AMENDED AND RESTATED CONTINUING GENERAL SECURITY AGREEMENT

 

Grantor: CPI Aerostructures, Inc.
91 Heartland Boulevard
Edgewood, New York 11717 Lender: Sovereign Bank, N.A., as Administrative Agent
and Collateral Agent for the Lenders defined below
Commercial Lending
330 South Service Road, Suite 118
Melville, New York 11747

 

WHEREAS, CPI AEROSTRUCTURES, INC. executed and delivered to Sovereign Bank, N.A.
a prior security agreement which granted security interests in certain personal
property and which security agreements are still in full force and effect
(“Prior Security Agreement”); and

 

WHEREAS, the Grantor and the Lender, each as defined below, wish to amend and
restate such Prior Security Agreement in its entirety, including (but not
limited to) the grant of a first priority security interest in all personal
property of Grantor, upon the terms and conditions set forth herein.

 

GRANT OF SECURITY INTEREST. For valuable consideration, the undersigned, CPI
AEROSTRUCTURES, INC. (the “Grantor”) hereby pledges and grants to SOVEREIGN
BANK, N.A., as Administrative Agent and Collateral Agent for the Lenders (the
“Lender”) under that certain Amended and Restated Credit Agreement among the
Grantor and the Lender of even date herewith (the “Credit Agreement”) a security
interest in the Collateral to secure the Indebtedness (inclusive of obligations
arising under any Swap Contract as defined in the Credit Agreement) and agrees
that Lender shall have the rights stated in this Agreement and the Credit
Agreement with respect to the Collateral, in addition to all other rights which
Lender may have by law.

 

COLLATERAL DESCRIPTION. The word “Collateral” as used in this Agreement means
all of Grantor’s right, title and interest in the following described property,
whether now owned or hereafter acquired, whether now existing or hereafter
arising, and wherever located, in which Grantor is giving to Lender a security
interest for the payment of the Indebtedness and performance of and other
obligations under the Note and this Agreement:

 

All Inventory, Chattel Paper, Accounts, Equipment, General Intangibles, Deposit
Accounts, Commercial Tort Claims, Commingled Goods, Consumer Goods, Documents of
Title, Instruments, Investment Property, Payment Intangibles, Contract Rights,
Letter of Credit Rights, Software, Money, Supporting Obligations and all other
Personal Property

 

In addition, the word “Collateral” also includes all the following, whether now
owned or hereafter acquired, whether now existing or hereafter arising, and
wherever located:

 

(A) All accessions, attachments, accessories, tools, parts, supplies,
replacements of and additions to any of the collateral described herein, whether
added now or later.

 

 

 

 

AMENDED AND RESTATED CONTINUING GENERAL SECURITY AGREEMENT (continued) Page - 2
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(B) All products and produce of any of the property described in this
“Collateral Description” section.

 

(C) All accounts, general intangibles, instruments, rents, monies, payments, and
all other rights, arising out of a sale, lease, consignment or other disposition
of any of the property described in this “Collateral Description” section.

 

(D) All proceeds (including insurance proceeds) from the sale, destruction,
loss, or other disposition of any of the property described in this “Collateral
Description” section, and sums due from a third party who has damaged or
destroyed the Collateral or from that party's insurer, whether due to judgment,
settlement or other process.

 

(E) All records and data relating to any of the property described in this
“Collateral Description” section, whether in the form of a writing, photograph,
microfilm, microfiche, or electronic media, together with all of Grantor's
right, title, and interest in and to all computer software required to utilize,
create, maintain, and process any such records or data on electronic media.

 

(F) All right, title and interest of the Grantor, whether now owned or hereafter
acquired, in the Master Agreement (as defined in the Credit Agreement), any
amendment or replacement thereof and any transaction thereunder including,
without limitation, all amounts payable or deliverable thereunder inclusive of
any termination payment.

 

CROSS-COLLATERALlZATION. In addition to the Note, this Agreement secures all
obligations, debts and liabilities, plus interest thereon, of Grantor to Lender,
or any one or more of them, as well as all claims by Lender against Grantor or
any one or more of them, whether now existing or hereafter arising, whether
related or unrelated to the purpose of the Note, whether voluntary or otherwise,
whether due or not due, direct or indirect, determined or undetermined, absolute
or contingent, liquidated or unliquidated, whether Grantor may be liable
individually or jointly with others, whether obligated as guarantor, surety,
accommodation party or otherwise, and whether recovery upon such amounts may be
or hereafter may become barred by any statute of limitations, and whether the
obligation to repay such amounts may be or hereafter may become otherwise
unenforceable.

 

FUTURE ADVANCES. In addition to the Note, this Agreement secures all future
advances made by Lender to Grantor regardless of whether the advances are made
a) pursuant to a commitment or b) for the same purposes.

 

GRANTOR’S WAIVERS AND RESPONSIBILITIES. Except as otherwise required under this
Agreement or by applicable law, (A) Grantor agrees that Lender need not tell
Grantor about any action or inaction Lender takes in connection with this
Agreement; (B) Grantor assumes the responsibility for being and keeping informed
about the Collateral; and (C) Grantor waives any defenses that may arise because
of any action or inaction of Lender, including without limitation any failure of
Lender to realize upon the Collateral or any delay by Lender in realizing upon
the Collateral; and Grantor agrees to remain liable under the Note no matter
what action Lender takes or fails to take under this Agreement.

