XECHEM INTERNATIONAL, INC.
TERM SHEET FOR $1,000,000 BRIDGE LOAN AND DEBT RESTRUCTURING
AUGUST 25, 2005
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New Debt
The Company will issue
convertible notes for
$1,000,000 (the
"Investment") to Ms. Chassman and
investors introduced to the Company by Ms. Chassman (collectively,
the "Investors") The Investors
will fund $100,000 within 24 hours of execution of this Term Sheet, $400,000 on or before
September 6, 2005 and $500,000 on or before October 6, 2005,
provided however, that the Investors
shall have
the right to extend the date for full funding of the September and October
installments by up to
7 days each. The monies shall be evidenced by convertible
notes due April
6, 2007 (the "Notes").
The Notes will bear simple interest at 8% per annum , which
shall accrue
and be due on
maturity. The Notes
may be prepaid in whole or part without penalty at any time
through January 31,
2006 and thereafter
on 5 business
days' advance notice, subject to the
Investors' right to convert the Notes from debt to equity at any
time prior to the effective date
of the prepayment.
The principal plus
accrued unpaid
interest of the Notes will be convertible
into the Company's
$0.00001 par value common stock prior to February 1, 2006 based upon a
conversion factor of 5
cents per share, and
thereafter at a
conversion factor of
one cent per
share. The Notes will
be secured by a
collateral
pledge of the
Company's allocation of tax
credits for fiscal 2004 from the State of New Jersey; the Company
will be permitted to sell those
credits, however the
proceeds of such sale shall be applied toward a mandatory
prepayment of the
Notes (pro rated among them based on the total principal plus unpaid interest with respect to
each
of the Notes);
provided further, that
if less than the full $1,000,000 is funded, then the
collateral pledge (and corresponding mandatory prepayment) will be reduced down
proportionately
(for example if only $500,000 is funded, then only half of the tax
credits and proceeds therefrom
will collateralize the loan). The Company will not be obligated to
register the shares underlying
the convertible notes. To the extent Xechem lacks sufficient
authorized unissued common stock for
conversion of the notes to shares, it will take t
