Hanford Area Economic Investment Fund Committee Loan Agreement
Hanford
Area Economic Investment Fund Committee
THIS
LOAN
AGREEMENT (the “Agreement”)
is made
and entered into this 15
day
of June, 2006,
by and
among the Hanford Area Economic Investment Fund Committee (the “Lender”),
and
IsoRay
Medical, Inc. a wholly owned subsidiary of IsoRay, Inc. a Delaware
Corporation,
(the
“Borrower/s”)
(collectively the “Parties”).
RECITALS
A. The
Hanford Area Economic Investment Fund Committee (the “Lender”);
desires to make such funds available to private borrowers in order to assist
in
the implementation of new value-added projects; stimulate private investment;
provide capital to ventures consistent with local economic development goals
and
capable of growth in the business markets; encourage and increase the employment
of Xxxxxx and Xxxxxxxx Counties; and assist viable, small
businesses.
B. The
Lender has determined that the Borrower/s application for a loan meets the
Program’s
requirements.
C. The
Lender desires to loan funds to the Borrower/s, and the Borrower/s desire to
borrow funds from the Lender, under the terms and conditions set forth in this
Agreement, which is intended to control the relationship among the
Parties.
AGREEMENT
NOW
THEREFORE, in consideration of the mutual promises contained in this Agreement,
the Parties agree as follows:
1. Overview
of the Transaction.
Under
this agreement, the Lender will lend One
Million Four Hundred Thousand Dollars and 00/100
($1,400,000.00)
to the
Borrowers at an interest rate of Eight
and One Half Percent
(8.50%)
per
annum, plus a one-half of one percent (.50%) loan service fee, for an effective
rate of Nine
Percent
(9.00%)
per
annum. Interest is calculated based on actual/365 day bases. The purpose of
the
loan is to purchase Equipment
for Production Lab.
The
loan will be governed by this Agreement and the Lenders’
Promissory Note of even date.
A
more
detailed description of the transaction is contained in the remaining provisions
of this Agreement, which sets forth the duties and responsibilities of the
Parties.
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2.
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Definitions.
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2.01. Business
Day.
A
weekday, excluding federal holidays, state holidays, Saturdays and
Sundays.
2.02. Collateral.
That
property, whether real or personal, which is pledged by Borrowers to secure
the
Loan, as detailed in the Loan Documents.
2.03. Lender
Promissory Note.
The
Promissory Note from the Borrowers to the Lender evidencing the Indebtedness
of
the Loan referred to in Section 3, and in the form attached hereto as Exhibit
A
and incorporated herein by this reference.
2.04. Lender
Promissory Note Repayment.
The
Borrowers repayment of the Loan, including principal interest, which is to
be
remitted to the Lender or loan servicing company.
2.05. Loan.
The Loan
from the Lender to the Borrowers.
2.06. Loan
Documents.
Those
standard documents required by the Lender to make and close a loan including,
but not limited to, the Lenders’
Promissory Note, security agreements, financing statements, assignment of
assets, and Deeds of Trust.
2.07. Project.
The
endeavor for which the funds comprising the Loan were borrowed by the
Borrower/s.
2.08. Section
Four Covenants.
Those
covenants of the Borrowers included in Section 4.01, 4.02, 4.03, 4.04, 4.05,
4.06, 4.07, and 4.08.
3. The
Loan.
Subject
to the terms and conditions set forth in this Agreement and the terms and
conditions set forth in the Loan Documents, the Lender hereby agrees to loan
to
the Borrower/s One
Million Four Hundred Thousand and 00/100
($1,400,000.00)
(the
“Loan”)
at an
interest rate of Nine
Percent
(9.00%)
per
annum.
3.01 Loan
Documents.
As
evidence of the Loan, the Borrower/s hereby agrees that the Loan Documents
shall
inure to the benefit of the Lender and that the Borrower/s shall review the
form
of the Loan Documents prior to execution.
3.02 Closing.
The
Borrower/s shall execute and deliver to the Lender all documents necessary
to
evidence the borrowing under this Agreement and to perfect the security
interests granted to the Lender. If a Deed of Trust is taken as collateral,
the
Borrower/s shall furnish the Lender with a standard form loan policy of title
insurance issued by a title company approved by the Lender insuring the Deed
of
Trust against the real property, subject only to matters approved by the
Lender.
3.03 Loan
Fee.
A loan
fee of one and one-half (1.50%) of the approved loan amount is due at time
of
closing.