 

 

 

 

AMENDED AND RESTATED CONTINUING GENERAL SECURITY AGREEMENT (continued) Page - 3
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GRANTOR’S REPRESENTATIONS AND WARRANTIES. Grantor warrants that: (A) this
Agreement is executed at Grantor’s request and not at the request of Lender; and
(B) Grantor has the full right, power and authority to enter into this Agreement
and to pledge the Collateral to Lender.

 

GRANTOR’S ADDITIONAL WAIVERS. Grantor waives all requirements of presentment,
protest, demand, and notice of dishonor or non-payment to Grantor or any other
party to the Indebtedness or the Collateral. Lender may do any of the following
with respect to any obligation of Grantor without first obtaining the consent of
Grantor: (A) grant any extension of time for any payment, (B) grant any renewal,
(C) permit any modification of payment terms or other terms, provided such
modification is not adverse to Grantor, or (D) exchange or release any
Collateral or other security. No such act or failure to act shall affect
Lender's rights against Grantor or the Collateral.

 

RIGHT OF SETOFF. To the extent permitted by applicable law, Lender reserves a
right of setoff in all Grantor's accounts with Lender (whether checking,
savings, or some other account and whether evidenced by a certificate of
deposit). This includes all accounts Grantor holds jointly with someone else and
all accounts Grantor may open in the future. However, this does not include any
IRA or Keogh accounts, or any trust accounts for which setoff would be
prohibited by law. Grantor authorizes Lender, to the extent permitted by
applicable law, to charge or setoff all sums owing on the Indebtedness against
any and all such accounts, and, at Lender's option, upon an Event of Default, to
administratively freeze all such accounts to allow Lender to protect Lender's
charge and setoff rights provided in this paragraph.

 

GRANTOR'S REPRESENTATIONS AND WARRANTIES WITH RESPECT TO THE COLLATERAL. With
respect to the Collateral, Grantor represents and promises to Lender that:

 

Perfection of Security Interest. Grantor agrees to take whatever actions are
reasonably requested by Lender to perfect and continue Lender's security
interest in the Collateral. Upon request of Lender, Grantor will deliver to
Lender any and all of the documents evidencing or constituting the Collateral,
and Grantor will note Lender's interest upon any and all chattel paper and
instruments if not delivered to Lender for possession by Lender.

 

Notices to Lender. Grantor will promptly notify Lender in writing at Lender's
address shown above (or such other addresses as Lender may designate from time
to time) prior to any (1) change in Grantor's name; (2) change in Grantor's
assumed business name(s); (3) change in the management of any entity Grantor;
(4) change in the authorized signer(s); (5) change in Grantor's principal office
address; (6) change in Grantor's state of organization; (7) conversion of
Grantor to a new or different type of business entity; or (8) change in any
other aspect of Grantor that directly or indirectly relates to any agreements
between Grantor and Lender. No change in Grantor's name or state of organization
will take effect until after Lender has received notice.

 

 

 

 

AMENDED AND RESTATED CONTINUING GENERAL SECURITY AGREEMENT (continued) Page - 4
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No Violation. The execution and delivery of this Agreement will not violate any
law or agreement governing Grantor or to which Grantor is a party, and its
certificate or articles of incorporation and bylaws do not prohibit any term or
condition of this Agreement.

 

Enforceability of Collateral. To the extent the Collateral consists of accounts,
chattel paper, or general intangibles, as defined by the Uniform Commercial
Code, the Collateral is enforceable in accordance with its terms, is genuine,
and fully complies with all applicable laws and regulations concerning form,
content and manner of preparation and execution, and all persons appearing to be
obligated on the Collateral have authority and capacity to contract and are in
fact obligated as they appear to be on the Collateral. At the time any account
becomes subject to a security interest in favor of Lender, the account shall be
a good and valid account representing an undisputed, bona fide indebtedness
incurred by the account debtor, for merchandise held subject to delivery
instructions or previously shipped or delivered pursuant to a contract of sale,
or for services previously performed by Grantor with or for the account debtor.
So long as this Agreement remains in effect, Grantor shall not, without Lender's
prior written consent, compromise, settle, adjust, or extend payment under or
with regard to any such Accounts. There shall be no setoffs or counterclaims
against any of the Collateral, and no agreement shall have been made under which
any deductions or discounts may be claimed concerning the Collateral except
those disclosed to Lender in writing.

 

Location of the Collateral. Except in the ordinary course of Grantor's business,
Grantor agrees to keep the Collateral (or to the extent the Collateral consists
of intangible property such as accounts or general intangibles, the records
concerning the Collateral) at Grantor's address shown above or at such other
locations as are acceptable to Lender. Upon Lender's request, Grantor will
deliver to Lender in form satisfactory to Lender a schedule of real properties
and Collateral locations relating to Grantor's operations, including without
limitation the following: (1) all real property Grantor owns or is purchasing;
(2) all real property Grantor is renting or leasing; (3) all storage facilities
Grantor owns, rents, leases, or uses; and (4) all other properties where
Collateral is or may be located.

