Document:

Exhibit 10.01

 

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 OR OTHER LOAN SECURED BY SUCH SECURITIES.

 

Original Issue Date: October 23, 2020

Original Set Conversion Price (subject
to adjustment herein): $0.02

 

$[______]

 

SENIOR
CONVERTIBLE DEBENTURE

DUE
OCTOBER 23, 2021

 

THIS SENIOR CONVERTIBLE DEBENTURE is one
of a series of duly authorized and validly issued Senior Convertible Debentures of Inspyr Therapeutics, Inc., a Delaware corporation
(the “Company”), having its principal place of business at 2629 Townsgate Road #215, Westlake Village, California
91361, designated as its Senior Convertible Debenture due October 23, 2021 (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 $[______] on October 23, 2021 (the “Maturity Date”)
or such earlier date as this Debenture is required or permitted to be repaid as provided hereunder. 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 Securities Purchase Agreement previously entered into by and between the Holder
and the Company on September 12, 2017 (“Purchase Agreement”) and (b) the following terms shall have the following
meanings:

 

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

 

“Base
Conversion Price” shall have the meaning set forth in Section 5(b).

 

    1

     

    

 

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

 

“Business
Day” means any day except any Saturday, any Sunday, any day which is a federal legal holiday in the United States or
any day on which banking institutions in the State of New York are authorized or required by law or other governmental action to
close.

 

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

 

“Conversion”
shall have the meaning ascribed to such term in Section 4.

 

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

 

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

 

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

 

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

 

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

 

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

 

“Equity
Conditions” means, during the period in question, (a) the Company shall have duly honored all conversions scheduled to
occur or occurring by virtue of one or more Notices of Conversion of the Holder, if any, (b) the Company shall have paid all liquidated
damages and other amounts owing to the Holder in respect of this Debenture, (c)(i) there is an effective registration statement
pursuant to which the Holder is permitted to utilize the prospectus thereunder to resell all of the shares of Common Stock issuable
pursuant to the Debentures (and the Company believes, in good faith, that such effectiveness will continue uninterrupted for the
foreseeable future) or (ii) all of the Conversion Shares issuable pursuant to the Debentures may be resold pursuant to Rule 144
without volume or manner-of-sale restrictions or current public information requirements as determined by the counsel to the Company
as set forth in a written opinion letter to such effect, addressed and acceptable to the Transfer Agent and the Holder, (d) the
Common Stock is trading on a Trading Market and all of the shares issuable pursuant to the Transaction Documents are listed or
quoted for trading on such Trading Market (and the Company believes, in good faith, that trading of the Common Stock on a Trading
Market will continue uninterrupted for the foreseeable future), (e) there is a sufficient number of authorized but unissued and
otherwise unreserved shares of Common Stock for the issuance of all of the shares then issuable pursuant to the Debentures, (f)
the issuance of the shares in question (or, in the case of an Optional Redemption, the shares issuable upon conversion in full
of the Optional Redemption Amount) to the Holder would not violate the limitations set forth in Section 4(d) herein, and (h) the
applicable Holder is not in possession of any information provided by the Company that constitutes, or may constitute, material
non-public information.

 

    2

     

    

 

“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).

 

“Mandatory
Default Amount” means the sum of (a) the greater of (i) the outstanding principal amount of this Debenture 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) 130% of the outstanding principal amount of this Debenture, 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 Amount” means the sum of (a) 110% of the then outstanding principal amount of the Debenture and (b) all liquidated
damages and other amounts due in respect of the Debenture.

 

“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.

 

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

 

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

 

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

 

“Trading
Day” means a day on which the principal Trading Market is open for trading.

 

“Trading
Market” means any of the following markets or exchanges on which the Common Stock is listed or quoted for trading on
the date in question: the NYSE American, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market,
the New York Stock Exchange, OTCQB, OTCQX or the Bulletin Board / Pink Sheets (or any successors to any of the foregoing).

 

    3

     

    

 

“VWAP”
means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed
or quoted on a Trading Market, the daily volume weighted average price of the Common Stock for such date (or the nearest preceding
date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg L.P. (based on a Trading
Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)), (b)  if OTCQB or OTCQX is not a Trading Market,
the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on OTCQB or OTCQX as applicable,
(c) if the Common Stock is not then listed or quoted for trading on OTCQB or OTCQX and if prices for the Common Stock are then
reported in the “Pink Sheets” published by OTC Markets, Inc. (or a similar organization or agency succeeding to its
functions of reporting prices), the most recent bid price per share of the Common Stock so reported, or (d) in all other cases,
the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the Holders
of a majority in interest of the Debentures then outstanding and reasonably acceptable to the Company, the fees and expenses of
which shall be paid by the Company.

 

Section 2. Interest and Prepayment.
No regularly scheduled interest payments shall be made on this Debenture. 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. The Holder affirms the representations set forth in the Purchase Agreement and the Debenture 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.

 

    4

     

    

 

Section 4. Conversion.

 

a) Voluntary
Conversion. At any time after the Original Issue Date until this Debenture is no longer outstanding, this Debenture shall be
convertible, in whole or in part, into shares of Common Stock at the option of the Holder, at any time and from time to time (subject
to the conversion limitations set forth in Section 4(d) hereof). The Holder shall effect conversions by delivering to the
Company a Notice of Conversion, the form of which is attached hereto as Annex A (each, a “Notice of Conversion”),
specifying therein the principal amount of this Debenture to be converted and the date on which such conversion shall be effected
(such date, the “Conversion Date”). If no Conversion Date is specified in a Notice of Conversion, the Conversion
Date shall be the date that such Notice of Conversion is deemed delivered hereunder. No ink-original Notice of Conversion shall
be required, nor shall any medallion guarantee (or other type of guarantee or notarization) of any Notice of Conversion form be
required. To effect conversions hereunder, the Holder shall not be required to physically surrender this Debenture to the Company
unless the entire principal amount of this Debenture 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 one (1) Business
Day of delivery of such Notice of Conversion. In the event of any dispute or discrepancy, the records of the Holder shall be controlling
and determinative in the absence of manifest error. The Holder, and any assignee by acceptance of this Debenture, acknowledge
and agree that, by reason of the provisions of this paragraph, following conversion of a portion of this Debenture, the unpaid
and unconverted principal amount of this Debenture may be less than the amount stated on the face hereof.

 

b) Conversion
Price. The conversion price in effect on any Conversion Date shall be equal to the lesser of (i) $0.02 (“Set
Conversion Price”) and (ii) 85% of the lesser of (a) the VWAP on the Trading Day immediately preceding the Conversion
Date and (b) the VWAP on the Conversion Date, 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.

 

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ii. Delivery
of Conversion Shares Upon Conversion. Not later than the earlier of (i) two (2) Trading Days and (ii) the number of Trading
Days comprising the Standard Settlement Period (as defined below) after each Conversion Date (the “Share Delivery Date”),
the Company shall deliver, or cause to be delivered, to the Holder (A) the Conversion Shares which, on or after the earlier of
(i) the six month anniversary of the Original Issue Date or (ii) the Effective Date, shall be free of restrictive legends and trading
restrictions (other than those which may then be required by the Purchase Agreement) representing the number of Conversion Shares
being acquired upon the conversion of this Debenture. On or after the earlier of (i) the six month anniversary of the Original
Issue Date or (ii) the Effective Date, the Company shall deliver any Conversion Shares required to be delivered by the Company
under this Section 4(c) electronically through the Depository Trust Company or another established clearing corporation performing
similar functions. As used herein, “Standard Settlement Period” means the standard settlement period, expressed
in a number of Trading Days, on the Company’s primary Trading Market with respect to the Common Stock as in effect on the
date of delivery of the Notice of Conversion.

 

iii. Failure
to Deliver Conversion Shares. If, in the case of any Notice of Conversion, such Conversion Shares are not delivered to or as
directed by the applicable Holder by the Share Delivery Date, the Holder shall be entitled to elect by written notice to the Company
at any time on or before its receipt of such Conversion Shares, 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 Conversion
Shares issued to such Holder pursuant to the rescinded Conversion Notice.

 

iv. Obligation
Absolute; Partial Liquidated Damages. The Company’s obligations to issue and deliver the Conversion Shares upon conversion
of this Debenture in accordance with the terms hereof are absolute and unconditional, irrespective of any action or inaction by
the Holder to enforce the same, any waiver or consent with respect to any provision hereof, the recovery of any judgment against
any Person or any action to enforce the same, or any setoff, counterclaim, recoupment, limitation or termination, or any breach
or alleged breach by the Holder or any other Person of any obligation to the Company or any violation or alleged violation of law
by the Holder or any other Person, and irrespective of any other circumstance which might otherwise limit such obligation of the
Company to the Holder in connection with the issuance of such Conversion Shares; provided, however, that such delivery
shall not operate as a waiver by the Company of any such action the Company may have against the Holder. In the event the Holder
of this Debenture shall elect to convert any or all of the outstanding principal amount hereof, the Company may not refuse conversion
based on any claim that the Holder or anyone associated or affiliated with the Holder has been engaged in any violation of law,
agreement or for any other reason, unless an injunction from a court, on notice to Holder, restraining and or enjoining conversion
of all or part of this Debenture shall have been sought and obtained, and the Company posts a surety bond for the benefit of the
Holder in the amount of 150% of the outstanding principal amount of this Debenture, which is subject to the injunction, which bond
shall remain in effect until the completion of arbitration/litigation of the underlying dispute and the proceeds of which shall
be payable to the Holder to the extent it obtains judgment. In the absence of such injunction, the Company shall issue Conversion
Shares or, if applicable, cash, upon a properly noticed conversion. If the Company fails for any reason to deliver to the Holder
such Conversion Shares 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 Conversion Shares 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.

