Exhibit 10.2

 

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 OR OTHERWISE TRANSFERRED,
PLEDGED OR HYPOTHECATED 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.

 

Original Issue Date: September __, 2013

 

$____________

 

5% ORIGINAL ISSUE DISCOUNT UNSECURED CONVERTIBLE DEBENTURE

 

DUE SEPTEMBER __, 2014 (1)

 

THIS 5% ORIGINAL ISSUE DISCOUNT UNSECURED CONVERTIBLE DEBENTURE is one of a
series of duly authorized and validly issued 5% Original Issue Discount
Unsecured Convertible Debentures of SpectraScience, Inc., a Minnesota
corporation, (the “Company”), having its principal place of business at 11568
Sorrento Valley Rd., Suite 11, San Diego, California 92121, designated as its 5%
Original Issue Discount Unsecured Convertible Debenture due SEPTEMBER __, 20141
(this debenture, the “Debenture” and, collectively with the other debentures of
such series, the “Debentures”). 

  

 

1 12 months from the closing date

 

1

 

 

FOR VALUE RECEIVED, the Company promises to pay to ______________________ or
his/her/its registered assigns (the “Holder”), or shall have paid pursuant to
the terms hereunder, the principal sum of $___________ on September __, 2014 (1)
(the “Maturity Date”) or such earlier date as this Debenture is required or
permitted to be repaid as provided hereunder, and to pay interest to the Holder
on the aggregate unconverted and then outstanding principal amount of this
Debenture in accordance with the provisions hereof. This Debenture is subject to
the following additional provisions:

 

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

 

"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(b).

 

“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.

 

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

 

2

 

 

“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(d)(iv).

 

“Change of Control Transaction” means the occurrence after the date hereof of
any of either (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 60% 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 shareholders 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
shareholders 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, and 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.

 

“Common Stock Equivalents” means any securities of the Company or the
Subsidiaries which would entitle the holder thereof to acquire at any time
Common Stock, including, without limitation, any debt, preferred stock, rights,
options warrants, or other instrument that is at any time convertible into or
exercisable or exchangeable for, or otherwise entitles the holder thereof to
receive Common Stock.

 

“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.

 

3

 

 

“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).

 

“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
and other amounts 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, (e) 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, (f) 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 (f) shall be satisfied, (g) there
has been no public announcement of a pending or proposed Fundamental Transaction
or Change of Control Transaction that has not been consummated, and (h) 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.

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder.

 

“Exempt Issuance” means the issuance of (a) shares of Common Stock or options to
employees, officers, consultants, advisors or directors of the Company pursuant
to any stock or option plan duly adopted for such purpose by a majority of the
existing members of the Board of Directors or a majority of the members of a
committee of directors established for such purpose, (b) securities upon the
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, exchange or
conversion price of such securities, (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 which is, itself or through its subsidiaries, an operating
company in a business synergistic with the business of the Company and in which
the Company receives 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, and (d) issuances of restricted securities issued by
the Company from time to time for the payment of services or to vendors, which
shares are not issued for cash consideration in an amount not to exceed 750,000
shares per calendar year.

 

4

 

 

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

 

“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.

 

“Minnesota 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.

 

5

 

 

“Permitted Indebtedness” means (a) the indebtedness evidenced by the Debentures
and any prior issued Debentures (b) lease obligations and purchase money
indebtedness of up to $500,000, in the aggregate, incurred in connection with
the acquisition of capital assets and lease obligations with respect to newly
acquired or leased assets, (c) trade account payables and expenses incurred in
the ordinary course of business, (d) wages and other compensation due to
employees and agents for services performed, (e) liabilities for taxes not yet
due, (f) liabilities for customer deposits, (g) indebtedness existing on the
date hereof, and (h) indebtedness of the Company to any Subsidiary and of any
Subsidiary to the Company or any other Subsidiary.

 

“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) deposits or pledges to secure bids,
tenders, contracts, leases, statutory obligations, performance bonds, surety and
appeal bonds and other obligations of like nature arising in the ordinary course
of the Company’s business; (c) deposits or pledges to secure obligations under
workers’ compensation, social security or similar laws, or under unemployment
insurance or general liability or product liability insurance; (d) Liens imposed
by law which were incurred in the ordinary course of the Company’s business,
such as carriers’, warehousemen’s and mechanics’ Liens, statutory landlords’
Liens, and other similar Liens arising in the ordinary course of the Company’s
business, and which (x) do not individually or in the aggregate materially
detract from the value of such property or assets or materially impair the use
thereof in the operation of the business of the Company and its consolidated
Subsidiaries or (y) are being contested in good faith by appropriate
proceedings, which proceedings have the effect of preventing for the foreseeable
future the forfeiture or sale of the property or asset subject to such Lien; and
(e) Liens incurred in connection with Permitted Indebtedness under clause (a)
thereunder; and (f) Liens incurred in connection with Permitted Indebtedness
under clause (b) thereunder, provided that such Liens are not secured by assets
of the Company or its Subsidiaries other than the assets so acquired or leased;
(g) Liens existing on the date hereof; (h) any attachment or judgment Lien not
constituting an Event of Default; and (i) easements, rights of way,
restrictions, and other similar charges or encumbrances not interfering in any
material respect with the ordinary conduct of the business of the Company.

