THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). THE SECURITIES MAY NOT BE
SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER SAID ACT, OR AN OPINION OF COUNSEL IN FORM,
SUBSTANCE AND SCOPE CUSTOMARY FOR OPINIONS OF COUNSEL IN COMPARABLE TRANSACTIONS
THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR UNLESS SOLD PURSUANT TO RULE
144 UNDER SAID ACT.
SECURED CONVERTIBLE NOTE
Houston, Texas
______________, 2006 $______________
FOR VALUE RECEIVED, HEALTHRENU MEDICAL, INC., a Nevada corporation
(hereinafter called the "Borrower"), hereby promises to pay to the order of
______________ or registered assigns (the "Holder") the sum of ______________
($______________), on ______________ (the "Maturity Date"), and to pay interest
on the unpaid principal balance hereof at the rate of eight percent (8%) per
annum from ______________ (the "Issue Date") until the same becomes due and
payable, whether at maturity or upon acceleration or by prepayment or otherwise.
Interest shall commence accruing on the issue date, shall be computed on the
basis of a 365-day year and the actual number of days elapsed and shall be
payable annually in shares of common stock, $.001 per value per share, of the
Borrower (the "Common Stock") valued at the then applicable Conversion Price (as
herein defined) on December 31 of each year beginning on December 31, 2006, or
at the time of conversion of the principal to which such interest relates in
accordance with Article I below.
All payments due hereunder (to the extent not converted into Common Stock
in accordance with the terms hereof) shall be made in shares of Common Stock of
the Borrower valued at the then applicable Conversion Price. All payments shall
be made at such address as the Holder shall hereafter give to the Borrower by
written notice made in accordance with the provisions of this Note.
Whenever any amount expressed to be due by the terms of this Note is due
on any day which is not a business day, the same shall instead be due on the
next succeeding day which is a business day and, in the case of any interest
payment date which is not the date on which this Note is paid in full, the
extension of the due date thereof shall not be taken into account for purposes
of determining the amount of interest due on such date. As used in this Note,
the term "business day" shall mean any day other than a Saturday, Sunday or a
day on which commercial banks in the city of New York, New York are authorized
or required by law or executive order to remain closed. Each capitalized term
used herein, and not otherwise defined, shall have the meaning ascribed thereto
in that certain Subscription Agreement and the Borrower to which this Note
relates, as amended from time to time, pursuant to which the Holder subscribed
to purchase this Note (the "Subscription Agreement").
1
This Note is free from all taxes, liens, claims and encumbrances with
respect to the issue thereof and shall not be subject to preemptive rights or
other similar rights of shareholders of the Borrower and will not impose
personal liability upon the Holder thereof.
The following terms shall apply to this Note:
1. CONVERSION RIGHTS
The Holder shall have the following conversion rights with respect to this
Note (the "Conversion Rights"):
A. Right to Convert. At any time on or after the date on the Note,
the Holder may, at such Holder's option, elect to convert (a "Voluntary
Conversion") all or any portion of this Note into a number of fully paid and
nonassessable shares of Common Stock equal to the quotient of (i) $1,000 divided
by (ii) the Conversion Price (as defined below) then in effect as of the date of
the delivery by the Holder of its notice of election to convert. In the event of
a liquidation, dissolution or winding up of the Company, the Conversion Rights
shall terminate at the close of business on the last full day preceding the date
fixed for the payment of any such amounts distributable on such event to any
security holder of the Company. In the event of such a liquidation, dissolution
or winding up, the Company shall provide to the Holder notice of such
liquidation, dissolution or winding up, which notice shall be sent at least
fifteen (15) days prior to the termination of the Conversion Rights.
B. Mechanics of Voluntary Conversion. The Voluntary Conversion of
this Note shall be conducted in the following manner:
1. Holder's Delivery Requirements. To convert this Note into
full shares of Common Stock on any date (the "Voluntary Conversion Date"), the
Holder thereof shall (A) transmit by facsimile (or otherwise deliver), for
receipt on or prior to 5:00 p.m., New York time on such date, a copy of a fully
executed notice of conversion in the form attached hereto as Exhibit I (the
"Conversion Notice"), to the Company, and (B) surrender to a common carrier for
delivery to the Company as soon as practicable following such Voluntary
Conversion Date but in no event later than three (3) business days after such
date this Note and the originally executed Conversion Notice.
