Document:

ex41.htm

    Exhibit 4.1

    
 

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

    

    Original
Issue Date: May __, 2008

    Original
Conversion Price (subject to adjustment herein): $0.25

    

    $_______________

    

    

    12%
SUBORDINATED SECURED CONVERTIBLE DEBENTURE

    DUE
MAY __, 2009

    

    THIS 12% SUBORDINATED SECURED
CONVERTIBLE DEBENTURE is one of a series of duly authorized and validly issued
12% Subordinated Secured Convertible Debentures of Healthcare Providers Direct,
Inc., a Nevada corporation, (the “Company”), having its
principal place of business at 3371 Route One, Suite 200, Lawrenceville, New
Jersey  08648, designated as its 12% Subordinated Secured Convertible
Debenture due May __, 2009 (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 May __, 2009 (the “Maturity Date”) or
such earlier date as this Debenture is required or permitted to be repaid as
provided hereunder, and to pay interest to the Holder on the aggregate
unconverted and then outstanding principal amount of this Debenture in
accordance with the provisions hereof.  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 Subscription Agreement and (b) the following terms
shall have the following meanings:

     

     

    
      
        
        

      

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

    

    “Bankruptcy Event”
means any of the following events: (a) the Company or any Significant Subsidiary
(as such term is defined in Rule 1-02(w) of Regulation S-X) thereof commences a
case or other proceeding under any bankruptcy, reorganization, arrangement,
adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or
similar law of any jurisdiction relating to the Company or any Significant
Subsidiary thereof, (b) there is commenced against the Company or any
Significant Subsidiary thereof any such case or proceeding that is not dismissed
within 60 days after commencement, (c) the Company or any Significant Subsidiary
thereof is adjudicated insolvent or bankrupt or any order of relief or other
order approving any such case or proceeding is entered, (d) the Company or any
Significant Subsidiary thereof suffers any appointment of any custodian or the
like for it or any substantial part of its property that is not discharged or
stayed within 60 calendar days after such appointment, (e) the Company or any
Significant Subsidiary thereof makes a general assignment for the benefit of
creditors, (f) the Company or any Significant Subsidiary thereof calls a meeting
of its creditors with a view to arranging a composition, adjustment or
restructuring of its debts or (g) the Company or any Significant Subsidiary
thereof, by any act or failure to act, expressly indicates its consent to,
approval of or acquiescence in any of the foregoing or takes any corporate or
other action for the purpose of effecting any of the foregoing.

    

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

    

    “Business Day” means
any day except any Saturday, any Sunday, any day which shall be 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.

    

    “Change of Control
Transaction” means the occurrence after the date hereof of any of (a) an
acquisition after the date hereof by an individual or legal entity or “group”
(as described in Rule 13d-5(b)(1) promulgated under the Exchange Act) of
effective control (whether through legal or beneficial ownership of capital
stock of the Company, by contract or otherwise) of in excess of 50% of the
voting securities of the Company (other than by means of conversion or exercise
of the Debentures and the Securities issued together with the Debentures), (b)
the Company merges into or consolidates with any other Person, or any Person
merges into or consolidates with the Company and, after giving effect to such
transaction, the stockholders of the Company immediately prior to such
transaction own less than 50% of the aggregate voting power of the Company or
the successor entity of such transaction, or (c) the Company sells or transfers
all or substantially all of its assets to another Person and the stockholders of
the Company immediately prior to such transaction own less than 50% of the
aggregate voting power of the acquiring entity immediately after the
transaction, (d) a replacement at one time or within a three year period of more
than one-half of the members of the 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 (e) 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 in clauses (a) through (d) above.

     

     

    
      
        
        

      

      
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    “Closing Bid Price”
means on any particular date (a) the last reported closing bid price per
share of Common Stock on such date on the Trading Market (as reported by
Bloomberg L.P. at 4:15 p.m. (New York City time)), or (b) if there is no such
price on such date, then the closing bid price on the Trading Market on the date
nearest preceding such date (as reported by Bloomberg L.P. at 4:15 p.m. (New
York City time)), or (c)  if the Common Stock is not then listed or quoted
on a Trading Market and if prices for the Common Stock are then reported in the
“pink sheets” published by Pink Sheets LLC (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) if the shares of Common Stock
are not then publicly traded the fair market value of a share of Common Stock as
determined by an independent appraiser selected in good faith by the
Holder  and reasonably acceptable to the Company, the fees and
expenses of which shall be paid by the Company.

    

    “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”
shall have the meaning set forth in Section 2(c).

    

    “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 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 pursuant to 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 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 issuable pursuant to the Transaction Documents, (f) there is no existing
Event of Default or no existing event which, with the passage of time or the
giving of notice, would constitute an Event of Default, (g) 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(c) 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, and (i) the Holder is not in possession of any
information provided by the Company that constitutes, or may constitute,
material non-public information.

    

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

    

    “Financing Event” shall have the meaning set forth in Section
4(f).

    

    “Financing Price” shall have the meaning set forth in Section
4(f).

     

     

    
      
        
        

      

      
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    “Financing
Securities” shall have the meaning set
forth in Section 4(f).

    

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

    

    “Interest Conversion
Rate” means 90% of the VWAP of the Common Stock for the 20 consecutive
Trading Days ending on the Trading Day that is immediately prior to the date the
applicable Interest Conversion Shares are issued and delivered if such delivery
is after the Interest Payment Date.

    

     “Interest Conversion
Shares” shall have the meaning set forth in Section 2(a).

    

    “Interest Notice
Period” shall have the meaning set forth in Section 2(a).

    

    “Interest Payment
Date” shall have the meaning set forth in Section 2(a).

    

    “Interest Share
Amount” shall have the meaning set forth in Section 2(a).

    

    “Late Fees” shall have
the meaning set forth in Section 2(d).

    

    “Mandatory Default
Amount”  means the sum of 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, and 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 8(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) 100% of the then outstanding principal
amount of the Debenture, (b) accrued but unpaid interest and (c) 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).

    

    “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.

    

    “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(d)(ii).

    

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

    

    “Subscription
Agreement” means the Subscription Agreement, dated as of May __, 2008
among the Company and the original Holders, as amended, modified or supplemented
from time to time in accordance with its terms.

     

     

     

    
      
        
        

      

      
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    “Trading Day” means a
day on which the New York Stock Exchange is open for business.

    

    “Trading Market” means
the following markets or exchanges on which the Common Stock is listed or quoted
for trading on the date in question: the American Stock Exchange, the Nasdaq
Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the
New York Stock Exchange or the OTC Bulletin Board.

    

    “Transaction
Documents” shall have the meaning set forth in the Subscription
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 for trading as reported by Bloomberg L.P. (based on a Trading Day from
9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)); (b)  if
the OTC Bulletin Board is not a Trading Market, 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 quoted for trading on
the OTC Bulletin Board and if prices for the Common Stock are then reported in
the “Pink Sheets” published by Pink Sheets, LLC (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 Holder and reasonably acceptable to the
Company.

    

    Section
2.                                Interest.

    

    a) Payment of Interest in Cash
or Kind. The Company shall pay interest to the Holder on the aggregate
unconverted and then outstanding principal amount of this Debenture at the rate
of 12% per annum, payable quarterly on March 31, June 30, September 30 and
December 31, beginning on the first such date after the Original Issue Date, on
each Conversion Date (as to that principal amount then being converted), on each
Optional Redemption Date (as to that principal amount then being redeemed) and
on the Maturity Date (each such date, an “Interest Payment
Date”) (if any Interest Payment Date is not a Business Day, then the
applicable payment shall be due on the next succeeding Business Day), in cash
or, at the Company’s option, in duly authorized, validly issued, fully paid and
non-assessable shares of Common Stock at the Interest Conversion Rate (the
dollar amount to be paid in shares, the “Interest Share
Amount”) or a combination thereof; provided, however, that payment
in shares of Common Stock may only occur if (i) all of the Equity Conditions
have been met (unless waived by the Holder in writing) during the 20 Trading
Days immediately prior to the applicable Interest Payment Date  (the
“Interest Notice
Period”) and through and including the date such shares of Common Stock
are actually issued to the Holder, (ii) the Company shall have given the Holder
notice in accordance with the notice requirements set forth below and (iii) as
to such Interest Payment Date, prior to such Interest Notice Period (but not
more than five (5) Trading Days prior to the commencement of such Interest
Notice Period), the Company shall have delivered to the Holder’s account with
The Depository Trust Company a number of shares of Common Stock to be applied
against such Interest Share Amount equal to the quotient of (x) the applicable
Interest Share Amount divided by the Interest Conversion Rate assuming for such
purposes that the Interest Payment Date is the Trading Day immediately prior to
the commencement of the Interest Notice Period (the “Interest Conversion
Shares”).

     

     

     

    
      
        
        

      

      
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    b) Company’s Election to Pay
Interest in Cash or Shares of Common Stock.  Subject to the
terms and conditions herein, the decision whether to pay interest hereunder in
cash, shares of Common Stock or a combination thereof shall be at the sole
discretion of the Company.  Prior to the commencement of any Interest
Notice Period, the Company shall deliver to the Holder a written notice of its
election to pay interest hereunder on the applicable Interest Payment Date
either in cash, shares of Common Stock or a combination thereof and the Interest
Share Amount as to the applicable Interest Payment Date, provided that the
Company may indicate in such notice that the election contained in such notice
shall apply to future Interest Payment Dates until revised by a subsequent
notice.  During any Interest Notice Period, the Company’s election
(whether specific to an Interest Payment Date or continuous) shall be
irrevocable as to such Interest Payment Date.  Subject to the
aforementioned conditions, failure to timely deliver such written notice to the
Holder shall be deemed an election by the Company to pay the interest on such
Interest Payment Date in cash.  At any time the Company delivers a
notice to the Holder of its election to pay the interest in shares of Common
Stock, the Company shall timely file a prospectus supplement pursuant to Rule
424 disclosing such election.  The aggregate number of shares of
Common Stock otherwise issuable to the Holder on an Interest Payment Date shall
be reduced by the number of Interest Conversion Shares previously issued to the
Holder in connection with such Interest Payment Date.

    

    c) Interest
Calculations. Interest shall be calculated on the basis of a 360-day
year, consisting of twelve 30 calendar day periods, and shall accrue daily
commencing on the Original Issue Date until payment in full of the outstanding
principal, together with all accrued and unpaid interest, liquidated damages and
other amounts which may become due hereunder, has been made.  Payment
of interest in shares of Common Stock (other than the Interest Conversion Shares
issued prior to an Interest Notice Period) shall otherwise occur pursuant to
Section 4(d)(ii) herein and, solely for purposes of the payment of interest in
shares, the Interest Payment Date shall be deemed the Conversion
Date.  Interest shall cease to accrue with respect to any principal
amount converted, provided that, the Company actually delivers the Conversion
Shares within the time period required by Section 4(d)(ii)
herein.  Interest hereunder will be paid to the Person in whose name
this Debenture is registered on the records of the Company regarding
registration and transfers of this Debenture (the “Debenture Register”).
Except as otherwise provided herein, if at any time the Company pays interest
partially in cash and partially in shares of Common Stock to the holders of the
Debentures, then such payment of cash shall be distributed ratably among the
holders of the then-outstanding Debentures based on their (or their
predecessor’s) initial purchases of Debentures pursuant to the Purchase
Agreement.

    

    d) Late
Fee.  All overdue accrued and unpaid interest to be paid
hereunder shall entail a late fee at an interest rate equal to the lesser of 18%
per annum or the maximum rate permitted by applicable law (the “Late Fees”) which
shall accrue daily from the date such interest is due hereunder through and
including the date of actual payment in full. Notwithstanding anything to the
contrary contained herein, if, on any Interest Payment Date the Company has
elected to pay accrued interest in the form of Common Stock but the Company is
not permitted to pay accrued interest in Common Stock because it fails to
satisfy the conditions for payment in Common Stock set forth in Section 2(a)
herein, then, at the option of the Holder, the Company, in lieu of delivering
either shares of Common Stock pursuant to this Section 2 or paying the regularly
scheduled interest payment in cash, shall deliver, within three (3) Trading Days
of each applicable Interest Payment Date, an amount in cash equal to the product
of (x) the number of shares of Common Stock otherwise deliverable to the Holder
in connection with the payment of interest due on such Interest Payment Date
multiplied by (y) the highest VWAP during the period commencing on the Interest
Payment Date and ending on the Trading Day prior to the date such payment is
actually made.  If any Interest Conversion Shares are issued to the
Holder in connection with an Interest Payment Date and are not applied against
an Interest Share Amount, then the Holder shall promptly return such excess
shares to the Company.

     

     

    
      
        
        

      

      
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    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 Subscription
Agreement and may be transferred or exchanged only in compliance with the
Subscription 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(c)
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.  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, plus all accrued
and unpaid interest thereon, 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 1 Business Day of delivery of such Notice of
Conversion.  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.

    

    b) Conversion
Price.  The conversion price in effect on any Conversion Date
shall be equal to $0.25,
subject to adjustment herein (the “Conversion
Price”).

    

    c) 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 other person or entity 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 (A) conversion of the remaining, unconverted
principal amount of this Debenture beneficially owned by the Holder or any of
its Affiliates and (B) 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(c), 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(c) 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(c), in determining the number of outstanding shares of Common
Stock, the Holder may rely on the number of outstanding shares of Common Stock
as stated in the most recent of the following: (A) the Company’s most recent
periodic or annual report, as the case may be; (B) a more recent public
announcement by the Company; or (C) a more recent 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 two Trading Days confirm orally and in writing to the Holder the
number of shares of Common Stock then outstanding.  In any case, the number
of outstanding shares of Common Stock shall be determined after giving effect to
the 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% 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(c), 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(c) shall continue to
apply.  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(c) 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.

     

     

    
      
        
        

      

      
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              d)  

            	
              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.

    i. 

    

    ii. Delivery of Certificate Upon
Conversion. Not later than three Trading Days after each Conversion Date
(the “Share Delivery
Date”), the Company shall deliver, or cause to be delivered, to the
Holder (A) a certificate or certificates representing the Conversion Shares
which, on or after the earlier of (i) the six 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) representing the number of Conversion Shares being acquired
upon the conversion of this Debenture (including, if the Company has given
continuous notice pursuant to Section 2(b) for payment of interest in shares of
Common Stock at least 20 Trading Days prior to the date on which the Notice of
Conversion is delivered to the Company, shares of Common Stock representing the
payment of accrued interest otherwise determined pursuant to Section 2(a) but
assuming that the Interest Notice Period is the 20 Trading Days period
immediately prior to the date on which the Notice of Conversion is delivered to
the Company and excluding for such issuance the condition that the Company
deliver Interest Conversion Shares as to such interest payment) and (B) a bank
check in the amount of accrued and unpaid interest (if the Company has elected
or is required to pay accrued interest in cash). On or after the earlier of (i)
the six month anniversary of the Original Issue Date or (ii) the Effective Date,
the Company shall use its best efforts to deliver any certificate or
certificates required to be delivered by the Company under this Section 4(d)
electronically through the Depository Trust Company or another established
clearing corporation performing similar functions.

    

    iii. Failure to Deliver
Certificates.  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 Trading Day after the Conversion Date, the Holder
shall be entitled to elect by written notice to the Company at any time on or
before its receipt of such certificate or certificates, 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 Common Stock certificates representing the principal amount
of this Debenture unsuccessfully tendered for conversion to the
Company.

    

    iv. 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 and
payment of interest on 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 Subscription Agreement) be issuable
(taking into account the adjustments and restrictions of Section 5) upon the
conversion of the outstanding principal amount of this Debenture and payment of
interest hereunder.  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 sale in
accordance with such Registration Statement.

    

    v. 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
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.

    

    vi. Transfer
Taxes.  The issuance of certificates for shares of the Common
Stock 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 certificates, 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 this Debenture 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.

    

    f)           Conversion Upon Financing
Event.  If all or any of the principal and accrued but unpaid
interest underlying this Debenture remains outstanding prior to the next sale by
the Company of its debt or equity securities (the “Financing
Securities”) which yields gross proceeds to the Company of at least
$2,000,000 (a “Financing Event”),
the Holder shall have the right, at its option, at any time prior to the close
of the Financing Event, to convert the outstanding principal balance and accrued
and unpaid interest on this Debenture, or any portion thereof, into the number
of fully paid and non-assessable shares of Financing Securities issued by the
Company as a result of the Financing Event, at a conversion price per share (the
“Financing
Price”) equal to seventy-five percent (75%) of the price paid by the
investors in the Financing Event.

     

     

    
      
        
        

      

      
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    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, or payment of
interest on, 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) Subsequent Rights
Offerings.  If the Company, at any time while the Debenture is
outstanding, shall issue rights, options or warrants to all holders of Common
Stock (and not to Holders) entitling them to subscribe for or purchase shares of
Common Stock at a price per share that is lower than the VWAP on the record date
referenced below, then the Conversion Price shall be multiplied by a fraction of
which the denominator shall be the number of shares of the Common Stock
outstanding on the date of issuance of such rights or warrants plus the number
of additional shares of Common Stock offered for subscription or purchase, and
of which the numerator shall be the number of shares of the Common Stock
outstanding on the date of issuance of such rights or warrants plus the number
of shares which the aggregate offering price of the total number of shares so
offered (assuming delivery to the Company in full of all consideration payable
upon exercise of such rights, options or warrants) would purchase at such
VWAP.  Such adjustment shall be made whenever such rights or warrants
are issued, and shall become effective immediately after the record date for the
determination of stockholders entitled to receive such rights, options or
warrants.

    

    c) Pro Rata
Distributions. If the Company, at any time while this Debenture is
outstanding, distributes to all holders of Common Stock (and not to the Holders)
evidences of its indebtedness or assets (including cash and cash dividends) or
rights or warrants to subscribe for or purchase any security (other than the
Common Stock, which shall be subject to Section 5(b)), then in each such case
the Conversion Price shall be adjusted by multiplying such Conversion Price in
effect immediately prior to the record date fixed for determination of
stockholders entitled to receive such distribution by a fraction of which the
denominator shall be the 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 1 outstanding share of the Common
Stock as determined by the Board of Directors of the Company in good
faith.  In either case the adjustments shall be described in a
statement delivered to the Holder describing the portion of assets or evidences
of indebtedness so distributed or such subscription rights applicable to 1 share
of Common Stock.  Such adjustment shall be made whenever any such
distribution is made and shall become effective immediately after the record
date mentioned above.

    

    d) Fundamental
Transaction. If, at any time while this Debenture is outstanding, (i) the
Company effects any merger or consolidation of the Company with or into another
Person, (ii) the Company effects any sale of all or substantially all of its
assets in one transaction or a series of related transactions, (iii) 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 (iv) the Company effects
any reclassification of the Common Stock or any compulsory share exchange
pursuant to which the Common Stock is effectively converted into or exchanged
for other securities, cash or property (in any such case, a “Fundamental
Transaction”), then, upon any subsequent conversion of this Debenture,
the Holder shall have the right to receive, for each Conversion Share that would
have been issuable upon such conversion immediately prior to the occurrence of
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 1 share of Common Stock (the “Alternate
Consideration”).  For purposes of any such conversion, the
determination of the Conversion Price shall be appropriately adjusted to apply
to such Alternate Consideration based on the amount of Alternate Consideration
issuable in respect of 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.  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 Section 5(e) and insuring that this Debenture (or any
such replacement security) will be similarly adjusted upon any subsequent
transaction analogous to a Fundamental Transaction.

