REGISTRATION RIGHTS AGREEMENT
Exhibit
13
THIS
REGISTRATION RIGHTS AGREEMENT (this
“Agreement”), dated as of June 19, 2007, is by and among Kronos Advanced
Technologies, Inc., a Nevada corporation (“Company”),
and
AirWorks Funding LLLP, a Georgia limited liability limited partnership
(“AirWorks”),
Sands
Brothers Venture Capital LLC, a New York limited liability company
(“Sands
I”)
Sands
Brothers Venture Capital II LLC, a New York limited liability company
(“Sands
II”),
Sands
Brothers Venture Capital III LLC, a New York limited liability company
(“Sands
III”),
Sands
Brothers Venture Capital IV LLC, a New York limited liability company
(“Sands
IV”),
Critical Capital Growth Fund, L.P., a Delaware limited partnership and a
debenture licensed U.S. Small Business Investment Company (“CCGF”)
and RS
Properties I LLC, a Delaware limited liability company (“RS
Properties”).
AirWorks, Sands II, Sands III, Sands IV, CCGF and RS Properties are collectively
referred to herein as the “Stockholders”).
WHEREAS,
this
Agreement is being entered into pursuant to that certain Funding Agreement
of
even date herewith by and among Company and the Stockholders and those certain
Secured Convertible Promissory Notes of even date herewith made by Company
in
favor of the Stockholders (the “Notes”).
NOW
THEREFORE,
for and
in consideration of the premises, the mutual promises herein contained, and
for
other good and valuable consideration, the receipt and adequacy of which are
acknowledged, the parties agree as follows:
1. Certain
Definitions.
As used
in this Agreement, the following initially capitalized terms shall have the
following meanings:
(a) “Affiliate”
means,
with respect to any person, any other person who, directly or indirectly, is
in
control of, is controlled by or is under common control with such
person.
(b) “Holder(s)”
means
the Stockholders and their successors and assigns who are holders of Registrable
Securities, including, without limitation, each individual or entity owning
a
partnership or membership interest of AirWorks, Sands I, Sands II, Sands III,
Sands IV, CCGF or RS Properties.
(c) “Registrable
Securities”
means
(x) shares of Company’s common stock, par value $0.001 per share (“Common
Stock”)
owned
by the Holders at any time, (y) shares of Common Stock issued or issuable to
the
Holders upon conversion or exchange of any securities of the Company, including,
without limitation, the Notes, and (z) any other securities issued or issuable
to the Holders of such shares of Common Stock (or such shares into which or
for
which such shares are so changed, converted or exchanged) upon any
reclassification, share combination, share subdivision, share dividend, merger,
consolidation or similar transactions or events; provided that any such
securities shall cease to be Registrable Securities if (i) a registration
statement with respect to the sale of such securities shall have become
effective under the Securities Act (as defined below) and such securities shall
have been disposed of in accordance with the plan of distribution set forth
in
such registration statement, (ii) such securities shall have been transferred
pursuant to Rule 144 (as defined below), (iii) the rights and obligations
related thereto under this Agreement shall have been transferred in violation
of
Section 9, (iv) at any time the total number of Registrable Securities held
by the Holder may then be distributed by the Holder in one transaction pursuant
to Rule 144, or (v) at such time that such securities are no longer
outstanding.
(d) “Registration
Expenses”
means
all reasonable expenses incurred by Company in connection with any registration
of Registrable Securities pursuant to this Agreement including, without
limitation, the following: (i) SEC filing fees; (ii) the fees, disbursements
and
expenses of Company’s counsel(s) and accountants in connection with the
registration of the Registrable Securities to be disposed of under the
Securities Act; (iii) all expenses of Company and its agents and representatives
in connection with the preparation, printing and filing of the registration
statement, any preliminary prospectus or final prospectus and amendments and
supplements thereto and the mailing and delivering of a reasonable number of
copies thereof to any Holders, underwriters and dealers and all actual expenses
incidental to delivery of the Registrable Securities; (iv) the cost of producing
blue sky memoranda (but specifically not including legal investment or foreign
blue sky memoranda); (v) all expenses in connection with the qualification
of
the Registrable Securities to be disposed of for offering and sale under state
securities laws; (vi) the filing fees incident to securing any required review
by the National Association of Securities Dealers, Inc. of the terms of the
sale
of the Registrable Securities to be disposed of; (vii) the expenses of Company’s
transfer agent and registrar appointed in connection with such offering; (viii)
all engraving and printing expenses for the Company securities being offered;
and (ix) all fees and expenses payable in connection with the listing of the
Registrable Securities on each securities exchange or inter-dealer quotation
system on which a class of common equity securities of Company is then
listed.
(e) “Rule
144”
means
Rule 144 promulgated under the Securities Act (as defined below), or any
successor rule to similar effect.
(f) “SEC”
means
the United States Securities and Exchange Commission.
