EXHIBIT 4.3


 


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 22, 2015


Original
Conversion Price (subject to adjustment herein): $0.75


 


$_______________


 


2.25%
SENIOR SECURED CONVERTIBLE DEBENTURE


DUE
June 22, 2020


 


THIS
2.25% SENIOR SECURED CONVERTIBLE DEBENTURE is one of a series of duly authorized and validly issued 2.25% Senior Secured Convertible
Debentures of MELA Sciences, Inc., a Delaware corporation, (the “Company”), having its principal place of business
at 50 South Buckhout Street, Suite 1, Irvington, New York, 10533, designated as its 2.25% Senior Secured Convertible Debenture
due June 22, 2020 (this debenture, the “Debenture” and, collectively with the other debentures of such series,
the “Debentures”).


 


FOR
VALUE RECEIVED, the Company promises to pay to ________________________ or its registered assigns (the “Holder”),
or shall have paid pursuant to the terms hereunder, the principal sum of $_______________ on June 22, 2020 (the “Maturity
Date”) or such earlier date as this Debenture is required or permitted to be repaid as provided hereunder, and to pay
interest to the Holder on the aggregate unconverted and then outstanding principal amount of this Debenture in accordance with
the provisions hereof. This Debenture is subject to the following additional provisions:


 


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


 




    	 



    	 



    

 


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


 


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


 


“Base
Share Price” has the meaning set forth in Section 5(b).


 


“Beneficial
Ownership Limitation” has the meaning set forth in Section 4(e).


 


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


 


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


 


“Capital
Raised” has the meaning set forth in Section 6.


 




    	2



    	 



    

 


“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 40% of the voting securities of the Company (other than by means of conversion or exercise of the Debentures and
the Securities issued together with the Debentures), (b) the Company merges into or consolidates with any other Person, or any
Person merges into or consolidates with the Company and, after giving effect to such transaction, the stockholders of the Company
immediately prior to such transaction own less than 40% of the aggregate voting power of the Company or the successor entity of
such transaction, (c) the Company sells or transfers all or substantially all of its assets to another Person and the stockholders
of the Company immediately prior to such transaction own less than 60% of the aggregate voting power of the acquiring entity immediately
after the transaction, (d) a replacement at one time or within an 18 month period of more than one-half of the members of the
Board of Directors which is not approved by a majority of those individuals who are members of the Board of Directors on the Original
Issue Date (or by those individuals who are serving as members of the Board of Directors on any date whose nomination to the Board
of Directors was approved by a majority of the members of the Board of Directors who are members on the date hereof), or (e) the
execution by the Company of an agreement to which the Company is a party or by which it is bound, providing for any of the events
set forth in clauses (a) through (d) above.


 


“Closing
Bid Price” means the closing bid price of the Common Stock on the Trading Market, as reported by Bloomberg L.P.


 


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


 


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


 


“Conversion
Price” has 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 and for the payment
of interest in accordance with the terms hereof.


 


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


 


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


 


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


 


“Effectiveness
Period” has the meaning set forth in the Registration Rights Agreement.


 




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“Equity
Conditions” means, during the period in question, (a) the Company shall have
duly honored all conversions and redemptions scheduled to occur or occurring by virtue of one or more Notices of Conversion of
the Holder, if any, (b) the Company shall have paid all liquidated damages and other amounts owing to the Holder in respect of
this Debenture, (c)(i) there is an effective Registration
Statement pursuant to which the Holder is permitted to utilize the prospectus thereunder to resell all of the shares of Common
Stock issuable pursuant to the Transaction Documents (and the Company believes, in good faith, that such effectiveness will continue
uninterrupted for the foreseeable future) or (ii) all of the Conversion Shares issuable pursuant to the Transaction Documents
(and shares issuable in lieu of cash payments of interest) may be resold pursuant to Rule 144 without volume or manner-of-sale
restrictions or current public information requirements as determined by the counsel to the Company as set forth in a written
opinion letter to such effect, addressed and acceptable to the Transfer Agent and the Holder, (d) the Common Stock is trading
on a Trading Market and all of the shares issuable pursuant to the Transaction Documents are listed or quoted for trading on such
Trading Market (and the Company believes, in good faith, that trading of the Common Stock on a Trading Market will continue uninterrupted
for the foreseeable future), (e) there is a sufficient number of authorized but unissued and otherwise unreserved shares of Common
Stock for the issuance of all of the shares then issuable pursuant to the Transaction Documents, (f) there is no existing Event
of Default and no existing event which, with the passage of time or the giving of notice, would constitute an Event of Default,
(g) the issuance of the shares in question to the Holder would not violate the limitations set forth in Section 4(a) or Section
4(d) herein, (h) there has been no public announcement of a pending or proposed Fundamental
Transaction or Change of Control Transaction that has not been consummated, (i) the applicable Holder is not in possession of
any information provided by the Company that constitutes, or may constitute, material non-public information and (j) for each
Trading Day in a period of 20 consecutive Trading Days prior to the applicable date in question, the daily trading volume for
the Common Stock on the principal Trading Market exceeds $75,000 per Trading Day.


