EXHIBIT 10.4
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 UNDER SAID ACT
AND ANY APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO NATURADE, INC. THAT SUCH REGISTRATION IS NOT REQUIRED.
SECURED CONVERTIBLE TERM NOTE
FOR VALUE RECEIVED, NATURADE, INC., a Delaware corporation (the
"COMPANY"), promises to pay to LAURUS MASTER FUND, LTD., c/o M&C Corporate
Services Limited, P.O. Box 309 GT, Xxxxxx House, South Church Street, Xxxxxx
Town, Grand Cayman, Cayman Islands, Fax: 000-000-0000 (the "HOLDER") or its
registered assigns or successors in interest, the sum of One Million Dollars
($1,000,000), together with any accrued and unpaid interest hereon, on July 26,
2008 (the "MATURITY DATE") if not sooner paid.
Capitalized terms used herein without definition shall have the
meanings ascribed to such terms in that certain Security and Purchase Agreement
dated as of the date hereof by and between the Companies and the Holder (as
amended, modified and/or supplemented from time to time, the "SECURITY
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 two percent
(2.0%) (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. Subject to Section 1.2,
the Contract Rate shall not at any time be less than six percent (6.0%) Interest
shall be (i) calculated on the basis of a 360 day year, and (ii) payable
monthly, in arrears, commencing on August 1, 2005, 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 Adjustments and 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 (each a "DETERMINATION DATE") and shall be subject to adjustment as set
forth herein. If (i) the Company shall have registered the shares of
the Common Stock underlying the conversion of this Note and each Warrant on a
registration statement declared effective by the Securities and Exchange
Commission (the "SEC"), and (ii) the market price (the "MARKET PRICE") of the
Common Stock as reported by Bloomberg, L.P. on the Principal Market for the five
(5) trading days immediately preceding a Determination Date exceeds the then
applicable Fixed Conversion Price by at least twenty-five percent (25%), the
Contract Rate for the succeeding calendar month shall automatically be reduced
by 200 basis points (200 b.p.) (2.0%) for each incremental twenty-five percent
(25%) increase in the Market Price of the Common Stock above the then applicable
Fixed Conversion Price. Notwithstanding the foregoing (and anything to the
contrary contained herein), in no event shall the Contract Rate at any time be
less than zero percent (0%).
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 November 1, 2005 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 Repayment Date, each such payment in the amount
of $30,303.03 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 103% 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 $ 0.80.
(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
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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 103% 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 a sum of money equal to one
hundred twenty five percent (125%) of the Principal Amount outstanding 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 Security
Agreement or any other Ancillary 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 Section 3.3 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.
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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 contained herein
to the contrary, the Holder shall not be entitled to convert pursuant to the
terms of this Note an amount that would be convertible into that number of
Conversion Shares which would exceed the difference between (i) 4.99% of the
issued and outstanding shares of Common Stock and (ii) the number of shares of
Common Stock beneficially owned by the Holder, issuable to the Holder upon
exercise of the Warrants and issuable to the Holder upon exercise of the
Options. For purposes of the immediately preceding sentence, beneficial
ownership shall be determined in accordance with Section 13(d) of the Exchange
Act and Regulation 13d-3 thereunder. The Conversion Shares limitation described
in this Section 2.2 shall automatically become null and void following notice to
any Company upon the occurrence and during the continuance of an Event of
Default, or upon 75 days prior notice to the Parent, except that at no time
shall the number of shares of Common Stock beneficially owned by the Holder
exceed 19.99% of the outstanding shares of Common Stock. Notwithstanding
anything contained herein to the contrary, the provisions of this Section 3.2
are irrevocable and may not be waived by the Holder or any Company.
3.3 Mechanics of Xxxxxx'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 one (1) business day 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
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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 $500 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.
