EXHIBIT 99.8
EQUITY-BACKED PROMISSORY NOTE
OCTOBER __, 2004
JERSEY CITY, NEW JERSEY $2,000,000.00
FOR VALUE RECEIVED, the undersigned, KRONOS ADVANCED TECHNOLOGIES, INC., a
Nevada corporation (the "COMPANY"), promises to pay CORNELL CAPITAL PARTNERS, LP
(the "HOLDER") at 101 Hudson Street, Suite 3700, Jersey City, New Jersey 07302
or other address as the Holder shall specify in writing, the principal sum of
TWO MILLION (U.S.) DOLLARS AND 00/100 ($2,000,000.00) and will be payable
pursuant to the following terms:
1. AMOUNT OF NOTE. The principal amount of this Promissory Note (this
"NOTE") shall be funded upon the filing of the Registration Statement on Form
SB-2 (the "REGISTRATION STATEMENT"), filed pursuant to the Investor Registration
Statement dated the date hereof, with the United States Securities and Exchange
Commission ("SEC"). The face amount of this Note plus twelve percent (12%)
interest shall be payable in equal weekly installments of Fifty Thousand Dollars
($50,000.00) plus twelve percent (12%) interest on the outstanding principal
balance commencing on the date that is the earlier to occur of (i) the
Registration Statement is declared effective by the SEC (the "EFFECTIVE DATE");
or (ii) twelve (12) weeks from the date hereof. For purposes of clarification,
and without limiting the preceding sentence, the repayment of this Note is in no
manner contingent on the Registration Statement being declared effective by the
SEC, if the Registration Statement is not declared effective by the SEC the face
amount of this Note plus twelve percent (12%) interest shall be due and payable
three hundred and sixty five calendar days (365) from the date hereof. In the
event the Registration Statement is declared effective, the Company shall use
the net proceeds to be received by the Company under that certain Standby Equity
Distribution Agreement (the "STANDBY EQUITY DISTRIBUTION AGREEMENT") dated as
October _____, 2004 towards the repayment of the obligations due under this Note
in accordance with this Section 1; provided, however, and without limiting the
foregoing, all amounts due under this Note shall be paid in full three hundred
sixty five (365) calendar days from the Effective Date, unless an extension is
mutually agreed to by the parties in writing. Failure to pay the obligations in
full under this Note within said applicable period shall result in an event of
default and Holder shall have the right to see any remedies available to it
under this Note or at law. The Company hereby agrees to escrow forty (40)
requests for advances under the Standby Equity Distribution Agreement, which are
deemed to be advances under such Standby Equity Distribution Agreement, in an
amount not less an FIFTYTHOUSAND DOLLARS ($50,000.00) PLUS TWELVE PERCENT (12%)
INTEREST ON THE OUTSTANDING PRINCIPAL BALANCE (individually referred to as
"ADVANCE NOTICE" collectively referred to "Advance Notices") and, on the
Effective Date, _______ Million (_______) shares of the Company's Common Stock
as required under Section 2.2(d) of the Standby Equity Distribution Agreement
(the "ESCROWED SHARES"). The Escrowed Shares are only an estimation of the
shares of the Company's common stock necessary to repay the principal amount and
interest due hereunder. In the event that during the life of this Note the
Escrowed Shares are insufficient to repay all amounts due hereunder the Company
shall immediately escrow, pursuant to the irrevocable transfer agent
instructions dated the date hereof (the "IRREVOCABLE TRANSFER AGENT
INSTRUCTIONS") such number of shares of the Company's common stock sufficient to
repay all amounts due hereunder. The Advance Notices and the Escrowed Shares
will be held in escrow by the Holder's general counsel David Gonzalez, Esq., who
shall release such requests to the Holder every seven (7) calendar days
commencing on the Effective Date. The Holder may at its sole discretion retain
and apply the net proceeds of each advance (after deducting any fees owed to the
Holder under the terms of the Standby Equity Distribution Agreement) to the
outstanding balance of this Note as existing from time to time. If this Note is
not paid in full when due, the outstanding principal owed hereunder shall be due
and payable in full together with interest thereon at the rate of twenty-four
percent (24%) per annum or the highest permitted by applicable law, if lower.
During the term of this Note the Company shall have the option to repay the
amounts due hereunder in immediately available funds and withdraw any Advance
Notices yet to be effected. At the Holder's option the interest due hereunder
shall be paid when due either in Common Stock or cash.
2. 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.
