Document:

ex10-2.htm

 

Exhibit 10.2

 

 

 

 

 

 

 

PURCHASE AGREEMENT

 

Between

 

HANCOCK FABRICS, INC.,
a Delaware corporation,

 

as Seller,

 

and

 

F9 Properties, LLC

 

 

as Buyer

 

 

 

 

 

PURCHASE AGREEMENT

 

THIS PURCHASE AGREEMENT (this “Agreement”) is made as of the 4th day of June, 2015 (the “Effective Date”), between HANCOCK FABRICS, INC., a Delaware corporation (“Seller”), and F9 Properties, LLC, a New Hampshire Limited Liability Company (“Buyer”), jointly the “Parties” and, occasionally, each of the Parties is hereinafter referred to individually as a “Party.” 

 

FACTUAL CONTEXT

 

A.     Seller is the owner of that certain 64.50 acre parcel of land and the improvements thereon, including a building containing approximately 742,372 square feet situated in the County of Lee, State of Mississippi, described in Exhibit A attached hereto and incorporated herein, which land and improvements are also known as One Fashion Way, Baldwyn, Mississippi and are herein referred to as the “Property.”

 

B.     The Parties have agreed that, subject to certain conditions, Buyer shall purchase the Property and concurrently with such purchase shall lease the Property back to the Seller, and the Parties desire to hereby set forth their agreement with respect to that transaction and certain other matters.

 

NOW THEREFORE, in consideration of the foregoing and the mutual covenants hereinafter contained, the Parties agree as follows:

 

1.          Agreement of Purchase and Sale. On and subject to all of the terms and conditions of this Agreement, Seller agrees to sell, and Buyer agrees to buy, the Property. 

 

2.          Agreement to Lease Property Back to Seller. Commencing on the Closing Date, Buyer, as landlord, shall lease to Seller, as tenant, the Property pursuant to a lease agreement (the “Lease Agreement”) substantially in the form attached as Exhibit B hereto. The Lease Agreement shall have an initial term of twenty (20) years. Seller shall have the right to renew the term of the Lease Agreement for up to five (5) successive extended terms of five (5) years each. As part of Section 5 (a) CONDITION TO BUYER’S PURCHASE OBLIGATION, this Agreement to Lease Property Back to Seller shall become part of the Due Diligence obligations described in Section 5 (a) and be executed within such due diligence timeframe of sixty (60) days as a contingency to the closing. 

 

3.          Earnest Money Deposit. Within three (3) business days after the Effective Date, Buyer shall deposit the sum of Two Hundred Fifty Thousand Dollars ($250,000.00) (the “Earnest Money”) with Escrow Holder, as identified in Section 6 below, who shall hold it in trust. Said earnest money received by Escrow Holder shall be deposited in a federally insured escrow account and shall remain in that account until the Closing or other termination of the transaction set forth in this Agreement. Upon Closing, as defined below, the Earnest Money shall be applied against the total purchase price set forth in Section 4(a). In the event Buyer fails, without legal excuse, to complete the purchase contemplated herein, Buyer shall forfeit to Seller the Earnest Money. Said forfeiture of the Earnest Money shall be Seller’s sole remedy against Buyer in the event of any such failure to complete the purchase contemplated herein.

 

 

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4.          Purchase Price.

 

(a)         Property. The purchase price for the Property shall be Eighteen Million Five Hundred Thousand Dollars ($18,500,000.00) (the “Purchase Price”).

 

(b)         Net to Seller. The Purchase Price shall be net to Seller, it being understood that Buyer shall have no right or remedy of offset, abatement or deduction against the Purchase Price for any reason, including, but not limited to, any reason arising out of any facts or circumstances regarding the Property, whether discovered in connection with Buyer’s investigation of the Property or otherwise.

 

5.          Conditions to Buyer’s Purchase Obligation.

 

(a)          Conditions.

 

(i)          Title Condition. That the condition of title to the Property be satisfactory to Buyer.

 

(A)         Within three (3) business days after the Effective Date, Seller shall order a current commitment for title insurance evidencing the condition of title to the Property (the “Commitment”).

 

(B)          Buyer shall have ten (10) days after receipt of the Commitment within which to object to the condition of title to the Property reflected in the Commitment. Buyer shall not object to current taxes and assessments for public improvements not delinquent, any printed exception to title in a commitment for a standard ALTA title insurance policy, any exception to title contained in the commitment which does not materially effect the value or use of the Property, any lien for the payment of money incurred by Seller, which shall be removed by Seller at or prior to Closing, that certain lease between Seller, as landlord, and HF Merchandising, Inc., as tenant, dated March 1, 2004, or that certain lease between Seller, as landlord, and hancockfabrics.com, Inc., as tenant, dated October 1, 2004 . Any objection to title made by Buyer (an “Objection”) shall be in writing and shall identify the title matter to which Buyer objects and the reason(s) for such Objection. If Buyer fails so to make an Objection within such ten (10) day period, Buyer shall be deemed to have approved the condition of title to the Property (except for any lien for the payment of money incurred by Seller other than current taxes and assessments, which shall be removed by Seller at or prior to Closing), and the condition contained in this Section 5(a)(i) shall be satisfied. If Buyer so objects within such ten (10) day period, then this Agreement shall terminate on the tenth (10th) business day following Seller’s receipt of Buyer’s Objection and the reasons supporting it, unless, within that ten business (10) day period, Seller delivers to Buyer the agreement of Seller to eliminate, prior to the Closing, the title matter or matters to which Buyer has objected or the commitment of the Title Insurer to insure over the title matter or matters to which Buyer has objected, by endorsement or otherwise, in Buyer’s policy of title insurance, in which event this Agreement shall continue in full force and effect and the condition contained in this Section 5(a)(i) shall be satisfied as of such delivery by Seller, as long as, at the Closing, such title matter or matters are in fact removed or insured over. If Seller does not so agree to remove such title matter or matters to which Buyer has objected or if Title Insurer does not so commit to insure over within such ten (10) business day period, the title condition shall be deemed not satisfied.

 

 

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(ii)         (C)          Commencing on the Closing Date, Buyer, as landlord, shall lease to Seller, as tenant, the Property pursuant to a lease agreement (the “Lease Agreement”) substantially in the form attached as Exhibit B hereto. The Lease Agreement shall have an initial term of twenty (20) years. Seller shall have the right to renew the term of the Lease Agreement for up to five (5) successive extended terms of five (5) years each. This Lease shall be executed by Buyer/Landlord and Seller/Tenant before the closing date of this Purchase Agreement as a contingency to said closing of this transaction. Due Diligence Investigations.

 

(A)         For a period of sixty (60) days after the Effective Date (the “Feasibility Period”), Buyer shall have the right to enter onto the Property and conduct such investigations as it may reasonably desire, which investigations may include, but are not limited to, surveys, Phase I environmental testing, engineering studies and building inspections; provided, however, Buyer shall not perform any destructive or invasive testing without Seller’s prior written consent, which consent shall not be unreasonably withheld.

 

(B)         Notwithstanding any other provision of this Agreement, Seller shall have no obligation to consider Buyer’s request to perform destructive or invasive tests unless Buyer’s request is accompanied by a reasonably detailed statement of the scope and methodology of such testing. If Seller approves Buyer’s proposed testing program, Buyer shall be entitled to proceed therewith, and Buyer shall not vary from the program approved by Seller unless Seller’s prior written consent to such deviation is first obtained. Seller shall have the right to have its representatives present when Buyer or its agents shall be on the Property conducting Buyer’s investigations, and Buyer shall give Seller written notice at least one (1) business day prior to any planned entry onto the Property so that Seller shall have the opportunity to have its representatives present on-site.

 

(C)         Pending the Closing and if this Agreement terminates without the occurrence of the Closing, Buyer shall hold the results of its investigations in confidence and shall not disclose the same to any third party without the prior written consent of Seller. Notwithstanding the foregoing, Buyer may share the results of its investigations with its attorneys, contractors, consultants and lenders so long as such parties agree to hold such information in confidence as provided herein.

 

(D)         Upon request, Buyer shall provide Seller with a copy of any report generated by or for Buyer as a result of such investigations; provided, however, that any reliance by Seller upon the contents of any such report shall be at Seller’s own risk, and Buyer shall not be deemed to have made any representation or warranty regarding the accuracy of any such report. Pending the Closing and after the Closing, Seller shall not disclose such information to any third party without the prior written consent of Buyer. Notwithstanding the foregoing, Seller may share such information with its attorneys, contractors, consultants and lenders so long as such parties agree to hold such information in confidence as provided herein.

 

(E)         Section 5(a)(ii)(C) and (D) hereof shall not be construed to require the non-disclosure of information when disclosure is compelled by law; provided, however, the Party subject to such compulsion shall give the other Party prompt written notice thereof so that such other Party may seek legal protection against such disclosure. Further, Section 5(a)(ii)(C) and (D) hereof shall not be construed to prevent either Party from disclosing any information in the course of making or defending a claim under this Agreement.

