Document:

YRCW-2013.9.30-EX10.2 (amend)

EXECUTION COPY
AMENDMENT NO. 4 TO CREDIT AGREEMENT 
AND AMENDMENT NO. 2 TO RECEIVABLES SALE AGREEMENT

THIS OMNIBUS AMENDMENT (“Amendment”) is entered into as of November 12, 2013 by and among:
		
	(a)
	YRCW Receivables LLC (the “Borrower” or “YRCW”),

		
	(b)
	YRC Worldwide Inc. (the “Servicer”),

		
	(c)
	the financial institutions listed on the signature pages hereof,

		
	(d)
	JPMorgan Chase Bank, N.A., as Administrative Agent (the “Administrative Agent”) and

		
	(e)
	YRC Inc., USF Reddaway Inc. and USF Holland Inc. (each an “Originator” and collectively, the “Originators”),

with respect to (i) that certain Credit Agreement dated as of July 22, 2011 by and among the Borrower, the Servicer, the lenders party thereto and the Administrative Agent (as amended, amended and restated, restated, supplemented or otherwise modified prior to the date hereof, the “Credit Agreement”) and (ii) that certain Receivables Sale Agreement dated as of July 22, 2011 among the Originators, the Servicer and YRCW, as buyer (as amended, amended and restated, restated, supplemented or otherwise modified prior to the date hereof, the “Sale Agreement”).  Capitalized terms used herein and not otherwise defined herein shall have the respective meanings given to them in the Credit Agreement or, if not defined therein, in the Sale Agreement.
For good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
1.Amendments to Credit Agreement.  Upon the occurrence of the Amendment Effective Date (as defined in Section 3 below), the Credit Agreement is hereby amended as follows:
(a)    Section 1.01 of the Credit Agreement is hereby amended to insert the following new definitions therein in the appropriate alphabetical order and, where applicable, replace the corresponding previously existing definitions, in each case as follows:
"Anti-Corruption Laws" means, with respect to any Person, all laws, rules, and regulations of any jurisdiction applicable to such Person or its subsidiaries from time to time concerning or relating to bribery or corruption.
“Applicable Rate” means, for any day, (a) with respect to Term A Loans, (i) 7.50% per annum in the case of any Eurodollar Loan and 6.50% per annum in the case of any ABR Loan, (b) with respect to Term B Loans, (i) 10.25% per annum in the case of any Eurodollar Loan and 9.25% per annum in the case of any ABR Loan or (c) with respect to the commitment fees payable hereunder, 7.50% per annum. 

K&E 28162413.15

"FATCA" means Sections 1471 through 1474 of the Code, as of the date of this Agreement (or any amended or successor version that is substantively comparable and not materially more onerous to comply with), any current or future regulations or official interpretations thereof and any agreement entered into pursuant to Section 1471(b)(1) of the Code.               
"Sanctions" means economic or financial sanctions or trade embargoes imposed, administered or enforced from time to time by (a) the U.S. government, including those administered by OFAC or the U.S. Department of State or (b) the United Nations Security Council, the European Union or Her Majesty's Treasury of the United Kingdom.
"Sanctioned Country" means, at any time, a country or territory which is the subject or target of any Sanctions.
"Sanctioned Person" means, at any time, (a) any Person listed in any Sanctions-related list of designated Persons maintained by OFAC, the U.S. Department of State, the United Nations Security Council, the European Union or any EU member state, (b) any Person operating, organized or resident in a Sanctioned Country or (c) any Person controlled by any such Person.
(b)     The first paragraph of the definition of “Consolidated EBITDA” appearing in Section 1.01 of the Credit Agreement is hereby amended and restated in its entirety as follows:
“Consolidated EBITDA” shall mean Consolidated Net Income plus, to the extent deducted from revenues in determining Consolidated Net Income, without duplication, (a) Consolidated Interest Expense, (b) expense for taxes paid or accrued, (c) depreciation (including that applied to the Company’s equity method investments), (d) amortization (including that applied to the Company’s equity method investments), (e) extraordinary, non-cash charges, expenses or losses incurred other than in the ordinary course of business, (f) non-recurring (including non-recurring and unusual) non-cash charges, expenses or losses (including non-cash impairment charges) incurred other than in the ordinary course of business, (g) non-cash expenses related to stock based compensation or stock appreciation rights, (h) the actual aggregate amount of transaction and restructuring professional fees paid by the Company and its subsidiaries in and during such four fiscal quarters, (i) to the extent applicable charges, expenses and losses incurred in respect of the transaction consummated pursuant to the Project Delta Purchase Agreement (as defined in the YRCW Amended Term Loan as in effect on the Effective Date), (j) deferred financing, legal and accounting costs with respect to the Company’s indebtedness that are charged to non-interest expense on the Company’s income statement in accordance with GAAP, (k) fees, costs and expenses required to be paid in connection with that certain Amendment No. 4 to this Agreement dated as of November 12, 2013 and contemporaneous amendment to the definitive documentation evidencing the YRCW Amended Term Loan, including without limitation any fees, costs and expenses required to be paid as result thereof under the terms of the Contribution Deferral Agreement, and (l) one time cash restructuring charges incurred on or after November 12, 2013 in an aggregate amount not to exceed $40,000,000, minus, to the extent included in Consolidated Net Income, (m) interest income,  (n) income tax credits and refunds (to the extent not netted from tax expense), (o) any cash payments made during such period in respect of items described in clauses (e), (f) or (g) above subsequent to the fiscal quarter in which the relevant non-cash expenses or losses were incurred, (p) 

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any income or gains resulting from the early retirement, redemption, defeasance, repayment or similar actions in respect of Indebtedness, and (q) extraordinary, unusual or non-recurring income or gains realized other than in the ordinary course of business, all calculated for the Company and its subsidiaries in accordance with GAAP on a consolidated basis.
(c)    The definition of "Excluded Taxes" appearing in Section 1.01 of the Credit Agreement is hereby amended to restate clause (d) thereof in its entirety as follows:
 (d)    any U.S. Federal withholding Taxes imposed under FATCA.

(d)    Section 2.12(a) of the Credit Agreement is hereby amended to insert a reference to “liquidity,” immediately before the reference to “special deposit” appearing in clause (i) thereof.
(e)    Section 2.12(b) of the Credit Agreement is hereby amended to (i) insert the words “or liquidity” immediately after the first reference to “capital” appearing therein and (ii) insert the words “and liquidity” immediately after the reference to “capital adequacy” appearing therein.

(f)      Section 3.01 of the Credit Agreement is hereby amended to insert a new clause (x) immediately following clause (w) thereof as follows:
(x)    Anti-Corruption Laws and Sanctions.  The Borrower has implemented and maintains in effect policies and procedures designed to ensure compliance in all material respects by the Borrower, its Subsidiaries and their respective directors, officers, employees and agents with Anti-Corruption Laws and applicable Sanctions, and the Borrower, its Subsidiaries and to the knowledge of the Borrower its directors, officers, employees and agents, are in compliance with Anti-Corruption Laws and applicable Sanctions in all material respects.  None of (a) the Borrower, any Subsidiary or to the knowledge of the Borrower or such Subsidiary any of their respective directors, officers or employees, or (b) to the knowledge of the Borrower, any agent of the Borrower or any Subsidiary that will act in any capacity in connection with or benefit from the credit facility established hereby, is a Sanctioned Person.  No Borrowing or use of proceeds will violate Anti-Corruption Laws or applicable Sanctions in any material respect.
(g)    Section 5.04 of the Credit Agreement is hereby amended to insert a new sentence at the end thereof as follows:  The Borrower will maintain in effect and enforce policies and procedures designed to ensure compliance in all material respects by the Borrower, its Subsidiaries and their respective directors, officers, employees and agents with Anti-Corruption Laws and applicable Sanctions.
(h)     The Credit Agreement is hereby amended to insert a new Section 6.13 immediately following Section 6.12 of the Credit Agreement as follows:
Section 6.13. Anti-Corruption Laws and Sanctions.  The Borrower will not request any Borrowing, and the Borrower shall not use, and shall procure that its Subsidiaries and its or their respective directors, officers, employees and agents shall not use, the proceeds of any Borrowing (i) in furtherance of an offer, payment, promise to pay, or authorization of the payment or giving of money, or anything else of value, to any Person in violation of any Anti-Corruption Laws, (ii) for the purpose of funding, financing or facilitating any activities, business or transaction of or with any Sanctioned Person, or in any Sanctioned Country or (iii) in any manner that would result in the violation in any material respect of any Sanctions applicable to any party hereto.    