 

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v. Compensation
for Buy-In on Failure to Timely Deliver Conversion Shares 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 Conversion Shares by the Share Delivery Date pursuant
to Section 4(c)(ii), and if after such Share Delivery Date the Holder is required by its brokerage firm to purchase (in an open
market transaction or otherwise), or the Holder’s brokerage firm otherwise purchases, shares of Common Stock to deliver in
satisfaction of a sale by the Holder of the Conversion Shares which the Holder was entitled to receive upon the conversion relating
to such Share Delivery Date (a “Buy-In”), then the Company shall (A) pay in cash to the Holder (in addition
to any other remedies available to or elected by the Holder) the amount, if any, by which (x) the Holder’s total purchase
price (including any brokerage commissions) for the Common Stock so purchased exceeds (y) the product of (1) the aggregate number
of shares of Common Stock that the Holder was entitled to receive from the conversion at issue multiplied by (2) the actual sale
price at which the sell order giving rise to such purchase obligation was executed (including any brokerage commissions) and (B)
at the option of the Holder, either reissue (if surrendered) this Debenture in a principal amount equal to the principal amount
of the attempted conversion (in which case such conversion shall be deemed rescinded) or deliver to the Holder the number of shares
of Common Stock that would have been issued if the Company had timely complied with its delivery requirements under Section 4(c)(ii).
For example, if the Holder purchases Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to an
attempted conversion of this Debenture with respect to which the actual sale price of the Conversion Shares (including any brokerage
commissions) giving rise to such purchase obligation was a total of $10,000 under clause (A) of the immediately preceding sentence,
the Company shall be required to pay the Holder $1,000. The Holder shall provide the Company written notice indicating the amounts
payable to the Holder in respect of the Buy-In and, upon request of the Company, evidence of the amount of such loss. Nothing herein
shall limit a Holder’s right to pursue any other remedies available to it hereunder, at law or in equity including, without
limitation, a decree of specific performance and/or injunctive relief with respect to the Company’s failure to timely deliver
Conversion Shares 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, each as herein provided,
free from preemptive rights or any other actual contingent purchase rights of Persons other than the Holder (and the other holders
of the Debentures), not less than such aggregate number of shares of the Common Stock as shall (subject to the terms and conditions
set forth in the Purchase Agreement) be issuable (taking into account the adjustments and restrictions of Section 5) upon the conversion
of the then outstanding principal amount of this Debenture and payment of interest hereunder. The Company covenants that all shares
of Common Stock that shall be so issuable shall, upon issue, be duly authorized, validly issued, fully paid and nonassessable.

 

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

 

viii. Transfer
Taxes and Expenses. The issuance of Conversion Shares 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 Conversion Shares,
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 Conversion Shares upon conversion in a name other than that of the Holder of this Debenture so converted
and the Company shall not be required to issue or deliver such Conversion Shares 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 same-day processing of any Notice
of Conversion and all fees to the Depository Trust Company (or another established clearing corporation performing similar functions)
required for same-day electronic delivery of the Conversion Shares.

 

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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 other Persons acting as a group together
with the Holder or any of the Holder’s Affiliates (such Persons, “Attribution Parties”)) 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 and Attribution Parties 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 or Attribution Parties 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) beneficially owned
by the Holder or any of its Affiliates or Attribution Parties.  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
Attribution Parties) 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 or Attribution Parties) and which
principal amount of this Debenture is convertible, in each case subject to the Beneficial Ownership Limitation. To ensure compliance
with this restriction, the Holder will be deemed to represent to the Company each time it delivers a Notice of Conversion that
such Notice of Conversion has not violated the restrictions set forth in this paragraph and the Company shall have no obligation
to verify or confirm the accuracy of such determination. In addition, a determination as to any group status as contemplated above
shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder.
For purposes of this Section 4(d), in determining the number of outstanding shares of Common Stock, the Holder may rely on the
number of outstanding shares of Common Stock as stated in the most recent of the following: (i) the Company’s most recent
periodic or annual report filed with the Commission, as the case may be, (ii) a more recent public announcement by the Company,
or (iii) a more recent written notice by the Company or the Company’s transfer agent setting forth the number of shares of
Common Stock outstanding.  Upon the written or oral request of a Holder, the Company shall within one Trading Day 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 9.99% 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 notice to the Company, may increase or decrease the Beneficial Ownership Limitation provisions of this
Section 4(d), provided that the Beneficial Ownership Limitation in no event exceeds 9.99% of the number of shares of the Common
Stock outstanding immediately after giving effect to the issuance of shares of Common Stock upon conversion of this Debenture held
by the Holder and the Beneficial Ownership Limitation provisions of this Section 4(d) shall continue to apply. Any increase in
the Beneficial Ownership Limitation will not be effective until the 61st day after such notice is delivered to the Company.
The Beneficial Ownership Limitation provisions of this paragraph shall be construed and implemented in a manner otherwise than
in strict conformity with the terms of this Section 4(d) to correct this paragraph (or any portion hereof) which may be defective
or inconsistent with the intended Beneficial Ownership Limitation contained herein or to make changes or supplements necessary
or desirable to properly give effect to such limitation. The limitations contained in this paragraph shall apply to a successor
holder of this Debenture.

 

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

 

b) Subsequent
Equity Sales. If, at any time while this Debenture is outstanding, the Company or any Subsidiary, as applicable, sells or grants
any option to purchase or sells or grants any right to reprice, or otherwise disposes of or issues (or announces any sale, grant
or any option to purchase or other disposition), any Common Stock or Common Stock Equivalents entitling any Person to acquire shares
of Common Stock at an effective price per share that is lower than the then Set Conversion Price (such lower price, the “Base
Conversion Price” and such issuances, collectively, a “Dilutive Issuance”) (if the holder of the Common
Stock or Common Stock Equivalents so issued shall at any time, whether by operation of purchase price adjustments, reset provisions,
floating conversion, exercise or exchange prices or otherwise, or due to warrants, options or rights per share which are issued
in connection with such issuance, be entitled to receive shares of Common Stock at an effective price per share that is lower than
the Set Conversion Price, such issuance shall be deemed to have occurred for less than the Set Conversion Price on such date of
the Dilutive Issuance), then the Set Conversion Price shall be reduced to equal the lesser of (i) the Base Conversion Price or
(ii) the lowest VWAP on a Trading Day during the three (3) Trading Days immediately following the public announcement of the Dilutive
Issuance. Such adjustment shall be made whenever such Common Stock or Common Stock Equivalents are issued. Notwithstanding the
foregoing, no adjustment will be made under this Section 5(b) in respect of an Exempt Issuance. For purposes of clarity, the Holder’s
conversion of this Debenture pursuant to Section 4(b) at a Conversion Price that is lower than the Set Conversion Price shall not
be a Dilutive Issuance. If the Company enters into a Variable Rate Transaction, despite the prohibition set forth in the Purchase
Agreement, the Company shall be deemed to have issued Common Stock or Common Stock Equivalents at the lowest possible conversion
price at which such securities may be converted or exercised. The Company shall notify the Holder in writing, no later than the
Trading Day following the issuance of any Common Stock or Common Stock Equivalents subject to this Section 5(b), indicating therein
the applicable issuance price, or applicable reset price, exchange price, conversion price and other pricing terms (such notice,
the “Dilutive Issuance Notice”). For purposes of clarification, whether or not the Company provides a Dilutive
Issuance Notice pursuant to this Section 5(b), upon the occurrence of any Dilutive Issuance, the Holder is entitled to receive
a number of Conversion Shares based upon the Base Conversion Price on or after the date of such Dilutive Issuance, regardless of
whether the Holder accurately refers to the Base Conversion Price in the Notice of Conversion.

 

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

 

    9

     

    

 

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, (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, 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) (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.

 

    10

     

    

 

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 or share exchange is expected to become effective or close, and the date
as of which it is expected that holders of the Common Stock of record shall be entitled to exchange their shares of the Common
Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share
exchange, provided that the failure to deliver such notice or any defect therein or in the delivery thereof shall not affect the
validity of the corporate action required to be specified in such notice. To the extent that any notice provided hereunder constitutes,
or contains, material, non-public information regarding the Company or any of the Subsidiaries, the Company shall simultaneously
file such notice with the Commission pursuant to a Current Report on Form 8-K. The Holder shall remain entitled to convert this
Debenture during the 20-day period commencing on the date of such notice through the effective date of the event triggering such
notice except as may otherwise be expressly set forth herein.

