Exhibit 4.4
SECURITY AGREEMENT
SECURITY AGREEMENT, dated as of September 30, 2003, by and among
Arotech Corporation, a Delaware corporation (f/k/a Electric Fuel Corporation)
(the "Parent"), I.E.S. Defense Services, Inc. ("IDS"), and IES Interactive
Training, Inc. ("IES" and, together with IDS and the Parent, the "Debtors") and
the secured parties signatory hereto (each, a "Secured Party", and collectively,
the "Secured Parties").
W I T N E S S E T H:
WHEREAS, pursuant to the Securities Purchase Agreement, dated the date
hereof by and among the Parent and the investors named therein (the "Secured
Parties") (the "Purchase Agreement"), the Secured Parties have agreed to
purchase 8% Secured Convertible Debentures, due September 30, 2006 (the
"Debentures");
WHEREAS, in order to induce the Secured Parties to enter into the
Purchase Agreement, the Debtors wish to grant to the Investors a first priority,
perfected security interest in (A) the Parent Collateral (as defined below) and
(B) the MAC Stock Collateral (as defined below), a second priority security
interest in (A) the IES Collateral and (B) the Subsidiary Stock Collateral (as
defined below) and a third priority security interest in the IES/IDS/MDT Stock
Collateral (as defined below) to secure the prompt payment, performance and
discharge in full of all of the Parent's Obligations under the Debentures and
related transaction documents; and
WHEREAS, it is contemplated that the Secured Parties will be granted
(i) a first priority, perfected security interest in (A) the Parent Collateral
and (B) the MAC Stock Collateral, (ii) a second priority security interest in
(A) the IES Collateral and (B) the Subsidiary Stock Collateral, junior only to
the first priority security interest, granted to certain investors (the "First
Investors") pursuant to a Security Agreement, dated as of December 31, 2002,
among the Parent, its subsidiaries party thereto and the First Investors, with
respect to the security interest (the "First Investors' Security Interest")
granted to the First Investors in such IES Collateral and Subsidiary Stock
Collateral and (iii) a third priority security interest, junior only to the
First Investors' Security Interest and to the second priority security interest
of IES Electronics Industries, Ltd. ("IES Electronics") pursuant to the IES
Security Agreements (defined below) to secure obligations of which the aggregate
amount of $450,000 is currently outstanding (the "Electronics' Security
Interest"), in the IES/IDS/MDT Stock Collateral.
NOW, THEREFORE, in consideration of the agreements herein contained and
for other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the parties hereto hereby agree as follows:
1. Certain Definitions. As used in this Agreement, the following terms
shall have the meanings set forth in this Section 1. Terms used but not
otherwise defined in this Agreement that are defined in Article 9 of the UCC
(such as "General Intangibles" and "Proceeds") shall have the respective
meanings given such terms in Article 9 of the UCC.
(a) "Accounts" shall mean all present and future rights of the
Debtors to payment for goods sold or leased or for services rendered,
which are not evidenced by instruments or chattel paper, and whether or
not earned by performance.
(b) "Acquisition" shall mean the purchase, acquisition by
lease, exchange, merger, consolidation, succession or other acquisition
by or on behalf of the Parent (whether directly or indirectly through a
Subsidiary or other entity currently existing or hereafter created in
which Parent or any of its subsidiaries own more than 50% of the
ownership interests) of more than 10% of the stock or assets of any
entity. Assets so acquired that are held by Electric Fuel Battery
Corporation ("EFBC") for use by EFBC in its zinc-air military battery
business ("Battery Assets"), or stock acquired by EFBC of entities the
primary business assets of which consist of Battery Assets, shall not
be deemed to be Acquisitions under this agreement, provided that the
consideration paid for such stock and/or asset should not exceed
$1,000,000.
(c) "Agent" means Smithfield Fiduciary LLC as agent for each
of the Secured Parties pursuant to this Agreement and the IP Security
Agreement, or such other Person as shall have been subsequently
appointed as a successor agent pursuant to this Agreement.
(d) "Collateral" means collectively, the IES Collateral, the
Parent Collateral, the IES/IDS/MDT Stock Collateral, the Subsidiary
Stock Collateral and the MAC Stock Collateral.
(e) "First Investors' Security Agreement" means the Security
Agreement dated as of December 31, 2002 made by the Debtors and certain
other Subsidiaries of the Parent in favor of the First Investors.
(f) "First Purchase Agreement" means the Securities Purchase
Agreements dated as of December 31, 2002, by and among the Parent and
the First Investors.
(g) "IES Collateral" means all personal property and assets of
IES, including, without limitation, the following, whether presently
owned or existing or hereafter acquired or coming into existence, and
all additions and accessions thereto and all substitutions and
replacements thereof, and all proceeds, products and Accounts thereof,
including, without limitation, all proceeds from the sale or transfer
of the Collateral and of insurance covering the same and of any tort
claims in connection therewith:
(i) All Goods of IES, including, without limitations,
all machinery, equipment, computers, motor vehicles, trucks,
tanks, boats, ships, appliances, furniture, special and
general tools, fixtures, test and quality control devices and
other equipment of every kind and nature and wherever
situated, together with all documents of title and documents
representing the same, all additions and accessions thereto,
replacements therefor, all parts therefor, and all substitutes
for any of the foregoing and all other items used and useful
in connection with IES' businesses and all improvements
thereto (collectively, the "Equipment"); and
(ii) All Inventory of IES; and
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(iii) All of IES' contract rights and general
intangibles, including, without limitation, all partnership
interests, stock or other securities, licenses, distribution
and other agreements, computer software development rights,
leases, franchises, customer lists, quality control
procedures, grants and rights, goodwill, trademarks, service
marks, trade styles, trade names, patents, patent
applications, copyrights, deposit accounts, and income tax
refunds (collectively, the "General Intangibles"); and
(iv) All Accounts of IES including all insurance
proceeds, and rights to refunds or indemnification whatsoever
owing, together with all instruments, all documents of title
representing any of the foregoing, all rights in any
merchandising, goods, equipment, motor vehicles and trucks
which any of the same may represent, and all right, title,
security and guaranties with respect to each Receivable,
including any right of stoppage in transit;
(v) All IES Pledged Shares; and
(vi) All of IES' documents, instruments and chattel
paper, files, records, books of account, business papers,
computer programs and the products and proceeds of all of the
foregoing Collateral set forth in clauses (i)-(v) above.
(h) "IES Electronics' Security Agreements" means the Pledge,
Security and Escrow Agreement dated as of August 2, 2002 made by the
Parent in favor of IES Electronics relating to the shares of IDS, as
modified by the letter agreement between the Parent and IES Electronics
dated as of December 31, 2002, and the Security Agreement dated as of
March 17, 2003 made by the Parent in favor of IES Electronics relating
to the shares of IES, IDS and MDT.
(i) "IES/IDS/MDT Stock Collateral" means (i) all the shares of
capital stock of each of IES, IDS and MDT of which the Parent is the
direct or indirect beneficial and record holder and set forth on
Schedule C attached hereto; (ii) all additional shares of each of MDT,
IDS and IES from time to time acquired by the Parent in any manner
provided, however, that to the extent any such subsidiary is organized
or formed under the laws of a jurisdiction other than the United States
of America, a pledge of the shares of common stock of such subsidiary
will be limited to sixty-six percent (66%) of the shares of common
stock of such subsidiary; (iii) the certificates representing the
shares referred to in clauses (i) and (ii) above; and (iv) subject to
Section 4, all dividends, cash, instruments, options, rights and other
property or proceeds, from time to time received, receivable or
otherwise distributed or distributable in respect of or in exchange for
any or all of the shares referred to in clauses (i) and (ii) above.
