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Thursday, November 02, 2006

China Expert Technologies (CXTI) makes agreement with debenture holders

CXTI (combined links) press release.

The debenture holders ("Holders"):
Alpha Capital AG, DKR Soundshore Oasis Holding Fund, Ltd., Ellis International, Platinum Partners Advisors, LLC, and Platinum Long Term Growth I, LLC

$6 million face amount, 7% "toxic" convertibles, due/payable on Halloween 2006. Some was converted. $4.4 million remained. The Holders have the right to extend the due date to April 30, 2007, no interest. All of them chose to extend. Detoxified. Conversion price fixed at $1.80, which is what they almost certainly would have gotten anyway, given the stock price, business performance, and previous terms.

CXTI defaulted by failing to get a registration statement effective 200 days after the deal was made last Halloween. The Holders agreed to accept payment for damages of 614K shares of restricted stock. The Holders waive other rights and remedies. Here's the damage allocation.

The overall amendment. One of the signatures is from "Platinum Partners Long Term Growth".

Various Holders are entitled to sell about 1.8 million shares.

Here's the original agreement. Section 8 deals with defaults. Paragraph a) ix deals with the 200 day limit on the registration statement. Subsection b) deals with remedies upon default. The principal and accrued interest is due immediately if elected by the Holders [yeah, I know, I'm mixing definitions from two different contracts]. Payable in stock at what would be $1.80 for a total of at least $1 meeellion dollars, or 556K shares. So they got an extra $100K?

I'm not sure why CXTI didn't get the registration in time. Maybe there were hoops that they couldn't jump in time. But I also wonder why the Holders accepted the extension. Perhaps they're interested in the company's long term value? I don't know.

I continue to own the stock.

UPDATE Nov 3, 2006:
Lecontinental is correct, even my own notes here show only two debenture holders remaining.

there is only 2 debt holders left.
The 8-K shows signatures by Alpha Capital, DKR Soundshore Oasis, Ellis International, Platinum Partners Advisors, and Platinum Partners Long Term Growth I. The exhibit also shows all of them receiving shares as damages and the 8-K says everyone holding debt at the closing elected to extend. Did I miss something?
yes read the last Q report. The reason why the 5 holders received damages is because at the time of the default there was 5 holders. Since then things have changed. 2 are left, as the lead, Platinum should be one of them and I don't know who is the other one, but who cares? Lecontinental:)
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