 

(F)         Buyer’s due diligence investigations shall be conducted at no expense to Seller. IN CONDUCTING SUCH INVESTIGATIONS BUYER SHALL NOT DISTURB OR OTHERWISE INTERFERE UNREASONABLY WITH THE USE AND OCCUPANCY OF THE PROPERTY. All work shall be done during normal business hours. Buyer agrees to hold Seller and the Property free of all claims, demands, liens, expenses and liability arising or alleged to have arisen from Buyer’s due diligence investigations pursuant to this Agreement (collectively, “Potential Claims”). With respect to any and all Potential Claims, Buyer agrees to defend (at Seller’s option and with counsel reasonably acceptable to Seller), protect, indemnify and hold Seller free and harmless from all liability and expense (including, but not limited to, reasonable attorneys’ fees and litigation expenses). In the event that this Agreement terminates without the occurrence of the Closing, Buyer, at its expense, shall promptly repair and restore all damage to the Property resulting from Buyer’s investigations.

 

(G)         Seller shall, within three (3) business days following the Effective Date, furnish to Buyer copies of any recent environmental studies, soils tests, easements, covenants, and restrictions, existing title insurance policies, boundary and topographic surveys, building plans, certificates of occupancy, real estate tax statements and/or proof of payment of real estate taxes, and insurance documents that are in the possession of Seller; provided, however, that any reliance by Buyer upon the contents of any such report shall be at Buyer’s own risk, and Seller shall not be deemed to have made any representation or warranty regarding the accuracy of any such report.

 

(iii)         Satisfaction. Buyer shall have the right to be satisfied in Buyer’s reasonable discretion with the result of its investigations pursuant to Section 5(a)(ii). If Buyer shall not be so satisfied, Buyer shall give Seller written notice of such lack of satisfaction (including a detailed description of the lack of satisfaction), if any, on or before the end of the Feasibility Period. If Buyer so gives such notice of lack of satisfaction, this Agreement shall terminate. If Buyer fails to give such notice of lack of satisfaction within the Feasibility Period, Buyer shall be deemed to have been satisfied with the results of its investigations, and the condition contained in Section 5(a)(ii) shall be deemed satisfied.

 

 

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(b)          Termination. If the conditions to Buyer’s obligation to purchase the Property set forth in Section 5(a) hereof are not satisfied or deemed satisfied as provided herein, Buyer’s obligation to purchase the Property shall be excused, this Agreement shall terminate as provided herein, Buyer’s Earnest Money shall be refunded, and thereafter the Parties shall have no further obligations hereunder except for those that shall have accrued and remain undischarged.

 

6.        Escrow Holder. Promptly following the occurrence of the Effective Date, if any, Buyer shall open an escrow with Meland, Russin Budwick – Attorney At law 3200 Southeast Financial Center 200 South Biscayne Blvd. Miami, FL 33131 Tel:305.358.6363 Attn: Amy Ginoris (the “Escrow Holder”). Escrow Holder shall conduct the close of any sale hereunder pursuant to escrow instructions of the Parties consistent with this Agreement. Buyer may purchase this Property using the Like-Kind Exchange Program under IRC Code Section 1031. Should Buyer elect to do so, Seller shall cooperate fully with all requests from Buyer under this program which do not subject Seller to monetary or other material obligations. 

 

7.        Closing.

 

(a)          Closing. Provided that this Agreement is not terminated as provided herein, the “Closing” shall take place through the office of Escrow Holder on a business day mutually satisfactory to Buyer and Seller not later than thirty (30) days after the expiration of the Feasibility Period. At the Closing and in exchange for the Purchase Price, Seller shall convey title, subject to exceptions to title as provided in Section 7(b) hereof, to Buyer by quitclaim deed (the “Deed”). For the purposes of this Agreement, the term “Closing” means the transfer of the executed Deed from Buyer to Seller with the recording of the Deed in the Official Records of Lee County to subsequently take place as described in the instructions to Escrow Holder.

 

(b)          Title. Buyer shall purchase the Property subject to: (i) real property taxes for 2015 and subsequent years and assessments not delinquent, (ii) all title exceptions contained in the Commitment, except (A) those which Seller shall remove pursuant to this Agreement, and (B) those to which Buyer timely objected pursuant to Section 5(a)(i) above and which Seller agrees to eliminate, (iii) the printed exceptions and exclusions referred to in the Standard ALTA Owner’s Policy of Title Insurance issued by Title Insurer, (iv) zoning laws and ordinances, and (v) all acts or omissions of Buyer and any other governmental authority and those acting by, through or under such parties.

 

(c)        Title Policy. As an additional condition to the Closing, Title Insurer shall have agreed to issue to Buyer at Closing a Standard ALTA Owners Policy of Title Insurance with policy limits equal to the Purchase Price subject only to the standard preprinted exceptions and exclusions and those title exceptions approved as provided in this Agreement (the “Title Policy”). 

 

 

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(d)        Prorations. 2015 taxes and assessments shall be prorated between the Parties at Closing and taxes and assessments for subsequent years shall be assumed by Buyer.

 

(e)        Costs. Title attorney fees and the cost of any policies of title insurance shall be paid by Buyer. Document preparation fees, recording fees and escrow fees shall be paid by Buyer. Buyer and Seller shall each pay fifty percent (50%) of the closing fee. Seller shall pay any transfer taxes associated with the transaction contemplated hereunder. Each Party shall pay for its own legal fees.

 

(f)         Business Days. In the event that this Agreement establishes a particular date for the giving of a notice or the occurrence of an event and that day is not a business day in the State of Mississippi, that notice shall be given or that event shall occur on the next business day thereafter. As used in this Agreement, the term “business day” means Monday through Friday, legal holidays in the State of Mississippi excepted. All references to “days” herein, as opposed to business days, means calendar days.

 

8.         Representations and Warranties of Seller. Seller hereby makes the following representations and warranties, each of which shall be deemed to be remade at Closing, except as Buyer may be notified in writing, and, as remade, shall survive the delivery of the Deed, and covenants and agrees with Buyer as follows:

 

(a)         Seller hereby warrants that (i) Seller is duly organized, validly existing, and in good standing under the laws of the State of Delaware and is duly qualified to do business in the State of Mississippi, (ii)  Seller has the full right and authority to enter into this Agreement and to consummate the sale and transfer, contemplated herein, and (iii) the person or persons signatory to this Agreement and any document executed pursuant hereto on behalf of Seller have full power and authority to bind Seller and no other signatures are needed to effectuate the sale of the Property.

 

9.         Broker. (a) Each Party (in this Section 9, “Indemnitor”) represents to the other Party (in this Section 9, “Indemnitee”) that Indemnitor has not entered into any contracts with any brokers or finders nor has Indemnitor obligated itself to pay any real estate commissions or finders’ fees on account of the execution of this Agreement or the close of the transaction contemplated hereby, other than Daniel Herrold of Stan Johnson Company (“Buyer’s Broker”) and Craig Tomlinson of Stan Johnson Company (“Seller’s Broker”) (collectively, “Brokers”). Therefore, Indemnitor agrees to defend, protect, indemnify and hold Indemnitee free and harmless from any claims, damages, expenses, liabilities, liens or judgments (including costs, expenses and reasonable attorneys’ fees in defending the same) which arise on account of any claim made that real estate commissions or finders’ fees are payable as a result of Indemnitor’s conduct.

 

(b)     Commission. At the Closing, Seller shall pay the Brokers pursuant to a separate agreement.

 

10.         Condition of Property; “As Is” Sale. At the Closing, the Property shall be delivered to Buyer by Seller in its condition on the day of Closing. Buyer hereby affirms that Seller, its agents, employees and/or attorneys have not made, nor has Buyer relied upon, any representation, warranty or promise by Seller or its representatives with respect to the Property, or any other subject matter of this Agreement, including, without limitation, any warranties or representations, express or implied, as to the condition of title, general plan designation, zoning, value, permitted use, tax status or physical condition of the Property, or improvements thereon, or any part thereof, including, but not limited to, the flood elevations, drainage patterns and soil and subsoils composition and compaction level, and other conditions at the Property, or the existence or non-existence of toxic or hazardous materials in, on or under the Property or any improvements (and Buyer assumes the risk that any such materials are located in, on or under the Property or any such improvements) or as to the accuracy of any boundary survey or other survey or any soils reports or other plans or reports therefor. Buyer agrees that it has ample opportunity to investigate, and Buyer hereby confirms that it shall rely solely on Buyer’s own investigation. THEREFORE, WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, BUYER, IS PURCHASING THE PROPERTY FROM SELLER, IN “AS IS,” “WHERE IS” CONDITION, SUBJECT TO “ALL FAULTS,” INCLUDING, BUT NOT LIMITED TO, BOTH LATENT AND PATENT DEFECTS AND THE EXISTENCE OF ANY HAZARDOUS MATERIAL THEREON. BUYER HEREBY WAIVES ALL WARRANTIES, EXPRESS OR IMPLIED, REGARDING THE TITLE, CONDITION AND USE OF THE PROPERTY, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.

 

 

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11.          Casualty; Condemnation. In the event that, prior to Closing, the Property is damaged by a casualty, or any authority having the power of condemnation initiates proceedings to acquire by condemnation any portion of or interest in the Property, this Agreement shall continue in full force and effect without reduction of the Purchase Price.

