Exhibit 10.85
NEITHER THIS SECURITY NOR THE SECURITIES INTO
WHICH THIS SECURITY IS CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION
OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH
EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THIS SECURITY AND THE SECURITIES ISSUABLE UPON CONVERSION
OF THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.
| Original Issue Date: |
June 5, 2017 |
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| Face Amount: |
$1,200,000 |
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| Purchase Price |
$1,000,000 |
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| No.: |
1 |
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20% ORIGINAL ISSUE DISCOUNT
UNSECURED CONVERTIBLE DEBENTURE
DUE ON OR BEFORE NOVEMBER 30, 2017
THIS 20% ORIGINAL ISSUE
DISCOUNT UNSECURED CONVERTIBLE DEBENTURE, dated as of June 5, 2017 between the “Holder” (defined below) and PROTEA
BIOSCIENCES GROUP, INC., a Delaware corporation (the “Company”), having its principal place of business
at 0000 Xxxxxxxx Xxxxx, Xxxxx 000, Xxxxxxxxxx, XX 00000 (the “Exchange Agreement”).
FOR VALUE RECEIVED, the Company promises to pay to XXXXXXX XXXXXX
or his or its registered assigns (the “Holder”), or shall have paid pursuant to the terms hereunder, the principal
sum of One Million Two Hundred Thousand ($1,200,000) Dollars (the “Principal Amount”) (representing the Purchase
Price of this Original Debenture set forth above plus $200,000 of accrued interest from the Original Issue Date to a date which
shall be the earlier to occur of (a) November 30, 2017, or (b) the date of the Securities Offering Closing (the “Maturity
Date”), or such earlier date as this Debenture is required or permitted to be repaid or converted, as provided hereunder,
and to pay interest to the Holder on the aggregate unconverted and then outstanding principal amount of this Debenture in accordance
with the provisions hereof.
This Debenture is subject
to the following additional provisions:
Section 1. Definitions.
For the purposes hereof, in addition to the terms defined elsewhere in this Debenture, (a) capitalized terms not otherwise defined
herein shall have the meanings set forth in the Subscription Agreement and (b) the following terms shall have the following meanings:
"Affiliate”
means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common
control with a Person, as such terms are used in and construed under Rule 405 under the Securities Act.
“Alternate
Consideration” shall have the meaning set forth in Section 5(c).
“Automatic
Conversion Price” shall have the meaning set forth in Section 4(d).
“Bankruptcy
Event” means any of the following events: (a) the Company or any Significant Subsidiary (as such term is defined in Rule
1-02(w) of Regulation S-X) thereof commences a case or other proceeding under any bankruptcy, reorganization, arrangement, adjustment
of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction relating to the Company or
any Significant Subsidiary thereof, (b) there is commenced against the Company or any Significant Subsidiary thereof any such case
or proceeding that is not dismissed within 60 days after commencement, (c) the Company or any Significant Subsidiary thereof is
adjudicated insolvent or bankrupt or any order of relief or other order approving any such case or proceeding is entered, (d) the
Company or any Significant Subsidiary thereof suffers any appointment of any custodian or the like for it or any substantial part
of its property that is not discharged or stayed within 60 calendar days after such appointment, (e) the Company or any Significant
Subsidiary thereof makes a general assignment for the benefit of creditors, (f) the Company or any Significant Subsidiary thereof
calls a meeting of its creditors with a view to arranging a composition, adjustment or restructuring of its debts or (g) the Company
or any Significant Subsidiary thereof, by any act or failure to act, expressly indicates its consent to, approval of or acquiescence
in any of the foregoing or takes any corporate or other action for the purpose of effecting any of the foregoing.
“Base
Conversion Price” shall have the meaning set forth in Section 5(b).
“Beneficial
Ownership Limitation” shall have the meaning set forth in Section 4(c)(ii).
“Business
Day” means any day except any Saturday, any Sunday, any day which shall be 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(e)(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 50% of the voting securities of the Company (other than by means of conversion or exercise of the Debenture and the
Securities issued together with the Debenture), (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 50% of the aggregate voting power of the Company or the successor entity of such transaction,
or (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 50% of the aggregate voting power of the acquiring entity immediately after
the transaction, (d) a replacement at one time or within a three year period of more than one-half of the members of the Board
of Directors which is not approved by a majority of those individuals who are members of the Board of Directors on the date hereof
(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.
“Closing
Bid Price” means on any particular date (a) the last reported closing bid price per share of Common Stock on such
date on the Trading Market (as reported by Bloomberg L.P. at 4:15 p.m. (New York City time)), or (b) if there is no such price
on such date, then the closing bid price on the Trading Market on the date nearest preceding such date (as reported by Bloomberg
L.P. at 4:15 p.m. (New York City time)), or (c) if the Common Stock is not then listed or quoted on a Trading Market and
if prices for the Common Stock are then reported in the “pink sheets” published by Pink Sheets LLC (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) if the shares of Common Stock are not then publicly traded the fair market value of a share of Common Stock as determined
by an independent appraiser selected in good faith by the Holder and reasonably acceptable to the Company, the fees and expenses
of which shall be paid by the Company; provided that in each case where Bloomberg L.P. data is being relied upon, Holder shall
provide to the Company a copy of such information for the Company's records.
“Common
Stock” shall mean the shares of common stock, $0.001 par value per share, of the Company.
“Common
Stock Equivalent” shall have the meaning set forth in Section 2(c).
“Conversion”
shall have the meaning ascribed to such term in Section 4.
“Conversion
Date” shall have the meaning set forth in Section 4(a).
“Conversion
Price” shall have the meaning set forth in Section 4(b).
“Conversion
Schedule” means the Conversion Schedule in the form of Schedule 1 attached hereto.
“Conversion
Shares” means, collectively, the shares of Common Stock issuable upon conversion of this Debenture in accordance with
the terms hereof.
“Debenture
Register” shall have the meaning set forth in Section 2(c).
“Dilutive Issuance”
shall have the meaning set forth in Section 5(b).
“Dilutive Issuance Notice”
shall have the meaning set forth in Section 5(b).
“Event
of Default” shall have the meaning set forth in Section 8(a).
“Equity
Conditions” means, during the period in question, (a) the Company shall have duly honored all conversions by virtue of
one or more Notices of Conversion of the Holder, if any, (b) the Company shall have paid all liquidated damages due under Sections
2(d), 4(e)(iv) and 4(e)(v) and other fees and expenses (other than principal and interest) owing to the Holder in respect of this
Debenture, (c) the Common Stock is trading on a Trading Market and all of the shares issuable pursuant to the Transaction Documents
are listed or quoted for trading on such Trading Market (and the Company believes, in good faith, that trading of the Common Stock
on a Trading Market will continue uninterrupted for the foreseeable future), (d) there is a sufficient number of authorized but
unissued and otherwise unreserved shares of Common Stock for the issuance of all of the shares issuable pursuant to the Transaction
Documents, (f) there is no existing Event of Default or no existing event which, with the passage of time or the giving of notice,
would constitute an Event of Default, (g) the issuance of the shares in question to the Holder would not violate the limitations
set forth in Section 4(c) herein provided that any shares proposed to be issued that would cause a violation of Section
4(c) will be automatically deemed canceled by the Company and upon such cancellation this clause (g) shall be satisfied, (h) there
has been no public announcement of a pending or proposed Fundamental Transaction or Change of Control Transaction that has not
been consummated, and (i) the Holder is not in possession of any information provided by the Company that constitutes, or may constitute,
material non-public information other than information required to be provided by the Company under the Subscription Agreement.
“Exempt
Issuance” means the issuance of (a) shares of Common Stock or options to employees, officers or directors of the Company
pursuant to any stock or option plan duly adopted for such purpose, by a majority of the non-employee members of the Board of Directors
or a majority of the members of a committee of non-employee directors established for such purpose, (b) securities upon the conversion,
exercise or exchange of or conversion of any Securities issued hereunder and/or other securities exercisable or exchangeable for
or convertible into shares of Common Stock issued and outstanding on the date of this Agreement, provided that such securities
have not been amended since the date of this Agreement to increase the number of such securities or to decrease the exercise price,
exchange price or conversion price of such securities and (c) securities issued pursuant to acquisitions or strategic transactions
approved by a majority of the disinterested directors of the Company, provided that any such issuance shall only be to a Person
(or to the equityholders of a Person) which is, itself or through its subsidiaries, an operating company or an owner of an asset
in a business synergistic with the business of the Company and shall provide to the Company additional benefits in addition to
the investment of funds, but shall not include a transaction in which the Company is issuing securities primarily for the purpose
of raising capital or to an entity whose primary business is investing in securities.
“Fundamental
Transaction” shall have the meaning set forth in Section 5(c).
“Interest
Notice Period” shall have the meaning set forth in Section 2(a).
“Interest
Payment Date” shall have the meaning set forth in Section 2(a).
“Interest
Share Amount” shall have the meaning set forth in Section 2(a).
"Interest
Rate" shall mean ten percent (10%) per annum.
“Late
Fees” shall have the meaning set forth in Section 2(d).
“Liens”
means a lien, charge, security interest, encumbrance, right of first refusal, preemptive right or other restriction.
“Mandatory
Default Amount” means the sum of (a) 100% of the outstanding principal amount of this Debenture, plus 100% of accrued
and unpaid interest hereon, and (b) all other amounts, costs, expenses and liquidated damages due in respect of this Debenture.
“New
York Courts” shall have the meaning set forth in Section 8(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 this Debenture, regardless of any transfers of any Debenture and
regardless of the number of instruments which may be issued to evidence such Debenture.
“Person”
means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.
“Securities
Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
“Securities
Offering Closing” shall have the meaning set forth in Section 2(c).
“Share
Delivery Date” shall have the meaning set forth in Section 4(d)(ii).
“Subsidiary”
shall have the meaning set forth in the Subscription Agreement.
“Subscription
Agreement” means the Subscription Agreement, dated as of May 31, 2017 among the Company and the Holder, as amended, modified
or supplemented from time to time in accordance with its terms, pursuant to which the Holder agreed to purchase this Debenture.
