SECURITY AGREEMENT
SECURITY AGREEMENT
This Security Agreement is made and entered into this 7th day of April, 2022, by and between KRONOS ADVANCED TECHNOLOGIES WV, INC., a West Virginia corporation (“Debtor) and WEST VIRGINIA ECONOMIC DEVELOPMENT AUTHORITY, a West Virginia public corporation (“Secured Party”). Capitalized terms used and not otherwise defined herein shall have the meanings assigned to such terms in the Loan Agreement (as hereinafter defined). Debtor and Secured Party agree as follows:
1.In consideration for loans made by Secured Party to Debtor and for other good and valuable consideration, the receipt of which is hereby acknowledged, Debtor hereby grants to Secured Party a security interest in all right, title and interest of Debtor in all of Debtor’s machinery, equipment, furniture and fixtures described on Exhibit A attached hereto and incorporated herein by reference, together with all additions and accessions thereto, all replacements thereof, all substitutions, repairs and improvements existing or later placed upon, added to or made in connection with the foregoing, all products and proceeds thereof, and all benefits and proceeds payable under any and all insurance policies covering the foregoing including without limitation the return of unearned collateral insurance policy premiums covering the foregoing (hereinafter referred to collectively as the “Collateral”).
2.The security interest in the Collateral secures the payment by Debtor to Secured Party of all accrued interest, unpaid principal, late charges and other amounts due and owing by Debtor to Secured Party under (a) that certain Promissory Note (Real Estate Loan) dated as of the date hereof (together with all amendments, renewals, extensions, substitutions and modifications thereof, the “Real Estate Loan Promissory Note”) in the original principal amount of One Million Eight Hundred Forty Five Thousand and 00/100 Dollars ($1,845,000.00), made by
Debtor and Kronos Advanced Technologies, Inc., a Nevada corporation (“KAT”), and payable to the order of Secured Party, and (b) that certain Promissory Note (Equipment Loan) dated as of the date hereof (together with all amendments, renewals, extensions, substitutions and modifications thereof, the “Equipment Loan Promissory Note” and together with the Real Estate Loan Promissory Note, the “Promissory Notes”) in the original principal amount of Seven Hundred Sixty Five Thousand and 00/100 Dollars ($765,000.00), made by Debtor and KAT, and payable to the order of Secured Party all in accordance with the terms and conditions of that certain Loan Agreement dated as of the date hereof between Secured Party, Debtor and KAT (together with all amendments, renewals, extensions, substitutions and modifications thereof, the “Loan Agreement”), together with any amendment, continuation, modification, extension, renewal or refinancing of the Promissory Notes, or of any notes or other evidence of indebtedness relating to said Promissory Notes, however changed in form, manner or amount (hereinafter collectively referred to as the “Indebtedness”). This Security Agreement shall, in addition to securing said sums due to Secured Party pursuant to the Indebtedness, secure all future advances made by Secured Party to, or for the account of Debtor, including advances for loans and advances for repairs to or maintenance of the Collateral, and all reasonable costs, fees, expenses and charges, including, without limitation, attorneys’ fees, incurred in the collection of any such Indebtedness.
3.Debtor agrees, covenants and warrants as follows:
(a)The Collateral will not be misused or abused, wasted or allowed to deteriorate, except for the ordinary wear and tear from its intended primary use.
(b)Debtor has good and marketable title to the Collateral described herein which is free and clear from all liens and encumbrances, and Debtor has the right to convey a valid and binding security interest in the Collateral to Secured Party.
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(c)Until this Security Agreement is terminated, the Collateral will be insured against fire, theft, vandalism, malicious mischief, and other hazards in an amount and with a policy or policies of insurance acceptable to Secured Party and payable to both Secured Party and Debtor, as their interests may appear, and with the policies, or copies thereof, deposited with Secured Party. Such insurance policies shall provide at least thirty (30) days’ prior written notice to Secured Party of any termination of or substantial modification in coverage under such insurance policy.
(d)Debtor shall not lease, sell, transfer, assign or otherwise dispose of the Collateral or any interest therein, other than replacement thereof in the ordinary course of business, or subject the Collateral to any unpaid charges, taxes, encumbrances, liens or to any subsequent interest or claim of a third party created or suffered by Debtor, whether voluntarily or involuntarily, unless Secured Party gives its prior written consent to such sale, transfer, assignment, disposition, charge, tax, encumbrance, lien or subsequent interest or claim.
(e)Debtor authorizes Secured Party to file financing statements and continuation statements, with or without the signature of the Debtor, in all jurisdictions necessary to create, perfect, and continue the security interests created by this Security Agreement, and Debtor will pay all fees and costs associated with the filing of such statements. Debtor will sign and execute, alone or with Secured Party, any financing statements, amendments or other documents, procure any documents and pay all costs necessary to maintain, defend and protect the security interests arising under this Security Agreement against the rights or interests of any third party.
4.Debtor shall pay to Secured Party, immediately upon demand, all reasonable costs, fees, expenses and charges, including, without limitation, reasonable attorneys’
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fees and expenses, incurred by Secured Party to remedy a default under this Security Agreement, preserve and protect the Collateral, or take possession of and sell the Collateral which Secured Party elects pursuant to the terms hereof. If unpaid by Debtor, such costs and expenses shall be secured by this Security Agreement and bear interest at the rate of ten percent (10%) per annum.