     

     

     

    
      
        
        

      

      
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    e) 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.

    

    f) 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, of 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.  The Holder is 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.

    

    Section
6.                                   Redemption.

    

    a) Optional Redemption at
Election of Company.  Subject to
the provisions of this Section 6(a), if at
any time after Effective Date, the
VWAP for each of any 20 consecutive Trading Days, which period shall have
commenced only after the Effective Date (such period the “Threshold Period”),
exceeds $0.40 (subject to adjustment for reverse and forward stock splits, stock
dividends, stock combinations and other similar transactions of the Common Stock
that occur after the Original Issue Date) AND the average daily trading volume
for such Threshold Period equals or exceeds 150,000 shares of Common Stock, the
Company may, within 1 Trading Day after the end of any such Threshold Period,
deliver a written notice 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 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.  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.

    

    

    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 in cash or its elections under Section
6(b) 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.                                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 default in the payment of (A) the principal amount of any Debenture or (B) interest,
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 an interest
payment or other default under clause (B)
above, is not cured within 10 Trading
Days;

    

    ii. the
Company shall 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 (xi) below) which failure is not cured, if
possible to cure, within the earlier to occur of (A) 10 Trading Days after
notice of such failure sent by the Holder or by any other Holder to the Company
and (B) 15 Trading Days after the Company has become or should have become aware
of such failure;

    

    iii. a 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 untrue or incorrect in any material respect as of the date when
made or deemed made;

    

    v. the
Company or any Significant Subsidiary (as such term is defined in Rule 1-02(w)
of Regulation S-X)  shall be subject to a Bankruptcy
Event;

    

    vi. the
Company or any Subsidiary shall default on 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 that (a) involves an
obligation greater than $150,000, whether such indebtedness now exists or shall
hereafter be created, and (b) results 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 listing or quotation for trading on a
Trading Market and shall not be eligible to resume listing or quotation for
trading thereon within seven Trading Days;

    

    viii. the
Company shall be a party to any Change of Control Transaction or Fundamental
Transaction or shall agree to sell or dispose of all or in excess of 50% of its
assets in one transaction or a series of related transactions (whether or not
such sale would constitute a Change of Control Transaction);

    

    ix. any
Person shall breach any agreement delivered to the initial Holders pursuant to
Section 2.2 of the Purchase Agreement; or

    

    x. any
monetary judgment, writ or similar final process shall be entered or filed
against the Company, any subsidiary or any of their respective property or other
assets for more than $50,000, and such judgment, writ or similar final process
shall remain unvacated, unbonded or unstayed for a period of 45 calendar
days.

    

    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.

     

     

    
      
        
        

      

      
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    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 purpose 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, at the principal place of business of the
Holder.  Any notice or other communication or deliveries hereunder
shall be deemed given and effective on the earliest of (i) the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile number specified on the signature page prior to 5:30 p.m. (New York
City time), (ii) the date immediately following the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile number
specified on the signature page between 5:30 p.m. (New York City time) and 11:59
p.m. (New York City time) on any 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.

    

    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, liquidated damages and accrued interest, 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.

    

    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 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 in the investigation,
preparation and prosecution of such action or proceeding.

    

    e) Amendment;
Waiver.  No provision of this Agreement may be waived,
modified, supplemented or amended except in a written instrument signed, in the
case of an amendment, by the Company and the Holders of at least 51% of the
Debentures then outstanding or, in the case of a waiver, by the party against
whom enforcement of any such waived provision is sought. 
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.

     

     

    
      
        
        

      

      
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    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. The Company covenants (to the extent that it may
lawfully do so) that it shall not at any time insist upon, plead, or in any
manner whatsoever claim or take the benefit or advantage of, any stay, extension
or usury law or other law which would prohibit or forgive the Company from
paying all or any portion of the principal of or interest on this Debenture as
contemplated herein, wherever enacted, now or at any time hereafter in force, or
which may affect the covenants or the performance of this indenture, and the
Company (to the extent it may lawfully do so) hereby expressly waives all
benefits or advantage of any such law, and covenants that it will not, by resort
to any such law, hinder, delay or impede the execution of any power herein
granted to the Holder, but will suffer and permit the execution of every such as
though no such law has been enacted.

    

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

    

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

    

    i) Assumption.  Any
successor to the Company or any surviving entity in a Fundamental Transaction
shall (i) assume, prior to such Fundamental Transaction, all of the obligations
of the Company under this Debenture and the other Transaction Documents pursuant
to written agreements in form and substance satisfactory to the Holder (such
approval not to be unreasonably withheld or delayed) and (ii) issue to the
Holder a new debenture of such successor entity evidenced by a written
instrument substantially similar in form and substance to this Debenture,
including, without limitation, having a principal amount and interest rate equal
to the principal amount and the interest rate of this Debenture and having
similar ranking to this Debenture, which shall be satisfactory to the Holder
(any such approval not to be unreasonably withheld or delayed).  The
provisions of this Section 9(i) shall apply similarly and equally to successive
Fundamental Transactions and shall be applied without regard to any limitations
of this Debenture.

    

    j) Secured
Obligation.  The obligations of the Company under this
Debenture are secured by a position on all assets of the Company pursuant to the
Security Agreement, dated as of May __, 2008 between the Company and the Secured
Parties (as defined therein).  The Holder acknowledges that
the  security interest granted by this Agreement is subordinated to
security interest granted to the holders of Company’s 9% Senior Secured
Convertible Debentures in the aggregate principal amount of
$2,150,000.

    

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

    

    (Signature
pages to Follow)

    

    

    

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

     

    

    

    

    

    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.

     

    
      
        	 	HEALTHCARE PROVIDERS DIRECT,
      INC.	 
	 	 	 	 
	
                Date

              	
                By:
      

              	/s/ 	 
	 	 	Name:
      Norman Proulx	 
	 	 	Title:
      Chief Executive Officer	 
	 	 	 	 

      

      Facsimile
No. for delivery of Notices: _______________

    

     

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

     

     

    ANNEX
A

    

    NOTICE
OF CONVERSION

    

    

    The undersigned hereby elects to
convert principal under the 12% Subordinated Secured Convertible Debenture due
May __, 2009 of Healthcare Providers Direct, Inc., 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:

    

    Payment
of Interest in Common Stock __ yes  __ no

     

    If yes,
$_____ of Interest Accrued on Account of Conversion at Issue.

