Contract
Exhibit
4.2
(AROTECH
CORPORATION)
THIS
AGREEMENT made and entered into as of the day
of December, 2007, by and between AROTECH CORPORATION, a
Delaware corporation, (hereinafter called "Grantor") and KEYBANK NATIONAL
ASSOCIATION, a national banking association, (hereinafter called
"the Secured Party").
W
I T N E S S E T H:
WHEREAS,
the Secured Party and FAAC Incorporated (“Borrower”) along with Related Parties
have entered into a Loan Agreement of even date herewith (the "Loan Agreement");
and
WHEREAS,
pursuant to the provisions of the Loan Agreement, the Grantor has guaranteed
the
obligations of Borrower to Secured Party and has agreed to give the Secured
Party a first security interest in and to all domestic U.S. assets of the
Grantor as hereinafter set forth;
NOW
THEREFORE, in consideration of the covenants hereinafter set forth, and for
other good and valuable consideration, the receipt and sufficiency of which
is
hereby acknowledged, the parties agree as follows:
1.
Granting
of Security Interest.
A.
The Grantor hereby grants to the Secured Party a security interest in all
Domestic U.S. Assets (as defined in the Loan Agreement) of Grantor, whether
now
owned or hereafter acquired, now existing or hereafter arising, and wherever
located, including without limitation all of the following:
All
domestic U.S. inventory, machinery, fixtures and equipment, accounts, accounts
receivable (including but not limited to all health care insurance receivables),
contract rights, documents, chattel paper, instruments, deposit accounts
and
general intangibles (including but not limited to all software and all payment
intangibles, all goodwill, trade names, trademarks, patents, copyrights,
trade
secrets, formulae, designs, customer lists, licenses and permits), beneficial
interests in trusts, minute books, records and data and embedded software
relating to all of the foregoing and all equipment, inventory and software
to
utilize, create, maintain and process any such records and data on electronic
media and all supporting obligations relating to the foregoing property,
together with all replacements thereof, attachments, accessories, parts,
equipment, tools and proceeds of any and all of the foregoing property
(including without limitation all insurance proceeds).
All
of the foregoing property is hereafter collectively referred to as the
"Collateral". The security interest granted hereby shall secure the
payment when due of all Indebtedness, including without limitation all
indebtedness and obligations of Borrower and Grantor to Secured Party, whether
now existing or hereafter arising, and all renewals, modifications and
extensions thereof (hereafter collectively called the
"Indebtedness"). The Grantor expressly acknowledges and agrees that
the security interest given hereby is in addition to and not the exclusion
of
any and all other security interests at any time given by the Grantor to
the
Secured Party.
B.
As a part of granting the above-referenced security interest and as a part
of
the above described Collateral, the Grantor does hereby assign, transfer
and set
over to the Secured Party as to Grantor all monies and claims for money due
or
to become due to Grantor under all of the foregoing accounts,
contract
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rights,
chattel paper, instruments and general intangibles, and choses in action
of
Grantor (hereafter collectively the "Accounts Receivable"). Until the
Secured Party shall give notice to the Grantor to the contrary, the Grantor
will, in the usual course of Grantor’s business and at the Grantor’s own cost
and expense, but as the agent of the Secured Party, demand and receive and
use
its best efforts to collect all monies due or to become due on such Accounts
Receivable. The Grantor agrees and covenants that upon the occurrence
and continuance of an Event of Default any and all sums of
money that shall be received by the Grantor on account of or in payment or
settlement of such Accounts Receivable shall be held by the Grantor as trustee
for the Secured Party. Upon the occurrence and continuance of an
Event of Default, all such monies received shall be segregated and not
commingled with any of Grantor’s other funds, and shall be forthwith delivered
to the Secured Party with endorsement to the Secured Party's order of any
checks
or similar instruments. It is agreed that, upon the occurrence and
continuance of an Event of Default, the Secured Party shall be entitled at
any
time, in its own name or in the name of the Grantor or otherwise, but at
the
expense and cost of the Grantor, to collect, demand, receive, xxx for or
compromise any and all such Accounts Receivable, and to give good and sufficient
releases therefore, to endorse any checks, drafts or other orders for the
payment of money payable to the Grantor in payment thereof and, in its
discretion, to file any claims or take any action or proceeding, either in
its
own name or in the name of the Grantor or otherwise, which the Secured Party
may
deem necessary or advisable. It is expressly understood and agreed,
however, that the Secured Party shall not be required or obligated in any
manner
to make any demand or 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
it or to which it may be entitled hereunder at any time.
C.
Unless otherwise expressly provided in this Agreement, all capitalized terms
shall have the same meaning as defined in the Loan
Agreement.
2.
Warranties
and Covenants.
A.