“Trading
Day” means a day on which the New York Stock Exchange is open for business.
“Trading
Market” means the following markets or exchanges on which the Common Stock may be listed or quoted for trading on the
date in question: the NYSE MKT, LLC, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the
New York Stock Exchange or the OTC Bulletin Board, or the other OTC markets, including the OTCQX, OTCQB and OTC Pink markets
“Transaction
Documents” shall have the meaning set forth in the Subscription Agreement.
Section 2. Payments.
a) Payment
of Interest in Cash or Kind. The Company shall pay interest to the Holder at the Interest Rate on the aggregate principal amount
of the principal being converted on any Conversion Date (as to that principal amount then being converted), and on the Maturity
Date (each such date, an “Interest Payment Date”) (if any Interest Payment Date is not a Business Day, then
the applicable payment shall be due on the next succeeding Business Day), in cash or, at the Holder’s option, in duly authorized,
validly issued, fully paid and non-assessable shares of Common Stock (the dollar amount to be paid in shares, the “Interest
Share Amount”) or a combination thereof; provided, however, that payment in shares of Common Stock on account
of interest may only occur if (i) all of the Equity Conditions have been met (unless waived by the Holder in writing) during the
2 Trading Days immediately prior to the applicable Interest Payment Date (the “Interest Notice Period”) and
through and including the date such shares of Common Stock are actually issued to the Holder, (ii) the notice of Conversion delivered
by the Holder to Company affirms that the issuance of the Conversion Shares on account of principal and interest will not violate
Section 4(c) hereunder. To the extent that any such issuance of Conversion Shares on account of interest under this Section 2(a)
would violate section 4(c), such interest shall either be paid in cash or at the Company's election deferred and paid in Conversion
Shares at the next Conversion Date. In the event that the Company shall pay all or any part of the interest amount in Common Stock,
the number of shares of Common Stock issuable to the Holder shall be determined by dividing (i) the Interest Share Amount, by (ii)
the Conversion Price then in effect.
b) Payment of Principal
Amount in Cash or Kind.
(i) In
the event that the Maturity Date shall occur prior to November 30, 2017 by reason of a Securities Offering Closing, in the event
that the Holder has not elected to convert all or any portion of the Principal Amount into Common Stock, the Company shall pay
the entire Principal Amount of this Debenture, together with all Interest accrued hereon only in cash out of the net proceeds of
such Securities Offering Closing.
(ii) In
the event that a Securities Offering Closing shall not have occurred prior thereto, on the November 30, 2017 Maturity Date, in
the event that the Holder has not elected to convert all or any portion of the Principal Amount into Common Stock, the Company
may pay all or any portion the then outstanding principal amount of this Debenture in cash or, at the Holder’s option, in
duly authorized, validly issued, fully paid and non-assessable shares of Common Stock (the dollar amount to be paid in shares,
the “Principal Share Amount”) or a combination thereof; provided, however, that payment in shares
of Common Stock on account of the principal amount may only occur if (i) all of the Equity Conditions have been met (unless waived
by the Holder in writing) during the 2 Trading Days immediately prior to the applicable Maturity Date (the “Principal
Notice Period”) and through and including the date such shares of Common Stock are actually issued to the Holder, (ii)
the notice of Conversion delivered by the Holder to Company affirms that the issuance of the Conversion Shares on account of principal
and interest will not violate Section 4(c) hereunder. To the extent that any such issuance of Conversion Shares on account of the
principal amount under this Section 2(b) would violate Section 4(c), such principal amount shall be paid in cash. In the event
that the Company shall pay all or any part of the principal amount in Common Stock, the number of shares of Common Stock issuable
to the Holder shall be determined by dividing (i) the Principal Share Amount, by (ii) the Conversion Price then in effect.
c) Securities
Offering Closing. As used in this Debenture, the term “Securities Offering Closing” shall mean and include
(i) consummation of an underwritten public offering, for cash, or (ii) consummation of a private placement of not less than $5,000,000
of Company Common Stock, preferred stock or other security convertible into or exercisable of exchangeable for shares of Common
Stock (a “Common Stock Equivalent”).
d) Election
to Pay Principal and/or Interest in Cash or Shares of Common Stock. Subject to the terms and conditions herein, including the
existence of the Equity Conditions, if a Securities Offering Closing shall not have occurred prior to November 30, 2017, the decision
whether to pay interest or the principal amount hereunder in cash, shares of Common Stock or a combination thereof shall be at
the sole discretion of the Holder on the November 30, 2017 Maturity Date.
e) Interest
Calculations. Interest on the principal balance of this Debenture shall be calculated on the basis of a 360-day year, consisting
of twelve 30 calendar day periods, and shall accrue daily commencing on the Original Issue Date until payment in full of the outstanding
principal, together with all accrued and unpaid interest, liquidated damages and other amounts which may become due hereunder,
has been made. Interest shall cease to accrue with respect to any principal amount converted, provided that, the Company actually
delivers the Conversion Shares within the time period required by Section 4(e)(ii) herein. Interest hereunder will be paid to the
Person in whose name this Debenture is registered on the records of the Company regarding registration and transfers of this Debenture
(the “Debenture Register”). Except as otherwise provided herein, if at any time the Company pays interest partially
in cash and partially in shares of Common Stock to the holders of the Debenture, then such payment of cash shall be distributed
ratably among the holders of the then-outstanding Debenture based on their (or their predecessor’s) initial purchases of
Debenture pursuant to the Subscription Agreement.
f) Late
Fee. All overdue accrued and unpaid interest to be paid hereunder shall entail a late fee at an interest rate equal to the
lesser of 18% per annum or the maximum rate permitted by applicable law (the “Late Fees”) which shall accrue
daily from the date such interest is due hereunder through and including the date of actual payment in full.
g) Prepayment.
Except as otherwise set forth in this Debenture, the Company may not prepay any portion of the principal amount of this Debenture
without the prior written consent of the Holder.
Section 3.
Registration of Transfers and Exchanges.
a) Different
Denominations. This Debenture is exchangeable for an equal aggregate principal amount of Debenture 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 Subscription Agreement and may be transferred or exchanged only in compliance with the Subscription Agreement and applicable
federal and state securities laws and regulations.
c) Reliance
on Debenture Register. Prior to due presentment for transfer to the Company of this Debenture, the Company and any agent of
the Company may treat the Person in whose name this Debenture is duly registered on the Debenture Register as the owner hereof
for the purpose of receiving payment as herein provided and for all other purposes, whether or not this Debenture is overdue, and
neither the Company nor any such agent shall be affected by notice to the contrary.
Section 4.
Conversion.
a) Voluntary
Conversion. At any time after the Original Issue Date until this Debenture is no longer outstanding, this Debenture shall be
convertible, in whole or in part, into shares of Common Stock at the option of the Holder, at any time and from time to time (subject
to the conversion limitations set forth in Section 4(c) hereof). The Holder shall effect conversions by delivering to the
Company a Notice of Conversion, the form of which is attached hereto as Annex A (each, a “Notice of Conversion”),
specifying therein the principal amount of this Debenture to be converted and the date on which such conversion shall be effected
(such date, or the date of a mandatory conversion pursuant to Section 4(d), 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 actually delivered
hereunder. To effect conversions hereunder, the Holder shall not be required to physically surrender this Debenture to the Company
unless the entire principal amount of this Debenture, plus all accrued and unpaid interest thereon, has been so converted. Conversions
hereunder shall have the effect of lowering the outstanding principal amount of this Debenture in an amount equal to the applicable
conversion. The Holder and the Company shall maintain records showing the principal amount(s) converted and the date of such conversion(s).
The Company may deliver an objection to any Notice of Conversion within 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.
b) Conversion
Price. The conversion price in effect on any voluntary Conversion Date shall be equal to $0.075, subject to adjustment herein
(the “Conversion Price”).
c) Conversion
Limitations. Holder shall not have the right to convert any portion of this Debenture, pursuant to Section 4 or otherwise,
to the extent that after giving effect to such issuance after conversion the Holder (together with the Holder’s Affiliates,
and any other person or entity acting as a group together with the Holder or any of the Holder’s Affiliates), would beneficially
own in excess of the Beneficial Ownership Limitation (as defined below). For purposes of this Section beneficial ownership shall
be calculated in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. Holder
is solely responsible for any schedules required to be filed in accordance therewith. The Company shall have no obligation to verify
or confirm the accuracy of such filings. 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 exercise of this Debenture. The Holder, upon not less than 61 days’
prior notice to the Company, may increase or decrease the Beneficial Ownership Limitation provisions of this Section 4(c), 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 exercise of this Debenture held by the Holder and the provisions
of this Section 4(c) shall continue to apply. Any such increase or decrease will not be effective until the 61st day
after such notice is delivered to the Company. The limitations contained in this paragraph shall apply to a successor holder of
this Debenture.
d) Mechanics of Conversion.
i. Conversion
Shares Issuable Upon Conversion of Principal and Interest 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 and accrued but unpaid
interest of this Debenture to be converted by (y) the Conversion Price then in effect or the Automatic Conversion Price, as applicable.
ii. Delivery
of Certificate Upon Conversion. Not later than four Trading Days after each Conversion Date (the “Share Delivery Date”),
the Company shall deliver, or cause to be delivered, to the Holder (A) a certificate or certificates representing the Conversion
Shares which, on or after the six month anniversary of the Original Issue Date, shall be free of restrictive legends and trading
restrictions (other than those which may then be required by the Subscription Agreement) representing the number of Conversion
Shares being acquired upon the conversion of this Debenture and (B) a bank check in the amount of accrued and unpaid interest (if
the Company has elected or is required to pay accrued interest in cash). On the six month anniversary of the Original Issue Date,
the Company shall use its best efforts to deliver any certificate or certificates required to be delivered by the Company under
this Section 4(e) electronically through the Depository Trust Company or another established clearing corporation performing similar
functions.
iii. Failure
to Deliver Certificates. If in the case of any Notice of Conversion such certificate or certificates are not delivered to or
as directed by the applicable Holder by the fourth Trading Day after the Conversion Date, the Holder shall be entitled to elect
by written notice to the Company at any time on or before its receipt of such certificate or certificates, to rescind such Conversion,
in which event the Company shall promptly return to the Holder any original Debenture delivered to the Company and the Holder shall
promptly return to the Company the Common Stock certificates representing the principal amount of this Debenture unsuccessfully
tendered for conversion to the Company.
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 130% of the outstanding principal amount of this Debenture, which is subject to the injunction, which bond
shall remain in effect until the completion of arbitration/litigation of the underlying dispute and the proceeds of which shall
be payable to the Holder to the extent it obtains judgment. In the absence of such injunction, the Company shall issue Conversion
Shares or, if applicable, cash, upon a properly noticed conversion. If the Company fails for any reason to deliver to the Holder
such certificate or certificates pursuant to Section 4(d)(ii) by the fifth Trading Day after the Conversion 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 seventh (7th) Trading Day after such liquidated damages begin
to accrue) for each Trading Day after such fourth (4th) Trading Day until such certificates are delivered. Nothing herein
shall limit a Xxxxxx’s right to pursue actual damages or declare an Event of Default pursuant to Section 7 hereof for the
Company’s failure to deliver Conversion Shares within the period specified herein and the Holder shall have the right to
pursue all remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance
and/or injunctive relief. The exercise of any such rights shall not prohibit the Holder from seeking to enforce damages pursuant
to any other Section hereof or under applicable law.
v. Compensation
for Buy-In on Failure to Timely Deliver Certificates Upon Conversion. In addition to any other rights available to the Holder,
if the Company fails for any reason to deliver to the Holder such certificate or certificates by the Share Delivery Date pursuant
to Section 4(d)(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 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 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(d)(ii). For example, if the Holder purchases Common Stock having a total
purchase price of $11,000 to cover a Buy-In with respect to an attempted conversion of this Debenture with respect to which the
actual sale price of the Conversion Shares (including any brokerage commissions) giving rise to such purchase obligation was a
total of $10,000 under clause (A) of the immediately preceding sentence, the Company shall be required to pay the Holder $1,000.
The Holder shall provide the Company written notice indicating the amounts payable to the Holder in respect of the Buy-In and,
upon request of the Company, evidence of the amount of such loss. Nothing herein shall limit a Holder’s right to pursue any
other remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or
injunctive relief with respect to the Company’s failure to timely deliver certificates representing shares of Common Stock
upon conversion of this Debenture as required pursuant to the terms hereof.
vi. Reservation
of Shares Issuable Upon Conversion. Subject to the Stockholder Approval, the Company covenants that it will at all times reserve
and keep available out of its authorized and unissued shares of Common Stock for the sole purpose of issuance upon conversion of
this Debenture and payment of interest on this Debenture, each as herein provided, free from preemptive rights or any other actual
contingent purchase rights of Persons other than the Holder (and the other holders of the Debenture), not less than such aggregate
number of shares of the Common Stock as shall (subject to the terms and conditions set forth in the Subscription Agreement) be
issuable (taking into account the adjustments and restrictions of Section 5) upon the conversion of the outstanding principal amount
of this Debenture and payment of interest hereunder. The Company covenants that all shares of Common Stock that shall be so issuable
shall, upon issue, be duly authorized, validly issued, fully paid and non-assessable.
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 Holder would otherwise be entitled to purchase upon such conversion, the Company shall at its
election, either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the
Conversion Price then in effect or the Automatic Conversion Price, as applicable or round up to the next whole share.
viii. Transfer
Taxes. The issuance of certificates for shares of the Common Stock on conversion of this Debenture shall be made without charge
to the Holder hereof for any documentary stamp or similar taxes that may be payable in respect of the issue or delivery of such
certificates, provided that, the Company shall not be required to pay any tax that may be payable in respect of any transfer involved
in the issuance and delivery of any such certificate upon conversion in a name other than that of the Holder of this Debenture
so converted and the Company shall not be required to issue or deliver such certificates unless or until the person or persons
requesting the issuance thereof shall have paid to the Company the amount of such tax or shall have established to the satisfaction
of the Company that such tax has been paid.
Section 5. Certain
Adjustments.
a) Stock
Dividends and Stock Splits. If the Company, at any time while this Debenture is outstanding: (i) pays a stock dividend or otherwise
makes a distribution or distributions payable in shares of Common Stock on shares of Common Stock or any Common Stock Equivalents
(which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Company upon conversion of, or payment
of interest on, the Debenture), (ii) subdivides outstanding shares of Common Stock into a larger number of shares, (iii) combines
(including by way of a reverse stock split) outstanding shares of Common Stock into a smaller number of shares or (iv) issues,
in the event of a reclassification of shares of the Common Stock, any shares of capital stock of the Company, then the Conversion
Price then in effect shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding
any treasury shares of the Company) outstanding immediately before such event and of which the denominator shall be the number
of shares of Common Stock outstanding immediately after such event. Any adjustment made pursuant to this Section shall become effective
immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall
become effective immediately after the effective date in the case of a subdivision, combination or re-classification.
