EXHIBIT 99.4
SECURITY AGREEMENT
(ALL ASSETS)
As of May 9, 2003, for value received, the undersigned, KRONOS ADVANCED
TECHNOLOGIES, INC., f/k/a TSET, INC., a Nevada corporation and KRONOS AIR
TECHNOLOGY, INC., a Nevada corporation (collectively, "Debtor") grant to FKA
DISTRIBUTING CO., d/b/a HOMEDICS, INC., a Michigan corporation ("Secured
Party"), a continuing security interest in the Collateral (as defined below) to
secure payment when due, whether by stated maturity, demand, acceleration or
otherwise, of all existing and future indebtedness ("Indebtedness") to the
Secured Party of Debtor. Indebtedness includes without limit any and all
obligations or liabilities of Debtor to the Secured Party, whether absolute or
contingent, direct or indirect, voluntary or involuntary, liquidated or
unliquidated, joint or several, known or unknown; any and all obligations or
liabilities for which Debtor would otherwise be liable to the Secured Party were
it not for the invalidity or unenforceability of them by reason of any
bankruptcy, insolvency or other law, or for any other reason; any and all
amendments, modifications, renewals and/or extensions of any of the above; all
costs incurred by Secured Party in establishing, determining, continuing, or
defending the validity or priority of its security interest, or in pursuing its
rights and remedies under this Agreement or under any other agreement between
Secured Party and Debtor or in connection with any proceeding involving Secured
Party as a result of any financial accommodation to Debtor; and all other costs
of collecting Indebtedness, including without limit attorney fees. Debtor agrees
to pay Secured Party all such costs incurred by the Secured Party, immediately
upon demand, and until paid all costs shall bear interest at the highest per
annum rate specified in the $2,400,000 Secured Promissory Note executed by the
parties of even date herewith (the "Note"), but not in excess of the maximum
rate permitted by law. Any reference in this Agreement to attorney fees shall be
deemed a reference to reasonable fees, costs, and expenses of attorneys and
paralegals, whether or not a suit or action is instituted, and to court costs if
a suit or action is instituted, and whether attorney fees or court costs are
incurred at the trial court level, on appeal, in a bankruptcy, administrative or
probate proceeding or otherwise.
1. COLLATERAL shall mean all of the following property Debtor now or later owns
or has an interest in, wherever located:
(a) all Accounts Receivable (for purposes of this Agreement, "Accounts
Receivable" consists of all accounts, general intangibles
(including, without limitation that certain Exclusive Licensing
Agreement, dated October 22, 2002 between Debtor and HoMedics USA,
Inc., as amended), payment intangibles, promissory notes, license
fees, royalty fees, chattel paper (including without limit
electronic chattel paper and tangible chattel paper), contract
rights, documents and instruments, letters of credit, letter of
credit rights, commercial tort claims (if any), franchise fees,
deposit accounts, investment property and supporting obligations for
any of the foregoing and any other rights to payment for services
provided or goods sold;
(b) all Inventory,
(c) all Equipment and Fixtures,
1
(d) all Software (for purposes of this agreement, "Software" consists of
all (i) computer programs and supporting information provided in
connection with a transaction relating to the program, and (ii)
computer programs embedded in goods and any supporting information
provided in connection with a transaction relating to the program
whether or not the program is associated with the goods in such a
manner that it customarily is considered part of the goods, and
whether or not, by becoming the owner of the goods, a person
acquires a right to use the program in connection with the goods,
and whether or not the program is embedded in goods that consist
solely of the medium in which the program is embedded),
(e) all Intellectual Property (for purposes of this Agreement,
"Intellectual Property" consists of (i) the US and foreign patents
and applications in SCHEDULE 1(e), any continuations,
continuations-in-part, divisionals, reexaminations, reissues,
renewals, or extensions of said patents and/or applications, as well
as all patents and applications claiming priority therefrom, and any
inventions, improvements, or modifications pertaining or relating to
or arising from the subject matter of said patents and applications;
(ii) all other patents and patent applications, inventions,
discoveries, concepts and ideas, now owned or hereafter acquired by
Debtor, or in which Debtor now owns or hereafter acquires an
interest; (iii) all trademarks, trade names, licenses, contract
rights, goodwill and general intangibles of Debtor (now owned or
hereafter acquired) in connection with any of the foregoing; and
(iv) any and all copyright rights of Debtor; and (v) all products
and proceeds of the foregoing, including, without limitation, any
claims by the Debtor against third parties for past, present or
future infringement of the patents, trademarks and/or copyrights,
with the right to xxx for and collect the damages for such
infringement, and any supporting obligations for any of the
foregoing),
(f) specific items listed on attached SCHEDULE 1(f), if any,
(g) all goods, instruments, documents, policies and certificates of
insurance, deposits, money, investment property or other property
(except real property which is not a fixture) which are now or later
in possession or control of Secured Party, or as to which Secured
Party now or later controls possession by documents or otherwise,
and
(h) all additions, attachments, accessions, parts, replacements,
substitutions, renewals, interest, dividends, distributions, rights
of any kind (including but not limited to stock splits, stock
rights, voting and preferential rights), products, and proceeds of
or pertaining to any of the above including, without limit, cash or
other property which were proceeds and are recovered by a bankruptcy
trustee or otherwise as a preferential transfer by Debtor.
