EXHIBIT 99.9
FIRST AMENDMENT TO
MASTER LOAN AND INVESTMENT AGREEMENT
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THIS FIRST AMENDMENT TO MASTER LOAN AND INVESTMENT AGREEMENT (together with
all Exhibits hereto, this "AMENDED AGREEMENT") is made this 25 day of October,
2004, by and among KRONOS ADVANCED TECHNOLOGIES, INC., F/K/A TSET, INC., a
Nevada corporation, whose principal place of business is located at 000 Xxxxxx
Xx., Xxxxx 000, Xxxxxxx, XX 00000 ("KRONOS"); KRONOS AIR TECHNOLOGIES INC., a
Nevada corporation, whose principal place of business is located at 0000 000xx
Xxxxxx XX, Xxxxxxx, XX 00000 ("KRONOS AIR"); and FKA DISTRIBUTING CO. D/B/A
HOMEDICS, INC., a Michigan corporation, whose principal place of business is
located at 0000 Xxxxxxx Xxxxx, Xxxxxxxx Xxxxxxxx, Xxxxxxxx 00000 ("HOMEDICS").
Kronos and Kronos Air are collectively referred to herein as the "BORROWERS" and
individually as a "BORROWER."
R E C I T A L S:
A. The Borrowers desired to borrow up to $3,400,000 from HoMedics, and
HoMedics agreed to loan such funds to the Borrowers on the terms and
conditions set forth in that certain Master Loan and Investment Agreement
executed on May 9, 2003 between HoMedics and the Borrowers (the
"AGREEMENT").
B. The Borrowers failed to make their August 2004 payment to HoMedics. In July
of 2004 the Borrowers began negotiating with HoMedics to provide future
flexibility for Borrowers to make their required payments and to secure an
obligation from HoMedics to fund an additional loan in the amount of
$925,000.
C. On October 15, 2004, HoMedics agreed to forbear from taking any action
under the Agreement pursuant to the terms of that certain forbearance
letter attached hereto as Exhibit A and incorporated herein by this
reference
D. During negotiations with HoMedics concerning the Agreement, the parties
executed the Second Amendment to their Exclusive Licensing Agreement, which
was executed on September 24, 2004 (the "AMENDED LICENSE Agreement").
E. This Amended Agreement, together with the execution and delivery of the
documents referred to herein, should provide the Borrowers with significant
flexibility without the threat of a potential default in the near future.
F. The execution of this Amended Agreement and all the related documents is
occurring subsequent to Kronos' execution of the following documents with
Cornell Capital Partners, LP ("CORNELL"), which commit Cornell to (i)
purchase $500,000 of Kronos stock (the "$.5M EQUITY INVESTMENT") subject to
the execution of this Amended Agreement; (ii) loan $4,000,000 to Kronos
under two Equity Backed Promissory Notes (collectively, the "$4M NOTE");
and (iii) perform certain obligations under a $20,000,000 Standby Equity
Distribution Agreement (the "SEDA", which together with the $4M Note and
the $.5M Equity Investment shall hereafter be referred to collectively as
the "CORNELL INVESTMENT").
G. All terms not otherwise defined herein shall have the same meaning as those
terms have in the Agreement.
NOW, THEREFORE, in consideration of the foregoing and for other valuable
consideration, the receipt and adequacy of which is hereby acknowledged, the
parties hereto agree as follows:
ARTICLE I
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LOAN AND INVESTMENT COMMITMENT AND DOCUMENTS
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1.1 LOAN AND INVESTMENT COMMITMENT. Subject to the terms and conditions set
forth herein, HoMedics hereby agrees to lend the Borrowers and invest in Kronos
up to an additional $925,000 (the "INVESTMENT PROCEEDS") as follows:
A. Upon the execution and delivery by the parties of this Amended
Agreement and the execution and delivery by the Borrowers of the Investment
Documents (defined below) identified in Section 1.2, HoMedics agrees to loan the
Borrowers up to an additional $925,000 (the "$925,000 LOAN"). The proceeds of
the $925,000 Loan shall be funded when Kronos attains the following milestones:
(i) First, $175,000 shall be funded upon Flextronics delivering
boards/power supply that can be plugged into prototypes as delivered by
Flextronics and the prototype, with the Flextronics boards and the
components from CP Tech, attains the same or better testing results as those
achieved in the August 13th and 25th testings (the "FIRST MILESTONE").
(ii) Second, $250,000 shall be funded upon obtaining 1) prototype
tooling of the current prototype configuration; 2) testing for performance
to spec; and 3) performing to spec (the "SECOND MILESTONE").
(iii) The last $500,000 shall be funded upon the Production
Effective Date, as such term is defined in the Exclusive Licensing Agreement
dated October 23, 2002 between Kronos and HoMedics, as amended ("LICENSE
AGREEMENT"), as the same may be amended from time to time (the "THIRD
MILESTONE," which together with the First Milestone and Second Milestone are
collectively referred to as the "MILESTONES").
Upon Kronos attaining each Milestone, HoMedics shall fund the appropriate
amount of loan proceeds into an escrow account at the Law Offices of Seyburn,
Kahn, Xxxx, Xxxx and Xxxxxx, P.C. to be disbursed pursuant to the terms of the
Escrow Agreement attached hereto as Exhibit 1.1A (the "ESCROW AGREEMENT"), which
is incorporated herein by this reference. Such loan proceeds shall be released
from the escrow account, as provided in the Escrow Agreement.
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B. Upon the execution and delivery by the parties of this Amended
Agreement, Warrant No. 3 and the Amended and Restated Registration Rights
Agreement, HoMedics shall acquire Warrant No. 3 (as defined below) from Kronos
in exchange for $75,000 and HoMedics' agreement herein to loan an additional
$925,000 as set forth more specifically in Section 1.1A above. HoMedics shall
deduct from such proceeds the Closing Fees (as defined in Section 2.3 below).
1.2 INVESTMENT DOCUMENTS. The loans made pursuant to this Amended Agreement
shall be evidenced by the following documents and instruments:
A. AMENDED AND RESTATED $2.4 MILLION SECURED PROMISSORY NOTE. The
$2,400,000 already loaned by HoMedics to the Borrowers pursuant to the Agreement
and the $2.4M Note shall be amended and restated as evidenced by the Amended and
Restated Secured Promissory Note in the form of EXHIBIT 1.2(A) (the "AMENDED
$2.4M NOTE"). Interest shall accrue on the outstanding principal balance of the
$2.4M Note at the rate of 6% per annum with a maturity date of five (5) years
from the date of this Agreement (the "MATURITY DATE"). No payments shall be
required under the Amended $2.4M Note until the earlier of (i) the quarter
following the Production Effective Date; or (ii) twenty-four (24) months from
the date of this Amended Agreement (the "REPAYMENT START DATE"). Interest
accrued during such period shall become part of the principal balance of the
note and shall be included as principal in any amortization of the note.
