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: __________, 2007
Original Conversion Price (subject to adjustment herein): $0.001 PER SHARE
$_______
15% CONVERTIBLE DEBENTURE
DUE OCTOBER 31, 2009
FOR VALUE RECEIVED, Xechem International, Inc. (the "Company") promises
to pay to the order of _______________________________________ ("Holder") the
principal sum of _________________________ and No/100 Dollars ($_____________)
together with simple interest computed at the rate of 15% per annum, and shall
issue two Warrants, as defined herein. Principal payable on October 31, 2009
(the "Maturity Date"). Company also grants Holder registration rights for the
Underlying Shares, as defined on attached EXHIBIT A.
Holder hereby represents and warrants that he she or it: (i) has access
to and has reviewed all reports, schedules, forms, statements and exhibits and
other documents filed by the Company under the Securities Act of 1933, as
amended and the Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder; and (ii) is an accredited investor, as that
term is defined under the Securities Act of 1933 as amended, and is able to bear
the full risk of loss of this investment.
Xechem Pharmaceuticals Nigeria, Limited was formed in 2002 under the
Companies and Allied Matters Act of 1992 of the Federal Republic of Nigeria. The
majority of the Company's business is being conducted through Xechem Nigeria.
Currently, Xechem Nigeria is wholly-owned by the Company, subject to the
disclosures contained in the public filings of the Company regarding ownership
of Xechem Nigeria. The Company is also considering the possibility of raising
capital through the issuance of additional equity in the Company (either
directly or indirectly through other instruments) and/or the issuance of
additional equity in or sale of stock owned by the Company of Xechem Nigeria,
both of which could be dilutive of shareholders of the Company or their indirect
interest in Xechem Nigeria.
The Company is past due/and or in default with respect to its
borrowings of monies including, but not limited to, Alembic, Limited, and the
debenture holders under the Purchase Agreement, as defined herein and other
lenders to the Company. There can be no assurances that the Company will be able
to generate sufficient funds to support its operations or to satisfy the
aforesaid obligations, and the holder of this Note is aware of the very high
risk of this investment. In addition, as of October 15, 2007, the Company is not
current with respect to its public filings of financial statements as required
by the Securities and Exchange Commission. The Company has advised the
undersigned and by execution of this note the undersigned acknowledges that:
absent significant additional financing to the Company (none of which is
presently established), there is a substantial risk that the Company may be
subject to voluntary or involuntary insolvency proceedings.
DEFINITIONS. For the purposes hereof, in addition to the terms defined
elsewhere in this Debenture, (a) capitalized terms not otherwise defined herein
shall have the meanings set forth in the Purchase Agreement and (b) the
following terms shall have the following meanings:
"Alternate Consideration" shall have the meaning set forth in Section
5(e).
"Bankruptcy Event" means any of the following events: (a) the Company
or any Significant Subsidiary (as such term is defined in Rule 1-02(w) of
Regulation S-X) thereof commences a case or other proceeding under any
bankruptcy, reorganization, arrangement, adjustment of debt, relief of debtors,
dissolution, insolvency or liquidation or similar law of any jurisdiction
relating to the Company or any Significant Subsidiary thereof; (b) there is
commenced against the Company or any Significant Subsidiary thereof any such
case or proceeding that is not dismissed within 60 days after commencement; (c)
the Company or any Significant Subsidiary thereof is adjudicated insolvent or
bankrupt or any order of relief or other order approving any such case or
proceeding is entered; (d) the Company or any Significant Subsidiary thereof
suffers any appointment of any custodian or the like for it or any substantial
part of its property that is not discharged or stayed within 60 calendar days
after such appointment; (e) the Company or any Significant Subsidiary thereof
makes a general assignment for the benefit of creditors; (f) the Company or any
Significant Subsidiary thereof calls a meeting of its creditors with a view to
arranging a composition, adjustment or restructuring of its debts; or (g) the
Company or any Significant Subsidiary thereof, by any act or failure to act,
expressly indicates its consent to, approval of or acquiescence in any of the
foregoing or takes any corporate or other action for the purpose of effecting
any of the foregoing.
"Base Conversion Price" shall have the meaning set forth in Section
5(b).
"Business Day" means any day except Saturday, 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)(v).
"Change of Control Transaction" means the occurrence after the date of
the closing of the final closing of the Purchase Agreement any of (i) an
acquisition by an individual or legal entity or "group" (as described in Rule
13d-5(b)(1) promulgated under the Exchange Act) of effective control (whether
through legal or beneficial ownership of capital stock of the Company, by
contract or otherwise) of in excess of 50% of the voting securities of the
Company (other than by means of conversion or exercise of the Debentures and the
Securities issued together with the Debentures), or (ii) the Company merges into
or consolidates with any other Person, or any Person merges into or consolidates
with the Company and, after giving effect to such transaction, the stockholders
of the Company immediately prior to such transaction own less than 50.1% of the
aggregate voting power of the Company or the successor entity of such
transaction, or (iii) the Company sells or transfers all or substantially all of
its assets to another Person and the stockholders of the Company immediately
prior to such transaction own less than 50.1% of the aggregate voting power of
the acquiring entity immediately after the transaction, or (iv) a replacement at
one time or within a three year period of more than one-half of the members of
the Company's 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
(v) 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
(i) through (iv) above.
"Common Stock" means the common stock, par value $.00001 per share, of
the Company and stock of any other class of securities into which such
securities may hereafter be reclassified or changed into.
"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 Shares" means, collectively, the shares of Common Stock
issuable upon conversion of this Debenture in accordance with the terms hereof.