 


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


 


“Excess
Capital” has the meaning set forth in Section 6.


 


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


 


“Interest
Conversion Rate” means 85% of the average of the VWAP’s for the ten Trading Days immediately preceding the applicable
Interest Payment Date.


 


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


 


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


 


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


 


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


 


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


 


“Mandatory
Default Amount” means the sum of (a) the greater of (i) the outstanding principal amount of this Debenture, plus all
accrued and unpaid interest hereon, divided by the Conversion Price on the date the Mandatory Default Amount is either (A) demanded
(if demand or notice is required to create an Event of Default) or otherwise due or (B) paid in full, whichever has a lower Conversion
Price, multiplied by the VWAP on the date the Mandatory Default Amount is either (x) demanded or otherwise due or (y) paid in
full, whichever has a higher VWAP, or (ii) 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.


 




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“New
Issue Price” has the meaning set forth in Section 5(c).


 


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


 


“Notice
of Conversion” has 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.


 


“Permitted
Indebtedness” means (a) the indebtedness evidenced by the Debt Securities, (b) the Indebtedness existing on the Original
Issue Date and set forth on Schedule 3.1(aa) attached to the Purchase Agreement, (c) lease obligations and purchase money
indebtedness of up to $150,000, in the aggregate per year, incurred in connection with the acquisition of capital assets and lease
obligations with respect to newly acquired or leased assets, and (d) other indebtedness incurred in the ordinary course of business
up to $250,000 at any time outstanding.


 


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


 


“Purchase
Agreement” means the Securities Purchase Agreement, dated as of June 22, 2015 among the Company and the original Holders,
as amended, modified or supplemented from time to time in accordance with its terms.


 




    	5



    	 



    

 


“Registration
Rights Agreement” means the Registration Rights Agreement, dated as of the date of the Purchase Agreement, among the
Company and the original Holders, in the form of Exhibit B attached to the Purchase Agreement.


 


“Registration
Statement” means a registration statement meeting the requirements set forth in the Registration Rights Agreement and
covering the resale of the Underlying Shares by each Holder as provided for in the Registration Rights Agreement.


 


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


 


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


 


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


 


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


 


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


 


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


 




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Section
2.         Interest.


 


a)        Payment
of Interest in Cash or Kind. The Company shall pay interest to the Holder on the aggregate unconverted and then outstanding
principal amount of this Debenture at the rate of 2.25% per annum, payable quarterly on January 1, April 1, July 1 and October
1, beginning on the first such date after the Original Issue Date, on each 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 at the Interest Conversion Rate
(the dollar amount to be paid in shares, the “Interest Share Amount”) or a combination thereof; provided,
however, that payment in shares of Common Stock may only occur if (i) all of the Equity Conditions have been met (unless
waived by the Holder in writing) during the 20 Trading Days immediately prior to the applicable Interest Payment Date (the “Interest
Notice Period”) and through and including the date such shares of Common Stock are actually issued to the Holder, (ii)
the Company shall have given the Holder notice in accordance with the notice requirements set forth below, (iii) the then applicable
Conversion Price is less than the Interest Conversion Rate and (iv) as to such Interest Payment Date, prior to such Interest Notice
Period (but not more than five (5) Trading Days prior to the commencement of such Interest Notice Period), the Company shall have
delivered to the Holder’s account with The Depository Trust Company a number of shares of Common Stock to be applied against
such Interest Share Amount equal to the quotient of (x) the applicable Interest Share Amount divided by (y) the lesser of the
(i) then Conversion Price and (ii) the Interest Conversion Rate assuming for such purposes that the Interest Payment Date is the
Trading Day immediately prior to the commencement of the Interest Notice Period (the “Interest Conversion Shares”).