Payments of principal and accrued interest shall be payable in equal quarterly
installments beginning on the first day of the quarter after the Repayment Start
Date and continuing on the first day of each November, February, May and August
until paid in full by the Maturity Date. Any payments made by the Borrowers
shall first be applied against the quarterly payment due under the Amended $2.4M
Note and then to the quarterly payment due under the $925,000 Note described in
subsection (B) below.
B. $925,000 SECURED PROMISSORY NOTE. The $925,000 to be loaned by
HoMedics to the Borrowers shall be evidenced by a Secured Promissory Note in the
form of EXHIBIT 1.2(B) (the "$925,000 NOTE"). Interest shall accrue on the
outstanding principal balance of the $925,000 Note at the rate of 6% per annum
and shall also mature on the Maturity Date. No payments of principal or interest
shall be required under the $925,000 Note until the Repayment Start Date (the
"ACCRUAL PERIOD"). Interest accrued during the Accrual Period shall become part
of the principal balance of the $925,000 Note and shall be included as principal
in any amortization of the $925,000 Note. Payments of principal and accrued
interest shall be payable in equal quarterly installments beginning on the first
day of the quarter after the Repayment Start Date and continuing on the first
day of each November, February, May and August until paid in full by the
Maturity Date.
C. STOCK PURCHASE WARRANT NO. 3. Kronos shall issue to HoMedics a
warrant in the form of EXHIBIT 1.2(C) ("Warrant No 3") to purchase 26,507,658
shares of Kronos Common Stock (defined in Section 3.9(A)) (the "WARRANT NO. 3
SHARES"). Warrant No. 3 shall be exercisable for a period of 10 years from the
date of issue. The exercise price shall be $0.10 per share. Warrant No. 3 shall
contain the provisions described in Section 1.2(E) herein. In consideration for
Warrant No. 3 granted pursuant to this Amended Agreement, HoMedics is hereby
deemed to deliver to Kronos $75,000 by funding the Closing Fees owed and
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HoMedics has agreed to amend Warrant Nos. 1 and 2 to remove the anti-dilution
protection previously granted as set forth in the Amended and Restated Warrant
No. 1 and the Amended and Restated Warrant No. 2 in the forms attached hereto as
Exhibits 1.2(C)(1) and (C)(2).
D. REGISTRATION RIGHTS AGREEMENT. Kronos shall grant HoMedics
piggy-back registration rights and one (1) demand registration right with
respect to any shares of Kronos Common Stock that it may acquire under Warrant
Nos. 1, 2 and 3 pursuant to the terms and conditions of an Amended and Restated
Registration Rights Agreement, in the form of EXHIBIT 1.2(D) (the "AMENDED
REGISTRATION RIGHTS AGREEMENT"). HoMedics agrees not to exercise (i) Warrant
Nos. 1,2 and 3 by means of a "cashless exercise" for one year following the
effective date of the registration statement to be filed by Kronos with the SEC
for the Cornell Investment; (ii) its demand registration rights for one year
following the effective date of the registration statement to be filed by Kronos
with the SEC for the Cornell Investment, and (iii) its piggyback registration
rights with respect to the registration statement the Company plans to file with
the SEC with respect to the Cornell Investment on or about October 24, 2005.
E. DILUTION. If Kronos shall issue, at any time after the date hereof
and before the exercise by HoMedics of Warrant No. 3 and any warrants issued
pursuant to this Section 1.2(E), any Common Stock, warrants, options, or similar
rights to acquire Common Stock at an issue price, exercise price or value less
than $0.20 per share, and following such securities issuance the shares of
Common Stock issuable to HoMedics under Warrant No. 3 and any warrants issued
pursuant to this Section 1.2(E), in the aggregate, represents less than thirty
percent (30%) of the Common Stock that is issued and outstanding as of the date
of such securities issuance, on a fully diluted basis assuming the conversion or
exchange of all outstanding convertible securities of Kronos and the exercise of
all outstanding options, warrants or similar rights to acquire Common Stock,
then Kronos shall issue to HoMedics (without the payment of additional
consideration) additional warrants, in the same form as Warrant No. 3 (and with
the same expiration date), so that the number of shares of Common Stock that
HoMedics may acquire pursuant to Warrant Nos. 1, 2 and 3 and any warrants issued
pursuant to this Section 1.2(E), in the aggregate, shall equal thirty percent
(30%) of the Common Stock, on a fully diluted basis, assuming the conversion or
exchange of all outstanding options, warrants or similar rights to acquire
Common Stock (except for unexercised options issued to employees, officers,
directors and consultants constituting Option Shares as defined in Section 3.9).
The calculation of the additional warrants to be issued to provide HoMedics
with 30% of Kronos Common Stock on a fully diluted basis (the "ANTI-DILUTIVE
WARRANTS TO BE ISSUED") shall be calculated pursuant to the following formula:
Kronos Shares Outstanding Post-Dilution Event (Fully Diluted Excluding
Option Shares) / 70% = Total Shares Outstanding (Fully Diluted)
Total Shares Outstanding (Fully Diluted) - Kronos Shares Outstanding
Post-Dilution Event (Fully Diluted) = Total HoMedics Warrants
Total HoMedics Warrants - HoMedics Warrants Owned Pre-Dilution Event =
Anti-Dilutive Warrants to be Issued
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Notwithstanding anything to the contrary set forth herein this Section
1.2(E), HoMedics hereby waives its right to receive any additional warrants it
would otherwise be entitled to receive pursuant to this Section 1.2(E) with
respect to all shares of Common Stock that Kronos sells to Cornell pursuant to
the SEDA, the proceeds of which are directly used to repay the $4M Note.
ARTICLE II
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CONDITIONS TO HOMEDICS' OBLIGATIONS
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The obligations of HoMedics under this Amended Agreement are subject to the
satisfaction of each of the following conditions:
2.1 DELIVERY OF INVESTMENT DOCUMENTS. The Borrowers shall have executed and
delivered to HoMedics and, as appropriate, there shall have been filed and
recorded with such filing or recording offices as HoMedics shall deem
appropriate, the following:
A. Amended and Restated $2,400,000 Secured Promissory Note;
B. $925,000 Secured Promissory Note;
C. Escrow Agreement;
D. Warrant No. 3;
E. Amended and Restated Warrant No. 1;
F. Amended and Restated Warrant No. 2;
G. Amended and Restated Registration Rights Agreement.
2.2 DELIVERY OF ANCILLARY DOCUMENTS: The Borrowers shall have furnished to
HoMedics the following documents and instruments, all in the form reasonably
acceptable to HoMedics:
A. RESOLUTIONS. A copy of the resolutions of the Board of Directors of
each Borrower authorizing the execution, delivery and performance of this
Amended Agreement, the borrowings and the issuance of the warrants hereunder,
the Notes and other Investment Documents to which it is a party, which
resolutions shall have been certified by an officer of each Borrower as being
complete, accurate and in full force and effect.
