SECURITY AGREEMENT
This
Security Agreement is executed by Axion Battery Products, Inc., a Pennsylvania
corporation and wholly owned subsidiary of Axion Power International, Inc.,
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 Pennsylvania
Uniform Commercial Code as in effect in Pennsylvania, 13 PA CONS. STAT. XXX.
§
1101, et seq.
(the
"UCC")
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
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
equipment, inventory, furniture and fixtures of the Debtor, together with all
substitutions or replacements thereto.
2. All
proceeds and accessions of the above-described collateral.
IV
PURCHASE
MONEY
Debtor
acknowledges that a portion of the proceeds of the obligations secured hereby
have been used to enable Debtor to acquire rights in, or the use of, the
collateral presently owned by Debtor.
V
CLASSIFICATION
OF COLLATERAL
Debtor
acknowledges that at the time the security interest attaches, the collateral
consists of equipment, inventory and other personal 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 Commonwealth
of
Pennsylvania, that it is in good standing under the laws of the Commonwealth
of
Pennsylvania, and that 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 VII
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 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
warrants that the collateral subject to this Agreement is presently located
at
0000 Xxxxxxxxxx Xxxx, Xxx Xxxxxx, Xxxxxxxxxxxx 00000, 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 to pay or perform under the Promissory
Note executed 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
is to have thirty (30) days in which to cure a default after the receipt 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
default by Debtor that remains uncured within the time limits set forth in
section VIII by Debtor, Secured Party may exercise the rights of enforcement
contained in the UCC 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 regular and certified mail, return receipt requested,
at least ten (10) days prior to the date of the public sale or 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 addressed 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
the
Secured Party: Xxxxxx
Xxxxxxx
000
Xxxxxx Xxxxx
Xxxxxxxx,
Xxx Xxxxxx 00000
Facsimile:000-000-0000
Email:
xxxxxxxxxx@xxxxx.xxx
To
the
Debtor: Xxxxxxx
X. Xxxxxxxx, Xx.
Xxxxx
& Xxxxxxx, P.C.
00
Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxxxxx,
Xxxxxxxxxxxx 00000-0000
Telephone:
000-000-0000
Direct
Facsimile: 000-000-0000
Email:
:
Xxxxxxxxx@xxxxxxxx.xxx
and
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
Commonwealth of Pennsylvania 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
BATTERY PRODUCTS, INC., a Pennsylvania corporation
By_________________________________
,
President
SECURED
PARTY
XXXXXX
XXXXXXX
By__________________________________