In the definition of Collateral, a reference to a type of collateral shall not
be limited by a separate reference to a more specific or narrower type of
collateral.
2
2. WARRANTIES, COVENANTS AND AGREEMENTS. Debtor warrants, covenants and agrees
as follows:
2.1 Debtor shall furnish to Secured Party, in form and at intervals as
Secured Party may request, any information Secured Party may reasonably request
and allow Secured Party to examine, inspect, and copy any of Debtor's books and
records. Debtor shall, at the request of Secured Party, xxxx its records and the
Collateral to clearly indicate the security interest of Secured Party under this
Agreement.
2.2 At the time any Collateral becomes, or is represented to be, subject
to a security interest in favor of Secured Party, Debtor shall be deemed to have
warranted that (a) Debtor is the lawful owner of the Collateral and has the
right and authority to subject it to a security interest granted to Secured
Party; (b) Except as disclosed on attached Schedule 2.2 (the "Permitted
Encumbrances"), none of the Collateral is subject to any security interest other
than that in favor of Secured Party and there are no financing statements on
file, other than in favor of Secured Party; (c) Debtor acquired its rights in
the Collateral in the ordinary course of its business, and (d) no person, other
than Secured Party, has possession or control (as defined in the Uniform
Commercial Code) of any Collateral of such nature that perfection of a security
interest may be accomplished by control.
2.3 Except for the Permitted Encumbrances, Debtor will keep the
Collateral free at all times from all claims, liens, security interests and
encumbrances other than those in favor of Secured Party. Debtor will not,
without the prior written consent of Secured Party, sell, transfer or lease, or
permit to be sold, transferred or leased, any or all of the Collateral, except
for Inventory in the ordinary course of its business and will not return any
Inventory to its supplier. Secured Party or its representatives may at all
reasonable times inspect the Collateral and may enter upon all premises where
the Collateral is kept or might be located.
2.4 Except as may be otherwise agreed in writing by Secured Party,
Debtor will do all acts and will execute or cause to be executed all writings
requested by Secured Party to establish, maintain and continue a perfected and
first security interest of Secured Party in the Collateral. The Debtor also
ratifies Secured Party's authority to make any prior filings and authorizes the
Secured Party to have filed in any Uniform Commercial Code jurisdiction any
initial financing statements or amendments thereto which may have been filed
prior to the date of this Agreement, including, but not limited to filings in
Patent, Trademark and/or Copyright Offices worldwide. Debtor agrees that Secured
Party has no obligation to acquire or perfect any lien on or security interest
in any asset(s), whether realty or personalty, to secure payment of the
Indebtedness, and Debtor is not relying upon assets in which the Secured Party
may have a lien or security interest for payment of the Indebtedness.
2.5 Debtor will pay within the time that they can be paid without
interest or penalty all taxes, assessments and similar charges which at any time
are or may become a lien, charge, or encumbrance upon any Collateral, except to
the extent contested in good faith and bonded in a manner satisfactory to
Secured Party. If Debtor fails to pay any of these taxes, assessments, or other
charges in the time provided above, Secured Party has the option (but not the
obligation) to do so and Debtor agrees to repay all amounts so expended by
3
Secured Party immediately upon demand, together with interest at the highest
rate permissible under the Note.
2.6 Debtor will keep the Collateral in good condition, reasonable wear
and tear excepted, and will protect it from loss, damage, or deterioration from
any cause. Debtor has and will maintain at all times (a) with respect to the
Collateral, insurance under an "all risk" policy against fire and other risks
customarily insured against, and (b) public liability insurance and other
insurance as may be required by law or reasonably required by Secured Party, all
of which insurance shall be in amount, form and content, and written by
companies as may be satisfactory to Secured Party, containing a secured party's
loss payable endorsement acceptable to Secured Party. Debtor will deliver to
Secured Party immediately upon demand evidence satisfactory to Secured Party
that the required insurance has been procured. If Debtor fails to maintain
satisfactory insurance, Secured Party has the option (but not the obligation) to
do so and Debtor agrees to repay all amounts so expended by Secured Party
immediately upon demand, together with interest at the highest lawful default
rate which could be charged by Secured Party under the Note.
2.7 On each occasion on which Debtor evidences to Secured Party the
account balances on and the nature and extent of the Accounts Receivable, Debtor
shall be deemed to have warranted that except as otherwise indicated (a) each of
those Accounts Receivable is valid and enforceable without performance by Debtor
of any act, (b) each of those account balances are in fact owing, (c) there are
no setoffs, recoupments, credits, contra accounts, counterclaims or defenses
against any of those Accounts Receivable, (d) as to any Accounts Receivable
represented by a note, trade acceptance, draft or other instrument or by any
chattel paper or document, the same have been endorsed and/or delivered by
Debtor to Secured Party, (e) Debtor has not received with respect to any Account
Receivable, any notice of the death of the related account debtor, nor of the
dissolution, liquidation, termination of existence, insolvency, business
failure, appointment of a receiver for, assignment for the benefit of creditors
by, or filing of a petition in bankruptcy by or against, the account debtor, and
(f) as to each Account Receivable, the account debtor is not an affiliate of
Debtor, the United States of America or any department, agency or
instrumentality of it, or a citizen or resident of any jurisdiction outside of
the United States. Debtor will do all acts and will execute all writings
requested by Secured Party to perform, enforce performance of, and collect all
Accounts Receivable. Debtor shall neither make nor permit any modification,
compromise or substitution for any Account Receivable without the prior written
consent of Secured Party. Debtor shall, at Secured Party's request, arrange for
verification of Accounts Receivable directly with account debtors or by other
methods acceptable to Secured Party.
2.8 Debtor at all times shall be in strict compliance with all
applicable laws, including without limit any laws, ordinances, directives,
orders, statutes, or regulations an object of which is to regulate or improve
health, safety, or the environment ("Environmental Laws").
2.9 Upon an Event of Default, if Secured Party, acting in its sole
discretion, redelivers Collateral to Debtor or Debtor's designee for the purpose
of (a) the ultimate sale or exchange thereof; or (b) presentation, collection,
renewal, or registration of transfer thereof; or (c) loading, unloading,
storing, shipping, transshipping, manufacturing, processing or otherwise dealing
4
with it preliminary to sale or exchange; such redelivery shall be in trust for
the benefit of Secured Party and shall not constitute a release of Secured
Party's security interest in it or in the proceeds or products of it unless
Secured Party specifically so agrees in writing. If Debtor requests any such
redelivery, Debtor will deliver with such request a duly executed financing
statement in form and substance satisfactory to Secured Party. Any proceeds of
Collateral coming into Debtor's possession as a result of any such redelivery
shall be held in trust for Secured Party and immediately delivered to Secured
Party for application on the Indebtedness. Secured Party may (in its sole
discretion) deliver any or all of the Collateral to Debtor, and such delivery by
Secured Party shall discharge Secured Party from all liability or responsibility
for such Collateral. Secured Party, at its option, may require delivery of any
Collateral to Secured Party at any time with such endorsements or assignments of
the Collateral as Secured Party may request.
2.10 Upon an Event of Default and without notice, Secured Party may (a)
cause any or all of the Collateral to be transferred to its name or to the name
of its nominees; (b) receive or collect by legal proceedings or otherwise all
dividends, interest, principal payments and other sums and all other
distributions at any time payable or receivable on account of the Collateral,
and hold the same as Collateral, or apply the same to the Indebtedness, the
manner and distribution of the application to be in the sole discretion of
Secured Party; (c) enter into any extension, subordination, reorganization,
deposit, merger or consolidation agreement or any other agreement relating to or
affecting the Collateral, and deposit or surrender control of the Collateral,
and accept other property in exchange for the Collateral and hold or apply the
property or money so received pursuant to this Agreement.