(j) "IES Pledged Shares" means (i) all the shares of capital
stock of Summit Training International, Inc., a Delaware corporation
("STI") and of any other corporation or other entity of which IES is
the direct or indirect beneficial and record holder and set forth on
Schedule C attached hereto; (ii) all additional shares of each of the
Subsidiaries from time to time acquired by IES in any manner provided,
however, that to the extent any such Subsidiary is organized or formed
under the laws of a jurisdiction other than the United States of
America, a pledge of the shares of capital stock of such Subsidiary
will be limited to sixty-six percent (66%) of the shares of capital
stock of such Subsidiary; (iii) the certificates representing the
shares referred to in clauses (i) and (ii) above; and (iv) subject to
Section 4, all dividends, cash,
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instruments, options, rights and other property or proceeds, from time
to time received, receivable or otherwise distributed or distributable
in respect of or in exchange for any or all of the shares referred to
in clauses (i) and (ii) above.
(k) "IP Security Agreement" means that certain security
agreement, dated the date hereof, among the Debtors and the Secured
Parties, granting to the Secured Parties a security interest in the
intellectual property of the Debtors in accordance with the terms
thereof.
(l) "MAC Stock Collateral" means (i) all the shares of capital
stock of MDT Armor Corporation of which the Parent is the direct or
indirect beneficial and record holder and set forth on Schedule C
attached hereto, (ii) all additional shares of MDT Armor Corporation
from time to time acquired by the Parent in any manner provided,
however, that to the extent such Subsidiary is organized or formed
under the laws of a jurisdiction other than the United States of
America, a pledge of the shares of common stock of such Subsidiary will
be limited to sixty-six percent (66%) of the shares of common stock of
such Subsidiary; (iii) the certificates representing the shares
referred to in clauses (i) and (ii) above; and (iv) subject to Section
4, all dividends, cash, instruments, options, rights and other property
or proceeds, from time to time received, receivable or otherwise
distributed or distributable in respect of or in exchange for any or
all of the shares referred to in clauses (i) and (ii) above.
(m) "Obligations" means all of the Debtors' obligations under
this Agreement, the Debentures, the IP Security Agreement, the Purchase
Agreement and the transaction documents contemplated thereby, in each
case, whether now or hereafter existing, voluntary or involuntary,
direct or indirect, absolute or contingent, liquidated or unliquidated,
whether or not jointly owed with others, and whether or not from time
to time decreased or extinguished and later increased, created or
incurred, and all or any portion of such obligations or liabilities
that are paid, to the extent all or any part of such payment is avoided
or recovered directly or indirectly from the Secured Parties as a
preference, fraudulent transfer or otherwise as such obligations may be
amended, supplemented, converted, extended or modified from time to
time.
(n) "Parent Collateral" means all personal property and assets
of the Parent hereafter acquired or coming into existence in connection
with any Acquisition, and all additions and accessions thereto and all
substitutions and replacements thereof, and all proceeds, products and
Accounts thereof, including, without limitation, all proceeds from the
sale or transfer of the Collateral and of insurance covering the same
and of any tort claims in connection therewith:
(i) All Goods of the Parent, including, without
limitations, all machinery, equipment, computers, motor
vehicles, trucks, tanks, boats, ships, appliances, furniture,
special and general tools, fixtures, test and quality control
devices and other equipment of every kind and nature and
wherever situated, together with all documents of title and
documents representing the same, all additions and accessions
thereto, replacements therefor, all parts therefor, and all
substitutes for any of the foregoing and all other items used
and useful in connection with the Parent's businesses and all
improvements thereto (collectively, the "Equipment"); and
(ii) All Inventory of the Parent; and
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(iii) All of the Parent's contract rights and general
intangibles, including, without limitation, all partnership
interests, stock or other securities, licenses, distribution
and other agreements, computer software development rights,
leases, franchises, customer lists, quality control
procedures, grants and rights, goodwill, trademarks, service
marks, trade styles, trade names, patents, patent
applications, copyrights, deposit accounts, and income tax
refunds (collectively, the "General Intangibles");
(iv) All Accounts of the Debtors including all
insurance proceeds, and rights to refunds or indemnification
whatsoever owing, together with all instruments, all documents
of title representing any of the foregoing, all rights in any
merchandising, goods, equipment, motor vehicles and trucks
which any of the same may represent, and all right, title,
security and guaranties with respect to each Receivable,
including any right of stoppage in transit; and
(v) All Parent Pledged Shares.
(o) All of the Debtors' documents, instruments and chattel
paper, files, records, books of account, business papers, computer
programs and the products and proceeds of all of the foregoing
Collateral set forth in clauses (i)-(v) above.
(p) "Parent Pledged Shares" means (i) all additional shares of
any entity from time to time acquired by the Parent in any manner in or
in connection with an Acquisition provided, however, that to the extent
any such Subsidiary is organized or formed under the laws of a
jurisdiction other than the United States of America, a pledge of the
shares of common stock of such Subsidiary will be limited to sixty-six
percent (66%) of the shares of common stock of such Subsidiary; (ii)
the certificates representing the shares referred to in clause (i)
above; and (iii) subject to Section 4, all dividends, cash,
instruments, options, rights and other property or proceeds, from time
to time received, receivable or otherwise distributed or distributable
in respect of or in exchange for any or all of the shares referred to
in clause (i) above.
(q) "Pledged Shares" means collectively the IES Pledged Shares
and the Parent Pledged Shares.
(r) "Stock Collateral" means collectively the MAC Stock
Collateral, the IES/IDS/MDT Stock Collateral and the Subsidiary Stock
Collateral.
(s) "Subsidiary" means each of Electric Fuel Transportation
Corp., a Delaware corporation ("EFT"), Electric Fuel B.V., a
Netherlands corporation ("EF-BV"), Electric Fuel Battery Corporation, a
Delaware corporation (formerly known as Instant Power Corporation)
("IPC"), Electric Fuel GmbH, a German corporation ("EF-G"), IES, MDT,
Electric Fuel UK Ltd., a British corporation ("EF-UK"), Arotech
Security Corporation, a Delaware corporation ("ASC"), and Arcon
Security Corporation, a Delaware corporation.
(t) "Subsidiary Stock Collateral" means (i) all the shares of
capital stock of each of the Subsidiaries set forth on Schedule C
attached hereto; (ii) all additional shares of the Subsidiaries from
time to time acquired by the Parent in any manner provided, however,
that to the extent any such Subsidiary is organized or formed under the
laws of a jurisdiction other than
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the United States of America, a pledge of the shares of common stock of
such Subsidiary will be limited to sixty-six percent (66%) of the
shares of common stock of such Subsidiary; (iii) the certificates
representing the shares referred to in clauses (i) and (ii) above; and
(iv) subject to Section 4, all dividends, cash, instruments, options,
rights and other property or proceeds, from time to time received,
receivable or otherwise distributed or distributable in respect of or
in exchange for any or all of the shares referred to in clauses (i) and
(ii) above.
(u) "UCC" means the Uniform Commercial Code and/or any other
applicable law of each jurisdiction in which any Debtor is incorporated
or organized (including, without limitation the State of Delaware) and
any jurisdiction as to any Collateral located therein.
2. Grant of Security Interest. As an inducement for the
Secured Parties to enter into the Purchase Agreement, and to secure the
complete and timely payment, performance and discharge in full of the
Obligations, each of the Debtors hereby, unconditionally and
irrevocably, pledges, grants and hypothecates to the Agent for the
benefit of the Secured Parties:
(a) a continuing first priority, perfected security interest
(the "First Priority Security Interest") in and lien upon and a right
of set-off against all of the Debtors' right, title and interest of
whatsoever kind and nature in and to (i) the Parent Collateral, and
(ii) the MAC Stock Collateral;
(b) a continuing second priority security interest (the
"Second Priority Security Interest") and a second lien upon and a right
of set-off against all of the Debtors' right, title and interest of
whatsoever kind and nature in and to (i) the IES Collateral and (ii)
the Subsidiary Stock Collateral, provided that the such Second Security
Interest is and shall be subordinate to the First Investors' Security
Interest in such IES Collateral and such Subsidiary Stock Collateral;
and
(c) a continuing third priority security interest (the "Third
Priority Security Interest", and together with the Second Priority
Security Interest, the "Security Interests") in and lien upon and a
right of set-off against all of the Debtors' right, title and interest
of whatsoever kind and nature in and to the IES/IDS/MDT Stock
Collateral, provided that such Third Priority Security Interest is and
shall be subordinate to (x) the First Investors' Security Interest and
(y) the Electronics' Security Interest in such IES/IDS/MDT Stock
Collateral.