(g) “Securities
Act”
means
the Securities Act of 1933, as amended, or any successor statute.
2. Demand
Registration.
(a) At
any
time following the date of this Agreement and upon written notice from a Holder
or Holders of at least twenty percent (20%) of the Registrable Securities
(without giving effect to any limitation on exercise or conversion) in the
manner set forth in Section 11(h) hereof requesting that Company effect the
registration under the Securities Act of any or all of the Registrable
Securities held by such Holder as described in Section 2(b) (which notice shall
specify the intended method or methods of disposition of such Registrable
Securities), Company shall use its reasonable best efforts to effect, in the
manner set forth in Section 5, the registration under the Securities Act of
such
Registrable Securities for disposition in accordance with the intended method
or
methods of disposition stated in such request; provided that:
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(i) if,
prior
to receipt of a registration request pursuant to this Section 2(a), Company
had commenced a financing plan and held or identified a date to hold a formal
“all hands” meeting with outside advisors, including an underwriter if such
financing plan is an underwritten offering, and, in the good faith business
judgment of Company’s underwriter (or outside advisors, if no underwriter), a
registration at the time and on the terms requested could materially and
adversely affect or interfere with such financing plan of Company or its
subsidiaries (a “Transaction
Blackout”),
Company shall not be required to effect a registration pursuant to this Section
2(a) until the earliest of (A) the abandonment of such offering or
(B) sixty (60) days after the termination of such offering; provided that
Company shall only be permitted to delay a requested registration under this
Section 2(a), whether in reliance on this subsection (i) or on subsection (ii)
below, twice during the term of this Agreement.
(ii) if,
while
a registration request is pending pursuant to this Section 2(a), Company has
determined in good faith that (A) the filing of a registration statement could
jeopardize or delay any contemplated material transaction other than a financing
plan involving Company or would require the disclosure of material information
that Company had a bona fide business purpose for preserving as confidential;
or
(B) Company then is unable to comply with SEC requirements applicable to the
requested registration (notwithstanding its reasonable best efforts to so
comply), Company shall not be required to effect a registration pursuant to
this
Section 2(a) until the earlier of (A) the date upon which such contemplated
transaction is completed or abandoned or such material information is otherwise
disclosed to the public or ceases to be material or Company reasonably is able
to so comply with applicable SEC requirements, as the case may be, and (B)
thirty (30) days after Company makes such good-faith determination; provided
that Company shall only be permitted to delay a requested registration under
this Section 2(a), whether in reliance on this subsection (ii) or on subsection
(i) above, twice during the term of this Agreement.
(iii) Company
shall not be obligated to file more than two (2) registration statements under
the Securities Act relating to a registration request pursuant to this
Section 2(a) and shall not be obligated in any event if such a registration
request is for a number of Registrable Securities which have an aggregate market
value less than $1 million. If such a request shall be for an underwritten
offering, such a request must be for a number of Registrable Securities which
have an aggregate market value of at least $5 million.
(b) Notwithstanding
any other provision of this Agreement to the contrary, a registration requested
by a Holder pursuant to this Section 2 shall not be deemed to have been effected
(and, therefore, not requested for purposes of Section 2(a)): (A) if it is
withdrawn by the requesting Holder based upon material adverse information
relating to Company that is (x) different from the information known to the
Holder or Holders requesting registration at the time of their request for
registration, or (y) promptly disclosed by Company to the Holder at the time
of
their request for registration; (B) if, when effective, it includes fewer than
ninety (90%) percent of the number of shares of Registrable Securities which
were the subject matter of the request; (C) if after it has become effective
such registration is interfered with by any stop order, injunction or other
order or requirement of the SEC or other governmental agency or court for any
reason other than a misrepresentation or an omission by such Holder and, as
a
result thereof, less than ninety (90%) percent of the Registrable Securities
requested to be registered can be completely distributed in accordance with
the
plan of distribution set forth in the related registration
statement.
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(c) In
the
event that any registration pursuant to this Section 2 shall involve, in whole
or in part, an underwritten offering, Company shall have the right to designate
the underwriter or underwriters, including the lead managing underwriter of
such
underwritten offering, subject to the reasonable approval of the
Holders.
(d) Holders
other than the Holder initiating the demand pursuant to Section 2(a) and
holders of other registrable securities with the right to participate in a
Company registration statement shall have the right to include their shares
of
Registrable Securities or other registrable securities, as the case may be,
in
any registration pursuant to Section 2(a). In connection with those
registrations in which multiple Holders or holders of other registrable
securities with the right to participate in such registration (“Piggy-back
Rights Holders”)
participate, in the event the facilitating broker/dealer or, in an underwritten
offering, the lead managing underwriter advises that marketing factors require
a
limitation on the number of shares to be sold, the number of shares to be
included in the sale or underwriting and registration shall be allocated
pro
rata
among
the Holders and the holders seeking registration pursuant to piggy-back
registration rights otherwise granted by Company on the basis of the estimated
proceeds from the sale of the securities covered by such
registration.
(e) Company
shall have the right to cause the registration of additional securities for
sale
for the account of Company in any registration of Registrable Securities
requested by a Holder pursuant to Section 2(a) which involves an underwritten
offering; provided that Company shall not have the right to cause the
registration of such additional securities if
such
Holder is advised in writing (with a copy to Company) by the lead managing
underwriter designated pursuant to Section 2(c) that, in such firm’s good
faith opinion, registration of such securities in addition to those securities
included pursuant to Sections 2(a)-(d) hereof would materially adversely affect
the offering and sale of the Registrable Securities then contemplated by such
Holder.
3. Piggy-back
Registration.
At any
time during the term of this Agreement if Company proposes to register any
of
its Company Stock or any other of its common equity securities (but not
including debt instruments or preferred stock convertible into its common equity
securities) (collectively, “Other
Securities”)
under
the Securities Act (other than a registration on Form S-4 or S-8 or any
successor form thereto), whether or not for sale for its own account, in a
manner which would permit registration of Registrable Securities for sale for
cash to the public under the Securities Act, it will each such time give prompt
written notice to each Holder of its intention to do so at least ten (10) days
prior to the anticipated filing date of the registration statement relating
to
such registration. Such notice shall offer each such Holder the opportunity
to
include in such registration statement such number of Registrable Securities
as
each such Holder may request. Upon the written request of any such Holder,
made
no later than 5:00 p.m. New York City, New York time on the
fifth (5th)
day
after such Holder’s receipt of Company’s notice (which request shall specify the
number of Registrable Securities intended to be disposed of and the intended
method of disposition thereof), Company shall use its reasonable best efforts
to
effect, in the manner set forth in Section 5, in connection with the
registration of the Other Securities, the registration under the Securities
Act
of all Registrable Securities which Company has been so requested to register,
to the extent required to permit the disposition (in accordance with such
intended methods thereof) of the Registrable Securities so requested to be
registered; provided that:
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(a) if
at any
time after giving written notice of its intention to register any securities
and
prior to the effective date of such registration, Company shall determine for
any reason not to register or to delay registration of such securities, Company
may, at its election, give written notice of such determination to the Holder
and, thereupon, (A) in the case of a determination not to register, Company
shall be relieved of its obligation to register any Registrable Securities
in
connection with such registration and (B) in the case of a determination to
delay such registration, Company shall be permitted to delay registration of
any
Registrable Securities requested to be included in such registration for the
same period as the delay in registering such Other Securities;
(b) if
the
registration referred to in the first sentence of this Section 3 is to be an
underwritten registration, and the managing underwriter advises Company in
writing that, in such firm’s opinion, such offering would be materially and
adversely affected by the inclusion therein of the Registrable Securities
requested to be included therein, Company shall include in such registration:
(1) first, all securities Company proposes to sell for its own account
(“Company
Securities”)
if
Company Securities are proposed to be included in such registration, (2) second,
up to the full number of Registrable Securities in excess of the number or
dollar amount of Company Securities, which, in the good faith opinion of such
managing underwriter, can be so sold without materially and adversely affecting
such offering (and, if less than the full number of such Registrable Securities,
allocated among the Holders of such Registrable Securities and holders (other
than Company) of Other Securities to be included in such registration pursuant
to agreements with Company (“Other
Holders”)
pro
rata on the basis of the net proceeds from the sale thereof), and (3) third,
all
other securities proposed to be registered. Notwithstanding any other provision
in this Agreement to the contrary, Company shall not be required to include
Registrable Securities in any registration statement if the inclusion of such
Registrable Securities would violate the provisions of any agreements or
arrangements pursuant to which such registration is being effected or entered
into in connection with such registration;
(c) Company
shall not be required to effect any registration of Registrable Securities
under
this Section 3 incidental to the registration of any of its securities in
connection with mergers, acquisitions, dividend reinvestment plans or stock
option or award or other executive or employee benefit or compensation plans;
and
(d) no
registration of Registrable Securities effected under this Section 3 shall
relieve Company of its obligation to effect a registration of Registrable
Securities pursuant to Section 2 hereof.
4. Expenses.
Company
agrees to pay all Registration Expenses with respect to an offering pursuant
to
Section 2 and Section 3 hereof (but not any fees or expenses of counsel to
any
Holder or the Holders or any commissions or underwriting discount in connection
with an offering which shall be the expense of the Holder(s)).
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5. Registration
and Qualification.