 


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


 




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


 


d)        Late
Fee. All overdue accrued and unpaid interest to be paid hereunder shall entail a late fee at an interest rate equal to the
lesser of 12% per annum or the maximum rate permitted by applicable law (the “Late Fees”) which shall accrue
daily from the date such interest is due hereunder through and including the date of actual payment in full. Notwithstanding anything
to the contrary contained herein, if, on any Interest Payment Date the Company has elected to pay accrued interest in the form
of Common Stock but the Company is not permitted to pay accrued interest in Common Stock because it fails to satisfy the conditions
for payment in Common Stock set forth in Section 2(a) herein, then, at the option of the Holder, the Company, in lieu of delivering
either shares of Common Stock pursuant to this Section 2 or paying the regularly scheduled interest payment in cash, shall deliver,
within three (3) Trading Days of each applicable Interest Payment Date, an amount in cash equal to the product of (x) the number
of shares of Common Stock otherwise deliverable to the Holder in connection with the payment of interest due on such Interest
Payment Date multiplied by (y) the highest VWAP during the period commencing on the Interest Payment Date and ending on the Trading
Day prior to the date such payment is actually made. If any Interest Conversion Shares are issued to the Holder in connection
with an Interest Payment Date and are not applied against an Interest Share Amount, then the Holder shall promptly return such
excess shares to the Company.


 


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


 


Section
3.         Registration of Transfers and Exchanges.


 


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


 




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


 


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


 


Section
4.         Conversion.


 


a)        Voluntary
Conversion. At any time after the both (i) the Original Issue Date and (ii) the earlier to occur of (1) the Company has received
shareholder approval as required by its Principal Market for the issuance of shares of Common Stock upon conversion of this Debenture
and (2) six months after the Original Issue Date (or until such later date if the Company continues to seek shareholder approval
at the request of the Holders), and 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 this Section 4(a) and in Section 4(d) hereof). Notwithstanding the foregoing, if the Company has
not obtained Shareholder Approval, the Company may not issue a number of shares of Common Stock, which, when aggregated with any
shares of Common Stock issued (i) pursuant to any Debentures issued pursuant to the Purchase Agreement (whether upon conversion
or as payment of interest), and (ii) upon prior exercise of any Warrant issued pursuant to the Purchase Agreement, would exceed
1,622,612, subject to adjustment for reverse and forward stock splits, stock dividends, stock combinations and other similar transactions
of the Common Stock that occur after the date of the Purchase Agreement (such number of shares, the “Issuable Maximum”).
The Holder and the holders of the other Debentures and Warrants issued pursuant to the Purchase Agreement shall be entitled to
a portion of the Issuable Maximum equal to the quotient obtained by dividing (x) the Holder’s original Subscription Amount
by (y) the aggregate original Subscription Amount of all holders pursuant to the Purchase Agreement. In addition, the Holder may
allocate its pro-rata portion of the Issuable Maximum among Warrants and Debentures held by it in its sole discretion. Such portion
shall be adjusted upward ratably in the event a Purchaser (other than the Holder) no longer holds any Warrants or Debentures and
the amount of shares issued to such Purchaser pursuant to its Warrants and Debentures was less than such Purchaser’s pro-rata
share of the Issuable Maximum. The Holder shall effect conversions by delivering to the Company a Notice of Conversion, the form
of which is attached hereto as Annex A (each, a “Notice of Conversion”), specifying therein the principal
amount of this Debenture to be converted and the date on which such conversion shall be effected (such date, the “Conversion
Date”). If no Conversion Date is specified in a Notice of Conversion, the Conversion Date shall be the date that such
Notice of Conversion is deemed delivered hereunder. No ink-original Notice of Conversion shall be required, nor shall any medallion
guarantee (or other type of guarantee or notarization) of any Notice of Conversion form be required. To effect conversions
hereunder, the Holder shall not be required to physically surrender this Debenture to the Company unless the entire principal
amount of this Debenture, plus all accrued and unpaid interest thereon, has been so converted. Conversions hereunder shall have
the effect of lowering the outstanding principal amount of this Debenture in an amount equal to the applicable conversion. The
Holder and the Company shall maintain records showing the principal amount(s) converted and the date of such conversion(s). The
Company may deliver an objection to any Notice of Conversion within one (1) Business Day of delivery of such Notice of Conversion.
In the event of any dispute or discrepancy, the records of the Holder shall be controlling and determinative in the absence of
manifest error. The Holder, and any assignee by acceptance of this Debenture, acknowledge and agree that, by reason of the
provisions of this paragraph, following conversion of a portion of this Debenture, the unpaid and unconverted principal amount
of this Debenture may be less than the amount stated on the face hereof.


 




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b)        Conversion
Price. The conversion price in effect on any Conversion Date shall be equal to $0.75, subject to adjustment herein
(the “Conversion Price”).