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(i)    Section 7(r) of the Credit Agreement is hereby restated in its entirety to read as follows: 

(r)    Consolidated EBITDA of the Company and its subsidiaries for any four consecutive fiscal quarter period ending on the date set forth below is less than the amount set forth opposite such period: 

	
		
	Four Consecutive Fiscal Quarter Period Ending
	Minimum Consolidated EBITDA

	December 31, 2013
	$245,000,000

	March 31, 2014
	$220,000,000

	June 30, 2014
	$225,000,000

	September 30, 2014
	$245,000,000

	December 31, 2014
	$260,000,000

2.    Amendments to Sale Agreement.  As of the Amendment Effective Date (as defined in Section 3 below), the Sale Agreement is hereby amended as follows:
(a)    Section 2.01 of the Sale Agreement is hereby amended to insert a new clause (o) immediately following clause (n) thereof as follows:
(o)    Anti-Corruption Laws and Sanctions.  Such Person has implemented and maintains in effect policies and procedures designed to ensure compliance in all material respects by such Person, its subsidiaries and their respective directors, officers, employees and agents with Anti-Corruption Laws and applicable Sanctions, and such Person, its subsidiaries and to the knowledge of such Person its directors, officers, employees and agents, are in compliance with Anti-Corruption Laws and applicable Sanctions in all material respects.  None of (a) such Person, any subsidiary of such Person or to the knowledge of such Person or such subsidiary any of their respective directors, officers or employees, or (b)  to the knowledge of such Person, any agent of such Person or any subsidiary of such Person that will act in any capacity in connection with or benefit from this Agreement or the Credit Agreement, is a Sanctioned Person.  No transactions made pursuant to or in connection with this Agreement will violate Anti-Corruption Laws or applicable Sanctions in any material respect.
(b)    Section 4.01(a)(i) of the Sale Agreement is hereby amended to delete the reference to “(other than in respect of the auditors’ report delivered in 2012 in respect of the fiscal year ended December 31, 2011, without a “going concern” or like qualification or exception and without any qualification or exception as to the scope of such audit)” appearing therein and to replace therefor a reference to “(other than in respect of the auditors’ report delivered in each of 2012 and 2014 in respect of the fiscal years ended December 31, 2011 and December 31, 2013, respectively, without a “going concern” or like qualification or exception and without any qualification or exception as to the scope of such audit)”.
(c)     Section 4.01(c) of the Sale Agreement is hereby amended to insert a new sentence at the end thereof as follows:
Such Person will maintain in effect and enforce policies and procedures designed to ensure compliance in all material respects by such Person, its subsidiaries and their respective 

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directors, officers, employees and agents with Anti-Corruption Laws and applicable Sanctions. 
(d)    Section 4.02 of the Sale Agreement is hereby amended to insert a new clause (i) immediately following clause (h) thereof as follows:
(i)    Anti-Corruption Laws and Sanctions.  Such Person will neither sell nor purchase Receivables, and such Person shall not use the proceeds of any such sale or purchase, and shall procure that its subsidiaries and its or their respective directors, officers, employees and agents shall not sell nor purchase Receivables nor use the proceeds of any such sale or purchase (i) in furtherance of an offer, payment, promise to pay, or authorization of the payment or giving of money, or anything else of value, to any Person in violation of any Anti-Corruption Laws, (ii) for the purpose of funding, financing or facilitating any activities, business or transaction of or with any Sanctioned Person, or in any Sanctioned Country or (iii) in any manner that would result in the violation in any material respect of any Sanctions applicable to any party hereto.
3.    Conditions of Effectiveness.  This Amendment shall become effective on the date (the “Amendment Effective Date”) that each of the following conditions precedent have been satisfied or waived:
(a)    The Administrative Agent shall have received (i) counterparts of this Amendment duly executed by the Borrower and the Required Lenders and (ii) a duly executed amendment in respect of the YRCW Amended Term Loan and such amendment shall be in full force and effect substantially contemporaneously with this Amendment. 
(b)    The Administrative Agent shall have received payment from the Borrower, for the account of each Lender that has executed and delivered a counterpart signature page to this Amendment at or prior to 12:00 p.m. noon (New York City time) on November 12, 2013 (or such later time as the Administrative Agent and the Borrower shall agree), a consent fee (the “Amendment Consent Fee”) in an amount equal to (i) 1.00 % of the aggregate outstanding principal amount of Term B Loans and (ii) 1.00% of the sum of (x) the aggregate outstanding principal amount of Term A Loans and (y) the unused Term A Commitment, in each case, of such Lender as of the date hereof.  The Amendment Consent Fee shall be payable in immediately available funds and, once paid, such fee or any part thereof shall not be refundable. 
(c)    The Borrower shall have paid all fees and expenses of the Administrative Agent, Credit Suisse Securities (USA) LLC, in its capacity as sole lead arranger for the Amendment (the “Arranger”), and their respective Affiliates (including, without limitation, all previously invoiced, reasonable, out-of-pocket expenses of the Administrative Agent and the Arranger (including, to the extent invoiced, reasonable attorneys’ fees and expenses), in each case to the extent reimbursable under the terms of, in the case of the Administrative Agent, the Credit Agreement, and in the case of the Arranger, that certain engagement letter dated as of October 24, 2013 between the Borrower and the Arranger) in connection with this Amendment and the other Transaction Documents.

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4.    Condition Subsequent to Effectiveness.  To the extent not already paid prior to the Amendment Effective Date pursuant to Section 3(b) above, the Borrower agrees to pay to the Administrative Agent for the account of each Lender which delivers an executed signature page to this Amendment after the Amendment Effective Date but prior to 5:00 p.m. (New York City time) on November 15, 2013 the same Amendment Consent Fee payable on November 18, 2013 as the consenting Lender would otherwise be entitled to pursuant to Section 3(b) above.  
5.    Representations and Warranties of the Borrower.  In order to induce the other parties to enter into this Amendment:
(a)    The Borrower hereby represents and warrants to the Administrative Agent and the Lenders as follows as of the Amendment Effective Date:
(i)This Amendment and the Credit Agreement, as amended hereby, constitute legal, valid and binding obligations of the Borrower and are enforceable against the Borrower in accordance with their terms except as such enforcement may be limited by applicable bankruptcy, insolvency, reorganization or other similar laws relating to or limiting creditors’ rights generally and subject to general principles of equity.
(ii)After giving effect to the terms of this Amendment, (i) no Termination Event or Incipient Termination Event has occurred and is continuing and (ii) the representations and warranties of the Borrower or any other Transaction Party set forth in the Credit Agreement, as amended hereby, or any other Transaction Document are true and correct in all material respects on and as of the date hereof, except to the extent any such representation or warranty is stated to relate solely to an earlier date, in which case such representation or warranty shall have been true and correct in all material respects on and as of such earlier date.
(b)    The Servicer and each Originator hereby represents and warrants to YRCW as follows as of the Amendment Effective Date:
i.This Amendment and the Sale Agreement, as amended hereby, constitute legal, valid and binding obligations of such party and are enforceable against such party in accordance with their terms except as such enforcement may be limited by applicable bankruptcy, insolvency, reorganization or other similar laws relating to or limiting creditors’ rights generally and subject to general principles of equity.
ii.After giving effect to the terms of this Amendment, (i) no Servicer Event of Default or Potential Servicer Event of Default has occurred and is continuing and (ii) the representations and warranties of such party set forth in the Sale Agreement, as amended hereby, are true and correct in all material respects on and as of the date hereof, except to the extent any such representation or warranty is stated to relate solely to an earlier date, in which case such representation or warranty shall have been true and correct in all material respects on and as of such earlier date.
6.    Reference to and Effect on the Credit Agreement and Sale Agreement.
(a)    Upon the effectiveness hereof, (i) each reference to the Credit Agreement in the Credit Agreement or any other Transaction Document shall mean and be a reference to the Credit Agreement, as amended hereby and (ii) each reference to the Sale Agreement in the Sale Agreement or any other Transaction Document shall mean and be a reference to the Sale Agreement as amended hereby.  This 

