AMENDED AND RESTATED
SECURED PROMISSORY NOTE
$2,400,000.00 October 25, 2004
R E C I T A L S:
A. FKA Distributing Co. d/b/a HoMedics, Inc., a Michigan corporation ("Lender")
has previously loaned the undersigned $2,400,000.00 pursuant to a Secured
Promissory Note in the principal amount of $2,400,000.00, dated May 9, 2003 (the
"Original $2.4 Million Note").
B. This Amended and Restated Secured Promissory Note ("Note") amends, restates
and replaces the Original $2.4 Million Note and upon execution of this Note by
the undersigned, Lender will destroy the Original $2.4 Million Note.
NOW, THEREFORE, from the date of this Note, the terms of repayment are as
follows:
FOR VALUE RECEIVED, the undersigned, Kronos Advanced Technologies, Inc., a
Nevada corporation ("Kronos"), and Kronos Air Technologies, Inc., a Nevada
corporation, promise to pay to the order of Lender, at the office of the Lender
in the State of Michigan, Two Million Four Hundred and 00/100 ($2,400,000.00)
Dollars (U.S.) as set forth herein. All accrued interest attributable to the
Original $2.4 Million Note prior to the date of this Note shall remain payable
to Lender subject to the terms of this Note. Interest on the unpaid principal
balance has been accruing since May 9, 2003 and shall continue to accrue at the
rate of 6% per annum until maturity, whether by acceleration or otherwise, or
until Default, as later defined, and after that at a default rate equal to the
rate of interest otherwise prevailing under this Note plus 3% per annum (but in
no event in excess of the maximum rate permitted by law). Interest shall be
calculated for the actual number of days the principal is outstanding on the
basis of a 365/366 day year. No payments shall be required under this Note until
the earlier of: (i) the quarter following the Production Effective Date (as such
term is defined in the Exclusive License Agreement dated October 23, 2002
between Lender and Kronos, as amended); or (ii) twenty-four (24) months from the
date of this Note (the "Repayment Start Date"). Interest shall continue to
accrue and all accrued interest from the Original $2.4 Million Note and this
Note shall, on the Repayment Start Date, become part of the principal balance
under this Note and be included as principal for purposes of calculating
amortization. Payments of principal and accrued interest due under this Note
shall be payable in equal quarterly installments beginning on the first day of
the quarter following the Repayment Start Date and continuing on the first day
of each November, February, May and August. The entire remaining unpaid balance
of principal and accrued interest shall be payable on the fifth (5th)
anniversary of this Note. A late installment charge equal to 5% of each late
installment may be charged on any installment payment not received by the Lender
within 10 calendar days after the installment due date, but acceptance of
payment of this charge shall not waive any Default under this Note.
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This Note and any other indebtedness and liabilities of any kind of the
undersigned to the Lender, and any and all modifications, renewals or extensions
of it, whether joint or several, contingent or absolute, now existing or later
arising, and however evidenced (collectively "Indebtedness") have previously
been and continue to be secured by and the Lender is granted a security interest
in all property of the undersigned from time to time in the possession of the
Lender and by any other collateral, rights and properties described in each and
every mortgage, security agreement, pledge, assignment and other security or
collateral agreement which has been, or will at any time(s) later be, executed
by the undersigned to or for the benefit of the Lender (collectively
"Collateral").
If the undersigned (a) fail to pay this Note or any of the Indebtedness when due
(after the expiration of the 30 day grace period as set forth in that certain
First Amendment to Master Loan and Investment Agreement of even date herewith
among the parties (the "Master Loan Agreement")), by maturity, acceleration or
otherwise; or (b) fail to comply (after the expiration of the 30 day grace
period as set forth in the Master Loan Agreement) with any of the terms or
provisions of any agreement between the undersigned and the Lender; or (c)
become the subject of a voluntary or involuntary proceeding in bankruptcy, or a
reorganization, arrangement or creditor composition proceeding, ceases doing
business as a going concern, dissolves or, is the subject of a dissolution,
merger or consolidation; or (d) if any warranty or representation made by the
undersigned in connection with the Original $2.4 Million Note or this Note or
any of the Indebtedness shall be discovered to be false or misleading in any
material respect; (e) or if there is any termination, notice of termination, or
breach of any guaranty, pledge, collateral assignment or subordination agreement
relating to all or any part of the Indebtedness; or (f) if there is any failure
by the undersigned to pay when due (after the expiration of the 30 day grace
period as set forth in the Master Loan Agreement) any of its indebtedness in
excess of $25,000 (other than to the Lender) or in the observance or performance
of any term, covenant or condition in any document evidencing, securing or
relating to such indebtedness; or (g) if there is filed or issued a levy or writ
of attachment or garnishment or other like judicial process upon the undersigned
or any of the Collateral, then the Lender, upon the occurrence of any of these
events (each a "Default"), may at its option declare any or all of the
Indebtedness to be immediately due and payable, sell or liquidate all or any
portion of the Collateral, set off against the Indebtedness any amounts owing by
the Lender to the undersigned, charge interest at the default rate provided in
the document evidencing the relevant Indebtedness and exercise any one or more
of the rights and remedies granted to the Lender by any agreement with the
undersigned or given to it under applicable law. All payments under this Note
shall be in immediately available United States funds, without setoff or
counterclaim.
This Note shall bind the undersigned, its successors and assigns.
The undersigned waive presentment, demand, protest, notice of dishonor, notice
of demand or intent to demand, notice of acceleration or intent to accelerate,
and all other notices, and agrees that no extension or indulgence to the
undersigned or release shall affect the obligations of any of the undersigned.
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The undersigned agree to reimburse the holder or owner of this Note for any and
all costs and expenses (including without limit, court costs, legal expenses and
reasonable attorney fees, whether inside or outside counsel is used, whether or
not suit is instituted and, if suit is instituted, whether at the trial court
level, appellate level, in a bankruptcy, probate or administrative proceeding or
otherwise) incurred in collecting or attempting to collect this Note or incurred
in any other matter or proceeding relating to this Note.
The undersigned acknowledge and agree that there are no contrary agreements,
oral or written, establishing a term of this Note and agree that the terms and
conditions of this Note may not be amended, waived or modified except in a
writing signed by an officer of the Lender expressly stating that the writing
constitutes an amendment, waiver or modification of the terms of this Note. As
used in this Note, the word "undersigned" means each maker signing this Note. If
any provision of this Note is unenforceable in whole or part for any reason, the
remaining provisions shall continue to be effective. THIS NOTE SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF MICHIGAN.
THE UNDERSIGNED AND THE LENDER 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 NOTE OR THE INDEBTEDNESS.
KRONOS ADVANCED TECHNOLOGIES, INC.,
A NEVADA CORPORATION
By:_______________________________________
Name:_____________________________________
Its:______________________________________
KRONOS AIR TECHNOLOGIES, INC.,
a Nevada corporation
By:_______________________________________
Name:_____________________________________
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