    

    Number of
shares of Common Stock to be issued:

    

    

    Signature:___________________________________

    

    Name:______________________________________

    

    Address
for Delivery of Common Stock Certificates:

    

    Or

    

    DWAC Instructions:

    

    Broker
No:                                                      

    Account
No:                                                      

    

     

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

     

    Schedule
1

    

    CONVERSION
SCHEDULE

    

    The 12%
Subordinated Secured Convertible Debenture due on May __, 2008 in the original
principal amount of $____________ is issued by Healthcare Providers Direct, 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

            
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      

    

     

     

    
 

    

    15ex42.htm

Exhibit 4.2

    THE
SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”) OR ANY STATE SECURITIES OR “BLUE
SKY LAWS,” AND MAY NOT BE OFFERED, SOLD, TRANSFERRED, ASSIGNED, PLEDGED OR
HYPOTHECATED ABSENT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR
COMPLIANCE WITH RULE 144 PROMULGATED UNDER SUCH ACT, OR UNLESS THE COMPANY HAS
RECEIVED AN OPINION OF COUNSEL, REASONABLY SATISFACTORY TO THE COMPANY AND ITS
COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED

     

    Right to
Purchase up to ____ Shares of Common Stock of

     

    Healthcare
Providers Direct Inc.

     

    (subject
to adjustment as provided herein)

     

    COMMON
STOCK PURCHASE WARRANT

     

    
      	
              No.:
      2008-________

            	
              Issue
      Date:  ________, 2008

            

    

    

    HEALTHCARE
PROVIDERS DIRECT INC., a corporation organized under the laws of the State of
Nevada (“HPD”), hereby certifies that, for value received, _______, or permitted
assigns (the “Holder”), is entitled, subject to the terms set forth below, to
purchase from the Company (as defined herein) from and after the Issue Date of
this Warrant and at any time or from time to time before 5:00 p.m., New York
time, through the close of business __________, 2013 (the “Expiration Date”), up
to _____1 fully paid and nonassessable shares
of Common Stock (as hereinafter defined), $0.001 par value per share, at an
exercise price per share equal to $0.25, (“Exercise Price”).  The
number and character of such shares of Common Stock and the applicable Exercise
Price per share are subject to adjustment as provided herein.

     

    As used
herein the following terms, unless the context otherwise requires, have the
following respective meanings:

     

    (a)           The
term “Company” shall include HPD and any corporation which shall succeed, or
assume the obligations of, HPD hereunder.

     

    (b)           The
term “Common Stock” includes (i) the Company's common stock, par value $0.001
per share; and (ii) any other securities into which or for which any of the
securities described in the preceding clause (i) may be converted or exchanged
pursuant to a plan of recapitalization, reorganization, merger, sale of assets
or otherwise.

     

    (c)           The
term “Subscription Agreement” shall mean the subscription agreement by and
between the original Holder hereof and the Company.

     

    1. Exercise of
Warrant.

     

    
      	
              1.1  

            	
              Number of Shares
      Issuable upon Exercise.  From and after the date hereof
      through and including the Expiration Date, the Holder shall be entitled to
      receive, upon exercise of this Warrant in whole or in part, by delivery of
      an original or fax copy of an exercise notice in the form attached hereto
      as Exhibit
      A (the “Exercise Notice”) and the Company shall have
      received  payment of the aggregate Exercise Price of the shares
      thereby purchased by wire transfer or cashier’s check drawn on a United
      States bank, shares of Common Stock of the Company, subject to adjustment
      pursuant to Sections 4 and 5.

            

    

     

    
      
         

      

      
        1

        
          

        

      

      
         

      

    

     

    
      	
              1.2  

            	
              Fair Market
      Value.  For purposes hereof, the “Fair Market Value” of a
      share of Common Stock as of a particular date (the “Determination Date”)
      shall mean:

            

    

     

    (a) If the
Common Stock is traded on the American Stock Exchange or another national
exchange or is quoted on the National or Capital Market of The Nasdaq Stock
Market, Inc. (“Nasdaq”), then the closing or last sale price, respectively,
reported for the last business day immediately preceding the Determination
Date.

     

    (b) If the
Common Stock is not traded on the American Stock Exchange or another national
exchange or on the Nasdaq but is traded over the counter, then the mean of the
average of the closing bid and asked prices reported for the last business day
immediately preceding the Determination Date.

     

    (c) Except as
provided in clause (d) below, if the Common Stock is not publicly traded, then
as the Holder and the Company agree or in the absence of agreement by
arbitration in accordance with the rules then in effect of the American
Arbitration Association, before a single arbitrator to be chosen by the Holder
and the Company from a panel of persons qualified by education and training to
pass on the matter to be decided.

     

    (d) If the
Determination Date is the date of a liquidation, dissolution or winding up, or
any event deemed to be a liquidation, dissolution or winding up pursuant to the
Company's charter, then all amounts to be payable per share to holders of the
Common Stock pursuant to the charter in the event of such liquidation,
dissolution or winding up, plus all other amounts to be payable per share in
respect of the Common Stock in liquidation under the charter, assuming for the
purposes of this clause (d) that all of the shares of Common Stock then issuable
upon exercise of the Warrant are outstanding at the Determination
Date.

     

    
      	
              1.3  

            	
              Company
      Acknowledgment.  The Company will, at the time of the
      exercise of the Warrant, upon the request of the Holder hereof acknowledge
      in writing its continuing obligation to afford to such Holder any rights
      to which such Holder shall continue to be entitled after such exercise in
      accordance with the provisions of this Warrant. If the Holder shall fail
      to make any such request, such failure shall not affect the continuing
      obligation of the Company to afford to such Holder any such
      rights.

            

    

     

    
      	
              1.4  

            	
              Trustee for Warrant
      Holders.  In the event that a bank or trust company shall
      have been appointed as trustee for the Holders of the Warrants pursuant to
      Subsection 3.2, such bank or trust company shall have all the powers and
      duties of a warrant agent (as hereinafter described) and shall accept, in
      its own name for the account of the Company or such successor person as
      may be entitled thereto, all amounts otherwise payable to the Company or
      such successor, as the case may be, on exercise of this Warrant pursuant
      to this Section 1.

