Document:

chpii-ex103_275.htm

 

Exhibit 10.3

Escrow Agreement

 

ESCROW AGREEMENT (this “Agreement”) entered into as of August 1, 2016, among CHP II Partners, LP, a Delaware limited partnership (“CHP II OP”), REIT Funding, LLC, a Georgia limited liability company (“RF”), and Cushing, Morris, Armbruster & Montgomery, LLP, a Georgia limited liability partnership (“Escrow Agent”).  The parties hereto agree as follows:

 

This Agreement is being entered into in connection with the transactions described in the Confidential Private Placement Memorandum dated July 13, 2016 regarding the offering by CNL Healthcare Properties II, Inc. (the “REIT”) and CHP II OP to 125 investors, each investor to purchase shares of common stock from the REIT and a promissory note from CHP II OP in the principal amount of $2,500 (each, a “Note” and collectively the “Notes”).  A form of Note is attached as Exhibit A.  

 

1.Appointment as Escrow Agent.  The parties hereto hereby appoint Escrow Agent, and Escrow Agent agrees to act, as escrow agent on and subject to the terms and conditions of this Agreement.  

 

2.Escrowed Funds

 

2.1Promptly after the parties’ execution of this Agreement, CHP II OP will (or will cause one of its affiliates to) pay to Escrow Agent $383,000.00 in immediately available funds (in accordance with written wiring instructions from Escrow Agent).  Such funds received by Escrow Agent from CHP II OP hereunder are called herein the “escrowed funds.”

 

2.2Escrow Agent will hold the escrowed funds in escrow hereunder.  

 

2.3Escrow Agent will hold the escrowed funds in its IOLTA trust account as maintained by Escrow Agent from time to time in accordance with the applicable requirements of the State Bar of Georgia.  Currently, Escrow Agent maintains its IOLTA trust account with State Bank & Trust Company.  The escrowed funds shall be invested only in a cash bank account and not in a money market fund or any investments.  Any interest or other earnings on the escrowed funds will be disposed of in accordance with Escrow Agent’s standard practices for its IOLTA trust account (in accordance with the applicable requirements of the State Bar of Georgia).  In general, the net earnings on the IOLTA trust account are paid to the Georgia Bar Foundation.  Accordingly, none of the interest or other earnings on the escrowed funds will become part of the escrowed funds.

 

2.4RF and CHP II OP agree that the escrowed funds are to be held by Escrow Agent as security for the Notes until the REIT has raised $10,000,000 in gross proceeds in its initial public offering of common stock (the “Offering Threshold”) or, if earlier the principal, interest and any prepayment premiums on the Notes have been paid in full in accordance with their terms (the “Note Satisfaction”), in either case, at which point the escrowed funds shall be returned to CHP II OP.  Once the REIT has raised the Offering Threshold in its initial public offering of common stock or upon the Note Satisfaction, CHP II OP shall send written notice to Escrow Agent and RF notifying them of such fact and providing instructions with respect to releasing the Escrow Funds to CHP II OP.  Escrow Agent shall thereafter provide RF with ten business days to object, through written notice to Escrow Agent and CHP II OP, to such release of the escrowed funds, if it has good reason to believe that neither the Offering Threshold nor Note Satisfaction has been achieved.   

 

2.5   If, prior to the Offering Threshold or Note Satisfaction being achieved, an Event of Default under the Notes has occurred and not been cured in accordance with Section 2.02 of the Notes, and the Notes shall have become due and payable in accordance with Section 2.02 of the Notes, then RF shall send written notice to Escrow Agent and CHP II OP notifying them of such fact and providing instructions with respect to releasing the escrowed funds to RF for the benefit of repaying principal and interest to the Noteholders.  Escrow Agent shall thereafter provide CHP II OP with ten business days to object, through written notice to Escrow Agent and RF, to such release of the escrowed funds, if it has good reason to believe that the Notes have not become due and payable in accordance with Section 2.02 of the Notes 

 

EAST\127084276.1 

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2.5If there are any disputes as to whether the Escrow Agent is obligated to deliver any of the escrowed funds delivered to it pursuant hereto, the Escrow Agent shall not be obligated to make any delivery, but in such event, may hold the same until receipt by the Escrow Agent of an authorization in writing signed by all the parties having an interest in such dispute, directing the disposition of same.  If such written authorization is not given, or if proceedings for such determination are not commenced and diligently continued, the Escrow Agent may, but is not required to, bring an appropriate proceeding for leave to deposit said monies and/or documents in the registry of a court having jurisdiction in the state in which the Escrow Agent’s principal office is located pending such determination.  The Escrow Agent shall be reimbursed by CHP II OP (without prejudice of any rights or remedies that CHP II OP may have against other parties hereto) for all costs and expenses incurred in connection with any such action or proceeding, including, without limitation, reasonable attorneys’ fees and disbursements through all investigations and proceedings.  In the event the Escrow Agent places the escrowed funds it holds in the registry of a court pursuant to this Section 2.5 and files an action of interpleader naming the parties having an interest in such dispute, the Escrow Agent shall be released and relieved from any and all further obligation and liability hereunder or in connection herewith.

 

3.Termination.  This Escrow Agreement will terminate when Escrow Agent has released all the escrowed funds pursuant to section 2 hereof. 

 

4.Succession in Office of Escrow Agent.  Escrow Agent may resign as Escrow Agent by giving written notice to the other parties hereto at least 30 days in advance of the stated effective date of the resignation.  Escrow Agent may be removed as Escrow Agent at any time, with or without cause, by written notice given to Escrow Agent by CHP II OP and RF.  If the office of Escrow Agent becomes vacant, CHP II OP and RF may appoint a successor Escrow Agent.  If no successor Escrow Agent is appointed within 30 days after the office of Escrow Agent becomes vacant, Escrow Agent may petition any court of competent jurisdiction to appoint a successor Escrow Agent.