3. Representations, Warranties, Covenants and Agreements of
the Debtors. The Debtors jointly and severally represent and warrant
to, and covenant and agree with, the Secured Parties as follows:
(a) Each Debtor has the requisite corporate power and
authority to enter into this Agreement and otherwise to carry out its
obligations thereunder. The execution, delivery and performance by each
Debtor of this Agreement and the filings contemplated therein have been
duly authorized by all necessary action on the part of such Debtor and
no further action is required by such Debtor.
(b) Each Debtor represents and warrants that its jurisdiction
of organization and organization identification number are as set forth
on Schedule A attached hereto;
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(c) (i) Except for the Security Interests and as set forth in
Schedule 3(c)(i) hereto, each Debtor is the sole owner of the
Collateral (except for non-exclusive licenses granted by the Debtors in
the ordinary course of business), free and clear of any liens, security
interests, encumbrances, rights or claims, and is fully authorized to
grant the Security Interests in the Collateral. There is not on file in
any governmental or regulatory authority, agency or recording office an
effective financing statement, security agreement, license or transfer
or any notice of any of the foregoing (other than those that have been
filed in favor of (i) the Secured Parties in accordance with this
Agreement, (ii) the First Investors pursuant to the First Investors'
Security Agreement, or (iii) IES Electronics pursuant to the
Electronics' Security Agreements) covering or affecting any of the
Collateral. So long as this Agreement shall be in effect, the Debtors
shall not execute and shall not knowingly permit to be on file in any
such office or agency any such financing statement or other document or
instrument (except to the extent filed or recorded in favor of the
Secured Parties pursuant to the terms of this Agreement).
(ii) The Debtors are the record, direct and
beneficial owner of the Pledged Shares and Stock Collateral.
Except as set forth in Schedule 3(c)(ii) hereto, all of the
Pledged Shares and Stock Collateral are owned by the Debtors,
free and clear of any lien, claim, encumbrance, security
interest, right or other charge, other than (A) the Security
Interests granted hereunder, (B) the First Investors' Security
Interest, and (C) Electronics' Security Interest. The Debtors
have the power, authority and legal right to pledge, assign,
transfer, deliver, deposit and set over the MAC Stock
Collateral and the Pledged Shares pledged to the Secured
Parties as provided herein.
(iii) Concurrently with or promptly following the
execution of this Agreement, all certificates or instruments
representing or evidencing the Pledged Shares and the Stock
Collateral, which are not currently in the possession of the
Agent, have been delivered to and held by the Agent for the
benefit of the Secured Parties pursuant to this Agreement
together with undated stock powers duly endorsed in blank and
irrevocable proxies, provided that such delivery shall not be
required with respect to any such certificates or instruments
delivered to the First Investors pursuant to the terms of the
First Investors' Security Agreement.
(d) No part of the Collateral has been judged invalid or
unenforceable. No written claim has been received that any Collateral
or the Debtors' use of any Collateral violates the rights of any third
party. There has been no adverse decision to the Debtors' claim of
ownership rights in or exclusive rights to use the Collateral in any
jurisdiction or to the Debtors' right to keep and maintain such
Collateral in full force and effect, and there is no proceeding
involving said rights pending or, to the best knowledge of the Debtors,
threatened before any court, judicial body, administrative or
regulatory agency, arbitrator or other governmental authority.
(e) Each Debtor shall at all times maintain its books of
account and records relating to the Collateral at its principal place
of business and its Collateral at the locations set forth on Schedule A
attached hereto and may not relocate such books of account and records
or tangible Collateral unless it delivers to each of the Secured
Parties at least 30 days prior to such relocation (i) written notice of
such relocation and the new location thereof (which must be within the
United States) and (ii) evidence that appropriate financing statements
under the UCC
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and other necessary documents have been filed and recorded and other
steps have been taken to perfect the Security Interests to create in
favor of each of the Secured Parties (A) a valid, perfected and
continuing first priority security interest and lien in the Parent
Collateral and the MAC Stock Collateral, (B) a valid and continuing
second priority security interest and lien in the IES Collateral and
the Subsidiary Stock Collateral, subordinate only to the First
Investors' Security Interest and (C) a valid and continuing third
priority security interest and lien in the IES/IDS/MDT Stock
Collateral, subordinate only to the First Investors' Security Interest
and the Electronics' Security Interest. The principal place of business
of each of the Debtors is located at the address set forth in Schedule
A hereto, and will not be moved without notice to each Secured Party.
(f) This Agreement creates in favor of the Secured Parties a
valid security interest in the Collateral securing the payment and
satisfaction of the Obligations and, upon making the filings described
in Section 3(g), a perfected security interest in the Parent
Collateral, the IES Collateral and the MAC Stock Collateral, which
security interest shall have the respective priorities set forth in
clause (e) above. Except for the filing of financing statements
pursuant to the UCC with the proper filing and recording agencies in
the jurisdictions indicated on Schedule B, attached hereto, no
authorization or approval of or filing with or notice to any
governmental authority or regulatory body is required either (i) for
the grant by the Debtors of, or the effectiveness of, the Security
Interests granted hereby or for the execution, delivery and performance
of this Agreement by the Debtors or (ii) for the perfection of or
exercise by the Secured Parties of their rights and remedies hereunder.
(g) The Debtors acknowledge and agree that on the date of
execution of this Agreement, the Secured Parties will file one or more
financing statements under the UCC with respect to the Security
Interests with the proper filing and recording agencies in the
jurisdictions, all as indicated on Schedule B, attached hereto and in
such other jurisdictions as the Secured Parties may deem necessary.
(h) The execution, delivery and performance of this Agreement
does not conflict with or cause a breach or default, or an event that
with or without the passage of time or notice, shall constitute a
breach or default, under any agreement to which the Debtors are a party
or by which the Debtors are bound. No consent (including, without
limitation, from stock holders or creditors of the Debtors) is required
for the Debtors to enter into and perform their obligations hereunder.
(i) The Debtors shall at all times maintain the liens and
Security Interests provided for hereunder as valid liens and security
interests in the Collateral in favor of the Secured Parties in
accordance with the terms hereof to ensure that such liens and Security
Interests are and remain senior to all not existing and hereafter
created security interests and liens. The Collateral will be kept free
of all liens, security interest, claims and encumbrances whatsoever,
except for the First Investors' Security Interest and the Electronics'
Security Interest. Each Debtor hereby agrees to defend the same against
any and all persons. Each Debtor shall safeguard and protect all
Collateral for the account of the Secured Parties. At the request of
the Agent and/or the Secured Parties, the Debtors will sign and deliver
to the Secured Parties at any time or from time to time one or more
financing statements pursuant to the UCC in form reasonably
satisfactory to the Secured Parties and will pay the cost of filing the
same in all public
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offices wherever filing is, or is deemed by the Secured Parties to be,
necessary or desirable to effect the rights and obligations provided
for herein. Without limiting the generality of the foregoing, the
Debtors shall pay all fees, taxes and other amounts necessary to
maintain the Collateral and the Security Interests hereunder, and the
Debtors shall obtain and furnish to the Secured Parties from time to
time, upon demand, such releases and/or subordinations of claims and
liens which may be required to maintain the priority of the Security
Interests.
(j) The Debtors will not allow any Collateral to be abandoned,
forfeited or dedicated to the public without the prior written consent
of the Secured Parties. The Debtors will not transfer, pledge,
hypothecate, encumber, license (except for non-exclusive licenses
granted by the Debtors in the ordinary course of business), sell or
otherwise dispose of any of the Collateral without the prior written
consent of the Secured Parties.