If and
whenever Company is required to use its reasonable best efforts to effect the
registration of any Registrable Securities under the Securities Act as provided
in Section 2 or 3 hereof, Company shall:
(a) prepare
and file a registration statement under the Securities Act relating to the
Registrable Securities to be offered as soon as practicable, but in no event
later than forty-five (45) days (ninety (90) days if the applicable registration
form is other than Form S-3) after the date notice is given, and use its
reasonable best efforts to cause the same to become effective as promptly as
practicable;
(b) prepare
and file with the SEC such amendments and supplements to such registration
statement and the prospectus used in connection therewith as may be necessary
to
keep such registration statement continuously effective until the earlier of
(x)
all Registrable Securities covered by such registration statement have been
sold
or (y) when all Registrable Securities are eligible for resale pursuant to
subsection (k) of Rule 144 of the Securities Act;
(c) furnish
to the Holders and to any underwriter of such Registrable Securities such number
of conformed copies of such registration statement and of each such amendment
and supplement thereto (in each case including all exhibits), such number of
copies of the prospectus included in such registration statement (including
each
preliminary prospectus and any summary prospectus), in conformity with the
requirements of the Securities Act, and such other documents, as the Holders
or
such underwriter may reasonably request in order to facilitate the public sale
of the Registrable Securities, and a copy of any and all transmittal letters
or
other correspondence to, or received from, the SEC or any other governmental
agency or self-regulatory body or other body having jurisdiction (including
any
domestic or foreign securities exchange) relating to such offering;
(d) use
its
reasonable best efforts to register or qualify all Registrable Securities
covered by such registration statement under the securities or blue sky laws
of
such United States jurisdictions as the Holders or any underwriter of such
Registrable Securities shall request, and use its best efforts to obtain all
appropriate registrations, permits and consents required in connection
therewith, and do any and all other acts and things which may be necessary
or
advisable to enable the Holders or any such underwriter to consummate the
disposition in such jurisdictions of its Registrable Securities covered by
such
registration statement; provided that Company shall not for any such purpose
be
required to register or qualify generally to do business as a foreign
corporation in any jurisdiction wherein it is not so qualified, or to subject
itself to taxation in any such jurisdiction, or to consent to general service
of
process in any such jurisdiction;
(e) in
connection with any underwritten offering, (i) use its reasonable best efforts
to furnish an opinion of counsel for Company addressed to the underwriters
and
each Holder of Registrable Securities included in such registration (each a
“Selling
Holder”)
and
dated the date of the closing under the underwriting agreement (if any) (or
if
such offering is not underwritten, dated the effective date of the registration
statement), and (ii) use its reasonable best efforts to furnish a “cold comfort”
letter addressed to each Selling Holder, if permissible under applicable
accounting practices, and signed by the independent public accountants who
have
audited Company’s financial statements included in such registration statement,
in each such case covering substantially the same matters with respect to such
registration statement (and the prospectus included therein) as are customarily
covered in opinions of issuer’s counsel and in accountants’ letters delivered to
underwriters in underwritten public offerings of securities and such other
matters as the Selling Holders may reasonably request and, in the case of such
accountants’ letter, with respect to events subsequent to the date of such
financial statements;
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(f) immediately
notify the Selling Holders in writing (i) at any time when a prospectus relating
to a registration pursuant to Section 2 or 3 hereof is required to be delivered
under the Securities Act of the happening of any event as a result of which
the
prospectus included in such registration statement, as then in effect, includes
an untrue statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements therein,
in
light of the circumstances under which they were made, not misleading, and
(ii)
of any request by the SEC or any other regulatory body or other body having
jurisdiction for any amendment of or supplement to any registration statement
or
other document relating to such offering, and in either such case (i) or (ii)
at
the request of the Selling Holders, subject to Section 4 hereof, prepare and
furnish to the Selling Holders a reasonable number of copies of a supplement
to
or an amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such Registrable Securities, such prospectus
shall not include an untrue statement of material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they are made, not
misleading;
(g) list
all
such Registrable Securities covered by such registration on each national
securities exchange and United States inter-dealer quotation system on which
a
class of common equity securities of Company is then listed, with expenses
in
connection therewith to be paid in accordance with Section 4 hereof;
and
(h) furnish
unlegended certificates representing ownership of the Registrable Securities
(including, without limitation, upon conversion of the Notes) being sold in
such
denominations as shall be requested by the Selling Holders or the underwriters
with expenses therewith to be paid in accordance with Section 4
hereof.
6. Underwriting,
Due Diligence.
(a) If
requested by the underwriters for any underwritten offering of Registrable
Securities pursuant to a registration requested under this Agreement, Company
shall enter into an underwriting agreement with such underwriters for such
offering, such agreement to contain such representations and warranties by
Company and such other terms and provisions as are customarily contained in
underwriting agreements with respect to secondary distributions, including,
without limitation, indemnities and contribution substantially to the effect
and
to the extent provided in Section 7 hereof and the provision of opinions of
counsel and accountants’ letters to the effect and to the extent provided in
Section 5(e) hereof. The Selling Holders on whose behalf the Registrable
Securities are to be distributed by such underwriters shall be parties to any
such underwriting agreement and the representations and warranties by, and
the
other agreements on the part of, Company to and for the benefit of such
underwriters, shall also be made to and for the benefit of such Selling Holders.