"Debenture" shall mean this Debenture, and "Debentures" shall mean any
of this Debenture, the debentures issued on or after October 15, 2007 in form
and substance similar to this Debenture and any of the debentures issued
pursuant to the Purchase Agreement.
"Debenture Register" shall have the meaning set forth in Section 2(c).
"Dilutive Issuance" shall have the meaning set forth in Section 5(b).
"Dilutive Issuance Notice" shall have the meaning set forth in Section
5(b).
"Equity Conditions" means, during the period in question, (i) 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, (ii) the Company shall have paid all liquidated damages and other
amounts owing to the Holder in respect of this Debenture, (iii) 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
Purchase Agreement, (iv) the issuance of the shares in question to the Holder
would not violate the limitations set forth in Section 4(c) herein, (v) there
has been no public announcement of a pending or proposed and still proposed and
Fundamental Transaction or Change of Control Transaction that has not been
consummated, and (vi) the Holder is not in possession of any information
provided by the Company that constitutes, or may constitute, material non-public
information.
"Event of Default" shall have the meaning set forth in Section 8.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
"Fundamental Transaction" shall have the meaning set forth in Section
5(e).
"Interest Conversion Rate" means the lesser of (a) the Conversion Price
or (b) the average of the VWAPs for the 30 consecutive Trading Days ending on
the last Trading Day of the most recently ended calendar quarter that is
immediately prior to the Maturity Date.
"Interest Notice Period" shall have the meaning set forth in Section
2(a).
"Interest Share Amount" shall have the meaning set forth in Section
2(a).
"Late Fees" shall have the meaning set forth in Section 2(d).
"Mandatory Default Amount" means the outstanding principal amount of
this Debenture, plus all accrued and unpaid interest hereon or 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, 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, and (ii) all other amounts, costs, expenses and liquidated
damages due in respect of this Debenture.
"New York Courts" shall have the meaning set forth in Section 10(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.
"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 Securities Purchase Agreement, dated as
of April 4, 2007, among the Company and the original Holders, as amended,
modified or supplemented from time to time in accordance with its terms.
"Securities" means the Debentures, the Warrants, the Warrant Shares and
the Underlying Shares.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"Short Sales" means all "short sales" as defined in Rule 200 of
Regulation SHO under the Exchange Act (but shall not be deemed to include the
location and/or reservation of borrowable shares of Common Stock).
"Share Delivery Date" shall have the meaning set forth in Section 4(d).
"Subsidiary" means Xechem Nigeria and Xechem, Inc.
"Trading Day" means a day on which the principal Trading Market 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
American Stock Exchange, the Nasdaq Capital Market, the Nasdaq Global Market,
the Nasdaq Global Select Market, the New York Stock Exchange or the OTC Bulletin
Board or the Pink Sheets.
"Transfer Agent" means Continental Stock and transfer Company, with a
mailing address of 0 Xxxxxxxx, 00xx Xxxxx, Xxx Xxxx, XX 00000, and a facsimile
number of 000-000-0000, and any successor transfer agent of the Company.
"Underlying Shares" means the shares of Common Stock issued and
issuable upon conversiuon or redemption of the Debentures and upon exercise of
the Warrants and issued and issuable in liue of the cash payment of interest on
the Debentures in accordance with the terms of the Debentures.
"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 for trading 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
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 Sheets, LLC (or a
similar organization or agency succeeding to its functions of reporting prices),
the most recent bid price per share of the Common Stock so reported; or (d) 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 Holder and reasonably
acceptable to the Company.
"Warrant" means collectively the Common Stock purchase warrants
delivered to the Holder at Closing, which warrants shall be exercisable
immediately; these warrants shall each provide Holder the right to purchase
37.5% of the shares of Common Stock issuable in the event of a conversion of
this Note as of the date of its issuance
"Warrant Shares" means the shares of Common Stock issuable upon
exercise of the Warrants.
Section 1. 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
15% per annum, payable on each of February 28, 2008, May 31,
2008, August 31, 2008, November 30, 2008, February 28, 2009,
May 31, 2009, August 31, 2009 and on the Maturity Date (if the
Maturity Date is not a Business Day, then the applicable
payment shall be due on the next succeeding Business Day), in
cash or 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, as
determined by the Holder upon notice to the Company received
not less than 15 business days prior to the Maturity Date;
provided, however, that, absent consent of the Holder to the
contrary, payment in shares of Common Stock may only occur if
all of the Equity Conditions have been met (unless waived by
the Holder in writing) during the 20 Trading Days immediately
prior to the Maturity Date (the "Interest Notice Period") and
through and including the date such shares of Common Stock are
issued to the Holder; provided further, that if the Company
lacks sufficient shares of authorized Common Stock to make the
payment in Common Stock, then at the request of the Holder,
the Company shall make the payment in such form of preferred
stock as the Company shall designate, with rights to convert
to Common Stock upon the due authorization of the shares of
Common Stock that would be underlying the preferred stock.
(b) INTENTIONALLY OMITTED.
(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 principal sum,
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 shall
otherwise occur pursuant to Section 4(d)(ii) herein and,
solely for purposes of the payment of interest in shares, the
Maturity 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(d)(ii) herein or such later date that is prior to the
delivery of written notice by the Holder to the Company
rescinding its election to receive Conversion Shares from the
Company. 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 15% per annum or the maximum rate permitted by
applicable law ("Late Fees") which shall accrue daily from the
date such interest is due hereunder through and including the
date of payment in full. Notwithstanding anything to the
contrary contained herein, if on the Maturity Date the Holder
has elected to be paid 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 interest payment in cash shall
deliver, within three Trading Days of the Maturity 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 multiplied by (y)
the applicable average VWAP for the measurement period related
to the interest due in question.
