4) the Company effects any reclassification 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


 


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


 


(l) “Person”
means a corporation, an association, a partnership, organization, a business, an individual, a government or political subdivision
thereof or a governmental agency.


 


(m) “Primary
Market” means any of (a) the NYSE Amex (b) the New York Stock Exchange, (c) the Nasdaq Stock Market, (d) the Nasdaq Capital
Market, (e) OTC Bulletin Board and (f) OTC Markets Group Inc. (including any of the OTCQX, OTCQB and the OTC Pink) or (f) any successor
to any of the foregoing markets or exchanges.


 


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


 


(o) “Trading
Day” means a day on which the shares of Common Stock are quoted or traded on a Primary Market on which the shares of
Common Stock are then quoted or listed; provided, that in the event that the shares of Common Stock are not listed or quoted, then
Trading Day shall mean a Business Day.


 


(p) “Transaction
Document(s)” shall mean this Debenture, along with the Securities Purchase Agreement, and any other documents or agreements
entered into in connection with the foregoing.


 


(q) “Underlying
Shares” means the shares of Common Stock issuable upon conversion of this Debenture or as payment of interest in accordance
with the terms hereof.


 


(r) “VWAP”
means, for any security as of any date, the daily dollar volume-weighted average price for such security on the Primary Market
as reported by Bloomberg through its “Historical Prices – Px Table with Average Daily Volume” functions, or,
if no dollar volume-weighted average price is reported for such security by Bloomberg, the average of the highest closing bid price
and the lowest closing ask price of any of the market makers for such security as reported in the “pink sheets” by
Pink Sheets LLC.


 


[Signature Page Follows]


 




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IN WITNESS WHEREOF,
the Company has caused this Secured Convertible Debenture to be duly executed by a duly authorized officer as of the date set forth
above.


 


	 	COMPANY:
	 	WESTPORT ENERGY HOLDINGS INC.
	 	 	 
	 	By:	/s/ Stephen
    Schoepfer
	 	Name:	Stephen Schoepfer 
	 	Title:	Chief Executive Officer



 



    	 



    	 



    


 


EXHIBIT I


CONVERSION NOTICE


 


(To be executed by the Holder in order
to Convert the Debenture)


 


TO:


 



The undersigned hereby
irrevocably elects to convert $____________________ of the principal amount of Debenture No. CICS-28 (A) into Shares of Common Stock of WESTPORT
ENERGY HOLDINGS INC., according to the conditions stated therein, as of the Conversion Date written below.


 


	Conversion Date:	 	 
	Conversion Amount to be converted:	 	$
	Conversion Price:	 	$
	Number of shares of Common Stock to be issued:	 	 


 


Please issue the shares of Common Stock in the following name and to the following address:


 


Issue to:


 



	Authorized Signature:	 	 
	Name:	 	 
	Title:	 	 
	Broker DTC Participant Code:	 	 
	Account Number: