EXHIBIT 99.1
MASTER LOAN AND INVESTMENT AGREEMENT
------------------------------------
THIS MASTER LOAN AND INVESTMENT AGREEMENT (together with all Exhibits
hereto, this "Agreement") is made this 9th day of May, 2003, by and among KRONOS
ADVANCED TECHNOLOGIES, INC., F/K/A TSET, INC., a Nevada corporation, whose
principal place of business is located at 000 Xxxxxx Xx., Xxxxx 000, Xxxxxxx, XX
00000 ("KRONOS"); KRONOS AIR TECHNOLOGIES INC., a Nevada corporation, whose
principal place of business is located at 0000 000xx Xxxxxx XX, Xxxxxxx, XX
00000 ("KRONOS AIR"); and FKA DISTRIBUTING CO. D/B/A HOMEDICS, INC., a Michigan
corporation, whose principal place of business is located at 0000 Xxxxxxx Xxxxx,
Xxxxxxxx Xxxxxxxx, Xxxxxxxx 00000 ("HOMEDICS"). Kronos and Kronos Air are
collectively referred to herein as the "BORROWERS" and individually as a
"BORROWER."
R E C I T A L S:
WHEREAS, the Borrowers desire to borrow up to $3,500,000 from HoMedics, and
HoMedics is willing to loan such funds to the Borrowers on the terms and
conditions set forth herein;
WHEREAS, Kronos owns one hundred percent (100%) of the common stock of
Kronos Air;
NOW, THEREFORE, in consideration of the foregoing and for other valuable
consideration, the receipt and adequacy of which is hereby acknowledged, the
parties hereto agree as follows:
ARTICLE I
---------
LOAN AND INVESTMENT COMMITMENT AND DOCUMENTS
--------------------------------------------
1.1 LOAN AND INVESTMENT COMMITMENT. Subject to the terms and conditions
set forth herein, HoMedics hereby agrees to lend the Borrowers and invest in
Kronos up to $3,500,000 (the "Investment Proceeds") as follows:
A. Upon the execution and delivery by the parties of this
Agreement and the execution and delivery by the Borrowers of the
Investment Documents (defined below) identified in Section 1.2(A),
1.2(C), 1.2(D), 1.2 (E), 1.2(F) and 1.2(G), HoMedics shall loan the
Borrowers an amount equal to $2,400,000, payable in immediately
available funds by wire transfer to an account designated by Kronos.
HoMedics shall deduct from such loan proceeds Closing Costs (as
defined in Section 2.3 below) in an amount equal to $25,000.
B. Provided that the Borrowers are not in default under this
Agreement or under any of the Investment Documents then outstanding,
upon the execution and delivery by the Borrowers of the Investment
Documents identified in Section 1.2(B), HoMedics shall loan the
Borrowers an additional $1,000,000. The loan contemplated under this
Section 1.1(B) shall be made no later than five (5) business days
following the Production Effective Date as such term is defined in
the Exclusive Licensing Agreement, dated October 23, 2002, between
Kronos and HoMedics ("License Agreement"), an executed copy of which
is attached as Exhibit 1.1(B), as the same may be amended from time
to time, and no earlier than the Production Effective Date. HoMedics
shall deduct from such loan proceeds Closing Costs in an amount
equal to $25,000, provided, however, that if the Production
Effective Date does not occur within thirty (30) months after the
Effective Date of the License Agreement, the $25,000 in Closing
Costs shall be immediately payable by the Borrowers to HoMedics.
1.2 INVESTMENT DOCUMENTS. The loans made pursuant to this
Agreement shall be evidenced by the following documents and
instruments:
A. $2.4 MILLION SECURED PROMISSORY. The $2,400,000 loaned
by HoMedics to the Borrowers pursuant to Section 1.1(A) above shall
be evidenced by a Secured Promissory Note in the form of EXHIBIT
1.2(A) (the "$2.4M Note"). Interest shall accrue on the outstanding
principal balance of the $2.4M Note at the rate of six (6%) percent
per annum with a maturity date of five (5) years from the date of
this Agreement (the "Maturity Date"). No payments shall be required
under the note during the first twelve (12) months thereof. Interest
accrued during such 12 month period shall become part of the
principal balance of the note and shall be included as principal in
any amortization of the note. Payments of principal and accrued
interest shall be payable in equal quarterly installments beginning
on August 1, 2004 and continuing on the first day of each November,
February, May and August until paid in full by the Maturity Date.
Any payments made by the Borrowers shall first be applied against
the quarterly payment due under the $2.4M Note and then to the
quarterly payment due under the $1.0M Note described in subsection
(B) below.
B. $1 MILLION SECURED PROMISSORY NOTE. The $1,000,000
loaned by HoMedics to the Borrowers pursuant to Section 1.1(B) above
shall be evidenced by a Secured Promissory Note in the form of
EXHIBIT 1.2(B) (the "$1.0M Note"). Interest shall accrue on the
outstanding principal balance of the $1.0M Note at the rate of six
(6%) percent per annum and shall also mature on the Maturity Date.
If the $1.0M Note is issued prior to the first anniversary date of
this Agreement, no payments of principal or interest shall be
required under the note until such first anniversary date (the
"Accrual Period"). Interest accrued during the Accrual Period shall
become part of the principal balance of the Note and shall be
included as principal in any amortization of the note. In this
event, payments of principal and accrued interest shall be payable
in equal quarterly installments beginning on August 1, 2004 and
continuing on the first day of each November, February, May and
August until paid in full by the Maturity Date. If the $1.0M Note is
issued on or after the first anniversary date of this Agreement,
payments shall be made in equal quarterly installments beginning on
the first day of the first quarter month immediately following the
issue date, and continuing until the Maturity Date.
C. SECURITY AGREEMENT. The Borrowers' obligations under the
$2.4M Note and the $1.0M Note (collectively, the "Notes") and under
Section 4.4 of this Agreement (Put Rights) shall be secured by a
first priority lien in all of the Borrowers' assets, including but
2
not limited to the patents and intellectual property owned by the
Borrowers related to the Licensed Technology as such term is defined
in the License Agreement (the "Intellectual Property"), as well as
the royalty payments owed to Kronos pursuant to the License
Agreement (collectively referred to as the "Collateral"), pursuant
to the terms and conditions of a Security Agreement in the form of
Exhibit 1.2(C) (the "Security Agreement"). As provided therein,
HoMedics shall not foreclose upon the Intellectual Property during
the term of the Notes (exclusive of any extensions of the original
term), so long as the Borrowers do not xxxxx x Xxxx (defined below)
in the Intellectual Property to any third party. In addition to the
Security Agreement, the Borrowers shall deliver all other documents
reasonably required by HoMedics to perfect the first priority lien
in the Collateral. For purposes of this Agreement, Lien shall be
defined as any voluntary or involuntary lien, including, without
limitation a lien resulting from a bankruptcy proceeding, but, shall
exclude mechanics liens. Notwithstanding anything to the contrary
contained in this Agreement, HoMedics agrees, that after the Notes
have been repaid in full by Borrowers, during the period of time
that HoMedics has a first priority lien in all of Borrowers' assets,
HoMedics will subordinate its first priority lien as long as the
contemplated subordination is to Borrowers' qualified financial
institution; otherwise, HoMedics may withhold its subordination for
any reason, in its sole discretion, to all other parties, including,
without limitation: (a) a Competitor (defined in Section 4.4), (b) a
shareholder of either Borrower, or (c) a venture capital investor or
venture capital group.
D. Assignment of License Agreements. Kronos shall
collaterally assign to HoMedics the royalty payments under the
License Agreement, pursuant to the terms and conditions of the
Security Agreement.
E. STOCK PURCHASE WARRANT NO. 1. Kronos shall issue to
HoMedics a warrant in the form of Exhibit 1.2(E) ("Warrant No. 1")
to purchase 6,746,171 shares of Kronos Common Stock (defined in
Section 3.9(A)), which represents ten (10%) of Kronos Common Stock
that is issued and outstanding as of the date of this Agreement, on
a fully diluted basis assuming the conversion or exchange of all
outstanding convertible securities and the exercise of all
outstanding options, warrants or similar rights to acquire Kronos
Common Stock (the "Warrant No. 1 Shares"). Warrant No. 1 shall be
exercisable for a period of ten (10) years from the date of issue.
The exercise price shall be $0.10 per share. Warrant No. 1 shall
contain the provisions described in Section 1.2(H) herein. In
consideration for Warrant No. 1 and Warrant No. 2 granted pursuant
to this Agreement, HoMedics hereby delivers to Kronos $100,000
payable via wire transfer to an account designated by Kronos.
F. STOCK PURCHASE WARRANT NO. 2. Kronos shall issue to
HoMedics a warrant in the form of Exhibit 1.2(F) ("Warrant No. 2")
to purchase 6,746,171 shares of Kronos Common Stock which represents
ten (10%) of Kronos Common Stock that is issued and outstanding as
of the date of this Agreement, on a fully diluted basis assuming the
conversion or exchange of all outstanding convertible securities and
the exercise of all outstanding options, warrants or similar rights
to acquire Kronos Common Stock (the "Warrant No. 2 Shares"). Warrant
No. 2 shall be exercisable for a period of ten (10) years from the
3
date of issue. The exercise price shall be $0.10 per share. Warrant
No. 2 shall contain the provisions described in Section 1.2(H)
herein. Warrant No. 2 shall be exercisable by HoMedics only if (1)
the Borrowers do not prepay the entire amount of principal and
interest due under the Notes by November 8, 2005; (2) either of the
Borrowers are in default under any of the Investment Documents, or
(3) Kronos does not earn, at any time after the date of this
Agreement but prior to November 8, 2005, Revenues in an aggregate
amount equal to or greater than $3,500,000. As used herein, the term
"REVENUES" means the gross cash receipts of any contractual
relationship representing a license or sale of the Kronos technology
to any third party or parties (other than proceeds from the License
Agreement, without taking into account any amendment thereof).
Revenues shall not include revenues which Kronos earns from research
and development contracts.
G. REGISTRATION RIGHTS AGREEMENT. Kronos will grant
HoMedics piggy-back registration rights and one (1) demand
registration right with respect to any shares of Kronos Common Stock
that it may acquire, pursuant to the terms and conditions of a
Registration Rights Agreement, in the form of Exhibit 1.2(G) (the
"Registration Rights Agreement").
H. DILUTION. If Kronos shall issue, at any time after the
date hereof and before the exercise by HoMedics of Warrant Xx. 0,
Xxxxxxx Xx. 0 and any warrants issued pursuant to this Section
1.1(H), any security of Kronos (outright or convertible) in a
capital raising transaction in which the Kronos Common Stock is
issued at a price less than $0.20 per share, and following such
securities issuance the shares of Kronos Common Stock issuable to
HoMedics under Warrant Xx. 0, Xxxxxxx Xx. 0 and any warrants issued
pursuant to this Section 1.1(H) in the aggregate, represents less
than fifteen percent (15%) of Kronos Common Stock that is issued and
outstanding as of the date of such securities issuance, on a fully
diluted basis assuming the conversion or exchange of all outstanding
convertible securities of Kronos and the exercise of all outstanding
options, warrants or similar rights to acquire Kronos Common Stock,
Kronos shall issue to HoMedics additional warrants, in the same form
as Warrant No. 1, so that the number of shares of Kronos Common
Stock that HoMedics may acquire pursuant to Warrant Xx. 0, Xxxxxxx
Xx. 0 and any warrants issued pursuant to this Section 1.1(H), in
the aggregate, shall equal fifteen percent (15%) of Kronos Common
Stock, on a fully diluted basis (or seven and one-half percent
(7.5%) for Warrant No. 1 or Warrant No. 2, individually). In the
event Kronos shall issue any security of Kronos (outright or
convertible) in a capital raising transaction in which the Kronos
Common Stock is issued at a price greater than $0.20 per share,
HoMedics shall not be entitled to any additional warrants pursuant
to this Agreement.
ARTICLE II
----------
CONDITIONS TO HOMEDICS' OBLIGATIONS
-----------------------------------
The obligations of HoMedics under this Agreement are subject to the
satisfaction of each of the following conditions:
4
2.1 DELIVERY OF INVESTMENT DOCUMENTS. The Borrowers shall have executed
and delivered to HoMedics and, as appropriate, there shall have been filed and
recorded with such filing or recording offices as HoMedics shall deem
appropriate, the following:
A. First Amendment to the Exclusive Licensing Agreement in the
form of EXHIBIT 2.1(A) (the "Amended License");
B. $2,400,000 Secured Promissory Note;
C. $1,000,000 Secured Promissory Note;
D. Security Agreement;
E. Warrant No. 1;
F. Warrant No. 2;
G. Registration Rights Agreement;
H. UCC-1 Financing Statement; and
I. Patent and other filings.
2.2 DELIVERY OF ANCILLARY DOCUMENTS: The Borrowers shall have furnished
to HoMedics the following documents and instruments, all in the form reasonably
acceptable to HoMedics:
A. RESOLUTIONS. A copy of the resolutions of the Board of
Directors of each Borrower authorizing the execution, delivery and
performance of this Agreement, the borrowing and the issuance of the
warrants hereunder, the Amended License, the Notes and other Investment
Documents to which it is a party, which resolutions shall have been
certified by an officer of each Borrower as being complete, accurate and
in full force and effect.
