Document:

Exhibit 4.2

 

FIRST SUPPLEMENTAL
INDENTURE

 

between

 

HENNESSY ADVISORS, INC.

 

and

 

U.S. BANK NATIONAL
ASSOCIATION,

 

Trustee

 

Dated
as of October [●], 2021

 

     

     

    

 

FIRST SUPPLEMENTAL
INDENTURE

 

THIS FIRST SUPPLEMENTAL
INDENTURE (this “First Supplemental Indenture”), dated as of October [●], 2021 is between Hennessy Advisors, Inc.,
a California corporation (the “Company”), and U.S. Bank National Association, a national banking association, as trustee
(the “Trustee”). All capitalized terms used herein shall have the meaning set forth in the Base Indenture (as defined below).

 

RECITALS OF THE
COMPANY

 

The Company and
the Trustee executed and delivered an indenture, dated as of October [●], 2021 (the “Base Indenture” and, as supplemented
by this First Supplemental Indenture, the “Indenture”), to provide for the issuance by the Company from time to time of the
Company’s unsecured debentures, notes, bonds or other evidences of indebtedness (the “Debt Securities”), to be issued
in one or more series as provided in the Indenture.

 

The Company desires
to issue and sell up to $[40,250,000] aggregate principal amount of the Company’s [●]% Notes due 2026 (the “Notes”).

 

Sections 11.01(i) and
11.01(j) of the Base Indenture provide that without the consent of Holders of the Securities of any series issued under the Indenture,
the Company, when authorized by or pursuant to a Board Resolution, and the Trustee, at any time and from time to time, may enter into
one or more indentures supplemental to the Base Indenture to (i) change or eliminate any of the provisions of the Base Indenture,
provided, however, that any such change or elimination shall become effective only when there is no Debt Security Outstanding
of any series created prior to the execution of such supplemental indenture which is entitled to the benefit of such provision and/or
(ii) establish the form or terms of Debt Securities of any series as permitted by Section 2.02 and Section 3.01 of the
Base Indenture.

 

The Company desires
to establish the form and terms of the Notes and to change or eliminate certain provisions of the Base Indenture for the benefit of the
Holders of the Notes (except as may be provided in a future supplemental indenture to the Indenture (a “Future Supplemental Indenture”)).

 

The Company has
duly authorized the execution and delivery of this First Supplemental Indenture to provide for the issuance of the Notes and all acts
and things necessary to make this First Supplemental Indenture a valid, binding, and legal obligation of the Company and to constitute
a valid agreement of the Company, in accordance with its terms, have been done and performed.

 

NOW, THEREFORE,
for and in consideration of the premises and the purchase of the Notes by the Holders thereof, it is mutually agreed, for the equal and
proportionate benefit of all Holders of the Notes, as follows:

 

Article I

TERMS
OF THE NOTES

 

Section 1.01     The
following terms relating to the Notes are hereby established:

 

(a)            The
Notes shall constitute a series of Debt Securities having the title “[●]% Notes due 2026.” The Notes shall bear a CUSIP
number of 425885 209 and an ISIN number of US4258852098.

 

(b)            The
aggregate principal amount of the Notes that may be initially authenticated and delivered under the Indenture (except for Debt Securities
authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of, other Debt Securities of that series
pursuant to Article 3, the second paragraph of Section 4.03, or Section 11.04 of the Indenture) shall be $[35,000,000]
(or up to $[40,250,000] aggregate principal amount if the underwriters’ over-allotment option is exercised in full). Under a Board
Resolution, Officers’ Certificate pursuant to Board Resolutions or a Future Supplemental Indenture, the Company may from time to
time, without the consent of the Holders of Notes, issue additional Notes (in any such case “Additional Notes”) having the
same ranking and the same interest rate, maturity and other terms as the Notes. Any Additional Notes and the existing Notes will constitute
a single series under the Indenture and all references to the relevant Notes herein shall include the Additional Notes unless the context
otherwise requires.

 

     

     

    

 

(c)            The
Stated Maturity of the Notes shall be December 31, 2026. The entire outstanding principal of the Notes shall be payable on the Stated
Maturity, unless earlier redeemed or repurchased in accordance with the provisions of the Indenture.

 

(d)            The
rate at which the Notes shall bear interest shall be [●]% per annum. The date from which interest shall accrue on the Notes
shall be [October [●]] 2021 or the most recent Interest Payment Date to which interest has been paid or provided for; the
Interest Payment Dates for the Notes shall be March 31, June 30, September 30 and December 31 of each year,
commencing December 31, 2021. If an Interest Payment Date falls on a day that is not a Business Day, then the applicable
interest payment will be made on the next succeeding Business Day and no additional interest will accrue as a result of such delayed
payment). The initial interest period will be the period from and including [October [●]], 2021, to, but excluding, the
initial Interest Payment Date, and the subsequent interest periods will be the periods from and including an Interest Payment Date
to, but excluding, the next Interest Payment Date or the Stated Maturity, as the case may be; the interest so payable, and
punctually paid or duly provided for, on any Interest Payment Date, will be paid to the Person in whose name the Note (or one or
more Predecessor Debt Securities) is registered at the close of business on the Regular Record Date for such interest, which shall
be March 15, June 15, September 15 and December 15 (whether or not a Business Day), as the case may be,
next preceding such Interest Payment Date. Payment of the principal of (and premium, if any, on) and any such interest on the Notes
will be made at the office of the Trustee located at 60 Livingston Avenue, St. Paul, MN, 55107, and at such other address as
designated by the Trustee, in such coin or currency of the United States of America as at the time of payment is legal tender for
payment of public and private debts; provided, however, that, at the request of the registered Holder the Company will
pay the principal of (and premium, if any, on) and interest, if any, on the Notes by wire transfer of immediately available funds to
an account at a bank in the United States, on the date when such amount is due and payable provided, further, however,
that so long as the Notes are registered to Cede & Co., such payment will be made by wire transfer in accordance with the
procedures established by The Depository Trust Company and the Trustee. To request payment by wire transfer, the registered Holder
must give the paying agent and the Trustee appropriate wire transfer instructions at least 15 Business Days before the requested
payment is due. In the case of any interest payment due on an Interest Payment Date, the instructions must be given by the person
who is the registered Holder on the Regular Record Date. Any wire instructions, once properly given, will remain in effect unless
and until new instructions are given in accordance with this Section. Interest on the Notes will be computed on the basis of a
360-day year of twelve 30-day months.

 

(e)            The
Notes shall be initially issuable in global form (each such Note, a “Global Note”). The Global Notes and the Trustee’s
certificate of authentication thereon shall be substantially in the form of Exhibit A to this First Supplemental Indenture. Each
Global Note shall represent the outstanding Notes as shall be specified therein and each shall provide that it shall represent the aggregate
principal amount of outstanding Notes from time to time endorsed thereon and that the aggregate principal amount of outstanding Notes
represented thereby may from time to time be reduced or increased, as appropriate, to reflect exchanges and redemptions. Any endorsement
of a Global Note to reflect the amount of any increase or decrease in the amount of outstanding Notes represented thereby shall be made
by the Trustee or the Debt Security Registrar, in accordance with Sections 2.04 and 3.06 of the Base Indenture.

 

(f)            The
depositary for such Global Notes (the “Depository”) shall be The Depository Trust Company, New York, New York. The Debt Security
Registrar with respect to the Global Notes shall be the Trustee.

 

(g)            The
Notes shall be defeasible pursuant to Section 13.02 or Section 13.06 of the Indenture. Covenant defeasance contained in Section 13.06
of the Indenture shall apply to the covenants contained in Sections 5.07 and 5.08 of the Indenture.

 

(h)            The
Notes shall be redeemable pursuant to Article 4 of the Base Indenture and as follows:

 

(i)            The
Notes will be redeemable in whole or in part at any time or from time to time, at the option of the Company, on or after December 31,
2023, at a redemption price equal to 100% of the outstanding principal amount of the Notes to be redeemed, plus accrued and unpaid interest payments otherwise
payable thereon for the then-current quarterly interest period accrued to, but excluding, the Redemption Date.

 

(ii)            Notice
of redemption shall be given in writing and electronically delivered through The Depository Trust Company or mailed, first-class postage
prepaid or by overnight courier guaranteeing next-day delivery, to each Holder of the Notes to be redeemed, not less than thirty (30)
nor more than sixty (60) days prior to the Redemption Date, at the Holder’s address appearing in the Debt Security Register. All
notices of redemption shall contain the information set forth in Section 4.02 of the Base Indenture.

 

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(iii)            If
the Company elects to redeem only a portion of the Notes, the Trustee or, with respect to the Global Notes, the Depository will
determine the method for selecting the particular Notes to be redeemed, in accordance with Section 4.02 of the Base Indenture
and the rules of any national securities exchange or quotation system on which the Notes are listed, to the extent
applicable.

 

(iv)            Unless
the Company defaults in payment of the Redemption Price, on and after the Redemption Date, interest will cease to accrue on the Notes
called for redemption.

 

(i)            The
Notes shall not be subject to any sinking fund pursuant to Section 4.05 of the Base Indenture.

 

(j)            The
Notes shall be issuable in denominations of $25.00 and integral multiples of $25.00 in excess thereof.

 

(k)            Holders
of the Notes will not have the option to have the Notes repaid prior to the Stated Maturity. Nothing in this Section shall prohibit
purchases by the Company in the open market, private transactions or otherwise prior to the Stated Maturity.

