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.
UNSECURED CONVERTIBLE NOTE
Houston, Texas
____________ __, 2005
$_____________
FOR VALUE RECEIVED, HEALTHRENU MEDICAL,
INC., a Nevada corporation (hereinafter
called the "Borrower"), hereby promises to
pay to the order of
_________________________ or registered
assigns (the "Holder") the sum of
___________________________________ Dollars
($___________), on ___________ __,
2009 (the "Maturity Date"), and to pay
interest on the unpaid principal balance
hereof at the rate of eight percent (8%)
per annum from ____________ __, 2005
(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,
2005, 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").
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<PAGE>
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:
I. 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.
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<PAGE>
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.
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<PAGE>
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
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 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 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 85.0%.
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.
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<PAGE>
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
