Document:

EX-10.32

 Exhibit 10.32 

THE SECURITIES REPRESENTED BY THIS NOTE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THIS NOTE
MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED EXCEPT IN COMPLIANCE THEREWITH. 
 THIS DEBT INSTRUMENT IS BEING ISSUED WITH “ORIGINAL
ISSUE DISCOUNT” (“OID”) WITHIN THE MEANING OF SECTION 1273(a) OF THE UNITED STATES INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”). THE HOLDER MAY OBTAIN THE “ISSUE PRICE”, THE AMOUNT OF
ORIGINAL ISSUE DISCOUNT, THE “ISSUE DATE” AND THE YIELD TO MATURITY OF THIS DEBT INSTRUMENT BY SUBMITTING A REQUEST FOR SUCH INFORMATION TO: THE ISSUER, C/O WELSH, CARSON, ANDERSON & STOWE, 320 PARK AVENUE, SUITE 2500, NEW YORK, NEW
YORK 10022. 
  

			
	No. 1	 	$5,000,000

 AMENDED AND RESTATED NOTE 

VALERITAS, INC. 
 DUE
September 8, 2021 
 THIS AMENDED AND RESTATED NOTE (this “Note”) is a duly authorized issue of notes of Valeritas, Inc., a
Delaware corporation (the “Issuer”), designated as its 10% Notes Due September 8, 2021 (the “Maturity Date”), in an aggregate principal amount of Five Million U.S. Dollars (U.S. $5,000,000) (the
“Note”). 
 FOR VALUE RECEIVED, the Issuer promises to pay to WCAS Capital Partners IV, L.P., a Delaware limited
partnership (“CP IV”), or a transferee thereof (together with CP IV’s successors and transferees, the “Holder”), the aggregate principal sum of Five Million U.S. Dollars (U.S. $5,000,000) on the Maturity Date and to pay
interest in kind (and not in cash) (each, an “Interest Payment”) on the principal sum outstanding from time to time under this Note (the “Outstanding Principal Amount”) in accordance with the terms herein. Interest on this Note
will accrue at the rate per annum equal to 10% and will be due and payable in kind (and not in cash) and in arrears by automatically adding accrued interest (the “PIK Interest”) to the Outstanding Principal Amount on each June 30 and
December 31 (each an “Interest Payment Date”), commencing with June 30, 2016. All PIK Interest added to the Outstanding Principal Amount shall thereafter be included in the Outstanding Principal Amount for all purposes hereunder. If
the Issuer fails to pay any Outstanding Principal Amount when due, at maturity, on redemption, upon acceleration or otherwise (the amount of such payment, a “Payment Amount”), then any portion of the Payment Amount shall bear interest at a
rate per annum equal to 12% (or, if less, the maximum interest rate then permitted by applicable law) from the due date thereof (whether at maturity, upon acceleration or otherwise) until paid in full in cash. 

Interest will be computed on the basis of a 360-day year of twelve 30-day months. If an Interest Payment Date is not a Business Day, then the
Interest Payment otherwise payable on 

 
such Interest Payment Date shall be due and payable on the Business Day immediately following such Interest Payment Date. Interest Payments will be paid to the Person in whose name this Note is
registered on the Notes Register on the Business Day prior to the applicable payment date. The Issuer shall maintain the Notes Register at its principal office in which it shall provide for the registration of Notes and of transfers and exchanges
thereof. 
 This Note is subject to the following additional provisions: 

ARTICLE 1 

DEFINITIONS 
 For
purposes of this Note, the following terms shall have the following meanings. 
 “Affiliate” shall mean, with respect to a Person,
any other Person directly or indirectly Controlling, Controlled by, or under common Control with, such first Person. “Control” shall mean, with respect to a Person, possession by another Person, directly or indirectly, of the power to
direct or cause the direction of the management or policies of such first Person, whether through the ownership of voting securities, by contract or otherwise. The words “Controlling” and “Controlled” have correlative meanings.
Without limiting the generality of the foregoing, a Person shall be deemed to be “controlled” by another Person if such other Person possesses, directly or indirectly, power to vote 10% or more of the securities having ordinary voting
powers for the election of directors, managing general partners or equivalent governing body of such Person. 
 “Business Day”
means any day other than a Saturday, Sunday or any other day on which commercial banks in the City of New York are authorized or required by law to remain closed. 

“Capital Royalty Debt” means all Indebtedness of the Issuer arising under or in connection with the Senior Term Loan Agreement. 

“Capitalized Lease Obligation” means, with respect to any Person, the obligations of such Person as lessee under a lease (or other
similar arrangement) which at the time would be required to be capitalized on a balance sheet of such lessee in accordance with GAAP; and, for the purposes of this Note, the amount of such obligations at any time shall be the capitalized amount
thereof at such time determined in accordance with GAAP. 
 “Cash Equivalents” shall mean investments in (i) certificates of
deposit, time deposits, eurodollar time deposits and other interest bearing deposits or accounts (including, without limitation, money market accounts) with any United States commercial banks (including, without limitation, United States branches of
foreign banks) having, or whose parent corporation has, a combined capital and surplus of at least $500,000,000, which mature within one (1) year from the date of investment, (ii) obligations issued or unconditionally guaranteed or insured by the
United States government, any agency or instrumentality thereof and backed by the full faith and credit of the United States government, which obligations mature within one (1) year from the date of investment, (iii) direct obligations issued by any
United States state or political subdivision thereof, which mature within one (1) year from the date of investment and have a 

  
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rating of at least A-2 from Standard & Poor’s Corporation or P-2 from Moody’s Investors Service on the date of investment or (iv) commercial paper which has a rating of at least A-1
from Standard & Poor’s Ratings Group, a division of McGraw Hill, Inc., or any successor, or P-2 from Moody’s Investors Service, or any successor, on the date of investment. 

“Change of Control” means (a) a merger or consolidation involving the Issuer or a sale, exchange, conveyance or other disposition of
voting securities of the Issuer to a person or “group” (within the meaning of Section 13(d)(3) of the Exchange Act), in a single transaction or series of related transactions, if, as a result of such merger, consolidation, sale, exchange
conveyance or other disposition, the stockholders of Issuer immediately prior to such merger, consolidation, exchange, conveyance or other disposition (determined at the time of the first of such series of transactions) beneficially own (within the
meaning of Section 13(d)(3) of the Exchange Act) less than a majority of the voting power of the Issuer (or, if applicable, successor to the Issuer or acquiring entity (or parent thereof)) immediately after such merger, consolidation, sale,
exchange, conveyance or other disposition or series of such transactions; (b) any person or “group” (within the meaning of Sections 13(d)(3) of the Exchange Act), other than the Permitted Holders is or becomes the beneficial owner,
directly or indirectly, a majority of the total voting power of all of the issued and outstanding Equity Interests of the Issuer entitled to vote for the election of directors of the Issuer; (c) a single transaction or series of related transactions
pursuant to which any person or “group” (within the meaning of Section 13(d)(3) of the Exchange Act) acquires all or substantially all of the Issuer’s assets determined on a consolidated basis, including through the purchase of equity
securities of one or more Subsidiaries of the Issuer (it being understood that a sale (or multiple related sales) of one or more Subsidiaries of the Issuer (whether by way or merger, consolidation, reorganization or sale of all or substantially all
of the Subsidiaries’ assets or securities) which constitutes all or substantially all of the consolidated assets of the Issuer shall be deemed a sale of substantially all of the assets of the Issuer for purposes of this definition); and (d) any
person or “group” (within the meaning of Section 13(d)(3) of the Exchange Act), other than any of the Permitted Holders, shall succeed in having a majority of its or their nominees elected to the Board of Directors of the Issuer,
provided that, notwithstanding the foregoing, a Change of Control shall not be deemed to have occurred as a result of the Reverse Merger (as defined in the Senior Term Loan Agreement) and the transactions contemplated by and related thereto.

 “Code” means the United States Internal Revenue Code of 1986, as amended. 

“Consolidated EBITDA” means, for any period, the sum of (a) Consolidated Net Income of the Issuer for such period, plus (b) an
amount which, in the determination of Consolidated Net Income for such period, has been deducted for, without duplication, (i) total interest expense; (ii) the provision for taxes based on income or profits; (iii) the total amount of depreciation
and amortization expense; (iv) the amount of management, monitoring, consulting, transaction and advisory fees paid or accrued during such period to the Sponsors in accordance with the Management Agreement; and (v) non-cash expenses related to
goodwill, trademarks and other intangible asset impairment; and minus (c) to the extent added in determining Consolidated Net Income for such period, the sum of the following for such period (without duplication): (1) interest income for such
period and (2) other non-cash income or gains. 

  
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 “Consolidated Net Income” means, for any period, with respect to any Person and its
Subsidiaries on a consolidated basis, net income as determined in accordance with GAAP; provided that Consolidated Net Income for any such period shall exclude, without duplication, 

(i) any net after-tax extraordinary, unusual or non-recurring gains, losses or charges; 

(ii) the cumulative effect of a change in accounting principle(s) during such period; 

(iii) any net after-tax gains or losses realized upon the disposition of assets outside the ordinary course of business (including any gain or
loss realized upon the disposition of any Equity Interests of any Person) and any net after-tax gains or losses on disposal of disposed, abandoned or discontinued operations; 

(iv) equity-based awards and compensation expense, non-cash compensation charges, including any such charges arising from stock options,
restricted stock grants or other equity-incentive programs; 
 (v) any net after-tax income or loss (less all fees and expenses or charges
relating thereto) attributable to the early extinguishment of Indebtedness; and 
 (vi) effects of any adjustments in the inventory, property
and equipment, software, goodwill, other intangible assets, in-process research and development, deferred revenue, debt line items and any other noncash charges resulting from the application of purchase accounting in relation to any consummated
acquisition or the amortization or write-off of any amounts thereof. 
 “Consolidated Total Debt” means, as of any date of
determination, (a) the aggregate stated balance sheet amount of Indebtedness of the Issuer and its Restricted Subsidiaries outstanding on such date, determined on a consolidated basis in accordance with GAAP, minus (b) the aggregate amount of
cash and Cash Equivalents (in each case, free and clear of all Liens) included in the consolidated balance sheet of the Issuer and its Restricted Subsidiaries as of such date; provided, that Consolidated Total Debt shall not include
Indebtedness in respect of (i) any letter of credit, except to the extent of unreimbursed amounts under standby letters of credit or (ii) obligations under Swap Contracts. 

“Default” shall mean any of the events specified in Section 11.01, which after the giving of notice or the lapse of time set
forth in Section 11.01, or both, would constitute an Event of Default. 
 “Disposition” means with respect to any Property,
any sale, lease, sale and leaseback, assignment (other than an assignment for security), conveyance, transfer or other disposition thereof, and the terms “Dispose” and “Disposed of” shall have correlative meanings. 

“Disqualified Equity Interests” means, with respect to any Person, any Equity Interest of such Person which, by its terms, or by the
terms of any security or other Equity Interests into which it is convertible or for which it is exchangeable, or upon the happening of any event or condition (a) matures or is mandatorily redeemable (other than solely for Qualified Equity
Interests), pursuant to a sinking fund obligation or otherwise (except as a result of a change of control, Initial Public Offering or asset sale so long as any rights of the holders thereof upon the occurrence of a Change of Control, Initial Public
Offering or asset sale event shall be subject to 

  
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the occurrence of the Maturity Date), (b) is redeemable at the option of the holder thereof (other than solely for Qualified Equity Interests), in whole or in part, or (c) is or becomes
convertible into or exchangeable for Indebtedness or any other Equity Interests that would constitute Disqualified Equity Interests, in each case, prior to the date that is ninety one (91) days after the Maturity Date. 