b) Subsequent
Equity Sales. If the Company or any Subsidiary thereof, as applicable, at any time while this Debenture is outstanding, shall
sell or grant any option to purchase, or sell or grant any right to reprice, or otherwise dispose of or issue (or announce any
offer, sale, grant or any option to purchase or other disposition) any Common Stock or Common Stock Equivalents, at an effective
price per share less than the Conversion Price then in effect (such lower price, the “New Issuance Price” and
such issuances collectively, a “Dilutive Issuance”) (it being understood and agreed that if the holder of the
Common Stock or Common Stock Equivalents so issued shall at any time, whether by operation of purchase price adjustments, reset
provisions, floating conversion, exercise or exchange prices or otherwise, or due to warrants, options or rights per share which
are issued in connection with such issuance, be entitled to receive shares of Common Stock at an effective price per share that
is less than the Conversion Price, such issuance shall be deemed to have occurred for less than the Conversion Price on such date
of the Dilutive Issuance at such effective price), then simultaneously with the consummation of each Dilutive Issuance the Conversion
Price shall be reduced and only reduced by multiplying the Conversion Price by a fraction, the numerator of which is the number
of shares of Common Stock issued and outstanding immediately prior to the Dilutive Issuance plus the number of shares of Common
Stock which the offering price for such Dilutive Issuance would purchase at the then Conversion Price, and the denominator of which
shall be the sum of the number of shares of Common Stock issued and outstanding immediately prior to the Dilutive Issuance plus
the number of shares of Common Stock so issued or issuable in connection with the Dilutive Issuance. Such adjustment shall be made
whenever such Common Stock or Common Stock Equivalents are issued. Notwithstanding the foregoing, no adjustments shall be made,
paid or issued under this Section 5(b) in respect of an Exempt Issuance.
As used in this Debenture, the term
“Exempt Issuance” shall mean the issuance of any Common Stock or Common Stock Equivalent by the Company in connection
with (a) the acquisition of the securities, assets or business of, or any joint venture with, any other Person; provided that the
Company does not finance the purchase price of such acquisition or joint venture through the sale of any Common Stock or Common
Stock Equivalents, (b) stock options or stock grants issued to employees of or consultants to the Company or any Subsidiary; or
(c) the issuance of Common Stock or Common Stock Equivalents in exchange for notes, debentures or other evidence of Indebtedness.
c) Fundamental
Transaction. If, at any time while this Debenture is outstanding, (i) the Company effects any merger or consolidation of the
Company with or into another Person, (ii) the Company effects any sale of all or substantially all of its assets in one transaction
or a series of related transactions, (iii) any tender offer or exchange offer (whether by the Company or another Person) is completed
pursuant to which holders of Common Stock are permitted to tender or exchange their shares for other securities, cash or property,
or (iv) the Company effects any reclassification 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 (in any such case, 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, the same kind and amount of securities, cash or property as it would have been entitled to receive upon the occurrence
of such Fundamental Transaction if it had been, immediately prior to such Fundamental Transaction, the holder of 1 share of Common
Stock (the “Alternate Consideration”). For purposes of any such conversion, the determination of the Conversion
Price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable
in respect of 1 share of Common Stock in such Fundamental Transaction, and the Company shall apportion the Conversion Price among
the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration.
If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction,
then the Holder shall be given the same choice as to the Alternate Consideration it receives upon any conversion of this Debenture
following such Fundamental Transaction. To the extent necessary to effectuate the foregoing provisions, any successor to the Company
or surviving entity in such Fundamental Transaction shall issue to the Holder a new debenture consistent with the foregoing provisions
and evidencing the Holder’s right to convert such debenture into Alternate Consideration. The terms of any agreement pursuant
to which a Fundamental Transaction is effected shall include terms requiring any such successor or surviving entity to comply with
the provisions of this Section 5(b) and insuring that this Debenture (or any such replacement security) will be similarly adjusted
upon any subsequent transaction analogous to a Fundamental Transaction.
d) 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.
e) Notice
to the Holder.
i. Adjustment
to Conversion Price. Whenever the Conversion Price is adjusted pursuant to any provision of this Section 5, the Company shall
promptly deliver to each Holder a notice setting forth the Conversion Price after such adjustment and setting forth a brief statement
of the facts requiring such adjustment.
ii. Notice
to Allow Conversion by Xxxxxx. 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, of 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. The Holder is 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.
Section 6. Rule
144. The Company covenants to use its reasonable best efforts to facilitate the public resale by Xxxxxx(s) of any Conversion
Shares pursuant to Rule 144 under the Securities Act of 1933 as amended.
Section 7. Negative
Covenants. As long as any portion of this Debenture remains outstanding, unless the holders of at least 51% in principal amount
of the then outstanding Debenture shall have otherwise given prior written consent, the Company shall not, and shall not permit
any of its subsidiaries (whether or not a Subsidiary on the Original Issue Date) to, directly or indirectly:
a) repay,
repurchase or offer to repay, repurchase or otherwise acquire any Indebtedness, other than the Debenture if on a pro-rata basis,
other than regularly scheduled principal and interest payments as such terms are in effect as of the Original Issue Date, provided
that such payments shall not be permitted if, at such time, or after giving effect to such payment, any Event of Default exist
or occur; or
b) enter
into any agreement with respect to any of the foregoing.
