INTERCREDITOR AGREEMENT
Exhibit
7
This
INTERCREDITOR AGREEMENT (this “Agreement”)
is
entered into as of June 19, 2007, among 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”),
AirWorks Funding LLLP, a Georgia limited liability limited partnership
(“AirWorks”)
and RS
Properties I LLC, a Delaware limited liability company (“RS
Properties”)
(Sands
I, Sands II, Sands III, Sands IV, CCGF, AirWorks and RS Properties are
collectively, the “First
Lien Creditors,”
and
each, a “First
Lien Creditor”),
Xxxxxxx X. Sun, an individual resident of the State of Virginia (“Sun”)
and
Xxxxxxx X. Xxxxxxxxx, an individual resident of the State of Virginia
(“Gumbinner”
and
together with Sun, collectively, “Second
Lien Creditors”
and
each, a “Second
Lien Creditor”),
in
light of the following:
R
E C I T A L S
A. Kronos
Advanced Technologies, Inc., a Nevada corporation (“Borrower”),
has
issued to each of the First Lien Creditors and Second Lien Creditors certain
Secured Convertible Promissory Notes in the aggregate principal amount of
$18,359,000, including those certain Convertible Promissory Notes dated as
of
April 27, 2007 made by Borrower in favor of Sun and Gumbinner,
respectively.
B. As
security for the prompt payment and performance of the Obligations (as
hereinafter defined), Borrower and Kronos Air Technologies, Inc., a Nevada
corporation (the “Subsidiary”,
and
together with Borrower, collectively, “Obligors”
and
each, an “Obligor”),
have
granted Secured Creditors (as hereinafter defined) a security interest in all
of
the Collateral (as hereinafter defined) for the benefit of Secured
Creditors.
C. First
Lien Creditors have entered into a separate Intercreditor Agreement among
themselves pursuant to which First Lien Creditors have evidenced their mutual
agreement and understanding with respect to the priority of the security
interests among First Lien Creditors (the “First
Lien Intercreditor Agreement”).
D. First
Lien Creditors and Second Lien Creditors wish to agree as to their respective
rights, priorities, and interests with respect to the liens upon and security
interests in the Collateral as between First Lien Creditors, on the one hand,
and Second Lien Creditors, on the other hand.
A
G R E E M E N T
In
consideration of the foregoing, the mutual covenants contained herein, and
for
other good and valuable consideration, the receipt of which First Lien Creditors
and Second Lien Creditors hereby acknowledge, First Lien Creditors and Second
Lien Creditors hereby agree as follows:
1. Definitions.
(a) Capitalized
terms used but not defined herein shall have the meanings given to them in
the
Funding Agreement. In addition, the following terms, as used in this Agreement,
shall have the following meanings:
1
“Bankruptcy
Code”
means
Title 11 of the United States Code entitled “Bankruptcy”, as now or hereafter in
effect, or any successor statute.
“Bankruptcy
Law”
means
the Bankruptcy Code and any other federal, state, or foreign law for the relief
of debtors.
“Collateral”
shall
mean all assets of the Obligors and all proceeds thereof.
“Control
Collateral”
means
any Collateral consisting of a certificated security, investment property,
a
deposit account, and any other Collateral as to which a Lien may be perfected
through physical possession or control by the secured party, or any agent
therefor.
“Discharge
of First Lien Obligations”
means
(a) payment in full in cash of the principal of and interest (including interest
accruing on or after the commencement of any Insolvency Proceeding, whether
or
not a claim for such interest is, or would be, allowed in such Insolvency
Proceeding) constituting First Lien Obligations and termination of all
commitments to lend or otherwise extend credit by First Lien Creditors under
the
Note Documents and (b) payment in full in cash of all other First Lien
Obligations that are due and payable or otherwise accrued and owing at or prior
to the time such principal and interest are paid (including legal fees and
other
expenses, costs or charges accruing on or after the commencement of any
Insolvency Proceeding, whether or not a claim for such fees, expenses, costs
or
charges is, or would be, allowed in such Insolvency Proceeding).
“Disposition”
or
“Dispose”
means
the sale, assignment, transfer, license, lease (as lessor), or other disposition
of any property by any Person (or the granting of any option or other right
to
do any of the foregoing).
“Distribution”
means
any payment or distribution by any Person of assets of any kind or character
(whether in cash, securities, assets, by set-off, or otherwise and including
by
purchase redemption or other acquisition).
“Enforcement
Action”
means:
(a) the exercise of any right of set-off for the collection of any amounts
due
in respect of the Second Lien Obligations; (b) exercise of any Secured Creditor
Remedy; or (c) in the event of an Insolvency Proceeding:
(i) prosecuting a motion for relief from the automatic stay to exercise an
Enforcement Action, (ii) objecting to First Lien Creditors’ motion for
relief from the automatic stay to foreclose on and sell any of the Collateral
or
(iii) seeking to provide debtor in possession loans or advances to an
Obligor wherein First Lien Creditors’ liens would be subordinated in priority.
Notwithstanding the foregoing, none of the following shall constitute an
“Enforcement Action” for purposes of this Agreement: (x) the delivery of any
notice of default or other notice to an Obligor pursuant to or in connection
with any Note Document; (y) the acceleration of the Second Lien Obligations;
and
(z) the filing by any Second Lien Creditor of a proof of claim in an Insolvency
Proceeding, which proof of claim indicates the subordination of such Second
Lien
Creditor’s Lien on the Collateral pursuant hereto.
“First
Lien Note Documents”
means, collectively, the Funding Agreement, the First Lien Notes and the
Security Agreement,
together with any amendments, supplements, restatements or other modifications
thereof.
