CPI AEROSTRUCTURES, INC. 8-K [cvu-8k_122018.htm]

 

Exhibit 10.4

 

 

CONTINUING GENERAL SECURITY AGREEMENT

 

 

Grantor:  Welding Metallurgy, Inc. and   Agent:  BankUnited, N.A., as
Administrative   Compac Development Corp.     Agent and Collateral Agent   c/o
CPI Aerostructures, Inc.     Commercial Lending   91 Heartland Blvd.     14817
Oak Lane   Edgewood, New York 11717     Miami Lakes, Florida 33016

 

 

GRANT OF SECURITY INTEREST. For valuable consideration, the undersigned, WELDING
METALLURGY, INC. and COMPAC DEVELOPMENT CORP. (collectively, the “Grantor”) each
hereby pledges and grants to BANKUNITED, N.A., as Administrative Agent and
Collateral Agent for the benefit of the Lenders (the “Agent”), as defined in and
party to that certain Amended and Restated Credit Agreement among CPI
Aerostructures, Inc. and the Lenders dated as of March 24, 2016 (as amended from
time to time, 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 Agent shall have
the rights stated in this Agreement and the Credit Agreement with respect to the
Collateral, in addition to all other rights which Agent 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 Agent a security
interest for the payment of the Indebtedness and performance of and other
obligations under the documents evidencing the Indebtedness and this Agreement:

 

All Assets, including (without limitation), all Inventory, Chattel Paper,
Accounts, Equipment, General Intangibles, Deposit Accounts, Commercial Tort
Claims, As Extracted Collateral, Deposit Accounts, Commingled Goods, Consumer
Goods, Documents of Title, Fixtures, 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.

 

(B)       

All products and produce and supporting obligations 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.

 

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 CONTINUING GENERAL SECURITY AGREEMENT  (continued) Page - 2 -

 

(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 any Swap Contract (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 Indebtedness, this Agreement secures
all obligations, debts and liabilities, plus interest thereon, of Grantor to
Agent, or any one or more of them, as well as all claims by Agent against
Grantor or any one or more of them, whether now existing or hereafter arising,
whether related or unrelated to the purpose of the Credit Agreement, 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 Indebtedness, this Agreement secures all
future advances made by the Agent on behalf of the Lenders to Grantor in
accordance with the provisions of the Credit Agreement, 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 Agent need not tell
Grantor about any action or inaction Agent 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 Agent, including without limitation any failure of
Agent to realize upon the Collateral or any delay by Agent in realizing upon the
Collateral; and Grantor agrees to remain liable hereunder no matter what action
Agent takes or fails to take under this Agreement.

 

GRANTOR’S REPRESENTATIONS AND WARRANTIES. Grantor warrants that: (A) this
Agreement is executed at Grantor’s request and not at the request of Agent; and
(B) Grantor has the full right, power and authority to enter into this Agreement
and to pledge the Collateral to Agent.

 

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 CONTINUING GENERAL SECURITY AGREEMENT  (continued) Page - 3 -

 

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. Agent 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 Agent's
rights against Grantor or the Collateral.

 

RIGHT OF SETOFF. To the extent permitted by applicable law, Agent reserves a
right of setoff in all Grantor's accounts with Agent (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 Agent, 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 Agent's option, upon an Event of Default, to administratively freeze all
such accounts to allow Agent to protect Agent'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 Agent that:

 

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

 

Notices to Agent. Grantor will promptly notify Agent in writing at Agent's
address shown above (or such other addresses as Agent 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 Agent. No change in Grantor's name or state of organization will take effect
until after Agent has received notice.

 

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 CONTINUING GENERAL SECURITY AGREEMENT  (continued) Page - 4 -

 

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 Agent for the benefit of the
Lenders in accordance with the terms hereof, 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 Agent'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
Agent 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 Agent. Upon Agent's request, Grantor will deliver
to Agent in form satisfactory to Agent 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 Agent'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
Agent’s prior written consent. Grantor shall, whenever requested, advise Agent
of the exact location of the Collateral.

 

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 or 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 Agent. 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 Agent, all proceeds from any
disposition of the Collateral (for whatever reason) shall be held in trust for
Agent for the benefit of the Lenders and shall not be commingled with any other
funds; provided however, this requirement shall not constitute consent by Agent
to any sale or other disposition. Upon receipt, Grantor shall immediately
deliver any such proceeds held in trust to Agent. 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.

 

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 CONTINUING GENERAL SECURITY AGREEMENT  (continued) Page - 5 -

 

Title. Grantor represents and warrants to Agent 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 Agent has specifically consented. Grantor
shall defend Agent'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.

 

Inspection of Collateral. Agent and Agent'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 Agent's interest in
the Collateral for the benefit of the Lenders is not jeopardized in Agent's sole
opinion. If the Collateral is subjected to a lien which is not discharged within
fifteen (15) days, Grantor shall deposit with Agent cash, a sufficient corporate
surety bond or other security satisfactory to Agent 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 Agent and
shall satisfy any final adverse judgment before enforcement against the
Collateral. Grantor shall name Agent as an additional obligee under any surety
bond furnished in the contest proceedings. Grantor further agrees to furnish
Agent 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 Agent's interest in the Collateral is not jeopardized.

