EXHIBIT 10.14
THIS NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES LAWS. THIS NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF
THIS NOTE MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS NOTE AND THE COMMON
SHARES ISSUABLE UPON CONVERSION OF THIS NOTE UNDER SAID ACT AND ANY APPLICABLE
STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO AMS
HEALTH SCIENCES, INC. THAT SUCH REGISTRATION IS NOT REQUIRED.
SECURED CONVERTIBLE TERM NOTE
FOR VALUE RECEIVED, AMS Health Sciences, Inc., an Oklahoma corporation (the
"Company"), promises to pay to LAURUS MASTER FUND, LTD., c/o M&C Corporate
Services Limited, P.O. Box 309 GT, ▇▇▇▇▇▇ House, South Church Street, ▇▇▇▇▇▇
Town, Grand Cayman, Cayman Islands, Fax: ▇▇▇-▇▇▇-▇▇▇▇ (the "Holder") or its
registered assigns or successors in interest, the sum of Two Million Dollars
($2,000,000), together with any accrued and unpaid interest hereon, on June 28,
2009 (the "Maturity Date") if not sooner paid.
Capitalized terms used herein without definition shall have the meanings
ascribed to such terms in that certain Securities Purchase Agreement dated as of
the date hereof by and between the Company and the Holder (as amended, modified
and/or supplemented from time to time, the "Purchase Agreement").
The following terms shall apply to this Secured Convertible Term Note (this
"Note"):
ARTICLE I CONTRACT RATE AND AMORTIZATION
1.1 Contract Rate. Subject to Sections 4.2 and 5.10, interest payable on
the outstanding principal amount of this Note (the "Principal Amount") shall
accrue at a rate per annum equal to the "prime rate" published in The Wall
Street Journal from time to time (the "Prime Rate"), plus three percent (3.0%)
(the "Contract Rate"). The Contract Rate shall be increased or decreased as the
case may be for each increase or decrease in the Prime Rate in an amount equal
to such increase or decrease in the Prime Rate; each change to be effective as
of the day of the change in the Prime Rate. The Contract Rate shall not at any
time be less than ten percent (10%). Interest shall be (i) calculated on the
basis of a 360 day year, and (ii) payable monthly, in arrears, commencing on
July1, 2006, on the first business day of each consecutive calendar month
thereafter through and including the Maturity Date, and on the Maturity Date,
whether by acceleration or otherwise.
1.2 Contract Rate Payments. The Contract Rate shall be calculated on the
last business day of each calendar month hereafter (other than for increases or
decreases in the Prime Rate which shall be calculated and become effective in
accordance with the terms of Section 1.1) until the Maturity Date.
1.3 Principal Payments. Amortizing payments of the aggregate principal
amount outstanding under this Note at any time (the "Principal Amount") shall be
made by the Company on July 1, 2007 and on the first business day of each
succeeding month thereafter through and including the Maturity Date (each, an
"Amortization Date"). Subject to Article III below, commencing on the first
Amortization Date, the Company shall make monthly payments to the Holder on each
Amortization Date, each such payment in the amount of $83,333.33 together with
any accrued and unpaid interest on such portion of the Principal Amount plus any
and all other unpaid amounts which are then owing under this Note, the Purchase
Agreement and/or any other Related Agreement (collectively, the "Monthly
Amount"). Any outstanding Principal Amount together with any accrued and unpaid
interest and any and all other unpaid amounts which are then owing by the
Company to the Holder under this Note, the Purchase Agreement and/or any other
Related Agreement shall be due and payable on the Maturity Date.
ARTICLE II
CONVERSION AND REDEMPTION
2.1 Payment of Monthly Amount.
(a) Payment in Cash or Common Stock. If the Monthly Amount (or a
portion of such Monthly Amount if not all of the Monthly Amount may be converted
into shares of Common Stock pursuant to Section 3.2) is required to be paid in
cash pursuant to Section 2.1(b), then the Company shall pay the Holder an amount
in cash equal to 100% of the Monthly Amount (or such portion of such Monthly
Amount to be paid in cash) due and owing to the Holder on the Amortization Date.
If the Monthly Amount (or a portion of such Monthly Amount if not all of the
Monthly Amount may be converted into shares of Common Stock pursuant to Section
3.2) is required to be paid in shares of Common Stock pursuant to Section
2.1(b), the number of such shares to be issued by the Company to the Holder on
such Amortization Date (in respect of such portion of the Monthly Amount
converted into shares of Common Stock pursuant to Section 2.1(b)), shall be the
number determined by dividing (i) the portion of the Monthly Amount converted
into shares of Common Stock, by (ii) the then applicable Fixed Conversion Price.
For purposes hereof, subject to Section 3.6 hereof, the initial "Fixed
Conversion Price" means $0.51.
(b) Monthly Amount Conversion Conditions. Subject to Sections 2.1(a),
2.2, and 3.2 hereof, the Holder shall convert into shares of Common Stock all or
a portion of the Monthly Amount due on each Amortization Date if the following
conditions (the "Conversion Criteria") are satisfied: (i) the average closing
price of the Common Stock as reported by Bloomberg, L.P. on the Principal Market
for the five (5) trading days immediately preceding such Amortization Date shall
be greater than or equal to 115% of the Fixed Conversion Price and (ii) the
amount of such conversion does not exceed twenty five percent (25%) of the
aggregate dollar trading volume of the Common Stock for the period of twenty-two
(22) trading days immediately preceding such Amortization Date. If subsection
(i) of the Conversion Criteria is met but subsection (ii) of the Conversion
Criteria is not met as to the entire Monthly Amount, the Holder shall convert
only such part of the Monthly Amount that meets subsection (ii) of the
Conversion Criteria. Any portion of the Monthly Amount due on an Amortization
Date that the Holder has not been able to convert into shares of Common Stock
due to the failure to meet the Conversion Criteria, shall be paid in cash by the
Company at the rate of 100% of the Monthly Amount otherwise due on such
Amortization Date, within three (3) business days of such Amortization Date.
2.2 No Effective Registration. Notwithstanding anything to the contrary
herein, none of the Company's obligations to the Holder may be converted into
Common Stock unless (a) either (i) an effective current Registration Statement
(as defined in the Registration Rights Agreement) covering the shares of Common
Stock to be issued in connection with satisfaction of such obligations exists or
(ii) an exemption from registration for resale of all of the Common Stock issued
and issuable is available pursuant to Rule 144 of the Securities Act and (b) no
Event of Default (as hereinafter defined) exists and is continuing, unless such
Event of Default is cured within any applicable cure period or otherwise waived
in writing by the Holder.
2.3 Optional Redemption in Cash. The Company may prepay this Note
("Optional Redemption") by paying to the Holder in accordance with the following
schedule:
(a) If such Optional Redemption occurs prior to the first anniversary
of the date hereof, a sum of money equal to one hundred twenty five percent
(125%) of the Principal Amount outstanding;
(b) If such Optional Redemption occurs after the first anniversary of
the date hereof but prior to the second anniversary of the date hereof, a sum of
money equal to one hundred twenty percent (120%) of the Principal Amount
outstanding; or
(c) If such Optional Redemption occurs after the second anniversary of
the date hereof but prior to the Maturity Date, a sum of money equal to one
hundred fifteen percent (115%) of the Principal Amount outstanding;
Such payment pursuant to Section 2.3(a), (b) or (c) shall be made at such time
together with accrued but unpaid interest thereon and any and all other sums
due, accrued or payable to the Holder arising under this Note, the Purchase
Agreement or any other Related Agreement (the "Redemption Amount") outstanding
on the Redemption Payment Date (as defined below). The Company shall deliver to
the Holder a written notice of redemption (the "Notice of Redemption")
specifying the date for such Optional Redemption (the "Redemption Payment
Date"), which date shall be ten (10) business days after the date of the Notice
of Redemption (the "Redemption Period"). A Notice of Redemption shall not be
effective with respect to any portion of this Note for which the Holder has
previously delivered a Notice of Conversion (as hereinafter defined) or for
conversions elected to be made by the Holder pursuant to Article III during the
Redemption Period. The Redemption Amount shall be determined as if the Holder's
conversion elections had been completed immediately prior to the date of the
Notice of Redemption. On the Redemption Payment Date, the Redemption Amount must
be paid in good funds to the Holder. In the event the Company fails to pay the
Redemption Amount on the Redemption Payment Date as set forth herein, then such
Redemption Notice will be null and void.
ARTICLE III
HOLDER'S CONVERSION RIGHTS
3.1 Optional Conversion. Subject to the terms set forth in this Article
III, the Holder shall have the right, but not the obligation, to convert all or
any portion of the issued and outstanding Principal Amount and/or accrued
interest and fees due and payable into fully paid and nonassessable shares of
Common Stock at the Fixed Conversion Price. The shares of Common Stock to be
issued upon such conversion are herein referred to as, the "Conversion Shares."
3.2 Conversion Limitation. Notwithstanding anything herein to the contrary,
in no event shall the Holder be entitled to convert any portion of this Note in
excess of that portion of this Note upon exercise of which the sum of (1) the
number of shares of Common Stock beneficially owned by the Holder and its
Affiliates (other than shares of Common Stock which may be deemed beneficially
owned through the ownership of the unconverted portion of this Note or the
unexercised or unconverted portion of any other security of the Holder subject
to a limitation on conversion analogous to the limitations contained herein) and
(2) the number of shares of Common Stock issuable upon the conversion of the
portion of this Note with respect to which the determination of this proviso is
being made, would result in beneficial ownership by the Holder and its
Affiliates of any amount greater than 4.99% of the then outstanding shares of
Common Stock (whether or not, at the time of such conversion, the Holder and its
Affiliates beneficially own more than 4.99% of the then outstanding shares of
Common Stock). As used herein, the term "Affiliate" means any person or entity
that, directly or indirectly through one or more intermediaries, controls or is
controlled by or is under common control with a person or entity, as such terms
are used in and construed under Rule 144 under the Securities Act. For purposes
of the proviso to the second preceding sentence, beneficial ownership shall be
determined in accordance with Section 13(d) of the Securities Exchange Act of
1934, as amended, and Regulations 13D-G thereunder, except as otherwise provided
in clause (1) of such proviso. The limitations set forth herein (x) may be
waived by the Holder upon provision of no less than sixty-one (61) days prior
notice to the Company and (y) shall automatically become null and void (i)
following notice to the Company upon the occurrence and during the continuance
of an Event of Default, or (ii) upon receipt by the Holder of a Notice of
Redemption.
3.3 Mechanics of ▇▇▇▇▇▇'s Conversion. In the event that the Holder elects
to convert this Note into Common Stock, the Holder shall give notice of such
election by delivering an executed and completed notice of conversion in
substantially the form of Exhibit A hereto (appropriate completed) ("Notice of
Conversion") to the Company and such Notice of Conversion shall provide a
breakdown in reasonable detail of the Principal Amount, accrued interest and
fees that are being converted. On each Conversion Date (as hereinafter defined)
and in accordance with its Notice of Conversion, the Holder shall make the
appropriate reduction to the Principal Amount, accrued interest and fees as
entered in its records and shall provide written notice thereof to the Company
within two (2) business days after the Conversion Date. Each date on which a
Notice of Conversion is delivered or telecopied to the Company in accordance
with the provisions hereof shall be deemed a Conversion Date (the "Conversion
Date"). Pursuant to the terms of the Notice of Conversion, the Company will
issue instructions to the transfer agent accompanied by an opinion of counsel
within two (2) business days of the date of the delivery to the Company of the
Notice of Conversion and shall cause the transfer agent to transmit the
certificates representing the Conversion Shares to the Holder by crediting the
account of the Holder's designated broker with the Depository Trust Corporation
("DTC") through its Deposit Withdrawal Agent Commission ("DWAC") system within
three (3) business days after receipt by the Company of the Notice of Conversion
(the "Delivery Date"). In the case of the exercise of the conversion rights set
forth herein the conversion privilege shall be deemed to have been exercised and
the Conversion Shares issuable upon such conversion shall be deemed to have been
issued upon the date of receipt by the Company of the Notice of Conversion. The
Holder shall be treated for all purposes as the record holder of the Conversion
Shares, unless the Holder provides the Company written instructions to the
contrary.
3.4 Late Payments. The Company understands that a delay in the delivery of
the Conversion Shares in the form required pursuant to this Article beyond the
Delivery Date could result in economic loss to the Holder. As compensation to
the Holder for such loss, in addition to all other rights and remedies which the
Holder may have under this Note, applicable law or otherwise, the Company shall
pay late payments to the Holder for any late issuance of Conversion Shares in
the form required pursuant to this Article II upon conversion of this Note, in
the amount equal to $400 per business day after the Delivery Date. The Company
shall make any payments incurred under this Section in immediately available
funds upon demand.
3.5 Conversion Mechanics. The number of shares of Common Stock to be issued
upon each conversion of this Note shall be determined by dividing that portion
of the principal and interest and fees to be converted, if any, by the then
applicable Fixed Conversion Price. In the event of any conversions of a portion
of the outstanding Principal Amount pursuant to this Article III, such
conversions shall be deemed to constitute conversions of the outstanding
Principal Amount applying to Monthly Amounts for the remaining Amortization
Dates in chronological order.
3.6 Adjustment Provisions. The Fixed Conversion Price and number and kind
of shares or other securities to be issued upon conversion determined pursuant
to this Note shall be subject to adjustment from time to time upon the
occurrence of certain events during the period that this conversion right
remains outstanding, as follows:
(a) Reclassification. If the Company at any time shall, by
reclassification or otherwise, change the Common Stock into the same or a
different number of securities of any class or classes, this Note, as to the
unpaid Principal Amount and accrued interest thereon, shall thereafter be deemed
to evidence the right to purchase an adjusted number of such securities and kind
of securities as would have been issuable as the result of such change with
respect to the Common Stock (i) immediately prior to or (ii) immediately after,
such reclassification or other change at the sole election of the Holder.
(b) Stock Splits, Combinations and Dividends. If the shares of Common
Stock are subdivided or combined into a greater or smaller number of shares of
Common Stock, or if a dividend is paid on the Common Stock or any preferred
stock issued by the Company in shares of Common Stock, the Fixed Conversion
Price shall be proportionately reduced in case of subdivision of shares or stock
dividend or proportionately increased in the case of combination of shares, in
each such case by the ratio which the total number of shares of Common Stock
outstanding immediately after such event bears to the total number of shares of
Common Stock outstanding immediately prior to such event.
3.7 Reservation of Shares. During the period the conversion right exists,
the Company will reserve from its authorized and unissued Common Stock a
sufficient number of shares to provide for the issuance of Conversion Shares
upon the full conversion of this Note and the Warrant. The Company represents
that upon issuance, the Conversion Shares will be duly and validly issued, fully
paid and non-assessable. The Company agrees that its issuance of this Note shall
constitute full authority to its officers, agents, and transfer agents who are
charged with the duty of executing and issuing stock certificates to execute and
issue the necessary certificates for the Conversion Shares upon the conversion
of this Note.
3.8 Registration Rights. The Holder has been granted registration rights
with respect to the Conversion Shares as set forth in the Registration Rights
Agreement.
3.9 Issuance of New Note. Upon any partial conversion of this Note, a new
Note containing the same date and provisions of this Note shall, at the request
of the Holder, be issued by the Company to the Holder for the principal balance
of this Note and interest which shall not have been converted or paid. Subject
to the provisions of Article IV of this Note, the Company shall not pay any
costs, fees or any other consideration to the Holder for the production and
issuance of a new Note.
