EXHIBIT 4.1
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: January 26, 2005
Original Conversion Price (subject to adjustment herein): $_______
$_____________
CONVERTIBLE DEBENTURE
DUE JANUARY 26, 2008
THIS DEBENTURE is one of a series of duly authorized and issued
Convertible Debentures of Power 3 Medical Products, Inc., a New York
corporation, having a principal place of business at 0000 Xxxxxxxx Xxxxxx Xxxxx,
Xxxxx X0-0, Xxx Xxxxxxxxx, Xxxxx 00000 (the "Company"), designated as its
Convertible Debenture, due January 26, 2008 (the "Debentures").
FOR VALUE RECEIVED, the Company promises to pay to __________________
or its registered assigns (the "Holder"), the principal sum of $________________
on January 26, 2008 or such earlier date as the Debentures are required or
permitted to be repaid as provided hereunder (the "Maturity Date"). 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 have the meanings given to such terms 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)(iii).
"Business Day" means any day except Saturday, Sunday and any
day which shall be a federal legal holiday in the United States or a
day on which banking institutions in the State of New York are
authorized or required by law or other government action to close.
"Change of Control Transaction" means the occurrence after the
date hereof of any of (i) an acquisition after the date hereof by an
individual or legal entity or "group" (as described in Rule 13d-5(b)(1)
promulgated under the Exchange Act) of effective control (whether
through legal or beneficial ownership of capital stock of the Company,
by contract or otherwise) of in excess of 50% of the voting securities
of the Company, or (ii) 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 (iii) 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 above in (i) or (ii).
"Closing Price" means on any particular date (a) the daily
volume weighted average price per share of Common Stock on such date
(or the nearest preceding date) on the Trading Market (as reported by
Bloomberg L.P. based on a Trading Day from 9:30 a.m. Eastern Time to
4:02 p.m. Eastern Time) using the VAP function, or (b) if the Common
Stock is not then listed or quoted on the Trading Market and if prices
for the Common Stock are then reported in the "pink sheets" published
by the National Quotation Bureau Incorporated (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 (c) if the shares of Common Stock are not then publicly
traded the fair market value of a share of Common Stock as determined
by a nationally-recognized independent appraiser selected in good faith
by the Purchasers of a majority in interest of the principal amount of
Debentures then outstanding and reasonably acceptable to the Company.
"Common Stock" means the common stock, par value $0.001 per
share, of the Company and stock of any other class into which such
shares may hereafter have been reclassified or changed.
"Conversion Date" shall have the meaning set forth in Section
4(a) hereof.
"Conversion Price" shall have the meaning set forth in Section
4(b).
"Conversion Shares" means the shares of Common Stock issuable
upon conversion of Debentures in accordance with the terms hereof.
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"Dilutive Issuance" shall have the meaning set forth in
Section 5(b) hereof.
"Effectiveness Period" shall have the meaning given to such
term in the Registration Rights Agreement.
"Equity Conditions" shall mean, 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 Notice of
Conversions, if any, (ii) all liquidated damages and other amounts
owing in respect of the Debentures shall have been paid; (iii) there is
an effective Registration Statement pursuant to which the Holder is
permitted to utilize the prospectus thereunder to resell all of the
shares issuable pursuant to the Transaction Documents (and the Company
believes, in good faith, that such effectiveness will continue
uninterrupted for the foreseeable future), (iv) the Common Stock is
trading on the Trading Market and all of the shares issuable pursuant
to the Transaction Documents are listed for trading on a 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), (v) there is a sufficient number of authorized but
unissued and otherwise unreserved shares of Common Stock for the
issuance of all of the shares issuable pursuant to the Transaction
Documents, (vi) there is then existing no Event of Default or event
which, with the passage of time or the giving of notice, would
constitute an Event of Default and (vii) all of the shares issued or
issuable pursuant to the Transaction Documents in full, ignoring for
such purposes any conversion or exercise limitation therein, would not
violate the limitations set forth in Section 4(c) and (ix) no public
announcement of a pending or proposed Fundamental Transaction, Change
of Control Transaction or acquisition transaction has occurred that has
not been consummated.