 

12.          Notices. Notices made or given by the Parties must be in writing and may be served by express courier service (overnight or better service) which maintains delivery records (such as Federal Express) or by the United States Mail, registered or certified, postage prepaid, addressed as follows (or at such other address of which the Party gives written notice):

 

	
To Seller:
	
Attn: Chief Financial Officer

One Fashion Way

Baldwyn, Mississippi 38824

	 	 
	
To Buyer:
	
Attn: F9 Properties, LLC

 

 

844 Alton Road, Suite #3

Miami Beach, Florida 33139

	  	  

 

 

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Notices are effective upon receipt, or upon attempted delivery if delivery is refused or if delivery is impossible because of the recipient’s failure to provide a reasonable means for accomplishing delivery.

 

13.          Attorneys’ Fees. In the event a Party commences a legal proceeding to enforce any of the terms of this Agreement, the prevailing Party in such action shall have the right to recover reasonable attorneys’ fees and costs from the other Party to be fixed by the court in the same action. The term “legal proceedings” as used above shall be deemed to include appeals from a lower court judgment and it shall include proceedings in the Federal Bankruptcy Court, whether or not they are adversary proceedings or contested matters. The term “prevailing Party” as used above in reference to proceedings in the Federal Bankruptcy Court shall be deemed to mean the prevailing Party in any adversary proceeding or contested matter, or any other actions taken by the nonbankrupt Party which are reasonably necessary to protect its rights in the Property and the terms of this Agreement.

 

14.          Survival. The provisions of this Agreement shall survive any expiration or termination of this Agreement and shall not merge into any deed delivered and accepted at the Closing.

 

15.          No Offer. This Agreement shall neither be deemed an offer to sell nor shall it bind, obligate or be effective against Seller unless and until (a) the Agreement has been approved in writing by Seller’s appropriate management authority and (b) this Agreement has been fully executed by Seller and Purchaser and an executed copy is delivered to Seller.

 

16.          No Liability. No individual officers, directors, shareholders, agents or representatives of Seller or of Purchaser shall have any personal liability under this Agreement, either for the observance or performance of such party’s rights, duties or obligations hereunder, or for the default of such party to observe and perform its obligations hereunder, or under any document executed in connection with the transactions contemplated hereby, or otherwise.

 

17.          Miscellaneous. The terms, covenants and conditions herein contained shall be binding upon and inure to the benefit of the heirs, personal representatives, successors, transferees and assigns of the Parties. Neither Buyer nor Seller shall assign this Agreement or any rights hereunder to anyone except with the prior written consent of the other Party, which consent shall not be unreasonably withheld if such assignee assumes the obligations of the assigning party hereunder and the assignor is not released of primary obligation hereunder. This Agreement shall be interpreted and construed only by the contents hereof, and there shall be no presumption or standard of construction in favor of or against either Seller or Buyer for any reason, including the fact that counsel for Seller prepared this Agreement, as each Party has had the opportunity to negotiate each and every provision of this Agreement. This Agreement shall be construed and enforced in accordance with, and governed by, the law of the State of Mississippi. The captions in this Agreement are for convenience only and do not constitute a part of the provisions hereof. Whenever required by the context, the singular shall include the plural and vice versa. If any term or provision of this Agreement or the application of it to any person, entity or circumstance shall to any extent be invalid and unenforceable, the remainder of this Agreement or the application of such term or provision to persons or circumstances other than those as to which it is invalid or unenforceable shall not be affected thereby, and each term and provision of this Agreement shall be valid and shall be enforced to the extent permitted by law. Time is of the essence of this Agreement. This Agreement supersedes any prior agreements and contains the entire agreement of the Parties on the matters covered. No other agreement, statement or promise made by any Party or agent of any Party that is not in writing and signed by all Parties shall be binding. Any amendments to this Agreement shall be in writing and signed by all Parties.

 

 

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IN WITNESS WHEREOF, this Agreement has been executed as of the date first above written.

 

 

 

	
“Buyer”

 

F9 PROPERTIES, LLC

 

 

 

By:                                                                                                   

 

 

 

 
	
“Seller”

 

HANCOCK FABRICS, INC.

a Delaware corporation

 

 

By:/s/ Steven R. Morgan                                                      

 

By:                                                                                            

 

 

 

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EXHIBIT A

 

(LEGAL DESCRIPTION)

 

 

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EXHIBIT B

 

LEASE AGREEMENT

 

 

 

 

-10-Exhibit
4.1

 

NEITHER
THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO,
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. THIS SECURITY AND
THE SECURITIES ISSUABLE UPON CONVERSION OF THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT WITH A REGISTERED
BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL INSTITUTION THAT IS AN “ACCREDITED INVESTOR” AS DEFINED IN RULE 501(a)
UNDER THE SECURITIES ACT OR OTHER LOAN SECURED BY SUCH SECURITIES.

 

Original
Issue Date: September 3, 2015

Original
Conversion Price (subject to adjustment herein): $0.80

 

$5,040,000.00

 

8%
SENIOR SECURED CONVERTIBLE DEBENTURE

DUE
july 1, 2017

 

This
8% SENIOR SECURED CONVERTIBLE DEBENTURE is one of a series of duly authorized and validly issued 8% Senior Secured Convertible
Debentures of CONTENT CHECKED HOLDINGS, INC., a Nevada corporation (the “Company”), having its principal place
of business at 8730 Sunset Blvd., Suite 240, West Hollywood, California 90069, designated as its 8% Senior Secured Convertible
Debenture due July 1, 2017 (this debenture, the “Debenture” and, collectively with the other debentures of
such series, the “Debentures”).

 

FOR
VALUE RECEIVED, the Company promises to pay to ________________ or its registered assigns (the “Holder”), or
shall have paid pursuant to the terms hereunder, the principal sum of $5,040,000.00 on July 1, 2017 (the “Maturity Date”)
or such earlier date as this Debenture is required or permitted to be repaid as provided hereunder, and to pay interest to the
Holder on the aggregate unconverted and then outstanding principal amount of this Debenture in accordance with the provisions
hereof. This Debenture is subject to the following additional provisions:

 

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

 

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

 

    	1

    	 

    

 

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

 

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

 

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

 

“Change
of Control Transaction” means the occurrence after the date hereof of any of (a) an acquisition after the date hereof
by an individual or legal entity or “group” (as described in Rule 13d-5(b)(1) promulgated under the Exchange Act)
of effective control (whether through legal or beneficial ownership of capital stock of the Company, by contract or otherwise)
of in excess of forty percent (40%) of the voting securities of the Company (other than by means of conversion or exercise of
the Debentures, the Warrants and the Securities issued together with the Debentures), (b) the Company merges into or consolidates
with any other Person, or any Person merges into or consolidates with the Company and, after giving effect to such transaction,
the stockholders of the Company immediately prior to such transaction own less than sixty percent (60%) of the aggregate voting
power of the Company or the successor entity of such transaction, (c) the Company sells or transfers all or substantially all
of its assets to another Person and the stockholders of the Company immediately prior to such transaction own less than sixty
percent (60%) of the aggregate voting power of the acquiring entity immediately after the transaction, (d) a replacement at one
time or within a three (3) year period of more than one-half of the members of the Board of Directors which is not approved by
a majority of those individuals who are members of the Board of Directors on the Original Issue Date (as defined below) (or by
those individuals who are serving as members of the Board of Directors on any date whose nomination to the Board of Directors
was approved by a majority of the members of the Board of Directors who are members on the date hereof), or (e) the execution
by the Company of an agreement to which the Company is a party or by which it is bound, providing for any of the events set forth
in clauses (a) through (d) above.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

“Mandatory
Default Amount” means the sum of (a) the greater of (i) the outstanding principal amount of this Debenture, plus all
accrued and unpaid interest hereon, divided by the Conversion Price on the date the Mandatory Default Amount is either (A) demanded
(if demand or notice is required to create an Event of Default) or otherwise due or (B) paid in full, whichever has a lower Conversion
Price, multiplied by the VWAP on the date the Mandatory Default Amount is either (x) demanded or otherwise due or (y) paid in
full, whichever has a higher VWAP, or (ii) one hundred thirty percent (130%) of the outstanding principal amount of this Debenture,
plus all accrued and unpaid interest hereon, and (b) all other amounts, costs, expenses and liquidated damages due in respect
of this Debenture.

 

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

 

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

 

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

 

“Optional
Redemption Amount” means the sum of (a) one hundred twenty percent (120%) of the then outstanding principal amount of
the Debenture, (b) accrued but unpaid interest and (c) all liquidated damages and other amounts due in respect of the Debenture.

 

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

 

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

 

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

 

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

 

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

 

“Periodic
Redemption” means the redemption of this Debenture pursuant to Section 6(b) hereof.

 

“Periodic
Redemption Amount” means the sum of (i) as to each Periodic Redemption Date, $[INSERT 1/4th of
principal amount], and (ii) accrued but unpaid interest, liquidated damages and any other amounts then owing to the Holder
in respect of this Debenture.

 

“Periodic
Redemption Date” means October 1, 2016, January 1, 2017, April 1, 2017 and July 1, 2017.