(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 2. 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 above and may be transferred or exchanged
only in compliance with 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 3. 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
(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. 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 5
Business Days of delivery of such Notice of Conversion. In the
event of any dispute or discrepancy, the records of the Holder
shall be controlling and determinative in the absence of
manifest error. The Holder, and any assignee by acceptance of
this Debenture, acknowledge and agree that, by reason of the
provisions of this paragraph, following conversion of a
portion of this Debenture, the unpaid and unconverted
principal amount of this Debenture may be less than the amount
stated on the face hereof.
(b) CONVERSION PRICE. The conversion price in effect on any
Conversion Date shall be equal to $0.001, subject to
adjustment herein (the "Conversion Price").
(c) 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, such Holder (together with
such Holder's Affiliates, and any other person or entity
acting as a group together with such Holder or any of such
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 such 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 (A)
conversion of the remaining, unconverted principal amount of
this Debenture beneficially owned by such Holder or any of its
Affiliates and (B) exercise or conversion of the unexercised
or unconverted portion of any other securities of the Company
subject to a limitation on conversion or exercise analogous to
the limitation contained herein (including, without
limitation, any other Debentures or the Warrants) beneficially
owned by such Holder or any of its Affiliates. Except as set
forth in the preceding sentence, for purposes of this Section
4(c), 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(c) applies, the
determination of whether this Debenture is convertible (in
relation to other securities owned by such Holder together
with any Affiliates) and of which principal amount of this
Debenture is convertible shall be in the sole discretion of
such Holder, and the submission of a Notice of Conversion
shall be deemed to be such Holder's determination of whether
this Debenture may be converted (in relation to other
securities owned by such Holder together with any Affiliates)
and which principal amount of this Debenture is convertible,
in each case subject to such aggregate percentage limitations.
To ensure compliance with this restriction, each 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(c), in determining the number of
outstanding shares of Common Stock, a Holder may rely on the
number of outstanding shares of Common Stock as stated in the
most recent of the following: (A) the Company's most recent
Form 10-QSB or Form 10-KSB, as the case may be; (B) a more
recent public announcement by the Company; or (C) a more
recent 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 such 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 such Holder or its Affiliates
since the date as of which such number of outstanding shares
of Common Stock was reported. The "Beneficial Ownership
Limitation" shall be 4.99% of the number of shares of the
Common Stock outstanding immediately after giving effect to
the issuance of shares of Common Stock issuable upon
conversion of this Debenture held by the Holder. The
Beneficial Ownership Limitation provisions of this Section
4(c) may be waived by such Holder, at the election of such
Holder, upon not less than 61 days' prior notice to the
Company, to change the Beneficial Ownership Limitation to
9.99% of the number of shares of the Common Stock outstanding
immediately after giving effect to the issuance of shares of
Common Stock upon conversion of this Debenture held by the
Holder and the provisions of this Section 4(c) shall continue
to apply. Upon such a change by a Holder of the Beneficial
Ownership Limitation from such 4.99% limitation to such 9.99%
limitation, the Beneficial Ownership Limitation may not be
further waived by such 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(c) to correct this paragraph (or any portion hereof)
which may be defective or inconsistent with the intended
Beneficial Ownership Limitation herein contained or to make
changes or supplements necessary or desirable to properly give
effect to such limitation. The limitations contained in this
paragraph shall apply to a successor holder of this Debenture.
(d) MECHANICS OF CONVERSION.
(i) CONVERSION SHARES ISSUABLE UPON CONVERSION OF
PRINCIPAL AMOUNT. The number of shares of Common
Stock 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 Trading Days after each Conversion Date
(the "Share Delivery Date"), the Company shall
deliver, or cause to be delivered, to the Holder a
certificate or certificates representing the
Conversion Shares which, on or after 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 shares of Common Stock being acquired
upon the conversion of this Debenture. On or after
the Effective Date, the Company shall use its best
efforts to deliver any certificate or certificates
required to be delivered by the Company under this
Section 4 electronically through the Depository Trust
Company or another established clearing corporation
performing similar functions.
(iii) FAILURE TO DELIVER CERTIFICATES. If in the case of
any Notice of Conversion such certificate or
certificates are not delivered to or as directed by
the applicable Holder by the third Trading Day after
the Conversion Date, the Holder shall be entitled to
elect by written notice to the Company at any time on
or before its receipt of such certificate or
certificates, to rescind such Conversion, in which
event the Company shall promptly return to the Holder
any original Debenture delivered to the Company and
the Holder shall promptly return the Common Stock
certificates representing the principal amount of
this Debenture tendered for conversion to the
Company.
(iv) OBLIGATION ABSOLUTE; PARTIAL LIQUIDATED DAMAGES. The
Company's obligations to issue and deliver the
Conversion Shares upon conversion of this Debenture
in accordance with the terms hereof are absolute and
unconditional, irrespective of any action or inaction
by the Holder to enforce the same, any waiver or
consent with respect to any provision hereof, the
recovery of any judgment against any Person or any
action to enforce the same, or any setoff,
counterclaim, recoupment, limitation or termination,
or any breach or alleged breach by the Holder or any
other Person of any obligation to the Company or any
violation or alleged violation of law by the Holder
or any other Person, and irrespective of any other
circumstance which might otherwise limit such
obligation of the Company to the Holder in connection
with the issuance of such Conversion Shares;
provided, however, that such delivery shall not
operate as a waiver by the Company of any such action
the Company may have against the Holder. In the event
the Holder of this Debenture shall elect to convert
any or all of the outstanding principal amount
hereof, the Company may not refuse conversion based
on any claim that the Holder or anyone associated or
affiliated with the Holder has been engaged in any
violation of law, agreement or for any other reason,
unless an injunction from a court, on notice to
Holder, restraining and or enjoining conversion of
all or part of this Debenture shall have been sought
and obtained, and the Company posts a surety bond for
the benefit of the Holder in the amount of 150% of
the outstanding principal amount of this Debenture,
which is subject to the injunction, which bond shall
remain in effect until the completion of
arbitration/litigation of the underlying dispute and
the proceeds of which shall be payable to such Holder
to the extent it obtains judgment. In the absence of
such injunction, the Company shall issue Conversion
Shares or, if applicable, cash, upon a properly
noticed conversion. If the Company fails for any
reason to deliver to the Holder such certificate or
certificates pursuant to Section 4(d)(ii) by the
third Trading Day after the Conversion Date, the
Company shall pay to such Holder, in cash, as
liquidated damages and not as a penalty, for each
$1000 of principal amount being converted, $10 per
Trading Day (increasing to $20 per Trading Day on the
fifth Trading Day after such liquidated damages begin
to accrue) for each Trading Day after such third
Trading Day until such certificates are delivered.