(k) Each Debtor shall keep and preserve its Equipment,
Inventory and other tangible Collateral in good condition, repair and
order and shall not operate or locate any such Collateral (or cause to
be operated or located) in any area excluded from insurance coverage.
(l) Each Debtor shall, within ten (10) days of obtaining
knowledge thereof, advise the Agent, in sufficient detail, of any
substantial change in the Collateral, and of the occurrence of any
event which would have a material adverse effect on the value of the
Collateral or the Security Interests.
(m) Each Debtor shall promptly execute and deliver to the
Secured Parties such further deeds, mortgages, assignments, security
agreements, financing statements or other instruments, documents,
certificates and assurances and take such further action as the Secured
Parties may from time to time request and may in its sole discretion
deem necessary to perfect, protect or enforce its security interest in
the Collateral including, without limitation, the IP Security Agreement
in which each the Secured Parties has been granted a security interest
hereunder, substantially in a form acceptable to the Secured Parties,
which IP Security Agreement, other than as stated therein, shall be
subject to all of the terms and conditions hereof.
(n) The Debtors shall permit the Secured Parties and their
representatives and agents upon reasonable prior notice to inspect the
Collateral at any time during normal business hours, and to make copies
of records pertaining to the Collateral as may be requested by the
Secured Parties from time to time.
(o) Each Debtor will, at its own expense, take all steps
reasonably necessary to diligently pursue and seek to preserve, enforce
and collect any rights, claims, causes of action and accounts
receivable in respect of the Collateral.
(p) Each Debtor shall promptly notify the Secured Parties in
sufficient detail upon becoming aware of any attachment, garnishment,
execution or other legal process levied against any Collateral and of
any other information received by the Debtors that may materially
affect the value of the Collateral, the Security Interests or the
rights and remedies of the Secured Parties hereunder.
(q) Each Debtor shall not use or permit any Collateral to be
used unlawfully or in violation of any provision of this Agreement or
any applicable statute, regulation or
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ordinance or any policy of insurance covering the Collateral where
violation is reasonably likely to have a material adverse effect on the
Secured Parties' rights in the Collateral or Secured Parties' ability
to foreclose on the Collateral.
(r) The Debtors shall not grant to any person or entity any
rights or interests in or to any of the Collateral that are senior to,
or pari passu with, the Secured Parties.
(s) Each Debtor shall notify the Agent of any change in such
Debtor's name, identity, chief place of business, chief executive
office or residence within 10 days prior to such change.
(t) All information heretofore, herein or hereafter supplied
to the Secured Parties by or on behalf of the Debtors with respect to
the Collateral is accurate and complete in all material respects as of
the date furnished.
4. Voting Rights; Dividends; Etc.
(a) Subject to the first priority rights of the First
Investors in the Subsidiary Stock Collateral and the IES/IDS/MDT Stock
Collateral, and to the second priority rights of IES Electronics in the
IES/IDS/MDT Stock Collateral, as long as no Event of Default (as
defined in Section 5) shall have occurred and be continuing and, in the
case of Section 4(b)(i), as long as no notice thereof shall have been
given by the Secured Parties to the Parent):
(i) The Debtors shall be entitled to exercise any and
all voting and other consensual rights pertaining to the Stock
Collateral and Pledged Shares pledged by it hereunder or any
part thereof for any purpose not inconsistent with the terms
of this Agreement or the Debentures; provided, however, that
the Parent shall not exercise or refrain from exercising any
such right if such action would have an adverse effect on the
value of the Stock Collateral and Pledged Shares or any part
thereof.
(ii) The Debtors shall be entitled to receive and
retain any and all dividends paid in respect of the Stock
Collateral and Pledged Shares pledged by it hereunder, other
than any and all:
(1) dividends paid or payable other than in
cash in respect of, and instruments and other property
received, receivable or otherwise distributed in respect of,
or in exchange for, any Stock Collateral and Pledged Shares;
(2) dividends and other distributions paid
or payable in cash in respect of any Stock Collateral and
Pledged Shares in connection with a partial or total
liquidation or dissolution or in connection with a reduction
of capital, capital surplus or paid-in-surplus; and
(3) cash paid, payable or otherwise
distributed in redemption of, or in exchange for, any Stock
Collateral and Pledged Shares,
all of which shall be, and all of which shall be forthwith
delivered to the Secured Parties to hold as pledged shares, provided
that, such delivery shall not be required with respect
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to the Subsidiary Stock Collateral and the IES/IDS/MDT Stock Collateral
or any Pledged Shares so long as these are subject to the First
Investors' Security Interest and Industries' Security Interest (as
applicable), and shall, if received by the any Debtor, be received in
trust for the benefit of the Secured Parties, be segregated from the
other property or funds of the Debtors, and be forthwith delivered to
Agent for the benefit of the Secured Parties as pledged shares in the
same form as so received (with any necessary endorsement). Upon
termination of the First Investors' Security Interest or the
Electronics' Security Interest, the Debtors will take all steps
necessary to cause the First Investors or IES Electronics, as the case
may be, to return any of the Subsidiary Stock Collateral, IES/IDS/MDT
Stock Collateral or Pledged Shares held by the First Investors or IES
Electronics to the Debtors and promptly upon receipt by the Debtors
deliver these to the Agent to for the benefit of the Secured Parties.
(iii) The Secured Parties shall execute and deliver
(or cause to be executed and delivered) to the Debtors all
such proxies and other instruments as the Debtors may
reasonably request for the purpose of enabling the Debtors to
exercise the voting and other rights which it is entitled to
exercise pursuant to subsection (a)(i) above and to receive
the dividends which it is authorized to receive and retain
pursuant to subsection (a)(ii) above.
(b) Upon the occurrence and during the continuance of an Event
of Default:
(i) All rights of the Debtors to exercise the voting
and other consensual rights which it would otherwise be
entitled to exercise pursuant to Section 4(a)(i) above shall
cease upon notice from the Secured Parties to the Debtors, and
all such rights shall thereupon become vested in the Secured
Parties who shall thereupon have the sole right to exercise
such voting and other consensual rights and any and all rights
of conversion, exchange, subscription or any other rights,
privileges or options pertaining to the Stock Collateral and
Pledged Shares or any part thereof, subject to the rights of
the First Investors to exercise voting and other consensual
rights upon the occurrence and during the continuance of an
"Event of Default" under the First Investors' Security
Agreement, and the rights of IES Electronics to exercise
voting and other consensual rights upon the occurrence and
during the continuance of an "Event of Default" under the
Electronics' Security Agreements, and the Secured Parties may
exercise such powers in such manner as the Secured Parties may
elect, but the Secured Parties shall have no duty to exercise
any of the aforesaid right, privileges or options and shall
not be responsible for any failure to do so or delay in doing
so.
(ii) All rights of the Debtors to receive the
dividends which the Debtors would otherwise be authorized to
receive and retain pursuant to Section 4(a)(ii) above shall
cease, and all such rights shall thereupon become vested in
the Secured Parties who shall thereupon have the sole right to
receive and hold as part of the Pledged Shares such dividends,
subject to the rights of the First Investors to receive such
dividends under the First Security Agreement and to the rights
of IES Electronics to receive such dividends under the
Electronics' Security Agreements.
(iii) All dividends which are received by the Debtors
contrary to the provisions of paragraph (ii) of this Section
4(b) shall be received in trust for the benefit of
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the Secured Parties, shall be segregated from other funds of
the Debtors and shall be forthwith paid over to the Secured
Parties as Pledged Shares in the same form as so received
(with any necessary endorsement).
(c) In order to permit the Secured Parties to exercise the
voting and other rights which it may be entitled to exercise pursuant
to Section 4(b)(i) above, and to receive all dividends and
distributions which it may be entitled Secured Parties, from time to
time execute and deliver to the Secured Parties appropriate proxies,
dividend payment orders and other instruments as the Secured Parties
may reasonably request.
