Document:

Exhibit

EXHIBIT 10.1
December 12, 2016

Kevin G. Wills 

Dear Kevin, 
It is with great pleasure that I confirm our offer to appoint you as Chief Financial Officer of Coach, Inc. (“Coach” or the “Company), reporting to Victor Luis, Chief Executive Officer of Coach.  Upon effectiveness of the appointment, you will be a member of the Company’s Operating Group. You will be considered an “officer” under Section 16 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as well as an “Executive Officer” of Coach pursuant to Rule 3b-7 of the Exchange Act.
This letter details your base salary, bonus opportunity, annual equity opportunity, joining compensation and other benefits. It also lays out the conditions of your employment. If you accept our offer, you agree to start in your new role as early as possible, on a date (the “Effective Date”) to be determined, and hopefully before February 6th, 2017.
		
	1.
	Base Salary

$750,000 per annum. 
Your salary will be paid bi-weekly on every other Friday and will be paid less withholding and deductions authorized under applicable law. 

Performance reviews are typically conducted at the end of our fiscal year, which presently runs from approximately July 1 through June 30. Any merit increases for which you may be eligible would be determined at that time, and would take effect in September.  You will be eligible for a merit increase in September 2017.
		
	2.
	Incentive Compensation

You will be eligible to participate in the Coach, Inc. 2013 Performance-Based Annual Incentive Plan ("SOPS"), a cash incentive program under which your payout is based on Coach’s financial performance (as well as your individual performance), subject to its terms and conditions. Your target bonus will be 100% of your salary actually earned during the fiscal year. The actual bonus payout may range from 0% of target for performance below established thresholds to 200% of target for maximum performance, with performance components, measures and target values to be established by the Company’s Board of Directors or the Human Resources Committee of the Board of Directors (the “Committee). You will be eligible for SOPS beginning in fiscal year 2017, and any such SOPS bonus earned will be pro-rated in accordance with the Effective Date.

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Any SOPS bonus is paid within three months of the end of the fiscal year and you must be an employee in good standing with Coach on the SOPS bonus payment date in order to be eligible to receive any such SOPS bonus payment.  If you resign your employment or are terminated for "cause," you are not eligible for this bonus for the fiscal year in which your employment is terminated. For the purposes of this letter, termination “cause” is defined in the Addendum. Please refer to the My Pay section of Coach’s intranet, Coachweb, for the governing terms and conditions of the SOPS bonus plan.  In addition, Coach’s Board of Directors has adopted an incentive repayment policy (attached) for members of the Operating Group, which you must sign and return to me coincident with your acceptance of this offer.
		
	3.
	Special New Hire Compensation

You will receive a gross sign-on cash bonus of $1,500,000, 50% of which will be payable within six (6) weeks of the Effective Date, and 50% on your 6 month anniversary,  subject to normal tax withholding. In accepting our offer, you (i) agree that, to the extent you receive a bonus from your prior employer for its fiscal year 2016 (“prior bonus”), you will repay us a portion of your sign-on bonus equal to the amount of such prior bonus, up to a maximum of $1,500,000, and (ii) you will repay the full amount of your sign-on cash bonus, less any amount previously paid to Coach under paragraph (3)(i) above, if you resign your employment within 24 months of your Effective Date, or if your employment is terminated for “cause,” as defined in the Addendum. Full repayment of this sign-on bonus must occur within one (1) month of your termination date.
		
	4.
	Equity Compensation

Your compensation package includes a guideline annual equity grant value of $1,400,000, to be granted in a fixed proportion of different equity vehicles as determined annually by the Committee and normally granted in August, which may include restricted stock units ("RSUs"), performance restricted stock units ("PRSUs"), and/or stock options.  Notwithstanding your joining grant outlined below, Executive Officers of Coach, of which you will be one, currently receive the following mix of equity vehicles: 20% RSU’s, 40% PRSU’s  and 40% stock options.   Currently, PRSUs cliff vest on the third anniversary of the grant date and may vest between 0 to 200% of target shares depending on performance.  RSUs vest on the third anniversary of the grant date and stock options are exercisable one third each year over three years beginning on the first anniversary of the grant date, in each case, subject to your continued employment or other service with Coach from the grant date to each applicable vesting date.  Any future equity grants will be determined based on your position, performance, time in job and other criteria Coach determines it its discretion, which are subject to change.  All equity awards are subject to approval by the Committee.
Your joining grant, with a grant value of $3,500,000 will be made on the first Monday of the fiscal month coincident with or following your Effective Date, and will be granted 100% as RSU’s,  the number of RSUs you receive will be based on the grant price on the day of grant. The RSUs for your joining grant will vest pro rata over four years 25%, 25%, 25%, 25%, subject to your continued employment or other service with Coach. 