 

Article II

DEFINITION AND OTHER PROVISIONS OF GENERAL APPLICATION

 

Section 2.01     Except
as may be provided in a Future Supplemental Indenture, for the benefit of the Holders of the Notes but no other series of Debt Securities
under the Indenture, whether now or hereafter issued and Outstanding, Article 1 of the Base Indenture shall be amended by adding
the following defined terms to Section 1.01 in appropriate alphabetical sequence, as follows:

 

Capital
Lease Obligation:

 

The
term “Capital Lease Obligation” means, at the time any determination thereof is to be made, the amount of the liability
in respect of a capital lease that would at such time be required to be capitalized and reflected as a liability on a balance sheet
(excluding the footnotes thereto) in accordance with GAAP; provided that obligations of the Company or any Subsidiaries the Company
may acquire or establish in the future, or of a special purpose or other entity not consolidated with the Company and any
Subsidiaries the Company may acquire or establish in the future that (x) initially were not included on the Company’s
consolidated balance sheet as capital lease obligations and were subsequently characterized as capital lease obligations or, in the
case of such a special purpose or other entity becoming consolidated with the Company and its Subsidiaries were required to be
characterized as capital lease obligations upon such consolidation, in either case, due to a change in accounting treatment or
otherwise, or (y) did not exist on the date of the First Supplemental Indenture and were required to be characterized as
capital lease obligations but would not have been required to be treated as capital lease obligations on such date had they
existed at that time, shall for all purposes not be treated as Capital Lease Obligations; provided further, notwithstanding the
foregoing, “Capital Lease Obligations” shall not include obligations relating to a lease that was (or would be)
classified and accounted for by the Company and its Subsidiaries as an operating lease under GAAP as in effect prior to the
effectiveness of Accounting Standards Codification 842.

 

Exchange Act:

 

The term
 “Exchange Act” means the Securities Exchange Act of 1934, as amended.

 

First Supplemental Indenture:

 

The term “First Supplemental Indenture” means that certain
First Supplemental Indenture, dated as of October [●], 2021, between the Company and the Trustee.

 

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GAAP:

 

The
term “GAAP” means generally accepted accounting principles in effect from time to time in the United States; provided, notwithstanding
the foregoing, if any change in such generally accepted accounting principles or in the application thereof after the date of the First
Supplemental Indenture would affect the computation of any financial ratio or requirement set forth in the Debt Securities or the Indenture,
then the Company may deliver notice to the Trustee that such change will not apply for any determinations thereafter under the Debt Securities
or the Indenture.

 

Net Consolidated Debt:

 

The term
 “Net Consolidated Debt” means, as of any determination date, without duplication, an amount equal to (a) the aggregate
principal amount of outstanding indebtedness for borrowed money of the Company and its Subsidiaries, plus (b) Capital Lease Obligations
that the Company and/or its Subsidiaries may have outstanding as of such date, minus (c) the aggregate amount of cash and cash equivalents
included on the Company’s most recent consolidated balance sheet; provided that the cash proceeds of any proposed incurrence of
indebtedness shall not be included in this clause (c) for purposes of calculating Net Consolidated Debt; provided further that “Net
Consolidated Debt” shall not include (1) any indebtedness that has been defeased, discharged and/or redeemed, provided that
funds in an amount equal to all such indebtedness (including interest and any other amounts required to be paid to the holders thereof
in order to give effect to such defeasance, discharge or redemption) have been irrevocably deposited with a trustee or agent for the
benefit of the relevant holders of such indebtedness, (2) interest, fees, make-whole amounts, premium, charges or expenses, if any,
relating to the principal amount of Net Consolidated Debt, and (3) any indebtedness owing to the Company by any of its Subsidiaries
or any indebtedness owing to any of its Subsidiaries by the Company or another Subsidiary.

 

Net Consolidated Debt to
Equity Ratio:

 

The term
 “Net Consolidated Debt to Equity Ratio” means the ratio of Net Consolidated Debt to the Company’s total shareholders’
equity as shown on the Company’s most recent consolidated balance sheet.

 

Article III

COVENANTS

 

Section 3.01     Except
as may be provided in a Future Supplemental Indenture, for the benefit of the Holders of the Notes but no other series of Debt Securities
under the Indenture, whether now or hereafter issued and Outstanding, Article 5 of the Base Indenture shall be amended by adding
the following new Sections 5.07 through 5.08 thereto, each as set forth below:

 

“Section 5.07.
Commission Reports and Reports to Holders.

 

If, at
any time, the Company is not subject to the reporting requirements of Sections 13 or 15(d) of the Exchange Act to file any periodic
reports with the Commission, the Company agrees to furnish to the Holders of Notes and the Trustee for the period of time during which
the Notes are Outstanding: (i) within 90 days after the end of each fiscal year of the Company, audited annual consolidated
financial statements of the Company and (ii) within 45 days after the end of each fiscal quarter of the Company (other than the
Company’s fourth fiscal quarter), unaudited interim consolidated financial statements of the Company. All such financial statements
shall be prepared, in all material respects, in accordance with GAAP.”

 

“Section 5.08.
Net Consolidated Debt to Equity Ratio.

 

The
Company agrees to not permit the Net Consolidated Debt to Equity Ratio, measured as of the last day of each fiscal quarter, to be greater
than 2 to 1.”

 

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Article IV

REMEDIES

 

Section 4.01     Except
as may be provided in a Future Supplemental Indenture, for the benefit of the Holders of the Notes but no other series of Debt Securities
under the Indenture, whether now or hereafter issued and Outstanding, Section 7.01 of the Base Indenture shall be amended by replacing
the final two paragraphs thereof with the following:

 

“In
each and every such case, so long as such Event of Default with respect to any series of Debt Securities for which there are Debt Securities
Outstanding occurs and is continuing and shall not have been remedied or waived to the extent permitted by the terms of this Indenture,
unless the principal of all of the Debt Securities of such series shall have already become due and payable, either the Trustee or the
Holders of not less than 25% in aggregate principal amount of the Outstanding Debt Securities of such series, by notice in writing to
the Company (and to the Trustee if given by Holders), may declare the principal of all the Debt Securities of such series and the interest
accrued thereon to be due and payable immediately, and upon any such declaration the same shall become and shall be immediately due and
payable, anything in this Indenture or in the Debt Securities of such series contained to the contrary notwithstanding. This provision,
however, is subject to the condition that if, at any time after the principal of the Debt Securities of such series shall have been so
declared due and payable, and before any judgment or decree for the payment of the moneys due shall have been obtained or entered as
hereinafter provided, (i) the Company shall pay or shall deposit with the Trustee a sum sufficient to pay in the currency in which
the Debt Securities of such series are payable all matured installments of interest upon all of the Debt Securities and the principal
of and premium, if any, on any and all Debt Securities of such series which shall have become due otherwise than by such declaration
(with interest on overdue installments of interest to the extent that payment of such interest is enforceable under applicable law and
on such principal and premium, if any, at the rate borne by the Debt Securities of such series or as otherwise provided in the form of
Debt Security for such series, to the date of such payment or deposit) and the expenses of the Trustee (subject to Section 8.06),
and (ii) any and all Events of Default under this Indenture, other than the nonpayment of principal of and accrued interest on Debt Securities
of such series which shall have become due by such declaration, shall have been cured or shall have been waived in accordance with Section 7.07
or provision deemed by the Trustee to be adequate shall have been made therefor — then and in every such case the Holders of at
least a majority in aggregate principal amount of the Debt Securities of such series then Outstanding, by written notice to the Company
and to the Trustee, may rescind and annul such declaration and its consequences; but no such rescission and annulment shall extend to
or shall affect any subsequent default, or shall impair any right consequent thereon.

 

In case
the Trustee or any Holders shall have proceeded to enforce any right under this Indenture and such proceedings shall have been discontinued
or abandoned because of such rescission and annulment or for any other reason or shall have been determined adversely to the Trustee,
then and in every such case the Company, the Trustee and the Holders shall be restored respectively to their several positions and rights
hereunder, and all rights, remedies and powers of the Company, the Trustee and the Holders shall continue as though no such proceeding
had been taken.”

 

Section 4.02      Except as may be provided in a Future Supplemental
Indenture, for the benefit of the Holders of the Notes but no other series of Debt Securities under the Indenture, whether now or hereafter
issued and Outstanding, Section 7.07 of the Base Indenture shall be amended by replacing the third sentence thereof with the following:

 

“Subject to Section 7.01, the Holders of a majority
in aggregate principal amount of the Outstanding Debt Securities of any series may on behalf of the Holders of all the Debt Securities
of such series waive any past default or Event of Default hereunder and its consequences except (i) a default in the payment of principal
of or premium, if any, or interest on such Debt Securities, or (ii) in respect of a covenant or provision hereof which cannot be modified
or amended without the written consent of the Holder of each Outstanding Debt Security of such series directly and adversely affected
thereby.”

 

Article V

MEETINGS OF HOLDERS OF SECURITIES

 

Section 5.01     Except
as may be provided in a Future Supplemental Indenture, for the benefit of the Holders of the Notes but no other series of Debt Securities
under the Indenture, whether now or hereafter issued and Outstanding, Section 10.05 of the Base Indenture shall be amended by replacing
the third paragraph thereof with the following:

 

“Subject
to the provisions of Section 9.04, at any meeting each Holder of a Debt Security of a series entitled to vote at such meeting or
proxy shall be entitled to one vote for each $25.00 principal amount of Debt Securities of such series held or represented by such Holder;
provided, however, that no vote shall be cast or counted at any meeting in respect of any Debt Security challenged as not
Outstanding and ruled by the chairman of the meeting to be not Outstanding. The chairman of the meeting shall have no right to vote except
as a Holder of Debt Securities of such series or proxy therefor. Any meeting of Holders of Debt Securities duly called pursuant to the
provisions of Section 10.02 or 10.03 may be adjourned from time to time and the meeting may be held as so adjourned without further
notice.”