 

5.Exculpation and Indemnification of Escrow Agent.

 

5.1Escrow Agent shall have no duties except those that are expressly set forth herein.

 

5.2Escrow Agent shall have no duty hereunder unless and until it has received counterpart(s) of this Agreement bearing signatures of CHP II OP and RF.

 

5.3Escrow Agent shall be protected in acting upon any written notice, affidavit, request, waiver, consent, receipt or other paper or document furnished to it, not only in assuming its due execution and the validity and effectiveness of its provisions but also as to the truth and acceptability of any information therein contained, which it in good faith believes to be genuine and what it purports to be. 

 

5.4In addition to any other protections of Escrow Agent hereunder, Escrow Agent shall not be liable for any error of judgment, mistake of fact or law, or action of any kind taken or omitted to be taken hereunder if (i) in good faith reasonably believed by it to be in accordance with the provisions and intent hereof or (ii) otherwise not constituting gross negligence or willful misconduct by Escrow Agent.

 

5.5CHP II OP and RF jointly and severally shall indemnify Escrow Agent and each of its owners (partners), employees, and agents (“Indemnified Persons”) against all claims, demands, liabilities, losses, and expenses, including reasonable attorneys’ fees, that may at any time be incurred by or asserted against any of the Indemnified Persons relating to this Agreement, any transaction contemplated hereby, or any act or omission by or on behalf of Escrow Agent hereunder, except to the extent directly resulting from Escrow Agent’s gross negligence or willful misconduct.  

 

5.6If Escrow Agent is uncertain as to the proper disposition of any of the escrowed funds, Escrow Agent in its sole discretion may deposit the escrowed funds with a court of competent jurisdiction, together with such pleadings as Escrow Agent deems appropriate, whereupon Escrow Agent shall have no further obligation hereunder.

 

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6.Compensation of Escrow Agent.  Upon the execution of this Agreement by all parties, CHP II OP will pay Escrow Agent $2,500 as a fee for Escrow Agent serving as Escrow Agent hereunder.

 

7.Effect of Certain Provisions as between CHP II OP and RF.  The provisions of this Agreement concerning exculpation and indemnification of Escrow Agent shall not affect any rights or obligations under or in connection with the PPM, any of the transactions contemplated thereby, or any other agreement relating thereto, as between any of CHP II OP (and its affiliates) and RF (and its affiliates).

 

8.Notices.  All notices, requests, demands, claims, and other communications hereunder (“notices”) shall be in writing. Any notice shall be deemed duly given if it is sent by registered or certified mail, return receipt requested, postage prepaid, and addressed to the intended recipient as set forth below:

 

		
	
If to CHP II OP:

CHP II Partners, LP

Attn. Kevin R. Maddron, Chief Financial Officer 

450 South Orange Avenue

Orlando, FL 32801

Telephone: (407) 650-1000

Facsimile: (407) 540-2699

 

If to RF:

REIT Funding, LLC

Attn. Patrick J. Whelchel

1175 Peachtree St, NE, Suite 2200

Atlanta, Georgia 30361

email pjwhelchel@reit-funding.com
	
If to Escrow Agent:

Cushing, Morris, Armbruster & Montgomery, LLP

Attn. Kevin R. Armbruster

191 Peachtree Street, N.E., Suite 4500

Atlanta, Georgia 30303

email kra@cmamlaw.com

 

 

Any party may send any notice to the intended recipient at the address set forth above using any other means (including personal delivery, expedited courier, messenger service, telecopy, ordinary mail, or electronic mail), but no such notice shall be deemed to have been duly given unless and until it actually is received by the intended recipient. Any party may change the address to which notices are to be delivered by giving the other parties notice in the manner herein set forth.

 

9.Miscellaneous. This Agreement embodies the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and understandings relating to such subject matter.  This Agreement may be modified or waived only by a written instrument signed by each party hereto sought to be charged thereby.  This Agreement shall bind and benefit the parties named herein and their respective successors and assigns. This Agreement shall be governed by and construed in accordance with the laws of the State of Georgia (without giving effect to any choice- or conflict-of-laws rule that would cause the application of the laws of any jurisdiction other than the State of Georgia).  Any provision of this Agreement that is invalid or unenforceable as to any person or in any situation or jurisdiction shall not affect the validity or enforceability of the remaining provisions hereof or the validity or enforceability of the offending provision as to any other person or in any other situation or jurisdiction. Without limiting the survival of any other provisions of this Agreement as provided herein (including any provision that by its content or nature is intended to survive) or as a matter of law, the provisions of section 5.5 (which relates to indemnification of Escrow Agent), and such other provisions of this Agreement as may be necessary or desirable to enforce or interpret the terms of this Agreement will survive the termination of this Agreement.  Section headings herein are for convenience of reference only and shall not affect in any way the meaning or interpretation of this Agreement.  Wherever the context requires, the masculine, feminine, or neuter gender shall include the other two genders, and the singular shall include the plural and vice versa, and words importing persons shall include entities.  The words “includes” and “including” are not limiting.  This Agreement may be signed in any number of counterparts (and by different parties on separate counterparts) with the same effect as if all parties hereto had signed the same document.

 

Witness the parties’ signatures.