 

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 CONTINUING GENERAL SECURITY AGREEMENT  (continued) Page - 6 -

 

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 Agent's interest in the Collateral for the benefit of the
Lenders, in Agent'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 Hazardous Substances. Grantor hereby (1) releases and waives any
future claims against Agent 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 Agent 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.

 

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 CONTINUING GENERAL SECURITY AGREEMENT  (continued) Page - 7 -

 

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 Agent may require with respect to the
Collateral, in form, amounts, coverages and basis reasonably acceptable to Agent
and issued by a company or companies reasonably acceptable to Agent. Grantor,
upon request of Agent, will deliver to Agent from time to time the policies or
certificates of insurance in form satisfactory to Agent, including stipulations
that coverages will not be cancelled or diminished without at least thirty (30)
days prior written notice to Agent 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 Agent 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 Agent
holds or is offered a security interest for the benefit of the Lenders, Grantor
will provide Agent with such loss payable or other endorsements as Agent may
require. If Grantor at any time fails to obtain or maintain any insurance as
required under this Agreement, Agent may (but shall not be obligated to) obtain
such insurance as Agent deems appropriate, including if Agent so chooses “single
interest insurance,” which will cover only Agent’s interest in the Collateral
for the benefit of the Lenders.

 

Application of Insurance Proceeds. Grantor shall promptly notify Agent of any
loss or damage to the Collateral, whether or not such casualty or loss is
covered by insurance. Agent 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 Agent as part
of the Collateral. If Agent consents to repair or replacement of the damaged or
destroyed Collateral, Agent shall, upon satisfactory proof of expenditure, pay
or reimburse Grantor from the proceeds for the reasonable cost of repair or
restoration. If Agent does not consent to repair or replacement of the
Collateral, Agent shall retain a sufficient amount of the proceeds to pay all of
the Indebtedness, and shall pay the balance to Grantor. 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 Agent 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. Agent may require Grantor to maintain with Agent reserves
for payment of insurance premiums, which reserves shall be created by monthly
payments from Grantor of a sum estimated by Agent 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 Agent. The reserve funds shall be held by Agent as a general
deposit and shall constitute a non-interest-bearing account which Agent may
satisfy by payment of the insurance premiums required to be paid by Grantor as
they become due. Agent does not hold the reserve funds in trust for Grantor, and
Agent is not the agent of Grantor 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.

 

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 CONTINUING GENERAL SECURITY AGREEMENT  (continued) Page - 8 -

 

Insurance Reports. Grantor, upon request of Agent, shall furnish to Agent
reports on each existing policy of insurance showing such information as Agent
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 Agent (however not more often than
annually) have an independent appraiser satisfactory to Agent determine, as
applicable, the cash value or replacement cost of the Collateral.

 

Financing Statements. Grantor authorizes Agent to file a UCC financing statement
to perfect Agent's security interest for the benefit of the Lenders. At Agent's
request, Grantor additionally agrees to sign all other documents that are
necessary to perfect, protect, and continue Agent's security interest in the
Property for the benefit of the Lenders. Grantor will pay all filing fees, title
transfer fees, and other fees and costs involved unless prohibited by law or
unless Agent is required by law to pay such fees and costs. Grantor irrevocably
appoints Agent to execute documents necessary to transfer title if there is an
Event of Default. Agent 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 Agent of such change.

 

GRANTOR'S RIGHT TO POSSESSION AND TO COLLECT ACCOUNTS. Until an Event of Default
exists, 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 Agent is required by law to perfect Agent's security interest in
such Collateral for the benefit of the Lenders. Until otherwise notified by
Agent, Grantor may collect any of the Collateral consisting of accounts. At any
time and even though no Event of Default exists, Agent may exercise its rights
to collect the accounts and to notify account debtors to make payments directly
to Agent for application to the Indebtedness. If Agent at any time has
possession of any Collateral, whether before or after an Event of Default, Agent
shall be deemed to have exercised reasonable care in the custody and
preservation of the Collateral if Agent takes such action for that purpose as
Grantor shall request or as Agent, in Agent'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. Agent
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.

 

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 CONTINUING GENERAL SECURITY AGREEMENT  (continued) Page - 9 -

 

AGENT'S EXPENDITURES. If any action or proceeding is commenced that would
materially affect Agent'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, Agent on Grantor's behalf may (but shall not be obligated to) take
any action that Agent 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 Agent for such purposes, with the exception of
insurance premiums paid by Agent with respect to motor vehicles, but including
the payment of attorneys' fees and expenses, will then bear interest at the rate
charged under the Revolving Credit Note (as defined in the Credit Agreement)
from the date incurred or paid by Agent to the date of repayment by Grantor. All
such expenses will become a part of the Indebtedness and, at Agent’s option,
will (A) be payable on demand; (B) be added to the balance of the Indebtedness
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 Credit Agreement; 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 Agent may be entitled upon an Event of Default.

