Exhibit 10.3

 

NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE
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. THESE SECURITIES AND THE SECURITIES ISSUABLE UPON CONVERSION OF THESE
SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER
LOAN SECURED BY SUCH SECURITIES.

 

Original Issue Date: May 17, 2005

Original Set Price (subject to adjustment herein): $3.00

 

$                     

 

SENIOR CONVERTIBLE DEBENTURE

DUE AUGUST 17, 2008

 

THIS DEBENTURE is one of a series of duly authorized and issued Senior
Convertible Debentures of World Health Alternatives, Inc., a Florida
corporation, having a principal place of business at 777 Penn Center Blvd.,
Suite 111, Pittsburgh, PA 15235 (the “Company”), designated as its Senior
Convertible Debenture, due August 17, 2008 (the “Debentures”). Capitalized terms
used but not defined herein shall have the meanings set forth in the Purchase
Agreement.

 

FOR VALUE RECEIVED, the Company promises to pay to
                                                            or its registered
assigns (the “Holder”), the principal sum of $                           on
August     , 2008 or such earlier date as the Debentures are required or
permitted to be repaid as provided hereunder (the “Maturity Date”). Except as
set forth in Section 7 of this Debenture, the Company may not prepay any portion
of the Principal Amount of this Debenture without the prior written consent of
the Holder.

 

This Debenture is subject to the following additional provisions:

 

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Section 1. 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.

 

Section 2. 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. 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 3. 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 (A) the Principal Amount of any Debenture, or
(B) 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 Date or the Maturity Date or by acceleration or
otherwise) which default is not cured, within five Business 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 the earlier
to occur of (A) five Business Days after notice of such default sent by the
Holder or by any other Holder and (B) 10 Business Days after the Company shall
become or should have become aware of such failure;

 

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

 

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any other report, financial statement or certificate made or delivered to the
Holder or any other holder of Debentures shall be untrue or incorrect in any
material respect as of the date when made or deemed made;

 

v) 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 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 the Company or any Subsidiary thereof is adjudicated
insolvent or bankrupt; or any order of relief or other order approving any such
case or proceeding is entered; or 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 of 60 days;
or the Company or any Subsidiary thereof makes a general assignment for the
benefit of creditors; or 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 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 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 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 five Business Days;

 

viii) the Company shall be a party to any Change of Control Transaction,
Fundamental Transaction (as that term is defined in Section

 

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4(c)(viii), or 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) 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 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 100th calendar day after the Original Issue Date
or any other Event (as defined in the Registration Rights Agreement) shall have
occurred;

 

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 20 consecutive Business Days or 35 non-consecutive
Business 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 15 consecutive Business
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 3(a)(vii));

 

xii) the Company shall fail for any reason to deliver certificates to a Holder
prior to the Third Business Day after a Conversion Date pursuant to and in
accordance with Section 4(b) 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

 

4

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(xiii) the Company shall fail for any reason to deliver the payment in cash
pursuant to a Buy-In (as defined herein) within five days after notice thereof
is delivered hereunder; or

 

(xiv) the Company shall not have amended its certificate of articles of
incorporation to increase the number of authorized but unissued shares of Common
Stock to at least the Required Minimum as of the Closing date.

 

b) If any Event of Default occurs, the full Principal Amount of this Debenture
and 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 Event of Default shall be equal to the
Mandatory Prepayment Amount. Commencing five days after the occurrence of any
Event of Default that results in the eventual acceleration of this Debenture,
interest 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 Holder 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 4. Conversion.

 

a) i) 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(a)(ii)
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

 

5

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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 unpaid and
unconverted Principal Amount of this Debenture may be less than the amount
stated on the face hereof.

 

ii) Conversion Limitations.

 

(A) Reserved.

 

(B) 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)(i) 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(a)(ii), 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 a 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

 

6

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purposes of this Section 4(a)(ii), 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-Q or Form
10-K, 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 Business Days confirm orally
and in writing to the Holder the number of shares of Common Stock then
outstanding. In any case, the number of outstanding shares of Common Stock shall
be determined after giving effect to the conversion or exercise of securities of
the Company, including this Debenture, by the Holder or its affiliates since the
date as of which such number of outstanding shares of Common Stock was reported.
The provisions of this Section 4(a)(ii) may be waived by the Holder upon, at the
election of the Holder, not less than 61 days’ prior notice to the Company, and
the provisions of this Section 4(a)(ii)(B) shall continue to apply until such
61st day (or such later date, as determined by the Holder, as may be specified
in such notice of waiver).

