LOAN AGREEMENT
WHEREAS, on the date hereof, KATWV will acquire from GX7 Limited Partnership certain parcels of real property located in the City of Parkersburg, Wood County, West Virginia, as described more particularly in Exhibit A attached hereto and incorporated herein by reference, with a physical address of 2501 Garfield Avenue, Parkersburg, West Virginia, and three buildings existing on said real property (the real property and all buildings and improvements located thereon are referred to as the “Property”), from which KATWV will operate its air purification manufacturing business;
WHEREAS, as part of its acquisition, KATWV will also acquire from GX7 Limited Partnership certain machinery, equipment, furniture and fixtures located at the Property as described in Exhibit B attached hereto and incorporated herein by reference (together with all additions and accessions thereto, all replacements thereof, all substitutions, repairs and improvements existing or later placed upon, added to or made in connection with the foregoing, the “Equipment”);
WHEREAS, GX7 Limited Partnership has made certain upgrades and improvements to the Property including, without limitation, replacement of light fixtures to LED fixtures, upgraded parking lot lights to LED fixtures and new controls, upgraded fire suppression
and fire alarm systems, replacement, as necessary, of water supply lines, fixtures stop, valves and fixtures, new carpeting and luxury vinyl plank flooring, repair and replacement of the existing HVAC system, perimeter fencing and gates, roof repairs and refurbished IT switches and networking at the Property (the “Upgrades” and together with the acquisition of the Property and the Equipment by KATWV from GX7 Limited Partnership, the “Project”);
WHEREAS, KAT applied to WVEDA for two term loans (collectively, the “WVEDA Loans”) in the aggregate principal amount of Two Million Six Hundred Ten Thousand Dollars ($2,610,000.00);
WHEREAS, since making application, KAT has formed a wholly-owned subsidiary under the laws of the State West Virginia, KATWV, to hold legal title to the assets comprising the Project, and as a result, the WVEDA Loans will be made jointly to the Borrowers as co-makers;
WHEREAS, the WVEDA Loans to be made on the date hereof will consist of (i) a real estate term loan in the principal amount of One Million Eight Hundred Forty Five Thousand and 00/100 Dollars ($1,845,000.00), as evidenced by a Promissory Note (Real Estate Loan) dated the date hereof, made by the Borrowers and payable to the order of the WVEDA (together with all amendments, renewals, extensions, substitutions and modifications thereof, the “WVEDA Real Estate Note”), and (ii) an equipment term loan in the principal amount of Seven Hundred Sixty Five Thousand and 00/100 Dollars ($765,000.00), as evidenced by a Promissory Note (Equipment
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Loan) dated the date hereof, made by the Borrowers and payable to the order of WVEDA (together with all amendments, renewals, extensions, substitutions and modifications thereof, the “WVEDA Equipment Note” and together with the WVEDA Real Estate Note, the “WVEDA Notes”), the proceeds of which are to be used to permanently finance a portion of the costs of the Project;
WHEREAS, the WVEDA Loans to the Borrowers shall be secured by a first priority deed of trust lien on the Property (including all of the Upgrades) and a first priority security interest in the Equipment (the Property, the Upgrades and the Equipment is sometimes referred to herein collectively as the “Project Assets”); and
WHEREAS, the Borrowers represent and warrant to WVEDA that all proceeds from the WVEDA Loans shall serve as a portion of the permanent financing for the Project.
1.WVEDA agrees to make a term loan in the principal amount of One Million Eight Hundred Forty Five Thousand and 00/100 Dollars ($1,845,000.00) to the Borrowers as permanent financing for a portion of the costs of the Project (the “WVEDA Real Estate Loan Loan”) under the following terms:
a.The WVEDA Real Estate Loan shall be evidenced by the WVEDA
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Real Estate Note. From the date of Closing (as hereinafter defined) through and including the 59th month after Closing, the principal balance outstanding under the WVEDA Real Estate Note shall bear interest from the date of Closing equal to the greater of (a) a rate equal to the 20-year U.S. Treasury Security yield (as such rate is stated in the Daily Treasury Yield Curve Rates section of the U.S Treasury official website www.ustreas.gov) (the “Index”) determined on the third business day prior to Closing plus 0.75% or (b) a floor (minimum) interest rate of 2.75% (the “Initial Rate”). The interest rate on the WVEDA Real Estate Note will be adjusted in the 60th and 120th months from the date of Closing, each time to a rate fixed for the next succeeding 59 months equal to the greater of (a) the Index from the third business day prior to the date of adjustment plus 0.75% or (b) a floor (minimum) interest rate or 2.75%. The maximum interest rate adjustment will not exceed five percent (5.00%) above the rate in effect immediately prior to such adjustment. Any interest rate adjustment shall not decline below the Initial Rate set on the date of Closing.
c.The WVEDA Real Estate Loan may be pre-paid, in whole or in part,
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at any time, without penalty.