2.11 Secured Party may not assign any of the Indebtedness and this
Agreement without the prior written consent of Debtor, which shall not
unreasonably be withheld.
2.12 Debtor shall defend, indemnify and hold harmless Secured Party, its
employees, agents, shareholders, affiliates, officers, and directors from and
against any and all claims, damages, fines, expenses, liabilities or causes of
action of whatever kind, including without limit consultant fees, legal
expenses, and attorney fees, suffered by any of them as a direct or indirect
result of any actual or asserted violation of any law, including, without limit,
Environmental Laws, or of any remediation relating to any property required by
any law, including without limit Environmental Laws.
2.13 Debtor's state or organization is Nevada (Kronos Advanced
Technologies, Inc. and Nevada (Kronos Air Technologies, Inc.). Debtor's resident
or chief executive office is located and shall be maintained at:
Kronos Advanced Technologies, Inc.
000 Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxxx, XX 00000
Kronos Air Technologies, Inc.
000 Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxxx, XX 00000
5
If Collateral is located, or was located prior to July 1, 2001, other
than in the state of organization (for registered entities), the address
of such location is:
00000 Xxxxxxxx Xxxxx
Xxxxx 00
Xxxx Xxxxxx, XX 00000
2.14 Debtor's entity identification number in the state of its
organization is C11290-1996 (Kronos Advanced Technologies, Inc.), and C9556-2000
(Kronos Air Technologies, Inc.). Debtor's federal employer identification number
is 00-0000000 (Kronos Advanced Technologies, Inc. and 00-0000000 (Kronos Air
Technologies, Inc.).
2.15 Debtor's full and correct legal name is: KRONOS ADVANCED
TECHNOLOGIES, INC. and KRONOS AIR TECHNOLOGIES, INC.
2.16 Debtor has done business under the following assumed names in the
five years prior to the date of this Agreement: TSET, INC.
2.17 The Debtor hereby irrevocably authorizes the Secured Party at any
time and from time to time to file in any Uniform Commercial Code jurisdiction
any initial financing or other statements and amendments thereto that (a)
indicate the Collateral (i) as all assets of the Debtor or words of similar
effect, regardless of whether any particular assets comprised in the Collateral
falls within the scope of Article 9 of the Uniform Commercial Code of the State
or such jurisdiction, or (ii) as being of an equal or lesser scope or with
greater detail, and (b) contain any other information required by part 5 of
Article 9 of the Uniform Commercial Code of the State for the sufficiency or
filing office acceptance of any financing statement or amendment, including (i)
whether the Debtor is an organization, the type of organization and any
organization identification number issued to the Debtor. The Debtor agrees to
furnish any such information to the Secured Party promptly upon request. The
Debtor also ratifies its authorization for the Secured Party to have filed in
any Uniform Commercial Code jurisdiction any like initial financing statements
or amendments thereto if filed prior to the date hereof.
2.18 The Debtor hereby irrevocably authorizes the Secured Party at any
time and from time to time to file in any Patent, Trademark and/or Copyright
Office worldwide any documents, statements and/or amendments thereto that
indicate, record, evidence, perfect, continue and/or secure the Secured Party's
interest in the Collateral.
3. COLLECTION OF PROCEEDS.
3.1 Debtor agrees to collect and enforce payment of all Collateral until
Secured Party shall direct Debtor to the contrary. Upon an Event of Default,
Debtor agrees to fully and promptly cooperate and assist Secured Party in the
collection and enforcement of all Collateral and to hold in trust for Secured
Party all payments received in connection with Collateral and from the sale,
lease or other disposition of any Collateral, all rights by way of suretyship or
guaranty and all rights in the nature of a lien or security interest which
Debtor now or later has regarding Collateral. Immediately upon and after such
notice, Debtor agrees to (a) endorse to Secured Party and immediately deliver to
Secured Party all payments received on Collateral or from the sale, lease or
6
other disposition of any Collateral or arising from any other rights or
interests of Debtor in the Collateral, in the form received by Debtor without
commingling with any other funds, and (b) immediately deliver to Secured Party
all property in Debtor's possession or later coming into Debtor's possession
through enforcement of Debtor's rights or interests in the Collateral. Debtor
irrevocably authorizes Secured Party or any Secured Party employee or agent to
endorse the name of Debtor upon any checks or other items which are received in
payment for any Collateral, and to do any and all things necessary in order to
reduce these items to money. Secured Party shall have no duty as to the
collection or protection of Collateral or the proceeds of it, nor as to the
preservation of any related rights, beyond the use of reasonable care in the
custody and preservation of Collateral in the possession of Secured Party.
