KNOW LABS, INC. FORM OF SUBORDINATION AGREEMENT
Exhibit 10.5
THIS
SUBORDINATION AGREEMENT (this "Agreement") dated
__________________________ , is between
___________________________________ (the "Subordinated Creditor"), and Xxxxxxx
Xxxxxx ("Senior
Creditor").
A. Subordinated
Creditor is purchasing a certain Subordinated Convertible Note of
even date hereof (the “Note”) from Know Labs, Inc., a
Nevada corporation (the "Company") pursuant to that certain
Securities Purchase Agreement dated as of the date hereof between
the Company and Subordinated Creditor (the “Securities Purchase Agreement”).
All capitalized terms not otherwise defined in this Agreement shall
have the meanings assigned to them in the Securities Purchase
Agreement.
B. Senior Creditor has
previously provided loans to the Company in the aggregate amount of
$1,071,000 (the “Senior
Loan”).
C. As a condition to
purchasing the Note, Subordinated Creditor has agreed to
subordinate the Note and related obligations to Subordinated
Creditor (the "Subordinated
Debt") to all of the Company’s indebtedness and
obligations to Senior Creditor (the "Senior Debt").
THE
PARTIES AGREE AS FOLLOWS:
1. All Subordinated
Debt payments are subordinated to Senior Creditor's right to full
payment and performance of the Senior Debt and all of the Company's
other obligations to Senior Creditor existing now or later,
together with collection costs, including attorneys' fees, and
including any interest accruing after any Bankruptcy
Event.
2.
Subordinated
Creditor will not:
a) demand or receive
from the Company (and the Company will not pay) any part of the
Subordinated Debt, by payment, prepayment, or otherwise, which may
now or hereafter be owing by the Company to Subordinated Creditor,
or
b) accelerate the
Subordinated Debt, or begin to or participate in any action against
the Company with respect to such Subordinated Debt, until all the
Senior Debt is paid, or
c) assign any of the
Subordinated Debt or any collateral security therefore without
notice to or consent of Senior Creditor and unless assigned
pursuant to an assignment made expressly subject to this
Agreement.
This
does not prohibit each such Subordinated Creditor from converting
any Subordinated Debt into equity securities of the Company or
exercising any rights as a stockholder of the Company.
3. Subordinated
Creditor must deliver to Senior Creditor, in the form received, any
payment, distribution, security, or proceeds it receives on the
Subordinated Debt other than according to this
Agreement.
4. These provisions
remain in full force and effect, despite any Bankruptcy Event, and
Senior Creditor's claims against the Company and the Company's
estate will be fully paid before any payment is made to any
Subordinated Creditor with respect to the Subordinated
Debt.
5. Until the Senior
Debt is paid, Subordinated Creditor irrevocably appoints Senior
Creditor as its attorney-in-fact, with power of attorney with power
of substitution, in each such Subordinated Creditor's name or in
Senior Creditor's name, for Senior Creditor's use and benefit
without notice to each such Subordinated Creditor, to do the
following in the case of any Bankruptcy Event involving the
Company:
a) file any claims for
the Subordinated Debt for Subordinated Creditor if such
Subordinated Creditor does not do so at least thirty (30) days
before the time to file claims expires; and
b) accept or reject
any plan of reorganization or arrangement for Subordinated Creditor
and vote Subordinated Creditor's claims in respect of the
Subordinated Debt in any way it chooses.
6. Subordinated
Creditor will immediately place a legend on the Subordinated Debt
instruments that the instruments are subject to this Agreement. No
amendment of the Subordinated Debt documents will modify this
Agreement in any way that terminates or impairs the subordination
of the Subordinated Debt or the subordination of the security
interest or lien that Senior Creditor has in the Company's
property.
7. This Agreement
shall be binding upon Subordinated Creditor, its successors, or
assigns, and shall inure to the benefit of and be enforceable by
each Senior Creditor and its successors or assigns.
8. This Agreement
shall terminate upon the date on which the Senior Debt shall have
been paid in full.
9. Senior Creditor may
administer and manage its credit and other relationships with the
Company in its own best interest, without notice or consent of
Subordinated Creditor. At any time and from time to time, Senior
Creditor may enter into any amendment or agreement with the Company
as Senior Creditor may deem proper.
All
conditions, covenants, duties, and obligations contained in this
Agreement can be waived only by written agreement. Forbearance or
indulgence in any form or manner by party shall not be construed as
a waiver, nor in any way limit the remedies available to that
party.
11. If one or more
provisions of this Agreement are held to be unenforceable under
applicable law, such provision shall be excluded from this
Agreement, and the balance of the Agreement shall be interpreted as
if such provision were so excluded, and shall be enforceable in
accordance with its terms.
12. This Agreement may
be executed in two or more counterparts, each of which is an
original and all of which together constitute one
instrument.
13. This Agreement
shall be governed by and be construed in accordance with the laws
of the State of Nevada without regard to the conflicts of law rules
of such state. The parties hereby irrevocably and unconditionally
submit, for themselves and their property, to the jurisdiction of
the courts sitting in Las Vegas, Nevada and any appellate court
from any thereof, in respect of actions brought against it in any
action, suit 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, suit or proceeding may be heard and determined
in such courts. Each of the parties hereto agrees that a final
judgment in any such action, suit 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.
14. If there is an
action to enforce the rights of a party under this Agreement, the
party prevailing will be entitled, in addition to other relief, all
reasonable costs and expenses, including reasonable attorneys'
fees, incurred in the action.
(signature pages follow)
IN
WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first set forth above.
SUBORDINATED
CREDITOR:
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By:
___________________________
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Name:
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Title (if
applicable):
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IN
WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first set forth above.
AGREED
AND ACKNOWLEDGED:
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By: ___________________________
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Name: Xxxxxx X.
Xxxxxxxx
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Title:
Chairman
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By: ___________________________
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Name: Xxxxxxx X.
Xxxxx
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Title: Chief
Executive Officer
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[Signature page to
Know Labs, Inc. Subordination Agreement]
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