 

iii) Conversion Shares Issuable Upon Conversion of Principal Amount. The number
of shares of Common Stock issuable upon a conversion shall be determined by the
quotient obtained by dividing (x) the outstanding Principal Amount of this
Debenture to be converted by (y) the Set Price.

 

(b) i) Not later than three Business 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) 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 best 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. 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 Business 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
certificates representing the Principal Amount of Debentures tendered for
conversion.

 

ii) If the Company fails for any reason to deliver to the Holder such
certificate or certificates pursuant to Section 4(b)(i) by the third Business
Day

 

7

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after the Conversion Date, the Company shall pay to such Holder, in cash, as
liquidated damages and not as a penalty, for each $5,000 of Principal Amount
being converted, $50 per Business Day (increasing to $100 per Business Day after
3 Business Days after such damages begin to accrue) for each Business Day after
such third Business 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,
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 of 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 of 150% of 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 Holder’s right to pursue actual
damages or declare an Event of Default pursuant to Section 3 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.

 

iii) 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(b)(i) by the third Business Day after the Conversion Date,
and if after such third Business Day the Holder is required by its brokerage
firm to purchase (in an open market transaction or otherwise) Common Stock to
deliver in satisfaction of a sale by such Holder of the

 

8

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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 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(b)(i). 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(b)(ii) in respect of the certificates resulting in such Buy-In.

 

(c) i) The conversion price in effect on any Conversion Date shall be equal to
$3.00 (subject to adjustment herein) (the “Set Price”).

 

ii) 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),
(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 Set 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

 

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receive such dividend or distribution and shall become effective immediately
after the effective date in the case of a subdivision, combination or
re-classification.

 

iii) If the Company, 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 Set 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 Set Price, such issuance
shall be deemed to have occurred for less than the Set Price), then the Set
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 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.

 

iv) 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 Set Price shall be determined by
multiplying such 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 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.

 

v) All calculations under this Section 4 shall be made to the nearest cent or
the nearest 1/100th of a share, as the case may be. For purposes of this

 

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Section 4, 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.

 

vi) Whenever the Set Price is adjusted pursuant to any of Section 4(c)(ii)—(v),
the Company shall promptly mail to each Holder a notice setting forth the Set
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).

 

vii) 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 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

 

11

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commencing the date of such notice to the effective date of the event triggering
such notice. Such conversion right does not limit any other conversion right of
the Holder.

 

viii) 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 Underlying 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 Set Price shall be appropriately adjusted to apply to such
Alternate Consideration based on the amount of Alternate Consideration issuable
in respect of one share of Common Stock in such Fundamental Transaction, and the
Company shall apportion the Set 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
(c) and insuring that this Debenture (or any such replacement security) will be
similarly adjusted upon any subsequent transaction analogous to a Fundamental
Transaction.

 

ix) Notwithstanding the foregoing, no adjustment will be made under this
paragraph (c) (i) in respect of an Exempt Issuances, or a transaction described
in Schedule 4(c)(ix); and (ii) that would result in an increase to the Set
Price.

 

12

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(d) 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, each as herein provided, 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 4(b)) 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 sale in accordance with such Registration Statement.

 

(e) 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 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, one whole share of Common Stock.

 

(f) 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 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.

 

(g) 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             , Attn:             , President 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 Holder 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

 

13

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earliest of (i) the date of transmission, if such notice or communication is
delivered via facsimile 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 sent
by nationally recognized overnight courier service, or (iv) upon actual receipt
by the party to whom such notice is required to be given.

 

Section 5. 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:

 

“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 33% 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).

 

“Commission” means the Securities and Exchange Commission.

 

“Common Stock” means the common stock, $0.01 par value 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)(i) hereof.

 

“Conversion Shares” means the shares of Common Stock issuable upon conversion of
Debentures in accordance with the terms hereof.

 

14

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“Effective Date” means the date that the Conversion Shares Registration
Statement is declared effective by the Commission.

 

“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 Conversion Notices, 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 and 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 limitation set forth in Section 4(a)(ii)(B) and (ix) no public
announcement of a pending or proposed Fundamental Transaction or acquisition
transaction has occurred that has not been consummated.

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

 

“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 Set 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 VWAP 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.

 

“Monthly Conversion Price” shall have the meaning set forth in Section 6(a).

 

“Monthly Redemption” shall mean the redemption of the Debenture pursuant to
Section 6(a).

 

15

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“Monthly Redemption Amount” shall mean, as to a Monthly Redemption, 1/36th of
the aggregate Principal Amounts of the Debentures issued to the Holders on the
Original Issue Date.

 

“Monthly Redemption Date” means the 1st day of each month, commencing
immediately following the 90th day following the Original Issuance Date and
continuing until this Debenture is no longer outstanding.