B. GOOD STANDING. A certificate of good standing from the
jurisdiction in which each Borrower is organized and certificates of
qualification to conduct business for each jurisdiction in which it is
required to qualify to do business, except where the failure would not
have an adverse effect on either Borrower.
C. CERTIFICATE. A copy of the Certificate of Incorporation of
each Borrower, including all amendments thereto and restatements thereof,
all of which shall have been certified by the jurisdiction of
organization.
D. BYLAWS. A copy of the Bylaws of each Borrower, including all
amendments thereto and restatements thereof, which shall have been
5
certified by the Secretary or Assistant Secretary of each Borrower as
being complete, accurate and in full force and effect.
E. INCUMBENCY. Certificates of the Secretary or Assistant
Secretary of each Borrower as to the incumbency and signatures of the
officers of each Borrower signing this Agreement, the Investment Documents
and the Amended License.
X. XXXX SEARCH. Except as set forth in Exhibit 3.4, UCC record
and other searches disclosing that no liens or encumbrances have been
filed against any of the Collateral (other than HoMedics' liens).
2.3 PAYMENT OF CLOSING FEES. Kronos shall pay $50,000 of the costs
incurred by HoMedics in connection with this transaction, including without
limitation, legal fees of HoMedics' legal counsel. All such costs and expenses
shall be deducted from the proceeds of the Notes as provided in Section 1.1,
except as otherwise provided in Section 1.1(B).
ARTICLE III
-----------
REPRESENTATIONS AND WARRANTIES OF KRONOS
----------------------------------------
Kronos and Kronos Air hereby represent and warrant to HoMedics as follows,
all of which shall survive the execution and delivery of this Agreement and the
closing of the transactions contemplated herein:
3.1 CORPORATE EXISTENCE. (A) Each Borrower is a corporation duly
organized, validly existing and in good standing under the laws of the state of
Nevada; (B) Each Borrower has the power and authority to own its property and
assets and to carry out its business as now being conducted and is duly
qualified to do business and in good standing in every jurisdiction wherein
failure to be so qualified or in good standing could have a material adverse
effect on its business, operations or activities; and (C) Each Borrower has the
power and authority to execute, deliver and perform this Agreement, to borrow
money in accordance with the terms set forth herein and in the Investment
Documents and to execute, deliver and perform its obligations under this
Agreement, the Investment Documents, the Amended License and all other documents
and instruments to be executed and delivered by it in connection with the
consummation of the transactions contemplated hereunder (collectively, the
"Kronos Agreements").
3.2. AUTHORIZATIONS AND APPROVALS. The execution, delivery and
performance of the Kronos Agreements, the borrowings hereunder and thereunder
(A) have been duly authorized by all requisite corporate action of each
Borrower; (B) do not require registration with or consent or approval of, or
other action by, any federal, state or other governmental authority or
regulatory body; (C) will not violate any provision of law, any order of any
court or other agency of government, the Certificate of Incorporation or Bylaws
of either Borrower, any provision of any indenture, note, agreement or other
instrument to which either Borrower is a party, or by which any of its
properties or assets are bound; (D) will not be in conflict with, result in a
breach of or constitute (with or without notice or passage of time) a default
6
under any such indenture, note, agreement or other instrument; and (E) will not
result in the creation or imposition of any lien, charge or encumbrance of any
nature whatsoever upon any of the properties or assets of either Borrower, other
than the liens in favor of HoMedics as contemplated hereby.
3.3 NO LITIGATION. Except as set forth in the SEC Documents (as defined
below), there are no actions, suits or proceedings, at law or in equity, and no
proceedings before any arbitrator or by or before any governmental commission,
board, bureau, or other administrative agency, pending, or, to the best
knowledge of each Borrower, threatened against or affecting it or any of its
properties or rights which, if adversely determined could materially impair its
right to carry on its business substantially as now conducted, or could have
material adverse effect upon the financial condition of either Borrower. "SEC
DOCUMENTS" shall mean Annual Reports on Form 10-KSB, Quarterly Reports on Form
10-QSB, Current Reports on Form 8-K and Proxy Statements of Kronos filed by
Kronos for a period of twelve (12) months immediately preceding the date hereof.
3.4 NO LIENS. Except as set forth in Exhibit 3.4, none of the assets and
properties of either Borrower, including without limitation the Intellectual
Property, are subject to any mortgage, pledge, lien, security interest or other
encumbrance of any kind or character.
3.5 FINANCIAL STATEMENTS. All consolidated and consolidating balance
sheets, earnings statements and other financial data furnished to HoMedics for
the purposes of, or in connection with, this Agreement and the transactions
contemplated herein, have been prepared in accordance with generally accepted
accounting principles, consistently applied ("GAAP") (except as disclosed
therein), and do or will fairly present the financial condition of Kronos as of
the dates, and the results of its operations for the periods, for which the same
are furnished to HoMedics. Neither Borrower has any material contingent
obligations, liabilities for taxes, long-term leases or unusual forward or
long-term commitments not disclosed by the financial statements set forth in the
SEC Documents that have been issued by either Borrower prior to the date of this
Agreement.
3.6 TAXES. Each Borrower has filed all federal, state and local tax
returns and other reports they are required by law to file, have paid or caused
to be paid all taxes, assessments and other governmental charges that are shown
to be due and payable under such returns, and have made adequate provision for
the payment of such taxes, assessments or other governmental charges which have
accrued but are not yet payable. Except as set forth in the SEC Documents,
neither Borrower has any knowledge of any deficiency or assessment in connection
with any taxes, assessments or other governmental charges and all deficiencies
resulting from any audits have been paid or settled.
3.7 COMPLIANCE WITH LAWS. Each Borrower has complied with all applicable
laws, to the extent that failure to comply would have a material adverse effect
on its operations, assets or the conduct of its business.
3.8 OTHER DEBT. Except as set forth in the SEC Documents and incurred in
the ordinary course of business, neither Borrower has any indebtedness for money
7
borrowed or any direct or indirect obligations under any leases (whether or not
required to be capitalized under GAAP) or any agreements of guarantee or surety.
3.9 ISSUANCE OF SECURITIES.
----------------------
A. CAPITALIZATION. As more specifically described in EXHIBIT
3.9(A), the authorized capital stock of Kronos consists of five hundred
million (500,000,000) shares of common stock, $.001 par value per share
("Kronos Common Stock"), of which fifty-four million five hundred
twenty-seven thousand five hundred sixty-five (54,527,565) shares are
currently issued and outstanding (the "Outstanding Shares") and as of the
date hereof, certain persons hold options and/or warrants to acquire
approximately twelve million nine hundred thirty-four thousand one hundred
forty-five (12,934,145) shares of Kronos Common Stock (the "Option
Shares"), which, when combined with the Outstanding Shares, constitute the
total issued and outstanding capital stock of Kronos, on a fully diluted
basis. The Outstanding Shares and the Option Shares, when issued,
constitute or will constitute all of the issued and outstanding capital
stock of Kronos, and all of such securities are validly issued, fully paid
(other than the payment of the price to be paid in connection with the
exercise of the Option Shares), nonassessable, and have been so issued in
full compliance with all applicable federal and state securities laws.
