Document:

Exhibit 10.1

 

SECURITIES PURCHASE AGREEMENT

 

This SECURITIES PURCHASE
AGREEMENT (this “Agreement”), dated as of March 28, 2013, is entered into by and among Pacific Ethanol,
Inc., a Delaware corporation with offices located at 400 Capitol Mall, Suite 2060, Sacramento, CA 95814 (the “Company”),
and each of the investors listed on the Schedule of Buyers attached hereto (individually, a “Buyer” and collectively,
the “Buyers”).

 

RECITALS

 

A.The Company
and each Buyer desire to enter into this transaction to purchase the Notes (as defined below) set forth herein pursuant to a
currently effective shelf registration statement on Form S-3, which has sufficient  availability for the issuance of
securities of the Company (Registration Number 333-180731) (the
“Registration Statement”), which Registration Statement has been declared effective in accordance with the
Securities Act of 1933, as amended (the “1933 Act”), by the United States Securities and Exchange
Commission (the “SEC”).

 

B.The Company has
authorized the issuance of one or more series of senior subordinated convertible debentures, in the form attached hereto to the
applicable Supplemental Indenture (as defined below)(the “Notes”), which Notes shall be convertible into shares
of common stock, $0.001 par value per share, of the Company (the “Common Stock”) (as converted, collectively,
together with any shares of Common Stock issuable as interest or otherwise pursuant to such Notes, the “Conversion Shares”)
in accordance with, and issued pursuant to and by, the provisions of an Indenture dated as of the Series A Closing Date (as defined
below), by and between the Company and U.S. Bank National Association, as trustee (the “Trustee”), in substantially
the form attached hereto as Exhibit A-1 (as amended and/or supplemented from time to time, including, without limitation,
by any Supplemental Indenture (as defined below), the “Indenture”).

 

C. Each Buyer wishes
to purchase, and the Company wishes to sell at the Series A Closing (as defined below), upon the terms and conditions stated in
this Agreement, (a) a Note in the aggregate original principal amount set forth opposite such Buyer’s name in column (3)
on the Schedule of Buyers (which aggregate principal amount for all Buyers shall not exceed $6 million (each, an “Series
A Note”, and collectively, the “Series A Notes”)(as converted, collectively, the “Series
A Conversion Shares”) issued pursuant to one or more supplemental indentures substantially in the form attached hereto
as Exhibit A-2 (each, a “Series A Supplemental Indenture”), (b) a warrant to acquire up to that
aggregate number of additional shares of Common Stock set forth opposite such Buyer’s name in column (5) on the Schedule
of Buyers, in the form attached hereto as Exhibit B-1 (the “Series A Warrants”) (as exercised,
collectively, the “Series A Warrant Shares”) and (c) a warrant to acquire up to that aggregate number of additional
shares of Common Stock set forth opposite such Buyer’s name in column (6) on the Schedule of Buyers, in the form attached
hereto as Exhibit B-2 (the “Series B Warrants”, and together with the Series A Warrants,
the “Warrants”) (as exercised, collectively, the “Series B Warrant Shares”, and together
with the Series A Warrant Shares, the “Warrant Shares”).

 

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D.Subject to the
terms and conditions set forth in this Agreement, the Company may require each Buyer to participate in the Series B Closing (as
defined below) for the purchase by such Buyer, and the sale by the Company, of a Note in an original principal amount of set forth
opposite such Buyer's name in column (4) on the Schedule of Buyers (which aggregate principal amount for all Buyers shall not exceed
$8 million) (each an “Series B Note”, and collectively, the "Series B Notes")(as converted,
collectively, the "Series B Conversion Shares" and, collectively with the Series A Conversion Shares, the "Conversion
Shares") issued pursuant to one or more supplemental indentures substantially in the form attached hereto as Exhibit
A-3 (each, a “Series B Supplemental Indenture”, and together with the Series A Supplemental Indentures,
the “Supplemental Indentures”).

 

E.The Notes are
entitled to interest, amortization payments and certain other amounts, which, at the option of the Company and subject to certain
conditions, may be paid in shares of Common Stock (the "Interest Shares") or in cash.

 

G.The Notes, the
Conversion Shares, the Interest Shares, the Warrants and the Warrant Shares are collectively referred to herein as the “Securities.”

 

AGREEMENT

 

NOW, THEREFORE, in
consideration of the premises and the mutual covenants contained herein and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the Company and each Buyer hereby agree as follows:

 

		1.	PURCHASE AND SALE OF NOTES AND WARRANTS.

 

(a)               
Notes and Warrants.

 

(i)                
Series A Closing. Subject to the satisfaction (or waiver) of the conditions set forth in Sections 6(a) and 7(a) below,
the Company shall issue and sell to each Buyer, and each Buyer severally, but not jointly, shall purchase from the Company on the
Series A Closing Date (as defined below), a Series A Note in the original principal amount as is set forth opposite such Buyer’s
name in column (3) on the Schedule of Buyers along with (x) a Series A Warrant to acquire up to that aggregate number of Series
A Warrant Shares as is set forth opposite such Buyer’s name in column (5) on the Schedule of Buyers and (y) a Series B Warrant
to acquire up to that aggregate number of Series B Warrant Shares as is set forth opposite such Buyer’s name in column (6)
on the Schedule of Buyers (the “Series A Closing”).

 

(ii)              
Series B Closing. Subject to the satisfaction (or waiver) of the conditions set forth in Sections 1(b)(ii), 6(b)
and 7(b) below, the Company shall issue and sell to each Buyer, and each Buyer severally, but not jointly, shall purchase from
the Company on the Series B Closing Date (as defined below), a Series B Note in the original principal amount as is set forth opposite
such Buyer’s name in column (4) on the Schedule of Buyers (the “Series B Closing”).

 

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(b)              
Closings. The Series A Closing and the Series B Closing are each referred to in this Agreement as a “Closing”.
Each Closing shall occur at the offices of Greenberg Traurig, LLP, MetLife Building, 200 Park Avenue, New York, NY 10166.

 

(i)                
Series A Closing. The date and time of the Series A Closing (the “Series A Closing Date”) shall
be 10:00 a.m., New York time, on the first (1st) Business Day (as defined below) on which the conditions to the Series
A Closing set forth in Sections 6(a) and 7(a) below are satisfied or waived (or such later date as is mutually agreed to by the
Company and each Buyer). As used herein “Business Day” means any day other than a Saturday, Sunday or other
day on which commercial banks in New York, New York are authorized or required by law to remain closed.

 

(ii)              
Series B Closing.

 

(1)               Series
B Closing Date. Subject to the satisfaction (or waiver) of the conditions set forth in this Section 1(b)(ii) and Sections
6(b) and 7(b) below, the date and time of the Series B Closing shall be 10:00 a.m., New York time on the third
(3rd) Trading Day after the Stockholder Approval Date (as defined below) (or such later date as is mutually agreed
to by the Company and each Buyer) (the “Series B Closing Date,” and the Series A Closing Date and the
Series B Closing Date, each, a "Closing Date”). Notwithstanding anything herein
to the contrary, if the Series B Closing Date has not occurred by July 1, 2013 (or such later date as mutually agreed upon by
the Company and each Buyer) (the “Series B Closing Expiration Date”), no Series B Closing shall occur
hereunder.

 

(2)              
Series B Closing Mechanics. Subject to the satisfaction (or waiver) of the conditions
to closing set forth in this Section 1(b)(ii) and Sections 6(b) and 7(b) below, on the Stockholder Approval Date, the
Company shall deliver a written notice (the “Series B Closing Notice”, and the date thereof the “Series
B Closing Notice Date”) to the Buyers, executed by the chief executive officer or chief financial officer of the Company,
(x) certifying that (I) the Stockholder Approval Date has occurred, (II) no Equity Conditions Failure (as
defined in the Series A Notes) exists (or detailing any such Equity Conditions Failure and specifying that no Series B Closing
shall occur unless the Buyers waiver such Equity Conditions Failure) and (III) both the Series B Closing Volume Condition
(as defined below) and the Series B Closing Price Condition (as defined below) have been satisfied (or
detailing any failure to satisfy such conditions and specifying that no Series B Closing shall occur unless the Buyers waivers
such failure), in each case, as of the Series B Closing Notice Date (the “Series B Notice Conditions”), (y)
confirming the Series B Note Amount to be purchased by such Buyer and the proposed Series B Closing Date and (z) attaching the
draft Series B Supplemental Indenture and Prospectus Supplement (as defined below) with respect thereto. The Series B Closing
Notice shall be irrevocable. If the Company fails to deliver a Series B Closing Notice to each Buyer on the Stockholder Approval
Date, the Company shall be deemed to have delivered a Series B Closing Notice on the Stockholder Approval Date and certified that
Series B Notice Conditions have been satisfied. For the avoidance of doubt, the Buyers shall not be required to consummate
any Series B Closing if on the Series B Closing Date the Stockholder Approval has not been obtained, there is an Equity Conditions
Failure (as defined in the Series A Notes) or if either the Series B Closing Volume Condition
(as defined below) or the Series B Closing Price Condition (as defined below) has not been satisfied
in full on the Series B Closing Date.

 

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(c)              
Purchase Price. The aggregate purchase price for the Series A Notes to be purchased by each Buyer (the “Series
A Purchase Price”) shall be the amount set forth opposite such Buyer’s name in column (7) on the Schedule of Buyers.
The aggregate purchase price for the Series B Notes to be purchased by each Buyer (the “Series B Purchase Price”,
and together with the Series A Purchase Price, each, a “Purchase Price”) shall be the amount set forth opposite
such Buyer’s name in column (8) on the Schedule of Buyers. The Buyers and the Company agree that for purposes of applying
Section 305 of the Internal Revenue Code of 1986, as amended (the "Code"), the Company will apply Section 1273(c)(2)
of the Code as if the Notes and the Warrants constitute an "investment unit" for purposes of Section 1273(c)(2) of the
Code. The parties agree that the Purchase Price shall be allocated between each Note and Warrant in accordance with Section 1273(c)(2)
of the Code and Treasury Regulation Section 1.1273-2(h) as mutually agreed to by the parties, and none of the parties shall take
any position inconsistent with such allocation in any tax return or in any judicial or administrative proceeding in respect of
taxes.

 

(d)             
Form of Payment.

 

(i)                
On the Series A Closing Date, (A) each Buyer shall pay its respective Series A Purchase Price (less any amounts permitted
to be withheld by such Buyer pursuant to Section 4(j)) to the Company for the Series A Notes to be issued and sold to such Buyer
at the Series A Closing, by wire transfer of immediately available funds in accordance with the Company’s written wire instructions
and (B) the Company shall deliver to each Buyer (x) a Series A Note in the aggregate original principal amount as is set forth
opposite such Buyer’s name in column (3) of the Schedule of Buyers, (y) a Series A Warrant pursuant to which such Buyer shall
have the right to acquire up to such aggregate number of Series A Warrant Shares as is set forth opposite such Buyer’s name
in column (5) of the Schedule of Buyers and (z) a Series B Warrant pursuant to which such Buyer shall have the right to acquire
up to that aggregate number of Series B Warrant Shares as is set forth opposite such Buyer’s name in column (6) on the Schedule
of Buyers, in each case, duly executed on behalf of the Company and registered in the name of such Buyer or its designee.

 

(ii)              
On the Series B Closing Date, (A) each Buyer shall pay the Series B Purchase Price (less
any amounts permitted to be withheld by such Buyer pursuant to Section 4(j)) to the Company for the Series B Notes to be issued
and sold to such Buyer at the Series B Closing, by wire transfer of immediately available funds
in accordance with the Company’s written wire instructions and (B) the Company shall deliver to each
Buyer a Series B Note in the aggregate original principal amount as is set forth opposite such Buyer’s name in column
(4) of the Schedule of Buyers duly executed on behalf of the Company and registered in the name of such
Buyer or its designee.

 

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(e)              
Rank. Each Buyer acknowledges that the Series A Notes and the Series B Notes shall rank pari passu with each other.

 

		2.	BUYER’S REPRESENTATIONS AND WARRANTIES.

 

Each Buyer, severally
and not jointly, represents and warrants to the Company with respect to only itself that, as of the date hereof and as of each
Closing Date:

 

(a)               
Organization; Authority. Such Buyer is an entity duly organized, validly existing and in good standing under
the laws of the jurisdiction of its organization with the requisite power and authority to enter into and to consummate the transactions
contemplated by the Transaction Documents (as defined below) to which it is a party and otherwise to carry out its obligations
hereunder and thereunder.

 

(b)              
Validity; Enforcement. This Agreement has been duly and validly authorized, executed and delivered on behalf
of such Buyer and constitutes the legal, valid and binding obligations of such Buyer enforceable against such Buyer in accordance
with their respective terms, except as such enforceability may be limited by general principles of equity or applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation and other similar laws relating to, or affecting generally, the enforcement
of applicable creditors’ rights and remedies.

 

(c)               
No Conflicts. The execution, delivery and performance by such Buyer of this Agreement and the consummation
by such Buyer of the transactions contemplated hereby and thereby will not (i) result in a violation of the organizational documents
of such Buyer, (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become
a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture
or instrument to which such Buyer is a party, or (iii) result in a violation of any law, rule, regulation, order, judgment or decree
(including federal and state securities laws) applicable to such Buyer, except in the case of clauses (ii) and (iii) above, for
such conflicts, defaults, rights or violations which would not, individually or in the aggregate, reasonably be expected to have
a material adverse effect on the ability of such Buyer to perform its obligations hereunder.

 

(d)              
Certain Trading Activities. Such Buyer has not directly or indirectly,
nor has any Person acting on behalf of or pursuant to any understanding with such Buyer, engaged in any transactions in the securities
of the Company (including, without limitation, any Short Sales (as defined below) involving the Company’s securities) during
the period commencing as of the time that such Buyer was first contacted by the Placement Agent (as defined below) regarding the
specific investment in the Company contemplated by this Agreement and ending immediately prior to the execution of this Agreement
by such Buyer. “Short Sales” means all “short sales” as defined in Rule 200 promulgated under Regulation
SHO under the 1934 Act (as defined below) (but shall not be deemed to include the location and/or reservation
of borrowable shares of Common Stock). Such Buyer is aware that Short Sales and other hedging activities may be subject
to applicable federal and state securities laws, rules and regulations and such Buyer acknowledges that the responsibility of
compliance with any such federal or state securities laws, rules and regulations is solely the responsibility of such Buyer.

 

(e)               
Receipt of Prospectus Supplements. Such Buyer acknowledges receipt of the
Company’s Prospectus Supplements relating to the offering of the Securities, which Prospectus Supplements are required to
be delivered to such Buyer pursuant to Section 4(c) below. Such Buyer acknowledges that it has had an opportunity to review the
Prospectus Supplements prior to committing to purchase any of the Securities. Such Buyer represents and warrants to the Placement
Agent that, in connection with the offering of the Securities, it has not received any Free Writing Prospectus, as defined in
Rule 405 under the 1933 Act, and in making its decision to purchase the Securities has relied solely upon the Company’s
disclosure in the Prospectus Supplements and the documents incorporated therein by reference.

 

(f)              
Independent Negotiation of Transaction. Such Buyer understands that
nothing in this Agreement, the Prospectus Supplements or any other materials presented to such Buyer in connection with the purchase
and sale of the Securities constitutes legal, tax or investment advice from the Placement Agent. Such Buyer is knowledgeable, sophisticated
and experienced in making, and is qualified to make decisions with respect to, investments in securities presenting an investment
decision like that involved in the purchase of the Securities. Such Buyer has independently negotiated and entered into this Agreement
and the transactions contemplated hereby and has consulted such legal, tax and investment advisors and made such investigation
as it, in its sole discretion, has deemed necessary or appropriate in connection with its purchase of the Securities. Such Buyer
confirms that it is not relying on any representation, warranty or other statement made by the Placement Agent. 

 

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(g)               
FINRA. Such Buyer represents that (i) it has had no position, office
or other material relationship within the past three years with the Company or persons known to it to be affiliates of the Company,
(ii) it is not a FINRA member or an Associated Person (as such term is defined under the NASD Membership and Registration Rules
Section 1011) as of the Closing, and (iii) neither such Buyer nor any group of investors (as identified in a public filing made
with the Commission) of which such Buyer is a part in connection with the offering of the Securities acquired, or obtained the
right to acquire, 20% or more of the Common Stock (or securities convertible into or exercisable for Common Stock) or the voting
power of the Company on a post-transaction basis.

 

(h)              
Reliance. Such Buyer acknowledges and agrees that the Placement Agent shall
be a third party beneficiary of the representations and warranties contained in this Section 2 and that the Placement Agent shall
be entitled to rely on such representations and warranties as of such Buyer made such representations and warranties directly
to the Placement Agent.

 

		3.	REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

 

The Company represents
and warrants to each of the Buyers that, as of the date hereof and as of each Closing Date:

 

(a)                Organization
and Qualification. Each of the Company and its Restricted Subsidiaries (as defined in the Notes) are entities
duly organized and validly existing and in good standing under the laws of the jurisdiction in which they are formed, and
have the requisite power and authorization to own their properties and to carry on their business as now being conducted and
as presently proposed to be conducted. Each of the Company and each of its Restricted Subsidiaries is duly qualified as
a foreign entity to do business and is in good standing in every jurisdiction in which its ownership of property or the
nature of the business conducted by it makes such qualification necessary, except to the extent that the failure to be so
qualified or be in good standing would not have a Material Adverse Effect. As used in this Agreement, “Material
Adverse Effect” means any material adverse effect on (i) the business, properties, assets, liabilities,
operations (including results thereof), condition (financial or otherwise) or prospects of the Company or any Restricted
Subsidiary, individually or taken as a whole, (ii) the transactions contemplated hereby or in any of the other Transaction
Documents or (iii) the authority or ability of the Company to perform any of its obligations under any of the Transaction
Documents (as defined below). Other than its Restricted Subsidiaries and Excluded Subsidiaries, there is no Person in which the Company,
directly or indirectly, owns capital stock or holds an equity or similar interest.

 

(b)               Authorization;
Enforcement; Validity. The Company has the requisite power and authority to enter into and perform its obligations under
this Agreement and the other Transaction Documents and to issue the Securities in accordance with the terms hereof and
thereof. The execution and delivery of this Agreement and the other Transaction Documents by the Company, and the
consummation by the Company of the transactions contemplated hereby and thereby (including, without limitation and subject to
the provisions contained in Section 2(c) above, the issuance of the Notes and issuance of the Conversion Shares issuable
upon conversion of the Notes and the reservation for issuance and issuance any Interest Shares issuable pursuant to the terms
of the Notes, the issuance of the Warrants and the reservation for issuance and issuance of the Warrant Shares issuable upon
exercise of the Warrants) have been duly authorized by the Company’s board of directors or other governing body and
(other than (i) obtaining the approval of the Company’s stockholders to increase the number of shares of authorized
Common Stock (and making any filings with the Principal Market (as defined below), the SEC and the Delaware Secretary of
State that are required in connection therewith), (ii) obtaining the approval of the Company's stockholders pursuant to
NASDAQ Listing Rule 5635(d) to issue more than 28,920,013 shares of our common stock upon exercise, conversion or otherwise
of the Securities (and making any filings with the SEC that are required in connection therewith) and (iii) the filing with
the SEC of (A) prospectus supplements in connection with the Series A Closing as required by the Registration Statement
pursuant to Rule 424(b) under the 1933 Act (each, a “Prospectus Supplement”, and collectively, the
“Prospectus Supplements”) supplementing the base prospectus forming part of the Registration Statement
(the “Prospectus”), and the Indenture (and/or any amendment or supplement thereto), (B) a registration
statement on Form S-1 or Form S-3 with respect to the issuance of the Series A Warrant Shares prior to the date the Series A
Warrants become exercisable (and any other filings as may be required by any state securities agencies in connection
therewith) and (C) a registration statement on Form S-1 or From S-3 with respect to the issuance of the Series B Warrant
Shares prior to the date the Series B Warrants become exercisable (and any other filings as may be required by any
state securities agencies in connection therewith) and any other filings as may be required by any state securities
agencies), no further filing, consent or authorization is required by the Company, its board of directors or its stockholders
or other governing body. This Agreement has been, and the other Transaction Documents to be delivered on or prior to the
applicable Closing will be prior to such Closing, duly executed and delivered by the Company, and upon such execution will
constitute the legal, valid and binding obligations of the Company, enforceable against the Company in accordance with their
respective terms, except as such enforceability may be limited by general principles of equity or applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally, the enforcement of
applicable creditors’ rights and remedies and except as rights to indemnification and to contribution may be limited by
federal or state securities law. “Transaction Documents” means, collectively, this Agreement, the Notes,
the Indenture, the Supplemental Indentures, the Warrants, the Irrevocable Transfer Agent Instructions (as defined below) and
each of the other agreements and instruments entered into or delivered by any of the parties hereto in connection with the
transactions contemplated hereby and thereby, as may be amended from time to time.

 

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(c)               
Issuance of Securities. The issuance of the Notes and the Warrants are duly authorized and upon issuance in
accordance with the terms of the Transaction Documents shall be validly issued, fully paid and non-assessable and free from all
preemptive or similar rights, taxes, liens, charges and other encumbrances with respect to the issuance thereof. The Company shall
have reserved from its duly authorized capital stock (x) as of the Series A Closing Date, not less than 30,000,000 shares of Common
Stock for issuance as Conversion Shares or Interest Shares pursuant to the terms of the Series A Notes and (y) if applicable, as
of the Series B Closing Date, the sum of (i) 125% of the maximum number of Conversion Shares issuable upon conversion of the Notes
(determined without taking into account any limitations on the conversion of the Notes set forth therein and assuming that the
Notes are convertible at the Series A Conversion Price (as defined in the Series A Notes) or Series B Conversion Price (as defined
in the Series B Notes), as applicable, and all Series B Notes issuable hereunder have been issued) and (ii) 125% of the maximum
number of Interest Shares issuable pursuant to the terms of the Notes from the Series A Closing Date through the maturity date
of the Series A Notes (determined without taking into account any limitations on the conversion of the Notes set forth therein
and assuming that all Series B Notes issuable hereunder have been issued) and (iii) the maximum number of Warrant Shares issuable
upon exercise of the Warrants (without taking into account any limitations on the exercise of the Warrants set forth therein).
Upon issuance or conversion in accordance with the Notes and the Indenture or exercise in accordance with the Warrants (as the
case may be), the Conversion Shares, the Interest Shares and the Warrant Shares, respectively, when issued, will be validly issued,
fully paid and nonassessable and free from all preemptive or similar rights, taxes, liens, charges and other encumbrances with
respect to the issue thereof, with the holders being entitled to all rights accorded to a holder of Common Stock. The issuance
by the Company of the Securities (other than the Series A Warrant Shares and the Series B Warrant Shares) has been registered under
the 1933 Act, the Securities (other than the Series A Warrant Shares and the Series B Warrant Shares) are being issued pursuant
to the Registration Statement and all of the Securities (other than the Series A Warrant Shares and the Series B Warrant Shares)
are freely transferable and freely tradable by each of the Buyers without restriction. The Registration Statement is effective
and available for the issuance of the Securities thereunder and the Company has not received any notice that the SEC has issued
or intends to issue a stop-order with respect to the Registration Statement or that the SEC otherwise has suspended or withdrawn
the effectiveness of the Registration Statement, either temporarily or permanently, or intends or has threatened in writing to
do so. The “Plan of Distribution” section under the Registration Statement permits the issuance and sale of the Securities
(other than the Series A Warrant Shares and the Series B Warrant Shares) hereunder and as contemplated by the other Transaction
Documents. Upon receipt of the Securities, each of the Buyers will have good and marketable title to the Securities. The Registration
Statement and any prospectus included therein, including the Prospectus and the Prospectus Supplement, complied in all material
respects with the requirements of the 1933 Act and the 1934 Act and the rules and regulations of the SEC promulgated thereunder
and all other applicable laws and regulations. At the time the Registration Statement and any amendments thereto became effective,
at the date of this Agreement and at each deemed effective date thereof pursuant to Rule 430B(f)(2) of the 1933 Act, the Registration
Statement and any amendments thereto complied and will comply in all material respects with the requirements of the 1933 Act and
did not and will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading. The Prospectus and any amendments or supplements thereto (including,
without limitation the Prospectus Supplement), at the time the Prospectus or any amendment or supplement thereto was issued and
at such Closing Date, complied, and will comply, in all material respects with the requirements of the 1933 Act and did not, and
will not, contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements
therein, in light of the circumstances under which they were made, not misleading. The Company meets all of the requirements for
the use of Form S-3 under the 1933 Act for the offering and sale of the Securities (other than the Series A Warrant Shares and
the Series B Warrant Shares) contemplated by this Agreement and the other Transaction Documents, and the SEC has not notified the
Company of any objection to the use of the form of the Registration Statement pursuant to Rule 401(g)(1) under the 1933 Act. The
Registration Statement meets the requirements set forth in Rule 415(a)(1)(x) under the 1933 Act.

 

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(d)              
No Conflicts. The execution, delivery and performance of the Transaction Documents by the Company and the
consummation by the Company and its Restricted Subsidiaries of the transactions contemplated hereby and thereby (including, without
limitation, the issuance of the Notes, the Warrants, the Conversion Shares, the Interest Shares and the Warrant Shares and the
reservation for issuance of the Conversion Shares, the Interest Shares and the Warrant Shares as contemplated under Section 2(c)
above) will not (i) result in a violation of the Certificate of Incorporation (as defined below) or other organizational documents
of the Company or any of its Restricted Subsidiaries, any capital stock of the Company or any of its Restricted Subsidiaries or
Bylaws (as defined below) of the Company or any of its Restricted Subsidiaries, (ii) conflict with, or constitute a default (or
an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement, indenture or instrument to which the Company or any of its Restricted
Subsidiaries is a party, or (iii) result in a violation of any law, rule, regulation, order, judgment or decree (including foreign,
federal and state securities laws and regulations and the rules and regulations of the Nasdaq Capital Market (the “Principal
Market”) and including all applicable federal laws, rules and regulations) applicable to the Company or any of its Restricted
Subsidiaries or by which any property or asset of the Company or any of its Restricted Subsidiaries is bound or affected except,
in the case of clause (ii) or (iii) above, to the extent such violations that could not reasonably be expected to have a Material
Adverse Effect.

 

(e)                Consents. Neither
the Company nor any Restricted Subsidiary is required to obtain any consent from, authorization or order of, or make
any filing or registration with (other than the filing with the SEC of the Prospectus Supplement, the Indenture (and/or
any amendment or supplement thereto) and the 8-K Filings and any other filings as may be required by any state
securities agencies), any Governmental Entity or other self-regulatory organization or body or any other Person in order for
it to execute, deliver or perform any of its respective obligations under or contemplated by the Transaction Documents, in
each case, in accordance with the terms hereof or thereof, except for (i) the consent of the holders of the Company’s
Senior Unsecured Notes issued on January 11, 2013 and the waiver of notice provisions applicable to participation rights
available under the Securities Purchase Agreement dated December 8, 2011, which consent and waiver will be obtained prior to
Closing, (ii) the filing of a registration statement on Form S-1 or Form S-3 with the SEC with respect to the resale of
shares of Common Stock issuable upon exercise of warrants held by the holders of the Company’s Senior Unsecured Notes
and in payment of interest under the Senior Unsecured Notes (the "Senior Unsecured Notes
Registration Statement"), (iii) the filing of a notification form with the Principal Market, (iv) the approval of
the Company's stockholders to increase the number of shares of authorized Common Stock (and making any filings with the
Principal Market, the SEC and the Delaware Secretary of State that are required in connection therewith) and (v) the approval
of the Company's stockholders pursuant to NASDAQ Listing Rule 5635(d) to issue more than 28,920,013 shares of our common
stock upon exercise, conversion or otherwise of the Securities (and making any filings with the SEC that are required in
connection therewith). All consents, authorizations, orders, filings and registrations which the Company or any Restricted
Subsidiary is required to obtain pursuant to the preceding sentence have been obtained or effected on or prior to such
Closing Date (other than the filing of the Senior Unsecured Notes Registration Statement and obtaining the approval of the company’s stockholders as described in subsection (ii), (iv) and
(v) above), and neither the Company nor any
of its Restricted Subsidiaries are aware of any facts or circumstances which might prevent the Company or any of its
Restricted Subsidiaries from obtaining or effecting any of the registration, application or filings contemplated by the
Transaction Documents. The Company is not in violation of the requirements of the Principal Market (other than the minimum
bid price per share of $1.00) and has no knowledge of any facts or circumstances which could reasonably lead to delisting or
suspension of the Common Stock in the foreseeable future. As used herein, “Governmental Entity” means any
nation, state, county, city, town, village, district, or other political jurisdiction of any nature, federal, state, local,
municipal, foreign, or other government, governmental or quasi-governmental authority of any nature (including any
governmental agency, branch, department, official, or entity and any court or other tribunal), multi-national organization or
body; or body exercising, or entitled to exercise, any administrative, executive, judicial, legislative, police, regulatory,
or taxing authority or power of any nature or instrumentality of any of the foregoing, including any entity or enterprise
owned or controlled by a government or a public international organization or any of the foregoing.

 

    	8

    	 

    

 

(f)               
Acknowledgment Regarding Buyer’s Purchase of Securities. The Company acknowledges and agrees that each
Buyer is acting solely in the capacity of an arm’s length purchaser with respect to the Transaction Documents and the transactions
contemplated hereby and thereby and that no Buyer is (i) an officer or director of the Company or any of its Restricted Subsidiaries,
(ii) to its knowledge, an “affiliate” (as defined in Rule 144) of the Company or any of its Restricted Subsidiaries
or (iii) to its knowledge, a “beneficial owner” of more than 10% of the shares of Common Stock (as defined for purposes
of Rule 13d-3 of the Securities Exchange Act of 1934, as amended (the “1934 Act”)). The Company further acknowledges
that no Buyer is acting as a financial advisor or fiduciary of the Company or any of its Restricted Subsidiaries (or in any similar
capacity) with respect to the Transaction Documents and the transactions contemplated hereby and thereby, and any advice given
by a Buyer or any of its representatives or agents in connection with the Transaction Documents and the transactions contemplated
hereby and thereby is merely incidental to such Buyer’s purchase of the Securities. The Company further represents to each
Buyer that the Company’s decision to enter into the Transaction Documents to which it is a party has been based solely on
the independent evaluation by the Company and its representatives.

 

(g)              
Placement Agent’s Fees. The Company shall be responsible for the payment of any placement agent’s
fees, financial advisory fees, or brokers’ commissions (other than for Persons engaged by any Buyer or its investment advisor)
relating to or arising out of the transactions contemplated hereby, including, without limitation, the sale of the Securities.
Other than Lazard Capital Markets LLC (the “Placement Agent”), neither the Company nor any of its Restricted
Subsidiaries has engaged any placement agent or other agent in connection with the offer or sale of the Securities.

 

(h)              
No Integrated Offering. None of the Company, its Restricted Subsidiaries
or any of their affiliates, nor any Person acting on their behalf has, directly or indirectly, made any offers or sales of any
security or solicited any offers to buy any security, under circumstances that would require registration of the issuance of any
of the Securities under the 1933 Act, whether through integration with prior offerings or otherwise. None of the Company, its Restricted Subsidiaries, their affiliates nor any Person acting on their behalf will take any action
or steps referred to in the preceding sentence that would require registration of the issuance of any of the Securities under the
1933 Act or cause the offering of any of the Securities to be integrated with other offerings of securities of the Company.

 

(i)                
Dilutive Effect. The Company understands and acknowledges that the number of Conversion Shares, Interest Shares
and Warrant Shares will increase in certain circumstances. The Company further acknowledges that its obligation to issue the Conversion
Shares upon conversion of the Notes in accordance with this Agreement, the Indenture and the Notes, the Interest Shares in accordance
with this Agreement, the Indenture and the Notes and the Warrant Shares upon exercise of the Warrants in accordance with this Agreement
and the Warrants is, absolute and unconditional regardless of the dilutive effect that such issuance may have on the ownership
interests of other stockholders of the Company.

 

(j)                 Application
of Takeover Protections; Rights Agreement. Except as described on Schedule 3(j), the  Company and its board of
directors have taken all necessary action, if any, in order to render inapplicable any control share acquisition, interested
stockholder, business combination, poison pill (including, without limitation, any distribution under a rights agreement) or
other similar anti-takeover provision under the Certificate of Incorporation, Bylaws or other organizational documents or
the laws of the jurisdiction of its incorporation or otherwise which is or could become applicable to any Buyer as a result
of the transactions contemplated by this Agreement, including, without limitation, the Company’s issuance of the
Securities and any Buyer’s ownership of the Securities. The Company and its board of directors have taken all necessary
action, if any, in order to render inapplicable any stockholder rights plan or similar arrangement relating to accumulations
of beneficial ownership of shares of Common Stock or a change in control of the Company or any of its Restricted
Subsidiaries.

 

    	9

    	 

    

 

(k)              
SEC Documents; Financial Statements. During the two (2) years prior to the date hereof, the Company has timely
filed all reports, schedules, forms, statements and other documents required to be filed by it with the SEC pursuant to the reporting
requirements of the 1934 Act (all of the foregoing filed prior to the date hereof and all exhibits included therein and financial
statements, notes and schedules thereto and documents incorporated by reference therein being hereinafter referred to as the “SEC
Documents”). The Company has delivered to the Buyers or their respective representatives true, correct and complete copies
of each of the SEC Documents not available on the EDGAR system requested by the Buyers or their respective representatives. As
of their respective dates, the SEC Documents complied in all material respects with the requirements of the 1934 Act and the rules
and regulations of the SEC promulgated thereunder applicable to the SEC Documents, and none of the SEC Documents, at the time they
were filed with the SEC, contained any untrue statement of a material fact or omitted to state a material fact required to be stated
therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not
misleading. As of their respective dates, the financial statements of the Company included in the SEC Documents complied as to
form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect
thereto as in effect as of the time of filing. Such financial statements have been prepared in accordance with generally accepted
accounting principles, consistently applied, during the periods involved (except (i) as may be otherwise indicated in such financial
statements or the notes thereto, or (ii) in the case of unaudited interim statements, to the extent they may exclude footnotes
or may be condensed or summary statements) and fairly present in all material respects the financial position of the Company as
of the dates thereof and the results of its operations and cash flows for the periods then ended (subject, in the case of unaudited
statements, to normal year-end audit adjustments which will not be material, either individually or in the aggregate). No other
information provided by or on behalf of the Company to any of the Buyers which is not included in the SEC Documents (including,
without limitation, information referred to in Section 4(l) of this Agreement) contains any untrue statement of a material fact
or omits to state any material fact necessary in order to make the statements therein not misleading, in the light of the circumstance
under which they are or were made. The Company is not currently contemplating to amend or restate any of the financial statements
(including without limitation, any notes or any letter of the independent accountants of the Company with respect thereto) included
in the SEC Documents (the “Financial Statements”), nor is the Company currently aware of facts or circumstances
which would require the Company to amend or restate any of the Financial Statements, in each case, in order for any of the Financials
Statements to be in compliance with GAAP and the rules and regulations of the SEC. The Company has not been informed by its independent
accountants that they recommend that the Company amend or restate any of the Financial Statements or that there is any need for
the Company to amend or restate any of the Financial Statements. The report of the Company’s independent auditors to be contained
in the Company’s audited financial statements for the years ended December 31, 2012 and 2011 shall not contain disclosure
raising substantial doubt about the Company’s ability to continue as a going concern.

