Anavex Life Sciences Corp. - Exhibit 10.3 - Filed by newsfilecorp.com






NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS
SECURITY IS CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO
AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO
THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY
ACCEPTABLE TO THE COMPANY. THIS SECURITY AND THE SECURITIES ISSUABLE UPON
CONVERSION OF THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES. 

Original Issue Date: March ___, 2014 
No.
__________
Original Conversion Price (subject to adjustment herein):
$0.30 


$_______________

SENIOR CONVERTIBLE DEBENTURE 
DUE MARCH ___, 2044



             
THIS SENIOR CONVERTIBLE DEBENTURE is one of a series of duly authorized and
validly issued Senior Convertible Debentures of ANAVEX LIFE SCIENCES CORP., a
Nevada corporation (the “Company”), having its principal place of
business at 51 West 52nd Street, 7th Floor, New York, New York 10019, designated
as its Senior Convertible Debenture due March ___, 2044 (this debenture, the
“Debenture” and, collectively with the other debentures of such series,
the “Debentures”). 

              FOR
VALUE RECEIVED, the Company promises to pay to ________________________ or its
registered assigns (the “Holder”), or shall have paid pursuant to the
terms hereunder, the principal sum of $_______________ on March ___, 2044 (the
“Maturity Date”) or such earlier date as this Debenture is required or
permitted to be repaid as provided hereunder. This Debenture is subject to the
following additional provisions: 

    
         Section
1.          Definitions.
For the purposes hereof, in addition to the terms defined elsewhere in this
Debenture, (a) capitalized terms not otherwise defined herein shall have the
meanings set forth in the Purchase Agreement and (b) the following terms shall
have the following meanings: 

1




             
“Alternate Consideration” shall have the meaning set forth in Section
5(e). 

              “Beneficial
Ownership Limitation” shall have the meaning set forth in Section 4(d).

              “Business
Day” means any day except any Saturday, any Sunday, any day which is a
federal legal holiday in the United States or any day on which banking
institutions in the State of New York are authorized or required by law or other
governmental action to close. 

             
“Buy-In” shall have the meaning set forth in Section 4(c)(v). 

             
“Conversion” shall have the meaning ascribed to such term in Section
4.

             
“Conversion Date” shall have the meaning set forth in Section 4(a). 

             
“Conversion Price” shall have the meaning set forth in Section 4(b). 

              “Conversion
Schedule” means the Conversion Schedule in the form of Schedule 1
attached hereto. 

              “Conversion
Shares” means, collectively, the shares of Common Stock issuable upon
conversion of this Debenture in accordance with the terms hereof. 

              “Debenture
Register” means the formal record maintained by the Company with respect to
the recording of the issuances of Debentures, the amounts thereof, and the
Holders thereof. 

              “Effective
Date” means the date that the Registration Statement filed by the Company
pursuant to the Registration Rights Agreement is first declared effective by the
Commission. 

              “Equity
Conditions” means, during the period in question, (a) the Company shall have
duly honored all conversions and redemptions scheduled to occur or occurring by
virtue of one or more Notices of Conversion of the Holder, if any, (b) the
Company shall have paid all liquidated damages and other amounts owing to the
Holder in respect of this Debenture, (c)(i) there is an effective Registration
Statement pursuant to which the Holder is permitted to utilize the prospectus
thereunder to resell all of the shares of Common Stock issuable pursuant to the
Transaction Documents (and the Company believes, in good faith, that such
effectiveness will continue uninterrupted for the foreseeable future) or (ii)
all of the Conversion Shares issuable pursuant to the Transaction Documents (and
shares issuable in lieu of cash payments of interest) may be resold pursuant to
Rule 144 without volume or manner-of-sale restrictions or current public
information requirements as determined by the counsel to the Company as set
forth in a written opinion letter to such effect, addressed and acceptable to
the Transfer Agent and the Holder, (d) the Common Stock is trading on a Trading
Market and all of 

2




the shares issuable pursuant to the Transaction Documents are
listed or quoted for trading on such 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), (e) there is a sufficient
number of authorized but unissued and otherwise unreserved shares of Common
Stock for the issuance of all of the shares then issuable pursuant to the
Transaction Documents, (f) the issuance of the shares in question (or, in the
case of an Optional Redemption, the shares issuable upon conversion in full of
the Optional Redemption Amount) to the Holder would not violate the limitations
set forth in Section 4(d) herein, (h) there has been no public announcement of a
pending or proposed Fundamental Transaction or Change of Control Transaction
that has not been consummated, (i) the applicable Holder is not in possession of
any information provided by the Company that constitutes, or may constitute,
material non-public information and (j) for each Trading Day in a period of 20
consecutive Trading Days prior to the applicable date in question, the daily
dollar trading volume for the Common Stock on the principal Trading Market
exceeds $100,000 per Trading Day. 

             
“Event of Default” shall have the meaning set forth in Section 8(a). 

             
“Fundamental Transaction” shall have the meaning set forth in Section
5(e). 

              “Mandatory
Default Amount” means the sum of (a) the greater of (i) the outstanding
principal amount of this Debenture, plus all accrued and unpaid interest hereon,
divided by the Conversion Price on the date the Mandatory Default Amount is
either (A) demanded (if demand or notice is required to create an Event of
Default) or otherwise due or (B) paid in full, whichever has a lower Conversion
Price, multiplied by the VWAP on the date the Mandatory Default Amount is either
(x) demanded or otherwise due or (y) paid in full, whichever has a higher VWAP,
or (ii) 130% of the outstanding principal amount of this Debenture, plus 100% of
accrued and unpaid interest hereon, and (b) all other amounts, costs, expenses
and liquidated damages due in respect of this Debenture. 

             
“New York Courts” shall have the meaning set forth in Section 9(d). 

             
“Notice of Conversion” shall have the meaning set forth in Section 4(a).


             
“Optional Redemption” shall have the meaning set forth in Section 6(a).


              “Optional
Redemption Amount” means the sum of (a) 110% of the then outstanding
principal amount of the Debenture and (b) all liquidated damages and other
amounts due in respect of the Debenture. 

             
“Optional Redemption Date” shall have the meaning set forth in Section
6(a). 

             
“Optional Redemption Notice” shall have the meaning set forth in Section
6(a). 

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              “Optional
Redemption Notice Date” shall have the meaning set forth in Section 6(a).


             
“Optional Redemption Period” shall have the meaning set forth in Section
6(a). 

              “Original
Issue Date” means the date of the first issuance of the Debentures,
regardless of any transfers of any Debenture and regardless of the number of
instruments which may be issued to evidence such Debentures. 

              “Permitted
Indebtedness” means (a) the indebtedness evidenced by the Debentures, (b)
the Indebtedness existing on the Original Issue Date and set forth on
Schedule 3.1(aa) attached to the Purchase Agreement, (c) lease
obligations and purchase money indebtedness of up to $250,000, in the aggregate,
incurred in connection with the acquisition of capital assets and lease
obligations with respect to newly acquired or leased assets. 

              “Permitted
Lien” means the individual and collective reference to the following: (a)
Liens for taxes, assessments and other governmental charges or levies not yet
due or Liens for taxes, assessments and other governmental charges or levies
being contested in good faith and by appropriate proceedings for which adequate
reserves (in the good faith judgment of the management of the Company) have been
established in accordance with GAAP, (b) Liens imposed by law which were
incurred in the ordinary course of the Company’s business, such as carriers’,
warehousemen’s and mechanics’ Liens, statutory landlords’ Liens, and other
similar Liens arising in the ordinary course of the Company’s business, and
which (x) do not individually or in the aggregate materially detract from the
value of such property or assets or materially impair the use thereof in the
operation of the business of the Company and its consolidated Subsidiaries or
(y) are being contested in good faith by appropriate proceedings, which
proceedings have the effect of preventing for the foreseeable future the
forfeiture or sale of the property or asset subject to such Lien, (c) Liens
incurred in connection with Permitted Indebtedness under clause (b) thereunder,
and (d) Liens incurred in connection with Permitted Indebtedness under clause
(c) thereunder, provided that such Liens are not secured by assets of the
Company or its Subsidiaries other than the assets so acquired or leased. 

              “Purchase
Agreement” means the Securities Purchase Agreement, dated as of March ___,
2014, among the Company and the original Holders, as amended, modified or
supplemented from time to time in accordance with its terms. 

              “Registration
Rights Agreement” means the Registration Rights Agreement, dated on or about
the date of the Purchase Agreement, among the Company and the original Holders,
in the form of Exhibit B attached to the Purchase Agreement. 

              “Registration
Statement” means a registration statement meeting the requirements set forth
in the Registration Rights Agreement and covering the resale of the Underlying
Shares by each Holder as provided for in the Registration Rights Agreement. 

4




              “Securities
Act” means the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder. 

             
“Share Delivery Date” shall have the meaning set forth in Section
4(c)(ii). 

             
“Successor Entity” shall have the meaning set forth in Section 5(e).

              “Trading
Day” means a day on which the principal Trading Market is open for trading.


              “Trading
Market” means any of the following markets or exchanges on which the Common
Stock is listed or quoted for trading on the date in question: the NYSE MKT, the
Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select
Market, the New York Stock Exchange, the OTC Bulletin Board, OTCQX or OTCQB (or
any successors to any of the foregoing). 

Section
2.          Interest and
Prepayment. No regularly scheduled interest payments shall be made on this
Debenture. Except as otherwise set forth in this Debenture, the Company may not
prepay any portion of the principal amount of this Debenture without the prior
written consent of the Holder. 

Section
3.          Registration of
Transfers and Exchanges.

              a)         
Different Denominations. This Debenture is exchangeable for an equal
aggregate principal amount of Debentures of different authorized denominations,
as requested by the Holder surrendering the same. No service charge will be
payable for such registration of transfer or exchange. 

              b)         
Investment Representations. This Debenture has been issued subject to
certain investment representations of the original Holder set forth in the
Purchase Agreement and may be transferred or exchanged only in compliance with
the Purchase Agreement and applicable federal and state securities laws and
regulations.

              c)         
Reliance on Debenture Register. Prior to due presentment for transfer to
the Company of this Debenture, the Company and any agent of the Company may
treat the Person in whose name this Debenture is duly registered on the
Debenture Register as the owner hereof for the purpose of receiving payment as
herein provided and for all other purposes, whether or not this Debenture is
overdue, and neither the Company nor any such agent shall be affected by notice
to the contrary. 

Section
4.          Conversion.


              a)         
Voluntary Conversion. At any time after the Original Issue Date until
this Debenture is no longer outstanding, this Debenture shall be convertible, in
whole or in part, into shares of Common Stock at the option of the Holder, at
any time and from time to time (subject to the conversion limitations set forth
in Section 4(d) hereof). The Holder shall effect conversions by
delivering to the Company a Notice of Conversion, the form of which is attached
hereto as Annex A (each, a “Notice of Conversion”), specifying
therein the principal amount of this Debenture to be converted and the date on
which such conversion shall be effected (such date, the “Conversion
Date”). If no Conversion Date is specified in a Notice of Conversion, the
Conversion Date shall be the date that such Notice of Conversion is deemed
delivered hereunder. No ink-original Notice of Conversion shall be required, nor
shall any medallion guarantee (or other type of guarantee or notarization) of
any Notice of Conversion form be required. To effect conversions
hereunder, the Holder shall not be required to physically surrender this
Debenture to the Company unless the entire principal amount of this Debenture
has been so converted. Conversions hereunder shall have the effect of lowering
the outstanding principal amount of this Debenture in an amount equal to the
applicable conversion. The Holder and the Company shall maintain records showing
the principal amount(s) converted and the date of such conversion(s). The
Company may deliver an objection to any Notice of Conversion within one (1)
Business Day of delivery of such Notice of Conversion. In the event of any
dispute or discrepancy, the records of the Holder shall be controlling and
determinative in the absence of manifest error. The Holder, and any assignee
by acceptance of this Debenture, acknowledge and agree that, by reason of the
provisions of this paragraph, following conversion of a portion of this
Debenture, the unpaid and unconverted principal amount of this Debenture may be
less than the amount stated on the face hereof. 

5




              b)         
Conversion Price. The conversion price in effect on any Conversion Date
shall be equal to $0.30, subject to adjustment herein (the
“Conversion Price”). . 

             
c)          Mechanics of
Conversion. 

              i.         
Conversion Shares Issuable Upon Conversion of Principal Amount.
The number of Conversion Shares issuable upon a conversion hereunder shall be
determined by the quotient obtained by dividing (x) the outstanding principal
amount of this Debenture to be converted by (y) the Conversion Price. 

              ii.         
Delivery of Conversion Shares Upon Conversion. Not later than one (1)
Trading Day after each Conversion Date (the “Share Delivery Date”), the
Company shall deliver, or cause to be delivered, to the Holder the number of
Conversion Shares being acquired upon the conversion of this Debenture which, on
or after the earlier of (i) the six (6) month anniversary of the Original Issue
Date or (ii) the Effective Date, shall be free of restrictive legends and
trading restrictions (other than those which may then be required by the
Purchase Agreement) and shall be delivered by the Company under this Section
4(c) electronically through the Depository Trust Company or another established
clearing corporation performing similar functions.

              iii.         
Failure to Deliver Conversion Shares. If, in the case of any Notice of
Conversion, such Conversion Shares are not delivered to or as directed by the
applicable Holder by the Share Delivery
Date, the Holder shall be entitled to elect by written notice to the Company at
any time on or before its receipt of the Conversion Shares, to rescind such
Conversion, in which event the Company shall promptly return to the Holder any
original Debenture delivered to the Company and the Holder shall promptly return
to the Company the Conversion Shares issued to such Holder pursuant to the
rescinded Conversion Notice.

