THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THIS NOTE HAS BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO DISTRIBUTION OR RESALE, AND MAY NOT BE OFFERED, SOLD, PLEDGED,...
Exhibit 10.2
THIS
NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THIS NOTE HAS BEEN
ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO DISTRIBUTION OR
RESALE, AND MAY NOT BE OFFERED, SOLD, PLEDGED, MORTGAGED,
HYPOTHECATED, RENOUNCED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF
AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND
ANY APPLICABLE STATE SECURITIES LAWS, OR THE AVAILABILITY OF AN
EXEMPTION FROM THE REGISTRATION PROVISIONS OF THE SECURITIES ACT OF
1933, AS AMENDED, AND APPLICABLE STATE SECURITIES
LAWS.
THIS
NOTE IS SUBJECT TO THE TERMS OF A SUBORDINATION AND INTERCREDITOR
AGREEMENT, DATED AS OF FEBRUARY 28, 2017, BY AND AMONG THE MAKER,
THE PAYEE AND M&T BANK.
SUBORDINATED
NOTE
|
$2,000,000
|
FEBRUARY
28, 2017
|
FOR VALUE
RECEIVED, LB&B Associates
Inc., a North Carolina corporation (“Maker”)
hereby promises to pay to the order of Brekford
Corp., a Delaware corporation
(“Payee”),
at the address set forth in paragraph 6 below, the principal sum of
Two Million Dollars ($2,000,000), together with interest thereon at
an annual rate of 3%, or such lesser rate as shall be the maximum
rate allowable under applicable law in accordance with the
provisions of this Subordinated Note (this
“Note”).
The Maker shall repay this Note as follows: (a)
$75,000 plus all accrued interest on each of September 30, 2017;
December 31, 2017; March 31, 2018, June 30, 2018 and September 30,
2018 (or, in the event any such date is not a Business Day, the
first Business Day after such date), (b) $100,000 plus all accrued
interest on each of December 31, 2018; March 31, 2019; June 30,
2019 and September 30, 2019 (or, in the event any such date is not
a Business Day, the first Business Day after such date) (c)
$125,000 plus all accrued interest on each of December 31, 2019;
March 31, 2020; June 30, 2020; September 30, 2020, December 31,
2020; March 31, 2021, June 31, 2021; September 30, 2021; and
December 31, 2021 (or, in the event any such date is not a Business
Day, the first Business Day after such date), and (d) $100,000 on
March 31, 2022. For avoidance of doubt the Maturity date of this
note shall be on March 31, 2022 and, subject to Section 7
hereof, all payments of interest and
principal outstanding on the Note on the Maturity Date must be made
on the Maturity Date. All payments due on this Note shall be made
in immediately available funds according to wiring instructions
provided by the Payee to the Maker from time to
time.
This
Note is subject to the following additional
provisions:
1.
Purpose of
Note. This Note is issued
pursuant to that certain Contribution and Unit Purchase Agreement
by, between and among Maker, Payee and Global Public Safety, LLC
(the “Company”)
dated as of February 6, 2017 (the “Purchase
Agreement”), whereby
Maker will purchase 80.1% of the outstanding equity interests of
the Company from Payee (the “Units”)
to evidence a portion of the payment therefor. Capitalized terms
not otherwise defined herein shall have the meaning set forth in
the Purchase Agreement.
1
2.
Security.
This Note is secured pursuant to the terms of that certain Pledge
Agreement, dated the date hereof, by and between Maker and Payee,
the form of which is attached hereto as Exhibit A (the
“Pledge
Agreement”).
3.
Prepayment.
Maker shall have the absolute right to prepay this Note in whole or
in part at any time and from time to time, without prepayment
penalty or premium. Any prepayment of this Note will be credited
first against accrued interest, then principal.
4. Subordination.
The payment obligations of Maker hereunder are subject to the terms
of that certain Subordination and Intercreditor Agreement entered
into contemporaneously herewith by and among M&T Bank
(“Senior
Lender”), Maker and Payee containing the terms upon
which the indebtedness to Payee owed hereunder is subordinated to
the indebtedness owed by Maker to Senior Lender (the
“Senior
Indebtedness”) under that certain Credit Agreement,
dated as of the date hereof, by and between the Senior Lender and
Maker.