 

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Article VI

MERGER

 

Section 6.01     Except
as may be provided in a Future Supplemental Indenture, for the benefit of the Holders of the Notes but no other series of Debt Securities
under the Indenture, whether now or hereafter issued and Outstanding, Article 12 of the Base Indenture shall be amended by replacing
Section 12.01 thereof with the following:

 

“Section 12.01     Company
May Consolidate, etc., on Certain Terms

 

Unless
otherwise provided in the terms of such Debt Securities, the Company shall not consolidate with or merge with or into any other entity
or convey or transfer all or substantially all of its assets to any Person, unless:

 

(1)            either
the Company shall be the continuing entity, or the entity (if other than the Company) formed by such consolidation or into which the
Company is merged or the Person which acquires by conveyance or transfer all or substantially all of the assets of the Company shall
expressly assume, by an indenture supplemental hereto, executed and delivered to the Trustee, in form reasonably satisfactory to the
Trustee, the due and punctual payment of the principal of (and premium, if any) and interest, if any, on all the Debt Securities and
the performance of every covenant of this Indenture on the part of the Company to be performed or observed;

 

(2)            immediately
after giving effect to such transaction, no default or Event of Default shall have happened and be continuing; and

 

(3)            the
Company and the successor Person have delivered to the Trustee an Officers’ Certificate and an Opinion of Counsel each stating
that such consolidation, merger, conveyance or transfer and such supplemental indenture comply with this Article and that all conditions
precedent herein provided for relating to such transaction have been complied with.”

 

Article VII

DEFEASANCE

 

Section 7.01     Except
as may be provided in a Future Supplemental Indenture, for the benefit of the Holders of the Notes but no other series of Debt Securities
under the Indenture, whether now or hereafter issued and Outstanding, Article 13 of the Base Indenture shall be amended by replacing
Section 13.01 thereof with the following:

 

“Section 13.01     Satisfaction,
Discharge and Defeasance of Debt Securities of any Series

 

Except
as set forth below, this Indenture shall upon Company Request cease to be of further effect with respect to any series of Debt Securities
specified in such Company Request (except as to any surviving rights of registration of transfer or exchange of Debt Securities of such
series expressly provided for herein or pursuant hereto, any surviving rights of tender for repayment at the option of the Holders),
and the Trustee, upon receipt of a Company Order, and at the expense of the Company, shall promptly execute proper instruments acknowledging
satisfaction and discharge of this Indenture as to such series when:

 

		(1)	Either:

 

		(A)	all Debt Securities of such series
                                            theretofore authenticated and delivered (other than (i) Debt Securities which have been
                                            destroyed, lost or stolen and which have been replaced or paid as provided in Section 3.07
                                            and (ii) Debt Securities for whose payment money has theretofore been deposited in trust
                                            or segregated and held in trust by the Company and thereafter repaid to the Company or discharged
                                            from such trust, as provided in Sections 13.03 and 13.04) have been delivered to the Trustee
                                            for cancellation; or

 

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		(B)	all
                                            Debt Securities of such series not theretofore delivered
                                            to the Trustee for cancellation

 

		(i)	have
                                            become due and payable, or

 

		(ii)	will
                                            become due and payable at their Stated Maturity within one year, or

 

		(iii)	if
                                            redeemable at the option of the Company, are to be called for redemption within one year
                                            under arrangements satisfactory to the Trustee for the giving of notice of redemption by
                                            the Trustee in the name, and at the expense, of the Company,

 

and the Company, in the
case of (i), (ii) or (iii) above, has irrevocably deposited or caused to be deposited with the Trustee as trust funds in
trust for such purpose, solely for the benefit of the Holders of such Debt Securities, an amount in the currency in which the Debt Securities of such
series are payable, sufficient to pay and discharge the entire indebtedness on such Debt Securities not theretofore delivered to the
Trustee for cancellation, for principal (and premium, if any) and interest, if any, to the date of such deposit (in the case of Debt
Securities which have become due and payable on or prior to the date of such doposit) or to the Stated Maturity or Redemption Date, as the case may be;

 

		(2)	the Company has paid or
                                            caused to be paid all other sums payable hereunder by the Company with respect to the Debt Securities of such series; and

 

		(3)	the Company has delivered to the Trustee
                                            an Officers’ Certificate and an Opinion of Counsel, each stating that all conditions
                                            precedent herein provided for in this Indenture relating to the satisfaction and discharge
                                            of this Indenture as to such series have been complied with.

 

Notwithstanding the satisfaction
and discharge of this Indenture, the obligations of the Company to the Trustee and any predecessor Trustee under Section 8.06, the
obligations of the Company to any Authenticating Agent under Section 8.14, and, if money shall have been deposited with the Trustee
pursuant to subclause (B) of clause (1) of this Section, the obligations of the Trustee under Section 8.05 and Section 13.04
shall survive any termination of this Indenture.”

 

Section 7.02     Except
as may be provided in a Future Supplemental Indenture, for the benefit of the Holders of the Notes but no other series of Debt Securities
under the Indenture, whether now or hereafter issued and Outstanding, Section 13.02 of the Base Indenture shall be amended by replacing
clauses (b) and (c) thereof with the following:

 

“(b)     no
Event of Default or event which with notice or lapse of time would become an Event of Default with respect to such series of Debt
Securities shall have occurred and be continuing on the date of such deposit and no Event of Default or event which with notice or
lapse of time would become an Event of Default specified in clause (e) or (f) of
Section 7.01 shall occur within the next 90 days thereafter;

 

(c)            the
Company shall have delivered to the Trustee an Opinion of Counsel stating that (i) the Company has received from, or there has
been published by, the U.S Internal Revenue Service, a ruling, or (ii) there has
been a change in applicable Federal income tax law, in either case to the effect  that, the Holders of such Outstanding Debt Securities will not recognize income, gain or loss for Federal income tax
purposes as a result of such defeasance and will be subject to Federal income tax on the same amounts, in the same manner and at the
same times as would have been the case if such defeasance had not occurred;”

 

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Section 7.03     Except
as may be provided in a Future Supplemental Indenture, for the benefit of the Holders of the Notes but no other series of Debt Securities
under the Indenture, whether now or hereafter issued and Outstanding, Section 13.02 of the Base Indenture shall be amended by adding
clause (e) thereof with the following:

 

“(e)     Such
defeasance shall not result in a breach or violation of, or constitute a default under, this Indenture or any other material
agreement or instrument to which the Company is a party or by which it is bound.”

 

Section 7.04     Except
as may be provided in a Future Supplemental Indenture, for the benefit of the Holders of the Notes but no other series of Debt Securities
under the Indenture, whether now or hereafter issued and Outstanding, Article 13 of the Base Indenture shall be amended by replacing
all reference to “Section 13.01 or 13.02” in Sections 13.03 or 13.05 thereof with “Sections 13.01, 13.02 or 13.06”.

 

Section 7.05     Except
as may be provided in a Future Supplemental Indenture, for the benefit of the Holders of the Notes but no other series of Debt Securities
under the Indenture, whether now or hereafter issued and Outstanding, Article 13 of the Base Indenture shall be amended by adding
the following new Section 13.06:

 

“Section 13.06     Covenant
Defeasance

 

The
Company shall be released from its obligations under any covenant with respect to a series of Outstanding Debt Securities and such
Debt Securities shall thereafter be deemed to be not “Outstanding” for the purposes of any direction, waiver, consent or
declaration or Act of Holders (and the consequences of any thereof) in connection with such covenant, but shall continue to be
deemed “Outstanding” for all other purposes hereunder if:

 

(a)            the
Company has deposited or caused to be deposited with the Trustee as trust funds in trust for the purpose (1) Dollars or Foreign
Currency, as applicable based on the denomination of such series of Debt Securities, in an amount, or (2) Government Obligations which through the payment of interest and principal in respect
thereof in accordance with their terms will provide on or before the due date of any payment in respect of such series of Debt Securities
in an amount, or (3) a combination thereof, sufficient, after payment of all Federal, state and local taxes in respect thereof payable
by the Trustee, in the opinion of a nationally-recognized firm of independent public accountants expressed in a written certification
thereof delivered to the Trustee, to pay and discharge (A) the principal of (and premium, if any) and each installment of principal
(and premium, if any) and interest on the Outstanding Debt Securities of that series on the Stated Maturity of such principal or installment
of principal or interest and (B) any mandatory sinking fund payments or analogous payments or payments pursuant to any call for
redemption applicable to Debt Securities of such series on the day on which such payments are due and payable in accordance with the
terms of the Indenture and such Debt Securities;

 

(b)            Such
covenant defeasance shall not result in a breach or violation of, or constitute a default under, this Indenture or any other material
agreement or instrument to which the Company is a party or by which it is bound;

 

(c)            no
Event of Default or event which with notice or lapse of time or both would become an Event of Default with respect to such series of
Debt Securities shall have occurred and be continuing on the date of such deposit and no Event of Default or event which with notice
or lapse of time would become an Event of Default specified in clause (e) or (f) of Section 7.01 shall occur within
the next 90 days thereafter;

 

(d)            the
Company shall have delivered to the Trustee an Opinion of Counsel to the effect that the Holders of such Outstanding Debt Securities
will not recognize income, gain or loss for Federal income tax purposes as a result of such covenant defeasance and will be subject to
Federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such covenant defeasance
had not occurred; and

 

    8 

     

    

 

(e)            the
Company has delivered to the Trustee an Officers’ Certificate and an Opinion of Counsel, each stating that all conditions precedent
herein provided for relating to the defeasance contemplated by this Section have been complied with.

 

For this
purpose, such “covenant defeasance” means that, with respect to such Outstanding Debt Securities, the Company may omit to
comply with and shall have no liability in respect of any term, condition or limitation set forth in any such Section or such other
covenant, whether directly or indirectly, by reason of any reference elsewhere herein to any such Section or such other covenant
or by reason of reference in any such Section or such other covenant to any other provision herein or in any other document and
such omission to comply shall not constitute a default or an Event of Default under Section 7.01(d) or 7.01(g) or otherwise,
as the case may be, but, except as specified above, the remainder of this Indenture and such Debt Securities shall be unaffected thereby.
Following a covenant defeasance, payment of such Debt Securities may not be accelerated because of an Event of Default solely by reference
to such Sections specified above in this Section 13.05.”

 

Article VIII

MISCELLANEOUS

 

Section 8.01     This
First Supplemental Indenture and the Notes shall be governed by and construed in accordance with the laws of the State of New York. This
First Supplemental Indenture is subject to the provisions of the Trust Indenture Act that are required to be part of the Indenture and
shall, to the extent applicable, be governed by such provisions.