“Equity Interests” means, with respect to any Person, shares of capital stock (or other ownership or profit interests in), limited
liability company interests, membership interests or other equivalents of such Person, warrants, options or other rights for the purchase or other acquisition from such Person of shares of capital stock of (or other ownership or profit interests
in), limited liability company interests, membership interests or other equivalents such Person, securities convertible into or exchangeable for shares of capital stock (or other ownership or profit interests in), limited liability company
interests, membership interests or other equivalents of such Person or warrants, rights or options for the purchase or other acquisition from such Person of such shares (or such other interests), and other ownership or profit interests in such
Person (including, without limitation, partnership, member or trust interests therein), whether voting or nonvoting, and whether or not such shares, warrants, options, rights or other interests are authorized or otherwise existing on any date of
determination. 
 “Events of Default” has the meaning set forth in Section 11.01. 

“GAAP” means generally accepted accounting principles in the United States of America as in effect from time to time. 

“Guaranty” or “Guaranteed,” as shall mean any agreement, undertaking or arrangement by which any Person guarantees or
otherwise becomes or is contingently liable upon the Indebtedness of any other Person (other than by endorsements of instruments in the course of collection). The amount of any Guaranty hereunder shall (subject to any limitations set forth therein)
be deemed to be an amount equal to the outstanding principal amount (or maximum principal amount, if larger) of the obligations in respect of which such Guaranty is made. 

“Holder” has the meaning set forth on the first page of this Note. 

“Indebtedness” of any Person means, without duplication, (a) all obligations of such Person for borrowed money or with respect to
advances of any kind, (b) all obligations of such Person evidenced by bonds, debentures, notes or similar instruments, (c) all obligations of such Person under conditional sale or other title retention agreements relating to property acquired by
such Person, (d) all obligations of such Person in respect of the deferred purchase price of property or services (excluding accrued expenses and trade accounts payable incurred in the ordinary course of business), (e) all Indebtedness of others
secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien on property owned or acquired by such Person, whether or not the Indebtedness secured thereby has been assumed, (f)
all Guarantees by such Person of Indebtedness of others, (g) all Capitalized Lease Obligations of such Person, (h) the face amount of all obligations, contingent or otherwise, of such Person as an account party in respect of letters of credit and
letters of guaranty, (i) all obligations, contingent or otherwise, of such Person in respect of bankers’ acceptances, (j) all net obligations of such Person under interest rate protection, swap agreements and collar agreements

  
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(such obligations to be equal to the termination value of such agreement giving rise to such obligation that would be payable by such person at such time) and (k) Disqualified Equity Interests.

 “Indemnitee” has the meaning set forth in Article 20. 

“Initial Public Offering” shall mean the initial public offering of the common stock of the IPO Issuer. 

“Interest Payment Date” has the meaning set forth on the first page of this Note. 

“Interest Payment” has the meaning set forth on the first page of this Note. 

“Investment” shall mean, with respect to the Issuer or any of its Restricted Subsidiaries, any loan, advance or extension of credit
(other than to customers in the ordinary course of business) by such Person to, or any Guaranty or other contingent liability with respect to the Equity Interests, indebtedness or other obligations of, or any contributions to the capital of, any
other Person, or any ownership, purchase or other acquisition by such Person of any interest in any Equity Interests or other securities of such other Person. The amount of any Investment shall be the original principal or capital amount thereof,
less all returns of principal or equity thereon and other cash returns thereof, less all liabilities expressly assumed by a Person (other than the Issuer or any of its Subsidiaries) in connection with the sale of such Investment and shall, if made
by the transfer or exchange of property other than cash, be deemed to have been made in an original principal or capital amount equal to the fair market value of such property at the time of such Investment. 

“IPO Issuer” shall mean the Issuer or any parent company of the Issuer. 

“Issue Date” means September 8, 2011. 

“Issuer” has the meaning set forth on the first page of this Note. 

“Leverage Ratio” means as of the any date of determination, the ratio of (a) Consolidated Total Debt as of such date to (b)
Consolidated EBITDA for the four consecutive fiscal quarter period most recently ended for which financial statements described in Section 5.01(a) or (b) of the Issuer are available. 

“Lien” shall mean, with respect to any property, any mortgage, lien, pledge, negative pledge or other agreement not to pledge,
charge, security interest, title retention agreement, levy, execution, seizure, attachment, garnishment or other encumbrance of any kind in respect of such property, whether created by statute, contract, the common law or otherwise, and whether or
not choate, vested or perfected. 
 “Management Agreement” shall mean that certain management agreement dated as of September 8,
2011 between the Sponsor and the Issuer, as the same may be amended, modified or replaced from time to time following the Issue Date. 

“Mandatory Redemption Date” has the meaning set forth in Section 2.01(b). 

  
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 “Material Adverse Effect” shall mean any material adverse effect upon any of the
following: (a) the business, assets, properties, liabilities, financial condition, or results of operations of the Issuer and its Restricted Subsidiaries on a consolidated basis, taken as a whole, or (b) upon the binding nature, validity, or
enforceability of the Notes, or (c) the ability of the Issuer and its Restricted Subsidiaries to perform the payment obligations under the Notes. 

“Maturity Date” has the meaning set forth on the first page of this Note. 

“Net Proceeds (Asset Sales)” shall mean, with respect to any sale or other disposition of material assets (excluding any asset
disposition permitted by Section 6.02 (other than clause (j) thereof)) by the Issuer or any Restricted Subsidiary, the positive difference between (a) the aggregate amount of cash or Cash Equivalents received (including proceeds of insurance paid
with respect to lost or damaged assets, awards arising from condemnation of assets or taking by eminent domain and including by way of sale or discounting of a note, installment receivable or other receivable (but, in each case, only as and when
received)), and (b) the sum of (i) all legal, title and recording tax expenses, commissions and other reasonable fees and expenses (including, without limitation, attorneys’ fees, accountants’ fees, consultant fees’, investment
banking fees, brokerage fees and commissions), incurred in connection with such event or the procurement of any such cash or Cash Equivalents and all federal, state, provincial, foreign and local taxes required to be paid or accrued as a liability
as a consequence of such event, (ii) all payments made by the Issuer or its Restricted Subsidiaries on any Indebtedness which is secured by the assets subject to such asset sale or other disposition in accordance with the terms of any Lien upon or
with respect to such assets or which must by the terms of such Lien, or in order to obtain a necessary consent to such asset sale or other disposition or by applicable law, be repaid out of the proceeds from such asset sale or other disposition,
(iii) any reasonable reserves established in connection therewith, (iv) reasonable holdbacks and (v) indemnity obligations (fixed or contingent) relating thereto. 

“Note” has the meaning set forth on the first page of this Note. 

“Noteholders” means the registered Holders from time to time of the Notes. 

“Notes Register” means the register maintained by the Issuer, which includes a list of the names and addresses of each Holder, as
well as the Outstanding Principal Amount and interest amount owing to such Holder from time to time. The entries in the Notes Register shall be conclusive, and the Issuer may treat each Person whose name is recorded in the Register pursuant to the
terms hereof as a Holder hereunder for all purposes of this Note. The Notes Register shall be available for inspection by any Holder, at any reasonable time and from time to time upon reasonable prior notice. 

“Notes” has the meaning set forth on the first page of this Note. 

“Optional Redemption Date” has the meaning set forth in Section 2.01(a). 

“Optional Redemption Notice” has the meaning set forth in Section 2.01(a). 

“Outstanding Principal Amount” has the meaning set forth on the first page of this Note. 

  
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 “Parent” means Valeritas Holdings, Inc., a Delaware corporation. 

“Payment Amount” has the meaning set forth on the second page of this Note. 

“Permitted Holders” shall mean each of (i) the Sponsor and (ii) limited partners of the Sponsor. 

“Permitted Transferee” means a holder of the Note pursuant to a valid transfer or assignment in compliance with Article 15.

 “Person” means any individual, sole proprietorship, partnership, joint venture, trust, unincorporated organization,
association, corporation, limited liability company, institution, public benefit corporation, other entity or government (whether federal, state, county, city, municipal, local, foreign, or otherwise, including any instrumentality, division, agency,
body or department thereof). 
 “PIK Interest” has the meaning set forth on the first page of this Note. 

“Property” means any right or interest in or to property of any kind whatsoever, whether real, personal or mixed and whether
tangible or intangible, including, without limitation, Equity Interests. 
 “Qualified Equity Interests” means any Equity
Interests that are not Disqualified Equity Interests. 
 “Redemption Date” has the meaning set forth in Section 2.01(b). 

“Redemption Price” has the meaning set forth in Section 2.01(a). 

“Required Noteholders” means, as of any date, the holders of more than 50% of the Notes. 

“Restricted Payment” shall mean (a) any direct or indirect distribution or dividend to any Person on account of any Equity Interests
of the Issuer or any of its Restricted Subsidiaries (other than dividends payable solely in stock of or other Equity Interests in such Person and stock splits), including, without limitation, any direct or indirect distribution or dividend to any
Person on account of any warrants or other rights or options to acquire Equity Interests of the Issuer or any of its Restricted Subsidiaries, (b) any payment (including, without limitation, any sinking fund payment, prepayment or installment
payment) on account of the purchase, redemption, defeasance or other acquisition or retirement of any Equity Interest in the Issuer or any of its Restricted Subsidiaries, including, without limitation, any warrants or other rights or options to
acquire shares of capital stock or other Equity Interests in the Issuer or any of its Restricted Subsidiaries, (c) any payment of principal of, or interest on, or payment into a sinking fund for the retirement of, or any defeasance of, subordinated
debt of the Issuer or any of its Restricted Subsidiaries or (d) any management, consulting or similar fees, or any interest thereon, payable by the Issuer or any of its Restricted Subsidiaries to any of their respective Affiliates. 

  
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 “Restricted Subsidiary” means any Subsidiary of the Issuer which is not an Unrestricted
Subsidiary. 
 “Securities Act” means the Securities Act of 1933, as amended. 

“Senior Debt” means any Indebtedness of the Issuer or one of its Restricted Subsidiaries permitted to be incurred under the terms of
this Note (including, without limitation, the Capital Royalty Debt), unless the instrument under which such Indebtedness is incurred expressly provides that it is on a parity with or subordinated in right of payment to this Note; provided,
however, that Senior Debt shall not include: 
 (A) accounts payable or any other obligations of the Issuer or a
Restricted Subsidiary to trade creditors created or assumed by the Issuer or a Restricted Subsidiary in the ordinary course of business in connection with the obtaining of materials or services (including guarantees thereof or instruments evidencing
such liabilities); 
 (B) any liability for U.S. Federal, state, local or other taxes owed or owing by the Issuer or a
Restricted Subsidiary; 
 (C) any obligation of the Issuer or a Restricted Subsidiary to any Subsidiary; or 

(D) any obligations with respect to any Equity Interests of the Issuer. 

