Exhibit 10.2
PROMISSORY NOTE
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$500,000.00 September 30, 2008
Birmingham, Alabama
FOR VALUE RECEIVED, the undersigned, ENGLOBAL CORPORATION, a Nevada
corporation, and ENGLOBAL AUTOMATION GROUP, INC., a Texas corporation
(individually referred to herein as a "Maker" and collectively referred to
herein as the "Makers"), hereby, jointly and severally, promise to pay to the
order of FRANK H. MCILWAIN, P.C., an Alabama professional corporation (together
with any future holder of this Promissory Note, the "Holder"), in lawful money
of the United States of America, the principal sum of FIVE HUNDRED THOUSAND and
NO/100 DOLLARS ($500,000.00), without interest.
This Promissory Note (this "Note") has been executed and delivered pursuant
to and in connection with the terms and conditions of that certain Purchase
Agreement, dated September 25, 2008, among the Makers, the Holder, William M.
Bosarge, P.C., Matthew R. Burton, P.C., James A. Walters, P.C., William M.
Bosarge, P.E., Matthew R. Burton, P.E., Frank H. McIlwain, P.E., and James A.
Walters, P.E. (the "Purchase Agreement"). Capitalized terms used in this Note
without definition shall have the respective meanings set forth in the Purchase
Agreement.
Section 1. Payment.
1.1 Installment Payments. The principal amount of this Note shall be due
and payable in the following three installments, with each such installment of
principal being due and payable on the date set forth opposite such installment:
Payment Date Installment of Principal
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December 31, 2008 $166,666.67
December 31, 2009 $166,666.67
December 31, 2010 $166,666.66
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The principal amount under the Note shall otherwise be due and payable until
paid in full.
1.2 Manner of Payment. All payments due under this Note shall be made by
check at 3101 International Drive Bldg. 7, Suite 700, Mobile, Alabama 36606, or
such other address as the Holder shall designate to the Makers in writing. If
any payment on this Note is due on a day which is not a Business Day (as
hereinafter defined), such payment shall be due on the next succeeding Business
Day. "Business Day" means any day other than a Saturday, Sunday or legal holiday
in the State of Alabama.
1.3 Prepayment. The Makers may, without premium or penalty, at any time and
from time to time, prepay all or any portion of the outstanding principal
balance due under this Note, provided that each such prepayment is accompanied
by any late charges that may be due. Any partial prepayments shall be applied to
installments of principal in inverse order of their maturity.
1.4 Right of Set-Off. The Makers shall have the right to withhold and
set-off against any amount due hereunder, as contemplated by Section 7.11 of the
Purchase Agreement, any amount to which either of the Makers may be entitled
under the Purchase Agreement and each of the documents contemplated thereby
except those certain Employment Agreements, dated of even date herewith, by and
between (i) ENGlobal Automation Group, Inc. and (ii) William M. Bosarge, P.E.,
Matthew R. Burton, P.E., Frank H. McIlwain, P.E., and James A. Walters, P.E. The
Makers shall be entitled to exercise such right of set-off against the next
payment or payments required hereunder as opposed to against the last payment or
payments due under this Note. The exercise of such right of set-off by the
Makers in good faith, whether or not ultimately determined to be justified, will
not constitute an Event of Default (as hereinafter defined) under this Note.
Neither the exercise of nor the failure to exercise such right of set-off will
constitute an election of remedies in any manner in the enforcement of any other
remedies that may be available to it.
Section 2. Defaults.
2.1 Events of Default. The occurrence of any one or more of the following
events shall constitute an event of default hereunder (an "Event of Default"):
(a) If the Makers shall fail to pay any payment of principal under
this Note when due and such failure shall have continued for five calendar days
after written notice thereof has been given by the Holder to the Makers;
provided, however, that any such notice shall be required to be provided only
once during the term of this Note, and after any such notice is given, such
five-day period shall commence without the giving of such notice. The exercise
by either of the Makers in good faith of its right of set-off pursuant to
Section 1.4 hereof, whether or not ultimately determined to be justified, shall
not constitute an Event of Default.
(b) If, pursuant to or within the meaning of the United States
Bankruptcy Code or any other federal or state law relating to insolvency or
relief of debtors (a "Bankruptcy Law"), either of the Makers shall (i) commence
a voluntary case or proceeding, (ii) consent to the entry of an order for relief
against it in an involuntary case, (iii) consent to the appointment of a
trustee, receiver, assignee, liquidator or similar official, (iv) make an
assignment for the benefit of its creditors, or (v) admit in writing its
inability to pay its debts as they become due.
(c) If a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that (i) is for relief against either of the Makers in
an involuntary case, (ii) appoints a trustee, receiver, assignee, liquidator or
similar official for either of the Makers or substantially all of the properties
of either of the Makers, or (iii) orders the liquidation of either of the
Makers, and in each such case the order or decree is not dismissed within 89
days.
