Exhibit 10.5
 
Continuing Security Agreement

Name of Debtor:                                    FREQUENCY ELECTRONICS, INC.
Debtor’s Address:                                55 Charles Lindbergh Boulevard,
Uniondale, NY 11553

Dated as of June 6, 2013

Grant of Security Interest. FREQUENCY ELECTRONICS, INC. (whether one or more,
the “Debtor”, individually and collectively if more than one) grants to JPMorgan
Chase Bank, N.A., whose address is 395 North Service Rd., 3rd Floor, Melville,
NY 11747 (together with its successors and assigns, the “Bank”) a continuing
security interest in, pledges and assigns to the Bank all of the “Collateral”
(as hereinafter defined) owned by the Debtor, all of the Collateral in which the
Debtor has rights or power to transfer rights and all Collateral in which the
Debtor later acquires ownership, other rights or rights or power to transfer
rights to secure the payment and performance of the Liabilities.

Borrower. “Borrower” means FREQUENCY ELECTRONICS, INC.

Credit Agreement. “Credit Agreement” means that certain Credit Agreement dated
as of the date hereof by and between Borrower and Bank. All terms used but not
defined herein shall have the meanings ascribed to such terms in the Credit
Agreement.

Liabilities. “Liabilities” means all debts, obligations, indebtedness and
liabilities of every kind and character of the Borrower, whether individual,
joint and several, contingent or otherwise, now or hereafter existing, in favor
of the Bank and its Affiliates, including, without limitation, all liabilities,
interest, costs and fees, arising under or from any note, open account,
overdraft, credit card, lease, Rate Management Transaction, letter of credit
application, endorsement, surety agreement, guaranty, acceptance, foreign
exchange contract or depository service contract, whether payable to the Bank or
to a third party and subsequently acquired by the Bank, any monetary obligations
(including interest) incurred or accrued during the pendency of any bankruptcy,
insolvency, receivership or other similar proceedings, regardless of whether
allowed or allowable in such proceeding, and all renewals, extensions,
modifications, consolidations, rearrangements, restatements, replacements or
substitutions of any of the foregoing.  The Debtor and the Bank specifically
contemplate that Liabilities include indebtedness hereafter incurred by the
Borrower to the Bank.  “Rate Management Transaction” means (1) any transaction
(including an agreement with respect thereto) which is a rate swap, swap option,
basis swap, forward rate transaction, commodity swap, commodity option, equity
or equity index swap, equity or equity index option, bond option, interest rate
option, foreign exchange transaction, cap, floor, collar, currency swap,
cross-currency rate swap, currency option, credit protection transaction, credit
swap, credit default swap, credit default option, total return swap, credit
spread, repurchase transaction, reverse repurchase transaction, buy/sell-back
transaction, securities lending transaction, weather index transaction or
forward purchase or sale of a security, commodity or other financial instrument
or interest (including an option with respect to any of these transactions), or
(2) any type of transaction that is similar to any transaction referred to in
clause (1) above that is currently, or in the future becomes, recurrently
entered into in the financial markets and which is a forward, swap, future,
option or other derivative on one or more rates, currencies, commodities, equity
securities or other equity instruments, debt securities or other debt
instruments, economic indices or measures of economic risk or value, or other
benchmarks against which payments or deliveries are to be made, or any
combination of the foregoing transactions.
 
Collateral. Accounts; Chattel Paper; Deposit Accounts and other payment
obligations of a financial institution (including the Bank); Documents;
Equipment; General Intangibles; Instruments; Inventory; Investment Property; and
Letter of Credit Rights.

Description of Collateral. As used in this agreement, the term “Collateral”
means all of the Debtor’s property whether owned individually or jointly with
others of the types indicated above and defined below, whether now owned or
hereafter acquired, whether now existing or hereafter arising, and wherever
located, including but not limited to any items listed on any schedule or list
attached hereto. In addition, the term “Collateral” includes all “proceeds,”
“products” and “supporting obligations” (as such terms are defined in the “UCC,”
meaning the Uniform Commercial Code of New York, as in effect from time to time)
of the Collateral indicated above, including but not limited to all stock
rights, subscription rights, dividends, stock dividends, stock splits, or
liquidating dividends, and all cash, accounts, chattel paper, “instruments,”
“investment property,” “financial assets,” and “general intangibles” (as such
terms are defined in the UCC) arising from the sale, rent, lease, casualty loss
or other disposition of the Collateral, and any Collateral returned to,
repossessed by or stopped in transit by the Debtor, and all insurance claims
relating to any of the Collateral (defined above). The term “Collateral” further
includes all of the Debtor’s right, title and interest in and to all books,
records and data relating to the Collateral identified above, regardless of the
form of media containing such information or data, and all software necessary or
desirable to use any of the Collateral identified above or to access, retrieve,
or process any of such information or data. Where the Collateral is in the
possession of the Bank or the Bank’s agent, the Debtor agrees to deliver to the
Bank any property that represents an increase in the Collateral or profits or
proceeds of the Collateral.
 