You are subject to the terms and conditions of the grant agreements, including, but not limited to, the provisions relating to claw back of equity gains in certain post-employment scenarios.  Notwithstanding anything to the contrary in this letter, the terms of the Amended and Restated Coach, Inc. 2010 Stock Incentive Plan (Amended and Restated as of September 23, 2016) (as it may be amended from time to time, the "Stock Plan") and related grant agreements, as they may be changed from time to time, are controlling.

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For the avoidance of doubt, upon termination of your employment by the Company without Cause or by you for Good Reason, your joining grant will continue to vest during the severance period to the extent that such awards would have become vested had you remained employed through the end of the severance period. In the event of your death or Permanent and Total Disability, your joining grant shall become fully vested as of the date of your death or Permanent and Total Disability.

		
	5.
	Severance

If your employment at Coach should cease involuntarily for any reason other than for "cause" (e.g., position elimination) or if you resign for “good reason” (each as defined in the attached addendum), you will be eligible to receive twelve (12) months of base salary under the Coach, Inc. Severance Pay Plan, subject to its terms and conditions (including with regard to the time and form of payment).  For more information, please view the Severance Plan document on Coachweb or contact Human Resources. To receive separation pay, you will be required to sign a waiver and release agreement in the form provided by Coach. This agreement will include restrictions on your ability to compete with Coach and solicit Coach employees. 

		
	6.
	Section 409A of the Internal Revenue Code

It is expressly intended and contemplated that this letter comply with the provisions of Section 409A of the Code and the applicable guidance thereunder ("Section 409A") and that the payments hereunder will either be exempt from Section 409A or will comply with the provisions of Section 409A.  This letter will be administered and interpreted in a manner consistent with this intent, and, notwithstanding any provision of this letter to the contrary, in the event that Coach determines that any amounts payable hereunder would be immediately taxable to you under Section 409A, Coach reserves the right (without any obligation to do so or to indemnify you for failure to do so) to amend this letter to satisfy Section 409A or be exempt therefrom (which amendment may be retroactive to the extent permitted by Section 409A).  
Notwithstanding any other provision of this letter, if you are a "specified employee" within the meaning of Treas. Reg. §1.409A-1(i)(1), then the payment of any amount or the provision of any benefit under this letter which is considered deferred compensation subject to Section 409A shall be deferred for six (6) months after your "separation from service" or, if earlier, the date of your death to the extent required by Section 409A(a)(2)(B)(i) (the "409A Deferral Period").  In the event payments are otherwise due to be made in installments or periodically during the 409A Deferral Period, the payments which would otherwise have been made in the 409A Deferral Period shall be accumulated and paid in a lump sum on Coach’s first standard payroll date that arises on or after the 409A Deferral Period ends, and the balance of the payments shall be made as otherwise scheduled.  For purposes of any provision of this letter providing for reimbursements to you, such reimbursements shall be made no later than the end of the calendar year following the calendar year in which you incurred such expenses, and in no event shall the unused reimbursement amount during one calendar year be carried over into a subsequent calendar year.  For purposes of this letter, you shall not be deemed to have terminated employment unless you have a "separation from service" within the meaning of Treas. Reg. § 1.409A-1(h). All rights to payments and benefits under this letter shall be treated as rights to receive a series of separate payments and benefits to the fullest extent allowed by Section 409A. In no event shall any liability for failure to comply with the requirements of Section 

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409A be transferred from you or any other individual to Coach or any of its affiliates, employees or agents.
		
	7.
	Benefits

Your other major benefits will include medical, dental, vision, life insurance, short and long term disability, Employee Stock Purchase Plan, employee discount program and 25 business days of vacation per calendar year, as generally provided by the Company at a comparable level in accordance with the plans, practices and programs of the Company, and subject to your satisfaction of applicable eligibility requirements.  These benefits are subject to change from time-to-time in the discretion of Coach.  We are enclosing a summary of executive benefits highlighting these programs in Your Coach Benefits Summary Kit.

		
	8.
	Confidentiality

Coach believes strongly in respecting the proprietary rights of third parties and expects each of its employees to honor their confidentiality obligations to former employers. Accordingly, we expect you to fully comply with any and all obligations you may have, including non-compete, non-solicitation and confidentiality obligations.  Coach does not want, and specifically instructs you to maintain in confidence, and not destroy, delete or alter, all information which is confidential and/or proprietary to your current and former employers.  As a reminder, we are offering you this position based upon your talent and the skills you have acquired throughout your career. 
As an employee of Coach, and as a part of this offer, you will be subject to various Company policies set forth in the attached Addendum as well as those set forth in the Your Coach Benefits Summary Kit that accompanies this offer.  Such policies include, but are not limited to the following:
		
	•
	Incentive Repayment Policy;

		
	•
	Executive Stock Ownership Policy;

		
	•
	Notice of Intent to Terminate Employment;

		
	•
	Post-Employment Restrictions; and

		
	•
	Other Terms and Conditions of Employment.

By accepting this offer, you are also expressly accepting to be bound by and adhere to the Company policies set forth in the attached Addendum and in the packet of materials that accompany this offer letter.  This letter, along with the documents attached hereto or referred to herein, constitutes the entire agreement and understanding between you and Coach with respect to your employment, and supersedes all prior discussions, promises, negotiations and agreements (whether written or oral) between you and Coach.

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Kevin, we are excited at the prospect of your joining us at Coach.  This letter and the documents attached hereto constitutes Coach’s entire offer.  As you review this offer, please feel free to contact me with any questions. To accept the offer, and acknowledge you are not relying on any promise or representation that is not contained in this letter, please sign in the space below and return one of the attached copies to me no later than December 14th 2016.
Sincerely,

/s/ Sarah J. Dunn______________________
Sarah J. Dunn
Global Human Resources Officer
Coach, Inc.
 
Agreed and accepted by: 
/s/ Kevin Wills_____________    12/12/16__________________
Kevin Wills                        Date

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ADDENDUM
COMPANY POLICIES & CONDITIONS OF EMPLOYMENT

As an employee of Coach, you will be subject to the following policies.  Please sign the acknowledgement at the end noting your understanding and agreement.

		
	1.
	Incentive Repayment Policy

Coach’s Board of Directors has adopted an incentive repayment policy affecting all performance-based compensation Coach pays to members of its Operating Group.  Information on this policy is attached.  You agree that you remain subject to this repayment policy and that it may change from time-to-time as the Committee deems appropriate and/or as is required by law.

		
	2.
	Executive Stock Ownership Policy

Coach’s Board of Directors has implemented a stock ownership policy for all Vice Presidents and above.  Information on this policy and the recommended amounts of stock ownership for your position is attached.  As an Operating Group member and Section 16(b) officer of Coach, you will be required to obtain pre-approval of all Coach stock transactions from the Coach Law Department.

		
	3.
	Notice of Intent to Terminate Employment

If at any time you elect to terminate your employment with Coach, including a valid retirement from Coach, but excluding as a result of your Permanent and Total Disability (as defined below), you agree to provide six (6) months’ advance written notice of your intent to terminate your employment and such notice shall be provided via email to the Chief Executive Officer and Global Human Resources Officer.  After you have provided your required notice, you will continue to be an employee of Coach.  Your duties and other obligations as an employee of Coach will continue and you’ll be expected to cooperate in the transition of your responsibilities.  Coach shall, however, have the right in its sole discretion to direct that you no longer come to work or to shorten the notice period.  Nothing herein alters your status as an employee at-will.  Coach reserves all legal and equitable rights to enforce the advance notice provisions of this paragraph.  You acknowledge and agree that your failure to comply with the notice requirements set forth in this paragraph shall result in: (i) Coach being entitled to an immediate injunction, prohibiting you from commencing employment elsewhere for the length of the required notice, (ii) Coach being entitled to claw back any bonus paid to you within 180 days of your last day of employment with Coach, (iii) the forfeiture of any unpaid bonus as of your last day of employment with Coach, (iv) any unvested equity awards or vested stock options held by you shall be automatically forfeited on your last day of employment with Coach, and (v) Coach being entitled to claw back any Financial Gain (as defined below) you realize from the vesting of any Coach equity award within the twelve (12) month period immediately preceding your last day of employment with Coach.  “Financial Gain” shall have the meaning set forth in the various equity award grant agreements that you receive during your employment with Coach.  In the event you terminate your employment due to your Permanent and Total Disability, you will be deemed to have satisfied the advance notice requirement set forth above and will not be subject to the penalties, and Coach will not have the remedies, set forth in clauses (i) through (v) of this Section 3.  For purposes of this Addendum, “Permanent and Total Disability” means that you are unable to engage in any substantial gainful activity by reason of any medically determinable 

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physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than twelve months.

		
	4.
	Post-Employment Restrictions

(a) Non-Competition.  You are prohibited from, directly or indirectly, counseling, advising, consulting for, becoming employed by or providing services in any capacity to a “competitor” (as defined below) of Coach or any of its operating divisions, subsidiaries or affiliates (collectively, the “Coach Group”) during your employment and the twelve (12) month period beginning on your last day of employment with Coach (the “Restricted Period”).

“Competitor” includes: the companies, together with their respective subsidiaries, parent entities, and all other affiliates as set forth on Exhibit A, attached hereto (such companies subject to change from time-to-time as posted on Coach’s intranet, Coachweb).  In the event your employment is terminated for any reason (other than for “cause,” as defined below) and Coach, at its sole discretion, elects to enforce its right to enjoin you from joining a competitor at any time during the Restricted Period, including prohibiting you from engaging in any of the activities prohibited by this Section 4(a), Coach shall compensate you at your most recent base salary, subject to usual withholdings, to be paid monthly, during the remainder of the Restricted Period.  The foregoing payments will be made to you solely to the extent that severance or other termination payments are not paid to you during the remainder of the Restricted Period. Nothing herein shall impact or limit your right to receive any severance payments and benefits pursuant to the terms of your offer letter, except that it is expressly understood and agreed that (i) you will not be entitled to receive payments pursuant to this paragraph during any period you are receiving severance or other termination payments and (ii) your receipt of any severance or other termination payments shall not impact Coach’s right to enforce its rights under this Section 4(a) or otherwise.   

You agree that if you are offered and desire to accept employment with, or provide consulting services to, another business, person or enterprise, including, but not limited to, a “competitor,” during the Restricted Period, you will promptly inform Coach’s Global Human Resources Officer, in writing, of the identity of the prospective employer or entity, your proposed title and duties with that business, person or enterprise, and the proposed starting date of that employment or consulting services.  You also agree that you will inform that prospective employer or entity of the terms of these provisions.  Failure to abide by the requirements of this Section 4(a) will also be deemed a failure to provide the required advance written notice set forth above under Notice of Intent to Terminate Employment. 

(b) Non-Solicitation.  You agree that during the Restricted Period, you will not, directly or indirectly, whether alone or in association with or for the benefit of others, without the prior written consent of Coach, hire or attempt to hire, employ or solicit for employment, consulting or other service, any officer, employee or agent of the Coach Group (each, a “Protected Person”), or encourage, persuade or induce any Protected Person to terminate, diminish or otherwise alter such Protected Person’s relationship with the Coach Group. 

For purposes of Section 4(b) and to avoid any ambiguity, you and Coach agree that it will be a rebuttable presumption that you solicited any Protected Person if such Protected Person commences employment or other service for or on behalf of you or any entity to which you provide services or terminates, diminishes or otherwise alters such Protected Person’s relationship with the Coach Group prior to the end of the Restricted Period. 

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(c) Non-Interference.  During the Restricted Period, you will not, directly or indirectly, whether alone or in association with or for the benefit of others, whether as an employee, owner, stockholder, partner, director, officer, consultant, advisor or otherwise, assist, attempt to or encourage (i) any vendor, supplier, customer or client of, or any other person or entity in a business relationship with, the Coach Group to terminate, reduce, limit or otherwise alter such relationship, whether contractual or otherwise, (ii) any prospective vendor, supplier, customer or client not to enter into a business or contractual relationship with the Coach Group or (iii) to impair or attempt to impair any relationship, contractual or otherwise, between the Coach Group and any vendor, supplier, customer or client or any other person or entity in a business relationship with the Coach Group.

(d) Remedies.  You acknowledge that compliance with this Section 4 is necessary to protect the business, good will and proprietary and confidential information of the Coach Group and that a breach or threatened breach of any provision in this Section 4 will irreparably and continually damage the Coach Group, for which money damages may not be adequate.  Accordingly, in the event that you breach any provision in this Section 4, you will forfeit any remaining earned but unpaid bonus and Coach shall be entitled to claw back any bonus paid to you within 180 days of your last day of employment with Coach. In addition, Coach will be entitled to preliminarily or permanently enjoin you from violating Section 4 in order to prevent the continuation of such harm. 

(e) Reasonableness of Restrictions.  You acknowledge: (i) that the scope and duration of the restrictions on your activities under Section 4 are reasonable and necessary to protect the legitimate business interests, goodwill and confidential and proprietary information of the Coach Group; (ii) that the Coach Group does business worldwide and, therefore, you specifically agree that, in order to adequately protect the Coach Group, the scope of the restrictions in this provision is reasonable; and (iii) that you will be reasonably able to earn a living without violating the terms of these provisions.

(f) Judicial Modification.  If any court of competent jurisdiction determines that any of the covenants in Section 4, or any part of them, is invalid or unenforceable, the remainder of such covenants and parts thereof shall not thereby be affected and shall be given full effect, without regard to the invalid portion.  If any court of competent jurisdiction determines that any of the covenants in Section 4, or any part of them, is invalid or unenforceable because of the geographic or temporal scope of such provisions, such court shall reduce such scope to the minimum extent necessary to make such covenants valid and enforceable.  You agree that in the event that any court of competent jurisdiction finally holds that any provision of this Section 4 constitutes an unreasonable restriction against you, such provision shall not be rendered void but shall apply to such extent as such court may judicially determine constitutes a reasonable restriction under the circumstances.

		
	5.
	Other Terms and Conditions of Employment

If you accept Coach’s offer, our relationship is "employment-at-will." That means you are free, at any time, for any reason, to end your employment with Coach and that Coach may do the same, subject to the advance notice requirements set forth above under Notice of Intent to Terminate Employment.   

