DATED [11TH DAY OF AUGUST 2006] FACILITY AGREEMENT BETWEEN OWLSTONE NANOTECH, INC. AS BORROWER
$400,000
BETWEEN
OWLSTONE
NANOTECH, INC.
AS
BORROWER
THIS
AGREEMENT
is made
on the [11th day of August 2006]
BETWEEN
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(1)
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OWLSTONE
NANOTECH, INC. whose
registered office is at ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
(“the
Borrower”)
and;
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|
(2)
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ADVANCE
NANOTECH, INC.
whose registered office is at ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇
▇▇▇▇▇
(“the Lender”)
(which expression shall, where applicable, include the Lender’s successors
and assigns)
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NOW
IT IS HEREBY AGREED
as
follows:
1. Interpretation
1.1 In
this
Agreement.
“Advance”
means,
save as otherwise provided herein, an advance (as from time to time reduced
by
repayment) made or to be made by the Lender hereunder. For the avoidance of
doubt “Advance” shall include amounts remitted to the Borrower by the Lender
pursuant to Clause 5.1;
“Available
Facility”
means,
at any time and save as otherwise provided herein, $400,000 less the amount
of
each Advance which has then been made hereunder,
“Designated
Account”
means
such bank account of the Borrower as the Borrower may from time to time notify
the Lender, the first such account being Account No. ▇▇▇▇▇▇▇▇ at the
Natwest Commercial Banking, Sort code: 60 04 23.
“Equity
Financing” the
completion of an equity financing for the Borrower.
“Equity
Financing Closing” the
determination by the Lender and the Borrower of the completion of the Equity
Financing.
“Event
of Default”
means
any of those events specified in Clause 15;
“Facility”
means
the dollar loan facility granted to the Borrower in this Agreement;
“Group”
means
the Borrower and its subsidiaries;
“Highest
Lawful Rate” shall
mean, on any day, the maximum nonusurious rate of interest permitted for that
day by whichever applicable Federal or State law permits the higher interest
rate, stated as a rate per annum
“Loan”
means
the aggregate principal amount for the time being outstanding hereunder;
“Notice
of Drawdown”
means
a
notice substantially in the form set out in the Second Schedule;
1
“Potential
Event of Default”
means
any event which could reasonably be expected to become (with the passage of
time, the giving of notice, the making of any determination hereunder or any
combination thereof) an Event of Default;
“Repayment
Date”
means
the earlier of (i) the Equity Financing Closing or (ii) October 28,
2006;
“Tranche
A Commitment” the
Lender’s obligation to make one or more loans in an amount of up to
$200,000.
“Tranche
B Commitment”
the
Lender’s obligation to make one or more loans in an amount of up to
$200,000.
1.2 Any
reference in this Agreement to:
the
“Lender”
shall
be construed so as to include its and any subsequent successors and assigns
in
accordance with their respective interests;
a
“business
day”
shall
be construed as a reference to a day (other than a Saturday or Sunday) on which
Lenders are generally open for business in New York and London;
a
“Clause”
shall,
subject to any contrary indication, be construed as a reference to a clause
hereof;
an
“encumbrance”
shall
be construed as a reference to a mortgage, charge, pledge, lien or other
encumbrance securing any obligation of any person or any other type of
preferential arrangement (including, without limitation, title transfer and
retention arrangements) having a similar effect;
a
“holding
company”
of
a
company of incorporation shall be construed as a reference to any company or
corporation of which the first mentioned company or corporation is a
subsidiary;
“indebtedness”
shall
be construed so as to include any obligation (whether incurred as principal
or
as surety) fore the payment or repayment of money, whether present or future,
actual or contingent;
a
“month”
is
a
reference to a period starting on one day in a calendar month and ending on
the
numerically corresponding day in the next succeeding calendar month save that,
where any such period would otherwise end on a day which is not a business
day,
it shall end on the next succeeding business day, unless that day falls in
the
calendar month succeeding that in which it would otherwise have ended, in which
case it shall end on the immediately preceding business day provided that,
if a
period starts on the last business day in a calendar month or if there is no
numerically corresponding day in the month in which that period ends, that
period shall end on the last business day in that later month (and references
to
“months” shall be construed accordingly);
a
“person”
shall
be construed as a reference to any person, firm, company, corporation,
government, state or agency of a state of any association or partnership
(whether or not having separate legal personality) of two or more of the
foregoing;
2
“repay”
(or
any
derivative form thereof) shall, subject to any contrary indication, be construed
to include “prepay’ (or, as the case may be, the corresponding derivative form
thereof);
a
“Schedule”
shall,
subject to any contrary indication, be construed as a reference to a schedule
hereto;
a
“subsidiary”
of
a
company or corporation shall be construed as a reference to any company or
corporation:
| (i) |
which
is controlled, directly or indirectly, by the first-mentioned company
or
corporation;
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| (ii) |
more
than half the issued share capital of which is beneficially owned,
directly or indirectly, by the first mentioned company or corporation;
or
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| (iii) |
which
is a subsidiary of another subsidiary of the first-mentioned company
or
corporation
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and,
for
these purposes, a company of corporation shall be treated as being controlled
by
another if that other company or corporation is able to direct its affairs
and/or to control the composition of its board of directors or equivalent
body;
“tax”
shall
be construed so as to include any tax, levy, impost, duty or other charge of
a
similar nature (including, without limitation, any penalty or interest payable
in connection with any failure to pay or any delay in paying any of the
same);
“VAT”
shall
be construed as a reference to value added tax including any similar tax which
may be imposed in place thereof from time to time;
a
“wholly-owned
subsidiary”
of
a
company or corporation shall be construed as a reference to any company or
corporation which has no other members except that other company or corporation
and that other company’s or corporation’s wholly-owned subsidiaries or persons
acting on behalf of that other company or corporation or its wholly-owned
subsidiaries; and
the
“winding-up”,
“dissolution”
or
“administration”
of
a
company or corporation shall be construed so as to include any equivalent or
analogous proceedings under the law of the jurisdiction in which such company
or
corporation is incorporated or any jurisdiction in which such company of
corporation carries on business including the seeking of liquidation,
winding-up, reorganisation, dissolution, administration, arrangement,
adjustment, protection or relief of debtors.
1.3 Save
where the contrary is indicated, any reference in this Agreement
to:
| (i) |
this
Agreement or any other agreement or document shall be construed as
a
reference to this Agreement or, as the case may be, such other agreement
or document as the same may have been, or may from time to time be,
amended, varied, novated or supplemented;
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3
| (ii) |
a
statute shall be construed as a reference to such status as the same
may
have been, or may from time to time be, amended or re-enacted;
and
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| (iii) |
a
time of day shall be construed as a reference to New York
time.
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1.4 Clause
and Schedule headings are for ease of reference only.
2. The
Facility
2.1 The
Lender grants to the Borrower, upon the terms and subject to the conditions
hereof, a loan facility in aggregate amount of $400,000 (four hundred US
Dollars).
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2.2
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The
Loan made pursuant to this Agreement shall be evidenced by Notes
in an
aggregate amount equal to the aggregate unpaid principal amount of
the
Loan. Each such Note shall be substantially in the from of Exhibit
A
hereto. At any time the Lender may elect to convert any or all amounts
due
and unpaid under the Notes, and all accrued by unpaid interest hereunder,
into shares of common stock of Borrower at a conversion price of
$2.50 per
share, or such lower price to equal the lowest per share price of
the
Borrower’s common stock sold in the Equity Financing.
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3. Purpose
3.1 The
Facility is intended for general corporate and working capital purposes of
the
Borrower.
3.2 Without
prejudice to the obligations of the Borrower hereunder, the Lender shall not
be
obliged to concern itself with the application of amounts raised by the Borrower
hereunder.
4. Conditions
Precedent
Save
as
the Lender may otherwise agree, the Borrower may not deliver any Notice of
Drawdown for the Tranche B Commitment and no drawings will take place under
Clause 5.1 unless the Lender has confirmed to the Borrower that (i) it has
received all of the documents listed in the First Schedule and that each is,
in
form and substance, satisfactory to the Lender, and (ii) the Chief Executive
Officer or Chief Financial Officer of the Lender has approved such
drawing.
5. Availability
of the Facility
5.1 On
the
date hereof, subject to the delivery to the Lender of all the documents listed
in the First Schedule, the Lender will remit to the Borrower an Advance in
the
amount of US Dollar equivalent to the Tranche A Commitment to the Designated
Account.
5.2 The
Lender will, subject to Clause 4, remit by cheque or wire transfer to the
Designated Account upon the delivery of the Notice of Drawdown (or if such
day
is not a business day, on the next following business day), an amount equal
to
the amount set forth in such Notice of Drawdown, up to the Tranche B Commitment,
less all amounts previously paid pursuant to Section 5.3.
4
5.3 Alternatively,
the Lender will, subject to Clause 4, directly pay Borrower obligations upon
receipt of invoice or demand (or if such day is not a business day, on the
next
following business day), an amount equal to the invoiced or demanded amount,
up
to the Tranche B Commitment, less all amounts previously paid pursuant to
Section 5.2.
6. Interest
6.1 Each
Advance shall bear interest on the outstanding principal amount thereof, for
each day from the date such Advance is made, at a rate per annum equal to 10%,
and shall be computed on the basis of a year of 360 days, and in each case
shall
be payable for the actual number of days elapsed (including the first day but
excluding the last day).
6.2 All
accrued and unpaid interest shall be due on the Repayment Date.
6.3 Upon
the
Occurrence and during the continuation of an Event of Default in accordance
with
clause 15, the principal of and, to the extent permitted by law, interest on
the
Loans and any other amounts owing hereunder or under the Notes shall bear
interest at a per annum rate equal to 18% and shall be paid by the Borrower
on a
monthly basis or on such other date or dates as the Lender may specific by
written notice to the Borrower. .