 

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CHP II PARTNERS, LP

 

By: CHP II GP, LLC

       as General Partner

 

By: /s/ Tracey B. Bracco_________________

Name: Tracey B. Bracco

Title:   Vice President

 

REIT FUNDING, LLC

 

By: /s/ Patrick J. Whelchel                             _ 

Name: Patrick J. Whelchel

Title: VP & General Counsel                         
	
CUSHING, MORRIS, ARMBRUSTER & MONTGOMERY, LLP

 

By: /s/ Kevin R. Armbruster____________ 

       Kevin R. Armbruster, Partner

	
 
	
 

 

 

 

 

 

EAST\127084276.1Exhibit 4.1

 

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

 

Original
Issue Date: August 9, 2016

Original
Conversion Price (subject to adjustment herein): $1.50

 

$5,700,000.00

 

 

8%
ORIGINAL ISSUE DISCOUNT SENIOR SECURED CONVERTIBLE DEBENTURE

DUE
AUGUST 9, 2018

 

THIS
8% ORIGINAL ISSUE DISCOUNT SENIOR SECURED CONVERTIBLE DEBENTURE is one of a series of duly authorized and validly issued 8% Original
Issue Discount Senior Secured Convertible Debentures of Sysorex Global, a Nevada corporation (the “Company”),
having its principal place of business at 2479 E. Bayshore Road, Suite 195, Palo Alto, California 94303, designated as its 8%
Original Issue Discount Senior Secured Convertible Debenture due August 9, 2018 (this debenture, the “Debenture”
and, collectively with the other debentures of such series, the “Debentures”).

 

FOR
VALUE RECEIVED, the Company promises to pay to HILLAIR CAPITAL INVESTMENTS L.P. or its registered assigns (the “Holder”),
or shall have paid pursuant to the terms hereunder, the principal sum of $5,700,000 on August 9, 2018 (the “Maturity
Date”) or such earlier date as this Debenture is required or permitted to be repaid as provided hereunder, and to pay
interest to the Holder on the aggregate unconverted and then outstanding principal amount of this Debenture in accordance with
the provisions hereof. Notwithstanding anything herein to the contrary, at any time while this Debenture remains outstanding,
upon any default in the payment of (A) the principal amount of any Debenture or (B) interest on any Debenture, as and when the
same shall become due and payable (whether on an Interest Payment Date, an Optional Redemption Date, a Periodic Redemption Date,
a Conversion Date or the Maturity Date or by acceleration or otherwise) which default is not cured within 10 Trading Days after
notice of such default is delivered by the Holder to the Company (each, a “Payment Default”) and upon each
subsequent Payment Default, the principal amount of this Debenture shall be increased by an amount equal to 0.5% of the then outstanding
principal amount of this Debenture (“Payment Default Principal Increase”). In addition, upon any Payment
Default, and until such time as such Payment Default has been cured, the Company shall pay interest to the Holder on the aggregate
unconverted and then outstanding principal amount of this Debenture at a rate of 15% per annum. This Debenture is subject
to the following additional provisions:

 

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

 

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

 

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

 

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

 

“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).

 

    	 	1	 

     

    

 

“Change
of Control Transaction” means the occurrence after the date hereof of any of (a) an acquisition after the date hereof
by an individual or legal entity or “group” (as described in Rule 13d-5(b)(1) promulgated under the Exchange Act)
of effective control (whether through legal or beneficial ownership of capital stock of the Company, by contract or otherwise)
of in excess of 40% of the voting securities of the Company (other than by means of conversion or exercise of the Debentures and
the Securities issued together with the Debentures), (b) the Company merges into or consolidates with any other Person, or any
Person merges into or consolidates with the Company and, after giving effect to such transaction, the stockholders of the Company
immediately prior to such transaction own less than 60% of the aggregate voting power of the Company or the successor entity of
such transaction, (c) the Company sells or transfers all or substantially all of its assets to another Person and the stockholders
of the Company immediately prior to such transaction own less than 60% of the aggregate voting power of the acquiring entity immediately
after the transaction, or (d) the execution by the Company of an agreement to which the Company is a party or by which it is bound,
providing for any of the events set forth in clauses (a) through (c) above.

 

“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.

 

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

 

“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).

 

    	 	2	 

     

    

 

“Equity
Conditions” means, during the period in question, (a) the Company shall have duly honored all conversions and redemptions
scheduled to occur or occurring by virtue of one or more Notices of 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) all of the Conversion Shares
issuable pursuant to the Transaction Documents (and shares issuable in lieu of cash payments of interest or redemptions of principal)
may be resold pursuant to Rule 144 without volume or manner-of-sale restrictions as determined by the counsel to the Company as
set forth in a written opinion letter to such effect, addressed and acceptable to the Transfer Agent and the Holder or a registration
statement covering the resale of all of the Conversion Shares issuable pursuant to the Transaction Documents (and shares issuable
in lieu of cash payments of interest or redemptions of principal) is effective under the Securities Act, (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 Transaction Documents, (f) there is
no existing Event of Default or Payment Default and no existing event which, with the passage of time or the giving of notice,
would constitute an Event of Default, (g) the issuance of the shares in question (or, in the case of an Optional Redemption, a
Periodic Redemption or an interest payment, the shares issuable upon conversion in full of the Optional Redemption Amount, Periodic
Redemption Amount or Interest Share Amount) to the Holder would not violate the limitations set forth in Section 4(d) and Section
4(e) herein, (h) there has been no public announcement of a pending or proposed Fundamental Transaction or Change of Control Transaction
that has not been consummated, other than a Fundamental Transaction or Change of Control Transaction to which the Company has
received the written consent of the Purchasers, (i) the applicable Holder is not in possession of any information provided by
the Company, any of its Subsidiaries, or any of their officers, directors, employees, agents or Affiliates, that constitutes,
or may constitute, material non-public information, (j) the number of shares of Common Stock issuable upon conversion in full
of the aggregate Interest Share Amount, Optional Redemption Amount or Periodic Redemption Amount at issue attributable to all
Holders is less than 20% of the aggregate volume of the number of shares of Common Stock traded on the principal Trading Market
during the 20 Trading Days immediately prior to such Interest Payment Date or Periodic Redemption Date and (k) the VWAP on the
Trading Day immediately preceding such Interest Payment Date, Optional Redemption Date or Periodic Redemption Date shall equal
or exceed the then Conversion Price.