 

Section 8.02     In
case any provision in this First Supplemental Indenture or in the Notes shall be invalid, illegal or unenforceable, the validity, legality
and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.

 

Section 8.03     This
First Supplemental Indenture may be executed in counterparts, each of which will be an original, but such counterparts will together
constitute but one and the same First Supplemental Indenture. The exchange of copies of this First Supplemental Indenture and of signature
pages by facsimile, .pdf transmission, email or other electronic means shall constitute effective execution and delivery of this
First Supplemental Indenture for all purposes. Signatures of the parties hereto transmitted by facsimile, .pdf transmission, email or
other electronic means shall be deemed to be their original signatures for all purposes.

 

Section 8.04     The
Base Indenture, as supplemented and amended by this First Supplemental Indenture, is in all respects ratified and confirmed, and the
Base Indenture and this First Supplemental Indenture shall be read, taken and construed as one and the same instrument with respect to
the Notes. All provisions included in this First Supplemental Indenture supersede any conflicting provisions included in the Base Indenture
with respect to the Notes, unless not permitted by law. The Trustee accepts the trusts created by the Base Indenture, as supplemented
by this First Supplemental Indenture, and agrees to perform the same upon the terms and conditions of the Base Indenture, as supplemented
by this First Supplemental Indenture.

 

Section 8.05     The
provisions of this First Supplemental Indenture shall become effective as of the date hereof.

 

Section 8.06     Notwithstanding
anything else to the contrary herein, the terms and provisions of this First Supplemental Indenture shall apply only to the Notes and
shall not apply to any other series of Debt Securities under the Indenture and this First Supplemental Indenture shall not and does not
otherwise affect, modify, alter, supplement or change the terms and provisions of any other series of Debt Securities under the Indenture,
whether now or hereafter issued and Outstanding.

 

Section 8.07     The
recitals contained herein and in the Notes, except the Trustee’s certificate of authentication, shall be taken as the statements
of the Company, and the Trustee assumes no responsibility for their correctness. The Trustee makes no representations as to the validity
or sufficiency of this First Supplemental Indenture, the Notes or any Additional Notes, except that the Trustee represents that it is
duly authorized to execute and deliver this First Supplemental Indenture, authenticate the Notes and any Additional Notes and perform
its obligations hereunder. The Trustee shall not be accountable for the use or application by the Company of the Notes or any Additional
Notes or the proceeds thereof.

 

    9 

     

    

 

IN WITNESS WHEREOF,
the parties hereto have caused this First Supplemental Indenture to be duly executed as of the date first above written.

 

	 	HENNESSY ADVISORS, INC.
	 	 	 
	 	By:	                                                          
	 	 	Name:
	 	 	Title:
	 	 	 
	 	U.S.
    BANK NATIONAL ASSOCIATION,
	 	as
    Trustee
	 	 	 
	 	By:	 
	 	 	Name:
	 	 	Title:

 

[Signature
page to First Supplemental Indenture]

 

     

     

    

 

Exhibit A
- Form of Global Note

 

This Debt Security
is a Global Note within the meaning of the Indenture hereinafter referred to and is registered in the name of The Depository Trust Company
or a nominee thereof. This Debt Security may not be exchanged in whole or in part for a Debt Security registered, and no transfer of
this Debt Security in whole or in part may be registered, in the name of any Person other than The Depository Trust Company or a nominee
thereof, except in the limited circumstances described in the Indenture.

 

Unless this certificate
is presented by an authorized representative of The Depository Trust Company to the Company or its agent for registration of transfer,
exchange or payment and such certificate issued in exchange for this certificate is registered in the name of Cede & Co., or
such other name as requested by an authorized representative of The Depository Trust Company, any transfer, pledge or other use hereof
for value or otherwise by or to any person is wrongful, as the registered owner hereof, Cede & Co., has an interest herein.

 

Hennessy Advisors, Inc.

 

	No.	$

    CUSIP No. 425885 209

    ISIN No. US4258852098

 

[●]%
Notes Due 2026

 

Hennessy Advisors, Inc.,
a corporation duly organized and existing under the laws of California (herein called the “Company,” which term includes
any successor Person under the Indenture hereinafter referred to), for value received, hereby promises to pay to Cede & Co.,
or registered assigns, the principal sum of             (U.S. $            )
on December 31, 2026 and to pay interest thereon from [●], 2021 or from the most recent Interest Payment Date to which interest
has been paid or duly provided for, quarterly on March 31, June 30, September 30 and December 31 in each year,
commencing December 31, 2021 (provided, that if an Interest Payment Date falls on a day that is not a Business Day, then the applicable
interest payment will be made on the next succeeding Business Day and no additional interest will accrue as a result of such delayed
payment), at the rate of [●]% per annum, until the principal hereof is paid or made available for payment. The interest so payable,
and punctually paid or duly provided for, on any Interest Payment Date will, as provided in such Indenture, be paid to the Person in
whose name this Debt Security is registered at the close of business on the Regular Record Date for such interest, which shall be March 15,
June 15, September 15 and December 15 (whether or not a Business Day), as the case may be, next preceding such Interest
Payment Date. Any such interest not so punctually paid or duly provided for will forthwith cease to be payable to the Holder on such
Regular Record Date and may either be paid to the Person in whose name this Debt Security is registered at the close of business on a
Special Record Date for the payment of such Defaulted Interest to be fixed by the Trustee, notice whereof shall be given to Holders of
Debt Securities of this series not less than 10 days prior to such Special Record Date, or be paid at any time in any other lawful manner
not inconsistent with the requirements of any securities exchange on which the Debt Securities of this series may be listed, and upon
such notice as may be required by such exchange, all as more fully provided in said Indenture. This Debt Security may be issued as part
of a series.

 

Payment of the principal
of (and premium, if any, on) and any such interest on this Debt Security will be made at the Corporate Trust Office of the Trustee in
such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts;
provided, however, that, at the request of the registered Holder as provided in the Indenture, the Company will pay the principal of (and premium, if any, on) and interest,
if any, on this Debt Security by wire transfer of immediately available funds to an account at a bank in the United States, on the date
when such amount is due and payable provided, further, however,
that so long as this Debt Security is registered to Cede & Co., such payment will be made by wire transfer in accordance with
the procedures established by The Depository Trust Company and the Trustee.

 

Reference is hereby
made to the further provisions of this Debt Security set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.

 

Unless the certificate
of authentication hereon has been executed by the Trustee referred to on the reverse hereof by manual signature, this Debt Security shall
not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose.

 

    A-1 

     

    

 

IN WITNESS WHEREOF,
the Company has caused this instrument to be duly executed.

 

Dated:

 

	 	HENNESSY ADVISORS, INC.
	 	 	 
	 	By:	                                                  
	 	 	Name:
	 	 	Title:
	 	 	 
	 	By:	 
	 	 	Name:
	 	 	Title:

  

    A-2 

     

    

 

This is one of the
Debt Securities of the series designated therein referred to in the within-mentioned Indenture.

 

Dated:

 

	 	U.S. BANK NATIONAL ASSOCIATION,
	 	as Trustee
	 	 	 
	 	By:	 
	 	 	Authorized Signatory

 

    A-3 

     

    

 

Hennessy
Advisors, Inc.

[●]% Notes due 2026

 

This Debt Security
is one of a duly authorized issue of Debt Securities of the Company (herein called the “Securities”), issued and to be issued
in one or more series under an indenture, dated as of October [●], 2021 (herein called the “Base Indenture,” which
term shall have the meaning assigned to it in such instrument), between the Company and U.S. Bank National Association, as Trustee (herein
called the “Trustee,” which term includes any successor trustee under the Base Indenture), and reference is hereby made to
the Base Indenture for a statement of the respective rights, limitations of rights, duties and immunities thereunder of the Company,
the Trustee, and the Holders of the Securities and of the terms upon which the Securities are, and are to be, authenticated and delivered,
as amended and supplemented by the First Supplemental Indenture, dated October [●], 2021, relating to the Securities, by and
between the Company and the Trustee (herein called the “First Supplemental Indenture,” the First Supplemental Indenture and
the Base Indenture collectively are herein called the “Indenture”). In the event of any conflict between the Base Indenture
and the First Supplemental Indenture, the First Supplemental Indenture shall govern and control.

 

This Security is
one of the series designated on the face hereof, initially limited in aggregate principal amount to [thirty-five million] dollars (U.S.
$[35,000,000]), or up to [forty million two hundred fifty thousand] dollars (U.S. $[40,250,000]) aggregate principal amount if the underwriters’
over-allotment option to purchase additional Securities is exercised in full. Under a Board Resolution, Officers’ Certificate pursuant
to Board Resolutions or an indenture supplement, the Company may from time to time, without the consent of the Holders of Securities,
issue additional Securities of this series (in any such case “Additional Securities”) having the same ranking and the same
interest rate, maturity and other terms as the Securities. Any Additional Securities and the existing Securities will constitute a single
series under the Indenture and all references to the relevant Securities herein shall include the Additional Securities unless the context
otherwise requires. The aggregate principal amount of outstanding Securities represented hereby may from time to time be reduced or increased,
as appropriate, to reflect exchanges and redemptions.

 

The Securities of
this series are subject to redemption in whole or in part at any time or from time to time, at the option of the Company, on or after
December 31, 2023 at a redemption price equal to 100% of the outstanding principal amount thereof, plus accrued and unpaid interest
payments otherwise payable for the then-current quarterly interest period accrued to, but excluding, the date fixed for redemption.

 

Notice of redemption
shall be given in writing and electronically delivered through The Depository Trust Company or mailed, first-class postage prepaid or
by overnight courier guaranteeing next-day delivery, to each Holder of the Securities to be redeemed, not less than thirty (30) nor more
than sixty (60) days prior to the Redemption Date, at the Holder’s address appearing in the Debt Security Register. All notices
of redemption shall contain the information set forth in Section 4.02 of the Base Indenture.

