Document:

Exhibit 10.1

 

Execution
Version

 

SECURITIES
PURCHASE AGREEMENT

 

This
Securities Purchase Agreement (this “Agreement”) is dated as of December 29, 2015, between InterCloud Systems,
Inc., a Delaware corporation (the “Company”), and each purchaser identified on the signature pages hereto (each,
including its successors and assigns, a “Purchaser” and collectively, the “Purchasers”).

 

WHEREAS,
subject to the terms and conditions set forth in this Agreement and pursuant to Section 4(a)(2) of the Securities Act of 1933,
as amended (the “Securities Act”), and Rule 506 promulgated thereunder, the Company desires to issue and sell
to each Purchaser, and each Purchaser, severally and not jointly, desires to purchase from the Company, securities of the Company
as more fully described in this Agreement.

 

NOW,
THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement, and for other good and valuable consideration,
the receipt and adequacy of which are hereby acknowledged, the Company and each Purchaser agree as follows:

 

ARTICLE
I.

DEFINITIONS

 

1.1          Definitions.
In addition to the terms defined elsewhere in this Agreement: (a) capitalized terms that are not otherwise defined herein have
the meanings given to such terms in the Debentures (as defined herein), and (b) the following terms have the meanings set forth
in this Section 1.1:

 

“Action”
shall have the meaning ascribed to such term in Section 3.1(j).

 

“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.

 

“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.

 

“Closing”
means the closing of the purchase and sale of the Securities pursuant to Section 2.1.

 

“Closing
Date” means the Trading Day on which all of the Transaction Documents have been executed and delivered by the applicable
parties thereto, and all conditions precedent to (i) the Purchasers’ obligations to pay the Subscription Amount and (ii)
the Company’s obligations to deliver the Securities, in each case, have been satisfied or waived.

 

     

     

    

 

“Commission”
means the United States Securities and Exchange Commission.

 

“Common
Stock” means the common stock of the Company, par value $0.0001 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 the Subsidiaries 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.

 

“Company
Counsel” means Pryor Cashman LLP, with offices located at 7 Times Square, New York, New York 10036.

 

“Conversion
Price” shall have the meaning ascribed to such term in the Debentures.

 

“Conversion
Shares” shall have the meaning ascribed to such term in the Debentures.

 

“DACAs”
means the Deposit Account Control Agreements, dated the date hereof, among the Company and each Guarantor, the Purchasers and
PNC Bank, National Association.

 

“Debentures”
means the 10% Original Issue Discount Senior Secured Convertible Debentures due, subject to the terms therein, three years from
their date of issuance, issued by the Company to the Purchasers hereunder, in the form of Exhibit A attached hereto.

 

“Disclosure
Schedules” shall have the meaning ascribed to such term in Section 3.1.

 

“Evaluation
Date” shall have the meaning ascribed to such term in Section 3.1(r).

 

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

 

“FCPA”
means the Foreign Corrupt Practices Act of 1977, as amended.

 

“GAAP”
shall have the meaning ascribed to such term in Section 3.1(h).

 

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“Governmental
Authority” means any national, supranational, federal, state, county, provincial, local, municipal or other government
or political subdivision thereof (including any Regulatory Authority), whether domestic or foreign, and any agency, authority,
commission, ministry, instrumentality, regulatory body, court, tribunal, arbitrator, central bank or other Person exercising executive,
legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to any such government.

 

“Guarantors”
means each of the Subsidiaries set forth on Schedule 1.1(a) and each other Person after the date hereof executing the Subsidiary
Guaranty and Security Agreement or, in each case, a joinder thereto.

 

“Haynes
and Boone” means Haynes and Boone, LLP, with offices located at 30 Rockefeller Plaza, 26th Floor, New York, NY 10112.

 

“Indebtedness”
shall have the meaning ascribed to such term in Section 3.1(aa).

 

“Intellectual
Property Rights” shall have the meaning ascribed to such term in Section 3.1(o).

 

“Legend
Removal Date” shall have the meaning ascribed to such term in Section 4.1(c).

 

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

 

“Material
Adverse Effect” shall have the meaning assigned to such term in Section 3.1(b).

 

“Maximum
Rate” shall have the meaning ascribed to such term in Section 5.16.

 

“Permits”
means all permits, licenses, registrations, certificates, orders, approvals, authorizations, consents, waivers, franchises, variances
and similar rights issued by or obtained from any Governmental Authority or any other Person.

 

“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.

 

“Payoff
Letter” means a pay off letter from GPB Life Science Holdings, LLC acceptable to the Purchasers in form and substance.

 

“Principal
Amount” means, as to each Purchaser, the amounts set forth below such Purchaser’s signature block on the signature
pages hereto next to the heading “Principal Amount,” in United States Dollars, which shall equal such Purchaser’s
Subscription Amount multiplied by 1.07.

 

“Proceeding”
means an action, claim, suit, investigation or proceeding (including, without limitation, an informal investigation or partial
proceeding, such as a deposition), whether commenced or threatened.

 

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“Public
Information Failure” shall have the meaning ascribed to such term in Section 4.3(b).

 

“Public
Information Failure Payments” shall have the meaning ascribed to such term in Section 4.3(b).

 

“Purchaser
Party” shall have the meaning ascribed to such term in Section 4.10.

 

“Registration
Rights Agreement” means the Registration Rights Agreement, dated the date hereof, among the Company and the Purchasers,
in the form of Exhibit F attached hereto.

 

“Registration
Statement” means a registration statement meeting the requirements set forth in the Registration Rights Agreement and
covering the resale of the Conversion Shares by each Purchaser as provided for in the Registration Rights Agreement.

 

“Required
Approvals” shall have the meaning ascribed to such term in Section 3.1(e).

 

“Required
Minimum” means, as of any date, the maximum aggregate number of shares of Common Stock then issued or potentially issuable
in the future pursuant to the Transaction Documents, including any Conversion Shares 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, and assuming that the Conversion Price is at all times on and after the date of determination 75% of the then Conversion
Price on the Trading Day immediately prior to the date of determination.

 

“Rule
144” means Rule 144 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time
to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule.

 

“SEC
Reports” shall have the meaning ascribed to such term in Section 3.1(h).

 

“Securities”
means the Debentures and the Conversion Shares.

 

“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, each of the Guarantors and the Purchasers,
in the form of Exhibit B attached hereto.

 

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

 

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“Subscription
Amount” means, as to each Purchaser, the aggregate amount to be paid for Debentures purchased hereunder as specified
below such Purchaser’s name on the signature page of this Agreement and next to the heading “Subscription Amount,”
in United States dollars and in immediately available funds. The aggregate “Subscription Amount” shall be $7,000,000.

 

“Subsidiary”
means any subsidiary of the Company existing on the date hereof and any subsidiary of the Company formed or acquired after the
date hereof.

 

“Subordination
Agreement(s)” means each Subordination Agreement, in substantially the form attached hereto as Exhibit C, of
even date herewith by and between the Purchasers, the Company, the Guarantors and each creditor of the Company set forth on Schedule 1.1(b)
hereto.

 

“Subsidiary
Guaranty” means the Subsidiary Guaranty of even date herewith substantially in the form attached hereto as Exhibit
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, or the OTC QB Marketplace (or any successors to any of the foregoing).

 

“Transaction
Documents” means this Agreement, the Debentures, the Security Agreement, the DACAs, the Subsidiary Guaranty, the Subordination
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 Corporate Stock Transfer, Inc., the current transfer agent of the Company, with a mailing address of 3200
Cherry Creek South Drive, Suite 430, Denver, Colorado 80209 and a facsimile number of (303) 282-5800, and any successor transfer
agent of the Company.

 

“Vaultlogix”
means Vaultlogix, LLC, a wholly-owned Subsidiary of the Company.

 

“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 the Common Stock is not then
listed or quoted for trading on a Trading Market and if prices for the Common Stock are then reported in the “Pink Sheets”
published by Pink 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 (c) 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 Purchasers and reasonably acceptable to
the Company, the fees and expenses of which shall be paid by the Company.

 

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“White
Oak Lien Release” means a letter from White Oak Global Advisors, LLC acknowledging the termination of it security interest
in the assets of the Company and its Subsidiaries (other than Vaultlogix, LLC, Data Protection Services, LLC, U.S. Data Security
Acquisition, LLC and U.S. Data Security Corporation) acceptable to the Purchasers in form and substance.

 

ARTICLE
II.

PURCHASE
AND SALE

 

2.1          Closing.
On the Closing Date, upon the terms and subject to the conditions set forth herein, substantially concurrent with the execution
and delivery of this Agreement by the parties hereto, the Company agrees to sell, and the Purchasers, severally and not jointly,
agree to purchase, $7,500,000 in principal amount of the Debentures. Each Purchaser shall deliver to the Company, via wire transfer
or a certified check, immediately available funds equal to such Purchaser’s Subscription Amount as set forth on the signature
page hereto executed by such Purchaser, and the Company shall deliver to each Purchaser its respective Debenture, as determined
pursuant to Section 2.2(a), and the Company and each Purchaser shall deliver the other items set forth in Section 2.2 deliverable
at the Closing. Upon satisfaction of the covenants and conditions set forth in Sections 2.2 and 2.3, the Closing shall occur at
the offices of Haynes and Boone or such other location as the parties shall mutually agree.

 

2.2          Deliveries.

 

(a)          On
or prior to the Closing Date, the Company shall deliver or cause to be delivered to each Purchaser the following:

 

(i)          this Agreement duly executed by the Company;

 

(ii)         a
legal opinion of Company Counsel, substantially in the form of Exhibit E attached hereto;

 

(iii)        a
Debenture with a Principal Amount equal to such Purchaser’s Subscription Amount multiplied by 1.07, registered in the name
of such Purchaser;

 

(iv)        the
Subsidiary Guaranty duly executed by each Subsidiary (other than Vaultlogix);

 

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(v)         the
Security Agreement duly executed by the Company and each Subsidiary (other than Vaultlogix), along with all of the Security Documents
duly executed by the parties thereto;

 

(vi)        DACAs
duly executed by the Company, each applicable Guarantor and PNC Bank, National Association with respect to the deposit accounts
maintained at PNC Bank, National Association set forth on Schedule 2.2(vi);

 

(vii)       Subordination
Agreements duly executed by the Company, each Guarantor, each creditor of the Company listed on Schedule 1.1(b) hereto;

 

(viii)      the
Registration Rights Agreement duly executed by the Company;

 

(ix)         the
Payoff Letter duly executed by GPB Life Science Holdings LLC; and

 

(x)          the
White Oak Lien Release duly executed by White Oak Global Advisors, LLC.

 

(b)          On
or prior to the Closing Date, each Purchaser shall deliver or cause to be delivered to the Company the following:

 

(i)          this Agreement duly executed by such Purchaser;

 

(ii)         such
Purchaser’s Subscription Amount by wire transfer to the account specified in writing by the Company;

 

(iii)        the
Security Agreement duly executed by such Purchaser;

 

(iv)        each
DACA duly executed by such Purchaser;

 

(v)         each
Subordination Agreement duly executed by such Purchaser; and

 

(vi)        the
Registration Rights Agreement duly executed by such Purchaser.

 

2.3          Closing
Conditions.

 

(a)          The
obligations of the Company hereunder in connection with the Closing are subject to the following conditions being met:

 

(i)          the
accuracy in all material respects on the Closing Date of the representations and warranties of the Purchasers contained herein
(unless as of a specific date therein in which case they shall be accurate as of such date);

 

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(ii)         all
obligations, covenants and agreements of each Purchaser required to be performed at or prior to the Closing Date shall have been
performed; and

 

(iii)        the
delivery by each Purchaser of the items set forth in Section 2.2(b) of this Agreement.

 

(b)          The
respective obligations of the Purchasers hereunder in connection with the Closing are subject to the following conditions being
met:

 

(iv)        the
accuracy in all material respects when made and on the Closing Date of the representations and warranties of the Company contained
herein (unless as of a specific date therein);

 

(v)         all
obligations, covenants and agreements of the Company required to be performed at or prior to the Closing Date shall have been
performed;

 

(vi)        the
delivery by the Company of the items set forth in Section 2.2(a) of this Agreement;

 

(vii)       there
shall have been no Material Adverse Effect with respect to the Company since the date hereof;

 

(viii)      The
Company shall have delivered a certificate, executed on behalf of the Company by its Secretary, dated as of the Closing Date,
certifying the resolutions adopted by the Board of Directors of the Company approving the transactions contemplated by this Agreement
and the other Transaction Documents and the issuance of the Securities, certifying the current versions of the Certificate of
Incorporation and Bylaws of the Company and certifying as to the signatures and authority of persons signing the Transaction Documents
and related documents on behalf of the Company;

 

(ix)         The
Company shall have delivered a certificate, executed on behalf of the Company by its Chief Executive Officer or its Chief Financial
Officer, dated as of the Closing Date, certifying to the fulfillment of the conditions specified in this Section 2.3(b); and

 

(x)          from
the date hereof to the Closing Date, trading in the Common Stock shall not have been suspended by the Commission or the Company’s
principal Trading Market and, at any time prior to the Closing Date, trading in securities generally as reported by Bloomberg
L.P. shall not have been suspended or limited, or minimum prices shall not have been established on securities whose trades are
reported by such service, or on any Trading Market, nor shall a banking moratorium have been declared either by the United States
or New York State authorities nor shall there have occurred any material outbreak or escalation of hostilities or other national
or international calamity of such magnitude in its effect on, or any material adverse change in, any financial market which, in
each case, in the reasonable judgment of such Purchaser, makes it impracticable or inadvisable to purchase the Securities at the
Closing.

 

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ARTICLE
III.

REPRESENTATIONS
AND WARRANTIES

 

3.1          Representations
and Warranties of the Company. Except as set forth in the Disclosure Schedules, which Disclosure Schedules shall be deemed
a part hereof and shall qualify any representation or otherwise made herein to the extent of the disclosure contained in the corresponding
section of the Disclosure Schedules, the Company hereby makes the following representations and warranties to each Purchaser:

 

(a)          Subsidiaries.
The Company’s Subsidiaries are as set forth in the SEC Reports.

 

(b)          Organization
and Qualification. The Company and each of the Subsidiaries is an entity duly incorporated or otherwise organized, validly
existing and in good standing under the laws of the jurisdiction of its incorporation or organization, with the requisite power
and authority to own and use its properties and assets and to carry on its business as currently conducted. Neither the Company
nor any Subsidiary is in violation nor default of any of the provisions of its respective certificate or articles of incorporation,
bylaws or other organizational or charter documents. Each of the Company and the Subsidiaries is duly qualified to conduct business
and is in good standing as a foreign corporation or other entity in each jurisdiction in which the nature of the business conducted
or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as
the case may be, could not have or reasonably be expected to result in: (i) a material adverse effect on the legality, validity
or enforceability of any Transaction Document, (ii) a material adverse effect on the results of operations, assets, business,
prospects or condition (financial or otherwise) of the Company and the Subsidiaries, taken as a whole, or (iii) a material adverse
effect on the Company’s ability to perform in any material respect on a timely basis its obligations under any Transaction
Document (any of (i), (ii) or (iii), a “Material Adverse Effect”) and no Proceeding has been instituted in
any such jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or curtail such power and authority or qualification.

 

(c)          Authorization;
Enforcement. The Company has the requisite corporate power and authority to enter into and to consummate the transactions
contemplated by this Agreement and each of the other Transaction Documents and otherwise to carry out its obligations hereunder
and thereunder. The execution and delivery of this Agreement and each of the other Transaction Documents by the Company and the
consummation by it of the transactions contemplated hereby and thereby have been duly authorized by all necessary action on the
part of the Company and no further action is required by the Company, the Board of Directors or the Company’s stockholders
in connection herewith or therewith other than in connection with the Required Approvals. This Agreement and each other Transaction
Document to which it is a party has been (or upon delivery will have been) duly executed by the Company and, when delivered in
accordance with the terms hereof and thereof, will constitute the valid and binding obligation of the Company enforceable against
the Company in accordance with its terms, except: (i) as limited by general equitable principles and applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally, (ii)
as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies and (iii)
insofar as indemnification and contribution provisions may be limited by applicable law.

 

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(d)          No
Conflicts. The execution, delivery and performance by the Company of this Agreement and the other Transaction Documents to
which it is a party, the issuance and sale of the Securities and the consummation by it of the transactions contemplated hereby
and thereby do not and will not: (i) conflict with or violate any provision of the Company’s or any Subsidiary’s certificate
or articles of incorporation, bylaws or other organizational or charter documents, (ii) conflict with, or constitute a default
(or an event that with notice or lapse of time or both would become a default) under, result in the creation of any Lien upon
any of the properties or assets of the Company or any Subsidiary, or give to others any rights of termination, amendment, acceleration
or cancellation (with or without notice, lapse of time or both) of, any agreement, credit facility, debt or other instrument (evidencing
a Company or Subsidiary debt or otherwise) or other understanding to which the Company or any Subsidiary is a party or by which
any property or asset of the Company or any Subsidiary is bound or affected, or (iii) subject to the Required Approvals, conflict
with or result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court
or Governmental Authority to which the Company or a Subsidiary is subject (including federal and state securities laws and regulations),
or by which any property or asset of the Company or a Subsidiary is bound or affected; except in the case of each of clauses (ii)
and (iii), such as could not have or reasonably be expected to result in a Material Adverse Effect.

 

(e)          Filings,
Consents and Approvals. The Company is not required to obtain any consent, waiver, authorization or order of, give any notice
to, or make any filing or registration with, any court or other federal, state, local or other Governmental Authority or other
Person in connection with the execution, delivery and performance by the Company of the Transaction Documents, other than: (i)
the filings required pursuant to Section 4.6 of this Agreement, (ii) the notice and/or application(s) to each applicable Trading
Market for the issuance and sale of the Securities and the listing of the Conversion Shares for trading thereon in the time and
manner required thereby, (iii) the Stockholder Approval, and (iv) the filing of Form D with the Commission and such filings as
are required to be made under applicable state securities laws (collectively, the “Required Approvals”).

 

(f)          Issuance
of the Securities. The Securities are duly authorized and, when issued and paid for in accordance with the applicable Transaction
Documents, will be duly and validly issued, fully paid and nonassessable, free and clear of all Liens imposed by the Company other
than restrictions on transfer provided for in the Transaction Documents. The Conversion Shares, when issued in accordance with
the terms of the Transaction Documents, will be validly issued, fully paid and nonassessable, free and clear of all Liens imposed
by the Company other than restrictions on transfer provided for in the Transaction Documents. The Company has reserved from its
duly authorized capital stock a number of shares of Common Stock for issuance of the Conversion Shares at least equal to the Required
Minimum on the date hereof.