 
 

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1.  
“Accounts” means all of the Debtor’s “accounts” as defined in Article 9 of the
UCC.

2.  
“Chattel Paper” means all of the Debtor’s “chattel paper” as defined in Article
9 of the UCC.

3.  
“Deposit Accounts” means all of the Debtor’s “deposit accounts” as defined in
Article 9 of the UCC and other payment obligations of a financial institution
(including the Bank) to the Debtor.

4.  
“Documents” means all of the Debtor’s “documents” as defined in Article 9 of the
UCC.

5.  
“Equipment” means all of the Debtor’s “equipment” as defined in Article 9 of the
UCC. In addition, “Equipment” includes any “documents” (as defined in Article 9
of the UCC) issued with respect to any of the Debtor’s “equipment” (as defined
in Article 9 of the UCC) and certificates of title relating to the foregoing.
Without limiting the security interest granted, the Debtor represents and
warrants that the Debtor’s Equipment is presently located at the address set
forth in this agreement or in a separate Collateral Location Schedule delivered
to the Bank.

6.  
“General Intangibles” means all of the Debtor’s “general intangibles” as defined
in Article 9 of the UCC. In addition, “General Intangibles” further includes any
right to a refund of taxes paid at any time to any governmental entity.

7.  
“Instruments” means all of the Debtor’s “instruments” as defined in Article 9 of
the UCC.

8.  
“Inventory” means all of the Debtor’s “inventory” as defined in Article 9 of the
UCC. In addition, “Inventory” includes any “documents” (as defined in article 9
of the UCC) and certificates of title issued with respect to any of the Debtor’s
“inventory” (as defined in Article 9 of the UCC). Without limiting the security
interest granted, the Debtor represents and warrants that the Debtor’s Inventory
is presently located at the address set forth in this agreement or in a separate
Collateral Location Schedule delivered to the Bank.

9.  
“Investment Property” means all of the Debtor’s “investment property” as defined
in Article 9 of the UCC and all of the Debtor’s “financial assets,” as defined
in Article 8 of the UCC.

10.  
“Letter of Credit Rights” means all of the Debtor’s “letter of credit rights” as
defined in Article 9 of the UCC.

Collateral Location Schedule. “Collateral Location Schedule” means a schedule in
the form attached to this agreement. The Debtor agrees to complete, execute and
deliver a Collateral Location Schedule to the Bank with respect to any
Collateral for which the Debtor has identified a location in this agreement: (i)
concurrently with the execution of this agreement, if the initial location of
the Collateral is other than the address of the Debtor set forth above; and (ii)
not less than ten (10) days prior to the relocation of any Collateral to any
place other than the address of the Debtor set forth above or any location
identified in any previously submitted Collateral Location Schedule.

Representations, Warranties and Covenants. The Debtor represents and warrants
to, and covenants and agrees with the Bank that each of the following is true in
all material respects and will remain true in all material respects until
termination of this agreement, except to the extent that such representations
and warranties specifically refer to an earlier date, in which case they shall
be true and correct in all material respects as of such earlier date, and full
and final payment of all Liabilities:
1.  
Its principal residence or chief executive office is at the address shown above
or such other address as specified in writing by Borrower to Bank;

2.  
The Debtor’s name as it appears in this agreement is its exact name as it
appears in the Debtor’s in its Organizational Documents, as amended, including
any trust documents or as otherwise specified in writing by Borrower to Bank;

3.  
It is or will become the owner of the Collateral free from any liens,
encumbrances or security interests, except for Permitted Liens, this security
interest and existing liens disclosed to and accepted by the Bank in writing,
and it will defend the Collateral against all claims and demands of all persons
at any time claiming any interest in the Collateral (except Permitted Liens);

4.  
It will keep the Collateral free of liens, encumbrances and other security
interests, except for Permitted Liens, this security interest, and maintain the
Collateral in good repair, not use it illegally and exhibit the Collateral to
the Bank on demand;

 
 
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5.  
At its own expense, the Debtor will maintain comprehensive casualty insurance on
the Collateral against such risks, in such amounts, with such deductibles and
with such companies as may be satisfactory to the Bank. Each insurance policy
shall contain a lender’s loss payable endorsement in form and substance
satisfactory to the Bank and a prohibition against cancellation or amendment of
the policy or removal of the Bank as loss payee without at least thirty (30)
days’ prior written notice to the Bank. In all events, the amounts of such
insurance coverages shall conform to prudent business practices and shall be in
such minimum amounts that the Debtor will not be deemed a co-insurer. The
policies and certificates evidencing them, shall, if the Bank so requests, be
deposited with the Bank. The Debtor authorizes the Bank to endorse on the
Debtor’s behalf and to negotiate drafts reflecting proceeds of insurance of the
Collateral, provided that the Bank shall remit to the Debtor such surplus, if
any, as remains after the proceeds have been applied, at the Bank’s option, to
the satisfaction of all of the Liabilities (in such order of application as the
Bank may elect) or to the establishment of a cash collateral account for the
Liabilities;