B. GOOD STANDING. A certificate of good standing from the jurisdiction
in which each Borrower is organized and certificates of qualification to conduct
business for each jurisdiction in which it is required to qualify to do
business, except where the failure would not have an adverse effect on either
Borrower.
C. CERTIFICATE. A copy of the Certificate of Incorporation of each
Borrower, including all amendments thereto and restatements thereof, all of
which shall have been certified by the jurisdiction of organization.
D. BYLAWS. A copy of the Bylaws of each Borrower, including all
amendments thereto and restatements thereof, which shall have been certified by
the Secretary or Assistant Secretary of each Borrower as being complete,
accurate and in full force and effect.
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E. INCUMBENCY. Certificates of the Secretary or Assistant Secretary of
each Borrower as to the incumbency and signatures of the officers of each
Borrower signing this Amended Agreement, the Investment Documents and the
Amended License.
X. XXXX SEARCH. Except as set forth in Exhibit 3.4, UCC record and
other searches disclosing that no liens or encumbrances have been filed against
any of the Collateral (other than HoMedics' liens).
2.3 PAYMENT OF CLOSING FEES. At the time the Agreement was executed, Kronos
paid $25,000 of the $50,000 of costs incurred by HoMedics in connection with
this transaction, including without limitation, legal fees of HoMedics' legal
counsel, and have agreed to now pay the remaining $25,000 owed, as well as an
additional $50,000. The total Closing Fees of $75,000 shall be deducted from the
proceeds of the consideration paid for Warrant No. 3, as provided in Section
1.1(B).
ARTICLE III
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REPRESENTATIONS AND WARRANTIES OF KRONOS
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Kronos and Kronos Air hereby represent and warrant to HoMedics as follows,
all of which shall survive the execution and delivery of this Amended Agreement
and the closing of the transactions contemplated herein:
3.1 CORPORATE EXISTENCE. (A) Each Borrower is a corporation duly organized,
validly existing and in good standing under the laws of the state of Nevada; (B)
Each Borrower has the power and authority to own its property and assets and to
carry out its business as now being conducted and is duly qualified to do
business and in good standing in every jurisdiction wherein failure to be so
qualified or in good standing could have a material adverse effect on its
business, operations or activities; and (C) Each Borrower has the power and
authority to execute, deliver and perform this Amended Agreement, to borrow
money in accordance with the terms set forth herein and in the Investment
Documents and to execute, deliver and perform its obligations under this Amended
Agreement, the Investment Documents, the Amended License and all other documents
and instruments to be executed and delivered by it in connection with the
consummation of the transactions contemplated hereunder (collectively, the
"KRONOS AGREEMENTS").
3.2. AUTHORIZATIONS AND APPROVALS. The execution, delivery and performance
of the Kronos Agreements, the borrowings hereunder and thereunder (A) have been
duly authorized by all requisite corporate action of each Borrower; (B) do not
require registration with or consent or approval of, or other action by, any
federal, state or other governmental authority or regulatory body; (C) will not
violate any provision of law, any order of any court or other agency of
government, the Certificate of Incorporation or Bylaws of either Borrower, any
provision of any indenture, note, Agreement or other instrument to which either
Borrower is a party, or by which any of its properties or assets are bound; (D)
will not be in conflict with, result in a breach of or constitute (with or
without notice or passage of time) a default under any such indenture, note,
Agreement or other instrument; and (E) will not result in the creation or
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imposition of any lien, charge or encumbrance of any nature whatsoever upon any
of the properties or assets of either Borrower, other than the liens in favor of
HoMedics as contemplated hereby.
3.3. NO LITIGATION. Except as set forth in the SEC Documents (as defined
below), there are no actions, suits or proceedings, at law or in equity, and no
proceedings before any arbitrator or by or before any governmental commission,
board, bureau, or other administrative agency, pending, or, to the best
knowledge of each Borrower, threatened against or affecting it or any of its
properties or rights which, if adversely determined could materially impair its
right to carry on its business substantially as now conducted, or could have
material adverse effect upon the financial condition of either Borrower. "SEC
DOCUMENTS" shall mean Annual Reports on Form 10-KSB, Quarterly Reports on Form
10-QSB, Current Reports on Form 8-K and Proxy Statements of Kronos filed by
Kronos for a period of twelve (12) months immediately preceding the date hereof.
3.4 NO LIENS. Except as set forth in Exhibit 3.4, none of the assets and
properties of either Borrower, including without limitation the Intellectual
Property, are subject to any mortgage, pledge, lien, security interest or other
encumbrance of any kind or character.
3.5 FINANCIAL STATEMENTS. All consolidated and consolidating balance
sheets, earnings statements and other financial data furnished to HoMedics for
the purposes of, or in connection with, this Amended Agreement and the
transactions contemplated herein, have been prepared in accordance with
generally accepted accounting principles, consistently applied ("GAAP") (except
as disclosed therein), and do or will fairly present the financial condition of
Kronos as of the dates, and the results of its operations for the periods, for
which the same are furnished to HoMedics. Neither Borrower has any material
contingent obligations, liabilities for taxes, long-term leases or unusual
forward or long-term commitments not disclosed by the financial statements set
forth in the SEC Documents that have been issued by either Borrower prior to the
date of this Amended Agreement.
3.6 TAXES. Each Borrower has filed all federal, state and local tax returns
and other reports they are required by law to file, have paid or caused to be
paid all taxes, assessments and other governmental charges that are shown to be
due and payable under such returns, and have made adequate provision for the
payment of such taxes, assessments or other governmental charges which have
accrued but are not yet payable. Except as set forth in the SEC Documents,
neither Borrower has any knowledge of any deficiency or assessment in connection
with any taxes, assessments or other governmental charges and all deficiencies
resulting from any audits have been paid or settled.
3.7 COMPLIANCE WITH LAWS. Each Borrower has complied with all applicable
laws, to the extent that failure to comply would have a material adverse effect
on its operations, assets or the conduct of its business.
3.8 OTHER DEBT. Except as set forth in the SEC Documents and incurred in
the ordinary course of business, neither Borrower has any indebtedness for money
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borrowed or any direct or indirect obligations under any leases (whether or not
required to be capitalized under GAAP) or any Agreements of guarantee or surety.