 

    	10

    	 

    

 

(l)                
Absence of Certain Changes. Since the date of the Company’s most recent audited financial statements
contained in a Form 10-K and any subsequent unaudited financial statements contained in a Form 10-Q, there has been no material
adverse change and no material adverse development in the business, assets, liabilities, properties, operations (including results
thereof), condition (financial or otherwise) or prospects of the Company or any of its Restricted Subsidiaries. Except as disclosed
in Schedule 3(l), since the date of the Company’s most recent audited financial statements contained in a Form 10-K,
neither the Company nor any of its Restricted Subsidiaries has (i) declared or paid any dividends, (ii) sold any assets, individually
or in the aggregate, outside of the ordinary course of business or (iii) made any material capital expenditures, individually or
in the aggregate. Neither the Company nor any of its Restricted Subsidiaries has taken any steps to seek protection pursuant to
any law or statute relating to bankruptcy, insolvency, reorganization, receivership, liquidation or winding up, nor does the Company
or any Restricted Subsidiary have any knowledge or reason to believe that any of their respective creditors intend to initiate
involuntary bankruptcy proceedings or any actual knowledge of any fact which would reasonably lead a creditor to do so. The Company
and its Restricted Subsidiaries, individually and on a consolidated basis, are not as of the date hereof, and after giving effect
to the transactions contemplated hereby to occur at such Closing will not be, Insolvent (as defined below). The Company and its
Restricted Subsidiaries, individually and on a consolidated basis, are not, assuming the concurrent payment of the Purchase Price,
Insolvent (as defined below). For purposes of this Section 3(l), “Insolvent” means, (I) with respect to the
Company and its Restricted Subsidiaries, on a consolidated basis, (i) the present fair saleable value of the Company’s and
its Restricted Subsidiaries’ assets is less than the amount required to pay the Company’s and its Restricted Subsidiaries’
total Indebtedness (as defined below), (ii) the Company and its Restricted Subsidiaries are unable to pay their debts and liabilities,
subordinated, contingent or otherwise, as such debts and liabilities become absolute and matured or (iii) the Company and its Restricted
Subsidiaries intend to incur or believe that they will incur debts that would be beyond their ability to pay as such debts mature;
and (II) with respect to the Company and each Restricted Subsidiary, individually, (i) the present fair saleable value of the Company’s
or such Restricted Subsidiary’s (as the case may be) assets is less than the amount required to pay its respective total
Indebtedness, (ii) the Company or such Restricted Subsidiary (as the case may be) is unable to pay its respective debts and liabilities,
subordinated, contingent or otherwise, as such debts and liabilities become absolute and matured or (iii) the Company or such Restricted
Subsidiary (as the case may be) intends to incur or believes that it will incur debts that would be beyond its respective ability
to pay as such debts mature. Neither the Company nor any of its Restricted Subsidiaries has engaged in any business or in any transaction,
and is not about to engage in any business or in any transaction, for which the Company’s or such Restricted Subsidiary’s
remaining assets constitute unreasonably small capital.

 

(m)            
No Undisclosed Events, Liabilities, Developments or Circumstances. No event, liability, development or circumstance
has occurred or exists, or is reasonably expected to exist or occur with respect to the Company, any of its Restricted Subsidiaries
or any of their respective businesses, properties, liabilities, prospects, operations (including results thereof) or condition
(financial or otherwise), that (i) would be required to be disclosed by the Company under applicable securities laws on a registration
statement on Form S-1 filed with the SEC relating to an issuance and sale by the Company of its Common Stock and which has not
been publicly announced, (ii) could have a material adverse effect on any Buyer’s investment hereunder or (iii) could have
a Material Adverse Effect.

 

    	11

    	 

    

 

(n)              
Conduct of Business; Regulatory Permits. Except as disclosed in Schedule 3(n), neither the Company
nor any of its Restricted Subsidiaries is in violation of any term of or in default under its Certificate of Incorporation, any
certificate of designation, preferences or rights of any other outstanding series of preferred stock of the Company or any of its
Restricted Subsidiaries or Bylaws or their organizational charter, certificate of formation or certificate of incorporation or
bylaws, respectively. Neither the Company nor any of its Restricted Subsidiaries is in violation of any judgment, decree or order
or any statute, ordinance, rule or regulation applicable to the Company or any of its Restricted Subsidiaries, and neither the
Company nor any of its Restricted Subsidiaries will conduct its business in violation of any of the foregoing, except in all cases
for possible violations which could not, individually or in the aggregate, have a Material Adverse Effect. Without limiting the
generality of the foregoing, except as disclosed in Schedule 3(n), the Company is not in violation of any of the rules,
regulations or requirements of the Principal Market and has no knowledge of any facts or circumstances that could reasonably lead
to delisting or suspension of the Common Stock by the Principal Market in the foreseeable future. Except as disclosed in Schedule
3(n), during the two years prior to the date hereof, (i) the Common Stock has been listed or designated for quotation on the
Principal Market, (ii) trading in the Common Stock has not been suspended by the SEC or the Principal Market and (iii) the Company
has received no communication, written or oral, from the SEC or the Principal Market regarding the suspension or delisting of the
Common Stock from the Principal Market. The Company and each of its Restricted Subsidiaries possess all certificates, authorizations
and permits issued by the appropriate regulatory authorities necessary to conduct their respective businesses, except where the
failure to possess such certificates, authorizations or permits would not have, individually or in the aggregate, a Material Adverse
Effect, and neither the Company nor any such Restricted Subsidiary has received any notice of proceedings relating to the revocation
or modification of any such certificate, authorization or permit.

 

(o)              
Foreign Corrupt Practices. Neither the Company, the Company’s subsidiary or any director, officer, agent,
employee, nor any other person acting for or on behalf of the foregoing (individually and collectively, a “Company Affiliate”)
have violated the U.S. Foreign Corrupt Practices Act (the “FCPA”) or any other applicable anti-bribery or anti-corruption
laws, nor has any Company Affiliate offered, paid, promised to pay, or authorized the payment of any money, or offered, given,
promised to give, or authorized the giving of anything of value, to any officer, employee or any other person acting in an official
capacity for any Governmental Entity to any political party or official thereof or to any candidate for political office (individually
and collectively, a “Government Official”) or to any person under circumstances where such Company Affiliate
knew or was aware of a high probability that all or a portion of such money or thing of value would be offered, given or promised,
directly or indirectly, to any Governmental Official, for the purpose of:

 

(1)              
(A) influencing any act or decision of such Government Official in his/her official capacity, (B) inducing such Government
Official to do or omit to do any act in violation of his/her lawful duty, (C) securing any improper advantage, or (D) inducing
such Government Official to influence or affect any act or decision of any Governmental Entity, or

 

    	12

    	 

    

 

(2)              
assisting the Company or its subsidiary in obtaining or retaining business for or with, or directing business to,
the Company or its subsidiary.

 

(p)              
Sarbanes-Oxley Act. The Company and each Restricted Subsidiary is in compliance with all applicable requirements
of the Sarbanes-Oxley Act of 2002 that are effective as of the date hereof, and all applicable rules and regulations promulgated
by the SEC thereunder that are effective as of the date hereof.

 

(q)               Transactions
With Affiliates. Except as disclosed in the SEC Documents or on Schedule 3(q), none of the officers, directors,
employees or affiliates of the Company or any of its Restricted Subsidiaries is presently a party to any transaction with the
Company or any of its Restricted Subsidiaries (other than for ordinary course services as employees, officers or
directors), including any contract, agreement or other arrangement providing for the furnishing of services to or by,
providing for rental of real or personal property to or from, or otherwise requiring payments to or from any such officer,
director, employee or affiliate or, to the knowledge of the Company or any of its Restricted Subsidiaries, any
corporation, partnership, trust or other Person in which any such officer, director, or employee has a substantial interest
or is an employee, officer, director, trustee, affiliate or partner.

 

(r)                
Equity Capitalization. As of the date hereof, the authorized capital stock of the Company consists of (i)
300,000,000 shares of Common Stock, of which, 155,415,594 are issued and outstanding and 111,257,122 shares are reserved for issuance
pursuant to securities (other than the Notes and the Warrants) exercisable or exchangeable for, or convertible into, shares of
Common Stock and (ii) 10,000,000 shares of preferred stock, of which 926,942 are issued and outstanding. No shares of Common Stock
are held in treasury. All of such outstanding shares are duly authorized and have been, or upon issuance will be, validly issued
and are fully paid and nonassessable. 5,011,637 shares of the Company’s issued and outstanding Common Stock on the date hereof
are as of the date hereof owned by Persons who are “affiliates” (as defined in Rule 405 of the 1933 Act and calculated
based on the assumption that only officers, directors and holders of at least 10% of the Company’s issued and outstanding
Common Stock are “affiliates” without conceding that any such Persons are “affiliates” for purposes of
federal securities laws) of the Company or any of its Restricted Subsidiaries. To the Company’s knowledge, as of the date
hereof, no Person owns 10% or more of the Company’s issued and outstanding shares of Common Stock (calculated based on the
assumption that all Convertible Securities (as defined below), whether or not presently exercisable or convertible, have been fully
exercised or converted (as the case may be) taking account of any limitations on exercise or conversion (including “blockers”)
contained therein without conceding that such identified Person is a 10% stockholder for purposes of federal securities laws).
Except as disclosed in Schedule 3(r): (i) none of the Company’s or any Restricted Subsidiary’s capital stock
is subject to preemptive rights or any other similar rights or any liens or encumbrances suffered or permitted by the Company or
any Restricted Subsidiary; (ii) there are no outstanding options, warrants, scrip, rights to subscribe to, calls or commitments
of any character whatsoever relating to, or securities or rights convertible into, or exercisable or exchangeable for, any capital
stock of the Company or any of its Restricted Subsidiaries, or contracts, commitments, understandings or arrangements by which
the Company or any of its Restricted Subsidiaries is or may become bound to issue additional capital stock of the Company or any
of its Restricted Subsidiaries or options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever
relating to, or securities or rights convertible into, or exercisable or exchangeable for, any capital stock of the Company or
any of its Restricted Subsidiaries; (iii) there are no outstanding debt securities, notes, credit agreements, credit facilities
or other agreements, documents or instruments evidencing Indebtedness of the Company or any of its Restricted Subsidiaries or by
which the Company or any of its Restricted Subsidiaries is or may become bound; (iv) there are no financing statements securing
obligations in any amounts filed in connection with the Company or any of its Restricted Subsidiaries; (v) there are no agreements
or arrangements under which the Company or any of its Restricted Subsidiaries is obligated to register the sale of any of their
securities under the 1933 Act; (vi) there are no outstanding securities or instruments of the Company or any of its Restricted
Subsidiaries which contain any redemption or similar provisions, and there are no contracts, commitments, understandings or arrangements
by which the Company or any of its Restricted Subsidiaries is or may become bound to redeem a security of the Company or any of
its Restricted Subsidiaries; (vii) there are no securities or instruments containing anti-dilution or similar provisions that will
be triggered by the issuance of the Securities; (viii) neither the Company nor any Restricted Subsidiary has any stock appreciation
rights or “phantom stock” plans or agreements or any similar plan or agreement; and (ix) neither the Company nor any
of its Restricted Subsidiaries have any liabilities or obligations required to be disclosed in the SEC Documents which are not
so disclosed in the SEC Documents, other than those incurred in the ordinary course of the Company’s or its Restricted Subsidiaries’
respective businesses and which, individually or in the aggregate, do not or could not have a Material Adverse Effect. The Company
has furnished to the Buyers true, correct and complete copies of the Company’s Certificate of Incorporation, as amended and
as in effect on the date hereof (the “Certificate of Incorporation”), and the Company’s bylaws, as amended
and as in effect on the date hereof (the “Bylaws”), and the terms of all securities convertible into, or exercisable
or exchangeable for, shares of Common Stock and the material rights of the holders thereof in respect thereto that have not been
disclosed in the SEC Documents.

 

    	13

    	 

    

 

(s)               
Indebtedness and Other Contracts. Except as disclosed on Schedule 3(s), neither the Company nor any
of its Restricted Subsidiaries (i) has any outstanding Indebtedness (as defined below), (ii) is a party to any contract, agreement
or instrument, the violation of which, or default under which, by the other party(ies) to such contract, agreement or instrument
could reasonably be expected to result in a Material Adverse Effect, (iii) is in violation of any term of, or in default under,
any contract, agreement or instrument relating to any Indebtedness, except where such violations and defaults would not result,
individually or in the aggregate, in a Material Adverse Effect, or (iv) is a party to any contract, agreement or instrument relating
to any Indebtedness, the performance of which, in the judgment of the Company’s officers, has or is expected to have a Material
Adverse Effect. For purposes of this Agreement: (x) “Indebtedness” of any Person means, without duplication
(A) all indebtedness for borrowed money, (B) all obligations issued, undertaken or assumed as the deferred purchase price of property
or services (including, without limitation, “capital leases” in accordance with generally accepted accounting principles)
(other than trade payables entered into in the ordinary course of business), (C) all reimbursement or payment obligations with
respect to letters of credit, surety bonds and other similar instruments, (D) all obligations evidenced by notes, bonds, debentures
or similar instruments, including obligations so evidenced incurred in connection with the acquisition of property, assets or businesses,
(E) all indebtedness created or arising under any conditional sale or other title retention agreement, or incurred as financing,
in either case with respect to any property or assets acquired with the proceeds of such indebtedness (even though the rights and
remedies of the seller or bank under such agreement in the event of default are limited to repossession or sale of such property),
(F) all monetary obligations under any leasing or similar arrangement which, in connection with generally accepted accounting principles,
consistently applied for the periods covered thereby, is classified as a capital lease, (G) all indebtedness referred to in clauses
(A) through (F) above secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise,
to be secured by) any mortgage, claim, lien, tax, right of first refusal, encumbrance, pledge, charge, security interest or other
encumbrance upon or in any property or assets (including accounts and contract rights) owned by any Person, even though the Person
which owns such assets or property has not assumed or become liable for the payment of such indebtedness, and (H) all Contingent
Obligations in respect of indebtedness or obligations of others of the kinds referred to in clauses (A) through (G) above; (y)
“Contingent Obligation” means, as to any Person, any direct or indirect liability, contingent or otherwise,
of that Person with respect to any indebtedness, lease, dividend or other obligation of another Person if the primary purpose or
intent of the Person incurring such liability, or the primary effect thereof, is to provide assurance to the obligee of such liability
that such liability will be paid or discharged, or that any agreements relating thereto will be complied with, or that the holders
of such liability will be protected (in whole or in part) against loss with respect thereto; and (z) “Person”
means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization,
any Governmental Entity or other self-regulatory organization or body, any other entity and a government or any department or agency
thereof.

 

(t)                
Absence of Litigation. There is no action, suit, proceeding, inquiry or investigation before or by the Principal
Market, any Governmental Entity or other self-regulatory organization or body pending or, to the knowledge of the Company, threatened
against or affecting the Company or any of its Restricted Subsidiaries, the Common Stock or any of the Company’s or its Restricted
Subsidiaries’ officers or directors which is outside of the ordinary course of business or individually or in the aggregate
material to the Company or any of its Restricted Subsidiaries. There has not been, and to the knowledge of the Company, there is
not pending or contemplated, any investigation by the SEC involving the Company, any of its Restricted Subsidiaries or any current
or former director or officer of the Company or any of its Restricted Subsidiaries. The SEC has not issued any stop order or other
order suspending the effectiveness of any registration statement filed by the Company under the 1933 Act or the 1934 Act.

 

(u)              
Insurance. The Company and each of its Restricted Subsidiaries are insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts as management of the Company believes to be prudent and customary
in the businesses in which the Company and its Restricted Subsidiaries are engaged. Neither the Company nor any such Restricted
Subsidiary has been refused any insurance coverage sought or applied for, and neither the Company nor any such Restricted Subsidiary
has any reason to believe that it will be unable to renew its existing insurance coverage as and when such coverage expires or
to obtain similar coverage from similar insurers as may be necessary to continue its business at a cost that would not have a Material
Adverse Effect.

 

    	14

    	 

    

 

(v)              
Employee Relations. Neither the Company nor any of its Restricted Subsidiaries is a party to any collective
bargaining agreement or employs any member of a union. No executive officer (as defined in Rule 501(f) promulgated under the 1933
Act) or other key employee of the Company or any of its Restricted Subsidiaries has notified the Company or any such Restricted
Subsidiary that such officer intends to leave the Company or any such Restricted Subsidiary or otherwise terminate such officer’s
employment with the Company or any such Restricted Subsidiary. No executive officer or other key employee of the Company or any
of its Restricted Subsidiaries is, or is now expected to be, in violation of any material term of any employment contract, confidentiality,
disclosure or proprietary information agreement, non-competition agreement, or any other contract or agreement or any restrictive
covenant, and the continued employment of each such executive officer or other key employee (as the case may be) does not subject
the Company or any of its Restricted Subsidiaries to any liability with respect to any of the foregoing matters. The Company and
its Restricted Subsidiaries are in compliance with all federal, state, local and foreign laws and regulations respecting labor,
employment and employment practices and benefits, terms and conditions of employment and wages and hours, except where failure
to be in compliance would not, either individually or in the aggregate, reasonably be expected to result in a Material Adverse
Effect.

 

(w)            
Title. The Company and its Restricted Subsidiaries have good and marketable title in fee simple to all real
property and have good and marketable title to all personal property owned by them which is material to the business of the Company
and its Restricted Subsidiaries, in each case, free and clear of all liens, encumbrances and defects except such as do not materially
affect the value of such property and do not interfere with the use made and proposed to be made of such property by the Company
and any of its Restricted Subsidiaries. Any real property and facilities held under lease by the Company or any of its Restricted
Subsidiaries are held by them under valid, subsisting and enforceable leases with such exceptions as are not material and do not
interfere with the use made and proposed to be made of such property and buildings by the Company or any of its Restricted Subsidiaries.

 

(x)              
Intellectual Property Rights. The Company and its Restricted Subsidiaries own or possess adequate rights or
licenses to use all trademarks, trade names, service marks, service mark registrations, service names, patents, patent rights,
copyrights, original works, inventions, licenses, approvals, governmental authorizations, trade secrets and other intellectual
property rights and all applications and registrations therefor (“Intellectual Property Rights”) necessary to
conduct their respective businesses as now conducted and as presently proposed to be conducted. None of the Company’s or
its Restricted Subsidiaries’ Intellectual Property Rights have expired, terminated or been abandoned, or are expected to
expire, terminate or be abandoned, within three years from the date of this Agreement. The Company has no knowledge of any infringement
by the Company or any of its Restricted Subsidiaries of Intellectual Property Rights of others. There is no claim, action or proceeding
being made or brought, or to the knowledge of the Company or any of its Restricted Subsidiaries, being threatened, against the
Company or any of its Restricted Subsidiaries regarding their Intellectual Property Rights. The Company is not aware of any facts
or circumstances which might give rise to any of the foregoing infringements or claims, actions or proceedings. The Company and
each of its Restricted Subsidiaries have taken reasonable security measures to protect the secrecy, confidentiality and value of
all of their Intellectual Property Rights.

 

    	15

    	 

    

 

(y)             
Environmental Laws. The Company and its Restricted Subsidiaries (i) are in compliance with all Environmental
Laws (as defined below), (ii) have received all permits, licenses or other approvals required of them under applicable Environmental
Laws to conduct their respective businesses and (iii) are in compliance with all terms and conditions of any such permit, license
or approval, except where, in each of the foregoing clauses (i), (ii) and (iii), the failure to so comply could be reasonably expected
to have, individually or in the aggregate, a Material Adverse Effect. The term “Environmental Laws” means all
federal, state, local or foreign laws relating to pollution or protection of human health or the environment (including, without
limitation, ambient air, surface water, groundwater, land surface or subsurface strata), including, without limitation, laws relating
to emissions, discharges, releases or threatened releases of chemicals, pollutants, contaminants, or toxic or hazardous substances
or wastes (collectively, “Hazardous Materials”) into the environment, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Materials, as well as all authorizations,
codes, decrees, demands or demand letters, injunctions, judgments, licenses, notices or notice letters, orders, permits, plans
or regulations issued, entered, promulgated or approved thereunder.

 

(z)              
Restricted Subsidiary Rights. Except as set forth on Schedule 3(z), the Company or one of its Restricted
Subsidiaries has the unrestricted right to vote, and (subject to limitations imposed by applicable law) to receive dividends and
distributions on, all capital securities of its Restricted Subsidiaries as owned by the Company or such Restricted Subsidiary.

 

(aa)           
Tax Status. Each of the Company and its Restricted Subsidiaries (i) has timely filed all foreign, federal
and state income and all other material tax returns, reports and declarations required by any jurisdiction to which it is subject,
(ii) has timely paid all taxes and other governmental assessments and charges that are material in amount, shown or determined
to be due on such returns, reports and declarations, except those being contested in good faith and (iii) has set aside on its
books provision reasonably adequate for the payment of all taxes for periods subsequent to the periods to which such returns, reports
or declarations apply. There are no unpaid taxes in any material amount claimed to be due by the taxing authority of any jurisdiction,
and the officers of the Company and its Restricted Subsidiaries know of no basis for any such claim. The Company is not operated
in such a manner as to qualify as a passive foreign investment company, as defined in Section 1297 of the U.S. Internal Revenue
Code of 1986, as amended.

 

(bb)          
Internal Accounting and Disclosure Controls. Each of the Company and its Restricted Subsidiaries maintains
internal control over financial reporting (as such term is defined in Rule 13a-15(f) under the 1934 Act) that is effective to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles, including that (i) transactions are executed in accordance
with management’s general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of
financial statements in conformity with generally accepted accounting principles and to maintain asset and liability accountability,
(iii) access to assets or incurrence of liabilities is permitted only in accordance with management’s general or specific
authorization and (iv) the recorded accountability for assets and liabilities is compared with the existing assets and liabilities
at reasonable intervals and appropriate action is taken with respect to any difference. The Company maintains disclosure controls
and procedures (as such term is defined in Rule 13a-15(e) under the 1934 Act) that are effective in ensuring that information required
to be disclosed by the Company in the reports that it files or submits under the 1934 Act is recorded, processed, summarized and
reported, within the time periods specified in the rules and forms of the SEC, including, without limitation, controls and procedures
designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the 1934
Act is accumulated and communicated to the Company’s management, including its principal executive officer or officers and
its principal financial officer or officers, as appropriate, to allow timely decisions regarding required disclosure. During the
past two years neither the Company nor any of its Restricted Subsidiaries has received any notice or correspondence from any accountant
or other Person relating to any potential material weakness or significant deficiency in any part of the internal controls over
financial reporting of the Company or any of its Restricted Subsidiaries.

 

    	16

    	 

    

 

(cc)           
Off Balance Sheet Arrangements. There is no transaction, arrangement, or other relationship between the Company
or any of its Restricted Subsidiaries and an unconsolidated or other off balance sheet entity that is required to be disclosed
by the Company in its 1934 Act filings and is not so disclosed or that otherwise could be reasonably likely to have a Material
Adverse Effect.

 

(dd)         
Investment Company Status. The Company is not, and upon consummation of the sale of the Securities will not
be, an “investment company,” an affiliate of an “investment company,” a company controlled by an “investment
company” or an “affiliated person” of, or “promoter” or “principal underwriter” for,
an “investment company” as such terms are defined in the Investment Company Act of 1940, as amended.

 

(ee)           
Acknowledgement Regarding Buyers’ Trading Activity. It is understood and acknowledged by the Company
that (i) following the public disclosure of the transactions contemplated by the Transaction Documents, in accordance with the
terms thereof, none of the Buyers have been asked by the Company or any of its Restricted Subsidiaries to agree, nor has any Buyer
agreed with the Company or any of its Restricted Subsidiaries, to desist from effecting any transactions in or with respect to
(including, without limitation, purchasing or selling, long and/or short) any securities of the Company, or “derivative”
securities based on securities issued by the Company or to hold any of the Securities for any specified term; (ii) any Buyer, and
counterparties in “derivative” transactions to which any such Buyer is a party, directly or indirectly, presently may
have a “short” position in the Common Stock which was established prior to such Buyer’s knowledge of the transactions
contemplated by the Transaction Documents, and (iii) each Buyer shall not be deemed to have any affiliation with or control over
any arm’s length counterparty in any “derivative” transaction. The Company further understands and acknowledges
that following the public disclosure of the transactions contemplated by the Transaction Documents pursuant to the 8-K Filings
(as defined below) one or more Buyers may engage in hedging and/or trading activities at various times during the period that the
Securities are outstanding, including, without limitation, during the periods that the value and/or number of the Interest Shares
or Conversion Shares, as applicable, deliverable with respect to the Securities are being determined and (b) such hedging and/or
trading activities, if any, can reduce the value of the existing stockholders’ equity interest in the Company both at and
after the time the hedging and/or trading activities are being conducted. The Company acknowledges that such aforementioned hedging
and/or trading activities do not constitute a breach of this Agreement, the Notes or any other Transaction Document or any of the
documents executed in connection herewith or therewith.

 

    	17

    	 

    

 

(ff)            
Manipulation of Price. Neither the Company nor any of its Restricted Subsidiaries has, and, to the knowledge
of the Company, no Person acting on their behalf has, directly or indirectly, (i) taken any action designed to cause or to result
in the stabilization or manipulation of the price of any security of the Company or any of its Restricted Subsidiaries to facilitate
the sale or resale of any of the Securities, (ii) sold, bid for, purchased, or paid any compensation for soliciting purchases of,
any of the Securities (other than the Placement Agent), or (iii) paid or agreed to pay to any Person any compensation for soliciting
another to purchase any other securities of the Company or any of its Restricted Subsidiaries.

 

(gg)          
U.S. Real Property Holding Corporation. Neither the Company nor any of its Restricted Subsidiaries is, or
has ever been, and so long as any of the Securities are held by any of the Buyers, shall become, a U.S. real property holding corporation
within the meaning of Section 897 of the Internal Revenue Code of 1986, as amended, and the Company and each Restricted Subsidiary
shall so certify upon any Buyer’s request.

 

(hh)          
Transfer Taxes. On such Closing Date, all stock transfer or other
taxes (other than income or similar taxes) which are required to be paid in connection with the issuance, sale and transfer of
the Securities to be sold to each Buyer hereunder will be, or will have been, fully paid or provided for by the Company, and all
laws imposing such taxes will be or will have been complied with.

 

(ii)              
Bank Holding Company Act. Neither the Company nor any of its Restricted
Subsidiaries is subject to the Bank Holding Company Act of 1956, as amended (the “BHCA”) and to regulation by
the Board of Governors of the Federal Reserve System (the “Federal Reserve”). Neither the Company nor any of
its Restricted Subsidiaries or affiliates owns or controls, directly or indirectly, five percent (5%) or more of the outstanding
shares of any class of voting securities or twenty-five percent (25%) or more of the total equity of a bank or any equity that
is subject to the BHCA and to regulation by the Federal Reserve. Neither the Company nor any of its Restricted Subsidiaries or
affiliates exercises a controlling influence over the management or policies of a bank or any entity that is subject to the BHCA
and to regulation by the Federal Reserve.

 

(jj)              
Shell Company Status. The Company is not, and since March 23, 2005
has never been, an issuer identified in, or subject to, Rule 144(i) promulgated under the 1933 Act.

 

(kk)          
Illegal or Unauthorized Payments; Political Contributions. Neither
the Company nor any of its Restricted Subsidiaries nor, to the Company's knowledge (after reasonable inquiry of its officers and
directors), any of the officers, directors, employees, agents or other representatives of the Company or any of its Restricted
Subsidiaries or any other business entity or enterprise with which the Company or any Restricted Subsidiary is or has been affiliated
or associated, has, directly or indirectly, made or authorized any payment, contribution or gift of money, property, or services,
whether or not in contravention of applicable law, (a) as a kickback or bribe to any Person or (b) to any political organization,
or the holder of or any aspirant to any elective or appointive public office except for personal political contributions not involving
the direct or indirect use of funds of the Company or any of its Restricted Subsidiaries.

 

    	18

    	 

    

 

(ll)            Money Laundering. The Company and its Restricted Subsidiaries are
in compliance with, and have not previously violated, the USA Patriot Act of 2001 and all other applicable U.S. and non-U.S. anti-money
laundering laws and regulations, including, but not limited to, the laws, regulations and Executive Orders and sanctions programs
administered by the U.S. Office of Foreign Assets Control, including, but not limited, to (i) Executive Order 13224 of September
23, 2001 entitled, "Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support
Terrorism" (66 Fed. Reg. 49079 (2001)); and (ii) any regulations contained in 31 CFR, Subtitle B, Chapter V.

 

(mm)      
Management. During the past five year period, to the knowledge of
the Company, no current or former officer or director of the Company or any of its Restricted Subsidiaries has been the subject
of:

 

(i)                
a petition under bankruptcy laws or any other insolvency or moratorium law or the appointment by a court of a receiver,
fiscal agent or similar officer for such Person, or any partnership in which such person was a general partner at or within two
years before the filing of such petition or such appointment, or any corporation or business association of which such person was
an executive officer at or within two years before the time of the filing of such petition or such appointment;

 

(ii)              
a conviction in a criminal proceeding or a named subject of a pending criminal proceeding (excluding traffic violations
that do not relate to driving while intoxicated or driving under the influence);

 

(iii)            
any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction,
permanently or temporarily enjoining any such person from, or otherwise limiting, the following activities:

 

(1)             
Acting as a futures commission merchant, introducing broker, commodity trading advisor, commodity pool operator,
floor broker, leverage transaction merchant, any other person regulated by the United States Commodity Futures Trading Commission
or an associated person of any of the foregoing, or as an investment adviser, underwriter, broker or dealer in securities, or as
an affiliated person, director or employee of any investment company, bank, savings and loan association or insurance company,
or engaging in or continuing any conduct or practice in connection with such activity;

 

(2)             
Engaging in any type of business practice; or

 

(3)             
Engaging in any activity in connection with the purchase or sale of any security or commodity or in connection with
any violation of securities laws or commodities laws;

 

(iv)            
any order, judgment or decree, not subsequently reversed, suspended or vacated, of any authority barring, suspending or
otherwise limiting for more than 60 days the right of any such person to engage in any activity described in the preceding sub
paragraph, or to be associated with persons engaged in any such activity;

 

    	19

    	 

    

 

(v)              
a finding by a court of competent jurisdiction in a civil action or by the SEC or other authority to have violated any securities
law, regulation or decree and the judgment in such civil action or finding by the SEC or any other authority has not been subsequently
reversed, suspended or vacated; or

 

(vi)            
a finding by a court of competent jurisdiction in a civil action or by the Commodity Futures Trading Commission to have
violated any federal commodities law, and the judgment in such civil action or finding has not been subsequently reversed, suspended
or vacated.

 

(nn)          
No Additional Agreements. The Company does not have any agreement
or understanding with any Buyer with respect to the transactions contemplated by the Transaction Documents other than as specified
in the Transaction Documents.

 

(oo)          
Public Utility Holding Act. None of the Company nor any of its Restricted
Subsidiaries is a “holding company,” or an “affiliate” of a “holding company,” as such terms
are defined in the Public Utility Holding Act of 2005.

 

(pp)          
Federal Power Act. None of the Company nor any of its Restricted
Subsidiaries is subject to regulation as a “public utility” under the Federal Power Act, as amended.

 

(qq)          
Ranking of Notes. Except as set forth on Schedule 3(qq), no Indebtedness
of the Company, at such Closing, will be senior to, or pari passu with, the Notes in right of payment, whether with respect
to payment or redemptions, interest, damages, upon liquidation or dissolution or otherwise. 

 

(rr)             
Disclosure. The Company confirms that neither it nor any other Person acting on its behalf has provided any
of the Buyers or their agents or counsel with any information that constitutes or could reasonably be expected to constitute material,
non-public information concerning the Company or any of its Restricted Subsidiaries, other than the existence of the transactions
contemplated by this Agreement and the other Transaction Documents. The Company understands and confirms that each of the Buyers
will rely on the foregoing representations in effecting transactions in securities of the Company. All disclosure provided to the
Buyers regarding the Company and its Restricted Subsidiaries, their businesses and the transactions contemplated hereby, including
the schedules to this Agreement, furnished by or on behalf of the Company or any of its Restricted Subsidiaries is true and correct
and does not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the
statements made therein, in the light of the circumstances under which they were made, not misleading. Each press release issued
by the Company or any of its Restricted Subsidiaries during the twelve (12) months preceding the date of this Agreement did not
at the time of release contain any untrue statement of a material fact or omit to state a material fact required to be stated therein
or necessary in order to make the statements therein, in the light of the circumstances under which they are made, not misleading.
No event or circumstance has occurred or information exists with respect to the Company or any of its Restricted Subsidiaries or
its or their business, properties, liabilities, prospects, operations (including results thereof) or conditions (financial or otherwise),
which, under applicable law, rule or regulation, requires public disclosure at or before the date hereof or announcement by the
Company but which has not been so publicly announced or disclosed. The Company acknowledges and agrees that no Buyer makes or has
made any representations or warranties with respect to the transactions contemplated hereby other than those specifically set forth
in Section 2.

 

    	20

    	 

    

 

(ss)            
Reliance. The Company acknowledges and agrees that the Placement Agent shall be a third party beneficiary
of the representations and warranties contained in this Section 3 and that the Placement Agent shall be entitled to rely on such
representations and warranties as of the Company made such representations and warranties directly to the Placement Agent.

 

		4.	COVENANTS.

 

(a)               
Best Efforts. Each Buyer shall use its best efforts to timely satisfy each of the conditions to be satisfied
by it as provided in Section 6. The Company shall use its best efforts to timely satisfy each of the conditions to be satisfied
by it as provided in Section 7.