“First
Lien Notes”
means, collectively, those Second Convertible Promissory Notes of even date
herewith made by Borrower in favor of First Lien Creditors.
2
“First
Lien Obligations”
means,
individually and collectively all
obligations of either of the Obligors owing to First Lien Creditors under or
with respect to the Security Agreement or, only with respect to the Borrower,
the First Lien Notes and all renewals, substitutions, modifications, extensions
and supplements to any of the foregoing.
“Funding
Agreement”
means
that certain Funding Agreement of even date herewith by and among Borrower
and
First Lien Creditors.
“Insolvency
Proceeding”
means: (a) any voluntary or involuntary case or proceeding under the
Bankruptcy Law with respect to any Obligor; (b) any other voluntary or
involuntary insolvency or Insolvency Proceeding or proceeding, or any
receivership, liquidation or other similar case or proceeding with respect
to
any Obligor or with respect to a material portion of its assets; (c) any
liquidation, dissolution or winding up of any Obligor, whether voluntary or
involuntary and whether or not involving insolvency or bankruptcy; or (d) any
assignment for the benefit of creditors or any other marshaling of assets and
liabilities of any Obligor.
“Note
Documents”
means the First Lien Note Documents and the Second Lien Notes.
“Obligations”
means,
individually and collectively, the First Lien Obligations and the Second Lien
Obligations.
“Second
Lien Notes”
means,
individually and collectively, those Secured Convertible Promissory Notes dated
as of April 27, 2007 made
by
Borrower in favor of Second Lien Creditors.
“Second
Lien Obligations”
means,
individually and collectively, all obligations of Borrower under or with respect
to the Second Lien Notes, and all renewals, substitutions, modifications,
extensions, and supplements to any of the foregoing.
“Secured
Creditor”
means
any of First Lien Creditors or Second Lien Creditors, or any successor or
assignee of any of them, in its capacity as a secured creditor under the Note
Documents.
“Secured
Creditor Remedies”
means
any action by a Secured Creditor in furtherance of the sale, foreclosure,
realization upon, or the repossession or liquidation of any of the Collateral,
including without limitation, (a) the exercise of any remedies or rights of
a
“Secured Creditor” under Article 9 of the UCC, such as the notification of
account debtors; (b) the exercise of any remedies available to a judgment
creditor; or (c) any other remedy available in respect of the Collateral
available to such Secured Creditor under any Note Document to which it is a
party.
“Security
Agreement”
means
that certain Security Agreement of even date herewith by and among Borrower
and
First Lien Creditors.
“UCC”
shall
have the meaning given to such term in the Security Agreement.
(b) Unless
otherwise set forth herein to the contrary, all terms not otherwise defined
herein and which are defined in the UCC are used herein with the meanings
ascribed to them in the UCC. However, if a term is defined in Article 9 of
the
UCC differently than in another Article of the UCC, the term has the meaning
specified in Article 9 of the UCC.
2. Permitted
Liens and Relative Priorities.
3
(a) As
between the Secured Creditors, notwithstanding (i) the terms (including the
description of collateral), dating, execution, or delivery of any document,
instrument, or agreement; the time, order, occurrence, method, or manner of
grant, attachment or perfection of any security interest or lien; the time
of
filing or recording of any financing statements, assignments, deeds of trust,
mortgages, or any other documents, instruments, or agreements under the UCC
or
any other applicable law, (ii) the existence of (or the order in which any
Secured Creditor becomes a party to or a beneficiary of) any collateral agency
arrangement with any party other than a Secured Creditor, or the appointment
of
such other party as a collateral agent to perfect the Secured Creditors’ liens
and security interests, in all or in any part of the Collateral, (iii) the
existence of any control agreement in favor of any Secured Creditor or
(iv) any provision of the UCC or any other applicable statute, rule, law,
or court decision to the contrary, the Secured Creditors agree that, as to
the
Collateral of each Obligor:
(i)
First
Lien Creditors shall have a first priority security interest in and lien on
the
Collateral to secure the First Lien Obligations; and
(ii)
Second
Lien Creditors shall have a junior and subordinate security interest in and
lien
on the Collateral to secure the Second Lien Obligations.
(b) For
purposes of the foregoing allocation of priorities, any claim or a right to
a
set-off shall be treated in all respects as a security interest and no claimed
right of set-off shall be asserted to defeat or diminish the rights or
priorities provided for herein.
(c) Each
Second Lien Creditor agrees that it will not take any Enforcement Action until
the Discharge of the First Lien Obligations.
3. No
Alteration of Priority.
The
lien and security interest priorities provided in Section
2
shall
not be altered or otherwise affected by any amendment, modification, supplement,
extension, renewal, restatement, or refinancing of any of the Secured Creditor
indebtedness, nor by any action or inaction which any Secured Creditor may
take
or fail to take in respect of the Collateral, or otherwise. Each Second Lien
Creditor agrees that it will not directly or indirectly take any action to
contest or challenge the validity, legality, perfection, priority, avoidability,
or enforceability of the liens or security interests of First Lien Creditors
upon the Collateral or seek to have the same avoided, disallowed, set aside,
or
otherwise invalidated in any judicial proceeding or otherwise.
4. Payments
Made to Second Lien Creditors.
Notwithstanding anything to the contrary in this Agreement, each Second Lien
Creditor shall be entitled to receive and retain payments of principal and
interest made by Borrower to such Second Lien Creditor during the term of this
Agreement.
5. Agent
for Perfection.