2.WVEDA agrees to make a term loan in the principal amount of Seven Hundred Sixty Five Thousand and 00/100 Dollars ($765,000.00) to the Borrowers as permanent financing for a portion of the costs of the Project (the “WVEDA Equipment Loan”) under the following terms:
a.The WVEDA Equipment Loan shall be evidenced by the WVEDA Equipment Note, bearing interest at a rate fixed at Closing equal to the rate from the third previous business day of the Wall Street Journal Prime rate multiplied by 0.75%, with a floor (minimum) interest rate of 2.75%.
b.The WVEDA Equipment Loan shall be repaid in consecutive monthly installments over a period of one hundred twenty (120) months bearing interest at the rate fixed at Closing and amortized over the entire term of the loan. The first monthly installment shall be due thirty (30) days from Closing, and monthly installments shall be paid on the same day of each succeeding month thereafter until the 120th and final installment which shall be due on January 29, 2031, at which time all principal and accrued interest shall be due and payable by Borrowers in full.
c.The WVEDA Equipment Loan may be pre-paid, in whole or in part, at any time, without penalty.
4.Any payment due to WVEDA under this Agreement or the WVEDA Notes
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and not made within ten (10) days of its due date may be subject to a late charge equal to five percent (5%) of the monthly payment due. An additional five percent (5%) may be charged for each successive month the payment remains past due. This late payment charge shall apply individually to all payments due and there shall be no daily pro-rata adjustment. All late charges accrue to the benefit of WVEDA and are in addition to, not in lieu of, the continuing accrual of interest.
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C.Conditions Precedent to Financing:
2.Due execution and delivery (and as appropriate, filing, registration or recordation) of all documents evidencing the WVEDA Loans and creating the liens and security interests contemplated herein, including, but not limited to, this Loan Agreement, the WVEDA Notes, the WVEDA Security Agreement and the WVEDA Deed of Trust (collectively, the “WVEDA Loan Documents”).
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5.Delivery of each Borrower’s Articles of Incorporation, together with all amendments thereto, certified by the Secretary of State of the applicable jurisdiction.
6.Delivery of each Borrower’s Bylaws, certified by its secretary or other duly authorized officer.
7.Delivery of a Certificate of Existence for each Borrower issued by the Secretary of State of the applicable jurisdiction.
8.Delivery of a Certificate of Authorization for KAT issued by the Secretary of State of the State of West Virginia.
10.The receipt of financial statements for each Borrower which are in a form acceptable to WVEDA.
13.Delivery to WVEDA of a legal description of the Property.
14.Delivery of a copy of all invoices for the Project.
15.Delivery to WVEDA of an as-built survey (ALTA survey) of the Property
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prepared by a registered professional engineer or land surveyor showing the boundary lines, encroachments, and completed improvements located thereon, including any streets, alleys, rights of way, easements and other statements of fact acceptable to WVEDA.
16.Delivery to WVEDA of a mortgagee title insurance policy in form and substance satisfactory to WVEDA and with no exceptions or reservations as to mechanic’s liens or survey.
19.Due execution and delivery at Closing of a settlement or closing statement among the seller, GX7 Limited Partnership, Borrowers and WVEDA.
20.Receipt at Closing of WVEDA’s legal fees and expenses incurred in connection with the WVEDA Loans.
21.Receipt at Closing of payment of any title insurance premium for the mortgagee title insurance policy to be issued to WVEDA.
22.Delivery to WVEDA of such other documents, agreements, certificates or instruments as may be reasonably requested by WVEDA.
D.Representations and Warranties:
The Borrowers hereby represent and warrant to WVEDA as follows:
1.KAT is a duly formed and validly existing corporation under the laws of the
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State of Nevada, with the power and authority necessary to own its assets and properties and to conduct its business as it is presently conducted in the State of Nevada and in any other state in which it is qualified to conduct business.
2.KATWV is a duly formed and validly existing corporation under the laws of the State of West Virginia. All applicable fees and taxes have been timely paid by KATWV to the State of West Virginia. KATWV has the power and authority necessary to own its assets and properties and to conduct its business as it is presently conducted in the State of West Virginia.