6.4 The
Borrower undertakes to indemnify the Lender against:
| (i) |
any
cost, claim, loss, expense (including legal fees) or liability together
with any VAT thereon, which it may sustain or incur as a consequence
of
the occurrence of any Event of Default or any default by the Borrower
in
the performance of any of the obligations expressed to be assumed by
it in
this. Agreement; and
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| (ii) |
any
loss it may suffer as a result of its funding an Advance requested
by the
Borrower hereunder but not made by reason of the operation of any one
of
more of the provisions hereof.
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7.4
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The
Borrower and the Lender intend to strictly comply with all applicable
laws, including applicable usury laws. In no event shall the Borrower
or
any other person be obligated to pay, or the Lender have any right
or
privilege to reserve, receive or retain, (a) any interest in excess
of the
maximum amount of nonusurious interest permitted under any laws of
the
United States any other applicable State, or (b) total interest in
excess
of the amount which such Lender could lawfully have contracted for,
reserved, received, retained or charged had the interest been calculated
for the full term of the Loan at the Highest Lawful Rate. On each
day, if
any, that the interest rate (the “Stated
Rate”)
called for under this Agreement exceeds the Highest Lawful Rate,
the rate
at which interest shall accrue shall automatically be fixed by operation
of this sentence at the Highest Lawful Rate for that day, and shall
remain
fixed at the Highest Lawful Rate for each day thereafter until the
total
amount of interest accrued equals the total amount of interest which
would
have accrued if there were no such ceiling rate as is imposed by
this
sentence. Thereafter, interest shall accrue at the Stated Rate unless
and
until the Stated Rate again exceeds the Highest Lawful Rate when
the
provisions of the immediately preceding sentence shall again automatically
operate to limit the interest accrual rate. The daily interest rates
to be
used in calculating interest at the Highest Lawful Rate shall be
determined by dividing the applicable Highest Lawful Rate per annum
by the
number of days in the calendar year for which such calculation is
being
made. None of the terms and provisions contained in this Agreement
which
directly or indirectly relate to interest shall ever be construed
to
create a contract to pay for the use, forbearance or detention of
money at
an interest rate in excess of the Highest Lawful Rate.
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5
7. Repayment
Subject
to any requirement to make early repayment in accordance with Clause 15.1 the
Loan shall be repayable by the Borrower on the Repayment Date.
8. Cancellation
and Prepayment
8.1 The
Borrower may, by giving to the Lender not less than thirty days’ prior notice to
that effect, terminate the Available Facility, without penalty.
8.2 The
Borrower may, if it has given to the Lender not less than thirty days’ prior
notice to that effect, prepay without penalty the whole of the
Loan.
8.3 Any
notice of cancellation or prepayment given by the Borrower pursuant to Clause
8.1 or 8.2 shall be irrevocable, shall specify the date upon which such
cancellation or prepayment is to be made and the amount of such cancellation
or
prepayment and, in the case of a notice of prepayment, shall oblige the Borrower
to make such prepayment on such date.
8.4 The
Borrower shall not repay all or any part of the Loan except at the times and
in
the manner expressly provided for in the Agreement and shall not be entitled
to
reborrow any amount repaid.
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9.5
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Upon
the termination of all the Available Facility and the prepayment
of the
entire Loan, including all accrued and unpaid interest thereon and
any the
satisfaction of any other obligations outstanding hereunder this
Agreement
shall terminate.
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9. Taxes
9.1 All
payments to be made by the Borrower to the Lender hereunder shall be made free
and clear of and without deduction for or on account of tax unless the Borrower
is required to make such a payment subject to the deduction or withholding
of
tax, in which case the sum payable by the Borrower in respect of which such
deduction or withholding is required to be made shall be increased to the extent
necessary to ensure that, after the making of the required deduction or
withholding, the Lender receives and retains (free from any liability in respect
of any such deduction or withholding) a net sum equal to the sum which it would
have received and so retained had no such deduction or withholding been made
or
required to be made.
9.2 Without
prejudice to the provisions of Clause 9.1, if the Lender is required to make
any
payment on account of tax (not being a tax imposed on the net income of the
Lender by the jurisdiction in which it is incorporated) or otherwise on or
in
relation to any sum received or receivable by it hereunder (including, without
limitation, any sum received or receivable under this Clause 9) or any liability
in respect of any such payment is asserted, imposed, levied or assessed against
the Lender, the Borrower shall, upon demand of the Lender, promptly indemnify
the Lender against such payment or liability, together with any interest,
penalties and expenses payable or incurred in connection therewith.
6
9.3 If
the
Lender intends to make a claim pursuant to Clause 9, it shall notify the
Borrower of the event by reason of which it is entitled to make such claim
provided that nothing herein shall require the Lender to disclose any
confidential information relating to the organisation of its
affairs.
10. Tax
receipts
10.1 If,
at
any time, the Borrower is required by law to make any deduction or withholding
from any sum payable by it hereunder (or if thereafter there is any change
in
the rates at which or the manner in which such deductions or withholdings are
calculated), the Borrower shall promptly notify the Lender.