4. Borrower/s
Representations, Warranties and Covenants. To induce the Lender to enter into
this Agreement, the Borrower/s hereby make the following representations,
warranties and covenants:
4.01. Repayment.
The
Borrower/s covenant and agree to make, when due, all payments of any interest
and/or principal in accordance with the terms of the Promissory
Note;
4.02. Authority.
The
Borrower/s represent and warrant that they are fully organized, validly existing
and in good standing under the laws of the State of Washington in force as
of
the date of this Agreement; that they have the legal power to enter into this
Agreement and to exercise their rights and perform their obligations under
this
Agreement; and that all actions required to authorize the making, execution,
and
performance of this Agreement have been duly taken;
4.03. Use
of
Funds.
The
Borrower/s covenant and agree that they will use the proceeds of the Loan for
the purposes of the Project only;
4.04. Insurance.
The
Lender shall require the Borrower/s to obtain an adequate and sufficient amount
of fire and extended coverage insurance covering the Collateral in the full
amount of the Loan. The Lender shall be named as loss payee or insured lender,
and such insurance shall be continuously maintained so long as the Lender has
an
interest in the Loan and the Collateral. In addition, if the Collateral is
located in a flood hazard area as designated by the Federal Insurance
Administrator, the Department shall require the Borrowers to obtain flood
insurance which shall be continuously maintained in the lesser of either the
outstanding principal balance of the Loan or the maximum available amount of
National Flood Insurance Program insurance.
4.05. Government
Regulations.
The
Borrower/s covenants and agrees that they will comply with all applicable state
and local laws, regulations, and requirements.
4.06. False,
Incorrect, or Incomplete Information.
The
Borrower/s covenant and agree that they have not submitted any materially false,
incorrect, or incomplete information to the Lender; and
4.07. Financial
Records. IsoRay
Medical, Inc. and IsoRay, Inc.
covenants and agrees to submit financial records to the Lender as follows:
annual CPA reviewed financial statements. Corporate tax returns are due
annually. The guarantor’s
personal financial statements are due annually. Guarantor’s
tax
returns are due annually.
4.08. Additional
Loan Covenants.
Additional loan covenants are included in Exhibit B., attached and made a part
of this loan agreement.
5. Loan
Security.
5.01. Collateral.
A. “Accounts”
means
any right to payment for goods sold or leased, or to be sold or to be leased,
or
for services rendered or to be rendered no matter how evidenced, including
accounts receivable, chattel paper, contract rights, purchase orders, notes,
instruments, drafts, acceptances and other forms of obligations and
receivables.
B. “Inventory”
means
all of Borrower’s
goods,
merchandise and other personal property which are held for sale or lease
including those held for display or demonstration or out on lease or consignment
or to be furnished under a contract of service or are raw materials, work in
process or materials used or consumed, or to be used or consumed, in
Borrower’s
business, and shall include all general intangibles, proprietary rights,
patents, trademarks, copyrights, plans, drawings, diagrams, schematics, assembly
and display materials relating thereto.
C. “Equipment”
means
all of Borrower’s
equipment, including machinery and office equipment, together with all parts,
fittings, accessories, and special tools, and renewals or replacements of all
or
any part thereof; and in all work in process and finished goods, whether now
owned or hereafter acquired by borrower and wheresoever located. Including
specific equipment and machinery listed on attached Exhibit C.
D. “Assignment
of Lease”
means
that all of Borrower’s
rights,
title, and interest in a lease dated February 9, 2005 and amended by Revision
1dated May 5, 2005 and made by subsidiaries of the Parties now delineated as
signatories, is made and entered into this 1st
day of
November, 2005 between Nuvotec USA, Inc. as “Lessor”
and
IsoRay, Inc. “Lessee”.
E. “Assignment
of Life Insurance”
means
all of Borrower’s
rights,
title, and interest in Life Insurance policies issued by Empire General Life
Assurance Corporation, or as may be modified, and issued as listed
below:
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1.
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Xxxxx
X Xxxxxx
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2.
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Xxxxx
X. Xxxxxxxx
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3.
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Xxxxxxx
X. Xxxxx
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4.
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Xxxxxxx
X. Xxxxxx
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6. Compliance
with Covenants.
The
Lender or its agent shall monitor the Borrowers compliance with the covenants
contained in Section 4 of this Agreement (the “Section
Four Covenants”).
7. Borrowers
Default.
7.01. Breach
of Section Four Covenant.
A. If
the
Lender shall conclude that the Borrower/s have materially breached one or more
of the Section Four Covenants, the Lender may declare the Promissory Note to
be
in default, and due and payable in full by providing a notice of default to
the
Borrower/s. Such notice shall inform the Borrower/s of the breach of the
relevant Section Four Covenant(s), and shall allow the Borrower/s thirty (30)
Business Days, the outstanding balance of the Promissory Note shall be due
and
payable in full.