 

(b)              
Amendments to the Registration Statement; Prospectus Supplements; Free Writing Prospectuses.

 

(i)                
Except as provided in this Agreement and other than periodic reports required to be filed pursuant to the 1934 Act, the
Company shall not file with the SEC any amendment to the Registration Statement that relates to the Buyer, this Agreement, the
Indenture, the Notes or the transactions contemplated hereby or thereby or file with the SEC any Prospectus Supplement that relates
to the Buyer, this Agreement, the Indenture, the Notes or the transactions contemplated hereby or thereby with respect to which
(a) the Buyer shall not previously have been advised, (b) the Company shall not have given due consideration to any comments thereon
received from the Buyer or its counsel, or (c) the Buyer shall reasonably object after being so advised, unless the Company reasonably
has determined that it is necessary to amend the Registration Statement or make any supplement to the Prospectus to comply with
the 1933 Act or any other applicable law or regulation, in which case the Company shall promptly (but in no event later than 24
hours) so inform the Buyer, the Buyer shall be provided with a reasonable opportunity to review and comment upon any disclosure
relating to the Buyer and the Company shall expeditiously furnish to the Buyer an electronic copy thereof. In addition, for so
long as, in the reasonable opinion of counsel for the Buyer, the Prospectus (or in lieu thereof, the notice referred to in Rule
173(a) under the 1933 Act) is required to be delivered in connection with any acquisition or sale of Securities (other than the
Series A Warrant Shares and the Series B Warrant Shares) by the Buyer, the Company shall not file any Prospectus Supplement with
respect to the Securities (other than the Series A Warrant Shares and the Series B Warrant Shares) without delivering or making
available a copy of such Prospectus Supplement, together with the Prospectus, to the Buyer promptly.

 

    	21

    	 

    

 

(ii)              
The Company has not made, and agrees that unless it obtains the prior written consent of the Buyer it will not make, an
offer relating to the Securities that would constitute an “issuer free writing prospectus” as defined in Rule 433 promulgated
under the Securities Act (an “Issuer Free Writing Prospectus”) or that would otherwise constitute a “free
writing prospectus” as defined in Rule 405 promulgated under the Securities Act (a “Free Writing Prospectus”)
required to be filed by the Company or the Buyer with the SEC or retained by the Company or the Buyer under Rule 433 under the
1933 Act. The Buyer has not made, and agrees that unless it obtains the prior written consent of the Company it will not make,
an offer relating to the Securities that would constitute a Free Writing Prospectus required to be filed by the Company with the
SEC or retained by the Company under Rule 433 under the 1933 Act. Any such Issuer Free Writing Prospectus or other Free Writing
Prospectus consented to by the Buyer or the Company is referred to in this Agreement as a “Permitted Free Writing Prospectus.”
The Company agrees that (x) it has treated and will treat, as the case may be, each Permitted Free Writing Prospectus as an Issuer
Free Writing Prospectus and (y) it has complied and will comply, as the case may be, with the requirements of Rules 164 and 433
under the Securities Act applicable to any Permitted Free Writing Prospectus, including in respect of timely filing with the SEC,
legending and record keeping.

 

(c)               
Prospectus Delivery. Immediately prior to execution of this Agreement, the Company shall have delivered to the Buyer,
and as soon as practicable after execution of this Agreement the Company shall file, Prospectus Supplements with respect to the
Securities (other than the Series A Warrant Shares and the Series B Warrant Shares) to be issued on the Initial Closing Date,
as required under, and in conformity with, the 1933 Act, including Rule 424(b) thereunder. The Company shall provide the Buyer
a reasonable opportunity to comment on a draft of each Prospectus Supplement and any Issuer Free Writing Prospectus, shall give
due consideration to all such comments and, subject to the provisions of Section 4(b) hereof, shall deliver or make available
to the Buyer, without charge, an electronic copy of each form of Prospectus Supplement, together with the Prospectus, and any
Permitted Free Writing Prospectus on each applicable Settlement Date. The Company consents to the use of the Prospectus (and of
any Prospectus Supplements thereto) in accordance with the provisions of the 1933 Act and with the securities or “blue sky”
laws of the jurisdictions in which the Securities (other than the Series A Warrant Shares and the Series B Warrant Shares) may
be sold by the Buyer, in connection with the offering and sale of the Securities (other than the Series A Warrant Shares and the
Series B Warrant Shares) and for such period of time thereafter as the Prospectus (or in lieu thereof, the notice referred to
in Rule 173(a) under the 1933 Act) is required by the 1933 Act to be delivered in connection with sales of the Securities (other
than the Series A Warrant Shares and the Series B Warrant Shares). If during such period of time any event shall occur that in
the judgment of the Company and its counsel is required to be set forth in the Registration Statement or the Prospectus or any
Permitted Free Writing Prospectus or should be set forth therein in order to make the statements made therein (in the case of
the Prospectus, in light of the circumstances under which they were made) not misleading, or if it is necessary to amend the Registration
Statement or supplement or amend the Prospectus or any Permitted Free Writing Prospectus to comply with the 1933 Act or any other
applicable law or regulation, the Company shall forthwith prepare and, subject to Section 4(b) above, file with the SEC an appropriate
amendment to the Registration Statement or Prospectus Supplement to the Prospectus (or supplement to the Permitted Free Writing
Prospectus) and shall expeditiously furnish or make available to the Buyer an electronic copy thereof.

 

    	22

    	 

    

 

(d)              
Stop Orders. The Company shall advise the Buyer promptly (but in no event later than 24 hours) and shall confirm
such advice in writing: (i) of the Company’s receipt of notice of any request by the SEC for amendment of or a supplement
to the Registration Statement, the Prospectus, any Permitted Free Writing Prospectus or for any additional information; (ii) of
the Company’s receipt of notice of the issuance by the SEC of any stop order suspending the effectiveness of the Registration
Statement or prohibiting or suspending the use of the Prospectus or any Prospectus Supplement, or of the suspension of qualification
of the Securities (other than the Series A Warrant Shares and the Series B Warrant Shares) for offering or sale in any jurisdiction,
or the initiation or contemplated initiation of any proceeding for such purpose; (iii) of the Company becoming aware of the happening
of any event, which makes any statement of a material fact made in the Registration Statement, the Prospectus or any Permitted
Free Writing Prospectus untrue or which requires the making of any additions to or changes to the statements then made in the
Registration Statement, the Prospectus or any Permitted Free Writing Prospectus in order to state a material fact required by
the 1933 Act to be stated therein or necessary in order to make the statements then made therein (in the case of the Prospectus,
in light of the circumstances under which they were made) not misleading, or of the necessity to amend the Registration Statement
or supplement the Prospectus or any Permitted Free Writing Prospectus to comply with the 1933 Act or any other law or (iv) if
at any time following the date hereof the Registration Statement is not effective or is not otherwise available for the issuance
of the Securities (other than the Series A Warrant Shares and the Series B Warrant Shares) or any Prospectus contained therein
is not available for use for any other reason. Thereafter, the Company shall promptly notify such holders when the Registration
Statement, the Prospectus, any Permitted Free Writing Prospectus and/or any amendment or supplement thereto, as applicable, is
effective and available for the issuance of the Securities (other than the Series A Warrant Shares and the Series B Warrant Shares).
The Company shall not issue any Series B Closing Notice during the continuation of any of the foregoing events. If at any time
the SEC shall issue any stop order suspending the effectiveness of the Registration Statement or prohibiting or suspending the
use of the Prospectus or any Prospectus Supplement, the Company shall use commercially reasonable efforts to obtain the withdrawal
of such order at the earliest possible time. So long as any Notes remain outstanding, the Company shall use its best efforts to
maintain the continuous effectiveness of the Registration Statement under the 1933 Act.

 

(e)               
Blue Sky. If required, the Company, on or before each Closing Date, shall take such action as the Company shall
reasonably determine is necessary in order to obtain an exemption for, or to qualify the Securities for sale to the Buyer at the
applicable Closing pursuant to this Agreement under applicable securities or “Blue Sky” laws of the states of the
United States (or to obtain an exemption from such qualification), and shall provide evidence of any such action so taken to the
Buyer on or prior to the applicable Closing Date. Without limiting any other obligation of the Company under this Agreement, the
Company shall timely make all filings and reports relating to the offer and sale of the Securities required under all applicable
securities laws (including, without limitation, all applicable federal securities laws and all applicable “Blue Sky”
laws), and the Company shall comply with all applicable federal, state and local laws, statutes, rules, regulations and the like
relating to the offering and sale of the Securities to the Buyer.

 

    	23

    	 

    

 

(f)               
Reporting Status. During the period (the “Reporting Period”)
commencing on the Series A Closing Date and ending on the date on which the Buyer shall have sold all of the Securities or any
capital stock of the Company issued or issuable with respect to the Conversion Shares or the Notes, including, without limitation,
(1) as a result of any stock split, stock dividend, recapitalization, exchange or similar event or otherwise and (2) shares of
capital stock of the Company into which the shares of Common Stock are converted, exercised or exchanged and shares of capital
stock of a Successor Entity (as defined in the Notes) into which the shares of Common Stock are converted, exercised or exchanged
(in each case, without regard to any limitations on conversion of (or other issuance pursuant to) the Notes or the Warrants) or
otherwise issuable pursuant to the terms of the Notes or the Warrants (collectively, the “Covered Securities”),
the Company shall timely file all reports required to be filed with the SEC pursuant to the 1934 Act, and the Company shall not
terminate its status as an issuer required to file reports under the 1934 Act even if the 1934 Act or the rules and regulations
thereunder would no longer require or otherwise permit such termination..

 

(g)              
Use of Proceeds. The Company will use the proceeds from the sale of the Securities for general corporate purposes,
but not for the (x) except as set forth on Schedule 4(g) attached hereto, the repayment of any outstanding Indebtedness
(other than in respect of the Notes) of the Company or any of its Subsidiaries or (y) redemption or repurchase of any securities
of the Company or any of its Subsidiaries or (z) the settlement of any outstanding litigation.

 

(h)              
Financial Information. The Company agrees to send the following to each holder of Notes (an “Investor”)
during the Reporting Period (i) unless the following are filed with the SEC through EDGAR and are available to the public through
the EDGAR system, within one (1) Business Day after the filing thereof with the SEC, a copy of its Annual Reports on Form 10-K
and Quarterly Reports on Form 10-Q, any interim reports or any consolidated balance sheets, income statements, stockholders’
equity statements and/or cash flow statements for any period other than annual, any Current Reports on Form 8-K and any registration
statements (other than on Form S-8) or amendments filed pursuant to the 1933 Act, (ii) on the same day as the release thereof,
facsimile copies of all press releases issued by the Company or any of its Subsidiaries and (iii) copies of any notices and other
information made available or given to the stockholders of the Company generally, contemporaneously with the making available or
giving thereof to the stockholders.

 

(i)                
Listing. The Company shall promptly secure the listing or designation for quotation (as the case may be) of
all of the Covered Securities upon each national securities exchange and automated quotation system, if any, upon which the Common
Stock is then listed or designated for quotation (as the case may be) (subject to official notice of issuance) and shall maintain
such listing or designation for quotation (as the case may be) of all Covered Securities from time to time issuable under the terms
of the Transaction Documents on a national securities exchange or automated quotation system. The Company shall maintain the Common
Stock’s listing or designation for quotation (as the case may be) on one of the Principal Market, The New York Stock Exchange,
the NYSE MKT, the Nasdaq Global Market or the Nasdaq Global Select Market (each, an “Eligible Market”). Neither
the Company nor any of its Subsidiaries shall take any action which could be reasonably expected to result in the delisting or
suspension of the Common Stock on an Eligible Market. The Company shall pay all fees and expenses in connection with satisfying
its obligations under this Section 4(i).

 

    	24

    	 

    

 

(j)                
Fees. The Company shall reimburse Capital Ventures International (“CVI”) for all reasonable
costs and expenses incurred by it or its affiliates in connection with the transactions contemplated by the Transaction Documents
(including, without limitation, as applicable, all reasonable legal fees and disbursements of Greenberg Traurig, LLP, any other
reasonable fees and expenses in connection with the structuring, documentation and implementation of the transactions contemplated
by the Transaction Documents and due diligence and regulatory filings in connection therewith) (the “Expense Amount”)
and shall be withheld by CVI from its Purchase Price at any Closing or paid by the Company upon termination of this Agreement on
demand by Capital Ventures and/or Greenberg Traurig, LLP so long as such termination did not occur as a result of a material breach
by CVI of any of its obligations hereunder (as the case may be), less $20,000 which was previously advanced to CVI by the Company.
Subject to the limitation set forth in the immediately preceding sentence, if the amount so withheld at any Closing by CVI was
less than the Expense Amount actually incurred by CVI and/or Greenberg Traurig, LLP, as applicable, in connection with the transactions
contemplated by the Transaction Documents and entitled to reimbursement from the Company in accordance herewith or any other Transaction
Document, the Company shall promptly reimburse CVI and/or Greenberg Traurig, LLP, as applicable, on demand for such Expense Amount
not so reimbursed by the Company on the date hereof or through such withholding at a Closing. The Company shall be responsible
for the payment of any placement agent’s fees, financial advisory fees, transfer agent fees, the fees and expenses of the
Trustee (including any legal counsel to the Trustee), DTC (as defined below) fees or broker’s commissions (other than for
Persons engaged by any Buyer) relating to or arising out of the transactions contemplated hereby (including, without limitation,
any fees payable to the Placement Agent, who is the Company’s sole placement agent in connection with the transactions contemplated
by this Agreement). The Company shall pay, and hold each Buyer harmless against, any liability, loss or expense (including, without
limitation, reasonable attorneys’ fees and out-of-pocket expenses) arising in connection with any claim relating to any such
payment. Except as otherwise set forth in the Transaction Documents, each party to this Agreement shall bear its own expenses in
connection with the sale of the Securities to each Buyer.

 

(k)              
Pledge of Securities. Notwithstanding anything to the contrary contained in this Agreement, the Company acknowledges
and agrees that the Securities may be pledged by a Buyer in connection with a bona fide margin agreement or other loan or financing
arrangement that is secured by the Securities. The pledge of Securities shall not be deemed to be a transfer, sale or assignment
of the Securities hereunder, and no Buyer effecting a pledge of Securities shall be required to provide the Company with any notice
thereof or otherwise make any delivery to the Company pursuant to this Agreement or any other Transaction Document. The Company
hereby agrees to execute and deliver such documentation as a pledgee of the Securities may reasonably request in connection with
a pledge of the Securities to such pledgee by a Buyer.

 

    	25

    	 

    

 

(l)                
Disclosure of Transactions and Other Material Information. file a Current Report on Form 8-K describing all
the material terms of the transactions contemplated by the Transaction Documents in the form required by the 1934 Act and attaching
all the material Transaction Documents (including, without limitation, this Agreement (and all schedules to this Agreement), the
Indenture, the forms of Supplemental Indentures, the forms of the Warrants and the forms of the Notes) (including all attachments,
the “Series A 8-K Filing”).From and after the filing of the Series A 8-K Filing (but prior to the delivery of
a Ser, the Company shall have disclosed all material, non-public information (if any) provided to any of the Buyers by the Company
or any of its Subsidiaries or any of their respective officers, directors, employees or agents in connection with the transactions
contemplated by the Transaction Documents. file a Current Report on Form 8-Kthe “Series B 8-K Filing”, and together
with the Series A 8-K Filing, the “8-K Filings”) reasonably acceptable to and attaching such Series B Closing
Notice and all material Transaction Documents with respect to such Series B Closing (to the extent not previously included in a
filing with the SEC)From and after the filing of Series B 8-K Filing, the Company shall have disclosed all material, non-public
information (if any) provided to by the Company or any of its Subsidiaries or any of their respective officers, directors, employees
or agents in connection with the transactions contemplated by the Transaction Documents. Except with respect to the delivery of
the Series B Closing Notice in accordance with Section 1(b)(ii), the Company shall not, and the Company shall cause each of its
Subsidiaries and each of its and their respective officers, directors, employees and agents not to, provide any Buyer with any
material, non-public information regarding the Company or any of its Subsidiaries from and after the Series A 8-K Filing without
the express prior written consent of such Buyer. The Company understands and confirms that each Buyer shall be relying on the foregoing
covenant and agreement in effecting transactions in securities of the Company, and based on such covenant and agreement, unless
otherwise expressly agreed in writing by such Buyer: (i) such Buyer does not have any obligation of confidentiality with respect
to any information that the Company provides to such Buyer; and (ii) such Buyer shall not be deemed to be in breach of any duty
to the Company and/or to have misappropriated any non-public information of the Company, if such Buyer engages in transactions
of securities of the Company, including, without limitation, any hedging transactions, short sales and/or any derivative transactions
based on securities of the Company while in possession of such material non-public information. In the event of a breach of any
of the foregoing covenants or any of the covenants or agreements contained in the Transaction Documents by the Company, any of
its Subsidiaries, or any of its or their respective officers, directors, employees and agents (as determined in the reasonable
good faith judgment of such Buyer), in addition to any other remedy provided herein or in the Transaction Documents, such Buyer
shall have the right to make a public disclosure, in the form of a press release, public advertisement or otherwise, of such breach
or such material, non-public information, as applicable, without the prior approval by the Company, any of its Subsidiaries, or
any of its or their respective officers, directors, employees or agents. No Buyer shall have any liability to the Company, any
of its Subsidiaries, or any of its or their respective officers, directors, employees, stockholders or agents, for any such disclosure.
Subject to the foregoing, neither the Company, its Subsidiaries nor any Buyer shall issue any press releases or any other public
statements with respect to the transactions contemplated hereby; provided, however, the Company shall be entitled, without the
prior approval of any Buyer, to make any press release or other public disclosure with respect to such transactions (i) in substantial
conformity with the 8-K Filings and contemporaneously therewith and (ii) as is required by applicable law and regulations (provided
that in the case of clause (i) each Buyer shall be consulted by the Company in connection with any such press release or other
public disclosure prior to its release). Without the prior written consent of the applicable Buyer, the Company shall not (and
shall cause each of its Subsidiaries and affiliates to not) disclose the name of such Buyer in any filing, announcement, release
or otherwise.

 

    	26

    	 

    

 

(m)            
Additional Registration Statements. Until the four month anniversary
of the Series A Closing Date (the “Applicable Date”), the Company shall not file a registration statement under
the 1933 Act relating to securities that are not the Securities (other than any registration statement on Form S-8 or any successor
form thereto or a resale registration statement on Form S-3 registering any Excluded Securities (as defined in the Warrants) or
the Senior Unsecured Notes Registration Statement).

 

(n)              
Additional Issuance of Securities. During the period commencing on the date hereof and ending on the later
of (x) the date no Notes remain outstanding and (y) the Series B Closing Expiration Date, the Company will not, without the prior
written consent of Buyers holding a majority in aggregate principal amount of the Notes then outstanding, issue any Notes (other
than to the Buyers as contemplated hereby) and the Company shall not issue any other securities that would cause a breach or default
under the Notes. The Company agrees that for the period commencing on the date hereof and ending on the date immediately following
the Applicable Date (the “Restricted Period”), neither the Company nor any of its Subsidiaries shall
directly or indirectly issue, offer, sell, grant any option or right to purchase, or otherwise dispose of (or announce any issuance,
offer, sale, grant of any option or right to purchase or other disposition of) any equity security or any equity-linked or related
security (including, without limitation, any “equity security” (as that term is defined under Rule 405 promulgated
under the 1933 Act), any Convertible Securities (as defined below), any debt, any preferred stock or any purchase rights) (any
such issuance, offer, sale, grant, disposition or announcement (whether occurring during the Restricted Period or at any time thereafter)
is referred to as a “Subsequent Placement”). Notwithstanding the foregoing, this Section 4(n) shall not apply
in respect of any Excluded Securities.

 

(o)              
Reservation of Shares. During the period commencing on the Series A Closing Date and ending on the later of
(x) the date no Notes remain outstanding and (y) the Series B Closing Expiration Date, the Company shall take all actions reasonably
necessary (including, without limitation increasing any such reserve, as necessary, prior to the consummation of any Subsequent
Placement (as defined below) to at all times have authorized, and reserved for the purpose of issuance, no less than (x) if prior
to the Stockholder Approval Date, (i) 30,000,000 shares of Common Stock issuable as Conversion Shares or Interest Shares or (ii)
if on or after the Stockholder Approval Date, the sum of (i) 125% of the maximum number of Conversion Shares issuable upon conversion
of the Notes (determined without taking into account any limitations on the conversion of the Notes set forth therein and assuming
that the Notes are convertible at the Series A Conversion Price (as defined in the Series A Notes) or the Series B Conversion Price
(as defined in the Series A Notes), as applicable, and all Series B Notes issuable hereunder have been issued), (ii) 125% of the
maximum number of Interest Shares issuable pursuant to the terms of the Notes from the Series A Closing Date through the maturity
date of the Series B Notes (determined without taking into account any limitations on the conversion of the Notes set forth therein
and assuming that all Series B Notes issuable hereunder have been issued) and (iii) the maximum number of Warrant Shares issuable
upon exercise of the Warrants (without taking into account any limitations on the exercise of the Warrants set forth therein).

 

(p)              
Conduct of Business. The business of the Company and its Subsidiaries shall not be conducted in violation
of any law, ordinance or regulation of any Governmental Entity, except where such violations would not result, either individually
or in the aggregate, in a Material Adverse Effect.

 

    	27

    	 

    

 

(q)              
Variable Securities. During the period commencing on the date hereof
and ending on the later of (x) the date less than $1 million in aggregate principal amount of Notes remain outstanding and (y)
the Series B Closing Expiration Date, the Company and each Subsidiary shall be prohibited from effecting or entering into an agreement
to effect any Subsequent Placement involving a Variable Rate Transaction. “Variable Rate Transaction” means
a transaction in which the Company or any Subsidiary (i) issues or sells any Convertible Securities either (A) at a conversion,
exercise or exchange rate or other price that is based upon and/or varies with the trading prices of or quotations for the shares
of Common Stock at any time after the initial issuance of such Convertible Securities, or (B) with a conversion, exercise or exchange
price that is subject to being reset at some future date after the initial issuance of such Convertible Securities or upon the
occurrence of specified or contingent events directly or indirectly related to the business of the Company or the market for the
Common Stock, other than pursuant to a customary “weighted average” anti-dilution provision or (ii) enters into any
agreement (including, without limitation, an equity line of credit) whereby the Company or any Subsidiary may sell securities at
a future determined price (other than standard and customary “preemptive” or “participation” rights). Each
Buyer shall be entitled to obtain injunctive relief against the Company and its Subsidiaries to preclude any such issuance, which
remedy shall be in addition to any right to collect damages

 

(r)                
Qualification Under Trust Indenture Act. Prior to any issuance of
Notes hereunder, the Company shall qualify the Indenture under the Trust Indenture Act of 1939, as amended (the “TIA”)
and enter into any necessary supplemental indentures in connection therewith and, so long as the Notes remain outstanding, the
Indenture shall be maintained in compliance with the TIA.

 

(s)               
Stockholder Approval. The Company shall provide each stockholder entitled to vote at either (x) the next annual
meeting of stockholders of the Company or (y) a special meeting of stockholders of the Company (the “Stockholder Meeting”),
which shall be promptly called and held not later than June 26, 2013 (the “Stockholder Meeting Deadline”), a
proxy statement, substantially in a form which shall have been previously reviewed by Greenberg Traurig LLP, at the expense of
the Company but in any event such expense not to exceed $10,000 without the prior written approval of the Company; soliciting each
such stockholder's affirmative vote at the Stockholder Meeting for approval of resolutions (“Stockholder Resolutions”)
providing for the Company's (x) issuance of all of the Securities as described in the Transaction Documents in accordance with
applicable law and the rules and regulations of the Principal Market and (y) unless approved by the stockholders of the Company
prior to such date, a reverse stock split of the Common Stock of the Company of at least one (1) share of Common Stock for every
five (5) shares of Common Stock (such affirmative approval being referred to herein as the “Stockholder Approval”,
and the date such Stockholder Approval is obtained, the “Stockholder Approval Date”), and the Company shall
use its reasonable best efforts to solicit its stockholders' approval of such resolutions and to cause the Board of Directors of
the Company to recommend to the stockholders that they approve such resolutions. The Company shall be obligated to seek to obtain
the Stockholder Approval by the Stockholder Meeting Deadline. If, despite the Company's reasonable best efforts the Stockholder
Approval is not obtained on or prior to the Stockholder Meeting Deadline, the Company shall cause an additional Stockholder Meeting
to be held once in each of the three subsequent calendar quarters thereafter until such Stockholder Approval is obtained. If, despite
the Company's reasonable best efforts the Stockholder Approval is not obtained after such subsequent stockholder meetings, the
Company shall cause an additional Stockholder Meeting to be held semi-annually thereafter until such Stockholder Approval is obtained.

 

    	28

    	 

    

 

(t)                
Dilutive Issuances. For so long as any Notes or Warrants remain outstanding, the Company shall not, in any
manner, enter into or affect any Dilutive Issuance (as defined in the Notes) if the effect of such Dilutive Issuance is to cause
the Company to be required to issue upon conversion of any Notes or exercise of any Warrant any shares of Common Stock in excess
of that number of shares of Common Stock which the Company may issue upon conversion of the Notes and exercise of the Warrants
without breaching the Company's obligations under the rules or regulations of the Principal Market.

 

(u)              
Passive Foreign Investment Company. The Company shall conduct its
business in such a manner as will ensure that the Company will not be deemed to constitute a passive foreign investment company
within the meaning of Section 1297 of the Code.

 

(v)              
Restriction on Redemption and Cash Dividends.During the period
commencing on the date hereof and ending on the later of (x) the date no Notes remain outstanding and (y) the Series B Closing
Expiration Date, the Company shall not, directly or indirectly, redeem, or pay any cash dividend or distribution on, any capital
stock of the Company without the prior express written consent of the Buyers (other than Permitted Distributions (as defined in
the Notes)).

 

(w)            
Corporate Existence. So long as any Buyer owns any Notes or Warrants,
the Company shall not be party to any Fundamental Transaction (as defined in the Notes) unless the Company is in compliance with
the applicable provisions governing Fundamental Transactions set forth in the Notes and the Warrants.

 

(x)            
Conversion and Exercise Procedures. Each of the form of Exercise Notice included in the Warrants and the form of
Conversion Notice included in the Notes set forth the totality of the procedures required of the Buyers in order to exercise the
Warrants or convert the Notes. No additional legal opinion, other information or instructions shall be required of the Buyers to
exercise their Warrants or convert their Notes. The Company shall honor exercises of the Warrants and conversions of the Notes
and shall deliver the Conversion Shares, Interest Shares and Warrant Shares in accordance with the terms, conditions and time periods
set forth in the Notes and Warrants.

 

(y)              
New PE Holdco Equity. During the period commencing on the date hereof
and ending on the later of (x) the date no Notes remain outstanding and (y) the Series B Closing Expiration Date, the Company shall
not acquire any additional securities or membership interest units of New PE Holdco LLC, a Delaware limited liability company (“New
PE Holdco”), in one or more transactions, except as otherwise contemplated in the Notes.

 

(z)               
Senior Unsecured Note Restrictions. Until the Stockholder Approval
Date, the Company shall not pay any dividends or other amounts due and payable or issuable under the Senior Unsecured Notes (as
defined in the Notes) or any Options or Convertible Securities issued to the holders of Senior Unsecured Notes in shares of Common
Stock.

 

    	29

    	 

    

 

(aa)           
Closing Documents. On or prior to fourteen (14) calendar days after
each Closing Date, the Company agrees to deliver, or cause to be delivered, to each Buyer and Greenberg Traurig, LLP executed copies
of the Transaction Documents, Securities and other document required to be delivered to any party pursuant to Section 7 hereof.

 

		5.	REGISTER; TRANSFER AGENT INSTRUCTIONS; LEGEND.

 

(a)               
Register. The Company shall maintain at its principal executive offices (or such other office or agency of
the Company as it may designate by notice to each holder of Securities), a register for the Notes and the Warrants in which the
Company shall record the name and address of the Person in whose name the Notes and the Warrants have been issued (including
the name and address of each transferee), the principal amount of the Notes held by such Person, the number of Conversion Shares
issuable upon conversion of the Notes, the number of Interest Shares issuable with respect to the Notes and the number of Warrant
Shares issuable upon exercise of the Warrants held by such Person. The Company shall keep the register open and available at all
times during business hours for inspection of any Buyer or its legal representatives.

 

(b)              
Transfer Agent Instructions. The Company shall issue irrevocable instructions to the Transfer Agent in the
form previously provided to the Company (the “Irrevocable Transfer Agent Instructions”) to issue certificates
or credit shares to the applicable balance accounts at DTC, registered in the name of each Buyer or its respective nominee(s),
for the Conversion Shares, the Interest Shares and the Warrant Shares in such amounts as specified from time to time by each Buyer
to the Company upon conversion of the Notes or other issuance pursuant to the terms of the Notes or the exercise of the Warrants
(as the case may be). The Company represents and warrants that no instruction other than the Irrevocable Transfer Agent Instructions
referred to in this Section 5(b) will be given by the Company to the Transfer Agent with respect to the Shares, and that the Shares
shall otherwise be freely transferable on the books and records of the Company. If a Buyer effects a sale, assignment or transfer
of the Securities, the Company shall permit the transfer and, with respect to the Shares, shall also promptly instruct the Transfer
Agent to issue one or more certificates or credit shares to the applicable balance accounts at DTC in such name and in such denominations
as specified by such Buyer to effect such sale, transfer or assignment. The Company acknowledges that a breach by it of its obligations
hereunder will cause irreparable harm to each Buyer. Accordingly, the Company acknowledges that the remedy at law for a breach
of its obligations under this Section 5(b) will be inadequate and agrees, in the event of a breach or threatened breach by the
Company of the provisions of this Section 5(b), that each Buyer shall be entitled, in addition to all other available remedies,
to an order and/or injunction restraining any breach and requiring immediate issuance and transfer, without the necessity of showing
economic loss and without any bond or other security being required. The Company shall cause its counsel to issue the legal opinion
referred to in the Irrevocable Transfer Agent Instructions to the Transfer Agent to the extent required or requested by the Transfer
Agent. Any fees (with respect to the Transfer Agent, counsel to the Company or otherwise) associated with the issuance of such
opinion shall be borne by the Company.

 

    	30

    	 

    

 

(c)               
Legends. Certificates and any other instruments evidencing the Securities shall not bear any restrictive or
other legend.

 

		6.	CONDITIONS TO THE COMPANY’S OBLIGATION TO SELL.

 

(a)               
The obligation of the Company hereunder to issue and sell the Series A Notes and the related Series A Warrants and
Series B Warrants to each Buyer at the Series A Closing is subject to the satisfaction, at or before the Series A Closing
Date, of each of the following conditions, provided that these conditions are for the Company’s sole benefit and may be waived
by the Company at any time in its sole discretion by providing each Buyer with prior written notice thereof:

 

(i)                
Such Buyer shall have executed each of the other Transaction Documents to which it is a party and delivered the same to
the Company.

 

(ii)              
Such Buyer and each other Buyer shall have delivered to the Company the Series A Purchase Price (less any amounts permitted
to be withheld by such Buyer pursuant to Section 4(j)) for the Series A Note and the related Series A Warrants and Series B Warrants
being purchased by such Buyer at such Series A Closing by wire transfer of immediately available funds pursuant to the wire instructions
provided by the Company.

 

(iii)            
The representations and warranties of such Buyer shall be true and correct in all material respects as of the date when
made and as of the Series A Closing Date as though originally made at that time (except for representations and warranties that
speak as of a specific date, which shall be true and correct as of such specific date), and such Buyer shall have performed, satisfied
and complied in all material respects with the covenants, agreements and conditions required by this Agreement to be performed,
satisfied or complied with by such Buyer at or prior to the Series A Closing Date.

 

(b)              
The obligation of the Company hereunder to issue and sell the Series B Notes to each Buyer at
the Series B Closing is subject to the satisfaction, at or before the Series B Closing Date, of each of the following conditions,
provided that these conditions are for the Company’s sole benefit and may be waived by the Company at any time in its sole
discretion by providing each Buyer with prior written notice thereof:

 

(i)                
Such Buyer shall have executed each of the other Transaction Documents to which it is
a party and delivered the same to the Company.

 

(ii)              
Such Buyer shall have delivered to the Company the Series B Purchase Price (less any amounts
permitted to be withheld by such Buyer pursuant to Section 4(j)) for the Series B Note being purchased by such
Buyer at such Series B Closing by wire transfer of immediately available funds pursuant to the wire instructions provided
by the Company.

 

(iii)            
The representations and warranties of such Buyer shall be true and correct in all material
respects as of the date when made and as of the Series B Closing Date as though originally made at that time (except for representations
and warranties that speak as of a specific date, which shall be true and correct as of such specific date), and such
Buyer shall have performed, satisfied and complied in all material respects with the covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied with by such Buyer at or prior
to the Series B Closing Date.

 

    	31

    	 

    

 

(iv)            
The Stockholder Approval has been obtained.

 

		7.	CONDITIONS TO EACH BUYER’S OBLIGATION TO PURCHASE. 

 

(a)               
The obligation of each Buyer hereunder to purchase its Series A Note and its related Series A Warrants and Series
B Warrants at the Series A Closing is subject to the satisfaction, at or before the Series A Closing Date, of each of the
following conditions, provided that these conditions are for each Buyer’s sole benefit and may be waived by such Buyer at
any time in its sole discretion by providing the Company with prior written notice thereof:

 

(i)                The
Company shall have duly executed and delivered to such Buyer each of the Transaction Documents to which it is a party and the
Company shall have duly executed and delivered to such Buyer a Series A Note (in such original principal amount as is set forth
across from such Buyer’s name in column (3) of the Schedule of Buyers) and the related (x) Series A Warrants (initially
for such aggregate number of shares of Series A Warrant Shares as is set forth across from such Buyer’s name in column (5)
of the Schedule of Buyers) being purchased by such Buyer at such Series A Closing pursuant to this Agreement and (y) and the related
Series B Warrants initially for such aggregate number of shares of Series B Warrant Shares as is set forth across from such Buyer’s
name in column (6) of the Schedule of Buyers) being purchased by such Buyer at such Series A
Closing pursuant to this Agreement.

 

(ii)              Such
Buyer shall have received the opinion of Troutman Sanders LLP, the Company’s counsel, dated as of the Series A Closing
Date, in the form acceptable to such Buyer (which opinion may be addressed to all of the Buyers and the Placement Agent).