5. Defaults. The following events shall be "Events of
Default":
(a) The occurrence of an Event of Default (as defined in the
Debentures) under the Debentures;
(b) Any representation or warranty of the Debtors in this
Agreement or in the IP Security Agreement shall prove to have been
incorrect in any material respect when made;
(c) The failure by a Debtor to observe or perform any of its
obligations hereunder or in the IP Security Agreement for ten (10) days
after receipt by a Debtor of notice of such failure from the Secured
Parties; or
(d) The failure by the Debtors to pay all amounts owed to IES
Electronics by December 31, 2003 and cause the Electronics' Security
Interest to be terminated as soon as practicable thereunder, subject to
any rights of setoff that the Debtors may claim.
6. Duty To Hold In Trust. Upon the occurrence and the
continuation of any Event of Default, the Debtors shall, upon receipt
by the Debtors of any revenue, income or other sums subject to the
Security Interests, whether payable pursuant to the Debentures or
otherwise, or of any check, draft, note, trade acceptance or other
instrument evidencing an obligation to pay any such sum, hold the same
in trust for the Secured Parties and shall forthwith endorse and
transfer any such sums or instruments, or both, to the Secured Parties
for application, on a pro rata basis, to the satisfaction of the
Obligations.
7. Rights and Remedies Upon Default. Upon the occurrence and
during the continuation of any Event of Default, the Agent (on behalf
of, and for the benefit of, itself and each of the Secured Parties)
shall have the right to exercise all of the remedies conferred
hereunder, under the Debentures and under the IP Security Agreement,
and the Agent (on behalf of and for the benefit of the Secured Parties)
shall have all the rights and remedies of a secured party under the
UCC. Without limitation, the Agent (on behalf of and for the benefit of
the Secured Parties) shall have the following rights and powers:
(a) The Agent shall have the right to take possession of all
tangible manifestations or embodiments of the Collateral and, for that
purpose, enter, with the aid and assistance of any person, any premises
where the Collateral, or any part thereof, is or may be placed and
remove the same, and the Debtors shall assemble the Collateral and make
it available to the Agent at places which the Agent shall reasonably
select, whether at the Debtors' premises or elsewhere, and make
available to the Agent, without rent, all of the Debtors' respective
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premises and facilities for the purpose of the Agent taking possession
of, removing or putting the Collateral in saleable or disposable form.
(b) The Agent shall have the right to operate the business of
the Debtors using the Collateral and shall have the right to assign,
sell, lease or otherwise dispose of and deliver all or any part of the
Collateral, at public or private sale or otherwise, either with or
without special conditions or stipulations, for cash or on credit or
for future delivery, in such parcel or parcels and at such time or
times and at such place or places, and upon such terms and conditions
as the Agent may deem commercially reasonable, all without (except as
shall be required by applicable statute and cannot be waived)
advertisement or demand upon or notice to the Debtors or right of
redemption of the Debtors, which are hereby expressly waived. Upon each
such sale, lease, assignment or other transfer of Collateral, the Agent
may, unless prohibited by applicable law which cannot be waived,
purchase all or any part of the Collateral being sold, free from and
discharged of all trusts, claims, right of redemption and equities of
the Debtors, which are hereby waived and released.
(c) The Agent may license or, to the same extent the Debtors
are permitted by law and contract to do so, sublicense, whether on an
exclusive or non-exclusive basis, any of the Collateral throughout the
world for such period, on such conditions and in such manner as the
Secured Parties shall, in its reasonable discretion, determine.
(d) The Agent may (without assuming any obligations or
liabilities thereunder), at any time, enforce (and shall have the
exclusive right to enforce) against licensee or sublicensee all rights
and remedies of the Debtors in, to and under any license agreement with
respect to such Collateral, and take or refrain from taking any action
thereunder.
(e) The Agent may, in order to implement the assignment,
license, sale or other disposition of any of the Collateral pursuant to
this Section, pursuant to the authority provided for in Section 13,
execute and deliver on behalf of the Debtors one or more instruments of
assignment of the Collateral in form suitable for filing, recording or
registration in any jurisdictions as the Secured Parties may determine
advisable.
(f) In the event that any Secured Party shall recover from the
Debtors or the Collateral more than its pro rata share of the
Obligations owed to all Secured Parties hereunder, whether by
agreement, understanding or arrangement with the Debtors or any other
Person, set off or other means, such Secured Party shall immediately
deliver or pay over to the other Secured Parties a pro rata portion of
any such recovery in the form received.
(g) Agent may, at any time or times that an Event of Default
exists or has occurred and is continuing, (i) notify any or all account
debtors that the Accounts have been assigned to Secured Parties and
that Secured Parties have a security interest therein and Agent may
direct any or all accounts debtors to make payment of Accounts directly
to Secured Parties, (ii) extend the time of payment of, compromise,
settle or adjust for cash, credit, return of merchandise or otherwise,
and upon any terms or conditions, any and all Accounts or other
obligations included in the Collateral and thereby discharge or release
the account debtor or any other party or parties in any way liable for
payment thereof without affecting any of the Obligations, (iii) demand,
collect or enforce payment of any Accounts or such other obligations,
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but without any duty to do so, and Agent and Secured Parties shall not
be liable for its failure to collect or enforce the payment thereof nor
for the negligence of its agents or attorneys with respect thereto and
(iv) take whatever other action Agent may deem necessary or desirable
for the protection of its interests. At any time that an Event of
Default exists or has occurred and is continuing, at Agent's request,
all invoices and statements sent to any account debtor shall state that
the Accounts and such other obligations have been assigned to Secured
Parties and are payable directly and only to Secured Parties and the
Debtors shall deliver to Agent such originals of documents evidencing
the sale and delivery of goods or the performance of services giving
rise to any Accounts as Agent may require.
8. Apportionment and Application of Proceeds. (a) Except as
otherwise provided herein, the proceeds of any such sale, lease,
license or other disposition of the Collateral hereunder shall be
apportioned ratably among the Secured Parties (according to the unpaid
balance of the Obligations to which such payments relate held by each
Secured Party) and shall be applied as follows, provided that any
apportionment and application under this Section 8 shall be subject to
any apportionment among the First Investors and IES Electronics and
application of the proceeds of any Collateral under the First
Investors' Security Agreement and the Electronics' Security Agreements:
(i) first, to the expenses of retaking, holding,
storing, processing and preparing for sale, selling, and the
like (including, without limitation, any taxes, fees and other
costs incurred in connection therewith) of the Collateral,
(ii) second, to the reasonable attorneys' fees and
expenses incurred by the Agent and/or Secured Parties in
enforcing its rights hereunder and in connection with
collecting, storing and disposing of such Collateral,
(iii) third, to satisfaction of the Obligations due
to the Secured Parties,
(iv) fourth, to the payment of any other amounts
required by applicable law, and
(v) fifth, to the Debtors any surplus proceeds.
(b) If, upon the sale, license or other disposition of the
Collateral, the proceeds thereof are insufficient to pay all amounts to
which the Secured Parties are legally entitled, the Debtors will be
liable for the deficiency, together with interest thereon, at the rate
of 12% per annum or the lesser amount permitted by applicable law (the
"Default Rate"), and the reasonable fees of any attorneys employed by
the Agent and/or Secured Parties to collect such deficiency. To the
extent permitted by applicable law, each Debtor waives all claims,
damages and demands against the Secured Parties arising out of the
repossession, removal, retention or sale of the Collateral, unless due
to the gross negligence or willful misconduct of the Agent and/or
Secured Parties.
(c) In the event of a direct conflict between the priority
provisions of this Section 8 and other provisions contained in any
other Debentures or documents executed in connection with the
Debentures, it is the intention of the parties hereto that such
priority provisions in such documents shall be read together and
construed, to the fullest extent possible,
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to be in concert with each other. In the event of any actual,
irreconcilable conflict that cannot be resolved as aforesaid, the terms
and provisions of this Section 8 shall control and govern.