“Senior Term Loan Agreement” means that certain Second Amended and Restated Term Loan Agreement dated as of May 3, 2016 among
the Issuer, as borrower, Parent, as guarantor, the subsidiary guarantors from time to time party thereto, Capital Royalty Partners II L.P., Capital Royalty Partners II – Parallel Fund “A” L.P., Parallel Investment Opportunities
Partners II L.P., Capital Royalty Partners II (Cayman) L.P., and Capital Royalty Partners II – Parallel Fund “B” (Cayman) L.P., as lenders, as amended, amended and restated, supplemented or modified from time to time 

“Sponsor” means each of Welsh, Carson, Anderson & Stowe XI, L.P., CP IV and WCAS Management Corporation, and each of their
respective Affiliates and related investment funds and the individual general partners of each of the foregoing partnerships. 

“Subordination Agreement” means the Second Amended and Restated Subordination Agreement dated as of May 3, 2016 among the Holder,
Capital Royalty Partners II L.P., Capital Royalty Partners II – Parallel Fund “A” L.P., Parallel Investment Opportunities Partners II L.P., Capital Royalty Partners II (Cayman) L.P., and Capital Royalty Partners II – Parallel
Fund “B” (Cayman) L.P., and the Issuer. 
 “Subsidiary” shall mean, as applied to any Person, any corporation of which
more than fifty percent (50%) of the outstanding stock having ordinary voting power to elect a majority of its board of directors, regardless of the existence at the time of a right of the holders of any class or classes of securities of such
corporation to exercise such voting power by reason of the happening of any contingency, or any partnership or limited liability company of which more than fifty percent (50%) of the outstanding Equity Interests, is at the time owned directly or
indirectly by such Person, or by one or more Subsidiaries of such Person, or by such Person and one or more Subsidiaries of such Person. 

  
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 “Swap Contract” shall mean (a) any and all rate swap transactions, basis swaps, credit
derivative transactions, forward rate transactions, commodity swaps, commodity options, forward commodity contracts, equity or equity index swaps or options, bond or bond price or bond index swaps or options or forward bond or forward bond price or
forward bond index transactions, interest rate options, forward foreign exchange transactions, cap transactions, floor transactions, collar transactions, currency swap transactions, cross-currency rate swap transactions, currency options, spot
contracts, or any other similar transactions or any combination of any of the foregoing (including any options to enter into any of the foregoing), whether or not any such transaction is governed by or subject to any master agreement, and (b) any
and all transactions of any kind, and the related confirmations, which are subject to the terms and conditions of, or governed by, any form of master agreement published by the International Swaps and Derivatives Association, Inc., any International
Foreign Exchange Master Agreement, or any other master agreement (any such master agreement, together with any related schedules, a “Master Agreement”), including any such obligations or liabilities under any Master Agreement. 

“Unrestricted Subsidiary” means (a) any Subsidiary of the Issuer that at the time of determination shall be designated an
Unrestricted Subsidiary by the Issuer in the manner provided herein and (b) any Subsidiary of an Unrestricted Subsidiary. The Issuer may designate any of its newly acquired or newly formed Subsidiaries after the date hereof to be an Unrestricted
Subsidiary unless such Subsidiary or any of its Subsidiaries owns any Equity Interests or Indebtedness of, or holds any Lien on any property of, the Issuer or any other Subsidiary of the Issuer that is not a Subsidiary of the Subsidiary to be so
designated; provided, however, that the Subsidiary to be so designated has total assets of $10,000 or less at the time of designation. The value of the total assets of the Subsidiary to be designated as an Unrestricted Subsidiary shall be determined
in good faith by the Issuer’s board of directors or similar governing body and certified to the Holder. The Issuer may designate any Unrestricted Subsidiary as a Restricted Subsidiary; provided, however, that immediately after giving effect to
such designation no Default or Event of Default shall have occurred and be continuing or result therefrom. 
 ARTICLE 2 

REDEMPTION 

Section 2.01 (a) Redemption at Option of the Issuer. At any time and from time to time after the Issue Date, the Issuer may deliver a
written notice to the Holder (the “Optional Redemption Notice”), indicating that the Issuer has elected to redeem, and is requiring the Holder to submit for redemption, subject to Section 2.01(d), all or any portion of this
Note for an amount in cash as set forth below (the “Redemption Price”). The Redemption Price with respect to any such date shall be equal to 100% of the Outstanding Principal Amount of this Note to be redeemed, plus accrued and
unpaid interest on such Outstanding Principal Amount to the Redemption Date. 

  
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 The Optional Redemption Notice shall be sent by facsimile and overnight courier to the Holder and
shall indicate (w) the date fixed for redemption, which shall be not less than five (5) Business Days or more than 30 days after the effective date of the Optional Redemption Notice (the “Optional Redemption Date”), (x) the
Outstanding Principal Amount of this Note to be redeemed, (y) the place or places where this Note is to be surrendered for payment of the Redemption Price and (z) that interest on the portion of this Note to be redeemed will cease to accrue on such
Optional Redemption Date. An Optional Redemption Notice may not be conditional. 
 (b) Mandatory Redemption. 

(i) Change of Control. The Issuer shall redeem concurrently with any Change of Control all of the Notes for an amount in cash equal to
the Redemption Price. 
 (ii) Repayments Upon Sales of Assets. Subject to prior application in accordance with the terms of any
documentation governing any Senior Debt, unless otherwise agreed by the Required Noteholders, on the fifth Business Day following the receipt of Net Proceeds (Asset Sales) in an aggregate amount greater than $15,000,000 for each fiscal year of the
Issuer other than sale of inventory in the ordinary course of business, the Notes shall be repaid in an amount equal to such Net Proceeds (Asset Sales), together with any accrued interest on the portion of the Notes repaid; provided,
however, that no such repayment shall be required if the Issuer notifies the Noteholders on or before the date such repayment would otherwise be required under this Section 2.01(b)(ii) that the Issuer or its Subsidiaries intend to use
any or all of such Net Proceeds (Asset Sales) to invest in capital assets or Investments in the business of the Issuer or its Subsidiaries within twelve (12) months of the date of such sale, lease, transfer or other disposition, in which case, the
repayment of the Notes which is otherwise required under this Section 2.01(b)(ii) up to the amount of the Net Proceeds (Asset Sales) to be reinvested pursuant to this Section 2.01(b)(ii) need not be made, but if all or part of such Net
Proceeds (Asset Sales) are not used within such twelve (12) month period (or committed to be reinvested and actually so reinvested within 90 days after such 12 month period), then the Notes shall be repaid by an amount equal to the Net Proceeds
(Asset Sales) calculated based on the portion of Net Proceeds (Asset Sales) not invested pursuant to this Section 2.01(b)(ii) on the day immediately following such twelve (12) month period (or 90 day period thereafter to the extent so
committed to be reinvested within such 12 month period). Such repayments shall be applied to the principal amount of the Notes, on a pro rata basis. Notwithstanding the foregoing provisions of this Section 2.01(b)(ii), if at the time
the Issuer would otherwise be required to required to repay the Notes pursuant to this Section 2.01(b)(ii), the Issuer does not have access to the applicable Net Proceeds (Assets Sales) as a result of a restriction contained in any
documentation governing any Senior Debt, then the Issuer shall have no obligation to repay the Notes pursuant to this Section 2.01(b)(ii) until such time as and to the extent such restriction no longer applies. 

The date of any such consummation pursuant to clause (i) or (ii) above is referred to herein as a “Mandatory Redemption
Date”, and any Optional Redemption Date or Mandatory Redemption Date is referred to herein as a “Redemption Date”. 

(c) Procedures. If the Issuer has elected to exercise its redemption right pursuant to Section 2.01(a), or in the case of a
mandatory redemption event described in Section 2.01(b), the 

  
 11 

 
Issuer shall pay to the Holder, in cash, on the Redemption Date, by wire transfer of immediately available funds to an account designated in writing by the Holder, an amount equal to the
Redemption Price. In the event that less than the entire Outstanding Principal Amount of this Note is being redeemed, then the Issuer shall, at its own expense, issue and deliver to the Holder within five (5) Business Days after delivery to the
Issuer of this Note, a replacement Note for the Outstanding Principal Amount of this Note not redeemed by the Issuer. 
 If the Issuer has
elected to exercise its redemption right pursuant to Section 2.01(a), or in the case of a mandatory redemption event described in Section 2.01(b) this Note (or portion hereof to be redeemed) shall, on the Redemption Date, become due
and payable at the applicable Redemption Price and from and after such date (unless the Issuer shall default in the payment of the Redemption Price) this Note (or portion hereof that was redeemed) shall cease to bear interest. Upon surrender of this
Note for redemption in accordance with said notice, this Note (or portion hereof to be redeemed) shall be paid by the Issuer at the Redemption Price. 

(d) If the applicable Redemption Date is an Interest Payment Date, the Interest Payment becoming due on such date shall be payable to the
Holder. Notwithstanding anything herein to the contrary, the Issuer may only exercise its rights pursuant to Section 2.01(a) so as to redeem Notes from all Noteholders in proportion to the Outstanding Principal Amount of all Notes held
by each such Noteholder on the applicable Redemption Date. 
 ARTICLE 3 

NO REISSUANCE OF NOTE 

No Notes acquired by the Issuer by reason of redemption, purchase, conversion or otherwise shall be reissued, and all such Notes shall be
retired. Except as contemplated by Section 2.01(c), no additional Notes shall be authorized or issued without the consent of the Required Noteholders. 

ARTICLE 4 
 NO
IMPAIRMENT 
 Except as otherwise approved in writing by the Required Noteholders, the Issuer shall not intentionally take
any action which would impair the rights and privileges of this Note set forth herein or the Holder hereof. 
 ARTICLE 5 

AFFIRMATIVE COVENANTS 

Section 5.01 Financial Statements and Reports. The Issuer shall furnish to the Holder the following financial information: 

(a) Annual Financial Statements. As soon as available and in any event within 15 days following the date the Parent or the Issuer files
Form 10-K with the SEC, the consolidated 

  
 12 

 
balance sheets of Parent, Issuer and their Subsidiaries as of the end of such fiscal year, and the related consolidated statements of income, shareholders’ equity and cash flows of Parent,
Issuer and their Subsidiaries for such fiscal year, prepared in accordance with GAAP consistently applied, all in reasonable detail, accompanied by a report and opinion thereon of KPMG LLP or another firm of independent certified public accountants
of recognized national standing acceptable to the Lenders, which report and opinion shall be prepared in accordance with generally accepted auditing standards and shall not be subject to any qualification or exception as to the scope of such audit.

 (b) Quarterly Financial Statements. As soon as available and in any event within 15 days following the date the Parent or the
Issuer files Form 10-Q with the SEC, the consolidated balance sheets of the Obligors as of the end of such quarter, and the related consolidated statements of income, shareholders’ equity and cash flows of Parent, Issuer and their Subsidiaries
for such quarter and the portion of the fiscal year through the end of such quarter, prepared in accordance with GAAP consistently applied, all in reasonable detail, together with a certificate of the chief financial officer of Issuer stating that
such financial statements fairly present the financial condition of Parent, Issuer and their Subsidiaries as at such date and the results of operations of Parent, Issuer and their Subsidiaries for the period ended on such date and have been prepared
in accordance with GAAP consistently applied, subject to changes resulting from normal, year-end audit adjustments and except for the absence of notes; 

(c) No Default. Concurrently with each delivery of financial statements pursuant to clauses (a) or (b) of this Section 5.01 a
certificate executed on behalf of the Issuer by the chief financial officer certifying that no event has occurred and is continuing which constitutes a Default or Event of Default, or describing each such event and the remedial steps being taken by
the Issuer. 
 (d) Other Information. Promptly, such additional financial and other information (x) concerning the Issuer or any of
its Restricted Subsidiaries as the Holder may from time to time reasonably request or (y) delivered by the Issuer to its creditors under any documentation governing any Senior Debt. 

