EXHIBIT 4.2
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THIS NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
THIS NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE
MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS NOTE UNDER
SAID ACT OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO XECHEM
INTERNATIONAL, INC. THAT SUCH REGISTRATION IS NOT REQUIRED.
UNSECURED CONVERTIBLE NOTE
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FOR VALUE RECEIVED, XECHEM INTERNATIONAL, INC., a Delaware corporation
(hereinafter called "Borrower"), hereby promises to pay to ____________________
(the "Holder") or order, without demand, the sum of _________________ Dollars
($__________), with simple interest accruing at the annual rate of 8%, on May
___, 2004 (the "Maturity Date").
This Note has been entered into pursuant to the terms of a
subscription agreement between the Borrower and the Holder, dated of even date
herewith (the "Subscription Agreement"), and shall be governed by the terms of
such Subscription Agreement. Unless otherwise separately defined herein, all
capitalized terms used in this Note shall have the same meaning as is set forth
in the Subscription Agreement. The following terms shall apply to this Note:
ARTICLE I
GENERAL PROVISIONS
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1.1 PAYMENT GRACE PERIOD. The Borrower shall have a ten (10) business day
grace period to pay any monetary amounts due under this Note, after which grace
period a default interest rate of fifteen percent (15%) per annum shall apply to
the amounts owed hereunder.
1.2 CONVERSION PRIVILEGES. The Conversion Privileges set forth in Article
II shall remain in full force and effect immediately from the date hereof and
until the Note is paid in full. The Note shall be payable in full on the
Maturity Date, unless previously converted into Common Stock in accordance with
Article II hereof; provided, that if the Borrower violates or breaches in any
material respect any of its covenants or agreements to register the Registrable
Securities pursuant to Section 10 of the Subscription Agreement, the Borrower
may not pay this Note after the Maturity Date, without the consent of the
Holder.
1.3 INTEREST RATE. Simple interest payable on this Note shall accrue at
the annual rate of eight percent (8%) and be payable upon each Conversion, and
on the Maturity Date, accelerated or otherwise, when the principal and remaining
accrued but unpaid interest shall be due and payable, or sooner as described
below.
ARTICLE II
CONVERSION RIGHTS
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The Holder shall have the right to convert the principal due under this
Note into Shares of the Borrower's Common Stock, $.00001 par value per share
("Common Stock") as set forth below.
2.1 Conversion into the Borrower's Common Stock.
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(a) The Holder shall have the right from and after six months from
the date of the issuance of this Note and then at any time until this Note is
fully paid, to convert any outstanding and unpaid principal portion of this
Note, and accrued interest, at the election of the Holder (the date of giving of
such notice of conversion being a "Conversion Date") into fully paid and
nonassessable shares of Common Stock as such stock exists on the date of
issuance of this Note, or any shares of capital stock of Borrower into which
such Common Stock shall hereafter be changed or reclassified, at the conversion
price as defined in Section 2.1(b) hereof (the "Conversion Price"), determined
as provided herein. Upon delivery to the Borrower of a Notice of Conversion as
described in Section 9 of the Subscription Agreement of the Holder's written
request for conversion, Borrower shall issue and deliver to the Holder within
three business days from the Conversion Date ("Delivery Date") that number of
shares of Common Stock for the portion of the Note converted in accordance with
the foregoing. At the election of the Holder, the Borrower will deliver accrued
but unpaid interest on the Note in the manner provided in Section 1.3 through
the Conversion Date directly to the Holder on or before the Delivery Date (as
defined in the Subscription Agreement). The number of shares of Common Stock to
be issued upon each conversion of this Note shall be determined by dividing that
portion of the principal of the Note and interest to be converted, by the
Conversion Price.
(b) Subject to adjustment as provided in Section 2.1(c) hereof, the
Conversion Price per share shall be the lower of (i) $.005 ("Maximum Base
Price") or (ii) fifty percent (50%) of the lowest closing bid price for the
Common Stock on the OTC Pink Sheets, NASD OTC Bulletin Board, NASDAQ SmallCap
Market, NASDAQ National Market System, American Stock Exchange, or New York
Stock Exchange, as applicable, or if not then trading on any of the foregoing,
such other principal market or exchange where the Common Stock is listed or
traded (whichever of the foregoing is at the time the principal trading exchange
or market for the Common Stock, the "Principal Market") for the thirty (30)
trading days prior to but not including the Conversion Date. Closing bid price
shall mean the last closing bid price as reported by Bloomberg Financial.