6.  
It will not sell, lease, license or offer to sell, lease, license or otherwise
transfer the Collateral or any rights in or to the Collateral, without the
written consent of the Bank, except (a) for the sale of inventory in the
ordinary course of business and (b) as otherwise provided by the Credit
Agreement;

7.  
It will not change the location of the Collateral from the locations of the
Collateral described in this agreement and any separate Collateral Location
Schedule provided to the Bank, without providing at least ten (10) days’ prior
written notice to the Bank by means of submitting a Collateral Location
Schedule;

8.  
It will pay promptly when due all taxes and assessments upon the Collateral, or
for the use or operation of the Collateral in each case except as they may be
contested in good faith and have been properly reflected in Debtor’s books with
adequate reserves established therefor;

9.  
No financing statement covering all or any part of the Collateral or any
proceeds is on file in any public office, unless the Bank has approved that
filing. From time to time at the Bank’s reasonable request, the Debtor will
execute one or more financing statements or similar record and a control
agreement with respect to the proceeds in form satisfactory to the Bank and will
pay the cost of filing them in all public offices where filing is deemed by the
Bank to be necessary or desirable. In addition, the Debtor shall execute and
deliver, or cause to be executed and delivered, such other documents as the Bank
may from time to time reasonably request to perfect or to further evidence the
security interest created in the Collateral by this agreement including, without
limitation: (a) any certificate or certificates of title to the Collateral with
the security interest of the Bank noted thereon or executed applications for
such certificates of title in form satisfactory to the Bank; (b) any assignments
of claims under government contracts which are included as part of the
Collateral, together with any notices and related documents as the Bank may from
time to time request; (c) any assignment of any specific account receivable as
the Bank may from time to time request; (d) a notice of and acknowledgment of
the Bank’s security interest and a control agreement with respect to any
Collateral, all in form and substance satisfactory to the Bank; (e) a notice to
and acknowledgment from any person holding or in possession of any Collateral
that such persons holds the Collateral as a bailee for the Bank’s benefit, all
in form and substance satisfactory to the Bank; and (f) any consent to the
assignment of proceeds of any letter of credit, all in form and substance
satisfactory to the Bank;

10.  
It will not, without the Bank’s prior written consent, (a) change the Debtor’s
name, provided that the Bank’s consent thereto shall not be unreasonably
withheld, or (b) the Debtor’s business organization, the jurisdiction under
which the Debtor’s business organization is formed or organized, or (c) the
Debtor’s chief executive office, or any other places of its businesses, provided
however, the Debtor may change the location of its businesses to other locations
in the Continental United States after giving at least four (4) months prior
written notice to the Bank;

11.  
It will provide any information that the Bank may reasonably request and will
permit the Bank or the Bank’s agents to inspect and copy its books, records,
data and the Collateral at any time during normal business hours;

12.  
The Bank shall have the right now, and at any time in the future in its sole and
absolute discretion, without notice to the Debtor, to (a) prepare, file and sign
the Debtor’s name on any proof of claim in bankruptcy or similar document
against any owner of the Collateral and (b) prepare, file and sign the Debtor’s
name on any financing statement, notice of lien, assignment or satisfaction of
lien or similar document in connection with the Collateral. The Debtor hereby
authorizes the Bank to file financing statements covering Collateral or such
lesser amount of assets as the Bank may determine, or the Bank may, at its
option, file financing statements or similar records containing any collateral
description which reasonably describes the Collateral in which a security
interest is granted under this agreement;

13.  
Immediately upon the Debtor’s receipt of any Collateral evidenced by an
agreement, “instrument,” “chattel paper,” certificated “security” or “document”
(as such terms are defined in the UCC) (collectively, “Special Collateral”), the
Debtor shall mark the Special Collateral to show that it is subject to the
Bank’s security interest and shall deliver the original to the Bank together
with appropriate endorsements and other specific evidence of assignment or
transfer in form and substance satisfactory to the Bank;

14.  
The Debtor shall keep all tangible Collateral in good order and repair and shall
not waste or destroy any of the Collateral, nor use any of the Collateral in
violation of any applicable law or any policy of insurance thereon. To the
extent that the Collateral consists of “farm products” (as defined in the UCC),
the Debtor shall attend to and care for the crops and livestock in accordance
with the best practices of good husbandry, and do, or cause to be done, any and
all acts that may at any time be appropriate or necessary to grow, raise,
harvest, care for, preserve and protect the farm products;

 
 
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15.  
Except as may be otherwise disclosed in writing by the Debtor to the Bank, none
of the Collateral is attached to real estate so as to constitute a “fixture” (as
defined in the UCC) and none of the Collateral shall at any time hereafter be
attached to real estate so as to constitute a fixture. If any of the Collateral
is now or at any time hereafter becomes so attached to real estate so as to
constitute a fixture, the Debtor shall, at any time upon the Bank’s request,
furnish the Bank with a disclaimer of interest in the Collateral executed by
each person or entity having an interest in such real estate.

Accounts; Chattel Paper; General Intangibles and Instruments. Until the Bank
gives notice to the Debtor to the contrary, the Debtor will, in the usual course
of its business and at its own expense, on the Bank’s behalf but not as the
Bank’s agent, demand and receive and use its best efforts to collect all moneys
due or to become due with respect to the Collateral. Until the Bank gives notice
to the Debtor to the contrary or until the Debtor is in default and such event
of default has continued beyond any applicable cure period, it may use the funds
collected in its business. Upon notice from the Bank or upon the occurrence and
during the continuance of an event of default, the Debtor agrees that all sums
of money it receives on account of or in payment or settlement of the Accounts,
Chattel Paper, General Intangibles and Instruments shall be held by it as
trustee for the Bank without commingling with any of the Debtor’s other funds,
and shall immediately be delivered to the Bank with endorsement to the Bank’s
order of any check or similar instrument. It is agreed that, upon the occurrence
and during the continuance of an event of default, the Bank shall be entitled,
in its own name or in the name of the Debtor or otherwise, but at the expense
and cost of the Debtor, to collect, demand, receive, sue for or compromise any
and all Accounts, Chattel Paper, General Intangibles, and Instruments, and to
give good and sufficient releases, to endorse any checks, drafts or other orders
for the payment of money payable to the Debtor and, in the Bank’s discretion, to
file any claims or take any action or proceeding which the Bank may deem
necessary or advisable. It is expressly understood and agreed, however, that the
Bank shall not be required or obligated in any manner to make any demand or to
make any inquiry as to the nature or sufficiency of any payment received by it
or to present or file any claim or take any other action to collect or enforce
the payment of any amounts which may have been assigned to the Bank or to which
the Bank may be entitled at any time or times. All notices required in this
paragraph will be immediately effective when sent. Such notices need not be
given prior to the Bank’s taking action. The Debtor appoints the Bank or the
Bank’s designee as the Debtor’s attorney-in-fact to do all things with reference
to the Collateral as provided for in this section including without limitation
(1) to notify the post office authorities to change the Debtor’s mailing address
to one designated by the Bank, (2) to receive, open and dispose of mail
addressed to the Debtor, (3) to sign the Debtor’s name on any invoice or bill of
lading relating to any Collateral, on assignments and verifications of account
and on notices to the Debtor’s customers, and (4) to do all things necessary to
carry out this agreement or to perform any of the obligations of the Debtor
under this agreement. The Debtor ratifies and approves all acts of the Bank as
attorney-in-fact. The Bank shall not be liable for any act or omission, nor any
error of judgment or mistake of fact or law, but only for its gross negligence
or willful misconduct. This power being coupled with an interest is irrevocable
until all of the Liabilities have been fully satisfied and shall survive the
death or disability of the Debtor.

Pledge. If the Debtor is not the Borrower, then the Debtor agrees that:

1.  
If any moneys become available from any source other than the Collateral that
the Bank can apply to the Liabilities, the Bank may apply them in any manner it
chooses, including but not limited to applying them against obligations,
indebtedness or liabilities which are not secured by this agreement.

2.  
The Bank may take any action against the Borrower, the Collateral or any other
collateral for the Liabilities, or any other person or entity liable for any of
the Liabilities.

3.  
The Bank may release the Borrower or anyone else from the Liabilities, either in
whole or in part, or release the Collateral in whole or in part or any other
collateral for the Liabilities, and need not perfect a security interest in the
Collateral or any other collateral for the Liabilities.

4.  
The Bank does not have to exercise any rights that it has against the Borrower
or anyone else, or make any effort to realize on the Collateral or any other
collateral for the Liabilities, or exercise any right of setoff.

5.  
Without notice or demand and without affecting the Debtor’s obligations
hereunder, from time to time, the Bank is authorized to: (a) renew, modify,
compromise, rearrange, restate, consolidate, extend, accelerate or otherwise
change the time for payment of, or otherwise change the terms of the Liabilities
or any part thereof, including increasing or decreasing the rate of interest
thereon; (b) release, substitute or add any one or more sureties, endorsers, or
guarantors; (c) take and hold other collateral for the payment of the
Liabilities, and enforce, exchange, substitute, subordinate, impair, waive or
release any such collateral; (d) proceed against the Collateral or any other
collateral for the Liabilities and direct the order or manner of sale as the
Bank in its discretion may determine; and (e) apply any and all payments
received by the Bank in connection with the Liabilities, or recoveries from the
Collateral or any other collateral for the Liabilities, in such order or manner
as the Bank in its discretion may determine.