            

    

     

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

     

    2. Procedure for
Exercise.

     

    The
Company agrees that the shares of Common Stock purchased upon exercise of this
Warrant shall be deemed to be issued to the Holder as the record owner of such
shares as of the close of business on the date on which the Company shall have
received such Holder’s Exercise Notice and payment made for such shares in
accordance herewith.  As soon as practicable after the exercise of
this Warrant in full or in part, and in any event within five (5) business days
thereafter, the Company at its expense (including the payment by it of any
applicable issue taxes) will cause to be issued in the name of and delivered to
the Holder, or as such Holder (upon payment by such Holder of any applicable
transfer taxes) may direct in compliance with applicable securities laws, a
certificate or certificates for the number of duly and validly issued, fully
paid and nonassessable shares of Common Stock to which such Holder shall be
entitled on such exercise, plus, in lieu of any fractional share to which such
Holder would otherwise be entitled, cash equal to such fraction multiplied by
the then Fair Market Value of one full share, together with any other stock or
other securities and property (including cash, where applicable) to which such
Holder is entitled upon such exercise pursuant to Section 1 or
otherwise.  In the event the Company elects not, or is unable, to make
such cash payment, the Company shall issue to the Holder, in lieu of the final
fraction of a share, one whole share of Common Stock.  Notwithstanding
anything herein to the contrary, the Holder shall not be required to physically
surrender this Warrant to the Company until the Holder has purchased all of the
Warrant Shares available hereunder and the Warrant has been exercised in full,
in which case, the Holder shall surrender this Warrant to the Company for
cancellation within three (3) business days of the date the final Notice of
Exercise is delivered to the Company.  Partial exercises of this
Warrant resulting in purchases of a portion of the total number of Warrant
Shares available hereunder shall have the effect of lowering the outstanding
number of Warrant Shares purchasable hereunder in an amount equal to the
applicable number of Warrant Shares purchased.  The Holder and any assignee, by
acceptance of this Warrant, acknowledge and agree that, by reason of the
provisions of this paragraph, following the purchase of a portion of the Warrant
Shares hereunder, the number of Warrant Shares available for purchase hereunder
at any given time may be less than the amount stated on the face
hereof.

     

    3. Effect of Reorganization,
Etc.; Adjustment of Exercise Price.

     

    
      	
              3.1  

            	
              Reorganization,
      Consolidation, Merger, Etc.  In case at any time or from
      time to time, the Company shall (a) effect a reorganization, (b)
      consolidate with or merge into any other person, or (c) transfer all or
      substantially all of its properties or assets to any other person under
      any plan or arrangement contemplating the dissolution of the Company,
      then, in each such case, as a condition to the consummation of such a
      transaction, proper and adequate provision shall be made by the Company
      whereby the Holder of this Warrant, on the exercise hereof as provided in
      Section 1 at any time after the consummation of such reorganization,
      consolidation or merger or the effective date of such dissolution, as the
      case may be, shall receive, in lieu of the Common Stock issuable on such
      exercise prior to such consummation or such effective date, the stock and
      other securities and property (including cash) to which such Holder would
      have been entitled upon such consummation or in connection with such
      dissolution, as the case may be, if such Holder had so exercised this
      Warrant, immediately prior thereto, all subject to further adjustment
      thereafter as provided in Section
4.

            

    

     

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

     

    
      	
              3.2  

            	
              Dissolution.  In
      the event of any dissolution of the Company following the transfer of all
      or substantially all of its properties or assets, the Company,
      concurrently with any distributions made to holders of its Common Stock,
      shall at its expense deliver or cause to be delivered to the Holder the
      stock and other securities and property (including cash, where applicable)
      receivable by the Holder of the Warrant pursuant to Section 3.1, or, if
      the Holder shall so instruct the Company, to a bank or trust company
      specified by the Holder and having its principal office in New York, NY as
      trustee for the Holder of the Warrant (the
  “Trustee”).

            

    

     

    
      	
              3.3  

            	
              Continuation of
      Terms.  Upon any reorganization, consolidation, merger or
      transfer (and any dissolution following any transfer) referred to in this
      Section 3, this Warrant shall continue in full force and effect and the
      terms hereof shall be applicable to the shares of stock and other
      securities and property receivable on the exercise of this Warrant after
      the consummation of such reorganization, consolidation or merger or the
      effective date of dissolution following any such transfer, as the case may
      be, and shall be binding upon the issuer of any such stock or other
      securities, including, in the case of any such transfer, the person
      acquiring all or substantially all of the properties or assets of the
      Company, whether or not such person shall have expressly assumed the terms
      of this Warrant as provided in Section 4.  In the event this
      Warrant does not continue in full force and effect after the consummation
      of the transactions described in this Section 3, then the Company's
      securities and property (including cash, where applicable) receivable by
      the Holders of the Warrant will be delivered to Holder or the Trustee as
      contemplated by Section 3.2.

            

    

     

    
      	
              3.4  

            	
              Extraordinary Events
      Regarding Common Stock.  In the event that the Company
      shall (a) issue additional shares of the Common Stock as a dividend or
      other distribution on outstanding Common Stock, (b) subdivide its
      outstanding shares of Common Stock, or (c) combine its outstanding shares
      of Common Stock into a smaller number of shares of the Common Stock, then,
      in each such event, the Exercise Price shall, simultaneously with the
      happening of such event, be adjusted by multiplying the then Exercise
      Price by a fraction, the numerator of which shall be the number of shares
      of Common Stock outstanding immediately prior to such event and the
      denominator of which shall be the number of shares of Common Stock
      outstanding immediately after such event, and the product so obtained
      shall thereafter be the Exercise Price then in effect. The Exercise Price,
      as so adjusted, shall be readjusted in the same manner upon the happening
      of any successive event or events described herein in this Section
      3.  The number of shares of Common Stock that the Holder of this
      Warrant shall thereafter, on the exercise hereof as provided in Section 1,
      be entitled to receive shall be increased to a number determined by
      multiplying the number of shares of Common Stock that would otherwise (but
      for the provisions of this Section 3) be issuable on such exercise by a
      fraction of which (a) the numerator is the Exercise Price that would
      otherwise (but for the provisions of this Section 3) be in effect, and (b)
      the denominator is the Exercise Price in effect on the date of such
      exercise.

            

    

     

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

     

    3.5 Share Issuance Below
Exercise Price.  Except for an Excepted Issuance (as defined in
the Subscription Agreement), for a period of twelve (12) months from the Final
Closing, in the event that the Company shall issue any Common Stock, prior to
the complete exercise of this Warrant for a consideration less than the Exercise
Price that would be in effect at the time of such issue, then, and thereafter
successively upon each such issue, the Exercise Price shall be reduced to such
other lower issue price. For purposes of this adjustment, the issuance of any
security or debt instrument of the Company carrying the right to convert such
security or debt instrument into Common Stock or of any warrant, right or option
to purchase Common Stock shall result in an adjustment to the Exercise Price
upon the issuance of the above-described security, debt instrument, warrant,
right, or option and again at any time upon any subsequent issuances of shares
of Common Stock upon exercise of such conversion or purchase rights if such
issuance is at a price lower than the Exercise Price in effect upon such
issuance. The reduction of the Exercise Price described in this Section 3.5 is
in addition to the other rights of the Holder described in the Subscription
Agreement.