The Grantor hereby warrants and covenants that:
(i) Except
for the Junior Liens (as such term is defined in the Loan Agreement), the
Grantor is the owner of the Collateral free from any adverse liens, security
interest or encumbrance; and that the Grantor will defend the Collateral
against
all claims and demands of all other persons at any time claiming the same
or any
interest therein.
(ii) Except
for any financing statement of the Secured Party and any Permitted Lien,
no
financing statement covering the Collateral is on file in any public
office. Grantor expressly agrees to promptly deliver to Secured Party
at such place or places as Secured Party shall designate from time to time
all
documents, instruments and writings of any kind and Grantor expressly authorizes
Secured Party to execute, file and record all financing statements deemed
reasonably necessary or desirable by Secured Party or its counsel to evidence
and perfect the security interest in all of the Grantor’s assets. The
Grantor acknowledges, warrants and covenants that the financing statement(s)
on
file are sufficient to perfect the security interest given
hereby. Nevertheless, if requested by Secured Party, the Grantor
hereby agrees to immediately execute and/or deliver if requested such other
documents in form reasonably satisfactory to counsel for the Secured Party
in
order to perfect the security interest given hereby, and for filing any
financing statements in all public offices where filing is deemed necessary
or
desirable.
(iii) The
Grantor will not sell or offer to sell or otherwise transfer, dispose of
or
convey any interest in the Collateral or any interest therein without securing
the prior written consent
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(iv) of
the Secured Party except for inventory and farm products sold in the ordinary
course of Grantor’s business.
(v) At
all times the Grantor will have and maintain insurance with respect to that
portion of the Collateral that is insurable against risk of loss by fire
(including so-called extended coverage), theft and other risk of loss as
the
Secured Party may require, containing such terms, in such form, for such
periods
and written by such companies as are commercially reasonable and customary
and
otherwise reasonably satisfactory to the Secured Party, such insurance to
be
payable to the Secured Party as “Loss Payee” or as the Secured Party shall
otherwise designate; that all policies of insurance shall provide for thirty
(30) days minimum written cancellation notice to the Secured Party and, at
the
request of the Secured Party, shall be delivered to and held by
it. The Secured Party is hereby appointed attorney in fact for the
Grantor, and shall have the right, but not the obligation, to settle and
compromise any and all claims under any of the policies required to be
maintained by Borrower hereunder; to demand, receive and receipt for all
monies
payable thereunder; and to execute in the name of Borrower or Secured Party
or
both any proof of loss, notice, or any other instruments in connection with
such
policies or any loss thereunder. The Grantor acknowledges that the
foregoing power of attorney is coupled with an interest and may not be revoked
until the Indebtedness is satisfied in full.
(vi) Except
for any Permitted Lien, the Grantor will keep the Collateral free from any
adverse lien, security interest or encumbrance, and in good order and repair,
and will not waste or destroy the Collateral or any part thereof; and the
Grantor will not use the Collateral in violation of any statute or ordinance;
and the Secured Party may examine and inspect the Collateral or any portion
thereof at any reasonable time.
(vii) The
Grantor will pay promptly when due any and all taxes and assessments upon
the
Collateral. At its option, if the Grantor is in default hereunder,
the Secured Party may discharge any taxes, liens or security interests or
any
other encumbrances at any time levied or placed on the Collateral, may pay
any
insurance on the Collateral and may pay for any maintenance and preservation
of
the Collateral all of which shall be added to the Indebtedness and shall
accrue
interest at the highest lawful rate. The Grantor agrees to reimburse
the Secured Party on demand for any payments made, or any expense incurred
by
the Secured Party pursuant to the foregoing authorization.
(viii) The
Grantor will perform and observe each and every covenant, term, obligation
or
provision contained in the Related Loan Documents.
(ix) Where
applicable, the Collateral will at all times be kept at the business premises
of
the Grantor and will not be removed from said premises without securing the
written consent of the Secured Party except when done so in the ordinary
course
of business.
B.
Until default, the Grantor may have possession of the Collateral and use
it in
any lawful manner not inconsistent with this Agreement and not inconsistent
with
any policy of insurance thereon.
3.
Default
and Remedies.
A.
The Grantor shall be in default under this Agreement upon the happening and
continuance of any one or more of the following events or conditions (“Event of
Default”):
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(i) Grantor
shall fail to make any payments required under the terms of any of the
Indebtedness, including but not limited to those required in any of the Related
Loan Documents on the date such payment is due or demanded;
(ii) The
occurrence and continuance of any event of default under the Loan Agreement
or
in one or more of the other Related Loan Documents, including without limitation
this Security Agreement, or any agreement whether now existing or hereafter
arising between or including both Grantor and Secured Party.
B.