(c) Share Issuances. Subject to the provisions of this Section
3.6, if the Company shall at any time prior to the conversion or repayment in
full of the Principal Amount issue any shares of Common Stock or securities
convertible into Common Stock to a Person other than the Holder (except (i)
pursuant to Sections 3.6(a) or (b) above; (ii) pursuant to options, warrants, or
other obligations to issue shares outstanding on the date hereof as disclosed
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to the Holder in writing; (iii) pursuant to options that may be issued under any
employee incentive stock option and/or any qualified stock option plan adopted
by the Company; or (iv) pursuant to issuances of Common Stock in connection with
transactions otherwise permitted pursuant to Section 13(l)(viii) of the Security
Agreement) for a consideration per share (the "OFFER PRICE") less than the Fixed
Conversion Price in effect at the time of such issuance, then the Fixed
Conversion Price shall be immediately reset to such lower Offer Price. For
purposes hereof, the issuance of any security of the Company convertible into or
exercisable or exchangeable for Common Stock shall result in an adjustment to
the Fixed Conversion Price upon the issuance of such securities.
(d) Computation of Consideration. For purposes of any
computation respecting consideration received pursuant to Section 3.6(c) above,
the following shall apply:
(i) in the case of the issuance of shares of Common
Stock for cash, the consideration shall be the amount of such cash,
provided that in no case shall any deduction be made for any commissions,
discounts or other expenses incurred by the Company for any underwriting
of the issue or otherwise in connection therewith;
(ii) in the case of the issuance of shares of Common
Stock for a consideration in whole or in part other than cash, the
consideration other than cash shall be deemed to be the fair market value
thereof as determined in good faith by the Board of Directors of the
Company (irrespective of the accounting treatment thereof); and
(iii) upon any such exercise, the aggregate
consideration received for such securities shall be deemed to be the
consideration received by the Company for the issuance of such securities
plus the additional minimum consideration, if any, to be received by the
Company upon the conversion or exchange thereof (the consideration in each
case to be determined in the same manner as provided in subsections (i)
and (ii) of this Section 3.6(d)).
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
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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 an Event of Default under
the Security Agreement shall constitute an event of default ("EVENT OF DEFAULT")
hereunder.
4.2 Default Interest. Following the occurrence and during the
continuance of an Event of Default, the Companies shall, jointly and severally,
pay additional interest on the outstanding principal balance of this Note in an
amount equal to two percent (2%) per month, and all outstanding Obligations,
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 elect, in
addition to all rights and remedies of the Holder under the Security Agreement
and the Ancillary Agreements and all obligations of each Company under the
Security Agreement and the Ancillary Agreements, to require the Companies,
jointly and severally, to make a Default Payment ("DEFAULT PAYMENT"). The
Default Payment shall be one hundred twenty five (125%) 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 the Notes and/or the Ancillary Agreements, then to accrued and
unpaid interest due on the Notes, the Security Agreement and then to the
outstanding principal balance of the Notes. 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
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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
Security Agreement executed in connection herewith, and to the Holder at the
address provided in the Security Agreement for such Holder, with a copy to Xxxx
X. Xxxxxx, Esq., 000 Xxxxx Xxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000,
xxxxxxxxx number (000) 000-0000, 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 Security 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 Security 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 ANCILLARY AGREEMENTS OR TO ANY MATTER ARISING OUT OF OR
ANCILLARY TO THIS NOTE OR ANY OF THE ANCILLARY 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
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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 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 SECURITY 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, ANCILLARY OR INCIDENTAL
TO THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH THIS NOTE, ANY
OTHER ANCILLARY AGREEMENT OR THE TRANSACTIONS ANCILLARY 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 in certain assets of the Parent as more fully described in the
Security Agreement 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.
[Balance of page intentionally left blank; signature page follows]
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IN WITNESS WHEREOF, the Company has caused this Secured Convertible
Term Note to be signed in its name effective as of this 26th day of July 2005.
NATURADE, INC.
By: /s/Xxxxxxx X. Xxxxxxxxx
Name: Xxxxxxx X. Xxxxxxxxx
Title: CFO
WITNESS:
/s/Xxx Xxxxxxx
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EXHIBIT 10.4
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)
[Name and Address of Company]
The undersigned hereby converts $_________ of the principal due on
[specify applicable Repayment Date] under the Secured Convertible Term Note
dated as of July 26, 2005 (the "NOTE") issued by NATURADE, 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: _______________________
[HOLDER]
By:________________________
Name:______________________
Title:_____________________