5. Events
of Default. If any of the following events (each, an
"Event of
Default") occurs and is
continuing for any reason:
(a) failure
to pay any amount payable under this Note that remains unpaid for
five (5) Business Days after such amount was due;
(b)
failure
to observe or perform any of the provisions of this Note, provided
that such failure has not been cured within fifteen (15) days after
receipt by Maker of written notice thereof from Payee, provided,
however, that if such default cannot by its nature be cured within
the fifteen (15) day period or cannot after diligent attempts by
the Maker be cured within such fifteen (15) day period, and such
default is likely to be cured within a reasonable time, then the
Maker shall have an additional period (which shall not in any case
exceed thirty (30) days from the date of initial failure) to
attempt to cure such default, and within such reasonable time
period the failure to cure the default;
(c)
default
by Maker in the performance of any of its obligations under the
Pledge Agreement, provided that such default has not been cured
within fifteen (15) days after receipt by Maker of written notice
thereof from Payee, provided, however, that if such default cannot
by its nature be cured within the fifteen (15) day period or cannot
after diligent attempts by the Maker be cured within such fifteen
(15) day period, and such default is likely to be cured within a
reasonable time, then the Maker shall have an additional period
(which shall not in any case exceed thirty (30) days from the date
of initial failure) to attempt to cure such default, and within
such reasonable time period the failure to cure the
default;
2
(d)
commencement
against Maker of any involuntary proceeding, suit, or action for
reorganization, dissolution, or liquidation which, is not
dismissed, stayed or set aside within sixty (60) days from the
filing thereof;
(e)
filing
by the Maker of a petition under the United States Bankruptcy Code
or any other insolvency act which;
(f)
application
for, or appointment of, a receiver for all the property of Maker or
consent by Maker to the entry of an order for relief in an
involuntary proceeding, a general assignment by Maker for the
benefit of Maker's creditors, or issuance of a warrant of
attachment against the property of Maker where, if involuntarily
and not requested by or consented to by Maker, is not discharged
within sixty (60) days; or
(g)
an
event of default or breach with respect to the Senior Indebtedness,
any agreement with the Senior Lender related thereto or any other
material indebtedness of the Mater that is not cured within an
applicable grace period under such agreements and results in an
acceleration of the Senior Indebtedness or such other indebtedness
as the case may be.
then, in each case subject to the Subordination
Agreement, and in every such Event of Default and at any time
thereafter during the continuance of an Event of Default, the Payee
may, at its option, by written notice in writing to the Maker,
declare the principal of this Note be immediately due and payable,
together with all unpaid interest declared thereon,
provided,
however,
that if any Event of Default in clauses (d) or (e) above occurs,
this Note will become immediately due and payable, both as to
principal and interest, without any action on the part of the Payee
and Payee may date such other action as may be provided in the
Pledge Agreement.
6. Set-Off
Rights. As set
forth in Section 6.7 of the Purchase Agreement, Maker and the other
Purchaser Indemnified Parties shall have the option of recovering
and recouping all or any part of any Losses suffered by any or all
of them as to which it or they shall be entitled to indemnification
from the Payee under Article 6 of the Purchase Agreement by set-off
of the amount of such Losses against the amount of any payments due
under, or the outstanding principal balance of, this Note.
Maker shall also have the option of recovering all or any part of
any adjustment to the Purchase Price due to the Payee pursuant to
Section 2.7 of the Purchase Agreement by set-off of the amount of
such adjustment against the amount of any payments due under, or
the outstanding principal balance of, this Note.
Maker’s and the other Purchaser Indemnified Parties’
right of set-off shall be effected by Maker or the other Purchaser
Indemnified Party notifying the Payee that Maker is reducing the
outstanding principal amount of this Note or any payments due in
respect hereof by the amount of all or any part of such Losses
suffered by all or any of Maker or other Purchaser Indemnified
Party or the amount of such Purchase Price adjustment, as
applicable, and Maker and Payee agree to exchange this Note for a
new note reflecting the reduced principal amount and/or interest
due to Payee.
3
7. Suspension
of Interest and Payment. Notwithstanding any other provision
of this Note, (i) in the event any claim for indemnification is
outstanding by any Purchaser Indemnified Party pursuant to
Section 6.2 or Article VI of the Purchase Agreement, accrual
of interest hereunder will be suspended until such time as all such
claims are resolved in accordance with the provisions of the
Purchase Agreement and (ii) in the event any claim for
indemnification is outstanding by any Purchaser Indemnified Party
pursuant to Section 6.2 or Article VI of the Purchase
Agreement, Maker shall be entitled to withhold payment under the
Note until such time as such claims are finally resolved in
accordance with the provisions of the Purchase Agreement. In the
event that the novation of any of the Government Contracts in
accordance with the Pre-Novation Agreement and Section 5.4 of the
Purchase Agreement is not completed within six months of the
Closing, Purchaser shall be entitled to suspend payment hereunder
until such time as the novation of each Government Contract is
completed, provided, that, upon completion of the novation all of
the Government Contracts, or the entry of the Company into
replacement contracts for any non-novated Government Contracts, any
payments so withheld will be due and payable with the next
scheduled payment due hereunder.
8.
Waivers.
Maker, for itself and its successors and assigns, expressly waives
presentment, demand, notice of dishonor, notice of nonpayment,
notice of maturity, notice of protest, presentment for the purposes
of accelerating maturity, and diligence in collection, and consents
that Payee, without notice, may release or surrender, exchange or
substitute any real estate and/or personal property or other
collateral security for the payment of this Note, and may extend
the time for payment or otherwise modify the terms of payment of
any part or the whole of the indebtedness evidenced hereby and such
consent shall not alter or diminish the liability of Maker under
this Note.
9.
Notices.
All notices which are required or may be given under this Note
shall be in writing and shall be deemed to have been received when
delivered personally or three (3) days after mailing, if mailed by
registered or certified mail, return receipt requested, postage
prepaid, as follows:
(a)
If
to Maker:
LB&B Associates
Inc.
0000
Xxxxxx Xxxx Xxxxxxx
Xxxxx
000
Xxxxxxxx, XX
00000
Attention: Xxxx
Xxxxx
Facsimile No:
[_____]
E-mail:
xxxxxx@xxxxxxxxxxxxx.xxx
4
with a
copy (which will not constitute notice) to:
Xxxxxx
Xxxxxxx Xxxxx & Xxxxxx LLP
0000
Xxxx Xxxxx Xxxxx, Xxxxx 000
Xxxxxxx, Xxxxx
Xxxxxxxx 00000
Attention: Xxx X.
Xxxxxxxx
Facsimile
No.: (000)
000-0000
E-mail:
xxxxxxxxx@xxxxxx.xxx
(b)
If
to Payee:
0000
Xxxxxx Xx.
Xxxx.
X
Xxxxxxx, XX
00000
Attention: Xxxxxx
X. Xxxxxxx
Facsimile No: (443)
557 - 0201
E-mail:
xxxxxxxx@xxxxxxxx.xxx
with a
copy to:
Sichenzia Xxxx
Xxxxxxx Xxxxxx LLP
00
Xxxxxxxx
Xxx
Xxxx, Xxx Xxxx 00000]
Attention: Xxxxxx
Xxxx, Esq.
Facsimile No.:
(000) 000-0000
E-mail:
xxxxx@xxxxxxx.xxx
Either
party may designate a new address for purposes of notice hereunder
by giving written notice thereof to the other party in accordance
with this paragraph.
10.
Collection
Expenses. In the event that
this Note shall at any time after maturity or after the occurrence
of an Event of Default be placed with an attorney for collection,
Maker agrees to pay, in addition to the entire unpaid principal
balance of this Note and all accrued interest thereon, all costs of
collection, including reasonable attorneys’
fees.
11.
Miscellaneous.
This Note may not be changed, altered, modified or terminated
orally, but only by an agreement or discharge in writing and signed
by Maker and by Payee. This Note shall be governed as to validity,
construction, enforcement and in all other respects by the laws of
the State of Delaware, without giving effect to any choice
or conflict of law provision or rule that would cause the
application of the Laws of any jurisdiction other than the State of
Delaware. The terms of this Note shall
be binding upon the successors and assigns of Maker and shall inure
to the benefit of the successors and assigns of
Payee.
(Signatures appear on the following page.)
5
IN WITNESS
WHEREOF, Maker has duly
executed this Note on the date first above
written.
LB&B ASSOCIATES INC.
By:
/s/ Xxxxxxxxx Xxxxx
Name:
Xxxxxxxxx Xxxxx
Its:
Executive Senior Vice
President
[Signature
Page to Promissory Note]
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