Section 5.02 Notice of Material Events. The Issuer will give prompt notice to the Holder of (i) any event or condition that constitutes
an Event of Default or Default, and (ii) of any litigation or proceeding affecting the Issuer or its Restricted Subsidiaries, which could reasonably be expected to result in a Material Adverse Effect. 

Section 5.03 Existence. The Issuer will and will cause each of its Restricted Subsidiaries to preserve and maintain its legal
existence, except as otherwise permitted hereunder. 
 Section 5.04 Notice of Changes in Organizational Documents. If there is any
change in the certificate of incorporation or by-laws of the Issuer or any of its Restricted Subsidiaries, the Issuer will promptly notify the Holder thereof and deliver the revised copies thereof to the Holder. 

  
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 Section 5.05 Compliance with Applicable Law. The Issuer will, and will cause each of its
Restricted Subsidiaries to, comply in all respects with the requirements of all applicable law, except where the failure to do so individually or in the aggregate could not reasonably be expected to have a Material Adverse Effect. 

Section 5.06 Maintenance of Properties. The Issuer will, and will cause each of its Restricted Subsidiaries to, maintain or cause to be
maintained in the ordinary course of business in good repair, working order and condition (reasonable wear and tear excepted) all material properties used in their respective businesses (whether owned or held under lease), other than obsolete
equipment or unused assets. 
 Section 5.07 Accounting Methods and Financial Records. The Issuer will, and will cause each of its
Restricted Subsidiaries to, maintain a system of accounting established and administered in accordance with GAAP in all material respects, keep adequate records and books of account in which complete entries in all material respects will be made in
accordance with GAAP in all material respects and reflecting all transactions required to be reflected by GAAP and keep accurate and complete records in all material respects of their respective material properties and assets. 

Section 5.08 Insurance. The Issuer will, and will cause each of its Restricted Subsidiaries to maintain insurance including, but not
limited to, business interruption coverage, personal property coverage, workmen’s compensation coverage and directors and officers coverage from responsible companies in such amounts and against such risks to the Issuer and each of its
Subsidiaries as is prudent for similarly situated companies engaged in similarly situated industries and such types, with such limits and deductibles and containing such other terms and conditions as are prudent in the reasonable business judgment
of the Issuer. 
 Section 5.09 Payment of Taxes. The Issuer will, and will cause each of its Restricted Subsidiaries to, pay
and discharge all taxes, including, without limitation, withholding taxes, assessments and governmental charges or levies required to be paid by them or imposed upon them or their income or profits or upon any properties belonging to them, prior to
the date on which penalties attach thereto; except that no such tax, assessment, charge, levy or claim need be paid (x) which is being diligently contested in good faith by appropriate proceedings and for which adequate reserves shall have been set
aside in accordance with GAAP on the appropriate books, but only so long as such tax, assessment, charge, levy or claim does not become a Lien or charge and no foreclosure, distraint, sale or similar proceedings shall have been commenced. The Issuer
will, and will cause each of its Restricted Subsidiaries to, timely file all income and material non-income information returns required by federal, state or local tax authorities before penalties attach thereto. 

Section 5.10 Visits and Inspections. The Issuer will, and will cause each of its Restricted Subsidiaries to, permit representatives of
the Holder, upon reasonable prior written notice, to (i) visit and inspect the properties of the Issuer or any of its Restricted Subsidiaries during business hours, (ii) inspect and make extracts from and copies of their respective books and
records, and (iii) discuss with their respective principal officers their respective businesses, assets, liabilities, financial positions, results of operations and business prospects. The Issuer and each of its Restricted Subsidiaries will also
permit representatives of the Holder to discuss 

  
 14 

 
with their respective accountants the Issuer’s and its Restricted Subsidiaries’ businesses, assets, liabilities, financial positions, results of operations and business prospects to the
extent the Issuer is given the opportunity to be present. 
 ARTICLE 6 

NEGATIVE COVENANTS 

So long as any amount payable under this Note remains unpaid, the Issuer covenants and agrees that the Issuer shall not and shall not permit
any of its Restricted Subsidiaries to: 
 Section 6.01 Limitations on Indebtedness. Incur or assume any Indebtedness unless after
giving pro forma effect to such incurrence on a pro forma basis, the Leverage Ratio would not be greater than 3 to 1. 
 Notwithstanding the
foregoing, the Issuer and its Restricted Subsidiaries may incur the following Indebtedness: 
 (a) Indebtedness permitted under the Senior
Term Loan Agreement; 
 (b) Indebtedness incurred pursuant to the Notes, including the accrual and/or capitalization of interest on this
Note and any applicable fees, costs or expenses associated therewith; 
 (c) Indebtedness outstanding on the date hereof and listed on
Schedule 6.01(b) and any refinancing, extension or replacement thereof; 
 (d) Indebtedness of Issuer or any of its Restricted
Subsidiaries to the Issuer or any other Restricted Subsidiary, so long as to the extent such Indebtedness is owing by Issuer, it is subordinated to the obligations hereunder; 

(e) Guarantees of other Indebtedness permitted pursuant to this Section 6.01; 

(f) Indebtedness in respect of Swap Contracts designed to hedge against the Issuer’s or any Restricted Subsidiary’s exposure to
interest rates, foreign exchange rates or commodities pricing risks incurred in the ordinary course of business and not for speculative purposes; 

(g) Indebtedness to current or former officers, managers, consultants, directors and employees, their respective estates, spouses or former
spouses to finance the purchase or redemption of Equity Interests of Issuer or Parent permitted by Section 6.04; 
 (h) Indebtedness
with respect to Capitalized Lease Obligations or with respect to purchase of equipment; 
 (i) Indebtedness incurred by the Issuer or any of
its Restricted Subsidiaries in respect of letters of credit, bank guarantees, supporting obligations, bankers’ acceptances, performance bonds, surety bonds, statutory bonds, appeal bonds, warehouse receipts or similar instruments issued or
created in the ordinary course of business, including in respect of workers 

  
 15 

 
compensation claims, health, disability or other employee benefits or property, casualty or liability insurance or self-insurance or other Indebtedness with respect to reimbursement-type
obligations regarding workers compensation claims; or 
 (j) the Capital Royalty Debt. 

Section 6.02 Disposition of Assets. At any time sell, lease, abandon, or otherwise dispose of any assets, other than: 

(a) Dispositions permitted under the Senior Term Loan Agreement; 

(b) Dispositions of inventory in the ordinary course of business; 

(c) (i) Dispositions of obsolete, surplus or worn out property in the ordinary course of business and Dispositions in the ordinary course of
business of property no longer used or useful in the conduct of the business of the Issuer or any of its Restricted Subsidiaries and (ii) Dispositions of property no longer used or useful in the conduct of the business of the Issuer and its
Restricted Subsidiaries outside the ordinary course of business in an aggregate amount not to exceed $500,000 per annum; 
 (d)
Dispositions of immaterial assets in the ordinary course of business; 
 (e) Dispositions of property to the extent that (x) such property
is exchanged for credit against the purchase price of similar replacement property or (y) the proceeds of such Disposition are promptly applied to the purchase price of such replacement property; 

(f) Dispositions of property to the Issuer or any Restricted Subsidiary; 

(g) to the extent constituting Dispositions, the making of Investments permitted by Section 6.03 and Restricted Payments permitted by
Section 6.04; 
 (h) Dispositions of cash and Cash Equivalents; 

(i) leases, subleases, licenses or sublicenses (including the provision of software or the licensing of other intellectual property rights)
and terminations thereof, and which do not materially interfere with the business of the Issuer and its Restricted Subsidiaries, taken as a whole; 

(j) transfers of property subject to casualty events or condemnation or eminent domain; 

(k) Dispositions of property not otherwise permitted under this Section 6.02 in an aggregate amount in any year not to exceed 10.0% of
Consolidated EBITDA for the most recently ended four quarter fiscal period at the time any Disposition is made pursuant to this clause (j); 

(l) Dispositions or discounts without recourse of accounts receivable in connection with the compromise or collection thereof in the ordinary
course of business; 

  
 16 

 (m) any swap of assets in exchange for services or other assets in the ordinary course of
business of comparable or greater value or usefulness to the business of the Issuer and its Restricted Subsidiaries as a whole, as determined in good faith by the management of the Issuer; 

(n) Dispositions of Investments in joint ventures to the extent required by, or made pursuant to customary buy/sell arrangements between, the
joint venture parties set forth in joint venture arrangements and similar binding arrangements; 
 (o) the unwinding of any Swap Contracts
pursuant to its terms; 
 (p) sales of non-core assets acquired in connection with Investments; provided that the aggregate amount
of such sales shall not exceed 25.0% of the fair market value of the acquired entity or business; and 
 (q) Disposition of the Equity
Interests of an Unrestricted Subsidiary for fair market value as determined in good faith by the Issuer’s board of directors or similar governing body. 

Section 6.03 Investments. Directly or indirectly make any Investment except that the Issuer and its Restricted Subsidiaries may make:

 (a) Investments permitted under the Senior Term Loan Agreement; 

(b) Investments to purchase Cash Equivalents; 

(c) Investments in the Issuer or a Restricted Subsidiary; 

(d) Investments in any Person (i) that will, upon the making of such Investment, become a Restricted Subsidiary or (ii) if as a result of
such Investment such Person is merged or consolidated with or into, or transfers or conveys all or substantially all its Property to, the Company or a Restricted Subsidiary; 

(e) (i) intercompany loans and advances permitted pursuant to Section 6.01; and (ii) capital contributions or other Investments by the
Issuer or any of its Restricted Subsidiary in the Issuer or one of its Restricted Subsidiaries; 
 (f) loans or advances to officers,
directors, consultants and employees of the Issuer or any of its Restricted Subsidiaries (i) for reasonable and customary business-related travel, entertainment, relocation and analogous ordinary business purposes, (ii) in connection with such
Person’s purchase of Equity Interests of the Issuer and (iii) for any other purposes not described in the foregoing clauses (i) and (ii); provided that the aggregate principal amount outstanding at any time under clause (iii) above shall
not exceed $500,000; 
 (g) Investments (i) consisting of advances to customers or extensions of credit in the nature of accounts
receivable or notes receivable arising from the grant of trade credit in the ordinary course of business, and (ii) received in satisfaction or partial satisfaction thereof from financially troubled account debtors and other credits to suppliers in
the ordinary course of business; 

  
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 (h) Investments consisting of Restricted Payments permitted by Section 6.04 and
Guarantees of Indebtedness permitted pursuant to this Section 6.01; 
 (i) Investments existing or contemplated on the Issue Date
and set forth on Schedule 6.03(h) and any modification, replacement, renewal, reinvestment or extension thereof; provided that the amount of any original Investment under this clause (h) is not increased except by the terms of such
Investment as of the Issue Date or as otherwise permitted by Section 6.03; 
 (j) Investments in the ordinary course of business
consisting of UCC Article 3 endorsements for collection or deposit and UCC Article 4 customary trade arrangements with customers consistent with past practices; 

(k) Investments (including debt obligations and Equity Interests) received in connection with permitted dispositions under Section
6.02, the bankruptcy or reorganization of suppliers and customers or in settlement of delinquent obligations of, or other disputes with, customers and suppliers arising in the ordinary course of business or upon the foreclosure with respect to
any secured Investment or other transfer of title with respect to any secured Investment; 
 (l) other Investments, in an aggregate amount
outstanding pursuant to this clause (k) at any time not to exceed $1,000,000 (net of any return in respect thereof, including dividends, interest, distributions, returns of principal, profits on sale, repayments, income and similar amounts); 

(m) advances of payroll payments to officers and employees and advances of fees and payments to directors and consultants, in each case, in
the ordinary course of business; 
 (n) Investments to the extent that payment for such Investments is made solely with Equity Interests of
the Issuer or proceeds thereof or capital contributions in respect thereof; 
 (o) Investments of a Restricted Subsidiary acquired after
the Issue Date or of a corporation merged or amalgamated or consolidated into the Issuer or merged, amalgamated or consolidated with a Restricted Subsidiary, after the Issue Date to the extent that such Investments were not made in contemplation of
or in connection with such acquisition, merger, amalgamation or consolidation, and were in existence on the date of such acquisition, merger or consolidation; 

(p) Guarantees by the Issuer or any of its Restricted Subsidiaries of leases (other than capitalized leases) or of other obligations that do
not constitute Indebtedness, in each case entered into in the ordinary course of business; and 
 (q) Investments in deposit accounts and
securities accounts opened in the ordinary course of business. 