ARTICLE IV
EVENTS OF DEFAULT
4.1 Events of Default. The occurrence of any of the following events set
forth in this Section 4.1 shall constitute an event of default ("Event of
Default") hereunder:
(a) Failure to Pay. The Company fails to pay when due any installment
of principal, interest or other fees hereon in accordance herewith, or the
Company fails to pay any of the other Obligations (under and as defined in the
Master Security Agreement) when due, and, in any such case, such failure shall
continue for a period of three (3) days following the date upon which any such
payment was due.
(b) Breach of Covenant. The Company or any of its Subsidiaries
breaches any covenant or any other term or condition of this Note in any
material respect and such breach, if subject to cure, continues for a period of
fifteen (15) days after written notice from Holder of the occurrence thereof.
(c) Breach of Representations and Warranties. Any representation,
warranty or statement made or furnished by the Company or any of its
Subsidiaries in this Note, the Purchase Agreement or any other Related Agreement
shall at any time be false or misleading in any material respect on the date as
of which made or deemed made.
(d) Default Under Other Agreements. The occurrence of any default (or
similar term) in the observance or performance of any other agreement or
condition relating to any indebtedness or contingent obligation of the Company
or any of its Subsidiaries beyond the period of grace (if any), the effect of
which default is to cause, or permit the holder or holders of such indebtedness
or beneficiary or beneficiaries of such contingent obligation to cause, such
indebtedness to become due prior to its stated maturity or such contingent
obligation to become payable;
(e) Material Adverse Effect. Any change or the occurrence of any event
which could reasonably be expected to have a Material Adverse Effect;
(f) Bankruptcy. The Company or any of its Subsidiaries shall (i) apply
for, consent to or suffer to exist the appointment of, or the taking of
possession by, a receiver, custodian, trustee or liquidator of itself or of all
or a substantial part of its property, (ii) make a general assignment for the
benefit of creditors, (iii) commence a voluntary case under the federal
bankruptcy laws (as now or hereafter in effect), (iv) be adjudicated a bankrupt
or insolvent, (v) file a petition seeking to take advantage of any other law
providing for the relief of debtors, (vi) acquiesce to, without challenge within
ten (10) days of the filing thereof, or failure to have dismissed, within thirty
(30) days, any petition filed against it in any involuntary case under such
bankruptcy laws, or (vii) take any action for the purpose of effecting any of
the foregoing;
(g) Judgments. Attachments or levies in excess of $50,000 in the
aggregate are made upon the Company or any of its Subsidiary's assets or a
judgment is rendered against the Company's property involving a liability of
more than $50,000 which shall not have been vacated, discharged, stayed or
bonded within thirty (30) days from the entry thereof;
(h) Insolvency. The Company or any of its Subsidiaries shall admit in
writing its inability, or be generally unable, to pay its debts as they become
due or cease operations of its present business;
(i) Change of Control. A Change of Control (as defined below) shall
occur with respect to the Company, unless Holder shall have expressly consented
to such Change of Control in writing. A "Change of Control" shall mean any event
or circumstance as a result of which (i) any "Person" or "group" (as such terms
are defined in Sections 13(d) and 14(d) of the Exchange Act, as in effect on the
date hereof), other than the Holder, is or becomes the "beneficial owner" (as
defined in Rules 13(d)-3 and 13(d)-5 under the Exchange Act), directly or
indirectly, of 35% or more on a fully diluted basis of the then outstanding
voting equity interest of the Company (other than a "Person" or "group" that
beneficially owns 35% or more of such outstanding voting equity interests of the
Company on the date hereof), (ii) the Board of Directors of the Company as exist
on the date of this Note shall cease to consist of a majority of the Company's
board of directors on the date hereof (or directors appointed by a majority of
the board of directors in effect immediately prior to such appointment) or (iii)
the Company or any of its Subsidiaries merges or consolidates with, or sells all