6




              iv.         
Obligation Absolute; Partial Liquidated Damages. The Company’s
obligations to issue and deliver the Conversion Shares upon conversion of this
Debenture in accordance with the terms hereof are absolute and unconditional,
irrespective of any action or inaction by the Holder to enforce the same, any
waiver or consent with respect to any provision hereof, the recovery of any
judgment against any Person or any action to enforce the same, or any setoff,
counterclaim, recoupment, limitation or termination, or any breach or alleged
breach by the Holder or any other Person of any obligation to the Company or any
violation or alleged violation of law by the Holder or any other Person, and
irrespective of any other circumstance which might otherwise limit such
obligation of the Company to the Holder in connection with the issuance of such
Conversion Shares; provided, however, that such delivery shall not
operate as a waiver by the Company of any such action the Company may have
against the Holder. In the event the Holder of this Debenture shall elect to
convert any or all of the outstanding principal amount hereof, the Company may
not refuse conversion based on any claim that the Holder or anyone associated or
affiliated with the Holder has been engaged in any violation of law, agreement
or for any other reason, unless an injunction from a court, on notice to Holder,
restraining and or enjoining conversion of all or part of this Debenture shall
have been sought and obtained, and the Company posts a surety bond for the
benefit of the Holder in the amount of 150% of the outstanding principal amount
of this Debenture, which is subject to the injunction, which bond shall remain
in effect until the completion of arbitration/litigation of the underlying
dispute and the proceeds of which shall be payable to the Holder to the extent
it obtains judgment. In the absence of such injunction, the Company shall issue
Conversion Shares or, if applicable, cash, upon a properly noticed conversion.
If the Company fails for any reason to deliver to the Holder the Conversion
Shares pursuant to Section 4(c)(ii) by the Share Delivery Date, the Company
shall pay to the Holder, in cash, as liquidated damages and not as a penalty,
for each $1,000 of principal amount being converted, $10 per Trading Day for
each Trading Day after such Share Delivery Date until such Conversion Shares are
delivered or Holder rescinds such conversion. Nothing herein shall limit a
Holder’s right to pursue actual damages for the Company’s failure to deliver
Conversion Shares within the period specified herein and the Holder shall have
the right to pursue all remedies available to it hereunder, at law or in equity
including, without limitation, a decree of specific performance and/or
injunctive relief. Nothing herein shall limit a Holder’s right to pursue actual
damages or declare an Event of Default pursuant to Section 8 hereof for the
Company’s failure to deliver Conversion Shares within the period specified herein and the
Holder shall have the right to pursue all remedies available to it hereunder, at
law or in equity including, without limitation, a decree of specific performance
and/or injunctive relief. The exercise of any such rights shall not prohibit the
Holder from seeking to enforce damages pursuant to any other Section hereof or
under applicable law. 

7




              v.         
Compensation for Buy-In on Failure to Timely Deliver Conversion Shares
Upon Conversion. In addition to any other rights available to the Holder, if
the Company fails for any reason to deliver to the Holder such Conversion Shares
by the Share Delivery Date pursuant to Section 4(c)(ii), and if after such Share
Delivery Date the Holder is required by its brokerage firm to purchase (in an
open market transaction or otherwise), or the Holder’s brokerage firm otherwise
purchases, shares of Common Stock to deliver in satisfaction of a sale by the
Holder of the Conversion Shares which the Holder was entitled to receive upon
the conversion relating to such Share Delivery Date (a “Buy-In”), then
the Company shall (A) pay in cash to the Holder (in addition to any other
remedies available to or elected by the Holder) the amount, if any, by which (x)
the Holder’s total purchase price (including any brokerage commissions) for the
Common Stock so purchased exceeds (y) the product of (1) the aggregate number of
shares of Common Stock that the Holder was entitled to receive from the
conversion at issue multiplied by (2) the actual sale price at which the sell
order giving rise to such purchase obligation was executed (including any
brokerage commissions) and (B) at the option of the Holder, either reissue (if
surrendered) this Debenture in a principal amount equal to the principal amount
of the attempted conversion (in which case such conversion shall be deemed
rescinded) or deliver to the Holder the number of shares of Common Stock that
would have been issued if the Company had timely complied with its delivery
requirements under Section 4(c)(ii). For example, if the Holder purchases Common
Stock having a total purchase price of $11,000 to cover a Buy-In with respect to
an attempted conversion of this Debenture with respect to which the actual sale
price of the Conversion Shares (including any brokerage commissions) giving rise
to such purchase obligation was a total of $10,000 under clause (A) of the
immediately preceding sentence, the Company shall be required to pay the Holder
$1,000. The Holder shall provide the Company written notice indicating the
amounts payable to the Holder in respect of the Buy-In and, upon request of the
Company, evidence of the amount of such loss. Nothing herein shall limit a
Holder’s right to pursue any other remedies available to it hereunder, at law or
in equity including, without limitation, a decree of specific performance and/or
injunctive relief with respect to the Company’s failure to timely deliver
Conversion Shares upon conversion of this Debenture as required pursuant to the
terms hereof. 

              vi.         
Reservation of Shares Issuable Upon Conversion. The Company covenants
that it will at all times reserve and keep available out of its authorized and
unissued shares of Common Stock for the sole purpose of issuance upon conversion of this Debenture, each as
herein provided, free from preemptive rights or any other actual contingent
purchase rights of Persons other than the Holder (and the other holders of the
Debentures), not less than such aggregate number of shares of the Common Stock
as shall (subject to the terms and conditions set forth in the Purchase
Agreement) be issuable (taking into account the adjustments and restrictions of
Section 5) upon the conversion of the then outstanding principal amount of this
Debenture. The Company covenants that all shares of Common Stock that shall be
so issuable shall, upon issue, be duly authorized, validly issued, fully paid
and nonassessable and, if the Registration Statement is then effective under the
Securities Act, shall be registered for public resale in accordance with such
Registration Statement (subject to such Holder’s compliance with its obligations
under the Registration Rights Agreement). 

8




              vii.         
Fractional Shares. No fractional shares or scrip representing fractional
shares shall be issued upon the conversion of this Debenture. As to any fraction
of a share which the Holder would otherwise be entitled to purchase upon such
conversion, the Company shall at its election, either pay a cash adjustment in
respect of such final fraction in an amount equal to such fraction multiplied by
the Conversion Price or round up to the next whole share. 

              viii.         
Transfer Taxes and Expenses. The issuance of Conversion Shares on
conversion of this Debenture shall be made without charge to the Holder hereof
for any documentary stamp or similar taxes that may be payable in respect of the
issue or delivery of such Conversion Shares, 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 Conversion Shares upon
conversion in a name other than that of the Holder of this Debenture so
converted and the Company shall not be required to issue or deliver such
Conversion Shares 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. The
Company shall pay all Transfer Agent fees required for same-day processing of
any Notice of Conversion and all fees to the Depository Trust Company (or
another established clearing corporation performing similar functions) required
for same-day electronic delivery of the Conversion Shares. 

9




              d)          Holder’s Conversion Limitations. The Company shall not effect any
conversion of this Debenture, and a Holder shall not have the right to convert
any portion of this Debenture, to the extent that after giving effect to the
conversion set forth on the applicable Notice of Conversion, the Holder
(together with the Holder’s Affiliates, and any Persons acting as a group
together with the Holder or any of the Holder’s Affiliates) would beneficially
own in excess of the Beneficial Ownership Limitation (as defined below). For
purposes of the foregoing sentence, the number of shares of Common Stock
beneficially owned by the Holder and its Affiliates shall include the number of
shares of Common Stock issuable upon conversion of this Debenture with respect
to which such determination is being made, but shall
exclude the number of shares of Common Stock which are issuable upon (i)
conversion of the remaining, unconverted principal amount of this Debenture
beneficially owned by the Holder or any of its Affiliates and (ii) exercise or
conversion of the unexercised or unconverted portion of any other securities of
the Company subject to a limitation on conversion or exercise analogous to the
limitation contained herein (including, without limitation, any other Debentures
or the Warrants) beneficially owned by the Holder or any of its Affiliates.
Except as set forth in the preceding sentence, for purposes of this Section
4(d), beneficial ownership shall be calculated in accordance with Section 13(d)
of the Exchange Act and the rules and regulations promulgated thereunder. To the
extent that the limitation contained in this Section 4(d) applies, the
determination of whether this Debenture is convertible (in relation to other
securities owned by the Holder together with any Affiliates) and of which
principal amount of this Debenture is convertible shall be in the sole
discretion of the Holder, and the submission of a Notice of Conversion shall be
deemed to be the Holder’s determination of whether this Debenture may be
converted (in relation to other securities owned by the Holder together with any
Affiliates) and which principal amount of this Debenture is convertible, in each
case subject to the Beneficial Ownership Limitation. 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. In
addition, a determination as to any group status as contemplated above shall be
determined in accordance with Section 13(d) of the Exchange Act and the rules
and regulations promulgated thereunder. For purposes of this Section 4(d), in
determining the number of outstanding shares of Common Stock, the Holder may
rely on the number of outstanding shares of Common Stock as stated in the most
recent of the following: (i) the Company’s most recent periodic or annual report
filed with the Commission, as the case may be, (ii) a more recent public
announcement by the Company, or (iii) a more recent written notice by the
Company or the Company’s transfer agent setting forth the number of shares of
Common Stock outstanding. Upon the written or oral request of a Holder, the
Company shall within one Trading Day 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
“Beneficial Ownership Limitation” shall be [4.99%] [9.99%] of the
number of shares of the Common Stock outstanding immediately after giving effect
to the issuance of shares of Common Stock issuable upon conversion of this
Debenture held by the Holder. The Holder, upon not less than 61 days’ prior
notice to the Company, may increase or decrease the Beneficial Ownership
Limitation provisions of this Section 4(d), provided that the Beneficial
Ownership Limitation in no event exceeds 9.99% of the number of shares of the
Common Stock outstanding immediately after giving effect to the issuance of
shares of Common Stock upon conversion of this Debenture held by the Holder and
the Beneficial Ownership Limitation provisions of this Section 4(d) shall
continue to apply.

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Any such increase or decrease will not
be effective until the 61st day after such notice is delivered to the Company.
The Beneficial Ownership Limitation provisions of this paragraph shall be
construed and implemented in a manner otherwise than in strict conformity with
the terms of this Section 4(d) to correct this paragraph (or any portion hereof)
which may be defective or inconsistent with the intended Beneficial Ownership
Limitation contained herein or to make changes or supplements necessary or
desirable to properly give effect to such limitation. The limitations contained
in this paragraph shall apply to a successor holder of this Debenture. 

Section
5.          Certain
Adjustments. 

              a)         
Stock Dividends and Stock Splits. If the Company, at any time while this
Debenture is outstanding: (i) pays a stock dividend or otherwise makes a
distribution or distributions payable in shares of Common Stock on shares of
Common Stock or any Common Stock Equivalents (which, for avoidance of doubt,
shall not include any shares of Common Stock issued by the Company upon
conversion of the Debentures), (ii) subdivides outstanding shares of Common
Stock into a larger number of shares, (iii) combines (including by way of a
reverse stock split) outstanding shares of Common Stock into a smaller number of
shares or (iv) issues, in the event of a reclassification of shares of the
Common Stock, any shares of capital stock of the Company, then the Conversion
Price shall be multiplied by a fraction of which the numerator shall be the
number of shares of Common Stock (excluding any treasury shares of the Company)
outstanding immediately before such event, and of which the denominator shall be
the number of shares of Common Stock outstanding immediately after such event.
Any adjustment made pursuant to this Section shall become effective immediately
after the record date for the determination of stockholders entitled to receive
such dividend or distribution and shall become effective immediately after the
effective date in the case of a subdivision, combination or re-classification.


             
b)          [RESERVED] 

              c)         
Subsequent Rights Offerings. In addition to any adjustments pursuant to
Section 5(a) above, if at any time the Company grants, issues or sells any
Common Stock Equivalents or rights to purchase stock, warrants, securities or
other property pro rata to the record holders of any class of shares of Common
Stock (the “Purchase Rights”), then the Holder will be entitled to
acquire, upon the terms applicable to such Purchase Rights, the aggregate
Purchase Rights which the Holder could have acquired if the Holder had held the
number of shares of Common Stock acquirable upon complete conversion of this
Debenture (without regard to any limitations on exercise hereof, including
without limitation, the Beneficial Ownership Limitation) immediately before the
date on which a record is taken for the grant, issuance or sale of such Purchase
Rights, or, if no such record is taken, the date as of which the record holders
of shares of Common Stock are to be determined for the grant, issue or sale of
such Purchase Rights (provided, however, to the extent that the Holder’s right
to participate in any such Purchase Right would result in the Holder exceeding
the Beneficial Ownership Limitation, then the Holder shall not be entitled to participate in such
Purchase Right to such extent (or beneficial ownership of such shares of Common
Stock as a result of such Purchase Right to such extent) and such Purchase Right
to such extent shall be held in abeyance for the Holder until such time, if
ever, as its right thereto would not result in the Holder exceeding the
Beneficial Ownership Limitation). 