5.At its option, Secured Party may discharge taxes, liens, security interests or other encumbrances not authorized by this Security Agreement at any time placed on the Collateral, may pay for insurance on the Collateral if not paid by Debtor when due, and may pay for the maintenance and preservation of the Collateral. Debtor shall reimburse Secured Party, immediately upon demand, for any cost or expense incurred by Secured Party pursuant to the foregoing authorization, which if not paid shall be secured by this Security Agreement and bear interest at the rate of ten percent (10%) per annum.
6.Until Default, as defined hereunder, Debtor shall be entitled to the possession of the Collateral and to use and enjoy the same.
7.Debtor shall be in default hereunder (“Default”) upon failure to pay when due any amount payable hereunder or under said Promissory Notes or upon failure to observe or perform any of Debtor’s other obligations contained herein or in the Loan Agreement or any other WVEDA Loan Document.
8.Upon the occurrence of any Default by Debtor, Secured Party shall give written notice of such Default to Debtor. In such event, Debtor shall have 30 days following the date notice of such Default is sent to cure the Default. If a Default, other than a failure of payment or insolvency, can not be cured within such 30-day notice period, then Debtor may take such longer period of time as is reasonably necessary to cure said Default, so long as Debtor commences a cure
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within the original 30-day period and diligently and continuously pursues the cure of the Default in good faith.
9.If one or more Defaults shall occur and are not cured within the 30-day period or such longer cure period as set forth in Section 8 hereof, then Secured Party may exercise its right of enforcement under the Uniform Commercial Code in force in West Virginia (the “WV UCC”), at the date of this Security Agreement and, in conjunction with, in addition to, or in substitution for those rights, at its sole discretion and without judicial process, Secured Party may enter upon Debtor’s premises to take possession of, disassemble and collect the Collateral or render it unusable, and may require Debtor to disassemble the Collateral and make it available at a mutually convenient place designated by Secured Party to allow Secured Party to take possession of or dispose of the Collateral. Secured Party may waive any Default or remedy any Default in any reasonable manner without waiving the Default remedy and without waiving any other prior or subsequent Defaults. In the event of Default by Debtor in its obligations to Secured Party and the repossession by Secured Party of the Collateral, Secured Party may sell, lease or otherwise dispose of all or part of the Collateral in its existing condition or after any commercially reasonable preparation or processing. Disposition of the Collateral may be by public or private proceedings and may be made by way of one or more contracts.
10.The rights, options and remedies of Secured Party shall be cumulative and no failure or delay by Secured Party in exercising any right, option or remedy shall be deemed a waiver thereof or of any other right, option or remedy, or a waiver of any event of Default hereunder.
11.All notices under this Security Agreement shall be in writing and shall be sufficiently given when sent by certified mail, return receipt requested, directed to the recipient at
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the address stated below or such other address given by the recipient in the same manner subsequent to the execution of this Security Agreement, which notice shall be effective upon receipt by such party:
To Debtor:Kronos Advanced Technologies WV, Inc.
2501 Garfield Avenue
Parkersburg, West Virginia 26101
Attention: Chief Operating Officer
To Secured Party:West Virginia Economic Development Authority
NorthGate Business Park
180 Association Drive
Charleston, West Virginia 25311-1217
Attention: Executive Director
12.To the extent Debtor’s obligations to Secured Party are now or hereafter secured by property other than the Collateral or by a guarantee, endorsement or property of any other person or entity, then Secured Party shall have the right, in its sole discretion, to determine which rights, guarantees, endorsements, security, liens or remedies Secured Party shall pursue without waiving or affecting any of Secured Party’s rights hereunder.
13.The Collateral is located at 2501 Garfield Avenue, Parkersburg, West Virginia, and will remain at said location until Secured Party consents in writing to its movement or said Promissory Notes are paid in full. Secured Party may inspect the Collateral at any reasonable time and upon reasonable notice, wherever the Collateral is located.
14.Any provision of this Security Agreement which is prohibited or unenforceable by the law of any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions of this Security Agreement, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.
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15.All covenants and agreements contained in this Security Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective permitted successors and assigns.
16.Secured Party may sell, transfer, assign or encumber all or any part of its interest in this Security Agreement without the consent of Debtor.
17.This Security Agreement and the security interest in the Collateral created hereunder shall be governed by the laws of the State of West Virginia and any disputes arising under this Security Agreement shall be resolved in the courts of West Virginia.
18.No inference shall be drawn in favor of or against either party because of its participation in the drafting of this Security Agreement.
19.This Agreement may be executed in counterparts, each of which shall be deemed an original and all of which shall constitute one and the same instrument. Delivery of an executed counterpart of a signature page of this Agreement by telecopy shall be effective as delivery of a manually executed counterpart of this Agreement.
[Signature Page Follows]
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IN WITNESS WHEREOF, the parties hereto have caused this Security Agreement to be executed by their duly authorized as of the day and year first above written.
KRONOS ADVANCED TECHNOLOGIES WV,
INC.,
a West Virginia corporation
By:___________________________________
Name: Joseph L. Florence
Its: Chief Operating Officer
WEST VIRGINIA ECONOMIC
DEVELOPMENT AUTHORITY,
a West Virginia public corporation
By:
Name:Kris E. Warner
Title:Executive Director
14773905 (1916.0939)
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EXHIBIT A
A-1
A-2
