EXHIBIT 10.5
Aholt Promissory Note
Exhibit 10.5
THIS PROMISSORY NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED. THE NOTE HAS BEEN ACQUIRED FOR INVESTMENT AND MUST BE HELD
INDEFINITELY and MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS IT
IS SUBSEQUENTLY REGISTERED UNDER SAID ACT or, in the opinion of counsel to the
company, an exemption from registration under said act is available.
PROMISSORY NOTE
$100,000 August 30, 2004
FOR VALUE RECEIVED, Phase III Medical, Inc., a Delaware corporation, ("Maker")
promises to pay to Robert Aholt ("Payee"), in lawful money of the United States
of America, the principal sum of One Hundred Thousand Dollars ($100,000.00 ),
together with interest thereon accruing at an annual rate equal to 20%, in the
manner provided below. Interest shall be calculated on the basis of a year of
365 or 366 days, as applicable, and charged for the actual number of days
elapsed.
1. PAYMENTS
1.1 Principal and interest.
Interest on the unpaid principal amount shall be payable monthly in
arrears until the entire principal amount shall be paid in full. All
principal and accrued interest shall be paid in full on February 30,
2005 (6 months after the date of issuance of this Note).
1.2 Manner of Payment
All payments of principal and interest on this Note shall be made by
check at Robert Aholt, 20128 Cavern Court, Saugus, CA, 91390, or at
such other place in the United States of America as Payee shall
designate to Maker in writing. If any payment of principal or
interest on this Note is due on a day which is not a
Business Day, such payment shall be due on the next succeeding
Business Day. "Business Day" means any day other than a Saturday,
Sunday or legal holiday in the State of New York.
1.3 Prepayment
Maker may, without premium or penalty, at any time and from time to
time, prepay all or any portion of the outstanding principal balance
due under this Note, provided that each such prepayment is
accompanied by accrued interest on the amount of principal prepaid
calculated to the date of such prepayment.
Any partial prepayments shall be applied first to accrued interest
and then to principal.
2. DEFAULTS
2.1 Events of Default
The occurrence of any one or more of the following events with
respect to Maker shall constitute an event of default hereunder
("Event of Default"):
(a) If Maker shall fail to pay when due any payment of principal
or interest on this Note.
(b) If, pursuant to or within the meaning of the United States
Bankruptcy Code or any other federal or state law relating to
insolvency or relief of debtors (a "Bankruptcy Law"), Maker
shall (i) commence a voluntary case or proceeding; (ii)
consent to the entry of an order for relief against it in an
involuntary case; (iii) consent to the appointment of a
trustee, receiver, assignee, liquidator or similar official;
(iv) make an assignment for the benefit of its creditors; or
(v) admit in writing its inability to pay its debts as they
become due.
(c) If a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that (i) is for relief against Maker
in an involuntary case; (ii) appoints of a trustee, receiver,
assignee, liquidator or similar official for the Maker or
substantially all of the Maker's properties; or (iii) orders
the liquidation of the Maker, and in each case the order is
not dismissed within 90 days.
2.2 Remedies
Upon the occurrence of an Event of Default hereunder (unless all
Events of Default have been cured or waived by Payee), Payee may, at
its option, (i) by written notice to Maker, declare the entire
unpaid principal balance of this Note, together with all accrued
interest thereon, immediately due and payable, and (ii) exercise all
and any rights and remedies available to it under applicable law,
including, without limitation, the right to collect from maker all
sums due under
this Note. Maker shall pay all reasonable costs and expenses
incurred by or on behalf of Payee in connection with Payee's
exercise of any or all of its rights and remedies under this Note,
including, without limitation, reasonable attorneys' fees and
expenses.
3. REPRESENTATIONS BY PAYEE
Payee represents and warrants to Maker as follows:
(a) Payee has received and examined all information, including financial
statements, of or concerning Maker which Payee considers necessary
to making an informed decision regarding this Note. In addition,
Payee has had the opportunity to ask questions of, and receive
answers from, the officers and agents of Maker concerning Maker and
to obtain such information, to the extent such persons possessed the
same or could acquire it without unreasonable effort or expense, as
Payee deemed necessary to verify the accuracy of the information
referred to herein.
(b) The Payee acknowledges and understands that (i) the Maker will use
the proceeds of this Note in its the establishment of new business
operations; (ii) the proceeds of this Note will not be sufficient to
provide Maker with the necessary funds to achieve its current
business plan; (iii) the Maker does not have sufficient cash
available to repay this Note; (iv) this Note will not be guaranteed
nor will it be secured by any assets of Maker nor senior to any
other indebtedness of Maker; and (v) Payee bears the economic risk
of never being repaid on this Promissory Note.
(c) The Payee hereby certifies that Payee is an "Accredited Investor"
(as that term is defined by Regulation D under the Securities Act of
1933, as amended) because at least one of the following statements
is applicable to Payee:
(i) Payee is an Accredited Investor because the Payee had
individual income of more than $200,000 in each of the
two prior calendar years and reasonably expects to have
individual income in excess of $200,000 during the
current calendar year.
(ii) The Payee is an Accredited Investor because the Payee
and his spouse together had income of more than $300,000
in each of the two prior calendar years and reasonably
expect to have joint income in excess of $300,000 during
the current calendar year.
(iii) The Payee is an Accredited Investor because the Payee
has an individual net worth, or the Payee and his spouse
have a joint net worth of more than $1,000,000.
(d) Payee is acquiring this Note for his own account, for investment
purposes only, and not with a view to the resale or distribution of
all or any part thereof.
(e) Payee acknowledges that this Note (i) has not been registered under
applicable securities laws, (ii) will be a "restricted security" as
defined in applicable securities laws, (iii) has been issued in
reliance on the statutory exemptions from registration contemplated
by applicable securities laws based (in part) on the accuracy of
Payee's representations contained herein, and (iv) will not be
transferable without registration under applicable securities laws,
unless an exemption from such registration requirements is
available.
(f) Payee has reviewed and understands Maker's (i) Annual Report on Form
10-K for the fiscal year ended December 31, 2003; (ii) Quarterly
Reports on Form10-Q for the quarters ended March 31, June 30,
September 30, 2003, and March 31, June 30, 2004; (iii) proxy
statement for its 2003 annual meeting of shareholders and (iv) all
Current Report on Form 8-K filed since the filing of its last Form
10-K.
4. MISCELLANEOUS
4.1 Waiver
The rights and remedies of Payee under this Note shall be cumulative
and not alternative. No waiver by Payee of any right or remedy under
this Note shall be effective unless it is in writing and signed by
Payee. Neither the failure nor any delay in exercising any right,
power or privilege under this Note will operate as a waiver of such
right, power or privilege and no single or partial exercise of any
such right, power or privilege by Payee will preclude any other or
further exercise of such right, power or privilege or the exercise
of any other right, power or privilege. To the maximum amount
permitted by applicable law, (i) no claim or right of Payee arising
out of this Note can be discharged by Payee, in whole or in part, by
a waiver or renunciation of the claim or right unless in a writing,
signed by Payee; (b) no waiver that may be given by Payee will be
applicable except in the specific instance for which it is given;
and (c) no notice to or demand on Maker will be deemed to be a
waiver of any obligation of Maker or of the right of Payee to take
further action without notice or demand as provided in this Note.
Maker acknowledges that this Note and Maker's obligations under this
Note are, and shall at all times continue to be, absolute and
unconditional in all respects, and shall at all times be valid and
enforceable. To the extent permitted by applicable law, Maker hereby
absolutely, unconditionally and irrevocably forever waives any and
all right to assert any defense, set-off, off-set, counterclaim,
cross-claim, or claim of any nature whatsoever with respect to this
Note or Maker's obligations hereunder.
4.2 Notices
Any notice or communication to be given hereunder by any party, to
the other party shall be in writing and shall be deemed to have been
given when personally delivered, or one day after the date sent by
recognized overnight courier or transmitted by facsimile, which
transmission by facsimile has been confirmed or 3 (three) days after
the date sent by registered or certified mail, postage prepaid, as
follows:
If to Maker, addressed to it at:
Phase III Medical, Inc.
330 South Service Road
Suite 120
Melville, NY 11747
Attn: Mark Weinreb
Facsimile Number: (631) 574 4956
If to Payee, addressed to:
Name: Robert Aholt
Address: 20128 Cavern Court
Saugus, CA 91390
Or persons or addresses as may be designated in writing by the party
to receive such notice.
4.3 Severability
If any provision of this Note is held invalid or unenforceable by
any court of competent jurisdiction, the other provisions of this
Note will remain in full force and effect. Any provision of this
Note held invalid or unenforceable only in part or degree will
remain in full force and effect to the extent not held invalid or
unenforceable.
4.4 Governing Law.
This Promissory Note will be governed by the laws of the State of
New York without regard to conflicts of laws principles.
4.5 Assignment; Parties in Interest
This Note shall bind Maker and its successors and assigns. This Note
shall not be assigned or transferred by Maker, without the express
prior written consent of Payee, and this Note will inure to the
benefit of Payee and his heirs, estates, representatives,
administrators, successors and assigns.
4.6 Section Headings, Construction
The headings of Sections in this Note are provided for convenience
only and will not affect its construction or interpretation. All
references to "Section" or "Sections" refer to the corresponding
Section or Sections of this Note unless otherwise specified.
All words used in this Note will be construed to be of such gender
or number as the circumstances require. Unless otherwise expressly
provided, the words "hereof" and "hereunder" and similar references
refer to this Note in its entirety and not to any specific section
or subsection hereof.
4.7 Savings Clause
If, at any time, the rate of interest under this Note shall be
deemed by any competent court of law, governmental agency or
tribunal to exceed the maximum rate of interest permitted by the
laws of any applicable jurisdiction or the rules or regulations of
any regulatory authority or agency, then during such time as such
rate of interest would be deemed excessive, that portion of each
interest payment attributable to that portion of such interest rate
that exceeds the maximum rate of interest so permitted shall be
deemed a voluntary prepayment of principal or, if all principal has
been paid, that portion of each interest payment attributable to
that portion of such interest rate that exceeds the maximum rate of
interest so permitted shall be promptly refunded to Maker.
4.8 Waiver of Jury Trial
MAKER AND PAYEE EACH HEREBY WAIVE, TO THE FULLEST EXTENT PERMITTED
BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRAIL BY JURY IN
RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF,
UNDER, OR IN CONNECTION WITH, THIS NOTE, IT BEING AGREED THAT ALL
SUCH TRAILS SHALL BE CONDUCTED SOLELY BY A JUDGE. MAKER AND PAYEE
EACH CERTIFY THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF EITHER HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT THE OTHER WOULD NOT, IN
THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS.
MAKER AND PAYEE EACH AGREE AND ACKNOWLEDGE THAT IT HAS BEEN
REPRESENTED BY INDEPENDENT COUNSEL IN CONNECTION WITH THIS NOTE OR
BEEN ADVISED THAT IT SHOULD BE REPRESENTED BY INDEPENDENT COUNSEL IN
CONNECTION WITH THIS NOTE. IF MAKER OR PAYEE HAS DECIDED NOT TO BE
REPRESENTED BY INDEPENDENT COUNSEL IN CONNECTION WITH THIS NOTE, IT
IRREVOCABLY AND FOREVER WAIVES ANY AND ALL DEFENSES OR RIGHTS
ARISING OUT OF OR RELATED TO SAID DECISION.
IN WITNESS WHEREOF, Maker has executed and delivered this Note as of the date
first stated above.
PHASE III MEDICAL, INC.
Bye :
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Name: Mark Weinreb
Title: President and Chief Executive Officer
Accepted and agreed to:
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Payee: Robert Aholt