 


c)        Mechanics
of Conversion.


 


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


 


ii.         Delivery
of Certificate Upon Conversion. Not later than three (3) Trading Days after each Conversion Date (the “Share Delivery
Date”), the Company shall deliver, or cause to be delivered, to the Holder (A) a certificate or certificates representing
the Conversion Shares which, on or after the earlier of (i) the six month anniversary of the Original Issue Date or (ii) the Effective
Date, shall be free of restrictive legends and trading restrictions (other than those which may then be required by the Purchase
Agreement) representing the number of Conversion Shares being acquired upon the conversion of this Debenture (including, if the
Company has given continuous notice pursuant to Section 2(b) for payment of interest in shares of Common Stock at least 20 Trading
Days prior to the date on which the Notice of Conversion is delivered to the Company, shares of Common Stock representing the
payment of accrued interest otherwise determined pursuant to Section 2(a) but assuming that the Interest Notice Period is the
20 Trading Days period immediately prior to the date on which the Notice of Conversion is delivered to the Company and excluding
for such issuance the condition that the Company deliver Interest Conversion Shares as to such interest payment prior to the commencement
of the Interest Notice Period) and (B) a bank check in the amount of accrued and unpaid interest (if the Company has elected or
is required to pay accrued interest in cash). On or after the earlier of (i) the six month anniversary of the Original Issue Date
or (ii) the Effective Date, the Company shall deliver any certificate or certificates required to be delivered by the Company
under this Section 4(c) electronically through the Depository Trust Company or another established clearing corporation performing
similar functions.


 




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


 


iv.        Obligation
Absolute; Partial Liquidated Damages. The Company’s obligations to issue and deliver the Conversion Shares upon conversion
of this Debenture in accordance with the terms hereof are absolute and unconditional, irrespective of any action or inaction by
the Holder to enforce the same, any waiver or consent with respect to any provision hereof, the recovery of any judgment against
any Person or any action to enforce the same, or any setoff, counterclaim, recoupment, limitation or termination, or any breach
or alleged breach by the Holder or any other Person of any obligation to the Company or any violation or alleged violation of
law by the Holder or any other Person, and irrespective of any other circumstance which might otherwise limit such obligation
of the Company to the Holder in connection with the issuance of such Conversion Shares; provided, however, that
such delivery shall not operate as a waiver by the Company of any such action the Company may have against the Holder. In the
event the Holder of this Debenture shall elect to convert any or all of the outstanding principal amount hereof, the Company may
not refuse conversion based on any claim that the Holder or anyone associated or affiliated with the Holder has been engaged in
any violation of law, agreement or for any other reason, unless an injunction from a court, on notice to Holder, restraining and
or enjoining conversion of all or part of this Debenture shall have been sought and obtained. In the absence of such injunction,
the Company shall issue Conversion Shares or, if applicable, cash, upon a properly noticed conversion. If the Company fails for
any reason to deliver to the Holder such certificate or certificates pursuant to Section 4(c)(ii) by the Share Delivery Date,
the Company shall pay to the Holder, in cash, as liquidated damages and not as a penalty, for each $1,000 of principal amount
being converted, $10 per Trading Day (increasing to $20 per Trading Day on the third (3rd) Trading Day after such liquidated
damages begin to accrue and increasing to $40 per Trading Day on the sixth Trading Day after such damages begin to accrue) for
each Trading Day after such Share Delivery Date until such certificates are delivered or Holder rescinds such conversion. Nothing
herein shall limit a Holder’s right to pursue actual damages or declare an Event of Default pursuant to Section 8 hereof
for the Company’s failure to deliver Conversion Shares within the period specified herein and the Holder shall have the
right to pursue all remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific
performance and/or injunctive relief. The exercise of any such rights shall not prohibit the Holder from seeking to enforce damages
pursuant to any other Section hereof or under applicable law.


 




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


 




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


 


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


 


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


 




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


 




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Section
5.         Certain Adjustments.