(c) The Maximum Base Price and number and kind of shares or other
securities to be issued upon conversion determined pursuant to Section 2.1(a),
shall be subject to adjustment from time to time upon the happening of certain
events while this conversion right remains outstanding, as follows:
X. Xxxxxx, Sale of Assets, etc. If the Borrower at any time
shall consolidate with or merge into or sell or convey all or substantially all
its assets to any other
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corporation, this Note, as to the unpaid principal portion thereof and accrued
interest thereon, shall thereafter be deemed to evidence the right to purchase
such number and kind of shares or other securities and property as would have
been issuable or distributable on account of such consolidation, merger, sale or
conveyance, upon or with respect to the securities subject to the conversion or
purchase right immediately prior to such consolidation, merger, sale or
conveyance. The foregoing provision shall similarly apply to successive
transactions of a similar nature by any such successor or purchaser. Without
limiting the generality of the foregoing, the anti-dilution provisions of this
Section shall apply to such securities of such successor or purchaser after any
such consolidation, merger, sale or conveyance.
B. Reclassification, etc. If the Borrower at any time shall, by
reclassification or otherwise, change the Common Stock into the same or a
different number of securities of any class or classes, this Note, as to the
unpaid principal portion thereof and accrued interest thereon, shall thereafter
be deemed to evidence the right to purchase an adjusted number of such
securities and kind of securities as would have been issuable as the result of
such change with respect to the Common Stock immediately prior to such
reclassification or other change.
C. Stock Splits, Combinations and Dividends. If the shares of
Common Stock are subdivided or combined into a greater or smaller number of
shares of Common Stock, or if a dividend is paid on the Common Stock in shares
of Common Stock, the Conversion Price shall be proportionately reduced in case
of subdivision of shares or stock dividend or proportionately increased in the
case of combination of shares, in each such case by the ratio which the total
number of shares of Common Stock outstanding immediately after such event bears
to the total number of shares of Common Stock outstanding immediately prior to
such event.
(d) During the period the conversion right exists, Borrower will
reserve from its authorized and unissued Common Stock a sufficient number of
shares to provide for the issuance of Common Stock upon the full conversion of
this Note. Borrower represents that upon issuance, such shares will be duly and
validly issued, fully paid and non-assessable. Xxxxxxxx agrees that its issuance
of this Note shall constitute full authority to its officers, agents, and
transfer agents who are charged with the duty of executing and issuing stock
certificates to execute and issue the necessary certificates for shares of
Common Stock upon the conversion of this Note.
2.2 METHOD OF CONVERSION. This Note may be converted by the Holder in
whole or in part as described in Section 2.1(a) hereof and the Subscription
Agreement. Upon partial conversion of this Note, a new Note containing the same
date and provisions of this Note shall, at the request of the Holder, be issued
by the Borrower to the Holder for the principal balance of this Note and
interest which shall not have been converted or paid.
2.3 MAXIMUM CONVERSION. The Holder shall not be entitled to convert on a
Conversion Date that amount of the Note in connection with that number of shares
of Common Stock which would be in excess of the sum of (i) the number of shares
of Common Stock beneficially owned by the Holder and its affiliates on a
Conversion Date, (ii) any Common Stock issuable in connection with the
unconverted portion of the Note, and (iii) the number of shares of
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Common Stock issuable upon the conversion of the Note with respect to which the
determination of this provision is being made on a Conversion Date, which would
result in beneficial ownership by the Holder and its affiliates of more than
9.99% of the outstanding shares of Common Stock of the Company on such
Conversion Date. For the purposes of the provision to the immediately preceding
sentence, beneficial ownership shall be determined in accordance with Section
13(d) of the Securities Exchange Act of 1934, as amended, and Regulation 13d-3
thereunder. Subject to the foregoing, the Holder shall not be limited to
aggregate conversions of only 9.99% and aggregate conversion by the Holder may
exceed 9.99%. The Holder shall have the authority and obligation to determine
whether the restriction contained in this Section 2.3 will limit any conversion
hereunder and to the extent that the Holder determines that the limitation
contained in this Section applies, the determination of which portion of the
Notes are convertible shall be the responsibility and obligation of the Holder.