 

(iii)            
The Trustee shall have duly executed and delivered to the Company and such Buyer the Indenture and the Series A Supplemental
Indenture. The Indenture and the Series A Supplemental Indenture shall be qualified under the TIA.

 

(iv)            
The Company shall have duly executed and delivered to such Buyer the FCPA questionnaire, in the form acceptable to such
Buyer.

 

(v)              The
Company shall have delivered to such Buyer a copy of the Irrevocable Transfer Agent Instructions, in the form acceptable to
such Buyer, which instructions shall have been delivered to and acknowledged in writing by the Company’s transfer
agent.

 

(vi)            
The Company shall have delivered to such Buyer a certificate evidencing the formation and good standing of the Company and
each of its Subsidiaries in each such entity’s jurisdiction of formation issued by the Secretary of State (or comparable
office) of such jurisdiction of formation as of a date within ten (10) days of the Series A Closing Date.

 

    	32

    	 

    

 

(vii)        
  The Company shall have delivered to such Buyer a certificate evidencing the Company’s and each
Subsidiary’s qualification as a foreign corporation and good standing issued by the Secretary of State (or comparable
office) of each jurisdiction in which the Company and each Subsidiary conducts business and is required to so qualify, as of
a date within ten (10) days of the Series A Closing Date.

 

(viii)      
   The Company shall have delivered to such Buyer a certified copy of the Certificate of Incorporation
as certified by the Delaware Secretary of State within ten (10) days of the Series A Closing Date.

 

(ix)         
   Each Subsidiary shall have delivered to such Buyer a certified copy of its certificate of
incorporation as certified by the Secretary of State (or comparable office) of such Subsidiary’s jurisdiction of
incorporation within thirty (30) days of the Series A Closing Date.

 

(x)          
   The Company shall have delivered to such Buyer a certificate, in the form acceptable to such Buyer,
executed by the Secretary of the Company and dated as of the Series A Closing Date, as to (i) the resolutions consistent with
Section 3(b) as adopted by the Company’s Board of Directors in a form reasonably acceptable to such Buyer, (ii) the
Certificate of Incorporation of the Company and (iii) the Bylaws of the Company, each as in effect at the Series A
Closing.

 

(xi)        
    Each and every representation and warranty of the Company shall be true and correct in all
material respects (other than representations and warranties that are already qualified by materiality or Material Adverse
Effect which shall be true and correct in all respects) as of the date when made and as of the Series A Closing Date as
though originally made at that time (except for representations and warranties that speak as of a specific date, which shall
be true and correct as of such specific date) and the Company shall have performed, satisfied and complied in all material
respects with the covenants, agreements and conditions required to be performed, satisfied or complied with by the Company at
or prior to the Series A Closing Date. Such Buyer shall have received a certificate, duly executed by the Chief Executive
Officer of the Company, dated as of such Series A Closing Date, certifying that that Company has performed, satisfied and
complied in all material respects with the covenants, agreements and conditions required to be performed, satisfied or
complied with by the Company at or prior to the Series A Closing Date and as to such other matters as may be reasonably
requested by such Buyer in the form acceptable to such Buyer.

 

(xii)        
  The Company shall have delivered to such Buyer a letter from the Company’s transfer agent certifying the
number of shares of Common Stock outstanding on the date immediately prior to the Series A Closing Date.

 

(xiii)      
   The Common Stock (I) shall be designated for quotation or listed (as applicable) on an Eligible Market
and (II) shall not have been suspended, as of the Series A Closing Date, by the SEC or the Eligible Market from trading on
the Eligible Market nor shall suspension by the SEC or the Principal Market have been threatened, as of the Series A Closing
Date (other than a failure of the Company to meet the minimum bid price requirement as required by the Principal Market),
either (A) in writing by the SEC or the Principal Market or (B) by falling below the minimum maintenance requirements of the
Principal Market.

 

    	33

    	 

    

 

(xiv)      
   The Company shall have obtained all governmental, regulatory or third party consents and approvals,
if any, necessary for the sale of the Securities, including without limitation, those required by the Principal Market, if
any.

 

(xv)      
    No statute, rule, regulation, executive order, decree, ruling or injunction shall have been
enacted, entered, promulgated or endorsed by any Governmental Entity of competent jurisdiction that prohibits the
consummation of any of the transactions contemplated by the Transaction Documents.

 

(xvi)     
    Since the date of execution of this Agreement, no event or series of events shall have occurred
that have or would reasonably be expected to result in a Material Adverse Effect.

 

(xvii)    
    The Company shall have obtained approval of the Principal Market to list or designate for
quotation (as the case may be) the Series A Conversion Shares and Interest Shares issuable pursuant to the Series A
Notes.

 

(xviii)    
  Such Buyer shall have received a letter on the letterhead of the Company, duly executed by an officer of the
Company, setting forth the wire instructions of the Company.

 

(xix)       
  From the date hereof to the Series A Closing Date, (i) trading in the Common Stock shall not have been
suspended by the SEC or the Principal Market (except for any suspension of trading of limited duration agreed to by the
Company, which suspension shall be terminated prior to the Series A Closing), and, (ii) at any time prior to the Series A
Closing Date, trading in securities generally as reported by Bloomberg L.P. shall not have been suspended or limited, or
minimum prices shall not have been established on securities whose trades are reported by such service, or on the Principal
Market, nor shall a banking moratorium have been declared either by the United States or New York State authorities nor shall
there have occurred any material outbreak or escalation of hostilities or other national or international calamity of such
magnitude in its effect on, or any material adverse change in, any financial market which, in each case, in the reasonable
judgment of each Buyer, makes it impracticable or inadvisable to purchase the Securities at the Series A Closing

 

(xx)       
    The Registration Statement shall be effective and available for the issuance and sale of the
Securities to be issued at the Series A Closing hereunder and pursuant to the terms of the Series A Notes and the Company
shall have delivered to such Buyer the Prospectus and the Prospectus Supplement as required thereunder.

 

(xxi)      
    The holders of the Senior Unsecured Notes shall have duly executed and delivered the
amendments to the Senior Unsecured Notes and related agreements, in the form attached hereto as Exhibit C-1
(collectively, the “Senior Unsecured Notes Amendment”).

 

    	34

    	 

    

 

(xxii)    
     That certain promissory note issued by the Company to Neil Koehler with an $750,000
aggregate principal amount shall have been amended to extend the maturity date thereof to March 31, 2014, in form and
substance reasonably satisfactory to the Buyers (such amendment, the “Koehler Amendment”).

 

(xxiii)    
    The Company and its Subsidiaries shall have delivered to such Buyer such other documents
relating to the transactions contemplated by this Agreement as such Buyer or its counsel may reasonably request.

 

(b)              
The obligation of each Buyer hereunder to purchase its Series B Note at the Series B Closing
is subject to the satisfaction, at or before the Series B Closing Date, of each of the following conditions, provided that these
conditions are for each Buyer’s sole benefit and may be waived by such
Buyer at any time in its sole discretion by providing the Company with prior written notice thereof:

 

(i)              The Company and each Subsidiary (as the case may be) shall have duly executed and
delivered to such Buyer each of the Transaction Documents to which it is a party and the
Company shall have duly executed and delivered to such Buyer a Series B Note (in such
original principal amount as is set forth across from such Buyer’s name in column (4) of the Schedule of Buyers) being
purchased by such Buyer at such Series B Closing pursuant to this Agreement.

 

(ii)         
   Such Buyer shall have received the opinion of Troutman Sanders LLP, the Company’s counsel,
dated as of the Series B Closing Date, in the form acceptable to such Buyer.

 

(iii)       
    The Trustee shall have duly executed and delivered to the Company and such Buyer the Series B
Supplemental Indenture. The Indenture and the Series B Supplemental Indenture shall be qualified under the TIA.

 

(iv)            The Company shall have delivered to such Buyer a copy
of the Irrevocable Transfer Agent Instructions, in the form acceptable to such Buyer, which
instructions shall have been delivered to and acknowledged in writing by the Company’s transfer agent.

 

(v)             The Company shall have delivered to such Buyer a certificate evidencing the formation and good standing of the Company and
each of its Subsidiaries in each such entity’s jurisdiction of formation issued by the Secretary of State (or comparable
office) of such jurisdiction of formation as of a date within ten (10) days of the Series B Closing Date.

 

(vi)            The Company shall have delivered to such Buyer a certificate evidencing the Company’s and each Subsidiary’s
qualification as a foreign corporation and good standing issued by the Secretary of State (or comparable office) of each jurisdiction
in which the Company and each Subsidiary conducts business and is required to so qualify, as of a date within ten (10) days of
the Series B Closing Date.

 

(vii)           The
Company shall have delivered to such Buyer a certified copy of the Certificate of Incorporation as certified by the Delaware Secretary
of State within ten (10) days of the Series B Closing Date.

 

    	35

    	 

    

 

(viii)         Each Subsidiary shall have delivered to such Buyer a certified copy of its certificate of incorporation as certified by
the Secretary of State (or comparable office) of such Subsidiary’s jurisdiction of incorporation within ten (10) days of
the Series B Closing Date.

 

(ix)            The
Company shall have delivered to such Buyer a certificate, in the form acceptable to such
Buyer, executed by the Secretary of the Company and dated as of such Series B Closing Date, as to (i) the resolutions consistent
with Section 3(b) as adopted by the Company’s Board of Directors in a form reasonably acceptable to such
Buyer, (ii) the Certificate of Incorporation of the Company and (iii) the Bylaws of the Company, each as in effect at such
Series A Closing.

 

(x)             Each
and every representation and warranty of the Company shall be true and correct in all material respects (other than representations
and warranties that are already qualified by materiality or Material Adverse Effect which shall be true and correct in all respects)
as of the date when made and as of the Series B Closing Date as though originally made at that time (except for representations
and warranties that speak as of a specific date, which shall be true and correct as of such specific date) and the Company shall
have performed, satisfied and complied in all material respects with the covenants, agreements and conditions required to be performed,
satisfied or complied with by the Company at or prior to the Series B Closing Date. Such Buyer shall
have received a certificate, duly executed by the Chief Executive Officer of the Company, dated as of the Series B Closing Date,
to the foregoing effect and as to such other matters as may be reasonably requested by such Buyer in
the form acceptable to such Buyer.

 

(xi)            The
Company shall have delivered to such Buyer a letter from the Company’s transfer agent
certifying the number of shares of Common Stock outstanding on the date immediately prior to the Series B Closing Date.

 

(xii)           The
Common Stock (I) shall be designated for quotation or listed (as applicable) on the Principal Market and (II) shall not have been
suspended, as of the Series B Closing Date, by the SEC or the Principal Market from trading on the Principal Market nor shall
suspension by the SEC or the Principal Market have been threatened, as of the Series B Closing Date, either (A) in writing by
the SEC or the Principal Market or (B) by falling below the minimum maintenance requirements of the Principal Market.

 

(xiii)          The
Company shall have obtained all governmental, regulatory or third party consents and approvals, if any, necessary for the sale
of the Securities, including without limitation, those required by the Principal Market.

 

(xiv)          No
statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed
by any Governmental Entity of competent jurisdiction that prohibits the consummation of any of the transactions contemplated by
the Transaction Documents.

 

    	36

    	 

    

 

(xv)          Since
the date of execution of this Agreement, no event or series of events shall have occurred that reasonably would have or result
in a Material Adverse Effect.

 

(xvi)         The Company shall have obtained approval of the Principal Market to list or designate for quotation (as the case may be)
the Covered Securities.

 

(xvii)         Such
Buyer shall have received a letter on the letterhead of the Company, duly executed by an officer of the Company, setting
forth the wire instructions of the Company.

 

(xviii)       The
Company and its Subsidiaries shall have delivered to such Buyer such other documents relating
to the transactions contemplated by this Agreement as such Buyer or its counsel may reasonably
request.

 

(xix)          All
of the Conversion Shares issued and issuable upon conversion of the Notes (assuming the conversion in full of such Notes on or
prior to the Series B Closing Eligibility Date and a conversion price of the Series B Notes calculated as if the Notes were issued
on the Series B Closing Date) may be completed by the Company without violating the rules and regulations of the Principal Market.

 

(xx)           The Stockholder Approval shall have been obtained.

 

(xxi)          The
quotient of (x) the sum of the aggregate daily dollar trading volume (as reported on Bloomberg) of the Common Stock on each Trading
Day over the fifteen (15) consecutive Trading Day period ending on the Trading Day immediately preceding the Series B Closing
Date, divided by (y) fifteen (15) is not less than $500,000 (as adjusted for any stock splits, stock dividends, stock combinations,
recapitalizations or other similar transactions) (the “Series B Closing Volume Condition”).

 

(xxii)         The volume-weighted average of the VWAP (as defined in the Notes) of the Common Stock during the fifteen (15) consecutive
Trading Day period ending on the Trading Day immediately preceding the Series B Closing Date exceeds
$0.20 (as adjusted for any stock splits, stock dividends, stock combinations, recapitalizations or other similar transactions)
(the “Base Price”); provided, however, that in the event the Company effects a reverse stock split between the
date hereof and the Series B Closing Date, the Base Price shall be replaced with $0.15 (as adjusted by such reverse stock split)
(the “Series B Closing Price Condition”).

 

(xxiii)        There
has been no Equity Conditions Failure (as defined in the Series A Notes).

 

(xxiv)        From
the date hereof to the Series B Closing Date, (i) trading in the Common Stock shall not have been suspended by the SEC or the
Principal Market (except for any suspension of trading of limited duration agreed to by the Company, which suspension shall be
terminated prior to the Series B Closing), and, (ii) at any time prior to the Series B Closing Date, trading in securities generally
as reported by Bloomberg L.P. shall not have been suspended or limited, or minimum prices shall not have been established on securities
whose trades are reported by such service, or on the Principal Market, nor shall a banking moratorium have been declared either
by the United States or New York State authorities nor shall there have occurred any material outbreak or escalation of hostilities
or other national or international calamity of such magnitude in its effect on, or any material adverse change in, any financial
market which, in each case, in the reasonable judgment of each Buyer, makes it impracticable or inadvisable to purchase the Securities
at the Series B Closing.

 

    	37

    	 

    

 

(xxv)         The Registration Statement shall be effective and available for the issuance and sale of the Securities to be issued at
the Series B Closing hereunder and pursuant to the terms of the Series B Notes and the Company shall have delivered to such Buyer
the Prospectus and the Prospectus Supplement as required thereunder.

 

(xxvi)        The
Company and its Subsidiaries shall have delivered to such Buyer such other documents relating to the transactions contemplated
by this Agreement as such Buyer or its counsel may reasonably request.

 

		8.	TERMINATION. 

  

In the event that the
Series A Closing shall not have occurred within five (5) days of the date hereof, then each Buyer shall have the right to terminate
its obligations under this Agreement with respect to itself at any time on or after the close of business on such date without
liability of such Buyer to any other party; provided, however, (i) the right to terminate this Agreement under this Section 8 shall
not be available to such Buyer if the failure of the transactions contemplated by this Agreement to have been consummated by such
date is the result of such Buyer’s breach of this Agreement and (ii) the abandonment of the sale and purchase of the Notes
shall be applicable only to the Buyer providing such written notice; provided further that no such termination shall affect any
obligation of the Company under this Agreement to reimburse such Buyer for the expenses described in Section 4(j) above. Nothing
contained in this Section 8 shall be deemed to release any party from any liability for any breach by such party of the terms and
provisions of this Agreement or the other Transaction Documents or to impair the right of any party to compel specific performance
by any other party of its obligations under this Agreement or the other Transaction Documents.

 

		9.	MISCELLANEOUS.

 

(a)               
Governing Law; Jurisdiction; Jury Trial. All questions concerning the construction, validity, enforcement
and interpretation of this Agreement shall be governed by the internal laws of the State of New York, without giving effect to
any choice of law or conflict of law provision or rule (whether of the State of New York or any other jurisdictions) that would
cause the application of the laws of any jurisdictions other than the State of New York. Each party hereby irrevocably submits
to the exclusive jurisdiction of the state and federal courts sitting in The City of New York, Borough of Manhattan, for the adjudication
of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby
irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to
the jurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue
of such suit, action or proceeding is improper. 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 to such party at the address for such notices
to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof.
Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. EACH PARTY
HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE
HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.

 

    	38

    	 

    

 

(b)              
Counterparts. This Agreement may be executed in two or more identical counterparts, all of which shall be
considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered
to the other party. In the event that any signature is delivered by facsimile transmission or by an e-mail which contains a portable
document format (.pdf) file of an executed signature page, such signature page shall create a valid and binding obligation of the
party executing (or on whose behalf such signature is executed) with the same force and effect as if such signature page were an
original thereof.

 

(c)               
Headings; Gender. The headings of this Agreement are for convenience of reference and shall not form part
of, or affect the interpretation of, this Agreement. Unless the context clearly indicates otherwise, each pronoun herein shall
be deemed to include the masculine, feminine, neuter, singular and plural forms thereof. The terms “including,” “includes,”
“include” and words of like import shall be construed broadly as if followed by the words “without limitation.”
The terms “herein,” “hereunder,” “hereof” and words of like import refer to this entire Agreement
instead of just the provision in which they are found.

 

(d)              
Severability. If any provision of this Agreement is prohibited by law or otherwise determined to be invalid
or unenforceable by a court of competent jurisdiction, the provision that would otherwise be prohibited, invalid or unenforceable
shall be deemed amended to apply to the broadest extent that it would be valid and enforceable, and the invalidity or unenforceability
of such provision shall not affect the validity of the remaining provisions of this Agreement so long as this Agreement as so modified
continues to express, without material change, the original intentions of the parties as to the subject matter hereof and the prohibited
nature, invalidity or unenforceability of the provision(s) in question does not substantially impair the respective expectations
or reciprocal obligations of the parties or the practical realization of the benefits that would otherwise be conferred upon the
parties. The parties will endeavor in good faith negotiations to replace the prohibited, invalid or unenforceable provision(s)
with a valid provision(s), the effect of which comes as close as possible to that of the prohibited, invalid or unenforceable provision(s).
Notwithstanding anything to the contrary contained in this Agreement or any other Transaction Document (and without implication
that the following is required or applicable), it is the intention of the parties that in no event shall amounts and value paid
by the Company and/or any of its Subsidiaries (as the case may be), or payable to or received by any of the Buyers, under the Transaction
Documents (including without limitation, any amounts that would be characterized as “interest” under applicable law)
exceed amounts permitted under any applicable law. Accordingly, if any obligation to pay, payment made to any Buyer, or collection
by any Buyer pursuant the Transaction Documents is finally judicially determined to be contrary to any such applicable law, such
obligation to pay, payment or collection shall be deemed to have been made by mutual mistake of such Buyer, the Company and its
Subsidiaries and such amount shall be deemed to have been adjusted with retroactive effect to the maximum amount or rate of interest,
as the case may be, as would not be so prohibited by the applicable law. Such adjustment shall be effected, to the extent necessary,
by reducing or refunding, at the option of such Buyer, the amount of interest or any other amounts which would constitute unlawful
amounts required to be paid or actually paid to such Buyer under the Transaction Documents. For greater certainty, to the extent
that any interest, charges, fees, expenses or other amounts required to be paid to or received by such Buyer under any of the Transaction
Documents or related thereto are held to be within the meaning of “interest” or another applicable term to otherwise
be violative of applicable law, such amounts shall be pro-rated over the period of time to which they relate.

 

    	39

    	 

    

 

(e)               
Entire Agreement; Amendments. This Agreement, the other Transaction Documents and the schedules and exhibits
attached hereto and thereto and the instruments referenced herein and therein supersede all other prior oral or written agreements
between the Buyers, the Company, its Subsidiaries, their affiliates and Persons acting on their behalf solely with respect to the
matters contained herein and therein, and this Agreement, the other Transaction Documents, the schedules and exhibits attached
hereto and thereto and the instruments referenced herein and therein contain the entire understanding of the parties solely with
respect to the matters covered herein and therein; provided, however, nothing contained in this Agreement or any other Transaction
Document shall (or shall be deemed to) (i) have any effect on any agreements any Buyer has entered into with, or any instruments
any Buyer has received from, the Company or any of its Subsidiaries prior to the date hereof with respect to any prior investment
made by such Buyer in the Company or (ii) waive, alter, modify or amend in any respect any obligations of the Company or any of
its Subsidiaries, or any rights of or benefits to any Buyer or any other Person, in any agreement entered into prior to the date
hereof between or among the Company and/or any of its Subsidiaries and any Buyer, or any instruments any Buyer received from the
Company and/or any of its Subsidiaries prior to the date hereof, and all such agreements and instruments shall continue in full
force and effect. Except as specifically set forth herein or therein, neither the Company nor any Buyer makes any representation,
warranty, covenant or undertaking with respect to such matters. For clarification purposes, the Recitals are part of this Agreement.
No provision of this Agreement may be amended other than by an instrument in writing signed by the Company and the Required Holders
(as defined below), and any amendment to any provision of this Agreement made in conformity with the provisions of this Section
9(e) shall be binding on all Buyers and holders of Securities, as applicable, provided that no such amendment shall be effective
to the extent that it (1) applies to less than all of the holders of the Securities then outstanding or (2) imposes any obligation
or liability on any Buyer without such Buyer’s prior written consent (which may be granted or withheld in such Buyer’s
sole discretion). No waiver shall be effective unless it is in writing and signed by an authorized representative of the waiving
party, provided that the Required Holders may waive any provision of this Agreement, and any waiver of any provision of this Agreement
made in conformity with the provisions of this Section 9(e) shall be binding on all Buyers and holders of Securities, as applicable,
provided that no such waiver shall be effective to the extent that it (1) applies to less than all of the holders of the Securities
then outstanding (unless a party gives a waiver as to itself only) or (2) imposes any obligation or liability on any Buyer without
such Buyer’s prior written consent (which may be granted or withheld in such Buyer’s sole discretion). Other than the
Transaction Documents, the Company has not, directly or indirectly, made any agreements with any Buyers relating to the terms or
conditions of the transactions contemplated by the Transaction Documents except as set forth in the Transaction Documents. Without
limiting the foregoing, the Company confirms that, except as set forth in this Agreement or the other Transaction Documents, no
Buyer has made any commitment or promise or has any other obligation to provide any financing to the Company, any Subsidiary or
otherwise. As a material inducement for each Buyer to enter into this Agreement, the Company expressly acknowledges and agrees
that (i) no due diligence or other investigation or inquiry conducted by a Buyer, any of its advisors or any of its representatives
shall affect such Buyer’s right to rely on, or shall modify or qualify in any manner or be an exception to any of, the Company’s
representations and warranties contained in this Agreement or any other Transaction Document and (ii) unless a provision of this
Agreement or any other Transaction Document is expressly preceded by the phrase “except as disclosed in the SEC Documents,”
nothing contained in any of the SEC Documents shall affect such Buyer’s right to rely on, or shall modify or qualify in any
manner or be an exception to any of, the Company’s representations and warranties contained in this Agreement or any other
Transaction Document. “Required Holders” means (i) on or prior to the earlier of (x) the Series B Closing Date
and (y) the Series B Closing Expiration Date, each Buyer entitled to purchase Notes and/or Warrants at a Closing hereunder and
(ii) thereafter, holders of two-thirds (2/3rds) of the Securities (excluding any Securities held by the Company or any of its Subsidiaries)
issued or issuable hereunder or pursuant to the Notes and/or the Warrants (as if such Notes and/or Warrants were voluntarily converted
or exercised, as applicable, by each such holder thereof, in full, immediately prior to such date of determination).

 

    	40

    	 

    

 

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

 

If to the Company:

 

Pacific Ethanol, Inc.

400 Capitol Mall

Suite 2060

Sacramento, CA 95814

Telephone: (916) 403-2123

Facsimile: (916) 403-3937

Attention: Chief Executive Officer

 

With a copy (for informational
purposes only) to:

 

Pacific Ethanol, Inc.

400 Capitol Mall

Suite 2060

Sacramento, CA 95814

Telephone: (916) 403-2130

Facsimile: (916) 403-2785

Attention: General Counsel

 

Troutman Sanders LLP

5 Park Plaza, Suite 1400

Irvine, CA 92614-2545

Telephone: (949) 622-2710

Facsimile: (949) 622-2739

Attention: Larry A. Cerutti, Esq.

 

If to the Transfer Agent:

 

American Stock Transfer &
Trust Company

6201 15th Avenue, 2nd
Floor

Brooklyn, New York 11219

Telephone: (718) 921-8360

Facsimile: (718) 921-8310

Attention: Marianela Patterson

 

    	41

    	 

    

 

If to a Buyer, to its address and facsimile
number set forth on the Schedule of Buyers, with copies to such Buyer’s representatives as set forth on the Schedule of Buyers,

 

with a copy (for informational
purposes only) to:

 

Greenberg Traurig, LLP

MetLife Building

200 Park Avenue

New York, NY 10166

Telephone: (212) 801-9200

Facsimile: (212) 805-9222

Attention: Michael A. Adelstein, Esq.

 

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) days prior to the effectiveness of such change, provided that Greenberg Traurig, LLP shall only be provided copies
of notices sent to CVI. Written confirmation of receipt (A) given by the recipient of such notice, consent, waiver or other communication,
(B) 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 (C) provided by an overnight courier service shall be rebuttable
evidence of personal service, receipt by facsimile or receipt from an overnight courier service in accordance with clause (i),
(ii) or (iii) above, respectively.

 

(g)              
Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their
respective successors and assigns, including any assignee of any of the Securities. The Company shall not assign this Agreement
or any rights or obligations hereunder without the prior written consent of the Required Holders, including, without limitation,
by way of a Fundamental Transaction (as defined in the Warrants) (unless the Company is in compliance with the applicable provisions
governing Fundamental Transactions set forth in the Warrants) or a Fundamental Transaction (as defined in the Notes) (unless the
Company is in compliance with the applicable provisions governing Fundamental Transactions set forth in the Notes). Provided a
Buyer provides the Company with written notice thereof, a Buyer may assign some or all of its rights hereunder in connection with
any transfer of any of its Securities without the consent of the Company, in which event such assignee shall be deemed to be a
Buyer hereunder with respect to such assigned rights.

 

(h)              
No Third Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective
permitted successors and assigns, and is not for the benefit of, nor may any provision hereof be enforced by, any other Person,
other than the Indemnitees referred to in Section 9(k).

 

(i)                
Survival. The representations, warranties, agreements and covenants shall survive each Closing. Each Buyer
shall be responsible only for its own representations, warranties, agreements and covenants hereunder.

 

(j)                
Further Assurances. Each party shall do and perform, or cause to be done and performed, all such further acts
and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as any other party
may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.

 

    	42

    	 

    

 

(k)              
Indemnification.

 

(i)                
In consideration of each Buyer’s execution and delivery of the Transaction Documents and acquiring the Securities
thereunder and in addition to all of the Company’s other obligations under the Transaction Documents, the Company shall defend,
protect, indemnify and hold harmless each Buyer and each holder of any Securities and all of their stockholders, partners, members,
officers, directors, employees and direct or indirect investors and any of the foregoing Persons’ agents or other representatives
(including, without limitation, those retained in connection with the transactions contemplated by this Agreement) (collectively,
the “Indemnitees”) from and against any and all actions, causes of action, suits, claims, losses, costs, penalties,
fees, liabilities and damages, and expenses in connection therewith (irrespective of whether any such Indemnitee is a party to
the action for which indemnification hereunder is sought), and including reasonable attorneys’ fees and disbursements (the
“Indemnified Liabilities”), incurred by any Indemnitee as a result of, or arising out of, or relating to (a)
any misrepresentation or breach of any representation or warranty made by the Company or any Subsidiary in any of the Transaction
Documents, (b) any breach of any covenant, agreement or obligation of the Company or any Subsidiary contained in any of the Transaction
Documents, (c) any untrue statement or alleged untrue statement of a material fact contained, or incorporated by reference, in
the Registration Statement or any amendment thereto or any omission or alleged omission to state therein, or in any document incorporated
by reference therein, a material fact required to be stated therein or necessary to make the statements therein not misleading,
(d) any untrue statement or alleged untrue statement of a material fact contained, or incorporated by reference, in the Prospectus,
any Issuer Free Writing Prospectus, or in any amendment thereof or supplement thereto, or in any “issuer information”
(as defined in Rule 433 under the Securities Act) of the Company, which “issuer information” is required to be, or
is, filed with the Commission or otherwise contained in any Free Writing Prospectus, or any amendment or supplement thereto, or
any omission or alleged omission to state therein, or in any document incorporated by reference therein, a material fact required
to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not
misleading, (e) any violation of United States federal or state securities laws or the rules and regulations of the Principal Market
or any Eligible Market in connection with the transactions contemplated by this Agreement, the Warrants, the Indenture and the
Notes by the Company or any of its Subsidiaries, affiliates, officers, directors or employees or (f) any cause of action, suit
or claim brought or made against such Indemnitee by a third party (including for these purposes a derivative action brought on
behalf of the Company or any Subsidiary) and arising out of or resulting from (i) the execution, delivery, performance or enforcement
of any of the Transaction Documents, (ii) any transaction financed or to be financed in whole or in part, directly or indirectly,
with the proceeds of the issuance of the Securities, (iii) any disclosure properly made by such Buyer pursuant to Section 4(l),
or (iv) the status of such Buyer or holder of the Securities as an investor in the Company pursuant to the transactions contemplated
by the Transaction Documents. To the extent that the foregoing undertaking by the Company may be unenforceable for any reason,
the Company shall make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities which is
permissible under applicable law.

 

    	43

    	 

    

 

(ii)              
Promptly after receipt by an Indemnitee under this Section 9(k) of notice of the commencement of any action or proceeding
(including any governmental action or proceeding) involving an Indemnified Liability, such Indemnitee shall, if a claim in respect
thereof is to be made against the Company under this Section 9(k), deliver to the Company a written notice of the commencement
thereof, and the Company shall have the right to participate in, and, to the extent the Company so desires, to assume control of
the defense thereof with counsel mutually satisfactory to the Company and the Indemnitee; provided, however, that an Indemnitee
shall have the right to retain its own counsel with the fees and expenses of such counsel to be paid by the Company if: (i) the
Company has agreed in writing to pay such fees and expenses; (ii) the Company shall have failed promptly to assume the defense
of such Indemnified Liability and to employ counsel reasonably satisfactory to such Indemnitee in any such Indemnified Liability;
or (iii) the named parties to any such Indemnified Liability (including any impleaded parties) include both such Indemnitee and
the Company, and such Indemnitee shall have been advised by counsel that a conflict of interest is likely to exist if the same
counsel were to represent such Indemnitee and the Company (in which case, if such Indemnitee notifies the Company in writing that
it elects to employ separate counsel at the expense of the Company, then the Company shall not have the right to assume the defense
thereof and such counsel shall be at the expense of the Company), provided further, that in the case of clause (iii) above the
Company shall not be responsible for the reasonable fees and expenses of more than one (1) separate legal counsel for such Indemnitee.
The Indemnitee shall reasonably cooperate with the Company in connection with any negotiation or defense of any such action or
Indemnified Liability by the Company and shall furnish to the Company all information reasonably available to the Indemnitee which
relates to such action or Indemnified Liability. The Company shall keep the Indemnitee reasonably apprised at all times as to the
status of the defense or any settlement negotiations with respect thereto. The Company shall not be liable for any settlement of
any action, claim or proceeding effected without its prior written consent, provided, however, that the Company shall not unreasonably
withhold, delay or condition its consent. The Company shall not, without the prior written consent of the Indemnitee, consent to
entry of any judgment or enter into any settlement or other compromise which does not include as an unconditional term thereof
the giving by the claimant or plaintiff to such Indemnitee of a release from all liability in respect to such Indemnified Liability
or litigation, and such settlement shall not include any admission as to fault on the part of the Indemnitee. Following indemnification
as provided for hereunder, the Company shall be subrogated to all rights of the Indemnitee with respect to all third parties, firms
or corporations relating to the matter for which indemnification has been made. The failure to deliver written notice to the Company
within a reasonable time of the commencement of any such action shall not relieve the Company of any liability to the Indemnitee
under this Section 9(k), except to the extent that the Company is materially and adversely prejudiced in its ability to defend
such action.

 

(iii)            
The indemnification required by this Section 9(k) shall be made by periodic payments of the amount thereof during the course
of the investigation or defense, as and when bills are received or Indemnified Liabilities are incurred.

 

(iv)            
The indemnity agreement contained herein shall be in addition to (A) any cause of action or similar right of the Indemnitee
against the Company or others, and (B) any liabilities the Company may be subject to pursuant to the law.

 

    	44

    	 

    

 

(l)                
Construction. The language used in this Agreement will be deemed to be the language chosen by the parties
to express their mutual intent, and no rules of strict construction will be applied against any party. No specific representation
or warranty shall limit the generality or applicability of a more general representation or warranty. Each and every reference
to share prices, shares of Common Stock and any other numbers in this Agreement that relate to the Common Stock shall be automatically
adjusted for any stock splits, stock dividends, stock combinations, recapitalizations or other similar transactions that occur
with respect to the Common Stock after the date of this Agreement.

 

(m)            
Remedies. Each Buyer and each holder of any Securities shall have all rights and remedies set forth in the
Transaction Documents and all rights and remedies which such holders have been granted at any time under any other agreement or
contract and all of the rights which such holders have under any law. Any Person having any rights under any provision of this
Agreement shall be entitled to enforce such rights specifically (without posting a bond or other security), to recover damages
by reason of any breach of any provision of this Agreement and to exercise all other rights granted by law. Furthermore, the Company
recognizes that in the event that it or any Subsidiary fails to perform, observe, or discharge any or all of its or such Subsidiary’s
(as the case may be) obligations under the Transaction Documents, any remedy at law may prove to be inadequate relief to the Buyers.
The Company therefore agrees that the Buyers shall be entitled to seek specific performance and/or temporary, preliminary and permanent
injunctive or other equitable relief from any court of competent jurisdiction in any such case without the necessity of proving
actual damages and without posting a bond or other security.

