EXHIBIT 10.5
PROMISSORY NOTE
MAY ___, 2005
JERSEY CITY, NEW JERSEY $188,843
FOR VALUE RECEIVED, the undersigned, HEALTHRENU MEDICAL, INC., a Nevada
corporation (the "Company"), promises to pay CORNELL CAPITAL PARTNERS, LP (the
"Lender") at 101 Hudson Street, Suite 3700, Jersey City, New Jersey 07302 or
other address as the Lender shall specify in writing, the principal sum of One
Hundred Eighty Eight Thousand Eight Hundred Forty Three DOLLARS ($188,843) (the
"Principal Amount") and interest at the annual rate of twelve percent (12%) on
the unpaid balance pursuant to the following terms:
Contemporaneous with the execution of this promissory note (the
"Note"), the parties entered into a Standby Equity Distribution Agreement (the
"Standby Equity Distribution Agreement"); a Registration Rights Agreement (the
"Registration Rights Agreement"); an Escrow Agreement (the "Escrow Agreement");
and a Placement Agent Agreement (the "Placement Agent Agreement") (collectively,
the Standby Equity Distribution Agreement, the Registration Rights Agreement,
the Escrow Agreement and Placement Agent Agreement are referred to as the
"Transaction Documents").
PRINCIPAL AND INTEREST. For value received, the Company hereby promises
to pay to the order of the Lender in lawful money of the United States of
America and in immediately available funds the entire principal sum of One
Hundred Eighty Eight Thousand Eight Hundred Forty Three Dollars ($188,843) on
the first (1st) Trading Day of the second (2nd) month after the Registration
Statement, filed pursuant to the Registration Rights Agreement is declared
effective by the Securities and Exchange Commission, plus all accrued and unpaid
interest (the "Maturity Date"). Interest shall accrue from the date hereof.
Notwithstanding the foregoing, the entire amount of principal and interest shall
be due and payable on the first (1st) Trading Day of October 2005 in the event
the Registration Statement is not declared effective by such date, for whatever
reason. This Note may be prepaid in full or in part without penalty or premium.
1. WAIVER AND CONSENT. To the fullest extent permitted by law and except as
otherwise provided herein, the Company waives demand, presentment, protest,
notice of dishonor, suit against or joinder of any other person, and all other
requirements necessary to charge or hold the Company liable with respect to this
Note.
2. COSTS, INDEMNITIES AND EXPENSES. In the Event of Default as defined herein,
the Company agrees to pay all reasonable fees and costs incurred by the Lender
in collecting or securing or attempting to collect or secure this Note or,
collecting upon any judgments and/or appellate or bankruptcy proceedings,
including reasonable attorneys' fees and expenses, whether or not involving
litigation. The Company agrees to pay any documentary stamp taxes, intangible
taxes or other taxes which may now or hereafter apply to this Note or any
payment made in respect of this Note, and the Company agrees to indemnify and
hold the Lender harmless from and against any liability, costs, reasonable
attorneys' fees, penalties, interest or expenses relating to any such taxes, as
and when the same may be incurred.
3. EVENT OF DEFAULT. An "Event of Default" shall be deemed to have occurred upon
the occurrence of any of the following: (i) the Company should fail for any
reason or for no reason to make any payment of the interest or principal
pursuant to this Note within five (5) business days of the date due as
prescribed herein; (ii) the Company shall fail to observe or perform in any
material respect any other covenant, agreement or warranty contained in, or
otherwise commit any material breach or default of any material provision of,
this Note or any of the Transaction Documents (as defined herein), which is not
cured within five (5) business days after the Company has received written
notice of the default; (iii) the Company or any material subsidiary of the
Company shall commence a proceeding under any applicable bankruptcy or
insolvency laws as now or hereafter in effect or any successor thereto, or the
Company or any material subsidiary of the Company commences any other proceeding
under any reorganization, arrangement, adjustment of debt, relief of debtors,
dissolution, insolvency or liquidation or similar law of any jurisdiction
whether now or hereafter in effect relating to the Company or any material
subsidiary of the Company or there is commenced against the Company or any
material subsidiary of the Company any such bankruptcy, insolvency or other
proceeding which remains undismissed for a period of 61 days; or the Company or
any material subsidiary of the Company is adjudicated insolvent or bankrupt; or
any order of relief or other order approving any such case or proceeding is
entered; or the Company or any material subsidiary of the Company suffers an
appointment of any custodian, private or court appointed receiver or the like
for it or any substantial part of its property which continues undischarged or
unstayed for a period of 61 days; or the Company or any material subsidiary of
the Company makes a general assignment for the benefit of creditors; or the
Company or any material subsidiary of the Company shall fail to pay, or shall
state that it is unable to pay, or shall be unable to pay, its debts generally
as they become due; or the Company or any material subsidiary of the Company
shall call a meeting of its creditors with a view to arranging a composition,
adjustment or restructuring of its debts; or the Company or any
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material subsidiary of the Company shall by any act or failure to act expressly
indicate its consent to, approval of or acquiescence in any of the foregoing; or
any corporate or other action is taken by the Company or any material subsidiary
of the Company for the purpose of effecting any of the foregoing; or (iv) a
material breach by the Company of its obligations, or an event of default, under
any of the Transaction Documents, or any other agreements entered into between
the Company and the Lender which is not cured by any applicable cure period set
forth therein or within five (5) business days following written notice of
default.
Upon an Event of Default (as defined above), the entire principal
balance and accrued interest outstanding under this Note, and all other
obligations of the Company under this Note, shall be immediately due and payable
without any action on the part of the Lender, default interest shall accrue on
the unpaid principal balance at two percent (2%), and the Lender shall be
entitled to seek and institute any and all remedies available to it.
4. MAXIMUM INTEREST RATE. In no event shall any agreed to or actual interest
charged, reserved or taken by the Lender as consideration for this Note exceed
the limits imposed by New Jersey law. In the event that the interest provisions
of this Note shall result at any time or for any reason in an effective rate of
interest that exceeds the maximum interest rate permitted by applicable law,
then without further agreement or notice the obligation to be fulfilled shall be
automatically reduced to such limit and all sums received by the Lender in
excess of those lawfully collectible as interest shall be applied against the
principal of this Note immediately upon the Lender's receipt thereof, with the
same force and effect as though the Company had specifically designated such
extra sums to be so applied to principal and the Lender had agreed to accept
such extra payment(s) as a premium-free prepayment or prepayments.
5. ISSUANCE OF CAPITAL STOCK. So long as any portion of this Note is
outstanding, the Company, except as set forth in Section 6.7(b) of the Standby
Equity Distribution Agreement, shall not, without the prior written consent of
the Lender not to be unreasonably withheld, (i) issue or sell shares of common
stock or preferred stock without consideration or for a consideration per share
less than the average closing bid price of the common stock, as quoted by
Bloomberg, LP (the "Bid Price"), for the 10 trading days prior to its issuance,
(ii) issue any warrant, option, right, contract, call, or other security
instrument granting the holder thereof, the right to acquire common stock
without consideration or for a consideration less than such common stock's
average Bid Price for the 10 trading days prior to its issuance, (iii) enter
into any security instrument granting the holder a security interest in any
significant amount of the assets of the Company (except for a purchase money
security interest), or (iv) file any registration statement on Form S-8 except
as set forth in Section 6.7(a)(iii) of the Standby Equity Distribution
Agreement.
6. CANCELLATION OF NOTE. Upon the repayment by the Company of all of its
obligations hereunder to the Lender, including, without limitation, the
principal amount of this Note, plus accrued but unpaid interest, the
indebtedness evidenced hereby shall be deemed canceled and paid in full. Except
as otherwise required by law or by the provisions of this Note, payments
received by the Lender hereunder shall be applied first against expenses and
indemnities, next against interest accrued on this Note, and next in reduction
of the outstanding principal balance of this Note.
7. SEVERABILITY. If any provision of this Note is, for any reason, invalid or
unenforceable, the remaining provisions of this Note will nevertheless be valid
and enforceable and will remain in full force and effect. Any provision of this
Note that is held invalid or unenforceable by a court of competent jurisdiction
will be deemed modified to the extent necessary to make it valid and enforceable
and as so modified will remain in full force and effect.
8. AMENDMENT AND WAIVER. This Note may be amended, or any provision of this Note
may be waived, provided that any such amendment or waiver will be binding on a
party hereto only if such amendment or waiver is set forth in a writing executed
by the parties hereto. The waiver by any such party hereto of a breach of any
provision of this Note shall not operate or be construed as a waiver of any
other breach.
9. SUCCESSORS. Except as otherwise provided herein, this Note shall bind and
inure to the benefit of and be enforceable by the parties hereto and their
permitted successors and assigns.
10. ASSIGNMENT. This Note shall not be directly or indirectly assignable or
delegable by the Company. The Lender may assign this Note as long as such
assignment complies with the Securities Act of 1933, as amended.
11. NO STRICT CONSTRUCTION. The language used in this Note will be deemed to be
the language chosen by the parties hereto to express their mutual intent, and no
rule of strict construction will be applied against any party.
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12. FURTHER ASSURANCES. Each party hereto will execute all documents and take
such other actions as the other party may reasonably request in order to
consummate the transactions provided for herein and to accomplish the purposes
of this Note.
13. NOTICES, CONSENTS, ETC. Any notices, consents, waivers or other
communications required or permitted to be given under the terms hereof must be
in writing and will be deemed to have been delivered: (i) upon receipt, when
delivered personally; (ii) upon receipt if during normal business hours or
otherwise the next business day, when sent by facsimile (provided confirmation
of transmission is mechanically or electronically generated and kept on file by
the sending party); or (iii) one (1) business day after deposit with a
nationally recognized overnight delivery service, in each case properly
addressed to the party to receive the same. The addresses and facsimile numbers
for such communications shall be:
If to Company: HealthRenu Medical, Inc., Inc.
12777 Jones Road - Suite 481
Houston, Texas 77070
Attention: Robert W. Prokos
Telephone: (281) 890-2561
Facsimile: (281) 890-2587
With a copy to: Gallagher, Briody & Butler
155 Village Blvd.
Suite 201
Princeton, NJ 08540
Attention: Thomas P. Gallagher, Esq.
Telephone: (609) 452-6000
Facsimile: (609) 452-0090
If to the Lender: Cornell Capital Partners, LP.
101 Hudson Street, Suite 3700
Jersey City, NJ 07302
Attention: Mark A. Angelo
Telephone: (201) 324-1619
Facsimile: (201) 324-1447
With a copy to: Troy Rillo, Esq.
101 Hudson Street, Suite 3700
Jersey City, NJ 07302
Telephone: (201) 324-1619
Facsimile: (201) 324-1447
or at such other address and/or facsimile number and/or to the attention of such
other person as the recipient party has specified by written notice given to
each other party three (3) business days prior to the effectiveness of such
change. Written confirmation of receipt (A) given by the recipient of such
notice, consent, waiver or other communication, (B) mechanically or
electronically generated by the sender's facsimile machine containing the time,
date, recipient facsimile number and an image of the first page of such
transmission or (C) provided by a nationally recognized overnight delivery
service, shall be rebuttable evidence of personal service, receipt by facsimile
or receipt from a nationally recognized overnight delivery service in accordance
with clause (i), (ii) or (iii) above, respectively.
14. REMEDIES, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF. The Lender's
remedies provided in this Note shall be cumulative and in addition to all other
remedies available to the Lender under this Note, at law or in equity (including
a decree of specific performance and/or other injunctive relief), no remedy of
the Lender contained herein shall be deemed a waiver of compliance with the
provisions giving rise to such remedy and nothing herein shall limit the
Lender's right to pursue actual damages for any failure by the Company to comply
with the terms of this Note. No
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remedy conferred under this Note upon the Lender is intended to be exclusive of
any other remedy available to the Lender, pursuant to the terms of this Note or
otherwise. No single or partial exercise by the Lender of any right, power or
remedy hereunder shall preclude any other or further exercise thereof. The
failure of the Lender to exercise any right or remedy under this Note or
otherwise, or delay in exercising such right or remedy, shall not operate as a
waiver thereof. Every right and remedy of the Lender under any document executed
in connection with this transaction may be exercised from time to time and as
often as may be deemed expedient by the Lender. The Company acknowledges that a
breach by it of its obligations hereunder will cause irreparable harm to the
Lender and that the remedy at law for any such breach may be inadequate. The
Company therefore agrees that, in the event of any such breach or threatened
breach, the Lender shall be entitled, in addition to all other available
remedies, to an injunction restraining any breach, and specific performance
without the necessity of showing economic loss and without any bond or other
security being required.
15. GOVERNING LAW; JURISDICTION. All questions concerning the construction,
validity, enforcement and interpretation of this Note shall be governed by the
internal laws of the State of New Jersey, without giving effect to any choice of
law or conflict of law provision or rule (whether of the State of New Jersey or
any other jurisdictions) that would cause the application of the laws of any
jurisdictions other than the State of New Jersey. Each party hereby irrevocably
submits to the exclusive jurisdiction of the Superior Court of the State of New
Jersey sitting in Hudson County, New Jersey and the United States Federal
District Court for the District of New Jersey sitting in Newark, New Jersey, for
the adjudication of any dispute hereunder or in connection herewith or
therewith, or with any transaction contemplated hereby or discussed herein, and
hereby irrevocably waives, and agrees not to assert in any suit, action or
proceeding, any claim that it is not personally subject to the jurisdiction of
any such court, that such suit, action or proceeding is brought in an
inconvenient forum or that the venue of such suit, action or proceeding is
improper. Each party hereby irrevocably waives personal service of process and
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address for such notices to it under
this Note and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing contained herein shall be deemed
to limit in any way any right to serve process in any manner permitted by law.
16. NO INCONSISTENT AGREEMENTS. None of the parties hereto will hereafter enter
into any agreement, which is inconsistent with the rights granted to the parties
in this Note.
17. THIRD PARTIES. Nothing herein expressed or implied is intended or shall be
construed to confer upon or give to any person or entity, other than the parties
to this Note and their respective permitted successor and assigns, any rights or
remedies under or by reason of this Note.
18. WAIVER OF JURY TRIAL. AS A MATERIAL INDUCEMENT FOR THE LENDER TO LOAN TO THE
COMPANY THE MONIES HEREUNDER, THE COMPANY HEREBY WAIVES ANY RIGHT TO TRIAL BY
JURY IN ANY LEGAL PROCEEDING RELATED IN ANY WAY TO THIS AGREEMENT AND/OR ANY AND
ALL OF THE OTHER DOCUMENTS ASSOCIATED WITH THIS TRANSACTION.
19. ENTIRE AGREEMENT. This Note (including any recitals hereto) sets forth the
entire understanding of the parties with respect to the subject matter hereof,
and shall not be modified or affected by any offer, proposal, statement or
representation, oral or written, made by or for any party in connection with the
negotiation of the terms hereof, and may be modified only by instruments signed
by all of the parties hereto.
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IN WITNESS WHEREOF, this Promissory Note is executed by the undersigned as of
the date hereof.
CORNELL CAPITAL PARTNERS, LP
By: Yorkville Advisors, LLC
Its: General Partner
By:
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Name: Mark Angelo
Its: Portfolio Manager
HEALTHRENU MEDICAL, INC.
By:
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Name: Robert W. Prokos
Title: President and Chief Executive Officer
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