Each
Secured Creditor agrees to hold (or cause to be held) all Control Collateral
in
its possession, custody, or control (or in the possession, custody, or control
of agents, bailees, or other similar third parties) as non-fiduciary agent
for
the other Secured Creditors solely for the purpose of perfecting the security
interest granted to each in such Control Collateral subject to the terms and
conditions of this Agreement. No Secured Creditor shall have any obligation
whatsoever to the others to assure that the Control Collateral is genuine or
owned by any Obligor or any other Person or to preserve their respective rights
or benefits or those of any Person. The duties or responsibilities of each
Secured Creditor under this Section 5
are and
shall be limited solely to holding or maintaining control of the Control
Collateral as non-fiduciary agent for the other Secured Creditors for purposes
of perfecting the Liens held by First Lien Creditors or Second Lien Creditors,
as applicable. First Lien Creditors are not and shall not be deemed to be a
fiduciary of any kind for Second Lien Creditors or any other
Person.
4
6. Management
of Collateral.
Notwithstanding anything to the contrary contained in any of the Note Documents,
until Discharge of the First Lien Obligations has occurred: (a) First Lien
Creditors shall have the exclusive right to manage the Collateral, including
the
exclusive right to perform and enforce the terms of the Note Documents with
respect to the Collateral and to exercise and enforce all privileges and rights
thereunder according to First Lien Creditors’ sole discretion, including,
without limitation, the exclusive right to enforce or settle insurance claims
with respect to the Collateral, to pay, compromise, or settle competing claims,
liens, or security interests affecting the Collateral, to take or retake control
or possession of the Collateral, and to hold, prepare for sale, sell, lease,
or
liquidate the Collateral; (b) neither Second Lien Creditors nor any Person
acting on their behalf shall exercise any Secured Party Remedies with respect
to
the Collateral; and (c) any and all proceeds of the Collateral which shall
come
into the possession, control, or custody of any Second Lien Creditor will be
deemed to have been received for the account of any First Lien Creditor and
shall be immediately delivered or paid, as applicable, over to First Lien
Creditors. In connection with the provisions of Second
6(a),
each
Second Lien Creditor waives any and all rights to affect the method or challenge
the appropriateness of any action by First Lien Creditors with respect to the
Collateral, and waives any claims or defenses it may have against First Lien
Creditors, including any such claims or defenses based on any actions or
omissions of any such person, in connection with the perfection, maintenance,
enforcement, foreclosure, sale, liquidation, or release of any lien or security
interest therein by First Lien Creditors, or any modification or waiver of
any
Note Documents, except as provided or limited under this Agreement.
7. Sale
of Collateral.
Until
the Discharge of the First Lien Obligations has occurred: (a) only First Lien
Creditors shall have the right to restrict or permit, or approve or disapprove,
the sale or disposition of the Collateral; and (b) immediately upon the sale
or
disposition of such Collateral by any Obligor with the consent of First Lien
Creditors or by or on behalf of First Lien Creditors in connection with the
exercise of its Secured Creditor Remedies, each Second Lien Creditor’s lien and
security interest upon the Collateral sold shall be automatically,
unconditionally and simultaneously released, and each Second Lien Creditor
will
promptly deliver (at Obligors’ expense) such release, reconveyance, and
termination documents as any First Lien Creditor or any Obligor may reasonably
require in connection therewith.
8. Insurance.
In the
event of the occurrence of a fire or other casualty resulting in damage to
all
or any portion of any Collateral (collectively, a “Casualty”):
(a) each
Second Lien Creditor hereby waives any right to participate or join in any
adjustment, compromise or settlement of any claims resulting from a Casualty
with respect to any Collateral;
(b) all
proceeds received or to be received on account of a Casualty shall be applied
in
the manner or manners provided for in the Note Documents; and
(c) each
Second Lien Creditor agrees to execute and deliver to First Lien Creditors
any
documents, instruments, agreements or further assurances reasonably required
to
effectuate any of the foregoing.
9. Insolvency
Proceeding.
(a) 0Enforceability
and Continuing Priority.
This
Agreement shall be applicable both before and after the commencement of any
Insolvency Proceeding and all converted or succeeding cases in respect thereof.
The relative rights of First Lien Creditors and Second Lien Creditors in or
to
any distributions from or in respect of any Collateral or proceeds of Collateral
shall continue after the commencement of any Insolvency Proceeding. Accordingly,
the provisions of this Agreement are intended to be and shall be enforceable
as
a subordination agreement within the meaning of Section 510 of the Bankruptcy
Code.
5
(b) Financing.
Until
Discharge of the First Lien Obligations has occurred, if any Obligor shall
be
subject to any Insolvency Proceeding and First Lien Creditors consent to the
use
of cash collateral (as such term is defined in Section 363(a) of the Bankruptcy
Code; herein, “Cash
Collateral”)
on
which any First Lien Creditor has a Lien or to permit any Obligor to obtain
financing provided by any First Lien Creditor under Section 364 of the
Bankruptcy Code or any similar Bankruptcy Law (such financing, together with
any
Cash Collateral use, collectively a “DIP
Financing”),
then
each Second Lien Creditor agrees that it will consent to such Cash Collateral
use and raise no objection to such DIP Financing and, to the extent the Liens
securing the First Lien Obligations are discharged, subordinated to or
pari passu
with
such DIP Financing, each Second Lien Creditor will subordinate its Liens in
the
Collateral to the Liens securing such DIP Financing. If any First Lien Creditor
offers to provide DIP Financing that meets the requirements set forth above,
each Second Lien Creditor agrees that it shall not, directly or indirectly,
(x)
provide or offer to provide DIP Financing or support any DIP Financing secured
by a Lien senior to or pari passu
with the
Liens securing the First Lien Obligations, or (y) request or accept any form
of
adequate protection or any other relief except as provided in Section
9(e)(ii).
