Exhibit 10.1

 

THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAW AND MAY NOT BE SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT
AND UNDER APPLICABLE STATE SECURITIES LAWS OR ORTEC INTERNATIONAL, INC. SHALL
HAVE RECEIVED AN OPINION OF ITS COUNSEL THAT REGISTRATION OF SUCH SECURITIES
UNDER THE SECURITIES ACT AND UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES
LAWS IS NOT REQUIRED.

 

ORTEC INTERNATIONAL, INC.

 

PROMISSORY NOTE

 

 

U.S. $____________

New York, New York

No.: PN-05-__

Issuance Date:_____________

 

Maturity Date: December 31, 2005

 

FOR VALUE RECEIVED, the undersigned, Ortec International, Inc., a Delaware
corporation (the "Company"), hereby promises to pay to the order of
____________________________, or any future permitted holder of this promissory
note (the "Payee"), at the principal office of the Payee set forth herein, or at
such other place as the holder may designate in writing to the Company, the
principal sum of ____________________________________________________
($___________) or such other amount as may be outstanding hereunder, together
with all accrued but unpaid interest, in such coin or currency of the United
States of America as at the time shall be legal tender for the payment of public
and private debts and in immediately available funds, as provided in this
promissory note (the "Note").

 

1.          Automatic Conversion of Principal and Interest into Qualified
Financing. The outstanding principal amount of this Note, together with all
accrued but unpaid interest hereunder (the “Outstanding Balance”), shall
automatically convert into equity securities issued in an equity financing or a
combination of equity financings with gross proceeds totaling at least
$5,000,000 (the “Qualified Financing”), such conversion to be at the same price
per equity security as the equity securities sold in the Qualified Financing;
provided, however, that for purposes of determining the number of equity
securities (including warrants) to be received by the Payee upon such
conversion, the Payee shall be deemed to have tendered 120% of the Outstanding
Balance of the Note as payment of the purchase price of such equity securities.

2.          Principal and Interest Payments.

(a)        In the event the Company does not complete the Qualified Financing,
the Company shall repay the entire principal balance then outstanding on
December 31, 2005 (the "Maturity Date").

 

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(b) Interest on the outstanding principal balance of this Note shall accrue at a
rate of eight percent (8%) per annum. Interest on the outstanding principal
balance of the Note shall be computed on the basis of the actual number of days
elapsed and a year of three hundred and sixty (360) days and shall be payable on
the Maturity Date by the Company in cash or in shares of the Company’s equity
securities. Furthermore, upon the occurrence of an Event of Default, then to the
extent permitted by law, the Company will pay interest to the Payee, payable on
demand, on the outstanding principal balance of the Note from the date of the
Event of Default until payment in full at the rate of twelve percent (12%) per
annum.

(c) At the Company’s sole option, the Company may prepay the outstanding
principal amount of this Note plus all accrued and unpaid interest in cash at
any time without penalty prior to maturity. All payments made on account of the
indebtedness evidenced by this Note shall be applied first to accrued but unpaid
interest, if any, and the remainder shall be applied to principal.

3.                 Non-Business Days. Whenever any payment to be made shall be
due on a Saturday, Sunday or a public holiday under the laws of the State of New
York, such payment may be due on the next succeeding business day and such next
succeeding day shall be included in the calculation of the amount of accrued
interest payable on such date.

4.                 Representations and Warranties of the Company. The Company
represents and warrants to the Payee as follows:

(a)               The Company has been duly incorporated and is validly existing
and in good standing under the laws of the state of Delaware, with full
corporate power and authority to own, lease and operate its properties and to
conduct its business as currently conducted.

(b)               This Note has been duly authorized, validly executed and
delivered on behalf of the Company and is a valid and binding obligation of the
Company enforceable against the Company in accordance with its terms, subject to
limitations on enforcement by general principles of equity and by bankruptcy or
other laws affecting the enforcement of creditors' rights generally, and the
Company has full power and authority to execute and deliver this Note and to
perform its obligations hereunder.

(c)               The execution, delivery and performance of this Note will not
(i) conflict with or result in a breach of or a default under any of the terms
or provisions of, (A) the Company's certificate of incorporation or by-laws, or
(B) any material provision of any indenture, mortgage, deed of trust or other
material agreement or instrument to which the Company is a party or by which it
or any of its material properties or assets is bound, (ii) result in a violation
of any material provision of any law, statute, rule, regulation, or any existing
applicable decree, judgment or order by any court, Federal or state regulatory
body, administrative agency, or other governmental body having jurisdiction over
the Company, or any of its material properties or assets or (iii) result in the
creation or imposition of any material lien, charge or encumbrance upon any
material property or assets of the Company or any of its subsidiaries pursuant
to the terms of any agreement or instrument to which any of them is a party or
by which any of them may be bound or to which any of their property or any of
them is subject.

