**Exhibit4.2**

 

**THE DEBENTURES OFFERED HEREBY HAVENOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE “SECURITIES ACT”),AND HAVE NOT BEEN QUALIFIED UNDER THE SECURITIES LAWS OF ANY OTHER STATE.  THE DEBENTURES CANNOT BE SOLD OR TRANSFERREDWITHOUT SUCH REGISTRATION OR QUALIFICATION UNLESS AN EXEMPTION FROM SUCHREGISTRATION OR QUALIFICATION IS THEN AVAILABLE.**

** **

**MEDICOR LTD.**

**FORM OF 10% CONVERTIBLE DEBENTURE DUE2006**

 
| **DEBENTURE  #:**      |   | **DATE  OF ISSUANCE:** |
|------------------------|--------|------------------------|
|                   |   |                   |
|                   |   |                   |
| **PRINCIPAL  AMOUNT:** |   |                   |
|                   |   |                   |
| **$**                  |   |                   |

 

**FOR VALUE RECEIVED,**the undersigned, **MEDICOR LTD.,** aDelaware corporation (the “*Company*”)promises to pay to the order of**                                                 (**the “*Holder*”), asdefined in the MediCor Investment Agreement for 10% Convertible Debentures due2006 dated as of the Date of Issuance set forth above between the Company andthe Holder and hereby incorporated herein by this reference (the *“Agreement”*), or order, at Holder'saddress as designated on the signature page of the Agreement, or at such otheraddress as the Holder designates, the entire outstanding principal amount ofthis Debenture or to issue to the Holder the Debenture Securities at the priceand on the terms and conditions set forth in the Agreement, at the Holder'soption, upon on conversion of this Debenture.

 

**1.         PAYMENTSAND INTEREST.     **Theoutstanding principal amount of this Debenture shall bear interest at a rate ofTen Percent (10%) per annum, for as long as the Debenture is outstanding.Interest shall be paid to the Holder by the Company on a quarterly basis,payable within thirty (30) days from the end of each calendar quarter. If theHolder converts this Debenture into the Debenture Securities or elects to havethe outstanding principal amount of this Debenture repaid to the Holder asdescribed in Section 2 of the Agreement, the Company will pay any accrued andunpaid interest, pro-rated to the Conversion Date (or the effective date of anyexercise of the Institutional Conversion Right) on the basis of a 365 day year,due the Holder and no further interest past the

 

**MEDICORLTD.**

10% Convertible Debenturedue 2006#    

 

1

----

 

Conversion Date (or theeffective date of any exercise of the Institutional Conversion Right) will bedue to the Holder by the Company with respect to the principal amount of thisDebenture so converted. This Debenture is payable only by the either: (i) thepayment to the Holder by the Company of the outstanding principal amount ofthis Debenture; or (ii) by the issuance by the Company of the DebentureSecurities, with the exception of any fractional shares which may be issuablehereunder, which will be paid in cash by the Company.

 

**2.         SECURITY.     **ThisDebenture is an unsecured obligation of the Company.

 

**3.         SEVERABILITY.     **Ifany provision of this Debenture is invalid by operation of any law orinterpretation placed thereon by any court, this Debenture shall be construedas not containing such provision and all other provisions of this Debenturewhich are otherwise lawful shall remain in full force and effect, and to thisend the provisions of this Debenture are declared to be severable.

 

**4.         GOVERNINGLAW.     THIS DEBENTURE AND ALL AMENDMENTS,SUPPLEMENTS, WAIVERS AND CONSENTS RELATING HERETO OR THERETO SHALL BE GOVERNEDBY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF DELAWARE WITHOUTREGARD TO PRINCIPLES OF CONFLICTS OF LAW. EACH PARTY HEREBY IRREVOCABLY SUBMITS ITSELF TO THE JURISDICTION OF THECOURTS SITTING IN THE STATE OF DELAWARE AND AGREES AND CONSENTS THAT SERVICE OFPROCESS MAY BE MADE UPON IT IN ANY LEGAL PROCEEDINGS RELATING HERETO BY ANYMEANS ALLOWED UNDER DELAWARE LAW.**

 

**5.         ASSIGNMENT.     **Withrespect to any offer, sale or other disposition of this Debenture, the Holderwill give written notice to the Company prior thereto, describing briefly themanner thereof, together with a written opinion of Holder's counsel in form andsubstance acceptable to the Company, to the effect that such offer, sale orother distribution may be effected without registration or qualification (underany federal or state law then in effect). Promptly upon receiving such written notice, the Company shall notifysuch Holder whether such Holder may sell or otherwise dispose of thisDebenture, all in accordance with the terms of the notice delivered to theCompany.