In
connection with any DIP Financing, if any Liens on the Collateral held by First
Lien Creditors are subject to a surcharge or are subordinated to an
administrative priority claim, a professional fee “carve out,” or fees owed to
the United States Trustee, then the Liens on the Collateral of each Second
Lien
Creditor shall also be subordinated to such interest or claim and shall remain
subordinated to the Liens on the Collateral of First Lien Creditors consistent
with this Agreement.
(c) Sales.
Until
Discharge of the First Lien Obligations has occurred, each Second Lien Creditor
agrees that it will consent to the Disposition of, and will not object or oppose
a motion to Dispose of, any Collateral free and clear of the Liens or the claims
that are in favor of such Second Lien Creditor under Section 363 of the
Bankruptcy Code if First Lien Creditors have consented to such Disposition
of
such assets free and clear of the Liens of the claims that are in favor of
First
Lien Creditors.
(d) Relief
from the Automatic Stay.
Until
Discharge of the First Lien Obligations has occurred, each Second Lien Creditor
agrees that it shall not seek (or support any other person seeking) relief
from
the automatic stay or any other stay in any Insolvency Proceeding in respect
of
the Collateral, without the prior written consent of First Lien
Creditors.
(e) Adequate
Protection.
(i) First
Lien Creditors.
In any
Insolvency Proceeding involving an Obligor, each Second Lien Creditor agrees
that it shall not contest (or support any other person contesting):
(A) any
request by any
First
Lien Creditor for adequate protection (whether in the form of payments, liens,
a
priority administrative expense claim or otherwise);
(B) any
objection by any
First
Lien Creditor to any motion, relief, action, or proceeding based on any First
Lien Creditor claiming a lack of adequate protection (whether in the form of
payments, liens, a priority administrative expense claim or
otherwise);
(C) the
payment of interest, fees, expenses, or other amounts to any
First
Lien Creditor under Section 506(b) or 506(c) of the Bankruptcy Code or
otherwise.
(ii) Second
Lien Creditors.
In any
Insolvency Proceeding involving an Obligor:
(A) Replacement
Liens.
6
(1) Until
Discharge of the First Lien Obligations has occurred, if any First Lien Creditor
is granted adequate protection in the form of a replacement Lien (on existing
or
future assets of Obligors) in connection with any DIP Financing, then each
Second Lien Creditor shall also be entitled to seek, without objection from
First Lien Creditors, adequate protection in the form of a replacement Lien
(on
existing or future assets of Obligors), which replacement Lien, if obtained,
shall be subordinate to the Liens securing the First Lien Obligations and the
Liens securing such DIP Financing on the same basis as the other Liens securing
the Second Lien Obligations are subordinate to the First Lien Obligations under
this Agreement; and
(2) In
the
event that Second Lien Creditors are granted adequate protection in the form
of
a replacement Lien (on existing or future assets of Obligors), then each Second
Lien Creditor agrees that each First Lien Creditor shall also be entitled to
seek, without objection from Second Lien Creditors, a senior adequate protection
Lien on existing or future assets of Obligors as security for the First Lien
Obligations and for any DIP Financing provided by any First Lien Creditor.
Any
adequate protection Lien on such existing or future assets securing the Second
Lien Obligations shall be subordinated (i) to the Lien on such collateral
securing the First Lien Obligations and any such DIP Financing provided by
any
First Lien Creditor, and (ii) to any other Liens granted to any First Lien
Creditor as adequate protection on the same basis as the other Liens securing
the Second Lien Obligations are so subordinated to such First Lien Obligations
under this Agreement.
(B) No
Distributions.
In any
Insolvency Proceeding involving an Obligor, Second Lien Creditors shall seek
neither (a) adequate protection in the form of Distributions in respect of
the
Second Lien Obligations nor (b) adequate protection in the form of Distributions
with respect to their rights to the Collateral.
(iii) Allowance
of Postpetition Accrual.
Second
Lien Creditors shall not object to, oppose or challenge any claim by any First
Lien Creditor for allowance in any Insolvency Proceeding of First Lien
Obligations consisting of post-petition interest, fees, or expenses.
(f) Section
1111(b) of the Bankruptcy Code.
Second
Lien Creditors shall not object to, oppose, support any objection, or take
any
other action to impede, the right of any First Lien Creditor to make an election
under Section 1111(b)(2) of the Bankruptcy Code. Each Second Lien Creditor
waives any claim it may hereafter have against any First Lien Creditor arising
out of the election by any First Lien Creditor of the application of Section
1111(b)(2) of the Bankruptcy Code.
(g) No
Waiver.
Nothing
contained herein shall prohibit or in any way limit
First
Lien Creditors from objecting in any Insolvency Proceeding involving an Obligor
to any action taken by any Second Lien Creditor, including the seeking by such
Second Lien Creditor of adequate protection or the assertion by such Second
Lien
Creditor of any of its rights and remedies under the Note
Documents.
(h) Avoidance
Issues.