 

Removal of the Collateral. Except for transactions permitted in the
“Transactions Involving Collateral” section below, Grantor shall not remove the
Collateral from its existing location without Lender's prior written consent. To
the extent that the Collateral consists of vehicles, or other titled property,
Grantor shall not take or permit any action which would require application for
certificates of title for the vehicles outside the State of New York, without
Lender's prior written consent, which consent shall not be unreasonably
withheld. Grantor shall, whenever requested, advise Lender of the exact location
of the Collateral.

 

 

 

 

AMENDED AND RESTATED CONTINUING GENERAL SECURITY AGREEMENT (continued) Page - 5
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Transactions Involving Collateral. Except for inventory sold or accounts
collected in the ordinary course of Grantor's business, and as otherwise
provided for in this Agreement and in Sections 7.6(a)-(d) of the Credit
Agreement (“Permitted Sales”), Grantor shall not sell, offer to sell, or
otherwise transfer or dispose of the Collateral. While no Event of Default is
continuing under this Agreement, Grantor may sell inventory, but only in the
ordinary course of its business and only to buyers who qualify as a buyer in the
ordinary course of business. A sale in the ordinary course of Grantor's business
does not include a transfer in partial or total satisfaction of a debt or any
bulk sale. Except for Liens (as defined in the Credit Agreement) permitted by
Section 7.3 of the Credit Agreement, Grantor shall not pledge, mortgage,
encumber or otherwise permit the Collateral to be subject to any lien, security
interest, encumbrance, or charge, other than the security interest provided for
in this Agreement, without the prior written consent of Lender. This includes
security interests even if junior in right to the security interests granted
under this Agreement. Except with respect to Permitted Sales, unless waived by
Lender, all proceeds from any disposition of the Collateral (for whatever
reason) shall be held in trust for Lender and shall not be commingled with any
other funds; provided however, this requirement shall not constitute consent by
Lender to any sale or other disposition. Upon receipt, Grantor shall immediately
deliver any such proceeds held in trust to Lender. If any of the Collateral
shall be sold, transferred or otherwise disposed of by any Grantor in a
Permitted Sale, then the security interest created pursuant to this Agreement in
such Collateral shall be released, and the term “Collateral” shall cease to
include the assets or property so released, provided that Grantor is in
compliance with the provisions hereof.

 

Title. Grantor represents and warrants to Lender that Grantor holds good and
marketable title to the Collateral, free and clear of all liens and encumbrances
except for the lien of this Agreement and Liens permitted by Section 7.3 of the
Credit Agreement. No financing statement covering any of the Collateral is on
file in any public office other than those which reflect the security interest
created by this Agreement or to which Lender has specifically consented. Grantor
shall defend Lender's rights in the Collateral against the claims and demands of
all other persons.

 

Repairs and Maintenance. Grantor agrees to keep and maintain, and to cause
others to keep and maintain, the Collateral in good order, repair and condition
at all times while this Agreement remains in effect. Grantor further agrees to
pay when due all claims for work done on, or services rendered or material
furnished in connection with the Collateral so that no lien or encumbrance may
ever attach to or be filed against the Collateral.

 

 

 

 

AMENDED AND RESTATED CONTINUING GENERAL SECURITY AGREEMENT (continued) Page - 6
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Inspection of Collateral. Lender and Lender's designated representatives and
agents shall have the right at all reasonable times to examine and inspect the
Collateral wherever located.

 

Taxes, Assessments and Liens. Grantor will pay when due all taxes, assessments
and liens upon the Collateral, its use or operation, upon this Agreement, upon
any promissory note or notes evidencing the Indebtedness, or upon any of the
other Related Documents. Grantor may withhold any such payment or may elect to
contest any lien if Grantor is in good faith conducting an appropriate
proceeding to contest the obligation to pay and so long as Lender's interest in
the Collateral is not jeopardized in Lender's sole opinion. If the Collateral is
subjected to a lien which is not discharged within fifteen (15) days, Grantor
shall deposit with Lender cash, a sufficient corporate surety bond or other
security satisfactory to Lender in an amount adequate to provide for the
discharge of the lien plus any interest, costs, reasonable attorneys' fees or
other charges that could accrue as a result of foreclosure or sale of the
Collateral. In any contest Grantor shall defend itself and Lender and shall
satisfy any final adverse judgment before enforcement against the Collateral.
Grantor shall name Lender as an additional obligee under any surety bond
furnished in the contest proceedings. Grantor further agrees to furnish Lender
with evidence that such taxes, assessments, and governmental and other charges
have been paid in full and in a timely manner. Grantor may withhold any such
payment or may elect to contest any lien if Grantor is in good faith conducting
an appropriate proceeding to contest the obligation to pay and so long as
Lender's interest in the Collateral is not jeopardized.

 

Compliance with Governmental Requirements. Grantor shall comply promptly in all
material respects with all laws, ordinances, rules and regulations of all
governmental authorities, now or hereafter in effect, applicable to the
ownership, production, disposition, or use of the Collateral, including all laws
or regulations relating to the undue erosion of highly-erodible land or relating
to the conversion of wetlands for the production of an agricultural product or
commodity. Grantor may contest in good faith any such law, ordinance or
regulation and withhold compliance during any proceeding, including appropriate
appeals, so long as Lender's interest in the Collateral, in Lender's opinion, is
not jeopardized.