2. Company's Response. Upon receipt by the Company of a copy
of the fully executed Conversion Notice, the Company or its designated transfer
agent (the "Transfer Agent"), as applicable, shall, within three (3) business
days following the date of receipt by the Company of the fully executed
Conversion Notice (so long as this Note and original Conversion Notice are
received by the Company on or before such third business day), issue and deliver
to the Holder as specified in the Conversion Notice, registered in the name of
the Holder or its designee, the number of shares of Common Stock to which the
Holder shall be entitled.
2
3. Dispute Resolution. In the case of a dispute as to the
arithmetic calculation of the number of shares of Common Stock to be issued upon
conversion, the Company shall cause its Transfer Agent to promptly issue to the
Holder the number of shares of Common Stock that is not disputed and shall
submit the arithmetic calculations to the Holder via facsimile as soon as
possible, but in no event later than two (2) business days after receipt of such
Holder's Conversion Notice. If such Holder and the Company are unable to agree
upon the arithmetic calculation of the number of shares of Common Stock to be
issued upon such conversion within one (1) business day of such disputed
arithmetic calculation being submitted to the Holder, then the Company shall
within one (1) business day submit via facsimile the disputed arithmetic
calculation of the number of shares of Common Stock to be issued upon such
conversion to the Company's independent, outside accountant. The Company shall
cause the accountant to perform the calculations and notify the Company and the
Holder of the results no later than seventy-two (72) hours from the time it
receives the disputed calculations. Such accountant's calculation shall be
binding upon all parties absent manifest error. The reasonable expenses of such
accountant in making such determination shall be paid by the Company, in the
event the Holder's calculation was correct, or by the Holder, in the event the
Company's calculation was correct, or equally by the Company and the Holder in
the event that neither the Company's or the Holder's calculation was correct.
The period of time in which the Company is required to effect conversions under
this Certificate of Designation shall be tolled with respect to the subject
conversion pending resolution of any dispute by the Company made in good faith
and in accordance with this Section.
4. Record Holder. The person or persons entitled to receive
the shares of Common Stock issuable upon a conversion of this Note shall be
treated for all purposes as the record holder or holders of such shares of
Common Stock on the Conversion Date.
C. Mandatory Conversion.
1. If this Note is outstanding in whole or in part on the
Mandatory Conversion Date it shall automatically and without any action on the
part of the Holder, convert into a number of fully paid and nonassessable shares
of Common Stock equal to the quotient of (i) $1,000 divided by (ii) the
Conversion Price in effect on the Mandatory Conversion Date.
2. As used herein, "Mandatory Conversion Date" shall be the
date that is three years after the date of issuance of this Note. The Mandatory
Conversion Date and the Voluntary Conversion Date collectively are referred to
herein as the "Conversion Date."
3. On the Mandatory Conversion Date, any amounts outstanding
under this Note shall be converted automatically without any further action by
the Holder and whether or not this Note surrendered to the Company or its
Transfer Agent; provided, however, that the Company shall not be obligated to
issue the shares of Common Stock issuable upon conversion of this Note unless
this Note is either delivered to the Company or the Holder notifies the Company
that such Note has been lost, stolen, or destroyed, and executes an agreement
satisfactory to the Company to indemnify the Company from any loss incurred by
it in connection therewith. Upon the occurrence of the automatic conversion of
this Note pursuant to this Section, the Holder shall surrender this Note to the
Company and the Company shall cause its Transfer Agent to deliver the shares of
Common Stock issuable upon such conversion (in the same manner set forth in
Section I C.2.) to the Holder within three (3) business days of the Holder's
delivery of this Note.
3
D. Conversion Price. The term "Conversion Price" shall mean the
Variable Conversion Price (as defined herein) (subject to adjustments as set
forth herein). The "Variable Conversion Price" shall mean the Applicable
Percentage (as defined herein) multiplied by the Market Price (as defined
herein). "Market Price" means the average of the average Trading Prices (as
defined below) for the Common Stock during the ten (10) Trading Day (as defined
below) period ending one Trading Day prior to the date the Conversion Notice is
sent by the Holder to the Company via facsimile (the "Conversion Date").
"Trading Price" means, for any security as of any date, the lowest intraday
trading price on the Over-the-Counter Bulletin Board (the "OTCBB") as reported
by a reliable reporting service mutually acceptable to and hereafter designated
by holders of a majority the Notes and the Company or, if the OTCBB is not the
principal trading market for such shares of Common Stock, the lowest intraday
trading price of such security on the principal securities exchange or trading
market where such security is listed or traded or, if no intraday trading price
of such security is available in any of the foregoing manners, the average of
the lowest intraday trading prices of any market makers for such security that
are listed in the "pink sheets" by the National Quotation Bureau, Inc. If the
Trading Price cannot be calculated for such security on such date in the manner
provided above, the Trading Price shall be the fair market value as mutually
determined by the Company and the holders of a majority of the shares of Notes
being converted for which the calculation of the Trading Price is required in
order to determine the Conversion Price of such Notes. "Trading Day" shall mean
any day on which the Common Stock is traded for any period on the OTCBB, or on
the principal securities exchange or other securities market on which the Common
Stock is then being traded. "Applicable Percentage" shall mean 80.0%.
E. Adjustments of Conversion Price.
1. Adjustment for Certain Dividends and Distributions. If the
Company shall at any time or from time to time after the date of this Note, make
or issue or set a record date for the determination of holders of Common Stock
entitled to receive a dividend or other distribution payable in securities of
the Company other than shares of Common Stock, then, and in each event, an
appropriate revision to the applicable Conversion Price shall be made and
provision shall be made (by adjustments of the Conversion Price or otherwise) so
that the holder of this Note shall receive upon conversions thereof, in addition
to the number of shares of Common Stock receivable thereon, the number of
securities of the Company which they would have received had their Note been
converted into Common Stock on the date of such event and had thereafter, during
the period from the date of such event to and including the Conversion Date,
retained such Note (together with any distributions payable thereon during such
period), giving application to all adjustments called for during such period
under this Section with respect to the rights of the Holder of this Note;
provided, however, that if such record date shall have been fixed and such
dividend is not fully paid or if such distribution is not fully made on the date
fixed therefor, the Conversion Price shall be adjusted pursuant to this
paragraph as of the time of actual payment of such dividends or distributions;
and provided further, however, that no such adjustment shall be made if the
Holder of this Note simultaneously receives a dividend or other distribution of
shares of Common Stock in a number equal to the number of shares of Common Stock
as the Holder would have received if this Note had been converted into Common
Stock on the date of such event.
4
2. Adjustments for Reclassification, Exchange or Substitution.
If the Common Stock issuable upon conversion of this Note at any time or from
time to time after the date of this Note shall be changed to the same or
different number of shares of any class or classes of stock, whether by
reclassification, exchange, substitution or otherwise (other than by way of
stock dividends provided for herein, or a reorganization, merger, consolidation,
or sale of assets provided for herein), then, and in each event, an appropriate
revision to the Conversion Price shall be made and provisions shall be made (by
adjustments of the Conversion Price or otherwise) so that the Holder of this
Note shall have the right thereafter to convert this Note into the kind and
amount of shares of stock and other securities receivable upon reclassification,
exchange, substitution or other change, by holders of the number of shares of
Common Stock into which such Note might have been converted immediately prior to
such reclassification, exchange, substitution or other change, all subject to
further adjustment as provided herein.