3.9 ISSUANCE OF SECURITIES.
A. CAPITALIZATION. As more specifically described in EXHIBIT 3.9(A),
the authorized capital stock of Kronos consists of five hundred million
(500,000,000) shares of common stock, $.001 par value per share ("KRONOS COMMON
STOCK"), of which 100,556,884 shares are currently issued and outstanding (the
"OUTSTANDING SHARES"), including, as of the date hereof, a reserve for options
to acquire approximately 12,813,812 shares of Kronos Common Stock (the "OPTION
SHARES") and a reserve for warrants to acquire 15,792,342 shares of Kronos
Common Stock (the "WARRANT SHARES"). The Outstanding Shares, the Option Shares
and the Warrant Shares, when issued, constitute or will constitute all of the
issued and outstanding capital stock of Kronos, and all of such securities are
validly issued, fully paid (other than the payment of the price to be paid in
connection with the exercise of the Option Shares and the Warrant Shares),
nonassessable, and have been so issued in full compliance with all applicable
federal and state securities laws. Other than Agreements relating to the Option
Shares, Warrant Shares and the Cornell Investment, there are no outstanding
subscriptions, options, rights, warrants, convertible securities or other
Agreements or commitments providing for the issuance, disposition or acquisition
of any of Kronos' capital stock (other than this Amended Agreement). There are
no outstanding or authorized stock appreciation, phantom stock or similar right
with respect to Kronos, and there are no voting trusts, proxies or any other
Agreements or understandings with respect to the voting of the capital stock of
Kronos. Kronos is not subject to any obligation (contingent or otherwise) to
repurchase or otherwise acquire or retire any of its capital stock.
B. There are 26,507,658 shares of Kronos Common Stock that have been
duly authorized and reserved for issuance upon exercise of Warrant No. 3. Upon
issuance and payment therefor in accordance with the terms and conditions of
this Amended Agreement and Warrant No. 3, such shares shall be validly issued,
fully paid and non-assessable and free from all taxes, liens and charges, with
the holders being entitled to all rights accorded to a holder of Kronos Common
Stock.
3.10 MATERIAL AGREEMENTS. Each Borrower has and, to its knowledge, all
parties to each of the material licenses, contracts or commitments of any kind
(including, without limitation, employment Agreements, collective bargaining
Agreements, powers of attorney, distribution contracts, patent or trademark
licenses, bonus, pension and retirement plans, or accrued vacation pay,
insurance and welfare Agreements) have, complied with the provisions of such
licenses, contracts or commitments and, neither Borrower is and, to its
knowledge, no other party to such Agreements is in default thereunder, nor has
there occurred any event which with notice or the passage of time, or both,
would constitute such a default.
3.11 ENVIRONMENTAL.
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A. Neither Borrower is a party to any litigation or administrative
proceeding, nor to the best of the knowledge of each Borrower, is any litigation
or administrative proceeding threatened against it, which in either case asserts
or alleges that (a) either Borrower violated any federal, state or local laws,
ordinances, statute, rules or regulations governing the use, storage,
transportation, or disposal of Hazardous Materials ("ENVIRONMENTAL LAWS"); (b)
either Borrower is required to clean up, remove, or take remedial or other
action due to the disposal, depositing, discharge, leaking or other release of
any Hazardous Materials; or (c) either Borrower is required to pay all or a
portion of the cost of any past, present, or future clean up, removal or
remedial or other response action which arises out of or is related to the
disposal, depositing, discharge, leaking or other release of any Hazardous
Materials on any of its properties or with respect to any of its assets.
B. To the best knowledge of each Borrower, there are no conditions
existing which would subject either Borrower to damages, penalties, injunctive
relief or clean up costs under any Environmental Laws or which require or are
likely to require clean up, removal, remedial action or other response action
pursuant to Environmental Laws by it.
C. Neither Borrower is subject to any judgment, decree, order or
citation related to or arising under the Environmental Laws and either Borrower
has not received any notice ("ENVIRONMENTAL COMPLAINT") of any violations of
Environmental Laws, and to the best of each Borrowers' knowledge, there have
been no actions commenced or threatened against it by any party for
noncompliance with any Environmental Laws.
D. Each Borrower has all permits, licenses, approvals and other
authorizations required under the Environmental Laws.
3.12 MISREPRESENTATION. No warranty or representation contained herein or
in any certificate or other document furnished to HoMedics pursuant hereto
contains any untrue statement of material fact or omits to state a material fact
necessary to make such warranty or representation not misleading in light of the
circumstances under which it was made. There is no fact which either Borrower
has not disclosed to the HoMedics in writing which materially and adversely
affects or is likely to materially and adversely affect the business,
operations, properties, prospects, profits or condition (financial or otherwise)
of either Borrower or the ability of either Borrower to perform the Kronos
Agreements.
3.13 INTELLECTUAL PROPERTY RIGHTS. Each Borrower owns or possesses adequate
rights or licenses to use all material trademarks, trade names, service marks,
service xxxx registrations, authorizations, trade secrets and rights necessary
to conduct its business as now being conducted. None of the Borrowers' material
trademarks, trade names, service marks, service xxxx registrations, service
names, patents, patent rights, copyrights, inventions, licenses, approvals,
government authorizations, trade secrets or other intellectual property rights
have expired or terminated, or, by the terms and conditions thereof, could
expire or terminate within two years from the date of this Amended Agreement.
Neither Borrower is infringing, and does not have any knowledge of any
infringement of any third party with respect to any material trademark, trade
name rights, patents, patent rights, copyrights, inventions, licenses, service
names, service marks, service xxxx registrations, trade secret or other similar
rights of others, or of any such development of similar or identical trade
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secrets or technical information, and there is no claim, action or proceeding
being made or brought against, or to each Borrowers knowledge, being threatened
against either Borrower regarding trademark, trade name, patents, patent rights,
invention, copyright, license, service names, service marks, service xxxx
registrations, trade secret or other infringement, which could reasonably be
expected to have a material adverse effect on either Borrower or its assets,
operations or business.
3.14 INSURANCE. Each Borrower is insured by insurers of recognized
financial responsibility against such losses and risks and in such amounts as
management of each Borrower believes to be prudent and customary in the
businesses in which each Borrower is engaged. Neither Borrower has been refused
any insurance coverage sought or applied for and each Borrower does not have any
reason to believe that it will not be able to renew its existing insurance
coverage as and when such coverage expires, or to obtain similar coverage from
similar insurers as may be necessary to continue its business at a cost that
would not materially and adversely affect its condition, financial or otherwise,
or earnings, business or operations.
3.15 APPLICATION OF TAKEOVER PROTECTIONS. Each Borrower and its Board of
Directors have taken or will take prior to the Production Effective Date all
necessary action, if any, in order to render inapplicable any control share
acquisition, business combination, poison pill (including any distribution under
a rights Agreement) or other similar anti-takeover provision under the
Certificate of Incorporation or the laws of the state of its incorporation.