If any
First Lien Creditor is required in any Insolvency Proceeding or otherwise to
turn over, disgorge or otherwise pay to the estate of any Obligor any amount
paid in respect of the First Lien Obligations (a “First
Lien Creditor Recovery”),
then
such First Lien Creditor shall be entitled to a reinstatement of First Lien
Obligations with respect to all such recovered amounts, and all rights,
interests, priorities and privileges recognized in this Agreement shall apply
with respect to any such First Lien Creditor Recovery. If this Agreement shall
have been terminated prior to such First Lien Creditor Recovery, this Agreement
shall be reinstated in full force and effect, and such prior termination shall
not diminish, release, discharge, impair, or otherwise affect the obligations
of
the parties hereto from such date of reinstatement. Collateral or proceeds
thereof received by any Second Lien Creditor after a Discharge of First Lien
Obligations and prior to the reinstatement of such First Lien Obligations shall
be delivered to First Lien Creditors upon such reinstatement in accordance
with
Section
9(j).
7
(i) Plan
of Reorganization.
(a) If,
in
any Insolvency Proceeding, debt obligations of the reorganized debtor secured
by
Liens upon any property of the reorganized debtor are distributed pursuant
to a
plan of reorganization or similar dispositive restructuring plan, both on
account of First Lien Obligations and on account of Second Lien Obligations,
then, to the extent the debt obligations distributed on account of the First
Lien Obligations and on account of the Second Lien Obligations are secured
by
Liens upon the same property, the provisions of this Agreement will survive
the
distribution of such debt obligations pursuant to such plan and will apply
with
like effect to the Liens securing such debt obligations, and
(b) No
Second
Lien Creditor
shall
propose or support any plan of reorganization that is inconsistent with the
priorities or other provisions of this Agreement.
(j) Payments
Held in Trust/Turnover.
In the
event that, notwithstanding the foregoing provisions of this Section
9,
any
Distribution in respect of the Second Lien Obligations prohibited by this
Agreement shall be received by any Second Lien Creditor before there has been
a
Discharge of the First Lien Obligations, such Distribution shall be held in
trust for the benefit of and shall be paid over to or delivered to First Lien
Creditors, until there has been a Discharge of the First Lien
Obligations.
10. Notice
of Default and Certain Events.
Each
Second Lien Creditor shall promptly notify First Lien Creditors in writing
of
the occurrence of any of the following as applicable:
(a) any
default or event of default under the Second Lien Note issued to such Second
Lien Creditor; or
(b) the
demand for payment of, acceleration of or termination of any of the Second
Lien
Obligations.
11. Further
Assurances.
(a) Additional
Documents.
Each
Second Lien Creditor agrees to execute and deliver, upon the request of First
Lien Creditors, such documents and instruments (appropriate for filing, if
requested) as may be necessary or appropriate to fully implement or to fully
evidence the understandings and agreements contained in this Agreement. Without
limiting the foregoing, in the event that all or part of any of the First Lien
Obligations is hereafter refinanced, each Second Lien Creditor agrees to enter
into one or more new agreements with the refinancing lender or lenders on terms
identical to those of this Agreement.
(b) Attorney
in Fact.
Each
First Lien Creditor is hereby irrevocably constituted and appointed the
attorney-in-fact of each Second Lien Creditor in order to take all action,
either in such First Lien Creditor’s name or in the name of such Second Lien
Creditor, which in such First Lien Creditor’s reasonable opinion is necessary or
desirable to enable such First Lien Creditor to obtain all Distributions that
are to be turned over to such First Lien Creditor pursuant to this
Agreement.
12. Representations;
Warranties.
Each
Second Lien Creditor represents and warrants to each First Lien Creditor that:
(a) such Second Lien Creditor is the holder of the liens and security
interests which secure or will secure the Second Lien Obligations;
(b) there do not exist any currently effective subordinations of the Second
Lien Obligations or of such Second Lien Creditor’s liens and security interests
in the Collateral; (c) such Second Lien Creditor is currently informed of
the financial condition of each Obligor and of all other circumstances which
bear upon the risk of nonpayment of the First Lien Obligations; and (d) it
has full right, power, and authority to enter into this Agreement and, to the
extent such Second Lien Creditor is an agent or trustee for other parties,
that
this Agreement shall fully bind all such other parties.
8
13. Modification
of First Lien Obligations.
Each
Second Lien Creditor agrees that each First Lien Creditor shall have absolute
power and discretion, without notice to such Second Lien Creditor, to deal
in
any manner with the First Lien Obligations, including, but not by way of
limitation, the power and discretion to do any of the following: (a) any demand
for payment of any First Lien Obligations may be rescinded in whole or in part,
and any First Lien Obligations may be continued, and the First Lien Obligations
or the liability of any Obligor upon or for any part thereof, or any Collateral
or guaranty therefor, or right of offset with respect thereto, may, from time
to
time, in whole or in part, be renewed, modified, accelerated, compromised,
waived, surrendered, or released; and (b) the First Lien Notes issued to First
Lien Creditors may be amended, modified, supplemented, or terminated, in whole
or in part, as First Lien Creditors may deem advisable from time to time, and
any Collateral may be sold, exchanged, waived, surrendered, or released. Each
Second Lien Creditor will remain bound under this Agreement, and the
subordination provided for herein shall not be impaired, abridged, released,
or
otherwise affected notwithstanding any such renewal, modification, acceleration,
compromise, amendment, supplement, termination, sale, exchange, waiver,
surrender, or release. All dealings between First Lien Creditors and any Obligor
shall be deemed to have been consummated in reliance upon this
Agreement.
14. Waivers
by Second Lien Creditors.
(a) First
Lien Obligations.
(i)
All
First
Lien Obligations at any time incurred by any Obligor shall be deemed to have
been incurred, and all First Lien Obligations held by First Lien Creditors
shall
be deemed to have been extended, acquired or obtained, as applicable, in
reliance upon this Agreement, and each Second Lien Creditor hereby waives (i)
notice of acceptance, or proof of reliance, by each First Lien Creditors of
this
Agreement, and (ii) notice of the existence, renewal, extension, accrual,
creation, or non-payment of all or any part of the First Lien Obligations.
Nothing contained in this Agreement shall preclude any First Lien Creditor
from
discontinuing the extension of credit to any Obligor (whether under the Note
Documents or otherwise) or from taking (without notice to any Second Lien
Creditor, any Obligor, or any other Person) any other action in respect of
the
First Lien Obligations or the Collateral which any First Lien Creditor is
otherwise entitled to take with respect to the First Lien Obligations or the
Collateral.
(ii)
None
of
First Lien Creditors or any of their affiliates, directors, officers, employees,
or agents shall be liable for failure to demand, collect, or realize upon any
of
the Collateral or any Proceeds or for any delay in doing so or shall be under
any obligation to sell or otherwise Dispose of any Collateral or Proceeds
thereof or to take any other action whatsoever with regard to the Collateral
or
any part or Proceeds thereof. If any First Lien Creditor should exercise any
of
its contractual rights or remedies under the Note Documents (subject to the
express terms and conditions hereof), First Lien Creditors shall not have any
liability whatsoever to any Second Lien Creditor as a result of such action,
omission, or exercise. First Lien Creditors will be entitled to manage and
supervise their loans and extensions of credit under the Note Documents as
First
Lien Creditors may, in their sole discretion, deem appropriate, and First Lien
Creditors may manage their loans and extensions of credit without regard to
any
rights or interests that any Second Lien Creditor may have in the Collateral
or
otherwise except as otherwise expressly set forth in this Agreement. Each Second
Lien Creditor agrees that First Lien Creditors shall not incur any liability
as
a result of a sale, lease, license, application or other Disposition of all
or
any portion of the Collateral or any part or Proceeds thereof. First Lien
Creditors may, from time to time, enter into agreements and settlements with
Obligors as they may determine in their sole discretion without impairing any
of
the subordinations, priorities, rights or obligations of the parties under
this
Agreement, including, without limitation, substituting Collateral, releasing
any
Lien and releasing any Obligor. Each Second Lien Creditor waives any and all
rights it may have to require any First Lien Creditor to marshal assets, to
exercise rights or remedies in a particular manner, or to forbear from
exercising such rights and remedies in any particular manner or
order.
9
(b) Notice
of Acceptance and Other Waivers.
To the
fullest extent permitted by applicable law, each Second Lien Creditor hereby
waives: (i) notice of acceptance hereof; (ii) notice of any loans or other
financial accommodations made or extended under the First Lien Notes, or the
creation or existence of any First Lien Obligations; (iii) notice of the amount
of the First Lien Obligations; (iv) notice of any adverse change in the
financial condition of any Obligor or of any other fact that might increase
such
Second Lien Creditor’s risk hereunder; (v) notice of presentment for payment,
demand, protest, and notice thereof as to the First Lien Notes; and (vi) all
other notices (except if such notice is specifically required to be given to
such Second Lien Creditor under this Agreement or any Note Document) and demands
to which such Second Lien Creditor might otherwise be entitled.
(c) Lawsuits;
Defenses; Set-off.
To the
fullest extent permitted by applicable law, each Second Lien Creditor (i) waives
the right by statute or otherwise to require any First Lien Creditor to
institute suit against any Obligor or to exhaust any rights and remedies which
any First Lien Creditor has or may have against any Obligor; (ii) waives any
defense arising by reason of any disability or other defense (other than the
defense that the Discharge of the First Lien Obligations has occurred (subject
to the provisions of Section
9(c))
of any
Obligor or by reason of the cessation from any cause whatsoever of the liability
of such Obligor in respect thereof, (iii) waives any rights to assert against
any First Lien Creditor any defense (legal or equitable), set-off, counterclaim,
or claim which such Second Lien Creditor may now or at any time hereafter have
against any Obligor or any other party liable to any First Lien Creditor or
such
Second Lien Creditor, (iv) waives any defense arising by reason of any claim
or
defense based upon an election of remedies by any First Lien Creditor; and
(vi)
waives the benefit of any statute of limitations affecting such Second Lien
Creditor’s obligations hereunder or the enforcement thereof, and any act which
shall defer or delay the operation of any statute of limitations applicable
to
the First Lien Obligations shall similarly operate to defer or delay the
operation of such statute of limitations applicable to such Second Lien
Creditor’s obligations hereunder.
(d) Subrogation.
Solely
after Discharge of the First Lien Obligations shall have occurred, Second Lien
Creditors shall be subrogated to the rights of First Lien Creditors to the
extent that distributions otherwise payable to Second Lien Creditors have been
applied to the payment of the First Lien Obligations in accordance with the
provisions of this Agreement. First Lien Creditors shall have no obligation
or
duty to protect any of Second Lien Creditors’ rights of subrogation arising
pursuant to this Agreement or under any applicable law, nor shall First Lien
Creditors be liable for any loss to, or impairment of, any subrogation rights
held by Second Lien Creditors.
(e) ELECTION
OF REMEDIES.
WITHOUT
LIMITING THE GENERALITY OF ANY OTHER WAIVER OR OTHER PROVISION SET FORTH IN
THIS
AGREEMENT, EACH SECOND LIEN CREDITOR WAIVES, TO THE FULLEST EXTENT PERMITTED
BY
LAW, ALL RIGHTS AND DEFENSES ARISING OUT OF AN ELECTION OF REMEDIES BY FIRST
LIEN CREDITOR, EVEN THOUGH THAT ELECTION OF REMEDIES HAS DESTROYED THE RIGHTS
OF
SUBROGATION OF SECOND LIEN CREDITORS AND REIMBURSEMENT AGAINST ANY OBLIGOR
BY
THE OPERATION OF ANY APPLICABLE LAW.