Nothing herein shall limit a Xxxxxx's right to pursue
actual damages or declare an Event of Default
pursuant to Section 8 hereof for the Company's
failure to deliver Conversion Shares within the
period specified herein and such Holder shall have
the right to pursue all remedies available to it
hereunder, at law or in equity including, without
limitation, a decree of specific performance and/or
injunctive relief. The exercise of any such rights
shall not prohibit the Holder from seeking to enforce
damages pursuant to any other Section hereof or under
applicable law.
(v) COMPENSATION FOR BUY-IN ON FAILURE TO TIMELY DELIVER
CERTIFICATES UPON CONVERSION. In addition to any
other rights available to the Holder, if the Company
fails for any reason to deliver to the Holder such
certificate or certificates by the Share Delivery
Date pursuant to Section 4(d)(ii), and if after such
Share Delivery Date the Holder is required by its
brokerage firm to purchase (in an open market
transaction or otherwise), or the Holder's brokerage
firm otherwise purchases, shares of Common Stock to
deliver in satisfaction of a sale by such 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 such 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 Xxxxxx's right to pursue
any other remedies available to it hereunder, at law
or in equity including, without limitation, a decree
of specific performance and/or injunctive relief with
respect to the Company's failure to timely deliver
certificates representing shares of Common Stock upon
conversion of this Debenture as required pursuant to
the terms hereof.
(vi) RESERVATION OF SHARES ISSUABLE UPON CONVERSION. The
Company covenants that it will at all times reserve
and keep available out of its authorized and unissued
shares of Common Stock for the sole purpose of
issuance upon conversion of this Debenture and
payment of interest on this Debenture, each as herein
provided, free from preemptive rights or any other
actual contingent purchase rights of Persons other
than the Holder (and the other holders of the
Debentures), not less than such aggregate number of
shares of the Common Stock as shall (subject to the
terms and conditions set forth in the Purchase
Agreement) be issuable (taking into account the
adjustments and restrictions of Section 5) upon the
conversion of the 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 sale in accordance with such
Registration Statement.
(vii) FRACTIONAL SHARES. Upon a conversion hereunder the
Company shall not be required to issue stock
certificates representing fractions of shares of
Common Stock, but may if otherwise permitted, make a
cash payment in respect of any final fraction of a
share based on the VWAP at such time. If the Company
elects not, or is unable, to make such a cash
payment, the Holder shall be entitled to receive, in
lieu of the final fraction of a share, 1 whole share
of Common Stock.
(viii) TRANSFER TAXES. The issuance of certificates for
shares of the Common Stock on conversion of this
Debenture shall be made without charge to the Holder
hereof for any documentary stamp or similar taxes
that may be payable in respect of the issue or
delivery of such certificates, provided that the
Company shall not be required to pay any tax that may
be payable in respect of any transfer involved in the
issuance and delivery of any such certificate upon
conversion in a name other than that of the Holder of
this Debenture so converted and the Company shall not
be required to issue or deliver such certificates
unless or until the person or persons requesting the
issuance thereof shall have paid to the Company the
amount of such tax or shall have established to the
satisfaction of the Company that such tax has been
paid.
Section 4. CERTAIN ADJUSTMENTS.
(a) STOCK DIVIDENDS AND STOCK SPLITS. If the Company, at any time
while this Debenture is outstanding: (A) 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); (B)
subdivides outstanding shares of Common Stock into a larger
number of shares; (C) combines (including by way of a reverse
stock split) outstanding shares of Common Stock into a smaller
number of shares; or (D) issues, in the event of a
reclassification of shares of the Common Stock, any shares of
capital stock of the Company, then the Conversion Price shall
be multiplied by a fraction of which the numerator shall be
the number of shares of Common Stock (excluding any treasury
shares of the Company) outstanding immediately before such
event and of which the denominator shall be the number of
shares of Common Stock outstanding immediately after such
event. Any adjustment made pursuant to this Section shall
become effective immediately after the record date for the
determination of stockholders entitled to receive such
dividend or distribution and shall become effective
immediately after the effective date in the case of a
subdivision, combination or re classification.
(b) SUBSEQUENT EQUITY SALES. If, at any time while this Debenture
is outstanding, the Company sells or grants any option to
purchase or sells or grants any right to reprice, or otherwise
disposes of or issues (or announces any sale, grant or any
option to purchase or other disposition), any Common Stock or
Common Stock Equivalents entitling any Person to acquire
shares of Common Stock at an effective price per share that is
lower than the then Conversion Price (such lower price, the
"Base Conversion Price" and such issuances, collectively, a
"Dilutive Issuance") (if the holder of the Common Stock or
Common Stock Equivalents so issued shall at any time, whether
by operation of purchase price adjustments, reset provisions,
floating conversion, exercise or exchange prices or otherwise,
or due to warrants, options or rights per share which are
issued in connection with such issuance, be entitled to
receive shares of Common Stock at an effective price per share
that is lower than the Conversion Price, such issuance shall
be deemed to have occurred for less than the Conversion Price
on such date of the Dilutive Issuance), then the Conversion
Price shall be reduced to equal the Base Conversion Price.