6.  
The Debtor’s obligations hereunder shall not be released, diminished or affected
by (a) any act or omission of the Bank, (b) the voluntary or involuntary
liquidation, sale or other disposition of all or substantially all of the assets
of the Borrower, or any receivership, insolvency, bankruptcy, reorganization, or
other similar proceedings affecting the Borrower or any of its assets or any
other obligor on the Liabilities or that obligor’s assets, (c) any change in the
composition or structure of the Borrower or any other obligor on the
Liabilities, including a merger or consolidation with any other person or
entity, or (d) any payments made upon the Liabilities.

 
 
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7.  
The Debtor expressly consents to any impairment of any other collateral for the
Liabilities, including, but not limited to, failure to perfect a security
interest and release of any other collateral for the Liabilities and any such
impairment or release shall not affect the Debtor’s obligations hereunder.

8.  
The Debtor waives and agrees not to enforce any rights of subrogation,
contribution, reimbursement, exoneration or indemnification that it may have
against the Borrower, any person or entity liable on the Liabilities, or the
Collateral, until the Borrower and the Debtor have fully performed all their
obligations to the Bank, even if those obligations are not covered by this
agreement.

9.  
The Debtor waives (a) to the extent not prohibited by applicable law, all rights
and benefits under any laws or statutes regarding sureties, as may be amended,
(b) any right the Debtor may have to receive notice of the following matters
before the Bank enforces any of its rights: (i) the Bank’s acceptance of this
agreement, (ii) incurrence or acquisition or material alteration of any
Liabilities, any credit that the Bank extends to the Borrower, (iii) the
Borrower’s default, (iv) any demand, diligence, presentment, dishonor and
protest, (v) any action that the Bank takes regarding the Borrower, anyone else,
any other collateral for the Liabilities, or any of the Liabilities, which it
might be entitled to by law or under any other agreement, or (vi) any adverse
facts that would affect the Debtor’s risk, (c) any right it may have to require
the Bank to proceed against the Borrower, any guarantor or other obligor on the
Liabilities, the Collateral or any other collateral for the Liabilities, or
pursue any remedy in the Bank’s power to pursue, (d) any defense based on any
claim that the Debtor’s obligations exceed or are more burdensome than those of
the Borrower, (e) the benefit of any statute of limitations affecting the
Debtor’s obligations hereunder or the enforcement hereof, (f) any defense
arising by reason of any disability or other defense of the Borrower or by
reason of the cessation from any cause whatsoever (other than payment in full)
of the obligation of the Borrower for the Liabilities, (g) any defense based on
or arising out of any defense that the Borrower may have to the payment or
performance of the Liabilities or any portion thereof and (h) any defense based
on or arising out of the Bank’s negligent administration of the Liabilities. The
Bank may waive or delay enforcing any of its rights without losing them. Any
waiver affects only the specific terms and time period stated in the waiver.

10.  
The Debtor agrees to fully cooperate with the Bank and not to delay, impede or
otherwise interfere with the efforts of the Bank to secure payment from the
assets which secure the Liabilities including actions, proceedings, motions,
orders, agreements or other matters relating to relief from automatic stay,
abandonment of property, use of cash collateral and sale of the Bank’s
collateral free and clear of all liens.

11.  
The Debtor has (a) without reliance on the Bank or any information received from
the Bank and based upon the records and information the Debtor deems
appropriate, made an independent investigation of the Borrower, the Borrower’s
business, assets, operations, prospects and condition, financial or otherwise,
and any circumstances that may bear upon those transactions, the Borrower or the
obligations, liabilities and risks undertaken pursuant to this agreement; (b)
adequate means to obtain from the Borrower on a continuing basis information
concerning the Borrower and the Bank has no duty to provide any information
concerning the Borrower or other obligor on the Liabilities to the Debtor; (c)
full and complete access to the Borrower and any and all records relating to any
Liabilities now or in the future owing by the Borrower; (d) not relied and will
not rely upon any representations or warranties of the Debtor not embodied in
this agreement or any acts taken by the Debtor prior to or after the execution
or other authentication and delivery of this agreement (including but not
limited to any review by the Debtor of the business, assets, operations,
prospects and condition, financial or otherwise, of the Borrower); and (e)
determined that the Debtor will receive benefit, directly or indirectly, and has
or will receive fair and reasonably equivalent value, for the execution and
delivery of this agreement and the rights provided to the Bank. By entering into
this agreement, the Debtor does not intend: (i) to incur or believe that the
Debtor will incur debts that would be beyond the Debtor’s ability to pay as
those debts mature; or (ii) to hinder, delay or defraud any creditor of the
Debtor. The Debtor is neither engaged in nor about to engage in any business or
transaction for which the remaining assets of the Debtor are unreasonably small
in relation to the business or transaction, and any property remaining with the
Debtor after the execution or other authentication of this agreement is not
unreasonably small capital.