 

“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.

 

“Purchase Agreement” means the Subscription Agreement, dated as of September 3,
2013 among the Company and the original Holders, as amended, modified or
supplemented from time to time in accordance with its terms.

 

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

 

6

 

 

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

 

“Subsidiary” shall have the meaning set forth in the Purchase Agreement.

 

“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 is listed or quoted for trading on the date in question: the NYSE AMEX
LLC, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global
Select Market, the New York Stock Exchange, 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 Purchase
Agreement.

 

Section 2.            Interest.

 

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 Company’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.

 

b)           Company’s Election to Pay Interest in Cash or Shares of Common
Stock. Subject to the terms and conditions herein, the decision whether to pay
interest hereunder in cash, shares of Common Stock or a combination thereof
shall be at the sole discretion of the Company.

 

7

 

 

c)           Interest Calculations. Interest on the principal balance of this
Note 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(d)(ii)
herein. Interest hereunder will be paid to the Person in whose name this
Debenture is registered on the records of the Company regarding registration and
transfers of this Debenture (the “Debenture Register”). Except as otherwise
provided herein, if at any time the Company pays interest partially in cash and
partially in shares of Common Stock to the holders of the Debentures, then such
payment of cash shall be distributed ratably among the holders of the
then-outstanding Debentures based on their (or their predecessor’s) initial
purchases of Debentures pursuant to the Purchase Agreement.

 

d)           Late Fee. All overdue accrued and unpaid interest to be paid
hereunder shall entail a late fee at an interest rate equal to the lesser of 18%
per annum or the maximum rate permitted by applicable law (the “Late Fees”)
which shall accrue daily from the date such interest is due hereunder through
and including the date of actual payment in full.

 

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

 

Section 3.             Registration of Transfers and Exchanges.

 

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

 

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

 

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

 

8

 

 

Section 4.             Conversion.

 

a)           Voluntary Conversion. At any time after the Original Issue Date
until this Debenture is no longer outstanding, this Debenture shall be
convertible, in whole or in part, into shares of Common Stock at the option of
the Holder, at any time and from time to time (subject to the conversion
limitations set forth in Section 4(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, 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 Company shall be controlling and determinative
in the absence of manifest error.

 

b)           Conversion Price. The conversion price in effect on any Conversion
Date shall be equal to $0.045, 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.

 

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
Purchase Agreement or applicable law) 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 commercially reasonable efforts
to deliver any certificate or certificates required to be delivered by the
Company under this Section 4(d) electronically through the Depository Trust
Company or another established clearing corporation performing similar
functions.

 

9

 

 

iii.         Partial Liquidated Damages. If the Company is obligated to and
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 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.

 

iv.         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 is obligated to and 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.

 

10

 

 

 

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

 

vi.         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 or round up to the next whole share.

 

vii.         Transfer Taxes. The issuance of certificates for 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 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 Debentures), (ii) subdivides
outstanding shares of Common Stock into a larger number of shares, (iii)
combines (including by way of a reverse stock split) outstanding shares of
Common Stock into a smaller number of shares or (iv) issues, in the event of a
reclassification of shares of the Common Stock, any shares of capital stock of
the Company, then the Conversion Price shall be multiplied by a fraction of
which the numerator shall be the number of shares of Common Stock (excluding any
treasury shares of the Company) outstanding immediately before such event and of
which the denominator shall be the number of shares of Common Stock outstanding
immediately after such event. Any adjustment made pursuant to this Section shall
become effective immediately after the record date for the determination of
shareholders 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.

 

11

 

 

 

b)           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, with respect to any of the
foregoing, 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.

 

c)           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.

 

d)           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.

 

12

 

 

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 shareholders 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.           Intentionally Omitted.

 

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 Debentures 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)           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
amended and restated articles of incorporation, as amended and restated bylaws,
in any manner that materially and adversely affects any rights of the Holder;

 

13

 

 

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 or prior issued Debentures if on a
pro-rata basis, and 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 exists and is continuing or occurs
and is continuing;

 

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

 

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

 

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

 

Section 8.          Events of Default.

