REGISTRATION RIGHTS AGREEMENT
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:
(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.
(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:
(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)).
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;
(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.
(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 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.
(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.
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. 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.
(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
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▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Paul, Hastings, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
RS Properties I LLC
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▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
if to Company to:
Kronos Advanced Technologies, Inc.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Telephone: (___) ___-____
Facsimile: (___) ___-____
with a copy to:
▇▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ LLP
Miami Center, 20th Floor
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇.
▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
(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]
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/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President
SANDS BROTHERS VENTURE CAPITAL LLC
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
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Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: COO
SANDS BROTHERS VENTURE CAPITAL II LLC
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
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Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: COO
SANDS BROTHERS VENTURE CAPITAL III LLC
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
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Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: COO
SANDS BROTHERS VENTURE CAPITAL IV LLC
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
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Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: COO
CRITICAL CAPITAL GROWTH FUND, L.P.
By: Critical Capital, L.P., its General
Partner
By: Critical Capital Corporation, its General
Partner
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
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Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Chairman
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: President
RS PROPERTIES I LLC
By: /s/ ▇▇▇▇ ▇▇▇▇
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Name: ▇▇▇▇ ▇▇▇▇
Title: Manager
COMPANY:
KRONOS ADVANCED TECHNOLOGIES, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: COO