10
15. Parties
Intended to be Benefited.
All of
the understandings, covenants, and agreements contained herein are solely for
the benefit of First Lien Creditors and Second Lien Creditors, and there are
no
other parties, including Obligors or any of the creditors, successors, or
assigns of Obligors, which are intended to be benefited, in any way, by this
Agreement.
16. No
Limitation Intended.
Nothing
contained in this Agreement is intended to or shall affect or limit, in any
way,
the rights that the Secured Creditors have with respect to any third parties.
The Secured Creditors hereby specifically reserve all of their respective rights
against Obligors and all other third parties. The First Lien Creditors hereby
acknowledge that each of them have received, or had an opportunity to receive,
and have had an opportunity to review the Second Lien Notes and documents
related thereto and acknowledge and ratify such agreements and the terms thereof
except as specifically modified herein.
17. Notices.
All
notices and other communications required or permitted hereunder shall be in
writing and shall be deemed effectively given upon personal delivery, delivery
by recognized overnight courier (such as FedEx) or upon receipt of confirmation
of delivery by facsimile, telecopy, or registered or certified mail, return
receipt requested, postage prepaid, addressed:
to
First Lien Creditors:
AirWorks
Funding LLLP
000
Xxxxxxx Xxxxxx
00xx
Xxxxx
Xxx
Xxxx, Xxx Xxxx 00000
Attn:
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
Attn:
Xxxxxxxx Xxxxxxx
Telephone:
(000) 000-0000
Facsimile:
(000) 000-0000
with
a copy to:
RS
Properties I LLC
000
Xxxxxxxx
0xx
Xxxxx
Xxx
Xxxx, Xxx Xxxx 00000
Attn:
Xxxx Xxxx
Telephone:
(000) 000-0000
Facsimile:
(000) 000-0000
11
to
Second Lien Creditors:
Xxxxxxx
X. Sun
00000
Xxxxxxxxxx Xxxx
Xxxxxx,
XX 00000
Telephone:
(___) _____-__________
Facsimile:
(___) _____-__________
and:
Xxxxxxx
X. Xxxxxxxxx
00000
Xxxxxx Xxxxx Xxxx
Xxxxxx,
XX 00000
Telephone:
(000) 000-0000
Facsimile:
(000) 000-0000
18. Severability.
Whenever possible, each provision of this Agreement shall be interpreted in
such
manner as to be effective and valid under applicable law, but if any provision
of this Agreement shall be prohibited by or invalid under applicable law, such
provision shall be ineffective to the extent of such prohibition or invalidity,
without invalidating the remainder of such provision or the remaining provisions
of this Agreement.
19. Complete
Agreement.
Except
with respect to the First Lien Intercreditor Agreement, this Agreement
constitutes the complete agreement and understanding of each of the Secured
Creditors and supersedes all prior or contemporaneous oral and written
negotiations, agreements and understandings, express or implied, with respect
to
the subject matter hereof.
20. Successors
and Assigns.
This
Agreement shall be binding upon, and inure to the benefit of, the successors
and
assigns of First Lien Creditors and Second Lien Creditors. Each Second Lien
Creditor agrees that it shall not assign or transfer any of the Second Lien
Obligations or any of its rights under the Note Documents (including any liens
and security interests in the Collateral) without (a) prior notice being given
to First Lien Creditors and (b) such assignment or transfer being made expressly
subject to the terms of this Agreement.
21. Waiver
of Jury Trial.
EACH
SECURED CREDITOR HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY
CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (A) ARISING UNDER THIS AGREEMENT OR
ANY
OTHER INSTRUMENT, DOCUMENT, OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION
HEREWITH, OR (B) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE
DEALINGS OF FIRST LIEN CREDITORS AND SECOND LIEN CREDITORS WITH RESPECT TO
THIS
AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED
BY THEM IN CONNECTION HEREWITH, OR THE TRANSACTIONS RELATED HERETO OR THERETO,
IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING
IN
CONTRACT OR TORT OR OTHERWISE. EACH SECURED CREDITOR HEREBY AGREES AND CONSENTS
THAT ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT
TRIAL WITHOUT JURY, AND THAT EITHER OF THEM MAY FILE AN ORIGINAL COUNTERPART
OR
A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT TO
THE
WAIVER OF RIGHT TO TRIAL BY JURY.
12
22. Waivers,
Amendments, Choice of Law, etc.
Any
waiver or amendment hereunder must be evidenced by a signed writing of a party
to be bound thereby, and shall only be effective in the specific instance.
This
Agreement shall be governed by and construed under the laws of the State of
New
York as applied to agreements among residents of New York made and to be
performed entirely within the State of New York. Each party to this Agreement
hereby irrevocably agrees that any legal suit, action or proceeding arising
out
of or relating to this Agreement or the transactions contemplated hereunder
may
be brought in the courts of New York County in the State of New York or of
the
United States of America for the Southern District of New York, and hereby
expressly submits to the personal jurisdiction and venue of such courts for
the
purposes thereof and expressly waives any claim of improper venue and any claim
that such courts are an inconvenient forum. Each party hereby irrevocably
consents to the service of process of any of the aforementioned courts in any
such suit, action or proceeding, by the mailing of copies thereof by registered
or certified mail, postage prepaid, to its address set forth in the Funding
Agreement, such service to become effective ten (10) days after such mailing.