4.All information at any time furnished to WVEDA by the Borrowers concerning their respective financial condition or otherwise, for the purpose of obtaining the WVEDA Loans, has been prepared in accordance with generally accepted accounting principles applied on a basis consistent with that of prior financial periods, is true and correct and fairly discloses their respective financial condition as of the date of each such statement, and there has been no material adverse change in their respective financial condition subsequent to the date of their most recent financial statement supplied to WVEDA. The Borrowers have no liabilities contingent or otherwise involving material amounts except as disclosed in such financial statements.
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corporate, fictitious or trade name, nor has it been the surviving entity of a merger or consolidation.
6.This Agreement constitutes, and any other document required to be given by the Borrowers hereunder will, when delivered, constitute their legal, valid and binding obligations, enforceable against them in accordance with the respective terms of such document, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws in effect from time to time affecting the rights of creditors generally and except to the extent that the enforceability thereof may be limited by the application of general principles of equity.
8.The Borrowers have obtained any necessary federal, state and local permits, licenses, authorizations and approvals for their present and intended use of the Project.
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copy of their unaudited or internal financial statements. Each statement submitted to WVEDA must be signed by a duly authorized officer of the Borrowers and prepared in accordance with generally accepted accounting principles consistently applied by its accountant. The Borrowers shall provide to WVEDA annually, as soon as available, but in any event within one hundred twenty (120) days after the close of their respective fiscal year, a full and complete signed copy of their annual audited or reviewed financial statements prepared by certified public accountants acceptable to WVEDA which financial statements shall include a balance sheet as of the end of such year and a statement of profit and loss reflecting the results of its operations during such year.
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canceled or diminished without at least thirty (30) days’ prior written notice to WVEDA. In connection with all policies covering the Project Assets, the Borrowers will provide WVEDA with such loss payable or other endorsements as WVEDA may require. The Borrowers shall cause all sums, including, without limitation, return of premiums, which may become payable under any and all of the policies of insurance for the Project Assets to be assigned to WVEDA as its interests may appear, and upon WVEDA’s request, direct each insurance company issuing any such policy to make payment thereof directly to WVEDA. The Borrowers shall cause proper unemployment compensation coverage and workers’ compensation coverage and other insurance to be maintained by KATWV against other risks as are commonly insured against by companies in similar types of business, all in a manner reasonably satisfactory to WVEDA.
��(3)the amount of the insurance policy;
(6)the expiration date of the policy.
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replacement cost of the Project Assets at the Borrowers’ expense; provided that WVEDA may not request such appraisals more than once per year.
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conducted in connection therewith, including, but not limited to, compliance with all minimum funding standards and other requirements of the Employee Retirement Income Security Act of 1974, as amended, and other laws applicable to employee benefit plans relating to employees working at the Property.
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Water Act of 1977 (33 U.S.C. § 1251, et seq.); the Clean Air Act (42 U.S.C. § 7401, et seq.); the Resource Conservation and Recovery Act of 1976 (42 U.S.C. § 6901, et seq.); the Safe Drinking Water Act (21 U.S.C. § 349, 42 U.S.C. §§ 201 and 300f through 300j-9); the Toxic Substances Control Act (15 U.S.C. § 2601, et seq.); the West Virginia Water Pollution Control Act (W. Va. Code § 22-11-1, et seq.); the West Virginia Hazardous Waste Management Act (W. Va. Code § 22-18-1, et seq.); the West Virginia Solid Waste Management Act (W. Va. Code § 22-15-1, et seq.); the West Virginia Underground Storage Tank Act (W. Va. Code § 22-17-1, et seq.); the West Virginia Groundwater Protection Act (W. Va. Code § 22-12-1, et seq.); and the West Virginia Air Pollution Control Act (W. Va. Code § 22-5-1, et seq.).
(b)If any Borrower receives any notice of (i) a Release of any
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Hazardous Substance, notification of which must be given to any governmental agency under any Environmental Law, or notification of which has, in fact, been given to any governmental agency, or (ii) any complaint, order, citation or notice with regard to air emissions, water discharges, or any other environmental health or safety matter affecting the Property (an “Environmental Complaint”) from any person or entity, including, without limitation, the Environmental Protection Agency (“EPA”), then the Borrowers shall immediately notify WVEDA orally and in writing of said Release, complaint, order, citation or notice.
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business location or state of incorporation or organization, as applicable.