 

    11

     

    

 

Section 6. 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 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 20th Trading
Day following the Optional Redemption Notice Date (such date, the “Optional Redemption Date”, such 20 Trading
Day period, the “Optional Redemption Period” and such redemption, the “Optional Redemption”).
The Optional Redemption Amount is payable in full on the Optional Redemption Date. The Company may only effect an Optional Redemption
if each of the Equity Conditions shall have been met (unless waived in writing by the Holder) on each Trading Day during the period
commencing on the Optional Redemption Notice Date through to the Optional Redemption Date and through and including the date payment
of the Optional Redemption Amount is actually made in full. If any of the Equity Conditions shall cease to be satisfied at any
time during the Optional Redemption Period, then the Holder may elect to nullify the Optional Redemption Notice by notice to the
Company within 3 Trading Days after the first day on which any such Equity Condition has not been met (provided that if, by a provision
of the Transaction Documents, the Company is obligated to notify the Holder of the non-existence of an Equity Condition, such notice
period shall be extended to the third Trading Day after proper notice from the Company) in which case the Optional Redemption Notice
shall be null and void, ab initio. The Company covenants and agrees that it will honor all Notices of Conversion tendered
from the time of delivery of the Optional Redemption Notice through the date all amounts owing thereon are due and paid in full.
The Company’s determination to pay an Optional Redemption in cash shall be applied ratably to all of the holders of the then
outstanding Debentures based on their (or their predecessor’s) initial principal amount of Debentures pursuant to the Purchase
Agreement.

 

b) Redemption
Procedure. The payment of cash pursuant to an Optional Redemption shall be payable on the Optional Redemption Date. If any
portion of the payment pursuant to an Optional Redemption shall not be paid by the Company by the applicable due date, interest
shall accrue thereon at an interest rate equal to the lesser of 18% per annum or the maximum rate permitted by applicable law until
such amount is paid in full. Notwithstanding anything herein contained to the contrary, if any portion of the Optional Redemption
Amount 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, 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. Notwithstanding anything to the contrary in this
Section 6, the Company’s determination to redeem shall be applied ratably among the Holders of Debentures. 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 67% 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)	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;

 

		b)	repay, repurchase or offer to repay, repurchase or otherwise
acquire more than a de minimis number of shares of its Common Stock or Common Stock Equivalents other than as to (i) the
Conversion Shares as permitted or required under the Transaction Documents and (ii) repurchases of Common Stock or Common Stock
Equivalents of departing officers and directors of the Company, provided that such repurchases shall not exceed an aggregate of
$100,000 for all officers and directors during the term of this Debenture;

 

		c)	repay, repurchase or offer to repay, repurchase or otherwise
acquire any Indebtedness, other than the Debentures or any other outstanding convertible debentures;

 

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

 

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

 

    12

     

    

 

Section 8. Events of Default.

 

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

 

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

 

ii. the Company
shall fail to observe or perform any other covenant or agreement contained in the Debentures (other than a breach by the Company
of its obligations to deliver shares of Common Stock to the Holder upon conversion, which breach is addressed in clause (vi) below)
or in any Transaction Document, which failure is not cured, if possible to cure, within the earlier to occur of (A) 5 Trading Days
after notice of such failure sent by the Holder or by any other Holder to the Company and (B) 10 Trading Days after the Company
has become or should have become aware of such failure;

 

iii. 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;

 

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

 

v. the Company
shall fail for any reason to deliver Conversion Shares to a Holder prior to the fifth 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; and

 

vi. 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”.

 

    13

     

    

 

b) Remedies
Upon Event of Default. If any Event of Default occurs, the outstanding principal amount of this Debenture, 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 5 days after the occurrence of any Event of Default that results
in the eventual acceleration of this Debenture, this Debenture shall bear an interest rate equal to the lesser of 18% per annum
or the maximum rate permitted under applicable law. Upon the payment in full of the Mandatory Default Amount, the Holder shall
promptly surrender this Debenture to or as directed by the Company. In connection with such acceleration described herein, the
Holder need not provide, and the Company hereby waives, any presentment, demand, protest or other notice of any kind, and the Holder
may immediately and without expiration of any grace period enforce any and all of its rights and remedies hereunder and all other
remedies available to it under applicable law. Such acceleration may be rescinded and annulled by Holder at any time prior to payment
hereunder and the Holder shall have all rights as a holder of the Debenture until such time, if any, as the Holder receives full
payment pursuant to this Section 8(b). No such rescission or annulment shall affect any subsequent Event of Default or impair any
right consequent thereon.

 

Section 9. Miscellaneous.

 

a) Notices.
Any and all notices or other communications or deliveries to be provided by the Holder hereunder, including, without limitation,
any Notice of Conversion, shall be in writing and delivered personally, by facsimile, by email attachment, or sent by a nationally
recognized overnight courier service, addressed to the Company, at the address set forth above, or such other facsimile number,
email address, or address as the Company may specify for such purposes by notice to the Holder delivered in accordance with this
Section 9(a).  Any and all notices or other communications or deliveries to be provided by the Company hereunder shall be
in writing and delivered personally, by facsimile, by email attachment, or sent by a nationally recognized overnight courier service
addressed to each Holder at the facsimile number, email address or address of the Holder appearing on the books of the Company,
or if no such facsimile number or email attachment or address appears on the books of the Company, at the principal place of business
of such Holder, as set forth in the Purchase Agreement.  Any notice or other communication or deliveries hereunder shall be
deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile
at the facsimile number or email attachment to the email address set forth on the signature pages attached hereto prior to 5:30
p.m. (New York City time) on any date, (ii) the next Trading Day after the date of transmission, if such notice or communication
is delivered via facsimile at the facsimile number or email attachment to the email address set forth on the signature pages attached
hereto on a day that is not a Trading Day or later than 5:30 p.m. (New York City time) on any Trading Day, (iii) the second Trading
Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service or (iv) upon actual receipt
by the party to whom such notice is required to be given.

 

b) Absolute
Obligation. Except as expressly provided herein, no provision of this Debenture shall alter or impair the obligation of the
Company, which is absolute and unconditional, to pay the principal of, and liquidated damages and other amounts owing 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.

 

    14

     

    

 

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

 

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

 

e) 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 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.

 

    15

     

    

 

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

 

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

 

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

 

    16

     

    

 

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.

 

Section 10. 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, 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, 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.

 

Section 10. Registration Rights.
Subsequent to the date that the next registration statement relating to an offering of the Company’s securities is declared
effective by the Commission, including but not limited to a registration statement on Form S-1 or Form S-3 (but not including a
registration statement on Form S-4 or Form S-8 (each as promulgated under the Securities Act), or their then equivalents relating
to equity securities to be issued solely in connection with any acquisition of any entity or business or equity securities issuable
in connection with the stock option or other employee benefit plans), the Company shall file a registration statement under the
Securities Act for the resale of securities of the Company held by Holder, or its Affiliates in such amounts as deemed reasonable
by the Company’s counsel, and shall use commercially reasonable efforts to cause such registration statement to be declared
effective by the Commission.

 

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

 

(Signature Page Follows)

 

    17

     

    

 

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.

 

	 	inspyr therapeutics, inc.
	 	 	 
	 	By:	
	 	Name:	Michael Cain
	 	Title:	CEO
	 	 	 
	 	Email address for delivery of Notices:
	 	dgluck@silvestrelaw.com

 

    18

     

    

 

ANNEX A

 

NOTICE OF CONVERSION

 

The undersigned hereby elects to convert
principal under the Senior Convertible Debenture due July 16, 2020 of Inspyr Therapeutics, Inc., a Delaware corporation (the “Company”),
into shares of common stock (the “Common Stock”), of the Company according to the conditions hereof, as of the
date written below. If shares of Common Stock are to be issued in the name of a person other than the undersigned, the undersigned
will pay all transfer taxes payable with respect thereto and is delivering herewith such certificates and opinions as reasonably
requested by the Company in accordance therewith. No fee will be charged to the holder for any conversion, except for such transfer
taxes, if any.

 

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

 

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

 

Conversion calculations:

 

	 	Date to Effect Conversion:
	 	 
	 	Principal Amount of Debenture to be Converted:
	 	 
	 	Number of shares of Common Stock to be issued:
	 	 
	 	Signature:
	 	 
	 	Name:
	 	 
	 	Address for Delivery of Common Stock Certificates:

 

	 	Or
	 	 	 
	 	DWAC Instructions:
	 	 	 
	 	Broker No:	                      
	 	Account No: 	 

  

    19

     

    

 

Schedule 1

 

CONVERSION SCHEDULE

 

The Senior Convertible Debentures due on
October 23, 2021 in the aggregate principal amount of $[________] are issued by Inspyr Therapeutics, Inc., a Delaware corporation.
This Conversion Schedule reflects conversions made under Section 4 of the above referenced Debenture.