"Event of Default" shall have the meaning set forth in Section
8.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Fundamental Transaction" shall have the meaning set forth in
Section 5(e)(iii) hereof.
"Late Fees" shall have the meaning set forth in the second
paragraph to this Debenture.
"Mandatory Prepayment Amount" for any Debentures shall equal
the sum of (i) the greater of: (A) 130% of the principal amount of
Debentures to be prepaid, or (B) the principal amount of Debentures to
be prepaid, divided by the Conversion Price on (x) the date the
Mandatory Prepayment Amount is demanded or otherwise due or (y) the
date the Mandatory Prepayment Amount is paid in full, whichever is
less, multiplied by the Closing Price on (x) the date the Mandatory
Prepayment Amount is demanded or otherwise due or (y) the date the
Mandatory Prepayment Amount is paid in full, whichever is greater, and
(ii) all other amounts, costs, expenses and liquidated damages due in
respect of such Debentures.
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"Original Issue Date" shall mean the date of the first
issuance of the Debentures regardless of the number of transfers of any
Debenture and regardless of the number of instruments which may be
issued to evidence such Debenture.
"Person" means a corporation, an association, a partnership, a
limited liability company, organization, a business, an individual, a
government or political subdivision thereof or a governmental agency.
"Purchase Agreement" means the Securities Purchase Agreement,
dated as of October 28, 2004, to which the Company and the original
Holder are parties, as amended by that certain Amendment to Securities
Purchase Agreement dated as of January 19, 2005, as may be further
amended, modified or supplemented from time to time in accordance with
its terms.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated October 28, 2004, to which the Company and the
original Holder are parties, as amended, modified or supplemented from
time to time in accordance with its terms.
"Registration Statement" means a registration statement
meeting the requirements set forth in the Registration Rights
Agreement, covering among other things the resale of the Conversion
Shares and naming the Holder as a "selling stockholder" thereunder.
"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder.
"Subsidiary" shall have the meaning given to such term in the
Purchase Agreement.
"Trading Day" means a day on which the Common Stock is traded
on a Trading Market.
"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 Nasdaq SmallCap Market, the American Stock Exchange, the
New York Stock Exchange, the Nasdaq National Market or the OTC Bulletin
Board.
"Transaction Documents" shall have the meaning set forth in
the Purchase Agreement.
Section 2. Interest.
a) No Payment of Interest. Except as set forth herein, the
Company shall not pay interest to the Holder on this Debenture.
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b) 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 made for such registration of transfer
or exchange.
b) Investment Representations. This Debenture has been issued
subject to certain investment representations of the original Holder
set forth in the Purchase Agreement and may be transferred or exchanged
only in compliance with the Purchase Agreement and applicable federal
and state securities laws and regulations.
c) Reliance on Debenture Register. Prior to due presentment to
the Company for transfer 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. Subject to the terms hereof and
restrictions and limitations contained herein, at any time after the
Original Issue Date until this Debenture is no longer outstanding, this
Debenture shall be convertible into shares of Common Stock at the
option of the Holder, in whole or in part at any time and from time to
time (subject to the limitations on conversion set forth in Section
4(c) hereof). The Holder shall effect conversions by delivering to the
Company the form of Notice of Conversion attached hereto as Annex A (a
"Notice of Conversion"), specifying therein the principal amount of
Debentures to be converted and the date on which such conversion is to
be effected (a "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 provided hereunder. To effect conversions
hereunder, the Holder shall not be required to physically surrender
Debentures to the Company unless the entire principal amount of this
Debenture 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 converted
and the date of such conversions. The Company shall deliver any
objection to any Notice of Conversion within 1 Business Day of receipt
of such notice. 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
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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 $0.90 (subject to adjustment herein);
provided, however, if the lesser of (i) 75% of the average of the 5
consecutive Closing Prices immediately prior to the Effective Date (as
defined in the Purchase Agreement) and (ii) the Closing Price on the
Effective Date (the lesser of (i) and (ii) being referred to as the
"Effective Date Price") is less than the Conversion Price, the
Conversion Price shall be reduced to equal the Effective Date Price
(the "Conversion Price").
c) Conversion Limitations; Xxxxxx's Restriction on Conversion.