 

“Permitted
Indebtedness” means (a) the indebtedness evidenced by the Debentures, (b) lease obligations and purchase money indebtedness
of up to $100,000, in the aggregate, incurred in connection with the acquisition of capital assets and lease obligations with
respect to newly acquired or leased assets, (c) the Indebtedness existing on the Original Issue Date and set forth on Schedule
3.1(cc) attached to the Purchase Agreement, and (d) up to $250,000 of indebtedness or other obligations that (i) are expressly
subordinate to the Debentures pursuant to a written subordination agreement with the Purchasers that is acceptable to Majority
Purchasers in their sole and absolute discretion and (ii) matures on a date later than the 91st day following the Maturity
Date.

 

    	3

    	 

    

 

“Permitted
Lien” means the individual and collective reference to the following: (a) Liens for taxes, assessments and other governmental
charges or levies not yet due or Liens for taxes, assessments and other governmental charges or levies being contested in good
faith and by appropriate proceedings for which adequate reserves (in the good faith judgment of the management of the Company)
have been established in accordance with GAAP, (b) Liens imposed by law which were incurred in the ordinary course of the Company’s
business, such as carriers’, warehousemen’s and mechanics’ Liens, statutory landlords’ Liens, and other
similar Liens arising in the ordinary course of the Company’s business, and which (x) do not individually or in the aggregate
materially detract from the value of such property or assets or materially impair the use thereof in the operation of the business
of the Company and its Subsidiaries or (y) are being contested in good faith by appropriate proceedings, which proceedings have
the effect of preventing for the foreseeable future the forfeiture or sale of the property or asset subject to such Lien, (c)
Liens incurred in connection with Permitted Indebtedness under subclauses (a), (b), (c) and (d) thereunder, provided that such
Liens (other than under subclauses (a) and (b)) are not secured by assets of the Company or its Subsidiaries other than the assets
so acquired or leased.

 

“Purchase
Agreement” means the Securities Purchase Agreement, dated as of September 3, 2015 among the Company and the original
Holders, as amended, modified or supplemented from time to time in accordance with its terms.

 

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

 

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

 

Section
2.Interest.

 

a)Payment
of Interest in Cash. The Company shall pay interest to the Holder on the aggregate unconverted and then outstanding principal
amount of this Debenture at the rate of 8% per annum, payable quarterly on January 1, April 1, July 1 and October 1, beginning
on July 1, 2016, and on each Periodic Redemption Date (as to that principal amount then being redeemed), and on each Conversion
Date (as to that principal amount then being converted), and on each Optional Redemption Date (as to that principal amount then
being redeemed) and on the Maturity Date (each such date, an “Interest Payment Date”) (if any Interest Payment
Date is not a Business Day, then the applicable payment shall be due on the next succeeding Business Day), in cash. For the avoidance
of doubt, the interest payment due on July 1, 2016 shall consist of all interest accrued from the Original Issue Date of this
Debenture through July 1, 2016.

 

b)Interest
Calculations. Interest shall be calculated on the basis of a 360-day year, consisting of twelve thirty (30) calendar day periods,
and shall accrue daily commencing on the Original Issue Date until payment in full of the outstanding principal, together with
all accrued and unpaid interest, liquidated damages and other amounts which may become due hereunder, has been made. Interest
shall cease to accrue with respect to any principal amount converted, provided that the Company actually delivers the Conversion
Shares within the time period required by Section 4(c)(ii) herein. Interest hereunder will be paid to the Person in whose name
this Debenture is registered on the records of the Company regarding registration and transfers of this Debenture (the “Debenture
Register”).

 

    	4

    	 

    

 

c)Late
Fee. All overdue accrued and unpaid interest to be paid hereunder shall entail a late fee at an interest rate equal to the
lesser of eighteen percent (18%) per annum or the Maximum Rate (the “Late Fees”), which shall accrue daily
from the date such interest is due hereunder through and including the date of actual payment in full.

 

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

 

Section
3.Registration of Transfers and Exchanges.

 

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

 

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

 

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

 

Section
4.Conversion.

 

a)Voluntary
Conversion. At any time after the Original Issue Date until this Debenture is no longer outstanding, this Debenture shall
be convertible, in whole or in part, into shares of Common Stock at the option of the Holder, at any time and from time to time
(subject to the conversion limitations set forth in Section 4(d) hereof). The Holder shall effect conversions by delivering to
the Company a Notice of Conversion, the form of which is attached hereto as Annex A (each, a “Notice of Conversion”),
specifying therein the principal amount of this Debenture to be converted and the date on which such conversion shall be effected
(such date, the “Conversion Date”). If no Conversion Date is specified in a Notice of Conversion, the Conversion
Date shall be the date that such Notice of Conversion is deemed delivered hereunder. No ink-original Notice of Conversion shall
be required, nor shall any medallion guarantee (or other type of guarantee or notarization) of any Notice of Conversion form be
required (unless the Holder is transferring any Underlying Shares resulting from such conversion). To effect conversions hereunder,
the Holder shall not be required to physically surrender this Debenture to the Company unless the entire principal amount of this
Debenture, plus all accrued and unpaid interest thereon, has been so converted in which case the Holder shall surrender this Debenture
as promptly as is reasonably practicable after such conversion without delaying the Company’s obligation to deliver the
shares on the Share Delivery Date. Conversions hereunder shall have the effect of lowering the outstanding principal amount of
this Debenture in an amount equal to the applicable conversion. The Holder and the Company shall maintain records showing the
principal amount(s) converted and the date of such conversion(s). The Company may deliver an objection to any Notice of Conversion
within two (2) Business Days of delivery of such Notice of Conversion. In the event of any dispute or discrepancy, the records
of the Company shall be controlling and determinative in the absence of manifest error. The Holder, and any assignee by acceptance
of this Debenture, acknowledge and agree that, by reason of the provisions of this Section 4(a), following conversion of a portion
of this Debenture, the unpaid and unconverted principal amount of this Debenture may be less than the amount stated on the face
hereof.

 

    	5

    	 

    

 

b)Conversion
Price. The conversion price in effect on any Conversion Date shall be equal to $0.80, subject to adjustment herein
(the “Conversion Price”).

 

c)
Mechanics of Conversion.

 

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

 

ii.Delivery
of Certificate Upon Conversion. Not later than five (5) Trading Days after each Conversion Date (the “Share Delivery
Date”), the Company shall deliver, or cause to be delivered, to (A) the Holder a certificate or certificates representing
the Conversion Shares being acquired upon the conversion of this Debenture, (B) to the Transfer Agent, a legal opinion of Company
counsel as may be requested by the Holder to enable Holder to deposit, if permitted, the Conversion Share certificates in accounts
with its prime broker (or other brokerage account), together with the instruction letter to the Transfer Agent and the resolution
of the Board of Directors authorizing the Transaction Documents and any additional supporting documentation requested by the Holder
(including, without limitation, any instruction letter to the Company’s transfer agent), and (C) a bank check in the amount
of accrued and unpaid interest.

 

iii.Failure
to Deliver Certificates. If, in the case of any Notice of Conversion, such certificate or certificates and the related legal
opinion of Company counsel, the instruction letter to the Transfer Agent and, if necessary, the resolution of the Board of Directors
authorizing the Transaction Documents are not delivered to or as directed by the applicable Holder or the Transfer Agent (as applicable)
by the Share Delivery Date, the Holder shall be entitled to elect by written notice to the Company at any time on or before its
receipt of such certificate or certificates to rescind such Conversion, in which event the Company shall promptly return to the
Holder any original Debenture delivered to the Company and the Holder shall promptly return to the Company the Common Stock certificates
issued to such Holder pursuant to the rescinded Conversion Notice.

 

    	6

    	 

    

 

iv.Obligation
Absolute; Partial Liquidated Damages. The Company’s obligations to issue and deliver the Conversion Shares upon conversion
of this Debenture in accordance with the terms hereof are absolute and unconditional, irrespective of any action or inaction by
the Holder to enforce the same, any waiver or consent with respect to any provision hereof, the recovery of any judgment against
any Person or any action to enforce the same, or any setoff, counterclaim, recoupment, limitation or termination, or any breach
or alleged breach by the Holder or any other Person of any obligation to the Company or any violation or alleged violation of
law by the Holder or any other Person, and irrespective of any other circumstance which might otherwise limit such obligation
of the Company to the Holder in connection with the issuance of such Conversion Shares; provided, however, that
such delivery shall not operate as a waiver by the Company of any such action the Company may have against the Holder. In the
event the Holder of this Debenture shall elect to convert any or all of the outstanding principal amount hereof, the Company may
not refuse conversion based on any claim that the Holder or anyone associated or affiliated with the Holder has been engaged in
any violation of law (other than with respect to applicable state or federal securities laws), agreement (other than with respect
to the Transaction Documents) or for any other reason, unless an injunction from a court, on notice to Holder, restraining and
or enjoining conversion of all or part of this Debenture shall have been sought and obtained, and the Company posts a surety bond
for the benefit of the Holder in the amount of one hundred fifty percent (150%) of the outstanding principal amount of this Debenture
that the Holder of this Debenture is electing to convert, which is subject to the injunction, which bond shall remain in effect
until the completion of arbitration/litigation of the underlying dispute and the proceeds of which shall be payable to the Holder
to the extent it obtains judgment. In the absence of such injunction, the Company shall issue Conversion Shares or, if applicable,
cash, upon a properly noticed conversion. If the Company fails for any reason to deliver to the Holder such certificate or certificates
and to the Transfer Agent the related legal opinion of Company counsel, the instruction letter to the Transfer Agent and, if necessary,
the resolution of the Board of Directors authorizing the Transaction Documents and other supporting documentation pursuant to
Section 4(c)(ii) by the Share Delivery Date, the Company shall pay to the Holder, in cash, as liquidated damages and not as a
penalty, for each $1,000 of principal amount being converted, $10 per Trading Day (increasing to $20 per Trading Day on the fifth
(5th) Trading Day after such liquidated damages begin to accrue) for each Trading Day after such Share Delivery Date
until such certificates and the related legal opinion of Company counsel, the instruction letter to the Transfer Agent, and, if
necessary, the resolution of the Board of Directors authorizing the Transaction Documents and other applicable supporting documentation
are delivered or Holder rescinds such conversion. Nothing herein shall limit a Holder’s right to pursue actual damages or
declare an Event of Default pursuant to Section 8 hereof for the Company’s failure to deliver Conversion Shares within the
period specified herein and the Holder shall have the right to pursue all remedies available to it hereunder, at law or in equity
including, without limitation, a decree of specific performance and/or injunctive relief. The exercise of any such rights shall
not prohibit the Holder from seeking to enforce damages pursuant to any other Section hereof or under applicable law.