 


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


 


b)        Subsequent
Equity Sales. If 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 “Base Share 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 to equal the Base Share Price. 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. The Company shall notify the Holder, in writing, no later than the Trading Day following the issuance
or deemed issuance of any Common Stock or Common Stock Equivalents subject to this Section 5(b), indicating therein the applicable
issuance price, or applicable reset price, exchange price, conversion price and other pricing terms (such notice, the “Dilutive
Issuance Notice”). For purposes of clarification, whether or not the Company provides a Dilutive Issuance Notice pursuant
to this Section 5(b), upon the occurrence of any Dilutive Issuance, the Holder is entitled to receive a number of Conversion Shares
based upon the Base Share Price regardless of whether the Holder accurately refers to the Base Share Price in the Notice of Conversion.
If the Company enters into a Variable Rate Transaction, despite the prohibition thereon in the Purchase Agreement, the Company
shall be deemed to have issued Common Stock or Common Stock Equivalents at the lowest possible conversion or exercise price at
which such securities may be converted or exercised. Notwithstanding anything herein to the contrary, this Section 5(b) shall
terminate and be of no further force or effect after the later of (i) the one year anniversary of the Original Issue Date, and
(ii) the earlier of (A) six months after the effective date of the registration statement registering all of the shares of Common
Stock required to be registered pursuant to the Registration Rights Agreement (in the event multiple registration statements are
required to register all such shares, then this provision shall refer to the last of such registration statements to become effective),
and (B) six months after the date that all of the Warrant Shares and shares of Common Stock issued or issuable under this Debentures
are freely tradable under Rule 144 without the requirement to be in compliance with the current public information requirements
thereunder.


 




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c)        Subsequent
Rights Offerings. If the Company, at any time while the Debenture is outstanding, shall issue rights, options or warrants
to all holders of Common Stock entitling them to subscribe for or purchase shares of Common Stock at a price per share (a “New
Issue Price”) that is lower than the Conversion Price on the record date referenced below, then the Conversion Price
shall be reduced to equal such New Issue Price. Such adjustment shall be made whenever such rights, options or warrants are issued,
and shall become effective immediately after the record date for the determination of stockholders entitled to receive such rights,
options or warrants.


 


d)        Pro
Rata Distributions. If the Company, at any time while this Debenture is outstanding, shall distribute to all holders of Common
Stock (and not to the Holder) evidences of its indebtedness or assets (including cash and cash dividends) or rights or warrants
to subscribe for or purchase any security, then in each such case the Exercise Price shall be adjusted by multiplying the Exercise
Price in effect immediately prior to the record date fixed for determination of stockholders entitled to receive such distribution
by a fraction of which the denominator shall be the VWAP determined as of the record date mentioned above, and of which the numerator
shall be such VWAP on such record date less the then per share fair market value at such record date of the portion of such assets
or evidence of indebtedness or rights or warrants so distributed applicable to one outstanding share of the Common Stock as determined
by the Board of Directors in good faith. In either case the adjustments shall be described in a statement provided to the Holder
of the portion of assets or evidences of indebtedness so distributed or such subscription rights applicable to one share of Common
Stock. Such adjustment shall be made whenever any such distribution is made and shall become effective immediately after the record
date mentioned above.


 