B. If
at the
end of the thirty (30) business day cure period: (i) the Borrower/s have not
cured the breach and notified the Lender of such cure; or (ii) the Borrower/s
have not paid the outstanding balance of the Promissory Note in full, then
the
interest rate on the Promissory Note shall immediately and automatically be
increased to twelve percent (12%), and the Department shall proceed against
the
Collateral.
8. Termination
of this Agreement.
This
Agreement shall terminate and be of no force or effect if the following event
shall occur:
A. If
not
sooner terminated by the Lender, then upon payment-in-full of the indebtedness
evidenced by the Promissory Note.
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9.
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Notice.
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A. All
notices required or permitted under this Agreement shall be in writing and
personally delivered or mailed to the offices set forth below by certified
mail,
return receipt requested, postage prepaid, and addressed to the Parties as
follows:
| To the Lender: | Hanford
Area Economic Investment Fund Committee
0000
X. Xxxx Xxx. X000
Xxxxxxxxx,
XX 00000
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| To the Borrower: | IsoRay Medical, Inc.
000
Xxxxx Xx.
Xxxxx
000
Xxxxxxxx,
XX 00000
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B.
Any
party may, from time to time, change the address to which its notices are to
be
sent, by written notice to all other Parties pursuant to this
section.
C.
Whenever notice is required or permitted to be given to fewer than all the
Parties, copies of the notice shall also be mailed to all other Parties. Copies
of notices required to be mailed pursuant to this Section shall be sent in
accordance with this section.
10. Indemnification.
It is
understood and agreed that this Agreement is solely for the benefit of the
Parties to the Agreement and gives no right to any other party. The Borrower/s
agree that the Lender is acting only as lender and is not directing or
controlling the business as a manager, partner, owner, principal, or any other
capacity. It is understood and agreed that no joint venture or partnership
is
formed as a result of this Agreement. Each party hereto agrees to be responsible
and assume liability for its own negligent acts or omissions, or those of its
partners, officers, agents, or employees to the fullest extent required by
law,
and agrees to save, indemnify, defend and hold the other Parties harmless from
any such liability. In the case of negligence of more than one party, any
damages allowed shall be levied in proportion to the percentage of negligence
attributable to each party; and each party shall have the right to seek
contribution from each of the other Parties in proportion to the percentage
of
negligence attributable to each of the other Parties.
11. No
Waiver.
Waiver
of any covenant, term, or condition of this Agreement by any party shall not
be
deemed a waiver of any subsequent breach of the same covenant, term, or
condition. No waiver of any default or breach by any party shall be implied
from
any failure to take action upon such default or breach, if the default or breach
persists or repeats.
12. Successors
and Assigns.
This
Agreement shall inure to the benefit of the successors and assigns of all the
Parties, provided that the Borrowers interest under this Agreement may not
be
assigned or transferred without the prior written consent of the
Department.
13. Time.
Time is
of the essence of this Agreement.
14. Severability.
The
invalidity of one or more provisions of this Agreement shall not affect, in
any
respect whatsoever, the validity of the remainder of this
Agreement.
15. Entire
Agreement.
This
Agreement, together with the Loan Documents, shall constitute the entire
agreement among the Parties. Any amendment to this Agreement must be in writing
and signed by all the Parties.
16. Governing
Laws.
This
Agreement shall be governed by and construed in accordance with the Laws of
the
State of Washington. Any action brought under this Agreement shall be brought
in
Superior Court of Xxxxxx County, Washington.
IN
WITNESS WHEREOF, the Parties have executed this Loan Agreement by and through
their duly authorized representatives as of the date first above
written.
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Hanford
Area Economic Investment Fund Committee
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By:
/s/
Xxx X. Xxxxxx, Xx.
Xxx
X. Xxxxxx, Xx.
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| Title: Chair | |
| Date: June 15, 2006 | |
| IsoRay Medical, Inc. | |
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By: /s/
Xxxxx X. Xxxxxx
Xxxxx
X. Xxxxxx
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| Title: CEO & Chairman | |
| Date: June 15, 2006 | |
| IsoRay, Inc. | |
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By: /s/
Xxxxx X. Xxxxxx
Xxxxx
X. Xxxxxx
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| Title: CEO & Chairman | |
| Date: June 15, 2006 |
Exhibit
A
Hanford
Area Economic Investment Fund Committee
Promissory
Note
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$1,400,000.00
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Kennewick, Washington
June
15, 2006
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FOR
VALUE
RECEIVED, IsoRay
Medical, Inc. a wholly owned subsidiary of IsoRay, Inc.
promises
to pay to the order of the Hanford Area Economic Investment Fund Committee,
the
principal sum of One
Million Four Hundred Thousand Dollars and 00/100 ($1,400,000.00),
along
with interest on the outstanding balance at a rate of Nine percent (9.00%).