 

Any exercise of
the Company’s option to redeem the Securities will be done in compliance with the Indenture.

 

If the Company
elects to redeem only a portion of the Securities, the Trustee or, with respect to the Global Notes, the Depository will determine
the method for selecting the particular Securities to be redeemed, in accordance with Section 4.02 of the Base Indenture and
the rules of any national securities exchange or quotation system on which the Securities are listed, to the extent applicable.
In the event of redemption of this Security in part only, a new Security or Securities of this series and of like tenor for the
unredeemed portion hereof will be issued in the name of the Holder hereof upon the cancellation hereof.

 

Unless the Company
defaults in payment of the Redemption Price, on and after the Redemption Date, interest will cease to accrue on the Securities called for
redemption.

 

Holders of Securities
do not have the option to have the Securities repaid prior to December 31, 2026.

 

     

     

    

 

The Indenture contains
provisions for defeasance at any time of the entire indebtedness of this Security or certain restrictive covenants and Events of Default
with respect to this Security, in each case upon compliance with certain conditions set forth in the Indenture.

 

The Indenture provides
that the Company may not consolidate with or merge with or into any other entity or convey or transfer all or substantially all of its
assets to any Person, unless certain specified conditions set forth in Article 12 of the Indenture are satisfied.

 

If an Event of Default
with respect to Securities of this series shall occur and be continuing, the principal of the Securities of this series may be declared
due and payable in the manner and with the effect provided in the Indenture.

 

The Indenture permits,
with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Company
and the rights of the Holders of the Securities of each series to be affected under the Indenture at any time by the Company and the
Trustee with the consent of the Holders of not less than a majority in aggregate principal amount of the Securities at the time Outstanding
of each series to be affected. The Indenture also contains provisions permitting the Holders of specified percentages in principal amount
of the Securities of each series at the time Outstanding, on behalf of the Holders of all Securities of such series, to waive compliance
by the Company with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such
consent or waiver by the Holder of this Security shall be conclusive and binding upon such Holder and upon all future Holders of this
Security and of any Security issued upon the registration of transfer hereof or in exchange hereof or in lieu hereof, whether or not
notation of such consent or waiver is made upon this Security.

 

As
provided in and subject to the provisions of the Indenture, the Holder of this Security shall not have the right to institute any
proceeding with respect to the Indenture or for the appointment of a receiver or trustee or for any other remedy thereunder, unless
such Holder shall have previously given the Trustee written notice of a continuing Event of Default with respect to the Securities
of this series, the Holders of not less than 25% in principal amount of the Securities of this series at the time Outstanding shall
have made written request to the Trustee to institute proceedings in respect of such Event of Default as Trustee and offered the
Trustee such indemnity, security or both as it may reasonably require against the costs,
expenses and other liabilities to be incurred in compliance with such request, and the Trustee for 60 days after its receipt of such
notice, request and offer of indemnity, security or both, shall have neglected or refused to institute any such action, suit or
proceeding (and no direction inconsistent with such written request shall have been given to the Trustee pursuant to Section 7.07 of
the Indenture). The foregoing shall not apply to any suit instituted by the Holder of this Security for the enforcement of any
payment of principal hereof or any premium or interest hereon on or after the respective due dates expressed herein.

 

No reference herein
to the Indenture and no provision of this Security or of the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of and any premium and interest on this Security at the times, place and rate, and in
the coin or currency, herein prescribed.

 

As provided in the
Indenture and subject to certain limitations therein set forth, the transfer of this Security is registrable in the Debt Security Register,
upon surrender of this Security for registration of transfer at the office or agency of the Company in any place where the principal
of and any premium and interest on this Security are payable, duly endorsed by, or accompanied by a written instrument of transfer in
form satisfactory to the Company and the Debt Security Registrar duly executed by, the Holder hereof or his attorney duly authorized
in writing, and thereupon one or more new Securities of this series and of like tenor, of authorized denominations and for the same aggregate
principal amount, will be issued to the designated transferee or transferees.

 

The Securities of
this series are issuable only in registered form without coupons in denominations of $25.00 and any integral multiples of $25.00 in excess
thereof. As provided in the Indenture and subject to certain limitations therein set forth, Securities of this series are exchangeable
for a like aggregate principal amount of Securities of this series and of like tenor of a different authorized denomination, as requested
by the Holder surrendering the same.

 

    2 

     

    

 

No service charge
shall be made for any such registration of transfer or exchange, but the Company, the Trustee or the Debt Security Registrar may require
payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith.

 

Prior to due presentment
of this Security for registration of transfer, the Company, the Trustee or the Debt Security Registrar and any agent of the Company,
the Trustee or the Debt Security Registrar may treat the Person in whose name this Security is registered as the owner hereof for all
purposes, whether or not this Security be overdue, and none of the Company, the Trustee, the Debt Security Registrar, or any agent thereof
shall be affected by notice to the contrary.

 

All
terms used in this Security which are defined in the Indenture shall have the meanings assigned to them in the Indenture. To
the extent any provision of this Security conflicts with the express provisions of the Indenture, the provisions of the Indenture shall
govern and be controlling.

 

The Indenture and
this Security shall be governed by and construed in accordance with the laws of the State of New York.

 

    3Exhibit
4.1

 

CERTAIN
CONFIDENTIAL INFORMATION (MARKED BY BRACKETS AS “[***]”) HAS BEEN EXCLUDED FROM THIS EXHIBIT BECAUSE IT IS BOTH (I) NOT MATERIAL
AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED.

 

UNLESS
PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY MUST NOT TRADE THE SECURITY BEFORE OCTOBER 11, 2021.

 

WITHOUT
PRIOR WRITTEN APPROVAL OF THE TSX VENTURE EXCHANGE AND COMPLIANCE WITH ALL APPLICABLE SECURITIES LEGISLATION, THE SECURITIES REPRESENTED
BY THIS CERTIFICATE MAY NOT BE SOLD, TRANSFERRED, HYPOTHECATED OR OTHERWISE TRADED ON OR THROUGH THE FACILITIES OF THE TSX VENTURE EXCHANGE
OR OTHERWISE IN CANADA OR TO OR FOR THE BENEFIT OF A CANADIAN RESIDENT UNTIL OCTOBER 11, 2021.

 

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

 

	 	Original
    Issue Date: June 10, 2021
	 	 
	Principal
    Amount: $1,500,000	 

 

Original
Conversion Price (subject to adjustment herein): $0.10

 

CONVERTIBLE
DEBENTURE

DUE
December 10, 2022

 

THIS
CONVERTIBLE DEBENTURE (this “Debenture”) is issued Debenture by WESTERN MAGNESIUM CORPORATION, a corporation incorporated
under the laws of the State of Delaware, (the “Borrower”), having its principal place of business at 580 Hornby Street,
Suite 900, British Columbia, V6C 3B6, Canada (the “Debenture”).

 

FOR
VALUE RECEIVED, Borrower promises to pay to ALPHA CAPITAL ANSTALT, or its registered assigns (the “Holder”),
with an address at: [***], email: [***], or shall have paid pursuant to the terms hereunder, the principal sum of $1,500,000 on
December 10, 2022, (the “Maturity Date”) or such earlier date as this Debenture is required or permitted to
be repaid or such later date if extended by the Holder as provided hereunder, and to pay interest, if any, to the Holder on the aggregate
unconverted and then outstanding principal amount of this Debenture in accordance with the provisions hereof.

 

    	1

    	 

    

 

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:

 

“Applicable
Law” shall mean any law, rule or regulation of any governmental authority or jurisdiction applicable to any party to this Agreement,
as the case may be.

 

“Bankruptcy
Event” means any of the following events: (a) Borrower or any Subsidiary 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 Borrower or any Subsidiary thereof, (b) there is commenced against Borrower or any Subsidiary thereof
any such case or proceeding that is not dismissed within 60 days after commencement, (c) Borrower or any Subsidiary thereof is adjudicated
insolvent or bankrupt or any order of relief or other order approving any such case or proceeding is entered, (d) Borrower or any 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) Borrower or any Subsidiary thereof makes a general assignment for the benefit
of creditors, (f) Borrower or any Subsidiary thereof calls a meeting of its creditors with a view to arranging a composition, adjustment
or restructuring of its debts or (g) Borrower or any 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.

 

“Change
of Control Transaction” means, other than by means of conversion or exercise of this Debenture and the Securities issued together
with this Debenture, 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 NI 45-106) of effective control (whether through legal or beneficial ownership of capital
stock of Borrower, by contract or otherwise) of in excess of 50% of the voting securities of Borrower, (b) Borrower merges into or consolidates
with any other Person, or any Person merges into or consolidates with Borrower and, after giving effect to such transaction, the stockholders
of Borrower immediately prior to such transaction own less than 50% of the aggregate voting power of Borrower or the successor entity
of such transaction, (c) Borrower sells or transfers all or substantially all of its assets to another Person and the stockholders of
Borrower immediately prior to such transaction own less than 50% of the aggregate voting power of the acquiring entity immediately after
the transaction, (d) a replacement at one time or within a three year period of more than one-half of the members of the Board of Directors
which is not approved by a majority of those individuals who are members of the Board of Directors on the Original Issue Date (or by
those individuals who are serving as members of the Board of Directors on any date whose nomination to the Board of Directors was approved
by a majority of the members of the Board of Directors who are members on the date hereof), or (e) the execution by Borrower of an agreement
to which Borrower is a party or by which it is bound, providing for any of the events set forth in clauses (a) through (d) above.

 

    	2

    	 

    

 

“Conversion
Shares” means, collectively, the shares of Common Stock issuable upon conversion of the Principal Amount and accrued interest
on this Debenture in accordance with the terms hereof.

“GAAP”
means United States generally accepted accounting principles.

 

“IFRS”
means international reporting financial standards.