Section 8. Events
of Default.
a) “Event
of Default” means, wherever used herein, any of the following events (whatever the reason for such event and whether
such event shall be voluntary or involuntary or effected by operation of law or pursuant to any judgment, decree or order of any
court, or any order, rule or regulation of any administrative or governmental body):
i. any
default in the payment of (A) the principal amount of any Debenture or (B) interest, liquidated damages and other amounts owing
to a Holder on any Debenture, as and when the same shall become due and payable (whether on a Conversion Date or the Maturity Date
or by acceleration or otherwise) which default, solely in the case of an interest payment or other default under clause (B) above,
is not cured within 5 Trading Days;
ii. the
Company shall fail to observe or perform any other covenant or agreement contained in the Debenture (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) which failure is not cured, if possible to cure, within the earlier to occur of (A) 7 Trading Days after notice of
such failure sent by the Holder or by any other Holder to the Company and (B) 12 Trading Days after the Company has become or should
have become aware of such failure;
iii. a
default or Event of Default (subject to any grace or cure period provided in the applicable agreement, document or instrument)
shall occur under (A) any of the Transaction Documents or (B) any other agreement, lease, document or instrument to which the Company
or any Subsidiary is obligated (and not covered by clause (vi) below) that could reasonably be expected to have a Material Adverse
Effect;
iv. any
representation or warranty made in this Debenture, any other Transaction Documents, any written statement pursuant hereto or thereto
or any other report, financial statement or certificate made or delivered to the Holder or any other Holder shall be untrue or
incorrect in any material respect as of the date when made or deemed made;
v. the
Company or any Significant Subsidiary (as such term is defined in Rule 1-02(w) of Regulation S-X) shall be subject to a Bankruptcy
Event;
vi. the
Company or any Subsidiary shall default on any of its obligations under any mortgage, credit agreement or other facility, indenture
agreement, factoring agreement or other instrument under which there may be issued, or by which there may be secured or evidenced,
any indebtedness for borrowed money or money due under any long term leasing or factoring arrangement that (a) involves an obligation
greater than $250,000, 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 seven 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 40% of its assets in one transaction or a series of related transactions (whether or not such sale would constitute
a Change of Control Transaction);
ix. the
Company shall fail for any reason to deliver certificates to a Holder on or prior to the fifth Trading Day after a Conversion Date
pursuant to Section 4(e) 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 Debenture in accordance with the terms hereof; or
x. any
monetary judgment, writ or similar final process shall be entered or filed against the Company, any subsidiary or any of their
respective property or other assets for more than $50,000, and such judgment, writ or similar final process shall remain unvacated,
unbonded or unstayed for a period of 45 calendar days.
b) Remedies
Upon Event of Default. If any Event of Default occurs, the outstanding principal amount of this Debenture, plus accrued but
unpaid interest, liquidated damages and other amounts owing in respect thereof through the date of acceleration, shall become,
at the Holder’s election, immediately due and payable in cash at the Mandatory Default Amount. Commencing 5 days after the
occurrence of any Event of Default that results in the eventual acceleration of this Debenture, the interest rate on this Debenture
shall accrue at an interest rate equal to the lesser of 18% per annum or the maximum rate permitted under applicable law. Upon
the payment in full of the Mandatory Default Amount, the Holder shall promptly surrender this Debenture to or as directed by the
Company. In connection with such acceleration described herein, the Holder need not provide, and the Company hereby waives, any
presentment, demand, protest or other notice of any kind, and the Holder may immediately and without expiration of any grace period
enforce any and all of its rights and remedies hereunder and all other remedies available to it under applicable law. Such acceleration
may be rescinded and annulled by Xxxxxx 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 electronic communication or sent by a
nationally recognized overnight courier service, addressed to the Company, at the address set forth above, or such other facsimile
number or address as the Company may specify for such purpose 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 electronic communication or sent by a nationally recognized overnight courier service addressed
to each Holder at the facsimile number or address of the Holder appearing on the books of the Company, or if no such facsimile
number or address appears, at the principal place of business of the Holder. 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 or electronic communication prior to 5:30 p.m. (New York City time), (ii) the date immediately following the date
of transmission, if such notice or communication is delivered via facsimile or electronic communication between 5:30 p.m. (New
York City time) and 11:59 p.m. (New York City time) on any date, (iii) the second Business Day following the date of mailing, if
sent by nationally recognized overnight courier service or (iv) upon actual receipt by the party to whom such notice is required
to be given.
b) Absolute
Obligation. Except as expressly provided herein, no provision of this Debenture shall alter or impair the obligation of the
Company, which is absolute and unconditional, to pay the principal of, liquidated damages and accrued interest, as applicable,
on this Debenture at the time, place, and rate, and in the coin or currency, herein prescribed. This Debenture is a direct debt
obligation of the Company. This Debenture ranks pari passu with all other Debenture now or hereafter issued under the terms
set forth herein.