 

    	7

    	 

    

 

v.Compensation
for Buy-In on Failure to Timely Deliver Certificates Upon Conversion. In addition to any other rights available to the Holder,
if the Company fails for any reason to deliver to the Holder such certificate or certificates by the Share Delivery Date pursuant
to Section 4(c)(ii), and if after such Share Delivery Date the Holder is required by its brokerage firm to purchase (in an open
market transaction or otherwise), or the Holder’s brokerage firm otherwise purchases, shares of Common Stock to deliver
in satisfaction of a sale by the Holder of the Conversion Shares which the Holder was entitled to receive upon the conversion
relating to such Share Delivery Date (a “Buy-In”), then the Company shall (A) pay in cash to the Holder (in
addition to any other remedies available to or elected by the Holder) the amount, if any, by which (x) the Holder’s total
purchase price (including brokerage commissions and other out-of-pocket expenses, if any, other than the brokerage commissions
and other out-of-pocket expenses that the Holder would have incurred irrespective of the Buy-In) for the Common Stock so purchased
exceeds (y) the product of (1) the aggregate number of shares of Common Stock that the Holder was entitled to receive from the
conversion at issue multiplied by (2) the actual sale price at which the sell order giving rise to such purchase obligation was
executed (including brokerage commissions and other out-of-pocket expenses, if any, other than the brokerage commissions and other
out-of-pocket expenses that the Holder would have incurred irrespective of the Buy-In) and (B) at the option of the Holder, either
reissue (if surrendered) this Debenture in a principal amount equal to the principal amount of the attempted conversion (in which
case such conversion shall be deemed rescinded) or deliver to the Holder the number of shares of Common Stock that would have
been issued if the Company had timely complied with its delivery requirements under Section 4(c)(ii). For example, if the Holder
purchases Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted conversion of this
Debenture with respect to which the actual sale price of the Conversion Shares (including brokerage commissions and other out-of-pocket
expenses, if any, other than the brokerage commissions and other out-of-pocket expenses that the Holder would have incurred irrespective
of the Buy-In) giving rise to such purchase obligation was a total of $10,000, then under clause (A) of the immediately preceding
sentence, the Company shall be required to pay the Holder $1,000. The Holder shall provide the Company written notice indicating
the amounts payable to the Holder in respect of the Buy-In and, upon request of the Company, evidence of the amount of such loss.
Nothing herein shall limit a Holder’s right to pursue any other remedies available to it hereunder, at law or in equity,
including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Company’s failure
to timely deliver certificates representing shares of Common Stock upon conversion of this Debenture as required pursuant to the
terms hereof.

 

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

 

    	8

    	 

    

 

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

 

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

 

d)Holder’s
Conversion Limitations. The Company shall not effect any conversion of this Debenture, and a Holder shall not have the right
to convert any portion of this Debenture, to the extent that after giving effect to the conversion set forth on the applicable
Notice of Conversion, the Holder (together with the Holder’s Affiliates, and any Persons acting as a group together with
the Holder or any of the Holder’s Affiliates) would beneficially own in excess of the Beneficial Ownership Limitation (as
defined below). For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by the Holder
and its Affiliates shall include the number of shares of Common Stock issuable upon conversion of this Debenture with respect
to which such determination is being made, but shall exclude the number of shares of Common Stock which are issuable upon (i)
conversion of the remaining, unconverted principal amount of this Debenture beneficially owned by the Holder or any of its Affiliates
and (ii) exercise or conversion of the unexercised or unconverted portion of any other securities of the Company subject to a
limitation on conversion or exercise analogous to the limitation contained herein (including, without limitation, any other Debentures
or the Warrants) beneficially owned by the Holder or any of its Affiliates. Except as set forth in the preceding sentence, for
purposes of this Section 4(d), beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and
the rules and regulations promulgated thereunder. To the extent that the limitation contained in this Section 4(d) applies, the
determination of whether this Debenture is convertible (in relation to other securities owned by the Holder together with any
Affiliates) and of which principal amount of this Debenture is convertible shall be in the sole discretion of the Holder, and
the submission of a Notice of Conversion shall be deemed to be the Holder’s determination of whether this Debenture may
be converted (in relation to other securities owned by the Holder together with any Affiliates) and which principal amount of
this Debenture is convertible, in each case subject to the Beneficial Ownership Limitation. To ensure compliance with this restriction,
the Holder will be deemed to represent to the Company each time it delivers a Notice of Conversion that such Notice of Conversion
has not violated the restrictions set forth in this Section 4(d) and the Company shall have no obligation to verify or confirm
the accuracy of such determination. In addition, a determination as to any group status as contemplated above shall be determined
in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. For purposes of this
Section 4(d), in determining the number of outstanding shares of Common Stock, the Holder may rely on the number of outstanding
shares of Common Stock as stated in the most recent of the following: (i) the Company’s most recent periodic or annual report
filed with the Commission, as the case may be, (ii) a more recent public announcement by the Company, or (iii) a more recent written
notice by the Company or the Company’s transfer agent setting forth the number of shares of Common Stock outstanding. Upon
the written or oral request of a Holder, the Company shall within two (2) Trading Days confirm orally and in writing to the Holder
the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be
determined after giving effect to the conversion or exercise of securities of the Company, including this Debenture, by the Holder
or its Affiliates since the date as of which such number of outstanding shares of Common Stock was reported. The “Beneficial
Ownership Limitation” shall be 4.99% of the number of shares of the Common Stock outstanding immediately after giving
effect to the issuance of shares of Common Stock issuable upon conversion of this Debenture held by the Holder. The Holder, upon
not less than sixty-one (61) days’ prior written notice to the Company, may increase or decrease the Beneficial Ownership
Limitation provisions of this Section 4(d); provided, that the Beneficial Ownership Limitation in no event shall exceed
9.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common
Stock upon conversion of this Debenture and the provisions of this Section 4(d) shall continue to apply with respect to such increased
or decreased Beneficial Ownership Limitation, as the case may be. Any such increase or decrease will not be effective until the
sixty-first (61st) day after such notice is delivered to the Company. The Beneficial Ownership Limitation provisions
of this Section 4(d) shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this
Section 4(d) to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended Beneficial
Ownership Limitation contained herein or to make changes or supplements necessary or desirable to properly give effect to such
limitation. The limitations contained in this Section 4(d) shall apply to a successor holder of this Debenture.

 

    	9

    	 

    

 

Section
5.Certain Adjustments.

 

a)Stock
Dividends and Stock Splits. If the Company, at any time while this Debenture is outstanding: (i) pays a stock dividend or
otherwise makes a distribution or distributions payable in shares of Common Stock on shares of Common Stock or any Common Stock
Equivalents (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Company upon conversion
of, or payment of interest on, the Debentures), (ii) subdivides outstanding shares of Common Stock into a larger number of shares,
(iii) combines (including by way of a reverse stock split) outstanding shares of Common Stock into a smaller number of shares
or (iv) issues, in the event of a reclassification of shares of the Common Stock, any shares of capital stock of the Company,
then the Conversion Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock
(excluding any treasury shares of the Company) outstanding immediately before such event, and of which the denominator shall be
the number of shares of Common Stock outstanding immediately after such event. Any adjustment made pursuant to this Section 5(a)
shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend
or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or reclassification.

 

b)[RESERVED]

 

c)Subsequent
Rights Offerings. In addition to any adjustments pursuant to Section 5(a) above, during such time as this Debenture is outstanding,
if at any time the Company grants, issues or sells any Common Stock Equivalents or rights to purchase stock, warrants, securities
or other property pro rata to the record holders of any class of shares of Common Stock (the “Purchase Rights”),
then the Holder will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights
which the Holder could have acquired if the Holder had held the number of shares of Common Stock acquirable upon complete conversion
of this Debenture (without regard to any limitations on exercise hereof, including, without limitation, the Beneficial Ownership
Limitation) immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or,
if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the grant,
issue or sale of such Purchase Rights (provided, however, to the extent that the Holder’s right to participate
in any such Purchase Right would result in the Holder exceeding the Beneficial Ownership Limitation, then the Holder shall not
be entitled to participate in such Purchase Right to such extent (or beneficial ownership of such shares of Common Stock as a
result of such Purchase Right to such extent) and such Purchase Right to such extent shall be held in abeyance for the Holder
until such time, if ever, as its right thereto would not result in the Holder exceeding the Beneficial Ownership Limitation).
Notwithstanding the foregoing, no adjustment shall be made pursuant to this Section 5(c) with respect to an Exempt Issuance.