 

“Indebtedness”
means (x) any liabilities for borrowed money, (y) all guaranties, endorsements and other contingent obligations in respect of indebtedness
of others, whether or not the same are or should be reflected in the Borrower’s consolidated balance sheet (or the notes thereto),
except guaranties by endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of
business; and (z) the present value of any lease payments in excess of $50,000 due under leases required to be capitalized in accordance
with IFRS and GAAP.

 

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

 

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

 

“Permitted
Indebtedness” means (a) any liabilities for borrowed money not in excess of $250,000 in the aggregate, (b) all guaranties,
endorsements and other contingent obligations in respect of indebtedness of others, whether or not the same are or should be reflected
in the Company’s consolidated balance sheet (or the notes thereto) not affecting more than $250,000 in the aggregate, except guaranties
by endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business; (c) the
present value of any lease payments not in excess of $250,000 due under leases required to be capitalized in accordance with IFRS; (d)
any industrial equipment leases up to an aggregate $500,000 and (e) indebtedness for the direct purposes of building a plant to produce
magnesium metal.

 

“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 Borrower) have been established
in accordance with IFRS, (b) Liens imposed by law which were incurred in the ordinary course of Borrower’s business, such as carriers’,
warehousemen’s and mechanics’ Liens, statutory landlords’ Liens, and other similar Liens arising in the ordinary course
of Borrower’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 Borrower 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 in connection with Permitted Indebtedness under clauses
(a), (b) and (e) thereunder, and Liens incurred in connection with Permitted Indebtedness under clauses (c) or (d) thereunder, provided
that such Liens are not secured by assets of Borrower or its Subsidiaries other than the assets so acquired or leased.

 

    	3

    	 

    

 

“Purchase
Agreement” means the Securities Purchase Agreement, dated as of June 10, 2021 among Borrower and the original Holder, 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.

 

“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 TSX Venture Exchange, the NYSE MKT, the NASDAQ Capital Market, the NASDAQ Global Market, the NASDAQ Global Select Market,
the New York Stock Exchange, the OTC Bulletin Board, the OTCQB, or the 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. (Toronto time) to 4:02 p.m. (Toronto time)), (b) if any of the NASDAQ markets or exchanges is not a Trading Market, the volume weighted
average price of the Common Stock for such date (or the nearest preceding date) on the OTC Bulletin Board, (c) if the Common Stock is
not then listed or quoted for trading on the OTC Bulletin Board and if prices for the Common Stock are then reported on the OTCQX, OTCQB
or OTC Pink Marketplace maintained by the OTC Markets Group, Inc. (or a similar organization or agency succeeding to its functions of
reporting prices), the volume weighted average price of the Common Stock on the first such facility (or a similar organization or agency
succeeding to its functions of reporting prices), 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 Borrower, the fees and expenses of which shall be paid by Borrower.

 

“Warrant
Certificates” means a certificate for Class A Warrants and a certificate for Class B Warrants to be issued upon conversion
of this Debenture.

 

Section
2. General.

 

a)
Interest in Cash or in Kind. Holder shall be entitled to receive, and Borrower shall pay, cumulative interest on the outstanding
principal amount of this Debenture at the annual rate of twelve percent (12%) (as subject to increase as set forth in this Debenture)
from the Original Issue Date through the Maturity Date. Interest shall be payable on the Maturity Date or when all amounts outstanding
in connection with this Debenture shall be paid or shall otherwise be due and payable.

 

b)
Payment Grace Period. Other than as set forth herein, the Borrower shall not have any grace period to pay any monetary amounts
due under this Debenture.

 

c)
Conversion Privileges. The Conversion Rights set forth in Section 4 shall remain in full force and effect immediately from the
date hereof and until the Debenture is paid in full regardless of the occurrence of an Event of Default. This Debenture shall be payable
in full on the Maturity Date, unless previously converted into Common Stock in accordance with Section 4 hereof.

 

    	4

    	 

    

 

d)
Application of Payments. Interest, if any, on this Debenture shall be calculated on the basis of a 360-day year and the actual
number of days elapsed. Payments made in connection with this Debenture shall be applied first to amounts due hereunder other than principal
and interest, thereafter to interest and finally to principal.

 

e)
Manner and Place of Payment. Principal and interest, if any, on this Debenture and other payments in connection with this Debenture
shall be payable at the Holder’s offices as designated above in lawful money of the United States of America in immediately available
funds without set-off, deduction or counterclaim. Upon assignment of the interest of Holder in this Debenture, Borrower shall instead
make its payment pursuant to the assignee’s instructions upon receipt of written notice thereof. Except as set forth herein, this
Debenture may not be prepaid or mandatorily converted without the 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 (with a minimum denomination of $1,000 and in multiples of $1,000), 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
Law.

 

c)
Reliance on Debenture Register. Prior to due presentment for transfer to Borrower of this Debenture, Borrower and any agent of
Borrower 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 Borrower nor
any such agent shall be affected by notice to the contrary.

 

Section
4. Conversion.

 

a)
Voluntary Conversion. At any time after the Original Issue Date until this Debenture is no longer outstanding, this Debenture
and, upon receipt of TSX Venture Exchange approval, accrued interest, shall be convertible, in whole or in part, into shares of Common
Stock issued at the option of the Holder, at any time and from time to time (subject to the conversion limitations set forth in Section
4(d) hereof). The Holder shall effect conversions by delivering to Borrower 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. If TSX Venture Exchange approval is required in order to convert accrued interest into shares of Common Stock, then the Conversion
Date shall be the date which is 3 Business Days from the date such TSX Venture Exchange approval has been provided. For clarity, the
Holder may not specify a Conversion Date prior to the date that such Notice of Conversion would be deemed to have been delivered hereunder.
To effect conversions hereunder, the Holder shall not be required to physically surrender this Debenture to Borrower unless the entire
principal amount of this Debenture has been so converted. Conversions hereunder shall have the effect of lowering the outstanding principal
amount of this Debenture in an amount equal to the applicable conversion. The Holder and Borrower shall maintain records showing the
principal amount(s) converted and the date of such conversion(s). Borrower may deliver an objection to any Notice of Conversion within
two (2) Trading Days 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.

 

    	5

    	 

    

 

b)
Conversion Price. The conversion price for the principal in connection with voluntary conversions by the Holder shall be $0.10,
subject to adjustment herein (the “Conversion Price”). The conversion price for accrued interest (the “Conversion
Price for Accrued Interest”) shall be the greater of (i) $0.10 and (ii) the minimum conversion price permitted by the TSX Venture
Exchange at the time of conversion (should the Borrower’s Common Stock then be listed on such exchange).

 

c)
Mechanics of Conversion.

 

i.
Conversion Shares Issuable Upon Conversion of Principal Amount and Accrued Interest. The number of Conversion Shares issuable
upon a conversion of all or part of the outstanding principal amount hereunder shall be determined by the quotient obtained by dividing
(x) the outstanding principal amount as of the Conversion Date to be converted by (y) the Conversion Price. The number of Conversion
Shares issuable upon a conversion of all or part of the accrued interest hereunder shall be determined by the quotient obtained by dividing
(x) the outstanding accrued interest as of the Conversion Date to be converted by (y) the Conversion Price for Accrued Interest.

 

ii.
Delivery of Certificate Upon Conversion. Not later than three (3) Trading Days after each Conversion Date (the “Share
Delivery Date”), Borrower shall deliver, or cause to be delivered, to the Holder (i) a certificate or certificates representing
the Conversion Shares which, on or after the one year 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 and under any Applicable Law) and which shall
represent the number of Conversion Shares being acquired upon the conversion of this Debenture; (ii) a Class A Warrant Certificate for
fifty percent (50%) of the conversion shares being issued on such conversion; and (iii) a Class B Warrant Certificate for fifty percent
(50%) of the conversion shares being issued on such conversion. On or after the one-year anniversary of the Original Issue Date, Borrower
shall use its best efforts to deliver any certificate or certificates required to be delivered by Borrower under this Section 4(c) electronically
through the Depository Trust Company or another established clearing corporation performing similar functions. In the event the Borrower
registers its common stock with the United States Securities and Exchange Commission (the “SEC”), the one-year period in
this Section 4(c)(ii) shall be reduced to six months.

 

iii.
Failure to Deliver Certificates. If, in the case of any Notice of Conversion, such certificate or certificates are not delivered
to or as directed by the applicable Holder by the Share Delivery Date, the Holder shall be entitled to elect by written notice to Borrower
at any time on or before its receipt of such certificate or certificates, to rescind such Conversion, in which event Borrower shall promptly
return to the Holder any original Debenture delivered to Borrower and the Holder shall promptly return to Borrower the Common Stock certificates
issued to such Holder pursuant to the rescinded Conversion Notice.

 

    	6

    	 

    

 

iv.
Obligation Absolute. Borrower’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 Borrower 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 Borrower to the Holder in connection with the issuance of such
Conversion Shares; provided, however, that such delivery shall not operate as a waiver by Borrower of any such action Borrower
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, Borrower 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 Borrower 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, Borrower shall issue Conversion
Shares or, if applicable, cash, upon a properly noticed conversion. If Borrower fails for any reason to deliver to the Holder such certificate
or certificates pursuant to Section 4(c)(ii) by the Share Delivery Date, Borrower shall pay to the Holder, in cash, as liquidated damages
and not as a penalty, for each $1,000 of principal amount being converted, $10 per Trading Day (increasing to $20 per Trading Day on
the fifth (5th) Trading Day after such liquidated damages being to accrue) for each Trading Day after such Share Delivery
Date until such certificates 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 7 hereof for Borrower’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.

 

v.
Compensation for Buy-In on Failure to Timely Deliver Certificates Upon Conversion. In addition to any other rights available to
the Holder, if Borrower fails for any reason to deliver to the Holder such certificate or certificates by the Share Delivery Date pursuant
to Section 4(c)(ii), and if after such Share Delivery Date the Holder is required by its brokerage firm to purchase (in an open market
transaction or otherwise), or the Holder or 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 Borrower 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 Borrower 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, Borrower shall be required to pay the Holder $1,000. The Holder shall provide Borrower written
notice indicating the amounts payable to the Holder in respect of the Buy-In and, upon request of Borrower, 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 Borrower’s failure to
timely deliver certificates representing shares of Common Stock upon conversion of this Debenture as required pursuant to the terms hereof.