Such underwriting agreement shall also contain such representations and
warranties by the Selling Holders on whose behalf the Registrable Securities
are
to be distributed as are customarily contained in underwriting agreements with
respect to secondary distributions. Selling Holders may require that any
additional securities included in an offering proposed by a Holder be included
on the same terms and conditions as the Registrable Securities that are included
therein.
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(b) In
the
event that any registration pursuant to Section 3 shall involve, in whole or
in
part, an underwritten offering, Company may require the Registrable Securities
requested to be registered pursuant to Section 3 to be included in such
underwriting on the same terms and conditions as shall be applicable to the
other securities being sold through underwriters under such registration. If
requested by the underwriters for such underwritten offering, the Selling
Holders on whose behalf the Registrable Securities are to be distributed shall
enter into an underwriting agreement with such underwriters, such agreement
to
contain such representations and warranties by the Selling Holders and such
other terms and provisions as are customarily contained in underwriting
agreements with respect to secondary distributions, including, without
limitation, indemnities and contribution substantially to the effect and to
the
extent provided in Section 7 hereof. Such underwriting agreement shall also
contain such representations and warranties by Company and such other person
or
entity for whose account securities are being sold in such offering as are
customarily contained in underwriting agreements with respect to secondary
distributions.
(c) In
connection with the preparation and filing of each registration statement
registering Registrable Securities under the Securities Act, Company shall
give,
subject to all parties executing confidentiality agreements with Company on
terms reasonably acceptable to Company, the Holders of such Registrable
Securities and the underwriters, if any, and their respective counsel and
accountants, such reasonable and customary access to its books and records
and
such opportunities to discuss the business of Company with its officers and
the
independent public accountants who have certified Company’s financial statements
as shall be necessary, in the opinion of such Holder and such underwriters
or
their respective counsel, to conduct a reasonable investigation within the
meaning of the Securities Act.
7. Indemnification
and Contribution.
(a) In
the
case of each offering of Registrable Securities made pursuant to this Agreement,
Company agrees to indemnify and hold harmless each Holder, its officers and
directors, managers, employees, partners and members, as the case may be, each
underwriter of Registrable Securities so offered and each person, if any, who
controls any of the foregoing persons within the meaning of the Securities
Act,
from and against any and all claims, liabilities, losses, damages, expenses
and
judgments, joint or several, to which they or any of them may become subject,
under the Securities Act or otherwise, including any amount paid in settlement
of any litigation commenced or threatened, and shall promptly reimburse them,
as
and when incurred, for any reasonable legal or other expenses incurred by them
in connection with investigating any claims and defending any actions, insofar
as such losses, claims, damages, liabilities or actions shall arise out of,
or
shall be based upon, any untrue statement or alleged untrue statement of a
material fact contained in the registration statement (or in any preliminary
or
final prospectus included therein) or any amendment thereof or supplement
thereto, or in any document incorporated by reference therein, or any omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not
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misleading;
provided,
however,
that
Company shall not be liable to a particular Holder in any such case to the
extent that any such loss, claim, damage, liability or action arises out of,
or
is based upon, any untrue statement or alleged untrue statement, or any
omission, if such statement or omission shall have been made in reliance upon
and in conformity with information relating to such Holder furnished to Company
in writing by or on behalf of such Holder specifically for use in the
preparation of the registration statement (or in any preliminary or final
prospectus included therein) or any amendment thereof or supplement thereto.
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of a Holder and shall survive the transfer
of
such securities. The foregoing indemnity agreement is in addition to any
liability which Company may otherwise have to each Holder, its officers and
directors, members employees, partners and managers, as the case may be,
underwriters of the Registrable Securities or any controlling person of the
foregoing; provided,
further,
that,
as to any underwriter or any person controlling any underwriter, this indemnity
does not apply to any loss, liability, claim, damage or expense arising out
of
or based upon any untrue statement or alleged untrue statement or omission
or
alleged omission in any preliminary prospectus if a copy of a prospectus was
not
sent or given by or on behalf of an underwriter to such person asserting such
loss, claim, damage, liability or action at or prior to the written confirmation
of the sale of the Registrable Securities as required by the Securities Act
and
such untrue statement or omission had been corrected in such
prospectus.