The Company shall not effect any conversion of this Debenture, and the
Holder shall not have the right to convert any portion of this
Debenture, pursuant to Section 4(a) or otherwise, to the extent that
after giving effect to such conversion, the Holder (together with the
Holder's affiliates), as set forth on the applicable Notice of
Conversion, would beneficially own in excess of 4.99% of the number of
shares of the Common Stock outstanding immediately after giving effect
to such conversion. 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 the
determination of such sentence is being made, but shall exclude the
number of shares of Common Stock which would be issuable upon (A)
conversion of the remaining, nonconverted portion of this Debenture
beneficially owned by the Holder or any of its affiliates and (B)
exercise or conversion of the unexercised or nonconverted portion of
any other securities of the Company (including, without limitation, any
other Debentures or the Warrants) subject to a limitation on conversion
or exercise analogous to the limitation contained herein beneficially
owned by the 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. To the extent that the limitation contained in this
section applies, the determination of whether this Debenture is
convertible (in relation to other securities owned by the Holder) and
of which portion of this Debenture is convertible shall be in the sole
discretion of such Holder. 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. For purposes of this Section 4(c), in determining the
number of outstanding shares of Common Stock, the Holder may rely on
the number of outstanding shares of Common Stock as reflected in (x)
the Company's most recent Form 10-QSB or Form 10-KSB, as the case may
be, (y) a more recent public announcement by the Company or (z) any
other 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 the 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
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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.
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. i.
ii. Delivery of Certificate Upon Conversion. Not
later than three Trading Days after any Conversion Date, the
Company will deliver to the Holder a certificate or
certificates representing the Conversion Shares which shall be
free of restrictive legends and trading restrictions (other
than those required by the Purchase Agreement or applicable
law) representing the number of shares of Common Stock being
acquired upon the conversion of Debentures. The Company shall,
if available and if allowed under applicable securities laws,
use its commercially reasonable efforts to deliver any
certificate or certificates required to be delivered by the
Company under this Section electronically through the
Depository Trust Corporation or another established clearing
corporation performing similar functions.
iii. Failure to Deliver Certificates. If such
certificate or certificates are not delivered to or as
directed by the applicable Holder by the third Trading Day
after a Conversion Date, the Holder shall be entitled by
written notice to the Company at any time on or before its
receipt of such certificate or certificates thereafter, to
rescind such conversion, in which event the Company shall
immediately return the certificate representing the principal
amount of Debentures tendered for conversion, if it was
delivered to the Company by the Holder, and the Holder shall
immediately return any stock certificates representing
Conversion Shares from such rescinded conversion to the
Company.
iv. Partial Liquidated Damages. 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 after 5 Trading
Days after such damages begin to accrue) for each Trading Day
after such third Trading Day until such certificates are
delivered. 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,
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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, 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 a 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 any one 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, 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 equal to the principal amount of
this Debenture outstanding, which is subject to the
injunction, which bond shall remain in effect until the
completion of arbitration/litigation of the dispute and the
proceeds of which shall be payable to such Holder to the
extent it obtains judgment. In the absence of an injunction
precluding the same, the Company shall issue Conversion Shares
or, if applicable, cash, upon a properly noticed conversion.