 

Hazardous Substances. Grantor represents and warrants that, except as could not
reasonably be expected to result in a Material Adverse Effect (as defined in the
Credit Agreement), the Collateral never has been, and never will be so long as
this Agreement remains a lien on the Collateral, used in violation of any
Environmental laws or for the generation, manufacture, storage, transportation,
treatment, disposal, release or threatened release of any Hazardous Substance in
violation of any Environmental Laws. The representations and warranties
contained herein are based on Grantor's due diligence in investigation of the
Collateral for Hazard Substances. Grantor hereby (1) releases and waives any
future claims against Lender for indemnity or contribution in the event Grantor
becomes liable for cleanup or other costs under any Environmental laws, and (2)
agrees to indemnify and hold harmless Lender against any and all claims and
losses resulting from a breach of this provision of this Agreement. This
obligation to indemnify shall survive the payment of the Indebtedness and the
satisfaction of this Agreement.

 

 

 

 

AMENDED AND RESTATED CONTINUING GENERAL SECURITY AGREEMENT (continued) Page - 7
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Maintenance of Casualty Insurance. Grantor shall procure and maintain all risks
insurance, including without limitation fire, theft and liability coverage
together with such other insurance as Lender may require with respect to the
Collateral, in form, amounts, coverages and basis reasonably acceptable to
Lender and issued by a company or companies reasonably acceptable to Lender.
Grantor, upon request of Lender, will deliver to Lender from time to time the
policies or certificates of insurance in form satisfactory to Lender, including
stipulations that coverages will not be cancelled or diminished without at least
thirty (30) days prior written notice to Lender and not including any disclaimer
of the insurer's liability for failure to give such a notice. Each insurance
policy also shall include an endorsement providing that coverage in favor of
Lender will not be impaired in any way by any act, omission or default of
Grantor or any other person. In connection with all policies covering assets in
which Lender holds or is offered a security interest, Grantor will provide
Lender with such loss payable or other endorsements as Lender may require. If
Grantor at any time fails to obtain or maintain any insurance as required under
this Agreement, Lender may (but shall not be obligated to) obtain such insurance
as Lender deems appropriate, including if Lender so chooses “single interest
insurance,” which will cover only Lender’s interest in the Collateral.

 

Application of Insurance Proceeds. Grantor shall promptly notify Lender of any
loss or damage to the Collateral, whether or not such casualty or loss is
covered by insurance. Lender may make proof of loss if Grantor fails to do so
within fifteen (15) days of the casualty. All proceeds of any insurance on the
Collateral, including accrued proceeds thereon, shall be held by Lender as part
of the Collateral. If Lender consents to repair or replacement of the damaged or
destroyed Collateral, Lender shall, upon satisfactory proof of expenditure, pay
or reimburse Grantor from the proceeds for the reasonable cost of repair or
restoration. If Lender does not consent to repair or replacement of the
Collateral, Lender shall retain a sufficient amount of the proceeds to pay all
of the Indebtedness, and shall pay the balance to Granter. Any proceeds which
have not been disbursed within six (6) months after their receipt and which
Grantor has not committed to the repair or restoration of the Collateral shall
be used to prepay the Indebtedness. Grantor hereby appoints Lender as its
attorney-in-fact with full power and authority to endorse in Grantor's name any
check or draft representing the proceeds of any insurance on the Collateral and
to settle or compromise in Grantor's name any claims with respect to such
insurance.

 

Insurance Reserves. Lender may require Grantor to maintain with Lender reserves
for payment of insurance premiums, which reserves shall be created by monthly
payments from Grantor of a sum estimated by Lender to be sufficient to produce,
at least fifteen (15) days before the premium due date, amounts at least equal
to the insurance premiums to be paid. If fifteen (15) days before payment is
due, the reserve funds are insufficient, Grantor shall upon demand pay any
deficiency to Lender. The reserve funds shall be held by Lender as a general
deposit and shall constitute a non-interest-bearing account which Lender may
satisfy by payment of the insurance premiums required to be paid by Grantor as
they become due. Lender does not hold the reserve funds in trust for Grantor,
and Lender is not the agent of Granter for payment of the insurance premiums
required to be paid by Grantor. The responsibility for the payment of premiums
shall remain Grantor's sole responsibility.

 

 

 

 

AMENDED AND RESTATED CONTINUING GENERAL SECURITY AGREEMENT (continued) Page - 8
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Insurance Reports. Grantor, upon request of Lender, shall furnish to Lender
reports on each existing policy of insurance showing such information as Lender
may reasonably request including the following: (1) the name of the insurer; (2)
the risks insured; (3) the amount of the policy; (4) the property insured; (5)
the then current value on the basis of which insurance has been obtained and the
manner of determining that value; and (6) the expiration date of the policy. In
addition, Grantor shall upon request by Lender (however not more often than
annually) have an independent appraiser satisfactory to Lender determine, as
applicable, the cash value or replacement cost of the Collateral.

 

Financing Statements. Grantor authorizes Lender to file a UCC financing
statement, or alternatively, a copy of this Agreement to perfect Lender's
security interest. At Lender's request, Grantor additionally agrees to sign all
other documents that are necessary to perfect, protect, and continue Lender's
security interest in the Property. Grantor will pay all filing fees, title
transfer fees, and other fees and costs involved unless prohibited by law or
unless Lender is required by law to pay such fees and costs. Grantor irrevocably
appoints Lender to execute documents necessary to transfer title if there is an
Event of Default. Lender may file a copy of this Agreement as a financing
statement. If Grantor changes Grantor's name or address, or the name or address
of any person granting a security interest under this Agreement changes, Grantor
will promptly notify the Lender of such change.