    

     

    4. Certificate as to
Adjustments.  In each case of any adjustment or readjustment in
the Exercise Price or the shares of Common Stock issuable on the exercise of the
Warrant, the Company at its expense will promptly cause its Chief Financial
Officer or other appropriate designee to compute such adjustment or readjustment
in accordance with the terms of the Warrant and prepare a certificate setting
forth such adjustment or readjustment and showing in detail the facts upon which
such adjustment or readjustment is based, including a statement of (a) the
consideration received or receivable by the Company for any additional shares of
Common Stock issued or sold or deemed to have been issued or sold, (b) the
number of shares of Common Stock outstanding or deemed to be outstanding, and
(c) the Exercise Price and the number of shares of Common Stock to be received
upon exercise of this Warrant, in effect immediately prior to such adjustment or
readjustment and as adjusted or readjusted as provided in this
Warrant.  The Company will forthwith mail a copy of each such
certificate to the Holder and any Warrant agent of the Company (appointed
pursuant to Section 9 hereof).

     

    5. Reservation of Common Stock
Issuable on Exercise of Warrant.  The Company will at all times
reserve and keep available, solely for issuance and delivery on the exercise of
the Warrant, shares of Common Stock from time to time issuable on the exercise
of the Warrant.

     

    6. Conversion
Limitations.  The Corporation shall not effect any exercise of
this Warrant, and a Holder shall not have the right to convert any portion of
this Warrant, to the extent that after giving effect to the exercise set forth
on the applicable Exercise Notice, such Holder (together with such Holder’s
Affiliates, and any other person or entity acting as a group together with such
Holder or any of such 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 such Holder and its Affiliates shall include the number of shares of Common
Stock issuable upon exercise of this Warrant with respect to which such
determination is being made, but shall exclude the number of shares of Common
Stock which are issuable upon (A) exercise of the remaining, unexercised
Warrants beneficially owned by such Holder or any of its Affiliates and (B)
exercise or conversion of the unexercised or unconverted portion of any other
securities of the Corporation subject to a limitation on conversion or exercise
analogous to the limitation contained herein (including, without limitation, any
debentures or other warrants to purchase shares of Common Stock) beneficially
owned by such Holder or any of its Affiliates.  Except as set forth in the
preceding sentence, for purposes of this Section 6, 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 6 applies, the determination of whether
this Warrant is exercisable (in relation to other securities owned by such
Holder together with any Affiliates) and of which shares of Common Stock into
which this Warrant is exercisable shall be in the sole discretion of such
Holder, and the submission of a Exercise Notice shall be deemed to be such
Holder’s determination of whether this Warrant may be exercised (in relation to
other securities owned by such Holder together with any Affiliates) and which
shares of Common Stock into which this Warrant is exercisable, in each case
subject to such aggregate percentage limitations. To ensure compliance with this
restriction, each Holder will be deemed to represent to the Corporation each
time it delivers an Exercise Notice that such form has not violated the
restrictions set forth in this paragraph and the Corporation 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 6, in determining the number of outstanding shares of
Common Stock, a Holder may rely on the number of outstanding shares of Common
Stock as stated in the most recent of the following: (A) the Corporation’s most
recent Form 10-QSB or Form 10-KSB, as the case may be; (B) a public announcement
by the Corporation; or (C) a notice by the Corporation or the Corporation’s
transfer agent.  Upon the written or oral request of a Holder, the
Corporation shall within two Trading Days confirm orally and in writing to such
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 Corporation,
including this Warrant, by such 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% or 9.99% (depending on the
Holder’s blocker provision election set forth on such Holder’s signature page to
the Purchase Agreement) of the number of shares of the Common Stock outstanding
immediately after giving effect to the issuance of shares of Common Stock
issuable upon exercise of this Warrant held by the Holder.  The Beneficial
Ownership Limitation provisions of this Section 6 may be waived by such Holder,
at the election of such Holder, upon not less than 61 days’ prior notice to the
Corporation, to change the Beneficial Ownership Limitation to 9.99%, if Holder’s
initial Beneficial Ownership Limitation was 4.99%, of the number of shares of
Common Stock outstanding immediately after giving effect to the issuance of
shares of Common Stock upon exercise of this Warrant held by the Holder, and the
provisions of this Section 6 shall continue to apply.  Upon such a
change by a Holder of the Beneficial Ownership Limitation from such 4.99%
limitation to such 9.99% limitation, the Beneficial Ownership Limitation may not
be further waived by such Holder.  The provisions of this paragraph
shall be construed and implemented in a manner otherwise than in strict
conformity with the terms of this Section 6 to correct this paragraph (or any
portion hereof) which may be defective or inconsistent with the intended
Beneficial Ownership Limitation herein contained 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 Warrant.

     

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

     

    7. Assignment; Exchange of
Warrant.  Subject to compliance with applicable securities
laws, this Warrant, and the rights evidenced hereby, may be transferred by any
registered Holder hereof (a “Transferor”) in whole or in part.  On the
surrender for exchange of this Warrant, with the Transferor's endorsement in the
form of Exhibit B attached hereto (the “Transferor Endorsement Form”) and
together with evidence reasonably satisfactory to the Company demonstrating
compliance with applicable securities laws, which shall include, without
limitation, the provision of a legal opinion from the Transferor's or Company’s
counsel (at the Company’s expense) that such transfer is exempt from the
registration requirements of applicable securities laws, and with payment by the
Transferor of any applicable transfer taxes) will issue and deliver to or on the
order of the Transferor thereof a new Warrant of like tenor, in the name of the
Transferor and/or the transferee(s) specified in such Transferor Endorsement
Form (each a “Transferee”), calling in the aggregate on the face or faces
thereof for the number of shares of Common Stock called for on the face or faces
of the Warrant so surrendered by the Transferor.

     

    8. Replacement of
Warrant.  On receipt of evidence reasonably satisfactory to the
Company of the loss, theft, destruction or mutilation of this Warrant and, in
the case of any such loss, theft or destruction of this Warrant, on delivery of
an indemnity agreement or security reasonably satisfactory in form and amount to
the Company or, in the case of any such mutilation, on surrender and
cancellation of this Warrant, the Company at its expense will execute and
deliver, in lieu thereof, a new Warrant of like tenor.

     

    9. Warrant
Agent.  The Company may, by written notice to each Holder of
Warrants, appoint an agent for the purpose of issuing Common Stock on the
exercise of this Warrant pursuant to Section 1, exchanging this Warrant pursuant
to Section 7, and replacing this Warrant pursuant to Section 8, or any of the
foregoing, and thereafter any such issuance, exchange or replacement, as the
case may be, shall be made at such office by such agent.