Other than agreements relating to the Option Shares, there are no
outstanding subscriptions, options, rights, warrants, convertible
securities or other agreements or commitments providing for the issuance,
disposition or acquisition of any of Kronos' capital stock (other than
this Agreement). There are no outstanding or authorized stock
appreciation, phantom stock or similar right with respect to Kronos, and
there are no voting trusts, proxies or any other agreements or
understandings with respect to the voting of the capital stock of Kronos.
Kronos is not subject to any obligation (contingent or otherwise) to
repurchase or otherwise acquire or retire any of its capital stock.
B. Thirteen million four hundred ninety-two thousand three
hundred forty-two (13,492,342) shares of Kronos Common Stock have been
duly authorized and reserved for issuance upon exercise of the Warrants.
Upon issuance and payment therefor in accordance with the terms and
conditions of this Agreement and Warrant No. 1 and Warrant No. 2, such
shares shall be validly issued, fully paid and non-assessable and free
from all taxes, liens and charges, with the holders being entitled to all
rights accorded to a holder of Kronos Common Stock.
C. Kronos owns one hundred percent (100%) of the common stock of
Kronos Air. There are no outstanding subscriptions, options, rights,
warrants, convertible securities or other agreements or commitments
providing for the issuance, disposition or acquisition of any of the
Kronos Air capital stock.
3.10 MATERIAL AGREEMENTS. Each Borrower has and, to its knowledge, all
parties to each of the material licenses, contracts or commitments of any kind
(including, without limitation, employment agreements, collective bargaining
agreements, powers of attorney, distribution contracts, patent or trademark
licenses, bonus, pension and retirement plans, or accrued vacation pay,
8
insurance and welfare agreements) have, complied with the provisions of such
licenses, contracts or commitments and, neither Borrower is and, to its
knowledge, no other party to such agreements is in default thereunder, nor has
there occurred any event which with notice or the passage of time, or both,
would constitute such a default.
3.11 ENVIRONMENTAL.
-------------
A. Neither Borrower is a party to any litigation or
administrative proceeding, nor to the best of the knowledge of each
Borrower, is any litigation or administrative proceeding threatened
against it, which in either case asserts or alleges that (a) either
Borrower violated any federal, state or local laws, ordinances, statute,
rules or regulations governing the use, storage, transportation, or
disposal of Hazardous Materials ("Environmental Laws"); (b) either
Borrower is required to clean up, remove, or take remedial or other action
due to the disposal, depositing, discharge, leaking or other release of
any Hazardous Materials; or (c) either Borrower is required to pay all or
a portion of the cost of any past, present, or future clean up, removal or
remedial or other response action which arises out of or is related to the
disposal, depositing, discharge, leaking or other release of any Hazardous
Materials on any of its properties or with respect to any of its assets.
B. To the best knowledge of each Borrower, there are no
conditions existing which would subject either Borrower to damages,
penalties, injunctive relief or clean up costs under any Environmental
Laws or which require or are likely to require clean up, removal, remedial
action or other response action pursuant to Environmental Laws by it.
C. Neither Borrower is subject to any judgment, decree, order or
citation related to or arising under the Environmental Laws and either
Borrower has not received any notice ("Environmental Complaint") of any
violations of Environmental Laws, and to the best of each Borrowers'
knowledge, there have been no actions commenced or threatened against it
by any party for noncompliance with any Environmental Laws.
D. Each Borrower has all permits, licenses, approvals and other
authorizations required under the Environmental Laws.
3.12 MISREPRESENTATION. No warranty or representation contained herein or
in any certificate or other document furnished to HoMedics pursuant hereto
contains any untrue statement of material fact or omits to state a material fact
necessary to make such warranty or representation not misleading in light of the
circumstances under which it was made. There is no fact which either Borrower
has not disclosed to the HoMedics in writing which materially and adversely
affects or is likely to materially and adversely affect the business,
operations, properties, prospects, profits or condition (financial or otherwise)
of either Borrower or the ability of either Borrower to perform the Kronos
Agreements.
3.13 INTELLECTUAL PROPERTY RIGHTS. Each Borrower owns or possesses
adequate rights or licenses to use all material trademarks, trade names, service
marks, service xxxx registrations, authorizations, trade secrets and rights
necessary to conduct its business as now being conducted. None of the Borrowers'
material trademarks, trade names, service marks, service xxxx registrations,
9
service names, patents, patent rights, copyrights, inventions, licenses,
approvals, government authorizations, trade secrets or other intellectual
property rights have expired or terminated, or, by the terms and conditions
thereof, could expire or terminate within two years from the date of this
Agreement. Neither Borrower is infringing, and does not have any knowledge of
any infringement of any third party with respect to any material trademark,
trade name rights, patents, patent rights, copyrights, inventions, licenses,
service names, service marks, service xxxx registrations, trade secret or other
similar rights of others, or of any such development of similar or identical
trade secrets or technical information, and there is no claim, action or
proceeding being made or brought against, or to each Borrowers knowledge, being
threatened against either Borrower regarding trademark, trade name, patents,
patent rights, invention, copyright, license, service names, service marks,
service xxxx registrations, trade secret or other infringement, which could
reasonably be expected to have a material adverse effect on either Borrower or
its assets, operations or business.
3.14 INSURANCE. Each Borrower is insured by insurers of recognized
financial responsibility against such losses and risks and in such amounts as
management of each Borrower believes to be prudent and customary in the
businesses in which each Borrower is engaged. Neither Borrower has been refused
any insurance coverage sought or applied for and each Borrower does not have any
reason to believe that it will not be able to renew its existing insurance
coverage as and when such coverage expires, or to obtain similar coverage from
similar insurers as may be necessary to continue its business at a cost that
would not materially and adversely affect its condition, financial or otherwise,
or earnings, business or operations.
3.15 APPLICATION OF TAKEOVER PROTECTIONS. Each Borrower and its Board of
Directors have taken or will take prior to the Production Effective Date all
necessary action, if any, in order to render inapplicable any control share
acquisition, business combination, poison pill (including any distribution under
a rights agreement) or other similar anti-takeover provision under the
Certificate of Incorporation or the laws of the state of its incorporation.
3.16 TRANSACTIONS WITH AFFILIATES. Except as set forth in the SEC
Documents, and other than the grant or exercise of stock options disclosed on
Exhibit 3.16, none of the officers, directors, or employees of either Borrower
is presently a party to any transaction with either Borrower or any of its
Affiliates (other than for services as employees, officers and directors),
including any contract, agreement or other arrangement providing for the
furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any officer,
director or such employee or, to the knowledge of each Borrower, any
corporation, partnership, trust or other entity in which any officer, director,
or any such employee has an interest or is an officer, director, trustee or
partner.