3.16 TRANSACTIONS WITH AFFILIATES. Except as set forth in the SEC
Documents, and other than the grant or exercise of stock options disclosed on
Exhibit 3.16, none of the officers, directors, or employees of either Borrower
is presently a party to any transaction with either Borrower or any of its
Affiliates (other than for services as employees, officers and directors),
including any contract, Agreement or other arrangement providing for the
furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any officer,
director or such employee or, to the knowledge of each Borrower, any
corporation, partnership, trust or other entity in which any officer, director,
or any such employee has an interest or is an officer, director, trustee or
partner.
ARTICLE IV
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COVENANTS AND AGREEMENTS
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4.1 AFFIRMATIVE COVENANTS. On a continuing basis from the date of this
Amended Agreement to the date the Notes have been paid in full and each Borrower
has performed all of its other obligations hereunder, each Borrower covenants
and agrees that it will:
A. Promptly furnish to HoMedics such information regarding its
operations, business affairs and financial condition and its subsidiaries as
HoMedics may reasonably request from time to time and permit HoMedics, its
employees, attorneys and agents, to inspect all the books, records and
properties of each Borrower and their subsidiaries during normal business hours
upon reasonable advance notice.
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B. Keep the insurable properties of each Borrower adequately insured
and maintained with (1) insurance against fire and other risks customarily
insured against and "all-risk" policy and such additional risks customarily
insured against by companies engaged in the same or similar businesses to that
of each Borrower; (2) necessary workers compensation insurance; (3) public
liability and product liability insurance commencing with the sale of products;
and (4) such other insurances as may be required by law or as may be reasonably
required in writing by HoMedics, all of which insurance shall be in such
amounts, containing such terms, in such form, for such purposes, prepaid for
such time period, and written by such companies as shall be reasonably
satisfactory to HoMedics. All such policies shall contain a provisions whereby
they may not be cancelled or amended except upon 30 days prior written notice to
HoMedics. Kronos will promptly deliver to HoMedics, at HoMedics' request,
evidence satisfactory to HoMedics that such insurance has been so procured.
C. Pay promptly and within the time that they can be paid without late
charge, penalty or interest all taxes, assessments and similar charges of every
kind and nature lawfully levied, assessed or imposed upon it and its property,
except to the extent being contested in good faith. If either Borrower shall
fail to pay such taxes and assessments within the time they can be paid without
penalty, late charge or interest, HoMedics shall have the option to do so and
each Borrower agrees to repay HoMedics upon demand, with interest as provided in
the Amendment to Security Agreement and/or the Notes, all amounts so expended by
HoMedics.
D. Do or cause to be done all things necessary to preserve and keep in
full force and effect the existence, rights and Intellectual Property of each
Borrower in all markets where HoMedics is distributing products utilizing the
Licensed Technology, and comply with all applicable laws in all material
respects, continue to conduct and operate and at all times maintain, preserve
and protect all assets (including the Intellectual Property), and from time to
time make, or cause to be made, all needed and proper improvements, renewals,
replacements, and updates thereto so that the business carried on in connection
therewith may be properly and advantageously conducted at all times.
E. Discuss various Kronos marketing issues with HoMedics and/or Xxx
Xxxxxx (collectively, the "ADVISORS"). In the event the Advisors play a
significant role in the marketing of a Kronos product, determined in Kronos'
sole discretion, the Advisors shall be entitled to a fee as negotiated between
Kronos and the Advisors.
F. The parties acknowledge and agree that the Amended License
anticipates that Kronos and HoMedics will negotiate the details of one or more
amendments to the License Agreement and/or one or more additional license
Agreements and that more fully developed amendments to the License Agreement
and/or additional license Agreements will need to be negotiated by the parties.
Kronos agrees to use its best efforts to, and commit adequate resources to
ensure that future amendments to the License Agreement and/or additional license
Agreements are executed by the parties and delivered within the time frames set
forth in the Amended License.
11
G. Deliver to HoMedics copies of any new patent applications and
related file history for all Licensed Technology within five (5) days of
submission to any Patent, Trademark and/or Copyright Office worldwide.
4.2 NEGATIVE COVENANTS. On a continuing basis from the date of this Amended
Agreement until the Notes are paid in full and each Borrower has performed all
of its other obligations hereunder, Kronos covenants and agrees that except as
otherwise contemplated herein, it will not, without HoMedics' prior written
consent, which shall not be unreasonably withheld:
A. Declare or pay distributions, dividends (whether by reduction of
capital or otherwise) or management fees to any of its shareholders other than
in connection with the exercise of the call rights set forth in EXHIBIT 4.2(A).
B. Purchase, redeem, retire or otherwise acquire or approve any plan to
purchase, redeem, retire or otherwise retire any of the shares of its capital
stock or make any commitment to do so.
C. Create, incur, assume or suffer to exist any mortgage, pledge,
encumbrance, security interest, lien or charge of any kind upon any of its now
owned or hereafter acquired properties or assets (including, without limitation,
any charge upon property purchased or acquired under a conditional sale or other
title-retaining Agreement or lease required to be capitalized under GAAP) other
than the liens resulting from the Notes and purchase money indebtedness or lease
obligations incurred in connection with purchases or leases of fixed assets, not
to exceed an aggregate of two hundred fifty thousand dollars ($250,000),
collectively.
D. Incur, create, assume or permit to exist any indebtedness or
liability for borrowed money, or any other indebtedness or liability evidenced
by notes, bonds, debentures or similar obligations, or any other indebtedness
whatsoever, except for: (1) the Notes; (2) the Cornell Investment; (3)
subordinate debt approved in writing by HoMedics (in its sole discretion); (4)
purchase money indebtedness or lease obligations incurred in connection with
purchases or leases of fixed assets not exceeding the amounts permitted in
subsection (C) above; (5) trade indebtedness incurred and paid in the ordinary
course of business; (6) promissory notes to employees; and (7) indebtedness that
does not cause the Borrowers collectively to exceed the requirements set forth
in (I) below.
E. Make loans, advances or extensions of credit to any person, other
than advances to employees in connection with business related travel in the
ordinary course of business.
F. Sell, lease, transfer or otherwise dispose of any Intellectual
Property, or sell, lease, transfer or otherwise dispose of any other properties
and assets having an aggregate book value of more than $100,000, except for the
sale of inventory in the ordinary course of business.
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G. Consolidate with or merge into any other corporation, permit another
corporation to merge into it, acquire all or substantially all the properties or
assets of any other person, enter into any reorganization or recapitalization or
reclassify its capital stock without prior written consent of HoMedics.
H. Purchase or hold beneficially any stock or other securities of, or
make any investment or acquire any interest whatsoever in any other person,
except for investments of certificates of deposit with maturities of one year or
less of United States Commercial Banks with capital, surplus, and undivided
profits in excess of $100 Million and direct obligations of the United States
government maturity within one year from the date of acquisition thereof.
I. Acquire or expend for fixed assets, or commit itself to acquire or
expend for fixed assets, whether by lease, purchase or otherwise, in amounts
that exceed two hundred fifty thousand dollars ($250,000), collectively, during
the term of the Notes.
J. Increase the amount of compensation to the officers and directors of
Kronos except as set by an independent committee of the board of directors of
Kronos.
4.3 SETOFF.
A. Subject to the terms and conditions set forth herein, HoMedics shall
have the right, from time to time, to set off against any payments, debts or
obligations that are otherwise due to HoMedics from the Borrowers, all or a
portion of the amount of any payments, debts or obligations due to Kronos from
HoMedics.
B. A set off by HoMedics shall have the effect of discharging the
amount set off as if such amounts were paid in full by the Borrowers.
4.4 PUT RIGHTS. Kronos hereby agrees that upon the occurrence of a Trigger
Event (defined below), HoMedics shall have the right to require Kronos to
purchase all, or at HoMedics' option, any portion of the shares of Kronos Common
Stock owned by HoMedics. HoMedics may exercise the option granted herein by
delivering to Kronos at any time following a Trigger Event a written notice
("PUT NOTICE") specifying that HoMedics desires to sell its shares to Kronos.
Upon receipt of the Put Notice, Kronos shall be obligated to purchase all shares
offered for sale in the Put Notice at a purchase price equal to the average
closing price per share (as reported in XXXXXX.xxx) of Kronos Common Stock for
the ten (10) trading days immediately preceding the date of the Put Notice (the
"PUT PER SHARE PRICE"); PROVIDED, HOWEVER, that the Put Per Share price shall
not be less than two (2) times the per share purchase price paid by HoMedics for
such shares; and PROVIDED, FURTHER, HOWEVER, that if the Trigger Event giving
rise to the exercise of rights granted hereunder is Trigger Event (A) below, the
Put Per Share Price as determined above shall be multiplied by a factor of ten
(10). As used herein, the term "TRIGGER EVENT" means:
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A. Kronos shall have issued or agreed to issue any securities to a
Competitor (as defined below) of HoMedics during the term of the License
Agreement, the Amended License or any other license arrangement between HoMedics
and either Borrower, provided, however, Kronos shall not be precluded from
issuing securities to an Affiliate (defined below) of a Competitor if the proper
protections are put into place, as determined by HoMedics in its sole
discretion, to prevent the Affiliate from selling any Products (as defined in
the License Agreement) or Additional Products (as defined in the Amended
License) in the Territories (as defined in the License Agreement, Amended
License and amendments thereto) using technology substantially similar to the
Licensed Technology (as defined in the License Agreement); and/or
B. Kronos shall have materially breached its obligations under or
otherwise defaulted under the License Agreement or the Amended License within
ten (10) years after the date of this Amended Agreement.
"COMPETITOR" shall mean a company manufacturing, distributing or selling
personal care electrical devices under the health and wellness category.
"AFFILIATE" shall mean: (i) with respect to any individual, any member of such
individual's immediate family, and any organization (x) in which such individual
and/or his Affiliate(s) own, directly or indirectly, more than 50% of any class
of equity security or (y) in which such individual and/or his Affiliate is the
sole general partner, the managing general partner or is the managing member, or
which is controlled by such individual and/or his Affiliates, directly or
indirectly; and (ii) with respect to any corporation, partnership, limited
liability company, trust, or other organization, any other corporation,
partnership, limited liability company, trust, or other organization, which
controls, is controlled by, or is under common control with, the
first-referenced corporation, partnership, limited liability company, trust, or
other organization, and any individual or entity who is the general partner,
managing member, officer, director, trustee of, or who directly or indirectly
controls, the first-referenced corporation, partnership, trust, or other
organization; and (iii) any Affiliate of any other Affiliate. For purposes of
this definition, the term "controls," "is controlled by" or "is under common
control with" shall mean the possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of a person or
entity, whether through the ownership of voting securities, by contract or
otherwise.
4.5 PREEMPTIVE RIGHTS.
A. Kronos hereby grants HoMedics the preemptive rights described in
this Section 4.5 with regard to all issuances by Kronos of shares of Kronos
Common Stock after the date of this Amended Agreement (collectively, the "NEW
SECURITIES"); PROVIDED, HOWEVER, that "New Securities" do not include:
1. Securities issued in connection with any stock splits, stock
dividends or other distribution payable pro rata to all holders of Kronos
Common Stock;
2. Any securities issued to employees, officers, directors,
consultants or other persons performing services for Kronos (if so issued
14
solely because of any such person's status as an officer, employee,
director, consultant or other person performing services for Kronos, and not
as part of any other offering of Kronos securities) pursuant to any stock
option plan, stock purchase plan or management incentive plan, Agreement or
arrangement approved by Kronos' Board of Directors;
3. Any Kronos Common Stock issued upon the conversion, exercise or
exchange of Warrant Nos. 1, 2 and 3; and
4. Shares issued to Cornell under the terms of the SEDA to the
extent that Kronos has issued such shares for the direct purpose of repaying
the $4M Note to Cornell.
B. Except for the Cornell Investment, Kronos proposes to offer to sell
any New Securities, Kronos shall first give HoMedics written notice stating such
intention. The written notice shall contain a full, accurate and complete
description of the price and terms of such proposed sale, and shall contain an
unconditional offer to sell a Pro Rata Share (as defined in Subsection (D)
below) of such New Securities to HoMedics on the same terms and conditions as
set forth in the notice. HoMedics shall have ten (10) business days from the
date such written notice is given to elect to purchase all or a portion of such
Pro Rata Share of the New Securities, by giving written notice to Kronos of such
election and the quantity of New Securities that HoMedics will purchase,
together with payment for such New Securities.
C. If HoMedics elects to purchase any of the New Securities within the
election periods described in subsection (B), Kronos shall deliver to HoMedics a
certificate or other instrument evidencing the New Securities by the close of
business on the fifteenth day (or if such day is not a business day, the next
succeeding business day) after the receipt of HoMedics' notice of election and
its payment for the shares acquired.
D. As used in this subsection 4.5, the "PRO RATA SHARE" of the New
Securities that HoMedics will be offered an opportunity to purchase is a
fraction of the total New Securities proposed to be issued, calculated as
follows: (i) the numerator of the fraction shall be the number of shares of
Kronos Common Stock that could be obtained by HoMedics upon conversion or
exchange on such date of any securities convertible into or exchangeable for
Kronos Common Stock plus the number of shares of Kronos Common Stock that could
be acquired by HoMedics on such date upon exercise of any option, warrant or
similar right (other than by exercise of preemptive rights hereunder); and (ii)
the denominator of the fraction shall be the aggregate number of shares of
Kronos Common Stock outstanding on such date calculated on a fully diluted basis
assuming the conversion or exchange of all outstanding convertible securities
and the exercise of all outstanding options, warrants or similar rights to
acquire Kronos Common Stock.
E. During the sixty (60) day period following the expiration of the ten
(10) business day election period described in the last sentence of subsection
(B) hereof, Kronos may issue the New Securities that HoMedics has not purchased
pursuant to this subsection 4.5, but only on terms and conditions and at a price
no more favorable to the purchasers thereof than was specified in Kronos's
notice to HoMedics.
15
F. The rights of HoMedics under this subsection 4.5 may be waived, in
whole or part, with respect to any proposed issuance of New Securities if a
written waiver is executed by HoMedics. Such waiver may be obtained at any time
prior to, contemporaneously with or after the actual issuance by Kronos of the
New Securities.
ARTICLE V
---------
EVENTS OF DEFAULT
-----------------
The following events are hereby defined as "defaults" for all purposes of
this Amended Agreement, whatever the reason for the occurrence thereof and
whether such event shall be voluntarily or involuntarily or come about or be
effected by operation of law or pursuant to compliance with any judgment, order
or decree of any court or any order, rule or regulation of any government or
administrative body:
5.1. DEFAULTS.
A. FAILURE TO PAY. The Borrowers shall fail to pay any principal,
interest or fee under the Notes, any other Investment Documents or other
indebtedness to HoMedics thirty (30) days following written notice by HoMedics
of either Borrower's failure to pay any such amounts when due, by maturity,
acceleration or otherwise.
B. MISREPRESENTATION. Any warranty or representation in connection with
or contained in this Amended Agreement, the License Agreement, the Amended
License, or any of the Investment Documents, or if any financial data or other
information now or hereafter furnished to HoMedics by or on behalf of the
Borrowers, is false or misleading in any material respect when made or deemed
made.
C. DEFAULT UNDER DOCUMENTS. Either Borrower shall otherwise fail to
perform any of its obligations or covenants under, or shall fail to comply with
any of the provision of: (1) this Amended Agreement; (2) the Investment
Documents, or (3) the License Agreement, the Amended License, or any other
license arrangement between HoMedics and either Borrower, which is not cured
within thirty (30) days following written notice by HoMedics of such failure to
perform by either Borrower.
D. INSOLVENCY/BANKRUPTCY. Either Borrower voluntarily suspends
transacting business, or either Borrower generally fails to pay its debts as
they mature or makes a general assignment for the benefit of creditors; or
commences any proceedings in bankruptcy, or for reorganization or liquidation
under the Bankruptcy Code or under any other state, federal or other applicable
law for the relief of debtors, or has commenced against it any proceedings in
bankruptcy, or for reorganization or liquidation under the Bankruptcy Code or
under any other state, federal or other applicable law for the relief of debtors
which proceedings are not discharged within sixty (60) days of commencement; or
a receiver, trustee or custodian is appointed for either Borrower or for any
substantial portion of its respective properties or assets.
00
X. XXXXXX XX XXXXXXXXXX XX CONTROL. Kronos shall experience a Change in
Control. A "CHANGE IN CONTROL" of Kronos will be deemed to occur if: (x) any
person (defined for the purposes of this Section 5.1(E) to mean any person
within the meaning of Section 13(d) of the Securities Exchange Act of 1934 (the
"EXCHANGE ACT")), other than Kronos, or an employee benefit plan established by
the Board of Directors of Kronos, acquires, directly or indirectly, the
beneficial ownership (determined under Rule 13d-3 of the regulations promulgated
by the Securities and Exchange Commission under Section 13(d) of the Exchange
Act) of securities issued by Kronos having 30% or more of the voting power of
all of the voting securities issued by Kronos in the election of directors at
the meeting of the holders of voting securities to be held for such purpose; or
(y) a majority of the directors elected at any meeting of the holders of voting
securities of Kronos are persons who were not nominated for such election by the
Board of Directors of Kronos having authority in such matters; or (z) Kronos
merges or consolidates with or transfers substantially all of its assets to
another person.
5.2 REMEDIES. If an Event of Default exists, HoMedics may exercise any
right, power or remedy permitted by law or as set forth in any of the documents
and instruments executed and delivered in connection herewith, including without
limitation, the Investment Documents. Without limiting the generality of the
foregoing, the Borrowers agree to reimburse HoMedics upon demand for all fees
and expenses incurred by HoMedics (A) in seeking to collect any amounts owed to
it (whether through formal or informal collection actions, workouts or
otherwise), in defending the validity or priority of its security interest, or
in pursuing its rights and remedies under this Amended Agreement; (B) in
connection with any proceeding (including, without limit, bankruptcy,
insolvency, administrative, appellate, or probate proceedings or any lawsuit) in
which HoMedics at any time is involved as a result of any lending relationship
or involving HoMedics and either Borrower; or (C) incurred by HoMedics during
the continuance of an Event of Default, which fees and expenses relate to or
would not have been incurred but for any lending relationship involving HoMedics
and either Borrower. The fees and expenses include, without limit, court costs,
legal expenses, and reasonable attorneys' fees.
ARTICLE VI
----------
MISCELLANEOUS
-------------
6.1 BINDING EFFECT. This Amended Agreement shall be binding upon and shall
inure to the benefit of the parties, and their respective successors and
assigns, provided, however, that neither Borrower may assign or transfer its
rights or obligations hereunder without the prior written consent of HoMedics.
6.2 NOTICES. Any notice permitted or required under this Amended Agreement
shall be conveyed to the party at the address reflected on the first page of
this Amended Agreement and will be deemed to have been given, when deposited in
the United States mail, postage paid, or when delivered in person, or by courier
or by facsimile transmission, with a copy, which shall not constitute notice to
the following:
If to the Borrowers: Kronos Advanced Technologies, Inc.
000 Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxxxxxxxx 00000-0000
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Attn: Xxxxxx X. Xxxxxx
Phone: 000-000-0000
Fax: 000-000-0000
With a copy to: Xxxxxxxxxxx & Xxxxxxxx, LLP
000 Xxxxx Xxxxxxxx Xxxxxxxxx, Xxxxx 0000
Xxxxx, Xxxxxxx 00000
Attn: Xxxxxxx X. Xxxxxx, Esq.
Phone: 000 000-0000
Fax: 000 000-0000
If to HoMedics: HoMedics, Inc.
0000 Xxxxxxx Xxxxx
Xxxxxxxx Xxxxxxxx, XX 00000
Attn: Xxx Xxxxxx
Phone: 000-000-0000
Fax: 000-000-0000
With a copy to: Seyburn, Kahn, Xxxx, Xxxx and Xxxxxx, P.C.
0000 Xxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxxx, XX 00000
Attn: Xxxx X. Xxxxxxxx, Esq.
Phone: 000-000-0000
Facsimile: 000-000-0000
6.3 SEVERABILITY. The invalidity or unenforceability of any particular
provision of this Amended Agreement shall not affect the other provisions
hereof, and this Amended Agreement shall be construed in all respects as if such
invalid or unenforceable provisions were omitted. In addition, if any provision
of this Amended Agreement may be modified by a court of competent jurisdiction
such that it may be enforced, then that provision shall be so modified and as
modified, shall be fully enforced.
6.4 CHOICE OF LAW AND FORUM SELECTION. This Amended Agreement shall be
interpreted and construed in accordance with the laws of the State of Michigan.
All actions arising directly or indirectly out of this Amended Agreement shall
be litigated only in the United States District Court for the Eastern District
of Michigan, Southern Division, or the Oakland County, Michigan Circuit Court,
and the parties to this Amended Agreement hereby irrevocably consent to the
personal jurisdiction and venue of those courts.
6.5 TERMS. Nouns and pronouns will be deemed to refer to the masculine,
feminine, neuter, singular and plural, as the context requires.
18
6.6 HEADINGS. The titles of the sections have been inserted as a matter of
convenience for reference only and shall not control or affect the meaning or
construction of any of the terms or provisions of this Amended Agreement.
6.7 COUNTERPARTS. This Amended Agreement may be executed in counterparts,
each of which will be deemed an original, but all of which will constitute one
and the same Agreement. For purposes of this Amended Agreement, a facsimile
signature shall be deemed the same as an original.
6.8 ENTIRE AGREEMENT. All Recitals and Exhibits referenced herein are
hereby incorporated into this Amended Agreement by this reference. The
Agreement, this Amended Agreement, the Investment Documents, the Amended License
and the other documents and instruments to be executed and delivered in
connection with this Amended Agreement constitute the entire agreement among the
parties hereto and contains all of the agreements among said parties with
respect to the subject matter hereof.
6.9 INDEPENDENT RIGHT. No single or partial exercise of any right, power or
privilege hereunder, or any delay in the exercise thereof, shall preclude other
or further exercise of the rights of the parties to this Amended Agreement.
6.10 COVENANT INDEPENDENCE. Each covenant in this Amended Agreement shall
be deemed to be independent of any other covenant, and the unenforceability in
one covenant shall not render any other covenant unenforceable.
6.11 WAIVERS AND AMENDMENTS. No forbearance on the part of HoMedics in
enforcing any of its rights under this Amended Agreement or any other document,
nor any renewal, extension or rearrangement of any payment or covenant to be
made or performed by Kronos hereunder, shall constitute a waiver of any of the
terms of this Amended Agreement or of any such right. No Default or Event of
Default shall be waived by HoMedics except in a writing signed and delivered by
an officer of HoMedics, and no waiver as to one Default or Event of Default
shall operate as a waiver of other or any future any Default or Event of
Default. No other amendment, modification or waiver of, or consent with respect
to, any provision of this Amended Agreement or any Note or other documents shall
be effective unless the same shall be in writing and signed and delivered by an
officer of HoMedics.
6.12 SURVIVAL OF WARRANTIES. All of the covenants, Agreements,
representations and warranties made in connection with this Amended Agreement
and any document contemplated hereby shall survive the execution and delivery of
this Amended Agreement and the consummation of the transactions contemplated
herein, and shall be deemed to have been relied upon by HoMedics,
notwithstanding any investigation heretofore or hereafter made by HoMedics. All
statements contained in any certificate or other document delivered to HoMedics
at any time by or on behalf of either Borrower pursuant hereto or in connection
with the transactions contemplated hereby shall constitute representations and
warranties by the Borrowers in connection with this Amended Agreement.
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6.13 COSTS AND EXPENSES. The Borrowers agree that they will reimburse
HoMedics, upon demand, for all reasonable costs and expenses incurred by
HoMedics in connection with (A) collecting or attempting to collect the
indebtedness or any part thereof; (B) maintaining or defending HoMedics'
security interests or liens (or the priority thereof); (C) the enforcement of
HoMedics' rights or remedies under this Amended Agreement or the other documents
contemplated hereby; (D) the preparation or making of any amendments,
modifications, waivers or consents with respect to this Amended Agreement or the
other documents contemplated hereby; and/or (E) any other matters or proceedings
arising out of or in connection with any lending arrangement between HoMedics
and either Borrower, which costs and expenses include, without limit, payments
made by HoMedics for taxes, insurance, assessments, or other costs or expenses
which either Borrower is required to pay under this Amended Agreement or the
other documents contemplated hereby, expenses related to the examination of the
collateral, audit expenses, court costs and reasonable attorneys' fees (whether
such costs are incurred in formal or informal collection actions, federal
bankruptcy proceedings, probate proceedings, on appeal or otherwise), and all
other costs and expenses of HoMedics incurred in connection with any of the
foregoing.
6.14 CROSS COLLATERALIZATION; CROSS DEFAULT. The indebtedness hereunder is
cross-collateralized with and cross-defaulted to any and all indebtedness of
either Borrower now or at any time hereafter owed to HoMedics such that (A) any
and all security given by either Borrower to secure their indebtedness owed to
HoMedics shall also stand as collateral security for the indebtedness and all
obligations of either Borrower hereunder to HoMedics; (B) all collateral
hereunder shall stand as collateral security for all indebtedness and
obligations of the Borrowers now or at any time hereafter owed to HoMedics; (C)
any Default and/or Event of Default hereunder shall constitute a matured Event
of Default under all documentation evidencing, securing and governing the
indebtedness of the Borrowers; and (D) any Default or Event of Default under the
documentation evidencing, governing and securing the indebtedness of the
Borrowers shall constitute an Event of Default under this Amended Agreement.
6.15 FURTHER ASSURANCES. Each party agrees to sign and deliver all
documents, instruments, certificates and applications which may be deemed
reasonably necessary by the other party, to consummate the transactions
contemplated by this Amended Agreement.
6.16 CONFLICT. To the extent that the terms and conditions of this Amended
Agreement conflict with, or are inconsistent with, the terms and conditions of
the Agreement, the terms and conditions of this Amended Agreement shall control
and be binding upon the parties.
6.17 RATIFICATION. Except as amended hereby, the Agreement shall remain in
full force and effect, and as amended hereby, the Agreement is ratified and
affirmed.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, Borrowers and HoMedics have caused this Amended
Agreement to be executed by their duly authorized officers as of the day and
year first written above.
Borrower:
KRONOS ADVANCED TECHNOLOGIES, INC.,
F/K/A TSET, INC.
By: _______________________________
Name: _____________________________
Its: ______________________________
Borrower:
KRONOS AIR TECHNOLOGIES, INC.
By:________________________________
Name:______________________________
Its:_______________________________
HoMedics:
FKA DISTRIBUTING, CO.,
D/B/A HOMEDICS
By: _______________________________
Name: _____________________________
Its: ______________________________
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