 

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(g)          Capitalization.
The capitalization of the Company is as set forth in the SEC Reports. Except as set forth in the SEC Reports, (i) no Person has
any right of first refusal, preemptive right, right of participation, or any similar right to participate in the transactions
contemplated by the Transaction Documents, (ii) except as a result of the purchase and sale of the Securities, there are no outstanding
options, warrants, scrip rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities,
rights or obligations convertible into or exercisable or exchangeable for, or giving any Person any right to subscribe for or
acquire any shares of Common Stock, or contracts, commitments, understandings or arrangements by which the Company or any Subsidiary
is or may become bound to issue additional shares of Common Stock or Common Stock Equivalents and (iii) the issuance and sale
of the Securities will not obligate the Company to issue shares of Common Stock or other securities to any Person (other than
the Purchasers) and will not result in a right of any holder of Company securities to adjust the exercise, conversion, exchange
or reset price under any of such securities. All of the outstanding shares of capital stock of the Company are duly authorized,
validly issued, fully paid and nonassessable, have been issued in compliance with all federal and state securities laws, and none
of such outstanding shares was issued in violation of any preemptive rights or similar rights to subscribe for or purchase securities.
No further approval or authorization of any stockholder, the Board of Directors or others is required for the issuance and sale
of the Securities. There are no stockholders agreements, voting agreements or other similar agreements with respect to the Company’s
capital stock to which the Company is a party or, to the knowledge of the Company, between or among any of the Company’s
stockholders.

 

(h)          SEC
Reports; Financial Statements. The Company has filed all reports, schedules, forms, statements and other documents required
to be filed by the Company under the Securities Act and the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof,
for the two years preceding the date hereof (or such shorter period as the Company was required by law or regulation to file such
material) (the foregoing materials, including the exhibits thereto and documents incorporated by reference therein, being collectively
referred to herein as the “SEC Reports”) on a timely basis or has received a valid extension of such time of
filing and has filed any such SEC Reports prior to the expiration of any such extension. As of their respective dates, the SEC
Reports complied in all material respects with the requirements of the Securities Act and the Exchange Act, as applicable, and
none of the SEC Reports, when filed, contained any untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they
were made, not misleading. The Company has not been, since January 1, 2015, an issuer subject to Rule 144(i) under the Securities
Act. The financial statements of the Company included in the SEC Reports comply in all material respects with applicable accounting
requirements and the rules and regulations of the Commission with respect thereto as in effect at the time of filing. Such financial
statements have been prepared in accordance with United States generally accepted accounting principles applied on a consistent
basis during the periods involved (“GAAP”), except as may be otherwise specified in such financial statements
or the notes thereto and except that unaudited financial statements may not contain all footnotes required by GAAP, and fairly
present in all material respects the financial position of the Company and its consolidated Subsidiaries as of and for the dates
thereof and the results of operations and cash flows for the periods then ended, subject, in the case of unaudited statements,
to normal, immaterial, year-end audit adjustments.

 

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(i)          Material
Changes; Undisclosed Events, Liabilities or Developments. Since the date of the latest audited financial statements included
within the SEC Reports, except as specifically disclosed in a subsequent SEC Report filed prior to the date hereof: (i) there
has been no event, occurrence or development that has had or that could reasonably be expected to result in a Material Adverse
Effect, (ii) the Company has not incurred any liabilities (contingent or otherwise) other than (A) trade payables and accrued
expenses incurred in the ordinary course of business consistent with past practice and (B) liabilities not required to be reflected
in the Company’s financial statements pursuant to GAAP or disclosed in filings made with the Commission, (iii) the Company
has not altered its method of accounting, (iv) the Company has not declared or made any dividend or distribution of cash or other
property to its stockholders or purchased, redeemed or made any agreements to purchase or redeem any shares of its capital stock
and (v) the Company has not issued any equity securities to any officer, director or Affiliate, except pursuant to existing Company
stock option plans. The Company does not have pending before the Commission any request for confidential treatment of information.
Except for the issuance of the Securities contemplated by this Agreement or as set forth on Schedule 3.1(i), no event,
liability, fact, circumstance, occurrence or development has occurred or exists or is reasonably expected to occur or exist with
respect to the Company or its Subsidiaries or their respective businesses, properties, operations, assets or financial condition,
that would be required to be disclosed by the Company under applicable securities laws at the time this representation is made
or deemed made that has not been publicly disclosed at least 1 Trading Day prior to the date that this representation is made.

 

(j)          Litigation.
Except as set forth in the SEC Reports, (A) there is no action, suit, inquiry, notice of violation, proceeding or investigation
pending or, to the knowledge of the Company, threatened against or affecting the Company, any Subsidiary or any of their respective
properties before or by any court, arbitrator, governmental or administrative agency or regulatory authority (federal, state,
county, local or foreign) (collectively, an “Action”) which (i) adversely affects or challenges the legality,
validity or enforceability of any of the Transaction Documents or the Securities or (ii) could, if there were an unfavorable decision,
have or reasonably be expected to result in a Material Adverse Effect, (B) neither the Company nor any Subsidiary, nor any director
or officer thereof, is or has been the subject of any Action involving a claim of violation of or liability under federal or state
securities laws or a claim of breach of fiduciary duty and (C) there has not been, and to the knowledge of the Company, there
is not pending or contemplated, any investigation by the Commission involving the Company or any current or former director or
officer of the Company. The Commission has not issued any stop order or other order suspending the effectiveness of any registration
statement filed by the Company or any Subsidiary under the Exchange Act or the Securities Act.

 

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(k)          Labor
Relations. No labor dispute exists or, to the knowledge of the Company, is imminent with respect to any of the employees of
the Company, which could reasonably be expected to result in a Material Adverse Effect. None of the Company’s or its Subsidiaries’
employees is a member of a union that relates to such employee’s relationship with the Company or such Subsidiary, and neither
the Company nor any of its Subsidiaries is a party to a collective bargaining agreement, and the Company and its Subsidiaries
believe that their relationships with their employees are good. To the knowledge of the Company, no executive officer of the Company
or any Subsidiary, is, or is now expected to be, in violation of any material term of any employment contract, confidentiality,
disclosure or proprietary information agreement or non-competition agreement, or any other contract or agreement or any restrictive
covenant in favor of any third party, and the continued employment of each such executive officer does not subject the Company
or any of its Subsidiaries to any liability with respect to any of the foregoing matters. The Company and its Subsidiaries are
in compliance with all U.S. federal, state, local and foreign laws and regulations relating to employment and employment practices,
terms and conditions of employment and wages and hours, except where the failure to be in compliance could not, individually or
in the aggregate, reasonably be expected to have a Material Adverse Effect.

 

(l)          Compliance.
Neither the Company nor any Subsidiary: (i) is in default under or in violation of (and no event has occurred that has not been
waived that, with notice or lapse of time or both, would result in a default by the Company or any Subsidiary under), nor has
the Company or any Subsidiary received notice of a claim that it is in default under or that it is in violation of, any indenture,
loan or credit agreement or any other agreement or instrument to which it is a party or by which it or any of its properties is
bound (whether or not such default or violation has been waived), (ii) is in violation of any judgment, decree or order of any
court, arbitrator or other Governmental Authority or (iii) is or has been in violation of any statute, rule, ordinance or regulation
of any Governmental Authority, including without limitation all foreign, federal, state and local laws relating to taxes, environmental
protection, occupational health and safety, product quality and safety and employment and labor matters, except in each case as
could not have or reasonably be expected to result in a Material Adverse Effect.

 

(m)          Regulatory
Permits. The Company and the Subsidiaries possess all Permits necessary to conduct their respective businesses as described
in the SEC Reports, except where the failure to possess such Permits could not reasonably be expected to result in a Material
Adverse Effect, and neither the Company nor any Subsidiary has received any notice of proceedings relating to the revocation or
modification of any such Permit.

 

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(n)          Title
to Assets. The Company and the Subsidiaries have good and marketable title in fee simple to all real property owned by them
and good and marketable title in all personal property owned by them that is material to the business of the Company and the Subsidiaries,
in each case free and clear of all Liens, except for (i) Liens as do not materially affect the value of such property and do not
materially interfere with the use made and proposed to be made of such property by the Company and the Subsidiaries and (ii) Liens
for the payment of federal, state or other taxes, for which appropriate reserves have been made therefor in accordance with GAAP
and, the payment of which is neither delinquent nor subject to penalties. Any real property and facilities held under lease by
the Company and the Subsidiaries are held by them under valid, subsisting and enforceable leases with which the Company and the
Subsidiaries are in compliance. Neither the Company nor any Subsidiary hold any material assets outside the United States.

 

(o)          Intellectual
Property. The Company and the Subsidiaries have, or have rights to use, all patents, patent applications, trademarks, trademark
applications, service marks, trade names, trade secrets, inventions, copyrights, licenses and other intellectual property rights
and similar rights as described in the SEC Reports as necessary or required for use in connection with their respective businesses
and which the failure to so have could have a Material Adverse Effect (collectively, the “Intellectual Property Rights”).
None of, and neither the Company nor any Subsidiary has received a notice (written or otherwise) that any of, the Intellectual
Property Rights has expired, terminated or been abandoned, or is expected to expire or terminate or be abandoned, within two (2)
years from the date of this Agreement. Neither the Company nor any Subsidiary has received, since the date of the latest audited
financial statements included within the SEC Reports, a written notice of a claim or otherwise has any knowledge that the Intellectual
Property Rights violate or infringe upon the rights of any Person, except as could not have or reasonably be expected to have
a Material Adverse Effect. To the knowledge of the Company, all such Intellectual Property Rights are enforceable and there is
no existing infringement by another Person of any of the Intellectual Property Rights. The Company and its Subsidiaries have taken
reasonable security measures to protect the secrecy, confidentiality and value of all of their intellectual properties, except
where failure to do so could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

 

(p)          Insurance.
The Company and the Subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks
and in such amounts as are prudent and customary in the businesses in which the Company and the Subsidiaries are engaged, including,
but not limited to, directors and officers insurance coverage. Neither the Company nor any Subsidiary has any reason to believe
that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage
from similar insurers as may be necessary to continue its business without a significant increase in cost.

 

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(q)          Transactions
With Affiliates and Employees. Except as set forth in the SEC Reports, none of the officers or directors of the Company or
any Subsidiary and, to the knowledge of the Company, none of the employees of the Company or any Subsidiary is presently a party
to any transaction with the Company or any Subsidiary (other than for services as employees, officers and directors), including
any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or
personal property to or from providing for the borrowing of money from or lending of money to, or otherwise requiring payments
to or from any officer, director or such employee or, to the knowledge of the Company, any entity in which any officer, director,
or any such employee has a substantial interest or is an officer, director, trustee, stockholder, member or partner, in each case
in excess of $120,000 other than for: (i) payment of salary or consulting fees for services rendered, (ii) reimbursement for expenses
incurred on behalf of the Company and (iii) other employee benefits, including stock option agreements under any stock option
plan of the Company.

 

(r)          Sarbanes-Oxley;
Internal Accounting Controls. The Company and the Subsidiaries are in compliance with any and all applicable requirements
of the Sarbanes-Oxley Act of 2002 that are effective as of the date hereof, and any and all applicable rules and regulations promulgated
by the Commission thereunder that are effective as of the date hereof and as of the Closing Date. The Company and the Subsidiaries
maintain a system of internal accounting controls sufficient to provide reasonable assurance that: (i) transactions are executed
in accordance with management’s general or specific authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with GAAP and to maintain asset accountability, (iii) access to assets is permitted
only in accordance with management’s general or specific authorization, and (iv) the recorded accountability for assets
is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences.
The Company and the Subsidiaries have established disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)
and 15d-15(e)) for the Company and the Subsidiaries and designed such disclosure controls and procedures to ensure that information
required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized
and reported, within the time periods specified in the Commission’s rules and forms. The Company’s certifying officers
have evaluated the effectiveness of the disclosure controls and procedures of the Company and the Subsidiaries as of the end of
the period covered by the most recently filed periodic report under the Exchange Act (such date, the “Evaluation Date”).
The Company presented in its most recently filed periodic report under the Exchange Act the conclusions of the certifying officers
about the effectiveness of the disclosure controls and procedures based on their evaluations as of the Evaluation Date. Since
the Evaluation Date, there have been no changes in the internal control over financial reporting (as such term is defined in the
Exchange Act) that have materially affected, or is reasonably likely to materially affect, the internal control over financial
reporting of the Company and its Subsidiaries.

 

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(s)          Certain
Fees. Except as set forth on Schedule 3.1(s), no brokerage or finder’s fees or commissions are or will be payable
by the Company or any Subsidiaries to any broker, financial advisor or consultant, finder, placement agent, investment banker,
bank or other Person with respect to the transactions contemplated by the Transaction Documents. The Purchasers shall have no
obligation with respect to any fees or with respect to any claims made by or on behalf of other Persons for fees of a type contemplated
in this Section that may be due in connection with the transactions contemplated by the Transaction Documents.

 

(t)          Private
Placement. Assuming the accuracy of the Purchasers’ representations and warranties set forth in Section 3.2, no registration
under the Securities Act is required for the offer and sale of the Securities by the Company to the Purchasers as contemplated
hereby. The issuance and sale of the Securities hereunder does not contravene the rules and regulations of the Trading Market.

 

(u)          Investment
Company. The Company is not, and is not an Affiliate of, and immediately after receipt of payment for the Securities, will
not be or be an Affiliate of, an “investment company” within the meaning of the Investment Company Act of 1940, as
amended. The Company shall conduct its business in a manner so that it will not become an “investment company” subject
to registration under the Investment Company Act of 1940, as amended.

 

(v)          Registration
Rights. Except as set forth in the SEC Reports, no Person has any right to cause the Company to effect the registration under
the Securities Act of any securities of the Company or any Subsidiaries.

 

(w)          Listing
and Maintenance Requirements. The Common Stock is registered pursuant to Section 12(b) or 12(g) of the Exchange Act, and the
Company has taken no action designed to, or which to its knowledge is likely to have the effect of, terminating the registration
of the Common Stock under the Exchange Act nor has the Company received any notification that the Commission is contemplating
terminating such registration. The Company has not, in the 12 months preceding the date hereof, received notice from any Trading
Market on which the Common Stock is or has been listed or quoted to the effect that the Company is not in compliance with the
listing or maintenance requirements of such Trading Market. The Company is, and has no reason to believe that it will not in the
foreseeable future continue to be, in compliance with all such listing and maintenance requirements. The Common Stock is currently
eligible for electronic transfer through the Depository Trust Company or another established clearing corporation and the Company
is current in payment of the fees to the Depository Trust Company (or such other established clearing corporation) in connection
with such electronic transfer.

 

(x)          Application
of Takeover Protections. The Company and the Board of Directors have taken all necessary action, if any, in order to render
inapplicable any control share acquisition, business combination, poison pill (including any distribution under a rights agreement)
or other similar anti-takeover provision under the Company’s certificate of incorporation (or similar charter documents)
or the laws of its state of incorporation that is or could become applicable to the Purchasers as a result of the Purchasers and
the Company fulfilling their obligations or exercising their rights under the Transaction Documents, including without limitation
as a result of the Company’s issuance of the Securities and the Purchasers’ ownership of the Securities.

 

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(y)          Disclosure.
Except with respect to the material terms and conditions of the transactions contemplated by the Transaction Documents, the Company
confirms that neither it nor any other Person acting on its behalf has provided any of the Purchasers or their agents or counsel
with any information that it believes constitutes or might constitute material, non-public information. The Company understands
and confirms that the Purchasers will rely on the foregoing representation in effecting transactions in securities of the Company.
All of the disclosure furnished by or on behalf of the Company to the Purchasers regarding the Company and its Subsidiaries, their
respective businesses and the transactions contemplated hereby, including the Disclosure Schedules to this Agreement, is true
and correct and does not contain any untrue statement of a material fact or omit to state any material fact necessary in order
to make the statements made therein, in light of the circumstances under which they were made, not misleading. The press releases
disseminated by the Company during the twelve months preceding the date of this Agreement taken as a whole do not contain any
untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they were made and when made, not misleading. The Company acknowledges
and agrees that no Purchaser makes or has made any representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in Section 3.2 hereof.

 

(z)          No
Integrated Offering. Assuming the accuracy of the Purchasers’ representations and warranties set forth in Section 3.2,
neither the Company, nor any of its Affiliates, nor any Person acting on its or their behalf has, directly or indirectly, made
any offers or sales of any security or solicited any offers to buy any security, under circumstances that would cause this offering
of the Securities to be integrated with prior offerings by the Company for purposes of (i) the Securities Act which would require
the registration of any such securities under the Securities Act, or (ii) except as contemplated by Section 4(e) of the Debentures,
any applicable stockholder approval provisions of any Trading Market on which any of the securities of the Company are listed
or designated. 

 

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(aa)          Solvency.
Based on the consolidated financial condition of the Company as of the Closing Date, after giving effect to the receipt by the
Company of the proceeds from the sale of the Securities hereunder: (i) the fair saleable value of the Company’s assets exceeds
the amount that will be required to be paid on or in respect of the Company’s existing debts and other liabilities (including
known contingent liabilities) as they mature, (ii) the Company’s assets do not constitute unreasonably small capital to
carry on its business as now conducted and as proposed to be conducted including its capital needs taking into account the particular
capital requirements of the business conducted by the Company, consolidated and projected capital requirements and capital availability
thereof, and (iii) the current cash flow of the Company, together with the proceeds the Company would receive, were it to liquidate
all of its assets, after taking into account all anticipated uses of the cash, would be sufficient to pay all amounts on or in
respect of its liabilities when such amounts are required to be paid. The Company does not intend to incur debts beyond its ability
to pay such debts as they mature (taking into account the timing and amounts of cash to be payable on or in respect of its debt).
The Company has no knowledge of any facts or circumstances which lead it to believe that it will file for reorganization or liquidation
under the bankruptcy or reorganization laws of any jurisdiction within one year from the Closing Date. Schedule 3.1(aa)
sets forth as of the date hereof all outstanding secured and unsecured Indebtedness of the Company or any Subsidiary, or for which
the Company or any Subsidiary has commitments. For the purposes of this Agreement, “Indebtedness” means (x)
any liabilities for borrowed money or amounts owed in excess of $250,000 (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 $250,000 due under leases required to be capitalized in accordance
with GAAP. Neither the Company nor any Subsidiary is in default with respect to any Indebtedness.