 

DEFAULT. The occurrence and continuance of an Event of Default under (and as
defined in) the Credit Agreement, 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 the Credit
Agreement, at any time thereafter, Agent shall have all the rights of a secured
party under the New York Uniform Commercial Code. In addition, and without
limitation, Agent may exercise any one or more of the following rights and
remedies:

 

Accelerate Indebtedness. Agent 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. Agent may require Grantor to deliver to Agent all or any
portion of the Collateral and any and all certificates of title and other
documents relating to the Collateral. Agent may require Grantor to assemble the
Collateral and make it available to Agent at a place to be designated by Agent.
Agent 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 Agent
may take such other goods, provided that Agent makes reasonable efforts to
return them to Grantor after repossession.

 

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 CONTINUING GENERAL SECURITY AGREEMENT  (continued) Page - 10 -

 

Sell the Collateral. Agent shall have full power to sell, lease, transfer, or
otherwise deal with the Collateral or proceeds thereof in Agent's own name or
that of Grantor. Agent 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, Agent 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. Agent 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. Agent'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 Agent regardless of the solvency of Grantor without
any requirement to give prior notice to Grantor.

 

Collect Revenues, Apply Accounts. Agent, either itself or through a receiver,
may collect the payments, rents, income, and revenues from the Collateral. Agent
may at any time in Agent's discretion transfer any Collateral into Agent's own
name or that of Agent'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 Agent may
determine. Insofar as the Collateral consists of accounts, general intangibles,
insurance policies, instruments, chattel paper, choses in action, or similar
property, Agent may demand, collect, receipt for, settle, compromise, adjust,
sue for, foreclose, or realize on the Collateral as Agent may determine, whether
or not Indebtedness or Collateral is then due. For these purposes, Agent 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, Agent may notify account debtors and
obligors on any Collateral to make payments directly to Agent.

 

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 CONTINUING GENERAL SECURITY AGREEMENT  (continued) Page - 11 -

 

Obtain Deficiency. If Agent chooses to sell any or all of the Collateral, Agent
may obtain a judgment against Grantor for any deficiency remaining on the
Indebtedness due to Agent for the benefit of Lenders 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. Agent 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, Agent 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
Agent'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 Agent 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 Agent'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 Agent’s
costs and expenses, including Agent's reasonable attorneys' fees and Agent’s
legal expenses, incurred in connection with the enforcement of this Agreement.
Agent 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
Agent'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.

 

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 CONTINUING GENERAL SECURITY AGREEMENT  (continued) Page - 12 -

 

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

 

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 Agent 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 Agent to any Grantor is deemed to be notice given to all Grantors.

 

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 CONTINUING GENERAL SECURITY AGREEMENT  (continued) Page - 13 -

 

Power of Attorney. Grantor hereby appoints Agent 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. Agent 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 Agent for all
expenses for the perfection and the continuation of the perfection of Agent's
security interest in the Collateral for the benefit of the Lenders. Grantor
authorizes Agent 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, Agent, 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.

 

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

 

Counterparts. 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.

 

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 CONTINUING GENERAL SECURITY AGREEMENT  (continued) Page - 14 -

 

Agent’s Powers. BankUnited, 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.

 

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 Continuing General Security
Agreement, as this Continuing General Security Agreement may be amended or
modified from time to time, together with all exhibits and schedules attached to
this 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 as of March 24, 2016 (as amended) among CPI
Aerostructures, Inc., and the Lenders, 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.

 

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 Welding Metallurgy, Inc. and Compac
Development Corp., and all their successors and assigns.

 

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.

 

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 CONTINUING GENERAL SECURITY AGREEMENT  (continued) Page - 15 -

 

Indebtedness. The word “Indebtedness” means all now existing or hereafter
incurred, direct or contingent, indebtedness evidenced by each Note, all
Obligations as defined in the Credit Agreement and all obligations under the
Related Documents, 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.

 

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

 

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,
pledge 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.

 

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 CONTINUING GENERAL SECURITY AGREEMENT  (continued) Page - 16 -

 

EACH GRANTOR HAS READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS CONTINUING
GENERAL SECURITY AGREEMENT AND AGREES TO ITS TERMS.

 

THIS AGREEMENT IS DATED AS OF DECEMBER 20, 2018.

 

  GRANTOR:       WELDING METALLURGY, INC.       By:  /s/ Vincent Palazzolo  
Name:  Vincent Palazzolo   Title: CFO       COMPAC DEVELOPMENT CORP.   By:  /s/
Vincent Palazzolo   Name:  Vincent Palazzolo   Title: CFO       AGENT:      
BANKUNITED, N.A.,   as Administrative Agent and Collateral   Agent for the
Lenders       By:  /s/ Christine Gerula   Name:  Christine Gerula   Title:
Senior Vice President

 

 

 

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