(d)               No consent, approval or authorization of or designation,
declaration or filing with any governmental authority on the part of the Company
is required in connection with the valid execution and delivery of this Note.

 

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5.                 Events of Default. The occurrence of any of the following
events shall be an "Event of Default" under this Note:

(a)               the Company shall fail to make the payment of any amount of
any principal outstanding for a period of three (3) business days after the date
such payment shall become due and payable hereunder; or

(b)               the Company shall fail to make any payment of interest for a
period of three (3) business days after the date such interest shall become due
and payable hereunder; or

(c)               any representation, warranty or certification made by the
Company herein or in any certificate or financial statement shall prove to have
been false or incorrect or breached in a material respect on the date as of
which made; or

(d)               the holder of any indebtedness of the Company or any of its
subsidiaries shall accelerate any payment of any amount or amounts of principal
or interest on any indebtedness (the "Indebtedness") (other than the
Indebtedness hereunder) prior to its stated maturity or payment date the
aggregate principal amount of which Indebtedness of all such persons is in
excess of $1,000,000, whether such Indebtedness now exists or shall hereinafter
be created, and such accelerated payment entitles the holder thereof to
immediate payment of such Indebtedness which is due and owing and such
indebtedness has not been discharged in full or such acceleration has not been
stayed, rescinded or annulled within ten (10) business days of such
acceleration; or

(e)               A judgment or order for the payment of money shall be rendered
against the Company or any of its subsidiaries in excess of $1,000,000 in the
aggregate (net of any applicable insurance coverage) for all such judgments or
orders against all such persons (treating any deductibles, self insurance or
retention as not so covered) that shall not be discharged, and all such
judgments and orders remain outstanding, and there shall be any period of sixty
(60) consecutive days following entry of the judgment or order in excess of
$1,000,000 or the judgment or order which causes the aggregate amount described
above to exceed $1,000,000 during which a stay of enforcement of such judgment
or order, by reason of a pending appeal or otherwise, shall not be in effect; or

(f)                the Company shall (i) apply for or consent to the appointment
of, or the taking of possession by, a receiver, custodian, trustee or liquidator
of itself or of all or a substantial part of its property or assets, (ii) make a
general assignment for the benefit of its creditors, (iii) commence a voluntary
case under the Bankruptcy Code or under the comparable laws of any jurisdiction
(foreign or domestic), (iv) file a petition seeking to take advantage of any
bankruptcy, insolvency, moratorium, reorganization or other similar law
affecting the enforcement of creditors' rights generally, (v) acquiesce in
writing to any petition filed against it in an involuntary case under the
Bankruptcy Code or under the comparable laws of any jurisdiction (foreign or
domestic), or (vi) take any action under the laws of any jurisdiction (foreign
or domestic) analogous to any of the foregoing; or

(g)               a proceeding or case shall be commenced in respect of the
Company or any of its subsidiaries without its application or consent, in any
court of competent jurisdiction, seeking (i) the liquidation, reorganization,
moratorium, dissolution, winding up, or composition or readjustment of its
debts, (ii) the appointment of a trustee, receiver, custodian, liquidator or the
like of it or of all or any substantial part of its assets or (iii) similar
relief in respect of it under any law providing for the relief of debtors, and
such proceeding or case described in clause (i), (ii) or (iii) shall continue
undismissed, or unstayed and in effect, for a period of thirty (30) consecutive
days or any order for relief shall be entered in an involuntary case under the
Bankruptcy Code or under the comparable laws of any jurisdiction

 

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(foreign or domestic) against the Company or any of its subsidiaries or action
under the laws of any jurisdiction (foreign or domestic) analogous to any of the
foregoing shall be taken with respect to the Company or any of its subsidiaries
and shall continue undismissed, or unstayed and in effect for a period of thirty
(30) consecutive days; or

(h)               the suspension from listing or the failure of the Common Stock
to be listed on the OTC Bulletin Board for a period of five (5) consecutive
trading days.