 

    	7

    	 

    

 

vi.
Reservation of Shares Issuable Upon Conversion. Borrower 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 as herein provided,
free from preemptive rights or any other actual contingent purchase rights of Persons other than the Holder, not less than such aggregate
number of shares of the Common Stock as shall (subject to the terms and conditions set forth 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
on such principal amount. Borrower 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, Borrower 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 Conversion Price for Accrued Interest, as applicable, or round up to the next whole share.

 

viii.
Transfer Taxes and Expenses. The issuance of certificates for shares of the Common Stock on conversion of this Debenture shall
be made without charge to the Holder hereof for any documentary stamp or similar taxes that may be payable in respect of the issue or
delivery of such certificates, provided that, Borrower shall not be required to pay any tax that may be payable in respect of any transfer
involved in the issuance and delivery of any such certificate upon conversion in a name other than that of the Holder of this Debenture
so converted and Borrower shall not be required to issue or deliver such certificates unless or until the Person or Persons requesting
the issuance thereof shall have paid to Borrower the amount of such tax or shall have established to the satisfaction of Borrower that
such tax has been paid. Borrower shall pay all Transfer Agent fees required for same-day processing of any Notice of Conversion.

 

d)
Holder’s Conversion Limitations. Borrower shall not effect any conversion of this Debenture, and a Holder shall not have
the right to convert any portion of this Debenture, to the extent that after giving effect to the conversion set forth on the applicable
Notice of Conversion, the Holder (together with the Holder’s Affiliates, and any Persons acting as a group together with the Holder
or any of the Holder’s Affiliates) would beneficially own in excess of the Beneficial Ownership Limitation (as defined below).
For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by the Holder and its Affiliates shall
include the number of shares of Common Stock issuable upon conversion of this Debenture with respect to which such determination is being
made, but shall exclude the number of shares of Common Stock which are issuable upon (i) conversion of the remaining, unconverted principal
amount of this Debenture beneficially owned by the Holder or any of its Affiliates and (ii) exercise or conversion of the unexercised
or unconverted portion of any other securities of Borrower subject to a limitation on conversion or exercise analogous to the limitation
contained herein (including, without limitation, any other Debentures or the Warrants) beneficially owned by the Holder or any of its
Affiliates. Except as set forth in the preceding sentence, for purposes of this Section 4(d), beneficial ownership shall be calculated
in accordance with the rules and policies of the TSX Venture Exchange. To the extent that the limitation contained in this Section 4(d)
applies, the determination of whether this Debenture is convertible (in relation to other securities owned by the Holder together with
any Affiliates) and of which principal amount of this Debenture is convertible shall be in the sole discretion of the Holder, and the
submission of a Notice of Conversion shall be deemed to be the Holder’s determination of whether this Debenture may be converted
(in relation to other securities owned by the Holder together with any Affiliates) and which principal amount of this Debenture is convertible,
in each case subject to the Beneficial Ownership Limitation. To ensure compliance with this restriction, the Holder will be deemed to
represent to Borrower each time it delivers a Notice of Conversion that such Notice of Conversion has not violated the restrictions set
forth in this paragraph and Borrower 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 the rules of the TSX Venture Exchange.
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) Borrower’s most recent periodic or annual
report filed with the TSX Venture Exchange, as the case may be, (ii) a more recent public announcement by Borrower, or (iii) a more recent
written notice by Borrower or Borrower’s transfer agent setting forth the number of shares of Common Stock outstanding. Upon the
written or oral request of a Holder, Borrower shall within three 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 Borrower, including this Debenture, by the Holder or its Affiliates since the date
as of which such number of outstanding shares of Common Stock was reported. The “Beneficial Ownership Limitation”
shall be 9.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common
Stock issuable upon conversion of this Debenture held by the Holder. The Holder may decrease the Beneficial Ownership Limitation at any
time and the Holder, upon not less than 61 days’ prior notice to Borrower, may increase the Beneficial Ownership Limitation provisions
of this Section 4(d), provided that the Beneficial Ownership Limitation in no event exceeds 9.99% of the number of shares of the Common
Stock outstanding immediately after giving effect to the issuance of shares of Common Stock upon conversion of this Debenture held by
the Holder and the Beneficial Ownership Limitation provisions of this Section 4(d) shall continue to apply. Any such increase will not
be effective until the 61st day after such notice is delivered to Borrower. 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.

 

    	8

    	 

    

 

Section
5. Certain Adjustments.

 

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

 

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

 

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

 

    	9

    	 

    

 

d)
Fundamental Transaction. If, at any time while this Debenture is outstanding, (i) Borrower, directly or indirectly, in one or
more related transactions effects any merger or consolidation of Borrower with or into another Person, (ii) Borrower, 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 Borrower
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) Borrower,
directly or indirectly, in one or more related transactions effects any reclassification, reorganization or recapitalization of the Common
Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities,
cash or property, (v) Borrower, directly or indirectly, in one or more related transactions consummates a stock or share purchase agreement
or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement)
with another Person whereby such other Person acquires more than 50% of the outstanding shares of Common Stock (not including any shares
of Common Stock held by the other Person or other Persons making or party to, or associated or affiliated with the other Persons making
or party to, such stock or share purchase agreement or other business combination) (each a “Fundamental Transaction”),
then, upon any subsequent conversion of this Debenture, the Holder shall have the right to receive, for each Conversion Share that would
have been issuable upon such conversion immediately prior to the occurrence of such Fundamental Transaction (without regard to any limitation
in Section 4(d) on the conversion of this Debenture), the number of shares of Common Stock of the successor or acquiring corporation
or of Borrower, if it is the surviving corporation, and any additional consideration (the “Alternate Consideration”)
receivable as a result of such Fundamental Transaction by a holder of the number of shares of Common Stock for which this Debenture is
convertible immediately prior to such Fundamental Transaction (without regard to any limitation in Section 4(d) on the conversion of
this Debenture). For purposes of any such conversion, the determination of the Conversion Price shall be appropriately adjusted to apply
to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one (1) share of Common Stock in
such Fundamental Transaction, and Borrower 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. Borrower shall
cause any successor entity in a Fundamental Transaction in which Borrower is not the survivor (the “Successor Entity”)
to assume in writing all of the obligations of Borrower under this Debenture and the other Transaction Documents (as defined in the Purchase
Agreement) in accordance with the provisions of this Section 5(d) pursuant to written agreements in form and substance reasonably satisfactory
to the Holder and approved by the Holder (without unreasonable delay) prior to or contemporaneously with 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 or contemporaneously with 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 Borrower and shall assume all of the obligations of Borrower under this Debenture and the other Transaction
Documents with the same effect as if such Successor Entity had been named as Borrower herein. Alternatively, the Holder may demand the
Company to redeem its Debenture at a rate equal to 125% of the principal and interest due thereon, to be paid in full contemporaneously
with consummation of the Fundamental Transaction.

 

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

 

f)
Notice to Allow Conversion by Holder. If (A) Borrower shall declare a dividend (or any other distribution in whatever form) on
the Common Stock, (B) Borrower shall declare a special nonrecurring cash dividend on or a redemption of the Common Stock, (C) Borrower
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 Borrower shall be required in connection with any reclassification
of the Common Stock, any consolidation or merger to which Borrower is a party, any sale or transfer of all or substantially all of the
assets of Borrower, or any compulsory share exchange whereby the Common Stock is converted into other securities, cash or property or
(E) Borrower shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of Borrower, then, in
each case, Borrower 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 Borrower or any of the Subsidiaries, Borrower shall simultaneously
make public disclosure of such notice in accordance with applicable securities laws. 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.

 

Section
6. Negative Covenants. As long as any principal amount of this Debenture remains outstanding, unless the Holder shall have
otherwise given prior written consent, Borrower 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;

 

    	11

    	 

    

 

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
adversely affects any rights of the Holder (notwithstanding the foregoing, the Holder acknowledges and agrees that the Borrower shall
be entitled to proceed with the amendments to the charter documents as shall be set out in the Borrower’s proxy materials for its
shareholder meeting to be held in 2021 as publicly disclosed no less than five Trading Days before the issue date of this Note);

 

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 the Conversion Shares or Warrant Shares as permitted or required under the Transaction Documents;

 

e)
redeem, defease, repurchase, repay or make any payments in respect of, by the payment of cash or cash equivalents (in whole or in part,
whether by way of open market purchases, tender offers, private transactions or otherwise), all or any portion of any Indebtedness (other
than the Debentures if on a pro-rata basis), whether by way of payment in respect of principal of (or premium, if any) or interest on,
such Indebtedness, in any case unless such Indebtedness or interest is due and payable in accordance with the initial terms of such debt
prior to any default thereunder;

 

f)
declare or make any dividend or other distribution of its assets or rights to acquire its assets to holders of shares of Common Stock,
preferred stock, or any other equity security by way of return of capital or otherwise including, without limitation, any distribution
of cash, stock or other securities, property or options by way of a dividend, spin off, reclassification, corporate rearrangement, scheme
of arrangement or other similar transaction;

 

g)
sell or offer to sell any securities with non-fixed or floating price features, issue any Common Stock or Common Stock Equivalents at
a price lower than the conversion price herein then in effect, or issue any equity or debt instruments with anti-dilution provisions;
or

 

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

 

Section
7. 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 or interest, if any, amount of this Debenture or (B) liquidated damages and other amounts
owing to a Holder on any Note, as and when the same shall become due and payable (whether on a Conversion Date or the Maturity Date or
by acceleration or otherwise) which default, solely in the case of a default under clause (B) above, is not cured within five Trading
Days after Borrower has become or should have become aware of such default;

 

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

 

    	12

    	 

    

 

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

 

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

 

v.
Borrower or any Subsidiary shall be subject to a Bankruptcy Event;