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Amendment constitutes a “Transaction Document” for all purposes of the Credit Agreement and the other Transaction Documents. 
(b)    Except as specifically amended above, the Credit Agreement, the Sale Agreement and all other documents, instruments and agreements executed and/or delivered in connection therewith shall remain in full force and effect and are hereby ratified and confirmed.
(c)    The execution, delivery and effectiveness of this Amendment shall not operate as a waiver of any right, power or remedy of the Administrative Agent or the Lenders, nor constitute a waiver of any provision of the Credit Agreement, the Sale Agreement or any other documents, instruments and agreements executed and/or delivered in connection therewith.
7.    Release.  In further consideration of the execution by the Lenders of this Amendment and the services of the Arranger in connection therewith, to the extent permitted by applicable law, the Borrower, on behalf of itself and each of the other Transaction Parties, and all of the successors and assigns of each of the foregoing (collectively, the “Releasors”), hereby completely, voluntarily, knowingly, and unconditionally releases and forever discharges the Administrative Agent, each of the Lenders, the Arranger and, in the case of each of the foregoing, each of its members, each of their advisors, professionals and employees, each affiliate of the foregoing and all of their respective permitted successors and assigns (collectively, the “Releasees”), from any and all claims, actions, suits, and other liabilities, including, without limitation, any so-called “lender liability” claims or defenses (collectively, “Claims”), whether arising in law or in equity, which any of the Releasors ever had, now has or hereinafter can, shall or may have against any of the Releasees for, upon or by reason of any matter, cause or thing whatsoever from time to time occurred on or prior to the date hereof, in any way concerning, relating to, or arising from (i) any of the Transactions, (ii) the Obligations, (iii) the Collateral, (iv) the Credit Agreement or any of the other Transaction Documents, (v) the financial condition, business operations, business plans, prospects or creditworthiness of the Borrower or the other Transaction Parties, and (vi) the negotiation, documentation and execution of this Amendment and any documents relating hereto except for Claims determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the gross negligence, bad faith or willful misconduct of such Releasee (or any of its Related Parties). The Releasors hereby acknowledge that they have been advised by legal counsel of the meaning and consequences of this release.
8.    Governing Law.  This Amendment shall be construed in accordance with and governed by the law of the State of New York, but after giving effect to federal laws applicable to national banks.
9.    Headings.  Section headings in this Amendment are included herein for convenience of reference only and shall not constitute a part of this Amendment for any other purpose.
10.    Counterparts.  This Amendment may be executed by one or more of the parties hereto on any number of separate counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument.  Signatures delivered by facsimile or PDF shall have the same force and effect as manual signatures delivered in person.
[Signature Pages Follow]

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IN WITNESS WHEREOF, this Amendment has been duly executed as of the day and year first above written.

YRCW RECEIVABLES LLC, as the Borrower

By:__/s/ Mark Boehmer_______________
Name: Mark Boehmer 
Title: Vice President

YRC WORLDWIDE INC., as the Servicer

By:___/s/ Jamie Pierson___________________________
Name: Jamie Pierson
Title: Executive Vice President and Chief Financial Officer

YRC INC., as an Originator

By:__/s/ Phil J. Gaines________________
Name: Phil J. Gaines 
Title: Senior Vice President, Finance

USF REDDAWAY INC., as an Originator

By:__/s/ Mark Boehmer_______________
Name: Mark Boehmer 
Title: Vice President

USF HOLLAND INC., as an Originator

By:__/s/ Mark Boehmer_______________
Name: Mark Boehmer 
Title: Vice President

Signature Page to Omnibus Amendment

JPMORGAN CHASE BANK, N.A., as Administrative Agent

By:____________________________________
Name:
Title:

 

Signature Page to Omnibus AmendmentExhibit 4.1

 

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

 

Original Issue Date: November __, 2013

Original Conversion Price (subject to adjustment
herein): $0.193

 

$1,232,000

 

8%
ORIGINAL ISSUE DISCOUNT SENIOR SECURED CONVERTIBLE DEBENTURE

DUE
February 1, 2015

 

THIS 8% ORIGINAL ISSUE
DISCOUNT SENIOR SECURED CONVERTIBLE DEBENTURE is one of a series of duly authorized and validly issued 8% Original Issue Discount
Senior Secured Convertible Debentures of NEW WESTERN ENERGY CORPORATION, a Nevada corporation, (the “Company”),
having its principal place of business at 1140 Spectrum, Irvine, California 92618, designated as its 8% Original Issue Discount
Senior Secured Convertible Debenture due February 1, 2015 (this debenture, the “Debenture” and, collectively
with the other debentures of such series, the “Debentures”).

 

FOR VALUE RECEIVED, the
Company promises to pay to Hillair Capital Investments L.P. or its registered assigns (the “Holder”), or shall
have paid pursuant to the terms hereunder, the principal sum of $1,232,000 on February 1, 2015 (the “Maturity Date”)
or such earlier date as this Debenture is required or permitted to be repaid as provided hereunder, and to pay interest to the
Holder on the aggregate unconverted and then outstanding principal amount of this Debenture in accordance with the provisions hereof.
This Debenture is subject to the following additional provisions:

 

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

    	 

    	 

    

 

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

 

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

 

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

 

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

 

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

 

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

 

“Change
of Control Transaction” means the occurrence after the date hereof of any of (a) an acquisition after the date hereof
by an individual or legal entity or “group” (as described in Rule 13d-5(b)(1) promulgated under the Exchange Act) of
effective control (whether through legal or beneficial ownership of capital stock of the Company, by contract or otherwise) of
in excess of 33% of the voting securities of the Company (other than by means of conversion or exercise of the Debentures and the
Securities issued together with the Debentures), (b) the Company merges into or consolidates with any other Person, or any Person
merges into or consolidates with the Company and, after giving effect to such transaction, the stockholders of the Company immediately
prior to such transaction own less than 66% of the aggregate voting power of the Company or the successor entity of such transaction,
(c) the Company sells or transfers all or substantially all of its assets to another Person and the stockholders of the Company
immediately prior

    	 

    	 

    

to such transaction own less than
66% 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 the Company of an agreement to which the Company
is a party or by which it is bound, providing for any of the events set forth in clauses (a) through (d) above.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

“Equity
Conditions” means, during the period in question, (a) the Company
shall have duly honored all conversions and redemptions scheduled to occur or occurring by virtue of one or more Notices of Conversion
of the Holder, if any, (b) the Company shall have paid all liquidated damages and other amounts owing to the Holder in respect
of this Debenture, (c)(i) there is an effective Registration Statement pursuant to which the Holder is permitted to utilize
the prospectus thereunder to resell all of the shares of Common Stock issuable pursuant to the Transaction Documents (and the Company
believes, in good faith, that such effectiveness will continue uninterrupted for the foreseeable future) or (ii) all of the Conversion
Shares issuable pursuant to the Transaction Documents (and shares issuable in lieu of cash payments of interest) may be resold
pursuant to Rule 144 without volume or manner-of-sale restrictions or current public information requirements as determined by
the counsel to the Company as set forth in a written opinion letter to such effect, addressed and acceptable to the Transfer Agent
and the Holder, (d) the Common Stock is trading on a Trading Market and all of the shares issuable pursuant to the Transaction
Documents are listed or quoted for trading on such Trading Market (and the Company believes, in good faith, that trading of the
Common Stock on a Trading Market will continue uninterrupted for the foreseeable

    	 

    	 

    

future), (e) there is a sufficient
number of authorized but unissued and otherwise unreserved shares of Common Stock for the issuance of all of the shares then issuable
pursuant to the Transaction Documents, (f) there is no existing Event of Default and no existing event which, with the passage
of time or the giving of notice, would constitute an Event of Default, (g) the issuance of the shares in question (or, in the case
of an Optional Redemption or Periodic Redemption, the shares issuable upon conversion in full of the Optional Redemption Amount
or Periodic Redemption Amount) to the Holder would not violate the limitations set forth in Section 4(d) herein (for purposes of
Sections 6(a) and 6(b) only, the “Beneficial Ownership Limitation” shall be deemed to be 9.9%), (h)
there has been no public announcement of a pending or proposed Fundamental Transaction or Change of Control Transaction that has
not been consummated, (i) the applicable Holder is not in possession of any information provided by the Company that constitutes,
or may constitute, material non-public information and (j) with respect to payments under Section 2 and Section 6(b), the number
of shares of Common Stock proposed to be issued in respect of such payments at issue, in each case as attributable to all holders
of Debentures, is less than 10% of the aggregate number of shares of Common Stock traded on the principal Trading Market during
the 20 Trading Days immediately prior to such payment date.

