Exhibit 10.2


 


THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND
MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED UNLESS SO REGISTERED OR AN EXEMPTION
FROM REGISTRATION UNDER SAID ACT IS AVAILABLE.


 


AVAX TECHNOLOGIES, INC.


 


5% Convertible Note Due May 17, 2004


 


	
  $            ,000.00

  	
   

  	
  Overland Park, Kansas

  
	
   

  	
   

  	
                                ,
  2003

  



 


AVAX
TECHNOLOGIES, INC., a Delaware corporation (the “Company”), for value received,
promises to pay to
                                                                    
or registered assigns, the principal sum of
                                           
and 00/100 Dollars ($          ,000.00)
on May 17, 2004, and interest (computed on the basis of a 365-day year) from
the date hereof on the unpaid principal amount from time to time outstanding at
the rate of five percent (5%) per annum, due and payable in arrears on the
maturity date hereof, unless payment is required at an earlier date pursuant to
the terms hereof.  This Note is one of a
series of similar Notes issued by the Company in the aggregate principal amount
not to exceed $1,000,000.


 


1.             Conversion.


 


(a)           Mandatory
Conversion.  This Note shall
automatically convert into the securities described below and at the conversion
ratios described below upon the closing of the Offering (as defined in Section 1(b)) if the closing of the
Offering occurs on or prior to the maturity date of this Note.  Upon the closing of the Offering, all
principal of and accrued and unpaid interest on this Note will automatically
convert, at the election of the holder of this Note, into either (i) 7.692
shares of Common Stock, $.004 par value per share, of the Company (“Common
Stock”) for each $1.00 of unpaid principal of and interest on this Note on the
conversion date, or (ii) into that number of securities issued by the Company
in the Offering equal to the quotient obtained by dividing the principal and
accrued interest owed hereunder on the conversion date by the price at which
the securities are issued in the Offering and on the same terms and conditions
and with the same rights and preferences as the securities issued in the
Offering.  To exercise this election as
to the form and amount of securities to be received upon conversion of this
Note, the holder of this Note shall deliver to the Company during usual
business hours at the Company’s principal executive office written notice in
form satisfactory to the Company that the holder elects to receive the
conversion securities specified in either clause (i) or clause (ii) above.  Such notice shall also state the name or
names (with address) in which the certificate or certificates for shares (or
other securities) that are issuable on such conversion are to be registered.


 


(b)           Offering
of Securities.  In accordance
with Section 7.5 of the Note
Purchase Agreement dated the date hereof, the Company will use its reasonable
efforts to close an offering of securities on or before May 17, 2004, in which
the gross proceeds to the Company are not less than $1,000,000 (the “Offering”).  Upon the closing of the Offering, the Note
will automatically convert into either (i) shares of Common Stock, or (ii) the
securities issued in the Offering, in accordance with Section 1(a).


 


(c)           Surrender
of Note and Delivery of Certificates. 
When surrendered for automatic conversion this Note shall, unless the
shares (or other securities) issuable on conversion are to be issued in the
same name as the name in which this Note is then registered, be duly endorsed
by, or accompanied by instruments of transfer in form satisfactory to the
Company duly executed by, the holder or his or its duly authorized
attorney.  As promptly as practicable
after the surrender of this Note for conversion and the


 


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receipt of the notice specified
above, the Company shall deliver or cause to be delivered to the holder, or on
the holder’s written order, a certificate or certificates for the number of
full shares (or other securities) issuable upon the conversion of this Note, in
accordance with the provisions hereof. 
Such conversion shall be deemed to have been made automatically on the
closing of the Offering, and from and after such time, the holder of this Note
will have no rights hereunder other than the right to receive the conversion
shares (or other securities) and the holder in whose name any certificate or
certificates for shares of shall be issuable upon such conversion shall be
deemed to have become on the Conversion Date the holder of record of the shares
represented thereby.


 


2.             Adjustment of
Conversion Price.


 


(a)           Stock
Dividends, Stock Splits, etc. 
If the Company:


 


(i)            declares a dividend of Common Stock on its
Common Stock,


 


(ii)           subdivides its outstanding Common Stock into
a larger number of shares of Common Stock by reclassification, stock split or
otherwise, or


 


(iii)          combines its outstanding Common Stock into a
smaller number of shares of Common Stock by reclassification, reverse stock
split or otherwise,


 


the number of shares of Common Stock issuable upon conversion of this
Note pursuant to clause (i) of Section 1
immediately prior to any such event shall be adjusted proportionately so that
thereafter the holder of this Note shall be entitled to receive upon conversion
of this Note the number of shares of Common Stock which such holder would have
owned after the happening of any of the events described above had this Note
been converted immediately prior to the happening of such event, provided that
the Conversion Price shall in no event be reduced to less than the par value of
the shares issuable upon conversion.  An
adjustment made pursuant to this Section 2
will become effective immediately after the record date in the case of a
dividend and will become effective immediately after the effective date in the
case of a subdivision or combination.


 


(b)           Merger
or Consolidation.  If, prior to
maturity of this Note, the Company at any time consolidates or merges with
another corporation (other than a merger or consolidation in which the Company
is the surviving corporation), the holder hereof will thereafter be entitled to
receive, upon the conversion hereof, the securities or property to which a
holder of the number of shares of Common Stock then deliverable upon the
conversion hereof would have been entitled upon such consolidation or merger,
and the Company shall take such steps in connection with such consolidation or
merger as may be necessary to ensure that the provisions hereof shall
thereafter be applicable, as nearly as reasonably may be, in relation to any
securities or property thereafter deliverable upon the conversion of this Note.


 


(c)           Notice.  If the Company proposes to take any action
referred to in this Section 2,
or to effect the liquidation, dissolution or winding up of the Company, then
the Company shall cause notice thereof to be mailed to the record holder of
this Note at least ten (10) days prior to the record date or effective date, as
applicable, of the stock dividend, merger, consolidation or other event subject
to this Section.


 


(d)           Statement
of Adjustment.  Whenever the
conversion price is adjusted as provided in Section 2(a),
the Company shall promptly file at the Company’s principal executive office, a
statement, signed by the Chairman of the Board, the President or any Vice
President of the Company, showing in reasonable detail the facts requiring such
adjustment and the conversion price that will be effective after such
adjustment.  The Company shall also
cause a notice setting forth any such adjustment to be sent by


 


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mail, first class, postage
prepaid, to each record holder of this Note. 
Where appropriate, such notice may be given in advance and may be
included as part of a notice required to be mailed under the provisions of Section 2(c).


 


(e)           Fractional
Shares.  No fractional shares of
Common Stock will be issued upon conversion of this Note, but a payment in cash
will be made in respect of any fraction of a share which would otherwise be
issuable upon the conversion of this Note. 
Such payment shall be based on the fair market value of the Common Stock
at the time of conversion of this Note.


 


(f)            Securities
Act of 1933.  Upon conversion of
this Note, the record holder may be required to execute and deliver to the
Company an instrument, in form satisfactory to the Company, representing that
the shares (or other securities) issuable upon conversion hereof are being
acquired for investment only and not with a view to distribution within the
meaning of the Securities Act of 1933, as amended.


 


3.             Prepayment of
Principal.  The principal amount of
this Note may NOT be prepaid in whole or in part, without the prior written
consent of the holder of this Note.


 


4.             Default.


 


The entire
unpaid principal of this Note and the interest then accrued on this Note shall
become and be immediately due and payable upon written demand of the holder of
this Note, without any other notice or demand of any kind or any presentment or
protest, if any one of the following events occurs and be continuing at the time
of such demand:


 


(a)           If the Offering has not
closed on or before the maturity date hereof an the Company fails to pay the
principal amount of and all accrued interest on this Note on the maturity date
hereof; or


 


(b)           If the Company defaults
in the performance of any other obligation under this Note or the Note Purchase
Agreement, and such default continues for twenty (20) days after notice thereof
by the holder hereof to the Company; or


 


(c)           If the stockholders of
the Company fail to approve on or before December 31, 2003, either (i) an
increase in the authorized Common Stock or (ii) a reverse stock split of the
Common Stock; or


 


(d)           If the Company
(i) makes an assignment for the benefit of creditors, (ii) applies
for, consents to, acquiesces in, files a petition seeking or admits (by answer,
default or otherwise) the material allegations of a petition filed against it
seeking the appointment of a trustee, receiver or liquidator, in bankruptcy or
otherwise, of itself or of all or a substantial portion of its assets, or a
reorganization, arrangement with creditors or other remedy, relief or
adjudication available to or against a bankrupt, insolvent or debtor under any
bankruptcy or insolvency law or any law affecting the rights of creditors
generally, or (iii) admits in writing its inability to pay its debts
generally as they become due; or


 


(e)           If an order for relief
shall have been entered by a bankruptcy court or if a decree, order or judgment
shall have been entered adjudging the Company insolvent, or appointing a
receiver, liquidator, custodian or trustee, in bankruptcy or otherwise, for it
or for all or a substantial portion of its assets, or approving the winding-up
or liquidation of its affairs on the grounds of insolvency or nonpayment of
debts, and such order for relief, decree, order or judgment shall remain
undischarged or unstayed for a period of sixty (60) days; or


 


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(f)            If any substantial
part of the property of the Company is sequestered or attached and is not
returned to the possession of the Company or released from such attachment
within sixty (60) days.


 


5.             General.


 


(a)           Successors
and Assigns.  This Note, and the
obligations and rights of the Company hereunder, shall be binding upon and
inure to the benefit of the Company, the holder of this Note, and their
respective successors and assigns.


 


(b)           Recourse.  Recourse under this Note is to the general
unsecured assets of the Company only and in no event to the officers, directors
or stockholders of the Company.


 


(c)           Changes.  Changes in or additions to this Note may be
made or compliance with any term, covenant, agreement, condition or provision
set forth herein may be omitted or waived (either generally or in a particular
instance and either retroactively or prospectively), upon written consent of
the Company and the holder of this Note.


 


(d)           Currency.  All payments shall be made in such coin or
currency of the United States of America as at the time of payment is legal
tender therein for the payment of public and private debts.


 


(e)           Saturdays,
Sundays, Holidays.  If any date
specified in this Note as a date for the making of any payment of principal or
interest under this Note falls on a Saturday, Sunday or on a day that is a
legal holiday in the State of Pennsylvania, then the date for the making of
that payment shall be the next subsequent day that is not a Saturday, Sunday or
legal holiday.


 


(f)            Governing
Law.  This Note shall be
construed and enforced in accordance with, and the rights of the parties shall
be governed by, the laws of the State of Delaware.


 


IN WITNESS WHEREOF,
this Note has been executed and delivered on the date first above written by
the duly authorized representative of the Company.


 


	
   

  	
  AVAX TECHNOLOGIES, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Richard P. Rainey

  
	
   

  	
  Title:

  	
  President

  



 


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