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(d) If final judgment or judgments shall be rendered by a court of law
or equity or an order or orders shall be entered by a governmental authority for
the payment of money in excess of $100,000 in the aggregate at any time are
outstanding against either or both of the Makers (which judgments or orders are
not covered by insurance policies as to which liability has been accepted by the
insurance carrier), and the same are not, within 80 days after the entry
thereof, discharged or execution thereof stayed or bonded pending appeal, or
such judgments or orders are not discharged prior to the expiration of any such
stay.
(e) If any representation, warranty or other statement made or deemed
made by either of the Makers in the Purchase Agreement or any Related Document
at any time shall be untrue or incorrect in any material respect as of the date
made or deemed made.
(f) If a default or breach occurs under any agreement, document or
instrument other than the Purchase Agreement or any Related Document to which
either of the Makers is a party that is not cured within any applicable grace
period therefor, and such default or breach (i) involves the failure to make any
payment when due in respect of any indebtedness or guaranteed indebtedness
(other than the principal amount due hereunder) of either or both of the Makers
in excess of $100,000 in the aggregate (including (A) undrawn committed or
available amounts, and (B) amounts owing to all creditors under any combined or
syndicated credit arrangements), or (ii) causes, or permits any holder of such
indebtedness or guaranteed indebtedness or a trustee to cause, indebtedness or
guaranteed indebtedness or a portion thereof in excess of $100,000 in the
aggregate to become due prior to its stated maturity or prior to its regularly
scheduled dates of payment, or cash collateral to be demanded in respect
thereof, in each case, regardless of whether such right is exercised, by such
holder or trustee.
(g) If any Change in Ownership (as hereinafter defined) shall occur. A
"Change in Ownership" shall mean any event, transaction or occurrence as a
result of which (i) the Parent Corporation ceases to own and control all of the
economic and voting rights associated with ownership of all of the outstanding
securities of the Acquiring Corporation, including common stock, preferred
stock, or any other "equity security" (as such term is defined) in Rule 3a11-1
of the General Rules and Regulations promulgated by the Securities and Exchange
Commission under the Securities Exchange Act of 1934), on a fully-diluted basis,
or (ii) the Acquiring Corporation ceases to own and control all of the economic
and voting rights associated with ownership of all of the membership interests
or any other "equity security" of ACE, on a fully-diluted basis.
2.2 Notice by Makers. The Makers shall notify the Holder in writing within
five days after the occurrence of any Event of Default of which either of the
Makers acquires knowledge.
2.3 Remedies. Upon the occurrence of an Event of Default hereunder (unless
all Events of Default have been cured or waived by the Holder), the Holder may,
at his option, (i) by written notice to the Makers, declare the entire unpaid
principal balance of this Note immediately due and payable regardless of any
prior forbearance, and (ii) exercise any and all rights and remedies available
to him under applicable law, including the right to collect from the Makers all
sums due under this Note. Upon the occurrence of an Event of Default hereunder
(unless all Events of Default have been cured or waived by the Holder), the
Makers do hereby agree to pay interest to the Holder at a rate equal to the
Prime Rate (as hereinafter defined), plus 5.0% on the aggregate indebtedness
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evidenced hereby (after the expiration of any applicable cure period), until
such aggregate indebtedness is paid in full. For purposes hereof, the "Prime
Rate" shall mean that interest rate as reported from time to time by The Wall
Street Journal, Eastern Edition (or if the same is discontinued, another source
reasonably selected by the Holder). Interest shall be calculated on the basis of
a year of 365 or 366 days, as applicable, and charged for the actual number of
days elapsed except as otherwise provided herein. If any scheduled payment under
this Note is not made within 15 days after the same becomes due, the Makers do
hereby agree to pay a late charge equal to 5.0% of the amount of the payment
which is in default, but not less than $7,500.00 or more than the maximum amount
allowed by applicable law. The Makers shall also pay all reasonable costs and
expenses incurred by or on behalf of the Holder in connection with the Holder's
exercise of any or all of his rights and remedies under this Note, including
reasonable attorneys' fees and expenses through appeal.
Section 3. Miscellaneous.
3.1 Joint and Several Liability. Each entity signing this Note as Maker is
jointly and severally liable for all obligations under this Note with the other
entity signing this Note as Maker.
3.2 Waiver.
(a) The rights and remedies of the Holder under this Note shall be
cumulative and not alternative. No waiver by the Holder of any right or remedy
under this Note shall be effective unless in a writing signed by the Holder.