Nothing herein shall limit a Xxxxxx's right to pursue actual
damages or declare an Event of Default pursuant to Section 8
herein 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 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 Holders from seeking to enforce
damages pursuant to any other Section hereof or under
applicable law.
v. 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 pursuant to Section
4(d)(ii) by the third Trading Day after the Conversion Date,
and if after such third Trading Day the Holder is required by
its brokerage firm to purchase, or its brokerage firm
purchases (in an open market transaction or otherwise) Common
Stock to deliver in satisfaction of a sale by such Holder of
the Conversion Shares which the Holder anticipated receiving
upon such conversion (a "Buy-In"), then the Company shall (A)
pay in cash to the Holder (in addition to any remedies
available to or elected by the Holder) the amount by which (x)
the Holder's total purchase price (including brokerage
commissions, if any) for the Common Stock so purchased exceeds
(y) the product of (1) the aggregate number of shares of
Common Stock that such Holder anticipated receiving from the
conversion at issue multiplied by (2) the actual sale price of
the Common Stock at the time of the sale (including brokerage
commissions, if any) giving rise to such purchase obligation
and (B) at the option of the Holder, either reissue Debentures
in principal amount equal to the principal amount of the
attempted conversion or
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deliver to the Holder the number of shares of Common Stock
that would have been issued had the Company 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 Debentures with respect to which the
actual sale price of the Conversion Shares at the time of the
sale (including brokerage commissions, if any) 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. Notwithstanding anything
contained herein to the contrary, if a Holder requires the
Company to make payment in respect of a Buy-In for the failure
to timely deliver certificates hereunder and the Company
timely pays in full such payment, the Company shall not be
required to pay such Holder liquidated damages under Section
4(d)(iv) in respect of the certificates resulting in such
Buy-In.
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 solely for the purpose of issuance upon
conversion of the Debentures free from preemptive rights or
any other actual contingent purchase rights of persons other
than the Holders, not less than such number of shares of the
Common Stock as shall (subject to any additional requirements
of the Company as to reservation of such shares 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 the Debentures. The
Company covenants that all shares of Common Stock that shall
be so issuable shall, upon issue, be duly and validly
authorized, issued and fully paid, nonassessable and, if the
Registration Statement is then effective under the Securities
Act, registered for public resale 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 the Common Stock, but may
if otherwise permitted, make a cash payment in respect of any
final fraction of a share based on the Closing Price 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, one whole share of Common
Stock.
viii. Transfer Taxes. The issuance of certificates
for shares of the Common Stock on conversion of the Debentures
shall be made without charge to the Holders thereof for any
documentary stamp or similar taxes that may be payable in
respect of the issue or delivery of such certificate, 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
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conversion in a name other than that of the Holder of such
Debentures so converted and the Company shall not be required
to issue or deliver such certificates unless or until the
person or persons requesting the issuance thereof shall have
paid to the Company the amount of such tax or shall have
established to the satisfaction of the Company that such tax
has been paid.
Section 5. Certain Adjustments.
a) Stock Dividends and Stock Splits. If the Company, at any
time while the Debentures are outstanding: (A) shall pay a stock
dividend or otherwise make a distribution or distributions on shares of
its Common Stock or any other equity or equity equivalent securities
payable in shares of Common Stock (which, for avoidance of doubt, shall
not include any shares of Common Stock issued by the Company pursuant
to this Debenture, the Warrants or the Additional Investment Rights),
(B) subdivide outstanding shares of Common Stock into a larger number
of shares, (C) combine (including by way of reverse stock split)
outstanding shares of Common Stock into a smaller number of shares, or
(D) issue by 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 treasury shares, if any) outstanding
before such event and of which the denominator shall be the number of
shares of Common Stock outstanding 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 Debentures are outstanding,
shall offer, sell, grant any option to purchase or offer, sell or grant
any right to reprice its securities, 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 entitling any
Person to acquire shares of Common Stock, at an effective price per
share less than the then Conversion Price ("Dilutive Issuance"), as
adjusted hereunder (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 is issued in connection with such issuance,
be entitled to receive shares of Common Stock at an effective price per
share which is less than the Conversion Price, such issuance shall be
deemed to have occurred for less than the Conversion Price), then the
Conversion Price shall be reduced to equal the effective conversion,
exchange or purchase price for such Common Stock or Common Stock
Equivalents (including any reset provisions thereof) at issue. Such
adjustment shall be made whenever such Common Stock or Common Stock
Equivalents are issued. The Company shall notify the Holder in writing,
no later than the business day following the issuance of any Common
Stock or Common
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Stock Equivalents subject to this section, indicating therein the
applicable issuance price, or of applicable reset price, exchange
price, conversion price and other pricing terms.