 

GRANTOR'S RIGHT TO POSSESSION AND TO COLLECT ACCOUNTS. Until an Event of Default
and except as otherwise provided below with respect to accounts, Grantor may
have possession of the tangible personal property and beneficial use of all the
Collateral and may use it in any lawful manner not inconsistent with this
Agreement or the Related Documents, provided that Grantor's right to possession
and beneficial use shall not apply to any Collateral where possession of the
Collateral by Lender is required by law to perfect Lender's security interest in
such Collateral. Until otherwise notified by Lender, Grantor may collect any of
the Collateral consisting of accounts. At any time and even though no Event of
Default exists, Lender may exercise its rights to collect the accounts and to
notify account debtors to make payments directly to Lender for application to
the Indebtedness. If Lender at any time has possession of any Collateral,
whether before or after an Event of Default, Lender shall be deemed to have
exercised reasonable care in the custody and preservation of the Collateral if
Lender takes such action for that purpose as Grantor shall request or as Lender,
in Lender's sole discretion, shall deem appropriate under the circumstances, but
failure to honor any request by Grantor shall not of itself be deemed to be a
failure to exercise reasonable care. Lender shall not be required to take any
steps necessary to preserve any rights in the Collateral against prior parties,
nor to protect, preserve or maintain any security interest given to secure the
Indebtedness.

 

 

 

 

AMENDED AND RESTATED CONTINUING GENERAL SECURITY AGREEMENT (continued) Page - 9
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LENDER'S EXPENDITURES. If any action or proceeding is commenced that would
materially affect Lender's interest in the Collateral or if Grantor fails to
comply with any provision of this Agreement or any Related Documents, including
but not limited to Grantor's failure to discharge or pay when due any amounts
Grantor is required to discharge or pay under this Agreement or any Related
Documents, Lender on Grantor's behalf may (but shall not be obligated to) take
any action that Lender deems appropriate, including but not limited to
discharging or paying all taxes, liens, security interests, encumbrances and
other claims, at any time levied or placed on the Collateral and paying all
costs for insuring, maintaining and preserving the Collateral. All such
expenditures incurred or paid by Lender for such purposes, with the exception of
insurance premiums paid by Lender with respect to motor vehicles, but including
the payment of attorneys' fees and expenses, will then bear interest at the rate
charged under the Note from the date incurred or paid by Lender to the date of
repayment by Grantor. All such expenses will become a part of the Indebtedness
and, at Lender's option, will (A) be payable on demand; (B) be added to the
balance of the Note and be apportioned among and be payable with any installment
payments to become due during either (1) the term of any applicable insurance
policy; or (2) the remaining term of the Note; or (C) be treated as a balloon
payment which will be due and payable at the Note's maturity. The Agreement also
will secure payment of these amounts. Such right shall be in addition to all
other rights and remedies to which Lender may be entitled upon an Event of
Default.

 

DEFAULT. The occurrence and continuance of an Event of Default under (and as
defined in) that certain Credit Agreement between Grantor and Lender of even
date herewith (as same may be amended from time to time) shall constitute an
Event of Default hereunder.

 

RIGHTS AND REMEDIES ON DEFAULT. If an Event of Default occurs under this
Agreement, at any time thereafter, Lender shall have all the rights of a secured
party under the New York Uniform Commercial Code. In addition and without
limitation, Lender may exercise any one or more of the following rights and
remedies:

 

Accelerate Indebtedness. Lender may declare the entire Indebtedness, including
any prepayment penalty which Grantor would be required to pay, immediately due
and payable, without notice of any kind to Grantor.

 

Assemble Collateral. Lender may require Grantor to deliver to Lender all or any
portion of the Collateral and any and all certificates of title and other
documents relating to the Collateral. Lender may require Grantor to assemble the
Collateral and make it available to Lender at a place to be designated by
Lender. Lender also shall have full power to enter upon the property of Grantor
to take possession of and remove the Collateral. If the Collateral contains
other goods not covered by this Agreement at the time of repossession, Grantor
agrees Lender may take such other goods, provided that Lender makes reasonable
efforts to return them to Grantor after repossession.

 

 

 

 

AMENDED AND RESTATED CONTINUING GENERAL SECURITY AGREEMENT (continued) Page - 10
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Sell the Collateral. Lender shall have full power to sell, lease, transfer, or
otherwise deal with the Collateral or proceeds thereof in Lender's own name or
that of Grantor. Lender may sell the Collateral at public auction or private
sale. Unless the Collateral threatens to decline speedily in value or is of a
type customarily sold on a recognized market, Lender will give Grantor, and
other persons as required by law, reasonable notice of the time and place of any
public sale, or the time after which any private sale or any other disposition
of the Collateral is to be made. However, no notice need be provided to any
person who, after Event of Default occurs, enters into and authenticates an
agreement waiving that person's right to notification of sale. The requirements
of reasonable notice shall be met if such notice is given at least ten (10) days
before the time of the sale or disposition. All expenses relating to the
disposition of the Collateral, including without limitation the expenses of
retaking, holding, insuring, preparing for sale and selling the Collateral
(including legal fees and costs), shall become a part of the Indebtedness
secured by this Agreement and payable from the proceeds of the disposition of
the Collateral, and shall be payable on demand, with interest at the rate
applicable to the Revolving Credit Note (as defined in the Credit Agreement)
from date of expenditure until repaid.