 

(n)              
Withdrawal Right. Notwithstanding anything to the contrary contained in (and without limiting any similar
provisions of) the Transaction Documents, whenever any Buyer exercises a right, election, demand or option under a Transaction
Document and the Company or any Subsidiary does not timely perform its related obligations within the periods therein provided,
then such Buyer may rescind or withdraw, in its sole discretion from time to time upon written notice to the Company or such Subsidiary
(as the case may be), any relevant notice, demand or election in whole or in part without prejudice to its future actions and rights

 

(o)              
Payment Set Aside; Currency. To the extent that the Company makes
a payment or payments to any Buyer hereunder or pursuant to any of the other Transaction Documents or any of the Buyers enforce
or exercise their rights hereunder or thereunder, and such payment or payments or the proceeds of such enforcement or exercise
or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside, recovered from, disgorged
by or are required to be refunded, repaid or otherwise restored to the Company, a trustee, receiver or any other Person under any
law (including, without limitation, any bankruptcy law, foreign, state or federal law, common law or equitable cause of action),
then to the extent of any such restoration the obligation or part thereof originally intended to be satisfied shall be revived
and continued in full force and effect as if such payment had not been made or such enforcement or setoff had not occurred. Unless
otherwise expressly indicated, all dollar amounts referred to in this Agreement and the other Transaction Documents are in United
States Dollars (“U.S. Dollars”), and all amounts owing under this Agreement and all other Transaction Documents
shall be paid in U.S. Dollars. All amounts denominated in other currencies (if any) shall be converted in the U.S. Dollar equivalent
amount in accordance with the Exchange Rate on the date of calculation. “Exchange Rate” means, in relation
to any amount of currency to be converted into U.S. Dollars pursuant to this Agreement, the U.S. Dollar exchange rate as published
in the Wall Street Journal on the relevant date of calculation.

 

    	45

    	 

    

 

(p)              
Maximum Payments. Nothing contained in any of the Indentures, any
Supplemental Indenture or any of the Notes shall be deemed to establish or require the payment of a rate of interest or other charges
in excess of the maximum permitted by applicable law. In the event that the rate of interest required to be paid or other charges
under any of the Notes exceeds the maximum permitted by such law, such rate and such charges, to the extent applicable, shall be
automatically reduced to the maximum rate and charges, as applicable, permitted by applicable law, without further action by the
parties hereto, and any payments or amounts actually received by the holder thereof in excess of such maximum shall be refunded
to the Company, which refund may be accomplished, at the option of the Company, by credit against amounts owed by the Company to
such holder or by actual return to the Company by such holder.

 

(q)              
Independent Nature of Buyers’ Obligations and Rights. The obligations of each Buyer under the Transaction
Documents are several and not joint with the obligations of any other Buyer, and no Buyer shall be responsible in any way for the
performance of the obligations of any other Buyer under any Transaction Document. Nothing contained herein or in any other Transaction
Document, and no action taken by any Buyer pursuant hereto or thereto, shall be deemed to constitute the Buyers as, and the Company
acknowledges that the Buyers do not so constitute, a partnership, an association, a joint venture or any other kind of group or
entity, or create a presumption that the Buyers are in any way acting in concert or as a group or entity with respect to such obligations
or the transactions contemplated by the Transaction Documents or any matters, and the Company acknowledges that the Buyers are
not acting in concert or as a group, and the Company shall not assert any such claim, with respect to such obligations or the transactions
contemplated by the Transaction Documents. The decision of each Buyer to purchase Securities pursuant to the Transaction Documents
has been made by such Buyer independently of any other Buyer. Each Buyer acknowledges that no other Buyer has acted as agent for
such Buyer in connection with such Buyer making its investment hereunder and that no other Buyer will be acting as agent of such
Buyer in connection with monitoring such Buyer’s investment in the Securities or enforcing its rights under the Transaction
Documents. The Company and each Buyer confirms that each Buyer has independently participated with the Company and its Subsidiaries
in the negotiation of the transaction contemplated hereby with the advice of its own counsel and advisors. Each Buyer shall be
entitled to independently protect and enforce its rights, including, without limitation, the rights arising out of this Agreement
or out of any other Transaction Documents, and it shall not be necessary for any other Buyer to be joined as an additional party
in any proceeding for such purpose. The use of a single agreement to effectuate the purchase and sale of the Securities contemplated
hereby was solely in the control of the Company, not the action or decision of any Buyer, and was done solely for the convenience
of the Company and its Subsidiaries and not because it was required or requested to do so by any Buyer. It is expressly understood
and agreed that each provision contained in this Agreement and in each other Transaction Document is between the Company, each
Subsidiary and a Buyer, solely, and not between the Company, its Subsidiaries and the Buyers collectively and not between and among
the Buyers.

 

[signature
pages follow]

 

    	46

    	 

    

 

IN WITNESS WHEREOF,
each Buyer and the Company have caused their respective signature page to this Agreement to be duly executed as of the date first
written above.

 

	 	COMPANY:

         

        PACIFIC ETHANOL, INC.
	 
	 	 	 	 
		By: 	/s/ Bryon T. McGregor  	 
	 	 	Name: Bryon T. McGregor  	 
	 	 	Title: Chief Financial Officer	 
	 	 	 	 

 

 

 

 

    	47

    	 

    

 

IN WITNESS WHEREOF,
each Buyer and the Company have caused their respective signature page to this Agreement to be duly executed as of the date first
written above.

 

 

	 	BUYER:

         

        CRANSHIRE CAPITAL MASTERFUND. LTD.
	 
	 	 	 	 
	 	By: 	  	 
	 	 	Name: 	 
	 	 	Title:	 
	 	 	 	 

 

 

    	48

    	 

    

 

IN WITNESS WHEREOF,
each Buyer and the Company have caused their respective signature page to this Agreement to be duly executed as of the date first
written above.

 

 

	 	BUYER:

         

        HUDSON BAY MASTER FUND LTD.
	 
	 	 	 	 
	 	By: 	  	 
	 	 	Name: 	 
	 	 	Title:	 
	 	 	 	 

 

 

 

    	49

    	 

    

 

IN WITNESS WHEREOF,
each Buyer and the Company have caused their respective signature page to this Agreement to be duly executed as of the date first
written above.

 

 

	 	BUYER:

         

        KINGSBROOK OPPORTUNITIES MASTER FUND LP
	 
	 	 	 	 
	 	By: 	  	 
	 	 	Name: 	 
	 	 	Title:	 
	 	 	 	 

 

 

    	50

    	 

    

 

IN WITNESS WHEREOF,
each Buyer and the Company have caused their respective signature page to this Agreement to be duly executed as of the date first
written above.

 

 

	 	BUYER:

         

        IROQUOIS MASTER FUND LTD.
	 
	 	 	 	 
	 	By: 	  	 
	 	 	Name: 	 
	 	 	Title:	 
	 	 	 	 

 

 

 

 

    	51

    	 

    

 

IN WITNESS WHEREOF,
each Buyer and the Company have caused their respective signature page to this Agreement to be duly executed as of the date first
written above.

 

 

	 	
        BUYER:

         

	 	
        CAPITAL
        VENTURES INTERNATIONAL

         

         

         

        By:_____________________________

        Name:

        Title:

        

 

 

 

 

 

 

 

    	52

    	 

    

 

SCHEDULE OF BUYERS

 

	(1)	(2)	(3)	(4)	(5)	(6)	(7)	(8)	(7)
	 	 	 	 	 	 	 	 	 
	Buyer
	Address
                                                                      and Facsimile Number
	Original
                                                                      Principal Amount of

                                                                      Series A Notes
	Original
                                               Principal Amount of

                                               Series B Notes
	Aggregate

                                               Number of

                                               Series A

                                               Warrant Shares
	Aggregate

                                               Number of

                                               Series B

                                               Warrant Shares
	Series
                                               A

                                               Purchase Price
	Series
                                               B

                                               Purchase Price
	Legal
                                                                      Representative’s

                                                                      Address and Facsimile Number

	 	 	 	 	 	 	 	 	 
	Capital Ventures
    International	

                                                              c/o Heights Capital Management, Inc.

        101
        California Street, Suite 3250

        San
        Francisco, CA 94111

        Attn:
        Martin Kobinger, Investment Manager

        Facsimile: 415-403-6525

        Telephone: 415-403-6500

        Residence:
        Cayman Islands
	$3,750,000.00	$5,000,000.00	7,391,250	9,855,000	$3,750,000.00	$5,000,000.00	Greenberg
                                                           Traurig, LLP

        MetLife
        Building

        200
        Park Avenue

        New
        York, NY 10166

        Telephone:
        (212) 801-9200

        Facsimile:
        (212) 805-9222

        Attn:
        Michael A. Adelstein, Esq.

	Hudson Bay
    Master Fund Ltd. 	777
                                                              Third Avenue, 30th Floor

        New
        York, NY 10017

        Tel:
        212-571-1244

        Fax:
        212-571-1325

        Attn:
        Yoav Roth/George Antonopoulos
	$1,350,000.00	$1,800,000.00	2,660,850	3,547,800	$1,350,000.00	$1,800,000.00	 
	Kingsbrook
    Opportunities Master Fund LP	c/o
                                                              Kingsbrook Partners LP

        689
        Fifth Avenue, 12th Floor

        New
        York, NY 10022

        Attention:
        Ari Storch/Adam Chill

        fax:
        212-600-8290

        investments@kingsbrookpartners.com
	$429,000.00	$571,000.00	845,559	1,127,412	$429,000.00	$571,000.00	 
	Iroquois
    Master Fund Ltd.	Iroquois
                                                              Master Fund Ltd

        641
        Lexington Avenue, 26th Floor

        New
        York, NY 10022

        Fax.
        212 207 3452
	$257,000.00	$343,000.00	506,547	675,396	$257,000.00	$343,000.00	 
	Cranshire
    Capital Master Fund, Ltd.	c/o
                                                              Cranshire Capital Advisors, LLC

        3100
        Dundee Road, Suite 703

        Northbrook,
        IL 60062

        Fax
        847-562-9031
	$214,000.00	$286,000.00	421,794	562,392	$214,000.00	$286,000.00	 

 

 

 

    	53

    	 

    

 

 

SCHEDULE 3(j)

to Securities Purchase Agreement

 

Application of Takeover Protections;
Rights Agreement

 

The board of directors
of the Company is authorized by resolution or resolutions, from time to time adopted, to provide for the issuance of Preferred
Stock in one or more series and to fix and state the voting powers, designations, preferences and relative participating, optional
or other special rights of the shares of each series and the qualifications, limitations and restrictions thereof.

 

 

    	54

    	 

    

 

SCHEDULE 3(l)

to Securities Purchase Agreement

 

 

Absence of Certain Changes

 

		1.	The Company declared and paid $0.3 million in dividends on our our Series B Cumulative Convertible Preferred Stock (“Series
B Preferred Stock”) for each of the three months ended March 31, 2012, the three months ended June 30, 2012, the three
months ended September 30, 2012 and the three months ended December 31, 2012.
	 	 	 

		2.	In August 2012, the Company issued an aggregate of 2,359,652 shares of Common Stock to the holders of its Series B Preferred
Stock in payment of 10% of the total amount of accrued and unpaid dividends owed to such holders and in consideration of each of
the holders forbearing from exercising such holder’s rights, if any, with respect to the payment of the then remaining accrued
and unpaid dividends until January 1, 2014, subject to certain exceptions.
	 	 	 

		3.	In December 2012, the Company issued an aggregate of 2,168,708 shares of Common Stock to the holders of its Series B Preferred
Stock in payment of 10% of the total amount of accrued and unpaid dividends owed to such holders and in consideration of each of
the holders forbearing from exercising such holder’s rights, if any, with respect to the payment of the then remaining accrued
and unpaid dividends until January 1, 2014.
	 	 	 

		4.	The Company  entered into a letter agreement with the holders of the Company’s Series B
                                                        Preferred Stock on March 27, 2013, pursuant to which the Company will agree to issue an aggregate of  2,089,977 shares of the
                                                        Company’s common stock in settlement of an aggregate of $731,492 of the accrued and unpaid dividends owed to the
                                                        holders of the Company’s Series B Preferred Stock.

 

    	55

    	 

    

 

SCHEDULE 3(n)

to Securities Purchase Agreement

 

 

Conduct of Business; Regulatory
Permits

 

		1.	The Company is in arrears in the payment of dividends prescribed by the Certificate of Designations, Powers, Preferences and
Rights of the Series B Cumulative Convertible Preferred Stock in the amount of approximately $5,852,000 as of December 31, 2012.
	 	 	 

		2.	The Company received a letter from The NASDAQ Stock Market on June 6, 2012, indicating that the bid price of the Company’s
common stock for the last 30 consecutive business days had closed below the minimum $1.00 per share required for continued listing.
The Company was provided an initial period of 180 calendar days, or until December 3, 2012, in which to regain compliance. The
Company was then provided an additional period of 180 calendar days, or until June 3, 2013, in which to regain compliance.
	 	 	 

		3.	The Company received a letter from The NASDAQ Stock Market on June 30, 2010, indicating that the bid price of the Company’s
common stock for the last 30 consecutive business days had closed below the minimum $1.00 per share required for continued listing.
The Company was provided an initial period of 180 calendar days, or until December 27, 2010, in which to regain compliance. The
Company was then provided an additional period of 180 calendar days, or until June 27, 2011, in which to regain compliance. The
Company subsequently regained compliance by notification of the NASDAQ Stock Market on June 22, 2011.

 

    	56

    	 

    

 

 

SCHEDULE 3(q)

to Securities Purchase Agreement

 

 

Transactions with Affiliates

 

		1.	On March 30, 2009, we entered into an unsecured promissory note in favor of Mr. Koehler. The promissory note was for the principal
amount of $1,000,000. Interest on the unpaid principal amount of the promissory note accrues at a rate per annum of 8.00%. As of
December 31, 2012, we had paid all accrued interest under the promissory note. As of December 31, 2012, the remaining principal
amount of $750,000 was due and payable on the extended maturity date of March 31, 2013. On February 7, 2013, the maturity date
was further extended to March 31, 2014.
	 	 	 

		2.	The Company has issued shares of its Series B Preferred Stock to certain related parties.
	 	 	 

		3.	The Company  entered into a letter agreement with the holders of the Company’s Series B
                                                        Preferred Stock on March 27, 2013, pursuant to which the Company will agree to issue an aggregate of  2,089,977 shares of the
                                                        Company’s common stock in settlement of an aggregate of $731,492 of the accrued and unpaid dividends owed to the
                                                        holders of the Company’s Series B Preferred Stock.
	 	 	 

		4.	The Company is party to Executive Employment Agreements with each of Neil M. Koehler, Bryon T. McGregor, Christopher W. Wright
and Michael Kandris.

 

    	57

    	 

    

 

SCHEDULE 3(r)

to Securities Purchase Agreement

 

 

Equity Capitalization

 

		1.	See Schedule 3(s) for documents evidencing Indebtedness.
	 	 	 

		2.	The Company has outstanding warrants to purchase 96,951,554 shares of Common Stock and outstanding options to purchase 194,774
shares of Common Stock. In addition, the Company has the option of paying interest payments due under the Senior Unsecured Notes
in shares of Common Stock; the Company currently has 7,369,714 shares reserved for these payments.
	 	 	 

		3.	The Company’s obligation to issue the Securities.
	 	 	 

		4.	The Registration Rights Agreement dated as of March 27, 2008 by and between Pacific Ethanol, Inc. and Lyles United, LLC.
	 	 	 

		5.	The Registration Rights Agreement, dated January 11, 2013, by and among the Company and certain investors.
	 	 	 

		6.	Certificate Of Designations, Powers, Preferences And Rights of the Series B Cumulative Convertible Preferred Stock provides
for preemptive rights and weighted-average anti-dilution protection.
	 	 	 

		7.	The holders of certain warrants issued pursuant to a Securities Purchase Agreement, dated December 8, 2011, are entitled to
participation rights. Further, these warrants provide for weighted-average anti-dilution protection.
	 	 	 

		8.	Certain warrants issued pursuant to a Securities Purchase Agreement, dated December 19, 2012, provide for weighted-average
anti-dilution protection.
	 	 	 

		9.	Certain warrants issued in June 2012 in a Confidentially Marketed Public Offering provide for weighted-average anti-dilution
protection
	 	 	 

		10.	Financing statements filed with respect to Permitted Liens, including the following:
	 	 	 

		a.	UCC Financing Statement filed for the benefit of Wachovia Capital Finance Corproation (Western) with the Secretary of State
of Oregon (Initial Filing No. 8038326).
	 	 	 

		b.	UCC Financing Statement filed for the benefit of Agricredit Acceptance LLC with the Secretary of State of California (Initial
Filing No. 20087174034983).

 

    	58

    	 

    

 

SCHEDULE 3(s)

to Securities Purchase Agreement

 

 

Indebtedness and Other Contracts

 

		1.	Senor Unsecured Notes (as defined in the Notes).
	 	 	 

		2.	Loan and Security Agreement between Kinergy Marketing LLC as Borrower and Wells Fargo Capital Finance, LLC, as amended. The
Loan and Security Agreement is a revolving credit facility whereunder the Company’s borrowing capacity is capped at $30,000,000
with an accordion for an additional $10,000,000.
	 	 	 

		3.	Promissory Note in the initial principal amount of $1,000,000 dated March 29, 2009 in favor of Neil M. Koehler, as amended.
$750,000 in principal remains outstanding under this Note.
	 	 	 

		4.	Agricredit Acceptance LLC Lease Agreement between Pacific Ag. Products LLC and Kirby Manufacturing,
Inc. dated September 17, 2008. The Company’s current liability under the lease is approximately $22,000.
	 	 	 

		5.	Accrued and unpaid dividends on the Company’s Series B Preferred Stock

 

    	59

    	 

    

 

SCHEDULE 3(z)

to Securities Purchase Agreement

 

 

Restricted Subsidiary Rights

 

The Company is limited
to the amount of dividends it may receive from its wholly-owned subsidiary, Kinergy Marketing LLC, under the terms of the Loan
and Security Agreement between Kinergy Marketing LLC and Wells Fargo Capital Finance, LLC.

 

    	60

    	 

    

 

SCHEDULE 3(qq)

to Securities Purchase Agreement

 

 

Ranking of Notes

 

The Senior Unsecured
Notes are senior to the Notes. The Notes rank pari passu with all Other Notes and the Permitted Indebtedness (as defined in the
Notes) described in clause (vi) of Section 28(hh) of the Notes.

 

    	61

    	 

    

 

SCHEDULE 4(g)

to Securities Purchase Agreement

 

 

Use of Proceeds

 

Certain of the Company’s Subsidiaries
are party to a credit facility that was amended and restated on October 29, 2012 and provides for a revolving credit facility of
up to $40.0 million (“Revolving Loan”), a term loan of $25.0 million, and a term loan of $26.3 million. Under
these credit facilities, $6.7 million of the combined revolving loans and term loans has a maturity date of June 25, 2013 (“June
Indebtedness”).

 

The Company intends to use (i) $2.1 million
of the  proceeds from the Series A Closing to purchase $2.6 million the June Indebtedness and limited liability company interests
of New PE Holdco, LLC held by the holders of the June Indebtedness being purchased, and (ii) $3.5 million of the  proceeds from
the Series A Closing to purchase approximately $3.5 million of the Revolving Loan from the existing lenders. Any remaining net
proceeds from the Series A Closing will be used as specified in the Senior Unsecured Notes (as defined in the Notes).

 

The Company intends to use (i) up to $4.0
million of the  proceeds from the Series B Closing to purchase the remaining $4.0 million of June Indebtedness and limited liability
company interests of New PE Holdco held by the holders of the June Indebtedness being purchased and, (ii) $2.0 million of the
proceeds from the Series B Closing to fund a reserve to service subordinated debt obligations and (iii) the remainder of the net
proceeds from the Series B Note Offering to repay the Senior Unsecured Notes and/or Revolving Loans.

 

 

    	62Exhibit 10.2

 

[FORM OF SERIES [A][B] SUBORDINATED
CONVERTIBLE NOTE]

 

ANY TRANSFEREE OF THIS NOTE SHOULD CAREFULLY
REVIEW THE TERMS OF THIS NOTE, INCLUDING SECTIONS 3(c)(iii) AND 17(d) HEREOF. THE PRINCIPAL AMOUNT REPRESENTED BY THIS NOTE AND,
ACCORDINGLY, THE SECURITIES ISSUABLE UPON CONVERSION HEREOF MAY BE LESS THAN THE AMOUNTS SET FORTH ON THE FACE HEREOF PURSUANT
TO SECTION 3(c)(iii) OF THIS NOTE.

 

Pacific
Ethanol, Inc.

 

Series
[A][B] Subordinated Convertible Note

 

	Issuance Date:  [_____], 2013	Original Principal Amount: U.S. $[________]

 

FOR VALUE
RECEIVED, Pacific Ethanol, Inc., a Delaware corporation (the “Company”), hereby promises to pay to
[BUYERS] or its registered assigns (“Holder”) the amount set out above as the Original Principal Amount
(as reduced pursuant to the terms hereof pursuant to redemption, conversion or otherwise, the “Principal”)
when due, whether upon the Maturity Date, on any Installment Date with respect to the Installment Amount due on such
Installment Date (each as defined below), or upon acceleration, redemption or otherwise (in each case in accordance with the
terms hereof) and to pay interest (“Interest”) on any outstanding Principal at the applicable Interest
Rate (as defined below) from the date set out above as the Issuance Date (the “Issuance Date”)
until the same becomes due and payable, whether upon the Maturity Date, on any Installment Date with respect to the
Installment Amount due on such Installment Date, acceleration, conversion, redemption or otherwise (in each case in
accordance with the terms hereof). This Series [A][B] Subordinated Convertible Note (including all Subordinated Convertible
Notes issued in exchange, transfer or replacement hereof, this “Note”) is one of an issue of Series [A][B]
Subordinated Convertible Notes issued on the Series [A][B] Closing Date and the Series [B][A] Notes [to be] issued on
the Series [B] Closing Date (collectively, the “Notes” and such other [First][Second] Subordinated
Convertible Notes and Series [B][A] Notes, the “Other Notes”) pursuant to (i) the Indenture, (ii)
the  [First][Second] Supplemental Indenture, (iii) Securities Purchase Agreement and (iv) the
Company’s Registration Statement on Form S-3 (File number 333-180731) (the “Registration
Statement”). Certain capitalized terms used herein
are defined in Section 28.

 

1.                 
PAYMENTS OF PRINCIPAL. On each Installment Date (which includes the Maturity Date), the Company shall pay to the
Holder an amount equal to the Installment Amount due on such Installment Date in accordance with Section 8. On the Maturity Date,
the Company shall pay to the Holder an amount in cash, shares of Common Stock or a combination thereof in accordance with Section
8 representing all outstanding Principal, accrued and unpaid Interest and accrued and unpaid Late Charges on such Principal and
Interest. Other than as specifically permitted by this Note, the Company may not prepay any portion of the outstanding Principal,
accrued and unpaid Interest or accrued and unpaid Late Charges on Principal and Interest, if any.

 

    	1

    	 

    

 

2.                 
INTEREST; INTEREST RATE.

 

(a)               
Interest on this Note shall (i) accrue at the Interest Rate, (ii) commence accruing on the Issuance Date (iii) be computed
on the basis of a 360-day year and twelve 30-day months, (iv) shall compound on the first calendar day of each calendar month and
(v) shall be payable on each Installment Date in accordance with Section 8 below or otherwise in accordance with the terms of this
Note.

 

(b)              
Prior to the payment of Interest on an Installment Date, Interest on this Note shall accrue at the Interest Rate and be
payable by way of inclusion of the Interest in the Conversion Amount on each Conversion
Date in accordance with Section 3(b)(i), on each Installment Date in accordance with Section 8 below or upon any redemption in
accordance with Section 11. From and after the occurrence and during the continuance of any Event of Default, the Interest Rate
shall automatically be increased to fifteen percent (15.0%) (the “Default Rate”). In the event that such Event
of Default is subsequently cured, the automatic increase to the Interest Rate referred to in the preceding sentence shall cease
to be effective as of the date of such cure; provided that the Interest as calculated and unpaid at such increased rate during
the continuance of such Event of Default shall continue to apply to the extent relating to the days after the occurrence of such
Event of Default through and including the date of such cure of such Event of Default.

 

3.                 
CONVERSION OF NOTES. This Note shall be convertible into validly issued, fully paid and non-assessable shares of
Common Stock (as defined below), on the terms and conditions set forth in this Section 3.

 

(a)            
Conversion Right. Subject to the provisions of Section 3(d), at any time or times on or after the Issuance Date,
the Holder shall be entitled to convert any portion of the outstanding and unpaid Conversion Amount (as defined below) into validly
issued, fully paid and non-assessable shares of Common Stock in accordance with Section 3(c), at the Conversion Rate (as defined
below). The Company shall not issue any fraction of a share of Common Stock upon any conversion. If the issuance would result in
the issuance of a fraction of a share of Common Stock, the Company shall round such fraction of a share of Common Stock up to the
nearest whole share. The Company shall pay any and all transfer, stamp, issuance and similar taxes that may be payable with respect
to the issuance and delivery of Common Stock upon conversion of any Conversion Amount.

 

(b)            
Conversion
Rate. The number of shares of Common Stock issuable upon conversion of any Conversion Amount pursuant to Section 3(a) shall
be determined by dividing (x) such Conversion Amount by (y) the Conversion Price (the “Conversion Rate”).

 

(i)                
“Conversion Amount” means the sum of (x) the portion of the Principal to be converted, redeemed or otherwise
with respect to which this determination is being made, plus (y) all accrued and unpaid Interest with
respect to such portion of the Principal amount and accrued and unpaid Late Charges with respect to such portion of such Principal
and such Interest.

 

    	2

    	 

    

 

(ii)              
“Conversion Price” means, as of any Conversion Date (as defined below) or other date of determination,
$1.00, subject to adjustment as provided herein.

 

(c)            
Mechanics of Conversion.

 

(i)                
Optional Conversion. To convert any Conversion Amount into shares of Common Stock on any date (a “Conversion
Date”), the Holder shall (A) deliver (whether via facsimile or otherwise), for receipt on or prior to 11:59 p.m., New
York time, on such date, a copy of an executed notice of conversion in the form attached hereto as Exhibit I (the “Conversion
Notice”) to the Company and the Trustee and (B) if required by Section 3(c)(iii), surrender this Note to a nationally
recognized overnight delivery service for delivery to the Company (or an indemnification undertaking with respect to this Note
in the case of its loss, theft or destruction as contemplated by Section 17(b)). On or before the first (1st) Trading
Day following the date of receipt of a Conversion Notice, the Company shall transmit by facsimile an acknowledgment of confirmation,
in the form attached hereto as Exhibit II, of receipt of such Conversion Notice to the Holder, the Trustee and the Company’s
transfer agent (the “Transfer Agent”). On or before the third (3rd) Trading Day following the date
of receipt of a Conversion Notice, the Company shall (1) provided that the Transfer Agent is participating in The Depository Trust
Company’s (“DTC”) Fast Automated Securities Transfer Program, credit such aggregate number of shares of
Common Stock to which the Holder shall be entitled to the Holder’s or its designee’s balance account with DTC through
its Deposit/Withdrawal at Custodian system or (2) if the Transfer Agent is not participating in the DTC Fast Automated Securities
Transfer Program, issue and deliver (via reputable overnight courier) to the address as specified in the Conversion Notice, a certificate,
registered in the name of the Holder or its designee, for the number of shares of Common Stock to which the Holder shall be entitled.
If this Note is physically surrendered for conversion as required by Section 3(c)(iii) and the outstanding Principal of this Note
is greater than the Principal portion of the Conversion Amount being converted, then the Company shall as soon as practicable and
in no event later than three (3) Trading Days after receipt of this Note and at its own expense, issue and, following authentication
of such new Note, deliver to the Holder (or its designee) a new Note (in accordance with Section 17(d)) representing the outstanding
Principal not converted. The Person or Persons entitled to receive the shares of Common Stock issuable upon a conversion of this
Note shall be treated for all purposes as the record holder or holders of such shares of Common Stock on the Conversion Date. In
the event of a partial conversion of this Note pursuant hereto, the Principal amount converted shall be deducted from the Installment
Amount(s) relating to the Installment Date(s) as set forth in the applicable Conversion Notice.

 

    	3

    	 

    

 

(ii)              
Company’s Failure to Timely Convert. If the Company shall fail, for any reason or for no reason, to issue to
the Holder within three (3) Trading Days after the Company’s receipt of a Conversion Notice (whether via facsimile or otherwise)
(the “Share Delivery Deadline”), a certificate for the number of shares of Common Stock to which the Holder
is entitled and register such shares of Common Stock on the Company’s share register or to credit the Holder’s or its
designee’s balance account with DTC for such number of shares of Common Stock to which the Holder is entitled upon the Holder’s
conversion of any Conversion Amount (as the case may be) (a “Conversion Failure”) and if on or after such Share
Delivery Deadline the Holder (or any other Person in respect, or on behalf, of the Holder) purchases (in an open market transaction
or otherwise) shares of Common Stock to deliver in satisfaction of a sale by the Holder of all or any portion of the number of
shares of Common Stock, or a sale of a number of shares of Common Stock equal to all or any portion of the number of shares of
Common Stock, issuable upon such conversion that the Holder so anticipated receiving from the Company, then, in addition to all
other remedies available to the Holder, the Company shall, within three (3) Business Days after receipt of the Holder’s written
request and in the Holder’s discretion, either (i) pay cash to the Holder in an amount equal to the Holder’s total
purchase price (including brokerage commissions and other out-of-pocket expenses, if any) for the shares of Common Stock so purchased
(including, without limitation, by any other Person in respect, or on behalf, of the Holder) (the “Buy-In Price”),
at which point the Company’s obligation to so issue and deliver such certificate or credit the Holder’s balance account
with DTC for the number of shares of Common Stock to which the Holder is entitled upon the Holder’s conversion hereunder
(as the case may be) (and to issue such shares of Common Stock) shall terminate, or (ii) promptly honor its obligation to so issue
and deliver to the Holder a certificate or certificates representing such shares of Common Stock or credit the Holder’s balance
account with DTC for the number of shares of Common Stock to which the Holder is entitled upon the Holder’s conversion hereunder
(as the case may be) and pay cash to the Holder in an amount equal to the excess (if any) of the Buy-In Price over the product
of (A) such number of shares of Common Stock multiplied by (B) the lowest Closing Sale Price of the Common Stock on any Trading
Day during the period commencing on the date of the applicable Conversion Notice and ending on the date of such issuance and payment
under this clause (ii).

 

(iii)            
Registration; Book-Entry. The Trustee shall maintain a register (the “Register”) for the recordation
of the names and addresses of the holders of each Note and the principal amount of the Notes held by such holders (the “Registered
Notes”) as provided in Section 3.5 of the Indenture. No later than the first (1st) Trading Day after the completion
of any conversion or redemption of this Note, the Company shall deliver written confirmation to the Trustee that such conversion
or redemption, as applicable, has been completed in full, which confirmation shall set forth the aggregate Principal of this Note
then converted or redeemed, as applicable, and the remaining aggregate principal of this Note then outstanding. The entries in
the Register shall be conclusive and binding for all purposes absent manifest error. The Company and the holders of the Notes shall
treat each Person whose name is recorded in the Register as the owner of a Note for all purposes (including, without limitation,
the right to receive payments of Principal and Interest hereunder) notwithstanding notice to the contrary. A Registered Note may
be assigned, transferred or sold in whole or in part only by registration of such assignment or sale on the Register. Notwithstanding
anything to the contrary set forth in this Section 3 or in the Indenture or in the Series [A][B] Supplemental Indenture, following
conversion of any portion of this Note in accordance with the terms hereof, the Holder shall not be required to physically surrender
this Note to the Company unless (A) the full Conversion Amount represented by this Note is being converted (in which event this
Note shall be delivered to the Company following conversion thereof as contemplated by Section 3(c)(i)) or (B) the Holder has provided
the Company with prior written notice (which notice may be included in a Conversion Notice) requesting reissuance of this Note
upon physical surrender of this Note. The Holder, the Trustee and the Company shall maintain records showing the Principal, Interest
and Late Charges, if any, converted and/or paid (as the case may be) and the dates of such conversions and/or payments (as the
case may be) or shall use such other method, reasonably satisfactory to the Holder and the Company, so as not to require physical
surrender of this Note upon conversion.

 

    	4

    	 

    

 

(iv)            
Pro Rata Conversion; Disputes. In the event that the Company receives a Conversion Notice from more than one holder
of Notes for the same Conversion Date and the Company can convert some, but not all, of such portions of the Notes submitted for
conversion, the Company, subject to Section 3(d), shall convert from each holder of Notes electing to have Notes converted on such
date a pro rata amount of such holder’s portion of its Notes submitted for conversion based on the principal amount of Notes
submitted for conversion on such date by such holder relative to the aggregate principal amount of all Notes submitted for conversion
on such date. In the event of a dispute as to the number of shares of Common Stock issuable to the Holder in connection with a
conversion of this Note, the Company shall issue to the Holder the number of shares of Common Stock not in dispute and resolve
such dispute in accordance with Section 22.

 

(d)            Limitations on Conversions.

 

(i)                
Beneficial Ownership. Notwithstanding anything to the contrary contained in this Note, this Note shall not be convertible
by the Holder hereof, and the Company shall not effect any conversion of this Note or otherwise issue any shares of Common Stock
pursuant hereto, to the extent (but only to the extent) that after giving effect to such conversion or other share issuance hereunder
the Holder (together with its affiliates and joint actors) would beneficially own in excess of 9.99% (the “Maximum Percentage”)
of the Common Stock. To the extent the above limitation applies, the determination of whether this Note shall be convertible
(vis-à-vis other convertible, exercisable or exchangeable securities owned by the Holder or any of its affiliates) and of
which such securities shall be convertible (as among all such securities owned by the Holder) shall, subject to such Maximum Percentage
limitation, be made on the basis of the first submission to the Company for conversion, exercise or exchange (as the case may be).
For purposes of the first sentence of this paragraph, the aggregate number of shares of Common Stock beneficially owned by such
Person and its affiliates and joint actors shall include the number of shares of Common Stock issuable upon conversion of this
Note with respect to which the determination is being made, but shall exclude shares of Common Stock which would be issuable upon
(i) conversion of the remaining, unconverted portion of this Note beneficially owned by such Person and its affiliates or joint
actors and (ii) exercise or conversion of the unexercised or unconverted portion of any other securities of the Company beneficially
owned by such Person or its affiliates and joint actors (including, without limitation, any Series [B][A] Notes, any other convertible
notes or convertible preferred shares), which in each case is subject to a limitation on conversion or exercise analogous to the
limitation contained herein. For the purposes of this paragraph, beneficial ownership and all determinations and calculations (including,
without limitation, with respect to calculations of percentage ownership) shall be determined in accordance with Section 13(d)
of the 1934 Act (as defined in the Securities Purchase Agreement) and the rules and regulations promulgated thereunder, except
as set forth in the preceding sentence. No prior inability to convert this Note pursuant to this paragraph shall have any effect
on the applicability of the provisions of this paragraph with respect to any subsequent determination of convertibility. The provisions
of this paragraph shall be implemented in a manner otherwise than in strict conformity with the terms of this paragraph to correct
this paragraph (or any portion hereof) which may be defective or inconsistent with the intended Maximum Percentage beneficial ownership
limitation herein contained or to make changes or supplements necessary or desirable to properly give effect to such Maximum Percentage
limitation. The limitations contained in this paragraph shall apply to a successor Holder of this Note. The holders of Common Stock
shall be third party beneficiaries of this paragraph and the Company may not waive this paragraph without the consent of holders
of a majority of its Common Stock. For any reason at any time, upon the written or oral request of the Holder, the Company shall
within one (1) Business Day confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding,
including by virtue of any prior conversion or exercise of convertible or exercisable securities into Common Stock, including,
without limitation, pursuant to this Note or securities issued pursuant to the Securities Purchase Agreement. By written notice
to the Company, any Holder may increase or decrease the Maximum Percentage to any other percentage not in excess of 9.99% specified
in such notice; provided that (i) any such increase will not be effective until the 61st day after such notice is delivered to
the Company, and (ii) any such increase or decrease will apply only to the Holder sending such notice and not to any other holder
of Notes.