or substantially all of its assets to, any other person or entity;
(j) Indictment; Proceedings. The indictment or threatened indictment
of the Company or any of its Subsidiaries or any executive officer of the
Company or any of its Subsidiaries under any criminal statute, or commencement
or threatened commencement of criminal or civil proceeding against the Company
or any of its Subsidiaries or any executive officer of the Company or any of its
Subsidiaries pursuant to which statute or proceeding penalties or remedies
sought or available include forfeiture of any of the property of the Company or
any of its Subsidiaries;
(k) The Purchase Agreement and Related Agreements. (i) An Event of
Default shall occur under and as defined in the Purchase Agreement or any other
Related Agreement, (ii) the Company or any of its Subsidiaries shall breach any
term or provision of the Purchase Agreement or any other Related Agreement in
any material respect and such breach, if capable of cure, continues unremedied
for a period of fifteen (15) days after written notice from Holder of the
occurrence thereof, (iii) the Company or any of its Subsidiaries attempts to
terminate, challenges the validity of, or its liability under, the Purchase
Agreement or any Related Agreement, (iv) any proceeding shall be brought to
challenge the validity, binding effect of the Purchase Agreement or any Related
Agreement or (v) the Purchase Agreement or any Related Agreement ceases to be a
valid, binding and enforceable obligation of the Company or any of its
Subsidiaries (to the extent such persons or entities are a party thereto);
(l) Stop Trade. An SEC stop trade order or Principal Market trading
suspension of the Common Stock shall be in effect for five (5) consecutive days
or five (5) days during a period of ten (10) consecutive days, excluding in all
cases a suspension of all trading on a Principal Market, provided that the
Company shall not have been able to cure such trading suspension within thirty
(30) days of the notice thereof or list the Common Stock on another Principal
Market within sixty (60) days of such notice; or
(m) Failure to Deliver Common Stock or Replacement Note. The Company's
failure to deliver Common Stock to the Holder pursuant to and in the form
required by this Note and the Purchase Agreement and, if such failure to deliver
Common Stock shall not be cured within two (2) business days or the Company is
required to issue a replacement Note to the Holder and the Company shall fail to
deliver such replacement Note within seven (7) business days.
4.2 Default Interest. Following the occurrence and during the continuance
of an Event of Default, the Company shall pay additional interest on this Note
in an amount equal to seven (7%) per annum, and all outstanding obligations
under this Note, the Purchase Agreement and each other Related Agreement,
including unpaid interest, shall continue to accrue interest at such additional
interest rate from the date of such Event of Default until the date such Event
of Default is cured or waived.
4.3 Default Payment. Following the occurrence and during the continuance of
an Event of Default, the Holder, at its option, may demand repayment in full of
all obligations and liabilities owing by Company to the Holder under this Note,
the Purchase Agreement and/or any other Related Agreement and/or may elect, in
addition to all rights and remedies of the Holder under the Purchase Agreement
and the other Related Agreemetns and all obligations and liabilities of the
Company under the Purchase Agreement and the other Related Agreements, to
require the Company to make a Default Payment ("Default Payment"). The Default
Payment shall be 110% of the outstanding principal amount of the Note, plus
accrued but unpaid interest, all other fees then remaining unpaid, and all other
amounts payable hereunder. The Default Payment shall be applied first to any
fees due and payable to the Holder pursuant to this Note, the Purchase
Agreement, and/or the Related Agreemetns, then to accrued and unpaid interest
due on this Note and then to the outstanding principal balance of this Note. The
Default Payment shall be due and payable immediately on the date that the Holder
has exercised its rights pursuant to this Section 4.3.
ARTICLE V
MISCELLANEOUS
5.1 Conversion Privileges. The conversion privileges set forth in Article
III shall remain in full force and effect immediately from the date hereof until
the date this Note is indefeasibly paid in full and irrevocably terminated.