 

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

 

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

 

“Interest
Conversion Rate” means the then Conversion Price.

 

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

 

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

 

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

 

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

 

“Issuable
Maximum” shall have the meaning set forth in Section 4(e).

 

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

 

    	 	3	 

     

    

 

“Mandatory
Default Amount” means the sum of (a) the greater of (i) the outstanding principal amount of this Debenture (excluding
any amount of outstanding principal amount of this Debenture that results from a Payment Default Principal Increase), plus all
accrued and unpaid interest hereon, divided by the Conversion Price on the date the Mandatory Default Amount is either (A) demanded
(if demand or notice is required to create an Event of Default) or otherwise due or (B) paid in full, whichever has a lower Conversion
Price, multiplied by the VWAP on the date the Mandatory Default Amount is either (x) demanded or otherwise due or (y) paid in
full, whichever has a higher VWAP, or (ii) 125% of the outstanding principal amount of this Debenture (excluding any amount of
outstanding principal amount of this Debenture that results from a Payment Default Principal Increase), plus 100% of accrued and
unpaid interest hereon, and (b) all other amounts, costs, expenses and liquidated damages due in respect of this Debenture.

 

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

 

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

 

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

 

“Optional
Redemption Amount” means the sum of (a) (i) if the Optional Redemption occurs within 12 months following the Original
Issue Date, 120% of the then outstanding principal amount of the Debenture or (ii) if the Optional Redemption occurs later than
12 months following the Original Issue Date, 110% of the then outstanding principal amount of the Debenture, (b) accrued but unpaid
interest and (c) all liquidated damages and other amounts due in respect of the Debenture.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

    	 	4	 

     

    

 

“Periodic
Redemption Amount” means, as to a Periodic Redemption, and subject to a proportional adjustment on account of a Payment
Default Principal Increase, $1,425,000, plus accrued but unpaid interest, liquidated damages and any other amounts then owing
to the Holder in respect of this Debenture.

 

“Periodic
Redemption Date” means November 9, 2017, February 9, 2018, May 9, 2018, and August 9, 2018.

 

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

 

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

 

“Permitted
Indebtedness” means (a) the indebtedness evidenced by the Debentures, (b) the Indebtedness existing on the Original
Issue Date and set forth on Schedule 3.1(aa) attached to the Purchase Agreement and (c) Indebtedness to Western Alliance
Bank pursuant to the Western Alliance Facility.

 

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

 

“Pre-Redemption
Conversion Shares” shall have the meaning set forth in Section 6(b) hereof.

 

“Purchase
Agreement” means the Securities Purchase Agreement, dated as of August 9, 2016 among the Company and the original Holders,
as amended, modified or supplemented from time to time in accordance with its terms.

 

“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).

 

    	 	5	 

     

    

 

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

 

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

 

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

 

“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 Purchasers of a majority in interest of the Securities then outstanding and reasonably acceptable to the Company, the fees
and expenses of which shall be paid by the Company.

 

Section
2.Interest.

 

a)  Payment of Interest in Cash or Kind. The Company shall pay interest to the Holder on the aggregate unconverted and then
outstanding principal amount of this Debenture at the rate of 8% per annum, payable quarterly on February 9, May 9, August 9 and
November 9, commencing on May 9, 2017, on each Periodic Redemption Date (as to that principal amount then being redeemed), on
each Conversion Date (as to that principal amount then being converted), on each Optional Redemption Date (as to that principal
amount then being redeemed) and on the Maturity Date (each such date, an “Interest Payment Date”) (if any Interest
Payment Date is not a Business Day, then the applicable payment shall be due on the next succeeding Business Day), in cash or,
at the Company’s option, in duly authorized, validly issued, fully paid and non-assessable shares of Common Stock at the
Interest Conversion Rate (the dollar amount to be paid in shares, the “Interest Share Amount”) or a combination
thereof; provided, however, that payment in shares of Common Stock may only occur if (i) all of the Equity Conditions
have been met (unless waived by the Holder in writing) during the 10 Trading Days immediately prior to the applicable Interest
Payment Date (the “Interest Notice Period”) and through and including the date such shares of Common Stock
are actually issued to the Holder, (ii) the Company shall have given the Holder notice in accordance with the notice requirements
set forth below, and (iii) as to such Interest Payment Date, prior to such Interest Notice Period (but not more than five (5)
Trading Days prior to the commencement of such Interest Notice Period), the Company shall have delivered to the Holder’s
account with The Depository Trust Company a number of shares of Common Stock to be applied against such Interest Share Amount
equal to the quotient of (x) the applicable Interest Share Amount divided by the Interest Conversion Rate (the “Interest
Conversion Shares”).