Reinstatement. The Debtor agrees that to the extent any payment or transfer is
received by the Bank in connection with the Liabilities, and all or any part of
such payment or transfer is subsequently invalidated, declared to be fraudulent
or preferential, set aside or required to be transferred or repaid by the Bank
or paid over to a trustee, receiver or any other person or entity, whether under
any bankruptcy act or otherwise (any of those payments or transfers is
hereinafter referred to as a “Preferential Payment”), then this agreement shall
continue to be effective or shall be reinstated, as the case may be, even if all
Liabilities have been paid in full, and whether or not the Bank is in possession
of this agreement or whether this agreement has been marked paid, cancelled,
released or returned to the Borrower or the Debtor, and, to the extent of the
payment or repayment or other transfer by the Bank, the Liabilities or part
intended to be satisfied by the Preferential Payment shall be revived and
continued in full force and effect as if the Preferential Payment had not been
made. If this agreement must be reinstated, the Debtor agrees to execute and
deliver to the Bank any new security agreements and financing statements, if
necessary or if requested by the Bank, in form and substance acceptable to the
Bank, covering the Collateral. The obligations of Debtor under this section
shall survive the termination of this agreement.
 
 
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Default; Remedies. If any of the Liabilities are not paid at maturity, whether
by acceleration or otherwise, or if a default by anyone occurs under the terms
of any agreement related to any of the Liabilities, then the Bank shall have the
rights and remedies provided by law or this agreement, including but not limited
to the right to require the Debtor to assemble the Collateral and make it
available to the Bank at a place to be designated by the Bank which is
reasonably convenient to both parties, the right to take possession of the
Collateral with or without demand and with or without process of law, and the
right to sell and dispose of it and distribute the proceeds according to law.
Should a default occur, the Debtor will pay to the Bank all costs reasonably
incurred by the Bank for the purpose of enforcing its rights hereunder, to the
extent not prohibited by law, including, without limitation: costs of
foreclosure; costs of obtaining money damages; and a reasonable fee for the
services of internal and outside attorneys employed or engaged by the Bank or
its affiliates for any purpose related to this agreement, including, without
limitation, consultation, drafting documents, sending notices or instituting,
prosecuting or defending litigation or any proceeding. The Debtor agrees that
upon default the Bank may dispose of any of the Collateral in its then present
condition, that the Bank has no duty to repair or clean the Collateral prior to
sale, and that the disposal of the Collateral in its present condition or
without repair or clean-up shall not affect the commercial reasonableness of
such sale or disposition. The Bank’s compliance with any applicable state or
federal law requirements in connection with the disposition of the Collateral
will not adversely affect the commercial reasonableness of any sale of the
Collateral. The Bank may disclaim warranties of title, possession, quiet
enjoyment, and the like, and the Debtor agrees that any such action shall not
affect the commercial reasonableness of the sale. In connection with the right
of the Bank to take possession of the Collateral, the Bank may take possession
of any other items of property in or on the Collateral at the time of taking
possession, and hold them for the Debtor without liability on the part of the
Bank. The Debtor expressly agrees that the Bank may enter upon the premises
where the Collateral is believed to be located without any obligation of payment
to the Debtor, and that the Bank may, without cost, use any and all of the
Debtor’s “equipment” (as defined in the UCC) in the manufacturing or processing
of any “inventory” (as defined in the UCC) or in growing, raising, cultivating,
caring for, harvesting, loading and transporting of any of the Collateral that
constitutes “farm products” (as defined in the UCC). If there is any statutory
requirement for notice, that requirement shall be met if the Bank sends notice
to the Debtor at least ten (10) days prior to the date of sale, disposition or
other event giving rise to the required notice, and such notice shall be deemed
commercially reasonable. The Debtor is liable for any deficiency remaining after
disposition of the Collateral.

Miscellaneous.
1.  
Where the Collateral is located at, used in or attached to a facility leased by
the Debtor, the Debtor will obtain, as soon as reasonably practicable, from the
lessor a consent to the granting of this security interest and a release or
subordination of the lessor’s interest in any of the Collateral, in form and
substance satisfactory to the Bank.

2.  
At its option the Bank may, but shall be under no duty or obligation to,
discharge taxes, liens, security interests or other encumbrances at any time
levied or placed on the Collateral, pay for insurance on the Collateral, and pay
for the maintenance and preservation of the Collateral, and the Debtor agrees to
reimburse the Bank on demand for any payment made or expense incurred by the
Bank, with interest at the highest rate at which interest may accrue under any
of the instruments or documents evidencing the Liabilities.

3.  
No delay on the part of the Bank in the exercise of any right or remedy waives
that right or remedy, no single or partial exercise by the Bank of any right or
remedy precludes any other exercise of it or the exercise of any other right or
remedy, and no waiver or indulgence by the Bank of any default is effective
unless it is in writing and signed by the Bank, nor does a waiver on one
occasion waive that right on any future occasion.