 

    	10

    	 

    

 

d)Pro
Rata Distributions. During such time as this Debenture is outstanding, if the Company shall declare or make any dividend or
other distribution of its assets (or rights to acquire its assets) to holders of shares of Common Stock, by way of return of capital
or otherwise (including, without limitation, any distribution of cash, stock or other securities, property or options by way of
a dividend, spin off, reclassification, corporate rearrangement, scheme of arrangement or other similar transaction) (a “Distribution”),
at any time after the issuance of this Debenture, then, in each such case, the Holder shall be entitled to participate in such
Distribution to the same extent that the Holder would have participated therein if the Holder had held the number of shares of
Common Stock acquirable upon complete conversion of this Debenture (without regard to any limitations on conversion hereof, including,
without limitation, the Beneficial Ownership Limitation) immediately before the date of which a record is taken for such Distribution,
or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the
participation in such Distribution (provided, however, to the extent that the Holder’s right to participate
in any such Distribution would result in the Holder exceeding the Beneficial Ownership Limitation, then the Holder shall not be
entitled to participate in such Distribution to such extent (or in the beneficial ownership of any shares of Common Stock as a
result of such Distribution to such extent) and the portion of such Distribution shall be held in abeyance for the benefit of
the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Beneficial Ownership Limitation).

 

e)Fundamental
Transaction. If, at any time while this Debenture is outstanding, (i) the Company, directly or indirectly, in one or more
related transactions effects any merger or consolidation of the Company with or into another Person, (ii) the Company, directly
or indirectly, effects any sale, lease, license, assignment, transfer, conveyance or other disposition of all or substantially
all of its assets in one or a series of related transactions, (iii) any, direct or indirect, purchase offer, tender offer or exchange
offer (whether by the Company or another Person) is completed pursuant to which holders of Common Stock are permitted to sell,
tender or exchange their shares for other securities, cash or property and has been accepted by the holders of 50% or more of
the outstanding Common Stock (other than as a result of the issuance of the Underlying Shares), (iv) the Company, directly or
indirectly, in one or more related transactions effects any reclassification, reorganization or recapitalization of the Common
Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other
securities, cash or property (other than as a result of the issuance of the Conversion Shares), or (v) the Company, directly or
indirectly, in one or more related transactions consummates a stock or share purchase agreement or other business combination
(including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with another Person whereby
such other Person acquires more than 50% of the outstanding shares of Common Stock (not including any shares of Common Stock held
by the other Person or other Persons making or party to, or associated or affiliated with the other Persons making or party to,
such stock or share purchase agreement or other business combination) (other than as a result of the issuance of the Underlying
Shares) (each a “Fundamental Transaction”), then, upon any subsequent conversion of this Debenture, the Holder
shall have the right to receive, for each Conversion Share that would have been issuable upon such conversion immediately prior
to the occurrence of such Fundamental Transaction (without regard to any limitation in Section 4(d) on the conversion of this
Debenture), the number of shares of Common Stock of the successor or acquiring corporation or of the Company, if it is the surviving
corporation, and any additional consideration (the “Alternate Consideration”) receivable as a result of such
Fundamental Transaction by a holder of the number of shares of Common Stock for which this Debenture is convertible immediately
prior to such Fundamental Transaction (without regard to any limitation in Section 4(d) on the conversion of this Debenture).
For purposes of any such conversion, the determination of the Conversion Price shall be appropriately adjusted to apply to such
Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one (1) share of Common Stock in
such Fundamental Transaction, and the Company shall apportion the Conversion Price among the Alternate Consideration in a reasonable
manner reflecting the relative value of any different components of the Alternate Consideration. If holders of Common Stock are
given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be
given the same choice as to the Alternate Consideration it receives upon any conversion of this Debenture following such Fundamental
Transaction. The Company shall cause any successor entity in a Fundamental Transaction in which the Company is not the survivor
(the “Successor Entity”) to assume in writing all of the obligations of the Company under this Debenture and
the other Transaction Documents (as defined in the Purchase Agreement) in accordance with the provisions of this Section 5(e)
pursuant to written agreements in form and substance reasonably satisfactory to the Holder and approved by the Holder (without
unreasonable delay) prior to such Fundamental Transaction and shall, at the option of the Holder of this Debenture, deliver to
the Holder in exchange for this Debenture a security of the Successor Entity evidenced by a written instrument substantially similar
in form and substance to this Debenture which is convertible for a corresponding number of shares of capital stock of such Successor
Entity (or its parent entity) equivalent to the shares of Common Stock acquirable and receivable upon conversion of this Debenture
(without regard to any limitations on the conversion of this Debenture) prior to such Fundamental Transaction, and with a conversion
price which applies the conversion price hereunder to such shares of capital stock (but taking into account the relative value
of the shares of Common Stock pursuant to such Fundamental Transaction and the value of such shares of capital stock, such number
of shares of capital stock and such conversion price being for the purpose of protecting the economic value of this Debenture
immediately prior to the consummation of such Fundamental Transaction), and which is reasonably satisfactory in form and substance
to the Holder. Upon the occurrence of any such Fundamental Transaction, the Successor Entity shall succeed to, and be substituted
for (so that from and after the date of such Fundamental Transaction, the provisions of this Debenture and the other Transaction
Documents referring to the “Company” shall refer instead to the Successor Entity), and may exercise every right and
power of the Company and shall assume all of the obligations of the Company under this Debenture and the other Transaction Documents
with the same effect as if such Successor Entity had been named as the Company herein.

 

    	11

    	 

    

 

f)Calculations.
All calculations under this Section 5 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be.
For purposes of this Section 5, the number of shares of Common Stock deemed to be issued and outstanding as of a given date shall
be the sum of the number of shares of Common Stock (excluding any treasury shares of the Company) issued and outstanding.

 

g)Notice
to the Holder.

 

i.Adjustment
to Conversion Price. Whenever the Conversion Price is adjusted pursuant to any provision of this Section 5, the Company shall
promptly deliver to each Holder a notice setting forth the Conversion Price after such adjustment and setting forth a brief statement
of the facts requiring such adjustment.

 

ii.Notice
to Allow Conversion by Holder. If (A) the Company shall declare a dividend (or any other distribution in whatever form) on
the Common Stock, (B) the Company shall declare a special nonrecurring cash dividend on or a redemption of the Common Stock, (C)
the Company shall authorize the granting to all holders of the Common Stock of rights or warrants to subscribe for or purchase
any shares of capital stock of any class or of any rights, (D) the approval of any stockholders of the Company shall be required
in connection with any reclassification of the Common Stock, any consolidation or merger to which the Company is a party, any
sale or transfer of all or substantially all of the assets of the Company, or any compulsory share exchange whereby the Common
Stock is converted into other securities, cash or property or (E) the Company shall authorize the voluntary or involuntary dissolution,
liquidation or winding up of the affairs of the Company, then, in each case, the Company shall cause to be filed at each office
or agency maintained for the purpose of conversion of this Debenture, and shall cause to be delivered to the Holder at its last
address as it shall appear upon the Debenture Register, at least twenty (20) calendar days prior to the applicable record or effective
date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution,
redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of the Common Stock of record
to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such
reclassification, consolidation, merger, sale, transfer, share exchange, dissolution, liquidation or winding up is expected to
become effective or close, and the date as of which it is expected that holders of the Common Stock of record shall be entitled
to exchange their shares of the Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation,
merger, sale, transfer, share exchange, dissolution, liquidation or winding up, provided that the failure to deliver such notice
or any defect therein or in the delivery thereof shall not affect the validity of the corporate action required to be specified
in such notice. To the extent that any notice provided hereunder constitutes, or contains, material, non-public information regarding
the Company or any of the Subsidiaries, the Company shall simultaneously file such notice with the Commission pursuant to a Current
Report on Form 8-K within the time required by the Exchange Act. The Holder shall remain entitled to convert this Debenture during
the 20-day period commencing on the date of such notice through the effective date of the event triggering such notice except
as may otherwise be expressly set forth herein.

 

    	12

    	 

    

 

Section
6.Optional Redemption and Periodic Redemption.

 

a)Optional
Redemption at Election of Company. Subject to the provisions of this Section 6(a), at any time after the Original Issue Date,
the Company may deliver a notice to the Holder (an “Optional Redemption Notice” and the date such notice is
deemed delivered hereunder, the “Optional Redemption Notice Date”) of its irrevocable election to redeem some
or all of the then outstanding principal amount of this Debenture for cash in an amount equal to the Optional Redemption Amount
on the tenth (10th) Trading Day following the Optional Redemption Notice Date (such date, the “Optional Redemption
Date”, such ten (10) Trading Day period, the “Optional Redemption Period” and such redemption, the
“Optional Redemption”). If such Optional Redemption is consummated, the Optional Redemption Amount shall be
payable in full on the Optional Redemption Date. The Company covenants and agrees that it will honor all Notices of Conversion
tendered within five (5) Business Days of the date of delivery of the Optional Redemption Notice. The Company’s determination
to pay an Optional Redemption in cash shall be applied ratably to all of the holders of the then outstanding Debentures based
on their (or their predecessor’s) initial purchases of Debentures pursuant to the Purchase Agreement.

