SECURITY AGREEMENT
This
Security Agreement is executed by Axion Power International, Inc., a Delaware
corporation, as Debtor, and Xxxxxx Xxxxxxx, an individual, as Secured Party.
I
CREATION
OF SECURITY INTEREST
Debtor
hereby grants to Secured Party a first priority security interest in the
collateral described in this Security Agreement pursuant to the Delaware Uniform
Commercial Code - Secured Transactions.
II
OBLIGATIONS
SECURED
The
security interest is granted to Secured Party to secure the following
obligations:
A. Payment
of the indebtedness evidenced by a Promissory Note of this same date executed
by
Axion Battery Products, Inc., a Pennsylvania corporation and wholly owned
subsidiary of Debtor, payable to the order of Secured Party, in the principal
amount of One Million Dollars ($1,000,000.00), bearing interest the fixed rate
of ten percent (10 %) per annum, together with any renewals, extensions,
modifications, or amendments of the Promissory Note (the "Note").
B. The
expenses and costs incurred or paid by Secured Party in the maintenance and
preservation of the collateral and the enforcement of the rights of Secured
Party and the duties of Debtor as stated in this Security Agreement, including,
without limitation, attorneys' fees, court costs, foreclosure expenses, and
witness fees.
III
DESCRIPTION
OF COLLATERAL
The
collateral of this Security Agreement consists of the following:
1. All
of
Debtor’s equipment, inventory, furniture, fixtures and intellectual
property.
2. All
substitutions, replacements, developments or accessions of the above-described
collateral.
IV
CLASSIFICATION
OF COLLATERAL
Debtor
acknowledges that at the time the security interest attaches, the collateral
consists of tangible and intangible personal property, including intellectual
property.
V
PERFECTION
OF SECURITY INTEREST
To
perfect the security interest granted to Secured Party by the terms of this
Security Agreement, Debtor agrees to the following:
A. Debtor
authorizes Secured Party to file financing statements in all states, counties,
and other jurisdictions as Secured Party may elect, without Debtor’s signature
as permitted by law.
B. Debtor
shall execute and deliver to Secured Party, in form and substance satisfactory
to Secured Party, such financing statements and such further assurances as
Secured Party may, from time to time, consider reasonably necessary to create,
perfect and preserve Secured Party's security interest herein granted, and
Secured Party may cause such statements and assurances to be recorded and filed
at such times and places as may be required or permitted by law to so create,
perfect and preserve such security interest.
Upon
performance of all obligations of Debtor to Secured Party that are secured
by
this Security Agreement, Secured Party agrees to surrender possession of the
original security instruments to Debtor and to execute such documents as may
be
necessary to completely release Secured Party's security interest created
hereby.
VI
DEBTOR'S
COVENANTS AND WARRANTIES
C. Debtor
is
a corporation duly organized and existing under the laws of the State of
Delaware, is in good standing under the laws of the State of Delaware, and
the
granting of the security interest and the performance of all other obligations
provided in this Agreement are within the Debtor's powers, have been duly
authorized, and are not in contravention of any law or the Debtor's Articles
of
Organization, or any agreement or undertaking of which Debtor is a party or
by
which it is bound.
D. Debtor
agrees that during the term of this Agreement, and as long as any obligation
that is subject to this Agreement remains outstanding, Debtor will not grant
a
security interest in the collateral or any part thereof to any person except
as
otherwise authorized in accordance with the provisions of article VI
below.
E. During
the term of this Security Agreement, Debtor shall keep the collateral free
and
clear from any and all liens, encumbrances, and other security interests, and
will pay, prior to delinquency, all taxes, charges, encumbrances, liens, and
assessments against the collateral, and, should the Debtor fail to do so,
Secured Party may, but shall not be required, to pay or discharge the same.
Debtor shall give Secured Party ten (10) days notice in the event of default
of
any of these obligations. Debtor shall reimburse Secured Party for any such
payments.
F. Debtor
shall maintain the collateral in good order and repair, reasonable and ordinary
wear and tear excepted.
G. Debtor
shall maintain insurance on the collateral that consists of equipment in an
amount not less than the replacement value of the equipment. The insurance
policy or policies shall name Secured Party as a loss payee. Debtor shall
provide Secured Party with a copy of the declaration page reflecting Secured
Party as Loss Payee.