9. Costs and Expenses. The Debtors agree to pay all
out-of-pocket fees, costs and expenses incurred in connection with any
filing required hereunder, including without limitation, any financing
statements pursuant to the UCC, continuation statements, partial
releases and/or termination statements related thereto or any expenses
of any searches reasonably required by the Agent. The Debtors shall
also pay all other claims and charges which in the reasonable opinion
of the Agent and/or Secured Parties might prejudice, imperil or
otherwise affect the Collateral or the Security Interests therein. The
Debtors will also, upon demand, pay to the Agent and/or Secured Parties
the amount of any and all reasonable expenses, including the reasonable
fees and expenses of its counsel and of any experts and agents, which
the Agent and/or Secured Parties may incur in connection with (i) the
enforcement of this Agreement, (ii) the custody or preservation of, or
the sale of, collection from, or other realization upon, any of the
Collateral, or (iii) the exercise or enforcement of any of the rights
of the Secured Parties under the Debentures. Until so paid, any fees
payable hereunder shall be added to the principal amount of the
Debentures and shall bear interest at the Default Rate.
10. Responsibility for Collateral. Each Debtor assumes all
liabilities and responsibility in connection with all Collateral, and
the obligations of such Debtor hereunder, under the Debentures or under
the IP Security Agreement shall in no way be affected or diminished by
reason of the loss, destruction, damage or theft of any of the
Collateral or its unavailability for any reason.
11. Security Interests Absolute. All rights of the Secured
Parties and all Obligations of the Debtors hereunder, shall be absolute
and unconditional, irrespective of: (a) any lack of validity or
enforceability of this Agreement, the Debentures, IP Security Agreement
or any agreement entered into in connection with the foregoing, or any
portion hereof or thereof; (b) any change in the time, manner or place
of payment or performance of, or in any other term of, all or any of
the Obligations, or any other amendment or waiver of or any consent to
any departure from the Debentures, or the IP Security Agreement or any
other agreement entered into in connection with the foregoing; (c) any
exchange, release or nonperfection of any of the Collateral, or any
release or amendment or waiver of or consent to departure from any
other collateral for, or any guaranty, or any other security, for all
or any of the Obligations; (d) any action by the Secured Parties to
obtain, adjust, settle and cancel in its sole discretion any insurance
claims or matters made or arising in connection with the Collateral; or
(e) any other circumstance which might otherwise constitute any legal
or equitable defense available to the Debtors, or a discharge of all or
any part of the Security Interests granted hereby. Until the
Obligations shall have been paid and performed in full, the rights of
the Secured Parties shall continue even if the Obligations are barred
for any reason, including, without limitation, the running of the
statute of limitations or bankruptcy. Each Debtor expressly waives
presentment, protest, notice of protest, demand, notice of nonpayment
and demand for performance. In the event that at any time any transfer
of any Collateral or any payment received by the Secured Parties
hereunder shall be deemed by final order of a court of competent
jurisdiction to have been a voidable preference or fraudulent
conveyance under the bankruptcy or insolvency laws of the United
States, or shall be deemed to be otherwise due to any party other than
the Secured Parties, then, in any such event, the Debtors' obligations
hereunder shall survive cancellation of
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this Agreement, and shall not be discharged or satisfied by any prior
payment thereof and/or cancellation of this Agreement, but shall remain
a valid and binding obligation enforceable in accordance with the terms
and provisions hereof. Each Debtor waives all right to require the
Secured Parties to proceed against any other person or to apply any
Collateral which the Secured Parties may hold at any time, or to
marshal assets, or to pursue any other remedy. Each Debtor waives any
defense arising by reason of the application of the statute of
limitations to any obligation secured hereby.
12. Term of Agreement. This Agreement and the Security
Interests shall terminate on the date on which all payments under the
Debentures have been made in full or otherwise converted pursuant to
the terms thereof and all other Obligations have been paid or
discharged. Upon such termination, the Secured Parties, at the request
and at the expense of the Debtors, will join in executing any
termination statement with respect to any financing statement executed
and filed pursuant to this Agreement.
13. Power of Attorney; Further Assurances. (a) Each Debtor
authorizes the Secured Parties, and does hereby make, constitute and
appoint it, and its respective officers, agents, successors or assigns
with full power of substitution, as the Debtors' true and lawful
attorney-in-fact, with power, in its own name or in the name of the
Debtors, to, after the occurrence and during the continuance of an
Event of Default, (i) endorse any notes, checks, drafts, money orders,
or other instruments of payment (including payments payable under or in
respect of any policy of insurance) in respect of the Collateral that
may come into possession of the Secured Parties; (ii) to sign and
endorse any financing statement pursuant to the UCC or any invoice,
freight or express bill, bill of lading, storage or warehouse receipts,
drafts against debtors, assignments, verifications and notices in
connection with accounts, and other documents relating to the
Collateral; (iii) to pay or discharge taxes, liens, security interests
or other encumbrances at any time levied or placed on or threatened
against the Collateral; (iv) to demand, collect, receipt for,
compromise, settle and sue for monies due in respect of the Collateral;
and (v) generally, to do, at the option of the Secured Parties, and at
the Debtors' expense, at any time, or from time to time, all acts and
things which the Secured Parties deems necessary to protect, preserve
and realize upon the Collateral and the Security Interests granted
therein in order to effect the intent of this Agreement, the Debentures
and the IP Security Agreement all as fully and effectually as the
Debtors might or could do; and each Debtor hereby ratifies all that
said attorney shall lawfully do or cause to be done by virtue hereof.
This power of attorney is coupled with an interest and shall be
irrevocable for the term of this Agreement and thereafter as long as
any of the Obligations shall be outstanding.
(b) On a continuing basis, each Debtor will make, execute,
acknowledge, deliver, file and record, as the case may be, with the
proper filing and recording agencies in any jurisdiction, including,
without limitation, the jurisdictions indicated on Schedule B, attached
hereto, all such instruments, and take all such action as may
reasonably be deemed necessary or advisable, or as reasonably requested
by the Secured Parties, to perfect the Security Interests granted
hereunder and otherwise to carry out the intent and purposes of this
Agreement, or for assuring and confirming to the Secured Parties the
grant or perfection of Security Interests in all the Collateral under
the UCC having the priority set forth in this Agreement.
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(c) Each Debtor hereby irrevocably appoints the Secured
Parties as such Debtor's attorney-in-fact, with full authority in the
place and stead of such Debtor and in the name of such Debtor, from
time to time in the Secured Parties' discretion, to take any action and
to execute any instrument which the Secured Parties may deem necessary
or advisable to accomplish the purposes of this Agreement, including
the filing, in its sole discretion, of one or more financing or
continuation statements and amendments thereto, relative to any of the
Collateral without the signature of such Debtor where permitted by law.
14. Agent.
(a) Actions The Agent shall at all times act upon and in
accordance with written instructions received from a
Majority-in-Interest (as defined in Section 17) time to time. The Agent
shall be deemed to be authorized on behalf of each Secured Party to act
on behalf of such Secured Party under this Agreement and the IP
Security Agreement and, in the absence of written instructions from a
Majority-in-Interest (with respect to which the Agent agrees that it
will, subject to the last two sentences of this Section, comply, except
as otherwise advised by counsel), to exercise such powers hereunder and
thereunder as are specifically delegated to or required of the Agent by
the terms hereof and thereof, together with such powers as may be
reasonably incidental thereto. The Agent shall have no duty to
ascertain or inquire as to the performance or observance of any of the
terms of this Agreement or the IP Security Agreement by the Debtors. By
accepting their Debentures each Secured Party shall be deemed to have
agreed to indemnify the Agent (which agreement shall survive any
termination of such Secured Party's percentage), from and against any
and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or
nature whatsoever which may at any time be imposed on, incurred by, or
asserted against the Agent in any way relating to or arising out of
this Agreement, the Debentures and the IP Security Agreement, including
the reimbursement of the Agent for all out-of-pocket expenses
(including attorneys' fees) incurred by the Agent hereunder or in
connection herewith or in enforcing the Obligations of the Debtors
under this Agreement, the Debentures or the IP Security Agreement, in
all cases as to which the Agent is not reimbursed by the Debtors;
provided that no Secured Party shall be liable for the payment of any
portion of such liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements determined
by a court of competent jurisdiction in a final proceeding to have
resulted solely from the Agent's gross negligence or willful
misconduct. The Agent shall not be required to take any action
hereunder, under the Debentures or under IP Security Agreement, or to
prosecute or defend any suit in respect of this Agreement or under the
Debentures or under IP Security Agreement, unless the Agent is
indemnified to its reasonable satisfaction by the Secured Parties
against loss, costs, liability and expense. If any indemnity in favor
of the Agent shall become impaired, it may call for additional
indemnity and cease to do the acts indemnified against until such
additional indemnity is given.