 

    	 	6	 

     

    

 

b) Company’s Election to Pay Interest in Cash or Kind. Subject to the terms and conditions herein, the decision whether
to pay interest hereunder in cash, shares of Common Stock or a combination thereof shall be at the sole discretion of the Company.
Prior to the commencement of any Interest Notice Period, the Company shall deliver to the Holder a written notice of its election
to pay interest hereunder on the applicable Interest Payment Date either in cash, shares of Common Stock or a combination thereof
and the Interest Share Amount as to the applicable Interest Payment Date, provided that the Company may indicate in such notice
that the election contained in such notice shall apply to future Interest Payment Dates until revised by a subsequent notice.
During any Interest Notice Period, the Company’s election (whether specific to an Interest Payment Date or continuous) shall
be irrevocable as to such Interest Payment Date. Subject to the aforementioned conditions, failure to timely deliver such written
notice to the Holder shall be deemed an election by the Company to pay the interest on such Interest Payment Date in cash. The
aggregate number of shares of Common Stock otherwise issuable to the Holder on an Interest Payment Date shall be reduced by the
number of Interest Conversion Shares previously issued to the Holder in connection with such Interest Payment Date.

 

c) Interest Calculations. Interest shall be calculated on the basis of a 360-day year, consisting of twelve 30 calendar day
periods, and shall accrue daily commencing on the Original Issue Date until payment in full of the outstanding principal, together
with all accrued and unpaid interest, liquidated damages and other amounts which may become due hereunder, has been made. Payment
of interest in shares of Common Stock (other than the Interest Conversion Shares issued prior to an Interest Notice Period) shall
otherwise occur pursuant to Section 4(c)(ii) herein and, solely for purposes of the payment of interest in shares, the Interest
Payment Date shall be deemed the Conversion Date. Interest shall cease to accrue with respect to any principal amount converted,
provided that the Company actually delivers the Conversion Shares within the time period required by Section 4(c)(ii) herein.
Interest hereunder will be paid to the Person in whose name this Debenture is registered on the records of the Company regarding
registration and transfers of this Debenture (the “Debenture Register”). Except as otherwise provided herein,
if at any time the Company pays interest partially in cash and partially in shares of Common Stock to the holders of the Debentures,
then such payment of cash shall be distributed ratably among the holders of the then-outstanding Debentures based on their (or
their predecessor’s) initial purchases of Debentures pursuant to the Purchase Agreement.

 

    	 	7	 

     

    

 

d) Late Fee. All overdue accrued and unpaid interest to be paid hereunder shall entail a late fee at an interest rate equal
to the lesser of 15% per annum or the maximum rate permitted by applicable law (the “Late Fees”) which shall
accrue daily from the date such interest is due hereunder through and including the date of actual payment in full. Notwithstanding
anything to the contrary contained herein, if, on any Interest Payment Date the Company has elected to pay accrued interest in
the form of Common Stock but the Company is not permitted to pay accrued interest in Common Stock because it fails to satisfy
the conditions for payment in Common Stock set forth in Section 2(a) herein, then, at the option of the Holder, the Company, in
lieu of delivering either shares of Common Stock pursuant to this Section 2 or paying the regularly scheduled interest payment
in cash, shall deliver, within five (5) Trading Days of each applicable Interest Payment Date, an amount in cash equal to the
product of (x) the number of shares of Common Stock otherwise deliverable to the Holder in connection with the payment of interest
due on such Interest Payment Date multiplied by (y) the highest VWAP during the period commencing on the Interest Payment Date
and ending on the Trading Day prior to the date such payment is actually made. If any Interest Conversion Shares are issued to
the Holder in connection with an Interest Payment Date and are not applied against an Interest Share Amount, then the Holder shall
promptly return such excess shares to the Company.

 

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

 

Section
3.Registration of Transfers and Exchanges.

 

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

 

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

 

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

 

    	 	8	 

     

    

 

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) and Section 4(e) hereof). The Holder shall effect
conversions by delivering to the Company a Notice of Conversion, the form of which is attached hereto as Annex A (each,
a “Notice of Conversion”), specifying therein the principal amount of this Debenture to be converted and the
date on which such conversion shall be effected (such date, the “Conversion Date”). If no Conversion Date is
specified in a Notice of Conversion, the Conversion Date shall be the date that such Notice of Conversion is deemed delivered
hereunder. No ink-original Notice of Conversion shall be required, nor shall any medallion guarantee (or other type of guarantee
or notarization) of any Notice of Conversion form be required. To effect conversions hereunder, the Holder shall not be
required to physically surrender this Debenture to the Company unless the entire principal amount of this Debenture, plus all
accrued and unpaid interest thereon, has been so converted 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 $1.50, subject to adjustment
herein (the “Conversion Price”).

 

 c) Mechanics of Conversion.

 

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

 

ii. Delivery of Conversion Shares Upon Conversion. Not later than three (3) Trading Days after each Conversion Date (the “Share
Delivery Date”), the Company shall deliver, or cause to be delivered, to the Holder (A) the Conversion Shares which,
on or after the six month anniversary of the Original Issue Date, shall be free of restrictive legends and trading restrictions
(other than those which may then be required by the Purchase Agreement) representing the number of Conversion Shares being acquired
upon the conversion of this Debenture (including, if the Company has given continuous notice pursuant to Section 2(b) for payment
of interest in shares of Common Stock at least 10 Trading Days prior to the date on which the Notice of Conversion is delivered
to the Company, shares of Common Stock representing the payment of accrued interest otherwise determined pursuant to Section 2(a)
but assuming that the Interest Notice Period is the 10 Trading Days period immediately prior to the date on which the Notice of
Conversion is delivered to the Company and excluding for such issuance the condition that the Company deliver Interest Conversion
Shares as to such interest payment prior to the commencement of the Interest Notice Period), (B) a bank check in the amount of
accrued and unpaid interest (if the Company has elected or is required to pay accrued interest in cash) and (C) a legal opinion
of Company counsel as may be requested by the Holder to enable Holder to deposit Conversion Shares in accounts with its prime
broker (or other brokerage account), together with the instruction letter to the Transfer Agent and the resolution of the Board
of Directors authorizing the Transaction Documents and any supporting documentation requested by the Holder (including, without
limitation, any instruction letter to the Transfer Agent). On or after the six month anniversary of the Original Issue 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.