 

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

 

i.            any default in the payment of (A) the principal amount of this
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 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) which failure is not cured, if
possible to cure, within the earlier to occur of (A) 10 Trading Days after
notice of such failure sent by the Holder or by any other Holder to the Company
and (B) 15 Trading Days after the Company has become or should have become aware
of such failure;

 

14

 

 

iii.         a material default or Event of Default (subject to any grace or
cure period provided in the applicable agreement, document or instrument) shall
occur under (A) any of the Transaction Documents or (B) any other material
agreement, lease, document or instrument to which the Company or any Subsidiary
is obligated (and not covered by clause (vi) below) the result of which would
reasonably be expected to have a material adverse effect on the operating
results and financial condition of the Company;

 

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

 

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

 

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

 

vii.         the Common Stock shall not be eligible for listing or quotation for
trading on a Trading Market and shall not be eligible to resume listing or
quotation for trading thereon within 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 prior to the fifteenth Trading Day after a Conversion Date pursuant to
Section 4(d) or the Company shall provide at any time notice to the Holder,
including by way of public announcement, of the Company’s intention to not honor
requests for conversions of any Debentures in accordance with the terms hereof;
or

 

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 $100,000, and such judgment, writ or similar final
process shall remain unvacated, unbonded or unstayed for a period of 45 calendar
days.

 

15

 

 

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 election of Holders of
twenty-five percent (25%) of the outstanding aggregate principal amount of
Debentures, immediately due and payable in cash at the Mandatory Default Amount,
except in the case of an Event of Default pursuant to Section 8(a)(i)(A), which
amounts shall become immediately due and payable in cash at the Mandatory
Default Amount at the election of the Holder. Commencing 5 days after the
occurrence of and during the continuance 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 the election
of Holders of twenty-five percent (25%) of the outstanding aggregate principal
amount of Debentures (or by the election of the Holder in the case of an Event
of Default pursuant to Section 8(a)(i)(A)) 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
Debentures now or hereafter issued under the terms set forth herein.         

 

16

 

 

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
Minnesota, 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 state of Minnesota.
Each party hereto hereby irrevocably submits to the exclusive jurisdiction of
the Minnesota 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 Minnesota Courts, or such Minnesota 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.

 

17

 

 

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.

 

j)         Existence of Class. Holder acknowledges and agrees by acceptance
hereof that such Holder has been offered and sold this Debenture pursuant to
that certain subscription agreement dated September 3, 2013 (the “Subscription
Agreement”) and that all such Holders of Debentures offered and sold pursuant to
the Subscription Agreement shall be part of and act as a class (the “Convertible
Debenture Holders”) for all purposes, including but not limited to any
amendments, waivers or defaults. Any such action shall require the affirmative
consent of Holders of a twenty-five percent (25%) in outstanding aggregate
principal amount of Debentures sold to the Convertible Debenture Holders (except
in the case of an Event of Default pursuant to Section 8(a)(i)(A)). All payments
made in connection with any Event of Default (except in the case of an Event of
Default pursuant to Section 8(a)(i)(A)) or any dissolution, winding up or other
event of liquidation with respect to the Company shall be made pro rata to all
Holders in proportion to such Holder’s percentage interest of the aggregate
principal amount of Debentures sold to the Convertible Debenture Holders.

 

k)           Subscription Agreement. In connection with the issuance of this
Debenture, the Holder has executed a Subscription Agreement and hereby
acknowledges and agrees that the representations and warranties made by the
Holder in such Subscription Agreement shall be incorporated by reference into
this Debenture as if fully set forth herein.

 

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

 

18

 

 

(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.

 

  Spectrascience, Inc.       By:__________________________________________  
Name:  Michael P. Oliver   Title:   Chief Executive Officer   Facsimile No. for
delivery of Notices: +1 858 847 0880

 

20

 

 

ANNEX A

 

NOTICE OF CONVERSION 

 

The undersigned hereby elects to convert principal under the 5% Original Issue
Discount Convertible Debenture due September __, 2014 of Spectrascience, Inc., a
Minnesota 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 Note:

 

Number of shares of Common Stock to be issued:

 

21

 

 

  Signature:       Name:           Address for Delivery of Common Stock
Certificates:       ____________________________

 

22

 

 

Schedule 1

 

CONVERSION SCHEDULE

 

The 5% Original Issue Discount Unsecured Convertible Debenture due on September
__, 2013 in the original principal amount of $263,157.90 is issued by
SpectraScience, Inc., a Minnesota corporation. This Conversion Schedule reflects
conversions made under Section 4 of the above referenced Debenture.

 

Dated:

 

Date of Conversion
(or for first entry, Original
Issue Date) Amount of Conversion Aggregate Principal
Amount Remaining
Subsequent to
Conversion
(or original
Principal Amount) Company Attest

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

23