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e)        Fundamental
Transaction. If, at any time while this Debenture is outstanding, (i) the Company, directly or indirectly, in one or more
related transactions effects any merger or consolidation of the Company with or into another Person, (ii) the Company, directly
or indirectly, effects any sale, lease, license, assignment, transfer, conveyance or other disposition of all or substantially
all of its assets in one or a series of related transactions, (iii) any, direct or indirect, purchase offer, tender offer or exchange
offer (whether by the Company or another Person) is completed pursuant to which holders of Common Stock are permitted to sell,
tender or exchange their shares for other securities, cash or property and has been accepted by the holders of 50% or more of
the outstanding Common Stock, (iv) the Company, directly or indirectly, in one or more related transactions effects any reclassification,
reorganization or recapitalization of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is
effectively converted into or exchanged for other securities, cash or property, (v) the Company, directly or indirectly, in one
or more related transactions consummates a stock or share purchase agreement or other business combination (including, without
limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with another Person whereby such other Person
acquires more than 50% of the outstanding shares of Common Stock (not including any shares of Common Stock held by the other Person
or other Persons making or party to, or associated or affiliated with the other Persons making or party to, such stock or share
purchase agreement or other business combination) (each a “Fundamental Transaction”), then, upon any subsequent
conversion of this Debenture, the Holder shall have the right to receive, for each Conversion Share that would have been issuable
upon such conversion immediately prior to the occurrence of such Fundamental Transaction (without regard to any limitation in
Section 4(d) on the conversion of this Debenture), the number of shares of Common Stock of the successor or acquiring corporation
or of the Company, if it is the surviving corporation, and any additional consideration (the “Alternate Consideration”)
receivable as a result of such Fundamental Transaction by a holder of the number of shares of Common Stock for which this Debenture
is convertible immediately prior to such Fundamental Transaction (without regard to any limitation in Section 4(d) on the conversion
of this Debenture) is convertible. For purposes of any such conversion, the determination of the Conversion Price shall be appropriately
adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one (1)
share of Common Stock in such Fundamental Transaction, and the Company shall apportion the Conversion Price among the Alternate
Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration.
If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction,
then the Holder shall be given the same choice as to the Alternate Consideration it receives upon any conversion of this Debenture
following such Fundamental Transaction. The Company shall cause any successor entity in a Fundamental Transaction in which the
Company is not the survivor (the “Successor Entity”) to assume in writing all of the obligations of the Company
under this Debenture and the other Transaction Documents (as defined in the Purchase Agreement) in accordance with the provisions
of this Section 5(e) pursuant to written agreements and shall, at the option of the holder of this Debenture, deliver to the Holder
in exchange for this Debenture a security of the Successor Entity evidenced by a written instrument substantially similar in form
and substance to this Debenture which is convertible for a corresponding number of shares of capital stock of such Successor Entity
(or its parent entity) equivalent to the shares of Common Stock acquirable and receivable upon conversion of this Debenture (without
regard to any limitations on the conversion of this Debenture) prior to such Fundamental Transaction, and with a conversion price
which applies the conversion price hereunder to such shares of capital stock (but taking into account the relative value of the
shares of Common Stock pursuant to such Fundamental Transaction and the value of such shares of capital stock, such number of
shares of capital stock and such conversion price being for the purpose of protecting the economic value of this Debenture immediately
prior to the consummation of such Fundamental Transaction). Upon the occurrence of any such Fundamental Transaction, the Successor
Entity shall succeed to, and be substituted for (so that from and after the date of such Fundamental Transaction, the provisions
of this Debenture and the other Transaction Documents referring to the “Company” shall refer instead to the Successor
Entity), and may exercise every right and power of the Company and shall assume all of the obligations of the Company under this
Debenture and the other Transaction Documents with the same effect as if such Successor Entity had been named as the Company herein.


 




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


 


g)        Notice
to the Holder.


 


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


 




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ii.         Notice
to Allow Conversion by Holder. If (A) the Company shall declare a dividend (or any other distribution in whatever form) on
the Common Stock, (B) the Company shall declare a special nonrecurring cash dividend on or a redemption of the Common Stock, (C)
the Company shall authorize the granting to all holders of the Common Stock of rights or warrants to subscribe for or purchase
any shares of capital stock of any class or of any rights, (D) the approval of any stockholders of the Company shall be required
in connection with any reclassification of the Common Stock, any consolidation or merger to which the Company is a party, any
sale or transfer of all or substantially all of the assets of the Company, or any compulsory share exchange whereby the Common
Stock is converted into other securities, cash or property or (E) the Company shall authorize the voluntary or involuntary dissolution,
liquidation or winding up of the affairs of the Company, then, in each case, the Company shall cause to be filed at each office
or agency maintained for the purpose of conversion of this Debenture, and shall cause to be delivered to the Holder at its last
address as it shall appear upon the Debenture Register, at least twenty (20) calendar days prior to the applicable record or effective
date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution,
redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of the Common Stock of record
to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such
reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date
as of which it is expected that holders of the Common Stock of record shall be entitled to exchange their shares of the Common
Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or
share exchange, provided that the failure to deliver such notice or any defect therein or in the delivery thereof shall not affect
the validity of the corporate action required to be specified in such notice. To the extent that any notice provided hereunder
constitutes, or contains, material, non-public information regarding the Company or any of the Subsidiaries, the Company shall
simultaneously file such notice with the Commission pursuant to a Current Report on Form 8-K. The Holder shall remain entitled
to convert this Debenture during the 20-day period commencing on the date of such notice through the effective date of the event
triggering such notice except as may otherwise be expressly set forth herein.


 


Section
6.          Mandatory Prepayment. Notwithstanding anything herein
to the contrary, from and after the Original Issue Date until December 31, 2015, at the end of each calendar quarter, the Company
shall determine the aggregate amount of cash received by the Company for (i) the exercise of any warrants, (i) issuance of any
capital stock or other securities exercisable for or exchangeable into shares of capital stock and (iii) capital raised by any
other means (such aggregate amount, the “Capital Raised”). To the extent that the Capital Raised exceeds $4
million (such excess, the “Excess Capital”), the Company shall, within five (5) Trading Days from the end of
each such calendar quarter, send the Holder a notice indicating the amount of Capital Raised from the Original Issue Date to date.
The Holder hereof shall within five (5) Trading Days, by notice to the Company, elect whether to receive repayment of all or part
of the Excess Capital. The Company shall pay to the Holder (and the Holders of other Debt Securities electing to receive repayment
of the Excess Capital) the portion of the Excess Capital (less any Excess Capital previously repaid) which equals the amount obtained
by multiplying the Excess Capital by a fraction, the numerator of which is the principal amount of this Debenture and the denominator
of which is the principal amount of all Debt Securities which have requested repayment of the Excess Capital.