ARTICLE IV
----------
COVENANTS AND AGREEMENTS
------------------------
4.1 AFFIRMATIVE COVENANTS. On a continuing basis from the date of this
Agreement to the date the Notes have been paid in full and each Borrower has
performed all of its other obligations hereunder, each Borrower covenants and
agrees that it will:
10
A. Promptly furnish to HoMedics such information regarding its
operations, business affairs and financial condition and its subsidiaries
as HoMedics may reasonably request from time to time and permit HoMedics,
its employees, attorneys and agents, to inspect all the books, records and
properties of each Borrower and their subsidiaries during normal business
hours upon reasonable advance notice.
B. Keep the insurable properties of each Borrower adequately
insured and maintained with (1) insurance against fire and other risks
customarily insured against and "all-risk" policy and such additional
risks customarily insured against by companies engaged in the same or
similar businesses to that of each Borrower; (2) necessary workers
compensation insurance; (3) public liability and product liability
insurance commencing with the sale of products; and (4) such other
insurances as may be required by law or as may be reasonably required in
writing by HoMedics, all of which insurance shall be in such amounts,
containing such terms, in such form, for such purposes, prepaid for such
time period, and written by such companies as shall be reasonably
satisfactory to HoMedics. All such policies shall contain a provisions
whereby they may not be cancelled or amended except upon 30 days prior
written notice to HoMedics. Kronos will promptly deliver to HoMedics, at
HoMedics' request, evidence satisfactory to HoMedics that such insurance
has been so procured.
C. Pay promptly and within the time that they can be paid without
late charge, penalty or interest all taxes, assessments and similar
charges of every kind and nature lawfully levied, assessed or imposed upon
it and its property, except to the extent being contested in good faith.
If either Borrower shall fail to pay such taxes and assessments within the
time they can be paid without penalty, late charge or interest, HoMedics
shall have the option to do so and each Borrower agrees to repay HoMedics
upon demand, with interest as provided in the Security Agreement and/or
the Notes, all amounts so expended by HoMedics.
D. Do or cause to be done all things necessary to preserve and
keep in full force and effect the existence, rights and Intellectual
Property of each Borrower in all markets where HoMedics is distributing
products utilizing the Licensed Technology, and comply with all applicable
laws in all material respects, continue to conduct and operate and at all
times maintain, preserve and protect all assets (including the
Intellectual Property), and from time to time make, or cause to be made,
all needed and proper improvements, renewals, replacements, and updates
thereto so that the business carried on in connection therewith may be
properly and advantageously conducted at all times.
E. Discuss various Kronos marketing issues with HoMedics and/or
Xxx Xxxxxx (collectively, the "Advisors"). In the event the Advisors play
a significant role in the marketing of a Kronos product, determined in
Kronos' sole discretion, the Advisors shall be entitled to a fee as
negotiated between Kronos and the Advisors.
11
F. The parties acknowledge and agree that the Amended License
anticipates that Kronos and HoMedics will negotiate the details of one or
more amendments to the License Agreement and/or one or more additional
license agreements and that more fully developed amendments to the License
Agreement and/or additional license agreements will need to be negotiated
by the parties. Kronos agrees to use its best efforts to, and commit
adequate resources to ensure that future amendments to the License
Agreement and/or additional license agreements are executed by the parties
and delivered within the time frames set forth in the Amended License.
G. Maintain solvency.
H. Deliver to HoMedics copies of any new patent applications and
related file history for all Licensed Technology within five (5) days of
submission to any Patent, Trademark and/or Copyright Office worldwide.
4.2 NEGATIVE COVENANTS. On a continuing basis from the date of this
Agreement until the Notes are paid in full and each Borrower has performed all
of its other obligations hereunder, Kronos covenants and agrees that except as
otherwise contemplated herein, it will not, without HoMedics' prior written
consent, which shall not be unreasonably withheld:
A. Declare or pay distributions, dividends (whether by reduction
of capital or otherwise) or management fees to any of its shareholders
other than in connection with the exercise of the call rights set forth in
EXHIBIT 4.2(A).
B. Purchase, redeem, retire or otherwise acquire or approve any
plan to purchase, redeem, retire or otherwise retire any of the shares of
its capital stock or make any commitment to do so.
C. Create, incur, assume or suffer to exist any mortgage, pledge,
encumbrance, security interest, lien or charge of any kind upon any of its
now owned or hereafter acquired properties or assets (including, without
limitation, any charge upon property purchased or acquired under a
conditional sale or other title-retaining agreement or lease required to
be capitalized under GAAP) other than the liens resulting from the Notes
and purchase money indebtedness or lease obligations incurred in
connection with purchases or leases of fixed assets, not to exceed an
aggregate of two hundred fifty thousand dollars ($250,000), collectively.
D. Incur, create, assume or permit to exist any indebtedness or
liability for borrowed money, or any other indebtedness or liability
evidenced by notes, bonds, debentures or similar obligations, or any other
indebtedness whatsoever, except for: (1) the Notes; (2) subordinate debt
approved in writing by HoMedics (in its sole discretion); (3) purchase
money indebtedness or lease obligations incurred in connection with
purchases or leases of fixed assets not exceeding the amounts permitted in
subsection (C) above; (4) trade indebtedness incurred and paid in the
ordinary course of business; and (5) indebtedness that does not cause the
Borrowers collectively to exceed the requirements set forth in (I) below.
12
E. Make loans, advances or extensions of credit to any person,
other than advances to employees in connection with business related
travel in the ordinary course of business.
F. Sell, lease, transfer or otherwise dispose of any Intellectual
Property, or sell, lease, transfer or otherwise dispose of any other
properties and assets having an aggregate book value of more than
$100,000, except for the sale of inventory in the ordinary course of
business.
G. Consolidate with or merge into any other corporation, permit
another corporation to merge into it, acquire all or substantially all the
properties or assets of any other person, enter into any reorganization or
recapitalization or reclassify its capital stock without prior written
consent of HoMedics.
H. Purchase or hold beneficially any stock or other securities
of, or make any investment or acquire any interest whatsoever in any other
person, except for investments of certificates of deposit with maturities
or one year or less of United States Commercial Banks with capital,
surplus, and undivided profits in excess of $100 Million and direct
obligations of the United States government maturity within one year from
the date of acquisition thereof.
I. Acquire or expend for fixed assets, or commit itself to
acquire or expend for fixed assets, whether by lease, purchase or
otherwise, in amounts that exceed two hundred fifty thousand dollars
($250,000), collectively, during the term of the Notes.
J. Increase the amount of compensation to the officers and
directors of Kronos except as set by an independent committee of the board
of directors of Kronos.