     

    10. Transfer on the Company's
Books.  Until this Warrant is transferred on the books of the
Company, the Company may treat the registered Holder hereof as the absolute
owner hereof for all purposes, notwithstanding any notice to the
contrary.

     

    11. Notices,
Etc.  All notices and other communications from the Company to
Holder shall be mailed by first class registered or certified mail, postage
prepaid, or sent via facsimile, at such address or facsimile number as may have
been furnished to the Company in writing by such Holder or, until any such
Holder furnishes to the Company an address or facsimile number, then to, and at
the address or facsimile number of, the last Holder of this Warrant who has so
furnished an address or facsimile number to the Company.

     

    
      
         

      

      
        6

        
          

        

      

      
         

      

    

     

    12. Miscellaneous.  This
Warrant and any term hereof may be changed, waived, discharged or terminated
only by an instrument in writing signed by the party against which enforcement
of such change, waiver, discharge or termination is sought. This Warrant shall
be governed by and construed in accordance with the laws of State of New York
without regard to principles of conflicts of laws.  Any action brought
concerning the transactions contemplated by this Warrant shall be brought only
in the state courts of New York or in the federal courts located in the state of
New York; provided, however, that the Holder may choose to waive this provision
and bring an action outside the state of New York.  The individuals
executing this Warrant on behalf of the Company agree to submit to the
jurisdiction of such courts and waive trial by jury.  The prevailing
party shall be entitled to recover from the other party its reasonable
attorney's fees and costs.  In the event that any provision of this
Warrant is invalid or unenforceable under any applicable statute or rule of law,
then such provision shall be deemed inoperative to the extent that it may
conflict therewith and shall be deemed modified to conform with such statute or
rule of law.  Any such provision which may prove invalid or
unenforceable under any law shall not affect the validity or enforceability of
any other provision of this Warrant.  The headings in this Warrant are
for purposes of reference only, and shall not limit or otherwise affect any of
the terms hereof.  The invalidity or unenforceability of any provision
hereof shall in no way affect the validity or enforceability of any other
provision hereof.  The Company acknowledges that legal counsel
participated in the preparation of this Warrant and, therefore, stipulates that
the rule of construction that ambiguities are to be resolved against the
drafting party shall not be applied in the interpretation of this Warrant to
favor any party against the other party.

     

    13. Registration
Rights. The shares of Common Stock issuable upon exercise of this
Warrant are entitled to the “piggyback” registration rights set forth in the
Subscription Agreement.  All terms, representations, warranties and
covenants of the Subscription Agreement are incorporated by reference
herein.

     

    

      

    

     

      1 Equal
the aggregate face amount of the debenture subscribed for by the Holder divided
by the conversion price of the debenture.

       

    

    
      
         

      

      
        7

        
          

        

      

      
         

      

    

    IN
WITNESS WHEREOF, the Company has executed this Warrant as of the date first
written above.

     

    
 

    
      
        	 	      
                HEALTHCARE
      PROVIDERS DIRECT INC.

              	 
	 	 	 	 
	
                 

              	
                By:
      

              	/s/ 	 
	 	Name: 	      
                Norman
      Proulx

              	 
	 	Title:	      
                Chief
      Executive Officer

              	 
	 	 	 	 

      

    

    

    
      
         

      

      
        8

        
          

        

      

      
         

      

    

    EXHIBIT
A

     

    FORM
OF SUBSCRIPTION

     

    (To Be
Signed Only On Exercise Of Warrant)

     

    

    TO:          HEALTHCARE
PROVIDERS DIRECT INC.

    

    

    

    Attention: Chief Executive
Officer

    

    The
undersigned, pursuant to the provisions set forth in the attached Warrant
(No.____), hereby irrevocably elects to purchase ________ shares of the Common
Stock covered by such Warrant.

     

    The
undersigned herewith makes payment of the full Exercise Price for such shares at
the price per share provided for in such Warrant, which is
$___________.  Such payment takes the form of $__________ in lawful
money of the United States.

     

    The
undersigned requests that the certificates for such shares be issued in the name
of, and delivered to ______________________________________________ whose
address is
___________________________________________________________________________.

     

    Please
issue a new Warrant for the unexercised portion of the attached Warrant in the
name of the undersigned or in such other name as is specified
below:

     

    The
undersigned represents and warrants that all offers and sales by the undersigned
of the securities issuable upon exercise of the within Warrant shall be made
pursuant to registration of the Common Stock under the Securities Act of 1933,
as amended (the “Securities Act”) or pursuant to an exemption from registration
under the Securities Act.

     

    
      	
              Dated:

            	 
      	 
      	 
      
	 
      	 
      	
              (Signature
      must conform to name of Holder as specified on the face of the
      Warrant)

            
	 
      	 
      	 
      
	 
      	 
      	
              Address:

            	 
      
	 
      	 
      	 
      	 
      

    

    

    
      
         

      

      
        A-1

        
          

        

      

      
         

      

    

    EXHIBIT
B

     

    FORM
OF TRANSFEROR ENDORSEMENT

     

    (To Be
Signed Only On Transfer Of Warrant)

     

               For
value received, the undersigned hereby sells, assigns, and transfers unto the
person(s) named below under the heading “Transferees” the right represented by
the within Warrant to purchase the percentage and number of shares of Common
Stock of Healthcare Providers Direct Inc. into which the within Warrant relates
specified under the headings “Percentage Transferred” and “Number Transferred,”
respectively, opposite the name(s) of such person(s) and appoints each such
person Attorney to transfer its respective right on the books of National
Investment Managers Inc. with full power of substitution in the
premises.  Please issue a new Warrant for the portion of the attached
Warrant that has not been transferred in the name of the undersigned or in such
other name as is specified below:

    

    ________________________

    ________________________

    ________________________

    

     

    
      	
               

              Transferees

            	 
      	
               

              Address

            	 
      	
              Percentage

              Transferred

            	 
      	
              Number
      Transferred

            
	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      	 
      	 
      

    

    

    
      	
              Dated:

            	 
      	 
      	 
      
	 
      	 
      	
              (Signature
      must conform to name of Holder as specified on the face of the
      Warrant)

            
	 
      	 
      	 
      
	 
      	 
      	
              Address:

            	 
      
	 
      	 
      	 
      	 
      

    

    

    
      	 
      	
              SIGNED
      IN THE PRESENCE OF:

            
	 
      	 
      
	 
      	 
      
	 
      	
              (Name)

            
	
              ACCEPTED
      AND AGREED:

            	 
      
	
              [TRANSFEREE]

            	 
      
	 
      	 
      
	
              (Name)

            	 
      

    

    
 

    B-1

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00143-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00143-of-00352.parquet"}]]