 

**6.         FORBEARANCENOT A WAIVER.     **No delay oromission on the part of the Holder in exercising any rights under thisDebenture or under the Agreement as defined herein, on default by the Company,shall operate as a waiver of such right or of any other right under thisDebenture, for the same default or any other default.

 

**7.         MANNEROF NOTIFICATION.     **Any noticeor surrender to the Company provided for in this Debenture shall be given bypersonal delivery or by mailing such notice or making such surrender by firstclass or certified mail, return receipt requested, addressed to the Company atthe property address stated below, or to such other address as the Company maydesignate for such purpose by written notice to the Holder.  Any notice to the Holder shall be given bypersonal delivery or by mailing such notice by first class or certified mail,return receipt requested, to the Holder at the address stated on the signaturepage of the Agreement, or at such other address as may have been designated theHolder by written notice to the Company. Mailed notices shall be deemed delivered and received on the deliverydate as shown on the postal return receipt or the receipt furnished by anindependent

 

2

----

 

courier service, and anynotices transmitted by confirmed facsimile transmission will be deemeddelivered and received as of the date of the transmission.

 

**8.         CONVERSIONRIGHTS OF HOLDER.**

 

**8.1       InstitutionalConversion Right**. As soon as practicable but in any eventnot less than five (5) business days prior to the proposed closing date of theInstitutional Offering (as defined in the Agreement), the Company shall givenotice to the Holder of the proposed terms and closing date of theInstitutional Offering.  Not less thantwo (2) business days prior to the scheduled closing date of the InstitutionalOffering, the Holder shall, if it elects to exercise the InstitutionalConversion Right, give notice thereof to the Company of the Holder's electionto convert the Convertible Debenture. The Holder may elect to convert all orpart (but in any event in integral multiples of $100,000 of this Debenture)into a like amount of the securities offered in the Institutional Offering.  If the Holder so elects to convert all orpart of this Debenture, then, subject to and with the consent of theInstitutional Investors, this Debenture (based on the outstanding principalamount) shall be converted into the securities sold to the InstitutionalInvestors in the Institutional Offering. If more than one security is sold in the Institutional Offering, thenthe Holder may, subject to and with the consent of the Institutional Investors,convert this Debenture (in integral multiples of $100,000) into each suchsecurity.  If the InstitutionalInvestors do not consent to such conversion (or part thereof), then thisDebenture (or part hereof) as to which consent is not given shall not beconverted and shall remain outstanding. If the Holder does not so notify the Company prior to the secondbusiness day prior to the closing date of the Institutional Offering, then thisDebenture will not be converted and will continue to be outstanding.

 

**8.2       ExtendedConversion Right**.  In the sole discretion ofthe Holder, not more than twenty (20) business days nor less than ten (10)business days prior to the first anniversary of the Date of Issuance set forthabove or thereafter at the 18-month, 24-month, 30-month and 36-monthanniversary of the Date of Issuance, the Holder may elect to: (a) have theentire outstanding principal amount of this Debenture repaid to the Holder,along with any accrued and unpaid interest thereon; (b) covert the entireoutstanding principal amount of this Debenture into the Debenture Shares at theConversion Price; or (c) continue to hold the Convertible Debenture until thethird anniversary of the Date of Issuance (the “*Maturity Date*”).  Ifthe Holder does not so notify the Company prior to the first anniversary of theDate of Issuance or thereafter at the 18-month, 24-month, 30-month or 36-monthanniversary of the Date of Issuance, this Debenture will remainoutstanding.  If the Holder does not sonotify the Company prior to the Maturity Date, this Debenture willautomatically convert into the Debenture Shares at the Conversion Price and,upon such conversion, any and all obligations of the Company to the Holder inrespect of this Debenture shall be satisfied.