4.  
The provisions of this agreement are severable, and if any one or more of the
provisions of this agreement are held to be invalid, illegal or unenforceable in
any jurisdiction, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired; and the invalidity,
illegality or unenforceability in one jurisdiction shall not affect the
validity, legality or enforceability of such provision(s) in any other
jurisdiction.

5.  
Except as provided in the Accounts; Chattel Paper; General Intangibles; and
Instruments paragraph above, any notices and demands under or related to this
document shall be in writing and delivered to the intended party at its address
stated herein, and if to the Bank, at its main office if no other address of the
Bank is specified herein, by one of the following means: (a) by hand, (b) by a
nationally recognized overnight courier service, or (c) by certified mail,
postage prepaid, with return receipt requested. Notice shall be deemed given:
(a) upon receipt if delivered by hand, (b) on the Delivery Day after the day of
deposit with a nationally recognized courier service, or (c) on the third
Delivery Day after the notice is deposited in the mail. “Delivery Day” means a
day other than a Saturday, a Sunday, or any other day on which national banking
associations are authorized to be closed. Any party may change its address for
purposes of the receipt of notices and demands by giving notice of such change
in the manner provided in this provision.

6.  
All rights of the Bank benefit the Bank’s successors and assigns; and all
obligations of the Debtor bind the Debtor’s heirs, executors, administrators,
successors and assigns. If more than one person or entity signs as the Debtor,
their obligations are joint and several and each agreement, representation,
warranty and covenant shall be individual, joint and several and the
“Collateral” includes any property that is owned by any Debtor individually or
jointly with any other.

 
 
6

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7.  
A carbon, photographic or other reproduction of this agreement is sufficient as,
and can be filed as, a financing statement. The Bank is irrevocably appointed
the Debtor’s attorney-in-fact to execute any financing statement on the Debtor’s
behalf covering the Collateral. The Debtor authorizes the Bank to file one or
more financing statements or similar records related to the security interests
created by this agreement, and further authorizes the Bank, as secured party
herein, instead of the Debtor, to sign such financing statements and other
similar records.

8.  
Time is of the essence under this agreement and in the performance of every
term, covenant and obligation contained herein.

Indemnification. The Debtor agrees to indemnify, defend and hold the Bank, its
parent companies, subsidiaries, affiliates, their respective successors and
assigns and each of their respective shareholders, directors, officers,
employees and agents (collectively the “Indemnified Persons”) harmless from and
against any and all loss, liability, obligation, damage, penalty, judgment,
claim, deficiency, expense, interest, penalties, reasonable attorneys’ fees
(including the reasonable fees and expenses of attorneys engaged by the
Indemnified Person at the Indemnified Person’s reasonable discretion) and
amounts paid in settlement (“Claims”) to which any Indemnified Person may become
subject arising out of or relating to this agreement or the Collateral, except
to the limited extent that the Claims are proximately caused by the Indemnified
Person’s gross negligence or willful misconduct. The indemnification provided
for in this paragraph shall survive the termination of this agreement and shall
not be affected by the presence, absence or amount of or the payment or
nonpayment of any claim under, any insurance.

Governing Law and Venue. This agreement shall be governed by and construed in
accordance with the laws of the State of New York (without giving effect to its
laws of conflicts), and to the extent applicable, federal law, except to the
extent that the laws regarding the perfection and priority of security interests
of the state(s) in which either the Debtor or any property securing the
Liabilities is located, are applicable. The Debtor agrees that any legal action
or proceeding with respect to any of its obligations under this agreement may be
brought by the Bank in any state or federal court located in the State of New
York, as the Bank in its sole discretion may elect. By the execution and
delivery of this agreement, the Debtor submits to and accepts, for itself and in
respect of its property, generally and unconditionally, the non-exclusive
jurisdiction of those courts. The Debtor waives any claim that the State of New
York is not a convenient forum or the proper venue for any such suit, action or
proceeding.

Additional Representations, Warranties and Covenants. The Debtor represents,
warrants and covenants to the Bank that each of the following is true in all
material respects and will remain true in all material respects until
termination of this agreement and payment in full of all Liabilities: (a) the
execution and delivery of this agreement and the performance of the obligations
it imposes do not violate any law, do not conflict with any agreement by which
it is bound, and do not require the consent or approval of any governmental
authority or any third party; (b) this agreement is a valid and binding
agreement, enforceable according to its terms; and (c) all balance sheets,
profit and loss statements, and other financial statements furnished to the Bank
in connection with the Liabilities are accurate and fairly reflect the financial
condition of the organizations and persons to which they apply on their
effective dates, including contingent liabilities of every type, which financial
condition has not changed materially and adversely since those dates. The
Debtor, other than a natural person, further represents that: (a) it is duly
organized, validly existing and in good standing under the laws of the state
where it is organized and in good standing in each state where it is doing
business; and (b) the execution and delivery of this agreement and the
performance of the obligations it imposes (i) are within its powers and have
been duly authorized by all necessary action of its governing body; and (ii) do
not contravene the terms of its articles of incorporation or organization, its
by-laws, or any agreement or document governing its affairs.

