THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED,
ASSIGNED, PLEDGED, OR HYPOTHECATED ABSENT AN EFFECTIVE REGISTRATION THEREOF
UNDER SUCH ACT OR COMPLIANCE WITH RULE 144 PROMULGATED UNDER SUCH ACT, OR UNLESS
THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL, IN FORM AND SUBSTANCE REASONABLY
SATISFACTORY TO THE COMPANY AND ITS COUNSEL AND FROM ATTORNEYS REASONABLY
ACCEPTABLE TO THE COMPANY AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT
REQUIRED.
PROMISSORY NOTE
August 18, 2006 $60,000.00
Sixty Thousand Dollars
15% NOTE
FOR VALUE RECEIVED, HEALTHRENU MEDICAL, INC., a Nevada corporation (the
"Company") hereby promises to pay to the order of Paul Cartmell (the "Holder"),
or its registered assigns, the principal sum of SIXTY THOUSAND DOLLARS AND
00/100 ($60,000.00), and to pay interest from the date hereof on the outstanding
principal sum at the rate of 15% per annum based on a 360-day year, such
interest to accrue from the date hereof (the "Closing Date"). The principal and
accrued but unpaid interest shall be paid in full on or before November 16, 2006
(the "Maturity Date").
All payments shall be paid in lawful money of the United States of America
at the principal office of the Holder or at such other place as the Holder may
designate from time to time in writing to the Company.
1. PREPAYMENTS. The Company may prepay and redeem the Note, at the
election of the Company, upon not less than 10 days' notice, at any time as a
whole only and not in part, at a price equal to the outstanding principal of the
Note together with accrued interest to the Maturity Date, along with any other
sums due hereunder.
2. ADDITIONAL CONSIDERATION. As additional consideration for making the
loan described herein, the Company agrees to issue to the Holder a warrant to
purchase a total of 400,000 shares of the Company's common stock which shall
have an exercise price of $0.05 per share (the "$0.05 Warrants") and shall be
exercisable for a period of five years (the shares issuable upon conversion of
the $0.05 Warrants shall be referred to as the "Warrant Shares"). In addition,
the Company agrees to include the Warrant Shares in the Company's pre-effective
amendment to its Registration Statement on Form SB-2 as filed by the Company on
April 12, 2006 with the SEC and to use its best efforts to cause such
registration to be declared effective by the SEC.
3. GRANT OF SECURITY INTEREST. The repayment of this obligation shall be
secured by the grant of a security interest in certain Advance Notices that may
be issued from time to time by the Company to Cornell Capital Partners, LP
pursuant to a certain Standby Equity Distribution Agreement dated May 23, 2005,
as amended to date. The parties acknowledge and agree that the Standby Equity
Distribution Agreement has been entered into for Ten Million Dollars
($10,000,000), however, the Company cannot request funds from Cornell Capital
Partners under the Standby Equity Distribution Agreement until such time as the
Company has an effective registration statement covering the shares that may be
issued pursuant to the Standby Equity Distribution Agreement and that Advance
Notices are subject to certain limits and other restrictions as set forth in the
Agreement. Within five (5) days of the effectiveness of such registration
statement, the Company will take action to perfect the Holder's security
interest in the Advance Notices.
4. DEFAULT. The Company shall be in default under this Note upon the
occurrence of any of the following events ("Event of Default"):
(a) Failure to make any principal or interest payment required under
this Note within three days of the date such payment is due; or
(b) An assignment for the benefit of creditors or the filing of a
petition under bankruptcy, insolvency or debtor's relief law, or for any
readjustment of indebtedness, composition or extension by the Company, or
commenced against the Company which is not discharged within sixty (60)
days.
5. REMEDIES UPON EVENT OF DEFAULT. Upon the occurrence of an Event of
Default:
(a) specified in clause (a) of Section 4, then the Holder may
declare the Note immediately accelerated due and payable;
(b) specified in clause (b) of Section43, then the Note shall be
automatically accelerated and immediately due and payable at the option of
Holder, without notice or demand; and
(c) the Holder shall have all of the rights and remedies, at law and
in equity, by statute or otherwise, and no remedy herein conferred upon
the Holder is intended to be exclusive of any other remedy and each remedy
shall be cumulative and shall be in addition to every other remedy given
hereunder or now or hereafter existing at law, in, equity, by statute or
otherwise.
2
6. CHANGES; PARTIES. This Note can only be changed by an agreement in
writing signed by the Company and the Holder. This Note shall inure to the
benefit of and be binding upon the Company and the Holder and their respective
successors and assigns.
7. WAIVER OF PRESENTMENT. The Company hereby waives presentment, demand,
notice, protest and all other demands and notices in connection with the
delivery, acceptance, performance, default or enforcement of this Note.
8. MAXIMUM RATE OF INTEREST. It is expressly stipulated and agreed to be
the intent of the Company and Holder at all times to comply with the applicable
law governing the maximum rate of interest payable on or in connection with all
indebtedness and transactions hereunder (or applicable United States federal law
to the extent that it permits Holder to contract for, charge, take, reserve or
receive a greater amount of interest). If the applicable law is ever judicially
interpreted so as to render usurious any amount of money or other consideration
called for hereunder, or contracted for, charged, taken, reserved or received
with respect to any loan or advance hereunder, or if acceleration of the
maturity of this Note or the indebtedness hereunder or if any prepayment by the
Company results in the Company's having paid any interest in excess of that
permitted by law, then it is the Company's and Holder's express intent that all
excess cash amounts theretofore collected by Holder be credited on the principal
balance of this Note (or if this Note has been or would thereby be paid in full,
refunded to the Company), and the provisions of this Note immediately be deemed
reformed and the amounts thereafter collectible hereunder reduced, without the
necessity of the execution of any new document, so as to comply with the
applicable law, but so as to permit the recovery of the fullest amount otherwise
called for hereunder. The right to accelerate maturity of this Note does not
include the right to accelerate any interest which has not otherwise accrued on
the date of such acceleration, and Holder does not intend to collect any
unearned interest in the event of acceleration.
9. NO IMPLIED WAIVER. No failure or delay on the part of Holder in
exercising any right, power or privilege under this Note and no course of
dealing between the Company and Holder shall operate as a waiver thereof. No
single or partial exercise of any right, power or privilege hereunder shall
preclude any other or further exercise of any right, power or privilege Holder
would otherwise have. No notice to, or demand on, the Company in any case shall
entitle the Company to any other or further notice or demand in similar or other
circumstances or constitute a waiver of the right of Holder to any other or
further action in any circumstances without notice or demand.
10. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED ACCORDING TO THE LAWS
OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE PRINCIPLES THEREOF
RELATING TO CONFLICTS OF LAWS.
[The remainder of this page is intentionally left blank.]
3
IN WITNESS WHEREOF, the Company has executed this Note as of the day
and year set forth above.
HEALTHRENU MEDICAL, INC.
By: ________________________________
Robert W. Prokos
Chief Executive Officer and President
4