Such adjustment shall be made whenever such Common Stock or
Common Stock Equivalents are issued. Notwithstanding the
foregoing, no adjustment will be made under this Section 5(b)
in respect of an Exempt Issuance. The Company shall notify the
Holder in writing, no later than 3 Business Days following the
issuance of any Common Stock or Common Stock Equivalents
subject to this Section 5(b), indicating therein the
applicable issuance price, or applicable reset price, exchange
price, conversion price and other pricing terms (such notice,
the "Dilutive Issuance Notice"). For purposes of
clarification, whether or not the Company provides a Dilutive
Issuance Notice pursuant to this Section 5(b), upon the
occurrence of any Dilutive Issuance, the Holder is entitled to
receive a number of Conversion Shares based upon the Base
Conversion Price on or after the date of such Dilutive
Issuance, regardless of whether the Holder accurately refers
to the Base Conversion Price in the Notice of Conversion.
(c) SUBSEQUENT RIGHTS OFFERINGS. If the Company, at any time while
the Debenture is outstanding, shall issue rights, options or
warrants to all holders of Common Stock (and not to Holders)
entitling them to subscribe for or purchase shares of Common
Stock at a price per share that is lower than the VWAP on the
record date referenced below, then the Conversion Price shall
be multiplied by a fraction of which the denominator shall be
the number of shares of the Common Stock outstanding on the
date of issuance of such rights or warrants plus the number of
additional shares of Common Stock offered for subscription or
purchase, and of which the numerator shall be the number of
shares of the Common Stock outstanding on the date of issuance
of such rights or warrants plus the number of shares which the
aggregate offering price of the total number of shares so
offered (assuming delivery to the Company in full of all
consideration payable upon exercise of such rights, options or
warrants) would purchase at such VWAP. Such adjustment shall
be made whenever such rights 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, distributes to all holders of Common
Stock (and not to the Holders) evidences of its indebtedness
or assets (including cash and cash dividends) or rights or
warrants to subscribe for or purchase any security (other than
the Common Stock, which shall be subject to Section 5(b)),
then in each such case the Conversion Price shall be adjusted
by multiplying such Conversion 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
fair market value at such record date of the portion of such
assets or evidence of indebtedness so distributed applicable
to 1 outstanding share of the Common Stock as determined by
the Board of Directors of the Company in good faith. In either
case the adjustments shall be described in a statement
delivered to the Holder describing the portion of assets or
evidences of indebtedness so distributed or such subscription
rights applicable to 1 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.
(e) FUNDAMENTAL TRANSACTION. If, at any time while this Debenture
is outstanding, (A) the Company effects any merger or
consolidation of the Company with or into another Person, (B)
the Company effects any sale of all or substantially all of
its assets in one transaction or a series of related
transactions, (C) 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 (D) the Company effects any reclassification of the Common
Stock or any compulsory share exchange pursuant to which the
Common Stock is effectively converted into or exchanged for
other securities, cash or property (in any such case, a
"Fundamental Transaction"), then, upon any subsequent
conversion of this Debenture, the Holder shall have the right
to receive, for each Conversion Share that would have been
issuable upon such conversion immediately prior to the
occurrence of such Fundamental Transaction, the same kind and
amount of securities, cash or property as it would have been
entitled to receive upon the occurrence of such Fundamental
Transaction if it had been, immediately prior to such
Fundamental Transaction, the holder of 1 share of Common Stock
(the "Alternate Consideration"). For purposes of any such
conversion, the determination of the Conversion Price shall be
appropriately adjusted to apply to such Alternate
Consideration based on the amount of Alternate Consideration
issuable in respect of 1 share of Common Stock in such
Fundamental Transaction, and the Company shall apportion the
Conversion Price among the Alternate Consideration in a
reasonable manner reflecting the relative value of any
different components of the Alternate Consideration. If
holders of Common Stock are given any choice as to the
securities, cash or property to be received in a Fundamental
Transaction, then the Holder shall be given the same choice as
to the Alternate Consideration it receives upon any conversion
of this Debenture following such Fundamental Transaction. To
the extent necessary to effectuate the foregoing provisions,
any successor to the Company or surviving entity in such
Fundamental Transaction shall issue to the Holder a new
debenture consistent with the foregoing provisions and
evidencing the Holder's right to convert such debenture into
Alternate Consideration unless the Fundamental Transaction
expressly provides that it shall not issue any of its
securities to the Company's holders of capital stocks,
warrants or convertible debentures in connection with the
Fundamental Transaction. 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(e) and insuring
that this Debenture (or any such replacement security) will be
similarly adjusted upon any subsequent transaction analogous
to a Fundamental Transaction, except as noted in the
penultimate sentence of this Section 5(f).
(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 mail 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. 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 price
at which such securities may be converted or
exercised.
(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, 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 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 5. INTENTIONALLY OMITTED.