Debtor agrees to take all steps necessary to preserve rights against prior
parties with respect to the Collateral. Nothing in this Section 3.1 shall be
deemed a consent by Secured Party to any sale, lease or other disposition of any
Collateral.
4. DEFAULTS, ENFORCEMENT AND APPLICATION OF PROCEEDS.
4.1 Upon the occurrence of any of the following events (each an "Event
of Default"), Debtor shall be in default under this Agreement:
(a) Any failure or neglect to comply with, or breach of, (after the
expiration of the 30 day grace period as set forth in that certain
Master Loan and Investment Agreement between Debtor and Secured
Party of even date herewith ("Master Loan Agreement")) any of the
terms, provisions, warranties or covenants of this Agreement, the
Master Loan Agreement, or any other agreement or commitment between
Debtor , any Guarantor of any of the Indebtedness ("Guarantor") and
Secured Party; or
(b) Any failure to pay the Indebtedness when due, or such portion of it
as may be due, by acceleration or otherwise before the expiration of
applicable cure periods; or
(c) Any warranty, representation, financial statement or other
information made, given or furnished to Secured Party by or on
behalf of Debtor or any Guarantor shall be, or shall prove to have
been, false or misleading, in any material respect, when made,
given, or furnished; or
(d) Any loss, theft, substantial damage or destruction to or of any of
the Collateral, or the issuance or filing of any attachment, levy,
garnishment or the commencement of any proceeding in connection with
any of the Collateral or of any other judicial process of, upon or
in respect of Debtor or any Guarantor or any of the Collateral; or
(e) Sale or other disposition by Debtor or Guarantor of any substantial
portion of its assets or property or voluntary suspension of the
transaction of business by Debtor or any Guarantor, or death,
dissolution, termination of existence, merger, consolidation,
insolvency, business failure or assignment for the benefit of
creditors of or by Debtor or any Guarantor; or commencement of any
proceedings under any state or federal bankruptcy or insolvency laws
or laws for the relief of debtors by or against Debtor or any
7
Guarantor; or the appointment of a receiver, trustee, court
appointee, sequestrator or otherwise, for all or any part of the
property of Debtor or any Guarantor; or
(f) Any termination or notice of termination of any guaranty of
collection or payment of, or any breach, termination or notice of
termination of any subordination agreement, pledge, or collateral
assignment relating to, all or any part of the Indebtedness; or
(g) Any failure by Debtor or any Guarantor to pay when due any of its
indebtedness in excess of $25,000 in the aggregate (other than to
Secured Party) or in the observance or performance of any term,
covenant or condition in any agreement evidencing, securing or
relating to that indebtedness, except where such indebtedness is
contested in good faith; or
(h) Secured Party deems the margin of Collateral insufficient or itself
insecure, in good faith believing that the prospect of payment of
the Indebtedness or performance of this Agreement is impaired or
shall fear deterioration, removal or waste of the Collateral.
4.2 Upon the occurrence of any Event of Default, Secured Party may at
its discretion and without prior notice to Debtor (unless otherwise provided
below) declare any or all of the Indebtedness to be immediately due and payable,
and shall have and may exercise any one or more of the following rights and
remedies:
(a) Exercise all the rights and remedies upon default, in foreclosure
and otherwise, available to secured parties under the provisions of
the Uniform Commercial Code and other applicable law;
(b) Institute legal proceedings to foreclose upon the lien and security
interest granted by this Agreement, to recover judgment for all
amounts then due and owing as Indebtedness, and to collect the same
out of any Collateral or the proceeds of any sale of it;
(c) Institute legal proceedings for the sale, under the judgment or
decree of any court of competent jurisdiction, of any or all
Collateral; and/or
(d) Personally or by agents, attorneys, or appointment of a receiver,
enter upon any premises where Collateral may then be located, and
take possession of all or any of it and/or render it unusable; and
without being responsible for loss or damage to such Collateral,
hold, operate, sell, lease, or dispose of all or any Collateral at
one or more public or private sales, leasings or other disposition,
at places and times and on terms and conditions as Secured Party may
deem fit, without any previous demand or advertisement, provided,
however, Secured Party will provide Debtor with any notice of sale,
lease or other disposition, and advertisement as required by
applicable law. Except as otherwise provided in this Agreement, any
8
other notice or demand, any right or equity of redemption, and any
obligation of a prospective purchaser or lessee to inquire as to the
power and authority of Secured Party to sell, lease, or otherwise
dispose of the Collateral or as to the application by Secured Party
of the proceeds of sale or otherwise, which would otherwise be
required by, or available to Debtor under, applicable law are
expressly waived by Debtor to the fullest extent permitted.