WAIVER OF SPECIAL DAMAGES. THE DEBTOR WAIVES, TO THE MAXIMUM EXTENT NOT
PROHIBITED BY LAW, ANY RIGHT THE DEBTOR MAY HAVE TO CLAIM OR RECOVER FROM THE
BANK IN ANY LEGAL ACTION OR PROCEEDING ANY SPECIAL, EXEMPLARY, PUNITIVE OR
CONSEQUENTIAL DAMAGES.

JURY WAIVER. TO THE MAXIMUM EXTENT NOT PROHIBITED BY APPLICABLE LAW, THE DEBTOR
AND THE BANK (BY ITS ACCEPTANCE HEREOF) HEREBY VOLUNTARILY, KNOWINGLY,
IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY RIGHT TO HAVE A JURY PARTICIPATE IN
RESOLVING ANY DISPUTE (WHETHER BASED ON CONTRACT, TORT, OR OTHERWISE) BETWEEN OR
AMONG THE DEBTOR AND THE BANK ARISING OUT OF OR IN ANY WAY RELATED TO THIS
DOCUMENT. THIS PROVISION IS A MATERIAL INDUCEMENT TO THE BANK TO PROVIDE THE
FINANCING DESCRIBED HEREIN.

 

 
Debtor:

     
FREQUENCY ELECTRONICS, INC.
     
By:
/s/ Alan Miller
       
Alan Miller
Secretary/Treasurer and CFO
       
Printed Name
Title
 
Date Signed:
June 6, 2013

Outside Counsel Prepared
 
 
7

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Collateral Location Schedule

Date:                                                                             
Check one:o Designation of initial location of Collateral
                   o Notice of intent to relocate Collateral
Debtor:                                                                                    
Date of Continuing Security Agreement:______________________
Instructions: This schedule should be completed by the Debtor (the owner of the
Collateral) described in the Continuing Security Agreement to which this form is
attached, if the Collateral is located at or will be relocated to, any place
other than the Debtor’s address set forth in the Continuing Security Agreement.
The Debtor is required to notify the Bank in writing at least ten (10) days’
prior to changing the location of any Collateral. The Debtor represents and
warrants that the Collateral is located or stored at the location(s) described
below and if any location(s) is leased or used for storage and not owned by the
Debtor, the name, address and the phone number of the Landlord or owner of the
warehouse (“Warehouseman”) and contact name is set forth below with respect to
the leased or storage premises.
Please PRINT or TYPE the following information.
Collateral Location
Landlord/Warehouseman Information
 
Address:                                                                         
 
City,
State:                                                                        
 
Zip Code:                                                                       
 
Collateral:                                                                       
 
o Check if Collateral Location is owned by the Debtor, otherwise, check
applicable box and complete information below.
o Landlord                      o Warehouseman
Name:                                                                                    
Address:                                                                          
         
Suite
Number:                                                                                   
City,
State:                                                                                   
Zip
Code:                                                                                   
Contact
Name:                                                                                   
Phone
Number:                                                                                   
 
Collateral Location
Landlord/Warehouseman Information
 
Address:                                                                         
 
City,
State:                                                                        
 
Zip Code:                                                                       
 
Collateral:                                                                       
 
o Check if Collateral Location is owned by the Debtor, otherwise, check
applicable box and complete information below.
o Landlord                      o Warehouseman
Name:                                                                                    
Address:                                                                                   
Suite
Number:                                                                                   
City,
State:                                                                                   
Zip
Code:                                                                                   
Contact
Name:                                                                                   
Phone
Number:                                                                                   
 
Collateral Location
Landlord/Warehouseman Information
 
Address:                                                                         
 
City,
State:                                                                        
 
Zip Code:                                                                       
 
Collateral:                                                                       
 
o Check if Collateral Location is owned by the Debtor, otherwise, check
applicable box and complete information below.
o Landlord                      o Warehouseman
Name:                                                                                    
Address:                                                                                   
Suite
Number:                                                                                   
City,
State:                                                                                   
Zip
Code:                                                                                   
Contact
Name:                                                                                   
Phone
Number:                                                                                   
 
Collateral Location
Landlord/Warehouseman Information
 
Address:                                                                         
 
City,
State:                                                                        
 
Zip Code:                                                                       
 
Collateral:                                                                        
 
o Check if Collateral Location is owned by the Debtor, otherwise, check
applicable box and complete information below.
o Landlord                      o Warehouseman
Name:                                                                                    
Address:                                                                                   
Suite
Number:                                                                                   
City,
State:                                                                                   
Zip
Code:                                                                                  
Contact
Name:                                                                                  
Phone
Number:                                                                                  
 
DEBTOR:                                                                            
By:                                                                                       
Name:                                                                                  
Title: