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, Ugland House, South Church
Street, George
Town, Grand Cayman, Cayman Islands, Fax: 345-949-8080 (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 Holder'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 u