H. Debtor
represents that the tangible collateral subject to this Agreement is presently
located at 000 Xxxx Xxxx Xxxxx, Xxxx Xxxxxxx, Xxx Xxxx 00000 and, to the extent
it has any ownership interest therein, at 000 Xxxxxx Xxxxxx, Xxxxxxx, Xxxxxxx,
Xxxxxx X0X0X0, and the Debtor shall inform Secured Party in writing at least
ten
(10) days prior to any change of location of the collateral.
I. Debtor
shall execute any and all Financing Statements relating to the perfection,
amendment, release, or termination of the security interest created hereby.
The
Debtor hereby authorizes and appoints Secured Party, in the case of need, to
sign on behalf of Debtor with full power of substitution as the Debtor's
attorney-in-fact.
VII
USE
OF
COLLATERAL
So
long
as the Debtor is not in default under the terms of this Security Agreement,
Debtor may use, consume, and dispose of the collateral in the ordinary course
of
Debtor's business. This right includes, but is not limited to, the use and
consumption of collateral in the manufacture, preparation, and delivery of
goods, and the sale or encumbrance of the collateral in the ordinary course
of
Debtor's business.
VIII
DEFAULT
PROVISIONS
A. Definition
Of Default.The occurrence of any of the following shall constitute a default
by the Debtor under this Security Agreement:
1. The
failure by Debtor to pay or perform any obligations secured by the terms of
this
Security Agreement, including the failure by Axion Battery Products, Inc. to
pay
or perform under the Promissory Note executed by it in conjunction with this
Security Agreement.
2. The
failure of Debtor to perform any of Debtor's obligations under the terms of
this
Security Agreement or the Loan Agreement executed concurrently
herewith.
3. A
material breach of any covenant or representation made to Secured Party
herein.
4. The
filing of a petition by or against the Debtor under any state or federal law
relating to the relief of debtors, any assignment by Debtor for the benefit
of
creditors, or the insolvency or cessation of business by Debtor.
5. The
sale,
transfer, alienation, encumbrance, or other disposition of the collateral,
or of
any part thereof or of any interest therein, whether voluntarily or
involuntarily, without the prior written consent of Secured Party, except for
sales or encumbrances of the equipment collateral as permitted in accordance
with the provisions of article VII above.
B. Notice
And Right To Cure.
1. Notice.
Secured
Party must, before pursuing any remedy for an alleged default by Debtor, give
written notice of default to Debtor. Each notice of default must specify the
alleged event of default.
2. Debtor's
Right To Cure Defaults.
Debtor
shall have thirty (30) days in which to cure a default after the delivery of
the
notice of default by Secured Party. However, if a non-monetary default cannot
reasonably be cured within thirty (30) days, then Debtor is not to be considered
in default if Debtor commences to cure the default within the thirty (30) day
period and diligently and in good faith continues to cure the default
thereafter. In the event of a monetary default that is substantially cured
within the thirty (30) day notice period, Secured Party will provide reasonable
time to complete the cure.
IX
SECURED
PARTY'S RIGHTS AND REMEDIES
Upon
the
occurrence of default that remains uncured within the time limit set forth
in
section VIII by Debtor, Secured Party may exercise the rights of enforcement
contained in the Uniform Commercial Code in force in Delaware at the date of
the
default, including, but not limited to, the following:
A
Acceleration.
Secured
Party may, at Secured Party's option, declare immediately due and payable the
obligations of Debtor to Secured Party which are secured hereby, and the same
shall, upon notice to or demand on Debtor, become immediately due and
payable.
B
Right
To Possession Of Collateral.
The
Secured Party shall have the right to take possession of the collateral and
the
Debtor agrees to cooperate fully with Secured Party in the exercise of Secured
Party's right to take possession of the collateral. This right includes, but
is
not limited to, Debtor's obligation to assemble and deliver the collateral
or
some portion of the collateral or some part or component of the collateral
upon
request of the Secured Party, to a place designated by Secured Party where
it
shall be made available to the Secured Party. Failure to cooperate shall
constitute a breach of this Agreement and the Debtor shall be liable for any
and
all expenses incident to such failure or cooperation.
C. Right
To Dispose Of Collateral.
The
Secured Party shall have the right to dispose of the collateral by public or
private proceeding and by way of one or more contracts. Such sale or other
disposition of the collateral may be made as a unit or in parcels and at such
time and on such terms as Secured Party may determine, provided only that the
disposition effected is commercially reasonable.