 

    	 	9	 

     

    

 

iii. Failure to Deliver Conversion Shares. If, in the case of any Notice of Conversion, such Conversion Shares and the related
legal opinion of Company counsel, the instruction letter to the Transfer Agent and the resolution of the Board of Directors authorizing
the Transaction Documents 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 and the related legal opinion of Company counsel, the instruction letter
to the Transfer Agent and the resolution of the Board of Directors authorizing the Transaction Documents and other supporting
documentation pursuant to Section 4(c)(ii) by the Share Delivery Date, the Company shall pay to the Holder, in cash, as liquidated
damages and not as a penalty, for each $1,000 of principal amount being converted, $10 per Trading Day (increasing to $20 per
Trading Day on the tenth (10th) Trading Day after such liquidated damages begin to accrue) for each Trading Day after
such Share Delivery Date until such Conversion Shares and the related legal opinion of Company counsel, the instruction letter
to the Transfer Agent and the resolution of the Board of Directors authorizing the Transaction Documents and other supporting
documentation are delivered or Holder rescinds such conversion. Nothing herein shall limit a Holder’s right to pursue actual
damages or declare an Event of Default pursuant to Section 8 hereof for the Company’s failure to deliver Conversion Shares
within the period specified herein and the Holder shall have the right to pursue all remedies available to it hereunder, at law
or in equity including, without limitation, a decree of specific performance and/or injunctive relief. The exercise of any such
rights shall not prohibit the Holder from seeking to enforce damages pursuant to any other Section hereof or under applicable
law.

 

    	 	10	 

     

    

 

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 and the related legal
opinion of Company counsel, the instruction letter to the Transfer Agent and the resolution of the Board of Directors authorizing
the Transaction Documents and other supporting documentation 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 and
payment of interest on this Debenture, each as herein provided, free from preemptive rights or any other actual contingent purchase
rights of Persons other than the Holder (and the other holders of the Debentures), not less than such aggregate number of shares
of the Common Stock as shall (subject to the terms and conditions set forth in the Purchase Agreement) be issuable (taking into
account the adjustments and restrictions of Section 5) upon the conversion of the then outstanding principal amount of this Debenture
and payment of interest hereunder. The Company covenants that all shares of Common Stock that shall be so issuable shall, upon
issue, be duly authorized, validly issued, fully paid and nonassessable.

 

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

 

    	 	11	 

     

    

 

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.

 

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
or the Preferred Stock) 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 two Trading Days confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding. 
In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise
of securities of the Company, including this Debenture, by the Holder or its Affiliates since the date as of which such number
of outstanding shares of Common Stock was reported. The “Beneficial Ownership Limitation” shall be 4.99% of
the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock
issuable upon conversion of this Debenture held by the Holder. The Holder, upon 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.

 

    	 	12	 

     

    

 

e) Issuance Limitations. Notwithstanding anything herein to the contrary, if the Company has not obtained Shareholder Approval,
then the Company may not issue, upon conversion or redemption of this Debenture, a number of shares of Common Stock which, when
aggregated with any shares of Common Stock issued on or after the Original Issue Date and prior to such Conversion Date (i) in
connection with the conversion or redemption of any Debentures issued pursuant to the Purchase Agreement and (ii) in connection
with the conversion of any Preferred Stock issued pursuant to the Purchase Agreement would exceed 5,339,221 shares of Common Stock
(subject to adjustment for forward and reverse stock splits, recapitalizations and the like) (such number of shares, the “Issuable
Maximum”). Each Holder shall be entitled to a portion of the Issuable Maximum equal to the quotient obtained by dividing
(x) the original principal amount of the Holder’s Debenture by (y) the aggregate original principal amount of all Debentures
issued on the Original Issue Date to all Holders. In addition, each Holder may allocate its pro-rata portion of the Issuable Maximum
among Debentures and Preferred Stock held by it in its sole discretion. Such portion shall be adjusted upward ratably in the event
a Holder no longer holds any Debentures or Preferred Stock and the amount of shares issued to the Holder pursuant to the Holder’s
Debentures and Preferred Stock was less than the Holder’s pro-rata share of the Issuable Maximum.

 

Section
5.Certain Adjustments.

 

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

 

b) Subsequent Equity Sales. If, at any time following the six (6) month anniversary of the Original Issue Date (or, in the
event of an Included Financing (as defined below) only, at any time following the Original Issue Date), the Company or any Subsidiary,
as applicable, sells or grants any option to purchase or sells or grants any right to reprice, or otherwise disposes of or issues
(or announces any sale, grant or any option to purchase or other disposition), any Common Stock or Common Stock Equivalents entitling
any Person to acquire shares of Common Stock at an effective price per share that is lower than the then Conversion Price (such
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 Conversion Price, such issuance shall be deemed to have occurred for less than the Conversion
Price on such date of the Dilutive Issuance), then the Conversion Price shall be reduced to equal the Base Conversion Price. Such
adjustment shall be made whenever such Common Stock or Common Stock Equivalents are issued. Notwithstanding the foregoing, no
adjustment will be made under this Section 5(b) in respect of an Exempt Issuance or that will result in an adjustment to the Conversion
Price to less than $0.47 (subject to adjustment for forward and reverse stock splits, recapitalizations and similar transactions
after the Original Issue Date). 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. For purposes herein,
an “Included Financing” means any issuance by the Company or any of its Subsidiaries of Common Stock or Common
Stock Equivalents in a financing transaction in which either (i) the aggregate gross proceeds to the Company exceeds $5,000,000
or (ii) the effective purchase price per share of Common Stock is less than $0.40 (subject to adjustment for reverse and forward
stock splits, recapitalizations and other transactions).