 

(bb)          Tax
Status. Except for matters that would not, individually or in the aggregate, have or reasonably be expected to result
in a Material Adverse Effect, the Company and its Subsidiaries each (i) has made or filed all United States federal, state and
local income and all foreign income and franchise tax returns, reports and declarations required by any jurisdiction to which
it is subject, (ii) has paid all taxes and other governmental assessments and charges that are material in amount, shown or determined
to be due on such returns, reports and declarations and (iii) has set aside on its books provision reasonably adequate for the
payment of all material taxes for periods subsequent to the periods to which such returns, reports or declarations apply. There
are no unpaid taxes in any material amount claimed to be due by the taxing authority of any jurisdiction, and the officers of
the Company or of any Subsidiary know of no basis for any such claim.

 

(cc)          No
General Solicitation. Neither the Company nor any person acting on behalf of the Company has offered or sold any of the Securities
by any form of general solicitation or general advertising. The Company has offered the Securities for sale only to the Purchasers
and certain other “accredited investors” within the meaning of Rule 501 under the Securities Act.

 

(dd)          Foreign
Corrupt Practices. Neither the Company nor any Subsidiary, nor to the knowledge of the Company or any Subsidiary, any agent
or other person acting on behalf of the Company or any Subsidiary, has: (i) directly or indirectly, used any funds for unlawful
contributions, gifts, entertainment or other unlawful expenses related to foreign or domestic political activity, (ii) made any
unlawful payment to foreign or domestic government officials or employees or to any foreign or domestic political parties or campaigns
from corporate funds, (iii) failed to disclose fully any contribution made by the Company or any Subsidiary (or made by any person
acting on its behalf of which the Company is aware) which is in violation of law or (iv) violated in any material respect any
provision of FCPA.

 

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(ee)          Accountants.
The Company’s accounting firm is Grant Thornton LLP. To the knowledge and belief of the Company, such accounting firm: (i)
is a registered public accounting firm as required by the Exchange Act and (ii) shall express its opinion with respect to the
financial statements to be included in the Company’s Annual Report for the fiscal year ending December 31, 2015.

 

(ff)          Seniority.
As of the Closing Date, no Indebtedness or other claim against the Company is senior to the Debentures in right of payment, whether
with respect to interest or upon liquidation or dissolution, or otherwise, other than indebtedness secured by purchase money security
interests (which is senior only as to underlying assets covered thereby) and capital lease obligations (which is senior only as
to the property covered thereby).

 

(gg)          No
Disagreements with Accountants and Lawyers. There are no disagreements of any kind presently existing, or reasonably anticipated
by the Company to arise, between the Company and the accountants and lawyers formerly or presently employed by the Company and
the Company is current with respect to any fees owed to its accountants and lawyers which could affect the Company’s ability
to perform any of its obligations under any of the Transaction Documents.

 

(hh)          Acknowledgment
Regarding Purchasers’ Purchase of Securities. The Company acknowledges and agrees that each of the Purchasers is acting
solely in the capacity of an arm’s length purchaser with respect to the Transaction Documents and the transactions contemplated
thereby. The Company further acknowledges that no Purchaser is acting as a financial advisor or fiduciary of the Company (or in
any similar capacity) with respect to the Transaction Documents and the transactions contemplated thereby and any advice given
by any Purchaser or any of their respective representatives or agents in connection with the Transaction Documents and the transactions
contemplated thereby is merely incidental to the Purchasers’ purchase of the Securities. The Company further represents
to each Purchaser that the Company’s decision to enter into this Agreement and the other Transaction Documents has been
based solely on the independent evaluation of the transactions contemplated hereby by the Company and its representatives.

 

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(ii)          Acknowledgment
Regarding Purchaser’s Trading Activity. Anything in this Agreement or elsewhere herein to the contrary notwithstanding,
it is understood and acknowledged by the Company that: (i) none of the Purchasers has been asked by the Company to agree, nor
has any Purchaser agreed, to desist from purchasing or selling, long and/or short, securities of the Company, or “derivative”
securities based on securities issued by the Company or to hold the Securities for any specified term, (ii) past or future open
market or other transactions by any Purchaser, specifically including, without limitation, short sales or “derivative”
transactions, before or after the closing of this or future private placement transactions, may negatively impact the market price
of the Company’s publicly-traded securities, (iii) any Purchaser, and counter-parties in “derivative” transactions
to which any such Purchaser is a party, directly or indirectly, may presently have a “short” position in the Common
Stock and (iv) each Purchaser shall not be deemed to have any affiliation with or control over any arm’s length counter-party
in any “derivative” transaction. The Company further understands and acknowledges that (y) one or more Purchasers
may engage in hedging activities at various times during the period that the Securities are outstanding, including, without limitation,
during the periods that the value of the Conversion Shares deliverable with respect to Securities are being determined, and (z)
such hedging activities (if any) could reduce the value of the existing stockholders' equity interests in the Company at and after
the time that the hedging activities are being conducted.  The Company acknowledges that such aforementioned hedging activities
do not constitute a breach of any of the Transaction Documents.

 

(jj)          Regulation
M Compliance.  The Company has not, and to its knowledge no one acting on its behalf has, (i) taken, directly or indirectly,
any action designed to cause or to result in the stabilization or manipulation of the price of any security of the Company to
facilitate the sale or resale of any of the Securities, (ii) sold, bid for, purchased, or paid any compensation for soliciting
purchases of, any of the Securities, or (iii) paid or agreed to pay to any Person any compensation for soliciting another to purchase
any other securities of the Company.

 

(kk)          Stock
Option Plans. Each stock option granted by the Company under the Company’s stock option plan was granted (i) in accordance
with the terms of the Company’s stock option plan and (ii) with an exercise price at least equal to the fair market value
of the Common Stock on the date such stock option would be considered granted under GAAP and applicable law. No stock option granted
under the Company’s stock option plan has been backdated. The Company has not knowingly granted, and there is no and has
been no Company policy or practice to knowingly grant, stock options prior to, or otherwise knowingly coordinate the grant of
stock options with, the release or other public announcement of material information regarding the Company or its Subsidiaries
or their financial results or prospects.

 

(ll)          Office
of Foreign Assets Control. Neither the Company nor any Subsidiary nor, to the Company's knowledge, any director, officer,
agent, employee or affiliate of the Company or any Subsidiary is currently subject to any U.S. sanctions administered by the Office
of Foreign Assets Control of the U.S. Treasury Department (“OFAC”).

 

(mm)          U.S.
Real Property Holding Corporation. The Company is not and has never been a U.S. real property holding corporation within the
meaning of Section 897 of the Internal Revenue Code of 1986, as amended, and the Company shall so certify upon Purchaser’s
request.

 

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(nn)          Bank
Holding Company Act. Neither the Company nor any of its Subsidiaries or Affiliates is subject to the Bank Holding Company
Act of 1956, as amended (the “BHCA”) and to regulation by the Board of Governors of the Federal Reserve System
(the “Federal Reserve”). Neither the Company nor any of its Subsidiaries or Affiliates owns or controls, directly
or indirectly, five percent (5%) or more of the outstanding shares of any class of voting securities or twenty-five percent or
more of the total equity of a bank or any entity that is subject to the BHCA and to regulation by the Federal Reserve. Neither
the Company nor any of its Subsidiaries or Affiliates exercises a controlling influence over the management or policies of a bank
or any entity that is subject to the BHCA and to regulation by the Federal Reserve.

 

(oo)          Money
Laundering. The operations of the Company and its Subsidiaries are and have been conducted at all times in compliance with
applicable financial record-keeping and reporting requirements of the Currency and Foreign Transactions Reporting Act of 1970,
as amended, applicable money laundering statutes and applicable rules and regulations thereunder (collectively, the “Money
Laundering Laws”), and no action, suit or proceeding by or before any court or governmental agency, authority or body
or any arbitrator involving the Company or any Subsidiary with respect to the Money Laundering Laws is pending or, to the knowledge
of the Company or any Subsidiary, threatened.

 

(rr)          No
Disqualification Events. With respect to the Securities to be offered and sold hereunder in reliance on Rule 506 under the
Securities Act, none of the Company, any of its predecessors, any affiliated issuer, any director, executive officer, other officer
of the Company participating in the offering hereunder, any beneficial owner of 20% or more of the Company’s outstanding
voting equity securities, calculated on the basis of voting power, nor any promoter (as that term is defined in Rule 405 under
the Securities Act) connected with the Company in any capacity at the time of sale (each, an "Issuer Covered Person"
and, together, "Issuer Covered Persons") is subject to any of the "Bad Actor" disqualifications described
in Rule 506(d)(1)(i) to (viii) under the Securities Act (a "Disqualification Event"), except for a Disqualification
Event covered by Rule 506(d)(2) or (d)(3). The Company has exercised reasonable care to determine whether any Issuer Covered Person
is subject to a Disqualification Event. The Company has complied, to the extent applicable, with its disclosure obligations under
Rule 506(e), and has furnished to the Purchasers a copy of any disclosures provided thereunder.

 

(ss)          Other
Covered Persons. The Company is not aware of any person (other than any Issuer Covered Person) that has been or will be paid
(directly or indirectly) remuneration for solicitation of purchasers in connection with the sale of any Regulation D Securities.

 

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3.2          Representations
and Warranties of the Purchasers. Each Purchaser, for itself and for no other Purchaser, hereby represents and warrants as
of the date hereof and as of the Closing Date to the Company as follows (unless as of a specific date therein):

 

(a)          Organization;
Authority. Such Purchaser is either an individual or an entity duly incorporated or formed, validly existing and in good standing
under the laws of the jurisdiction of its incorporation or formation with full right, corporate, partnership, limited liability
company or similar power and authority to enter into and to consummate the transactions contemplated by the Transaction Documents
and otherwise to carry out its obligations hereunder and thereunder. The execution and delivery of the Transaction Documents and
performance by such Purchaser of the transactions contemplated by the Transaction Documents have been duly authorized by all necessary
corporate, partnership, limited liability company or similar action, as applicable, on the part of such Purchaser. Each Transaction
Document to which it is a party has been duly executed by such Purchaser, and when delivered by such Purchaser in accordance with
the terms hereof, will constitute the valid and legally binding obligation of such Purchaser, enforceable against it in accordance
with its terms, except: (i) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization,
moratorium and other laws of general application affecting enforcement of creditors’ rights generally, (ii) as limited by
laws relating to the availability of specific performance, injunctive relief or other equitable remedies and (iii) insofar as
indemnification and contribution provisions may be limited by applicable law.

 

(b)          Own
Account. Such Purchaser understands that the Securities are “restricted securities” and have not been registered
under the Securities Act or any applicable state securities law and is acquiring the Securities as principal for its own account
and not with a view to or for distributing or reselling such Securities or any part thereof in violation of the Securities Act
or any applicable state securities law, has no present intention of distributing any of such Securities in violation of the Securities
Act or any applicable state securities law and has no direct or indirect arrangement or understandings with any other persons
to distribute or regarding the distribution of such Securities in violation of the Securities Act or any applicable state securities
law (this representation and warranty not limiting such Purchaser’s right to sell the Securities in compliance with applicable
federal and state securities laws). Such Purchaser is acquiring the Securities hereunder in the ordinary course of its business.

 

(c)          Purchaser
Status. At the time such Purchaser was offered the Securities, it was, and as of the date hereof it is, and on each date on
which it converts any Debentures it will be, an “accredited investor” as defined in Rule 501(a)(1), (a)(2), (a)(3),
(a)(7) or (a)(8) under the Securities Act.

 

(d)          Experience
of Such Purchaser. Such Purchaser, either alone or together with its representatives, has such knowledge, sophistication and
experience in business and financial matters so as to be capable of evaluating the merits and risks of the prospective investment
in the Securities, and has so evaluated the merits and risks of such investment. Such Purchaser is able to bear the economic risk
of an investment in the Securities and, at the present time, is able to afford a complete loss of such investment.

 

(e)          General
Solicitation. Such Purchaser is not purchasing the Securities as a result of any advertisement, article, notice or other communication
regarding the Securities published in any newspaper, magazine or similar media or broadcast over television or radio or presented
at any seminar or any other general solicitation or general advertisement.

 

The
Company acknowledges and agrees that the representations contained in Section 3.2 shall not modify, amend or affect such Purchaser’s
right to rely on the Company’s representations and warranties contained in this Agreement or any representations and warranties
contained in any other Transaction Document or any other document or instrument executed and/or delivered in connection with this
Agreement or the consummation of the transaction contemplated hereby.

 

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ARTICLE
IV.

OTHER
AGREEMENTS OF THE PARTIES

 

4.1          Transfer
Restrictions.

 

(a)          The
Debentures may only be disposed of in compliance with state and federal securities laws. In connection with any transfer of Debentures
other than pursuant to an effective registration statement or Rule 144, to the Company or to an Affiliate of a Purchaser or in
connection with a pledge as contemplated in Section 4.1(b), the Company may require, at the Company’s expense, the transferor
thereof to provide to the Company an opinion of counsel selected by the transferor and reasonably acceptable to the Company, the
form and substance of which opinion shall be reasonably satisfactory to the Company, to the effect that such transfer does not
require registration of such transferred Securities under the Securities Act. As a condition of transfer, any such transferee
shall agree in writing to be bound by the terms of this Agreement and shall have the rights and obligations of a Purchaser under
this Agreement.

 

(b)          The
Purchasers agree to the imprinting, so long as is required by this Section 4.1, of a legend on any of the Securities in the following
form:

 

[NEITHER]
THIS SECURITY [NOR THE SECURITIES INTO WHICH THIS SECURITY IS [CONVERTIBLE]] HAS [NOT] 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 AS EVIDENCED
BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.
THIS SECURITY [AND THE SECURITIES ISSUABLE UPON [CONVERSION] OF THIS SECURITY] MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
ACCOUNT WITH A REGISTERED BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL INSTITUTION THAT IS AN “ACCREDITED INVESTOR”
AS DEFINED IN RULE 501(a) UNDER THE SECURITIES ACT OR OTHER LOAN SECURED BY SUCH SECURITIES.

 

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The
Company acknowledges and agrees that a Purchaser may from time to time pledge pursuant to a bona fide margin agreement with a
registered broker-dealer or grant a security interest in some or all of the Securities to a financial institution that is an “accredited
investor” as defined in Rule 501(a) under the Securities Act and who agrees to be bound by the provisions of this Agreement
and, if required under the terms of such arrangement, such Purchaser may transfer pledged or secured Securities to the pledgees
or secured parties. Such a pledge or transfer would not be subject to approval of the Company and no legal opinion of legal counsel
of the pledgee, secured party or pledgor shall be required in connection therewith. Further, no notice shall be required of such
pledge. At the appropriate Purchaser’s expense, the Company will execute and deliver such reasonable documentation as a
pledgee or secured party of Securities may reasonably request in connection with a pledge or transfer of the Securities.

 

(c)          Certificates
evidencing the Conversion Shares shall not contain any legend (including the legend set forth in Section 4.1(b) hereof): (i) following
any sale of such Conversion Shares pursuant to Rule 144, (ii) if such Conversion Shares are eligible for sale under Rule 144 without
the requirement for the Company to be in compliance with the current public information requirement required under Rule 144 as
to such Conversion Shares and without volume or manner-of-sale restrictions or (ii) if such legend is not required under applicable
requirements of the Securities Act (including judicial interpretations and pronouncements issued by the staff of the Commission).
After the Closing Date, the Company shall issue irrevocable instructions to the Transfer Agent in a form acceptable to each of
the Purchasers (the “Irrevocable Transfer Agent Instructions”) to issue certificates or credit shares to the
applicable balance accounts at the Depository Trust Company, registered in the name of each Purchaser or its respective nominee(s),
for the Conversion Shares in such amounts as specified from time to time by each Purchaser to the Company upon conversion or redemption
of the Debentures. The Company represents, warrants and covenants that no instruction other than the Irrevocable Transfer Agent
Instructions referred to in this Section 4.1(c), and stop transfer instructions to give effect to Section 4.1 hereof, will
be given by the Company to the Transfer Agent with respect to the Conversion Shares, and that the Conversion Shares shall otherwise
be freely transferable on the books and records of the Company, as applicable, to the extent provided in this Agreement and the
other Transaction Documents. If a Purchaser effects a sale, assignment or transfer of the Securities, the Company shall permit
the transfer and shall promptly instruct the Transfer Agent to issue one or more certificates or credit shares to the applicable
balance accounts at the Depository Trust Company in such name and in such denominations as specified by such Purchaser to effect
such sale, transfer or assignment. In the event that such sale, assignment or transfer (i) involves the Conversion Shares, the
Transfer Agent shall issue such shares to such Purchaser, assignee or transferee (as the case may be) without any restrictive
legend in accordance with this Section 4.1(c) and/or the terms of the Debentures. The Company acknowledges that a breach by it
of its obligations hereunder will cause irreparable harm to a Purchaser. Accordingly, the Company acknowledges that the remedy
at law for a breach of its obligations under this Section 4.1 will be inadequate and agrees, in the event of a breach or threatened
breach by the Company of the provisions of this Section 4.1, that a Purchaser shall be entitled, in addition to all other available
remedies, to an order and/or injunction restraining any breach and requiring immediate issuance and transfer, without the necessity
of showing economic loss and without any bond or other security being required. The Company shall cause its counsel to issue the
legal opinion referred to in the Irrevocable Transfer Agent Instructions to the Transfer Agent following any sale of Conversion
Shares pursuant to Rule 144. Any fees (with respect to the Transfer Agent, counsel to the Company or otherwise) associated with
the issuance of such opinion or the removal of any legends on any of the Securities shall be borne by the Company. The Company
agrees that following such time as such legend is no longer required under this Section 4.1(c) or pursuant to any applicable term
of the Debentures, it will, no later than three Trading Days (such third Trading Day, the “Legend Removal Date”)
following the delivery by a Purchaser to the Company or the Transfer Agent of, as applicable, (i) a certificate representing Conversion
Shares issued with a restrictive legend or (ii) a Conversion Notice or Holder Redemption Notice together with a representation
letter of the Purchaser or its broker that the Conversion Shares to be issued pursuant to such Conversion Notice or Holder Redemption
Notice have been sold under Rule 144, deliver or cause to be delivered to such Purchaser a certificate representing such shares
that is free from all restrictive and other legends. The Company may not make any notation on its records or give instructions
to the Transfer Agent that enlarge the restrictions on transfer set forth in this Section 4. Certificates for Conversion Shares
subject to legend removal or issuance without a legend hereunder shall be transmitted by the Transfer Agent to the Purchaser by
crediting the account of the Purchaser’s prime broker with the Depository Trust Company System as directed by such Purchaser.