Upon the occurrence and continuance of an Event of Default for a period of
seven
(7) business days after notice, all of the Indebtedness secured hereby shall,
without notice, become immediately due and payable in full, and Secured Party
shall have all of the following rights and remedies:
(i) At
the request of the Secured Party, the Grantor shall assemble the Collateral
and
make it available to the Secured Party at a place to be designated by the
Secured Party which is reasonably convenient to both parties. The
Secured Party will give the Grantor reasonable notice of the time and place
of
any public sale thereof or of the time after which any private sale or any
other
intended disposition thereof is to be made. The requirements of
reasonable notice shall be met if such notice is mailed, by certified mail,
to
the address of the Grantor shown at the beginning of this Agreement, at least
ten (10) days before the time of the sale or disposition. Expenses of
retaking, holding, preparing for sale, selling, or the like, shall be paid
by
Grantor and shall include the Secured Party's reasonable attorneys' fees
and
legal expenses; and
(ii) The
Secured Party shall have, in addition to any other rights and remedies set
forth
in this Agreement, and those contained in any of the Related Loan Documents
and
any other agreements, guarantees, notes, instruments and documents now or
at any
time hereafter executed by Grantor and delivered to Secured Party, all of
the
rights and remedies of a secured party under applicable law, including without
limitation the Michigan Uniform Commercial Code, as amended.
In
addition to all of the foregoing, the Secured Party shall have at any time
prior
to or after the occurrence and continuance of an Event of Default by the
Grantor
the right to set-off, without notice to Grantor, any and all deposits or
other
sums at any time or times credited by or due from the Secured Party to the
Grantor, whether in a special account or other account or represented by
a
certificate of deposit (whether or not matured), which deposits and other
sums
shall at all times constitute additional security for the
Indebtedness.
All
of the foregoing rights and remedies afforded to the Secured Party shall
be
cumulative and nonexclusive.
C.
No waiver by the Secured Party of any Event of Default shall be deemed a
waiver
of any other then existing or subsequent default. No delay or omission by
the
Secured Party in exercising any right or remedy under this Agreement or any
of
the other Related Loan Documents shall impair such right to be construed
as a
waiver thereof or an acquiescence therein, nor shall any single or partial
exercise right, preclude other or further exercise thereof, or the exercise
of
any other right under this Agreement or any of the other Related Loan Documents
or otherwise. Any waiver, consent or approval of any kind or character on
the
part of the Secured Party of any provision of this Agreement or of any of
the
other Related Loan Documents shall be in writing and shall be effective only
to
the extent specifically set forth in such writing.
4.
Miscellaneous.
A.
The rights and obligations of the parties hereto shall be binding upon and
inure
to the benefit of their respective successors and
assigns.
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B.
This Agreement constitutes the complete understanding of the parties hereto
regarding the matters set forth herein, and may not be altered, amended or
modified in any way unless done so in writing and signed by the parties
hereto.
C.
This Agreement shall be governed by and construed according to the internal
laws
of the State of Michigan.
D.
The headings included in this Agreement are for purposes of convenience only
and
shall not be construed to be a part of the Agreement.
E.
Wherever possible, each provision of this Agreement shall be interpreted
in such
manner as to be effective and valid under applicable law, and should any
portion
of this Agreement be declared invalid for any reason, such declaration shall
have no effect on the remaining portions of this Agreement.
F.
THE GRANTOR AND SECURED PARTY ACKNOWLEDGE THAT THE RIGHT TO TRIAL BY JURY
IS A
CONSTITUTIONAL ONE, BUT THAT IT MAY BE WAIVED. NOTWITHSTANDING ANYTHING TO
THE
CONTRARY CONTAINED IN THIS AGREEMENT, THE RELATED LOAN DOCUMENTS OR ANY OTHER
AGREEMENT BETWEEN OR INCLUDING THE GRANTOR AND THE SECURED PARTY, AFTER BEING
PROVIDED THE OPPORTUNITY TO CONSULT WITH COUNSEL OF CHOICE, BORROWER HEREBY
KNOWINGLY AND VOLUNTARILY WAIVES ANY RIGHT TO TRIAL BY JURY IN THE EVENT
OF
LITIGATION AS TO ANY AND ALL ISSUES ARISING FROM OR OUT OF THIS AGREEMENT,
THE
RELATED LOAN DOCUMENTS AND/OR ANY OTHER AGREEMENTS BETWEEN OR INCLUDING THE
GRANTOR AND THE SECURED PARTY, INCLUDING WITHOUT LIMITATION ANY ISSUE RELATED
TO
THE PERFORMANCE OR ENFORCEMENT OF ANY OR ALL OF THE SAME.
G.
Unless otherwise indicated, all capitalized terms used herein shall have
the
same meaning as defined in the Loan Agreement.
IN
WITNESS WHEREOF, the parties hereto have set their hands and seals as of
the day
and year first above written.
GRANTOR:
AROTECH
CORPORATION
A
Delaware corporation
|
|
By:
_______________________________
|
Its:____________________________
SECURED
PARTY
KEYBANK
NATIONAL
ASSOCIATION,
a
national banking association
By:
_____________________________
Its: _____________________________
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