5.2 Cumulative Remedies. The remedies under this Note shall be cumulative.
5.3 Failure or Indulgence Not Waiver. No failure or delay on the part of
the Holder hereof in the exercise of any power, right or privilege hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise of
any such power, right or privilege preclude other or further exercise thereof or
of any other right, power or privilege. All rights and remedies existing
hereunder are cumulative to, and not exclusive of, any rights or remedies
otherwise available.
5.4 Notices. Any notice herein required or permitted to be given shall be
in writing and shall be deemed effectively given: (a) upon personal delivery to
the party notified, (b) when sent by confirmed telex or facsimile if sent during
normal business hours of the recipient, if not, then on the next business day,
(c) five days after having been sent by registered or certified mail, return
receipt requested, postage prepaid, or (d) one day after deposit with a
nationally recognized overnight courier, specifying next day delivery, with
written verification of receipt. All communications shall be sent to the Company
at the address provided in the Purchase Agreement executed in connection
herewith, and to the Holder at the address provided in the Purchase Agreement
for such Holder, with a copy to ▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq., ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ number (▇▇▇) ▇▇▇-▇▇▇▇, or at such
other address as the Company or the Holder may designate by ten days advance
written notice to the other parties hereto. A Notice of Conversion shall be
deemed given when made to the Company pursuant to the Purchase Agreement.
5.5 Amendment Provision. The term "Note" and all references thereto, as
used throughout this instrument, shall mean this instrument as originally
executed, or if later amended or supplemented, then as so amended or
supplemented, and any successor instrument as such successor instrument may be
amended or supplemented.
5.6 Assignability. This Note shall be binding upon the Company and its
successors and assigns, and shall inure to the benefit of the Holder and its
successors and assigns, and may be assigned by the Holder in accordance with the
requirements of the Purchase Agreement. The Company may not assign any of its
obligations under this Note without the prior written consent of the Holder, any
such purported assignment without such consent being null and void.
5.7 Cost of Collection. In case of any Event of Default under this Note,
the Company shall pay the Holder reasonable costs of collection, including
reasonable attorneys' fees.
5.8 Governing Law, Jurisdiction and Waiver of Jury Trial.
(a) THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES
OF CONFLICTS OF LAW.
(b) THE COMPANY HEREBY CONSENTS AND AGREES THAT THE STATE OR FEDERAL
COURTS LOCATED IN THE COUNTY OF NEW YORK, STATE OF NEW YORK SHALL HAVE EXCLUSIVE
JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN THE COMPANY,
ON THE ONE HAND, AND THE HOLDER, ON THE OTHER HAND, PERTAINING TO THIS NOTE OR
ANY OF THE OTHER RELATED AGREEMENTS OR TO ANY MATTER ARISING OUT OF OR RELATED
TO THIS NOTE OR ANY OF THE RELATED AGREEMENTS; PROVIDED, THAT THE COMPANY
ACKNOWLEDGES THAT ANY APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY A COURT
LOCATED OUTSIDE OF THE COUNTY OF NEW YORK, STATE OF NEW YORK; AND FURTHER
PROVIDED, THAT NOTHING IN THIS NOTE SHALL BE DEEMED OR OPERATE TO PRECLUDE THE
HOLDER FROM BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN ANY OTHER JURISDICTION
TO COLLECT THE OBLIGATIONS, TO REALIZE ON THE COLLATERAL OR ANY OTHER SECURITY
FOR THE OBLIGATIONS, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF
THE HOLDER. THE COMPANY EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH
JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND THE COMPANY
HEREBY WAIVES ANY OBJECTION WHICH IT MAY HAVE BASED UPON LACK OF PERSONAL
JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS. THE COMPANY HEREBY WAIVES
PERSONAL SERVICE OF THE SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH
ACTION OR SUIT AND AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINT AND OTHER
PROCESS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL ADDRESSED TO THE COMPANY AT
THE ADDRESS SET FORTH IN THE PURCHASE AGREEMENT AND THAT SERVICE SO MADE SHALL
BE DEEMED COMPLETED UPON THE EARLIER OF THE COMPANY'S ACTUAL RECEIPT THEREOF OR
THREE (3) DAYS AFTER DEPOSIT IN THE U.S. MAILS, PROPER POSTAGE PREPAID.