 

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(d)          In
addition to such Purchaser’s other available remedies, the Company shall pay to a Purchaser, in cash, the greater of (i)
as partial liquidated damages and not as a penalty, for each $1,000 of Conversion Shares (based on the VWAP of the Common Stock
on the date such Securities are submitted to the Transfer Agent) delivered for removal of or issuance without the restrictive
legend and subject to Section 4.1(c), $10 per Trading Day (increasing to $20 per Trading Day five (5) Trading Days after such
damages have begun to accrue) for each Trading Day after the second Trading Day (provided that if the Company fails to issue shares
without legends or remove legends as required by Section 4.1(c) more than twice in any twelve (12) month period, then such two
day grace period shall no longer apply) following the Legend Removal Date until such certificate is delivered without a legend,
or (ii) if after the Required Delivery Date such Purchaser purchases (in an open market transaction or otherwise) shares of Common
Stock to deliver in satisfaction of a sale by such Purchaser of all or any portion of the number of shares of Common Stock, or
a sale of a number of shares of Common Stock equal to all or any portion of the number of shares of Common Stock that such Purchaser
anticipated receiving from the Company without any restrictive legend, then, an amount equal to the excess of such Purchaser’s
total purchase price (including brokerage commissions and other out-of-pocket expenses, if any) for the shares of Common Stock
so purchased (including brokerage commissions and other out-of-pocket expenses, if any) (the “Buy-In Price”)
over the product of (A) such number of Conversion Shares that the Company was required to deliver to such Purchaser by the Legend
Removal Date multiplied by (B) the lowest closing sale price of the Common Stock on any Trading Day during the period commencing
on the date of the delivery by such Purchaser to the Company of the applicable Conversion Shares (as the case may be) and ending
on the date of such delivery and payment under this clause (ii).

 

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(e)          Each
Purchaser, severally and not jointly with the other Purchasers, agrees with the Company that such Purchaser will sell any Securities
pursuant to either the registration requirements of the Securities Act, including any applicable prospectus delivery requirements,
or an exemption therefrom, and acknowledges that the removal of the restrictive legend from certificates representing Securities
as set forth in this Section 4.1 is predicated upon the Company’s reliance upon this understanding.

 

4.2          Acknowledgment
of Dilution. The Company acknowledges that the issuance of the Securities may result in dilution of the outstanding shares
of Common Stock, which dilution may be substantial under certain market conditions. The Company further acknowledges that its
obligations under the Transaction Documents, including, without limitation, its obligation to issue the Conversion Shares pursuant
to the Transaction Documents, are unconditional and absolute and not subject to any right of set off, counterclaim, delay or reduction,
regardless of the effect of any such dilution or any claim the Company may have against any Purchaser and regardless of the dilutive
effect that such issuance may have on the ownership of the other stockholders of the Company.

 

4.3          Furnishing
of Information; Public Information.

 

(a)          If
the Common Stock is not registered under Section 12(b) or 12(g) of the Exchange Act on the date hereof, the Company agrees to
cause the Common Stock to be registered under Section 12(g) of the Exchange Act on or before the 60th calendar day
following the date hereof. Until such time that no Purchaser owns Securities, the Company covenants to maintain the registration
of the Common Stock under Section 12(b) or 12(g) of the Exchange Act and to timely file (or obtain extensions in respect thereof
and file within the applicable grace period) all reports required to be filed by the Company after the date hereof pursuant to
the Exchange Act even if the Company is not then subject to the reporting requirements of the Exchange Act.

 

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(b)          At
any time during the period commencing from the six (6) month anniversary of the date hereof and ending at such time that all of
the Securities may be sold without the requirement for the Company to be in compliance with Rule 144(c)(1) and otherwise without
restriction or limitation pursuant to Rule 144, if the Company shall fail for any reason to satisfy the current public information
requirement under Rule 144(c) (a “Public Information Failure”) then, in addition to such Purchaser’s
other available remedies, the Company shall pay to a Purchaser, in cash, as partial liquidated damages and not as a penalty, by
reason of any such delay in or reduction of its ability to sell the Securities, an amount in cash equal to 0.075% of the aggregate
Subscription Amount of such Purchaser’s Securities on the day of a Public Information Failure and such amount on each day
thereafter until the earlier of (a) the date such Public Information Failure is cured and (b) such time that such public information
is no longer required  for the Purchasers to transfer the Conversion Shares pursuant to Rule 144.  The payments to which
a Purchaser shall be entitled pursuant to this Section 4.3(b) are referred to herein as “Public Information Failure Payments.” 
For purposes hereof, a “Public Information Failure” shall be deemed to have occurred and be continuing during any
Rule 12b-25 extension period for any annual, quarterly or other report required to be filed by the Company with the Commission.
Public Information Failure Payments shall be paid on the earlier of (i) the last day of the calendar month during which
such Public Information Failure Payments are incurred and (ii) the third (3rd) Business Day after the event
or failure giving rise to the Public Information Failure Payments is cured.  In the event the Company fails to make
Public Information Failure Payments in a timely manner, such Public Information Failure Payments shall bear interest
at the rate of 1.5% per month (prorated for partial months) until paid in full. Nothing herein shall limit such Purchaser’s
right to pursue actual damages for the Public Information Failure, and such Purchaser 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.

 

4.4          Integration;
Rules of the Trading Market.

 

(a)          The
Company shall not sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any security (as defined
in Section 2 of the Securities Act) that would be integrated with the offer or sale of the Securities in a manner that would require
the registration under the Securities Act of the sale of the Securities or that would be integrated with the offer or sale of
the Securities for purposes of the rules and regulations of any Trading Market unless stockholder approval is obtained before
the closing of such subsequent transaction.

 

(b)          The
Company shall provide each stockholder entitled to vote at either (x) the next annual meeting of stockholders of the Company or
(y) a special meeting of stockholders of the Company (the “Stockholder Meeting”), which shall be promptly called
and held not later than March 31, 2016 (the “Stockholder Meeting Deadline”), a proxy statement, substantially
in a form which shall have been previously reviewed by the Purchasers’ counsel, at the expense of the Company, soliciting
each such stockholder's affirmative vote at the Stockholder Meeting for approval of resolutions (“Stockholder Resolutions”)
providing for the Company's issuance of Conversion Shares as described in the Transaction Documents in accordance with applicable
law and the rules and regulations of the Principal Market and without any limitation on the number of Conversion Shares that may
be issued (such affirmative approval being referred to herein as the “Stockholder Approval”, and the date such
Stockholder Approval is obtained, the “Stockholder Approval Date”), and the Company shall use its reasonable
best efforts to solicit its stockholders' approval of such resolutions and to cause the Board of Directors of the Company to recommend
to the stockholders that they approve such resolutions. The Company shall be obligated to seek to obtain the Stockholder Approval
by the Stockholder Meeting Deadline. If, despite the Company's reasonable best efforts the Stockholder Approval is not obtained
on or prior to the Stockholder Meeting Deadline, the Company shall cause an additional Stockholder Meeting to be held once in
each of the four subsequent calendar quarters thereafter until such Stockholder Approval is obtained.

 

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4.5          Conversion
Procedures. The form of Notice of Conversion included in the Debentures set forth the totality of the procedures required
of the Purchasers in order to convert the Debentures. Without limiting the preceding sentences, 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 in order to convert the Debenture. No additional legal opinion, other information or instructions shall be required
of the Purchasers to convert their Debentures. The Company shall honor conversions of the Debentures and shall deliver Conversion
Shares in accordance with the terms, conditions and time periods set forth in the Transaction Documents.

 

4.6          Securities
Laws Disclosure; Publicity. The Company shall (a) by 9:30 a.m. (New York City time) on the Trading Day immediately following
the date hereof, issue a press release disclosing the material terms of the transactions contemplated hereby, and (b) file a Current
Report on Form 8-K, including the Transaction Documents as exhibits thereto, with the Commission within the time required by the
Exchange Act. From and after the issuance of such press release, the Company represents to the Purchasers that it shall have publicly
disclosed all material, non-public information delivered to any of the Purchasers by the Company or any of its Subsidiaries, or
any of their respective officers, directors, employees or agents in connection with the transactions contemplated by the Transaction
Documents. The Company and each Purchaser shall consult with each other in issuing any other press releases with respect to the
transactions contemplated hereby, and neither the Company nor any Purchaser shall issue any such press release nor otherwise make
any such public statement without the prior consent of the Company, with respect to any press release of any Purchaser, or without
the prior consent of each Purchaser, with respect to any press release of the Company, which consent shall not unreasonably be
withheld or delayed, except if such disclosure is required by law, in which case the disclosing party shall promptly provide the
other party with prior notice of such public statement or communication. Notwithstanding the foregoing, the Company shall not
publicly disclose the name of any Purchaser, or include the name of any Purchaser in any filing with the Commission or any regulatory
agency or Trading Market, without the prior written consent of such Purchaser, except: (a) as required by federal securities law
in connection with the filing of final Transaction Documents with the Commission and (b) to the extent such disclosure is required
by law or Trading Market regulations, in which case the Company shall provide the Purchasers with prior notice of such disclosure
permitted under this clause (b).

 

4.7          Stockholder
Rights Plan. No claim will be made or enforced by the Company or, with the consent of the Company, any other Person, that
any Purchaser is an “Acquiring Person” under any control share acquisition, business combination, poison pill (including
any distribution under a rights agreement) or similar anti-takeover plan or arrangement in effect or hereafter adopted by the
Company, or that any Purchaser could be deemed to trigger the provisions of any such plan or arrangement, by virtue of receiving
Securities under the Transaction Documents or under any other agreement between the Company and the Purchasers.

 

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4.8          Disclosure
of Material Information; No Obligation of Confidentiality.

 

(a)          Except
with respect to the material terms and conditions of the transactions contemplated by the Transaction Documents, the Company covenants
and agrees that neither it, nor any other Person acting on its behalf, has provided prior to the date hereof or will in the future
provide any Purchaser or its agents or counsel with any information that the Company believes constitutes material non-public
information, unless prior thereto such Purchaser shall have entered into a written agreement with the Company regarding the confidentiality
and use of such information. The Company understands and confirms that each Purchaser shall be relying on the foregoing covenant
in effecting transactions in securities of the Company. In the event of a breach of the foregoing covenant by the Company, or
any of its Subsidiaries, or any of its or their respective officers, directors, employees and agents, in addition to any other
remedy provided herein or in the Transaction Documents, the Company shall publicly disclose any material, non-public information
in a Current Report on Form 8-K within one business day following the date that it discloses such information to any Purchaser
or such earlier time as may be required by Regulation FD or other applicable law.

 

(b)          No
Purchaser shall be deemed to have any obligation of confidentiality with respect to (i) any non-public information of the Company
disclosed to such Purchaser in breach of Section 4.8(a) (whether or not the Company files a Current Report on Form 8-K as provided
above), (ii) the fact that any Purchaser has exercised any of its rights and/or remedies under the Transaction Documents or (iii)
any information obtained by any Purchaser as a result of exercising any of its rights and/or remedies under the Transaction Documents.
In addition, no Purchaser shall be deemed to be in breach of any duty to the Company and/or to have misappropriated any non-public
information of the Company, if such Purchaser engages in transactions of securities of the Company, including, without limitation,
any hedging transactions, short sales or any “derivative” transactions while in possession of such non-public information.

 

(c)          Any
Form 8-K, including all exhibits thereto, filed by the Company pursuant to Section 4.8(a) shall be subject to prior review and
comment by the applicable Purchasers. 

 

(d)          From
and after the filing of any such Form 8-K pursuant to Section 4.8(a) with the Commission, no Purchaser shall be deemed to
be in possession of any material, nonpublic information regarding the Company.

 

4.9          Use
of Proceeds. The Company shall use the net proceeds from the sale of the Securities hereunder for the satisfaction of the
Company’s debt in accordance with the Payoff Letter and for general corporate purposes and shall not use such proceeds:
(a) for the redemption of any Common Stock or Common Stock Equivalents, (b) for the settlement of any outstanding litigation
or (c) in violation of FCPA or OFAC regulations.

 

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4.10        Indemnification
of Purchasers. Subject to the provisions of this Section 4.10, the Company will indemnify and hold each Purchaser and its
directors, officers, stockholders, members, partners, employees and agents (and any other Persons with a functionally equivalent
role of a Person holding such titles notwithstanding a lack of such title or any other title), each Person who controls such Purchaser
(within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the directors, officers, stockholders,
agents, members, partners or employees (and any other Persons with a functionally equivalent role of a Person holding such titles
notwithstanding a lack of such title or any other title) of such controlling persons (each, a “Purchaser Party”)
harmless from any and all losses, liabilities, obligations, claims, contingencies, damages, costs and expenses, including all
judgments, amounts paid in settlements, court costs and reasonable attorneys’ fees and costs of investigation that any such
Purchaser Party may suffer or incur as a result of or relating to (a) any breach of any of the representations, warranties, covenants
or agreements made by the Company in this Agreement or in the other Transaction Documents or (b) any action instituted against
the Purchaser Parties in any capacity, or any of them or their respective Affiliates, by any stockholder of the Company who is
not an Affiliate of such Purchaser Party, with respect to any of the transactions contemplated by the Transaction Documents (unless
such action is based upon a breach of such Purchaser Party’s representations, warranties or covenants under the Transaction
Documents or any agreements or understandings such Purchaser Party may have with any such stockholder or any violations by such
Purchaser Party of state or federal securities laws or any conduct by such Purchaser Party which constitutes fraud, gross negligence,
willful misconduct or malfeasance). If any action shall be brought against any Purchaser Party in respect of which indemnity may
be sought pursuant to this Agreement, such Purchaser Party shall promptly notify the Company in writing, and the Company shall
have the right to assume the defense thereof with counsel of its own choosing reasonably acceptable to the Purchaser Party. Any
Purchaser Party shall have the right to employ separate counsel in any such action and participate in the defense thereof, but
the fees and expenses of such counsel shall be at the expense of such Purchaser Party except to the extent that (i) the employment
thereof has been specifically authorized by the Company in writing, (ii) the Company has failed after a reasonable period of time
to assume such defense and to employ counsel or (iii) in such action there is, in the reasonable opinion of counsel, a material
conflict on any material issue between the position of the Company and the position of such Purchaser Party, in which case the
Company shall be responsible for the reasonable fees and expenses of no more than one such separate counsel. The Company will
not be liable to any Purchaser Party under this Agreement (y) for any settlement by a Purchaser Party effected without the Company’s
prior written consent, which shall not be unreasonably withheld or delayed; or (z) to the extent, but only to the extent that
a loss, claim, damage or liability is attributable to any Purchaser Party’s breach of any of the representations, warranties,
covenants or agreements made by such Purchaser Party in this Agreement or in the other Transaction Documents. The indemnification
required by this Section 4.10 shall be made by periodic payments of the amount thereof during the course of the investigation
or defense, as and when bills are received or are incurred. The indemnity agreements contained herein shall be in addition to
any cause of action or similar right of any Purchaser Party against the Company or others and any liabilities the Company may
be subject to pursuant to law.

 

4.11        Reservation
and Listing of Securities.

 

(a)          The
Company shall maintain a reserve from its duly authorized shares of Common Stock for issuance pursuant to the Transaction Documents
in such amount as may then be required to fulfill its obligations in full under the Transaction Documents.

 

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(b)          If,
on any date, the number of authorized but unissued (and otherwise unreserved) shares of Common Stock is less than the Required
Minimum on such date, then the Board of Directors shall use commercially reasonable efforts to amend the Company’s certificate
or articles of incorporation to increase the number of authorized but unissued shares of Common Stock to at least the Required
Minimum at such time, as soon as possible and in any event not later than the 75th day after such date.

 

(c)          The
Company shall, if applicable: (i) in the time and manner required by the principal Trading Market, prepare and file with such
Trading Market an additional shares listing application covering a number of shares of Common Stock at least equal to the Required
Minimum on the date of such application, (ii) take all steps necessary to cause such shares of Common Stock to be approved for
listing or quotation on such Trading Market as soon as possible thereafter, (iii) provide to the Purchasers evidence of such listing
or quotation and (iv) maintain the listing or quotation of such Common Stock on any date at least equal to the Required Minimum
on such date on such Trading Market or another Trading Market. The Company agrees to maintain the eligibility of the Common Stock
for electronic transfer through the Depository Trust Company or another established clearing corporation, including, without limitation,
by timely payment of fees to the Depository Trust Company or such other established clearing corporation in connection with such
electronic transfer.

 

4.12        Form
D; Blue Sky Filings. The Company agrees to timely file a Form D with respect to the Securities as required under Regulation
D and to provide a copy thereof, promptly upon request of any Purchaser. The Company shall take such action as the Company shall
reasonably determine is necessary in order to obtain an exemption for, or to qualify the Securities for, sale to the Purchasers
at the Closing under applicable securities or “Blue Sky” laws of the states of the United States, and shall provide
evidence of such actions promptly upon request of any Purchaser.

 

4.13        Additional
Investment Right. While this Debenture is outstanding, Purchasers may, in their sole discretion, but are under no obligation
to, purchase from the Company, and the Company shall be obligated to sell to the Purchasers, additional Debentures in an aggregate
principal amount of up to $2,150,000 (including original issue discount) (the “AIR Debentures”). Any additional
investment pursuant to this Section 4.13 (the “AIR”) will be on terms and prices identical to those set forth
in this Agreement, the Debentures and the other Transaction Documents, in each case, as amended, supplemented or modified after
the date hereof. For the avoidance of doubt, the aggregate purchase price for the entire amount of AIR Debentures shall be equal
to $2,000,000. In addition to the foregoing, the parties agree as follow with respect to the AIR Debentures (x) for purposes of
the anti-dilution provisions of the AIR Debentures, the Original Issue Date of the AIR Debentures shall be deemed to be the date
of this Agreement and (y) the Monthly Allowance (as defined in the Debentures) for any AIR Debentures shall be $100,000 per month.
The Purchasers may exercise the AIR in whole or in part, at any time and from time to time, while the Debentures are outstanding.
In order to effectuate a purchase and sale of the AIR Debentures, the Company and the Guarantors shall enter into such agreements
and instruments as the Purchasers deem appropriate and which shall include updated disclosure schedules and representations, warranties,
covenants and agreements substantially identical to those set forth in the Transaction Documents. For the avoidance of doubt,
the obligations of the Company under the AIR Debentures and related agreements and instruments are in addition to all of the obligations
of the Company under this Agreement, the Debentures and the other Transaction Documents.