 


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


 




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


 


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


 


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


 


d)        repay,
repurchase or offer to repay, repurchase or otherwise acquire more than a de minimis number of shares of its Common
Stock or Common Stock Equivalents other than as to (i) the Conversion Shares or Warrant Shares as permitted or required under
the Transaction Documents and (ii) repurchases of Common Stock or Common Stock Equivalents of departing officers and directors
of the Company, provided that such repurchases shall not exceed an aggregate of $75,000 per year 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 Debt
Securities 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 or otherwise permitted hereunder, 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;


 


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):


 




    	20



    	 



    

 


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, an Interest Payment
Date or the Maturity Date or by acceleration or otherwise) which default, solely in the case of an interest payment or other default
under clause (B) above, is not cured within 3 Trading Days;


 


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


 


iii.         an
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) and which have been filed as exhibits to the
SEC Reports on or before the Original Issue Date or are filed as exhibits to the SEC Reports after the Original Issue Date and
while this Debenture remains outstanding;


 


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;


 




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


 


viii.      the
Company shall be a party to any Change of Control Transaction or Fundamental Transaction or shall agree to sell or dispose of
all or in excess of 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
Initial Registration Statement (as defined in the Registration Rights Agreement) shall not have been declared effective by the
Commission on or prior to the 120th calendar day after the Closing Date or the Company does not meet the current public
information requirements under Rule 144 in respect of the Registrable Securities (as defined under the Registration Rights Agreement);


 


x.          if,
during the Effectiveness Period (as defined in the Registration Rights Agreement), either (a) the effectiveness of the Registration
Statement lapses for any reason or (b) the Holder shall not be permitted to resell Registrable Securities (as defined in the Registration
Rights Agreement) under the Registration Statement for a period of more than 20 consecutive Trading Days or 30 non-consecutive
Trading Days during any 12 month period; provided, however, that if the Company is negotiating a merger, consolidation,
acquisition or sale of all or substantially all of its assets or a similar transaction and, in the written opinion of counsel
to the Company, the Registration Statement would be required to be amended to include information concerning such pending transaction(s)
or the parties thereto which information is not available or may not be publicly disclosed at the time, the Company shall be permitted
an additional 10 consecutive Trading Days during any 12 month period pursuant to this Section 7(a)(x);


 


xi.         the
Company shall fail for any reason to deliver certificates to a Holder prior to the fifth Trading Day after a Conversion Date pursuant
to Section 4(e) or any Forced Conversion Date pursuant to Section 6 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;


 


xii.        the
electronic transfer by the Company of shares of Common Stock through the Depository Trust Company or another established clearing
corporation is no longer available or is subject to a “chill”;


 




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xiii.       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;


 


xiv.       the
Company shall have failed to obtain Shareholder Approval of all items required by Section 4.11(c) of the Purchase Agreement on
or prior to November 30, 2015; or


 


xv.        an
Event of Default (as defined in the Notes (as defined in the Purchase Agreement)) shall have occurred and be continuing.


 


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 12% per annum or the maximum rate permitted under applicable law. Upon
the payment in full of the Mandatory Default Amount, the Holder shall promptly surrender this Debenture to or as directed by the
Company. In connection with such acceleration described herein, the Holder need not provide, and the Company hereby waives, any
presentment, demand, protest or other notice of any kind, and the Holder may immediately and without expiration of any grace period
enforce any and all of its rights and remedies hereunder and all other remedies available to it under applicable law. Such acceleration
may be rescinded and annulled by Holder at any time prior to payment hereunder and the Holder shall have all rights as a holder
of the Debenture until such time, if any, as the Holder receives full payment pursuant to this Section 8(b). No such rescission
or annulment shall affect any subsequent Event of Default or impair any right consequent thereon.


 


Section
9.         Miscellaneous.