4.3 SETOFF.
------
A. Subject to the terms and conditions set forth herein, HoMedics
shall have the right, from time to time, to set off against any payments,
debts or obligations that are otherwise due to HoMedics from the
Borrowers, all or a portion of the amount of any payments, debts or
obligations due to Kronos from HoMedics.
B. A set off by HoMedics shall have the effect of discharging the
amount set off as if such amounts were paid in full by the Borrowers.
4.4 PUT RIGHTS. Kronos hereby agrees that upon the occurrence of a
Trigger Event (defined below), HoMedics shall have the right to require Kronos
to purchase all, or at HoMedics' option, any portion of the shares of Kronos
Common Stock owned by HoMedics. HoMedics may exercise the option granted herein
by delivering to Kronos at any time following a Trigger Event a written notice
("Put Notice") specifying that HoMedics desires to sell its shares to Kronos.
Upon receipt of the Put Notice, Kronos shall be obligated to purchase all shares
offered for sale in the Put Notice at a purchase price equal to the average
13
closing price per share (as reported in XXXXXX.xxx) of Kronos Common Stock for
the ten (10) trading days immediately preceding the date of the Put Notice (the
"Put Per Share Price"); PROVIDED, HOWEVER, that the Put Per Share price shall
not be less than two (2) times the per share purchase price paid by HoMedics for
such shares; and PROVIDED, FURTHER, HOWEVER, that if the Trigger Event giving
rise to the exercise of rights granted hereunder is Trigger Event (A) below, the
Put Per Share Price as determined above shall be multiplied by a factor of ten
(10). As used herein, the term "Trigger Event" means:
A. Kronos shall have issued or agreed to issue any securities to
a Competitor (as defined below) of HoMedics during the term of the License
Agreement, the Amended License or any other license arrangement between
HoMedics and either Borrower, provided, however, Kronos shall not be
precluded from issuing securities to an Affiliate (defined below) of a
Competitor if the proper protections are put into place, as determined by
HoMedics in its sole discretion, to prevent the Affiliate from selling any
Products (as defined in the License Agreement) or Additional Products (as
defined in the Amended License) in the Territories (as defined in the
License Agreement, Amended License and amendments thereto) using
technology substantially similar to the Licensed Technology (as defined in
the License Agreement); and/or
B. Kronos shall have materially breached its obligations under or
otherwise defaulted under the License Agreement or the Amended License
within ten (10) years after the date of this Agreement.
"COMPETITOR" shall mean a company manufacturing, distributing or selling
personal care electrical devices under the health and wellness category.
"AFFILIATE" shall mean: (i) with respect to any individual, any member of such
individual's immediate family, and any organization (x) in which such individual
and/or his Affiliate(s) own, directly or indirectly, more than fifty percent
(50%) of any class of equity security or (y) in which such individual and/or his
Affiliate is the sole general partner, the managing general partner or is the
managing member, or which is controlled by such individual and/or his
Affiliates, directly or indirectly; and (ii) with respect to any corporation,
partnership, limited liability company, trust, or other organization, any other
corporation, partnership, limited liability company, trust, or other
organization, which controls, is controlled by, or is under common control with,
the first-referenced corporation, partnership, limited liability company, trust,
or other organization, and any individual or entity who is the general partner,
managing member, officer, director, trustee of, or who directly or indirectly
controls, the first-referenced corporation, partnership, trust, or other
organization; and (iii) any Affiliate of any other Affiliate. For purposes of
this definition, the term "controls," "is controlled by" or "is under common
control with" shall mean the possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of a person or
entity, whether through the ownership of voting securities, by contract or
otherwise.
14
4.5 PREEMPTIVE RIGHTS.
-----------------
A. Kronos hereby grants HoMedics the preemptive rights described
in this Section 4.5 with regard to all issuances by Kronos of shares of
Kronos Common Stock after the date of this Agreement (collectively, the
"New Securities"); PROVIDED, HOWEVER, that "New Securities" do not
include:
1. securities issued in connection with any stock splits,
stock dividends or other distribution payable pro rata to all
holders of Kronos Common Stock;
2. any securities issued to employees, officers, directors,
consultants or other persons performing services for Kronos (if so
issued solely because of any such person's status as an officer,
employee, director, consultant or other person performing services
for Kronos, and not as part of any other offering of Kronos
securities) pursuant to any stock option plan, stock purchase plan
or management incentive plan, agreement or arrangement approved by
Kronos' Board of Directors; and
3. any Kronos Common Stock issued upon the conversion,
exercise or exchange of any securities included in the calculation
of the Warrant No. 1 Shares and the Warrant No. 2 Shares.
B. If Kronos proposes to offer to sell any New Securities, Kronos
shall first give HoMedics written notice stating such intention. The
written notice shall contain a full, accurate and complete description of
the price and terms of such proposed sale, and shall contain an
unconditional offer to sell a Pro Rata Share (as defined in Subsection (D)
below) of such New Securities to HoMedics on the same terms and conditions
as set forth in the notice. HoMedics shall have ten (10) business days
from the date such written notice is given to elect to purchase all or a
portion of such Pro Rata Share of the New Securities, by giving written
notice to Kronos of such election and the quantity of New Securities that
HoMedics will purchase, together with payment for such New Securities.
C. If HoMedics elects to purchase any of the New Securities
within the election periods described in subsection (B), Kronos shall
deliver to HoMedics a certificate or other instrument evidencing the New
Securities by the close of business on the fifteenth day (or if such day
is not a business day, the next succeeding business day) after the receipt
of HoMedics' notice of election and its payment for the shares acquired.
D. As used in this subsection 4.5, the "Pro Rata Share" of the
New Securities that HoMedics will be offered an opportunity to purchase is
a fraction of the total New Securities proposed to be issued, calculated
as follows: (i) the numerator of the fraction shall be the number of
shares of Kronos Common Stock that could be obtained by HoMedics upon
conversion or exchange on such date of any securities convertible into or
exchangeable for Kronos Common Stock plus the number of shares of Kronos
Common Stock that could be acquired by HoMedics on such date upon exercise
of any option, warrant or similar right (other than by exercise of
15
preemptive rights hereunder); and (ii) the denominator of the fraction
shall be the aggregate number of shares of Kronos Common Stock outstanding
on such date calculated on a fully diluted basis assuming the conversion
or exchange of all outstanding convertible securities and the exercise of
all outstanding options, warrants or similar rights to acquire Kronos
Common Stock.
E. During the sixty (60) day period following the expiration of
the ten (10) business day election period described in the last sentence
of subsection (B) hereof, Kronos may issue the New Securities that
HoMedics has not purchased pursuant to this subsection 4.5, but only on
terms and conditions and at a price no more favorable to the purchasers
thereof than was specified in Kronos's notice to HoMedics.
