EXHIBIT NO. 10.4
[FORM OF] CONVERTIBLE TERM NOTE
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR APPLICABLE
STATE SECURITIES LAWS, AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH SECURITIES UNDER THE
SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN OPINION OF
COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT THERE IS AN AVAILABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.
Subscription Amount: $[amount] Irvine, California
Dated: [date]
FOR VALUE RECEIVED, NUWAY MEDICAL, INC., a corporation organized under the
laws of the state of Delaware ("Borrower"), promises to pay to the order of
"Investor", as that term is defined in the Convertible Loan Agreement by and
between Borrower and Investor ("Convertible Loan Agreement") (hereafter,
together with any subsequent holder hereof, called "Lender"), at its office at
"Investor's Address", as that term is defined in the Convertible Loan Agreement,
or at such other place as Lender may direct, the "Subscription Amount", noted
above (the "Loan"), payable in full one year from the "Subscription Date", or at
an earlier date as provided in Section 3.2 of the Convertible Loan Agreement
(the "Maturity Date"). This Convertible Term Note is duly authorized issue of
the Borrower (the "Issuer"), issued on [date] (the "Issuance Date"), and
designated as its Convertible Term Note due one year from the Issuance Date (the
"Note").
Borrower agrees to pay interest on the unpaid principal amount from time
to time outstanding hereunder on the dates and at the rate or rates as set forth
in the Convertible Loan Agreement.
Payments of both principal and interest are to be made in immediately
available funds in lawful money of the United States of America, or in Common
Stock of the Borrower as set forth below.
Accrual of interest shall commence as of the Issuance Date. Interest shall
be payable by the Issuer, at the Issuer's option, in cash or in that number of
shares of Common stock of the Issuer (the "Common Stock") (at a price per share
calculated pursuant to the conversion formula contained below), upon the earlier
to occur of (i) upon conversion of this Note pursuant to the conversion features
set forth below, or (ii) upon an Event of Default as defined below, and if an
Event of Default occurs interest due hereunder shall be payable in cash or stock
as set forth herein at the option of the Holder. Unless otherwise agreed in
writing by both parties hereto, the interest so payable will be paid to the
person in whose name this Note (or one or more predecessor Notes) is registered
on the records of the Issuer regarding registration and transfers of the Note
(the "Note Register"), provided, however, that the Issuer's obligation to a
transferee of this Note arises only if such transfer, sale or other disposition
is made in accordance with the terms and conditions contained in the Agreement
and this Note.
The Note is subject to the following additional provisions:
1. The Issuer shall be entitled to withhold from all payments of principal
and/or interest of this Note any amounts required to be withheld under the
applicable provisions of the U.S. Internal Revenue Code of 1986, as amended, or
other applicable laws at the time of such payments.
2. This Note has been issued subject to investment representations of the
original Holder hereof and may be transferred or exchanged only in compliance
with the Securities Act and applicable state securities laws and in compliance
with the restrictions on transfer provided in the Agreement. Prior to the due
presentment for such transfer of this Note, the Issuer and any agent of the
Issuer may treat the person in whose name this Note is duly registered on the
Issuer's Note register as the owner hereof for the purpose of receiving payment
as herein provided and all other purposes, whether or not this Note is overdue,
and neither the Issuer nor any such agent shall be affected by notice to the
contrary. The transferee shall be bound, as the original Holder by the same
representations and terms described herein and under the Agreement.
3. The Holder or Issuer may, at its option, at any time up to and
including [date], convert the principal amount of this Note or any portion
thereof, and any accrued interest thereon, into [number] shares of fully paid
and non assessable Common Stock of the Issuer ("Conversion Shares"). The right
to convert the Note may be exercised by telecopying an executed and completed
notice of conversion (the "Notice of Conversion") to the Holder or Issuer. Each
business day on which a Notice of Conversion is telecopied in accordance with
the provisions hereof shall be deemed a "Conversion Date". The Issuer will
transmit the certificates representing Conversion Shares issuable upon such
conversion of the Note (together with the certificates representing the Note not
so converted) to the Holder via express courier, by electronic transfer (if
applicable) or otherwise within ten Business Days after the Conversion Date,
provided, the Issuer has received the original Note being so converted from the
Holder. If the Company has not received the original Note being converted within
three Business Days after Conversion Date, then the Issuer shall transmit the
certificates representing the Conversion Shares issuable upon such conversion of
the Note (together with the certificates representing the Note not so converted)
to the Holder via express courier, by electronic transfer (if applicable) or
otherwise within five business days after receipt of the original Notice of
Conversion and original Note being converted. The Conversion of this note will
require that the Issue amend its charter to increase the number of common shares
authorized and therefore, the conversion will not be allowed prior to the
Issuers completion of that process. Issuer shall promptly affect such amendments
to its charter.
4. The principal amount of this Note, and any accrued interest thereon,
shall be reduced as per that principal amount indicated on the Notice of
Conversion upon the proper receipt by the Holder of such Conversion Shares due
upon such Notice of Conversion.
5. The number of Conversion Shares shall be adjusted as follows:
a. If the Issuer shall at any time subdivide its outstanding shares
of Common Stock into a greater number of shares of Common Stock, the number of
Conversion Shares in effect immediately prior to such subdivision shall be
proportionately increased, and conversely, in case the outstanding shares of
Common Stock shall be combined into a smaller number of shares of Common Stock,
the Conversion Price in effect immediately prior to such combination shall be
proportionately reduced.