 

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

 

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

 

“Interest
Conversion Rate” means the lesser of (a) the Conversion Price or (b) 90% of the lesser
of (i) the average of the VWAPs for the 20 consecutive Trading Days ending on the Trading Day that is immediately prior to the
applicable Interest Payment Date or (ii) the average of the VWAPs for the 20 consecutive Trading Days ending on the Trading Day
that is immediately prior to the date the applicable Interest Conversion Shares are issued and delivered if such delivery is after
the Interest Payment Date (provided, however, in the case of clause (b) the Interest Conversion Rate shall be at least a $.01 discount
to the VWAP on the Trading Day immediately preceding such payment date).

 

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

 

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

 

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

 

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

 

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

 

“Mandatory
Default Amount” means the sum of (a) the greater of (i) the outstanding principal amount of this Debenture, plus all
accrued and unpaid interest hereon, divided by the Conversion Price on the date the Mandatory Default Amount is

    	 

    	 

    

either (A) demanded (if demand or
notice is required to create an Event of Default) or otherwise due or (B) paid in full, whichever has a lower Conversion Price,
multiplied by the VWAP on the date the Mandatory Default Amount is either (x) demanded or otherwise due or (y) paid in full, whichever
has a higher VWAP, or (ii) 130% of the outstanding principal amount of this Debenture, plus 100% of accrued and unpaid interest
hereon, and (b) all other amounts, costs, expenses and liquidated damages due in respect of this Debenture.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

“Periodic
Redemption Amount” means the sum of (i) $308,000 and (ii) plus accrued but unpaid interest, liquidated damages and any
other amounts then owing to the Holder in respect of this Debenture.

 

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

 

“Periodic
Redemption Date” means May 1, 2014, August 1, 2014, November 1, 2014, and February 1, 2015.

 

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

    	 

    	 

    

 

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

 

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

 

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

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

 

“Purchase
Agreement” means the Securities Purchase Agreement, dated as of November 6, 2013 among the Company and the original Holders,
as amended, modified or supplemented from time to time in accordance with its terms.

 

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

 

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

 

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

 

    	 

    	 

    

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

 

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

 

“VWAP”
means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed
or quoted on a Trading Market, the daily volume weighted average price of the Common Stock for such date (or the nearest preceding
date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg L.P. (based on a Trading
Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)), (b)  if the OTC Bulletin Board 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 in the “Pink Sheets” published by Pink OTC Markets, Inc. (or a similar organization or agency
succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported, or (d) in
all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith
by the Holders of a majority in interest of the Securities then outstanding and reasonably acceptable to the Company, the fees
and expenses of which shall be paid by the Company.

 

Section 2.Interest.

 

a)                 
Payment of Interest in Cash or Kind. The Company shall pay interest to the Holder on
the aggregate unconverted and then outstanding principal amount of this Debenture at the rate of 8% per annum, payable quarterly
on February 1, May 1, August 1 and November 1, beginning on May 1, 2014, on each Periodic Redemption Date (as to that principal
amount then being redeemed), on each Conversion Date (as to that principal amount then being converted), on each Optional Redemption
Date (as to that principal amount then being redeemed) and on the Maturity Date (each such date, an “Interest Payment
Date”) (if any Interest Payment Date is not a Business Day, then the applicable payment shall be due on the next succeeding
Business Day), in cash or, at the Company’s option, in duly authorized, validly issued, fully paid and non-assessable shares
of Common Stock at the Interest Conversion Rate (the dollar amount to be paid in shares, the “Interest Share Amount”)
or a combination thereof; provided, however, that payment in shares of Common Stock may only occur if (i) all of
the Equity Conditions have been met (unless waived by the Holder in writing) during the 20 Trading Days immediately prior to the
applicable Interest Payment Date (the “Interest Notice Period”) and through and including the date such shares
of Common Stock are actually issued to the Holder, (ii) the Company shall have given the Holder notice in accordance with the notice
requirements set forth below and (iii) as to such Interest Payment Date, prior to

    	 

    	 

    

such Interest Notice Period (but
not more than five (5) Trading Days prior to the commencement of such Interest Notice Period), the Company shall have delivered
to the Holder’s account with The Depository Trust Company a number of shares of Common Stock to be applied against such Interest
Share Amount equal to the quotient of (x) the applicable Interest Share Amount divided by (y) the lesser of the (i) then Conversion
Price and (ii) the Interest Conversion Rate assuming for such purposes that the Interest Payment Date is the Trading Day immediately
prior to the commencement of the Interest Notice Period (the “Interest Conversion Shares”).

 

b)                 
Company’s Election to Pay Interest in Cash or Kind. Subject to the terms and
conditions herein, the decision whether to pay interest hereunder in cash, shares of Common Stock or a combination thereof shall
be at the sole discretion of the Company. Prior to the commencement of any Interest Notice Period, the Company shall deliver to
the Holder a written notice of its election to pay interest hereunder on the applicable Interest Payment Date either in cash, shares
of Common Stock or a combination thereof and the Interest Share Amount as to the applicable Interest Payment Date, provided that
the Company may indicate in such notice that the election contained in such notice shall apply to future Interest Payment Dates
until revised by a subsequent notice. During any Interest Notice Period, the Company’s election (whether specific to an Interest
Payment Date or continuous) shall be irrevocable as to such Interest Payment Date. Subject to the aforementioned conditions, failure
to timely deliver such written notice to the Holder shall be deemed an election by the Company to pay the interest on such Interest
Payment Date in cash. At any time the Company delivers a notice to the Holder of its election to pay the interest in shares of
Common Stock, if such shares are then subject to an effective Registration Statement, the Company shall timely file a prospectus
supplement pursuant to Rule 424 disclosing such election. The aggregate number of shares of Common Stock otherwise issuable to
the Holder on an Interest Payment Date shall be reduced by the number of Interest Conversion Shares previously issued to the Holder
in connection with such Interest Payment Date.

 

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

    	 

    	 

    

based on their (or their predecessor’s)
initial purchases of Debentures pursuant to the Purchase Agreement.

 

d)                
Late Fee. All overdue accrued and unpaid interest to be paid hereunder shall entail
a late fee at an interest rate equal to the lesser of 18% per annum or the maximum rate permitted by applicable law (the “Late
Fees”) which shall accrue daily from the date such interest is due hereunder through and including the date of actual
payment in full. Notwithstanding anything to the contrary contained herein, if, on any Interest Payment Date the Company has elected
to pay accrued interest in the form of Common Stock but the Company is not permitted to pay accrued interest in Common Stock because
it fails to satisfy the conditions for payment in Common Stock set forth in Section 2(a) herein, then, at
the option of the Holder, the Company, in lieu of delivering either shares of Common Stock pursuant to this Section 2 or paying
the regularly scheduled interest payment in cash, shall deliver, within three (3) Trading Days of each applicable Interest Payment
Date, an amount in cash equal to the product of (x) the number of shares of Common Stock otherwise deliverable to the Holder in
connection with the payment of interest due on such Interest Payment Date multiplied by (y) the highest VWAP during the period
commencing on the Interest Payment Date and ending on the Trading Day prior to the date such payment is actually made. If any Interest
Conversion Shares are issued to the Holder in connection with an Interest Payment Date and are not applied against an Interest
Share Amount, then the Holder shall promptly return such excess shares to the Company.

 

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

 

Section 3.Registration
of Transfers and Exchanges.

 

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

 

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

 

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

    	 

    	 

    

 

Section 4.Conversion.