c) Pro Rata Distributions. If the Company, at any time while
Debentures are outstanding, shall distribute to all holders of Common
Stock (and not to Holders) evidences of its indebtedness or assets or
rights or warrants to subscribe for or purchase any security, then in
each such case the Conversion Price shall be determined 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
Closing Price determined as of the record date mentioned above, and of
which the numerator shall be such Closing Price 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
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 Holders 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.
d) Calculations. All calculations under this Section 5 shall
be made to the nearest cent or the nearest 1/100th of a share, as the
case may be. For purposes of this Section 5, the number of shares of
Common Stock outstanding as of a given date shall be the sum of the
number of shares of Common Stock (excluding treasury shares, if any)
outstanding.
e) Notice to Holders.
i. Adjustment to Conversion Price. Whenever the
Conversion Price is adjusted pursuant to any 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. If the Company issues a variable rate security,
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 in the case of a Variable Rate Transaction (as
defined in the Purchase Agreement), or the lowest possible
adjustment price in the case of an MFN Transaction (as defined
in the Purchase Agreement).
ii. Notice to Allow Conversion by Xxxxxx. If (A) the
Company shall declare a dividend (or any other distribution)
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 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
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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; (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 the Debentures, and shall cause to be mailed to
the Holders at their last addresses as they shall appear upon
the stock books of the Company, 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 mail such notice or any defect
therein or in the mailing thereof shall not affect the
validity of the corporate action required to be specified in
such notice. Holders are entitled to convert Debentures during
the 20-day period commencing the date of such notice to the
effective date of the event triggering such notice.
iii. 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 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 absent 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 one 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
12
Alternate Consideration issuable in respect of one share of
Common Stock in such Fundamental Transaction, and the Company
shall apportion the Conversion Price among the Alternate
Consideration in a reasonable manner reflecting the relative
value of any different components of the Alternate
Consideration. If holders of Common Stock are given any choice
as to the securities, cash or property to be received in a
Fundamental Transaction, then the Holder shall be given the
same choice as to the Alternate Consideration it receives upon
any conversion of this Debenture following such Fundamental
Transaction. To the extent necessary to effectuate the
foregoing provisions, any successor to the Company or
surviving entity in such Fundamental Transaction shall issue
to the Holder a new debenture consistent with the foregoing
provisions and evidencing the Holder's right to convert such
debenture into Alternate Consideration. The terms of any
agreement pursuant to which a Fundamental Transaction is
effected shall include terms requiring any such successor or
surviving entity to comply with the provisions of this
paragraph (iii) and insuring that this Debenture (or any such
replacement security) will be similarly adjusted upon any
subsequent transaction analogous to a Fundamental Transaction.
iv. Exempt Issuance. Notwithstanding the foregoing,
no adjustment will be made under this Section 5 in respect of
an Exempt Issuance.
Section 6. RESERVED.
Section 7. Negative Covenants. So long as any portion of this Debenture
is outstanding, the Company will not and will not permit any of its Subsidiaries
to directly or indirectly take any of the following actions unless approved by
the holder(s) of a two-thirds majority of the then-outstanding principal amount
of all Debentures:
a) enter into, create, incur, assume or suffer to exist any
indebtedness or 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 that is senior to, in any
respect, the Company's obligations under the Debentures except for
Permitted Indebtedness and Permitted Liens described below;
b) amend its certificate of incorporation, bylaws or other
charter documents so as to adversely affect any rights of the Holder
(it being agreed by the Holder that the proposed amendments to the
Company's Series A Preferred Stock and the designation of the proposed
Series B Preferred Stock shall not be considered as adversely affecting
any rights of the Holder);
c) repay, repurchase or offer to repay, repurchase or
otherwise acquire more than a de minimis number of shares of its Common
Stock or other equity securities other than as to the Conversion Shares
to the extent permitted or required under the Transaction Documents or
as otherwise permitted by the Transaction Documents; or
13
d) enter into any agreement with respect to any of the
foregoing.