F. The rights of HoMedics under this subsection 4.5 may be
waived, in whole or part, with respect to any proposed issuance of New
Securities if a written waiver is executed by HoMedics. Such waiver may be
obtained at any time prior to, contemporaneously with or after the actual
issuance by Kronos of the New Securities.
ARTICLE V
---------
EVENTS OF DEFAULT
-----------------
The following events are hereby defined as "defaults" for all purposes of
this Agreement, whatever the reason for the occurrence thereof and whether such
event shall be voluntarily or involuntarily or come about or be effected by
operation of law or pursuant to compliance with any judgment, order or decree of
any court or any order, rule or regulation of any government or administrative
body:
5.1. DEFAULTS.
--------
A. FAILURE TO PAY. The Borrowers shall fail to pay any principal,
interest or fee under the Notes, any other Investment Documents or other
indebtedness to HoMedics thirty (30) days following written notice by
HoMedics of either Borrower's failure to pay any such amounts when due, by
maturity, acceleration or otherwise.
B. MISREPRESENTATION. Any warranty or representation in
connection with or contained in this Agreement, the License Agreement, the
Amended License, or any of the Investment Documents, or if any financial
data or other information now or hereafter furnished to HoMedics by or on
behalf of the Borrowers, is false or misleading in any material respect
when made or deemed made.
C. DEFAULT UNDER DOCUMENTS. Either Borrower shall otherwise fail
to perform any of its obligations or covenants under, or shall fail to
comply with any of the provision of: (1) this Agreement; (2) the
Investment Documents, or (3) the License Agreement, the Amended License,
or any other license arrangement between HoMedics and either Borrower,
which is not cured within thirty (3) days following written notice by
HoMedics of such failure to perform by either Borrower.
16
D. INSOLVENCY/BANKRUPTCY. Either Borrower voluntarily suspends
transacting business, or either Borrower generally fails to pay its debts
as they mature or makes a general assignment for the benefit of creditors;
or commences any proceedings in bankruptcy, or for reorganization or
liquidation under the Bankruptcy Code or under any other state, federal or
other applicable law for the relief of debtors, or has commenced against
it any proceedings in bankruptcy, or for reorganization or liquidation
under the Bankruptcy Code or under any other state, federal or other
applicable law for the relief of debtors which proceedings are not
discharged within sixty (60) days of commencement; or a receiver, trustee
or custodian is appointed for either Borrower or for any substantial
portion of its respective properties or assets.
E. CHANGE OF MANAGEMENT OR CONTROL. Kronos shall experience a
Change in Control. A "CHANGE IN CONTROL" of Kronos will be deemed to occur
if: (x) any person (defined for the purposes of this Section 5.1(E) to
mean any person within the meaning of Section 13(d) of the Securities
Exchange Act of 1934 (the "EXCHANGE Act")), other than Kronos, or an
employee benefit plan established by the Board of Directors of Kronos,
acquires, directly or indirectly, the beneficial ownership (determined
under Rule 13d-3 of the regulations promulgated by the Securities and
Exchange Commission under Section 13(d) of the Exchange Act) of securities
issued by Kronos having thirty percent (30%) or more of the voting power
of all of the voting securities issued by Kronos in the election of
directors at the meeting of the holders of voting securities to be held
for such purpose; or (y) a majority of the directors elected at any
meeting of the holders of voting securities of Kronos are persons who were
not nominated for such election by the Board of Directors of Kronos having
authority in such matters; or (z) Kronos merges or consolidates with or
transfers substantially all of its assets to another person.
5.2 REMEDIES. If an Event of Default exists, HoMedics may exercise any
right, power or remedy permitted by law or as set forth in any of the documents
and instruments executed and delivered in connection herewith, including without
limitation, the Investment Documents. Without limiting the generality of the
foregoing, the Borrowers agree to reimburse HoMedics upon demand for all fees
and expenses incurred by HoMedics (A) in seeking to collect any amounts owed to
it (whether through formal or informal collection actions, workouts or
otherwise), in defending the validity or priority of its security interest, or
in pursuing its rights and remedies under this Agreement; (B) in connection with
any proceeding (including, without limit, bankruptcy, insolvency,
administrative, appellate, or probate proceedings or any lawsuit) in which
HoMedics at any time is involved as a result of any lending relationship or
involving HoMedics and either Borrower; or (C) incurred by HoMedics during the
continuance of an Event of Default, which fees and expenses relate to or would
not have been incurred but for any lending relationship involving HoMedics and
either Borrower. The fees and expenses include, without limit, court costs,
legal expenses, and reasonable attorneys' fees.
17
ARTICLE VI
----------
MISCELLANEOUS
-------------
6.1 BINDING EFFECT. This Agreement shall be binding upon and shall inure
to the benefit of the parties, and their respective successors and assigns,
provided, however, that neither Borrower may assign or transfer its rights or
obligations hereunder without the prior written consent of HoMedics.
6.2 NOTICES. Any notice permitted or required under this Agreement shall
be conveyed to the party at the address reflected on the first page of this
Agreement and will be deemed to have been given, when deposited in the United
States mail, postage paid, or when delivered in person, or by courier or by
facsimile transmission, with a copy, which shall not constitute notice to the
following:
If to the Borrowers: Kronos Advanced Technologies, Inc.
000 Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxxxxxxxx 00000-0000
Attn: Xxxxxx X. Xxxxxx
Phone: 000-000-0000
Fax: 000-000-0000
With a copy to: Xxxxxxxxxxx & Xxxxxxxx, LLP
000 Xxxxx Xxxxxxxx Xxxxxxxxx, Xxxxx 0000
Xxxxx, Xxxxxxx 00000
Attn: Xxxxxxx X. Xxxxxx, Esq.
Phone: 000 000-0000
Fax: 000 000-0000
If to HoMedics: HoMedics, Inc.
0000 Xxxxxxx Xxxxx
Xxxxxxxx Xxxxxxxx, XX 00000
Attn: Xxx Xxxxxx
Phone: 000-000-0000
Fax:
With a copy to: Seyburn, Kahn, Xxxx, Xxxx and Xxxxxx, P.C.
0000 Xxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxxx, XX 00000
Attn: Xxxx X. Xxxxxxxx, Esq.
Phone: 000-000-0000
Facsimile: 000-000-0000
6.3 SEVERABILITY. The invalidity or unenforceability of any particular
provision of this Agreement shall not affect the other provisions hereof, and
this Agreement shall be construed in all respects as if such invalid or
unenforceable provisions were omitted. In addition, if any provision of this
Agreement may be modified by a court of competent jurisdiction such that it may
18
be enforced, then that provision shall be so modified and as modified, shall be
fully enforced.
6.4 CHOICE OF LAW AND FORUM SELECTION. This Agreement shall be
interpreted and construed in accordance with the laws of the State of Michigan.