 

“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, 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
May 13, 2005, 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 Rights Agreement” means the Registration Rights Agreement, dated
as of the date of the Purchase Agreement, 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.

 

“Set Price” shall have the meaning set forth in Section 4(c)(i).

 

“Trading Day” means (a) a day on which the shares of Common Stock are traded on
a Trading Market on which the shares of Common Stock are then listed or quoted,
or (b) if the shares of Common Stock are not quoted on a Trading Market, a day
on which the shares of Common Stock are quoted in the over-the-counter market as
reported by the National Quotation Bureau Incorporated (or any similar
organization or agency succeeding its functions of reporting prices); provided,
that in the event that the shares of Common Stock are not listed or quoted as
set forth in (a), (b) and (c) hereof, then Trading Day shall mean a Business
Day.

 

16

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

 

“VWAP” means, for any date, the price determined by the first of the following
clauses that applies: (a) if the Common Stock is then listed or quoted on a
Trading Market, the daily volume weighted average price of the Common Stock for
such date (or the nearest preceding date) on the Trading Market on which the
Common Stock is then listed or quoted as reported by Bloomberg Financial L.P.
(based on a trading day from 9:30 a.m. Eastern Time to 4:02 p.m. Eastern Time);
(b) if the Common Stock is not then listed or quoted on a Trading Market and if
prices for the Common Stock are then quoted on the OTC Bulletin Board, the
volume weighted average price of the Common Stock for such date (or the nearest
preceding date) on the OTC Bulletin Board; (c) if the Common Stock is not then
listed or quoted on the OTC Bulletin Board 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 (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 Purchasers and reasonably acceptable to the Company.

 

Section 6. Redemption.

 

(a) Monthly Redemption. On each Monthly Redemption Date, the Company shall
redeem the Holder’s Pro-Rata Portion of the Monthly Redemption Amount plus the
sum of all liquidated damages and any other amounts then owing to such Holder in
respect of any Debentures held by such Holder. “Pro Rata Portion” is the lower
of (i) the product of the Monthly Redemption Amount multiplied by ratio of
(A) the Principal Amount of this Debenture held by the original Holder on the
Original Issue Date and (B) the sum of the aggregate original Principal Amounts
of the Debentures issued to all Holders on the Original Issue Date, or (ii) the
aggregate Principal Amounts of the Debentures outstanding and held by such
Holder at the Redemption Date. If the Holder assigns any portion of this
Debenture to multiple assignees, in connection with such assignments, the Holder
shall instruct the Company as to how to apportion the original Principal Amount
in (A) above among such assignees for purposes of calculating the Pro-Rata
Portions of the assignees. If a Holder and its transferees no longer hold any
Debentures, then the Pro Rata Portion shall be recalculated to exclude the
original Principal Amount of any Debentures once held by such Holder and its
transferees, if any, from clause (B) above. On each Monthly Redemption Date, the
Company will pay to each Holder in cash, except as provided in this Section, an
amount equal to 110% of the Holder’s Pro-Rata Portion of the Monthly Redemption
Amount. As to any Monthly Redemption and upon 20 Trading Days’ prior written
irrevocable notice, in lieu of a cash redemption payment the Company may elect
to pay all or a portion of a Monthly Redemption in Underlying Shares based on a
conversion price equal to the lesser of (i) the then Set Price and (ii) 80% of
the VWAP for the 5 Trading Days prior to the

 

17

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applicable Monthly Redemption Date (subject to adjustment for any stock
dividend, stock split, stock combination or other similar event affecting the
Common Stock during such 5 Trading Day period) (the “Monthly Conversion Price”);
provided, however, that the Company may not pay the Monthly Redemption Amount in
Underlying Shares unless, (i) during the 20 Trading Days, prior notice period
immediately prior to the applicable Monthly Redemption Date until the Monthly
Redemption has occurred, each of the Equity Conditions shall have been met,
(ii) on or prior to the 20th Trading Day prior to such Monthly Redemption Date,
the Company irrevocably notifies the Holder that it will issue Underlying Shares
in lieu of cash and in such notice the Company shall have indicated the amount
to be paid in Underlying Shares (the Company may indicate in such notice that
the election contained in such notice shall continue for later periods until
revised or until the Equity Conditions are no longer satisfied), and (iii) the
Monthly Conversion Price is above $1.90. The Holder may convert, pursuant to
Section 4, any Principal Amount of this Debenture subject to a Monthly
Redemption at any time prior to the date that the Monthly Redemption Amount and
all amounts owing thereon are due and paid in full. The Company covenants and
agrees that it will honor all Conversion Notices tendered up until such amounts
are paid in full. If the Holder elects to convert any Principal Amount of this
Debenture subject to a Monthly Redemption prior to the Monthly Redemption Date,
such Holder’s Monthly Redemption Amount paid on such Monthly Redemption Date
shall be reduced by the Principal Amount so converted. For clarity, such
conversion shall not reduce the Monthly Redemption Amount payable on any future
Monthly Redemption Date.