 

    	 	13	 

     

    

 

c) [RESERVED]

 

d) [RESERVED]

 

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) and Section 4(e) 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) and Section
4(e) 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.

 

    	 	14	 

     

    

 

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.

 

    	 	15	 

     

    

 

Section
6.Redemption.

 

a) Optional Redemption at Election of Company. Subject to the provisions of this Section 6(a), the Company may deliver a notice
to the Holder (an “Optional Redemption Notice” and the date such notice is deemed delivered hereunder, the
“Optional Redemption Notice Date”) of its irrevocable election to redeem some or all of the then outstanding
principal amount of this Debenture for cash in an amount equal to the Optional Redemption Amount on the 10th Trading Day following
the Optional Redemption Notice Date (such date, the “Optional Redemption Date”, such 10 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 and including 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 the Company will honor
all Notices of Conversion tendered from the time of delivery of the Optional Redemption Notice through the date that is 5 Trading
Days following the date of delivery of the Optional Redemption Notice. The Company’s determination to pay an Optional Redemption
in cash shall be applied ratably to all of the holders of the then outstanding Debentures based on their (or their predecessor’s)
initial purchases of Debentures pursuant to the Purchase Agreement.

 

b) Periodic Redemption. On each Periodic Redemption Date, the Company shall redeem the Periodic Redemption Amount (the “Periodic
Redemption”). The Periodic Redemption Amount payable on each Periodic Redemption Date shall be paid in cash; provided,
however, as to any Periodic Redemption and upon 10 Trading Days’ prior written irrevocable notice (the “Periodic
Redemption Notice” and such 10 Trading Days period, the “Periodic Redemption Period”), in lieu of
a cash redemption payment, the Company may elect to pay all or part of a Periodic Redemption Amount in Conversion Shares based
on a conversion price equal the then Conversion Price (the “Periodic Redemption Conversion Price”); provided,
further, that the Company may not pay the Periodic Redemption Amount in Conversion Shares unless (y) from the date that
the Holder receives the duly delivered Periodic Redemption Notice through and until the date such Periodic Redemption is paid
in full, the Equity Conditions have been satisfied, unless waived in writing by the Holder, and (z) as to such Periodic Redemption,
prior to such Periodic Redemption Period (but not more than 5 Trading Days prior to the commencement of the Periodic Redemption
Period), the Company shall have delivered to the Holder’s account with The Depository Trust Company a number of shares of
Common Stock to be applied against such Periodic Redemption Amount equal to the quotient of (x) the applicable Periodic Redemption
Amount divided by the Periodic Redemption Conversion Price (the “Pre-Redemption Conversion Shares”). The Holder
may convert, pursuant to Section 4(a), any principal amount of this Debenture subject to a Periodic Redemption at any time prior
to the date that the Periodic Redemption Amount, plus accrued but unpaid interest, liquidated damages and any other amounts then
owing to the Holder are due and paid in full. Unless otherwise indicated by the Holder in the applicable Notice of Conversion,
any principal amount of this Debenture converted during the applicable Periodic Redemption Period until the date the Periodic
Redemption Amount is paid in full shall be first applied to the principal amount subject to the Periodic Redemption Amount payable
in cash and then to the Periodic Redemption Amount payable in Conversion Shares. Any principal amount of this Debenture converted
during the applicable Periodic Redemption Period in excess of the Periodic Redemption Amount shall be applied against the last
principal amount of this Debenture scheduled to be redeemed hereunder, in reverse time order from the Maturity Date; provided,
however, if any such conversion is applied against such Periodic Redemption Amount, the Pre-Redemption Conversion Shares,
if any were issued in connection with such Periodic Redemption or were not already applied to such conversions, shall be first
applied against such conversion. The Company covenants and agrees that it will honor all Notices of Conversion tendered up until
such amounts are paid in full. The Company’s determination to pay a Periodic Redemption in cash, shares of Common Stock
or a combination thereof shall be applied ratably to all of the holders of the then outstanding Debentures based on their (or
their predecessor’s) initial purchases of Debentures pursuant to the Purchase Agreement.

 

    	 	16	 

     

    

 

c) Redemption Procedure. The payment of cash or issuance of Common Stock, as applicable, pursuant to an Optional Redemption
or a Periodic Redemption shall be payable on the Optional Redemption Date or the Periodic Redemption Date, as applicable. If any
portion of the payment pursuant to an Optional Redemption or a Periodic Redemption shall not be paid by the Company by the applicable
due date, interest shall accrue thereon at an interest rate equal to the lesser of 15% per annum or the maximum rate permitted
by applicable law until such amount is paid in full. Notwithstanding anything herein contained to the contrary, if any portion
of the Optional Redemption Amount or Periodic Redemption Amount remains unpaid after such date, the Holder may elect, by written
notice to the Company given at any time thereafter, to invalidate such Optional Redemption or Periodic Redemption, ab
initio, and, with respect to the Company’s failure to honor the Optional Redemption, the Company shall have no further
right to exercise such Optional Redemption. Notwithstanding anything to the contrary in this Section 6, the Company’s determination
to redeem in cash or its elections under Section 6(b) 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, the Company shall not, and
shall not permit any of the Subsidiaries to, directly or indirectly:

 

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

 

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

 

c) amend its charter documents, including, without limitation, its certificate of incorporation and bylaws, in any manner that materially
and adversely affects any rights of the Holder;

 

d) repay, repurchase or offer to repay, repurchase or otherwise acquire more than a de minimis number of shares of
its Common Stock or Common Stock Equivalents other than as to (i) the Conversion Shares 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;

 

    	 	17	 

     

    

 

e) repay, repurchase or offer to repay, repurchase or otherwise acquire any Indebtedness, other than the Debentures if on a pro-rata
basis;

 

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

 

g) enter into any transaction with any Affiliate of the Company which would be required to be disclosed in any public filing with
the Commission, unless such transaction is made on an arm’s-length basis and expressly approved by a majority of the disinterested
directors of the Company (even if less than a quorum otherwise required for board approval); or

 

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

 

Section
8.Events of Default.