  
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 Section 6.04 Restricted Payments. Directly or indirectly declare or make any Restricted
Payment except that: 
 (a) the Issuer and each Restricted Subsidiary may make any Restricted Payments that are permitted under the Senior
Term Loan Agreement; 
 (b) each Restricted Subsidiary may make Restricted Payments to the Issuer, and other Restricted Subsidiaries of the
Issuer (and, in the case of a Restricted Payment by a non-wholly owned Restricted Subsidiary, to the Issuer and any other Restricted Subsidiary and to each other owner of Equity Interests of such Restricted Subsidiary based on their relative
ownership interests of the relevant class of Equity Interests); 
 (c) the Issuer and each Restricted Subsidiary may declare and make
dividend payments or other Restricted Payments payable solely in Equity Interests; 
 (d) repurchases of Equity Interests in the Issuer
deemed to occur upon exercise of stock options or warrants if such Equity Interests represent a portion of the exercise price of such options or warrants, 

(e) the Issuer may pay for the repurchase, retirement or other acquisition or retirement for value of Equity Interests of the Issuer, by any
future, present or former employee, officer, director, manager or consultant of the Issuer or any of its Restricted Subsidiaries upon the death, disability, retirement or termination of employment of any such Person or pursuant to any employee,
manager or director equity plan, employee, manager or director stock option plan or any other employee, manager or director benefit plan or any agreement (including any stock subscription or shareholder agreement) with any such employee, director,
officer or consultant; provided that the aggregate amount of Restricted Payments made pursuant to this clause (d) shall not exceed an aggregate amount of $500,000 in any calendar year; 

(f) notwithstanding anything to the contrary herein, the Issuer may make regularly scheduled payments of interest on any subordinated debt in
accordance with its terms and the applicable subordination agreement; 
 (g) the Issuer may make payments for the reimbursement of expenses
of board members in connection with the performance of their duties as directors; 
 (h) the Issuer may make consummate transactions
expressly permitted pursuant to Section 6.03 and Section 6.05; and 
 (i) the Issuer may make other Restricted Payments
with the proceeds of, in each case to the extent not otherwise applied: (i) the net proceeds from the sale of (or capital contributions in respect of) Equity Interests of the Issuer and (ii) the net proceeds from the sale of the Equity Interests of
(or dividend or distribution received from) an Unrestricted Subsidiary, provided that, the amount available to be applied for Restricted Payments pursuant to this clause (iii) shall be net of the aggregate amount of Investments made in
Unrestricted Subsidiaries pursuant to Section 6.03(k). 

  
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 Section 6.05 Affiliate Transactions. At any time engage in any transaction with an
Affiliate (other than the Issuer or one of its Restricted Subsidiaries), or make an assignment or other transfer of any of its properties or assets to any such Affiliate, in each case, on terms materially less advantageous to the Issuer or such
Restricted Subsidiary than would be the case if such transaction had been effected with a non-Affiliate, except: 
 (j) as permitted under
the Senior Term Loan Agreement; 
 (k) as specifically provided herein (including the payment of any sums permitted under Section
6.04 hereof and transactions under Section 6.03); 
 (l) as may be described on Schedule 2 attached hereto or any
amendment or modification thereto or replacement thereof (so long as any such amendment, modification or replacement is not disadvantageous to the Noteholders in any material respect as compared to the applicable agreement in effect on the Issue
Date); 
 (m) for agreements and arrangements entered into with employees of the Issuer or any of its Restricted Subsidiaries as part of
normal compensation, incentive compensation and expense reimbursement; 
 (n) the payment or performance of obligations under the
Management Agreement; 
 (o) the payment of reasonable and customary fees, bonuses, severance, retirement packages, paid to, and
indemnities provided on behalf of, officers, directors, employees or consultants of the Issuer or any of its Restricted Subsidiaries; 

(p) the issuance of Equity Interests of the Issuer to the extent not otherwise restricted hereunder; 

(q) the payment of reasonable out-of-pocket costs and expenses relating to registration rights and indemnities provided to shareholders; and

 (r) other transactions to the extent that the amount of such transaction does not exceed $250,000 and the aggregate amount of all such
transactions during any one fiscal year of the Issuer does not exceed $500,000. 
 Section 6.06 Limitation on Upstream Dividends and
Loans by Subsidiaries. Except for (i) restrictions imposed by applicable law and (ii) restrictions imposed by the Notes and any documentation governing any Senior Debt, permit any of its Restricted Subsidiaries to enter into or agree, or
otherwise become subject, to any agreement, contract or other arrangement with any Person pursuant to the terms of which (a) such Subsidiary is or would be prohibited or otherwise restricted from declaring or paying any cash dividends or
distributions on any class of its Equity Interests owned directly or indirectly by the Issuer or from making any other distribution on account of any class of any such Equity Interests owned directly or indirectly by the Issuer; or (b) such
Restricted Subsidiary would be prohibited from making loans to the Issuer or repaying loans or advances to the Issuer; provided that the foregoing clauses shall not apply to contractual obligations which (i) are permitted under the Senior
Term Loan Agreement, (ii) binding on a 

  
 20 

 
Restricted Subsidiary at the time such Restricted Subsidiary first becomes a Restricted Subsidiary of the Issuer, so long as such contractual obligations were not entered into solely in
contemplation of such Person becoming a Restricted Subsidiary of the Issuer, (iii) arise in connection with any Disposition permitted by Section 6.02 and relate solely to the assets or Person subject to such Disposition, or (iv) are customary
restrictions in leases, subleases, licenses, sublicenses or asset sale agreements otherwise permitted hereby so long as such restrictions relate to the assets subject thereto. 

ARTICLE 7 

OBLIGATIONS ABSOLUTE 

No provision of this Note shall alter or impair the obligation of the Issuer, which is absolute and unconditional, to pay the principal of,
and interest on, this Note at the time, place and rate, and in the manner, herein prescribed. 
 ARTICLE 8 

WAIVERS OF DEMAND, ETC. 

The Issuer hereby expressly waives (to the extent permitted by applicable law) demand and presentment for payment, notice of nonpayment,
protest, notice of protest, notice of dishonor, notice of acceleration or intent to accelerate, bringing of suit and diligence in taking any action to collect amounts called for hereunder and will be directly and primarily liable for the payment of
all sums owing and to be owing hereon, regardless of and without any notice, diligence, act or omission as or with respect to the collection of any amount called for hereunder. 

ARTICLE 9 

REPLACEMENT NOTES 

In the event that the Holder notifies the Issuer that this Note has been lost, stolen or destroyed, a replacement Note identical in all
respects to the original Note (except for registration number and Outstanding Principal Amount, if different than that shown on the original Note) shall be issued by the Issuer to the Holder; provided that the Holder executes and delivers to
the Issuer an agreement reasonably satisfactory to the Issuer to indemnify the Issuer from any loss incurred by it in connection with such lost, stolen or destroyed Note. 

ARTICLE 10 
 PAYMENT
OF EXPENSES 
 The Issuer agrees to pay all reasonable expenses, including reasonable attorneys’ fees,
which may be incurred by the Holder in connection with any waiver or consent hereunder, any amendment hereof, any Event of Default or alleged Event of Default hereunder or in enforcing the provisions of this Note and/or collecting any amount due
under this Note. 

  
 21 

 ARTICLE 11 

DEFAULTS AND REMEDIES 

Section 11.01 Events of Default. If any one or more of the following events (each, an “Event of Default”) occurs and
is continuing: 
 (a) any default by the Issuer in any payment of interest on this Note when the same becomes due and payable, and such
default continuing for a period of 180 calendar days; 
 (b) any default by the Issuer in the payment of any principal on this Note when the
same becomes due and payable at the Maturity Date, upon acceleration or otherwise; 
 (c) the Issuer shall default in the observance or
performance of any other agreement contained in this Note (other than as provided in paragraphs (a) and (b) of this Section 11.01), and such default shall continue un-remedied for a period of thirty (30) calendar days after the receipt of notice of
such default shall have been given to the Issuer by the Required Noteholders; 
 (d) any representation or warranty made or deemed made by
the Issuer herein or in any other document furnished by it at any time under or in connection with this Note shall prove to have been inaccurate in any material respect on or as of the date made or deemed made or furnished; 

(e) there shall be entered and remain unstayed a decree or order for relief in respect of the Issuer or any of its Restricted Subsidiaries
under Title 11 of the United States Code, as now constituted or hereafter amended, or any other applicable foreign, Federal or state bankruptcy law or other similar law, or appointing a receiver, liquidator, assignee, trustee, custodian,
sequestrator or similar official of the Issuer or any of its Restricted Subsidiaries, or of any substantial part of their respective properties, or ordering the winding-up or liquidation of the affairs of the Issuer or any of its Restricted
Subsidiaries; or an involuntary petition shall be filed against the Issuer or any of its Restricted Subsidiaries and a temporary stay entered, and (i) such petition and stay shall not be diligently contested, or (ii) any such petition and stay shall
continue undismissed for a period of sixty (60) consecutive days; 
 (f) the Issuer or any of its Restricted Subsidiaries shall file a
petition, answer or consent seeking relief under Title 11 of the United States Code, as now constituted or hereafter amended, or any other applicable foreign, Federal or state bankruptcy law or other similar law, or the Issuer or any of its
Restricted Subsidiaries shall consent to the institution of proceedings thereunder or to the filing of any such petition or to the appointment or taking of possession of a receiver, liquidator, assignee, trustee, custodian, sequestrator or other
similar official of the Issuer or any of its Restricted Subsidiaries or of any substantial part of their respective properties, or the Issuer or any of its Restricted Subsidiaries shall take any action in furtherance of any such action; 