11




              d)         
Pro Rata Distributions. During such time as this Debenture is
outstanding, if the Company shall declare or make any dividend or other
distribution of its assets (or rights to acquire its assets) to holders of
shares of Common Stock, by way of return of capital or otherwise (including,
without limitation, any distribution of cash, stock or other securities,
property or options by way of a dividend, spin off, reclassification, corporate
rearrangement, scheme of arrangement or other similar transaction) (a
"Distribution"), at any time after the issuance of this Debenture, then,
in each such case, the Holder shall be entitled to participate in such
Distribution to the same extent that the Holder would have participated therein
if the Holder had held the number of shares of Common Stock acquirable upon
complete exercise of this Debenture (without regard to any limitations on
exercise hereof, including without limitation, the Beneficial Ownership
Limitation) immediately before the date of which a record is taken for such
Distribution, or, if no such record is taken, the date as of which the record
holders of shares of Common Stock are to be determined for the participation in
such Distribution (provided, however, to the extent that the
Holder's right to participate in any such Distribution would result in the
Holder exceeding the Beneficial Ownership Limitation, then the Holder shall not
be entitled to participate in such Distribution to such extent (or in the
beneficial ownership of any shares of Common Stock as a result of such
Distribution to such extent) and the portion of such Distribution shall be held
in abeyance for the benefit of the Holder until such time, if ever, as its right
thereto would not result in the Holder exceeding the Beneficial Ownership
Limitation). 

12




              e)          Fundamental Transaction. If, at any time while this Debenture is
outstanding, (i) the Company, directly or indirectly, in one or more related
transactions effects any merger or consolidation of the Company with or into
another Person, (ii) the Company, directly or indirectly, effects any sale,
lease, license, assignment, transfer, conveyance or other disposition of all or
substantially all of its assets in one or a series of related transactions,
(iii) any, direct or indirect, purchase offer, tender offer or exchange offer
(whether by the Company or another Person) is completed pursuant to which
holders of Common Stock are permitted to sell, tender or exchange their shares
for other securities, cash or property and has been accepted by the holders of
50% or more of the outstanding Common Stock, (iv) the Company, directly or
indirectly, in one or more related transactions effects any reclassification,
reorganization or recapitalization 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, or (v) the Company, directly
or indirectly, in one or more related transactions consummates a stock or share
purchase agreement or other business combination (including, without limitation,
a reorganization, recapitalization, spin-off or scheme of arrangement) with
another Person whereby such other Person acquires more than 50% of the
outstanding shares of Common Stock (not including any shares
of Common Stock held by the other Person or other Persons making or party to, or
associated or affiliated with the other Persons making or party to, such stock
or share purchase agreement or other business combination) (each, a
“Fundamental Transaction”), then, upon any subsequent conversion of this
Debenture, the Holder shall have the right to receive, for each Conversion Share
that would have been issuable upon such conversion immediately prior to the
occurrence of such Fundamental Transaction (without regard to any limitation in
Section 4(d) on the conversion of this Debenture), the number of shares of
Common Stock of the successor or acquiring corporation or of the Company, if it
is the surviving corporation, and any additional consideration (the
“Alternate Consideration”) receivable as a result of such Fundamental
Transaction by a holder of the number of shares of Common Stock for which this
Debenture is convertible immediately prior to such Fundamental Transaction
(without regard to any limitation in Section 4(d) on the conversion of this
Debenture). For purposes of any such conversion, the determination of the
Conversion Price shall be appropriately adjusted to apply to such Alternate
Consideration based on the amount of Alternate Consideration issuable in respect
of one (1) share of Common Stock in such Fundamental Transaction, and the
Company shall apportion the Conversion Price among the Alternate Consideration
in a reasonable manner reflecting the relative value of any different components
of the Alternate Consideration. If holders of Common Stock are given any choice
as to the securities, cash or property to be received in a Fundamental
Transaction, then the Holder shall be given the same choice as to the Alternate
Consideration it receives upon any conversion of this Debenture following such
Fundamental Transaction. The Company shall cause any successor entity in a
Fundamental Transaction in which the Company is not the survivor (the
“Successor Entity”) to assume in writing all of the obligations of the
Company under this Debenture and the other Transaction Documents (as defined in
the Purchase Agreement) in accordance with the provisions of this Section 5(e)
pursuant to written agreements in form and substance reasonably satisfactory to
the Holder and approved by the Holder (without unreasonable delay) prior to such
Fundamental Transaction and shall, at the option of the holder of this
Debenture, deliver to the Holder in exchange for this Debenture a security of
the Successor Entity evidenced by a written instrument substantially similar in
form and substance to this Debenture which is convertible for a corresponding
number of shares of capital stock of such Successor Entity (or its parent
entity) equivalent to the shares of Common Stock acquirable and receivable upon
conversion of this Debenture (without regard to any limitations on the
conversion of this Debenture) prior to such Fundamental Transaction, and with a
conversion price which applies the conversion price hereunder to such shares of
capital stock (but taking into account the relative value of the shares of
Common Stock pursuant to such Fundamental Transaction and the value of such
shares of capital stock, such number of shares of capital stock and such
conversion price being for the purpose of protecting the economic value of this
Debenture immediately prior to the consummation of such Fundamental
Transaction), and which is reasonably satisfactory in form and substance to the
Holder. Upon the occurrence of any such Fundamental Transaction, the Successor
Entity shall succeed to, and be substituted for (so that from and after the date
of such Fundamental Transaction, the provisions of this Debenture and the other Transaction Documents referring to the
“Company” shall refer instead to the Successor Entity), and may exercise every
right and power of the Company and shall assume all of the obligations of the
Company under this Debenture and the other Transaction Documents with the same
effect as if such Successor Entity had been named as the Company herein. 

13




              f)         
Calculations. All calculations under this Section 5 shall be made to the
nearest cent or the nearest 1/100th of a share, as the case may be. For purposes
of this Section 5, the number of shares of Common Stock deemed to be issued and
outstanding as of a given date shall be the sum of the number of shares of
Common Stock (excluding any treasury shares of the Company) issued and
outstanding. 

             
g)          Notice to the
Holder. 

              i.         
Adjustment to Conversion Price. Whenever the Conversion Price is adjusted
pursuant to any provision of this Section 5, the Company shall promptly deliver
to each Holder a notice setting forth the Conversion Price after such adjustment
and setting forth a brief statement of the facts requiring such adjustment.