(b) In
the
case of each offering made pursuant to this Agreement, each Holder of
Registrable Securities included in such offering, by exercising its registration
rights hereunder, agrees to indemnify and hold harmless Company, its officers,
directors, agents and Affiliates and each person, if any, who controls any
of
the foregoing within the meaning of the Securities Act (and if requested by
the
underwriters, each underwriter who participates in the offering and each person,
if any, who controls any such underwriter within the meaning of the Securities
Act), from and against any and all claims, liabilities, losses, damages,
expenses and judgments, joint or several, to which they or any of them may
become subject under the Securities Act or otherwise, including any amount
paid
in settlement of any litigation commenced or threatened, and shall promptly
reimburse them, as and when incurred, for any reasonable legal or other expenses
incurred by them in connection with investigating any claims and defending
any
actions, insofar as any such losses, claims, damages, liabilities or actions
shall arise out of, or shall be based upon, any untrue statement or alleged
untrue statement of a material fact contained in the registration statement
(or
in any preliminary or final prospectus included therein) or any amendment
thereof or supplement thereto, or any omission or alleged omission to state
therein a material fact relating to the Holder required to be stated therein
or
necessary to make the statements therein not misleading, but in each case only
to the extent that such untrue statement of a material fact is contained in,
or
such material fact relating to the Holder is omitted from, information relating
to such Holder furnished in writing to Company by or on behalf of such Holder
specifically for use in the preparation of such registration statement (or
in
any preliminary or final prospectus included therein). The foregoing indemnity
is in addition to any liability which such Holder may otherwise have to Company,
or any of its directors, officers or controlling persons; provided,
however,
that,
as to any underwriter or any person controlling any underwriter, this indemnity
does not apply to any loss, liability, claim, damage or expense arising out
of
or based upon any untrue statement or alleged untrue statement or omission
or
alleged omission in any preliminary prospectus if a copy of a prospectus was
not
sent to or given by or on behalf of an underwriter to such person asserting
such
loss, claim, damage, liability or action at or prior to the written confirmation
of the sale of the Registrable Securities as required by the Securities Act
and
such untrue statement or omission had been corrected in such prospectus. In
no
event shall the liability of any Holder be greater in amount than the dollar
amount of the net proceeds received by such Holder upon the sale of the
Registrable Securities giving rise to such indemnification
obligation.
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(c) Procedure
for Indemnification.
Each
party indemnified under paragraph (a) or (b) of this Section 7 shall, promptly
after receipt of notice of any claim or the commencement of any action against
such indemnified party in respect of which indemnity may be sought, notify
the
indemnifying party in writing of the claim or the commencement thereof; provided
that the failure to notify the indemnifying party shall not relieve it from
any
liability which it may have to an indemnified party on account of the indemnity
agreement contained in paragraph (a) or (b) of this Section 7, except to the
extent the indemnifying party was prejudiced by such failure, and in no event
shall relieve the indemnifying party from any other liability which it may
have
to such indemnified party. If any such claim or action shall be brought against
an indemnified party, and it shall notify the indemnifying party thereof, the
indemnifying party shall be entitled to participate therein, and, to the extent
that it wishes, jointly with any other similarly notified indemnifying party,
to
assume the defense thereof with counsel reasonably satisfactory to the
indemnified party. After notice from the indemnifying party to the indemnified
party of its election to assume the defense of such claim or action, the
indemnifying party shall not be liable to the indemnified party under this
Section 7 for any legal or other expenses subsequently incurred by the
indemnified party in connection with the defense thereof other than reasonable
costs of investigation; provided that each indemnified party, its employees,
officers and directors, if any, and each person, if any, who controls such
indemnified party within the meaning of the Securities Act, shall have the
right
to employ separate counsel reasonably approved by the indemnifying party to
represent them if the named parties to any action (including any impleaded
parties) include both such indemnified party and an indemnifying party or an
affiliate of an indemnifying party, and such indemnified party shall have been
advised by counsel either (i) that there are one or more legal defenses
available to such indemnified party that are different from or additional to
those available to such indemnifying party or such affiliate or (ii) a conflict
may exist between such indemnified party and such indemnifying party or such
affiliate, and in that event the fees and expenses of one such separate counsel
for all such indemnified parties shall be paid by the indemnifying party. An
indemnified party will not enter into any settlement agreement which is not
approved by the indemnifying party, such approval not to be unreasonably
withheld. The indemnifying party may not agree to any settlement of any such
claim or action which provides for any remedy or relief other than monetary
damages for which the indemnifying party shall be responsible hereunder, without
the prior written consent of the indemnified party, which consent shall not
be
unreasonably withheld. In any action hereunder as to which the indemnifying
party has assumed the defense thereof with counsel reasonably satisfactory
to
the indemnified party, the indemnified party shall continue to be entitled
to
participate in the defense thereof, with counsel of its own choice, but, except
as set forth above, the indemnifying party shall not be obligated hereunder
to
reimburse the indemnified party for the costs thereof. In all instances, the
indemnified party shall cooperate fully with the indemnifying party or its
counsel in the defense of each claim or action.