For the purposes of this letter, termination for “cause” means a determination by Coach that your employment should be terminated for any of the following reasons: (i) your violation of the Coach Employee Guide or any other written policies or procedures of Coach, (ii) your 

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indictment, conviction of, or plea of guilty or nolo contendere to, a felony or a crime involving moral turpitude, (iii) your willful or grossly negligent breach of your duties, (iv) any act of fraud, embezzlement or other similar dishonest conduct, (v) any act or omission that Coach determines could have a material adverse effect on Coach, including without limitation, its reputation, business interests or financial condition, (vi) your failure to follow the lawful directives of the Chief Executive Officer or other officer of Coach to whom you report, or (vii) your breach of this offer letter or any other written agreement between you and Coach or any of its affiliates.

For any dispute arising between the parties regarding or relating to this letter and/or any aspect of your employment, the parties hereby consent to the exclusive jurisdiction in the state and Federal courts located in New York, New York. This Agreement will be construed and enforced in accordance with the laws of the state of New York, without regard to conflicts of laws principles.    
You have “Good Reason” to resign your employment upon the occurrence of either of the following without your consent: (i) failure of the Company to continue you in the position of Chief Financial Officer or (ii) relocation of the Company's executive offices more than 50 miles outside of New York, New York; provided, however, that notwithstanding the foregoing you may not resign your employment for Good Reason unless: (x) you provide the Company with at least 30 days prior written notice of your intent to resign for Good Reason (which notice is provided not later than the 60th day following the occurrence of the event constituting Good Reason) and (y) the Company does not remedy the alleged violation(s) within such 30-day period.
Our agreement regarding employment-at-will may not be changed, except specifically in writing signed by both the Committee and you.  Coach may in its discretion add to, discontinue, or change compensation, duties, benefits and policies.  Nothing in the preceding two sentences shall be construed as diminishing the financial obligations of either of the parties hereunder, including, without limitation, Coach’s obligations to pay salary, bonus, equity compensation, severance etc., pursuant to the pertinent provisions set forth above.  All payments made hereunder are subject to the usual withholdings required by law.  In the event of a breach by you of any provision of this offer letter and/or any of the Company policies which are included herewith, you agree to reimburse Coach for any and all reasonable attorney’s fees and expenses related to the enforcement of this agreement, including, but not limited to, the clawback of gains specified hereunder. 

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Our offer of employment is contingent on the following: 
		
	•
	Formal ratification of this agreement by the Human Resources Committee;

		
	•
	You passing a credit/background check and verification of your identity and authorization to be employed in the United States;

		
	•
	Your returning a signed copy of this offer letter by December 14th  2016,;  

		
	•
	Your agreement to be bound by, and adhere to, all of Coach’s policies in effect during your employment with Coach, including the Executive Stock Ownership Policy and Incentive Repayment Policy, and our Confidentiality, Information Security and Privacy Agreement; and

		
	•
	The terms and conditions of individual equity award agreements.

Agreed and Accepted by:

/s/ Kevin Wills_________________  12/12/16__________________
Kevin Wills                 Date

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EXHIBIT A

Competitor List
(as of November 2016)
        
Burberry Group PLC
Cole Haan LLC
Fast Retailing Co., Ltd.
Fung Group
G-III Apparel Group, Ltd.
The Gap, Inc.
Kering
J. Crew Group, Inc.
Kate Spade and Company
L Brands, Inc.
LVMH Moet Hennessy Louis Vuitton SA
Michael Kors Holdings Limited
PVH Corp.
Prada, S.p.A.
Proenza Schouler, LLC
Rag & Bone, Inc.
Ralph Lauren Corporation
Tory Burch LLC
Tumi Holdings, Inc.
V.F. Corporation

Page 11 of 11Exhibit 10.123

 

 

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

 

Original Issue Date: February 2, 2017

 

Original Conversion Price (subject to adjustment
herein): $0.086

 

$1,590,000

 

Original
Issue Discount Convertible Debenture

DUE
May 2, 2017

 

ORIGINAL
ISSUE DISCOUNT CONVERTIBLE DEBENTURE is one of a series of duly authorized and validly issued Original Issue Discount
Convertible Debentures of Rennova Health, Inc., a Delaware corporation, (the “Company”), having its
principal place of business at 400 S. Australian Avenue, West Palm Beach, Florida 33401, designated as its Original Issue
Discount Convertible Debenture due May 2, 2017 (this debenture, the “Debenture” and, collectively
with the other debentures of such series, the “Debentures”).

 

FOR
VALUE RECEIVED, the Company promises to pay to  Sabby Healthcare Master Fund, Ltd. or its registered assigns
(the “Holder”), or shall have paid pursuant to the terms hereunder, the principal sum of $1,590,000 on May
2, 2017 (the “Maturity Date”) or such earlier date as this Debenture is required or permitted to
be repaid as provided hereunder. This Debenture is subject to the following additional provisions:

 

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

 

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

 

 

 

 

 

    	 	1	 

     

    

 

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

 

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

 

“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 45% of the voting securities of the Company (other than by means of conversion or exercise of the Debentures and the
Securities issued together with the Debentures), (b) the Company merges into or consolidates with any other Person, or any Person
merges into or consolidates with the Company and, after giving effect to such transaction, the stockholders of the Company immediately
prior to such transaction own less than 60% of the aggregate voting power of the Company or the successor entity of such transaction,
(c) the Company sells or transfers all or substantially all of its assets to another Person and the stockholders of the Company
immediately prior to such transaction own less than 60% of the aggregate voting power of the acquiring entity immediately after
the transaction, (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.