Section 6. NEGATIVE COVENANTS. As long as any portion of this Debenture remains
outstanding, the Company shall not:
(a) Intentionally omitted;
(b) Intentionally omitted;
(c) amend its charter documents, including, without limitation,
the certificate of incorporation and bylaws, in any manner
that materially and adversely affects any rights of the
Holder;
(d) repay, repurchase or offer to repay, repurchase or otherwise
acquire more than a de minimis number of shares of its Common
Stock or Common Stock Equivalents other than as to (i) the
Conversion Shares or Warrant Shares as permitted or required
under the Transaction Documents and (ii) repurchases of Common
Stock or Common Stock Equivalents of departing officers and
directors of the Company, provided that such repurchases shall
not exceed an aggregate of $100,000 for all officers and
directors during the term of this Debenture or such greater
amount as is agreed to by the Board of Directors of the
Company (including the representatives, if any, of the
Debenture holders);
(e) pay cash dividends or distributions on any equity securities
of the Company;
(f) enter into any transaction with any Affiliate of the Company
which would be required to be disclosed in any public filing
with the Commission, other than transactions of a nature
currently in place, transactions not prohibited by the
Purchase Agreement or this Debenture, or transactions approved
by the Board of Directors of the Company; provided, that any
interested party shall be disqualified from approving the
transaction; or
(g) enter into any agreement with respect to any of the foregoing.
Section 7. 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 or interest of any Debenture issued
pursuant to the Purchase Agreement or (B) interest,
liquidated damages and other amounts owing to a
Holder on this 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 following the date of
delivery of notice of the default by Xxxxxx;
(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 5 Trading Days after notice
of such failure sent by the Holder;
(iii) a declaration of default by the holders of a majority
of the Debentures issued pursuant to the Purchase
Agreement;
(iv) any representation or warranty made in this Debenture
shall be untrue or incorrect in any material respect
as of the date when made or deemed made;
(v) the Company shall be subject to a Bankruptcy Event;
(vi) 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(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
(vii) any monetary judgment, writ or similar final process
shall be entered or filed against the Company, any
Subsidiary or any of their respective property or
other assets for more than $50,000, and such
judgment, writ or similar final process shall remain
unvacated, unbonded or unstayed for a period of 45
calendar days.
(b) REMEDIES UPON EVENT OF DEFAULT. If any Event of Default occurs
and remains uncured beyond the applicable grace period, 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. Immediately
after the occurrence of any Event of Default (or an Event of
Default that with the passing of time will become an 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 15% per annum or the
maximum rate permitted under applicable law. Upon the payment
in full of the Mandatory Default Amount, the Holder shall
promptly surrender this Debenture to or as directed by the
Company. In connection with such acceleration described
herein, the Holder need not provide, and the Company hereby
waives, any presentment, demand, protest or other notice of
any kind, and the Holder may immediately and without
expiration of any grace period enforce any and all of its
rights and remedies hereunder and all other remedies available
to it under applicable law. Such acceleration may be rescinded
and annulled by Xxxxxx at any time prior to payment hereunder
and the Holder shall have all rights as a holder of the
Debenture until such time, if any, as the Holder receives full
payment pursuant to this Section 8(b). No such rescission or
annulment shall affect any subsequent Event of Default or
impair any right consequent thereon.
Section 8. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND HOLDER.
(a) The Company, represents and warrants as of the date hereof to
the Holder as follows:
(i) ORGANIZATION AND QUALIFICATION. The Company and each
of the Subsidiaries is an entity duly incorporated or
otherwise organized, validly existing and in good
standing under the laws of the jurisdiction of its
incorporation or organization (as applicable), with
the requisite power and authority to own and use its
properties and assets and to carry on its business as
currently conducted. Neither the Company nor any
Subsidiary is in violation or default of any of the
provisions of its respective certificate or articles
of incorporation, bylaws or other organizational or
charter documents. Each of the Company and the
Subsidiaries is duly qualified to conduct business
and is in good standing as a foreign corporation or
other entity in each jurisdiction in which the nature
of the business conducted or property owned by it
makes such qualification necessary, except where the
failure to be so qualified or in good standing, as
the case may be, could not have or reasonably be
expected to result in a material adverse effect on
the Company and the Subsidiary, taken as a whole, or
a material adverse effect on the Company's ability to
perform in any material respect on a timely basis its
obligations under the Debenture, and no proceeding
has been instituted in any such jurisdiction
revoking, limiting or curtailing or seeking to
revoke, limit or curtail such power and authority or
qualification.
(ii) AUTHORIZATION; ENFORCEMENT. The Company has the
requisite corporate power and authority to enter into
and to consummate the transactions contemplated by
the Debenture and Warrants and otherwise to carry out
its obligations hereunder and thereunder. The
execution and delivery of the Debenture and Warrants
by the Company and the consummation by it of the
transactions contemplated hereby and thereby have
been duly authorized by all necessary action on the
part of the Company and no further action is required
by the Company, its board of directors or its
stockholders in connection therewith. Each of the
Debenture and Warrants has been (or upon delivery
will have been) duly executed by the Company and,
when delivered in accordance with the terms hereof
and thereof, will constitute the valid and binding
obligation of the Company enforceable against the
Company in accordance with its terms except (i) as
limited by general equitable principles and
applicable bankruptcy, insolvency, reorganization,
moratorium and other laws of general application
affecting enforcement of creditors' rights generally,
(ii) as limited by laws relating to the availability
of specific performance, injunctive relief or other
equitable remedies and (iii) insofar as
indemnification and contribution provisions may be
limited by applicable law.
(iii) ISSUANCE OF THE SECURITIES. The Securities are duly
authorized and, when issued and paid for in
accordance with the applicable Debenture, will be
duly and validly issued, fully paid and
nonassessable, free and clear of all liens imposed by
the Company other than restrictions on transfer
provided for in the Debenture. The Underlying Shares,
when issued in accordance with the terms of the
Debenture and Warrants, will be validly issued, fully
paid and nonassessable, free and clear of all liens
imposed by the Company. The Company has reserved from
its duly authorized capital stock a number of shares
of Common Stock for issuance of the Underlying
Shares.