The Holder may void the conversion limitation described in this Section 2.3 upon
75 days prior written notice to the Borrower. The Holder may allocate which of
the equity of the Company deemed beneficially owned by the Holder shall be
included in the 9.99% amount described above and which shall be allocated to the
excess above 9.99%.
ARTICLE III
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EVENT OF DEFAULT
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The occurrence of any of the following events of default ("Event of
Default") shall, at the option of the Holder hereof, make all sums of principal
and interest then remaining unpaid hereon and all other amounts payable
hereunder immediately due and payable, upon demand, without presentment, or
grace period, all of which hereby are expressly waived, except as set forth
below:
3.1 FAILURE TO PAY PRINCIPAL OR INTEREST. The Borrower fails to pay any
installment of principal, interest or other sum due under this Note when due and
such failure continues for a period of ten (10) days after the due date. The ten
(10) day period described in this Section 3.1 is the same ten (10) business day
period described in Section 1.1 hereof.
3.2 BREACH OF COVENANT. The Borrower breaches any material covenant or
other term or condition of the Subscription Agreement or this Note in any
material respect and such breach, if subject to cure, continues for a period of
ten (10) business days after written notice to the Borrower from the Holder.
3.3 BREACH OF REPRESENTATIONS AND WARRANTIES. Any material representation
or warranty of the Borrower made herein, in the Subscription Agreement, or in
any agreement, statement or certificate given in writing pursuant hereto or in
connection therewith shall be false or misleading in any material respect as of
the date made and the Closing Date.
3.4 RECEIVER OR TRUSTEE. The Borrower shall make an assignment for the
benefit of creditors, or apply for or consent to the appointment of a receiver
or trustee for it or for a substantial part of its property or business; or such
a receiver or trustee shall otherwise be appointed.
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3.5 JUDGMENTS. Any money judgment, writ or similar final process shall be
entered or filed against Borrower or any of its property or other assets for
more than $100,000, and shall remain unvacated, unbonded or unstayed for a
period of forty-five (45) days.
3.6 BANKRUPTCY. Bankruptcy, insolvency, reorganization or liquidation
proceedings or other proceedings or relief under any bankruptcy law or any law
for the relief of debtors shall be instituted by or against the Borrower and if
instituted against Borrower are not dismissed within 45 days of initiation.
3.7 DELISTING. Delisting of the Common Stock from the OTC Bulletin Board
or such other principal exchange on which the Common Stock is listed for
trading; failure to comply with the requirements for continued listing on the
OTC Bulletin Board for a period of three consecutive trading days; or
notification from the OTC Bulletin Board or any Principal Market that the
Borrower is not in compliance with the conditions for such continued listing on
the OTC Bulletin Board or other Principal Market.
3.8 STOP TRADE. An SEC stop trade order or Principal Market trading
suspension that lasts for five or more consecutive trading days.
3.9 FAILURE TO DELIVER COMMON STOCK OR REPLACEMENT NOTE. Xxxxxxxx's
failure to timely deliver Common Stock to the Holder pursuant to and in the form
required by this Note and Section 9 of the Subscription Agreement, or, if
required, a replacement Note.
3.10 NON-REGISTRATION EVENT. The occurrence of a Non-Registration Event as
described in Section 10.4 of the Subscription Agreement.
3.11 CROSS DEFAULT. A default by the Borrower of a material term, covenant,
warranty or undertaking of any other agreement to which the Borrower and Holder
are parties, or the occurrence of a material event of default under any such
other agreement, in each case, which is not cured after any required notice
and/or cure period.
ARTICLE IV
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MISCELLANEOUS
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4.1 FAILURE OR INDULGENCE NOT WAIVER. No failure or delay on the part of
Holder hereof in the exercise of any power, right or privilege hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such power, right or privilege preclude other or further exercise thereof or of
any other right, power or privilege. All rights and remedies existing hereunder
are cumulative to, and not exclusive of, any rights or remedies otherwise
available.