6. No provision of this Note shall alter or impair the obligation of the
Issuer, which is absolute and unconditional, upon an Event of Default (as
defined below), to pay the principal of, and interest on this Note at the place,
time, and rate, and in the coin or currency herein prescribed.
7. The Issuer hereby expressly waives demand and presentment for payment,
notice on nonpayment, protest, notice of protest, notice of dishonor, notice of
acceleration or intent to accelerate, and diligence in taking any action to
collect amounts called for hereunder and shall be directly and primarily liable
for the payment of all sums owing and to be owing hereon, regardless of and
without any notice, diligence, act or omission as or with respect to the
collection of any amount called for hereunder.
8. If one or more "Events of Default" shall occur, as that term is used in
the Convertible Loan Agreement, then, or at any time thereafter, and in each and
every such case, unless such Event of Default shall have been waived in writing
by the Holder (which waiver shall not be deemed to be a waiver of any subsequent
default) or cured as provided herein, at the option of the Holder, and in the
Holder's sole discretion, the Holder may consider this Note (and all interest
through such date) immediately due and payable in cash, without presentment,
demand protest or notice of any kind, all of which are hereby expressly waived,
anything herein or in any note or other instruments contained to the contrary
notwithstanding, and Holder may immediately, and without expiration of any
period of grace, enforce any and all of the Holder's rights and remedies
provided herein or any other rights or remedies afforded by law (including but
not limited to consequential damages if any). It is agreed that in the event of
such action, such Holder shall be entitled to receive all reasonable fees, costs
and expenses incurred, including without limitation such reasonable fees and
expenses of attorneys. The parties acknowledge that a change in control of the
Issuer shall not be deemed to be an Event of Default as set forth herein.
9. In case any provision of this Note is held by a court of competent
jurisdiction to be excessive in scope or otherwise invalid or unenforceable,
such provision shall be adjusted rather than voided, if possible, so that it is
enforceable to the maximum extent possible, and the validity and enforceability
of the remaining provisions of this Note will not in any way be affected or
impaired thereby.
10. The Holder shall have the right, if applicable, to include all of the
Conversion Shares underlying this Note (the "Registrable Securities") as part of
any registration of securities filed by the Issuer (other than in connection
with a transaction contemplated by Rule 145(a) promulgated under the Act or
pursuant to Form S-4 or S-8) and must be notified in writing of such filing as
soon as reasonably practicable; PROVIDED, HOWEVER, that the Holder agrees it
shall not have any piggy-back registration rights pursuant to this Note if the
Conversion Shares underlying this Note may be sold in the United States pursuant
to the provisions of Rule 144 without any restriction on resale. Holder shall
have five business days after receipt of the aforementioned notice from the
Issuer, to notify the Issuer in writing as to whether the Issuer is to include
Holder or not include Holder as part of such registration; PROVIDED, HOWEVER,
that if any registration pursuant to this paragraph shall be underwritten, in
whole or in part, the Issuer may require that the Registrable Securities
requested for inclusion pursuant to this paragraph be included in the
underwriting on the same terms and conditions as the securities otherwise being
sold through the underwriters. If in the good faith judgment of the underwriter
evidenced in writing of such offering only a limited number of Registrable
Securities should be included in such offering, or no such shares should be
included, the Holder, and all other selling stockholders, shall be limited to
registering such proportion of their respective shares as shall equal the
proportion that
the number of shares of selling stockholders permitted to be registered by the
underwriter in such offering bears to the total number of all shares then held
by all selling stockholders desiring to participate in such offering. All
registration expenses incurred by the Issuer in complying with the terms of this
Note shall be paid by the Issuer, exclusive of underwriting discounts,
commissions and legal fees and expenses for counsel to the Holder.
11. This Note does not entitle the Holder hereof to any voting rights or
other rights as a shareholder of the Issuer prior to the conversion into Common
Stock thereof, except as provided by applicable law. If, however, at the time of
the surrender of this Note and conversion the Holder hereof shall be entitled to
convert this Note, the Conversion Shares so issued shall be and be deemed to be
issued to such holder as the record owner of such shares as of the close of
business on the Conversion Date.
12. Except as expressly provided herein or as required by law, so long as
this Note remains outstanding, the Issuer shall not, without the approval by
vote or written consent by the Holder, take any action that would adversely
affect the rights, preferences or privileges of this Note.
IN WITNESS WHEREOF, the Issuer has caused this Convertible Term Note to be
duly executed by an officer thereunto duly authorized.
NUWAY MEDICAL, INC.
By /s/ Dennis Calvert
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Name: Dennis Calvert, its President
NOTICE OF CONVERSION
(To be Executed by the Registered Holder in order to Convert the Note)
The undersigned hereby irrevocably elects to convert ___________ of the
principal amount of the above Note into ___________ Shares of Common Stock of
NuWay Medical, Inc. according to the conditions hereof, as of the date written
below.
Date of Conversion:
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Signature:
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Name:
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Address:
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Date of Conversion:
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Signature:
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Name:
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Address:
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