(g) there is entered by any court or arbitration panel against the Issuer or any of its Restricted Subsidiaries a final non-appealable
monetary judgment, decree or award not covered by insurance or indemnification, for the payment of money which exceeds singly or in the aggregate with other such judgments, $5,000,000, and if, within sixty days after the entry, issue or levy
thereof, such judgment, shall not have been paid or discharged or stayed pending appeal or removed to bond, or if, after the expiration of any such stay, such judgment, warrant or process shall not have been paid or discharged or removed to bond
within 60 days thereafter; 

  
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 (h) there shall occur (i) any payment default (after giving effect to all grace periods and
notices) under any instrument, document or agreement relating to any Indebtedness of the Issuer or any of its Restricted Subsidiaries in an aggregate principal amount exceeding $5,000,000; (ii) any event or condition the occurrence of which
would permit acceleration of such Indebtedness, or which, as a result of a failure to comply with the terms thereof, would make such Indebtedness otherwise due and payable, and which event or condition has not been cured within any applicable cure
period or waived in writing prior to any declaration of an Event of Default or acceleration of the Loans hereunder; or (iii) an acceleration of any Senior Debt; or 

(i) Any Note or any material provision thereof, shall at any time and for any reason (other than as expressly permitted hereunder or
thereunder or the satisfaction in full of all the obligations under this Note) be declared by a court of competent jurisdiction to be null and void, or a proceeding shall be commenced by the Issuer or any of its Restricted Subsidiaries seeking to
establish the invalidity or unenforceability thereof (exclusive of questions of interpretation of any provision thereof or satisfaction of the Obligations), or the Issuer or any of its Restricted Subsidiaries shall deny that it has any liability or
obligation for the payment of principal or interest purported to be created under any Note (other than for payment of the Obligations); or 

(j) Any Change of Control shall occur; 

then, the Required Noteholders may, at their option, by notice to the Issuer, declare all the Notes to be forthwith due and payable, whereupon
the principal of the Notes, together with accrued interest thereon, shall become forthwith due and payable, without presentment, demand, protest or further notice of any kind, all of which are expressly waived by the Issuer; provided,
however, that in any event described in Section 11.01(e) or (f), all the Notes, together with interest accrued thereon, shall automatically become due and payable, without presentment, demand, protest or any other notice of any kind, all of
which are hereby expressly waived by the Issuer. 
 Section 11.02 Acceleration. The Required Noteholders may rescind an acceleration
and its consequences if the rescission would not conflict with any judgment or decree and if all existing Events of Default have been cured or waived except nonpayment of principal or interest that has become due solely because of acceleration. No
such rescission shall affect any subsequent Default or impair any right consequent thereto. A delay or omission by the Required Noteholders or any Holder in exercising any right or remedy accruing upon an Event of Default shall not impair the right
or remedy or constitute a waiver of or acquiescence in the Event of Default. No remedy is exclusive of any other remedy. All available remedies are, to the extent permitted by law, cumulative. 

Section 11.03 Waiver of Past Defaults. Waiver of Past Defaults. The Required Noteholders may waive any past or existing Default
and its consequences. When a Default is waived, it is deemed cured, and any Event of Default arising therefrom shall be deemed to have been cured, but no such waiver shall extend to any subsequent or other Default or impair any consequent right. No
failure to exercise and no delay in exercising, on the part of the Required 

  
 23 

 
Noteholders or any Holder, any right, remedy, power or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any right, remedy, power or privilege
hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges herein provided are cumulative and not exclusive of any rights, remedies, powers and
privileges provided by law. 
 Section 11.04 Waiver of Stay or Extension Laws. The Issuer (to the extent it may lawfully do so) shall
not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law wherever enacted, now or at any time hereafter in force, which may affect the covenants or the performance of
this Note, and the Issuer (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and shall not hinder, delay or impede the execution of any power herein granted to the Holder, but shall suffer
and permit the execution of every such power as though no such law had been enacted. 
 ARTICLE 12 

SUBORDINATION 

Section 12.01 Agreement to Subordinate. If requested by a holder of Senior Debt, the Holder agrees to subordinate the Indebtedness and
other obligations evidenced by this Note pursuant to the terms and conditions of a subordination agreement reasonably satisfactory to the Holder. 

ARTICLE 13 
 SAVINGS
CLAUSE 
 In case any provision of this Note is held by a court of competent jurisdiction to be excessive in scope or
otherwise invalid or unenforceable, such provision shall be adjusted rather than voided, if possible, so that it is enforceable to the maximum extent possible, and the validity and enforceability of the remaining provisions of this Note will not in
any way be affected or impaired thereby. 
 ARTICLE 14 

ENTIRE AGREEMENT; AMENDMENTS 

This Note constitutes the full and entire understanding and agreement between the Issuer and the Holder with respect to the subject hereof.
Neither this Note nor any term hereof may be amended, waived, discharged or terminated other than by a written instrument signed by the Issuer and the Required Noteholders. Notwithstanding the foregoing, if (x) any amendment or waiver of any
provision or term of this Note is proposed at any time after the dissolution of CP IV and/or the distribution of Notes to the members of CP IV and (y) such amendment or waiver would reduce the principal of, or rate of interest on, any Note or
postpone the date fixed for any payment of principal and/or interest on any Note, such amendment or waiver shall 

  
 24 

 
require the written consent of a majority in interest of all Holders of Notes other than CP IV and its Affiliates (determined by reference to the aggregate principal amount of Notes held by such
other Holders). 
 ARTICLE 15 

TRANSFER; ASSIGNMENT, ETC. 

Prior to an Initial Public Offering this Note shall not be assignable by Holder except with prior consent of a Board Majority of the Minority
(as such term is defined in the Issuer’s Certificate of Incorporation, as amended), such consent not to be unreasonably withheld and after an Initial Public Offering there shall be no such restriction on assignment. Subject to the foregoing
sentence, Holder may exchange any Note for Notes of different denominations, by surrendering such Note to the Issuer together with written instructions for the issuance of one or more new Notes specifying the respective principal amounts of each new
Note. Subject to any restrictions under applicable law, with the prior written consent of the Required Noteholders, a Holder may transfer a Note to a new Holder, by surrendering such Note to the Issuer duly endorsed for transfer or accompanied by a
duly executed instrument of transfer naming the new Holder, together with written instructions for the issuance of one or more new Notes specifying the respective principal amounts of each new Note and the name of each new Holder and each address
therefor. In each case, the Issuer shall simultaneously deliver to such Holder or its designee such new Notes and shall mark the surrendered Notes as canceled. In lieu of the foregoing procedures, a Holder may, with the prior written consent of the
Required Note Holders, assign a Note (in whole but not in part) to a new Holder by sending written notice to the Issuer of such assignment specifying the new Holder’s name and address; in such case, the Issuer shall promptly acknowledge such
assignment in writing to both the old and new Holder. The Issuer shall not be required to recognize any subsequent Holder of a Note unless and until the Issuer has received reasonable assurance that all applicable transfer taxes have been paid. 

ARTICLE 16 
 NO
WAIVER 
 No failure on the part of the Holder to exercise, and no delay in exercising, any right, remedy or power hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise by the Holder of any right, remedy or power hereunder preclude any other or future exercise of any other right, remedy or power. Each and every right, remedy or power hereby
granted to the Holder or allowed it by law or other agreement shall be cumulative and not exclusive of any other, and may be exercised by the Holder from time to time. 

ARTICLE 17 
 NOTICES

 Unless otherwise provided herein, any notices, consents, waivers or other communications required or permitted to be given under the
terms of this Note must be in 

  
 25 

 
writing and will be deemed to have been delivered: (i) upon receipt, when delivered personally, (ii) upon receipt, when sent by facsimile (provided confirmation of transmission is mechanically or
electronically generated and kept on file by the sending party) or (iii) one Business Day after deposit with a nationally recognized overnight delivery service, in each case properly addressed to the party to receive the same. The addresses and
facsimile numbers for such communications shall be: 
 If to the Issuer: 

Valeritas, Inc. 
 750 Route 202
South 
 Suite 100 

Bridgewater NJ 08807 

Attention: Chief Financial Officer 

Telephone: 908-927-9920 

Facsimile: 908-927-9927 
 With a
copy to: 
 Morgan, Lewis & Bockius, LLP 

502 Carnegie Center 
 Princeton
NJ 08540 
 Telephone number: 609-919-6600 

Facsimile number: 609-919-6701 

Attention: Steven M. Cohen, Esquire 

If to the Holder, to its address and facsimile number appearing in the Notes Register, or to such other address and/or facsimile number and/or
to the attention of such other Person as the recipient party has specified by written notice given to each other party five (5) Business Days prior to the effectiveness of such change. Written confirmation of receipt (x) given by the recipient of
such notice, consent, waiver or other communication, (y) mechanically or electronically generated by the sender’s facsimile machine containing the time, date, recipient facsimile number and an image of the first page of such transmission or (z)
provided by a courier or overnight courier service shall be rebuttable evidence of personal service, receipt by facsimile or receipt from a nationally recognized overnight delivery service in accordance with clause (i), (ii) or (iii) above,
respectively. 
 ARTICLE 18 

HOME OFFICE PAYMENT; MISCELLANEOUS 

The Issuer shall make all cash payments due on this Note in immediately available funds to a bank account of the Holder specified in writing
by the Holder to the Issuer. Whenever the sense of this Note requires, words in the singular shall be deemed to include the plural and words in the plural shall be deemed to include the singular. Paragraph headings are for convenience only and shall
not affect the meaning of this document. 

  
 26 

 ARTICLE 19 

CHOICE OF LAW AND VENUE; WAIVER OF
JURY TRIAL 
 This Note shall be governed by and construed in accordance with the law of the State of New
York. The Issuer hereby irrevocably consents to the exclusive jurisdiction of the United States District Court for the Southern District of New York or any New York State court sitting in New York City (and of the appropriate appellate courts
therefrom) in any suit, action or proceeding seeking to enforce any provision of, or based on any suit, action or proceeding arising out of or in connection with, this Note or the transactions contemplated hereby and irrevocably waives, to the
fullest extent permitted by law, any objection that it may now or hereafter have to the laying of the venue of any such suit, action or proceeding in any such court or that any such suit, action or proceeding which is brought in any such court has
been brought in an inconvenient forum. Process in any such suit, action or proceeding may be served on any party anywhere in the world, whether within or without the jurisdiction of any such court. Without limiting the foregoing, each party agrees
that service of process on such party as provided in this Article 19 shall be deemed effective service of process on such party. THE ISSUER HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR
RELATED TO THIS NOTE. 
 ARTICLE 20 

INDEMNITY 
 The
Issuer agrees to indemnify and hold harmless each Noteholder and each of their respective Affiliates, employees, representatives, shareholders, officers, directors, trustees, agents and advisors (any of the foregoing shall be an
“Indemnitee”) from and against any and all claims, liabilities, losses, damages, actions, reasonable attorneys’ fees and expenses (as such fees and expenses are incurred) and demands by any party, including the costs of
investigating and defending such claims, whether or not the Issuer, any Subsidiary thereof or the Person seeking indemnification is the prevailing party arising out of (i) the Notes or otherwise under this agreement, or any transaction contemplated
hereby or thereby, (ii) any claims against the Noteholders, or any of them, by any shareholder or other investor in or lender to the Issuer or any Subsidiary thereof, by any brokers or finders or investment advisers or investment bankers retained by
the Issuer or by any other third party, arising out of this Note; provided that no Indemnitee will be indemnified hereunder for its gross negligence or willful misconduct. 