 

 

 

 

 

 

 

 

    	 	2	 

     

    

 

“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).

 

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

 

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

 

“Mandatory
Default Amount” means the sum of (a) the greater of (i) the outstanding principal amount of this Debenture divided by
the fixed 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 fixed Conversion Price, multiplied by the
VWAP on the date the Mandatory Default Amount is either (x) demanded or otherwise due or (y) paid in full, whichever has a higher
VWAP, or (ii) 130% of the outstanding principal amount of this Debenture, and (b) all other amounts, costs, expenses and liquidated
damages due in respect of this Debenture.

 

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

 

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

 

“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.

 

 

 

 

 

 

 

 

 

 

 

    	 	3	 

     

    

 

“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
of up to $3,000,000, in the aggregate, incurred in connection with the acquisition of capital assets 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 at 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,
(c) Liens incurred in connection with Permitted Indebtedness under clauses (a), (b) and (d)/(e) thereunder, (d) Liens incurred
in connection with Permitted Indebtedness under clause (c) thereunder, provided that such Liens are not secured by assets of the
Company or its Subsidiaries other than the assets so acquired or leased, (e) Liens in connection with equipment leases in effect
on the Original Issue Date, and (f) Liens in favor of the Florida Department of Revenue in effect on the Original Issue Date.

 

“Purchase
Agreement” means the Securities Purchase Agreement, dated as of January 29, 2017 among the Company and the original Holders,
as amended, modified or supplemented from time to time in accordance with its terms.

 

“Registration
Statement” means a registration statement covering the resale of the Underlying Shares by each Holder.

 

“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).

 

 

 

 

 

 

 

 

 

 

    	 	4	 

     

    

 

“Tegal
Notes” means those certain notes payable to CommerceNet and Jay Tenenbaum in the original principal amount of $500,000.

 

“TCA
Notes” means the loans payable to TCA Global Master Fund, LP in the principal amount of $3,000,000 at 16% interest rate.

 

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

 

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

 

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

 

Section 2.Interest; Original
Issue Discount. This Debenture is issued as an original issue discount debenture and there are no regularly scheduled interest
payments on this Debenture except as set forth in Section 8(b).

 

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.

 

 

 

 

 

 

 

 

 

    	 	5	 

     

    

 

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). The Holder shall effect conversions by delivering to
the Company a Notice of Conversion, the form of which is attached hereto as Annex A (each, a “Notice of Conversion”),
specifying therein the principal amount of this Debenture to be converted and the date on which such conversion shall be effected
(such date, the “Conversion Date”). If no Conversion Date is specified in a Notice of Conversion, the Conversion
Date shall be the date that such Notice of Conversion is deemed delivered hereunder. No ink-original Notice of Conversion shall
be required, nor shall any medallion guarantee (or other type of guarantee or notarization) of any Notice of Conversion form be
required. To effect conversions hereunder, the Holder shall not be required to physically surrender this Debenture to the Company
unless the entire principal amount of this Debenture has been so converted in which case the Holder shall surrender this Debenture
as promptly as is reasonably practicable after such conversion without delaying the Company’s obligation to deliver the shares
on the Share Delivery Date. Conversions hereunder shall have the effect of lowering the outstanding principal amount of this Debenture
in an amount equal to the applicable conversion. The Holder and the Company shall maintain records showing the principal amount(s)
converted and the date of such conversion(s). The Company may deliver an objection to any Notice of Conversion within one (1) Business
Day of delivery of such Notice of Conversion. In the event of any dispute or discrepancy, the records of the Holder shall be controlling
and determinative in the absence of manifest error. The Holder, and any assignee by acceptance of this Debenture, acknowledge
and agree that, by reason of the provisions of this paragraph, following conversion of a portion of this Debenture, the unpaid
and unconverted principal amount of this Debenture may be less than the amount stated on the face hereof.

 

b)                  Conversion
Price. The conversion price in effect on any Conversion Date shall be equal to the lesser of (i) $0.086, subject to
adjustment herein (the “Conversion Price”). Notwithstanding the foregoing, in the event that this
Debenture is outstanding on or after the Maturity Date (the “Trigger Date”), the Conversion Price shall be
reduced, and only reduced, to equal the lesser of (i) the then applicable Conversion Price and (ii) $0.531 (subject to
adjustment for forward and reverse stock splits and the like). (the “Reset Conversion Price”, which shall
thereafter be the new Conversion Price, subject to further adjustment hereunder). The adjustment to the Reset Conversion
Price shall become immediately effective on the Trigger Date without any additional action by the Holder. The Holder shall
receive a number of Conversion Shares based upon the Conversion Price as adjusted pursuant to this Section, regardless of
whether the Holder accurately refers to such price any Notice of Conversion.