 

Dated:

 

	
        Date of Conversion

        (or for first entry, 

Original Issue Date)
	 	Amount of 

Conversion	 	
        Aggregate 

Principal 

Amount 

Remaining 

Subsequent to 

Conversion

        (or original 

Principal 

Amount)
	 	Company Attest
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 

 

 

20Document

Exhibit 10.1
Power Integrations, Inc.
Amended and Restated 1997 Employee Stock Purchase Plan

(As Approved By the Board on March 17, 2016)
(As Approved By the Stockholders on May 13, 2016)
(As Adjusted for the 1-for-1 Stock Dividend on August 19, 2020)

1.    Establishment, Purpose and Term of Plan.
1.1    Establishment.  The Power Integrations, Inc. 1997 Employee Stock Purchase Plan (the “Plan”) is hereby established effective as of the effective date of the initial registration by the Company of its Stock under Section 12 of the Securities Exchange Act of 1934, as amended (the “Effective Date”).  
1.2    Purpose.  The purpose of the Plan is to advance the interests of Company and its stockholders by providing an incentive to attract, retain and reward Eligible Employees of the Participating Company Group and by motivating such persons to contribute to the growth and profitability of the Participating Company Group.  The Plan provides such Eligible Employees with an opportunity to acquire a proprietary interest in the Company through the purchase of Stock.  The Plan consists of two programs, which are referred to as the U.S. Program and the Global Program.  The U.S. Program is intended to qualify as an “employee stock purchase plan” under Section 423(b) of the Code (including any amendments or replacements of such section), and the Global Program is not intended to so qualify.  
1.3    Term of Plan.  The Plan shall continue in effect until the earlier of its termination by the Board or the date on which all of the shares of Stock available for issuance under the Plan have been issued.
2.    Definitions and Construction.
2.1    Definitions.  Any term not expressly defined in the Plan (or other provisions governing the Global Program) but defined for purposes of Section 423 of the Code shall have the same definition herein.  Whenever used herein, the following terms shall have their respective meanings set forth below:
(a)    “Board” means the Board of Directors of the Company.  If one or more Committees have been appointed by the Board to administer the Plan, “Board” also means such Committee(s).
(b)    “Code” means the Internal Revenue Code of 1986, as amended, and any applicable regulations promulgated thereunder.
(c)    “Committee” means a committee of the Board duly appointed to administer the Plan and having such powers as shall be specified by the Board.  Unless the powers of the Committee have been specifically limited, the Committee shall have all of the powers of the Board granted herein, including, without limitation, the power to amend or terminate the Plan at any time, subject to the terms of the Plan and any applicable limitations imposed by law.  
    

(d)    “Company” means Power Integrations, Inc., a Delaware corporation, or any successor corporation thereto.
(e)    “Compensation” means, with respect to any Offering Period, base wages or salary, commissions, overtime, bonuses, annual awards, other incentive payments, shift premiums, and all other compensation paid in cash during such Offering Period before deduction for any contributions to any plan maintained by a Participating Company and described in Section 401(k) or Section 125 of the Code.  Compensation shall not include reimbursements of expenses, allowances, long-term disability, workers’ compensation or any amount deemed received without the actual transfer of cash or any amounts directly or indirectly paid pursuant to the Plan or any other equity compensation plan, or any other compensation not included above.
(f)    “Eligible Employee” means an Employee who meets the requirements set forth in Section 5 for eligibility to participate in the Plan.
(g)    “Employee” means a person treated as an employee of a Participating Company.  A Participant shall be deemed to have ceased to be an Employee either upon an actual termination of employment or upon the corporation employing the Participant ceasing to be a Participating Company.  For purposes of the Plan, an individual shall not be deemed to have ceased to be an Employee while such individual is on any military leave, sick leave, or other bona fide leave of absence approved by the Company of three (3) months or less.  In the event an individual’s leave of absence exceeds three (3) months, the individual shall be deemed to have ceased to be an Employee on the first day following the three (3)-month anniversary of such leave unless the individual’s right to reemployment with the Participating Company Group is guaranteed either by statute or by contract.  The Company shall determine in good faith and in the exercise of its discretion whether an individual has become or has ceased to be an Employee and the effective date of such individual’s employment or termination of employment, as the case may be.  For purposes of an individual’s participation in or other rights, if any, under the Plan as of the time of the Company’s determination, all such determinations by the Company shall be final, binding and conclusive, notwithstanding that the Company or any governmental agency subsequently makes a contrary determination.
(h)    “Fair Market Value” means, as of any date, if there is then a public market for the Stock, the U.S. Dollar closing price of a share of Stock (or the mean of the U.S. Dollar closing bid and asked prices if the Stock is so quoted instead) as quoted on the Nasdaq Global Select Market, Nasdaq Global Market, the Nasdaq Capital Market or such other national or regional securities exchange or market system constituting the primary market for the Stock, as reported in The Wall Street Journal or such other source as the Company deems reliable.  If the relevant date does not fall on a day on which the Stock has traded on such securities exchange or market system, the date on which the Fair Market Value shall be established shall be the last day on which the Stock was so traded prior to the relevant date, or such other appropriate day as shall be determined by the Board, in its sole discretion.  If there is then no public market for the Stock, the Fair Market Value on any relevant date shall be as determined by the Board. 
(i)    “Global Program” means the component of the Plan intended to provide Employees, who are not subject to United States income tax, the opportunity to purchase Stock through accumulated payroll deductions or other approved contributions.  This component of the Plan is not intended to qualify for special tax treatment under Section 423 of the Code.  
(j)    “Offering” means an offering of Stock as provided in Section 6.
    

(k)    “Offering Date” means, for any Offering, the first day of the Offering Period with respect to such Offering.
(l)    “Offering Period” means a period established in accordance with Section 6.1.
(m)    “Parent Corporation” means any present or future “parent corporation” of the Company, as defined in Section 424(e) of the Code.
(n)    “Participant” means an Eligible Employee who has become a participant in an Offering Period in accordance with Section 7 and remains a participant in accordance with the Plan.
(o)    “Participating Company” means (i) for purposes of the U.S. Program, the Company or any U.S. Parent Corporation or U.S. Subsidiary Corporation designated by the Board as a corporation the Employees of which may, if Eligible Employees, participate in the Plan and (ii) for purposes of the Global Program, any entity (whether or not treated as a corporation for U.S. tax purposes) controlling the Company or controlled by the Company directly or indirectly through one or more intermediaries.  The Board shall have the sole and absolute discretion to determine from time to time which Parent Corporations or Subsidiary Corporations shall be Participating Companies.  To the extent that any Participating Company in the Global Program has an entity located in more than one local jurisdiction, the Board shall also have the authority to establish eligibility to participate in the Global Program on an entity-by-entity basis within such Participating Company.  The Participating Companies in the U.S. Program and Global Program are set forth on Appendix A.  
(p)    “Participating Company Group” means, at any point in time, the Company and all other corporations collectively which are then Participating Companies.
(q)    “Plan” means this 1997 Employee Stock Purchase Plan and shall apply to both the U.S. Program and the Global Program.  
(r)    “Purchase Date” means, for any Purchase Period, the last day of such period.
(s)    “Purchase Period” means a period established in accordance with Section 6.2.
(t)    “Purchase Price” means the price at which a share of Stock may be purchased under the Plan, as determined in accordance with Section 9.
(u)    “Purchase Right” means an option granted to a Participant pursuant to the Plan to purchase such shares of Stock as provided in Section 8, which the Participant may or may not exercise during the Offering Period in which such option is outstanding.  Such option arises from the right of a Participant to withdraw any accumulated payroll deductions of the Participant not previously applied to the purchase of Stock under the Plan and to terminate participation in the Plan at any time during an Offering Period.
(v)    “Stock” means the common stock of the Company, as adjusted from time to time in accordance with Section 4.2.
    

(w)    “Subscription Agreement” means a written agreement in such form as specified by the Company, stating an Employee’s election to participate in the Plan and authorizing payroll deductions under the Plan from the Employee’s Compensation.
(x)    “Subscription Date” means the last business day prior to the Offering Date of an Offering Period or such earlier date as the Company shall establish.
(y)    “Subsidiary Corporation” means any present or future “subsidiary corporation” of the Company, as defined in Section 424(f) of the Code.
(z)    “U.S. Program” means the component of the Plan intended to provide Employees, who are subject to United States income tax, the opportunity to purchase Stock through accumulated payroll deductions or other approved contributions.  This component of the Plan shall be deemed to be a plan that is intended to qualify for special tax treatment under Section 423 of the Code and does not include the Global Program.  
2.2    Construction.  Captions and titles contained herein are for convenience only and shall not affect the meaning or interpretation of any provision of the Plan.  Except when otherwise indicated by the context, the singular shall include the plural and the plural shall include the singular.  Use of the term “or” is not intended to be exclusive, unless the context clearly requires otherwise.
3.    Administration.
3.1    Administration by the Board.  
(a)    The Plan shall be administered by the Board.  All questions of interpretation of the Plan, of any form of agreement or other document employed by the Company in the administration of the Plan, or of any Purchase Right shall be determined by the Board and shall be final and binding upon all persons having an interest in the Plan or the Purchase Right.  All expenses incurred in connection with the administration of the Plan shall be paid by the Company.  Subject to the provisions of the Plan, the Board shall determine all of the relevant terms and conditions of Purchase Rights granted pursuant to the Plan under the U.S. Program; provided, however, that all Participants granted Purchase Rights pursuant to the U.S. Program shall have the same rights and privileges within the meaning of Section 423(b)(5) of the Code.  
(b)    The Board may also adopt rules, procedures, or sub-plans applicable to a Participating Company or jurisdiction as part of the Global Program to accommodate the specific requirements of the law and procedures of foreign jurisdictions, including but not limited to, establishing rules and procedures regarding handling of payroll deductions or other approved contributions, payment of interest, conversion of local currency, payroll tax, withholding procedures, and handling of stock certificates that vary with local requirements.  Unless otherwise superseded by the terms of a sub-plan under the Global Program, the provisions of the Plan shall govern the operation of such sub-plan.  
3.2    Authority of Officers.  Any officer of the Company shall have the authority to act on behalf of the Company with respect to any matter, right, obligation, determination or election that is the responsibility of or that is allocated to the Company herein, provided that the officer has apparent authority with respect to such matter, right, obligation, determination or election.
    