 

Appoint Receiver. Lender shall have the right to have a receiver appointed to
take possession of all or any part of the Collateral, with the power to protect
and preserve the Collateral, to operate the Collateral proceeding foreclosure or
sale, and to collect the Rents from the Collateral and apply the proceeds, over
and above the cost of the receivership, against the Indebtedness. Lender's right
to the appointment of a receiver shall exist whether or not the apparent value
of the Collateral exceeds the Indebtedness by a substantial amount. The right to
a receiver shall be given to Lender regardless of the solvency of Grantor
without any requirement to give prior notice to Grantor.

 

Collect Revenues, Apply Accounts. Lender, either itself or through a receiver,
may collect the payments, rents, income, and revenues from the Collateral.
Lender may at any time in Lender's discretion transfer any Collateral into
Lender's own name or that of Lender's nominee and receive the payments, rents,
income, and revenues therefrom and hold the same as security for the
Indebtedness or apply it to payment of the Indebtedness in such order of
preference as Lender may determine. Insofar as the Collateral consists of
accounts, general intangibles, insurance policies, instruments, chattel paper,
choses in action, or similar property, Lender may demand, collect, receipt for,
settle, compromise, adjust, sue for, foreclose, or realize on the Collateral as
Lender may determine, whether or not Indebtedness or Collateral is then due. For
these purposes, Lender may, on behalf of and in the name of Grantor, receive,
open and dispose of mail addressed to Grantor; change any address to which mail
and payments are to be sent; and endorse notes, checks, drafts, money orders,
documents of title, instruments and items pertaining to payment, shipment, or
storage of any Collateral. To facilitate collection, Lender may notify account
debtors and obligors on any Collateral to make payments directly to Lender.

 

 

 

 

AMENDED AND RESTATED CONTINUING GENERAL SECURITY AGREEMENT (continued) Page - 11
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Obtain Deficiency. If Lender chooses to sell any or all of the Collateral,
Lender may obtain a judgment against Grantor for any deficiency remaining on the
Indebtedness due to Lender after application of all amounts received from the
exercise of the rights provided in this Agreement. Grantor shall be liable for a
deficiency even if the transaction described in this subsection is a sale of
accounts or chattel paper.

 

Other Rights and Remedies. Lender shall have all the rights and remedies of a
secured creditor under the provisions of the Uniform Commercial Code, as may be
amended from time to time. In addition, Lender shall have and may exercise any
or all other rights and remedies it may have available at law, in equity, or
otherwise.

 

Election of Remedies. Except as may be prohibited by applicable law, all of
Lender's rights and remedies, whether evidenced by this Agreement, the Related
Documents, or by any other writing, shall be cumulative and may be exercised
singularly or concurrently. Election by Lender to pursue any remedy shall not
exclude pursuit of any other remedy, and an election to make expenditures or to
take action to perform an obligation of Grantor under this Agreement, after
Grantor's failure to perform, shall not affect Lender's right to declare an
Event of Default and exercise its remedies.

 

MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of
this Agreement:

 

Amendments. This Agreement, together with any Related Documents, constitutes the
entire understanding and agreement of the parties as to the matters set forth in
this Agreement. No alteration of or amendment to this Agreement shall be
effective unless given in writing and signed by the party or parties sought to
be charged or bound by the alteration or amendment.

 

Attorneys' Fees; Expenses. Grantor agrees to pay upon demand all of Lender's
costs and expenses, including Lender's reasonable attorneys' fees and Lender's
legal expenses, incurred in connection with the enforcement of this Agreement.
Lender may hire or pay someone else to help enforce this Agreement, and Grantor
shall pay the costs and expenses of such enforcement. Costs and expenses include
Lender's reasonable attorneys' fees and legal expenses whether or not there is a
lawsuit, including reasonable attorneys' fees and legal expenses for bankruptcy
proceedings (including efforts to modify or vacate any automatic stay or
injunction), appeals, and any anticipated post-judgment collection services.
Grantor also shall pay all court costs and such additional fees as may be
directed by the court.

 

 

 

 

AMENDED AND RESTATED CONTINUING GENERAL SECURITY AGREEMENT (continued) Page - 12
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Caption Headings. Caption headings in this Agreement are for convenience
purposes only and are not to be used to interpret or define the provisions of
this Agreement.

 

Governing Law. This Agreement will be governed by federal law applicable to
Lender and, to the extent not preempted by federal law, the laws of the State of
New York without regard to its conflicts of law provisions. This Agreement has
been accepted by Lender in the State of New York.

 

Joint and Several Liability. If there is more than one party executing as
Grantor below, then all obligations of Grantor under this Agreement shall be
joint and several, and all references to Grantor shall mean each and every
Grantor. This means that each Grantor signing below is responsible for all
obligations in this Agreement. Where any one or more of the parties is a
corporation, partnership, limited liability company or similar entity, it is not
necessary for Lender to inquire into the powers of any of the officers,
directors, partners, members, or other agents acting or purporting to act on the
entity's behalf, and any obligations made or created in reliance upon the
professed exercise of such powers shall be guaranteed under this Agreement.