ARTICLE 21 

SUBORDINATION 

This Note is subject to the terms and conditions of the Subordination Agreement. In the event of any conflict between any provision in this
Note and a provision in the Subordination Agreement, such provision of the Subordination Agreement shall control. No right, power or remedy granted to the Holder hereunder or under any document executed in connection with this Note shall be
exercised by the Holder in contravention of the Subordination Agreement. 

  
 27 

 ARTICLE 22 

AMENDED AND RESTATED NOTE 

This Note amends and restates that certain Note dated September 8, 2011, issued by the Issuer to the Holder, as amended by that certain
Amendment No. 1 to note, dated May 24, 2013 (the “Existing Note”). This Note is executed and delivered in substitution for, but not in satisfaction of, the Existing Note and shall not be deemed a novation of such indebtedness. 

[Remainder of this page intentionally left blank] 

  
 28 

 IN WITNESS WHEREOF, the Issuer has caused this instrument to be duly executed by its officer
thereunto duly authorized. 
 Dated: May 3, 2016 
  

			
	VALERITAS, INC.
		
	By:	 	

		 	Name: John Timberlake
		 	Title:   Chief Executive Officer

 ACKNOWLEDGED AND AGREED 

as of the date first above written: 
  

			
	WCAS CAPITAL PARTNERS IV, L.P.
		
	By:	 	 WCAS CP IV Associates LLC,
 its General
Partner

		
	By:	 	  

		 	Name:
		 	Title:

 [Signature Page to Amended and Restated WCAS Note] 

 IN WITNESS WHEREOF, the Issuer has caused this instrument to be duly executed by its officer
thereunto duly authorized. 
 Dated: May 3, 2016 
  

			
	VALERITAS, INC.
		
	By:	 	  

		 	Name:
		 	Title:

 ACKNOWLEDGED AND AGREED 

as of the date first above written: 
  

			
	 WCAS CAPITAL PARTNERS IV, L.P.

		
	 By:
	 	 WCAS CP IV Associates LLC,

		 	 its General Partner

		
	 By:
	 	 

		 	Name: Sean M. Traynor
		 	 Title:Exhibit 10.1

 

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

Fixed
Conversion Price (subject to adjustment herein): $0.2043

 

$7,500,000

 

THIRD
AMENDED AND RESTATED 

SENIOR
SECURED CONVERTIBLE DEBENTURE

DUE
MAY 31, 2019

 

THIS
THIRD AMENDED AND RESTATED SENIOR SECURED CONVERTIBLE DEBENTURE due May 31, 2019 (this “Debenture”) is made
by InterCloud Systems, Inc., a Delaware corporation, (the “Company”), having its principal place of business
at 1030 Broad Street, Suite 102, Shrewsbury, NJ 07702, and amends and restates the 10% Original Issue Discount Senior Secured
Convertible Debenture (as subsequently amended and restated, amended and otherwise modified) originally issued pursuant to that
certain Securities Purchase Agreement (the “Purchase Agreement”), dated December 29, 2015, by and between the
Holder (as defined below) and the Company.

 

FOR
VALUE RECEIVED, the Company promises to pay in cash 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 May 31, 2019 (the “Maturity Date”)
or such earlier date as this Debenture is required or permitted to be repaid as provided hereunder, and to pay interest to the
Holder on the aggregate unconverted and then outstanding principal amount of this Debenture in accordance with the provisions
hereof. As of September 1, 2016, the date of this amendment and restatement, the outstanding principal balance of this Debenture
is $5,930,555. 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:

 

“4.67%
Notes” means the Second Amended and Restated Senior Secured Convertible Note of the Company issued to JGB (Cayman) Concord
Ltd., as may be subsequently amended, restated, modified and supplemented.

 

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

 

“Applicable
Interest Rate” means an annual rate equal to 4.67%, and, in any event, following the occurrence and during the continuance
of an Event of Default, an annual rate equal to seven percent (7%).

 

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

 

“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.

 

    	 	2	 

     

    

 

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

 

“Change
of Control Transaction” means the occurrence after the date hereof of any of (a) an acquisition after the date hereof
by an individual or legal entity or “group” (as described in Rule 13d-5(b)(1) promulgated under the Exchange Act)
of effective control (whether through legal or beneficial ownership of capital stock of the Company, by contract or otherwise)
of in excess of fifty percent (50%) of the voting securities of the Company (other than by means of conversion or exercise of
the Debenture and the Securities issued together with the Debenture), (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” means the common stock of the Company, $0.0001 par value per share.

 

“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 the 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 the Guarantors in connection with borrowed money actually paid by the Company and the Guarantors in such period, (ii) the
provision for federal, state, local and foreign income taxes payable by the Company and the Guarantors for such period, (iii) depreciation
and amortization expense and (iv) other non-recurring expenses of the Company and the 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 the 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
Date” shall have the meaning set forth in Section 4(a).

 

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

 

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

 

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

 

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

 

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

 

“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.

 

“Distributions”
shall have the meaning set forth in Section 5(c).

 

“Dollar
Volume Amount” means, with respect to any Trading Day, seven percent (7%) 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 Days immediately
prior to such Trading Day. 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 occurring
by virtue of one or more Notices of Conversions, if any, (b) the Company shall have paid all liquidated damages and other amounts
owing to the Holder in respect of this Debenture, (c) all of the Conversion Shares 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 or any information
requirements of paragraph (i) of 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) and
the issuance of such Conversion Shares would not violate the rules and regulations of any such Trading Market, (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 this Debenture, (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, (h) there has been no public announcement of
a pending or proposed Fundamental Transaction or Change of Control Transaction that has not been consummated, (i) the applicable
Holder is not in possession of any information provided by the Company that constitutes, or may constitute, material non-public
information, and (j) the Common Stock is DTC eligible and the Company and its transfer agent is participating in DTC’s Fast
Automated Securities Transfer Program.

 

“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.

 

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

 

“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.

 

    	 	5	 

     

    

 

“Fixed
Conversion Price” means $0.2043, subject to adjustment as provided herein.

 

“Forced
Conversion” shall have the meaning set forth in Section 6(b).

 

“Forced
Conversion Amount” shall have the meaning set forth in Section 6(b).

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

“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.

 

“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(c).

 

“Mandatory
Default Amount” means the sum of (a) 110% of the outstanding principal amount of this Debenture plus 100% of accrued
and unpaid interest thereon, and (b) all other amounts, costs, expenses and liquidated damages due in respect of this Debenture.

 

    	 	6	 

     

    

 

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

 

“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).

 

“Original
Issue Date” means December 29, 2015, regardless of any transfers of any Debenture or amendments to the Debenture and
regardless of the number of instruments which may be issued to evidence such Debenture.

 

“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, (d) Indebtedness outstanding on the Original Issue
Date and identified on Schedule A hereto, and (e) the 4.67% Note.

 

“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 30, 2016 and the FGI Litigation shall be dismissed, settled or finally
adjudicated by such date.

“Person”
means any natural person, corporation, partnership, limited liability company, limited liability partnership, joint venture, trust,
association, company, or other entity, and any governmental authority or self-regulatory organization.

 

    	 	7	 

     

    

 

“Prepayment
Date” shall have the meaning set forth in Section 2(d).

 

“Prepayment
Notice” shall have the meaning set forth in Section 2(d).

 

“Principal
Market” means the principal Trading Market where the Common Stock is then listed or quoted.

 

“Purchase
Rights” shall have the meaning set forth in Section 5(b).

 

“Secured
Debt Obligation” means, on any date of determination, the aggregate outstanding principal amount of the Debenture 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).

 

“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 thereunder (other than in shares of Common Stock) 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(d).

 

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

 

“Threshold
Price” shall have the meaning set forth in Section 6(b).

 

“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 Global Market, the Nasdaq Global Select Market, the Nasdaq Capital Market, the
New York Stock Exchange or any U.S. trading market operated by the OTC Markets Group, Inc. (or any successors to any of the foregoing).

 

    	 	8	 

     

    

 

“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 (based on a
Trading Day from 9:30 a.m. (local time in New York City, New York) to 4:00 p.m. (local time in New York City, New York)), (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 OTC Markets Group, 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 of the then outstanding principal amount of the Debentures 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, (iv) any accounts receivable that are more
than sixty (60) days past due, 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; Late Fees; Prepayment.

 

a)        Payment of Interest in Cash. The Company shall pay interest to the Holder on the aggregate unconverted and then outstanding
principal amount of this Debenture at the Applicable Interest Rate, payable monthly in arrears as of the last Trading Day of each
calendar month and on the Maturity Date (if any such date is not a Business Day, then the applicable payment shall be due on the
next succeeding Business Day) in cash.

 

b)        Interest Calculations. Interest shall be calculated on the basis of a 360-day year and the actual number of days elapsed,
and shall accrue daily, until payment in full of the outstanding principal, together with all accrued and unpaid interest, liquidated
damages and other amounts which may become due hereunder, has been made. Interest hereunder will be paid to the Person in whose
name this Debenture is registered on the records of the Company regarding registration and transfers of this Debenture (the “Debenture
Register”). 

 

    	 	9	 

     

    

 

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

 

d)       Prepayment. At any time, and from time to time, the Company may deliver a notice to the Holder (a “Prepayment
Notice”) of its irrevocable election to prepay all or any portion of the then outstanding principal amount of this Debenture
on the tenth (10th) Trading Day (the “Prepayment Date”) following the date of such Prepayment Notice, for cash
in an amount equal to 110% of the sum of (i) the applicable portion of the outstanding principal amount of this Debenture being
prepaid and (ii) all accrued but unpaid interest thereon. The Company covenants and agrees that it will honor all Notices of Conversion
tendered from the time of delivery of the Prepayment Notice through the date all amounts owing thereon are paid in full. 

 

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 may be transferred or exchanged only in compliance with applicable federal and
state securities laws and regulations. 

 

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

 

    	 	10	 

     

    

 

Section
4.         Conversion.

 

a)       Voluntary Conversion. At any time, and from time to time, until this Debenture is no longer outstanding, this Debenture
shall be convertible, in whole or in part, into shares of Common Stock (subject to the conversion limitations set forth in Section 4(d)
hereof) at the option of the Holder as provided herein. 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 (the “Conversion Price”) in effect on any Conversion Date shall
be equal to the lowest of: (a) the Fixed Conversion Price, (b) 80% of the average of the VWAPs for each of the five (5) consecutive
Trading Days immediately prior to the applicable Conversion Date, and (c) 85% of the VWAP for the Trading Day immediately preceding
the applicable Conversion Date.

 

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 June 29, 2016, shall be free of restrictive legends and trading restrictions
(other than those which may be required by the Purchase Agreement) representing the number of Conversion Shares being acquired
upon the conversion of this Debenture and (B) a wire transfer of immediately available funds in the amount of accrued and unpaid
interest. On or after June 29, 2016, the Company shall deliver any certificate or certificates required to be delivered by the
Company under this Section 4(c) electronically through DTC without any restrictive legends 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. The
Company shall cause, at its own expense, Pryor Cashman LLP to provide any legal opinions required to deliver shares free of restrictive
legends pursuant to this Section 4(c). 

 

    	 	11	 

     

    

 

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 upon a properly noticed conversion. If the Company fails for any reason to deliver to the
Holder such certificate or certificates pursuant to this Section 4(c) 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 this Section 4(c) 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.