3.3    Policies and Procedures Established by the Company.  The Company may, from time to time, consistent with the Plan and the requirements of Section 423 of the Code, establish, change or terminate such rules, guidelines, policies, procedures, limitations, or adjustments as deemed advisable by the Company, in its sole discretion, for the proper administration of the Plan, including, without limitation, (a) a minimum payroll deduction amount required for participation in an Offering, (b) a limitation on the frequency or number of changes permitted in the rate of payroll deduction during an Offering, (c) an exchange ratio applicable to amounts withheld in a currency other than United States dollars, (d) a payroll deduction greater than or less than the amount designated by a Participant in order to adjust for the Company’s delay or mistake in processing a Subscription Agreement or in otherwise effecting a Participant’s election under the Plan or as advisable to comply with the requirements of Section 423 of the Code, and (e) determination of the date and manner by which the Fair Market Value of a share of Stock is determined for purposes of administration of the Plan.
4.    Shares Subject to Plan.
4.1    Maximum Number of Shares Issuable.  Subject to adjustment as provided in Section 4.2, the maximum aggregate number of shares of Stock that may be issued under the Plan shall be seven million (7,000,000) and shall consist of authorized but unissued or reacquired shares of Stock, or any combination thereof.  If an outstanding Purchase Right for any reason expires or is terminated or canceled, the shares of Stock allocable to the unexercised portion of such Purchase Right shall again be available for issuance under the Plan.
4.2    Adjustments for Changes in Capital Structure.  In the event of any stock dividend, stock split, reverse stock split, recapitalization, combination, reclassification or similar change in the capital structure of the Company, or in the event of any merger (including a merger effected for the purpose of changing the Company’s domicile), sale of assets or other reorganization in which the Company is a party, appropriate and proportionate adjustments shall be made in the number and class of shares subject to the Plan and each Purchase Right and in the Purchase Price.  If a majority of the shares which are of the same class as the shares that are subject to outstanding Purchase Rights are exchanged for, converted into, or otherwise become (whether or not pursuant to an Ownership Change Event) shares of another corporation (the “New Shares”), the Board may unilaterally amend the outstanding Purchase Rights to provide that such Purchase Rights are exercisable for New Shares.  In the event of any such amendment, the number of shares subject to, and the Purchase Price of, the outstanding Purchase Rights shall be adjusted in a fair and equitable manner, as determined by the Board, in its sole discretion.  Notwithstanding the foregoing, any fractional share resulting from an adjustment pursuant to this Section 4.2 shall be rounded down to the nearest whole number, and in no event may the Purchase Price be decreased to an amount less than the par value, if any, of the stock subject to the Purchase Right.  The adjustments determined by the Board pursuant to this Section 4.2 shall be final, binding and conclusive.
5.    Eligibility.
5.1    Employees Eligible to Participate in U.S. Program.  Each Employee of a Participating Company in the U.S. Program is eligible to participate in the Plan and shall be deemed an Eligible Employee, except the following:
(a)    Any Employee who is customarily employed by the Participating Company Group for less than twenty (20) hours per week; or
    

(b)    Any Employee who is customarily employed by the Participating Company Group for not more than five (5) months in any calendar year.
5.2    Employees Eligible to Participate in Global Program.  To the extent that any Participating Company in the Global Program has Employees located in more than one local jurisdiction, the Board shall have the authority to determine whether such Employees are Eligible Employees on a jurisdiction-by-jurisdiction basis, and may otherwise excluded such Employees from participation in the Global Program.  
5.3    Exclusion of Certain Stockholders.  Notwithstanding any provision of the Plan to the contrary, no Employee shall be granted a Purchase Right under the Plan if, immediately after such grant, such Employee would own or hold options to purchase stock of the Company or of any Parent Corporation or Subsidiary Corporation possessing five percent (5%) or more of the total combined voting power or value of all classes of stock of such corporation, as determined in accordance with Section 423(b)(3) of the Code.  For purposes of this Section 5.3, the attribution rules of Section 424(d) of the Code shall apply in determining the stock ownership of such Employee.
6.    Offerings.
6.1    Offering Periods.  
(a)    Prior to February 1, 2009, the Plan shall be implemented by sequential Offerings of approximately twenty-four (24) months duration (an “Offering Period”); provided, however, that the first such Offering Period shall commence on the Effective Date and end on January 31, 2000 (the “Initial Offering Period”).  Subsequent Offerings shall commence on the first day of February and August of each year and end on the last day of the second January and July, respectively, occurring thereafter.  
(b)    Beginning February 1, 2009, the Plan shall be implemented by sequential Offerings of approximately six (6) months duration, which shall run from the first day of February to the last day of July each year and from the first day of August each year to the last day in January in the following year.  
(c)    Notwithstanding the foregoing, the Board may establish a different duration for one or more future Offering Periods or different commencing or ending dates for such Offering Periods; provided, however, that no Offering Period may have a duration exceeding twenty-seven (27) months.  If the first or last day of an Offering Period is not a day on which the national securities exchanges or Nasdaq Stock Market are open for trading, the Company shall specify the trading day that will be deemed the first or last day, as the case may be, of the Offering Period.
6.2    Purchase Periods.  
(a)    Prior to February 1, 2009, each Offering Period shall consist of four (4) consecutive Purchase Periods of approximately six (6) months duration, or such other number or duration as the Board shall determine.  The Purchase Period commencing on the Offering Date of the Initial Offering Period shall end on July 31, 1998.  A Purchase Period commencing on or about February 1 shall end on or about the next July 31.  A Purchase Period commencing on or about August 1 shall end on or about the next January 31.  
    

(b)    Beginning February 1, 2009, each Offering Period shall consist of one Purchase Period of approximately six (6) months duration.  
(c)    Notwithstanding the foregoing, the Board may establish a different duration for one or more future Purchase Periods or different commencing or ending dates for such Purchase Periods.  If the first or last day of a Purchase Period is not a day on which the national securities exchanges or Nasdaq Stock Market are open for trading, the Company shall specify the trading day that will be deemed the first or last day, as the case may be, of the Purchase Period.
7.    Participation in the Plan.
7.1    Initial Participation.  An Eligible Employee may become a Participant in an Offering Period by delivering a properly completed Subscription Agreement to the office designated by the Company not later than the close of business for such office on the Subscription Date established by the Company for such Offering Period.  An Eligible Employee who does not deliver a properly completed Subscription Agreement to the Company’s designated office on or before the Subscription Date for an Offering Period shall not participate in the Plan for that Offering Period or for any subsequent Offering Period unless such Eligible Employee subsequently delivers a properly completed Subscription Agreement to the appropriate office of the Company on or before the Subscription Date for such subsequent Offering Period.  An Employee who becomes an Eligible Employee after the Offering Date of an Offering Period shall not be eligible to participate in such Offering Period but may participate in any subsequent Offering Period provided such Employee is still an Eligible Employee as of the Offering Date of such subsequent Offering Period.
7.2    Continued Participation.  A Participant shall automatically participate in the next Offering Period commencing immediately after the final Purchase Date of each Offering Period in which the Participant participates provided that such Participant remains an Eligible Employee on the Offering Date of the new Offering Period and has not either (a) withdrawn from the Plan pursuant to Section 12.1 or (b) terminated employment as provided in Section 13.  A Participant who may automatically participate in a subsequent Offering Period, as provided in this Section, is not required to deliver any additional Subscription Agreement for the subsequent Offering Period in order to continue participation in the Plan.  However, a Participant may deliver a new Subscription Agreement for a subsequent Offering Period in accordance with the procedures set forth in Section 7.1 if the Participant desires to change any of the elections contained in the Participant’s then effective Subscription Agreement.  Eligible Employees may not participate simultaneously in more than one Offering.
8.    Right to Purchase Shares.
8.1    Grant of Purchase Right.  Except as set forth below, on the Offering Date of each Offering Period, each Participant in such Offering Period shall be granted automatically a Purchase Right consisting of an option to purchase the lesser of (a) that number of whole shares of Stock determined by dividing Fifty Thousand Dollars ($50,000) by the Fair Market Value of a share of Stock on such Offering Date or (b) ten thousand (10,000) shares of Stock.  No Purchase Right shall be granted on an Offering Date to any person who is not, on such Offering Date, an Eligible Employee.
8.2    Pro Rata Adjustment of Purchase Right.  Notwithstanding the provisions of Section 8.1, if the Board establishes an Offering Period of any duration other than twenty-four 
    