c) Lost
or Mutilated Debenture. If this Debenture shall be mutilated, lost, stolen or destroyed, the Company shall execute and deliver,
in exchange and substitution for and upon cancellation of a mutilated Debenture, or in lieu of or in substitution for a lost, stolen
or destroyed Debenture, a new Debenture for the principal amount of this Debenture so mutilated, lost, stolen or destroyed, but
only upon receipt of evidence of such loss, theft or destruction of such Debenture, and of the ownership hereof, reasonably satisfactory
to the Company.
d) Governing
Law. All questions concerning the construction, validity, enforcement and interpretation of this Debenture shall be governed
by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles of
conflict of laws thereof. Each party agrees that all legal proceedings concerning the interpretation, enforcement and defense of
the transactions contemplated by any of the Transaction Documents (whether brought against a party hereto or its respective Affiliates,
directors, officers, shareholders, employees or agents) shall be commenced in the state and federal courts sitting in the City
of New York, Borough of Manhattan (the “New York Courts”). Each party hereto hereby irrevocably submits to the
exclusive jurisdiction of the New York Courts for the adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein (including with respect to the enforcement of any of the Transaction Documents),
and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally
subject to the jurisdiction of such New York Courts, or such New York Courts are improper or inconvenient venue for such proceeding.
Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action
or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such
party at the address in effect for notices to it under this Debenture and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process
in any other manner permitted by applicable law. Each party hereto hereby irrevocably waives, to the fullest extent permitted by
applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Debenture or the
transactions contemplated hereby. If either party shall commence an action or proceeding to enforce any provisions of this Debenture,
then the prevailing party in such action or proceeding shall be reimbursed by the other party for its attorneys fees and other
costs and expenses incurred in the investigation, preparation and prosecution of such action or proceeding.
e) Waiver.
Any waiver by the Company or the Holder of a breach of any provision of this Debenture shall not operate as or be construed to
be a waiver of any other breach of such provision or of any breach of any other provision of this Debenture. The failure of the
Company or the Holder to insist upon strict adherence to any term of this Debenture on one or more occasions shall not be considered
a waiver or deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this Debenture.
Any waiver by the Company or the Holder must be in writing.
f) Severability.
If any provision of this Debenture is invalid, illegal or unenforceable, the balance of this Debenture shall remain in effect,
and if any provision is inapplicable to any Person or circumstance, it shall nevertheless remain applicable to all other Persons
and circumstances. If it shall be found that any interest or other amount deemed interest due hereunder violates the applicable
law governing usury, the applicable rate of interest due hereunder shall automatically be lowered to equal the maximum rate of
interest permitted under applicable law. The Company covenants (to the extent that it may lawfully do so) that it shall not at
any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury
law or other law which would prohibit or forgive the Company from paying all or any portion of the principal of or interest on
this Debenture as contemplated herein, wherever enacted, now or at any time hereafter in force, or which may affect the covenants
or the performance of this indenture, 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) 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.
h) 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.
i) Assumption.
Any successor to the Company or any surviving entity in a Fundamental Transaction shall (i) assume, prior to such Fundamental Transaction,
all of the obligations of the Company under this Debenture and the other Transaction Documents pursuant to written agreements in
form and substance satisfactory to the Holder (such approval not to be unreasonably withheld or delayed) and (ii) issue to the
Holder a new debenture of such successor entity evidenced by a written instrument substantially similar in form and substance to
this Debenture, including, without limitation, having a principal amount and interest rate equal to the principal amount and the
interest rate of this Debenture and having similar ranking to this Debenture, which shall be satisfactory to the Holder (any such
approval not to be unreasonably withheld or delayed). The provisions of this Section 9(i) shall apply similarly and equally
to successive Fundamental Transactions and shall be applied without regard to any limitations of this Debenture.
(Signature Pages Follow)
IN WITNESS WHEREOF, the
Company has caused this Debenture to be duly executed by a duly authorized officer as of the date first above indicated.
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Protea Biosciences Group, Inc. |
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By: |
/s/ Xxxxxxx Xxxxxx |
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Name: Xxxxxxx Xxxxxx |
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Title: Chief Executive Officer |
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Facsimile No. for delivery of Notices: 000-000-0000 |
ANNEX A
NOTICE OF CONVERSION
The undersigned hereby
elects to convert principal under the 20% Original Issue Discount Convertible Debenture due on or before November 30, 2017 of Protea
Biosciences Group, 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:
Payment of Interest in Common Stock __ yes __ no
If yes, $_____ of Interest Accrued.
Number of Conversion Shares payable on Principal or Interest that would exceed the limits set forth in Section 4(c) of the Debenture:
Number of shares of Common Stock to be issued:
Signature:
Name:
Address for Delivery of Common Stock Certificates:
Schedule 1
CONVERSION SCHEDULE
The 20% Original Issue Discount Unsecured Convertible
Debenture due on November 30 2017 in the original principal amount of $____________ is issued by Protea Biosciences Group, Inc.,
a Delaware corporation. This Conversion Schedule reflects conversions made under Section 4 of the above referenced Debenture.
Dated:
Date
of Conversion
(or for first entry,
Original Issue Date) |
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Amount
of
Conversion |
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Aggregate
Principal Amount
Remaining
Subsequent to
Conversion
(or original
Principal
Amount) |
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