Interest calculation based on actual days/365 day bases.
The
loan
shall be repaid in 120
successive Monthly
payments
of $17,734.61
including interest as specified above. The first payment will be due
August
1, 2006,
and
will continue on the first (1st)
day of
the month until paid in full. The privilege is reserved to prepay the
indebtedness evidenced hereby in full at anytime without penalty.
Late
Fee:
Any payment hereunder that has not been received by Hanford Area Economic
Investment Fund Committee within fifteen (15) days of the due date shall be
deemed to be late and a penalty of five percent (5%) of the payment due will
be
assessed as a late charge and shall be deducted before any application of the
funds to principal or interest.
Default
in the payment of any installment of principal or interest, at the option of
the
holder, shall render the whole amount then unpaid due and payable, whether
due
by lapse of time or not, time being of the essence of this agreement. Failure
to
exercise this option shall not constitute a waiver of the right to exercise
the
same at any other time.
Default
under this note is defined in the Loan Agreement.
Should
any action be brought for the collection of any principal or interest due under
this note, the undersigned promises to pay all costs thereof, including such
additional sum as attorneys’
fees, as
the court may adjudge reasonable.
The
makers and endorsers severally waive presentment, protest, and demand, notice
of
protest, demand, or dishonor and nonpayment of this note, and expressly agree
that this note, or any payment hereunder, may be extended from time-to-time
without in any way affecting the liability of the makers and endorsers
hereof.
This
note
and any renewals or extensions thereof are to be governed by and construed
in
accordance with the laws of the state of Washington and the Loan
Agreement.
June
15, 2006
By:
/s/
Xxxxx X. Xxxxxx
Title:
CEO
& Chairman
Exhibit
B
Loan
Covenants:
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A.
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Current
Ratio not less than 1.50 to 1
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B.
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Debt
to Equity not more than 2.00 to 1
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C.
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Fixed
Charge Coverage not less than
a)
1.10 to 1 by
December 31, 2006 and thereafter
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D.
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All
production facilities and corporate headquarters to remain within
the
boundaries of Xxxxxx and Franklin Counties of Washington State. If
IsoRay
removes all or any part of its operations from the boundaries of
Xxxxxx or
Xxxxxxxx Counties, all principle and accrued interest due by IsoRay
is
automatically due and payable in full. HAEFIC will consider requests
for
moving part of it operations or establishing additional facilities
outside
of the defined boundaries.
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X.
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Xxxxxx-Xxxxxxxx
Economic Development District to subordinate all collateral to
HAEIFC.
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F.
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IsoRay
will not remove any equipment purchased with the proceeds of this
loan
from the PECOS facility, any removal will require the reduction in
loan
principle equal to the equipments original cost, or full repayment
of the
outstanding principle and accrued
interest.
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G.
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Assignment
of lease and leasehold improvements, which will allow HAEIFC to take
position of the production
facility.
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H.
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Letters
from all creditors recognizing HAEIFC’s
loan and waiving any default such loan may
trigger.
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I.
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Letters
from all creditors recognizing HAEIFC’s
collateral and waiving all rights to
it.
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J.
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Assignment
of Life Insurance for $250,000.00 each from guarantors Xxxxxx, Segna,
Swanberg, and Dunlop.
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K.
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Will
not pay annual compensation to any Officer, Director, Manager, Salaried
Employee, or Family member of any for mentioned in excess of $100,000.00
annually during the term of this loan. Annual compensations over
$100,000.00 at time of application to be grandfathered. Requests
for
grandfathered annual compensation to be supported by individuals
name,
annual compensation, and position. Exceptions to annual compensation
will
be considered for newly hired, or replacement employees on a case
by case
basis.
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L.
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Will
pay no dividend to common and/or preferred stockholders and/or bonuses
to
Employees as an aggregated total that exceeds 30% of prior
year’s
net income as expressed by generally acceptable accounting principles
and
reported on the companies prior years audited financial statement
during
the term of this loan. This covenant will become effective on June
30,
2010.
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M.
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Buy
back any stock either common or preferred from any Officer, Director,
Manager, or Salaried employee or their family members during the
term of
this loan.
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N.
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Annual
audited financial statements and tax return, due within 90 days of
corporate year-end.
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O.
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Quarterly
GAAP prepared financial statements, due by the end of the month following
the quarters end.
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