months, then (a) the dollar amount in Section 8.1 shall be determined by multiplying $2,083.33 by the number of months (rounded to the nearest whole month) in the Offering Period and rounding to the nearest whole dollar, and (b) the share amount in Section 8.1 shall be determined by multiplying 416.66 shares by the number of months (rounded to the nearest whole month) in the Offering Period and rounding to the nearest whole share.
8.3    Calendar Year Purchase Limitation.  Notwithstanding any provision of the Plan to the contrary, no Participant shall be granted a Purchase Right which permits his or her right to purchase shares of Stock under the Plan to accrue at a rate which, when aggregated with such Participant’s rights to purchase shares under all other employee stock purchase plans of a Participating Company intended to meet the requirements of Section 423 of the Code, exceeds Twenty-Five Thousand Dollars ($25,000) in Fair Market Value (or such other limit, if any, as may be imposed by the Code) for each calendar year in which such Purchase Right is outstanding at any time.  For purposes of the preceding sentence, the Fair Market Value of shares purchased during a given Offering Period shall be determined as of the Offering Date for such Offering Period.  The limitation described in this Section 8.3 shall be applied in conformance with applicable regulations under Section 423(b)(8) of the Code.
9.    Purchase Price.
The Purchase Price at which each share of Stock may be acquired in an Offering Period upon the exercise of all or any portion of a Purchase Right shall be established by the Board; provided, however, that the Purchase Price shall not be less than eighty-five percent (85%) of the lesser of (a) the Fair Market Value of a share of Stock on the Offering Date of the Offering Period or (b) the Fair Market Value of a share of Stock on the Purchase Date.  Unless otherwise provided by the Board prior to the commencement of an Offering Period, the Purchase Price for that Offering Period shall be eighty-five percent (85%) of the lesser of (a) the Fair Market Value of a share of Stock on the Offering Date of the Offering Period, or (b) the Fair Market Value of a share of Stock on the Purchase Date.
10.    Accumulation of Purchase Price through Payroll Deduction.
Shares of Stock acquired pursuant to the exercise of all or any portion of a Purchase Right may be paid for only by means of payroll deductions from the Participant’s Compensation accumulated during the Offering Period for which such Purchase Right was granted, subject to the following:
10.1    Amount of Payroll Deductions.  Except as otherwise provided herein or prohibited by the law of a local jurisdiction, the amount to be deducted under the Plan from a Participant’s Compensation on each payday during an Offering Period shall be determined by the Participant’s Subscription Agreement.  The Subscription Agreement shall set forth the percentage of the Participant’s Compensation to be deducted on each payday during an Offering Period in whole percentages of not less than one percent (1%) (except as a result of an election pursuant to Section 10.3 to stop payroll deductions made effective following the first payday during an Offering) or more than fifteen percent (15%).  Notwithstanding the foregoing, the Board may change the limits on payroll deductions effective as of any future Offering Date.  In jurisdictions where payroll deductions are not permitted under local law, the Participants may participate in the Global Program by making contributions in the form that is acceptable and approved by the Board. 
    

10.2    Commencement of Payroll Deductions.  Payroll deductions shall commence on the first payday following the Offering Date and shall continue to the end of the Offering Period unless sooner altered or terminated as provided herein.
10.3    Election to Change or Stop Payroll Deductions.  During an Offering Period, a Participant may elect to increase or decrease the rate of or to stop deductions from his or her Compensation by delivering to the Company’s designated office an amended Subscription Agreement authorizing such change on or before the “Change Notice Date.” The “Change Notice Date” shall be a date prior to the beginning of the first pay period for which such election is to be effective as established by the Company from time to time and announced to the Participants.  A Participant who elects to decrease the rate of his or her payroll deductions to zero percent (0%) shall nevertheless remain a Participant in the current Offering Period unless such Participant withdraws from the Plan as provided in Section 12.1.
10.4    Administrative Suspension of Payroll Deductions.  The Company may, in its sole discretion, suspend a Participant’s payroll deductions under the Plan as the Company deems advisable to avoid accumulating payroll deductions in excess of the amount that could reasonably be anticipated to purchase the maximum number of shares of Stock permitted during a calendar year under the limit set forth in Section 8.3.  Payroll deductions shall be resumed at the rate specified in the Participant’s then effective Subscription Agreement at the beginning of the next Purchase Period the Purchase Date of which falls in the following calendar year.
10.5    Participant Accounts.  Individual bookkeeping accounts shall be maintained for each Participant.  Except as otherwise required by the law of a local jurisdiction, all payroll deductions from a Participant’s Compensation shall be: (i) credited to such Participant’s Plan account, (ii) deposited with the general funds of the Company, and (iii) used by the Company for any corporate purpose.
10.6    No Interest Paid.  Except as otherwise required by the law of a local jurisdiction, interest shall not be paid on sums deducted from a Participant’s Compensation pursuant to the Plan.
10.7    Voluntary Withdrawal from Plan Account.  A Participant may withdraw all or any portion of the payroll deductions credited to his or her Plan account and not previously applied toward the purchase of Stock by delivering to the Company’s designated office a written notice on a form provided by the Company for such purpose.  A Participant who withdraws the entire remaining balance credited to his or her Plan account shall be deemed to have withdrawn from the Plan in accordance with Section 12.1.  Amounts withdrawn shall be returned to the Participant as soon as practicable after the withdrawal and may not be applied to the purchase of shares in any Offering under the Plan.  The Company may from time to time establish or change limitations on the frequency of withdrawals permitted under this Section, establish a minimum dollar amount that must be retained in the Participant’s Plan account, or terminate the withdrawal right provided by this Section.
11.    Purchase of Shares.
11.1    Exercise of Purchase Right.  On each Purchase Date of an Offering Period, each Participant who has not withdrawn from the Plan and whose participation in the Offering has not terminated before such Purchase Date shall automatically acquire pursuant to the exercise of the Participant’s Purchase Right the number of whole shares of Stock determined by dividing (a) the total amount of the Participant’s payroll deductions accumulated in the Participant’s Plan 
    

account during the Offering Period and not previously applied toward the purchase of Stock by (b) the Purchase Price.  However, in no event shall the number of shares purchased by the Participant during an Offering Period exceed the number of shares subject to the Participant’s Purchase Right.  No shares of Stock shall be purchased on a Purchase Date on behalf of a Participant whose participation in the Offering or the Plan has terminated before such Purchase Date.
11.2    Pro Rata Allocation of Shares.  In the event that the number of shares of Stock which might be purchased by all Participants in the Plan on a Purchase Date exceeds the number of shares of Stock available in the Plan as provided in Section 4.1, the Company shall make a pro rata allocation of the remaining shares in as uniform a manner as shall be practicable and as the Company shall determine to be equitable.  Any fractional share resulting from such pro rata allocation to any Participant shall be disregarded.
11.3    Delivery of Certificates.  As soon as practicable after each Purchase Date, the Company shall arrange the delivery to each Participant, as appropriate, of a certificate representing the shares acquired by the Participant on such Purchase Date; provided that the Company may deliver such shares to a broker that holds such shares in street name for the benefit of the Participant.  Shares to be delivered to a Participant under the Plan shall be registered in the name of the Participant, or, if requested by the Participant, in the name of the Participant and his or her spouse, or, if applicable, in the names of the heirs of the Participant.
11.4    Return of Cash Balance.  Any cash balance remaining in a Participant’s Plan account following any Purchase Date shall be refunded to the Participant as soon as practicable after such Purchase Date.  However, if the cash to be returned to a Participant pursuant to the preceding sentence is an amount less than the amount that would have been necessary to purchase an additional whole share of Stock on such Purchase Date, the Company may retain such amount in the Participant’s Plan account to be applied toward the purchase of shares of Stock in the subsequent Purchase Period or Offering Period, as the case may be.
11.5    Tax Withholding.  At the time a Participant’s Purchase Right is exercised, in whole or in part, or at the time a Participant disposes of some or all of the shares of Stock he or she acquires under the Plan, the Participant shall make adequate provision for the foreign, federal, state and local tax withholding obligations of the Participating Company Group, if any, which arise upon exercise of the Purchase Right or upon such disposition of shares, respectively.  The Participating Company Group may, but shall not be obligated to, withhold from the Participant’s compensation the amount necessary to meet such withholding obligations.
11.6    Expiration of Purchase Right.  Any portion of a Participant’s Purchase Right remaining unexercised after the end of the Offering Period to which the Purchase Right relates shall expire immediately upon the end of the Offering Period.
11.7    Reports to Participants.  Each Participant who has exercised all or part of his or her Purchase Right shall receive, as soon as practicable after the Purchase Date, a report of such Participant’s Plan account setting forth the total payroll deductions accumulated prior to such exercise, the number of shares of Stock purchased, the Purchase Price for such shares, the date of purchase and the cash balance, if any, remaining immediately after such purchase that is to be refunded or retained in the Participant’s Plan account pursuant to Section 11.4.  The report required by this Section may be delivered in such form and by such means, including by electronic transmission, as the Company may determine.
    