As used herein, "Permitted Indebtedness" shall mean:
i. indebtedness existing as of the date of the
Purchase Agreement;
ii. indebtedness, including capitalized lease
obligations, incurred by the Company or any subsidiary for the
purpose of financing all or any part of the purchase price of
property, plant, equipment or other assets (tangible or
intangible) used in the business of the Company or any
subsidiary; and
iii. funded indebtedness from a non-affiliated
lending institution or other third party in an amount not to
exceed $5,000,000.
As used herein, "Permitted Liens" shall mean:
i. liens for taxes, assessments for governmental
charges or claims either not delinquent or contested in good
faith by appropriate proceedings;
ii. statutory liens of landlords, carriers,
warehousemen, mechanics, suppliers, materialmen and other
liens imposed by law incurred in the ordinary course of
business for sums not yet delinquent or being contested in
good faith;
iii. liens incurred or deposits made in the ordinary
course of business in connection with workers' compensation,
unemployment insurance and other types of social security, or
to secure the performance of statutory obligations, surety and
appeal bonds and other similar obligations;
iv. liens securing any Permitted Indebtedness; and
v. liens arising from filing Uniform Commercial Code
financing statements regarding leases.
Section 8. Events of Default.
a) "Event of Default", wherever used herein, means any one of
the following events (whatever the reason and whether it 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 the principal
amount of any Debenture, or liquidated
damages in respect of, any Debenture, in
each case free of any claim of
subordination, as and when the same shall
become due and payable (whether on a
Conversion
14
Date or the Maturity Date or by acceleration
or otherwise) which default, is not cured,
within 3 Trading Days;
ii. the Company shall fail to observe or perform
any other covenant or agreement contained in
this Debenture or any of the other
Transaction Documents (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 (xii) below) which failure is not
cured, if possible to cure, within 10
Trading Days after notice of such default
sent by the Holder or by any other holder of
Debentures;
iii. a default or event of default (subject to
any grace or cure period provided for in the
applicable agreement, document or
instrument) shall occur under (A) any of the
Transaction Documents other than the
Debentures, or (B) any other material
agreement, lease, document or instrument to
which the Company or any Subsidiary is
bound;
iv. any representation or warranty made herein,
in any other Transaction Document, in any
written statement pursuant hereto or
thereto, or in any other report, financial
statement or certificate made or delivered
to the Holder or any other holder of
Debentures pursuant to the Purchase
Agreement shall be untrue or incorrect in
any material respect as of the date when
made or deemed made;
v. (i) the Company or any of its Subsidiaries
shall commence, or there shall be commenced
against the Company or any such Subsidiary,
a case under any applicable bankruptcy or
insolvency laws as now or hereafter in
effect or any successor thereto, or the
Company or any Subsidiary commences any
other proceeding under any reorganization,
arrangement, adjustment of debt, relief of
debtors, dissolution, insolvency or
liquidation or similar law of any
jurisdiction whether now or hereafter in
effect relating to the Company or any
Subsidiary thereof or (ii) there is
commenced against the Company or any
Subsidiary thereof any such bankruptcy,
insolvency or other proceeding which remains
undismissed for a period of 60 days; or
(iii) the Company or any Subsidiary thereof
is adjudicated by a court of competent
jurisdiction insolvent or bankrupt; or any
order of relief or other order approving any
such case or proceeding is entered; or (iv)
the Company or any Subsidiary thereof
suffers any appointment of any custodian or
the like for it or any substantial part of
its property which continues undischarged or
unstayed for a period
15
of 60 days; or (v) the Company or any