 

    	5

    	 

    

 

(ii)              
Principal Market Regulation. The Company shall not issue any shares of Common Stock upon conversion of this Note
or otherwise pursuant to the terms of this Note if the issuance of such shares of Common Stock would exceed the aggregate number
of shares of Common Stock which the Company may issue upon conversion or exercise (as the case may be) of the Notes and the Warrants
or otherwise pursuant to the terms of this Note without breaching the Company’s obligations under the rules or regulations
of the Principal Market (the number of shares which may be issued without violating such rules and regulations, including rules
related to the aggregate of offerings under NASDAQ Listing Rule 5635(d), the “Exchange Cap”), except that such
limitation shall not apply in the event that the Company (A) obtains the approval of its stockholders as required by the applicable
rules of the Principal Market for issuances of shares of Common Stock in excess of such amount or (B) obtains a written opinion
from outside counsel to the Company that such approval is not required, which opinion shall be reasonably satisfactory to the Holder.
Until such approval or such written opinion is obtained, no Buyer shall be issued in the aggregate, upon conversion or exercise
(as the case may be) of any Notes or any of the Warrants or otherwise pursuant to the terms of this Note, shares of Common Stock
in an amount greater than the product of (i) the Exchange Cap multiplied by (ii) the quotient of (1) the aggregate original principal
amount of Notes issued to such Buyer pursuant to the Securities Purchase Agreement on both the Series A Closing Date and the Series
B Closing Date (if such Closing Date has occurred) divided by (2) the aggregate original principal amount of all Notes issued to
the Buyers pursuant to the Securities Purchase Agreement both the Series A Closing Date and the Series B Closing Date (if such
Closing Date has occurred) (with respect to each Buyer, the “Exchange Cap Allocation”). In the event that any
Buyer shall sell or otherwise transfer any of such Buyer’s Notes, the transferee shall be allocated a pro rata portion of
such Buyer’s Exchange Cap Allocation with respect to such portion of such Notes so transferred, and the restrictions of the
prior sentence shall apply to such transferee with respect to the portion of the Exchange Cap Allocation so allocated to such transferee.
Upon conversion and exercise in full of a holder’s Notes and Warrants, the difference (if any) between such holder’s
Exchange Cap Allocation and the number of shares of Common Stock actually issued to such holder upon such holder’s conversion
in full of such holder’s Notes and exercise in full of such Warrants shall be allocated to the respective Exchange Cap Allocations
of the remaining holders of Notes and Warrants on a pro rata basis in proportion to the shares of Common Stock underlying the Notes
and Warrants then held by each such holder. In the event that the Company is prohibited from issuing shares of Common Stock pursuant
to this Section 3(d)(ii) (the “Exchange Cap Shares”), the Company shall pay cash (each, an “Exchange
Cap Share Cancellation Amount”) in exchange for the cancellation of such shares of Common Stock at a price equal to the
sum of (i) the product of (x) such number of Exchange Cap Shares and (y) the greatest Closing Sale Price of the Common Stock on
any Trading Day during the period commencing on the date the Holder delivers the applicable Conversion Notice with respect to such
Exchange Cap Shares to the Company and ending on the date of such issuance and payment under this Section 3(d)(ii) and (ii) to
the extent the Holder purchases (in an open market transaction or otherwise) shares of Common Stock to deliver in satisfaction
of a sale by the Holder of Exchange Cap Shares, any brokerage commissions and other out-of-pocket expenses, if any, of the Holder
incurred in connection therewith.

 

4.                 
RIGHTS UPON EVENT OF DEFAULT.

 

(a)               
Event of Default. Each of the following events shall constitute an “Event of Default”:

 

    	6

    	 

    

 

(i)                
the suspension from trading or the failure of the Common Stock to be trading or listed (as applicable) on an Eligible Market
for a period of five (5) consecutive days;

 

(ii)              
the Company’s (A) failure to cure a Conversion Failure or a Delivery Failure (as defined in the Warrants) by delivery
of the required number of shares of Common Stock within five (5) Trading Days after the applicable Conversion Date or exercise
date (as the case may be) or (B) notice, written or oral, to any holder of the Notes or Warrants, including, without limitation,
by way of public announcement or through any of its agents, at any time, of its intention not to comply, as required, with a request
for conversion of any Notes into shares of Common Stock that is requested in accordance with the provisions of the Notes, other
than pursuant to Section 3(d), or a request for exercise of any Warrants for shares of Common Stock in accordance with the provisions
of the Warrants;

 

(iii)            
the Company’s failure to pay to the Holder any amount of Principal, Interest, Late Charges or other amounts when and
as due under this Note (including, without limitation, the Company’s failure to pay any redemption payments or amounts hereunder)
or any other Transaction Document (as defined in the Securities Purchase Agreement) or any other agreement, document, certificate
or other instrument delivered in connection with the transactions contemplated hereby and thereby, except, in the case of a failure
to pay Interest and Late Charges when and as due, in which case only if such failure remains uncured for a period of at least five
(5) days;

 

(iv)            
the Company fails to remove any restrictive legend on any certificate or any shares of Common Stock issued to the Holder
upon conversion of any Securities acquired by the Holder under the Securities Purchase Agreement (including this Note) as and when
required by such Securities or the Securities Purchase Agreement, unless otherwise then prohibited by applicable state or federal
securities laws, and any such failure remains uncured for at least five (5) days;

 

(v)              
the occurrence of any default under, redemption of or acceleration prior to maturity of Indebtedness (as defined in the
Securities Purchase Agreement) of the Company or any of its Restricted Subsidiaries, in the aggregate, in excess of $500,000;

 

(vi)            
bankruptcy, insolvency, reorganization or liquidation proceedings or other proceedings for the relief of debtors shall be
instituted by or against the Company or any Restricted Subsidiary and, if instituted against the Company or any Restricted Subsidiary
by a third party, shall not be dismissed within thirty (30) days of their initiation;

 

    	7

    	 

    

 

(vii)          
the commencement by the Company or any Restricted Subsidiary of a voluntary case or proceeding under any applicable federal,
state or foreign bankruptcy, insolvency, reorganization or other similar law or of any other case or proceeding to be adjudicated
a bankrupt or insolvent, or the consent by it to the entry of a decree, order, judgment or other similar document in respect of
the Company or any Restricted Subsidiary in an involuntary case or proceeding under any applicable federal, state or foreign bankruptcy,
insolvency, reorganization or other similar law or to the commencement of any bankruptcy or insolvency case or proceeding against
it, or the filing by it of a petition or answer or consent seeking reorganization or relief under any applicable federal, state
or foreign law, or the consent by it to the filing of such petition or to the appointment of or taking possession by a custodian,
receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Company or any Restricted Subsidiary or
of any substantial part of its property, or the making by it of an assignment for the benefit of creditors, or the execution of
a composition of debts, or the occurrence of any other similar federal, state or foreign proceeding, or the admission by it in
writing of its inability to pay its debts generally as they become due, the taking of corporate action by the Company or any Restricted
Subsidiary in furtherance of any such action or the taking of any action by any Person to commence a Uniform Commercial Code foreclosure
sale or any other similar action under federal, state or foreign law;

 

(viii)        
the entry by a court of (i) a decree, order, judgment or other similar document in respect of the Company or any Restricted
Subsidiary of a voluntary or involuntary case or proceeding under any applicable federal, state or foreign bankruptcy, insolvency,
reorganization or other similar law or (ii) a decree, order, judgment or other similar document adjudging the Company or any Restricted
Subsidiary as bankrupt or insolvent, or approving as properly filed a petition seeking liquidation, reorganization, arrangement,
adjustment or composition of or in respect of the Company or any Restricted Subsidiary under any applicable federal, state or foreign
law or (iii) a decree, order, judgment or other similar document appointing a custodian, receiver, liquidator, assignee, trustee,
sequestrator or other similar official of the Company or any Restricted Subsidiary or of any substantial part of its property,
or ordering the winding up or liquidation of its affairs, and, the continuance of any such decree, order, judgment or other similar
document or any such other decree, order, judgment or other similar document unstayed and in effect for a period of thirty (30)
consecutive days;

 

(ix)            
a final judgment, judgments, any arbitration or mediation award or any settlement of any litigation or any other satisfaction
of any claim made by any Person pursuant to any litigation, as applicable, (each a “Judgment”, and collectively,
the “Judgments”) with respect to the payment of cash, securities and/or other assets with an aggregate fair
value (as determined in accordance with Section 2(b)(iv) of the Warrants) in excess of $300,000 are rendered against, agreed to
or otherwise accepted by, the Company and/or any of its Restricted Subsidiaries and which Judgments are not, within thirty (30)
days after the entry thereof, bonded, discharged or stayed pending appeal, or are not discharged within thirty (30) days after
the expiration of such stay; provided, however, any Judgment which is covered by insurance or an indemnity from a credit worthy
party shall not be included in calculating the $300,000 amount set forth above so long as the Company provides the Holder a written
statement from such insurer or indemnity provider (which written statement shall be reasonably satisfactory to the Holder) to the
effect that such Judgment is covered by insurance or an indemnity and the Company or such Restricted Subsidiary (as the case may
be) will receive the proceeds of such insurance or indemnity within thirty (30) days of the issuance of such Judgment;

 

    	8

    	 

    

 

(x)              
the Company and/or any Restricted Subsidiary, individually or in the aggregate, either (i) fails to pay, when due, or within
any applicable grace period, any payment with respect to any Indebtedness in excess of $300,000 due to any third party (other than,
with respect to unsecured Indebtedness only, payments contested by the Company and/or such Restricted Subsidiary (as the case may
be) in good faith by proper proceedings and with respect to which adequate reserves have been set aside for the payment thereof
in accordance with GAAP) or is otherwise in breach or violation of any agreement for monies owed or owing in an amount in excess
of $300,000, which breach or violation permits the other party thereto to declare a default or otherwise accelerate amounts due
thereunder, or (ii) suffer to exist any other circumstance or event that would, with or without the passage of time or the giving
of notice, result in a default or event of default under any agreement binding the Company or any Restricted Subsidiary, which
default or event of default would or is likely to have a material adverse effect on the business, assets, operations (including
results thereof), liabilities, properties, condition (including financial condition) or prospects of the Company or any of its
Restricted Subsidiaries, individually or in the aggregate;

 

(xi)            
other than as specifically set forth in another clause of this Section 4(a), the Company
or any Restricted Subsidiary breaches any representation, warranty, covenant or other term or condition of any Transaction Document
(as defined in the Securities Purchase Agreement), and only in the case of a breach of a covenant or other term or condition that
is curable, only if such breach remains uncured for a period of ten (10) consecutive Trading Days;

 

(xii)          
any breach or failure in any respect by the Company or any Subsidiary to comply with any provisions of Section 10 or 13
of this Note or Section 2.16 of the  [First][Second] Supplemental Indenture;

 

(xiii)        
any breach or failure in any respect by (A) the holders of the Senior Unsecured Notes to comply with the terms of the Senior
Unsecured Notes Amendment (as defined in the Securities Purchase Agreement) or (B) Neil Koehler to comply with the terms of the
Koehler Amendment (as defined in the Securities Purchase Agreement);

 

(xiv)        
any provision of any Transaction Document (shall at any time for any reason (other than pursuant to the express terms thereof)
cease to be valid and binding on or enforceable against the parties thereto, or the validity or enforceability thereof shall be
contested by any party thereto, or a proceeding shall be commenced by the Company or any Subsidiary or any governmental authority
having jurisdiction over any of them, seeking to establish the invalidity or unenforceability thereof, or the Company or any Subsidiary
shall deny in writing that it has any liability or obligation purported to be created under any Transaction Document to which it
is a party; or

 

(xv)          
any Event of Default (as defined in the Other Notes) occurs with respect to any Other Notes.

 

    	9

    	 

    

 

(b)              
Redemption Right. Upon the occurrence of an Event of Default with respect to this Note, the Company shall promptly
deliver written notice thereof via facsimile and overnight courier (with next day delivery specified) (an “Event of Default
Notice”) to the Holder and the Trustee. The obligation of the Company to deliver an Event of Default Notice is in addition
to, and may not be substituted by, the Trustee’s delivery of notice of the same Event of Default to the Holder in accordance
with Section 6.2 of the Indenture. At any time after the earlier of the Holder’s receipt of an Event of Default Notice and
the Holder becoming aware of an Event of Default (such earlier date, the “Event of Default Right Commencement Date”)
and ending (such ending date, the “Event of Default Right Expiration Date”) on the tenth (10th) Trading
Day after the later of (x) the date such Event of Default is cured and (y) the Holder’s receipt of an Event of Default Notice
that includes (I) a reasonable description of the applicable Event of Default, (II) a certification as to whether, in the opinion
of the Company, such Event of Default is capable of being cured and, if applicable, a reasonable description of any existing plan
of the Company to cure such Event of Default and (III) a certification as to the date the Event of Default occurred and the applicable
Event of Default Right Expiration Date, the Holder may elect to redeem all or any portion of the Notes by delivering written notice
thereof (the “Event of Default Redemption Notice”) to the Company and the Trustee, which Event of Default Redemption
Notice shall indicate the portion of the Notes the Holder is electing to redeem. If the Company receives Event of Default Redemption
Notices from holders of Notes electing to redeem at least 20% of the principal amount of the Notes then outstanding prior to the
applicable Event of Default Expiration Date (the date of the Company’s receipt of such notice, the “Event of Default
Redemption Trigger Date”), each portion of this Note subject to redemption by the Company pursuant to this Section 4(b)
shall be redeemed by the Company at a price equal to the greater of (i) the product of (A) the Conversion Amount to be redeemed
multiplied by (B) the Redemption Premium and (ii) the product of (X) the Conversion Rate with respect to the Conversion Amount
in effect at such time as the Holder delivers an Event of Default Redemption Notice multiplied by (Y) the product of (1) the Redemption
Premium multiplied by (2) the greatest Closing Sale Price of the Common Stock on any Trading Day during the period commencing on
the date immediately preceding such Event of Default and ending on the date the Company makes the entire payment required to be
made under this Section 4(b) (the “Event of Default Redemption Price”). Redemptions required by this
Section 4(b) shall be made in accordance with the provisions of Section 11. To the extent redemptions required by this Section
4(b) are deemed or determined by a court of competent jurisdiction to be prepayments of this Note by the Company, such redemptions
shall be deemed to be voluntary prepayments. Notwithstanding anything to the contrary in this Section 4, but subject to Section
3(d), until the Event of Default Redemption Price (together with any Late Charges thereon) is paid in full, the Conversion Amount
submitted for redemption under this Section 4(b) (together with Late Charges thereon) may be converted, in whole or in part, by
the Holder into Common Stock pursuant to Section 3. In the event of a partial redemption of this Note pursuant hereto, the Principal
amount redeemed shall be deducted from the Installment Amount(s) relating to the applicable Installment Date(s) as set forth in
the Event of Default Redemption Notice. In the event of the Company’s redemption of any portion of this Note under this Section
4(b), the Holder’s damages would be uncertain and difficult to estimate because of the parties’ inability to predict
future interest rates and the uncertainty of the availability of a suitable substitute investment opportunity for the Holder. Accordingly,
any redemption premium due under this Section 4(b) is intended by the parties to be, and shall be deemed, a reasonable estimate
of the Holder’s actual loss of its investment opportunity and not as a penalty.

 

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5.                 
RIGHTS UPON FUNDAMENTAL TRANSACTION.

 

(a)               
Assumption. The Company shall not consummate a Fundamental Transaction unless the Successor Entity (if different
than the Company) assumes in writing all of the obligations of the Company under this Note and the other Transaction Documents
in accordance with the provisions of this Section 5(a), including agreements to deliver to each holder of Notes in exchange for
such Notes a security of the Successor Entity evidenced by a written instrument substantially similar in form and substance to
the Notes, including, without limitation, having a principal amount and interest rate equal to the principal amounts then outstanding
and the interest rates of the Notes held by such holder, having similar conversion rights as the Notes and having similar ranking
to the Notes. Upon the occurrence of any 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 Note 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 Note and the other Transaction Documents with the
same effect as if such Successor Entity had been named as the Company herein. Upon consummation of a Fundamental Transaction, the
Successor Entity (if different than the Company) shall deliver to the Holder confirmation that there shall be issued upon conversion
or redemption of this Note at any time after the consummation of such Fundamental Transaction, in lieu of the shares of the Company’s
Common Stock (or other securities, cash, assets or other property (except such items still issuable under Sections 6 and 14, which
shall continue to be receivable thereafter) issuable upon the conversion or redemption of the Notes prior to such Fundamental Transaction,
such shares of the common stock (or their equivalent) of the Successor Entity (including its Parent Entity) which the Holder would
have been entitled to receive upon the happening of such Fundamental Transaction had this Note been converted immediately prior
to such Fundamental Transaction (without regard to any limitations on the conversion of this Note, except to the extent prohibited
by the rules and regulations of the Principal Market), as adjusted in accordance with the provisions of this Note. Notwithstanding
the foregoing, the Holder may elect, at its sole option, by delivery of written notice to the Company to waive this Section 5(a)
to permit the Fundamental Transaction without the assumption of this Note. The provisions of this Section 5 shall apply similarly
and equally to successive Fundamental Transactions and shall be applied without regard to any limitations on the conversion of
this Note.

 

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(b)              
Redemption Right. No earlier than twenty (20) Trading Days nor later than ten (10) Trading Days prior to the consummation
of a Change of Control, but not prior to the public announcement of such Change of Control, the Company shall deliver written notice
thereof via facsimile and overnight courier to the Holder and the Trustee (a “Change of Control Notice”).
At any time and from time to time during the period commencing on the earlier to occur of (x) any oral or written agreement by
the Company or any of its Subsidiaries, which upon consummation of the transaction contemplated thereby would reasonably be expected
to result in a Change of Control, (y) the Holder becoming aware of a Change of Control and (z) the Holder’s receipt of a
Change of Control Notice, and ending on the later of twenty (20) Trading Days after (A) consummation of such Change of Control
or (B) the date of receipt of such Change of Control Notice, the Holder may require the Company to redeem all or any portion of
the Notes by delivering written notice thereof (“Change of Control Redemption Notice”) to the Company and the
Trustee, which Change of Control Redemption Notice shall indicate the Conversion Amount the Holder is electing to redeem. The portion
of this Note subject to redemption pursuant to this Section 5 shall be redeemed by the Company in cash at a price equal to the
greater of (i) the product of (x) the Change of Control Redemption Premium multiplied by (y) the Conversion Amount being redeemed,
(ii) the product of (x) the Change of Control Redemption Premium multiplied by (y) the product of (A) the Conversion Amount being
redeemed multiplied by (B) the quotient determined by dividing (I) the greatest Closing Sale Price of the Common Stock during the
period beginning on the date immediately preceding the earlier to occur of (1) the consummation of the Change of Control and (2)
the public announcement of such Change of Control and ending on the Trading Day immediately prior to the Trading Day during which
the Company pays the Change of Control Redemption Price (as defined below) to the holders of the Notes (the “Change of
Control Measuring Period”) by (II) the Conversion Price then in effect, or (iii) the
product of (x) the Change of Control Redemption Premium multiplied by (y) the product of (A) the Conversion Amount being redeemed
multiplied by (B) the quotient of (I) the aggregate cash consideration and the aggregate cash value of any non-cash consideration
per share of Common Stock to be paid to the holders of the shares of Common Stock upon consummation of such Change of Control (any
such non-cash consideration constituting publicly-traded securities shall be valued at the highest of the Closing Sale Price of
such securities as of the Trading Day immediately prior to the consummation of such Change of Control, the Closing Sale Price of
such securities on the Trading Day immediately following the public announcement of such proposed Change of Control and the Closing
Sale Price of such securities on the Trading Day immediately prior to the public announcement of such proposed Change of Control)
divided by (II) the Conversion Price then in effect (the “Change of Control Redemption Price”). Redemptions
required by this Section 5 shall be made in accordance with the provisions of Section 11 and shall have priority to payments to
stockholders in connection with such Change of Control. To the extent redemptions required by this Section 5(b) are deemed or determined
by a court of competent jurisdiction to be prepayments of this Note by the Company, such redemptions shall be deemed to be voluntary
prepayments. Notwithstanding anything to the contrary in this Section 5, but subject to Section 3(d), until the Change of Control
Redemption Price (together with Late Charges thereon) is paid in full, the Conversion Amount submitted for redemption under this
Section 5(b) (together with Late Charges thereon) may be converted, in whole or in part, by the Holder into Common Stock pursuant
to Section 3. In the event of a partial redemption of this Note pursuant hereto, the Principal amount redeemed shall be deducted
from the Installment Amount(s) relating to the applicable Installment Date(s) as set forth in the Change of Control Redemption
Notice. In the event of the Company’s redemption of any portion of this Note under this Section 5(b), the Holder’s
damages would be uncertain and difficult to estimate because of the parties’ inability to predict future interest rates and
the uncertainty of the availability of a suitable substitute investment opportunity for the Holder. Accordingly, any redemption
premium due under this Section 5(b) is intended by the parties to be, and shall be deemed, a reasonable estimate of the Holder’s
actual loss of its investment opportunity and not as a penalty.

 

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6.                 
RIGHTS UPON OTHER CORPORATE EVENTS. In addition to and not in substitution for any other rights hereunder, prior
to the consummation of any Fundamental Transaction pursuant to which holders of shares of Common Stock are entitled to receive
securities or other assets with respect to or in exchange for shares of Common Stock (a “Corporate Event”),
the Company shall make appropriate provision to insure that the Holder will thereafter have the right to receive upon a conversion
of this Note in lieu of the shares of Common Stock otherwise receivable upon such conversion, such securities or other assets received
by the holders of shares of Common Stock in connection with the consummation of such Corporate Event in such amounts as the Holder
would have been entitled to receive had this Note initially been issued with conversion rights for the form of such consideration
(as opposed to shares of Common Stock) at a conversion rate for such consideration commensurate with the Conversion Rate. Provision
made pursuant to the preceding sentence shall be in a form and substance satisfactory to the Required Holders. The provisions of
this Section 6 shall apply similarly and equally to successive Corporate Events and shall be applied without regard to any limitations
on the conversion or redemption of this Note.

 

7.                 
RIGHTS UPON ISSUANCE OF OTHER SECURITIES.

 

(a)               
Adjustment of Conversion Price upon Subdivision or Combination of Common Stock. Without limiting any provision of
Section 5, if the Company at any time on or after the Subscription Date subdivides (by any stock split, stock dividend, recapitalization
or otherwise) one or more classes of its outstanding shares of Common Stock into a greater number of shares, the Conversion Price
in effect immediately prior to such subdivision will be proportionately reduced. Without limiting any provision of Section 5, if
the Company at any time on or after the Subscription Date combines (by combination, reverse stock split or otherwise) one or more
classes of its outstanding shares of Common Stock into a smaller number of shares, the Conversion Price in effect immediately prior
to such combination will be proportionately increased. Any adjustment pursuant to this Section 7(a) shall become effective immediately
after the effective date of such subdivision or combination. If any event requiring an adjustment under this Section 7(a) occurs
during the period that a Conversion Price is calculated hereunder, then the calculation of such Conversion Price shall be adjusted
appropriately to reflect such event.

 

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(b)              
Holder's Right of Alternative Conversion Price Following Issuance of Certain Options or Convertible Securities. Subject
to Section 4(q) of the Securities Purchase Agreement, in addition to and not in limitation of the other provisions of this Section
7, if the Company in any manner issues or sells or enters into any agreement to issue or sell, any Common Stock, Options or Convertible
Securities (other than the Notes) (any such securities, “Variable Price Securities”) after the Subscription
Date that are issuable pursuant to such agreement or convertible into or exchangeable or exercisable for shares of Common Stock
pursuant to such Options or Convertible Securities, as applicable, at a price which varies or may vary with the market price of
the shares of Common Stock, including by way of one or more reset(s) to a fixed price, but exclusive of such formulations reflecting
customary anti-dilution provisions (such as share splits, share combinations, share dividends and similar transactions) (each of
the formulations for such variable price being herein referred to as, the “Variable Price”), the Company shall
provide written notice thereof via facsimile and overnight courier to the Holder on the date of such agreement and/or the issuance
of such Convertible Securities or Options, as applicable. Subject to Section 4(q) of the Securities Purchase Agreement, from and
after the date the Company enters into such agreement or issues any such Variable Price Securities, the Holder shall have the right,
but not the obligation, in its sole discretion to substitute the Variable Price for the Conversion Price upon conversion of this
Note by designating in the Conversion Notice delivered upon any conversion of this Note that solely for purposes of such conversion
the Holder is relying on the Variable Price rather than the Conversion Price then in effect. The Holder’s election to rely
on a Variable Price for a particular conversion of this Note shall not obligate the Holder to rely on a Variable Price for any
future conversion of this Note.

 

(c)               
Other Events. In the event that the Company (or any Subsidiary) shall take any action to which the provisions hereof
are not strictly applicable, or, if applicable, would not operate to protect the Holder from dilution or if any event occurs of
the type contemplated by the provisions of this Section 7 but not expressly provided for by such provisions (including, without
limitation, the granting of stock appreciation rights, phantom stock rights or other rights with equity features), then the Company’s
board of directors shall in good faith determine and implement an appropriate adjustment in the Conversion Price so as to protect
the rights of the Holder, provided that no such adjustment pursuant to this Section 7(c) will increase the Conversion Price as
otherwise determined pursuant to this Section 7, provided further that if the Holder does not accept such adjustments as appropriately
protecting its interests hereunder against such dilution, then the Company’s board of directors and the Holder shall agree,
in good faith, upon an independent investment bank of nationally recognized standing to make such appropriate adjustments, whose
determination shall be final and binding and whose fees and expenses shall be borne by the Company.

 

(d)              
Calculations. All calculations under this Section 77 shall be made by rounding to the nearest cent or the nearest
1/100th of a share, as applicable. The number of shares of Common Stock outstanding at any given time shall not include
shares owned or held by or for the account of the Company, and the disposition of any such shares shall be considered an issue
or sale of Common Stock.

 

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8.                 
COMPANY INSTALLMENT CONVERSION OR REDEMPTION.

 

(a)               
General. On each applicable Installment Date, the Company shall pay to the Holder of this Note the applicable Installment
Amount due on such date by converting such Installment Amount in accordance with this Section 8 (a “Company Conversion”);
provided, however, the Company may, at its option as described below, pay all or any part of such Installment Amount by redeeming
such Installment Amount in cash (a “Company Redemption”) or by any combination of a Company Conversion and a
Company Redemption so long as the entire amount of such Installment Amount due shall be converted and/or redeemed by the Company
on the applicable Installment Date, subject to the provisions of this Section 8, provided further that the Company shall not be
entitled to elect a Company Conversion with respect to any portion of such Installment Amount and shall be required to elect and
to pay the entire amount of such Installment Amount in cash pursuant to a Company Redemption if on the applicable Installment Notice
Due Date or on the applicable Installment Date (as the case may be) there is an Equity Conditions Failure (unless waived in writing
by the Holder). Notwithstanding the foregoing, if (i) the Company has elected to effect a Company Conversion pursuant to this Section
88 with respect to the applicable Installment Date, (ii) the Company is permitted pursuant to this Section 8 to effect such Company
Conversion on such Installment Date and (iii) prior to such Installment Date the Holder has delivered (via facsimile or otherwise)
to the Company and the Trustee a written notice (a “Blocker Notice”) (A) stating that such Company Conversion
would result in a violation of Section 3(d)(i) and (B) specifying the portion of the applicable Installment Amount with respect
to which such Company Conversion would result in a violation of Section 3(d)3(d)(i) if such Company Conversion were effected (such
amount so specified is referred to herein as the “Designated Specified Amount”), the Installment Amount
of the Holder for such Installment Date shall be automatically reduced by such Designated Specified Amount; provided, that (x)
at the Holder’s option, at any time prior to the applicable Installment Date, the Holder may reduce the Designated Specified
Amount of shares of Common Stock covered by such Blocker Notice, in whole or in part, by delivery of one or more written notices
to the Company and the Trustee (each, a “Withdrawal Notice”, and each date, a “Withdrawal Notice Date”)
and elect to convert the Designated Specified Amount (or such lesser amount as set forth in the Withdrawal Notice) in accordance
with this Section 8 (each a “Withdrawn Designated Specified Amount”) and (B) the Installment Amount with respect
to such Installment Date shall be automatically increased by an amount equal to the sum of any Withdrawn Designated Specified Amounts
set forth in Withdrawal Notices of the Holder with respect to such Installment Date delivered to the Company prior to such Installment
Date and (y) either (A) if such Installment Date is prior to the Maturity Date, the Installment Amount of the immediately subsequent
Installment Date shall be automatically increased by the Designated Specified Amount (less an amount equal to the sum of any Withdrawn
Designated Specified Amounts set forth in Withdrawal Notices of the Holder delivered with respect to such Installment Date) or
(Y) if such Installment Date is the Maturity Date, such Designated Specified Amount shall automatically increase the Company Redemption
Amount to be paid in cash on the Maturity Date.

 

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(b)              
Mechanics of Company Installment Payments. On or prior to the date which is ten (10) calendar days prior to each
Installment Date (each, an “Installment Notice Due Date”), the Company shall deliver written notice (each, a
“Company Installment Notice” and the date the Trustee and all of the holders receive such notice is referred
to as to the “Company Installment Notice Date”), to the Trustee and each holder of Notes and such Company Installment
Notice shall (i) either (A) confirm that the applicable Installment Amount of such holder’s Note shall be converted, in whole
or in part, pursuant to a Company Conversion or (B) specify the portion of the applicable Installment Amount which the Company
elects, or is required to elect and redeem, pursuant to a Company Redemption (the “Company Redemption Amount”)
and the portion of the applicable Installment Amount, if any, that the Company elects, and is permitted to convert pursuant to
a Company Conversion (the “Company Conversion Amount”), which amounts when added together, must equal the entire
applicable Installment Amount and (ii) if the applicable Installment Amount is to be paid, in whole or in part, pursuant to a Company
Conversion, certify that there is not then an Equity Conditions Failure as of the date of the Company Installment Notice. Each
Company Installment Notice shall be irrevocable. If the Company does not timely deliver a Company Installment Notice in accordance
with this Section 88, then the Company shall be deemed to have delivered an irrevocable Company Installment Notice as of the applicable
Installment Notice Due Date confirming a Company Conversion and shall be deemed to have certified as of the applicable Installment
Notice Due Date that there is not then an Equity Conditions Failure in connection with such Company Conversion.

 

(c)              
Mechanics of Company Conversion. Subject to Section 3(d), if the Company delivers a Company Installment Notice and elects,
or is deemed to have delivered a Company Installment Notice and deemed to have elected, in whole or in part, a Company Conversion
in accordance with Section 8(b), then the remainder of this Section 8(c) shall apply. On each Installment Date, any outstanding
Company Conversion Amount shall be converted as of such Installment Date at the Company Conversion Price and the Company shall,
on the applicable Installment Date, deliver to the Holder’s account with DTC such shares of Common Stock issued upon such
conversion (subject to the reduction contemplated by the immediately following sentence and, if applicable, the last sentence
of this Section 8(c)), provided that the Equity Conditions are then satisfied (or waived in writing by the Holder) on such Installment
Date and a Company Conversion is not otherwise prohibited under any other provision of this Note. If any of the Equity Conditions
are not satisfied (or waived in writing by the Holder) on such Installment Date or a Company Conversion is not otherwise permitted
under any other provision of this Note, then, at the option of the Holder designated in writing to the Company and, in the event
the Holder elects a redemption, the Trustee (i) the Holder may require the Company to do any one or more of the following: the
Company shall redeem in cash, as designated by the Holder, all or any part of the Company Conversion Amount (together with any
Designated Specified Amount specified in a Blocker Notice delivered with respect to any Company Conversion for such Installment
Date) (such designated amount, together with such Designated Specified Amount, if any, is referred to as the “Designated
Redemption Amount”) and the Company shall pay to the Holder within three (3) Business Days of such Installment Date,
by wire transfer of immediately available funds, an amount in cash equal to 115% of such Designated Redemption Amount, and/or
(ii) cause the Company Conversion to be null and void with respect to such Designated Redemption Amount; provided, however, the
Conversion Price for such Designated Redemption Amount shall thereafter be adjusted to equal the lesser of (A) the Company Conversion
Price as in effect on the date on which the Holder voided the Company Conversion and (B) the Company Conversion Price that would
be in effect on the date on which the Holder delivers a Conversion Notice relating thereto as if such date was an Installment
Date. The Holder shall be entitled to all the rights of a holder of this Note with respect to such Designated Redemption Amount.
If the Company fails to redeem any Designated Redemption Amount by the third (3rd) Trading Day following the applicable
Installment Date by payment of such amount on the applicable Installment Date, then the Holder shall have the rights set forth
in Section 11(a) as if the Company failed to pay the applicable Company Installment Redemption Price (as defined below) and all
other rights under this Note. Notwithstanding anything to the contrary in this Section 8(c), but subject to Section 3(d), until
the Company delivers Common Stock representing the Company Conversion Amount to the Holder, the Company Conversion Amount may
be converted, in whole or in part, by the Holder into Common Stock pursuant to Section 3, in which event the Company Conversion
Amount so converted shall be deducted from the Installment Amount(s) relating to the applicable Installment Date(s) as set forth
in the applicable Conversion Notice. The Company shall pay any and all taxes that may be payable with respect to the issuance
and delivery of any shares of Common Stock in any Company Conversion hereunder.

 

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(d)              
Mechanics of Company Redemption. If the Company elects, or is required to elect, a Company Redemption, in whole or
in part, in accordance with Section 8(b), then the Company Redemption Amount, if any, which is to be paid to the Holder on the
applicable Installment Date shall be redeemed by the Company, or at the Company’s election, by the Trustee, on such Installment
Date, and the Company, or Trustee, as applicable, shall pay to the Holder on such Installment Date, by wire transfer of immediately
available funds in an amount in cash (the “Company Installment Redemption Price”) equal to the applicable Company
Redemption Amount. If the Company fails to redeem the applicable Company Redemption Amount on the applicable Installment Date,
then, at the option of the Holder designated in writing to the Company and the Trustee (any such designation shall be a “Conversion
Notice” for purposes of this Note), the Holder may require the Company to convert all or any part of the Company Redemption
Amount at the Company Conversion Price (determined as of the date of such designation). Conversions required by this Section 8(d)8(d)
shall be made in accordance with the provisions of Section 3(c). Notwithstanding anything to the contrary in this Section 8(d),
but subject to Section 3(d), until the Company Installment Redemption Price (together with any Late Charges thereon) is paid in
full, the Company Redemption Amount (together with any Late Charges thereon) may be converted, in whole or in part, by the Holder
into Common Stock pursuant to Section 3. In the event the Holder elects to convert all or any portion of the Company Redemption
Amount prior to the applicable Installment Date as set forth in the immediately preceding sentence, the portion of the Company
Redemption Amount so converted shall be deducted from the Installment Amounts relating to the applicable Installment Date(s) as
set forth in the applicable Conversion Notice. Redemptions required by this Section 8(d) shall be made in accordance with the provisions
of Section 11.

 

(e)               
Deferred Installment Amount. Notwithstanding any provision of this Section 8 to the contrary, the Holder may, at
its option and in its sole discretion, deliver a written notice to the Company and the Trustee no later than the Trading Day immediately
prior to the applicable Installment Date (the “Installment Notification Deadline Date”) electing to have the
payment of all or any portion of an Installment Amount payable on such Installment Date deferred (such amount deferred, the “Deferral
Amount”) until any subsequent Installment Date selected by the Holder, in its sole discretion,
in which case, the Deferral Amount shall be added to, and become part of, such subsequent Installment Amount and such Deferral
Amount shall continue to accrue Interest hereunder. Any notice delivered by the Holder pursuant to this Section 8(d) shall set
forth (i) the Deferral Amount and (ii) the date that such Deferral Amount shall now be payable.

 

(f)               
Conversion of Installment Amounts. Notwithstanding anything herein to the contrary, during the period commencing
on an Installment Date (a “Current Installment Date”) and ending on the Trading Day immediately prior to the
next Installment Date, at the option of the Holder, at one or more times, the Holder may convert other Installment Amounts, in
whole or in part, at the Company Conversion Price of such Current Installment Date in accordance with the conversion procedures
set forth in Section 3 hereunder, mutatis mutandis. Notwithstanding the foregoing, with respect to any Installment Date,
the Holder may not elect to effect any conversion of any other Installment Amounts pursuant to this Section 8(f), in the aggregate,
in excess of the sum of four (4) other Installment Amounts (or, if the Company has elected to effect a Company Conversion with
respect to the entire Installment Amount of such Installment Date, three (3) other Installment Amounts) (collectively, the “Installment
Adjustment Limitation”); provided, further that if any Event of Default described in Sections 4(a)(vi) through 4(a)(viii)
has occurred and is continuing (or, if by replacing “Restricted Subsidiary” with “Subsidiary” therein,
would have occurred or would be continuing), the Installment Adjustment Limitation shall no longer apply to this Note and the “Company
Conversion Price” thereafter for purposes of this Section 8(f) shall equal the lesser of (x) the Company Conversion Price
with respect to such Current Installment Date and (y) the applicable Installment Adjustment Conversion Price.

 

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9.                 
NONCIRCUMVENTION. The Company hereby covenants and agrees that the Company will not, by amendment of its Certificate
of Incorporation (as defined in the Securities Purchase Agreement), Bylaws (as defined in the Securities Purchase Agreement) or
through any reorganization, transfer of assets, consolidation, merger, scheme of arrangement, dissolution, issue or sale of securities,
or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Note, and will
at all times in good faith carry out all of the provisions of this Note and take all action as may be required to protect the rights
of the Holder of this Note. Without limiting the generality of the foregoing, the Company (i) shall not increase the par value
of any shares of Common Stock receivable upon conversion of this Note above the Company Conversion Price with respect to the Installment
Date occurring in the calendar month in which such increase occurs, (ii) shall take all such actions as may be necessary or
appropriate in order that the Company may validly and legally issue fully paid and nonassessable shares of Common Stock upon the
conversion of this Note, and (iii) shall, so long as any of the Notes are outstanding, take all action reasonably necessary to
reserve and keep available out of its authorized and unissued shares of Common Stock, solely for the purpose of effecting the conversion
of the Notes, the maximum number of shares of Common Stock as shall from time to time be necessary to effect the conversion of
the Notes then outstanding (without regard to any limitations on conversion).

 

10.             
RESERVATION OF AUTHORIZED SHARES.

 

(a)               
Reservation. The Company shall initially reserve out of its authorized and unissued Common Stock and for so long
as any of the Notes are outstanding, the Company shall take all action necessary to reserve and keep available out of its authorized
and unissued Common Stock, such number of shares of Common Stock for each of the Notes equal to (x) if prior to the earlier to
occur of (A) the Stockholder Approval Date (as defined in the Securities Purchase Agreement) and (B) the Series B Closing Expiration
Date (as defined in the Securities Purchase Agreement) (such earlier date, the “Reservation Requirement Date”),
30,000,000 shares of Common Stock for issuance upon conversion and/or upon payment of any other amounts due under the Notes and
(y) if on or after the Reservation Requirement Date, the sum of (i) 125% of the maximum number of Conversion Shares issued and
issuable pursuant to the Notes (determined without taking into account any limitations on the conversion of the Notes set forth
therein and assuming that the Notes are convertible at the Company Conversion Price with respect to the Installment Date of the
calendar month in which such time of determination occurs and all Series B Notes issuable pursuant to the Securities Purchase Agreement
have been issued) and (ii) 125% of the maximum number of Interest Shares (as defined in the Securities Purchase Agreement) issued
and issuable pursuant to the terms of the Notes from the Series A Closing Date through the maturity date of the Series B Notes
(determined without taking into account any limitations on the conversion of the Notes set forth therein and assuming that all
Series B Notes issuable pursuant to the Securities Purchase Agreement have been issued) (collectively, the “Required Reserve
Amount”). The initial number of shares of Common Stock reserved for conversions of the Notes and each increase in the
number of shares so reserved shall be allocated pro rata among the holders of the Notes based on the original principal amount
of the Notes held by each holder on the Series A Closing Date or increase in the number of reserved shares (as the case may be)
(the “Authorized Share Allocation”). In the event that a holder shall sell or otherwise transfer any of such
holder’s Notes, each transferee shall be allocated a pro rata portion of such holder’s Authorized Share Allocation.
Any shares of Common Stock reserved and allocated to any Person which ceases to hold any Notes shall be allocated to the remaining
holders of Notes, pro rata based on the principal amount of the Notes then held by such holders.

 

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(b)              
Insufficient Authorized Shares. If, notwithstanding Section 10(a), and not in limitation thereof, at any time while
any of the Notes remain outstanding the Company does not have a sufficient number of authorized and otherwise unreserved shares
of Common Stock to satisfy its obligation to reserve for issuance upon conversion of the Notes at least a number of shares of Common
Stock equal to the Required Reserve Amount (an “Authorized Share Failure”), then the Company shall immediately
take all action reasonably necessary to increase the Company’s authorized shares of Common Stock to an amount sufficient
to allow the Company to reserve the Required Reserve Amount for the Notes then outstanding. Without limiting the generality of
the foregoing sentence, as soon as practicable after the date of the occurrence of an Authorized Share Failure, but in no event
later than ninety (90) days after the occurrence of such Authorized Share Failure, the Company shall hold a meeting of its stockholders
for the approval of an increase in the number of authorized shares of Common Stock. In connection with such meeting, the Company
shall provide each stockholder with a proxy statement and shall use its reasonable best efforts to solicit its stockholders’
approval of such increase in authorized shares of Common Stock and to cause its board of directors to recommend to the stockholders
that they approve such proposal. In the event that the Company is prohibited from issuing shares of Common Stock upon any conversion
due to the failure by the Company to have sufficient shares of Common Stock available out of the authorized but unissued shares
of Common Stock (such unavailable number of shares of Common Stock, the “Authorization Failure Shares”), in
lieu of delivering such Authorization Failure Shares to the Holder, the Company shall pay cash (each, an “Authorized Failure
Share Cancellation Amount”) in exchange for the redemption of such portion of the Conversion Amount convertible into
such Authorized Failure Shares at an amount equal to the sum of (i) the product of (x) such number of Authorization Failure Shares
and (y) the greatest Closing Sale Price of the Common Stock on any Trading Day during the period commencing on the date the Holder
delivers the applicable Conversion Notice with respect to such Authorization Failure Shares to the Company and ending on the date
of such issuance and payment under this Section 10(b) and (ii) to the extent the Holder purchases (in an open market transaction
or otherwise) shares of Common Stock to deliver in satisfaction of a sale by the Holder of Authorization Failure Shares, any brokerage
commissions and other out-of-pocket expenses, if any, of the Holder incurred in connection therewith. Nothing contained in Section
10(a) or this Section 10(b) shall limit any obligations of the Company under any provision of the Securities Purchase Agreement.

 

 

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11.             
REDEMPTIONS.

 

(a)               
Mechanics. The Company, or at the Company’s direction, the Trustee, shall deliver the applicable Event of Default
Redemption Price to the Holder in cash within five (5) Business Days after the later of (x) the Company’s receipt of the
Holder’s Event of Default Redemption Notice and (y) the applicable Event of Default Redemption Trigger Date. If the Holder
has submitted a Change of Control Redemption Notice in accordance with Section 5(b), the Company, or at the Company’s direction,
the Trustee, shall deliver the applicable Change of Control Redemption Price to the Holder in cash concurrently with the consummation
of such Change of Control if such notice is received prior to the consummation of such Change of Control and within five (5) Business
Days after the Company’s receipt of such notice otherwise. The Company, or at the Company’s direction, the Trustee,
shall deliver the applicable Company Installment Redemption Price to the Holder in cash on the applicable Installment Date. In
the event of a redemption of less than all of the Conversion Amount of this Note, the Company shall promptly cause to be issued,
following authentication of such new Note, and delivered to the Holder a new Note (in accordance with Section 17(d)) representing
the outstanding Principal which has not been redeemed. In the event that the Company does not pay the applicable Redemption Price
to the Holder within the time period required, at any time thereafter and until the Company pays such unpaid Redemption Price in
full, the Holder shall have the option, in lieu of redemption, to require the Company to promptly return to the Holder all or any
portion of this Note representing the Conversion Amount that was submitted for redemption and for which the applicable Redemption
Price (together with any Late Charges thereon) has not been paid. Notwithstanding anything herein to the contrary, in connection
with any redemption hereunder at a time the Holder is entitled to receive a cash payment under any of the other Transaction Documents,
at the option of the Holder delivered in writing to the Company, the applicable Redemption Price hereunder shall be increased by
the amount of such cash payment owed to the Holder, in whole or in part as specified in such writing, under such other Transaction
Document and, upon payment in full or conversion in accordance herewith, shall satisfy the Company’s payment obligation under
such other Transaction Document. Upon the Company’s receipt of such notice, (x) the applicable Redemption Notice shall be
null and void with respect to such Conversion Amount and (y) the Company shall immediately return this Note, or issue a new, duly
authenticated Note (in accordance with Section 17(d)), to the Holder, and in each case the principal amount of this Note or
such new Note (as the case may be) shall be increased by an amount equal to the difference between (1) the applicable Event of
Default Redemption Price, Change of Control Redemption Price or Company Installment Redemption Price, as the case may be, minus
(2) the Conversion Amount submitted for redemption and (z) the Conversion Price of this Note or such new Notes (as the case may
be) shall be automatically adjusted with respect to each conversion effected thereafter by the Holder to the lowest of (A) the
lowest Company Conversion Price of the Installment Dates occurring during the period commencing on the date the Holder delivers
the applicable Redemption Notice and ending on the date the applicable Redemption Notice is voided and (B) 85% of the lowest Closing
Bid Price of the Common Stock during the period beginning on and including the date on which the applicable Redemption Notice is
delivered to the Company and ending on and including the date on which the applicable Redemption Notice is voided. The Holder’s
delivery of a notice voiding a Redemption Notice and exercise of its rights following such notice shall not affect the Company’s
obligations to make any payments of Late Charges which have accrued prior to the date of such notice with respect to the Conversion
Amount subject to such notice.

 

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(b)              
Redemption by Other Holders. Upon the Company’s receipt of notice from any of the holders of the Other Notes
that an event or occurrence substantially similar to the events or occurrences described in Section 4(b) or Section 5(b) has occurred,
the Company shall immediately, but no later than one (1) Business Day of its receipt thereof, forward to the Holder by facsimile
a copy of such notice (whether or not the Company agrees that such event or occurrence has occurred and/or is continuing). Upon
the Company’s receipt of notice from any of the holders of the Other Notes for redemption or repayment as a result of an
event or occurrence substantially similar to the events or occurrences described in Section 4(b) or Section 5(b) (each, an “Other
Redemption Notice”), the Company shall immediately, but no later than one (1) Business Day of its receipt thereof, forward
to the Holder by facsimile a copy of such notice (whether or not the Company agrees that such event or occurrence has occurred
and/or is continuing). If the Company receives a Redemption Notice and one or more Other Redemption Notices, during the seven (7)
Business Day period beginning on and including the date which is three (3) Business Days prior to the Company’s receipt of
the Holder’s applicable Redemption Notice and ending on and including the date which is three (3) Business Days after the
Company’s receipt of the Holder’s applicable Redemption Notice and the Company is unable to redeem all principal, interest
and other amounts designated in such Redemption Notice and such Other Redemption Notices received during such seven (7) Business
Day period, then the Company shall redeem a pro rata amount from each holder of the Notes (including the Holder) based on the principal
amount of the Notes submitted for redemption pursuant to such Redemption Notice and such Other Redemption Notices received by the
Company during such seven (7) Business Day period.

 

12.             
VOTING RIGHTS. The Holder shall have no voting rights as the holder of this Note, except as required by law (including,
but not limited to, the Delaware General Corporation Law), and as expressly provided in this Note.

 

13.             
COVENANTS. Until all of the Notes have been converted, redeemed or otherwise satisfied in accordance with their terms:

 

(a)               
Rank. All payments due under this Note (i) shall rank pari passu with all Other Notes and the Permitted Indebtedness
described in clause (vi) of Section 28(ii) below and (ii) shall be senior to all other Indebtedness of the Company, other than
the Senior Unsecured Notes.

 

(b)              
Incurrence of Indebtedness. The Company shall not, and the Company shall cause each of its Restricted Subsidiaries
to not, directly or indirectly, incur or guarantee, assume or suffer to exist any Indebtedness (other than (i) the Indebtedness
evidenced by this Note and the Other Notes and (ii) Permitted Indebtedness).

 

(c)               
Existence of Liens. The Company shall not, and the Company shall cause each of its Restricted Subsidiaries to not,
directly or indirectly, allow or suffer to exist any mortgage, lien, pledge, charge, security interest or other encumbrance upon
or in any property or assets owned by the Company or any of its Restricted Subsidiaries (collectively, “Liens”)
other than Permitted Liens.

 

(d)              
Restricted Payments. The Company shall not, and the Company shall cause each of its Restricted Subsidiaries to not,
directly or indirectly, redeem, defease, repurchase, repay or make any payments in respect of, by the payment of cash or cash equivalents
(in whole or in part, whether by way of open market purchases, tender offers, private transactions or otherwise), all or any portion
of any Indebtedness (other than the Senior Unsecured Notes and/or the Kinergy Credit Facility), whether by way of payment in respect
of principal of (or premium, if any) or interest on, such Indebtedness if at the time such payment is due or is otherwise made
or, after giving effect to such payment, (i) an event constituting an Event of Default has occurred and is continuing or (ii) an
event that with the passage of time and without being cured would constitute an Event of Default has occurred and is continuing.

 

    	21

    	 

    

 

(e)               
Restriction on Redemption and Cash Dividends. The Company shall not, and the Company shall cause each of its Restricted
Subsidiaries to not, directly or indirectly, redeem, repurchase or pay any cash dividend or distribution on any of its capital
stock (other than Permitted Distributions) without the prior written express consent of the Holder.

 

(f)               
Maturity of Indebtedness. Except for any Permitted Investments, including the June Indebtedness, in an aggregate
amount of $6.7 million, the Company shall not, and the Company shall cause each of its Subsidiaries to not, directly or indirectly,
permit any Indebtedness of the Company or any of the Subsidiaries to mature or accelerate prior to the Maturity Date without the
prior written express consent of the Required Holders.

 

(g)              
Payment of Indebtedness. Subject to Section 13(d) above, the Company shall not, and the Company shall cause each
of its Subsidiaries to not, directly or indirectly, redeem, repurchase or prepay any Indebtedness without the prior written express
consent of the Required Holders other than (i) mandatory prepayments of the Senior Unsecured Notes, the Kinergy Credit Facility
and/or the Pacific Holding Restated Credit Facility required by the terms of such Indebtedness as in effect as of the Subscription
Date, (ii) regular payments of interest in accordance with the terms of such Indebtedness required by the terms of such Indebtedness
as in effect as of the Subscription Date, (iii) Permitted Investments, including the June Indebtedness, in an aggregate amount
of $6.7 million, and (iv) Permitted Distributions.

 

(h)              
Change in Nature of Business. The Company shall not, and the Company shall cause each of its Restricted Subsidiaries
to not, directly or indirectly, engage in any material line of business substantially different from those lines of business conducted
by the Company and each of its Restricted Subsidiaries on the Issuance Date or any business substantially related or incidental
thereto. The Company shall not, and the Company shall cause each of its Restricted Subsidiaries to not, directly or indirectly,
modify its or their corporate structure or purpose.

 

(i)                
Preservation of Existence, Etc. The Company shall maintain and preserve, and cause each of its Restricted Subsidiaries
to maintain and preserve, its existence, rights and privileges, and become or remain, and cause each of its Restricted Subsidiaries
to become or remain, duly qualified and in good standing in each jurisdiction in which the character of the properties owned or
leased by it or in which the transaction of its business makes such qualification necessary.

 

(j)                
Maintenance of Properties, Etc. The Company shall maintain and preserve, and cause each of its Restricted Subsidiaries
to maintain and preserve, all of its properties which are necessary or useful in the proper conduct of its business in good working
order and condition, ordinary wear and tear excepted, and comply, and cause each of its Restricted Subsidiaries to comply, at all
times with the provisions of all leases to which it is a party as lessee or under which it occupies property, so as to prevent
any loss or forfeiture thereof or thereunder.

 

    	22

    	 

    

 

(k)              
Maintenance of Insurance. The Company shall maintain, and cause each of its Restricted Subsidiaries to maintain,
insurance with responsible and reputable insurance companies or associations (including, without limitation, comprehensive general
liability, hazard, rent and business interruption insurance) with respect to its properties (including all real properties leased
or owned by it) and business, in such amounts and covering such risks as is required by any governmental authority having jurisdiction
with respect thereto or as is carried generally in accordance with sound business practice by companies in similar businesses similarly
situated.

 

(l)                
Investments. Except for any Permitted Investments, the Company shall not, and the Company shall cause each of its
Restricted Subsidiaries to not, directly or indirectly, without the prior written express consent of the Required Holders, lend
money or credit (by way of guarantee or otherwise) or make advances to any Subsidiary, or purchase or acquire any stock, bonds,
notes, debentures or other obligations or securities of, or any other interest in, or make any capital contribution to, any Subsidiary.

 

(m)            
Restriction on Transfer of Assets. The Company shall not, and the Company shall cause each of its Subsidiaries to
not, directly or indirectly, sell, lease, license, assign, transfer, convey or otherwise dispose of any assets or rights of the
Company or any Subsidiary owned or hereafter acquired whether in a single transaction or a series of related transactions, other
than (i) sales, leases, licenses, assignments, transfers, conveyances and other dispositions of such assets or rights by the Company
and its Subsidiaries that are in the ordinary course of their respective businesses and, after giving effect thereto, would not
result in a Material Adverse Change, (ii) sales of product, inventory or receivables in the ordinary course of business, (iii)
Permitted Transfers, (iv) Permitted Investments or (v) the sale, leasing, licensing, assignment, transfer, conveyance or other
disposition of any assets or rights of any Subsidiary to the extent permitted under the Kinergy Credit Facility or the Pacific
Holding Credit Facilities.

 

14.             
PARTICIPATION. In addition to any adjustments pursuant to Section 7, the Holder, as the holder of this Note, shall
be entitled to receive such dividends paid and distributions made to the holders of Common Stock to the same extent as if the Holder
had converted this Note into Common Stock (without regard to any limitations on conversion herein or elsewhere) and had held such
shares of Common Stock on the record date for such dividends and distributions. Payments under the preceding sentence shall be
made concurrently with the dividend or distribution to the holders of Common Stock (provided, however, to the extent that the Holder’s
right to participate in any such dividend or distribution would result in the Holder exceeding the Maximum Percentage, then the
Holder shall not be entitled to participate in such dividend or distribution to such extent (or the beneficial ownership of any
such shares of Common Stock as a result of such dividend or distribution to such extent) and such dividend or distribution to such
extent 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 Maximum Percentage.

 

    	23

    	 

    

 

15.             
AMENDING THE TERMS OF THIS NOTE. The prior written consent of the Holder shall be required for any change or amendment
to this Note.

 

16.             
TRANSFER. This Note and any shares of Common Stock issued upon conversion of this Note may be offered, sold, assigned
or transferred by the Holder without restriction and without the consent of the Company.

 

17.             
REISSUANCE OF THIS NOTE.

 

(a)               
Transfer. If this Note is to be transferred, the Holder shall surrender this Note to the Company along with a duly
executed copy of the transfer instrument attached hereto as Exhibit III, whereupon the Company will forthwith issue and, following
authentication of such new Note, deliver upon the order of the Holder a new Note (in accordance with Section 17(d)), registered
as the Holder may request, representing the outstanding Principal being transferred by the Holder and, if less than the entire
outstanding Principal is being transferred, a new, duly authenticated Note (in accordance with Section 17(d)) to the Holder representing
the outstanding Principal not being transferred. The Holder and any assignee, by acceptance of this Note, acknowledge and agree
that, by reason of the provisions of Section 3(c)(iii) following conversion or redemption of any portion of this Note, the outstanding
Principal represented by this Note may be less than the Principal stated on the face of this Note.

 

(b)              
Lost, Stolen or Mutilated Note. Upon compliance with Section 3.6 of the Indenture, the Company shall execute and,
following authentication of such new Note, deliver to the Holder a new Note (in accordance with Section 17(d)) representing the
outstanding Principal.

 

(c)               
Note Exchangeable for Different Denominations. This Note is exchangeable, upon the surrender hereof by the Holder
at the principal office of the Company, for a new, duly authenticated Note or Notes (in accordance with Section 17(d) and in principal
amounts of at least $1,000) representing in the aggregate the outstanding Principal of this Note, and each such new Note will represent
such portion of such outstanding Principal as is designated by the Holder at the time of such surrender.

 

(d)              
Issuance of New Notes. Whenever the Company is required to issue a new Note pursuant to the terms of this Note, such
new Note (i) shall be of like tenor with this Note, (ii) shall represent, as indicated on the face of such new Note, the Principal
remaining outstanding (or in the case of a new Note being issued pursuant to Section 17(a) or Section 17(c)), the Principal designated
by the Holder which, when added to the principal represented by the other new Notes issued in connection with such issuance, does
not exceed the Principal remaining outstanding under this Note immediately prior to such issuance of new Notes), (iii) shall have
an issuance date, as indicated on the face of such new Note, which is the same as the Issuance Date of this Note, (iv) shall have
the same rights and conditions as this Note, (v) shall represent accrued and unpaid Interest and Late Charges on the Principal
and Interest of this Note, from the Issuance Date and (vi) shall be duly authenticated in accordance with the Indenture.

 

    	24

    	 

    

 

18.             
REMEDIES, CHARACTERIZATIONS, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF. The remedies provided in this Note
shall be cumulative and in addition to all other remedies available under this Note 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 damages for any failure by the Company to comply with the terms of this Note. 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 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 Note (including, without limitation,
compliance with Section 7).

 

19.             
PAYMENT OF COLLECTION, ENFORCEMENT AND OTHER COSTS. If (a) this Note is placed in the hands of an attorney for collection
or enforcement or is collected or enforced through any legal proceeding or the Holder otherwise takes action to collect amounts
due under this Note or to enforce the provisions of this Note or (b) there occurs any bankruptcy, reorganization, receivership
of the Company or other proceedings affecting Company creditors’ rights and involving a claim under this Note, then the Company
shall pay the costs incurred by the Holder for such collection, enforcement or action or in connection with such bankruptcy, reorganization,
receivership or other proceeding, including, without limitation, attorneys’ fees and disbursements. The Company expressly
acknowledges and agrees that no amounts due under this Note shall be affected, or limited, by the fact that the Purchase Price
(as defined in the Securities Purchase Agreement) paid for this Note was less than the original Principal amount hereof.

 

20.             
CONSTRUCTION; HEADINGS. This Note shall be deemed to be jointly drafted by the Company and the Holder and shall not
be construed against any Person as the drafter hereof. The headings of this Note are for convenience of reference and shall not
form part of, or affect the interpretation of, this Note. Terms used in this Note but defined in the other Transaction Documents
shall have the meanings ascribed to such terms on the Series A Closing Date in such other Transaction Documents unless otherwise
consented to in writing by the Holder.

 

21.             
FAILURE OR INDULGENCE NOT WAIVER. No failure or delay on the part of the Holder in the exercise of any power, right
or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or
privilege preclude other or further exercise thereof or of any other right, power or privilege. No waiver shall be effective unless
it is in writing and signed by an authorized representative of the waiving party.

 

    	25

    	 

    

 

22.             
DISPUTE RESOLUTION. In the case of a dispute as to the determination of the Conversion Price, the Closing Bid Price,
the Closing Sale Price or fair market value (as the case may be) or the arithmetic calculation of the Conversion Rate or the applicable
Redemption Price (as the case may be), the Company or the Holder (as the case may be) shall submit the disputed determinations
or arithmetic calculations (as the case may be) via facsimile (i) within two (2) Business Days after receipt of the applicable
notice giving rise to such dispute to the Company or the Holder (as the case may be) or (ii) if no notice gave rise to such dispute,
at any time after the Holder learned of the circumstances giving rise to such dispute (including, without limitation, as to whether
any issuance or sale or deemed issuance or sale was an issuance or sale or deemed issuance or sale of Excluded Securities). If
the Holder and the Company are unable to agree upon such determination or calculation within two (2) Business Days of such disputed
determination or arithmetic calculation (as the case may be) being submitted to the Company or the Holder (as the case may be),
then the Company shall, within two (2) Business Days, submit via facsimile (a) the disputed determination of the Conversion Price,
the Closing Bid Price, the Closing Sale Price or fair market value (as the case may be) to an independent, reputable investment
bank selected by the Company and approved by the Holder or (b) the disputed arithmetic calculation of the Conversion Rate or any
Redemption Price (as the case may be) to the Company’s independent, outside accountant. The Company shall cause at its expense
the investment bank or the accountant (as the case may be) to perform the determinations or calculations (as the case may be) and
notify the Company and the Holder of the results no later than ten (10) Business Days from the time it receives such disputed determinations
or calculations (as the case may be). Such investment bank’s or accountant’s determination or calculation (as the case
may be) shall be binding upon all parties absent demonstrable error.

 

23.             
NOTICES; CURRENCY; PAYMENTS.

 

(a)               
Notices. Whenever notice is required to be given under this Note, unless otherwise provided herein, such notice shall
be given in accordance with Section 9(f) of the Securities Purchase Agreement. The Company shall provide the Holder and the Trustee
with prompt written notice of all actions taken pursuant to this Note, including in reasonable detail a description of such action
and the reason therefore. Without limiting the generality of the foregoing, the Company will give written notice to the Holder
and the Trustee (i) promptly upon any adjustment of the Conversion Price, setting forth in reasonable detail, and certifying, the
calculation of such adjustment and (ii) at least fifteen (15) days prior to the date on which the Company closes its books or takes
a record with respect to (A) any dividend or distribution upon the Common Stock, (B) any grants, issuances, or sales of any Options,
Convertible Securities or rights to purchase stock, warrants, securities or other property to holders of shares of Common Stock
generally or (C) any determination of rights to vote with respect to any Fundamental Transaction, dissolution or liquidation; provided
that in each case that such information shall be made known to the public prior to or in conjunction with such notice being provided
to the Holder.

 

    	26

    	 

    

 

(b)              
Currency. All principal, interest and other amounts owing under this Note or any Transaction Document that, in accordance
with their terms, are paid in cash, shall be paid in United States Dollars (“U.S. Dollars”). All amounts denominated
in other currencies shall be converted to the U.S. Dollar equivalent amount in accordance with the Exchange Rate on the date of
calculation. “Exchange Rate” means, in relation to any amount of currency to be converted into U.S. Dollars
pursuant to this Note, the U.S. Dollar exchange rate as published in the Wall Street Journal on the relevant date of calculation
(it being understood and agreed that where an amount is calculated with reference to, or over, a period of time, the date of calculation
shall be the final date of such period of time).

 

(c)               
Payments. Whenever any payment of cash is to be made by the Company to any Person pursuant to this Note, unless otherwise
expressly set forth herein, such payment shall be made in lawful money of the United States of America by a certified check drawn
on the account of the Company and sent via overnight courier service to such Person at such address as previously provided to the
Company in writing (which address, in the case of each of the Buyers (as defined in the Securities Purchase Agreement), shall initially
be as set forth on the Schedule of Buyers attached to the Securities Purchase Agreement), provided that the Holder may elect to
receive a payment of cash via wire transfer of immediately available funds by providing the Company with prior written notice setting
out such request and the Holder’s wire transfer instructions. Whenever any amount expressed to be due by the terms of this
Note is due on any day which is not a Business Day, the same shall instead be due on the next succeeding day which is a Business
Day. Any amount of Principal or other amounts due under the Transaction Documents which is not paid when due (other than any amounts
due hereunder that are otherwise accruing interest at the Default Rate) shall result in a late charges being incurred and payable
by the Company in an amount equal to interest on such amount at the rate of fifteen percent (15%) per annum from the date such
amount was due until the same is paid in full (“Late Charge”).

 

24.             
CANCELLATION. After all Principal, accrued Interest, Late Charges and other amounts at any time owed on this Note
have been paid in full, this Note shall automatically be deemed canceled, shall be surrendered to the Company for cancellation
and shall not be reissued.

 

25.             
WAIVER OF NOTICE. To the extent permitted by law, the Company hereby irrevocably waives demand, notice, presentment,
protest and all other demands and notices in connection with the delivery, acceptance, performance, default or enforcement of this
Note and the Securities Purchase Agreement.

 

26.             
GOVERNING LAW. This Note shall be construed and enforced in accordance with, and all questions concerning the construction,
validity, interpretation and performance of this Note shall be governed by, the internal laws of the State of New York, without
giving effect to any choice of law or conflict of law provision or rule (whether of the State of New York or any other jurisdictions)
that would cause the application of the laws of any jurisdictions other than the State of New York. The Company hereby irrevocably
submits to the exclusive jurisdiction of the state and federal courts sitting in The City of New York, Borough of Manhattan, for
the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein,
and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally
subject to the jurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that
the venue of such suit, action or proceeding is improper. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law. In the event that any provision of this Note is invalid or unenforceable under
any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith
and shall be deemed modified to conform with such statute or rule of law. Any such provision which may prove invalid or unenforceable
under any law shall not affect the validity or enforceability of any other provision of this Note. Nothing contained herein shall
be deemed or operate to preclude the Holder from bringing suit or taking other legal action against the Company in any other jurisdiction
to collect on the Company’s obligations to the Holder to realize on any collateral or any other security for such obligations
or to enforce a judgment or other court ruling in favor of the Holder. THE COMPANY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY
HAVE TO, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING
OUT OF THIS NOTE OR ANY TRANSACTION CONTEMPLATED HEREBY.

 

    	27

    	 

    

 

27.             
MAXIMUM PAYMENTS. Nothing contained herein shall be deemed to establish or require the payment of a rate of interest
or other charges in excess of the maximum permitted by applicable law. In the event that the rate of interest required to be paid
or other charges hereunder exceed the maximum permitted by such law, any payments in excess of such maximum shall be credited against
amounts owed by the Company to the Holder and thus refunded to the Company.

 

28.             
CERTAIN DEFINITIONS. For purposes of this Note, the following terms shall have the following meanings:

 

(a)               
 [INSERT IN SERIES B NOTES: “Aggregate Series B Installment Amount” means the quotient of (x)
$8,000,000, divided by (y) the sum of the number of Installment Dates occurring during the period commencing on the Series B Closing
Date and ending on, and including, the Maturity Date.]

 

(b)              
“Approved Stock Plan” means any employee benefit plan which has been approved by the board of directors
of the Company prior to or subsequent to the date hereof pursuant to which shares of Common Stock and standard options to purchase
Common Stock may be issued to any employee, officer, or director for services provided to the Company in their capacity as such.

 

(c)               
“Bloomberg” means Bloomberg, L.P.

 

(d)              
“Business Day” means any day other than Saturday, Sunday or other day on which commercial banks in The
City of New York are authorized or required by law to remain closed.

 

(e)               
 “Change of Control” means any Fundamental Transaction other than (i) any merger of the Company or any
of its, direct or indirect, wholly-owned Subsidiaries with or into any of the foregoing Persons, (ii) any reorganization, recapitalization
or reclassification of the shares of Common Stock in which holders of the Company’s voting power immediately prior to such
reorganization, recapitalization or reclassification continue after such reorganization, recapitalization or reclassification to
hold publicly traded securities and, directly or indirectly, are, in all material respects, the holders of the voting power of
the surviving entity (or entities with the authority or voting power to elect the members of the board of directors (or their
equivalent if other than a corporation) of such entity or entities) after such reorganization, recapitalization or reclassification,
(iii) pursuant to a migratory merger effected solely for the purpose of changing the jurisdiction of incorporation of the Company
or any of its Subsidiaries or (iv) the sale (whether by merger, asset sale or otherwise) of any one Plant of the Company or any
of its Subsidiaries.

 

    	28

    	 

    

 

(f)               
“Change of Control Redemption Premium” means 125%.

 

(g)              
“Closing Bid Price” and “Closing Sale Price” means, for any security as of any date,
the last closing bid price and last closing trade price, respectively, for such security on the Principal Market, as reported by
Bloomberg, or, if the Principal Market begins to operate on an extended hours basis and does not designate the closing bid price
or the closing trade price (as the case may be) then the last bid price or last trade price, respectively, of such security prior
to 4:00:00 p.m., New York time, as reported by Bloomberg, or, if the Principal Market is not the principal securities exchange
or trading market for such security, the last closing bid price or last trade price, respectively, of such security on the principal
securities exchange or trading market where such security is listed or traded as reported by Bloomberg, or if the foregoing do
not apply, the last closing bid price or last trade price, respectively, of such security in the over-the-counter market on the
electronic bulletin board for such security as reported by Bloomberg, or, if no closing bid price or last trade price, respectively,
is reported for such security by Bloomberg, the average of the bid prices, or the ask prices, respectively, of any market makers
for such security as reported in the “pink sheets” by OTC Markets Group Inc. (formerly Pink Sheets LLC). If the Closing
Bid Price or the Closing Sale Price cannot be calculated for a security on a particular date on any of the foregoing bases, the
Closing Bid Price or the Closing Sale Price (as the case may be) of such security on such date shall be the fair market value as
mutually determined by the Company and the Holder. If the Company and the Holder are unable to agree upon the fair market value
of such security, then such dispute shall be resolved in accordance with the procedures in Section 22. All such determinations
shall be appropriately adjusted for any stock splits, stock dividends, stock combinations, recapitalizations or other similar transaction
during such period.

 

(h)              
“Common Stock” means (i) the Company’s shares of common stock, $0.001 par value per share,
and (ii) any capital stock into which such common stock shall have been changed or any share capital resulting from a reclassification
of such common stock.

 

(i)                
 “Company Conversion Price” means, with respect to a particular date of determination, the lower of (i)
the Conversion Price then in effect and (ii) 85% of the Market Price. All such determinations to be appropriately adjusted for
any stock split, stock dividend, stock combination, or other similar transaction during any such measuring period.

 

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(j)                
“Contingent Obligation” means, as to any Person, any direct or indirect liability, contingent or otherwise,
of that Person with respect to any indebtedness, lease, dividend or other obligation of another Person if the primary purpose or
intent of the Person incurring such liability, or the primary effect thereof, is to provide assurance to the obligee of such liability
that such liability will be paid or discharged, or that any agreements relating thereto will be complied with, or that the holders
of such liability will be protected (in whole or in part) against loss with respect thereto

 

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

 

(l)                
“Eligible Market” means The New York Stock Exchange, the NYSE MKT, the Nasdaq Global Select Market, the
Nasdaq Global Market or the Principal Market.

 

(m)            
“Equity Conditions” means: (i) on each day during the period beginning fifteen (15) Trading Days prior
to the applicable date of determination and ending on and including the applicable date of determination (the “Equity
Conditions Measuring Period”), the Common Stock is listed or designated for quotation (as applicable) on an Eligible
Market and shall not have been suspended from trading on an Eligible Market (other than suspensions of not more than two (2) days
and occurring prior to the applicable date of determination due to business announcements by the Company) nor shall delisting or
suspension by an Eligible Market be pending in writing by such Eligible Market (if prior to the Reservation Requirement Date, excluding
the requirement of the Principal Market for the Closing Bid Price of the Common Stock to exceed $1.00); (ii) on each day during
the Equity Conditions Measuring Period, the Company shall have delivered all shares of Common Stock issuable upon conversion of
this Note on a timely basis pursuant to the applicable provisions hereof and all other shares of capital stock required to be delivered
by the Company on a timely basis as set forth in the other Transaction Documents; (iii) any shares of Common Stock to be issued
in connection with the event requiring determination may be issued in full without violating Section 3(d) hereof; (iv) any shares
of Common Stock to be issued in connection with the event requiring determination may be issued in full without violating the rules
or regulations of the Eligible Market on which the Common Stock is then listed or designated for quotation (as applicable); (v)
on each day during the Equity Conditions Measuring Period, no public announcement of a pending, proposed or intended Fundamental
Transaction shall have occurred which has not been abandoned, terminated or consummated; (vi) the Holder
shall not be in possession of any material, non-public information provided to any of them by the Company, any of its affiliates
or any of their respective officers, employees, directors, representatives, agents or the like; (vii) on each day during
the Equity Conditions Measuring Period, there shall not have occurred an Event of Default or an event that with the passage of
time or giving of notice would constitute an Event of Default, and (viii) as of the applicable date of determination, there shall
not be any Volume Failure or any Price Failure.

 

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(n)              
“Equity Conditions Failure” means that on any day during the period commencing on the applicable Company
Installment Notice Date through the later of the applicable Installment Date and the date on which the applicable shares of Common
Stock are actually delivered to the Holder, the Equity Conditions have not been satisfied (or waived in writing by the Holder);
provided, that notwithstanding the foregoing and solely in connection with a Company Conversion hereunder, the Company’s
failure to satisfy clause (vi) of the definition of Equity Conditions shall not be deemed to be an Equity Conditions Failure if
(x) the Company has properly notified the Holder that it desires to give the Holder material nonpublic information and, prior to
the Holder’s receipt of such material nonpublic information, the Holder has delivered a written notice to the Company acknowledging
its agreement to receive such material nonpublic information and (y) such Equity Condition is satisfied during the 72 hour period
immediately preceding and including each Trading Day in which the Company is required to deliver shares of Common Stock to the
Holder (or the Holder’s account with DTC, as applicable) in connection with such Company Conversion.

 

(o)              
“Excluded Subsidiaries” means New PE Holdco LLC, a Delaware limited liability company, Pacific Ethanol
Holding Co. LLC, a Delaware limited liability company, Pacific Ethanol Madera LLC, a Delaware limited liability company, Pacific
Ethanol Columbia, LLC, a Delaware limited liability company, Pacific Ethanol Stockton, LLC, a Delaware limited liability company,
and Pacific Ethanol Magic Valley, LLC, a Delaware limited liability company.

 

(p)              
“Fundamental Transaction” means that (i) the Company or any of its Subsidiaries shall, directly or indirectly,
in one or more related transactions, (1) consolidate or merge with or into (whether or not the Company or any of its Subsidiaries
is the surviving corporation) any other Person, or (2) sell, assign, transfer, convey or otherwise dispose of all or substantially
all of its respective properties or assets to any other Person, or (3) allow any other Person to make a purchase, tender or exchange
offer that is accepted by the holders of more than 50% of the outstanding shares of Voting Stock of the Company (not including
any shares of Voting Stock of the Company held by the Person or Persons making or party to, or associated or affiliated with the
Persons making or party to, such purchase, tender or exchange offer), or (4) consummate a stock or share purchase agreement or
other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement)
with any other Person whereby such other Person acquires more than 50% of the outstanding shares of Voting Stock of the Company
(not including any shares of Voting Stock of the Company 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),
or (ii) any “person” or “group” (as these terms are used for purposes of Sections 13(d) and 14(d) of the
1934 Act and the rules and regulations promulgated thereunder) is or shall become the “beneficial owner” (as defined
in Rule 13d-3 under the 1934 Act), directly or indirectly, of 50% of the aggregate ordinary voting power represented by issued
and outstanding Voting Stock of the Company.

 

(q)              
“GAAP” means United States generally accepted accounting principles, consistently applied.

 

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(r)                
“Holder Pro Rata Amount” means a fraction (i) the numerator of which is the original Principal amount
of this Note on the Closing Date at which this Note was originally issued and (ii) the denominator of which is the aggregate original
principal amount of all Notes issued to the initial purchasers pursuant to the Securities Purchase Agreement on the Closing Date.

 

(s)               
“Indenture” means that certain Indenture for Subordinated Debt Securities dated as of the Series A Closing
Date, by and between the Company and the Trustee, as may be amended, modified or supplemented from time to time, including, without
limitation, by any Supplemental Indenture (as defined below).

 

(t)                
“Installment Adjustment Conversion Price” means, with respect to a particular date of determination,
the lower of (i) the Conversion Price then in effect and (ii) 85% of the Market Price as of such date of determination.

 

(u)              
[INSERT IN SERIES A NOTES: “Installment Amount” means (i) with respect to any Installment Date
other than the Maturity Date, the lesser of (A) (x) if prior to the Series B Closing Date, the product of (I) $1,166,667, multiplied
by (II) the Holder Pro Rata Amount, or (y) if on or after the Series B Closing Date, the Remaining Series A Installment Amount
and (B) the Principal amount then outstanding under this Note as of such Installment Date, and (ii) with respect to the Installment
Date that is the Maturity Date, the Principal amount then outstanding under this Note as of such Installment Date, in each case,
as any such Installment Amount may be reduced or increased pursuant to the terms of this Note, whether upon conversion, redemption
or otherwise, together with, in each case of clauses (i) and (ii), the sum of any accrued and unpaid Interest as of such Installment
Date under this Note and accrued and unpaid Late Charges, if any, under this Note as of such Installment Date. In the event the
Holder shall sell or otherwise transfer any portion of this Note, the transferee shall be allocated a pro rata portion of each
unpaid Installment Amount hereunder.]

 

[INSERT IN SERIES B NOTES:
“Installment Amount” means (i) with respect to any Installment Date other than the Maturity Date, the lesser
of (A) the product of (I) the Aggregate Series B Installment Amount, multiplied by (II) the Holder Pro Rata Amount and (B) the
Principal amount then outstanding under this Note as of such Installment Date, and (ii) with respect to the Installment Date that
is the Maturity Date, the Principal amount then outstanding under this Note as of such Installment Date, in each case, as any such
Installment Amount may be reduced or increased pursuant to the terms of this Note, whether upon conversion, redemption or otherwise,
together with, in each case of clauses (i) and (ii), the sum of any accrued and unpaid Interest as of such Installment Date under
this Note and accrued and unpaid Late Charges, if any, under this Note as of such Installment Date. In the event the Holder shall
sell or otherwise transfer any portion of this Note, the transferee shall be allocated a pro rata portion of each unpaid Installment
Amount hereunder.]

 

    	32

    	 

    

 

(v)              
[INSERT IN SERIES A NOTES: “Installment Date” means (i) initially, the date that is eleven (11)
Trading Days after the Series A Closing Date, (ii) then, (x) if the first Trading Day of the calendar month immediately following
the initial Installment Date occurs less than eleven (11) Trading Days after the initial Installment Date, the first Trading Day
of the second (2nd) calendar month immediately following the initial Installment Date or (y) otherwise, the first (1st)
Trading Day of the calendar month immediately following the initial Installment Date, and (iii) thereafter, the first (1st)
Trading Day of every subsequent calendar month until the Maturity Date.]

 

[INSERT IN SERIES B NOTES:
“Installment Date” means (i) initially, the Series B Closing Date; provided, that if there are less than eleven
(11) Trading Days between, the Series B Closing Date and the first (1st) Trading Day of the succeeding calendar month,
then the initial Installment Date shall be such first (1st) Trading Day of the succeeding calendar month, and (ii) thereafter,
each first (1st) Trading Day of every subsequent calendar month until the Maturity Date.]

 

(w)            
“Interest Rate” means five percent (5%) per annum, as may be adjusted from time to time in accordance
with Section 2.

 

(x)              
“June Indebtedness” means amounts due and owing on June 25, 2013 under the Pacific Holding Restated Credit
Facility as in effect as of the Subscription Date.

 

(y)              
“Kinergy Credit Facility” means that certain credit facility as evidenced by, among other loan documents,
that certain Amended and Restated Loan and Security Agreement, dated as of May 4, 2012, by and between Kinergy Marketing, LLC and
Pacific AG. Products, LLC as borrowers thereunder and Wells Fargo Capital Finance, LLC as Agent, and Wells Fargo Capital Finance,
LLC as Sole Lead Arranger, Manager and Bookrunner, as such credit facility is in effect on the date hereof.

 

(z)               
“Mandatory Prepayment Alternative Indebtedness” means, in connection with the occurrence of any given
event which, pursuant to the terms of the Senior Unsecured Notes in effect as of the Subscription Date, would require that the
Company make a mandatory prepayment of all, or any part, of the Indebtedness outstanding under the Senior Unsecured Notes (the
“Mandatory Prepayment Amount”), any Indebtedness of the Company or any of its Subsidiaries permitted by the
holders of the Senior Unsecured Notes to be prepaid or purchased by the Company or any of its Subsidiaries, as applicable, in lieu
of requiring the prepayment of such Mandatory Prepayment Amount; provided, that (i) the actual amount of such alternative Indebtedness
to be prepaid or purchased, as applicable, shall not exceed the Mandatory Prepayment Amount and (ii) the aggregate Mandatory Prepayment
Alternative Indebtedness shall not exceed $3.5 million.

 

(aa)           
“Market Price” means, for any given date, the lesser of (x) the VWAP of the Common Stock on the Trading
Day immediately preceding such given date and (y) quotient of (I) the sum of the three (3) lowest VWAPs of the Common Stock during
the ten (10) consecutive Trading Day period ending and including the Trading Day immediately prior to such given date, divided
by (II) three (3) (such period, the “Market Price Measuring Period”). All such determinations to be appropriately
adjusted for any stock dividend, stock split, stock combination, reclassification or similar transactions during such Market Price
Measuring Period.

 

    	33

    	 

    

 

(bb)          
“Maturity Date” means [____]1; provided, however, the Maturity Date may be extended
at the option of the Holder (i) in the event that, and for so long as, an Event of Default shall have occurred and be continuing
or any event shall have occurred and be continuing that with the passage of time and the failure to cure would result in an Event
of Default or (ii) through the date that is twenty (20) Business Days after the consummation of a Fundamental Transaction in the
event that a Fundamental Transaction is publicly announced or a Change of Control Notice is delivered prior to the Maturity Date,
provided further that if a Holder elects to convert some or all of this Note pursuant to Section 3 hereof, and the Conversion
Amount would be limited pursuant to Section 3(d) hereunder, the Maturity Date shall automatically be extended until such time
as such provision shall not limit the conversion of this Note.

 

(cc)           
“Material Adverse Change” shall mean any set of circumstances or events which occur, arise or otherwise
take place from and after the Issuance Date which (a) has or could reasonably be expected to have any material adverse effect whatsoever
upon the validity or enforceability of this Note or any other Transaction Document, (b) is or could reasonably be expected to be
material and adverse to the business properties, assets, financial condition, results of operations or prospects of the Company
or the Company and any of Subsidiaries on a collective basis, (c) impairs materially or could reasonably be expected to impair
materially the ability of the Company to duly and punctually pay or perform any its obligations under this Note or any other Transaction
Document, or (d) materially impairs or could reasonably be expected to materially impair the ability of Holder, to the extent permitted,
to enforce its legal rights and remedies pursuant to this Note or any other Transaction Document; provided, that a Material Adverse
Change shall not include the sale (whether by merger, asset sale or otherwise) of any one Plant of the Company or any of its Subsidiaries.

 

(dd)         
 “Options” means any rights, warrants or options to subscribe for or purchase shares of Common Stock
or Convertible Securities.

 

(ee)           
“Pacific Holding Restated Credit Facility” means that certain credit facility as evidenced by, among
other loan documents, that certain Second Amended and Restated Credit Agreement dated as of October 29, 2012 among Pacific Ethanol
Holding Co. LLC, a Delaware limited liability company, as a borrower thereunder and as agent for borrowers thereunder, and co-borrowers
Pacific Ethanol Madera LLC, a Delaware limited liability company, Pacific Ethanol Columbia, LLC, a Delaware limited liability company,
Pacific Ethanol Stockton LLC, a Delaware limited liability company, and Pacific Ethanol Magic Valley, LLC, a Delaware limited liability
company, each of the lenders thereunder who are from time to time signatories thereto, Wells Fargo Bank, N.A., as administrative
agent and collateral agent for such lenders and such other parties thereto as identified therein, as such credit facility may have
been or may be amended, restated or otherwise modified prior to the Subscription Date.

 

 

1
Insert date that is the one year anniversary of the Series A Closing Date.

 

    	34

    	 

    

 

(ff)            
“Parent Entity” of a Person means an entity that, directly or indirectly, controls the applicable Person
and whose common stock or equivalent equity security is quoted or listed on an Eligible Market, or, if there is more than one such
Person or Parent Entity, the Person or Parent Entity with the largest public market capitalization as of the date of consummation
of the Fundamental Transaction.

 

(gg)          
“Plant” means any Excluded Subsidiary (other than New PE Holdco LLC or Pacific Ethanol Holding Co LLC).

 

(hh)          
“Permitted Distributions” means (a) dividends by Subsidiaries of the Company to the Company or other
Subsidiaries of the Company, and (b) current quarterly dividends required to be paid by Company with respect to the Company’s
Series B Cumulative Convertible Preferred Stock pursuant to the organizational documents of the Company as in effect as of the
Issuance Date on the Company. For the avoidance of doubt, to the extent that payment thereof is in the form of Common Stock, payment
of previously accrued and unpaid dividends with respect to the Company’s Series B Cumulative Convertible Preferred Stock
outstanding as of the Issuance Date shall be deemed to be “Permitted Distributions”.

 

(ii)              
“Permitted Indebtedness” means (i) Indebtedness evidenced by this Note and the Other Notes; (ii) the
Senior Unsecured Notes, (iii) any Indebtedness secured by a Permitted Lien (other than any Indebtedness referred to in clause (iv)
of the definition of “Permitted Lien”), (iv) Indebtedness incurred by the Company that is made expressly subordinate
in right of payment to the Indebtedness evidenced by this Note, as reflected in a written agreement acceptable to the Holder and
approved by the Holder in writing, and which Indebtedness does not provide at any time for (1) the payment, prepayment, repayment,
repurchase or defeasance, directly or indirectly, of any principal or premium, if any, thereon until ninety-one (91) days after
the Maturity Date or later and (2) total interest and fees at a rate in excess of ten percent (10%) per annum (collectively, the
“Subordinated Indebtedness”), (v) Indebtedness existing on the Issuance Date (which, for the avoidance of doubt,
includes the $10 million accordion feature contained in the Kinergy Credit Facility as in effect on the Issuance Date); provided,
that the principal amount of such Indebtedness is not increased by more than five percent (5%) in the aggregate, the terms of such
Indebtedness are not modified to impose more burdensome terms upon the Company or any of its Subsidiaries and the terms of such
Indebtedness are not materially changed in any manner that adversely affects the Holder or any of the Buyers, (vi) any Contingent
Obligation with respect to the Kinergy Credit Facility or otherwise required to be incurred by the Company in order for
any of its Subsidiaries to obtain any bonds or letters of credit required in connection with the continued operation of such Subsidiary’s
business; provided that such Contingent Obligation shall not exceed $750,000 in the aggregate at any time and (vii) such
other trade and operating indebtedness incurred in the ordinary course of business by the Company, including without limitation,
unsecured trade debt, financing with respect to the acquisition or lease of equipment and financing of insurance premiums; provided
that in the aggregate, such indebtedness in this clause (vii) does not exceed the greater of $2,000,000 or three-quarters of one
percent (0.75%) of total assets as reported in the Company’s most recent publicly filed Form 10-K or 10-Q reports.

 

    	35

    	 

    

 

(jj)              
“Permitted Investments” means (w) the purchase of equity interests in New PE Holdco LLC for an aggregate
purchase price not to exceed $500,000, (x) intercompany loans between and among the Company and any of its Subsidiaries and/or
any contributions of capital to any Subsidiary in an amount not to exceed $1 million in the aggregate, (y) the June Indebtedness,
in an aggregate amount not to exceed $6.7 million and/or (z) the Mandatory Prepayment Alternative Indebtedness.

 

(kk)          
“Permitted Liens” means (i) any Lien for taxes not yet due or delinquent or being contested in good faith
by appropriate proceedings for which adequate reserves have been established in accordance with GAAP, (ii) any statutory Lien arising
in the ordinary course of business by operation of law with respect to a liability that is not yet due or delinquent, (iii) any
Lien created by operation of law, such as materialmen’s liens, mechanics’ liens and other similar liens, arising in
the ordinary course of business with respect to a liability that is not yet due or delinquent or that are being contested in good
faith by appropriate proceedings, (iv) Liens securing financing obtained in the ordinary course of the Company's operations, including
financing with respect to the acquisition or lease of equipment and financing of insurance premiums; provided, that
(A) such Liens are solely upon and confined solely to the equipment, unearned insurance premiums or other asset or assets being
acquired by such financing and (B) in the aggregate, the Indebtedness secured by such liens does not exceed the greater of $2,000,000
or three-quarters of one percent (0.75%) of total assets as reported in the Company's most recent publicly filed Form 10-K or 10-Q
reports, (v) Liens incurred in connection with the extension, renewal or refinancing of the indebtedness secured by Liens of the
type described in clause (iv) above, provided that any extension, renewal or replacement Lien shall be limited to the property
encumbered by the existing Lien and the principal amount, interest rate and other amounts to be paid under such Indebtedness being
extended, renewed or refinanced does not increase, (vi) any Lien on the assets or properties of Kinergy Marketing LLC and Pacific
AG. Products, LLC securing the Kinergy Credit Facility and (vii) any Lien arising out of the Indenture for the benefit of the Trustee
as security for the performance of the obligations of the Company thereunder.

 

(ll)              
“Permitted Transfers” means any payments, distributions or transfers with respect to (i) any Permitted
Indebtedness (in the case of Subordinated Indebtedness, to the extent permitted by the relevant subordination or intercreditor
agreement) and (ii) any Permitted Distributions or (ii) the sale (whether by merger, asset sale or otherwise) of any one Plant
of the Company or any of its Subsidiaries.

 

(mm)      
“Person” means an individual, a limited liability company, a partnership, a joint venture, a corporation,
a trust, an unincorporated organization, any other entity or a government or any department or agency thereof.

 

    	36

    	 

    

 

(nn)          
“Price Failure” means, with respect to a particular date of determination, the volume-weighted average
of the VWAP of the Common Stock during the fifteen (15) consecutive Trading Day period ending on the Trading Day immediately preceding
such date of determination fails to exceed $0.20 (as adjusted for any stock splits, stock dividends,
stock combinations, recapitalizations or other similar transactions) (the “Base Price”); provided, however,
that in the event the Company effects a reverse stock split between the Issuance Date and the Maturity Date, the Base Price shall
be replaced with $0.15 (as adjusted by such reverse stock split). All such determinations to be appropriately adjusted for any
stock splits, stock dividends, stock combinations, recapitalizations or other similar transactions during such Price Failure Measuring
Period.

 

(oo)          
“Principal Market” means the Nasdaq Capital Market.

 

(pp)          
“Redemption Notices” means, collectively, the Event of Default Redemption
Notices, the Company Installment Notices with respect to any Company Redemption, and the Change of Control Redemption Notices,
and each of the foregoing, individually, a “Redemption Notice.”

 

(qq)          
“Redemption Premium” means (i) in the case of the Events of Default described in Section 4(a) (other
than Sections 4(a)(vi) through 4(a)(viii)), 125% or (ii) in the case of the Events of Default described in Sections 4(a)(vi) through
4(a)(viii), 100%.

 

(rr)             
“Redemption Prices” means, collectively, Event of Default Redemption Prices, the Change of Control Redemption
Prices, and the Company Installment Redemption Prices, and each of the foregoing, individually, a “Redemption Price.”

 

(ss)             [INSERT
IN SERIES A NOTES: “Remaining Series A Installment Amount” means, with respect to the Holder, the
greater of (x) the product of (I) $500,000 multiplied by (II) the Holder Pro Rata Amount and (y) the quotient of (A)
the Principal amount of this Note outstanding on the Series B Closing Date, divided by (B) the sum of the number of
Installment Dates occurring during the period commencing on the Series B Closing Date and ending on, and including, the
Maturity Date.]

 

(tt)             
“Required Holders” means the holders of Notes representing at least a majority of the aggregate principal
amount of the Notes then outstanding (excluding any Notes held by the Company or any of its Subsidiaries).

 

(uu)          
“Restricted Subsidiary” means any Subsidiary other than the Excluded Subsidiaries.

 

(vv)          
“SEC” means the United States Securities and Exchange Commission or the successor thereto.

 

(ww)      
“Securities Purchase Agreement” means that certain securities purchase agreement, dated as of the Subscription
Date, by and among the Company and the initial holders of the Notes pursuant to which the Company issued the Notes and the Warrants,
as may be amended, modified or supplemented from time to time.

 

(xx)          
“Senior Unsecured Notes” means those certain senior unsecured notes, in the original principal amount
of $22.2 million, issued on December 19, 2012 to certain investors as in effect as of the Subscription Date.

 

    	37

    	 

    

  

(yy)          
 “Series A Closing Date” shall have the meaning ascribed to such term in the Securities Purchase Agreement,
which date is the date the Company initially issued Series A Notes pursuant to the terms of the Indenture, Series A Supplemental
Indenture and the Securities Purchase Agreement.

 

(zz)           
“Series A Notes” shall have the meaning ascribed to such term in the Securities Purchase Agreement, and
shall include all notes issued in exchange therefor or replacement thereof.

 

(aaa)        
“Series A Supplemental Indenture” shall have the meaning ascribed to such term in the Securities Purchase
Agreement, as such supplemental indenture may be amended, modified or supplemented from time to time.

 

(bbb)      
“Series B Closing Date” shall have the meaning ascribed to such term in the Securities Purchase Agreement,
which date is the date the Company initially issued Series B Notes pursuant to the terms of the Indenture, Series B Supplemental
Indenture and the Securities Purchase Agreement.

 

(ccc)        
“Series B Notes” shall have the meaning ascribed to such term in the Securities Purchase Agreement, and
shall include all notes issued in exchange therefor or replacement thereof.

 

(ddd)     
“Series B Supplemental Indenture” shall have the meaning ascribed to such term in the Securities Purchase
Agreement, as such supplemental indenture may be amended, modified or supplemented from time to time.

 

(eee)        
“Subscription Date” means March 28, 2013.

 

(fff)         
“Subsidiary” means any Person in which the Company, directly or indirectly, (i) owns any of the outstanding
capital stock or holds any equity or similar interest of such Person or (ii) controls or operates all or any part of the business,
operations or administration of such Person, and all of the foregoing.

 

(ggg)      
“Supplemental Indenture” shall have the meaning ascribed to such term in the Securities Purchase Agreement,
as such supplemental indenture may be amended, modified or supplemented from time to time.

 

(hhh)      
“Successor Entity” means the Person (or, if so elected by the Holder, the Parent Entity) formed by, resulting
from or surviving any Fundamental Transaction or the Person (or, if so elected by the Holder, the Parent Entity) with which such
Fundamental Transaction shall have been entered into.

 

(iii)            
“Trading Day” means any day on which the Common Stock is traded on the Principal Market, or, if the Principal
Market is not the principal trading market for the Common Stock, then on the principal securities exchange or securities market
on which the Common Stock is then traded, provided that “Trading Day” shall not include any day on which the Common
Stock is scheduled to trade on such exchange or market for less than 4.5 hours or any day that the Common Stock is suspended from
trading during the final hour of trading on such exchange or market (or if such exchange or market does not designate in advance
the closing time of trading on such exchange or market, then during the hour ending at 4:00:00 p.m., New York City time) unless
such day is otherwise designated as a Trading Day in writing by the Holder.

 

    	38

    	 

    

 

(jjj)            
“Trustee” means U.S. Bank National Association, in its capacity as trustee under the Indenture, or any
successor or any additional trustee appointed with respect to the Notes pursuant to the Indenture.

 

(kkk)      
“Voting Stock” of a Person means capital stock of such Person of the class or classes pursuant to which
the holders thereof have the general voting power to elect, or the general power to appoint, at least a majority of the board of
directors, managers, trustees or other similar governing body of such Person (irrespective of whether or not at the time capital
stock of any other class or classes shall have or might have voting power by reason of the happening of any contingency).

 

(lll)            
“Warrants” has the meaning ascribed to such term in the Securities Purchase Agreement, and shall include
all warrants issued in exchange therefor or replacement thereof.

 

(mmm)
“Volume Failure” means, with respect to a particular date of determination, the quotient of (x) the sum
of the aggregate daily dollar trading volume (as reported on Bloomberg) of the Common Stock on each Trading Day over the fifteen
(15) consecutive Trading Day period ending on the Trading Day immediately preceding such date of determination (such period, the
“Volume Failure Measuring Period”), divided by (y) fifteen (15) is not less than $500,000 (as adjusted for any
stock splits, stock dividends, stock combinations, recapitalizations or other similar transactions). All such determinations to
be appropriately adjusted for any stock splits, stock dividends, stock combinations, recapitalizations or other similar transactions
during such Volume Failure Measuring Period.

 

(nnn)      
 “VWAP” means, for any security as of any date, the dollar volume-weighted average price for such security
on the Principal Market (or, if the Principal Market is not the principal trading market for such security, then on the principal
securities exchange or securities market on which such security is then traded) during the period beginning at 9:30:01 a.m., New
York City time, and ending at 4:00:00 p.m., New York City time, as reported by Bloomberg through its “Volume at Price”
function or, if the foregoing does not apply, the dollar volume-weighted average price of such security in the over-the-counter
market on the electronic bulletin board for such security during the period beginning at 9:30:01 a.m., New York City time, and
ending at 4:00:00 p.m., New York City time, as reported by Bloomberg, or, if no dollar volume-weighted average price is reported
for such security by Bloomberg for such hours, the average of the highest Closing Bid Price and the lowest Closing Sale Price of
any of the market makers for such security as reported in the “pink sheets” by OTC Markets Group Inc. (formerly Pink
Sheets LLC). If the VWAP cannot be calculated for such security on such date on any of the foregoing bases, the VWAP of such security
on such date shall be the fair market value as mutually determined by the Company and the Holder. If the Company and the Holder
are unable to agree upon the fair market value of such security, then such dispute shall be resolved in accordance with the procedures
in Section 22. All such determinations shall be appropriately adjusted for any stock dividend, stock split, stock combination,
or other similar transaction during such period.

 

    	39

    	 

    

 

29.             
SUBORDINATION. This Note and the rights and obligations evidenced hereby are subordinate in the manner and to the
extent set forth in the  [First][Second] Supplemental Indenture.

 

30.             
DISCLOSURE. Upon receipt or delivery by the Company of any notice in accordance with the terms of this Note, unless
the Company has in good faith determined that the matters relating to such notice do not constitute material, non-public information
relating to the Company or any of its Subsidiaries, the Company shall within one (1) Business Day after any such receipt or delivery
publicly disclose such material, non-public information on a Current Report on Form 8-K or otherwise. In the event that the Company
believes that a notice contains material, non-public information relating to the Company or any of its Subsidiaries, the Company
so shall indicate to such Holder contemporaneously with delivery of such notice, and in the absence of any such indication, the
Holder shall be allowed to presume that all matters relating to such notice do not constitute material, non-public information
relating to the Company or its Subsidiaries. Nothing contained in this Section 30 shall limit any obligations of the Company, or
any rights of the Holder, under Section 4(i) of the Securities Purchase Agreement.

 

[signature page follows]

 

 

 

 

    	40

    	 

    

 

IN WITNESS WHEREOF,
the Company has caused this Note to be duly executed as of the Issuance Date set out above.

  

	 	
         

	 	
        PACIFIC
        ETHANOL, INC.

         

         

         

        By:_____________________________

        Name:

        Title:

 

 

Attest:

 

 

 

By:_____________________________

Name:

Title:

 

 

 

CERTIFICATE OF AUTHENTICATION

 

This is one of the Securities
of the series designated herein referred to in the within-mentioned Indenture and First Supplemental Indenture.

 

Dated: ________________, ____

 

 

U.S. Bank National Association,

as Trustee

 

By:_____________________________

         Authorized Signatory

 

 

    	41

    	 

    

 

EXHIBIT I

 

Pacific Ethanol, Inc.

CONVERSION NOTICE

 

Reference is made to
the Subordinated Convertible Note (the “Note”) issued to the undersigned by Pacific Ethanol, Inc. (the “Company”).
In accordance with and pursuant to the Note, the undersigned hereby elects to convert the Conversion Amount (as defined in the
Note) of the Note indicated below into shares of Common Stock, $0.001 par value per share (the “Common Stock”),
of the Company, as of the date specified below.

 

	Date of Conversion:	 
	Aggregate Principal to be converted:	 
	Aggregate accrued and unpaid Interest with respect to such portion of the Aggregate Principal and such Aggregate Interest to be converted:	 
	AGGREGATE CONVERSION AMOUNT

 TO BE CONVERTED:	 
	Please confirm the following information:
	Conversion Price:	 
	Number of shares of Common Stock to be issued:	 
	Please issue the Common Stock into which the Note is being converted in the following name and to the following address:
	Issue to:	 
	 	 
	 	 
	Facsimile Number:	 
	Holder:	 
	By:	 
	Title:	 
	Dated:	 
	Account Number:	 
	  (if electronic book entry transfer)	 
	Transaction Code Number:	 
	
          (if
        electronic book entry transfer)

         
	 
	Installment Amount(s) to be reduced (and corresponding Installment Date(s)) and amount of reduction:	
	 	 	 	 	 	 	 	 	 	 	 	 

 

 

    	42

    	 

    

 

EXHIBIT II

 

ACKNOWLEDGMENT

 

The Company hereby
acknowledges this Conversion Notice and hereby directs _________________ to issue the above indicated number of shares of Common
Stock in accordance with the Transfer Agent Instructions dated _____________, 2013 from the Company and acknowledged and agreed
to by ________________________.

 

	 	
         

	 	
        PACIFIC
        ETHANOL, INC.

         

         

         

        By:_____________________________

        Name:

        Title:

 

 

 

 

 

 

 

 

 

    	43

    	 

    

 

EXHIBIT III

 

FOR VALUE RECEIVED, the undersigned
hereby sell(s), assign(s) and transfer(s) unto [NAME OF ASSIGNEE] the within instrument of PACIFIC ETHANOL, INC. and
does hereby irrevocably constitute and appoint [_________] Attorney to transfer said instrument on the books of the
within-named Company, with full power of substitution in the premises.

 

Please Insert Social Security or Other Identifying Number of
Assignee: ________________________

 

Dated: ______________ ____, ___

 

 

 

By:_____________________________

Name:

Title:

 

 

NOTICE: The signature to this assignment
must correspond with the name as written upon the face of the within instrument in every particular, without alteration or enlargement
or any change whatever.

 

 

 

 

 

 

44

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