10.2 If
the
Borrower makes any payment hereunder in respect of which it is required to
make
any deduction of withholding, it shall pay the full amount required to be
deducted or withheld to the relevant taxation or other authority within the
time
allowed for such payment under applicable law and shall deliver to the Lender,
promptly upon receipt of the same, an original receipt (or a certified copy
thereof) issued by such authority evidencing the payment to such authority
of
all amounts so required to be deducted or withheld in respect of such
payment.
11. Increased
Costs
11.1 If,
by
reason of any change in law of in its interpretation or
administration:
| (a) |
there
is any increase in the cost to the Lender of funding or maintaining
all or
any of the advances comprised in a class of advances formed by or
including the Advances; or
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| (b) |
the
Lender becomes liable to make any payment on account of tax or otherwise
(not being a tax imposed on the net income of the Lender by the
jurisdiction in which it is incorporated) on or calculated by reference
to
the amount of the Advances and/or to any sum received or receivable
by it
hereunder.
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then
the
Borrower shall, from time to time on demand of the Lender, promptly pay to
the
Lender amounts sufficient to indemnify it or any such holding company against,
as the case me be, (1) such increased cost (or such proportion of such
increased cost as is, in the opinion of the Lender, attributable to its funding
or maintaining Advances) or (2) such liability.
11.2 If
the
Lender intends to make a claim pursuant to Clause 11.1, it shall notify the
Borrower of the event by reason of which it is entitled to do so provided that
nothing herein shall require the Lender to disclose any confidential information
relating to the organisation of its affairs.
7
12. Illegality
If,
at
any time, it is unlawful for the Lender to make, fund or allow to remain
outstanding all or any of the Advances, then the Lender shall, promptly after
becomes aware of the same, deliver to the Borrower a certificate to that effect
and:
| (i) |
the
Lender shall not thereafter be obliged to make any Advances and the
amount
of the Available Facility shall be immediately reduced to zero;
and
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| (ii) |
if
the Lender so requires, the Borrower shall on such date as the Lender
shall have specified repay each outstanding Advance and all other amount
owing to the Lender hereunder.
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In
the
event that this Clause shall become operative, the Lender will discuss in good
faith with the Borrower what alternative funding methods shall be available
and
agrees to give assistance to the Borrower in obtaining such
funding.
13. Representations
The
Borrower represents that:
| (i) |
it
is a corporation duly organised under the Laws of Delaware with power
to
enter into this Agreement and to exercise its rights and perform its
obligations hereunder and all corporate and other action required to
authorise its execution of this Agreement and its performance of its
obligations hereunder has been duly
taken;
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| (ii) |
all
acts, conditions and things required to be done, fulfilled and performed
in order (a) to enable it lawfully to enter into, exercise its rights
under and perform and comply with the obligations expressed to be assumed
by it in this Agreement and (b) to ensure that the obligations
expressed to be assumed by it in this Agreement are legal, valid and
binding;
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| (iii) |
it
has not taken any corporate action nor have any other steps been taken
or
legal proceedings been started or (to the best of its knowledge and
belief) threatened against the Borrower for its winding-up, dissolution,
administration or re-organisation or for the appointment of a receiver,
administrator, administrative received, trustee or similar officer
of it
or of any or all of its assets or
revenues;
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| (iv) |
it
is not in breach of or in default under any agreement to which it is
a
party or which is binding on it or any of its assets to an extent or
in a
manner which might have a material adverse effect on the business or
financial condition of the Group;
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| (v) |
no
action or administrative proceeding of or before any court of agency
which
might have a material adverse effect on the business or financial
condition of the Borrower has been started or
threatened;
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| (vi) |
save
as permitted hereunder no encumbrance exists over all or any of the
present or future revenues or assets of the
Borrower;
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8
| (vii) |
the
execution by the Borrower of this Agreement and the Borrower’s exercise of
its rights and performance of its obligations hereunder will not result
in
the existence of nor oblige the Borrower to create any encumbrance
over
all of any of its present or future revenues or assets (other than
as
created by the Note);
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| (viii) |
the
execution by the Borrower of this Agreement and the Borrower’s exercise of
its rights and performance of its obligations hereunder do not and
will
not:
|
| (a) |
conflict
with any agreement, mortgage, bond or other instrument or treaty to
which
such party is a party or which is binding upon it or any of its
assets;
|
| (b) |
conflict
with such party’s constitutional documents and rules and regulations;
or
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| (c) |
conflict
with any applicable law, regulation or official or judicial
order.