 

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ARTICLE
V.

MISCELLANEOUS

 

5.1          Fees
and Expenses. At the Closing, the Company has agreed to reimburse the Purchasers for their legal fees and expenses, $25,000
of which has been paid prior to the Closing. Accordingly, in lieu of the foregoing payments, the aggregate amount that the Purchasers
are to pay for the Securities at the Closing shall be reduced by $40,000 in lieu thereof. Except as expressly set forth in the
Transaction Documents to the contrary, each party shall pay the fees and expenses of its advisers, counsel, accountants and other
experts, if any, and all other expenses incurred by such party incident to the negotiation, preparation, execution, delivery and
performance of this Agreement. The Company shall pay all Transfer Agent fees (including, without limitation, any fees required
for processing of any instruction letter delivered by the Company and any conversion notice delivered by a Purchaser), stamp taxes
and other taxes and duties levied in connection with the delivery of any Securities to the Purchasers.

 

5.2          Entire
Agreement. The Transaction Documents, together with the exhibits and schedules thereto, contain the entire understanding of
the parties with respect to the subject matter hereof and thereof and supersede all prior agreements and understandings, oral
or written, with respect to such matters, which the parties acknowledge have been merged into such documents, exhibits and schedules.

 

5.3          Notices.
Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be in writing and
shall be deemed given and effective on the earliest of: (a) the date of transmission, if such notice or communication is delivered
via facsimile at the facsimile number or email attachment as set forth on the signature pages attached hereto at or prior to 5:30
p.m. (New York City time) on a Trading Day, (b) 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 as 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, (c) the second (2nd)
Trading Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service or (d) upon actual
receipt by the party to whom such notice is required to be given. The address for such notices and communications shall be as
set forth on the signature pages attached hereto.

 

5.4          Amendments;
Waivers. No provision of this Agreement may be waived, modified, supplemented or amended except in a written instrument signed,
in the case of an amendment, by the Company and the Purchasers or, in the case of a waiver, by the party against whom enforcement
of any such waived provision is sought. No waiver of any default with respect to any provision, condition or requirement of this
Agreement shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of any other
provision, condition or requirement hereof, nor shall any delay or omission of any party to exercise any right hereunder in any
manner impair the exercise of any such right.

 

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

 

5.6          Successors
and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their successors and permitted
assigns. The Company may not assign this Agreement or any rights or obligations hereunder without the prior written consent of
each Purchaser (other than by merger). Any Purchaser may assign any or all of its rights under this Agreement to any Person to
whom such Purchaser assigns or transfers any Securities, provided that such transferee agrees in writing to be bound, with respect
to the transferred Securities, by the provisions of the Transaction Documents that apply to the “Purchasers.”

 

5.7          No
Third Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective successors
and permitted assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other Person, except as
otherwise set forth in Section 4.10 and this Section 5.7.

 

5.8          Governing
Law. All questions concerning the construction, validity, enforcement and interpretation of the Transaction Documents 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 conflicts of law thereof. Each party agrees that all legal proceedings concerning the interpretations, enforcement
and defense of the transactions contemplated by this Agreement and any other Transaction Documents (whether brought against a
party hereto or its respective affiliates, directors, officers, stockholders, partners, members, employees or agents) shall be
commenced exclusively in the state and federal courts sitting in the City of New York. Each party hereby irrevocably submits to
the exclusive jurisdiction of the state and federal courts sitting in the City of New York, Borough of Manhattan 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 any such court, that such
suit, action or proceeding is improper or is an 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 Agreement 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 law. If either
party shall commence an action, suit or proceeding to enforce any provisions of the Transaction Documents, then, in addition to
the obligations of the Company under Section 4.10, the prevailing party in such action, suit or proceeding shall be reimbursed
by the other party for its reasonable attorneys’ fees and other costs and expenses incurred with the investigation, preparation
and prosecution of such action or proceeding.

 

    33

     

    

 

5.9          Survival.
The representations and warranties contained herein shall survive the Closing and the delivery of the Securities.

 

5.10        Execution.
This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each party and delivered to each other party, it being
understood that the parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission
or by e-mail delivery of a “.pdf” format data file, such signature shall create a valid and binding obligation of
the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or “.pdf”
signature page were an original thereof.

 

5.11        Severability.
If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain
in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their commercially
reasonable efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated
by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that
they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be
hereafter declared invalid, illegal, void or unenforceable.

 

5.12        Rescission
and Withdrawal Right. Notwithstanding anything to the contrary contained in (and without limiting any similar provisions of)
any of the other Transaction Documents, whenever any Purchaser exercises a right, election, demand or option under a Transaction
Document and the Company does not timely perform its related obligations within the periods therein provided, then such Purchaser
may rescind or withdraw, in its sole discretion from time to time upon written notice to the Company, any relevant notice, demand
or election in whole or in part without prejudice to its future actions and rights; provided, however, that in the
case of a rescission of a conversion of a Debenture, the applicable Purchaser shall be required to return any shares of Common
Stock subject to any such rescinded conversion notice.

 

5.13        Replacement
of Securities. If any certificate or instrument evidencing any Securities is mutilated, lost, stolen or destroyed, the Company
shall issue or cause to be issued in exchange and substitution for and upon cancellation thereof (in the case of mutilation),
or in lieu of and substitution therefor, a new certificate or instrument, but only upon receipt of evidence reasonably satisfactory
to the Company of such loss, theft or destruction. The applicant for a new certificate or instrument under such circumstances
shall also pay any reasonable third-party costs (including customary indemnity) associated with the issuance of such replacement
Securities.

 

5.14        Remedies.
In addition to being entitled to exercise all rights provided herein or granted by law, including recovery of damages, each of
the Purchasers and the Company will be entitled to specific performance under the Transaction Documents. The parties agree that
monetary damages may not be adequate compensation for any loss incurred by reason of any breach of obligations contained in the
Transaction Documents and hereby agree to waive and not to assert in any action for specific performance of any such obligation
the defense that a remedy at law would be adequate.

 

    34

     

    

 

5.15        Payment
Set Aside. To the extent that the Company makes a payment or payments to any Purchaser pursuant to any Transaction Document
or a Purchaser enforces or exercises its rights thereunder, and such payment or payments or the proceeds of such enforcement or
exercise or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside, recovered from,
disgorged by or are required to be refunded, repaid or otherwise restored to the Company, a trustee, receiver or any other Person
under any law (including, without limitation, any bankruptcy law, state or federal law, common law or equitable cause of action),
then to the extent of any such restoration the obligation or part thereof originally intended to be satisfied shall be revived
and continued in full force and effect as if such payment had not been made or such enforcement or setoff had not occurred.

 

5.16        Usury.
To the extent it may lawfully do so, the Company hereby agrees not to insist upon or plead or in any manner whatsoever claim,
and will resist any and all efforts to be compelled to take the benefit or advantage of, usury laws wherever enacted, now or at
any time hereafter in force, in connection with any claim, action or proceeding that may be brought by any Purchaser in order
to enforce any right or remedy under any Transaction Document. Notwithstanding any provision to the contrary contained in any
Transaction Document, it is expressly agreed and provided that the total liability of the Company under the Transaction Documents
for payments in the nature of interest shall not exceed the maximum lawful rate authorized under applicable law (the “Maximum
Rate”), and, without limiting the foregoing, in no event shall any rate of interest or default interest, or both of
them, when aggregated with any other sums in the nature of interest that the Company may be obligated to pay under the Transaction
Documents exceed such Maximum Rate. It is agreed that if the maximum contract rate of interest allowed by law and applicable to
the Transaction Documents is increased or decreased by statute or any official governmental action subsequent to the date hereof,
the new maximum contract rate of interest allowed by law will be the Maximum Rate applicable to the Transaction Documents from
the effective date thereof forward, unless such application is precluded by applicable law. If under any circumstances whatsoever,
interest in excess of the Maximum Rate is paid by the Company to any Purchaser with respect to indebtedness evidenced by the Transaction
Documents, such excess shall be applied by such Purchaser to the unpaid principal balance of any such indebtedness or be refunded
to the Company, the manner of handling such excess to be at such Purchaser’s election.

 

5.17        Independent
Nature of Purchasers’ Obligations and Rights. The obligations of each Purchaser under any Transaction Document are several
and not joint with the obligations of any other Purchaser, and no Purchaser shall be responsible in any way for the performance
or non-performance of the obligations of any other Purchaser under any Transaction Document. Nothing contained herein or in any
other Transaction Document, and no action taken by any Purchaser pursuant hereto or thereto, shall be deemed to constitute the
Purchasers as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Purchasers
are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated by the Transaction
Documents. Each Purchaser shall be entitled to independently protect and enforce its rights, including, without limitation, the
rights arising out of this Agreement or out of the other Transaction Documents, and it shall not be necessary for any other Purchaser
to be joined as an additional party in any proceeding for such purpose. The Company has elected to provide all Purchasers with
the same terms and Transaction Documents for the convenience of the Company and not because it was required or requested to do
so by any of the Purchasers.

 

    35

     

    

 

5.18        Liquidated
Damages. The Company’s obligations to pay any partial liquidated damages or other amounts owing under the Transaction
Documents is a continuing obligation of the Company and shall not terminate until all unpaid partial liquidated damages and other
amounts have been paid notwithstanding the fact that the instrument or security pursuant to which such partial liquidated damages
or other amounts are due and payable shall have been canceled.

 

5.19        Saturdays,
Sundays, Holidays, etc.          If the last or appointed day for the taking of any action or the expiration of any right required
or granted herein shall not be a Business Day, then such action may be taken or such right may be exercised on the next succeeding
Business Day.

 

5.20        Construction.
The parties agree that each of them and/or their respective counsel have reviewed and had an opportunity to revise the Transaction
Documents and, therefore, the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting
party shall not be employed in the interpretation of the Transaction Documents or any amendments thereto. In addition, each and
every reference to share prices and shares of Common Stock in any Transaction Document shall be subject to adjustment for reverse
and forward stock splits, stock dividends, stock combinations and other similar transactions of the Common Stock that occur after
the date of this Agreement.

 

5.21        WAIVER
OF JURY TRIAL. IN ANY ACTION, SUIT, OR PROCEEDING IN ANY JURISDICTION BROUGHT BY ANY PARTY AGAINST ANY OTHER PARTY, THE PARTIES
EACH KNOWINGLY AND INTENTIONALLY, TO THE GREATEST EXTENT PERMITTED BY APPLICABLE LAW, HEREBY ABSOLUTELY, UNCONDITIONALLY, IRREVOCABLY
AND EXPRESSLY WAIVES FOREVER TRIAL BY JURY. 

 

5.22        Termination. 
This Agreement may be terminated by any Purchaser, as to such Purchaser’s obligations hereunder only and without any effect
whatsoever on the obligations between the Company and the other Purchasers, by written notice to the other parties, if the Closing
has not been consummated on or before January 1, 2016; provided, however, that such termination will not affect
the right of any party to sue for any breach by any other party (or parties).

 

(Signature
Pages Follow)

 

    36

     

    

 

IN
WITNESS WHEREOF, the parties hereto have caused this Securities Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.

 

	INTERCLOUD
    SYSTEMS, INC.	 	Address
    for Notice:
	 	 	 	 
	By:	/s/
    Daniel Sullivan	 	Fax:
    
	 	Name:
    Daniel Sullivan	 	E-mail:
	 	Title:   Chief
    Accounting Officer	 	 

 

With
a copy to (which shall not constitute notice):

 

[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK

SIGNATURE
PAGE FOR PURCHASER FOLLOWS]

 

    37

     

    

 

[PURCHASER
SIGNATURE PAGES TO INTERCLOUD SECURITIES PURCHASE AGREEMENT]

 

IN
WITNESS WHEREOF, the undersigned have caused this Securities Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.

 

Name
of Purchaser: ________________________________________________________

 

Signature
of Authorized Signatory of Purchaser: __________________________________

 

Name
of Authorized Signatory: ____________________________________________________

 

Title
of Authorized Signatory: _____________________________________________________

 

Email
Address of Authorized Signatory: _____________________________________________

 

Facsimile
Number of Authorized Signatory: __________________________________________

 

Address
for Notice to Purchaser:

 

 

 

Address
for Delivery of Securities to Purchaser (if not same as address for notice):

 

 

 

Subscription
Amount: _____________

 

Principal
Amount (1.07 x Subscription Amount): _____________

 

EIN
Number: _______________________

 

[SIGNATURE
PAGES CONTINUE]

 

 

38Exhibit 10.2

 

EXHIBIT
A

 

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 AS EVIDENCED BY A
LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.
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 WITH A FINANCIAL INSTITUTION THAT IS AN “ACCREDITED INVESTOR” AS DEFINED IN RULE 501(a) UNDER
THE SECURITIES ACT OR OTHER LOAN SECURED BY SUCH SECURITIES.

 

Original
Issue Date: December 29, 2015

Original
Conversion Price (subject to adjustment herein): $1.33

 

$7,500,000

 

10%
ORIGINAL ISSUE DISCOUNT SENIOR SECURED CONVERTIBLE DEBENTURE

DUE
June 30, 2017

 

THIS
10% ORIGINAL ISSUE DISCOUNT SENIOR SECURED CONVERTIBLE DEBENTURE is one of a series of duly authorized and validly issued 10%
Original Issue Discount Senior Secured Convertible Debentures of InterCloud Systems, Inc., a Delaware corporation, (the “Company”),
having its principal place of business at 1030 Broad Street, Suite 102, Shrewsbury, NJ 07702, designated as its 10% Original Issue
Discount Senior Secured Convertible Debenture due June 30, 2017 (this debenture, the “Debenture” and, collectively
with the other debentures of such series, the “Debentures”).

 

FOR
VALUE RECEIVED, the Company promises to pay to JGB (Cayman) Waltham Ltd. or its registered assigns (the “Holder”),
or shall have paid pursuant to the terms hereunder, the principal sum of $7,500,000 on June 30, 2017 (the “Maturity Date”)
or such earlier date as this Debenture is required or permitted to be repaid as provided hereunder, and to pay interest to the
Holder on the aggregate unconverted and then outstanding principal amount of this Debenture in accordance with the provisions
hereof. This Debenture is subject to the following additional provisions:

 

Section
1.         Definitions. For the purposes hereof, in addition to the terms defined elsewhere in this Debenture, (a) capitalized
terms not otherwise defined herein shall have the meanings set forth in the Purchase Agreement and (b) the following terms shall
have the following meanings:

 

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

 

     

     

    

 

“Applicable
Interest Rate” means an annual rate equal to ten percent (10%), provided, if the Stockholder Approval has not been obtained
by the Stockholder Meeting Deadline, an annual rate equal to thirteen percent (13%), provided, further, in any event, following
the occurrence and during the continuance of an Event of Default, an annual rate equal to fifteen percent (15%).

 

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

 

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

 

“Bloomberg”
means Bloomberg, L.P.

 

“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 fifty percent (50%) of the voting securities of the Company (other than by means of conversion or exercise of
the Debentures and the Securities issued together with the Debentures), (b) the Company merges into or consolidates with any other
Person, or any Person merges into or consolidates with the Company and, after giving effect to such transaction, the stockholders
of the Company immediately prior to such transaction own less than fifty percent (50%) 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 fifty percent (50%) 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 Original Issue 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.

 

“Common
Stock Equivalents” means any securities of the Company or the Subsidiaries 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.

 

“Consolidated
EBITDA” means, for any period, for the Company and Guarantors (as defined in Purchase Agreement) on a consolidated basis,
an amount equal to the net income (on a consolidated basis) of the Company and the Guarantors for such period plus (a) the
following to the extent deducted in calculating such net income: (i) all interest and premium payments of the Company and Guarantors
in connection with borrowed money actually paid by the Company and Guarantors in such period, (ii) the provision for federal,
state, local and foreign income taxes payable by the Company and Guarantors for such period, (iii) depreciation and amortization
expense and (iv) other non-recurring expenses of the Company and Guarantors reducing net income which do not represent a
cash item in such period or any future period and minus (b) the following to the extent included in calculating such
net income: (i) Federal, state, local and foreign income tax credits of the Company and Guarantors for such period and (ii) all
non-cash items increasing net income for such period. For the avoidance of doubt, the calculation of Consolidated EBITDA shall
exclude, for all purposes, Vaultlogix, Data Protection Services, LLC, U.S. Data Security Acquisition, LLC and U.S. Data Security
Corporation.

 

    	 	3	 

     

    

 

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

 

“Conversion
Shares” means, collectively, the shares of Common Stock issuable (i) upon conversion of this Debenture in accordance
with the terms hereof or (ii) pursuant to Section 6(b) hereof.

 

“DACA”
means each Deposit Account Control Agreement, dated as of the date hereof, by and between the Company or a Subsidiary, as applicable,
PNC Bank, National Association and the Purchasers pursuant to the Purchase Agreement.

 

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

 

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

 

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

 

“Dispose”
means the sale, transfer, license, lease or other disposition (including any sale and leaseback transaction or by way of a merger)
of any property by any Person, including any sale, assignment, transfer or other disposal, with or without recourse, of any notes
or accounts receivable or any rights and claims associated therewith, in each case, whether or not the consideration therefor
consists of cash, securities or other assets owned by the acquiring Person, excluding any sales of inventory in the ordinary course
of business on ordinary business terms.

 

“Dollar
Volume Limitation” means fifteen percent (15%) of the aggregate dollar trading volume of the Common Stock on the Principal
Market (or other applicable Trading Market) over the twenty (20) consecutive Trading Day period ending on the Trading Day immediately
preceding the date of any Holder Redemption Notice or the commencement of any Interest Notice Period, as applicable. For the purposes
of this definition the term “dollar trading volume” for any Trading Day shall be determined by multiplying the VWAP
by the volume as reported on Bloomberg for such Trading Day.

 

“DTC”
means the Depository Trust Company.