              ii.         
Notice to Allow Conversion by Holder. If (A) the Company shall declare a
dividend (or any other distribution in whatever form) on the Common Stock, (B)
the Company shall declare a special nonrecurring cash dividend on or a
redemption of the Common Stock, (C) the Company shall authorize the granting to
all holders of the Common Stock of rights or warrants to subscribe for or
purchase any shares of capital stock of any class or of any rights, (D) the
approval of any stockholders of the Company shall be required in connection with
any reclassification of the Common Stock, any consolidation or merger to which
the Company is a party, any sale or transfer of all or substantially all of the
assets of the Company, or any compulsory share exchange whereby the Common Stock
is converted into other securities, cash or property or (E) the Company shall
authorize the voluntary or involuntary dissolution, liquidation or winding up of
the affairs of the Company, then, in each case, the Company shall cause to be
filed at each office or agency maintained for the purpose of conversion of this
Debenture, and shall cause to be delivered to the Holder at its last address as
it shall appear upon the Debenture Register, at least twenty (20) calendar days
prior to the applicable record or effective date hereinafter specified, a notice
stating (x) the date on which a record is to be taken for the purpose of such
dividend, distribution, redemption, rights or warrants, or if a record is not to
be taken, the date as of which the holders of the Common Stock of record to be
entitled to such dividend, distributions, redemption, rights or warrants are to
be determined or (y) the date on which such reclassification, consolidation,
merger, sale, transfer or share exchange is expected to become effective or
close, and the date as of which it is expected that holders of the Common Stock
of record shall be entitled to exchange their shares of the Common Stock for
securities, cash or other property deliverable upon such
reclassification, consolidation, merger, sale, transfer or share exchange,
provided that the failure to deliver such notice or any defect therein or in the
delivery thereof shall not affect the validity of the corporate action required
to be specified in such notice. To the extent that any notice provided hereunder
constitutes, or contains, material, non-public information regarding the Company
or any of the Subsidiaries, the Company shall simultaneously file such notice
with the Commission pursuant to a Current Report on Form 8-K. The Holder shall
remain entitled to convert this Debenture during the 20-day period commencing on
the date of such notice through the effective date of the event triggering such
notice except as may otherwise be expressly set forth herein.

14




Section
6.         
Redemption.

              a)         
Optional Redemption at Election of Company. Subject to the provisions of
this Section 6(a), at any time after the Original Issue Date, the Company may
deliver to the Holder (an “Optional Redemption Notice” and the date such
notice is deemed delivered hereunder, the “Optional Redemption Notice
Date”) of its irrevocable election to redeem some or all of the then
outstanding principal amount of this Debenture for cash in an amount equal to
the Optional Redemption Amount on the 20th Trading Day following the Optional
Redemption Notice Date (such date, the “Optional Redemption Date”,
such 20 Trading Day period, the “Optional Redemption Period” and such
redemption, the “Optional Redemption”). The Optional Redemption Amount is
payable in full on the Optional Redemption Date. The Company may only effect an
Optional Redemption if each of the Equity Conditions shall have been met (unless
waived in writing by the Holder) on each Trading Day during the period
commencing on the Optional Redemption Notice Date through to the Optional
Redemption Date and through and including the date payment of the Optional
Redemption Amount is actually made in full. If any of the Equity Conditions
shall cease to be satisfied at any time during the Optional Redemption Period,
then the Holder may elect to nullify the Optional Redemption Notice by notice to
the Company within 3 Trading Days after the first day on which any such Equity
Condition has not been met (provided that if, by a provision of the Transaction
Documents, the Company is obligated to notify the Holder of the nonexistence of
an Equity Condition, such notice period shall be extended to the third Trading
Day after proper notice from the Company) in which case the Optional Redemption
Notice shall be null and void, ab initio. The Company covenants
and agrees that it will honor all Notices of Conversion tendered from the time
of delivery of the Optional Redemption Notice through the date all amounts owing
thereon are due and paid in full. The Company’s determination to pay an Optional
Redemption in cash shall be applied ratably to all of the holders of the then
outstanding Debentures based on their (or their predecessor’s) initial purchases
of Debentures pursuant to the Purchase Agreement. 

15




              b)          Redemption Procedure. The payment of cash or issuance of Common Stock, as
applicable, pursuant to an Optional Redemption shall be payable on the Optional Redemption Date. If any
portion of the payment pursuant to an Optional Redemption shall not be paid by
the Company by the applicable due date, interest shall accrue thereon at an
interest rate equal to the lesser of 18% per annum or the maximum rate permitted
by applicable law until such amount is paid in full. Notwithstanding anything
herein contained to the contrary, if any portion of the Optional Redemption
Amount remains unpaid after such date, the Holder may elect, by written notice
to the Company given at any time thereafter, to invalidate such Optional
Redemption, ab initio, and, with respect to the Company’s failure
to honor the Optional Redemption, the Company shall have no further right to
exercise such Optional Redemption. Notwithstanding anything to the contrary in
this Section 6, the Company’s determination to redeem shall be applied ratably
among the Holders of Debentures. The Holder may elect to convert the outstanding
principal amount of the Debenture pursuant to Section 4 prior to actual payment
in cash for any redemption under this Section 6 by the delivery of a Notice of
Conversion to the Company. 

Section
7.          Negative
Covenants. Until the twelve (12) month anniversary of the Effective Date,
unless the holders of at least 67% in principal amount of the then outstanding
Debentures shall have otherwise given prior written consent, the Company shall
not, and shall not permit any of the Subsidiaries to, directly or
indirectly:

              a)         
other than Permitted Indebtedness, enter into, create, incur, assume, guarantee
or suffer to exist any indebtedness for borrowed money of any kind, including,
but not limited to, a guarantee, on or with respect to any of its property or
assets now owned or hereafter acquired or any interest therein or any income or
profits therefrom; 

              b)         
other than Permitted Liens, enter into, create, incur, assume or suffer to exist
any Liens of any kind, on or with respect to any of its property or assets now
owned or hereafter acquired or any interest therein or any income or profits
therefrom; 

              c)         
amend its charter documents, including, without limitation, its certificate of
incorporation and bylaws, in any manner that materially and adversely affects
any rights of the Holder;

              d)         
repay, repurchase or offer to repay, repurchase or otherwise acquire more than a
de minimis number of shares of its Common Stock or Common Stock
Equivalents other than as to (i) the Conversion Shares or Warrant Shares as
permitted or required under the Transaction Documents and (ii) repurchases of
Common Stock or Common Stock Equivalents of departing officers and directors of
the Company, provided that such repurchases shall not exceed an aggregate of
$100,000 for all officers and directors during the term of this Debenture;

              e)         
repay, repurchase or offer to repay, repurchase or otherwise acquire any
Indebtedness, other than the Debentures if on a pro-rata basis;

16




              f)
pay cash dividends or distributions on any equity securities of the Company;

              g)
enter into any transaction with any Affiliate of the Company which would be
required to be disclosed in any public filing with the Commission, unless such
transaction is made on an arm’s-length basis and expressly approved by a
majority of the disinterested directors of the Company (even if less than a
quorum otherwise required for board approval); or 

             
h)          enter into any
agreement with respect to any of the foregoing. 