 

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

 

b)                 
Conversion Price. The conversion price in effect on any Conversion Date shall be equal
to $0.193, subject to adjustment herein (the “Conversion Price”).

 

		c)	Mechanics of Conversion.

 

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

 

                                                                 
ii.                       
Delivery of Certificate Upon Conversion. Not later than three (3) Trading Days after
each Conversion Date (the “Share Delivery Date”), the Company shall deliver, or cause to be delivered, to the
Holder (A) a certificate or certificates representing the Conversion Shares which, on or after the earlier of (i) the six month
anniversary of the Original Issue Date or (ii) the Effective Date, shall be free of restrictive legends and trading restrictions
(other than those which

    	 

    	 

    

may then be required by the Purchase
Agreement) representing the number of Conversion Shares being acquired upon the conversion of this Debenture (including, if the
Company has given continuous notice pursuant to Section 2(b) for payment of interest in shares of Common Stock at least 20 Trading
Days prior to the date on which the Notice of Conversion is delivered to the Company, shares of Common Stock representing the payment
of accrued interest otherwise determined pursuant to Section 2(a) but assuming that the Interest Notice Period is the 20 Trading
Days period immediately prior to the date on which the Notice of Conversion is delivered to the Company and excluding for such
issuance the condition that the Company deliver Interest Conversion Shares as to such interest payment prior to the commencement
of the Interest Notice Period) and (B) a bank check in the amount of accrued and unpaid interest (if the Company has elected or
is required to pay accrued interest in cash). On or after the earlier of (i) the six month anniversary of the Original Issue Date
or (ii) the Effective Date, the Company shall use its best efforts to deliver any certificate or certificates required to be delivered
by the Company under this Section 4(c) electronically through the Depository Trust Company or another established clearing corporation
performing similar functions.

 

                                                               
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 the Company at any time on or before its receipt of such certificate or certificates,
to rescind such Conversion, in which event the Company shall promptly return to the Holder any original Debenture delivered to
the Company and the Holder shall promptly return to the Company the Common Stock certificates issued to such Holder pursuant to
the rescinded Conversion Notice. 

 

                                                               
iv.                       
Obligation Absolute; Partial Liquidated Damages. The Company’s obligations to
issue and deliver the Conversion Shares upon conversion of this Debenture in accordance with the terms hereof are absolute and
unconditional, irrespective of any action or inaction by the Holder to enforce the same, any waiver or consent with respect to
any provision hereof, the recovery of any judgment against any Person or any action to enforce the same, or any setoff, counterclaim,
recoupment, limitation or termination, or any breach or alleged breach by the Holder or any other Person of any obligation to the
Company or any violation or alleged violation of law by the Holder or any other Person, and irrespective of any other circumstance
which might otherwise limit such obligation of the Company to the Holder in connection with the issuance of such Conversion Shares;
provided, however, that such delivery shall not operate as a waiver by the Company of any such action the Company
may have against the Holder. In the event the Holder of this Debenture shall elect to convert any or all of the outstanding principal
amount hereof, the Company may not refuse conversion based on any claim that the Holder or anyone associated or affiliated

    	 

    	 

    

with the Holder has been engaged in
any violation of law, agreement or for any other reason, unless an injunction from a court, on notice to Holder, restraining and
or enjoining conversion of all or part of this Debenture shall have been sought and obtained, and the Company posts a surety bond
for the benefit of the Holder in the amount of 150% of the outstanding principal amount of this Debenture, which is subject to
the injunction, which bond shall remain in effect until the completion of arbitration/litigation of the underlying dispute and
the proceeds of which shall be payable to the Holder to the extent it obtains judgment. In the absence of such injunction, the
Company shall issue Conversion Shares or, if applicable, cash, upon a properly noticed conversion. If the Company fails for any
reason to deliver to the Holder such certificate or certificates pursuant to Section 4(c)(ii) by the Share Delivery Date, the Company
shall pay to the Holder, in cash, as liquidated damages and not as a penalty, for each $1,000 of principal amount being converted,
$10 per Trading Day (increasing to $20 per Trading Day on the fifth (5th) Trading Day after such liquidated damages
begin to accrue) for each Trading Day after such Share Delivery Date until such certificates are delivered or Holder rescinds such
conversion. Nothing herein shall limit a Holder’s right to pursue actual damages or declare an Event of Default pursuant
to Section 8 hereof for the Company’s failure to deliver Conversion Shares within the period specified herein and the Holder
shall have the right to pursue all remedies available to it hereunder, at law or in equity including, without limitation, a decree
of specific performance and/or injunctive relief. The exercise of any such rights shall not prohibit the Holder from seeking to
enforce damages pursuant to any other Section hereof or under applicable law.

 

                                                                 
v.                       
Compensation for Buy-In on Failure to Timely Deliver Certificates Upon Conversion.
In addition to any other rights available to the Holder, if the Company fails for any reason to deliver to the Holder such certificate
or certificates by the Share Delivery Date pursuant to Section 4(c)(ii), and if after such Share Delivery Date the Holder is required
by its brokerage firm to purchase (in an open market transaction or otherwise), or the Holder’s brokerage firm otherwise
purchases, shares of Common Stock to deliver in satisfaction of a sale by the Holder of the Conversion Shares which the Holder
was entitled to receive upon the conversion relating to such Share Delivery Date (a “Buy-In”), then the Company
shall (A) pay in cash to the Holder (in addition to any other remedies available to or elected by the Holder) the amount, if any,
by which (x) the Holder’s total purchase price (including any brokerage commissions) for the Common Stock so purchased exceeds
(y) the product of (1) the aggregate number of shares of Common Stock that the Holder was entitled to receive from the conversion
at issue multiplied by (2) the actual sale price at which the sell order giving rise to such purchase obligation was executed (including
any brokerage commissions) and (B) at the option of the Holder, either reissue (if surrendered) this Debenture in a principal amount
equal to the principal amount of the attempted conversion (in which case such conversion shall be deemed rescinded) or deliver
to the Holder the number of shares of Common Stock that would have

    	 

    	 

    

been issued if the Company had timely
complied with its delivery requirements under Section 4(c)(ii). For example, if the Holder purchases Common Stock having a total
purchase price of $11,000 to cover a Buy-In with respect to an attempted conversion of this Debenture with respect to which the
actual sale price of the Conversion Shares (including any brokerage commissions) giving rise to such purchase obligation was a
total of $10,000 under clause (A) of the immediately preceding sentence, the Company shall be required to pay the Holder $1,000.
The Holder shall provide the Company written notice indicating the amounts payable to the Holder in respect of the Buy-In and,
upon request of the Company, evidence of the amount of such loss. Nothing herein shall limit a Holder’s right to pursue any
other remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or
injunctive relief with respect to the Company’s failure to timely deliver certificates representing shares of Common Stock
upon conversion of this Debenture as required pursuant to the terms hereof.

 

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

 

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

 

                                                           
viii.                       
Transfer Taxes and Expenses. The issuance of certificates for shares of the Common
Stock on conversion of this Debenture shall be made without charge to the Holder hereof for any documentary stamp or similar taxes
that may be payable in respect of the issue or delivery of such certificates, provided that, the Company shall not be required
to pay any tax that may be payable in respect of any transfer involved in the issuance and delivery of any

    	 

    	 

    

such certificate upon conversion in
a name other than that of the Holder of this Debenture so converted and the Company shall not be required to issue or deliver such
certificates unless or until the Person or Persons requesting the issuance thereof shall have paid to the Company the amount of
such tax or shall have established to the satisfaction of the Company that such tax has been paid. The Company shall pay all Transfer
Agent fees required for same-day processing of any Notice of Conversion.

 

d)                
Holder’s Conversion Limitations. The Company shall not effect any conversion
of this Debenture, and a Holder shall not have the right to convert any portion of this Debenture, to the extent that after giving
effect to the conversion set forth on the applicable Notice of Conversion, the Holder (together with the Holder’s Affiliates,
and any Persons acting as a group together with the Holder or any of the Holder’s Affiliates) would beneficially own in excess
of the Beneficial Ownership Limitation (as defined below).  For purposes of the foregoing sentence, the number of shares of
Common Stock beneficially owned by the Holder and its Affiliates shall include the number of shares of Common Stock issuable upon
conversion of this Debenture with respect to which such determination is being made, but shall exclude the number of shares of
Common Stock which are issuable upon (i) conversion of the remaining, unconverted principal amount of this Debenture beneficially
owned by the Holder or any of its Affiliates and (ii) exercise or conversion of the unexercised or unconverted portion of any other
securities of the Company subject to a limitation on conversion or exercise analogous to the limitation contained herein (including,
without limitation, any other Debentures or the Warrants) beneficially owned by the Holder or any of its Affiliates.  Except
as set forth in the preceding sentence, for purposes of this Section 4(d), beneficial ownership shall be calculated in accordance
with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. To the extent that the limitation
contained in this Section 4(d) applies, the determination of whether this Debenture is convertible (in relation to other securities
owned by the Holder together with any Affiliates) and of which principal amount of this Debenture is convertible shall be in the
sole discretion of the Holder, and the submission of a Notice of Conversion shall be deemed to be the Holder’s determination
of whether this Debenture may be converted (in relation to other securities owned by the Holder together with any Affiliates) and
which principal amount of this Debenture is convertible, in each case subject to the Beneficial Ownership Limitation. To ensure
compliance with this restriction, the Holder will be deemed to represent to the Company each time it delivers a Notice of Conversion
that such Notice of Conversion has not violated the restrictions set forth in this paragraph and the Company shall have no obligation
to verify or confirm the accuracy of such determination. In addition,
a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange
Act and the rules and regulations promulgated thereunder.
For purposes of this Section 4(d), in determining the number of outstanding shares of Common Stock, the Holder may rely on the
number of outstanding shares of Common Stock as stated in the most recent of the following: (i) the Company’s most recent
periodic or annual report filed with the Commission, as the case may be, (ii) a more recent public announcement by the

    	 

    	 

    

Company, or (iii) a more recent written
notice by the Company or the Company’s transfer agent setting forth the number of shares of Common Stock outstanding. 
Upon the written or oral request of a Holder, the Company shall within two Trading Days confirm orally and in writing to the Holder
the number of shares of Common Stock then outstanding.  In any case, the number of outstanding shares of Common Stock shall
be determined after giving effect to the conversion or exercise of securities of the Company, including this Debenture, by the
Holder or its Affiliates since the date as of which such number of outstanding shares of Common Stock was reported. The “Beneficial
Ownership Limitation” shall be 4.99% of the number of shares of the Common Stock outstanding immediately after giving
effect to the issuance of shares of Common Stock issuable upon conversion of this Debenture held by the Holder. The Holder, upon
not less than 61 days’ prior notice to the Company, may increase or decrease the Beneficial Ownership Limitation provisions
of this Section 4(d), provided that the Beneficial Ownership Limitation in no event exceeds 9.99% of the number of shares of the
Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock upon conversion of this Debenture
held by the Holder and the Beneficial Ownership Limitation provisions of this Section 4(d) shall continue to apply. Any such increase
or decrease will not be effective until the 61st day after such notice is delivered to the Company. The Beneficial Ownership
Limitation provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with
the terms of this Section 4(d) to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the
intended Beneficial Ownership Limitation contained herein or to make changes or supplements necessary or desirable to properly
give effect to such limitation. The limitations contained in this paragraph
shall apply to a successor holder of this Debenture.

 

Section 5.Certain Adjustments.

 

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

    	 

    	 

    

 

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

c)                 
Subsequent Rights Offerings. In addition to any adjustments
pursuant to Section 5(a) above, if at any time the Company grants, issues or sells any Common Stock Equivalents or rights to purchase
stock, warrants, securities or other property pro rata to the record holders of any class of shares of Common Stock (the “Purchase
Rights”), then the Holder will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate
Purchase Rights which the Holder could have acquired if the Holder had held the number of shares of Common Stock acquirable upon
complete conversion of this Debenture (without regard to any limitations on exercise hereof, including without limitation, the
Beneficial Ownership Limitation) immediately before the date on which a record is taken for the grant, issuance or sale of such
Purchase Rights, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined
for the grant, issue or sale of such Purchase Rights (provided, however, to the extent that the Holder’s right to participate
in any such Purchase Right would result in

    	 

    	 

    

the Holder exceeding the Beneficial
Ownership Limitation, then the Holder shall not be entitled to participate in such Purchase Right to such extent (or beneficial
ownership of such shares of Common Stock as a result of such Purchase Right to such extent) and such Purchase Right to such extent
shall be held in abeyance for the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding
the Beneficial Ownership Limitation).

 

d)                
Pro Rata Distributions. During such time as this Debenture is outstanding, if the Company
shall declare or make any dividend or other distribution of its assets (or rights to acquire its assets) to holders of shares of
Common Stock, by way of return of capital or otherwise (including, without limitation, any distribution of cash, stock or other
securities, property or options by way of a dividend, spin off, reclassification, corporate rearrangement, scheme of arrangement
or other similar transaction) (a "Distribution"), at any time after the issuance of this Debenture, then, in each
such case, the Holder shall be entitled to participate in such Distribution to the same extent that the Holder would have participated
therein if the Holder had held the number of shares of Common Stock acquirable upon complete 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).

 

e)                 
Fundamental Transaction. If, at any time while this Debenture is outstanding, (i) the
Company, directly or indirectly, in one or more related transactions effects any merger or consolidation of the Company with or
into another Person, (ii) the Company, directly or indirectly, effects any sale, lease, license, assignment, transfer, conveyance
or other disposition of all or substantially all of its assets in one or a series of related transactions, (iii) any, direct or
indirect, purchase offer, tender offer or exchange offer (whether by the Company or another Person) is completed pursuant to which
holders of Common Stock are permitted to sell, tender or exchange their shares for other securities, cash or property and has been
accepted by the holders of 50% or more of the outstanding Common Stock, (iv) the Company, directly or indirectly, in one or more
related transactions effects any reclassification, reorganization or recapitalization of the Common Stock or any compulsory share
exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property,
(v) the Company, directly or indirectly, in one or more related transactions consummates a stock or share purchase agreement or
other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement)
with another

    	 

    	 

    

Person whereby such other Person
acquires more than 50% of the outstanding shares of Common Stock (not including any shares of Common Stock held by the other Person
or other Persons making or party to, or associated or affiliated with the other Persons making or party to, such stock or share
purchase agreement or other business combination) (each a “Fundamental Transaction”), then, upon any subsequent
conversion of this Debenture, the Holder shall have the right to receive, for each Conversion Share that would have been issuable
upon such conversion immediately prior to the occurrence of such Fundamental Transaction (without regard to any limitation in Section
4(d) on the conversion of this Debenture), the number of shares of Common Stock of the successor or acquiring corporation or of
the Company, if it is the surviving corporation, and any additional consideration (the “Alternate Consideration”)
receivable as a result of such Fundamental Transaction by a holder of the number of shares of Common Stock for which this Debenture
is convertible immediately prior to such Fundamental Transaction (without regard to any limitation in Section 4(d) on the conversion
of this Debenture). For purposes of any such conversion, the determination of the Conversion Price shall be appropriately adjusted
to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one (1) share of
Common Stock in such Fundamental Transaction, and the Company shall apportion the Conversion Price among the Alternate Consideration
in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration. If holders of
Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the
Holder shall be given the same choice as to the Alternate Consideration it receives upon any conversion of this Debenture following
such Fundamental Transaction. The Company shall cause any successor entity in a Fundamental Transaction in which the Company is
not the survivor (the “Successor Entity”) to assume in writing all of the obligations of the Company under this
Debenture and the other Transaction Documents (as defined in the Purchase Agreement) in accordance with the provisions of this
Section 5(e) pursuant to written agreements in form and substance reasonably satisfactory to the Holder and approved by the Holder
(without unreasonable delay) prior to such Fundamental Transaction and shall, at the option of the holder of this Debenture, deliver
to the Holder in exchange for this Debenture a security of the Successor Entity evidenced by a written instrument substantially
similar in form and substance to this Debenture which is convertible for a corresponding number of shares of capital stock of such
Successor Entity (or its parent entity) equivalent to the shares of Common Stock acquirable and receivable upon conversion of this
Debenture (without regard to any limitations on the conversion of this Debenture) prior to such Fundamental Transaction, and with
a conversion price which applies the conversion price hereunder to such shares of capital stock (but taking into account the relative
value of the shares of Common Stock pursuant to such Fundamental Transaction and the value of such shares of capital stock, such
number of shares of capital stock and such conversion price being for the purpose of protecting the economic value of this Debenture
immediately prior to the consummation of such Fundamental Transaction), and which is reasonably satisfactory in form and substance
to the Holder. Upon the occurrence of any such Fundamental Transaction, the Successor Entity shall succeed to, and be substituted
for (so that from and after the date of such Fundamental

    	 

    	 

    

Transaction, the provisions of this
Debenture and the other Transaction Documents referring to the “Company” shall refer instead to the Successor Entity),
and may exercise every right and power of the Company and shall assume all of the obligations of the Company under this Debenture
and the other Transaction Documents with the same effect as if such Successor Entity had been named as the Company herein.

 

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

 

g)                 
Notice to the Holder.

 

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

 

                                                                 
ii.                       
Notice to Allow Conversion by Holder. If (A) the Company shall declare a dividend (or
any other distribution in whatever form) on the Common Stock, (B) the Company shall declare a special nonrecurring cash dividend
on or a redemption of the Common Stock, (C) the Company shall authorize the granting to all holders of the Common Stock of rights
or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights, (D) the approval of any stockholders
of the Company shall be required in connection with any reclassification of the Common Stock, any consolidation or merger to which
the Company is a party, any sale or transfer of all or substantially all of the assets of the Company, or any compulsory share
exchange whereby the Common Stock is converted into other securities, cash or property or (E) the Company
shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company, then, in each
case, the Company shall cause to be filed at each office or agency maintained for the purpose of conversion of this Debenture,
and shall cause to be delivered to the Holder at its last address as it shall appear upon the Debenture Register, at least twenty
(20) calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date
on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record
is not to be taken, the date as of which the holders of the Common Stock of record to be entitled to such dividend, distributions,
redemption, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale,
transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of the
Common Stock of record shall be entitled to exchange their shares of the Common Stock for securities, cash or other property

    	 

    	 

    

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

 

Section 6.Redemption.

 

a)                 
Optional Redemption at Election of Company. Subject
to the provisions of this Section 6(a), at any time after the 6-month anniversary of the Closing Date, the Company may deliver
a notice to the Holder (an “Optional Redemption Notice”
and the date such notice is deemed delivered hereunder, the “Optional Redemption
Notice Date”) of its irrevocable election to redeem some or all of the then
outstanding principal amount of this Debenture for cash in an amount equal to the Optional Redemption Amount on the 10th
Trading Day following the Optional Redemption Notice Date (such date, the “Optional
Redemption Date”, such 10 Trading Day period, the “Optional
Redemption Period” and such redemption, the “Optional
Redemption”). The Optional Redemption Amount is payable in full on the Optional
Redemption Date. The Company may only effect an Optional Redemption if each of the Equity Conditions shall have been met (unless
waived in writing by the Holder) on each Trading Day during the period commencing on the Optional Redemption Notice Date through
to the Optional Redemption Date and through and including the date payment of the Optional Redemption Amount is actually
made in full. If any of the Equity Conditions shall cease to be satisfied
at any time during the Optional Redemption Period, then the Holder may elect to nullify the Optional Redemption Notice by notice
to the Company within 3 Trading Days after the first day on which any such Equity Condition has not been met (provided that if,
by a provision of the Transaction Documents, the Company is obligated to notify the Holder of the non-existence of an Equity Condition,
such notice period shall be extended to the third Trading Day after proper notice from the Company) in which case the Optional
Redemption Notice shall be null and void, ab
initio. The Company covenants and agrees
that it will honor all Notices of Conversion tendered from the time of delivery of the Optional Redemption Notice through the date
all amounts owing thereon are due and paid in full. The Company’s determination to pay an Optional Redemption
in cash shall be applied ratably to all of the holders of the then outstanding Debentures based on their (or their predecessor’s)
initial purchases of Debentures pursuant to the Purchase Agreement.

 

b)                 
Periodic Redemption. On each Periodic Redemption Date, the Company shall redeem the Periodic Redemption Amount (the
“Periodic Redemption”). The

    	 

    	 

    

Periodic Redemption Amount payable
on each Periodic Redemption Date shall be paid in cash; provided, however, as to any Periodic Redemption and upon
20 Trading Days’ prior written irrevocable notice (the “Periodic Redemption Notice”), in lieu of a cash
redemption payment the Company may elect to pay all or part of a Periodic Redemption Amount in Conversion Shares based on a conversion
price equal to the lesser of (i) the then Conversion Price, (ii) the price at which the applicable Pre-Redemption Conversion Shares
are delivered and (iii) 90% of the average of the VWAPs for the 20 consecutive Trading Days ending on the Trading Day that is immediately
prior to the applicable Periodic Redemption Date (subject to adjustment for any stock dividend, stock split, stock combination
or other similar event affecting the Common Stock during such 20 Trading Day period) provided, however, in the case of this clause
(iii) the conversion price shall be equal to at least a $0.01 discount the VWAP on the Trading Day immediately prior to the applicable
Periodic Redemption Date (the price calculated during the 20 Trading Day period immediately prior to the Periodic Redemption Date,
the “Periodic Conversion Price” and such 20 Trading Day period, the “Periodic Conversion Period”);
provided, further, that the Company may not pay the Periodic Redemption Amount in Conversion Shares unless (y) from
the date the Holder receives the duly delivered Periodic Redemption Notice through and until the date such Periodic Redemption
is paid in full, the Equity Conditions have been satisfied, unless waived in writing by the Holder, and (z) as to such Periodic
Redemption, prior to such Periodic Conversion Period (but not more than 5 Trading Days prior to the commencement of the Periodic
Conversion Period), the Company shall have delivered to the Holder’s account with The Depository Trust Company a number of
shares of Common Stock to be applied against such Periodic Redemption Amount equal to the quotient of (x) the applicable Periodic
Redemption Amount divided by (y) the lesser of (A) the Conversion Price and (B) 90% of the average of the 20 VWAPs during the period
ending on the 3rd Trading Day immediately prior to the date of the Periodic Redemption Notice (the “Pre-Redemption
Conversion Shares”). The Holder may convert, pursuant to Section 4(a), any principal amount of this Debenture subject
to a Periodic Redemption at any time prior to the date that the Periodic Redemption Amount, plus accrued but unpaid interest, liquidated
damages and any other amounts then owing to the Holder are due and paid in full. Unless otherwise indicated by the Holder in the
applicable Notice of Conversion, any principal amount of this Debenture converted during the applicable Periodic Conversion Period
until the date the Periodic Redemption Amount is paid in full shall be first applied to the principal amount subject to the Periodic
Redemption Amount payable in cash and then to the Periodic Redemption Amount payable in Conversion Shares. Any principal amount
of this Debenture converted during the applicable Periodic Conversion Period in excess of the Periodic Redemption Amount shall
be applied against the last principal amount of this Debenture scheduled to be redeemed hereunder, in reverse time order from the
Maturity Date; provided, however, if any such conversion is applied against such Periodic Redemption Amount, the
Pre-Redemption Conversion Shares, if any were issued in connection with such Periodic Redemption or were not already applied to
such conversions, shall be first applied against such conversion. The Company covenants and agrees that it will honor all Notices
of Conversion tendered up until such amounts are paid in full. The Company’s determination to pay a Periodic Redemption in

    	 

    	 

    

cash, shares of Common Stock or a
combination thereof shall be applied ratably to all of the holders of the then outstanding Debentures based on their (or their
predecessor’s) initial purchases of Debentures pursuant to the Purchase Agreement. At any time the Company delivers a notice
to the Holder of its election to pay the Periodic Redemption Amount in shares of Common Stock, the Company shall file a prospectus
supplement pursuant to Rule 424 disclosing such election.

 

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

 

Section 7.Negative
Covenants. As long as any portion of this Debenture remains outstanding, unless the holders of at least 67% in principal amount
of the then outstanding Debentures shall have otherwise given prior written consent, the Company shall not, and shall not permit
any of the Subsidiaries to, directly or indirectly:

 

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

 

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

 

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

 

    	 

    	 

    

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

 

e)                 
Other than Permitted Indebtedness described in clause (b) and (c) (provided
as to clause (c), the payment terms of such Permitted Indebtedness are not amended or modified after the Original Issue Date absent
the prior written consent of the Holder), repay, repurchase or offer to repay, repurchase or otherwise acquire any Indebtedness,
other than the Debentures if on a pro-rata basis;

 

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

 

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

 

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

 

Section 8.Events of Default.

 

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

 

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

 

                                                                 
ii.                       
the Company shall fail to observe or perform any other covenant or agreement contained in the Debentures (other than
a breach by the Company of its obligations to deliver shares of Common Stock to the Holder upon conversion, which breach is addressed
in clause (x) 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 or
by any other Holder to the Company and (B) 10 Trading Days after the Company has become or should have become aware of such failure;

 

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

 

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

 

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

 

                                                               
vi.                       
the Company or any Subsidiary shall default on any of its obligations under any mortgage, credit agreement or other facility,
indenture agreement, factoring agreement or other instrument under which there may be issued, or by which there may be secured
or evidenced, any indebtedness for borrowed money or money due under any long term leasing or factoring arrangement that (a) involves
an obligation greater than $150,000, whether such indebtedness now exists or shall hereafter be created, and (b) results in such
indebtedness becoming or being declared due and payable prior to the date on which it would otherwise become due and payable;

 

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

 

                                                           
viii.                       
the Company shall be a party to any Change of Control Transaction or Fundamental Transaction or shall agree to sell or dispose
of all or in excess of 33% of its assets in one transaction or a series of related transactions (whether or not such sale would
constitute a Change of Control Transaction);

 

                                                               
ix.                       
the Company does not meet the current public information requirements under Rule 144 in respect
of the Underlying Shares; 

 

                                                                 
x.                       
the Company shall fail for any reason to deliver certificates to a Holder prior to the fifth Trading Day after a Conversion
Date pursuant to Section 4(c) or the Company shall provide at any time notice to the Holder, including by

    	 

    	 

    

way of public announcement, of the
Company’s intention to not honor requests for conversions of any Debentures in accordance with the terms hereof; or

 

                                                               
xi.                       
any monetary judgment, writ or similar final process shall be entered or filed against the Company, any subsidiary or any
of their respective property or other assets for more than $50,000, and such judgment, writ or similar final process shall remain
unvacated, unbonded or unstayed for a period of 45 calendar days.

 

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

 

Section 9.Miscellaneous.

 

a)                 
Notices. Any and all notices or other communications or deliveries to be provided by
the Holder hereunder, including, without limitation, any Notice of Conversion, shall be in writing and delivered personally, by
facsimile, or sent by a nationally recognized overnight courier service, addressed to the Company, at the address set forth above,
or such other facsimile number or address as the Company may specify for such purposes by notice to the Holder delivered in accordance
with this Section 9(a). Any and all notices or other communications or deliveries to be provided by the Company hereunder shall
be in writing and delivered personally, by facsimile, or sent by a nationally recognized overnight courier service addressed to
each Holder at the facsimile number or address of the Holder appearing on the books of the Company, or if no such facsimile number
or address appears on the books of the Company, at the principal place of business of such Holder, as set forth in the Purchase
Agreement. Any notice or other communication or deliveries hereunder shall be deemed given and effective on the earliest of (i)
the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number set forth on the signature
pages attached

    	 

    	 

    

hereto prior to 5:30 p.m. (New York
City time) on any date, (ii) the next Trading Day after the date of transmission, if such notice or communication is delivered
via facsimile at the facsimile number set forth on the signature pages attached hereto on a day that is not a Trading Day or later
than 5:30 p.m. (New York City time) on any Trading Day, (iii) the second Trading Day following the date of mailing, if sent by
U.S. nationally recognized overnight courier service or (iv) upon actual receipt by the party to whom such notice is required to
be given.

 

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

 

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

 

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

    	 

    	 

    

in any other manner permitted by
applicable law. Each party hereto hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right
to trial by jury in any legal proceeding arising out of or relating to this Debenture or the transactions contemplated hereby.
If any party shall commence an action or proceeding to enforce any provisions of this Debenture, then the prevailing party in such
action or proceeding shall be reimbursed by the other party for its attorneys fees and other costs and expenses incurred in the
investigation, preparation and prosecution of such action or proceeding.

 

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

 

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

 

g)                 
Remedies, Characterizations, Other Obligations, Breaches and Injunctive Relief.  The
remedies provided in this Debenture shall be cumulative and in addition to all other remedies available under this Debenture and
any of the other Transaction Documents at law or in equity (including a decree of specific performance and/or other injunctive
relief), and nothing herein shall limit the Holder’s right to pursue actual and consequential damages for any failure by
the Company to comply with the terms of this Debenture.  The Company covenants to the Holder that there shall be no characterization
concerning this instrument other than as expressly provided herein. Amounts set forth or provided for herein with respect to payments,
conversion and the like (and the computation thereof) shall be the amounts to be received by the Holder and shall not,

    	 

    	 

    

except as expressly provided herein,
be subject to any other obligation of the Company (or the performance thereof). The Company acknowledges that a breach by it of
its obligations hereunder will cause irreparable harm to the Holder and that the remedy at law for any such breach may be inadequate.
The Company therefore agrees that, in the event of any such breach or threatened breach, the Holder shall be entitled, in addition
to all other available remedies, to an injunction restraining any such breach or any such threatened breach, without the necessity
of showing economic loss and without any bond or other security being required. The Company shall provide all information and documentation
to the Holder that is requested by the Holder to enable the Holder to confirm the Company’s compliance with the terms and
conditions of this Debenture.

 

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

 

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

 

j)                   
Secured Obligation. The obligations of the Company under this Debenture are secured
by all assets of the Company and each Subsidiary pursuant to the Security Agreement, dated as of November 6, 2013 between the Company,
the Subsidiaries of the Company and the Secured Parties (as defined therein) and mortgages on the Secured Leases.

 

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

 

 

(Signature Pages
Follow)

    	 

    	 

    

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

 

 

	
        NEW WESTERN ENERGY CORPORATION

         

         

	
        By:__________________________________________

        Name: Javan Khazali

        Title: CEO & President

         

        Facsimile No. for delivery of Notices: _______________

	 
	 

 

    	 

    	 

    

ANNEX A

 

NOTICE OF CONVERSION

 

The undersigned
hereby elects to convert principal under the 8% Original Issue Discount Senior Secured Convertible Debenture due February 1, 2015
of NEW WESTERN ENERGY CORPORATION, a Nevada corporation (the “Company”), into shares of common stock (the “Common
Stock”), of the Company according to the conditions hereof, as of the date written below. If shares of Common Stock are
to be issued in the name of a person other than the undersigned, the undersigned will pay all transfer taxes payable with respect
thereto and is delivering herewith such certificates and opinions as reasonably requested by the Company in accordance therewith.
No fee will be charged to the holder for any conversion, except for such transfer taxes, if any.

 

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

 

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

 

Conversion calculations:

Date to Effect
Conversion:

 

Principal Amount of Debenture
to be Converted:

 

Payment of Interest in Common
Stock __ yes __ no

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

Number of shares of Common
Stock to be issued:

Signature:

Name:

Address for Delivery
of Common Stock Certificates:

 

Or

 

DWAC Instructions:

 

Broker No:

Account No:

    	 

    	 

    

Schedule 1

 

CONVERSION SCHEDULE

 

The 8% Original Issue Discount Senior
Secured Convertible Debenture due on February 1, 2015 in the original principal amount of $1,232,000 is issued by NEW WESTERN ENERGY
CORPORATION. This Conversion Schedule reflects conversions made under Section 4 of the above referenced Debenture.

 

Dated:

 

	
         

        Date of Conversion

        (or for first entry, Original Issue
        Date)
	
         

        Amount of Conversion
	
         

        Aggregate Principal Amount Remaining
        Subsequent to Conversion

        (or original Principal Amount)
	
         

        Company Attest

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