Subsidiary thereof makes a general
assignment for the benefit of creditors; or
(vi) the Company shall fail to pay, or shall
state that it is unable to pay, or shall be
unable to pay, its debts generally as they
become due; or (vii) the Company or any
Subsidiary thereof shall call a meeting of
its creditors with a view to arranging a
composition, adjustment or restructuring of
its debts; or (viii) the Company or any
Subsidiary thereof shall by any act or
failure to act expressly indicate its
consent to, approval of or acquiescence in
any of the foregoing; or (ix) any corporate
or other action is taken by the Company or
any Subsidiary thereof for the purpose of
effecting any of the foregoing;
vi. the Company or any Subsidiary shall default
in 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 of the
Company in an amount exceeding $150,000,
whether such indebtedness now exists or
shall hereafter be created and such default
shall result in such indebtedness becoming
or being declared due and payable prior to
the date on which it would otherwise become
due and payable;
vii. the Common Stock shall not be eligible for
quotation on or quoted for trading on a
Trading Market and shall not again be
eligible for and quoted or listed for
trading thereon within 10 Trading Days;
viii. the Company shall be a party to any Change
of Control Transaction or Fundamental
Transaction (other than a Fundamental
Transaction undertaken for the purpose of
changing the domicile of the Company), shall
agree to sell or dispose of all or in excess
of 33% of its assets in one or more
transactions (whether or not such sale would
constitute a Change of Control Transaction),
provided, that any license by the Company of
its intellectual property rights shall not
be considered a sale or other disposal
hereunder, or shall redeem or repurchase
more than a de minimis number of its
outstanding shares of Common Stock or other
equity securities of the Company (other than
redemptions of Conversion Shares and
repurchases of shares of Common Stock or
other equity securities of departing
officers and directors of the Company;
provided such repurchases shall not
16
exceed $100,000, in the aggregate, for all
officers and directors during the term of
this Debenture);
ix. a Registration Statement shall not have been
declared effective by the Commission on or
prior to the 180th calendar day after the
First Closing Date;
x. if, during the Effectiveness Period (as
defined in the Registration Rights
Agreement), the effectiveness of the
Registration Statement lapses for any reason
or the Holder shall not be permitted to
resell Registrable Securities (as defined in
the Registration Rights Agreement) under the
Registration Statement, in either case, for
more than 30 consecutive Trading Days or 60
non-consecutive Trading Days during any 12
month period; provided, however, that in the
event that 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 transactions or the parties thereto
that 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
relating to such an event;
xi. an Event (as defined in the Registration
Rights Agreement) shall not have been cured
to the satisfaction of the Holder prior to
the expiration of thirty days from the Event
Date (as defined in the Registration Rights
Agreement) relating thereto (other than an
Event resulting from a failure of an
Registration Statement to be declared
effective by the Commission on or prior to
the Effectiveness Date (as defined in the
Registration Rights Agreement), which shall
be covered by Section 8(a)(ix);
xii. 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 and in accordance with
Section 4(d) or the Company shall provide
notice to the Holder, including by way of
public announcement, at any time, of its
intention not to comply with requests for
conversions of any Debentures in accordance
with the terms hereof; or
xiii. the Company shall fail for any reason to pay
in full the amount of cash due pursuant to a
Buy-In within 10 Trading Days after notice
therefor is delivered hereunder or shall
fail to pay all
17
amounts owed on account of an Event of
Default within 10 Trading Days of the date
due.