Section
8.          Events of
Default. 

              a)         
“Event of Default” means, wherever used herein, any of the following
events (whatever the reason for such event and whether such event shall be
voluntary or involuntary or effected by operation of law or pursuant to any
judgment, decree or order of any court, or any order, rule or regulation of any
administrative or governmental body): 

              i.         
any material default in the payment of (A) the principal amount of any Debenture
or (B) liquidated damages and other amounts owing to a Holder on any Debenture,
as and when the same shall become due and payable (whether on a Conversion Date
or the Maturity Date or by acceleration or otherwise) which default, solely in
the case of a default under clause (B) above, is not cured within 3 Trading
Days; 

              ii.         
the Company shall materially fail to observe or perform any other covenant or
agreement contained in the Debentures (other than a breach by the Company of its
obligations to deliver shares of Common Stock to the Holder upon conversion,
which breach is addressed in clause (viii) below) which failure is not cured, if
possible to cure, within the earlier to occur of (A) 5 Trading Days after notice
of such failure sent by the Holder or by any other Holder to the Company and (B)
10 Trading Days after the Company has become or should have become aware of such
failure;

              iii.         
a material default or event of default (subject to any grace or cure period
provided in the applicable agreement, document or instrument) shall occur under
(A) any of the Transaction Documents or (B) any other material agreement, lease,
document or instrument to which the Company or any Subsidiary is obligated (and
not covered by clause (vi) below); 

              iv.         
any representation or warranty made in this Debenture, any other Transaction
Documents, any written statement pursuant hereto or thereto or any other report,
financial statement or certificate made or delivered to the Holder or any other Holder shall be materially
untrue or incorrect in any material respect as of the date when made or deemed
made; 

17




              v.         
the Common Stock shall not be eligible for listing or quotation for trading on a
Trading Market and shall not be eligible to resume listing or quotation for
trading thereon within five Trading Days; 

              vi.         
the Initial Registration Statement (as defined in the Registration Rights
Agreement) shall not have been declared effective by the Commission on or prior
to the 120th calendar day after the Closing Date or the Company does not meet
the current public information requirements under Rule 144 in respect of the
Registrable Securities (as defined under the Registration Rights Agreement);


              vii.         
if, during the Effectiveness Period (as defined in the Registration Rights
Agreement), either (a) the effectiveness of the Registration Statement lapses
for any reason or (b) the Holder shall not be permitted to resell Registrable
Securities (as defined in the Registration Rights Agreement) under the
Registration Statement for a period of more than 20 consecutive Trading Days or
30 non-consecutive Trading Days during any 12 month period; provided,
however, that, if 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 pending transaction(s) or the parties thereto which information
is not available or may not be publicly disclosed at the time, the Company shall
be permitted an additional 10 consecutive Trading Days during any 12 month
period pursuant to this Section 8(a)(vii);

              viii.         
the Company shall fail for any reason to deliver certificates to a Holder prior
to the fifth Trading Day after a Conversion Date pursuant to Section 4(c) or the
Company shall provide at any time notice to the Holder, including by way of
public announcement, of the Company’s intention to not honor requests for
conversions of any Debentures in accordance with the terms hereof; or 

              ix.         
the electronic transfer by the Company of shares of Common Stock through the
Depository Trust Company or another established clearing corporation is no
longer available or is subject to a “chill”. 

              b)         
Remedies Upon Event of Default. If any Event of Default occurs, the
outstanding principal amount of this Debenture, plus accrued but unpaid
interest, liquidated damages and other amounts owing in respect thereof through
the date of acceleration, shall become, at the Holder’s election, immediately
due and payable in cash at the Mandatory Default Amount. Commencing 5 days after
the occurrence of any Event of Default that results in the eventual acceleration
of this Debenture, the interest rate on this Debenture shall accrue at an
interest rate equal to the lesser of 18% per annum or the maximum rate permitted
under applicable law. Upon the payment in full of the Mandatory Default Amount,
the Holder shall promptly surrender this Debenture to or as directed by the
Company. In connection with such acceleration described herein, the Holder need
not provide, and the Company hereby waives, any presentment, demand, protest or
other notice of any kind, and the Holder may immediately and without expiration
of any grace period enforce any and all of its rights and remedies hereunder and
all other remedies available to it under applicable law. Such acceleration may
be rescinded and annulled by Holder at any time prior to payment hereunder and
the Holder shall have all rights as a holder of the Debenture until such time,
if any, as the Holder receives full payment pursuant to this Section 8(b). No
such rescission or annulment shall affect any subsequent Event of Default or
impair any right consequent thereon. 

18




Section
9.         
Miscellaneous.

              a)         
Notices. Any and all notices or other communications or deliveries to be
provided by the Holder hereunder, including, without limitation, any Notice of
Conversion, shall be in writing and delivered personally, by facsimile, or sent
by a nationally recognized overnight courier service, addressed to the Company,
at the address set forth above, or such other facsimile number or address as the
Company may specify for such purposes by notice to the Holder delivered in
accordance with this Section 9(a). Any and all notices or other communications
or deliveries to be provided by the Company hereunder shall be in writing and
delivered personally, by facsimile, or sent by a nationally recognized overnight
courier service addressed to each Holder at the facsimile number or address of
the Holder appearing on the books of the Company, or if no such facsimile number
or address appears on the books of the Company, at the principal place of
business of such Holder, as set forth in the Purchase Agreement. Any notice or
other communication or deliveries hereunder shall be deemed given and effective
on the earliest of (i) the date of transmission, if such notice or communication
is delivered via facsimile at the facsimile number set forth on the signature
pages attached hereto prior to 5:30 p.m. (New York City time) on any date, (ii)
the next Trading Day after the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile number set forth on
the signature pages attached hereto on a day that is not a Trading Day or later
than 5:30 p.m. (New York City time) on any Trading Day, (iii) the second Trading
Day following the date of mailing, if sent by U.S. nationally recognized
overnight courier service or (iv) upon actual receipt by the party to whom such
notice is required to be given. 

              b)         
Absolute Obligation. Except as expressly provided herein, no provision of
this Debenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of and liquidated damages, as
applicable, on this Debenture at the time, place, and rate, and in the coin or
currency, herein prescribed. This Debenture is a direct debt obligation of the
Company. This Debenture ranks pari passu with all other Debentures
now or hereafter issued under the terms set forth herein. 

19




              c)         
Lost or Mutilated Debenture. If this Debenture shall be mutilated, lost,
stolen or destroyed, the Company shall execute and deliver, in exchange and
substitution for and upon cancellation of a mutilated Debenture, or in lieu of
or in substitution for a lost, stolen or destroyed Debenture, a new Debenture
for the principal amount of this Debenture so mutilated, lost, stolen or
destroyed, but only upon receipt of evidence of such loss, theft or destruction
of such Debenture, and of the ownership hereof, reasonably satisfactory to the
Company. 

              d)         
Governing Law. All questions concerning the construction, validity,
enforcement and interpretation of this Debenture shall be governed by and
construed and enforced in accordance with the internal laws of the State of New
York, without regard to the principles of conflict of laws thereof. Each party
agrees that all legal proceedings concerning the interpretation, enforcement and
defense of the transactions contemplated by any of the Transaction Documents
(whether brought against a party hereto or its respective Affiliates, directors,
officers, shareholders, employees or agents) shall be commenced in the state and
federal courts sitting in the City of New York, Borough of Manhattan (the
“New York Courts”). Each party hereto hereby irrevocably submits to the
exclusive jurisdiction of the New York Courts for the adjudication of any
dispute hereunder or in connection herewith or with any transaction contemplated
hereby or discussed herein (including with respect to the enforcement of any of
the Transaction Documents), and hereby irrevocably waives, and agrees not to
assert in any suit, action or proceeding, any claim that it is not personally
subject to the jurisdiction of such New York Courts, or such New York Courts are
improper or inconvenient venue for such proceeding. Each party hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by mailing a copy thereof via
registered or certified mail or overnight delivery (with evidence of delivery)
to such party at the address in effect for notices to it under this Debenture
and agrees that such service shall constitute good and sufficient service of
process and notice thereof. Nothing contained herein shall be deemed to limit in
any way any right to serve process in any other manner permitted by applicable
law. Each party hereto hereby irrevocably waives, to the fullest extent
permitted by applicable law, any and all right to trial by jury in any legal
proceeding arising out of or relating to this Debenture or the transactions
contemplated hereby. If any party shall commence an action or proceeding to
enforce any provisions of this Debenture, then the prevailing party in such
action or proceeding shall be reimbursed by the other party for its attorneys’
fees and other costs and expenses incurred in the investigation, preparation and
prosecution of such action or proceeding. 

              e)         
Waiver. Any waiver by the Company or the Holder of a breach of any
provision of this Debenture shall not operate as or be construed to be a waiver
of any other breach of such provision or of any breach of any other provision of
this Debenture. The failure of the Company or the Holder to insist upon strict
adherence to any term of this Debenture on one or more occasions shall not be
considered a waiver or deprive that party of the right thereafter to insist upon
strict adherence to that term or any other term of this Debenture on any other
occasion. Any waiver by the Company or the Holder must be in writing. 

20




              f)         
Severability. If any provision of this Debenture is invalid, illegal or
unenforceable, the balance of this Debenture shall remain in effect, and if any
provision is inapplicable to any Person or circumstance, it shall nevertheless
remain applicable to all other Persons and circumstances. If it shall be found
that any interest or other amount deemed interest due hereunder violates the
applicable law governing usury, the applicable rate of interest due hereunder
shall automatically be lowered to equal the maximum rate of interest permitted
under applicable law. 

              g)         
Remedies, Characterizations, Other Obligations, Breaches and Injunctive
Relief. The remedies provided in this Debenture shall be cumulative and
in addition to all other remedies available under this Debenture and any of the
other Transaction Documents at law or in equity (including a decree of specific
performance and/or other injunctive relief), and nothing herein shall limit the
Holder’s right to pursue actual and consequential damages for any failure by the
Company to comply with the terms of this Debenture. The Company covenants to the
Holder that there shall be no characterization concerning this instrument other
than as expressly provided herein. Amounts set forth or provided for herein with
respect to payments, conversion and the like (and the computation thereof) shall
be the amounts to be received by the Holder and shall not, except as expressly
provided herein, be subject to any other obligation of the Company (or the
performance thereof). The Company acknowledges that a breach by it of its
obligations hereunder will cause irreparable harm to the Holder and that the
remedy at law for any such breach may be inadequate. The Company therefore
agrees that, in the event of any such breach or threatened breach, the Holder
shall be entitled, in addition to all other available remedies, to an injunction
restraining any such breach or any such threatened breach, without the necessity
of showing economic loss and without any bond or other security being required.
The Company shall provide all information and documentation to the Holder that
is requested by the Holder to enable the Holder to confirm the Company’s
compliance with the terms and conditions of this Debenture. 

              h)         
Next Business Day. Whenever any payment or other obligation hereunder
shall be due on a day other than a Business Day, such payment shall be made on
the next succeeding Business Day. 

              i)         
Headings. The headings contained herein are for convenience only, do not
constitute a part of this Debenture and shall not be deemed to limit or affect
any of the provisions hereof. 

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

(Signature Page Follows) 

21




        
     IN WITNESS WHEREOF, the Company has caused this
Debenture to be duly executed by a duly authorized officer as of the date first
above indicated. 

ANAVEX LIFE SCIENCES CORP. 

 

By:__________________________________________
     
Name: 
      Title: 
Facsimile No. for
delivery of Notices: _______________


22




ANNEX A 

NOTICE OF CONVERSION 

             
The undersigned hereby elects to convert principal under the Senior Convertible
Debenture No. ____ due March ___, 2044 of Anavex Life Sciences Corp., a Nevada
corporation (the “Company”), into shares of common stock (the “Common
Stock”), of the Company according to the conditions hereof, as of the date
written below. If shares of Common Stock are to be issued in the name of a
person other than the undersigned, the undersigned will pay all transfer taxes
payable with respect thereto and is delivering herewith such certificates and
opinions as reasonably requested by the Company in accordance therewith. No fee
will be charged to the holder for any conversion, except for such transfer
taxes, if any. 

             
By the delivery of this Notice of Conversion the undersigned represents and
warrants to the Company that its ownership of the Common Stock does not exceed
the amounts specified under Section 4 of this Debenture, as determined in
accordance with Section 13(d) of the Exchange Act. 

             
The undersigned agrees to comply with the prospectus delivery requirements under
the applicable securities laws in connection with any transfer of the aforesaid
shares of Common Stock.

Conversion calculations: 

	 	Date to Effect Conversion: 
	 	 
	 	Principal Amount of Debenture to be Converted:
    
	 	 
	 	Number of shares of Common Stock to be issued:
    
	 	 
	 	  
	 	 
	 	Signature: 
	 	 
	 	Name: 
	 	 
	 	Address for Delivery of Conversion Shares:
  
	 	 
	 	Or 
	 	 
	 	DWAC Instructions: 
	 	 
	 	Broker No: _________________________
	 	Account No:
  _______________________


23




Schedule 1 

CONVERSION SCHEDULE 

The Senior Convertible Debentures No. ____ due on March ___,
2044 in the aggregate principal amount of $_______ are issued by Anavex Life
Sciences Corp., a Nevada corporation. 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 
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	 	 	 



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