 

(b) Redemption Procedure. The payment of cash and/or issuance of Common Stock,
as the case may be, pursuant to a Monthly Redemption shall be made on the
Monthly Redemption Date. If any portion of the Monthly Redemption shall not be
paid by the Company by the respective due date, interest shall accrue thereon at
the rate of 18% per annum (or the maximum rate permitted by applicable law,
whichever is less) until the payment of the Monthly Redemption Amount plus all
amounts owing thereon is paid in full. Alternatively, if any portion of the
Monthly Redemption Amount remains unpaid after such date, the Holders subject to
such redemption may elect, by written notice to the Company given at any time
thereafter, to invalidate such redemption. Notwithstanding anything to the
contrary in this Section, the Company’s determination to redeem in cash or
shares of Common Stock shall be applied among the Holders of Debentures
according to each Holder’s Pro-Rata Portion.

 

Section 7. Intentionally Omitted.

 

Section 8. Forced Conversion. Notwithstanding anything to the contrary contained
in this Debenture, if after the Effective Date the VWAP for each of any 20
consecutive Trading Days (“Threshold Period”), which 20 consecutive Trading Day
period shall have commenced only after the Effective Date, exceeds 250% of the
effective Set Price, the Company may, within 3 Trading Days after any such
Threshold Period, deliver a notice to all Holders (a “Forced Conversion Notice”
and the date such notice is received by the Holders, the “Forced Conversion

 

18

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Notice Date”) to cause the Holders to immediately convert all or part of the
then outstanding Debentures and the Holders shall surrender (if all Debentures
are converted) their respective Debentures to the Company for conversion within
5 Trading Days of the Forced Conversion Notice Date. The Company may only effect
a Forced Conversion Notice if all of the Equity Conditions have been met during
the Threshold Period through the Forced Conversion Notice Date. Any Forced
Conversion Notices shall be applied ratably to all of the Holders in proportion
to each Holders Principal Amount of Debentures.

 

Section 9. 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. The Company acknowledges and agrees that the
amount actually paid for this Debenture is less than the Principal Amount
issued, such difference representing an original issue discount to the Holder As
long as this Debenture is outstanding, the Company shall not and shall cause it
subsidiaries not to, without the consent of the Holder, (a) amend its
certificate of incorporation (except to increase its authorized Common Stock),
bylaws or other charter documents so as to adversely affect any rights of the
Holder; (b) 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 (c) enter into any agreement with respect to any of
the foregoing.

 

Section 10. 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.

 

Section 11. Except as set forth on Schedule 11, 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, 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 income or
profits therefrom that is senior to, or pari passu with, in any respect, the
Company’s obligations under the Debentures without the prior consent of the
Holder.

 

Section 12. 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,

 

19

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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 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.

 

Section 13. 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.

 

Section 14. 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 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.

 

20

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Section 15. 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.

 

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

 

21

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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.

 

WORLD HEALTH ALTERNATIVES, INC. By:        

Name:

Title:

 

22

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ANNEX A

 

NOTICE OF CONVERSION

 

The undersigned hereby elects to convert under the Senior Convertible Debenture
of World Health Alternatives, Inc., a Florida corporation (the “Company”), due
on May 13, 2008, into shares of common stock, $0.01 par value 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.

 

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 to be Converted:

 

Principal Amount to be Converted and applied to the next

Monthly Redemption Amount:

 

Number of shares of Common Stock to be issued:

 

Signature:

 

Name:

 

Address:

           

 

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Schedule 1

 

CONVERSION SCHEDULE

 

Convertible Debentures due on May     , 2005, in the aggregate principal amount
of $             issued by World Health Alternatives, Inc. This Conversion
Schedule reflects conversions made under Section 4 of the above referenced
Debenture.

 

Dated:

 

Date of Conversion

(or for first entry,

Original Issue Date)

--------------------------------------------------------------------------------

 

Amount of

Conversion

--------------------------------------------------------------------------------

 

Aggregate

Principal

Amount

Remaining

Subsequent to

Conversion

(or original

Principal

Amount)

--------------------------------------------------------------------------------

 

Company Attest

--------------------------------------------------------------------------------

 

24