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14. Covenants
14.1 The
Borrower shall:
| (i) |
obtain,
comply with the terms of and do all that is necessary to maintain in
full
force and effect all material authorisations, approvals, licenses and
consents required in or by the laws and regulations of is jurisdiction
of
incorporation to enable it lawfully to enter into and perform its
obligations under this Agreement or to ensure the legality, validity,
enforceability or admissibility in evidence in its jurisdiction of
incorporation of this Agreement;
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| (ii) |
maintain
insurances on and in relation to its business and material assets with
reputable underwriters or insurance companies against such risks and
to
such extent as is usual for companies carrying on a business such as
that
carried on by the Group;
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| (iii) |
after
the delivery of any Notice of Drawdown and before the proposed making
of
the Advance requested therein, notify the Lender of the occurrence
of any
event which results in or may reasonably be expected to result in any
of
the representations contained in Clause 13 being untrue in any material
respect at or before the time of the proposed making of such
Advance;
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| (iv) |
promptly
inform the Lender of the occurrence of any Event of Default or Potential
Event of Default and, upon receipt of a written request to that effect
from the Lender, confirm to the Lender that, save as previously notified
to the Lender or as notified in such confirmation, no Event of Default
or
Potential Event of Default has occurred;
and
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| (v) |
ensure
that at all times the claims of the Lender against it under this Agreement
rank at least pari passu with the claims of all its other unsecured
creditors save those whole claims are preferred by any bankruptcy,
insolvency, liquidation or other similar laws of general
application.
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9
14.2 No
member
of the Group shall, without the prior written consent of the
Lender:
| (i) |
pay,
make or declare any dividend or other distribution in respect of any
financial year;
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| (ii) |
create
or permit to subsist any encumbrance over all or any of its present
or
future revenues or assets other than an encumbrance which has been
disclosed in writing to the Lender prior to the execution hereof and
secures only indebtedness outstanding at the date
hereof;
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| (iii) |
make
any loans, grant any credit (save in the ordinary course of business)
or
give any guarantee or indemnity (except as required hereby) to or for
the
benefit of any person or otherwise voluntarily assume any liability,
whether actual or contingent, in respect of any obligation of any other
person;
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| (iv) |
issue
any further shares or alter any rights attaching to its issued shares
in
existence at the date hereof; or
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| (v) |
(disregarding
sales of stock in trade and licensing of intellectual property rights
in
each case in the ordinary course of business) sell, lease, transfer
or
otherwise dispose of, by one of more transactions or series of transaction
(whether related or not), the whole or any material part of its revenues
or its assets.
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15. Events
of Default
15.1 If:
| (i) |
the
Borrower shall fail to pay, within three business days of the due date
of
any such further period as may be agreed in writing by the Lender,
any sum
due from it hereunder- at the time, in the currency and in the manner
specified herein; or
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| (ii) |
any
representation or statement made by the Borrower in this Agreement
or in
any notice or other document, certificate or statement delivered by
it
pursuant hereto or in connection herewith is or proves td have been
misleading or materially incorrect when made;
or
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| (iii) |
the
Borrower fails duly to perform of comply with any other obligation
expressed to be assumed by it in this Agreement and such failure, if
capable of remedy, is not remedied within fourteen days after the Lender
has given notice thereof to such party;
or
|
| (iv) |
any
indebtedness of any member of the Group being in aggregate in excess
of
£10,000 is not paid when due or is declared to be or otherwise becomes
due
and payable prior to its specified maturity or any creditor or creditors
of any members of the Group become entitled to declare any indebtedness
of
such party due and payable prior to its specified maturity;
or
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10
| (v) |
any
member of the Group is unable to pay its debts as they fall due, commences
negotiations with any one or more of ‘its creditors with a view to the
general readjustment or rescheduling of its indebtedness or makes a
general assignment for the benefit of or a composition with its creditors;
or
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| (vi) |
any
member of the Group takes any corporate action or other steps are taken
or
legal proceedings are started for its winding up, dissolution,
administration or re-organisation or for the appointment of a receiver,
administrator, administrative receiver, trustee or similar officer
of it
or of any or all of its revenues and assets save that this clause will
not
apply in respect of any action taken vexatiously or without cause;
or
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| (vii) |
any
execution of distress is levied against, or an encumbrances takes
possession of the whole or any material part of, the property, undertaking
or assets of any member of the Group; or
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| (viii) |
by
or under the authority of any government, (a) the management of any
member
of the Group is wholly or partially displaced or the authority of any
member of the Group in the conduct of its business is wholly or partially
curtailed or (b) all or a majority of the issued shares of the Borrower
or
the whole or any party (the book value of which is twenty per cent
or more
of the book value of the whole) of the revenues or assets of the Group
is
seized, nationalised, expropriated or compulsorily acquired;
or
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| (ix) |
the
Borrower repudiates this Agreement or does or causes to be done any
act or
thing evidencing an intention to repudiate this Agreement;
or
|
| (x) |
at
any time it is or becomes unlawful for the Borrower to perform or comply
with any or all of its obligations hereunder or any of the obligations
of
the Borrower hereunder are not or cease to be legal, valid and binding
which would have a material adverse effect on the Lender;
|
then,
and
in any such case and at any time thereafter, the Lender may by written notice
to
the Borrower:
| (a) |
declare
the Advances to be immediately due and payable (whereupon the same
shall
become so payable together with any other sums then owed by the Borrower
hereunder) or declare the Advances to be due and payable on demand
of the
Lender; and/or
|
| (b) |
declare
that any undrawn portion of the Facility shall be cancelled, whereupon
the
same shall be cancelled and the Available Facility shall be reduced
to
zero.
|
11
15.2 If,
pursuant to Clause 15.1, the Lender declares the Advances to be due and payable
on demand of the Lender, then, and at any time thereafter, the Lender may by
written notice to the Borrower call for repayment of the Advances on such date
as it may specify in such notice (whereupon the same shall become due and
payable on such date together with any other sums then owed by the Borrower
hereunder) or withdraw its declaration with effect from such date as it may
specify in such notice.