(b) Exculpation. Neither the Agent nor any of its directors,
officers, partners, members, shareholders, employees or agents shall be
liable to any Secured Party for any action taken or omitted to be taken
by it under this Agreement, the Debentures or the IP Security
Agreement, or in connection herewith or therewith, except for its own
willful misconduct or gross negligence or be responsible for the
consequences of any error in judgment. Neither the Agent nor any of its
directors, officers, partners, members, shareholders, employees or
agents has
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any fiduciary relationship with any Secured Party by virtue of this
Agreement or the IP Security Agreement. The Agent shall not be
responsible to any Secured Party for any recitals, statements,
representations or warranties herein or in any certificate or other
document delivered in connection herewith or for the authorization,
execution, effectiveness, genuineness, validity, enforceability,
perfection, collectibility, or sufficiency this Agreement, the
Debentures or the IP Security Agreement, the financial condition of the
Debtors or the condition or value of any of the Collateral, or be
required to make any inquiry concerning either the performance or
observance of any of the terms, provisions or conditions of this
Agreement, the Debentures or the IP Security Agreement, the financial
condition of the Debtors or the existence or possible existence of any
default or event of default. The Agent shall be entitled to rely upon
advice of counsel concerning legal matters and upon any notice,
consent, certificate, statement or writing which it believes to be
genuine and to have presented by a proper person.
(c) Obligations Held by the Agent. The Agent shall have the
same rights and powers with respect to any Debentures held by it or any
of its affiliates, as any Secured Party and may exercise the same as if
it were not the Agent. Each of the Debtors and the Secured Parties
hereby waives, and each successor to any Secured Party shall be deemed
to waive, any right to disqualify any Secured Party from serving as the
Agent or any claim against that Secured Party for serving as Agent.
(d) Copies, etc. The Agent shall give prompt notice to each
Secured Party of each notice or request required or permitted to be
given to the Agent by the Debtors pursuant to the terms of this
Agreement. The Agent will distribute to each Secured Party each
instrument and other agreement received for its account and copies of
all other communications received by the Agent from a Debtor for
distribution to the Secured Parties by the Agent in accordance with the
terms of this Agreement. Notwithstanding anything herein contained to
the contrary, all notices to and communications with the Debtors under
this Agreement shall be effected by the Secured Parties through the
Agent.
(e) Resignation of Agent. The Agent may resign as such at any
time upon at least thirty (30) days' prior notice to the Debtors and
all the Secured Parties, such resignation not to be effective until a
successor Agent is in place. If the Agent at any time shall resign, a
Majority-in-Interest may jointly appoint another Secured Party as a
successor Agent which shall thereupon become the Agent hereunder. Upon
the acceptance of any appointment as Agent hereunder by a successor
Agent, such successor Agent shall be entitled to receive from the
retiring Agent such documents of transfer and assignment as such
successor Agent may reasonably request, and shall thereupon succeed to
and become vested with all rights, powers, privileges, and duties of
the retiring Agent, and the retiring Agent shall be discharged from its
duties and obligations under this Agreement.
(f) Replacement of Agent. A Majority-in-Interest may at any
time and for any reason replace the Agent with a successor Agent
jointly selected by them, upon at least ten days written notice to the
Debtors and the other Secured Parties. Upon the acceptance of any
appointment as Agent hereunder by a successor Agent, such successor
Agent shall be entitled to receive from the terminated Agent such
documents of transfer and assignment as such successor Agent may
reasonably request, and shall thereupon succeed to and become vested
with all rights,
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powers, privileges, and duties of the retiring Agent, and the
terminated Agent shall be discharged from its duties and obligations
under this Agreement.
15. Notices. All notices, requests, demands and other
communications hereunder shall be in writing, with copies to all the
other parties hereto, and shall be deemed to have been duly given when
(i) if delivered by hand, upon receipt, (ii) if sent by facsimile, upon
receipt of proof of sending thereof, (iii) if sent by nationally
recognized overnight delivery service (receipt requested), the next
business day or (iv) if mailed by first-class registered or certified
mail, return receipt requested, postage prepaid, four days after
posting in the U.S. mails, in each case if delivered to the following
addresses:
If to the Debtors: Arotech Corporation
632 Broadway, Suite 1200
New York, NY 10012
Facsimile No.: (646) 654-2187
Attn: Chief Executive Officer
With a copy to: Electric Fuel (E.F.L.) Ltd.
One HaSolela Street, POB 641
Western Industrial Park
Beit Shemesh 99000, Israel
Facsimile No.: 011-972-2-990-6688
Attn.: General Counsel
If to the Secured Parties: To the address set forth under such
Secured Parties' name on the
signature pages hereto.
16. Other Security. To the extent that the Obligations are now
or hereafter secured by property other than the Collateral or by the
guarantee, endorsement or property of any other person, firm,
corporation or other entity, then the Secured Parties shall have the
right, in its sole discretion, to pursue, relinquish, subordinate,
modify or take any other action with respect thereto, without in any
way modifying or affecting any of the Secured Parties' rights and
remedies hereunder.
17. Actions by Secured Parties. Any action required or
permitted hereunder to be taken by or on behalf of the Secured Parties
shall, for such action to be valid, require the approval of the
Majority-in-Interest prior to the taking of such action. If the
consent, approval or disapproval of the Secured Parties is required or
permitted pursuant to this Agreement, such consent, approval or
disapproval shall only be valid if given by the Majority-in-Interest.
"Majority-in-Interest" means the Secured Party or Secured Parties (as
the case may be) holding in excess of a majority of the outstanding
aggregate principal amount under the Debentures, determined on a
cumulative basis.
18. Miscellaneous.
(a) No course of dealing between the Debtors and the Secured
Parties, nor any failure to exercise, nor any delay in exercising, on
the part of the Secured Parties, any right,
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power or privilege hereunder, under the Debentures or under the IP
Security Agreement shall operate as a waiver thereof; nor shall any
single or partial exercise of any right, power or privilege hereunder
or thereunder preclude any other or further exercise thereof or the
exercise of any other right, power or privilege.
(b) All of the rights and remedies of the Secured Parties with
respect to the Collateral, whether established hereby, by the
Debentures, by the IP Security Agreement or by any other agreements,
instruments or documents or by law shall be cumulative and may be
exercised singly or concurrently.
(c) This Agreement constitutes the entire agreement of the
parties with respect to the subject matter hereof and is intended to
supersede all prior negotiations, understandings and agreements with
respect thereto. Except as specifically set forth in this Agreement, no
provision of this Agreement may be modified or amended except by a
written agreement signed by the parties hereto.
(d) In the event that any provision of this Agreement is held
to be invalid, prohibited or unenforceable in any jurisdiction for any
reason, unless such provision is narrowed by judicial construction,
this Agreement shall, as to such jurisdiction, be construed as if such
invalid, prohibited or unenforceable provision had been more narrowly
drawn so as not to be invalid, prohibited or unenforceable. If,
notwithstanding the foregoing, any provision of this Agreement is held
to be invalid, prohibited or unenforceable in any jurisdiction, such
provision, as to such jurisdiction, shall be ineffective to the extent
of such invalidity, prohibition or unenforceability without
invalidating the remaining portion of such provision or the other
provisions of this Agreement and without affecting the validity or
enforceability of such provision or the other provisions of this
Agreement in any other jurisdiction.
(e) No waiver of any breach or default or any right under this
Agreement shall be considered valid unless in writing and signed by the
party giving such waiver, and no such waiver shall be deemed a waiver
of any subsequent breach or default or right, whether of the same or
similar nature or otherwise.