Disposition
of the collateral may be from the premises of the Debtor and Debtor agrees
to
cooperate fully in facilitating such a disposition, which may include, on
request, the obligation to assemble the collateral in some designated location
of the Debtor where the collateral shall be made available to prospective
buyers. Disposition of the collateral may be from any other commercially
reasonable location, including the principal place of business of Secured
Party.
D. Notice
Of Sale.
Debtor
and Secured Party agree that notice of disposition of the collateral shall
be
commercially reasonable if such notice is received by the Debtor by facsimile
or
hand delivery, as well as sent by regular and certified mail, return receipt
requested, at least ten (10) days prior to the date of the public sale or the
date after which a private sale or other disposition may be
effected.
E. Proceeds
Of Sale.
The
proceeds of any sale or disposition of the collateral shall be applied in the
manner provided by law and shall include any and all expenses provided in this
Agreement. Debtor agrees that Secured Party shall be entitled to recover
reasonable attorneys' fees and costs incurred by the Secured Party in exercising
its rights and remedies under this Agreement. Upon payment of Secured Party’s
principle, interests and expenses as allowed by this agreement and by law,
Secured Party will return possession of all collateral to Debtor and agrees
to
execute such documents as may be necessary to completely release Secured Party's
security interest created hereby.
F. Deficiency.
In the
event the proceeds of collection, sale or disposition of the collateral are
not
sufficient to discharge Debtor's obligation secured hereby, Debtor shall be
liable for the deficiency.
X
MISCELLANEOUS
A. Notices.
Except
as otherwise expressly provided in this Security Agreement or by law, all
notices must be in writing and shall be considered given upon delivery of,
or if
mailed, upon the first to occur of actual receipt or the expiration of three
(3)
days after the deposit in United States Postal Service mail, first class,
postage prepaid and addressed at the address specified. Notices must given
by
email and any other method of delivery, such as facsimile, regular mail,
overnight or personal delivery, to the parties at the addresses listed
below:
To
Secured Party: Xxxxxx
Xxxxxxx
000
Xxxxxx Xxxxx
Xxxxxxxx,
Xxx Xxxxxx 00000
Facsimile:
000-000-0000
Email:
xxxxxxxxxx@xxxxx.xxx
To
Debtor: Axion
Power International, Inc.
Xxxxxx
X.
Xxxxxxxxx
000
Xxxxxx Xxxxxx
Xxxxxxx,
Xxxxxxx, Xxxxxx X0X 0X0
Facsimile:
000-000-0000
Email:
xxxx@xxxxxxxxx.xxx
Any
change in the address of any party shall be given by the party having such
change to the other parties in the manner provided above. Thereafter, all
notices shall be given in accordance with the notice of change of address.
Notices given before actual receipt of the notice of change of address shall
not
be invalidated by change of address.
B. Time
Of The Essence.
Time is
of the essence of this Security Agreement.
C. Waiver.
The
waiver by either party of the time for performing any act shall not constitute
a
waiver of the time for performing any other act or of an identical act required
to be performed at a later time. The exercise of any remedy provided for in
this
Security Agreement shall not constitute a waiver of any other remedy provided
by
law.
D. Severability.
The
unenforceability, invalidity, or illegality of any provision of this Security
Agreement shall not render any other provision unenforceable, invalid, or
illegal.
E. Choice
Of Law.
This
Security Agreement shall be governed by and interpreted under the laws of the
State of Delaware in force from time to time.
F. Gender
And Number.
As used
in this Security Agreement, the masculine, feminine, or neuter gender, and
the
singular or plural number, shall each be considered to include the others
whenever the context so indicates.
G. Binding
Effect.
This
Security Agreement shall inure to the benefit of, and be binding upon, the
heirs, assigns, transferees, personal representatives, and successors in
interest of the parties hereto.
H. Captions.
The
captions in this Security Agreement shall have no effect on its interpretation.
I.
Counterparts
and Fax Signatures.
This
Agreement may be signed in counterpart and all signatures shall constitute
the
entire Agreement. Signature by facsimile shall be deemed original.
Dated
this 31st
day of
January, 2006.
DEBTOR
AXION
POWER INTERNATIONAL, INC., a Delaware corporation
By_________________________________
,
President
SECURED
PARTY
XXXXXX
XXXXXXX
By__________________________________