 

    	 	4	 

     

    

 

“Equity
Conditions” means, during the period in question, (a) the Company shall have duly honored all conversions and redemptions
scheduled to occur or occurring by virtue of one or more Notices of Conversions or Holder Redemption Notices of the Holder, if
any, (b) the Company shall have paid all liquidated damages and other amounts owing to the Holder in respect of this Debenture,
(c)(i) there is an effective Registration Statement pursuant to which the Holder is permitted to utilize the prospectus thereunder
to resell all of the shares of Common Stock issuable pursuant to the Transaction Documents (and the Company believes, in good
faith, that such effectiveness will continue uninterrupted for the foreseeable future) or (ii) all of the Conversion Shares issuable
pursuant to the Transaction Documents (and shares issuable in lieu of cash payments of interest) may be resold pursuant to Rule
144 without volume or manner-of-sale restrictions as determined by the counsel to the Company as set forth in a written opinion
letter to such effect, addressed and acceptable to the Transfer Agent and the Holder, provided, however, this condition shall
not be deemed satisfied (1) during any Rule 12b-25 extension period with respect to any quarterly or annual report of the Company
that is not filed by the prescribed due date for such quarterly or annual report (without giving effect to any extension period)
or (2) during any period that the Company is not in compliance with the current public information requirements under Rule 144,
(d) the Common Stock is trading on a Trading Market and all of the Conversion Shares issuable pursuant to the Transaction Documents
are listed or quoted for trading on such Trading Market (and the Company believes, in good faith, that trading of the Common Stock
on a Trading Market will continue uninterrupted for the foreseeable future), (e) there is a sufficient number of authorized but
unissued and otherwise unreserved shares of Common Stock for the issuance of all of the Conversion Shares then issuable pursuant
to the Transaction Documents, (f) there is no existing Event of Default and no existing event which, with the passage of time
or the giving of notice, would constitute an Event of Default, (g) the issuance of the Conversion Shares in question to the Holder
would not violate the limitations set forth in Section 4(d) herein or the Exchange Cap, (h) there has been no public announcement
of a pending or proposed Fundamental Transaction or Change of Control Transaction that has not been consummated, (i) the applicable
Holder is not in possession of any information provided by the Company that constitutes, or may constitute, material non-public
information, (j) on each of the ten (10) Trading Days prior to the applicable date, unless waived by the Holder, the Closing Price
of the Common Stock is at least $1.00 per share (appropriately adjusted for any stock split, stock dividend, stock combination,
stock buy-back or other similar transaction), (k) the Common Stock is DTC eligible and the Company’s transfer agent is participating
in DTC’s Fast Automated Securities Transfer Program, and (l) the Stockholder Approval has been obtained.

 

“Equity
Conditions Failure” shall have the meaning set forth in Section 6(b)(iii).

 

“Equity
Interests” means, with respect to any Person, all of the shares of capital stock of (or other ownership or profit interests
in) such Person, all of the warrants, options or other rights for the purchase or acquisition from such Person of shares of capital
stock of (or other ownership or profit interests in) such Person, all of the securities convertible into or exchangeable for shares
of capital stock of (or other ownership or profit interests in) such Person or warrants, rights or options for the purchase or
acquisition from such Person of such shares (or such other interests), and all of the other ownership or profit interests in such
Person (including partnership, member or trust interests therein), whether voting or nonvoting, and whether or not such shares,
warrants, options, rights or other interests are outstanding on any date of determination.

 

    	 	5	 

     

    

 

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

 

“Exchange
Cap” shall have the meaning set forth in Section 4(e).

 

“Excess
Shares” shall have the meaning set forth in Section 6(b)(v)(B).

 

“Exempt
Issuance” means the issuance of (a) shares of Common Stock or options to employees, consultants, officers or directors
of the Company pursuant to any stock or option plan duly adopted for such purpose, or approved by a majority of the non-employee
members of the Board of Directors or a majority of the members of a committee of non-employee directors established for such purpose
and (b) securities upon the exchange of or conversion of this Debenture and/or other Common Stock Equivalents issued and outstanding
on the Original Issue Date, including any amendment or modification to such securities subsequent to the Original Issue Date to
decrease the exercise price, exchange price or conversion price of such securities.

 

“FGI
Litigation” shall have the meaning set forth in Section 6(b)(i).

 

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

 

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

 

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

 

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

 

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

 

“Indebtedness”
shall include (a) all obligations for borrowed money, (b) all obligations evidenced by bonds, debentures, notes, or other similar
instruments and all reimbursement or other obligations in respect of letters of credit, bankers acceptances, current swap agreements,
interest rate hedging agreements, interest rate swaps or other financial products, (c) all capital or equipment lease obligation
or purchase money security interests, (d) all obligations or liability secured by a Lien (except for Liens described in clauses
(a) and (b) of the definition of Permitted Liens) on any asset of the Company, irrespective of whether such obligation or liability
is assumed), and (e) any obligation guaranteeing or intended to guarantee (whether directly or indirectly guaranteed, endorsed,
co-made, discounted or sold with recourse) any of the foregoing obligations of any other person or entity.

 

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

 

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

 

    	 	6	 

     

    

 

“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).

 

“Investments”
means, as to any Person, any direct or indirect acquisition or investment by such Person, whether by means of (a) the purchase
or other acquisition (including by merger) of Equity Interests of another Person, (b) a loan, advance or capital contribution
to, guarantee or assumption of debt of, or purchase or other acquisition of any other debt or interest in, another Person, or
(c) the purchase or other acquisition (in one transaction or a series of transactions) of assets of another Person that constitute
a business unit or all or a substantial part of the business of, such Person.

 

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

 

“Make-Whole
Amount” means, with respect to the applicable date of determination, an amount in cash equal to all of the interest
that, but for the applicable conversion or redemption payment (including, for the avoidance of doubt any redemption in connection
with the Holder Redemption Right) or acceleration, would have accrued pursuant to Section 2 with respect to the applicable principal
amount being so converted or redeemed or accelerated for the period commencing on the applicable redemption date or Conversion
Date or default payment date and ending on the Make-Whole End Date.

 

“Make-Whole
End Date” means the Maturity Date, provided that (a) if the Make-Whole Conditions are satisfied prior to the first anniversary
of the Original Issue, the “Make-Whole End Date” shall be the first anniversary of the Original Issue Date
and (b) if the Make-Whole Termination Conditions are satisfied subsequent to the first anniversary of the Original Issue Date,
the “Make-Whole End Date” shall be the date that the Make-Whole Termination Conditions are so satisfied.

 

“Make-Whole
Period” means the period commencing on the Original Issue Date and ending on the Make-Whole End Date.

 

“Make
Whole Termination Conditions” means (a) the VWAP for the Common Stock on the Principal Market for each of any twenty
(20) consecutive Trading Days, which period shall have commenced only if all of the Equity Conditions are satisfied, equals or
exceeds 120% of the then-effective Conversion Price, (b) the average dollar trading volume of the Common Stock on the Principal
Market during such twenty (20) consecutive Trading Day period exceeds $225,000 per Trading Day, and (c) the Equity Conditions
are satisfied on each and every Trading Day of such twenty (20) Trading Day period.

 

“Mandatory
Default Amount” means the sum of (a) 105% of the outstanding principal amount of this Debenture plus 100% of accrued
and unpaid interest thereon, plus the Make-Whole Amount, if applicable, and (b) all other amounts, costs, expenses and liquidated
damages due in respect of this Debenture.

 

    	 	7	 

     

    

 

“Monthly
Allowance” shall have the meaning set forth in Section 6(b)(i).

 

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

 

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

 

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

 

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

 

“Optional
Redemption Amount” means the sum of (a) 100% of the then outstanding principal amount of the Debenture, (b) accrued
but unpaid interest and, if the Optional Redemption Notice is delivered during the Make-Whole Period, the Make-Whole Amount 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)(i).

 

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

 

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

 

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

 

“Optional
Redemption Premium” means an amount equal to $350,000.

 

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

 

“Permitted
Indebtedness” means (a) the indebtedness evidenced by the Debentures, (b) lease obligations and purchase money indebtedness
of up to $250,000, in the aggregate, incurred in connection with the acquisition of capital assets and lease obligations with
respect to newly acquired or leased assets, (c) Subordinated Indebtedness and (d) Indebtedness outstanding on the Original Issue
Date and identified on Schedule A hereto.

 

    	 	8	 

     

    

 

“Permitted
Lien” means the individual and collective reference to the following: (a) Liens for taxes, assessments and other governmental
charges or levies not yet due or Liens for taxes, assessments and other governmental charges or levies being contested in good
faith and by appropriate proceedings for which adequate reserves (in the good faith judgment of the management of the Company)
have been established in accordance with GAAP, (b) Liens imposed by law which were incurred in the ordinary course of the Company’s
business, such as carriers’, warehousemen’s and mechanics’ Liens, statutory landlords’ Liens, and other
similar Liens arising in the ordinary course of the Company’s business, and which (x) do not individually or in the aggregate
materially detract from the value of such property or assets or materially impair the use thereof in the operation of the business
of the Company and its consolidated Subsidiaries or (y) are being contested in good faith by appropriate proceedings, which proceedings
have the effect of preventing for the foreseeable future the forfeiture or sale of the property or asset subject to such Lien,
(c) Liens incurred in connection with Permitted Indebtedness under clause (a) thereunder, (d) Liens incurred in connection with
Permitted Indebtedness under clause (b) thereunder, provided that such Liens are not secured by assets of the Company or its Subsidiaries
other than the assets so acquired or leased, (e) Liens existing on the Original Issue Date and identified on Schedule B
hereto; and (f) the purported Lien against the assets of the Company in favor Faunus Group International, Inc., provided that
the purported Indebtedness, claims and/or other liabilities secured thereby do not exceed $750,000 in the aggregate and, provided,
further that such Lien is terminated by not later than June __, 2016 and the FGI Litigation shall be dismissed, settled or finally
adjudicated by such date.

 

“Principal
Market” means the Nasdaq Capital Market or such other Trading Market where the Common Stock is then listed or quoted.

 

“Purchase
Agreement” means the Securities Purchase Agreement, dated as of December 29, 2015 among the Company and the original
Holders, as amended, modified or supplemented from time to time in accordance with its terms.

 

“Registration
Statement” means a registration statement meeting the requirements set forth in the Registration Rights Agreement and
covering the resale of the Conversion Shares by each Holder of the Debentures as provided for in the Registration Rights Agreement.

 

“Secured
Debt Obligation” means, on any date of determination, the aggregate outstanding principal amount of the Debentures plus
all accrued and unpaid interest thereon plus all other amounts, costs, expenses and liquidated damages due in respect of the Debentures
as of such date.

 

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

 

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

 

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

 

“Stock
On Effective Date” shall have the meaning set forth in Section 6(b)(ii).

 

“Stock
Off Notice” shall have the meaning set forth in Section 6(b)(iv).

 

“Stock
On Notice” shall have the meaning set forth in Section 6(b)(ii).

 

“Stock
Payment Amount” shall have the meaning set forth in Section 6(b)(v).

 

    	 	9	 

     

    

 

“Stock
Payment Rate” means the lowest of (a) the Conversion Price, (b) 80% of the average of the VWAPs for each of the five
(5) consecutive Trading Days immediately prior to, as the case may be, the applicable Interest Payment Date, the Optional Redemption
Date, or, with respect to any redemption pursuant to Section 6(b), the date of the applicable Holder Redemption Notice and (c)
90% of the average of the five (5) lowest VWAPs during the twenty (20) consecutive Trading Days immediately prior to, as the case
may be, the applicable Interest Payment Date, the Optional Redemption Date, or, with respect to any redemption pursuant to Section
6(b), the date of the applicable Holder Redemption Notice.

 

“Stock
Replacement Payment” shall have the meaning set forth in Section 6(b)(v)(A).

 

“Subordination
Agreement(s)” shall have the meaning given in the Securities Purchase Agreement.

 

“Subordinated
Indebtedness” means unsecured Indebtedness of the Company (i) with a maturity at least 90 days after the Maturity Date,
(ii) where the Company is not obligated to make any payments in cash thereunder until a date that is at least 90 days after the
Maturity Date, and (iii) that is subject to a subordination agreement with terms and conditions satisfactory to the Holder in
its sole discretion.

 

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

 

“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 OTC QB Marketplace, the Nasdaq Global Market, the Nasdaq Global Select Market, the New
York Stock Exchange or the Principal Market (or any successors to any of the foregoing).

 

“Vaultlogix”
means Vaultlogix, LLC, a wholly-owned Subsidiary of the Company.

 

“Vaultlogix
Indebtedness” means any Indebtedness or other liabilities of Vaultlogix or any subsidiary of Vaultlogix.

 

“Voluntary
Stock Off Effective Date” shall have the meaning set forth in Section 6(b)(iv).

 

    	 	10	 

     

    

 

“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 the Common Stock is not then
listed or quoted for trading on a Trading Market and if prices for the Common Stock are then reported in the “Pink Sheets”
published by Pink 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 (c) 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 Holders of a majority in interest of the
Securities then outstanding and reasonably acceptable to the Company, the fees and expenses of which shall be paid by the Company.

 

“Working
Capital” means, as of any date of determination, (i) the Company’s and each Guarantor’s cash on deposit
in a bank account subject to a DACA and (ii) the amount of the Company’s and each Guarantor’s accounts receivables
which are not more than ninety (90) days past due and the proceeds thereof, upon collection, would be deposited into a bank account
subject to a DACA, provided, for purposes hereof, the following shall be excluded from the calculation of Working Capital: (i)
any accounts receivable of Vaultlogix, Data Protection Services, LLC, U.S. Data Security Acquisition, LLC, and U.S. Data Security
Corporation (ii) any accounts receivable for which an invoice has not been presented to the account debtor, (iii) any accounts
receivable where the account debtor is an Affiliate of the Company or any Subsidiary, and (iv) any accounts receivable payable
by an account debtor that is owed any monetary obligation by the Company or any Subsidiary.

 

Section
2.         Interest.

 

a)         Payment
of Interest in Cash or Shares. The Company shall pay interest to the Holder on the aggregate unconverted and then outstanding
principal amount of this Debenture at the Applicable Interest Rate, payable monthly in arrears as of the last Trading Day of each
calendar month 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 Stock
Payment Rate (the dollar amount to be paid in shares, the “Interest Share Amount”) or a combination thereof.
In addition, the one-year anniversary of the Original Issue Date shall be an Interest Payment Date and a fixed amount, which shall
be additional interest hereunder, equal to $350,000 (the “Special Interest Payment”) shall be due and payable
to the Holder on such date in cash, shares of Common Stock or a combination thereof as provided in this Section 2 with respect
regular interest payments. Notwithstanding anything contained herein to the contrary, any payment of interest in shares of Common
Stock may only occur if (i) all of the Equity Conditions have been met (unless waived by the Holder in writing) during the five
(5) Trading Days immediately prior to the applicable Interest Payment Date (the “Interest Notice Period”) and
through and including the date such shares of Common Stock are actually issued to the Holder; (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, prior
to such Interest Notice Period (but not more than two (2) Trading Days prior to the commencement of such Interest Notice Period),
the Company shall have delivered to the Holder’s account with DTC 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 Stock Payment
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 Advance Shares”). In the event that the Interest Advance Shares in respect
of any Interest Share Amount would exceed the Dollar Volume Limitation, then the Company shall pay the portion of the Interest
Advance Shares that would be in excess of the Dollar Volume Limitation in cash.

 

    	 	11	 

     

    

 

b)         Company’s
Election to Pay Interest in Cash or Shares. 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. At two (2)
Trading Days 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.
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 Advance Shares previously issued to the Holder in connection with such Interest Payment Date. In addition,
if the number of Interest Advance Share exceeds the aggregate number of share of Common Stock otherwise issuable to the Holder
on the Interest Payment Date, then the Holders shall promptly return such excess number of shares to the Company.

 

c)         Interest
Calculations. Interest shall be calculated on the basis of a 365-day year and the actual number of days elapsed, and shall
accrue daily commencing on the Original Issue Date until payment in full of the outstanding principal, together with all accrued
and unpaid interest, liquidated damages and other amounts which may become due hereunder, has been made. Payment of interest in
shares of Common Stock (other than the Interest Advance 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 shall cease to accrue with respect to any principal amount converted, provided that, the
Company actually delivers the Conversion Shares within the time period required by Section 4(c)(ii) herein. Interest hereunder
will be paid to the Person in whose name this Debenture is registered on the records of the Company regarding registration and
transfers of this Debenture (the “Debenture Register”).

 

    	 	12	 

     

    

 

d)         Late
Fee. All overdue accrued and unpaid interest to be paid hereunder shall entail a late fee at an interest rate equal to the
lesser of fifteen percent (15%) per annum or the maximum rate 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.

 

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

 

Section
3.         Registration of Transfers and Exchanges.

 

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

 

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

 

c)         Reliance
on Debenture Register. Prior to due presentment for transfer to the Company of this Debenture, the Company and any agent of
the Company may treat the Person in whose name this Debenture is duly registered on the Debenture Register as the owner hereof
for the purpose of receiving payment as herein provided and for all other purposes, whether or not this Debenture is overdue,
and neither the Company nor any such agent shall be affected by notice to the contrary.

 

    	 	13	 

     

    

 

Section
4.         Conversion.

 

a)         Voluntary
Conversion. At any time after the Original Issue Date until this Debenture is no longer outstanding, this Debenture shall
be convertible, in whole or in part, into shares of Common Stock at the option of the Holder, at any time and from time to time
(subject to the conversion limitations set forth in Section 4(d) hereof). The Holder shall effect conversions by delivering
to the Company a Notice of Conversion, the form of which is attached hereto as Annex A (each, a “Notice of Conversion”),
specifying therein the principal amount of this Debenture to be converted and the date on which such conversion shall be effected
(such date, the “Conversion Date”). If no Conversion Date is specified in a Notice of Conversion, the Conversion
Date shall be the date that such Notice of Conversion is deemed delivered hereunder. No ink-original Notice of Conversion shall
be required, nor shall any medallion guarantee (or other type of guarantee or notarization) of any Notice of Conversion form be
required. To effect conversions hereunder, the Holder shall not be required to physically surrender this Debenture to the Company
unless the entire principal amount of this Debenture, plus all accrued and unpaid interest thereon, has been so converted. 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).
In the event of any dispute or discrepancy, the records of the Holder shall be controlling and determinative in the absence of
manifest error. The Holder, and any assignee by acceptance of this Debenture, acknowledge and agree that, by reason of the
provisions of this 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. The conversion price in effect on any Conversion Date shall be equal to $1.33, subject to adjustment
herein (the “Conversion Price”).

 

c)         Mechanics of Conversion.

 

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

 

ii.         Delivery
of Certificate Upon Conversion. Not later than three (3) Trading Days after each Conversion Date (the “Share Delivery
Date”), the Company shall deliver, or cause to be delivered, to the Holder (A) a certificate or certificates representing
the Conversion Shares which, on or after the six month anniversary of the Original Issue Date, shall be free of restrictive legends
and trading restrictions (other than those which may then be required by the Purchase Agreement) representing the number of Conversion
Shares being acquired upon the conversion of this Debenture (including, if the Company has given continuous notice pursuant to
Section 2(b) for payment of interest in shares of Common Stock at least seven (7) Trading Days prior to the date on which
the Notice of Conversion is delivered to the Company, shares of Common Stock equal to (x) accrued and unpaid interest on the principal
amount being converted plus, if the applicable conversion is during the Make-Whole Period, the Make-Whole Amount divided by (y)
the Stock Payment Rate assuming that the Conversion Date is an Interest Payment Date) and (B) a bank check in the amount of accrued
and unpaid interest and, if the applicable conversion is during the Make-Whole Period, the Make-Whole Amount in cash (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 certificate or certificates required to be delivered by the Company under this Section 4(c) electronically
through DTC provided that (i) the Company is in compliance with the current public information requirements of Rule 144 and (ii)
the Holder has delivered to the Company a broker representation letter that the shares of Common Stock represented by such certificates
have been sold pursuant to Rule 144.

 

    	 	14	 

     

    

 

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

 

iv.         Obligation
Absolute; Partial Liquidated Damages. The Company’s obligations to issue and deliver the Conversion Shares upon conversion
of this Debenture in accordance with the terms hereof are absolute and unconditional, irrespective of any action or inaction by
the Holder to enforce the same, any waiver or consent with respect to any provision hereof, the recovery of any judgment against
any Person or any action to enforce the same, or any setoff, counterclaim, recoupment, limitation or termination, or any breach
or alleged breach by the Holder or any other Person of any obligation to the Company or any violation or alleged violation of
law by the Holder or any other Person, and irrespective of any other circumstance which might otherwise limit such obligation
of the Company to the Holder in connection with the issuance of such Conversion Shares; provided, however, that
such delivery shall not operate as a waiver by the Company of any such action the Company may have against the Holder. In the
event the Holder of this Debenture shall elect to convert any or all of the outstanding principal amount hereof, the Company may
not refuse conversion based on any claim that the Holder or anyone associated or affiliated with the Holder has been engaged in
any violation of law, agreement or for any other reason, unless an injunction from a court, on notice to Holder, restraining and
or enjoining conversion of all or part of this Debenture shall have been sought and obtained, and the Company posts a surety bond
for the benefit of the Holder in the amount of 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 second Trading Day following
the Share Delivery Date, the Company shall pay to the Holder, in cash, as partial 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 the second Trading Day following such Share
Delivery Date until such certificates are delivered or Holder rescinds such conversion; provided, however, if the Company has
failed to deliver a certificate or certificates pursuant to Section 4(c)(ii) by the Share Delivery Date more than twice in any
twelve (12) month period, then such partial liquidated damages shall begin to accrue on the Share Delivery Date. 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.

 

    	 	15	 

     

    

 

v.         Compensation
for Buy-In on Failure to Timely Deliver Certificates Upon Conversion. In addition to any other rights available to the Holder,
if the Company fails for any reason to deliver to the Holder such certificate or certificates by the Share Delivery Date pursuant
to Section 4(c)(ii), and if after such Share Delivery Date the Holder is required by its brokerage firm to purchase (in an open
market transaction or otherwise), or the Holder’s brokerage firm otherwise purchases, shares of Common Stock to deliver
in satisfaction of a sale by the Holder of the Conversion Shares which the Holder was entitled to receive upon the conversion
relating to such Share Delivery Date (a “Buy-In”), then the Company shall (A) pay in cash to the Holder (in
addition to any other remedies available to or elected by the Holder) the amount, if any, by which (x) the Holder’s total
purchase price (including 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 certificates representing shares of Common Stock upon conversion of this Debenture as required pursuant
to the terms hereof.

 

    	 	16	 

     

    

 

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

 

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

 

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

 

    	 	17	 

     

    

 

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 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 not less than sixty one (61) days’ prior 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 such increase or decrease will not be effective until the sixty first (61st)
day after such notice is delivered to the Company. The Beneficial Ownership Limitation provisions of this 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.

 

    	 	18	 

     

    

 

e)         Principal
Market Regulation. The Company shall not issue any shares of Common Stock pursuant to the terms of this Debenture if the issuance
of such shares of Common Stock would exceed the aggregate number of shares of Common Stock which the Company may issue pursuant
to the terms of (x) this Debenture, (y) the Senior Convertible Note, dated November 12, 2015 (the “Dominion Note”),
issued by the Company to Dominion Capital LLC (“Dominion”) in connection with that certain Securities Purchase
Agreement, dated as of November 12, 2015, by and between the Company and Dominion, and (z) the three Senior Convertible Notes
(together, the “Exchange Notes”) issued by the Company to Dominion in connection with that certain Exchange
Agreement, dated November 12, 2015, by and among the Company, all of the Company’s subsidiaries party thereto and Dominion
without breaching the Company’s obligations under the rules or regulations of the Principal Market, which number of shares
of Common Stock is 5,245,755 (the number of shares which may be issued without violating such rules and regulations, the “Exchange
Cap”), except that such limitation shall not apply in the event that the Company (A) obtains the approval of its stockholders
as required by the applicable rules of the principal market for issuances of shares of Common Stock in excess of such amount or
(B) obtains a written opinion from outside counsel to the Company that such approval is not required, which opinion shall be reasonably
satisfactory to the Holder.

 

Section
5.         Certain Adjustments.

 

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

 

    	 	19	 

     

    

 

b)         Subsequent
Equity Sales.

 

(i)         If,
at any time while this Debenture is outstanding the Company or any Subsidiary, as applicable, sells or grants any option to purchase
or sells or grants any right to reprice, or otherwise disposes of or issues (or announces any sale, grant or any option to purchase
or other disposition), any Common Stock or Common Stock Equivalents entitling any Person to acquire shares of Common Stock at
an effective price per share that is lower than the then Conversion Price (such issuances, collectively, a “Dilutive
Issuance”) (if the holder of the Common Stock or Common Stock Equivalents so issued shall at any time, whether by operation
of purchase price adjustments, reset provisions, floating conversion, exercise or exchange prices or otherwise, or due to warrants,
options or rights per share which are issued in connection with such issuance, be entitled to receive shares of Common Stock at
an effective price per share that is lower than the Conversion Price, such issuance shall be deemed to have occurred for less
than the Conversion Price on such date of the Dilutive Issuance), then the Conversion Price shall be reduced, and only reduced,
to an amount equal to 120% of such lower price (such lower price, 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)(i) in respect of an Exempt Issuance. 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)(i), indicating
therein the applicable issuance price, or applicable reset price, exchange price, conversion price and other pricing terms (such
notice, the “Dilutive Issuance Notice”).

 

(ii)         Intentionally
Omitted.

 

(iii)         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.

 

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).

 

    	 	20	 

     

    

 

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 exercise of this Debenture (without regard to any limitations on exercise 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).

 

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 fifty percent (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, (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 fifty percent (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 capital stock of the successor
or acquiring corporation or of the Company, if it is the surviving corporation, and any additional consideration (the “Alternate
Consideration”) receivable as a result of such Fundamental Transaction by a holder of the number of shares of Common
Stock for which this Debenture is convertible immediately prior to such Fundamental Transaction (without regard to any limitation
in Section 4(d) on the conversion of this Debenture). For purposes of any such conversion, the determination of the Conversion
Price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration
issuable in respect of one (1) share of Common Stock in such Fundamental Transaction, and the Company shall apportion the Conversion
Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the
Alternate Consideration. If holders of Common Stock are given any choice as to the securities, cash or property to be received
in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it receives upon
any conversion of this Debenture following such Fundamental Transaction. The Company shall cause any successor entity in a Fundamental
Transaction in which the Company is not the survivor (the “Successor Entity”) to assume in writing all of the
obligations of the Company under this Debenture and the other Transaction Documents (as defined in the Purchase Agreement) in
accordance with the provisions of this Section 5(e) pursuant to written agreements in form and substance reasonably satisfactory
to the Holder and approved by the Holder (without unreasonable delay) prior to such Fundamental Transaction and shall, at the
option of the holder of this Debenture, deliver to the Holder in exchange for this Debenture a security of the Successor Entity
evidenced by a written instrument substantially similar in form and substance to this Debenture which is convertible for a corresponding
number of shares of capital stock of such Successor Entity (or its parent entity) equivalent to the shares of Common Stock acquirable
and receivable upon conversion of this Debenture (without regard to any limitations on the conversion of this Debenture) prior
to such Fundamental Transaction, and with a conversion price which applies the conversion price hereunder to such shares of capital
stock (but taking into account the relative value of the shares of Common Stock pursuant to such Fundamental Transaction and the
value of such shares of capital stock, such number of shares of capital stock and such conversion price being for the purpose
of protecting the economic value of this Debenture immediately prior to the consummation of such Fundamental Transaction), and
which is reasonably satisfactory in form and substance to the Holder. Upon the occurrence of any such Fundamental Transaction,
the Successor Entity shall succeed to, and be substituted for (so that from and after the date of such Fundamental Transaction,
the provisions of this Debenture and the other Transaction Documents referring to the “Company” shall refer instead
to the Successor Entity), and may exercise every right and power of the Company and shall assume all of the obligations of the
Company under this Debenture and the other Transaction Documents with the same effect as if such Successor Entity had been named
as the Company herein.

 

    	 	21	 

     

    

 

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 the 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.

 

    	 	22	 

     

    

 

Section
6.         Optional Redemption.

 

a)         Optional
Redemption at Election of Company.

 

i.         Subject
to the provisions of this Section 6(a), at any time after the Original Issue Date and provided that the Equity Conditions are
satisfied during the Optional Redemption Period, 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 all, but not less than all, of the then outstanding principal amount of this Debenture for
cash in an amount equal to the Optional Redemption Amount plus, if the Company has not already made the Special Interest Payment,
the Optional Redemption Premium, on the twentieth (20th) Trading Day following the Optional Redemption Notice Date
(such date, the “Optional Redemption Date”, such 20 Trading Day period, the “Optional Redemption Period”
and such redemption, the “Optional Redemption”). The Optional Redemption Amount and the Optional Redemption
Premium, if applicable, is payable in full on the Optional Redemption Date. The Optional Redemption Premium, if applicable, shall
be payable in cash or, at the Company’s option, in fully paid, duly authorized and non-assessable shares of Common Stock
at the Stock Payment Rate; provided, the Company complies with the requirements set forth below in Section 6(a)(iii). 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. The Company’s determination to pay an Optional
Redemption in cash shall be applied ratably to all of the holders of the then outstanding Debentures based on their (or their
predecessor’s) initial purchases of Debentures pursuant to the Purchase Agreement. The Company will, concurrently with the
delivery of the Optional Redemption Notice to the Holder, publicly announce its intention to redeem the Debenture by means of
a press release and Current Report on Form 8-K. For the avoidance of doubt, the Optional Redemption Amount is payable only in
cash; only the Optional Redemption Premium, if applicable, may be paid in shares of Common Stock.

 

    	 	23	 

     

    

 

ii.         The
payment of cash and, if applicable, Common Stock, pursuant to an Optional Redemption shall be payable on the Optional Redemption
Date. If any portion of the payment pursuant to an Optional Redemption shall not be paid by the Company by the applicable due
date, interest shall accrue thereon at an interest rate equal to the lesser of fifteen percent (15%) per annum or the maximum
rate 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 and, if applicable, Optional Redemption Premium, remains unpaid after such applicable
date, or if the Equity Conditions are not satisfied during the Optional Redemption Period, the Holder may elect, by written notice
to the Company given at any time thereafter, to invalidate such Optional Redemption, ab initio, and 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(a) by the delivery
of a Notice of Conversion to the Company.

 

iii.         To
the extent that the Company desires to pay the Optional Redemption Premium in shares of Common Stock, then (i) the Company shall
give the Holder notice in accordance with the notice requirements set forth below and (ii) on the Optional Redemption Notice Date,
the Company shall have delivered to the Holder’s account with DTC a number of shares of Common Stock to be applied against
such Optional Redemption Premium equal to the quotient of (x) the Optional Redemption Premium divided by (y) the Stock Payment
Rate assuming for such purposes that the Optional Redemption Date is the Trading Day immediately prior to Optional Redemption
Notice Date (the “Optional Redemption Advance Shares”). Subject to the terms and conditions herein, the decision
whether to pay the Optional Redemption Premium hereunder in cash or shares of Common Stock shall be at the sole discretion of
the Company. On the Optional Redemption Notice Date, the Company shall deliver to the Holder a written notice of its election
to pay the Optional Redemption Premium hereunder on the Optional Redemption Date either in cash or shares of Common Stock. The
Company’s election shall be irrevocable. Subject to the aforementioned conditions, failure to deliver such written notice
on the Optional Redemption Notice Date to the Holder shall be deemed an election by the Company to pay the Optional Redemption
Premium in cash. The aggregate number of shares of Common Stock otherwise issuable to the Holder on the Optional Redemption Date
shall be reduced by the number of Optional Redemption Advance Shares previously issued to the Holder. In the event that the Optional
Redemption Advance Shares in respect of any Optional Redemption Notice would exceed the Dollar Volume Limitation, then the Company
shall pay the portion of the Optional Redemption Advance Shares that would be in excess of the Dollar Volume Limitation in cash.

 

    	 	24	 

     

    

 

b)         Optional
Redemption at Election of Holder.

 

i.         Commencing
on February 29, 2016, the Holder shall have the right, at its option, to require the Company to redeem up to $350,000 of the outstanding
principal amount (plus accrued and unpaid interest thereon) plus, during the Make-Whole Period, the Make-Whole Amount (the “Monthly
Allowance”) per calendar month (the “Holder Redemption Right”). The Holder may exercise its Holder
Redemption Right for a calendar month, at any time and from time to time, during such calendar month, by sending one or more written
notices, the form of which is attached hereto as Annex B (each a “Holder Redemption Notice”), to the
Company by not later than 11:59:59 P.M. (local time in New York City, New York) on the last Trading Day of such calendar month,
which Holder Redemption Notices shall specify the principal amount to be redeemed and the amount of accrued and unpaid interest
thereon and, if applicable, the Make-Whole Amount (together, the “Holder Redemption Amount”). The Company shall
promptly, but in any event no more than three (3) Trading Days after the date that the Holder delivers a Holder Redemption Notice
to the Company (the “Holder Redemption Payment Date”), pay the applicable Holder Redemption Amount (1) in cash
by wire transfer of immediately available funds to the extent that this Debenture is Stock Off (as defined below) on the date
that the Holder delivers the Holder Redemption Notice to the Company or (2) shares of Common Stock to the extent that this Debenture
is Stock On (as defined below) on the date that the Company delivers the Holder Redemption Notice. For the avoidance of doubt,
payment in cash or Common Stock shall be determined according to the status of the Debenture as Stock On or Stock Off on the date
that the Holder delivers the Holder Redemption Notice to the Company and not the Holder Redemption Payment Date. For the further
avoidance of doubt, the Holder and the Company agree that the Holder may deliver more than one Holder Redemption Notice during
a calendar month provided that the sum of the Holder Redemption Amounts set forth in all of the Holder Redemption Notices delivered
during such calendar month does not exceed the Monthly Allowance. Notwithstanding the preceding sentence, in the event that the
Company settles or compromises the FGI Litigation or a judgment is entered against the Company in in the FGI Litigation, in any
case, for an amount in excess of $150,000 (such amount in excess of $150,000, the “FGI Resolution Amount”),
the Holder shall have the right, at the Holder’s option, to require the Company to redeem pursuant to this Section 6(b)
an additional amount equal to the FGI Resolution Amount, in whole or in part, at any time and from time to time (which time may
be prior to February 29, 2016), and the Company acknowledges that in such event, that the aggregate Holder Redemption Amount set
forth in all of the Holder Redemption Notices delivered during a calendar month may exceed the Monthly Allowance until the FGI
Resolution Amount is reduced to zero. The “FGI Litigation” means InterCloud Systems, Inc., TNS Inc, Integration
Partners – NY Corporation, ADEX Corporation, AW Solutions, Inc., as plaintiffs, against Faunus Group, Inc., Index No. 652720/2015,
Supreme Court of the State of New York, New York County, and any other litigation, proceeding or action arising out of the same
facts and circumstances in dispute in the foregoing.

 

    	 	25	 

     

    

 

ii.         At
any time, and from time to time, subject to the provisions of this Section 6(b), the Company may deliver a written notice to the
Holder that it will pay any Holder Redemption Amounts under Section 6(b)(i) in shares of Common Stock (a “Stock On Notice”)
and any such notice shall become effective on the second (2nd) Trading Day after the Holder’s receipt thereof
(the “Stock On Effective Date”). Such Stock On Notice shall certify that the Equity Conditions are satisfied
and at any time that this Debenture is Stock On, the Company shall, upon the Holder’s request, certify in writing to the
Holder that the Equity Conditions are satisfied. From the time that a Stock On Notice takes effect until such time that such Stock
On Notice is withdrawn pursuant to Section 6(b)(iv) or deemed withdrawn pursuant to Section 6(b)(iii), this Debenture shall be
deemed to be “Stock On.” At any time that this Debenture is not Stock On, then this Debenture shall be deemed
to be “Stock Off.” For the avoidance of doubt, the Holder may deliver a Holder Redemption Notice during the
period after receipt of the Stock On Notice but prior to the Stock On Effective Date; the Debenture shall be Stock Off during
such period and, accordingly, the applicable Holder Redemption Amount would be payable in cash.

 

iii.         The
Company may not deliver a Stock On Notice unless the Equity Conditions are then satisfied. If the Equity Conditions cease, for
any reason, to be satisfied while this Debenture is Stock On, then the applicable Stock On Notice shall, automatically without
any further action of the Company or the Holder, immediately be deemed to be withdrawn and this Debenture shall immediately be
deemed to be Stock Off (an “Equity Conditions Failure”). The Company shall immediately notify the Holder of
any Equity Conditions Failure.

 

iv.         The
Company may voluntarily withdraw a Stock On Notice by delivering a written notice (a “Stock Off Notice”) to
the Holder and such Stock On Notice shall be deemed withdrawn and this Debenture shall be Stock Off two (2) Trading Days after
receipt thereof by the Holder (the “Voluntary Stock Off Effective Date”). For the avoidance of doubt, the Holder
may deliver a Holder Redemption Notice during the period after receipt of the Stock Off Notice but prior to the Voluntary Stock
Off Effective Date; the Debenture shall be Stock On during such period and, accordingly, the applicable Holder Redemption Amount
would be payable in shares of Common Stock on the applicable Holder Redemption Payment Date as provided herein.

 

v.         With
respect to each Holder Redemption Notice delivered to the Company pursuant to Section 6(b)(i) at a time when this Debenture was
Stock On, subject to the provisions of this Section 6(b)(v), the Company shall, in payment of the Holder Redemption Amount deliver
to the Holder a number of shares of Common Stock equal to the quotient of (such quotient of (x) and (y), the “Stock Payment
Amount”) (x) the applicable Holder Redemption Amount and (y) the Stock Payment Rate by not later than the applicable
Holder Redemption Payment Date. Notwithstanding the foregoing or any other provision herein to the contrary:

 

(A)         in
the event any Equity Conditions Failure occurs after the delivery of the applicable Holder Redemption Notice at a time when this
Debenture is Stock On but prior to the applicable Holder Redemption Payment Date, the Company shall pay to the Holder an amount
in cash equal to the product of (i) the applicable Holder Redemption Amount divided by Stock Payment Amount and (ii) the highest
VWAP for the Common Stock during the five (5) Trading Days immediately preceding the date of the applicable Holder Redemption
Notice (such product of (i) and (ii), the “Stock Replacement Payment”);

 

    	 	26	 

     

    

 

(B)         in
the event that the aggregate number of shares of Common Stock to be delivered to the Holder pursuant to this Section 6(b)(v) in
respect of any individual Holder Redemption Notice would cause such Holder to exceed the Beneficial Ownership Limitation, then,
(I) the Holder shall provide written notice to the Company that such delivery of all or a portion of such shares of Common Stock
would cause Holder to exceed the Beneficial Ownership Limitation, and (II) in addition to delivery of the number of shares of
Common Stock that would not cause such Holder to exceed the Beneficial Ownership Limitation, the Company shall pay to the Holder
in lieu of such number of shares of Common Stock that would cause the Holder to exceed the Maximum Percentage (such excess number
of shares, the “Excess Shares”), not more than the later of (x) the Holder Redemption Payment Date and (y)
one (1) Trading Day after the date of the Holder’s written notice, an amount in cash equal to the portion of the Holder
Redemption Amount that would otherwise be payable in respect of the Excess Shares;

 

(C)         in
the event that the Holder Redemption Amount in respect of any Holder Redemption Notice would exceed the Dollar Volume Limitation,
then the Company shall pay the portion of the Holder Redemption Amount that would be in excess of the Dollar Volume Limitation
in cash.

 

Any
shares of Common Stock required to be delivered by the Company to the Holder under this Section 6(b)(v) shall be credited to the
Holder’s or its designee’s balance account with DTC through its Deposit/Withdrawal at Custodian system on the Holder
Redemption Payment Date. In addition, the provisions of Section 4(c)(iv), Section 4(c)(v) and Section 8(a)(viii) shall apply to
the delivery of shares of Common Stock under this Section 6(b)(v) mutatis mutandis as if each date when shares of Common
Stock are required to be delivered under this Section 6(b) was a Share Delivery Date.

 

Section
7.         Covenants.

 

a)         As
long as any portion of this Debenture remains outstanding, unless the Holders shall have otherwise given prior written consent,
the Company shall not, and shall not permit any of the Subsidiaries to, directly or indirectly:

 

i.         other
than Permitted Indebtedness, enter into, create, incur, assume, guarantee or suffer to exist any Indebtedness 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;

 

    	 	27	 

     

    

 

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

 

iii.         make
or hold any Investments, including making any Investment in a Subsidiary that is not a Guarantor;

 

iv.         Dispose
of any of its assets other than the sale of inventory in the ordinary course of business consistent with past practices. Without
limiting the foregoing, neither the Company nor any Guarantor will not Dispose of or otherwise transfer any assets or property
to any Subsidiary that is not a Guarantor. Nothing herein shall prohibit the Company from Disposing of Vaultlogix, or assets of
Vaultlogix, provided, that (i) the Company and each Subsidiary is unconditionally released from any guarantees or other contingent
liabilities related to Vaultlogix Indebtedness, (ii) any liens on the assets or property of the Company or any Subsidiary in connection
with any Vaultlogix Indebtedness or any guaranty thereof is irrevocably released, and (iii) neither the Company nor any Subsidiary
assumes or retains any Vaultlogix Indebtedness;

 

v.         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;

 

vi.         merge,
dissolve, liquidate, consolidate with or into another Person, or Dispose of (whether in one transaction or in a series of transactions)
all or substantially all of its assets (whether now owned or hereafter acquired) to or in favor of any Person or otherwise suffer
or permit a Change of Control Transaction;

 

vii.         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 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;

 

viii.         repay,
repurchase or offer to repay, repurchase or otherwise acquire any Indebtedness (including, for the avoidance of doubt, any guaranty
or surety of Vaultlogix Indebtedness) other than (i) the Debentures and (ii) payments by the Company in the form of any equity
security of the Company permitted by the Subordination Agreements;

 

    	 	28	 

     

    

 

ix.         pay
cash dividends or distributions on any equity securities of the Company;

 

x.         create
any new Subsidiary unless such Subsidiary is promptly added as a Guarantor and promptly executes a joinder to the Subsidiary Guaranty
and Security Agreement;

 

xi.         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);

 

xii.         make
any payments under the Conversion Agreement, dated December __, 2013, by and between the Company and GPB Life Science Holding,
LLC other than in shares of Common Stock;

 

xiii.         enter
into any agreement with respect to any of the foregoing.

 

b)         Consolidated
EBITDA Covenant. The Company shall maintain as of the last day of each fiscal quarter (commencing with the quarter ended March
31, 2016), Consolidated EBITDA for the trailing three (3) month period then ended on such day in an amount equal to or greater
than $0.01.

 

c)         Working
Capital Covenant. The Company shall maintain at all times (tested as of the end of each calendar week upon delivery of a compliance
certificate for each such calendar week as provided in Section 7(e)), a ratio of Working Capital to Secured Debt Obligation of
not less than 1.50:1.00, subject to adjustment as provided in Section 7(g).

 

d)         EBITDA
Compliance Certificate. Immediately following the filing of its Quarterly Report on Form 10-Q for any fiscal quarter and,
with respect to any fourth fiscal quarter, its Annual Report on Form 10-K, and commencing with the fiscal quarter ending on March
31, 2016, the Company shall deliver to the Holder a compliance certificate containing a calculation of its Consolidated EBITDA
for such fiscal quarter. If any Quarterly Report on Form 10-Q or Annual Report on Form 10-K required to be filed by the Company
is not filed by the expiration of any Rule 12b-25 extension period, the Company shall be deemed to have breached the covenants
contained in Section 7(b).

 

e)         Working
Capital Compliance Certificate. On the last Business Day of each calendar week, the Company shall deliver to the Holder a
compliance certificate setting forth all of the components of Working Capital for each day during such calendar week. If the compliance
certificate required to be delivered by the Company under this Section 7(e) is not delivered to the Holder by 5:00PM (local time
in New York City, New York) on the last Business Day of any calendar week, the Company shall be deemed to have breached the covenants
contained in Section 7(c).

 

    	 	29	 

     

    

 

f)         Delivery
of Compliance Certificates. The Company shall deliver any compliance certificates required under this Debenture solely to
those representatives of the Holder identified to the Company in writing by the Holder and to no other representatives of the
Holder.

 

g)         Forward.
Not later than the date that is ninety (90) days after the Original Issuance Date, the Company shall (1) cause Forward Investments,
LLC (including its successors and assigns, “Forward”) and Richard Smithline to enter into a subordination agreement
with the Holder (substantially similar to the Subordination Agreements in form and substance) with respect to all Indebtedness
of the Company to Forward or (2) cause to be deposited into an account at PNC Bank, National Association that is subject to a
DACA, and maintain on deposit in such account at all times while this Debenture is outstanding, an amount in cash equal to the
sum of (x) $7,200,000 and (y) 150% of the outstanding principal amount of this Debenture. If the Company is unable to comply with
the requirements of the preceding sentence, then on the 91st first day after the Original Issuance Date the ratio set
forth in Section 7(c) shall automatically be adjusted to 2.00:1.00 from 1.50:1.00.

 

h)         DACAs.
Not later than the date that is sixty (60) days after the date of this Agreement, the Company shall cause Bank HaPoalim, Iberia
Bank and Regions Bank to enter into deposit account control agreements with the Holder for all accounts of the Company and its
Subsidiaries maintained at such banks. In addition, the Company shall keep all DACAs with PNC Bank, National Association executed
and delivered on the Original Issuance Date in continuous effect until the Debentures have been indefeasibly repaid in full. The
Company shall cause the Holder to have online view access to all bank accounts with PNC Bank, National Association, Bank HaPoalim,
Iberia Bank and Regions Bank.

 

i)         White
Oak Letter Agreement. By not later than February 1, 2016, the Company shall notify the representative of the Holder identified
pursuant to Section 7(f), if (1) the Specified Consolidated Leverage Ratio (as defined in the Loan and Security Agreement, dated
October 1, 2014, by and among Vaultlogix, White Oak Global Advisors, LLC and the other parties signatory thereto) as at the end
of the fiscal quarter ending December 31, 2015, is greater than 2.50 to 1.00 and (2) the amount that Vaultlogix would be required
to prepay (the “Required Vaultlogix Prepayment”) to White Oak Global Advisors, LLC under that certain letter
agreement dated December __, 2015, between White Oak Global Advisors, LLC and Vaultlogix (the “White Oak Letter Agreement”).
The Company shall cause Vaultlogix to make the Required Vaultlogix Prepayment by not later than the close of business on the date
that is two (2) Business Day prior to the due date therefor set forth in the White Oak Letter Agreement. Without limiting any
of the Holder’s rights and remedies hereunder, if such Required Vaultlogix Prepayment is not made such date, the Holder
shall have the option to required the Company to redeem a portion of the principal amount of this Note in cash equal to the Required
Vaultlogix Prepayment, which shall be due and payable within three (3) Business Days of Holder’s written request.

 

    	 	30	 

     

    

 

Section
8.         Events of Default.

 

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

 

i.         any
default in the payment of (A) the principal amount of any Debenture or (B) interest, liquidated damages and other amounts owing
to a Holder on any Debenture, as and when the same shall become due and payable (whether on a Conversion Date or the Maturity
Date or by acceleration or otherwise) which default, solely in the case of an interest payment or other default under clause (B)
above, is not cured within three (3) Trading Days;

 

ii.         the
Company shall fail to observe or perform any other covenant or agreement contained in the Debentures (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
(viii) below) which failure is not cured, if possible to cure, within the earlier to occur of (A) five (5) Trading Days after
notice of such failure sent by the Holder or by any other Holder to the Company and (B) ten (10) Trading Days after the Company
has become or should have become aware of such failure; provided, that any failure to observe or perform Sections 7(a)(viii),
(b), (c), (d), (e), (f), (g) or (i) shall be an immediate Event of Default without any grace period;

 

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

 

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

 

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;

 

    	 	31	 

     

    

 

vi.         the
Company or any Subsidiary (including Vaultlogix, Data Protection Services, LLC, U.S. and Data Security Acquisition, LLC) 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 $250,000,
whether such Indebtedness now exists or shall hereafter be created, and (b) results in such Indebtedness becoming or being declared
due and payable prior to the date on which it would otherwise become due and payable;

 

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

 

viii.         the
Company shall fail for any reason to deliver certificates to a Holder prior to the second Trading Day after a Share Delivery Date
or the Company shall provide at any time notice to the Holder, including by way of public announcement, of the Company’s
intention to not honor requests for conversions of any Debentures in accordance with the terms hereof;

 

ix.         the
Company or any Guarantor shall breach any agreement delivered to the initial Holders pursuant to Section 2.2 of the Purchase Agreement;

 

x.         a
material false or inaccurate certification (including a false or inaccurate deemed certification) by the Company that the Equity
Conditions are satisfied, the Dollar Volume Limitation has not been exceeded or as to whether any Event of Default has occurred;

 

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

 

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 $500,000, and such judgment, writ or similar final process shall remain unvacated,
unbonded or unstayed for a period of forty five (45) calendar days.

 

    	 	32	 

     

    

 

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; provided, that such acceleration
shall be automatic, without any notice or other action of the Holder required, in respect of an Event of Default occurring pursuant
to clause (v) of Section  8(a). Upon the payment in full of the Mandatory Default Amount, the Holder shall promptly surrender
this Debenture to or as directed by the Company. In connection with such acceleration described herein, the Holder need not provide,
and the Company hereby waives, any presentment, demand, protest or other notice of any kind, and the Holder may immediately and
without expiration of any grace period enforce any and all of its rights and remedies hereunder and all other remedies available
to it under applicable law. Such acceleration may be rescinded and annulled by Holder at any time prior to payment hereunder and
the Holder shall have all rights as a holder of the Debenture until such time, if any, as the Holder receives full payment pursuant
to this Section 8(b). No such rescission or annulment shall affect any subsequent Event of Default or impair any right consequent
thereon.

 

Section
9.         Miscellaneous.

 

a)         Notices.
Any and all notices or other communications or deliveries to be provided by the Holder hereunder, including, without limitation,
any Notice of Conversion, shall be in writing and delivered personally, by facsimile, by email attachment, or sent by a nationally
recognized overnight courier service, addressed to the Company, at the address set forth above, or such other 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 9(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 the 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 Purchase 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.         

 

    	 	33	 

     

    

 

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)         Amendments;
Waivers. No provision herein may be waived, modified, supplemented or amended except in a written instrument signed, in the
case of an amendment, by the Company and the holders of the Debentures then outstanding or, in the case of a waiver, by the party
against whom enforcement of any such waived provision is sought. No waiver of any default with respect to any provision, condition
or requirement of this Debenture shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default
or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of any party to exercise
any right hereunder in any manner impair the exercise of any such right.

 

    	 	34	 

     

    

 

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 or interest on
this Debenture as contemplated herein, wherever enacted, now or at any time hereafter in force, or which may affect the covenants
or the performance of this Debenture, and the Company (to the extent it may lawfully do so) hereby expressly waives all benefits
or advantage of any such law, and covenants that it will not, by resort to any such law, hinder, delay or impede the execution
of any power herein granted to the Holder, but will suffer and permit the execution of every such as though no such law has been
enacted.

 

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

 

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 pursuant to the Security
Agreement, dated as of December 29, 2015 between the Grantors (as defined therein) and the Secured Parties (as defined therein).

 

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

 

(Signature
Pages Follow)

    	 	35	 

     

    

 

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

 

	 	InterCloud
    Systems, inc.
	 	 
	 	By:	/s/
    Daniel Sullivan
	 	Name:	Daniel Sullivan
	 	Title:	Chief Accounting Officer
	 	Facsimile
    No.  for delivery of Notices: _______________ 
	 	E-mail
    Address for delivery of Notices: ______________
	 	 	 
	 	JGB
    (CAYMAN) WALTHAM LTD.  
	 	 	 
	 	By:	/s/
Brett Cohen
	 	Name:	Brett
    Cohen
	 	Title:	President
	 	Facsimile
    No.  for delivery of Notices: (212) 253-4093
	 	E-mail
    Address(es) for delivery of Notices:

sehrenberg@jgbcap.com, bcohen@jgbcap.com,

dshmookler@jgbcap.com, jwhite@jgbcap.com
    

 

     

     

    

 

ANNEX
A

 

NOTICE
OF CONVERSION

 

The
undersigned hereby elects to convert principal under the 10% Original Issue Discount Senior Secured Convertible Debenture due
June __, 2017 of InterCloud Systems, Inc., 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.

 

Conversion
calculations:         

	 	Date
    to Effect Conversion:
	 	 
	 	Principal
    Amount of Debenture to be Converted:
	 	 
	 	Accrued
    and unpaid interest thereon:
	 	 
	 	Make-Whole
    Amount, if applicable:
	 	 
	 	Number
    of shares of Common Stock to be issued:
	 	 
	 	 
	 	Signature:
	 	 
	 	Name:
	 	 
	 	Address
    for Delivery of Common Stock Certificates:
	 	 
	 	Or
	 	 
	 	DWAC
    Instructions:
	 	 
	 	Broker
    No: ____________
	 	 
	 	Account
    No: _____________________

 

     

     

    

 

ANNEX
B

 

HOLDER
REDEMPTION NOTICE

 

The
undersigned hereby exercises its right to require the Company to redeem the 10% Original Issue Discount Senior Secured Convertible
Debenture due June __, 2017 (the “Debenture”) of InterCloud Systems, Inc., a Delaware corporation (the “Company”),
in accordance with Section 6(b) of the Debenture.

 

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

 

Conversion
calculations:

 

	 	Principal
    Amount of Debenture to be Redeemed:
	 	 
	 	Accrued
    and unpaid interest thereon:
	 	 
	 	Make-Whole
    Amount, if applicable:
	 	 
	 	Stock
    Payment Rate:
	 	 
	 	Stock
    Payment Amount, if applicable:
	 	 
	 	Dollar
    Volume Limitation:
	 	 
	 	If
    applicable, cash due in respect of Excess Shares or pursuant to Section  6(b)(v)(C):
	 	 
	 	 
	 	Signature:
	 	 
	 	Name:
	 	 
	 	Wire
    Instructions:
	 	 
	 	Or,
    if applicable
	 	 
	 	Address
    for Delivery of Common Stock Certificates:
	 	 
	 	Or
	 	 
	 	DWAC
    Instructions:
	 	 
	 	Broker
    No:______________
	 	 
	 	Account
    No:______________

 

     

     

    

 

Schedule
1

 

CONVERSION
SCHEDULE

 

The
10% Original Issue Discount Senior Secured Convertible Debentures due on June__, 2017 in the aggregate principal amount of $____________
are issued by InterCloud Systems, Inc., a Delaware corporation. This Conversion Schedule reflects conversions made under Section
4 of the above referenced Debenture.

 

Dated:

 

	Date of Conversion 
(or for first entry, Original Issue Date)	 
Amount of

Conversion
	Aggregate Principal Amount Remaining Subsequent to Conversion 
(or original Principal Amount)	Company Attest

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