3. Adjustments for Reorganization, Merger, Consolidation or
Sales of Assets. If at any time or from time to time after the date of this Note
there shall be a capital reorganization of the Company (other than by way of
stock dividends or distributions provided for herein, or a reclassification,
exchange or substitution of shares provided for herein), or a merger or
consolidation of the Company with or into another corporation where the holders
of outstanding voting securities prior to such merger or consolidation do not
own over 50% of the outstanding voting securities of the merged or consolidated
entity, immediately after such merger or consolidation, or the sale of all or
substantially all of the Company's properties or assets to any other person (an
"Organic Change"), then as a part of such Organic Change an appropriate revision
to the Conversion Price shall be made if necessary and provision shall be made
if necessary (by adjustments of the Conversion Price or otherwise) so that the
Holder of this Note shall have the right thereafter to convert this Note into
the kind and amount of shares of stock and other securities or property of the
Company or any successor corporation resulting from Organic Change. In any such
case, appropriate adjustment shall be made in the application of the provisions
of this Section with respect to the rights of the Holder of this Note after the
Organic Change to the end that the provisions of this Section (including any
adjustment in the Conversion Price then in effect and the number of shares of
stock or other securities deliverable upon conversion of this Note) shall be
applied after that event in as nearly an equivalent manner as may be
practicable.
4. Consideration for Stock. In case any shares of Common Stock
or Convertible Securities other than this Note, or any rights or warrants or
options to purchase any such Common Stock or convertible securities, shall be
issued or sold:
(1) in connection with any merger or consolidation in which
the Company is the surviving corporation (other than any consolidation or merger
in which the previously outstanding shares of Common Stock of the Company shall
be changed to or exchanged for the stock or other securities of another
corporation), the amount of consideration therefore shall be, deemed to be the
fair value, as determined reasonably and in good faith by the Board of Directors
of the Company, of such portion of the assets and business of the nonsurviving
corporation as such Board may determine to be attributable to such shares of
Common Stock, convertible securities, rights or warrants or options, as the case
may be; or
5
(2) in the event of any consolidation or merger of the Company
in which the Company is not the surviving corporation or in which the previously
outstanding shares of Common Stock of the Company shall be changed into or
exchanged for the stock or other securities of another corporation, or in the
event of any sale of all or substantially all of the assets of the Company for
stock or other securities of any corporation, the Company shall be deemed to
have issued a number of shares of its Common Stock for stock or securities or
other property of the other corporation computed on the basis of the actual
exchange ratio on which the transaction was predicated, and for a consideration
equal to the fair market value on the date of such transaction of all such stock
or securities or other property of the other corporation. If any such
calculation results in adjustment of the applicable Conversion Price, or the
number of shares of Common Stock issuable upon conversion of this Note, the
determination of the applicable Conversion Price or the number of shares of
Common Stock issuable upon conversion of this Note immediately prior to such
merger, consolidation or sale, shall be made after giving effect to such
adjustment of the number of shares of Common Stock issuable upon conversion of
this Note. In the event any consideration received by the Company for any
securities consists of property other than cash, the fair market value thereof
at the time of issuance or as otherwise applicable shall be as determined in
good faith by the Board of Directors of the Company. In the event Common Stock
is issued with other shares or securities or other assets of the Company for
consideration which covers both, the consideration computed as provided in this
Section shall be allocated among such securities and assets as determined in
good faith by the Board of Directors of the Company.
F. No Impairment. The Company shall not, through any reorganization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms to be observed or performed hereunder by the
Company, but will at all times in good faith, assist in the carrying out of all
the provisions of this Note and in the taking of all such action as may be
necessary or appropriate in order to protect the Conversion Rights of the
Holders of this Note against impairment. and the proceeds of which shall be
payable to such holder in the event it obtains judgment.
G. Certificates as to Adjustments. Upon occurrence of each
adjustment or readjustment of the Conversion Price or number of shares of Common
Stock issuable upon conversion of this Note, the Company at its expense shall
promptly compute such adjustment or readjustment in accordance with the terms
hereof and furnish to the Holder of this Note a certificate setting forth such
adjustment and readjustment, showing in detail the facts upon which such
adjustment or readjustment is based. The Company shall, upon written request of
the Holder, at any time, furnish or cause to be furnished to such Holder a like
certificate setting forth such adjustments and readjustments, the Conversion
Price in effect at the time, and the number of shares of Common Stock and the
amount, if any, of other securities or property which at the time would be
received upon the conversion of this Note. Notwithstanding the foregoing, the
Company shall not be obligated to deliver a certificate unless such certificate
would reflect an increase or decrease of at least one percent of such adjusted
amount.
6
H. Issue Taxes. The Company shall pay any and all issue and other
taxes, excluding federal, state or local income taxes, that may be payable in
respect of any issue or delivery of shares of Common Stock on conversion of this
Note pursuant thereto; provided, however, that the Company shall not be
obligated to pay any transfer taxes resulting from any transfer requested by any
holder in connection with any such conversion.
I. Notices. All notices and other communications hereunder shall be
in writing and shall be deemed given if delivered personally or by facsimile or
three (3) business days following being mailed by certified or registered mail,
postage prepaid, return-receipt requested, addressed to the Holder of record at
its address appearing on the books of the Company. The Company will give written
notice to the Holder at least twenty (20) days prior to the date on which the
Company closes its books or takes a record with respect to any dividend or
distribution upon the Common Stock and in no event shall such notice be provided
to such Holder prior to such information being made known to the public. The
Company will also give written notice to the Holder at least twenty (20) days
prior to the date on which any Organic Change, dissolution, liquidation or
winding-up will take place and in no event shall such notice be provided to such
Holder prior to such information being made known to the public.
J. Fractional Shares. No fractional shares of Common Stock shall be
issued upon conversion of this Note. In lieu of any fractional shares to which
the Holder would otherwise be entitled, the Company shall pay cash equal to the
product of such fraction multiplied by the average of the Closing Bid Prices of
the Common Stock for the five (5) consecutive trading immediately preceding the
Voluntary Conversion Date or Mandatory Conversion Date, as applicable, or the
Company, at the Company's option, shall round up the shares of Common Stock to
be issued to the next whole share.
K. Reservation of Common Stock. The Company shall, so long as this
Note is outstanding, reserve and keep available out of its authorized and
unissued Common Stock, solely for the purpose of effecting the conversion of
this Note, such number of shares of Common Stock as shall from time to time be
sufficient to effect the conversion of all of this Note then outstanding.
L. Regulatory Compliance. If any shares of Common Stock to be
reserved for the purpose of conversion of this Note require registration or
listing with or approval of any governmental authority, stock exchange or other
regulatory body under any federal or state law or regulation or otherwise before
such shares may be validly issued or delivered upon conversion, the Company
shall, at its sole cost and expense, in good faith and as expeditiously as
possible, endeavor to secure such registration, listing or approval, as the case
may be.
M. Irrevocable Nature of Conversion Notice. The Company agrees that
it shall have no discretion to dishonor or otherwise not fully comply with a
duly executed notice of conversion received by the Company in accordance with
the terms of this Note. The Company agrees that it shall provide Holder with a
certificate representing the number of shares acquired pursuant to such notice
of conversion or upon the Mandatory Conversion Date, as applicable, within three
business days after the Company's receipt of a Conversion Notice or the Note, as
applicable.
7
2. EVENTS OF DEFAULT
If any of the following events of default (each, an "Event of Default") shall
occur:
A. Failure to Pay Principal or Interest.
The Borrower fails to pay the principal hereof or interest thereon
when due on this Note, whether at maturity, upon acceleration or otherwise;
B. Conversion and the Shares.
The Borrower fails to issue shares of Common Stock to the Holder (or
announces or threatens that it will not honor its obligation to do so) upon
exercise by the Holder of the conversion rights of the Holder in accordance with
the terms of this Note, or fails to transfer or cause its transfer agent to
transfer (electronically or in certificated form) any certificate for shares of
Common Stock issued to the Holder upon conversion of or otherwise pursuant to
this Note as and when required by this Note, and any such failure shall continue
uncured (or any announcement, statement or threat not to honor its obligations
shall not be rescinded in writing) for ten (10) days after the Borrower shall
have been notified thereof in writing by the Holder;
C. Receiver or Trustee.
The Borrower or any subsidiary of the Borrower shall make an
assignment for the benefit of creditors, or apply for or consent to the
appointment of a receiver or trustee for it or for a substantial part of its
property or business, or such a receiver or trustee shall otherwise be
appointed;
D. Bankruptcy.
Bankruptcy, insolvency, reorganization or liquidation proceedings or
other proceedings for relief under any bankruptcy law or any law for the relief
of debtors shall be instituted by or against the Borrower or any subsidiary of
the Borrower which remains unvacated, unbonded or unstayed for a period of
thirty (30) days;
8
then, upon the occurrence and during the continuation of any Event of Default
specified in Section 2.A or B, at the option of the Holders of a majority of the
aggregate principal amount of the outstanding Notes exercisable through the
delivery of written notice to the Borrower by such Holders (the "Default
Notice"), and upon the occurrence of an Event of Default specified in Section
2.C or D, the Notes shall become immediately due and payable and the Borrower
shall deliver to the Holder, in full satisfaction of its obligations hereunder,
shares of Common Stock of the Borrower in an amount equal to the then
outstanding principal amount of this Note for purposes of determining the lowest
applicable Conversion Price, multiplied by (b) the highest Closing Price for the
Common Stock during the period beginning on the date of first occurrence of the
Event of Default and ending one day prior to the Mandatory Prepayment Date (the
"Default Amount") and all other amounts payable hereunder shall immediately
become due and payable, all without demand, presentment or notice, all of which
hereby are expressly waived, together with all costs, including, without
limitation, legal fees and expenses, of collection, and the Holder shall be
entitled to exercise all other rights and remedies available at law or in
equity. If the Borrower fails to pay the Default Amount within five (5) business
days of written notice that such amount is due and payable, then the Holder
shall have the right at any time, so long as the Borrower remains in default
(and so long and to the extent that there are sufficient authorized shares), to
require the Borrower, upon written notice, to immediately issue, in lieu of the
Default Amount, the number of shares of Common Stock of the Borrower equal to
the Default Amount divided by the Conversion Price then in effect.
5. SECURITY INTEREST
Holder shall be given a security interest for the principal amount of the
Note in all of the inventory and accounts receivable of the Company, which
security interest shall be subordinate to any security interests held by any
purchase money security interest holder, any bank or any financial institution
which requests a security interest in our assets for the purpose of financing
our operations or purchasing inventory.
4. MISCELLANEOUS
A. Failure or Indulgence Not Waiver.
No failure or delay on the part of the Holder 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 privileges.
All rights and remedies existing hereunder are cumulative to, and not exclusive
of, any rights or remedies otherwise available.
B. Notices.
Any notice herein required or permitted to be given shall be in
writing and may be personally served or delivered by courier or sent by United
States mail and shall be deemed to have been given upon receipt if personally
served (which shall include telephone line facsimile transmission) or sent by
courier or three (3) days after being deposited in the United States mail,
certified, with postage pre-paid and properly addressed, if sent by mail. For
the purposes hereof, the address of the Holder shall be as shown on the records
of the Borrower; and the address of the Borrower shall be 12777 Jones Road,
Suite 481, Houston, TX 77070, facsimile number: 281-890-2587. Both the Holder
and the Borrower may change the address for service by service of written notice
to the other as herein provided.
9
C. Amendments.
This Note and any provision hereof may only be amended by an
instrument in writing signed by the Borrower and the Holder. The term "Note" and
all reference 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.
D. Assignability.
This Note shall be binding upon the Borrower and its successors and
assigns, and shall inure to be the benefit of the Holder and its successors and
assigns. Each transferee of this Note must be an "accredited investor" (as
defined in Rule 501(a) of the 1933 Act). Notwithstanding anything in this Note
to the contrary, this Note may be pledged as collateral in connection with a
bona fide margin account or other lending arrangement, subject to all applicable
federal and state securities laws.