At any sale pursuant to this Section 4.2, whether under the power of
sale, by virtue of judicial proceedings or otherwise, it shall not
be necessary for Secured Party or a public officer under order of a
court to have present physical or constructive possession of
Collateral to be sold. The recitals contained in any conveyances and
receipts made and given by Secured Party or the public officer to
any purchaser at any sale made pursuant to this Agreement shall, to
the extent permitted by applicable law, conclusively establish the
truth and accuracy of the matters stated (including, without limit,
as to the amounts of the principal of and interest on the
Indebtedness, the accrual and nonpayment of it and advertisement and
conduct of the sale); and all prerequisites to the sale shall be
presumed to have been satisfied and performed. Upon any sale of any
Collateral, the receipt of the officer making the sale under
judicial proceedings or of Secured Party shall be sufficient
discharge to the purchaser for the purchase money, and the purchaser
shall not be obligated to see to the application of the money. Any
sale of any Collateral under this Agreement shall be a perpetual bar
against Debtor with respect to that Collateral.
4.3 Upon the occurrence of any Event of Default, Debtor shall at the
request of Secured Party or the Secured Party may, itself, notify the account
debtors or obligors of Secured Party's security interest in the Collateral and
direct payment of it to Secured Party.
4.4 The proceeds of any sale or other disposition of Collateral
authorized by this Agreement shall be applied by Secured Party first upon all
expenses authorized by the Uniform Commercial Code and all reasonable attorney
fees and legal expenses incurred by Secured Party; the balance of the proceeds
of the sale or other disposition shall be applied in the payment of the
Indebtedness, first to interest, then to principal, then to remaining
Indebtedness and the surplus, if any, shall be paid over to Debtor or to such
other person(s) as may be entitled to it under applicable law. Debtor shall
remain liable for any deficiency, which it shall pay to Secured Party
immediately upon demand.
4.5 Nothing in this Agreement is intended, nor shall it be construed, to
preclude Secured Party from pursuing any other remedy provided by law for the
collection of the Indebtedness or for the recovery of any other sum to which
Secured Party may be entitled for the breach of this Agreement by Debtor.
Nothing in this Agreement shall reduce or release in any way any rights or
security interests of Secured Party contained in any existing agreement between
Debtor or any Guarantor and Secured Party.
4.6 No waiver of default or consent to any act by Debtor shall be
effective unless in writing and signed by an authorized officer of Secured
Party. No waiver of any default or forbearance on the part of Secured Party in
9
enforcing any of its rights under this Agreement shall operate as a waiver of
any other default or of the same default on a future occasion or of any rights.
4.7 Debtor authorizes and irrevocably appoints Secured Party or any
agent of Secured Party (which appointment is coupled with an interest) upon the
occurrence of an Event of Default the true and lawful attorney of Debtor (with
full power of substitution) in the name, place and stead of, and at the expense
of, Debtor, to demand, receive, xxx for, and give receipts or acquittances for
any moneys due or to become due on any Collateral and to endorse any item
representing any payment on or proceeds of the Collateral;
4.8 Upon the occurrence of an Event of Default, Debtor also agrees, upon
request of Secured Party, to assemble the Collateral and make it available to
Secured Party at any place designated by Secured Party which is reasonably
convenient to Secured Party and Debtor.
5. MISCELLANEOUS.
5.1 Until Secured Party is advised in writing by Debtor to the contrary,
all notices, requests and demands required under this Agreement or by law shall
be given to, or made upon, Debtor at the first address indicated in Section 5.7
below.
5.2 Debtor will give Secured Party not less than 90 days prior written
notice of all contemplated changes in Debtor's name, state of organization,
chief executive office or principal residence location, and/or location of any
Collateral, but the giving of this notice shall not cure any Event of Default
caused by this change.