 

No Waiver by Lender. Lender shall not be deemed to have waived any rights under
this Agreement unless such waiver is given in writing and signed by Lender. No
delay or omission on the part of Lender in exercising any right shall operate as
a waiver of such right or any other right. A waiver by Lender of a provision of
this Agreement shall not prejudice or constitute a waiver of Lender's right
otherwise to demand strict compliance with that provision or any other provision
of this Agreement. No prior waiver by Lender, nor any course of dealing between
Lender and Grantor, shall constitute a waiver of any of Lender's rights or of
any of Grantor's obligations as to any future transactions. Whenever the consent
of Lender is required under this Agreement, the granting of such consent by
Lender in any instance shall not constitute continuing consent to subsequent
instances where such consent is required and in all cases such consent may be
granted or withheld in the sole discretion of Lender.

 

Notices. Any notice required to be given under this Agreement shall be given in
writing, and shall be effective when actually delivered, when actually received
by telefacsimile (unless otherwise required by law), when deposited with a
nationally recognized overnight courier, or, if mailed, when deposited in the
United States mail, as first class, certified or registered mail postage
prepaid, directed to the addresses shown near the beginning of this Agreement.
Any party may change its address for notices under this Agreement by giving
formal written notice to the other parties, specifying that the purpose of the
notice is to change the party's address. For notice purposes, Grantor agrees to
keep Lender informed at all times of Grantor's current address. Unless otherwise
provided or required by law, if there is more than one Grantor, any notice given
by Lender to any Grantor is deemed to be notice given to all Grantors.

 

 

 

 

AMENDED AND RESTATED CONTINUING GENERAL SECURITY AGREEMENT (continued) Page - 13
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Power of Attorney. Grantor hereby appoints Lender as Grantor's irrevocable
attorney-in-fact for the purpose of executing any documents necessary to
perfect, amend, or to continue the security interest granted in this Agreement
or to demand termination of filings of other secured parties. Lender may at any
time, and without further authorization from Grantor, file a carbon,
photographic or other reproduction of any financing statement or of this
Agreement for use as a financing statement. Grantor will reimburse Lender for
all expenses for the perfection and the continuation of the perfection of
Lender's security interest in the Collateral. Grantor authorizes Lender to file
a financing statement covering the Collateral.

 

Severability. If a court of competent jurisdiction finds any provision of this
Agreement to be illegal, invalid, or unenforceable as to any person or
circumstance, that finding shall not make the offending provision illegal
invalid, or unenforceable as to any other person or circumstance. If feasible,
the offending provision shall be considered modified so that it becomes legal,
valid and enforceable. If the offending provision cannot be so modified, it
shall be considered deleted from this Agreement. Unless otherwise required by
law, the illegality, invalidity, or unenforceability of any provision of this
Agreement shall not affect the legality, validity or enforceability of any other
provision of this Agreement.

 

Successors and Assigns. Subject to any limitations stated in this Agreement or
the Credit Agreement on transfer of Grantor's interest, this Agreement shall be
binding upon and inure to the benefit of the parties, their successors and
assigns. If ownership of the Collateral becomes vested in a person other than
Grantor, Lender, without notice to Grantor, may deal with Grantor's successors
with reference to this Agreement and the Indebtedness by way of forbearance or
extension without releasing Grantor from the obligations of this Agreement or
liability under the Indebtedness.

 

Survival of Representations and Warranties. All representations, warranties, and
agreements made by Grantor in this Agreement shall survive the execution and
delivery of this Agreement, shall be continuing in nature, and shall remain in
full force and effect until such time as Grantor’s Indebtedness shall be paid in
full.

 

Subordination. Notwithstanding any provision herein to the contrary, the
security interest and lien upon the Collateral created hereby is subject and
subordinate to the rights of the United States of America (“Government”)
pursuant to that USA Subordination Agreement by Grantor and Lender in favor of
the Government.

 

Time is of the Essence. Time is of the essence in the performance of this
Agreement.

 

 

 

 

AMENDED AND RESTATED CONTINUING GENERAL SECURITY AGREEMENT (continued) Page - 14
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Execution. This Agreement may be executed in one or more counterparts, each of
which, when taken together, shall constitute one and the same agreement. This
Agreement may, upon execution, be delivered by facsimile or electronic mail,
which shall be deemed for all purposes to be an original signature.

 

Waive Jury. All parties to this Agreement hereby waive the right to any jury
trial in any action, proceeding, or counterclaim brought by any party against
any other party.

 

Agent’s Powers. Sovereign Bank, N.A., as Agent has been irrevocably appointed
and authorized to take such actions and exercise such powers on behalf of the
Lenders as are set forth in the Credit Agreement.

 

Restated Agreement. This Agreement amends, restates and supercedes the Prior
Security Agreement.