16. Payment
Procedures
16.1 On
each
date on which this Agreement requires an amount denominated in US Dollars to
be
paid by the Borrower, the Borrower shall make the same available to the Lender
by payment in US Dollars and in immediately available, freely transferable,
cleared funds to the Lender’s bank account as the Lender may have specified for
this purpose.
16.2 On
each
date on which this Agreement requires an amount denominated in US Dollars to
be
paid by the Lender to the Borrower or, on behalf of Borrower, directly to a
third party upon invoice or demand, the Lender shall make the same available
to
the Borrower by payment in Dollars and in immediately available, freely
transferable, cleared funds to the Designated Account (or such account as the
Borrower may have specified for this purpose).
16.3 All
payments required to be made by the Borrower hereunder shall be calculated
without reference to any set-off or counterclaim and shall be made free and
clear of and without any deduction for or on account of any set-off or
counterclaim.
16.4 All
moneys received, recovered or realised by the Lender by virtue of Clause 16.2
may, in the Lender’s discretion, be credited to a suspense or impersonal account
and many be held in such account for so long as the Lender thinks fit pending
the application from time to time (as the Lender Imay
think
fit) of such moneys in or towards the payment and discharge of any amounts
owing
by the Borrower to the Lender hereunder.
17. Set-Off
The
Borrower authorises the Lender to apply any credit balance to which the Borrower
is entitled on any account of the Borrower with the Lender in satisfaction
of
any sum due and payable from the Borrower to the Lender hereunder but unpaid;
for this purpose, the Lender is authorised to purchase with the moneys standing
to the credit of any such account such other currencies as may be necessary
to
effect such application. The Lender shall not be obliged to exercise any right
given to it by this Clause 17.
18. Costs
and Expenses
18.1 The
Borrower shall, from time to time on demand of the Lender, reimburse the Lender
for all costs and expenses (including legal fees) together with any VAT thereon
incurred in or in connection with the preservation and/or enforcement of any
of
its rights under this Agreement.
18.2 The
Borrower shall pay all stamp, registration and other taxes to which this
Agreement or any judgment given in connection herewith is or at any time may
be
subject and shall, from time to time on demand, indemnify the Lender against
any
liabilities, costs, claims and expenses resulting from any failure to pay or
any
delay in paying any such tax.
12
19. Benefit
of Agreement
This
Agreement shall be binding upon and enure to the benefit of each party hereto
and its or any subsequence successors and assigns.
20. Assignments
20.1 The
Borrower shall not be entitled to assign or transfer all or any of its rights,
benefits and obligations hereunder.
20.2 The
Lender may assign all or any of its rights and benefits hereunder
to:
| 20.2.1 |
any
other person provided that the Lender can demonstrate to the reasonable
satisfaction of the Borrower that person is of good credit standing
and
does not have any interests which conflict with those of the Borrower;
or
|
20.3 any
subsidiary or holding company of the Lender or other subsidiary of such holding
company (as such terms are defined in the Companies Act 1985) provided that
the
Borrower agrees to guarantee the performance of the obligations under this
Agreement of such company.
21. Calculation—and
Evidence of Debt
21.1 The
Lender shall maintain in accordance with its usual practice accounts evidencing
the amounts from time to time lent by and owing to it hereunder.
22. Remedies
and Waivers
No
failure by the Lender to exercise, nor any delay by the Lender in exercising,
any right or remedy hereunder shall operate as a waiver thereof, nor shall
any
single or partial exercise of any right or remedy prevent any further or other
exercise thereof or the exercise of any other right or remedy. The rights and
remedies herein provided are cumulative and not exclusive of any rights or
remedies provided by law.
23. Partial
Invalidity
If,
at
any time, any provision hereof is or becomes illegal, invalid or unenforceable
in any respect under the law of any jurisdiction, neither the legality, validity
or enforceability of the remaining provisions hereof nor the legality or
enforceability of such provision under the law of any other jurisdiction shall
in any way be affected or impaired thereby.
24. Notices
24.1 Each
communication to be made hereunder shall be made in writing but, unless
otherwise states, may be made by telefax, letter.
13
24.2 Any
communication or document to be made or delivered by one person to another
pursuant to this Agreement shall (unless that other person has by fifteen days’
written notice to the one specified another address) be made or delivered to
that other person at the address identified with its signature below and shall
be deemed to have been made or delivered at the opening of business on the
business day following the date of despatch (in the case of any communication
made by telefax) or when left at that address (in the case of any communication
made by letter) or
(as
the case may be) ten days after being deposited in the post postage prepaid
in
an envelope addresses to it at that address provided that any communication
or
document to be made or delivered by the Borrower to the Lender shall be
effective only when received by the Lender and then only if the same is
expressly marked for the attention of the department or officer identified
with
the Lender’s signature below (or such other department or officer as the Lender
shall from time to time specific for this purpose).