4.2 NOTICES. All notices, demands, requests, consents, approvals, and
other communications required or permitted hereunder shall be in writing and,
unless otherwise specified herein, shall be (i) personally served, (ii)
deposited in the mail, registered or certified, return receipt requested,
postage prepaid, (iii) delivered by reputable air courier service with charges
prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed
as set
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forth below or to such other address as such party shall have specified most
recently by written notice. Any notice or other communication required or
permitted to be given hereunder shall be deemed effective (a) upon hand delivery
or delivery by facsimile, with accurate confirmation generated by the
transmitting facsimile machine, at the address or number designated below (if
delivered on a business day during normal business hours where such notice is to
be received), or the first business day following such delivery (if delivered
other than on a business day during normal business hours where such notice is
to be received) or (b) on the second business day following the date of mailing
by express courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur. The addresses for
such communications shall be: (i) if to the Borrower to: Xechem International,
Inc., 000 Xxxxxx Xxxxxx, Xxxxxxxx X, Xxxxx 000, Xxx Xxxxxxxxx, Xxx Xxxxxx 00000,
telecopier number: (000) 000-0000, with a copy by telecopier only to: Xxxxxxx &
Xxxxxxxx Ltd., 000 Xxxxx Xxxxxxxx Xxxxxx, Xxxxxxx, XX 00000, Attn: Xxxxxxxx X.
Xxxxxxxxx, Esq. and Xxxxxx X'Xxxxx, Esq., telecopier number: (000) 000-000-0000,
and (ii) if to the Holder, to the name, address and telecopy number set forth on
the front page of this Note, with a copy by telecopier only to Grushko &
Xxxxxxx, P.C., 000 Xxxxx Xxxxxx, Xxxxx 0000, Xxx Xxxx, Xxx Xxxx 00000,
telecopier number: (000) 000-0000.
4.3 AMENDMENT PROVISION. The term "Note" and all reference thereto, as
used throughout this instrument, shall mean this instrument as originally
executed, or if later amended or supplemented, then as so amended or
supplemented.
4.4 ASSIGNABILITY. This Note shall be binding upon the Borrower and its
successors and assigns, and shall inure to the benefit of the Holder and its
successors and assigns.
4.5 COST OF COLLECTION. If default is made in the payment of this Note,
Borrower shall pay the Holder hereof reasonable costs of collection, including
reasonable attorneys' fees.
4.6 GOVERNING LAW. This Note shall be governed by and construed in
accordance with the laws of the State of New York. Any action brought by either
party against the other concerning the transactions contemplated by this
Agreement shall be brought only in the state courts of New York or in the
federal courts located in the state of New York. Both parties and the individual
signing this Agreement on behalf of the Borrower agree to submit to the
jurisdiction of such courts. The prevailing party shall be entitled to recover
from the other party its reasonable attorney's fees and costs.
4.7 MAXIMUM PAYMENTS. Nothing contained herein shall be deemed to
establish or require the payment of a rate of interest or other charges in
excess of the maximum permitted by applicable law. In the event that the rate of
interest required to be paid or other charges hereunder exceed the maximum
permitted by such law, any payments in excess of such maximum shall be credited
against amounts owed by the Borrower to the Holder and thus refunded to the
Borrower.
4.8 REDEMPTION. This Note may not be redeemed or paid before the Maturity
Date without the consent of the Holder.
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4.9 SHAREHOLDER STATUS. The Holder shall not have rights as a shareholder
of the Borrower with respect to unconverted portions of this Note.
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IN WITNESS WHEREOF, Xxxxxxxx has caused this Note to be signed in its name
by an authorized officer on this ____ day of May, 2002.
XECHEM INTERNATIONAL, INC.
By:________________________________
Name: Xxxxxx X. Xxxxxx
Title: President/CEO
WITNESS:
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NOTICE OF CONVERSION
(To be executed by the Registered Holder in order to convert the Note)
The undersigned hereby elects to convert $_________ of the principal and
$_________ of the interest due on the Note issued by XECHEM INTERNATIONAL, INC.
on May ____, 2002 into Shares of Common Stock of XECHEM INTERNATIONAL, INC. (the
"Company") according to the conditions set forth in such Note, as of the date
written below.
Date of Conversion:
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Conversion Price:
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Shares To Be Delivered:
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Signature:
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Print Name:
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Address:
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