 

DEFlNITIONS. The following capitalized words and terms shall have the following
meanings when used in this Agreement. Capitalized terms not defined herein shall
have the meanings set forth in the Credit Agreement. Unless specifically stated
to the contrary, all references to dollar amounts shall mean amounts in lawful
money of the United States of America. Words and terms used in the singular
shall include the plural, and the plural shall include the singular, as the
context may require. Words and terms not otherwise defined in this Agreement or
the Credit Agreement shall have the meanings attributed to such terms in the
Uniform Commercial Code:

 

Agreement. The word “Agreement” means this Amended and Restated Continuing
General Security Agreement, as this Amended and Restated Continuing General
Security Agreement may be amended or modified from time to time, together with
all exhibits and schedules attached to this Amended and Restated Continuing
General Security Agreement from time to time.

 

Collateral. The word “Collateral” means all of Grantor's right, title and
interest in and to all the Collateral as described In the “Collateral
Description” section of this Agreement.

 

Credit Agreement. The words “Credit Agreement” mean that certain Amended and
Restated Credit Agreement dated on or about the date hereof between the Grantor
and the Lender, as same may be hereafter amended, restated, increased or
otherwise modified in writing from time to time.

 

Environmental Laws. The words “Environmental Laws” mean any and all state,
federal and local statutes, regulations and ordinances relating to the
protection of human health or the environment, including without limitation the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980,
as amended, 42 U.S.C. Section 9601, et seq. (“CERCLA”), the Superfund Amendment
and Reauthorization Act of 1986, Pub. L. No. 99-499 (“SARA”), the Hazardous
Materials Transportation Act, 49 U.S.C. Section 1801, et seq., the Resource
Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq., or other
applicable state or federal laws, rules or regulations adopted pursuant thereto.

 

 

 

 

AMENDED AND RESTATED CONTINUING GENERAL SECURITY AGREEMENT (continued) Page - 15
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Event of Default. The words “Event of Default” mean any of the events of default
set forth in this Agreement in the “Default” section of this Agreement.

 

Grantor. The word “Grantor” means CPI Aerostructures, Inc. and includes all
co-signers and co-makers signing the Credit Agreement and, all their successors
and assigns.

 

Guarantor. The word “Guarantor” means any guarantor, surety, or accommodation
party, if any, of any or all of the Indebtedness.

 

Guaranty. The word “Guaranty” means the guaranty from Guarantor to Lender,
including without limitation a guaranty of all or part of the Indebtedness.

 

Hazardous Substances. The words “Hazardous Substances” mean materials that,
because of their quantity, concentration or physical, chemical or infectious
characteristics, may cause or pose a present or potential hazard to human health
or the environment when improperly used, treated, stored, disposed of,
generated, manufactured, transported or otherwise handled. The words “Hazardous
Substances” are used in their very broadest sense and include, without
limitation, any and all hazardous or toxic substances, materials or waste as
defined by or listed under the Environmental Laws. The term “Hazardous
Substances” also includes, without limitation, petroleum and petroleum
by-products or any fraction thereof and asbestos.

 

Indebtedness. The word “Indebtedness” means the indebtedness evidenced by the
Note and all Obligations as defined in the Credit Agreement, including all
principal and interest together with all other indebtedness and costs and
expenses for which Grantor is responsible under this Agreement or under any of
the Related Documents. Specifically, without limitation, Indebtedness includes
the future advances set forth in the Future Advances provision, together with
interest thereon and all amounts that may be indirectly secured by the
Cross-Collateralization provision of this Agreement and all obligations of the
Grantor arising under any Swap Contract, as such term is defined in the Credit
Agreement.

 

Lender. The word “Lender” shall have the meaning set forth in the “Grant of
Security Interest” paragraph on the first page of this Agreement, its successors
and assigns.

 

 

 

 

AMENDED AND RESTATED CONTINUING GENERAL SECURITY AGREEMENT (continued) Page - 16
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Note. The word “Note” means each note executed by the Grantor pursuant to the
Credit Agreement together with all renewals of, extensions of, modifications of,
refinancings of, consolidations of, and substitutions for the note or Credit
Agreement.

 

Obligations. The word “Obligations” shall have the meaning set forth in the
Credit Agreement.

 

Property. The word “Property” means all of Grantor's right, title and interest
in and to all the Property as described in the “Collateral Description” section
of this Agreement.

 

Related Documents. The words “Related Documents” mean, collectively, the Credit
Agreement, each Note, this Agreement, the other documents defined as “Loan
Documents” in the Credit Agreement and all promissory notes, credit agreements,
loan agreements, environmental agreements, guaranties, security agreements,
hedge agreements, mortgages, deeds of trust, security deeds, collateral
mortgages, and all other instruments, agreements, and documents, whether now or
hereafter existing, executed in connection with the Indebtedness.

 

[NO FURTHER TEXT ON THIS PAGE]

 

 

 

 

AMENDED AND RESTATED CONTINUING GENERAL SECURITY AGREEMENT (continued) Page - 17
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GRANTOR HAS READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS AMENDED AND RESTATED
CONTINUING GENERAL SECURITY AGREEMENT AND AGREE TO ITS TERMS. THIS AGREEMENT IS
DATED AS OF DECEMBER 5, 2012.

 

  GRANTOR:         CPI AEROSTRUCTURES, INC.         By: /s/ Douglas McCrosson  
  Name: Douglas McCrosson     Title: Chief Operating Officer         LENDER:    
    SOVEREIGN BANK, N.A.,   as Administrative Agent and Collateral Agent for the
Lenders         By: /s/ Christine Gerula     Name: Christine Gerula     Title:
S.V.P.