 

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.

 

 

    	 	6	 

     

    

 

 

ii.                       
Delivery of Conversion Shares Upon Conversion. Not later than the earlier of (i) three (3) Trading Days and (ii) the number
of Trading Days comprising the Standard Settlement Period (as defined below) after each Conversion Date (the “Share Delivery
Date”), the Company shall deliver, or cause to be delivered, to the Holder 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 (as defined in the Purchase Agreement),
shall be free of restrictive legends and trading restrictions (other than those which may then be required by the Purchase Agreement)
representing the number of Conversion Shares being acquired upon the conversion of this Debenture. On or after the earlier of (i)
the six month anniversary of the Original Issue Date or (ii) the Effective Date, the Company shall deliver any Conversion Shares
required to be delivered by the Company under this Section 4(c) electronically through the Depository Trust Company or another
established clearing corporation performing similar functions. As used herein, “Standard Settlement Period”
means the standard settlement period, expressed in a number of Trading Days, on the Company’s primary Trading Market with
respect to the Common Stock as in effect on the date of delivery of the Notice of Conversion.

 

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

 

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

 

 

 

 

 

 

 

 

    	 	7	 

     

    

 

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

 

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

 

 

 

 

 

    	 	8	 

     

    

 

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

 

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

 

 

 

 

    	 	9	 

     

    

 

Section 5.            Certain
Adjustments.

 

a)                 
Stock Dividends and Stock Splits. If the Company, at any time while this Debenture is outstanding: (i) pays a stock dividend
or otherwise makes a distribution or distributions payable in shares of Common Stock on shares of Common Stock or any Common Stock
Equivalents (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Company upon conversion
of 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 set 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, and the number of shares issuable upon conversion of this Debenture shall
be proportionately adjusted such that the aggregate Conversion Price of this Debenture shall remain unchanged. 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)                 
[RESERVED]

 

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 conversion of this Debenture (without regard to any limitations
on conversion hereof, including without limitation, the Beneficial Ownership Limitation) immediately before the date of which a
record is taken for such Distribution, or, if no such record is taken, the date as of which the record holders of shares of Common
Stock are to be determined for the participation in such Distribution (provided, however, to the extent that the
Holder's right to participate in any such Distribution would result in the Holder exceeding the Beneficial Ownership Limitation,
then the Holder shall not be entitled to participate in such Distribution to such extent (or in the beneficial ownership of any
shares of Common Stock as a result of such Distribution to such extent) and the portion of such Distribution shall be held in abeyance
for the benefit of the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Beneficial
Ownership Limitation).

 

 

 

 

 

 

 

    	 	10	 

     

    

 

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

 

 

 

 

 

 

 

 

    	 	11	 

     

    

 

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

 

g)                 
Notice to the Holder.

 

i.                       
Adjustment to Conversion Price. Whenever the set 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 set 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.             [RESERVED]

 

 

 

 

 

 

 

 

 

    	 	12	 

     

    

 

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)                 
repay, repurchase or offer to repay, repurchase or otherwise acquire any Indebtedness, other than the Debentures if on a pro-rata
basis, except pursuant to their terms as such terms exist on the date hereof;

 

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):

 

 

 

 

 

 

 

 

 

    	 	13	 

     

    

 

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 a default under clause (B) above, is not cured within
5 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 (xi) below) or in any Transaction Document, which failure is not cured, if possible to cure, within the earlier to occur
of (A) 5 Trading Days after notice of such failure sent by the Holder or by any other Holder to the Company and (B) 10 Trading
Days after the Company has become or should have become aware of such failure;

 

iii.                       
a default or event of default (subject to any grace or cure period provided in the applicable agreement, document or instrument)
shall occur under (A) any of the Transaction Documents (and not covered by clause (i) or (ii) above) or (B) any other material
agreement, lease, document or instrument to which the Company or any Subsidiary is obligated for more than $200,000 (and not covered
by clause (vi) below) that is not cured within 45 calendar days. For the purposes of clarification any existing defaults on the
Tegal Notes and the TCA Notes (collectively, the “Outstanding Defaults”) that are cured within 45 calendar days
of the Original Issue Date shall not be deemed an Event of Default, (provided that in the event that the Outstanding Defaults are
not cured within 45 calendar days of the Original Issue Date, the Outstanding Defaults shall be deemed an Event of Default for
the purposes of this section);

 

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;

 

 

 

 

 

 

 

 

 

 

    	 	14	 

     

    

 

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

 

x.                       
the occurrence of a Subsequent Financing pursuant to which the Holder does not exercise its rights under Section 4.13 of
the Purchase Agreement; or