 

    	 	12	 

     

    

 

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.

 

    	 	13	 

     

    

 

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,
each as herein provided, free from preemptive rights or any other actual contingent purchase rights of Persons other than the
Holder, not less than such aggregate number of shares of the Common Stock as shall (subject to the terms and conditions set forth
herein and in the Purchase Agreement) be issuable upon the conversion of the then outstanding principal amount of this Debenture.
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 non-assessable.

 

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.

 

    	 	14	 

     

    

 

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.

 

    	 	15	 

     

    

 

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, this Debenture), (ii) subdivides outstanding shares of Common Stock into a larger number of shares,
(iii) combines (including by way of a reverse stock split) outstanding shares of Common Stock into a smaller number of shares
or (iv) issues, in the event of a reclassification of shares of the Common Stock, any shares of capital stock of the Company,
then the Fixed Conversion Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common
Stock (excluding any treasury shares of the Company) outstanding immediately before such event, and of which the denominator shall
be the number of shares of Common Stock outstanding immediately after such event. Any adjustment made pursuant to this Section
shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend
or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification.

 

b)       Subsequent 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).

 

    	 	16	 

     

    

 

c)       Pro Rata Distributions. During such time as this Debenture is outstanding, if the Company shall declare or make any dividend
or other distribution of its assets (or rights to acquire its assets) to holders of shares of Common Stock, by way of return of
capital or otherwise (including, without limitation, any distribution of cash, stock or other securities, property or options
by way of a dividend, spin off, reclassification, corporate rearrangement, scheme of arrangement or other similar transaction)
(a "Distribution"), at any time after the issuance of this Debenture, then, in each such case, the Holder shall
be entitled to participate in such Distribution to the same extent that the Holder would have participated therein if the Holder
had held the number of shares of Common Stock acquirable upon complete conversion of this Debenture (without regard to any limitations
on 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).

 

d)       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 in accordance with the provisions of this
Section 5(d) 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.

 

    	 	17	 

     

    

 

e)       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.

 

f)        Notice to the Holder.

 

i.         Adjustment to Fixed Conversion Price. Whenever the Fixed 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 Fixed 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. 

 

    	 	18	 

     

    

 

Section
6.         Optional Redemption at the Election of the Holder; Forced Conversion.  

 

a)       Commencing
on May 17, 2016, the Holder shall have the right, at its option, to require the Company to redeem in cash up to one hundred sixty
nine thousand four hundred forty five dollars ($169,445) of the outstanding principal amount of this Debenture plus accrued and
unpaid interest thereon (the “Monthly Allowance”) per calendar month (the “Holder Redemption Right”).
The Holder may exercise its Holder Redemption Right for a calendar month by sending a written notice, the form of which is attached
hereto as Annex B (each a “Holder Redemption Notice”), to the Company at any time on the last Trading
Day of such calendar month, which Holder Redemption Notice shall specify the principal amount to be redeemed and the amount of
accrued and unpaid interest thereon (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 to the Holder in cash by wire
transfer of immediately available funds. Provided that no Event of Default of has occurred and is continuing, the Monthly Allowance
for a given calendar month shall be reduced (but not below zero) by the principal amount of this Debenture converted by the Holder
pursuant to Section 2 hereof (and for which conversions the Company has actually delivered the Conversion Shares to the Holder)
during such calendar month. For the avoidance of doubt, to the extent that the principal amount of this Debenture converted by
the Holder during a particular calendar month exceeds the Monthly Allowance such excess amount shall not be carried over
to reduce the Monthly Allowance for any subsequent calendar month. 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(a)
an additional amount equal to the FGI Resolution Amount, in whole or in part, at any time and from time to time, 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.

 

b)       Forced Conversion. If, at any time after September 1, 2016, (i) the VWAP for Common Stock equals or exceeds two hundred
percent (200%) of the Fixed Conversion Price (the “Threshold Price”) for any five (5) consecutive Trading Days
(the “Threshold Period”), and (ii) the Equity Conditions have been satisfied on each Trading Day during the
Threshold Period and each of the ten (10) consecutive Trading Days immediately prior to the first day of the Threshold Period,
then the Company shall have the option, within two (2) Trading Days after the end of any such Threshold Period, to deliver a written
notice to the Holder (a “Forced Conversion Notice”) to cause the Holder to convert, pursuant to Section 4 hereof,
a principal amount of this Debenture (a “Forced Conversion”), during the thirty (30) Trading Day period after
the Holder’s receipt of the Forced Conversion Notice (the “Forced Conversion Period”), equal to the lesser
of (1) the Dollar Volume Amount for date of the Forced Conversion Notice and (2) one million dollars ($1,000,000) (such lesser
amount, the “Forced Conversion Amount”); provided, however, if the Equity Conditions cease to be satisfied
at any time during the Forced Conversion Period or the VWAP for the Common Stock on any Trading Day during the Forced Conversion
Period is less than the Threshold Price, then the Holder shall be under no further obligation with respect to such Forced Conversion.
The Holder shall effect any Forced Conversion by delivering one or more Notices of Conversions pursuant to Section 4 at any time,
and from time to time, during the applicable Forced Conversion Period, for an aggregate principal amount equal to the Forced Conversion
Amount. For the avoidance of doubt, the Company may deliver more than one Forced Conversion Notice during the term of this Debenture,
provided, that it may not deliver a Forced Conversion Notice during any Forced Conversion Period unless there is no further Forced
Conversion Amount that is as yet unconverted. For the further avoidance of doubt, nothing in this Section 6(b) shall be deemed
to limit the Holder’s right to voluntarily convert all or any portion of this Debenture, at any time, and from time to time,
in accordance with Section 4, and the Holder may submit Notices of Conversion for a principal amount of this Debenture in excess
of the Forced Conversion Amount during any Forced Conversion Period. The Company will not deliver a Forced Conversion Notice hereunder
unless it also delivers a Forced Conversion Notice under the 4.67% Note.

 

    	 	19	 

     

    

 

Section
7.         Covenants.

 

a)       As long as any portion of this Debenture remains outstanding, unless the Holder 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;

 

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;

 

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;

 

    	 	20	 

     

    

 

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 or Fundamental Transaction;

 

vii.     repay, repurchase or offer to repay, repurchase or otherwise acquire any Equity Securities; 

 

viii.    repay, repurchase or offer to repay, repurchase or otherwise acquire any Indebtedness other than (i) the Debentures and (ii) payments
by the Company in the form of shares of Common Stock permitted by the Subordination Agreements;

 

ix.       pay cash dividends or distributions on any Equity Securities;

 

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.      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 quarter upon delivery
of a compliance certificate for each such calendar quarter as provided in Section 7(d)), a ratio of Working Capital to Secured
Debt Obligation of not less than 2.00:1.00. 

 

d)       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
and the ratio of Working Capital to Secured Debt Obligation, in each case, for such fiscal quarter. Such compliance certificate
shall not contain any material, non-public information and shall be derived solely the Company’s publicly available financial
information. 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) and Section 7(c). 

 

    	 	21	 

     

    

 

e)       DACAs. The Company shall keep all deposit account control agreements with PNC Bank, National Association and Iberia Bank
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 and Iberia Bank. Neither the Company nor any Subsidiary shall
have any deposit accounts that are not subject to a deposit account control agreement in favor the Holder.

 

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, in any case, whether on a Conversion Date,
the Maturity Date or Holder Redemption Date or by acceleration or otherwise;

 

ii.        the Company shall fail to observe or perform any other covenant or agreement contained in this Debenture (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 any provision
of Sections 7 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)
or any material breach shall occur under (A) any of the Transaction Documents or (B) any other material agreement, lease, document
or instrument to which the Company or any Subsidiary is obligated (and not covered by clause (vi) below);

 

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

 

    	 	22	 

     

    

 

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

 

vi.       the Company or any Subsidiary (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.      (a) the Common Stock shall not be eligible for listing or quotation for trading on a Trading Market and shall not be eligible
to resume listing or quotation for trading thereon within five (5) Trading Days, (b) the shares of Common Stock are suspended
from trading or otherwise not listed or quoted for trading on a Trading Market for five (5) Trading Days (which need not be consecutive)
during any twelve (12) month period, or (c) the shares of Common Stock are suspended from trading or otherwise not listed or quoted
for trading on a Trading Market for three (3) consecutive 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 this Debenture 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 Public Information Failure occurs and continues uncured for ten (10) consecutive Trading Days;

 

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”; 

 

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;

 

    	 	23	 

     

    

 

xiii.     an Event of Default (as defined therein) occurs and is continuing under the 4.67% Note; or

 

xiv.     there shall have occurred any significant and material adverse change in the business, operations, properties or condition (financial
or otherwise) of the Company or any Significant Subsidiary, which, in the reasonable opinion of the Holder acting in good faith,
impairs its security or increases its risk.

 

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). For the avoidance of doubt, in no event shall the Mandatory Default Amount
(or any portion thereof) be payable in shares of Common Stock. Upon the payment in full of the Mandatory Default Amount in cash,
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) (or such later time expressly specified elsewhere in this Debenture)
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) (or such later time expressly specified elsewhere in this Debenture)
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.

 

    	 	24	 

     

    

 

b)       Absolute Obligation. Except as expressly provided herein, no provision of this Debenture shall alter or impair the obligation
of the Company, which is absolute and unconditional, to pay the principal of, liquidated damages and accrued interest, as applicable,
on this Debenture at the time, place, and rate, and in the coin or currency, herein prescribed. This Debenture is a direct debt
obligation of the Company. 

 

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.

 

    	 	25	 

     

    

 

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. 

 

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.

 

    	 	26	 

     

    

 

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)

 

    	 	27	 

     

    

 

IN
WITNESS WHEREOF, the parties below have caused this Debenture to be duly executed by a duly authorized officer as September 1,
2016.

 

	 	InterCloud Systems, inc.
	 	 	 
	 	By:	                      
	 	Name:	 
	 	Title:	 

 

	 	Facsimile No.  for delivery of Notices: 	 
	 	E-mail Address for delivery of Notices:	 

 

	 	JGB (CAYMAN) WALTHAM LTD.
	 	 	 
	 	By:	             
	 	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

 

    	 	28	 

     

    

 

ANNEX
A

 

 NOTICE
OF CONVERSION

 

The
undersigned hereby elects to convert principal under the Third Amended and Restated Senior Convertible Debenture 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. No fee will be charged to the holder for any
conversion.

 

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.

 

Conversion
calculations: 

Date
to Effect Conversion:

 

Principal
Amount of Debenture to be Converted:

 

Accrued
and unpaid interest thereon:

 

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:                                                        

 

    	 	29	 

     

    

 

ANNEX
B

 

HOLDER
REDEMPTION NOTICE

 

The
undersigned hereby exercises its right to require the Company to redeem the Third Amended and Restated Senior Secured Convertible
Debenture due May 31, 2019 (the “Debenture”) of InterCloud Systems, Inc., a Delaware corporation (the “Company”),
in accordance with Section 6(a) 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:

 

Signature:

 

Name:

 

Wire
Instructions:

 

    	 	30	 

     

    

 

Schedule
1

 

CONVERSION
SCHEDULE

 

The
Third Amended and Restated Senior Convertible Debenture in the aggregate principal amount of $7,500,000 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
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 

 

 

31

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00262-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00262-of-00352.parquet"}]]