b) Remedies Upon Event of Default. If any Event of Default
occurs, the full principal amount of this Debenture, together with
other amounts owing in respect thereof, to the date of acceleration
shall become, at the Holder's election, immediately due and payable in
cash. The aggregate amount payable upon an acceleration by reason of an
Event of Default shall be equal to the Mandatory Prepayment 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 the rate of 18% per annum, or
such lower maximum amount of interest permitted to be charged under
applicable law. All Debentures for which the full Mandatory Prepayment
Amount hereunder shall have been paid in accordance herewith shall
promptly be surrendered to or as directed by the Company. 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 declaration may be rescinded and annulled by
Xxxxxx at any time prior to payment hereunder and the Holder shall have
all rights as a Debenture holder until such time, if any, as the full
payment under this Section shall have been received by it. 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 Holders hereunder, including, without
limitation, any Notice of Conversion, shall be in writing and delivered
personally, by facsimile, sent by a nationally recognized overnight
courier service, addressed to the Company, at the address set forth
above, facsimile number (000) 000-0000, Attn: Xxxxxx X. Xxxx, or such
other address or facsimile number as the Company may specify for such
purposes by notice to the Holders delivered in accordance with this
Section. 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, sent by a nationally recognized overnight
courier service addressed to each Holder at the facsimile telephone
number or address of such Xxxxxx appearing on the books of the Company,
or if no such facsimile telephone 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 (and the sender
receives a confirmation of successful transmission) at the facsimile
telephone number specified in this Section prior to 5:30 p.m. (New York
City time), (ii) the date after the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile
telephone number specified in this Section later than 5:30 p.m. (New
York City time) on any date and earlier than 11:59 p.m. (New York City
time) on such date, (iii) the second Business Day following the date of
mailing, if
18
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 and liquidated damages (if any) 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, and indemnity, if requested,
all 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
conflicts of law thereof. Each party agrees that all legal proceedings
concerning the interpretations, 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 any such court, 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 manner permitted by 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
19
reimbursed by the other party for its attorneys fees and other costs
and expenses incurred with the investigation, preparation and
prosecution of such action or proceeding.
e) Waiver. Any waiver by the Company or the Holder of a breach
of any provision of this Debenture shall not operate as or be construed
to be a waiver of any other breach of such provision or of any breach
of any other provision of this Debenture. The failure of the Company or
the Holder to insist upon strict adherence to any term of this
Debenture on one or more occasions shall not be considered a waiver or
deprive that party of the right thereafter to insist upon strict
adherence to that term or any other term of this Debenture. Any waiver
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 applicable laws
governing usury, the applicable rate of interest due hereunder shall
automatically be lowered to equal the maximum permitted rate of
interest. 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 and no interest shall
be payable in respect of such extension.
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.
*********************
20
IN WITNESS WHEREOF, the Company has caused this Convertible Debenture
to be duly executed by a duly authorized officer as of the date first above
indicated.
POWER 3 MEDICAL PRODUCTS, INC.
By:
-----------------------------------------
Name: Xxxxxx X. Xxxx
Title: Chief Executive Officer
21
ANNEX A
NOTICE OF CONVERSION
The undersigned hereby elects to convert principal under the
Convertible Debenture of Power 3 Medical Products, Inc., a New York corporation
(the "Company"), due on January 26, 2008, into shares of common stock, par value
$0.001 per share (the "Common Stock"), of the Company according to the
conditions hereof, as of the date written below. If shares 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 determined in accordance with Section 13(d) of the Exchange
Act, specified under Section 4 of this Debenture.
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 Debentures to be Converted:
Number of shares of Common Stock to be issued:
Signature:
Name:
Address:
22
SCHEDULE 1
CONVERSION SCHEDULE
The Convertible Debenture due on January 26, 2008, in the aggregate principal
amount of $_____________ issued by Power 3 Medical Products, Inc., a New York
corporation. This Conversion Schedule reflects conversions made under Section 4
of the above referenced Debenture.
Dated:
Aggregate Principal
Amount Remaining
Subsequent to
Date of Conversion Conversion
(or for first entry, Original (or original
Issue Date) Amount of Conversion Principal Amount) Company Attest
------------------------------ -------------------- ------------------ --------------
23
SCHEDULE TO
FORM OF CONVERTIBLE DEBENTURE
The Company has issued Convertible Debentures Due January 26, 2008 to
the following listed holders. The terms of the Convertible Debentures issued by
the Company to each of the following holders are identical except for the name
of the holder and the original principal amount of the Convertible Debenture.
HOLDER ORIGINAL PRINCIPAL AMOUNT
------ -------------------------
Cityplatz Limited $ 50,000
Crestview Capital Master, LLC $150,000
Gryphon Master Fund L.P. $100,000
GSSF Master Fund, LP $100,000