(iv) PRIVATE PLACEMENT. Assuming the accuracy of the
Holders representations and warranties, no
registration under the Securities Act is required for
the offer and sale of the Securities by the Company
to the Holder as contemplated hereby.
(v) INVESTMENT COMPANY. The Company is not, and is not an
Affiliate of, and immediately after receipt of
payment for the Securities, will not be or be an
Affiliate of, an "investment company" within the
meaning of the Investment Company Act of 1940, as
amended. The Company shall conduct its business in a
manner so that it will not become subject to the
Investment Company Act of 1940, as amended
(b) Holder hereby, for itself and for no other Holder, represents
and warrants as of the date hereof to the Company as follows:
(i) ORGANIZATION; AUTHORITY. Such Holder, if: (1) an
entity, is an entity duly organized, validly existing
and in good standing under the laws of the
jurisdiction of its organization with full right,
corporate or partnership power and authority to enter
into and to consummate the transactions contemplated
by this Debenture and otherwise to carry out its
obligations hereunder and thereunder; and (2) an
individual, is duly authorized to enter into the
transactions contemplated by this Xxxxxxxxx and to
otherwise carry out the individual's obligation
hereunder. The execution, delivery and performance by
such Holder of the transactions contemplated by this
Debenture have been duly authorized by all necessary
corporate or similar action on the part of such
Holder. The Debenture has been duly executed by such
Holder, and when delivered by such Holder in
accordance with the terms hereof, will constitute the
valid and legally binding obligation of such Holder,
enforceable against it in accordance with its terms,
except (A) as limited by general equitable principles
and applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general
application affecting enforcement of creditors'
rights generally, (B) as limited by laws relating to
the availability of specific performance, injunctive
relief or other equitable remedies and (C) insofar as
indemnification and contribution provisions may be
limited by applicable law.
(ii) OWN ACCOUNT. Such Holder understands that the
Securities are "restricted securities" and have not
been registered under the Securities Act or any
applicable state securities law and is acquiring the
Securities as principal for its own account and not
with a view to or for distributing or reselling such
Securities or any part thereof in violation of the
Securities Act or any applicable state securities
law, has no present intention of distributing any of
such Securities in violation of the Securities Act or
any applicable state securities law and has no direct
or indirect arrangement or understandings with any
other persons to distribute or regarding the
distribution of such Securities (this representation
and warranty not limiting such Holder's right to sell
the Securities pursuant to the Registration Statement
or otherwise in compliance with applicable federal
and state securities laws) in violation of the
Securities Act or any applicable state securities
law. Such Holder is acquiring the Securities
hereunder in the ordinary course of its, his or her
business.
(iii) PURCHASER STATUS. At the time such Holder was offered
the Securities, it was, and at the date hereof it is,
and on each date on which he, she or it exercises any
Warrants or converts any Debentures he, she or it
will be either: (i) an "accredited investor" as
defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7) or
(a)(8) under the Securities Act, and in addition if
the qualification is due to satisfaction of the
requirements of Rule 501(a)(1)(5) of the Securities
Act and the individual is a resident of the State of
Illinois, then such net worth requirement is
satisfied exclusive of home, home furnishings and
automobiles; or (ii) a "qualified institutional
buyer" as defined in Rule 144A(a) under the
Securities Act. Such Holder is not required to be
registered as a broker-dealer under Section 15 of the
Exchange Act.
(iv) EXPERIENCE OF SUCH HOLDER. Such Holder, either alone
or together with his, her or its representatives, has
such knowledge, sophistication and experience in
business and financial matters so as to be capable of
evaluating the merits and risks of the prospective
investment in the Securities, and has so evaluated
the merits and risks of such investment. Such Holder
is able to bear the economic risk of an investment in
the Securities and, at the present time, is able to
afford a complete loss of such investment. Such
Holder has the right to seek counsel.
(v) GENERAL SOLICITATION. Such Holder is not purchasing
the Securities as a result of any advertisement,
article, notice or other communication regarding the
Securities published in any newspaper, magazine or
similar media or broadcast over television or radio
or presented at any seminar or any other general
solicitation or general advertisement.
(vi) SHORT SALES AND CONFIDENTIALITY PRIOR TO THE DATE
HEREOF. Other than the transaction contemplated
hereunder, such Xxxxxx has not directly or
indirectly, nor has any Person acting on behalf of or
pursuant to any understanding with such Xxxxxx,
executed any transaction, including Short Sales, in
the securities of the Company during the period
commencing from the time that such Xxxxxx first
received a term sheet (written or oral) from the
Company or any other Person setting forth the
material terms of the transactions contemplated
hereunder until the date hereof ("Discussion Time").
Notwithstanding the foregoing, in the case of a
Holder that is a multi-managed investment vehicle
whereby separate portfolio managers manage separate
portions of such Holder's assets and the portfolio
managers have no direct knowledge of the investment
decisions made by the portfolio managers managing
other portions of such Xxxxxx's assets, the
representation set forth above shall only apply with
respect to the portion of assets managed by the
portfolio manager that made the investment decision
to purchase the Securities covered by this Agreement.
Other than to other Persons party to this Agreement,
such Xxxxxx has maintained the confidentiality of all
disclosures made to it in connection with this
transaction (including the existence and terms of
this transaction).
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 Xechem International, Inc., 000 Xxxxxxxx
Xxxxxx, Xxxxxx XX 00000, with a copy to facsimile at (fax
312-527-3194) 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 10. 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 such Xxxxxx 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 at the facsimile
number specified in this Section 10 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 at the facsimile number specified in this
Section 10 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.