 

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

 

i. any default in the payment of (A) the principal amount of any Debenture or (B) interest, liquidated damages and other amounts
owing to a Holder on any Debenture, as and when the same shall become due and payable (whether on a Conversion Date, an Interest
Payment Date, an Optional Redemption Date, a Periodic Redemption Date or the Maturity Date or by acceleration or otherwise) which
default is not cured within 10 Trading Days after notice of such default is delivered by the Holder to the Company;

 

ii. the Company or any Subsidiary shall fail to observe or perform in any material respect 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 (ix) 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. a default or event of default (subject to any grace or cure period provided in the applicable agreement, document or instrument)
shall occur under (A) any of the Transaction Documents or (B) any material agreement, lease, document or instrument to which the
Company or any Subsidiary is obligated, including, without limitation, any mortgage, indenture agreement, or credit agreement
or credit facility, that is filed as an exhibit to the SEC Reports or is required to be filed as an exhibit to the SEC Reports
or a future SEC Report;

 

    	 	18	 

     

    

 

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

 

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

 

vi.  the 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;

 

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

 

viii. the Company does not meet the current public information requirements under Rule 144;

 

ix. 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;

 

x. 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”;

 

xi. any monetary judgment, writ or similar final process shall be entered or filed against the Company, any subsidiary or any of their
respective property or other assets for more than $200,000, and such judgment, writ or similar final process shall remain unvacated,
unbonded or unstayed for a period of 45 calendar days; or

 

xii. a false or inaccurate certification (including a false or inaccurate deemed certification) by the Company that the Equity Conditions
are satisfied or that there has been no Equity Conditions Failure or as to whether any Event of Default has occurred.

 

    	 	19	 

     

    

 

b) Remedies Upon Event of Default. If any Event of Default occurs, the outstanding principal amount of this Debenture, plus
accrued but unpaid interest, liquidated damages and other amounts owing in respect thereof through the date of acceleration, shall
become, at the Holder’s election, immediately due and payable in cash at the Mandatory Default Amount. Commencing 5 days
after the occurrence of any Event of Default that results in the eventual acceleration of this Debenture, the interest rate on
this Debenture shall accrue at an interest rate equal to the lesser of 15% 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 or email address or address of the Holder appearing
on the books of the Company, or if no such facsimile number or email address 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 at 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.

 

    	 	20	 

     

    

 

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

 

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

 

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.

 

    	 	21	 

     

    

 

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.

 

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

 

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

 

    	 	22	 

     

    

 

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

 

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

 

j) Secured Obligation. The obligations of the Company under this Debenture are secured by all assets of the Company and each
Subsidiary pursuant to the Security Agreement, dated as of August 5, 2016, between the Company, the Subsidiaries and the Secured
Parties (as defined therein).

 

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.

 

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

 

(Signature
Page Follows)

 

    	 	23	 

     

    

 

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.

 

	 	sysorex
                                         global

	 	 
	 	By:	/s/
    Nadir Ali
	 		

        Name: Nadir
        Ali

        Title:   Chief
        Executive Officer

        

	 	 	 
	 	Facsimile
    No. for delivery of Notices: (408) 824-1543
	 	 	 
	 	E-mail
    address for delivery of Notices: nadir.ali@sysorex.com

 

    	 	24	 

     

    

 

ANNEX
A

 

NOTICE
OF CONVERSION

 

The
undersigned hereby elects to convert principal under the 8% Original Issue Discount Senior Secured Convertible Debenture due August
9, 2018 of Sysorex Global, a Nevada corporation (the “Company”), into shares of common stock (the “Common
Stock”), of the Company according to the conditions hereof, as of the date written below. If shares of Common Stock
are to be issued in the name of a person other than the undersigned, the undersigned will pay all transfer taxes payable with
respect thereto and is delivering herewith such certificates and opinions as reasonably requested by the Company in accordance
therewith. No fee will be charged to the holder for any conversion, except for such transfer taxes, if any.

 

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

 

The
undersigned agrees to comply with the 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:
	 	 
	 	Payment
        of Interest in Common Stock __ yes __ no

        If
        yes, $_____ of Interest Accrued on Account of Conversion at Issue.

	 	 
	 	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:________________

 

     

     

    

 

Schedule 1

 

CONVERSION
SCHEDULE

 

The
8% Original Issue Discount Senior Secured Convertible Debentures due on August 9, 2018 in the aggregate principal amount of $5,700,000
are issued by Sysorex Global, a Nevada corporation. This Conversion Schedule reflects conversions made under Section 4 of the
above referenced Debenture.

 

Dated:

  

	
         

        Date of Conversion

        (or for first entry, Original Issue Date)
	 	
         

        Amount of 

Conversion
	 	
        Aggregate
Principal Amount 

Remaining Subsequent to 

Conversion

        (or original Principal Amount)
	 	
        Company

Attest

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