25. Law
This
Agreement shall be governed by, and shall be construed in accordance with the
laws of the State of New York, without giving effect to its principals or rules
of conflicts of laws to the extent such principals or rules would require the
application of the laws of another jurisdiction.
26. Jurisdiction
26.1 Each
party hereto hereby irrevocably and unconditionally submits, for itself and
its
property, to the exclusive jurisdiction of the Supreme Court of the State of
New
York sitting in New York County and of the United States District Court of
the
Southern District of New York, and any appellate court from any thereof, in
any
action or proceeding arising out of or relating to this Agreement, or for
recognition or enforcement of any judgment, and each of the parties hereto
hereby irrevocably and unconditionally agrees that all claims in respect of
any
such action or proceeding may be heard and determined in such New York State
or,
to the extent permitted by law, in such Federal court. Each of the parties
hereto agrees that a final judgment in any such action or proceeding shall
be
conclusive and may be enforced in other jurisdictions by suit on the judgment
or
in any other manner provided by law.
AS
WITNESS
the
hands of the duly authorised representatives of the parties hereto on the date
set out above.
14
|
THE
BORROWER:
OWLSTONE NANOTECH, INC., |
|||
| By: |
|
||
|
Address:
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇
▇▇▇▇, ▇▇ ▇▇▇▇▇
Tel:
(▇▇▇) ▇▇▇-▇▇▇▇
Fax:
(▇▇▇) ▇▇▇-▇▇▇▇
Email:
▇▇▇▇.▇▇▇▇▇@▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇
Atten:
▇▇▇▇ ▇▇▇▇▇, CEO
|
|||
|
THE
LENDER:
ADVANCED
NANOTECH, INC.,
|
|||
| By: | |||
|
Address:
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇
▇▇▇▇, ▇▇ ▇▇▇▇▇
Tel:
(▇▇▇) ▇▇▇-▇▇▇▇
Fax:
(▇▇▇) ▇▇▇-▇▇▇▇
Email:
▇▇▇.▇▇▇▇@▇▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇
Atten:
▇▇▇▇▇▇ ▇▇▇▇, CFO
|
|||
15
THE
FIRST
SCHEDULE
Condition
Precedent Documents
| (i) |
a
copy, certified a true copy by a duly authorised officer of the Borrower,
of its Memorandum and Articles of
Association;
|
| (ii) |
a
copy, certified a true copy by a duly authorised officer of the Borrower,
of a Board Resolution of the Borrower approving the execution, delivery
and performance of this Agreement and the terms amid conditions hereof
and
authorizing a named person or persons to sign this Agreement and any
documents to be delivered by the Borrower pursuant
hereto;
|
| (iii) |
a
certificate of a duly authorised officer of the Borrower setting out
the
names and signatures of the persons authorised to sign, on behalf of
the
Borrower, this Agreement and any documents to be delivered by the Borrower
pursuant hereto or thereto; and
|
| (iv) |
a
Warrant to purchase 40,000 shares of the Borrower’s common stock (or such
greater amount if the lowest per share price of the such sock sold
in the
Equity Financing is below $2.50 per share) at an exercise price of
$1.50
per share.
|
16
THE
SECOND SCHEDULE
Notice
of
Drawdown
From: Owlstone
Nanotech, Inc.
Dated:
Dear
Sirs,
| 1. |
We
refer to the agreement (the “Facility Agreement”) dated _______, 2006 and
made between ourselves as borrower and yourselves as lender. Terms
defined
in the Facility Agreement shall have the same meaning in this
notice.
|
| 2. |
We
hereby give you notice that, pursuant to the Facility Agreement and
on
[date of proposed advance], we wish to borrow an Advance in the following
amount _____________, up to the Tranche B Commitment, upon the terms
and
subject to the conditions contained
therein.
|
| 3. |
We
confirm that, at the date hereof, the representations set out in Clause
13
of the Facility Agreement are true and no Event of Default of Potential
Event of Default has occurred.
|
| 4. |
The
proceeds of this drawdown should be credited to [insert account
details].
|
Yours
faithfully,
For
an on
behalf of Owlstone Nanotech, Inc.
17
EXHIBIT
A
FORM
OF SENIOR SECURED SUBORDINATED PROMISSORY GRID NOTE
Up
to
$400,000
[__________],
2006
FOR
VALUE
RECEIVED, the undersigned, OWLSTONE NANOTECH, INC., a Delaware corporation
(the
“Borrower”),
hereby
unconditionally promises to pay to the order of ADVANCE NANOTECH, INC. (the
“Lender”)
and its
successors and assigns, the unpaid principal amount set forth on the attached
Schedule A (the “Loan”). The Borrower further agrees to pay interest on the
unpaid principal amount hereof from time to time outstanding at the rates and
on
the dates as set forth in the Credit Agreement. All such payments of principal
and interest shall be made without offset, counterclaim or deduction of any
kind
in lawful money of the United States of America and in immediately available
funds at such location in the United States of America as the Lender shall
designate from time to time.