3. COSTS, INDEMNITIES AND EXPENSES. In the event of default as described
herein, the Company agrees to pay all reasonable fees and costs incurred by the
Holder in collecting or securing or attempting to collect or secure this Note,
including reasonable attorneys' fees and expenses, whether or not involving
litigation, collecting upon any judgments and/or appellate or bankruptcy
proceedings. 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 Holder harmless from and against any liability, costs, attorneys' fees,
penalties, interest or expenses relating to any such taxes, as and when the same
may be incurred.
4. EVENT OF DEFAULT. Upon an Event of Default (as defined below), 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 Holder, and the Holder shall
be entitled to seek and institute any and all remedies available to it. No
remedy conferred under this Note upon the Holder is intended to be exclusive of
any other remedy available to the Holder, pursuant to the terms of this Note or
otherwise. No single or partial exercise by the Holder of any right, power or
remedy hereunder shall preclude any other or further exercise thereof. The
failure of the Holder 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. 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 payment of the outstanding principal balance plus
accrued interest pursuant to this Note within the time prescribed herein or the
Company fails to satisfy any other obligation or requirement of the Company
under this Note; or (ii) any proceedings under any bankruptcy laws of the United
States of America or under any insolvency, not disclosed to the Holder,
reorganization, receivership, readjustment of debt, dissolution, liquidation or
any similar law or statute of any jurisdiction now or hereinafter in effect
(whether in law or at equity) is filed by or against the Company or for all or
any part of its property.
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Upon an Event of Default the Holder is entitled, at its option, to
convert, and sell on the same day, at any time and from time to time, until
payment in full of this Note, all o any part of the principal amount of this
Note, plus accrued interest, into shay: (the "CONVERSION SHARES") of the
Company's common stock, par value US$0.001 per share ("COMMON STOCK"), at the
price per share (the "CONVERSION PRICE") equal to seventy percent (70%) of the
lowest closing bid price of the Company's Common Stock, as quoted by Bloomberg,
LP, for the thirty (30) trading days immediately preceding the conversion date.
5. MAXIMUM INTEREST RATE. In no event shall any agreed to or actual
interest charged, reserved or taken by the Holder 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 Holder in excess of those lawfully collectible as interest shall be applied
against the principal of this Note immediately upon the Holder'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 Holder had
agreed to accept such extra payment(s) as a premium-free prepayment or
prepayments.
6. CANCELLATION OF NOTE. Upon the repayment by the Company of all of its
obligations hereunder to the Holder, including, without limitation, the face
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
Holder 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 Holder may assign this Note as long as such
assignment complies with the Securities Act of 1933, as amended.
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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.
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, 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) trading 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: Kronos Advanced Technologies, Inc.
464 Common Street - Suite 301
Belmont, MA 02478
Attention: Daniel R. Dwight
Telephone: (617) 993-9980
Facsimile: (617) 993-9985
With Copy to: Kirkpatrick & Lockhart LLP
201 South Biscayne Blvd. - Suite 2000
Miami, FL 33131-2399
Attention: Clayton E. Parker, Esq.
Telephone: (305) 539-3300
Facsimile: (305) 358-7095
If to the Company: Cornell Capital Partners, L.P.
101 Hudson Street, Suite 3606
Jersey City, NJ 07302
Attention: Mark A. Angelo
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) trading 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.
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14. REMEDIES, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF. The
Holder's remedies provided in this Note shall be cumulative and in addition to
all other remedies available to the Holder under this Note, at law or in equity
(including a decree of specific performance and/or other injunctive relief), no
remedy of the Holder contained herein shall be deemed a waiver of compliance
with the provisions giving rise to such remedy and nothing herein shall limit
the Holder's right to pursue actual damages for any failure by the Company to
comply with the terms of this Note. Every right and remedy of the Holder 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 Holder. The Company
acknowledges that a breach by it of its obligations hereunder will cause
irreparable harm to the Holder 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 Holder 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 Agreement 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 state and
federal courts sitting in Essex County, 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 Agreement 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 HOLDER 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 NOTE AND/OR ANY
AND ALL OF THE OTHER DOCUMENTS ASSOCIATED WITH THIS TRANSACTION.
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19. ENTIRE AGREEMENT. This Note (including the 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.
[SIGNATURE BLOCK ON FOLLOWING PAGE]
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IN WITNESS WHEREOF, this Note is executed by the undersigned as of the
date hereof.
CORNELL CAPITAL PARTNERS, LP
By: Yorkville Advisors, LLC
Its: General Partner
By: /s/ Mark Angelo
--------------------------------
Name: Mark Angelo
Its: Portfolio Manager
KRONOS ADVANCED TECHNOLOGIES, INC.
By: /s/ Daniel R. Dwight
--------------------------------
Name: Daniel R. Dwight
Title: President and CEO
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