6.                 Remedies Upon An Event of Default. If an Event of Default
shall have occurred and shall be continuing, the Payee of this Note may at any
time at its option, (a) declare the entire unpaid principal balance of this
Note, together with all interest accrued hereon, due and payable, and thereupon,
the same shall be accelerated and so due and payable; provided, however, that
upon the occurrence of an Event of Default described in (i) Sections 5(f) and
(g), without presentment, demand, protest, or notice, all of which are hereby
expressly unconditionally and irrevocably waived by the Company, the outstanding
principal balance and accrued interest hereunder shall be automatically due and
payable, and (ii) Sections 5(a) through (e) and Section 5(h), the Payee may
exercise or otherwise enforce any one or more of the Payee's rights, powers,
privileges, remedies and interests under this Note or applicable law. No course
of delay on the part of the Payee shall operate as a waiver thereof or otherwise
prejudice the right of the Payee. No remedy conferred hereby shall be exclusive
of any other remedy referred to herein or now or hereafter available at law, in
equity, by statute or otherwise. Notwithstanding the foregoing, Payee agrees
that its rights and remedies hereunder are limited to receipt of cash or shares
of the Company’s equity securities in the amounts described herein.

7.                 Replacement. Upon receipt of a duly executed, notarized and
unsecured written statement from the Payee with respect to the loss, theft or
destruction of this Note (or any replacement hereof), and without requiring an
indemnity bond or other security, or, in the case of a mutilation of this Note,
upon surrender and cancellation of such Note, the Company shall issue a new
Note, of like tenor and amount, in lieu of such lost, stolen, destroyed or
mutilated Note.

8.                 Parties in Interest, Transferability. This Note shall be
binding upon the Company and its successors and assigns and the terms hereof
shall inure to the benefit of the Payee and its successors and permitted
assigns. This Note may be transferred or sold, subject to the provisions of
Section 17 of this Note, or pledged, hypothecated or otherwise granted as
security by the Payee.

9.                 Amendments. This Note may not be modified or amended in any
manner except in writing executed by the Company and the Payee.

10.              Notices. Any notice, demand, request, waiver or other
communication required or permitted to be given hereunder shall be in writing
and shall be effective (a) upon hand delivery by telecopy or facsimile at the
address or number designated below (if delivered on a business day during normal
business hours where such notice is to be received), or the first business day
following such delivery (if delivered other than on a business day during normal
business hours where such notice is to be received) or (b) on the second
business day following the date of mailing by express courier service, fully
prepaid, addressed to such address, or upon actual receipt of such mailing,
whichever shall first occur. The Company will give written notice to the Payee
at least thirty (30) days prior to the date on which the Company closes its
books or takes a record (x) with respect to any dividend or distribution upon
the common stock of the Company, (y) with respect to any pro rata subscription
offer to holders of common stock of the Company or (z) for determining rights to
vote with respect to a Major Transaction, dissolution, liquidation or winding-up
and in no event shall such notice be provided to such holder prior to such
information being made known to the public. The Company will also give written
notice to the

 

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Payee at least twenty (20) days prior to the date on which dissolution,
liquidation or winding-up will take place and in no event shall such notice be
provided to the Payee prior to such information being made known to the public.

 

Address of the Payee:
                                                   
With a copy to:
  Kramer Levin Naftalis & Frankel LLP
1177 Avenue of the Americas
New York, New York 10036
Attention: Christopher S. Auguste
Tel. No.: (212) 715-9265
Fax No.: (212) 715-8277      
Address of the Company:
  Ortec International, Inc.
3960 Broadway
New York, New York 10032
Attention: Chief Financial Officer
Tel. No.: (212) 740-6999
Fax No.: (212) 740-2570      
With a copy to:
  Feder, Kaszovitz, Issacson, Weber, Skala, Bass & Rhine LLP
750 Lexington Ave.
New York, New York 10022
Attention: Gabriel Kaszovitz, Esq.
Tel. No.: (212) 888-8200
Fax No.: (212) 888-7776

11.              Governing Law. This Note shall be governed by and construed in
accordance with the internal laws of the State of New York, without giving
effect to the choice of law provisions. This Note shall not be interpreted or
construed with any presumption against the party causing this Note to be
drafted.

12.              Headings. Article and section headings in this Note are
included herein for purposes of convenience of reference only and shall not
constitute a part of this Note for any other purpose.

13.              Remedies, Characterizations, Other Obligations, Breaches and
Injunctive Relief. The remedies provided in this Note shall be cumulative and in
addition to all other remedies available under this Note, at law or in equity
(including, without limitation, a decree of specific performance and/or other
injunctive relief), no remedy contained herein shall be deemed a waiver of
compliance with the provisions giving rise to such remedy and nothing herein
shall limit a Payee's right to pursue actual damages for any failure by the
Company to comply with the terms of this Note. Amounts set forth or provided for
herein with respect to payments and the like (and the computation thereof) shall
be the amounts to be received by the Payee and shall not, except as expressly
provided herein, be subject to any other obligation of the Company (or the
performance thereof). The Company acknowledges that a breach

 

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by it of its obligations hereunder will cause irreparable and material harm to
the Payee and that the remedy at law for any such breach may be inadequate.
Therefore the Company agrees that, in the event of any such breach or threatened
breach, the Payee shall be entitled, in addition to all other available rights
and remedies, at law or in equity, to seek and obtain such equitable relief,
including but not limited to an injunction restraining any such breach or
threatened breach, without the necessity of showing economic loss and without
any bond or other security being required.