 

vi.
Borrower or any Subsidiary shall default on any of its obligations under any mortgage, credit agreement or other facility, indenture
agreement, factoring agreement or other instrument under which there may be issued, or by which there may be secured or evidenced, any
indebtedness for borrowed money or money due under any long term leasing or factoring arrangement that (a) involves an obligation greater
than $50,000, whether such indebtedness now exists or shall hereafter be created, and (b) results in such indebtedness becoming or being
declared due and payable prior to the date on which it would otherwise become due and payable;

 

vii.
Borrower shall have completed any Change of Control Transaction or Fundamental Transaction without giving Holder at least ten Trading
Days prior written notice;

 

viii.
Upon the earlier of the Borrower registering its common stock with the SEC or one year from the Issue Date, the Borrower does not meet
the current public information requirements under Rule 144;

 

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

 

x.
any judgment or order is rendered against Borrower, any subsidiary or any of their respective property or other assets for the payment
of money in excess of $150,000, and such judgment or order shall remain unvacated, unbonded or unstayed for a period of 60 calendar days;

 

xi.
other than as a result of a Fundamental Transaction, any dissolution, liquidation or winding up by Borrower or a material Subsidiary
of a substantial portion of their business;

 

    	13

    	 

    

 

xii.
other than as a result of a Fundamental Transaction, cessation of operations by Borrower or a material Subsidiary;

 

xiii.
an event resulting in the Common Stock no longer being listed or quoted on a Trading Market, or notification from a Trading Market that
the Borrower is not in compliance with the conditions for such continued quotation and such non-compliance continues for twenty (20)
days following such notification;

 

xiv.
the SEC, TSX Venture Exchange, Canadian Securities Commission or judicial stop trade order or suspension from the Borrower’s Principal
Trading Market or the OTCQB, which remains in effect for no more than five (5) consecutive Trading Days or twenty (20) days in any calendar
year;

 

xv.
the Borrower effectuates a reverse split of its Common Stock without ten (10) days prior written notice to the Holder;

 

xvi.
a failure by Borrower to notify Holder of any material event of which Borrower is obligated to notify Holder pursuant to the terms of
this Debenture or any other Transaction Document;

 

xvii.
a default by the Borrower of a material term, covenant, warranty or undertaking of any other agreement to which the Borrower and Holder
are parties, or the occurrence of an event of default under any such other agreement to which Borrower and Holder are parties which is
not cured after any required notice and/or cure period;

 

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

 

xix.
the failure by Borrower or any material Subsidiary to maintain any material intellectual property rights, personal, real property, equipment,
leases or other assets which are necessary to conduct its business (whether now or in the future) and such breach is not cured with twenty
(20) days after written notice to the Borrower from the Holder;

 

xx.
the restatement after the date hereof of any financial statements filed by the Borrower under any Applicable Law for any date or period
from two years prior to the Original Issue Date and until this Debenture is no longer outstanding, if the result of such restatement
would, by comparison to the unrestated financial statements, have constituted a Material Adverse Effect. For the avoidance of doubt,
any restatement related to new accounting pronouncements shall not constitute a default under this Section; or

 

xxi.
the occurrence of an Event of Default as defined in and under any other debt instrument issued by Borrower to Holder or any Other Holder.

 

    	14

    	 

    

 

b)
Remedies Upon Event of Default, Fundamental Transaction and Change of Control Transaction. If any Event of Default or a Fundamental
Transaction or a Change of Control Transaction occurs, the outstanding principal amount of this Debenture, liquidated damages and other
amounts owing in respect thereof through the date of acceleration, shall become, at the Holder’s election, immediately due and
payable in cash at the Mandatory Default Amount. Additionally, upon an Event of Default, the Exercise Price of the Warrants shall be
reduced to $0.10 per share of Common Stock and the Borrower shall not file any registration statement unless all the Holder’s Underlying
Shares have been previously registered for resale with the SEC. Commencing on the Maturity Date and also five (5) Trading Days after
the occurrence of any Event of Default interest on this Debenture shall accrue at an interest rate equal to the lesser of 20% per annum
or the maximum rate permitted under Applicable Law until paid. Upon the payment in full of the Mandatory Default Amount, the Holder shall
promptly surrender this Debenture to or as directed by Borrower. In connection with such acceleration described herein, the Holder need
not provide, and Borrower 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 7(b). No such rescission or annulment shall affect any subsequent Event of Default or impair any right consequent thereon.

 

Section
8. Prepayment. Provided an Event of Default has not occurred, upon 20 days’ prior written notice received by the Holder,
the Borrower may prepay and satisfy this Debenture by paying 125% of the amounts owed on this Debenture, including all principal, interest
and other fees. Provided however, during the 20-day period after receipt of the notice the Holder may convert all or a portion of this
Debenture.

 

Section
9. Miscellaneous.

 

a)
Notices. All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be
in writing and, unless otherwise specified herein, shall be (i) personally served, (ii) deposited in the mail, registered or certified,
return receipt requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid, or (iv) transmitted
by hand delivery, telegram, or facsimile, addressed as set forth below or to such other address as such party shall have specified most
recently by written notice. Any notice or other communication required or permitted to be given hereunder shall be deemed effective (a)
upon hand delivery or delivery by facsimile, with accurate confirmation generated by the transmitting facsimile machine, at the address
or number designated below (if delivered on a Trading Day during normal business hours where such notice is to be received), or the first
Trading Day following such delivery (if delivered other than on a Trading Day during normal business hours where such notice is to be
received) or (b) on the second Trading Day following the date of mailing by express courier service, fully prepaid, addressed to such
address, or upon actual receipt of such mailing, whichever shall first occur. The addresses for such communications shall be: (i) if
to Borrower, to: Western Magnesium Corporation, 580 Hornby Street, Suite 900, British Columbia, V6C 3B6, Canada, Attn: Sam Ataya, Chief
Executive Officer, email: sataya@westmagcorp.com, with a copy by email only to: Gowling WLG (Canada) LLP, Attention: Brett Kagetsu, email:
brett.kagetsu@gowlingwlg.com, and (ii) if to the Holder, to: the address and email address indicated on the front page of this Debenture,
with an additional copy by email only to (which shall not constitute notice): Grushko & Mittman, P.C., 515 Rockaway Avenue, Valley
Stream, New York 11581, email: counslers@grushkomittman.com.

 

b)
Absolute Obligation. Except as expressly provided herein, no provision of this Debenture shall alter or impair the obligation
of Borrower, 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 Borrower. This Debenture ranks pari passu with all other Debentures now or hereafter issued under the terms set forth herein
pursuant to the Purchase Agreement.

 

    	15

    	 

    

 

c)
Lost or Mutilated Debenture. If this Debenture shall be mutilated, lost, stolen or destroyed, Borrower 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
Borrower, including an indemnity and surety in amount and form satisfactory to the Borrower in its sole discretion.

 

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 Delaware, 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. This Debenture shall be deemed an unconditional obligation of Borrower for the payment of money and, without limitation
to any other remedies of Holder, may be enforced against Borrower by summary proceeding pursuant to New York Civil Procedure Law and
Rules Section 3213 or any similar rule or statute in the jurisdiction where enforcement is sought. For purposes of such rule or statute,
any other document or agreement to which Holder and Borrower are parties or which Borrower delivered to Holder, which may be convenient
or necessary to determine Holder’s rights hereunder or Borrower’s obligations to Holder are deemed a part of this Debenture,
whether or not such other document or agreement was delivered together herewith or was executed apart from this Debenture.

 

e)
Waiver. Any waiver by Borrower 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 Borrower
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 Borrower or the Holder must be in writing.

 

    	16

    	 

    

 

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.

 

g)
Usury. 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. Borrower 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 Borrower 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 Borrower (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.

 

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

 

i)
Headings; Dollar Amounts. 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. Unless otherwise specified herein, all dollar amounts are in US$.

 

j)
Amendment. Unless otherwise provided for hereunder, this Debenture may not be modified or amended or the provisions hereof waived
without the written consent of Borrower and the Holder.

 

k)
Facsimile Signature. In the event that the Borrower’s signature is delivered by facsimile transmission, PDF, electronic
signature or other similar electronic means, such signature shall create a valid and binding obligation of the Borrower with the same
force and effect as if such signature page were an original thereof.

 

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

 

(Signature
Pages Follow)

 

    	17

    	 

    

 

IN
WITNESS WHEREOF, Borrower has caused this Debenture to be signed in its name by an authorized officer as of the 10th day
of June, 2021.

 

	 	WESTERN
    MAGNESIUM CORPORATION
	 	 	 
	 	By:
    	/s/
    Sam Ataya
	 	Name:
    	Sam
    Ataya
	 	Title:
    	Executive
    President and CEO
	 	 	 
	WITNESS:	 	 
	 	 	 
	/s/
    Karim Alameddine	 	 
	Karim
    Alameddine, Corporate Secretary	 	 

 

    	18

    	 

    

 

ANNEX
A

 

NOTICE
OF CONVERSION

 

The
undersigned hereby elects to convert principal under the Convertible Debenture Due December 10, 2022 of Western Magnesium Corporation,
a Delaware corporation (the “Company”), into shares of common stock (the “Common Stock”), of Borrower
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 Borrower 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 Borrower 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 Law 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: $__________________
	 	 
	 	Applicable
    Conversion Price: $__________________

     

    Interest
    Amount to be Converted: $__________________________

     

    Applicable
    Conversion Price for Accrued Interest: $___________________________

     

    Number
    of shares of Common Stock to be issued: _______________

	 	 
	 	Signature:
    _________________________________________
	 	 
	 	Name:
    ____________________________________________
	 	 
	 	Address
    for Delivery of Common Stock Certificates: _____________
	 	_____________________________________________________
    
	 	_____________________________________________________
	 	 
	 	Or
	 	 
	 	DWAC
    Instructions: _________________________________
	 	 
	 	Broker
    No:_____________
	 	Account
    No: _______________

 

    	19

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