5.3 Secured Party assumes no duty of performance or other responsibility
under any contracts contained within the Collateral.
5.4 Secured Party shall not sell, assign, transfer or grant an interest
in, any or all of the Indebtedness and any related obligations, including
without limit this Agreement without the prior written consent of Debtor, which
shall not be unreasonably withheld. In connection with the above, but without
limiting its ability to make other disclosures to the full extent allowable and
subject to applicable securities laws, Secured Party may disclose all documents
and information which Secured Party now or later has relating to Debtor, the
Indebtedness or this Agreement, however obtained. Debtor further agrees that
Secured Party may provide information relating to this Agreement or relating to
Debtor to the Secured Party's parent, affiliates, subsidiaries, and service
providers.
5.5 In addition to Secured Party's other rights, any indebtedness owing
from Secured Party to Debtor can be set off and applied by Secured Party on any
Indebtedness at any time(s) either before or after maturity or demand without
notice to anyone.
5.6 Debtor waives any right to require the Secured Party to: (a) proceed
against any person or property; or (b) pursue any other remedy in the Secured
Party's power. Debtor waives notice of acceptance of this Agreement and
presentment, demand, protest, notice of protest, dishonor, notice of dishonor,
notice of default, notice of intent to accelerate or demand payment of any
10
Indebtedness, any and all other notices to which the undersigned might otherwise
be entitled, and diligence in collecting any Indebtedness, and agree(s) that the
Secured Party may, once or any number of times, modify the terms of any
Indebtedness, compromise, extend, increase, accelerate, renew or forbear to
enforce payment of any or all Indebtedness, all without notice to Debtor and
without affecting in any manner the unconditional obligation of Debtor under
this Agreement. Debtor unconditionally and irrevocably waives each and every
defense and setoff of any nature which, under principles of guaranty or
otherwise, would operate to impair or diminish in any way the obligation of
Debtor under this Agreement, and acknowledges that such waiver is by this
reference incorporated into each security agreement, collateral assignment,
pledge and/or other document from Debtor now or later securing the Indebtedness,
and acknowledges that as of the date of this Agreement no such defense or setoff
exists.
5.7 In the event that applicable law shall obligate Secured Party to
give prior notice to Debtor of any action to be taken under this Agreement,
Debtor agrees that a written notice given to Debtor at least five days before
the date of the act shall be reasonable notice of the act and, specifically,
reasonable notification of the time and place of any public sale or of the time
after which any private sale, lease, or other disposition is to be made, unless
a shorter notice period is reasonable under the circumstances. A notice shall be
deemed to be given under this Agreement when delivered to Debtor or when placed
in an envelope addressed to Debtor and deposited, with postage prepaid, in a
post office or official depository under the exclusive care and custody of the
United States Postal Service or delivered to an overnight courier. The mailing
shall be by overnight courier, certified, or first class mail at the following
addresses:
If to Debtor: Kronos Advanced Technologies, Inc.
000 Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxxxxxxxx 00000
Attn: Xxxxxx X. Xxxxxx
Kronos Air Technologies, Inc.
000 Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxxxxxxxx 00000
Attn: Xxxxxx X. Xxxxxx
With a copy to: Xxxxxxxxxxx & Xxxxxxxx LLP
000 Xxxxx Xxxxxxxx Xxxxxxxxx, Xxxxx 0000
Xxxxx, Xxxxxxx 00000
Attn: Xxxxxxx X. Xxxxxx, Esq.
If to Secured Party: HoMedics, Inc.
0000 Xxxxxxx Xxxxx
Xxxxxxxx Xxxxxxxx, Xxxxxxxx 00000
Attn: Xxx Xxxxxx
11
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.
5.8 Notwithstanding any prior revocation, termination, surrender, or
discharge of this Agreement in whole or in part, the effectiveness of this
Agreement shall automatically continue or be reinstated in the event that any
payment received or credit given by Secured Party in respect of the Indebtedness
is returned, disgorged, or rescinded under any applicable law, including,
without limitation, bankruptcy or insolvency laws, in which case this Agreement,
shall be enforceable against Debtor as if the returned, disgorged, or rescinded
payment or credit had not been received or given by Secured Party, and whether
or not Secured Party relied upon this payment or credit or changed its position
as a consequence of it. In the event of continuation or reinstatement of this
Agreement, Debtor agrees upon demand by Secured Party to execute and deliver to
Secured Party those documents which Secured Party determines are appropriate to
further evidence (in the public records or otherwise) this continuation or
reinstatement, although the failure of Debtor to do so shall not affect in any
way the reinstatement or continuation.