(c) THE COMPANY DESIRES THAT ITS DISPUTES BE RESOLVED BY A JUDGE
APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE
BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE COMPANY HERETO WAIVES
ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, SUIT, OR PROCEEDING BROUGHT TO
RESOLVE ANY DISPUTE, WHETHER ARISING IN CONTRACT, TORT, OR OTHERWISE BETWEEN THE
HOLDER AND THE COMPANY ARISING OUT OF, CONNECTED WITH, RELATED OR INCIDENTAL TO
THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH THIS NOTE, ANY
OTHER RELATED AGREEMENT OR THE TRANSACTIONS RELATED HERETO OR THERETO.
5.9 Severability. In the event that any provision of this Note 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
Note.
5.10 Maximum Payments. Nothing contained herein shall be deemed to
establish or require the payment of a rate of interest or other charges in
excess of the maximum permitted by applicable law. In the event that the rate of
interest required to be paid or other charges hereunder exceed the maximum rate
permitted by such law, any payments in excess of such maximum rate shall be
credited against amounts owed by the Company to the Holder and thus refunded to
the Company.
5.11 Security Interest and Guarantee. The Holder has been granted a
security interest (i) in certain assets of the Company and its Subsidiaries as
more fully described in the Master Security Agreement dated as of the date
hereof; (ii) in the equity interests of the Companies' Subsidiaries pursuant to
the Stock Pledge Agreement dated as of the date hereof; and (iii) in certain
intellectual property of the Company and its Subsidiaries as more fully
described in the IP Security Agreement dated as of the date hereof. The
obligations of the Company under this Note are guaranteed by certain
Subsidiaries of the Company pursuant to the Subsidiary Guaranty dated as of the
date hereof.
5.12 Construction. Each party acknowledges that its legal counsel
participated in the preparation of this Note 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 Note to favor any party
against the other.
5.13 Registered Obligation. This Note is intended to be a registered
obligation within the meaning of Treasury Regulation Section 1.871-14(c)(1)(i)
and the Company (or its agent) shall register this Note (and thereafter shall
maintain such registration) as to both principal and any stated interest.
Notwithstanding any document, instrument or agreement relating to this Note to
the contrary, transfer of this Note (or the right to any payments of principal
or stated interest thereunder) may only be effected by (i) surrender of this
Note and either the reissuance by the Company of this Note to the new holder or
the issuance by the Company of a new instrument to the new holder, or (ii)
transfer through a book entry system maintained by the Company (or its agent),
within the meaning of Treasury Regulation Section 1.871-14(c)(1)(i)(B).
[Balance of page intentionally left blank; signature page follows]
IN WITNESS WHEREOF, the Company has caused this Secured Convertible Term
Note to be signed in its name effective as of this 28 day of June, 2006.
AMS HEALTH SCIENCES, INC.
By:/s/▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Chairman, President
& CEO
WITNESS:
/s/▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇
EXHIBIT A
NOTICE OF CONVERSION
(To be executed by the Holder in order to convert all
or part of the Secured Convertible Term Note into Common Stock)
AMS Health Sciences, Inc.
▇▇▇ ▇▇ ▇▇▇▇ ▇▇▇▇▇▇
Oklahoma City, OK 73105The undersigned hereby converts $_________ of
the principal due on [specify applicable Repayment Date] under the Secured
Convertible Term Note dated as of _________, 200__ (the "Note") issued by AMS
Health Sciences, Inc. (the "Company") by delivery of shares of Common Stock of
the Company ("Shares") on and subject to the conditions set forth in the Note.
1. Date of Conversion _______________________
2. Shares To Be Delivered: _______________________
LAURUS MASTER FUND, LTD.
By:_______________________________
Name:_____________________________
Title:____________________________