This
Note
is given in connection with the Facility Agreement, dated as of [August 11,
2006], among the Borrower and the Lender (the “Facility Agreement”). This Note
is one of the Notes referred to in the Facility Agreement and evidences Advances
made by the Lender to the Borrower. Capitalized terms used in this Note and
not
otherwise defined shall have the respective meaning assigned to them in the
Facility Agreement and the terms and conditions of the Facility Agreement are
expressly incorporated herein and made a part hereof.
At
any
time the Lender may elect to convert any or all amounts due and unpaid under
this Note, and all accrued by unpaid interest hereunder, into shares of common
stock of Borrower at a conversion price of $2.50 per share, or such lower price
to equal the lowest per share price of the Borrower’s common stock sold in the
Equity Financing.
The
holder of this Note is authorized (but nor required) to endorse on the schedules
annexed hereto and made a part hereof the date and amount of each payment or
prepayment of principal with respect to the Loan. Each such endorsement shall
constitute prima facie
evidence
of the accuracy of the information endorsed. The failure to make any such
endorsement or any error in any such endorsement shall not affect the
obligations of the Borrowers in respect of such Loan.
Upon
the
commencement by or against the Borrower of any case or other proceeding seeking
liquidation, reorganization or other relief with respect to the Borrower or
its
debts under any bankruptcy, insolvency or other similar law now of hereafter
in
effect or seeking the appointment of a trustee, receiver, liquidator, custodian
or other similar official of it or any substantial part of its property, the
unpaid principal amount hereof shall become immediately due and payable without
presentment, demand, protest or notice of any kind, all of which are hereby
waived by the Borrower.
The
Borrower hereby pledges, assigns and grants to the Lender a security interest
in
all of such Grantor’s right, title and interest, whether now owned or hereafter
acquired, in and to the Collateral (as defined below) to secure the prompt
and
complete payment and performance of its obligations hereunder.
18
For
the
purposes of this Note, the term “Collateral” shall mean all Accounts (including
all commissions), Chattel Paper, Commercial Tort Claims, Documents, Equipment,
Goods, General Intangibles, Instruments, Inventory, Investment Property, Pledged
Deposits, Supporting Obligations and Other Collateral, wherever located, in
which any Grantor now has or hereafter acquires any right or interest, and
the
proceeds (including Stock Rights), insurance proceeds and products thereof,
together with all books and records, customer lists, credit files, computer
files, programs, printouts and other computer materials and records related
thereto. Notwithstanding anything to the contrary contained in this definition,
Collateral shall not include (i) Accounts, Chattel Paper, Documents, General
Intangibles, Instruments or other contractual rights to the extent and for
so
long as the grant of a security interest herein would violate the terms of
the
agreement under which such Account, General Intangible or contractual rights
arise or exist, or under such Chattel Paper, Document or Instrument, in each
case to the extent such prohibition is enforceable under applicable law, (ii)
rights under governmental licenses and authorizations to the extent and for
so
long as the grant of a security interest therein is prohibited by law, (iii)
any
intent-to-use trademark or service ▇▇▇▇ application prior to the filing of
a
statement of use or amendment to allege use, or any other intellectual property,
to the extent that applicable law or regulation prohibits the creation of a
security interest or would otherwise result in the loss of rights from the
creation of such security interest or from the assignment of such rights upon
the occurrence and continuance of an Event of Default, and (iv) Equipment that
is subject to a Lien securing a purchase money obligation or capital lease
obligation permitted to be incurred pursuant to the provisions of the Credit
Agreement if the contract or other agreement in which such Lien is granted
(or
the documentation providing for such purchase money obligation or capital lease
obligation) validly prohibits the creation of any other Lien on such
Equipment.
All
parties now and hereafter liable with respect to this Note, whether maker,
principal, surety, guarantor, endorser or otherwise, hereby waive presentment,
demand, protest and all other notices of any kind with respect to matters
relating to this Note.
This
Note
is expressly subordinated in all rights, including, without limitation, the
right of payment, to the prior payment in full of the Borrower’s obligations to
the Lender under that certain Facility Agreement, dated as of May 28, 2004.
[REMAINDER
OF THIS PAGE INTENTIONALLY LEFT BLANK]
19
THIS
TERM NOTE AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS TERM NOTE
SHALL BE CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, AND GOVERNED BY, THE
LAWS
OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO ITS PRINCIPLES OR RULES
OF
CONFLICTS OF LAWS TO THE EXTENT SUCH PRINCIPLES OR RULES WOULD REQUIRE THE
APPLICATION OF THE LAWS OF ANOTHER JURISDICTION.
| OWLSTONE NANOTECH, INC. | ||
| |
|
|
| By: | ||
|
Name:
|
||
| Title | ||
20
Schedule
A
to
Grid
Note
GRID
SCHEDULE
LOANS;
REPAYMENT
|
Date
|
Amount
of Loan
|
Amount
of
Principal
Repaid
|
Notation
Made
By
|
21