5.9 This Agreement and all the rights and remedies of Secured Party
under this Agreement shall inure to the benefit of Secured Party's successors
and assigns and to any other holder who derives from Secured Party title to or
an interest in the Indebtedness or any portion of it, and shall bind Debtor and
the heirs, legal representatives, successors, and assigns of Debtor. Nothing in
this Section 5.9 is deemed a consent by Secured Party to any assignment by
Debtor.
5.10 Except as otherwise provided in this Agreement, all terms in this
Agreement have the meanings assigned to them in Article 9 (or, absent definition
in Article 9, in any other Article) of the Uniform Commercial Code. "Uniform
Commercial Code" means Act No. 174 of the Michigan Public Acts of 1962, as
amended.
5.11 No single or partial exercise, or delay in the exercise, of any
right or power under this Agreement, shall preclude other or further exercise of
the rights and powers under this Agreement. The unenforceability of any
provision of this Agreement shall not affect the enforceability of the remainder
of this Agreement. This Agreement constitutes the entire agreement of Debtor and
Secured Party with respect to the subject matter of this Agreement. No amendment
or modification of this Agreement shall be effective unless the same shall be in
writing and signed by Debtor and an authorized officer of Secured Party. This
Agreement shall be governed by and construed in accordance with the internal
laws of the State of Michigan, without regard to conflict of laws principles.
5.12 A carbon, photographic or other reproduction of this Agreement shall
be sufficient as a financing statement under the Uniform Commercial Code and may
be filed by Secured Party in any filing office.
5.13 This Agreement shall be terminated only by the filing of a
termination statement in accordance with the applicable provisions of the
Uniform Commercial Code, but the obligations contained in Section 2.12 of this
Agreement shall survive termination.
12
5.14 This Agreement may be executed in multiple counterparts, each of
which shall be deemed an original and all of which shall constitute one
agreement. The signature of any party to any counterpart shall be deemed to be a
signature to, and may be appended to, any other counterpart. For purposes of
this Agreement, a facsimile signature shall be deemed the same as an original.
6. DEBTOR AND SECURED PARTY ACKNOWLEDGE THAT THE RIGHT TO TRIAL BY JURY
IS A CONSTITUTIONAL ONE, BUT THAT IT MAY BE WAIVED. EACH PARTY, AFTER CONSULTING
(OR HAVING HAD THE OPPORTUNITY TO CONSULT) WITH COUNSEL OF THEIR CHOICE,
KNOWINGLY AND VOLUNTARILY, AND FOR THEIR MUTUAL BENEFIT WAIVES ANY RIGHT TO
TRIAL BY JURY IN THE EVENT OF LITIGATION REGARDING THE PERFORMANCE OR
ENFORCEMENT OF, OR IN ANY WAY RELATED TO, THIS AGREEMENT OR THE INDEBTEDNESS.
Debtor:
KRONOS ADVANCED TECHNOLOGIES, INC., f/k/a
TSET, INC., A NEVADA CORPORATION
By: /s/ Xxxxxx X. Xxxxxx
--------------------------------------
Name: Xxxxxx X. Xxxxxx
Its: President and CEO
Debtor:
KRONOS AIR TECHNOLOGY, INC., a Nevada
corporation
By: /s/ Xxxxxx X. Xxxxxx
--------------------------------------
Name: Xxxxxx X. Xxxxxx
Its: President and CEO
Secured Party:
FKA DISTRIBUTING CO.,
d/b/a HOMEDICS, INC., a Michigan corporation
By: /s/ Xxx Xxxxxx
--------------------------------------
Name: Xxx Xxxxxx
Its: President
13
SCHEDULE 1(F)
-------------
OTHER SPECIFIC COLLATERAL
The obligation of Debtor to satisfy Secured Party's right to require Debtor to
purchase all or any portion of the shares of Debtor's common stock owned by
Secured Party as more specifically set forth in that certain Master Loan and
Investment Agreement dated May 9, 2003 among Debtor and Secured Party.
14
SCHEDULE 2.2
------------
PERMITTED ENCUMBRANCES
None.
15