All actions arising directly or indirectly out of this Agreement shall be
litigated only in the United States District Court for the Eastern District of
Michigan, Southern Division, or the Oakland County, Michigan Circuit Court, and
the parties to this Agreement hereby irrevocably consent to the personal
jurisdiction and venue of those courts.
6.5 TERMS. Nouns and pronouns will be deemed to refer to the masculine,
feminine, neuter, singular and plural, as the context requires.
6.6 HEADINGS. The titles of the sections have been inserted as a matter
of convenience for reference only and shall not control or affect the meaning or
construction of any of the terms or provisions of this Agreement.
6.7 COUNTERPARTS. This Agreement may be executed in counterparts, each
of which will be deemed an original, but all of which will constitute one and
the same agreement. For purposes of this Agreement, a facsimile signature shall
be deemed the same as an original.
6.8 ENTIRE AGREEMENT. This Agreement, the Investment Documents, the
Amended License and the other documents and instruments to be executed and
delivered in connection with this Agreement constitute the entire agreement
among the parties hereto and contains all of the agreements among said parties
with respect to the subject matter hereof.
6.9 INDEPENDENT RIGHT. No single or partial exercise of any right, power
or privilege hereunder, or any delay in the exercise thereof, shall preclude
other or further exercise of the rights of the parties to this Agreement.
6.10 COVENANT INDEPENDENCE. Each covenant in this Agreement shall be
deemed to be independent of any other covenant, and the unenforceability in one
covenant shall not render any other covenant unenforceable.
6.11 WAIVERS AND AMENDMENTS. No forbearance on the part of HoMedics in
enforcing any of its rights under this Agreement or any other document, nor any
renewal, extension or rearrangement of any payment or covenant to be made or
performed by Kronos hereunder, shall constitute a waiver of any of the terms of
this Agreement or of any such right. No Default or Event of Default shall be
waived by HoMedics except in a writing signed and delivered by an officer of
HoMedics, and no waiver as to one Default or Event of Default shall operate as a
waiver of other or any future any Default or Event of Default. No other
amendment, modification or waiver of, or consent with respect to, any provision
of this Agreement or any Note or other documents shall be effective unless the
same shall be in writing and signed and delivered by an officer of HoMedics.
19
6.12 SURVIVAL OF WARRANTIES. All of the covenants, agreements,
representations and warranties made in connection with this Agreement and any
document contemplated hereby shall survive the execution and delivery of this
Agreement and the consummation of the transactions contemplated herein, and
shall be deemed to have been relied upon by HoMedics, notwithstanding any
investigation heretofore or hereafter made by HoMedics. All statements contained
in any certificate or other document delivered to HoMedics at any time by or on
behalf of either Borrower pursuant hereto or in connection with the transactions
contemplated hereby shall constitute representations and warranties by the
Borrowers in connection with this Agreement.
6.13 COSTS AND EXPENSES. The Borrowers agree that they will reimburse
HoMedics, upon demand, for all reasonable costs and expenses incurred by
HoMedics in connection with (A) collecting or attempting to collect the
indebtedness or any part thereof; (B) maintaining or defending HoMedics'
security interests or liens (or the priority thereof); (C) the enforcement of
HoMedics' rights or remedies under this Agreement or the other documents
contemplated hereby; (D) the preparation or making of any amendments,
modifications, waivers or consents with respect to this Agreement or the other
documents contemplated hereby; and/or (E) any other matters or proceedings
arising out of or in connection with any lending arrangement between HoMedics
and either Borrower, which costs and expenses include, without limit, payments
made by HoMedics for taxes, insurance, assessments, or other costs or expenses
which either Borrower is required to pay under this Agreement or the other
documents contemplated hereby, expenses related to the examination of the
collateral, audit expenses, court costs and reasonable attorneys' fees (whether
such costs are incurred in formal or informal collection actions, federal
bankruptcy proceedings, probate proceedings, on appeal or otherwise), and all
other costs and expenses of HoMedics incurred in connection with any of the
foregoing.
6.14 CROSS COLLATERALIZATION; CROSS DEFAULT. The indebtedness hereunder
is cross-collateralized with and cross-defaulted to any and all indebtedness of
either Borrower now or at any time hereafter owed to HoMedics such that (A) any
and all security given by either Borrower to secure their indebtedness owed to
HoMedics shall also stand as collateral security for the indebtedness and all
obligations of either Borrower hereunder to HoMedics; (B) all collateral
hereunder shall stand as collateral security for all indebtedness and
obligations of the Borrowers now or at any time hereafter owed to HoMedics; (C)
any Default and/or Event of Default hereunder shall constitute a matured Event
of Default under all documentation evidencing, securing and governing the
indebtedness of the Borrowers; and (D) any Default or Event of Default under the
documentation evidencing, governing and securing the indebtedness of the
Borrowers shall constitute an Event of Default under this Agreement.
6.15 FURTHER ASSURANCES. Each party agrees to sign and deliver all
documents, instruments, certificates and applications which may be deemed
reasonably necessary by the other party, to consummate the transactions
contemplated by this Agreement.
[SIGNATURE PAGE FOLLOWS]
20
IN WITNESS WHEREOF, Borrowers and HoMedics have caused this Agreement to
be executed by their duly authorized officers as of the day and year first
written above.
Borrower:
KRONOS ADVANCED TECHNOLOGIES, INC.,
F/K/A TSET, INC.
By: /s/ Xxxxxx X. Xxxxxx
--------------------------------------
Name: Xxxxxx X. Xxxxxx
Its: President and CEO
Borrower:
KRONOS AIR TECHNOLOGIES, INC.
By: /s/ Xxxxxx X. Xxxxxx
--------------------------------------
Name: Xxxxxx X. Xxxxxx
Its: President and CEO
HoMedics:
FKA DISTRIBUTING, CO.,
D/B/A HOMEDICS
By: /s/ Xxx Xxxxxx
--------------------------------------
Name: Xxx Xxxxxxx
Its: President
21
EXHIBIT 1.1(B)
LICENSE AGREEMENT
22
EXHIBIT 1.2(A)
$2.4M NOTE
23
EXHIBIT 1.2(B)
$1.0M NOTE
24
EXHIBIT 1.2(C)
SECURITY AGREEMENT
25
EXHIBIT 1.2(E)
WARRANT NO. 1
26
EXHIBIT 1.2(F)
WARRANT NO. 2
27
EXHIBIT 1.2(G)
REGISTRATION RIGHTS AGREEMENT
28
EXHIBIT 2.1(A)
AMENDED LICENSE
29
EXHIBIT 3.4
LIENS
None.
30
EXHIBIT 3.9(A)
FULLY DILUTED COMMON SHARES
31
EXHIBIT 3.16
TRANSACTIONS WITH AFFILIATES
None.
32
EXHIBIT 4.2(A)
CALL RIGHTS
33