12.    Withdrawal from Offering or Plan.
12.1    Voluntary Withdrawal from the Plan.  A Participant may withdraw from the Plan by signing and delivering to the Company’s designated office a written notice of withdrawal on a form provided by the Company for such purpose.  Such withdrawal may be elected at any time prior to the end of an Offering Period; provided, however, that if a Participant withdraws from the Plan after the Purchase Date of a Purchase Period, the withdrawal shall not affect shares of Stock acquired by the Participant on such Purchase Date.  A Participant who voluntarily withdraws from the Plan is prohibited from resuming participation in the Plan in the same Offering from which he or she withdrew, but may participate in any subsequent Offering by again satisfying the requirements of Sections 5 and 7.1.  The Company may impose, from time to time, a requirement that the notice of withdrawal from the Plan be on file with the Company’s designated office for a reasonable period prior to the effectiveness of the Participant’s withdrawal.
12.2    Automatic Withdrawal from an Offering.  If the Fair Market Value of a share of Stock on a Purchase Date of an Offering Period (other than the final Purchase Date of such offering) is less than the Fair Market Value of a share of Stock on the Offering Date for such Offering Period, then every Participant shall automatically be (a) withdrawn from such Offering Period after the acquisition of shares of Stock on the Purchase Date and (b) enrolled in the new Offering Period effective on its Offering Date.  A Participant may elect not to be automatically withdrawn from an Offering Period pursuant to this Section 12.2 by delivering to the Company’s designated office not later than the close of business on the Offering Date of the new Offering Period a written notice indicating such election.
12.3    Return of Payroll Deductions.  Upon a Participant’s voluntary withdrawal from the Plan pursuant to Sections 12.1 or automatic withdrawal from an Offering pursuant to Section 12.2, the Participant’s accumulated payroll deductions which have not been applied toward the purchase of shares of Stock (except, in the case of an automatic withdrawal pursuant to Section 12.2, for an amount necessary to purchase an additional whole share as provided in Section 11.4) shall be refunded to the Participant as soon as practicable after the withdrawal, without the payment of any interest, and the Participant’s interest in the Plan or the Offering, as applicable, shall terminate.  Such accumulated payroll deductions to be refunded in accordance with this Section may not be applied to any other Offering under the Plan.
13.    Termination of Employment or Eligibility.
Upon a Participant’s ceasing, prior to a Purchase Date, to be an Employee of the Participating Company Group for any reason, including retirement, disability or death, or the failure of a Participant to remain an Eligible Employee, the Participant’s participation in the Plan shall terminate immediately.  In such event, the payroll deductions credited to the Participant’s Plan account since the last Purchase Date shall, as soon as practicable, be returned to the Participant or, in the case of the Participant’s death, to the Participant’s legal representative, and all of the Participant’s rights under the Plan shall terminate.  Except as otherwise required by the law of a local jurisdiction, interest shall not be paid on sums returned pursuant to this Section 13.  A Participant whose participation has been so terminated may again become eligible to participate in the Plan by again satisfying the requirements of Sections 5 and 7.1.
    

14.    Change in Control.
14.1    Definitions.
(a)    An “Ownership Change Event” shall be deemed to have occurred if any of the following occurs with respect to the Company: (i) the direct or indirect sale or exchange in a single or series of related transactions by the stockholders of the Company of more than fifty percent (50%) of the voting stock of the Company; (ii) a merger or consolidation in which the Company is a party; (iii) the sale, exchange, or transfer of all or substantially all of the assets of the Company; or (iv) a liquidation or dissolution of the Company.
(b)    A “Change in Control” shall mean an Ownership Change Event or a series of related Ownership Change Events (collectively, the “Transaction”) wherein the stockholders of the Company immediately before the Transaction do not retain immediately after the Transaction, in substantially the same proportions as their ownership of shares of the Company’s voting stock immediately before the Transaction, direct or indirect beneficial ownership of more than fifty percent (50%) of the total combined voting power of the outstanding voting stock of the Company or the corporation or corporations to which the assets of the Company were transferred (the “Transferee Corporation(s)”), as the case may be.  For purposes of the preceding sentence, indirect beneficial ownership shall include, without limitation, an interest resulting from ownership of the voting stock of one or more corporations which, as a result of the Transaction, own the Company or the Transferee Corporation(s), as the case may be, either directly or through one or more subsidiary corporations.  The Board shall have the right to determine whether multiple sales or exchanges of the voting stock of the Company or multiple Ownership Change Events are related, and its determination shall be final, binding and conclusive.
14.2    Effect of Change in Control on Purchase Rights.  In the event of a Change in Control, the surviving, continuing, successor, or purchasing corporation or parent corporation thereof, as the case may be (the “Acquiring Corporation”), may assume the Company’s rights and obligations under the Plan.  If the Acquiring Corporation elects not to assume the Company’s rights and obligations under outstanding Purchase Rights, the Purchase Date of the then current Purchase Period shall be accelerated to a date before the date of the Change in Control specified by the Board, but the number of shares of Stock subject to outstanding Purchase Rights shall not be adjusted.  All Purchase Rights which are neither assumed by the Acquiring Corporation in connection with the Change in Control nor exercised as of the date of the Change in Control shall terminate and cease to be outstanding effective as of the date of the Change in Control.
15.    Nontransferability of Purchase Rights.
A Purchase Right may not be transferred in any manner otherwise than by will or the laws of descent and distribution and shall be exercisable during the lifetime of the Participant only by the Participant.
16.    Compliance with Securities Law.
The issuance of shares under the Plan shall be subject to compliance with all applicable requirements of federal, state and foreign law with respect to such securities.  A Purchase Right may not be exercised if the issuance of shares upon such exercise would constitute a violation of any applicable federal, state or foreign securities laws or other law or regulations or the 
    

requirements of any securities exchange or market system upon which the Stock may then be listed.  In addition, no Purchase Right may be exercised unless (a) a registration statement under the Securities Act of 1933, as amended, shall at the time of exercise of the Purchase Right be in effect with respect to the shares issuable upon exercise of the Purchase Right, or (b) in the opinion of legal counsel to the Company, the shares issuable upon exercise of the Purchase Right may be issued in accordance with the terms of an applicable exemption from the registration requirements of said Act.  The inability of the Company to obtain from any regulatory body having jurisdiction the authority, if any, deemed by the Company’s legal counsel to be necessary to the lawful issuance and sale of any shares under the Plan shall relieve the Company of any liability in respect of the failure to issue or sell such shares as to which such requisite authority shall not have been obtained.  As a condition to the exercise of a Purchase Right, the Company may require the Participant to satisfy any qualifications that may be necessary or appropriate, to evidence compliance with any applicable law or regulation, and to make any representation or warranty with respect thereto as may be requested by the Company.
17.    Rights as a Stockholder and Employee.
A Participant shall have no rights as a stockholder by virtue of the Participant’s participation in the Plan until the date of the issuance of a certificate for the shares purchased pursuant to the exercise of the Participant’s Purchase Right (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company).  No adjustment shall be made for dividends, distributions or other rights for which the record date is prior to the date such certificate is issued, except as provided in Section 4.2.  Nothing herein shall confer upon a Participant any right to continue in the employ of the Participating Company Group or interfere in any way with any right of the Participating Company Group to terminate the Participant’s employment at any time.
18.    Legends.
The Company may at any time place legends or other identifying symbols referencing any applicable federal, state or foreign securities law restrictions or any provision convenient in the administration of the Plan on some or all of the certificates representing shares of Stock issued under the Plan.  The Participant shall, at the request of the Company, promptly present to the Company any and all certificates representing shares acquired pursuant to a Purchase Right in the possession of the Participant in order to carry out the provisions of this Section.  Unless otherwise specified by the Company, legends placed on such certificates may include but shall not be limited to the following:
“THE SHARES EVIDENCED BY THIS CERTIFICATE WERE ISSUED BY THE CORPORATION TO THE REGISTERED HOLDER UPON THE PURCHASE OF SHARES UNDER AN EMPLOYEE STOCK PURCHASE PLAN AS DEFINED IN SECTION 423 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED. THE TRANSFER AGENT FOR THE SHARES EVIDENCED HEREBY SHALL NOTIFY THE CORPORATION IMMEDIATELY OF ANY TRANSFER OF THE SHARES BY THE REGISTERED HOLDER HEREOF.  THE REGISTERED HOLDER SHALL HOLD ALL SHARES PURCHASED UNDER THE PLAN IN THE REGISTERED HOLDER’S NAME (AND NOT IN THE NAME OF ANY NOMINEE).”
    