The headings in this Agreement are for convenience of reference only, and shall
not alter or otherwise affect the meaning hereof.
23. Construction.
Unless
the context of this Agreement clearly requires otherwise, references to the
plural include the singular, the singular includes the plural, the part includes
the whole, “including” is not limiting, and “or” has the inclusive meaning
represented by the phrase “and/or.” The words “hereof,” “herein,” “hereby,”
“hereunder,” and similar terms in this Agreement refer to this Agreement as a
whole and not to any particular provision of this Agreement. Article, section,
subsection, exhibit, and schedule references are to this Agreement unless
otherwise specified.
24. Costs
and Attorneys Fees.
In the
event it becomes necessary for any First Lien Creditor to commence or become
a
party to any proceeding or action to enforce the provisions of this Agreement,
the court or body before which the same shall be tried shall award to such
First
Lien Creditor all costs and expenses thereof, including, but not limited to,
reasonable attorneys’ fees, the usual and customary and lawfully recoverable
court costs, and all other expenses in connection therewith.
25. Information
Concerning Financial Condition.
Each
Second Lien Creditor hereby assumes responsibility for keeping itself informed
of the financial condition of Obligors and of all other circumstances bearing
upon the risk of nonpayment of the Second Lien Obligations, and agrees that
First Lien Creditors have and shall have no duty to advise any Second Lien
Creditor of information known to First Lien Creditors regarding such condition
or any such circumstances. In the event that First Lien Creditors, in their
sole
discretion, undertake, at any time or from time to time, to provide any such
information to any Second Lien Creditor, then First Lien Creditors shall not
be
under any obligation (a) to provide any such information to any Second Lien
Creditor on any subsequent occasion, (b) to undertake any investigation, or
(c) to disclose any information which, pursuant to its commercial finance
practices, First Lien Creditors wish to maintain confidential. Each Second
Lien
Creditor acknowledges and agrees that First Lien Creditors have not made any
warranties or representations with respect to the legality, validity,
enforceability, collectibility or perfection of the First Lien Obligations
or
any liens or security interests held in connection therewith.
13
26. Counterparts.
This
Agreement may be executed in any number of counterparts, and by First Lien
Creditors and Second Lien Creditors in separate counterparts, each of which
shall be an original, but all of which shall together constitute one and the
same Agreement. Delivery of an executed counterpart of a signature page of
this
Agreement or any document or instrument delivered in connection herewith by
telecopy or electronic transmission shall be effective as delivery of a manually
executed counterpart of this Agreement or such other document or instrument,
as
applicable.
[Remainder
of page intentionally left blank]
14
IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the date first herein above set forth.
|
FIRST
LIEN CREDITORS:
SANDS
BROTHERS VENTURE CAPITAL LLC
By:
/s/
Xxxxx X. Xxxxxx
Name:
Xxxxx
X. Xxxxxx
Its:
COO
SANDS
BROTHERS VENTURE CAPITAL II LLC
By:
/s/
Xxxxx X. Xxxxxx
Name:
Xxxxx
X. Xxxxxx
Its:
COO
SANDS
BROTHERS VENTURE CAPITAL III LLC
By:
/s/
Xxxxx X. Xxxxxx
Name:
Xxxxx
X. Xxxxxx
Its:
COO
SANDS
BROTHERS VENTURE CAPITAL IV LLC
By:
/s/
Xxxxx X. Xxxxxx
Name:
Xxxxx
X. Xxxxxx
Its:
COO
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
Its:
Chairman
By:
/s/
Xxxxxxx X. Xxxxxxxx
Name:
Xxxxxxx X. Xxxxxxxx
Its:
President
AIRWORKS
FUNDING LLLP
By:
Compass Partners, LLC, its general partner
By:
/s/
Xxxxxxx X. Xxxxxxx
Name:
Xxxxxxx X. Xxxxxxx
Its:
President
|
S-1
Sun
and Gumbinner Intercreditor Agreement
|
RS
PROPERTIES I LLC
By:
/s/
Xxxx Xxxx
Name:
Xxxx Xxxx
Its:
Manager
SECOND
LIEN CREDITORS:
/s/
Xxxxxxx X. Sun
Xxxxxxx
X. Sun
/s/
Xxxxxxx X. Xxxxxxxxx by Xxxxxxx X. Sun AIF
Xxxxxxx
X. Sun, as attorney-in-fact for Xxxxxxx X.
Xxxxxxxxx
|
S-2
Sun
and Gumbinner Intercreditor
Agreement
ACKNOWLEDGMENT
Each
of
the undersigned hereby acknowledges receipt of a copy of the foregoing
Intercreditor Agreement (initially capitalized terms used without definitions
herein shall have the meaning ascribed to such terms in the Intercreditor
Agreement) and consents thereto, and agrees to recognize all rights granted
thereby to the parties thereto, and will not do any act or perform any
obligation which is not in accordance with the agreements set forth in such
Intercreditor Agreement. Each of the undersigned further acknowledges that
no
Obligor is an intended beneficiary under the Intercreditor
Agreement.
Dated
as
of June 19, 2007.
|
KRONOS
ADVANCED TECHNOLOGIES, INC.
By:
/s/
Xxxxxxx X. Xxxxxx
Name:
Xxxxxxx
X. Xxxxxx
Its:
COO
KRONOS
AIR TECHNOLOGIES, INC.
By:
/s/
Xxxxxxx X. Xxxxxx
Name:
Xxxxxxx
X. Xxxxxx
Its:
COO
|
S-3
Sun
and Gumbinner Intercreditor
Agreement