The Borrowers covenant and agree that while any part of the WVEDA Loans is outstanding:
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2.KATWV shall not lease, sell, transfer, encumber, pledge or otherwise dispose of any part of its properties or assets, which, whether in one or more transactions, would result in the cessation or substantial curtailment of its business activities.
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unless a profit was made in the calendar year immediately preceding such increase and all of the Borrowers’ debts are paid to current status.
Each of the following shall constitute an “Event of Default” under this Agreement:
2.Any Borrower shall fail to observe or perform any other agreement, term,
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obligation, covenant or condition contained in this Agreement or any other WVEDA Loan Document to which it is a party.
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such Borrower as to the validity or reasonableness of the claim which is the basis of the creditor proceeding, and if such Borrower gives WVEDA written notice of the creditor proceeding and furnishes reserves or other adequate security, such as a surety bond, for the creditor proceeding satisfactory to WVEDA.
WVEDA shall have the following remedies upon the occurrence of an Event of Default:
1.(a)Upon the occurrence of any Event of Default under subsections G.1,
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G.2, G.3, G.4, G.5, G.6, G.7, G.8 or G.9, WVEDA shall first be required to give written notice of such default to the Borrowers. The Borrowers, in such event, will have thirty (30) days following the receipt of such notice to cure the Event of Default. If one or more Events of Default shall occur and such Events of Default are not cured within the 30-day period or such longer period as may be agreed to by WVEDA in its sole discretion, then WVEDA, at its option, may declare the entire unpaid principal of the WVEDA Loans, together with all unpaid accrued interest and all other sums due and owing thereon, immediately due and payable and proceed under the terms of this Agreement or any other WVEDA Loan Document.
The parties agree to the following miscellaneous provisions:
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this Agreement and the Borrowers will pay for those reasonable costs and services. This includes the reasonable attorneys’ fees and legal expenses of WVEDA, whether or not there is a lawsuit, including reasonable attorneys’ fees for bankruptcy proceedings (including efforts to modify or vacate any automatic stay or injunction), appeals, and any anticipated post-judgment collection services. The Borrowers will also pay any court costs, in addition to all other sums provided by law.
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(a)WEST VIRGINIA ECONOMIC DEVELOPMENT
AUTHORITY
Charleston, West Virginia 25311-1217
(b)KRONOS ADVANCED TECHNOLOGIES, INC.
2501 Garfield Avenue
Parkersburg, West Virginia 26101
Attention: Chief Operating Officer
(c)KRONOS ADVANCED TECHNOLOGIES WV, INC.
2501 Garfield Avenue
Parkersburg, West Virginia 26101
Attention: Chief Operating Officer
In addition, notice shall be deemed sufficiently given if the notice is transmitted by telecopy to the appropriate party’s principal place of business or if the notice is served in a manner prescribed by the laws of the State of West Virginia for the service of a summons in a civil action.
5.If a court of competent jurisdiction finds any provision of this Agreement to be invalid or unenforceable as to any person, entity or circumstance, such finding shall not render that provision invalid or unenforceable as to any other persons, entities or circumstances. If feasible, any such offending provision shall be deemed to be modified in order to comply with the limits of enforceability or validity; provided, however, if the offending provision cannot be so modified, it shall be stricken and all other provisions of this Agreement in all other respects shall remain valid and enforceable.
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covenants and indemnities set forth in this Agreement may be assigned or otherwise transferred by WVEDA to its successors and assigns and to any subsequent transferee of all or any portion of the WVEDA Loans, through or under WVEDA, without notice to the Borrowers and without any further consent of any other person or entity.
7.Time is of the essence in the performance of this Agreement.
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12.WVEDA shall have the right, at its own expense, to place at any reasonable location on the Property, a sign or signs (which shall comply with applicable local ordinances), advertising the fact that financing is being or has been provided by WVEDA. WVEDA shall also have the right, at its own expense, to publicize the Project through press releases and participation in ground-breaking and/or opening ceremonies and similar events.
13.This Agreement shall be governed by and construed in accordance with the laws of the State of West Virginia without giving effect to conflicts of laws provisions.
[Remainder of Page Intentionally Left Blank]
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a West Virginia public corporation
By:___________________________________
BORROWERS:KRONOS ADVANCED TECHNOLOGIES,
INC.,
By:___________________________________
KRONOS ADVANCED TECHNOLOGIES WV,
INC.,
a West Virginia corporation
By:___________________________________
Name: Joseph L. Florence
Its: Chief Operating Officer
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EXHIBIT B