-10-
If
the
indemnification provided for in this Section 7 shall for any reason be
unavailable to an indemnified party in respect of any loss, claim, damage or
liability, or any action in respect thereof, referred to herein, then each
indemnifying party shall, in lieu of indemnifying such indemnified party,
contribute to the amount paid or payable by such indemnified party as a result
of such loss, claim, damage or liability, or action in respect thereof, in
such
proportion as shall be appropriate to reflect the relative fault of the
indemnifying party on the one hand and the indemnified party on the other with
respect to the statements or omissions which resulted in such loss, claim,
damage or liability, or action in respect thereof, as well as any other relevant
equitable considerations. The relative fault shall be determined by reference
to
whether the untrue or alleged untrue statement of a material fact or omission
or
alleged omission to state a material fact relates to information supplied by
the
indemnifying party on the one hand or the indemnified party on the other, the
intent of the parties and their relative knowledge, access to information and
opportunity to correct or prevent such statement or omission, but not by
reference to any indemnified party’s stock ownership in Company. The amount paid
or payable by an indemnified party as a result of the loss, claim, damage or
liability, or action in respect thereof, referred to above in this paragraph
shall be deemed to include, for purposes of this paragraph, any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
foregoing, no Holder shall be required to contribute, in the aggregate, any
amount in excess of the amount by which the net proceeds actually received
by
such Holder from the sale of the Registrable Securities giving rise to such
indemnification obligation exceeds the amount of any damages that such Holder
has otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
8. Rule
144.
Company
shall take such measures and timely file such information, documents and reports
as shall be required by the SEC as a condition to the availability of Rule
144
and to remain in compliance with the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
9. Transfer
of Registration Rights.
A
Holder may not transfer all or any portion of its rights and obligations under
this Agreement to any transferee without the prior written consent of Company,
which consent shall not be unreasonably withheld; provided, however, that
AirWorks shall have the right to assign any or all of its rights and obligations
hereunder to any individual or entity owning a partnership interest of
AirWorks.
10.
Limitations
on Subsequent Registration Rights.
From
and after the date of this Agreement, the Company shall not, without the prior
written consent of the Holder or Holders of 51% of the Registrable Securities
then outstanding, enter into any agreement with any holder or prospective holder
of any securities of the Company that would allow such holder or prospective
holder (i) to include such securities in any registration unless, under the
terms of such agreement, such holder or prospective holder may include such
securities in any such registration only to the extent that the inclusion of
such securities will not reduce the number of the Registrable Securities of
the
Holders that are included or (ii) to demand registration of any securities
held
by such holder or prospective holder.
-11-
11. Miscellaneous.
(a) Injunctions.
Each
party acknowledges and agrees that irreparable damage would occur in the event
that any of the provisions of this Agreement was not performed in accordance
with its specific terms or was otherwise breached. Therefore, each party shall
be entitled to an injunction or injunctions to prevent breaches of the
provisions of this Agreement and to enforce specifically the terms and
provisions hereof in any court having jurisdiction, such remedy being in
addition to any other remedy to which such party may be entitled at law or
in
equity.
(b) Severability.
If any
term or provision of this Agreement shall be held by a court of competent
jurisdiction to be invalid, void or unenforceable, the remainder of the terms
and provisions set forth herein shall remain in full force and effect and shall
in no way be affected, impaired or invalidated, and each of the parties shall
use its best efforts to find and employ an alternative means to achieve the
same
or substantially the same result as that contemplated by such term or
provision.
(c) Further
Assurances.
Subject
to the specific terms of this Agreement, each of the parties hereto shall make,
execute, acknowledge and deliver such other instruments and documents, and
take
all such other actions, as may be reasonably required in order to effectuate
the
purposes of this Agreement and to consummate the transactions contemplated
hereby.
(d) Waivers,
etc.
No
failure or delay on the part of either party (or the intended third-party
beneficiaries referred to herein) in exercising any power or right hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise
of
any such right or power, or any abandonment or discontinuance of steps to
enforce such a right or power preclude any other or further exercise thereof
or
the exercise of any other right or power. No modification or waiver of any
provision of this Agreement nor consent to any departure therefrom shall in
any
event be effective unless the same shall be in writing and signed by an
authorized officer of each of the parties, and then such waiver or consent
shall
be effective only in the specific instance and for the purpose for which
given.
(e) Entire
Agreement.
This
Agreement contains the entire understanding of the parties with respect to
its
subject matter. This Agreement supersedes all prior agreements and
understandings between the parties, whether written or oral, with respect to
the
subject matter hereof. The paragraph headings contained in this Agreement are
for reference purposes only, and shall not affect in any manner the meaning
or
interpretation of this Agreement.
(f) Counterparts.
For the
convenience of the parties, this Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original but all of which
together shall be one and the same instrument.
(g) Amendment.
This
Agreement may be amended only by a written instrument duly executed by an
authorized officer of each of Company and the Holders of at least 51% of the
Registrable Securities.
-12-
(h) Notices.
Unless
expressly provided herein, all notices, claims, certificates, requests, demands
and other communications hereunder shall be in writing and shall be deemed
to be
duly given (i) when personally delivered, (ii) if mailed by registered or
certified mail, postage prepaid, return receipt requested, on the date the
return receipt is executed or the letter refused by the addressee or its agent,
(iii) if given by telex or telecopier, once such notice or other communication
is transmitted to the telex or telecopier number specified below and the
appropriate answer back or telephonic confirmation is received; provided that
such notice or other communication is mailed in accordance with clause (ii)
hereof or (iv) if sent by overnight courier which delivers only upon the signed
receipt of the addressee, on the date the receipt acknowledgment is executed
or
refused by the addressee or its agent:
if
to the
Stockholders:
AirWorks
Funding LLLP
000
Xxxxxxx Xxxxxx
00xx
Xxxxx
Xxx
Xxxx,
Xxx Xxxx 00000
Attention:
Xxxxxxx X. Xxxxxxx
Telephone:
(000) 000-0000
Facsimile:
(000) 000-0000
with
a
copy to:
Paul,
Hastings, Xxxxxxxx & Xxxxxx LLP
000
Xxxxxxxxx Xxxxxx
Xxxxx
0000
Xxxxxxx,
Xxxxxxx 00000
Attention:
Xxxxxxxx Xxxxxxx
Telephone:
(000) 000-0000
Facsimile:
(000) 000-0000
with
a
copy to:
000
Xxxxxxxx
0xx
Xxxxx
Xxx
Xxxx,
Xxx Xxxx 00000
Attention:
Xxxx Xxxx
Telephone:
(000) 000-0000
Facsimile:
(000) 000-0000
if
to
Company to:
Kronos
Advanced Technologies, Inc.
000
Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxxx,
XX 00000
Attention:
Xxxxxx X. Xxxxxx
Telephone:
(___) ___-____
Facsimile:
(___) ___-____
-13-
with
a
copy to:
Xxxxxxxxxxx
& Xxxxxxxx Xxxxxxx Xxxxx Xxxxx LLP
Miami
Center, 20th Floor
000
Xxxxx
Xxxxxxxx Xxxx.
Xxxxx,
XX
00000-0000
Attention:
Xxxxxxx X. Xxxxxx
Telephone:
(000)
000-0000
Facsimile:
(000) 000-0000
(i) Governing
Law.
This
Agreement is executed by Company in, and shall be construed in accordance with
and governed by the laws of the State of New York without giving effect to
the
principles of conflicts of laws thereof.
(j) Term.
This
Agreement shall be effective as to each Stockholder that is a party to this
Agreement upon the issuance of any Registrable Securities to such Stockholder
and shall remain in full force and effect until there are no Registrable
Securities outstanding or until terminated by the mutual agreement of Company
and the Holders.
(k) Assignment.
The
Holders may not assign their rights, duties or obligations hereunder or any
part
thereof to any other person or entity; provided, however, that a Holder shall
be
permitted to assign its rights, duties and obligations hereunder in connection
with the transfer of Registrable Securities owned by such Holder. This agreement
and all of the obligations hereunder, shall be binding upon and enforceable
against all permitted assigns and transferees.
[Signatures
on next page]
-14-
IN
WITNESS WHEREOF, the Stockholders and Company have caused this Agreement to
be
duly executed by their authorized representatives as of the date first above
written.
|
STOCKHOLDERS:
AIRWORKS
FUNDING LLLP
By:
Compass Partners, LLC, its general partner
By: /s/
Xxxxxxx X. Xxxxxxx
Name: Xxxxxxx
X. Xxxxxxx
Title: President
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|
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SANDS
BROTHERS VENTURE CAPITAL LLC
By: /s/
Xxxxx X. Xxxxx
Name: Xxxxx
X. Xxxxx
Title: COO
|
|
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SANDS
BROTHERS VENTURE CAPITAL II LLC
By:
/s/ Xxxxx X. Xxxxx
Name: Xxxxx
X. Xxxxx
Title: COO
|
|
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SANDS
BROTHERS VENTURE CAPITAL III LLC
By: /s/
Xxxxx X. Xxxxx
Name: Xxxxx
X. Xxxxx
Title: COO
|
|
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SANDS
BROTHERS VENTURE CAPITAL IV LLC
By: /s/
Xxxxx X. Xxxxx
Name: Xxxxx
X. Xxxxx
Title: COO
|
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CRITICAL
CAPITAL GROWTH FUND, L.P.
By:
Critical Capital, L.P., its General Partner
By:
Critical Capital Corporation, its General Partner
By: /s/
Xxxxxx X. Xxxxx
Name: Xxxxxx
X. Xxxxx
Title: Chairman
By: /s/
Xxxxxxx X. Xxxxxxxx
Name: Xxxxxxx
X. Xxxxxxxx
Title: President
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By:
/s/ Xxxx Xxxx
Name: Xxxx
Xxxx
Title: Manager
|
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COMPANY:
KRONOS
ADVANCED TECHNOLOGIES, INC.
By: /s/
Xxxxxxx X. Xxxxxx
Name: Xxxxxxx
X. Xxxxxx
Title: COO
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