 

xi.                       
when required under Section 4(c)(ii) of this Debenture, the electronic transfer by the Company of shares of Common Stock
through the Depository Trust Company or another established clearing corporation is no longer available or is subject to a “chill”,
and such “chill” is not lifted after 3 Trading Days;

 

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

 

 

 

 

 

 

 

 

 

 

 

    	 	15	 

     

    

 

b)                 
Remedies Upon Event of Default. If any Event of Default occurs, the outstanding principal amount of this Debenture, liquidated
damages and other amounts owing in respect thereof through the date of acceleration, shall become, at the Holder’s election,
immediately due and payable in cash at the Mandatory Default Amount. Commencing 5 days after the occurrence of any Event of Default
that results in the eventual acceleration of this Debenture, 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, by email attachment, or sent
by a nationally recognized overnight courier service, addressed to the Company, at the address set forth above, or such other facsimile
number, email address, or address as the Company may specify for such purposes by notice to the Holder delivered in accordance
with this Section 9(a).  Any and all notices or other communications or deliveries to be provided by the Company hereunder
shall be in writing and delivered personally, by facsimile, by email attachment, or sent by a nationally recognized overnight courier
service addressed to each Holder at the facsimile number, email address or address of the Holder appearing on the books of the
Company, or if no such facsimile number or email attachment or address appears on the books of the Company, at the principal place
of business of such Holder, as set forth in the Purchase Agreement.  Any notice or other communication or deliveries hereunder
shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered
via facsimile at the facsimile number or email attachment to the email address set forth on the signature pages attached hereto
prior to 5:30 p.m. (New York City time) on any Trading Day, (ii) the next Trading Day after the date of transmission, if such notice
or communication is delivered via facsimile at the facsimile number or email attachment to the email address set forth on the signature
pages attached hereto on a day that is not a Trading Day or later than 5:30 p.m. (New York City time) on any Trading Day, (iii)
the second Trading Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service or (iv) upon
actual receipt by the party to whom such notice is required to be given.

 

 

 

 

 

 

 

 

 

    	 	16	 

     

    

 

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 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. 

 

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.

 

 

 

 

 

 

 

 

 

 

    	 	17	 

     

    

 

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 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.

 

 

 

 

 

 

 

 

 

 

 

 

    	 	18	 

     

    

 

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.

 

Section 10.                Disclosure.
Upon receipt or delivery by the Company of any notice in accordance with the terms of this Debenture, unless the Company has in
good faith determined that the matters relating to such notice do not constitute material, nonpublic information relating to the
Company or its Subsidiaries, the Company shall within two (2) Business Days after such receipt or delivery publicly disclose such
material, nonpublic information on a Current Report on Form 8-K or otherwise. In the event that the Company believes that a notice
contains material, non-public information relating to the Company or its Subsidiaries, the Company so shall indicate to the Holder
contemporaneously with delivery of such notice, and in the absence of any such indication, the Holder shall be allowed to presume
that all matters relating to such notice do not constitute material, nonpublic information relating to the Company or its Subsidiaries.

 

 

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

 

 

 

 

(Signature Pages Follow)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    	 	19	 

     

    

 

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.

 

 

RENNOVA HEALTH, INC.

 

 

By: /s/ Seamus
Lagan                               

Name: Seamus Lagan

Title: Chief
Executive Officer

 

 

Email address for delivery of Notices:

slagan@rennovahealth.com

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    	 	20	 

     

    

 

 

 

ANNEX
A

 

NOTICE OF CONVERSION

 

 

The undersigned
hereby elects to convert principal under the Original Issue Discount Convertible Debenture due May 2, 2017 of Rennova
Health, Inc., a Delaware corporation (the “Company”), into shares of common stock (the “Common
Stock”), of the Company according to the conditions hereof, as of the date written below. If shares of Common Stock
are to be issued in the name of a person other than the undersigned, the undersigned will pay all transfer taxes payable with
respect thereto and is delivering herewith such certificates and opinions as reasonably requested by the Company in
accordance therewith. No fee will be charged to the holder for any conversion, except for such transfer taxes, if any.

 

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

 

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

 

 

Conversion calculations:

Date to Effect Conversion:

 

Principal Amount of Debenture to be Converted:

 

Conversion Price:

 

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: _______________ 

 

 

 

 

 

 

 

 

 

    	 	21	 

     

    

 

Schedule 1

 

CONVERSION SCHEDULE

 

The Original Issue
Discount Convertible Debentures due on May 2, 2017 in the aggregate principal amount of $1,590,000 are issued by
Rennova Health, Inc., a Delaware corporation. This Conversion Schedule reflects conversions made under Section 4 of the above
referenced Debenture.

 

 

Dated:

 

 

 Company Attest

 

	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
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	 	 	 

 

 

 

 

 

    	 	22

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