 


a)        Notices.
Any and all notices or other communications or deliveries to be provided by the Holder hereunder, including, without limitation,
any Notice of Conversion, shall be in writing and delivered personally, by facsimile, or sent by a nationally recognized overnight
courier service, addressed to the Company, at the address set forth above, or such other facsimile number or address as the Company
may specify for such purposes by notice to the Holder delivered in accordance with this Section 9(a). Any and all notices or other
communications or deliveries to be provided by the Company hereunder shall be in writing and delivered personally, by facsimile,
or sent by a nationally recognized overnight courier service addressed to each Holder at the facsimile number or address of the
Holder appearing on the books of the Company, or if no such facsimile number or address appears on the books of the Company, at
the principal place of business of such Holder, as set forth in the Purchase Agreement. Any notice or other communication or deliveries
hereunder shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication
is delivered via facsimile at the facsimile number set forth on the signature pages attached hereto prior to 5:30 p.m. (New York
City time) on any date, (ii) the next Trading Day after the date of transmission, if such notice or communication is delivered
via facsimile at the facsimile number set forth on the signature pages attached hereto on a day that is not a Trading Day or later
than 5:30 p.m. (New York City time) on any Trading Day, (iii) the second Trading Day following the date of mailing, if sent by
U.S. nationally recognized overnight courier service or (iv) upon actual receipt by the party to whom such notice is required
to be given.


 




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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 Debt Securities now or hereafter issued
under the terms set forth herein.         


 


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


 


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


 




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


 


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


 


g)        Remedies,
Characterizations, Other Obligations, Breaches and Injunctive Relief.  The remedies provided in this Debenture shall
be cumulative and in addition to all other remedies available under this Debenture and any of the other Transaction Documents
at law or in equity (including a decree of specific performance and/or other injunctive relief), and nothing herein shall limit
the Holder’s right to pursue actual and consequential damages for any failure by the Company to comply with the terms of
this Debenture.  The Company covenants to the Holder that there shall be no characterization concerning this instrument other
than as expressly provided herein. Amounts set forth or provided for herein with respect to payments, conversion and the like
(and the computation thereof) shall be the amounts to be received by the Holder and shall not, except as expressly provided herein,
be subject to any other obligation of the Company (or the performance thereof). The Company acknowledges that a breach by it of
its obligations hereunder will cause irreparable harm to the Holder and that the remedy at law for any such breach may be inadequate.
The Company therefore agrees that, in the event of any such breach or threatened breach, the Holder shall be entitled, in addition
to all other available remedies, to an injunction restraining any such breach or any such threatened breach, without the necessity
of showing economic loss and without any bond or other security being required. The Company shall provide all information and
documentation to the Holder that is requested by the Holder to enable the Holder to confirm the Company’s compliance with
the terms and conditions of this Debenture.


 




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


 


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


 


j)         Secured
Obligation. The obligations of the Company under this Debenture are secured by all assets of the Company pursuant to the Security
Agreement, dated as of June 22, 2015 between the Company and the Agent.


 


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


 


(Signature
Page Follows)


 




    	26



    	 



    

 


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.


 


	 	mela sciences, inc.
	 	 
	 	By:	 
	 	 	Michael R. Stewart
	 	 	Chief Executive Officer
	 	Facsimile No. for delivery of Notices: (914) 291-3701


 


[Signature Page to Debenture]


 




    	 



    	 



    

 


ANNEX
A


 


NOTICE
OF CONVERSION


 


The
undersigned hereby elects to convert principal under the 2.25% Senior Secured Convertible Debenture due June 22, 2020 of MELA
Sciences, 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 common
stock of the Company does not exceed the amounts specified under Section 4 of this Debenture, as determined in accordance with
Section 13(d) of the Exchange Act.


 


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


 


	Conversion
    calculations:	 
	 	Date to Effect
    Conversion:
	 	 
	 	Principal
    Amount of Debenture to be Converted:
	 	 
	 	Payment of
    Interest in Common Stock __ yes  __ no
	 	If
    yes, $_____ of Interest Accrued on Account of Conversion at Issue.
	 	 
	 	Number of
    shares of Common Stock to be issued:
	 	 
	 	Signature:
	 	 
	 	Name:
	 	 
	 	Address for
    Delivery of Common Stock Certificates:
	 	 
	 	Or
	 	 
	 	DWAC Instructions:
	 	 
	 	Broker No:                            
	 	Account No:
                           


 




    	 



    	 



    

 


Schedule
1


 


CONVERSION
SCHEDULE


 


The
2.25% Senior Secured Convertible Debentures due on June 22, 2020 in the aggregate principal amount of $____________ are issued
by MELA Sciences, 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)	 	Amount of
 Conversion	 	Aggregate
 Principal
 Amount
 Remaining
 Subsequent to
 Conversion
 (or original
 Principal
 Amount)	 	Company Attest