14.              Failure or Indulgence Not Waiver. No failure or delay on the
part of the Payee 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.

15.              Enforcement Expenses. The Company agrees to pay all costs and
expenses of enforcement of this Note, including, without limitation, reasonable
attorneys' fees and expenses.

16.              Binding Effect. The obligations of the Company and the Payee
set forth herein shall be binding upon the successors and assigns of each such
party, whether or not such successors or assigns are permitted by the terms
hereof.

17.              Compliance with Securities Laws. The Payee of this Note
acknowledges that this Note is being acquired solely for the Payee's own account
and not as a nominee for any other party, and for investment, and that the Payee
shall not offer, sell or otherwise dispose of this Note other than in compliance
with the laws of the United States of America and as guided by the rules of the
Securities and Exchange Commission. This Note and any Note issued in
substitution or replacement therefore shall be stamped or imprinted with a
legend in substantially the following form:

"THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAW AND MAY NOT BE SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT
AND UNDER APPLICABLE STATE SECURITIES LAWS OR ORTEC INTERNATIONAL, INC. SHALL
HAVE RECEIVED AN OPINION OF ITS COUNSEL THAT REGISTRATION OF SUCH SECURITIES
UNDER THE SECURITIES ACT AND UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES
LAWS IS NOT REQUIRED."

 

18.              Severability. The provisions of this Note are severable, and if
any provision shall be held invalid or unenforceable in whole or in part in any
jurisdiction, then such invalidity or unenforceability shall not in any manner
affect such provision in any other jurisdiction or any other provision of this
Note in any jurisdiction.

19.              Consent to Jurisdiction. Each of the Company and the Payee (i)
hereby irrevocably submits to the jurisdiction of the United States District
Court sitting in the Southern District of New York and the courts of the State
of New York located in New York County for the purposes of any suit, action or
proceeding arising out of or relating to this Note and (ii) hereby waives, and
agrees not to assert in any such suit, action or proceeding, any claim that it
is not personally subject to the jurisdiction of such court, that the suit,
action or proceeding is brought in an inconvenient forum or that the venue of
the suit, action or proceeding is improper. Each of the Company and the Payee
consents to process being

 

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served in any such suit, action or proceeding by mailing a copy thereof to such
party at the address set forth in Section 10 hereof and agrees that such service
shall constitute good and sufficient service of process and notice thereof.
Nothing in this Section 19 shall affect or limit any right to serve process in
any other manner permitted by law.

20.              Company Waivers. Except as otherwise specifically provided
herein, the Company and all others that may become liable for all or any part of
the obligations evidenced by this Note, hereby waive presentment, demand, notice
of nonpayment, protest and all other demands and notices in connection with the
delivery, acceptance, performance and enforcement of this Note, and do hereby
consent to any number of renewals of extensions of the time or payment hereof
and agree that any such renewals or extensions may be made without notice to any
such persons and without affecting their liability herein and do further consent
to the release of any person liable hereon, all without affecting the liability
of the other persons, firms or Company liable for the payment of this Note, AND
DO HEREBY WAIVE TRIAL BY JURY.

(a)               No delay or omission on the part of the Payee in exercising
its rights under this Note, or course of conduct relating hereto, shall operate
as a waiver of such rights or any other right of the Payee, nor shall any waiver
by the Payee of any such right or rights on any one occasion be deemed a waiver
of the same right or rights on any future occasion.

(b)               THE COMPANY ACKNOWLEDGES THAT THE TRANSACTION OF WHICH THIS
NOTE IS A PART IS A COMMERCIAL TRANSACTION, AND TO THE EXTENT ALLOWED BY
APPLICABLE LAW, HEREBY WAIVES ITS RIGHT TO NOTICE AND HEARING WITH RESPECT TO
ANY PREJUDGMENT REMEDY WHICH THE PAYEE OR ITS SUCCESSORS OR ASSIGNS MAY DESIRE
TO USE.

 

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IN WITNESS WHEREOF, the Company has executed and delivered this Note as of the
date first written above.

 

 

 

ORTEC INTERNATIONAL, INC.

   

By:

 

 

Name:

 

 

 

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