19.    Notification of Sale of Shares.
The Company may require the Participant to give the Company prompt notice of any disposition of shares acquired by exercise of a Purchase Right within two years from the date of granting such Purchase Right or one year from the date of exercise of such Purchase Right.  The Company may require that until such time as a Participant disposes of shares acquired upon exercise of a Purchase Right, the Participant shall hold all such shares in the Participant’s name (or, if elected by the Participant, in the name of the Participant and his or her spouse but not in the name of any nominee) until the lapse of the time periods with respect to such Purchase Right referred to in the preceding sentence.  The Company may direct that the certificates evidencing shares acquired by exercise of a Purchase Right refer to such requirement to give prompt notice of disposition.
20.    Notices.
All notices or other communications by a Participant to the Company under or in connection with the Plan shall be deemed to have been duly given when received in the form specified by the Company at the location, or by the person, designated by the Company for the receipt thereof.
21.    Indemnification.
In addition to such other rights of indemnification as they may have as members of the Board or officers or employees of the Participating Company Group, members of the Board and any officers or employees of the Participating Company Group to whom authority to act for the Board or the Company is delegated shall be indemnified by the Company against all reasonable expenses, including attorneys’ fees, actually and necessarily incurred in connection with the defense of any action, suit or proceeding, or in connection with any appeal therein, to which they or any of them may be a party by reason of any action taken or failure to act under or in connection with the Plan, or any right granted hereunder, and against all amounts paid by them in settlement thereof (provided such settlement is approved by independent legal counsel selected by the Company) or paid by them in satisfaction of a judgment in any such action, suit or proceeding, except in relation to matters as to which it shall be adjudged in such action, suit or proceeding that such person is liable for gross negligence, bad faith or intentional misconduct in duties; provided, however, that within sixty (60) days after the institution of such action, suit or proceeding, such person shall offer to the Company, in writing, the opportunity at its own expense to handle and defend the same.
22.    Amendment or Termination of the Plan.
(a)    The Board may at any time amend or terminate the Plan, except that (a) such termination shall not affect Purchase Rights previously granted under the Plan, except as permitted under the Plan, and (b) no amendment may adversely affect a Purchase Right previously granted under the Plan without the consent of the Participant to whom such Purchase Rights were granted (except to the extent permitted by the Plan or as may be necessary to qualify the Plan as an employee stock purchase plan pursuant to Section 423 of the Code or to obtain qualification or registration of the shares of Stock under applicable federal, state or foreign securities laws). 
(b)    Except as provided in Section 4.2, approval of the stockholders of the Company will be required for any amendment of the Plan for which stockholder approval is required by 
    

applicable law or listing requirements, including any amendment that (i) materially increases the number of shares of Common Stock available for issuance under the Plan, (ii) materially expands the class of individuals eligible to become Participants and receive Purchase Rights, (iii) materially increases the benefits accruing to Participants under the Plan or materially reduces the price at which shares of Common Stock may be purchased under the Plan, (iv) materially extends the term of the Plan, or (v) expands the types of awards available for issuance under the Plan, but in each of (i) through (v) above only to the extent stockholder approval is required by applicable law or listing requirements. In addition, an amendment to the Plan that authorizes the sale of more shares than are authorized for issuance under the Plan or changes the definition of the corporations that may be designated by the Board as Participating Companies must be approved by the stockholders of the Company within twelve (12) months of the adoption of such amendment. 
(c)    No Purchase Rights may be granted under the Plan after it is terminated.

    

APPENDIX A

Participating Companies in U.S. Program
Power Integrations, Inc.

Participating Companies in Global Program
Power Integrations, K.K.
Power Integrations Ltd.
Power Integrations Malaysia SDN. BHD.
Power Integrations Singapore Pte. Ltd.
Power Integrations Netherlands B.V. (excluding the Beijing Representative Office, Shanghai Representative Office, Shenzhen Representative Office, Chengdu Representative Office, Foshan Representative Office, Quingdao Representative Office and Xiamen Representative Office)
Power Integrations GmbH
Power Integrations Italy S.r.l.
Power Integrations India Private Ltd.
Power Integrations Canada ULC
Power Integrations (Europe) Ltd.
Power Integrations Switzerland GmbH
Power Integrations U.K. Ltd.

    

POWER INTEGRATIONS, INC.
1997 EMPLOYEE STOCK PURCHASE PLAN
SUBSCRIPTION AGREEMENT

NAME (Please print):    ____________________________________________________________________
(Last)        (First)        (Middle)

    Application for the Offering Period beginning ____________________, 20___.

    Change in Payroll Deduction rate effective with the pay period ending ___________________, 20___.

    I hereby elect to participate in the 1997 Employee Stock Purchase Plan (the “Plan”) of Power Integrations, Inc. (the “Company”) and subscribe to purchase shares of the Company's Stock in accordance with this Subscription Agreement and the Plan.

    I hereby authorize payroll deductions in the amount of ________ percent (in whole percentages not less than 1% (unless an election to stop deductions is being made) or more than 15%) of my “Compensation” on each payday throughout the “Offering Period” in accordance with the Plan.  I understand that these payroll deductions will be accumulated for the purchase of shares of Stock at the applicable purchase price determined in accordance with the Plan.  I understand that, except as otherwise provided by the Plan, I will automatically purchase shares on each Purchase Date under the Plan unless I withdraw from the Plan by giving written notice on a form provided by the Company or unless my employment terminates.

    I understand that I will automatically participate in each subsequent Offering that commences immediately after the last day of an Offering in which I am participating until I withdraw from the Plan by giving written notice on a form provided by the Company or my employment terminates.

    Shares I purchase under the Plan should be issued in the name(s) set forth below.  (Shares may be issued in the participant's name alone or together with the participant's spouse as community property or in joint tenancy.)

    NAME(S):    _______________________________________________________________________

    ADDRESS:    _______________________________________________________________________

    MY SOCIAL SECURITY NUMBER:  ______________________________________________________

    I agree to make adequate provision for the federal, state, local and foreign tax withholding obligations, if any, which may arise upon my purchase of shares under the Plan and/or my disposition of such shares.  The Company may, but will not be obligated to, withhold from my compensation the amount necessary to meet such withholding obligations.

    I agree that, unless otherwise permitted by the Company, until I dispose of the shares I purchased under the Plan, I will hold such shares in the name(s) entered above (and not in the name of any nominee) for at least two years from the first day of the Offering Period in which, and at least one year from the Purchase Date on which, I acquired such shares.

    I agree that I will notify the Chief Financial Officer of the Company in writing within 30 days after any sale, gift, transfer or other disposition of any kind prior to the end of the periods referred to in the preceding paragraph (a “Disqualifying Disposition”) of any shares I purchased under the Plan.  I further agree that if I do not respond within 30 days of the date of a Disqualifying Disposition Survey delivered to me by certified mail, the Company may treat my nonresponse as my notice to the Company of a Disqualifying Disposition and may compute and report to the Internal Revenue Service the ordinary income I must recognize upon such Disqualifying Disposition.

    I am familiar with the provisions of the Plan and agree to participate in the Plan subject to all of its provisions.  I understand that the Board of Directors of the Company reserves the right to terminate the Plan or to amend the Plan and my right to purchase stock under the Plan to the extent provided by the Plan.  I understand that the effectiveness of this Subscription Agreement is dependent upon my eligibility to participate in the Plan.

Date: _______________________        Signature:________________________________________________

    

POWER INTEGRATIONS, INC.
1997 EMPLOYEE STOCK PURCHASE PLAN
NOTICE OF WITHDRAWAL
NAME (Please print):____________________________________________________________
(Last)    (First)    (Middle)
I hereby elect to withdraw from the Offering under Power Integrations, Inc. 1997 Employee Stock Purchase Plan (the “Plan”) which began on ____________________________, 20____ and in which I am currently participating (the “Current Offering”).
Elect either A or B below:
[_]    A.    I elect to terminate immediately my participation in the Current Offering and in the Plan.
I request that the Company cease all further payroll deductions from my Compensation under the Plan (provided that I have given sufficient notice prior to the next payday).  I request that all payroll deductions credited to my account under the Plan (if any) not previously used to purchase shares under the Plan shall not be used to purchase shares on the next Purchase Date of the Current Offering.
    

Instead, I request that all such amounts be paid to me as soon as practicable.  I understand that this election immediately terminates my interest in the Current Offering and in the Plan.
[_]    B.    I elect to terminate my participation in the Current Offering and in the Plan following my purchase of shares on next Purchase Date of the Current Offering.
I request that the Company cease all further payroll deductions from my Compensation under the Plan (provided that I have given sufficient notice prior to the next payday).  I request that all payroll deductions credited to my account under the Plan (if any) not previously used to purchase shares under the Plan shall be used to purchase shares on the next Purchase Date of the Current Offering to the extent permitted by the Plan.  I understand that this election will terminate my interest in the Current Offering and in the Plan immediately following such purchase.  I request that any cash balance remaining in my account under the Plan after my purchase of shares be paid to me as soon as practicable.
I understand that by making this election I am terminating my interest in the Plan and that no further payroll deductions will be made (provided that I have given sufficient notice prior to the next payday) unless I elect in accordance with the Plan to become a participant in another Offering under the Plan by filing a new Subscription Agreement with the Company.
Date:______________________            Signature:_________________________________

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