(f) This Agreement shall be binding upon and inure to the
benefit of each party hereto and its successors and assigns.
(g) Each party shall take such further action and execute and
deliver such further documents as may be necessary or appropriate in
order to carry out the provisions and purposes of this Agreement.
(h) This Agreement shall be construed in accordance with the
laws of the State of New York, except to the extent the validity,
perfection or enforcement of a security interest hereunder in respect
of any particular Collateral which are governed by a jurisdiction other
than the State of New York in which case such law shall govern. Each of
the parties hereto irrevocably submits to the exclusive jurisdiction of
any New York State or United States Federal court sitting in New York
county over any action or proceeding arising out of or relating to this
Agreement, and the parties hereto hereby irrevocably agree that all
claims in respect of such action or proceeding may be heard and
determined in such New York State or Federal court.
-20-
The parties hereto agree that a final judgment in any such action or
proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided
by law. The parties hereto further waive any objection to venue in the
State of New York and any objection to an action or proceeding in the
State of New York on the basis of forum non convenient. If either party
shall commence an action or a proceeding to enforce any provisions of
this Agreement, then the prevailing party in such action or proceeding
shall be reimbursed by the other party for its attorney's fees and
other costs and expenses incurred with the investigation, preparation
and prosecution of such action or proceeding.
(i) EACH PARTY HERETO HEREBY AGREES TO WAIVE ITS RESPECTIVE
RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF THIS AGREEMENT. THE SCOPE OF THIS WAIVER IS INTENDED TO
BE ALL ENCOMPASSING OF ANY DISPUTES THAT MAY BE FILED IN ANY COURT AND
THAT RELATE TO THE SUBJECT MATTER OF THIS AGREEMENT, INCLUDING WITHOUT
LIMITATION CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS AND ALL
OTHER COMMON LAW AND STATUTORY CLAIMS. EACH PARTY HERETO ACKNOWLEDGES
THAT THIS WAIVER IS A MATERIAL INDUCEMENT FOR EACH PARTY TO ENTER INTO
A BUSINESS RELATIONSHIP, THAT EACH PARTY HAS ALREADY RELIED ON THIS
WAIVER IN ENTERING INTO THIS AGREEMENT AND THAT EACH PARTY WILL
CONTINUE TO RELY ON THIS WAIVER IN THEIR RELATED FUTURE DEALINGS. EACH
PARTY FURTHER WARRANTS AND REPRESENTS THAT IT HAS REVIEWED THIS WAIVER
WITH ITS LEGAL COUNSEL, AND THAT SUCH PARTY KNOWINGLY AND VOLUNTARILY
WAIVES ITS RIGHTS TO A JURY TRIAL FOLLOWING SUCH CONSULTATION. THIS
WAIVER IS IRREVOCABLE, MEANING THAT, NOTWITHSTANDING ANYTHING HEREIN TO
THE CONTRARY, IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND
THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS AND
SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT. IN THE EVENT OF A
LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL
BY THE COURT.
(j) This Agreement may be executed in any number of
counterparts, each of which when so executed shall be deemed to be an
original and, all of which taken together shall constitute one and the
same Agreement. In the event that any signature is delivered by
facsimile transmission, such signature shall create a valid binding
obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile
signature were the original thereof.
* * * * * * * * * * *
-21-
IN WITNESS WHEREOF, the parties hereto have caused this Security
Agreement to be duly executed on the day and year first above written.
Arotech Corporation
By:
-----------------------------------------------
Name:
Title:
I.E.S. DEFENSE SERVICES, INC.
By:
-------------------------------------------------
Name:
Title:
IES INTERACTIVE TRAINING, INC.
By:
-------------------------------------------------
Name:
Title:
-22-
IN WITNESS WHEREOF, the parties hereto have caused this Security
Agreement to be duly executed on the day and year first above written.
SMITHFIELD FIDUCIARY LLC
By:_____________________________________
Name:
Title:
Address for Notice:
c/o Highbridge Capital Management, LLC
9 West 57th Street, 27th Floor
New York, New York 10019
Attention: Ari J. Storch / Adam J. Chill
Facsimile No.: (212) 751-0755
Telephone No.: (212) 287-4720
With a copy to:
Schulte Roth & Zabel LLP
919 Third Avenue
New York, New York 10022
Facsimile No.: (212) 593-5955
Telephone No.: (212) 756-2376
Attention: Eleazer Klein, Esq.
-23-
IN WITNESS WHEREOF, the parties hereto have caused this Security
Agreement to be duly executed on the day and year first above written.
OMICRON MASTER TRUST
By:_____________________________________
Name:
Title:
Address for Notice:
c/o Omicron Capital L.P.
810 Seventh Avenue
39th Floor
New York, New York 10019
Attention: Brian Daly
Facsimile: (212) 803-5269
Telephone: (212) 803-5263
-24-
IN WITNESS WHEREOF, the parties hereto have caused this Security
Agreement to be duly executed on the day and year first above written.
PORTSIDE GROWTH AND OPPORTUNITY FUND
By:______________________________
Name:
Title:
Address for Notice:
c/o Ramius Capital Group, L.L.C.
666 Third Avenue, 26th Floor
New York, New York 10006
Facsimile No.: (212) 845-7999
Telephone No.: (212) 845-7917
Attention: Jeffrey Solomon
Jeffrey Smith
-25-
IN WITNESS WHEREOF, the parties hereto have caused this Security
Agreement to be duly executed on the day and year first above written.
MAINFIELD ENTERPRISES INC.
By:_____________________________________
Name:
Title:
Address for Notice:
c/o Cavallo Capital Corp.
660 Madison Avenue, 18th Floor
New York, New York 10021
Attention: Mor Sagi
Facsimile: (212) 651-9010
Telephone: (212) 651-9005
-26-
IN WITNESS WHEREOF, the parties hereto have caused this Security
Agreement to be duly executed on the day and year first above written.
CRANSHIRE CAPITAL L.P.
By:_____________________________________
Name:
Title:
Address for Notice:
c/o Downsview Capital, Inc.
The General Partner
666 Dundee Road, Suite 1901
Northbrook, IL 60062
Attention: Mitchell D. Kopin
Facsimile: (847) 562-9031
Telephone: (847) 562-9030
-27-
IN WITNESS WHEREOF, the parties hereto have caused this Security
Agreement to be duly executed on the day and year first above written.
CLEVELAND OVERSEAS LTD.
By:_________________________________
Name:
Title:
Address for Notice:
-----------------------------
-----------------------------
-----------------------------
Facsimile No.: (___) ___-____
Telephone No.: (___) ___-_______
Attention: ____________________
-28-
Schedule A
Jurisdiction of Organization of the Debtors:
Organization Identification Number:
-29-
Schedule B
Jurisdictions:
-30-
Schedule C
- ----------------------- ------------------- -------------------- ----------------- ------------------ ----------------
Name/Address of Issuer Name/Address of Jurisdiction of Class of No. of Shares No. of Pledged
Holder Incorporation Securities Outstanding Shares
- ----------------------- ------------------- -------------------- ----------------- ------------------ ----------------
I.E.S. Defense
Services, Inc.
- ----------------------- ------------------- -------------------- ----------------- ------------------ ----------------
IES Interactive
Training, Inc.
- ----------------------- ------------------- -------------------- ----------------- ------------------ ----------------
Electric Fuel GmbH
- ----------------------- ------------------- -------------------- ----------------- ------------------ ----------------
Summit Training
International, Inc.
- ----------------------- ------------------- -------------------- ----------------- ------------------ ----------------
Electric Fuel UK Ltd.
- ----------------------- ------------------- -------------------- ----------------- ------------------ ----------------
M.D.T. Protective
Services Ltd.
- ----------------------- ------------------- -------------------- ----------------- ------------------ ----------------
Electric Fuel Ltd.
- ----------------------- ------------------- -------------------- ----------------- ------------------ ----------------
-31-