 

b)Mandatory
Periodic Redemption. On each Periodic Redemption Date, the Company shall redeem the Periodic Redemption Amount (the “Periodic
Redemption”). The Periodic Redemption Amount payable on each Periodic Redemption Date shall be paid in cash. The Holder
may convert, pursuant to Section 4(a), any principal amount of this Debenture subject to a Periodic Redemption at any time prior
to the date that the Periodic Redemption Amount, plus accrued but unpaid interest, liquidated damages and any other amounts then
owing to the Holder are due and paid in full. Unless otherwise indicated by the Holder in the applicable Notice of Conversion,
any principal amount of this Debenture converted during the period beginning on the delivery date of the applicable Periodic Redemption
Notice until the date on which the Periodic Redemption Amount is paid in full shall be first applied to the principal amount subject
to the Periodic Redemption Amount. Any principal amount of this Debenture converted during the during the period beginning on
the delivery date of the applicable Periodic Redemption Notice until the date on which the Periodic Redemption Amount is paid
in full in excess of the Periodic Redemption Amount shall be applied against the last principal amount of this Debenture scheduled
to be redeemed hereunder, in reverse time order from the Maturity Date. The Company covenants and agrees that it will honor all
Notices of Conversion tendered up until such amounts are paid in full.

 

    	13

    	 

    

 

c)Redemption
Procedure. The payment of cash pursuant to an Optional Redemption or a Periodic Redemption shall be payable on the Optional
Redemption Date or the Periodic Redemption Date, respectively. If any portion of the payment pursuant to an Optional Redemption
or Periodic Redemption shall not be paid by the Company by the applicable due date, interest shall accrue thereon at an interest
rate equal to the lesser of eighteen percent (18%) per annum or the Maximum Rate until such amount is paid in full. Notwithstanding
anything herein contained to the contrary, if any portion of the Optional Redemption Amount or Periodic Redemption Amount remains
unpaid after such date, the Holder may elect, by written notice to the Company given at any time thereafter, to invalidate such
Optional Redemption or Periodic Redemption, ab initio, and, with respect to the Company’s failure to honor
the Optional Redemption, the Company shall have no further right to exercise such Optional Redemption. The Holder may elect to
convert the outstanding principal amount of the Debenture pursuant to Section 4 prior to actual payment in cash for any redemption
under this Section 6 by the delivery of a Notice of Conversion to the Company.

 

Section
7.Negative Covenants. As long as any portion of this Debenture remains outstanding, unless the holders of at least
fifty percent (50%) in principal amount of the then outstanding Debentures shall have otherwise given prior written consent, the
Company shall not, and shall not permit any of the Subsidiaries to, directly or indirectly:

 

a)other
than Permitted Indebtedness, enter into, create, incur, assume, guarantee or suffer to exist any Indebtedness for borrowed money
of any kind, including, but not limited to, a guarantee, on or with respect to any of its property or assets now owned or hereafter
acquired or any interest therein or any income or profits therefrom;

 

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

 

    	14

    	 

    

 

c)amend
its charter documents, including, without limitation, its certificate of incorporation and bylaws, in any manner that materially
and adversely affects any rights of the Holder (other than with respect to any uplisting by the Company);

 

d)repay,
repurchase or offer to repay, repurchase or otherwise acquire more than a de minimis number of shares of its Common
Stock or Common Stock Equivalents other than as to (i) the Conversion Shares or Warrant Shares as permitted or required under
the Transaction Documents and (ii) repurchases of Common Stock or Common Stock Equivalents of departing officers and directors
of the Company, provided that such repurchases shall not exceed an aggregate of $50,000 for all officers and directors during
the term of this Debenture;

 

e)other
than to repay permitted Indebtedness or to repay any amounts owed by the Company to Mr. Kris Finstad (as such maybe permitted
by Hillair), repay, repurchase or offer to repay, repurchase or otherwise acquire any Indebtedness, other than the Debentures
if on a pro rata basis;

 

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

 

g)enter
into any transaction with any Affiliate of the Company which would be required to be disclosed in any public filing with the Commission,
unless such transaction is made on an arm’s-length basis and expressly approved by a majority of the Board of Directors;
or

 

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

 

Section
8.Events of Default.

 

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

 

i.any
default in the payment of (A) the principal amount of any Debenture, including, without limitation, in connection with a Periodic
Redemption, or (B) interest, liquidated damages and other amounts owing to a Holder on any Debenture, as and when the same shall
become due and payable (whether on a Conversion Date, Periodic Redemption Date or the Maturity Date or by acceleration or otherwise)
which default, solely in the case of an interest payment or other default under clause (B) above, is not cured within five (5)
Trading Days;

 

    	15

    	 

    

 

ii.the
Company shall fail to observe or perform any other covenant or agreement contained in the Debentures or the Purchase Agreement
(other than a breach by the Company of its obligations to deliver shares of Common Stock to the Holder upon conversion, which
breach is addressed in clause (x) below) which failure is not cured, if possible to cure, within the earlier to occur of (A) seven
(7) Trading Days after notice of such failure sent by the Holder or by any other Holder to the Company and (B) ten (10) Trading
Days after the Company has become or should have become aware of such failure;

 

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

 

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

 

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

 

vi.the
Company or any Subsidiary shall default on any of its obligations under any mortgage, credit agreement or other facility, indenture
agreement, factoring agreement or other instrument under which there may be issued, or by which there may be secured or evidenced,
any Indebtedness for borrowed money or money due under any long term leasing or factoring arrangement that (a) involves an obligation
greater than $100,000, whether such Indebtedness now exists or shall hereafter be created, and (b) results in such Indebtedness
becoming or being declared due and payable prior to the date on which it would otherwise become due and payable;

 

vii.the
Common Stock shall not be eligible for listing or quotation for trading on a Trading Market and shall not be eligible to resume
listing or quotation for trading thereon within five (5) Trading Days;

 

viii.the
Company shall be a party to any Change of Control Transaction or Fundamental Transaction or shall agree to sell or dispose of
all or in excess of forty percent (40%) of its assets in one (1) transaction or a series of related transactions (whether or not
such sale would constitute a Change of Control Transaction);

 

    	16

    	 

    

 

ix.the
Company does not meet the current public information requirements under Rule 144 with respect to the Securities and such failure
continues for more than seven (7) Trading Days;

 

x.the
Company shall fail for any reason to deliver certificates to a Holder prior to the fifth (5th) Trading Day after a
Conversion Date pursuant to Section 4(c) or the Company shall provide at any time notice to the Holder, including by way of public
announcement, of the Company’s intention to not honor requests for conversions of any Debentures in accordance with the
terms hereof;

 

xi.if
required by the Transaction Documents, the electronic transfer by the Company of shares of Common Stock through the Depository
Trust Company or another established clearing corporation is no longer available or is subject to a “chill” as reasonably
determined by the Company’s counsel;

 

xii.any
monetary judgment, writ or similar final process shall be entered or filed against the Company, any Subsidiary or any of their
respective property or other assets for more than $100,000, and such judgment, writ or similar final process shall remain unvacated,
unbonded or unstayed for a period of forty-five (45) calendar days;

 

xiii.the
issuance by the Company of Common Stock or Common Stock Equivalents at an effective price per share of less than the Conversion
Price (subject to adjustment for forward and reverse stock splits and the like that occur after the date hereof); provided that
no Event of Default shall be deemed to have occurred or exist with respect to an Exempt Issuance; or

 

xiv.a
false or inaccurate certification (including a false or inaccurate deemed certification) by the Company as to whether any Event
of Default has occurred.

 

b)Remedies
Upon Event of Default. If any Event of Default occurs, the outstanding principal amount of this Debenture, plus accrued but
unpaid interest, liquidated damages and other amounts owing in respect thereof through the date of acceleration, shall become,
at the Holder’s election, immediately due and payable in cash at the Mandatory Default Amount. Commencing five (5) days
after the occurrence of any Event of Default that results in the eventual acceleration of this Debenture, the interest rate on
this Debenture shall accrue at an interest rate equal to the lesser of eighteen percent (18%) per annum or the Maximum Rate. Upon
the payment in full of the Mandatory Default Amount, the Holder shall promptly surrender this Debenture to or as directed by the
Company. In connection with such acceleration described herein, the Holder need not provide, and the Company hereby waives, any
presentment, demand, protest or other notice of any kind, and the Holder may immediately and without expiration of any grace period
enforce any and all of its rights and remedies hereunder and all other remedies available to it under applicable law. Such acceleration
may be rescinded and annulled by Holder at any time prior to payment hereunder and the Holder shall have all rights as a holder
of the Debenture until such time, if any, as the Holder receives full payment pursuant to this Section 8(b). No such rescission
or annulment shall affect any subsequent Event of Default or impair any right consequent thereon.

 

    	17

    	 

    

 

Section
9.Miscellaneous.

 

a)Notices.
Any and all notices or other communications or deliveries to be provided by the Holder hereunder, including, without limitation,
any Notice of Conversion, shall be in writing and delivered personally, by facsimile, by email attachment, or sent by a nationally
recognized overnight courier service, addressed to the Company at the address set forth above (or such other address as the Company
may specify for such purposes by notice to the Holder delivered in accordance with this Section 9(a)), its facsimile number or
its email address, as applicable. Any and all notices or other communications or deliveries to be provided by the Company hereunder
shall be in writing and delivered personally, by facsimile, by email attachment, or sent by a nationally recognized overnight
courier service addressed to each Holder at such Holder’s address appearing on the books of the Company (or such other address
as the Holder may specify for such purposes by notice to the Company delivered in accordance with this Section 9(a)), such Holder’s
facsimile number or email address, as applicable. Any notice or other communication or deliveries hereunder shall be deemed given
and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile at the
facsimile number or email attachment to the email address set forth on the signature pages attached hereto prior to 5:30 p.m.
(New York City time) on any date, (ii) the next Trading Day after the date of transmission, if such notice or communication is
delivered via facsimile at the facsimile number or email attachment to the email address set forth on the signature pages attached
hereto on a day that is not a Trading Day or later than 5:30 p.m. (New York City time) on any Trading Day, (iii) the second (2nd)
Trading Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service, or (iv) upon actual
receipt by the party to whom such notice is required to be given.

 

b)Absolute
Obligation. Except as expressly provided herein, no provision of this Debenture shall alter or impair the obligation of the
Company, which is absolute and unconditional, to pay the principal of, liquidated damages and accrued interest, as applicable,
on this Debenture at the time, place, and rate, and in the coin or currency, herein prescribed. This Debenture is a direct debt
obligation of the Company. This Debenture ranks pari passu with all other Debentures now or hereafter issued under
the terms set forth herein.

 

c)Lost
or Mutilated Debenture. If this Debenture shall be mutilated, lost, stolen or destroyed, the Company shall execute and deliver,
in exchange and substitution for and upon cancellation of a mutilated Debenture, or in lieu of or in substitution for a lost,
stolen or destroyed Debenture, a new Debenture for the principal amount of this Debenture so mutilated, lost, stolen or destroyed,
but only upon receipt of evidence of such loss, theft or destruction of such Debenture, and of the ownership hereof, reasonably
satisfactory to the Company.

 

    	18

    	 

    

 

d)Governing
Law. All questions concerning the construction, validity, enforcement and interpretation of this Debenture shall be governed
by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles
of conflict of laws thereof. Each party agrees that all Actions or Proceedings concerning the interpretation, enforcement and
defense of the transactions contemplated by any of the Transaction Documents (whether brought against a party hereto or its respective
Affiliates, directors, officers, shareholders, employees or agents) shall be commenced in the state and federal courts sitting
in the City of New York, Borough of Manhattan (the “New York Courts”). Each party hereto hereby irrevocably
submits to the exclusive jurisdiction of the New York Courts for the adjudication of any dispute hereunder or in connection herewith
or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of any of the Transaction
Documents), and hereby irrevocably waives, and agrees not to assert in any Action or Proceeding, any claim that it is not personally
subject to the jurisdiction of such New York Courts, or such New York Courts are improper or inconvenient venue for such proceeding.
Each party hereby irrevocably waives personal service of process and consents to process being served in any such Action or Proceeding
by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at
the address in effect for notices to it under this Debenture and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process
in any other manner permitted by applicable law. Each party hereto hereby irrevocably waives, to the fullest extent permitted
by applicable law, any and all right to trial by jury in any legal Action or Proceeding arising out of or relating to this Debenture
or the transactions contemplated hereby. If any party shall commence an Action or Proceeding to enforce any provisions of this
Debenture, then the prevailing party in such Action or Proceeding shall be reimbursed by the other party for its attorneys’
fees and other costs and expenses incurred in the investigation, preparation and prosecution of such Action or Proceeding.

 

e)Waiver.
Any waiver by the Company or the Holder of a breach of any provision of this Debenture shall not operate as or be construed to
be a waiver of any other breach of such provision or of any breach of any other provision of this Debenture. The failure of the
Company or the Holder to insist upon strict adherence to any term of this Debenture on one (1) or more occasions shall not be
considered a waiver or deprive that party of the right thereafter to insist upon strict adherence to that term or any other term
of this Debenture on any other occasion. Any waiver by the Company or the Holder must be in writing.

 

f)Severability.
If any provision of this Debenture is invalid, illegal or unenforceable, the balance of this Debenture shall remain in effect,
and if any provision is inapplicable to any Person or circumstance, it shall nevertheless remain applicable to all other Persons
and circumstances. If it shall be found that any interest or other amount deemed interest due hereunder violates the applicable
law governing usury, the applicable rate of interest due hereunder shall automatically be lowered to equal the Maximum Rate. The
Company covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, plead, or in any manner
whatsoever claim or take the benefit or advantage of, any stay, extension or usury law or other law which would prohibit or forgive
the Company from paying all or any portion of the principal of or interest on this Debenture as contemplated herein, wherever
enacted, now or at any time hereafter in force, or which may affect the covenants or the performance of this Debenture, and the
Company (to the extent it may lawfully do so) hereby expressly waives all benefits or advantage of any such law, and covenants
that it will not, by resort to any such law, hinder, delay or impede the execution of any power herein granted to the Holder,
but will suffer and permit the execution of every such as though no such law has been enacted.

 

    	19

    	 

    

 

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

 

h)Next
Business Day. Whenever any payment or other obligation hereunder shall be due on a day other than a Business Day, such payment
shall be made on the next succeeding Business Day.

 

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

 

j)Secured
Obligation. The obligations of the Company under this Debenture are secured by all assets of the Company and each Subsidiary
pursuant to the Security Agreement.

 

k)Disclosure.
Upon receipt or delivery by the Company of any notice in accordance with the terms of this Debenture, unless the Company has in
good faith determined that the matters relating to such notice do not constitute material, nonpublic information relating to the
Company or its Subsidiaries, taken in the aggregate, the Company shall within two (2) Business Days after such receipt or delivery
publicly disclose such material, nonpublic information on a Current Report on Form 8-K or otherwise. In the event that the Company
believes that a notice contains material, non-public information relating to the Company or its Subsidiaries, taken in the aggregate,
the Company so shall indicate to the Holder contemporaneously with delivery of such notice, and in the absence of any such indication,
the Holder shall be allowed to presume that all matters relating to such notice do not constitute material, nonpublic information
relating to the Company or its Subsidiaries.

 

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

 

(Signature
Pages Follow)

 

    	20

    	 

    

 

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

 

	 	CONTENT
    CHECKED HOLDINGS, INC.
	 	 	 
	 	By:	 
	 	Name: 	Kris Finstad
	 	Title: 	Chief Executive
    Officer

 

	 	Facsimile
    Number:	 
	 	 	 
	 	Email Address: kf@contentchecked.com

 

    	21

    	 

    

 

ANNEX
A

 

NOTICE
OF CONVERSION

 

The
undersigned hereby elects to convert principal under the 8% Senior Secured Convertible Debenture due July 1, 2017 of Content Checked
Holdings, Inc., a Nevada corporation (the “Company”), into shares of common stock (the “Common Stock”),
of the Company according to the conditions hereof, as of the date written below. If shares of Common Stock are to be issued in
the name of a person other than the undersigned, the undersigned will pay all transfer taxes payable with respect thereto and
is delivering herewith such certificates and opinions as reasonably requested by the Company in accordance therewith. No fee will
be charged to the holder for any conversion, except for such transfer taxes, if any.

 

By
the delivery of this Notice of Conversion the undersigned represents and warrants to the Company that its ownership of the Common
Stock does not exceed the amounts specified under Section 4 of this Debenture, as determined in accordance with Section 13(d)
of the Exchange Act.

 

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

 

	Conversion
    calculations:	 
	 	 
	 	Date to Effect
    Conversion:
	 	 
	 	Principal Amount
    of Debenture to be Converted:
	 	 
	 	Number of shares
    of Common Stock to be issued:
	 	 
	 	Signature:
	 	 
	 	Name:
	 	 
	 	Address for Delivery
    of Common Stock Certificates:
	 	 
	 	_________________________________
	 	_________________________________
	 	 
	 	Or (if permitted)
	 	 
	 	DWAC Instructions:
	 	 
	 	Broker No: ____________________
	 	Account
    No: ____________________

 

    	22

    	 

    

 

Schedule
1

 

CONVERSION
SCHEDULE

 

The
8% Senior Secured Convertible Debentures due on July 1, 2017 in the aggregate principal amount of $_________ are issued by Content
Checked Holdings, Inc., a Nevada corporation. This Conversion Schedule reflects conversions made under Section 4 of the above
referenced Debenture.

 

Dated:

 

	Date
    of Conversion

    (or for first entry,

    Original Issue Date)	 	Amount
    of

    Conversion	 	Aggregate
    Principal 

    Amount Remaining 

    Subsequent to Conversion

    (or original Principal Amount)	 	Company
    Attest
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 

 

    	23

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