Xechem International, Inc. $1,000,000 Bridge Loan and Debt Restructuring Term Sheet with Marjorie Chassman and Investors (August 25, 2005)

Summary

Xechem International, Inc. is entering into a $1,000,000 bridge loan agreement with Marjorie Chassman and other investors she introduces. The investors will provide funds in installments, receiving convertible notes with 8% interest, due April 2007, and the right to convert the debt into Xechem’s common stock at set prices. The notes are secured by tax credits, and additional shares are issued for each $100,000 funded. The agreement also restructures existing debt owed to Chassman and affiliates, adjusting conversion terms based on stock price performance. Legal fees are covered if the full loan is funded.

EX-10.1 2 v025014_ex10-1.txt XECHEM INTERNATIONAL, INC. TERM SHEET FOR $1,000,000 BRIDGE LOAN AND DEBT RESTRUCTURING AUGUST 25, 2005 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 the necessary steps to obtain approval for the issuance of the same as promptly as practicable, and in the interim shall issue shares of Series C Preferred Stock with a conversion ratio of 1,000,000 shares of common stock for each share of Series C Stock, which shares shall have a Stated Value of $0.00001 per share and shall be mandatorily convertible into common stock as soon as the necessary underlying common stock is authorized. Registration Rights None; however, the Company will work with the Investors with respect to delivering the Rule 144 eligibility opinions for outstanding debt conversions resulting in proposed share sales from time to time, provided the seller meets the necessary Rule 144 requirements.

Issuance of Shares For each $100,000 of principal amount of the Notes that is funded, the Company shall issue 1,500,000 shares of its common stock to the Investor funding the same (prorated for fractional amounts),which would result in 15,000,000 shares in the aggregate if the full loan is funded. These shares will be privately issued and not subject to registration rights. Failure to Timely Fund the Loan Should the Investors fail to timely fund the loan as set forth in the schedule above, the conversion ratio for the Restructuring referenced below will revert to the conversion ratio in effect as if this transaction were not consummated. Restructuring At the Closing the conversion price on all outstanding loans (principal plus accrued interest) owing from the Company to Marjorie Chassman, The Harbor Trust or any of their respective affiliates (the "Old Debt"), will be reset to $0.0075 per share; provided further that if the closing price of the Company's common stock as quoted on the Over the Counter Bulletin Board reaches $0.03 per share at any time from the date hereof through January 31, 2006, then: (1) the conversion price for the Old Debt will be reset to $0.01 per share,; and (2) to the extent any of the Old Debt was converted to common stock during the period from the date hereof through January 31, the Company shall cancel the principal amount of the remaining outstanding Old Debt by an amount equal to the additional amount of principal that would have had to have been converted to equity to yield the number of shares that were issued due to the prior conversions if all of the conversions had been effected at $0.01 per share, rather than $0.0075 per share. The holders of the Old Debt will agree to not convert at least 50% of the principal amount of the Old Debt until it is either determined that the $0.03 per share price was not met during the requisite time period or if met, until the necessary principal cancellation has been effected. Legal Fees Company to pay legal fees of one counsel selected by the Investors, not to exceed $7,500, provided that no such fees shall be payable unless the full loan amount is funded.

This Agreement shall constitute a binding agreement among the parties with respect to the subject matter hereof with the parties to use good faith efforts to prepare definitive documentation as quickly as practicable subject to the foregoing. This Agreement supersedes all other drafts of the Agreement. AGREED TO: AGREED TO: XECHEM INTERNATIONAL, INC. ------------------------------------ MARJORIE CHASSMAN By: -------------------------- Ramesh C. Pandey, PhD, CEO