(c) LOST OR MUTILATED DEBENTURE. If this Debenture shall be
mutilated, lost, stolen or destroyed, the Company shall
execute and deliver, in exchange and substitution for and upon
cancellation of a mutilated Debenture, or in lieu of or in
substitution for a lost, stolen or destroyed Debenture, a new
Debenture for the principal amount of this Debenture so
mutilated, lost, stolen or destroyed, but only upon receipt of
evidence of such loss, theft or destruction of such Debenture,
and of the ownership hereof, reasonably satisfactory to the
Company.
(d) GOVERNING LAW. All questions concerning the construction,
validity, enforcement and interpretation of this Debenture
shall be governed by and construed and enforced in accordance
with the internal laws of the State of New York, without
regard to the principles of conflict of laws thereof. Each
party agrees that all legal proceedings concerning the
interpretation, enforcement and defense of the transactions
contemplated by any of the Transaction Documents (whether
brought against a party hereto or its respective Affiliates,
directors, officers, shareholders, employees or agents) shall
be commenced in the state and federal courts sitting in the
City of New York, Borough of Manhattan (the "New York
Courts"). Each party hereto hereby irrevocably submits to the
exclusive jurisdiction of the New York Courts for the
adjudication of any dispute hereunder or in connection
herewith or with any transaction contemplated hereby or
discussed herein (including with respect to the enforcement of
any of the Transaction Documents), and hereby irrevocably
waives, and agrees not to assert in any suit, action or
proceeding, any claim that it is not personally subject to the
jurisdiction of such New York Courts, or such New York Courts
are improper or inconvenient venue for such proceeding. Each
party hereby irrevocably waives personal service of process
and consents to process being served in any such suit, action
or proceeding by mailing a copy thereof via registered or
certified mail or overnight delivery (with evidence of
delivery) to such party at the address in effect for notices
to it under this Debenture and agrees that such service shall
constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in
any way any right to serve process in any other manner
permitted by applicable law. EACH PARTY HERETO HEREBY
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY
LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS DEBENTURE
OR THE TRANSACTIONS CONTEMPLATED HEREBY. If either party shall
commence an action or proceeding to enforce any provisions of
this Debenture, then the prevailing party in such action or
proceeding shall be reimbursed by the other party for its
attorneys fees and other costs and expenses incurred in the
investigation, preparation and prosecution of such action or
proceeding. Either party is entitled to obtain injunctive
relief to enforce the terms of this Debenture, hereby
unconditionally waiving any requirement for posting bond or
other similar security.
(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 impeded the execution of any power herein granted to
the Holder, but will suffer and permit the execution of every
such as though no such law has been enacted.
(g) NEXT BUSINESS DAY. Whenever any payment or other obligation
hereunder shall be due on a day other than a Business Day,
such payment shall be made on the next succeeding Business
Day.
(h) HEADINGS. The headings contained herein are for convenience
only, do not constitute a part of this Debenture and shall not
be deemed to limit or affect any of the provisions hereof.
(i) ASSUMPTION. Any successor to the Company or any surviving
entity in a Fundamental Transaction shall (i) assume, prior to
such Fundamental Transaction, all of the obligations of the
Company under this Debenture and the other Transaction
Documents pursuant to written agreements in form and substance
satisfactory to the Holder (such approval not to be
unreasonably withheld or delayed) and (ii) issue to the Holder
a new debenture of such successor entity evidenced by a
written instrument substantially similar in form and substance
to this Debenture, including, without limitation, having a
principal amount and interest rate equal to the principal
amount and the interest rate of this Debenture and having
similar ranking to this Debenture, which shall be satisfactory
to the Holder (any such approval not to be unreasonably
withheld or delayed). The provisions of this Section 10(i)
shall apply similarly and equally to successive Fundamental
Transactions and shall be applied without regard to any
limitations of this Debenture.
THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK
IN WITNESS WHEREOF, the Company and Holder have caused this Debenture
to be duly executed by a duly authorized officer as of the date first above
indicated.
HOLDER XECHEM INTERNATIONAL, INC.
-------------------------------
[PRINT NAME]* By:
---------------------------
Its:
---------------------------
Date of Issuance:_________________
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[SIGNATURE]
*ADDITIONAL INFORMATION TO BE PROVIDED ON NEXT PAGE
ANNEX A
NOTICE OF CONVERSION
The undersigned hereby elects to convert principal under the 15%
Convertible Debenture due October 31, 2009 of Xechem International, Inc., a
Delaware corporation (the "Company"), into shares of common stock, par value
$0.00001 per share (the "Common Stock"), of the Company according to the
conditions hereof, as of the date written below. If shares of Common Stock are
to be issued in the name of a person other than the undersigned, the undersigned
will pay all transfer taxes payable with respect thereto and is delivering
herewith such certificates and opinions as reasonably requested by the Company
in accordance therewith. No fee will be charged to the holder for any
conversion, except for such transfer taxes, if any.
By the delivery of this Notice of Conversion the undersigned represents
and warrants to the Company that its ownership of the Common Stock does not
exceed the amounts specified under Section 4 of this Debenture, as determined in
accordance with Section 13(d) of the Exchange Act.
The undersigned agrees to comply with the prospectus delivery
requirements under the applicable securities laws in connection with any
transfer of the aforesaid shares of Common Stock.
Conversion Calculations:
-----------------------------------
Date to Effect Conversion:
-----------------------------------
Principal Amount of Debenture to be Converted:
-----------------------------------
Payment of Interest in Common Stock: /__/ YES /__/ NO
If YES, :$_____________ of Interest
accrued on Account of Conversion at
Issue
Number of Shares of Common Stock to be Issued:
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Signature:
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Print Name:
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Address:
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