Well, in my opinion, it's like kicking the person when they are down. In many situations I'm sure the price per share is higher and therefore the dilution is a lot less damaging and acceptable to the company and shareholders, but not in this case at .0001. The lenders WILL get their money, and probably even with fat interest if they could "work with the company". They probably would also build a better reputation in the industry so that other companies would come to them for lending. Again, I know they are in the business of making money, but they could also be flexible and make money at the same time, if that is possible.
Think about it, credit card companies do that with people with bad credit, is this that much different? Do a deal, do something, but manage the dilution for all to benefit.
I would hope that the company has been open with their struggles and has tried to reach out to the lender(s), it would only make logical sense that they would do so instead of succumbing to dilution. We have in fact seen that occur with the large consolidation of loans in the fall (see the 8-Ks), so it IS possible.