E. Governing Law.
THIS NOTE SHALL BE ENFORCED, GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE
PERFORMED ENTIRELY WITHIN SUCH STATE, WITHOUT REGARD TO THE PRINCIPLES OF
CONFLICT OF LAWS. THE BORROWER HEREBY SUBMITS TO THE EXCLUSIVE JURISDICTION OF
THE UNITED STATES FEDERAL COURTS LOCATED IN NEW YORK, NEW YORK WITH RESPECT TO
ANY DISPUTE ARISING UNDER THIS NOTE, THE AGREEMENTS ENTERED INTO IN CONNECTION
HEREWITH OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. BOTH PARTIES
IRREVOCABLY WAIVE THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF
SUCH SUIT OR PROCEEDING. BOTH PARTIES FURTHER AGREE THAT SERVICE OF PROCESS UPON
A PARTY MAILED BY FIRST CLASS MAIL SHALL BE DEEMED IN EVERY RESPECT EFFECTIVE
SERVICE OF PROCESS UPON THE PARTY IN ANY SUCH SUIT OR PROCEEDING. NOTHING HEREIN
SHALL AFFECT EITHER PARTY'S RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED
BY LAW. BOTH PARTIES AGREE THAT A FINAL NON-APPEALABLE JUDGMENT IN ANY SUCH SUIT
OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY
SUIT ON SUCH JUDGMENT OR IN ANY OTHER LAWFUL MANNER. THE PARTY WHICH DOES NOT
PREVAIL IN ANY DISPUTE ARISING UNDER THIS NOTE SHALL BE RESPONSIBLE FOR ALL FEES
AND EXPENSES, INCLUDING ATTORNEYS' FEES, INCURRED BY THE PREVAILING PARTY IN
CONNECTION WITH SUCH DISPUTE.
F. Denominations.
At the request of the Holder, upon surrender of this Note, the
Borrower shall promptly issue new Notes in the aggregate outstanding principal
amount hereof, in the form hereof, in such denominations of at least $1,000 as
the Holder shall request.
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G. No Preemptive Rights.
Except as provided in Section 2 hereof no Holder of this Note shall
be entitled to rights to subscribe for, purchase or receive any part of any new
or additional shares of any class, whether now or hereinafter authorized, or of
bonds or debentures, or other evidences of indebtedness convertible into or
exchangeable for shares of any class, but all such new or additional shares of
any class, or any bond, debentures or other evidences of indebtedness
convertible into or exchangeable for shares, may be issued and disposed of by
the Board of Directors on such terms and for such consideration (to the extent
permitted by law), and to such person or persons as the Board of Directors in
their absolute discretion may deem advisable.
[The remainder of this page is intentionally left blank.]
11
IN WITNESS WHEREOF, Borrower has caused this Note to be signed in its name
by its duly authorized officer this ____ day of _________________, 2006.
HEALTHRENU MEDICAL, INC.
By:
--------------------
Robert W. Prokos
President & Chief Executive Officer
12
EXHIBIT A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder
in order to Convert the Notes)
The undersigned hereby irrevocably elects to convert $__________ principal
amount of the Note (defined below) into shares of common stock, par value $.001
per share ("Common Stock"), of HealthRenu Medical, Inc., a Nevada corporation
(the "Borrower") according to the conditions of the convertible Notes of the
Borrower dated as of __________ (the "Notes"), as of the date written below. If
securities are to be issued in the name of a person other than the undersigned,
the undersigned will pay all transfer taxes payable with respect thereto and is
delivering herewith such certificates. No fee will be charged to the Holder for
any conversion, except for transfer taxes, if any. A copy of each Note is
attached hereto (or evidence of loss, theft or destruction thereof).
The undersigned represents and warrants that all offers and sales by the
undersigned of the securities issuable to the undersigned upon conversion of the
Notes shall be made pursuant to registration of the securities under the
Securities Act of 1933, as amended (the "Act"), or pursuant to an exemption from
registration under the Act.
Date of Conversion:______________________________________
Applicable Conversion Price:_____________________________
Number of Shares of Common Stock to be Issued Pursuant to
Conversion of the Notes:_________________________________
Signature:_______________________________________________
Name:____________________________________________________
Address:_________________________________________________
The Borrower shall issue and deliver shares of Common Stock to an
overnight courier not later than three (3) business days following receipt of
the original Note(s) to be converted, and shall make any applicable payments
pursuant to the Notes for the number of business days such issuance and delivery
is late.
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