 

**8.3       ConversionProcedure; Notice of Conversion.    **Beforethe Holder shall be entitled to convert this Debenture into the DebentureSecurities, the Holder shall surrender this Debenture to the Company at theaddress of the Company provided for such purpose pursuant to Section 7 andshall give written notice by mail, postage prepaid, to the Company, of theelection to convert the same, all as described in the Agreement and in Section8 hereof.  The Company shall, as soon aspracticable thereafter, issue and deliver to the Holder pursuant to Section 8.4a certificate or certificates for the Debenture Securities to which the Holdershall be entitled as aforesaid (bearing such legends as are required byapplicable state and federal securities laws in the opinion of counsel to theCompany), including a check payable to the Holder for any cash amounts payableas described in Section 8.4. Such

 

3

----

 

conversion shall bedeemed to have been made immediately prior to the close of business on theConversion Date as defined in Section 1 of the Agreement (or the effective dateof any exercise of the Institutional Conversion Right), and the Holder shall betreated for all purposes as the record holder or holders of the ConversionSecurities issuable on conversion as of such date.

 

**8.4       Mechanicsand Effect of Conversion.  **No fractionalConversion Securities shall be issued upon conversion of this Debenture.  In lieu of the Company issuing anyfractional securities to the Holder upon the conversion of this Debenture, theCompany shall pay to the Holder the amount of outstanding principal that is notso converted because of a fractional share, such payment to be in the form asprovided below.  Upon the conversion ofthis Debenture pursuant to Section 8, the Holder shall surrender thisDebenture, duly endorsed, at the Company's address provided for such purposepursuant to Section 7.  At is expense,the Company shall, as soon as practicable thereafter, issue and deliver to suchHolder by mail a certificate or certificates for the number of whole DebentureSecurities to which the Holder shall be entitled upon such conversion (bearingsuch legends as are required by applicable state and federal securities laws inthe opinion of counsel to the Company). Upon conversion of this Debenture or repayment of the entire principalamount of this Debenture to the Holder, the Company shall be forever releasedfrom all of its obligations and liabilities under this Debenture and under theAgreement.

 

**9.         HEADING;REFERENCES.      **Allheadings used herein are used for convenience only and shall not be used toconstrue or interpret this Debenture. Except where otherwise indicated, all references herein to Sectionsrefer to the numbered and lettered sections hereof.

 

IN WITNESS WHEREOF, the undersigned has caused thisDebenture to be signed by its duly authorized officer.

 
|       | **THE  COMPANY:**                         |
|------------|-------------------------------------------|
|       |                                      |
|       | **MEDICOR  LTD.  a Delaware corporation** |
|       |                                      |
|       |                                      |
|       | **By:**                                   |   |
| ** ** | **Its:**                                  | Chairman |
|       |                                      |
|       | **Address  for Notices:**                 |
|       |                                      |
|       | **4560  South Decatur Boulevard**         |
|       | **Suite  300**                            |
|       | **Las  Vegas, NV 89103-5253**             |

 

4

----

 

**NOTICE OF CONVERSION**

 

**(To be signed only upon Conversion ofDebenture)**

 

**TO:        MEDICORLTD.**

4560 South Decatur Boulevard

Suite 300

Las Vegas, NV 89103-5253

 

The undersigned, the Holder of the foregoing 10%Convertible Debenture due 2006, hereby surrenders such Debenture for conversioninto the Conversion Securities issuable upon conversion thereof in accordancewith the terms thereof and of the Agreement (as defined therein), to the extentof the outstanding principal amount of the Debenture set forth below (inintegral multiples of $100,000), and requests that the certificates for suchsecurities be issued in the name of, and delivered to:

 
|               |
|--------------------|
| whose address  is: |
|               |
|               |

 
| Dated: |                                                                                                           |   |   |
|--------|----------------------------------------------------------------------------------------------------------------|--------|--------|
|   |                                                                                                           |
|   | Signed:                                                                                                        |
|   |                                                                                                           |
|   |                                                                                                           |   |
|   | (Signature must  conform in all respects to the name of  the Holder as specified on the face of the Debenture) |

 
| Principal Amount  Converted: |     |
|------------------------------|----------|
|                         |     |
| $                            |     |
|                         |     |
|                         | Address: |
|                         |     |
|                         |     |

 

5

----