Neither the failure nor any delay in exercising any right, power or privilege
under this Note shall operate as a waiver of such right, power or privilege and
no single or partial exercise of any such right, power or privilege by the
Holder shall preclude any other or further exercise of such right, power or
privilege or the exercise of any other right, power or privilege. To the maximum
extent permitted by applicable law, (i) no claim or right of the Holder arising
out of this Note can be discharged by the Holder, in whole or in part, by a
waiver or renunciation of the claim or right unless in a writing signed by the
Holder, (ii) no waiver that may be given by the Holder shall be applicable
except in the specific instance for which it is given, and (iii) no notice to or
demand on either or both of the Makers shall be deemed to be a waiver of any
obligation of each of the Makers or of the right of the Holder to take further
action without notice or demand as provided in this Note.
(b) With respect to the amounts due pursuant to this Note, each of the
Makers does hereby waive (i) all rights of exemption of property from levy or
sale under execution or other process for the collection of debts under the
Constitution or laws of the United States of America or any state thereof, (ii)
demand, presentment, protest, notice of dishonor, notice of nonpayment, suit
against any party, diligence in collection and all other requirements necessary
to enforce this Note, and (iii) all statutory provisions and requirements for
the benefit of either or both of the Makers now or hereinafter enforced (to the
extent that the same may be waived).
3.3 Notices. All notices required or permitted to be given under this Note
shall be in writing and may be delivered by personal delivery, by facsimile, by
nationally recognized private courier, by PDF/email, or by United States mail,
postage prepaid, registered or certified mail, return receipt requested. Notices
delivered by mail, by personal delivery or by nationally recognized private
courier shall be deemed given upon the actual, verifiable date of receipt or
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refusal to accept delivery by the receiving Party. Notices delivered by
facsimile or PDF/email shall be deemed given upon electronic confirmation of
receipt. All notices shall be addressed as follows:
(i) If to the Makers:
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ENGlobal Corporation
654 N. Sam Houston Parkway E., Suite 400
Houston, Texas 77060
Attention: William A. Coskey, P.E.
Fax: (281) 878-1010
ENGlobal Automation Group, Inc.
654 N. Sam Houston Parkway E., Suite 400
Houston, Texas 77060
Attention: William A. Coskey
Fax: (281) 878-1010
In each such case, with a copy to:
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John Williams, Esq.
13831 Northwest Freeway, Suite 155
Houston, Texas 77040
Fax: (713) 895-7733
(ii) If to the Holder:
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Frank H. McIlwain, P.C.
3101 International Drive Bldg. 7
Suite 700
Mobile, Alabama 36606
Fax: (251) 662-7712
With a copy to:
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J. Fred Kingren, Esq.
Hand Arendall LLC
1200 Park Place Tower
2001 Park Place North
Birmingham, Alabama 35203
Fax: (205) 322-1163
or at such other address as any party shall have specified by notice in writing
to the other party.
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3.4 Amendment. This Note may not be amended orally, but only by an
agreement in writing signed by the party against whom enforcement of any waiver,
change, modification or discharge is sought.
3.5 Severability. If any provision of this Note is held by final judgment
of a court of competent jurisdiction to be invalid, illegal or unenforceable,
such invalid, illegal or unenforceable provision shall be severed from the
remainder of this Note, and the remainder of this Note shall be enforced. In
addition, the invalid, illegal or unenforceable provision shall be deemed to be
automatically modified, and, as so modified, to be included in this Note, such
modification being made to the minimum extent necessary to render the provision
valid, legal and enforceable.
3.6 Applicable Law and Venue. This Note shall be interpreted, construed and
governed by and in accordance with the Laws of the State of Alabama, except that
with respect to matters mandatorily governed by the Laws of the State of Texas,
the Laws of the State of Texas shall govern. The parties hereto hereby consent
to the exclusive jurisdiction of the state and federal courts located in Mobile
County, Alabama with respect to any controversy relating to this Note.
3.7 Parties in Interest. This Note shall bind each of the Makers and their
respective successors and permitted assigns. This Note may not be assigned or
transferred by either of the Makers or the Holder without the express prior
written consent of the other party.
3.8 Construction. Pronouns used in this Note shall include the masculine,
feminine, neuter, singular or plural as the identity of the antecedent may
require. The terms "or" and "and" shall be construed conjunctively or
disjunctively as the context may make appropriate. Unless otherwise expressly
provided, the word "including" does not limit the preceding words or terms. The
terms "herein", "hereof", "hereto", or "hereunder" or similar terms shall be
deemed to refer to this Note as a whole and not to a particular Section. The
headings contained in this Note are for convenience of reference only and shall
not affect the meaning or interpretation of this Note. Section references are to
sections of this Note unless otherwise indicated and include the entire section
referred to, as well as any subsections that are subordinate to the referenced
section. (For example, a reference to Section 2 shall include each provision of
this Note commencing at the beginning of Section 2 and up to but not including
Section 3. A reference to Section 2.2 shall include each provision of this Note
commencing at the beginning of Section 2.2 and up to but not including Section
2.3.)
3.9 Maximum Legal Rate. The Makers and the Holder do hereby agree that no
payment of default interest or other consideration made or agreed to be made by
the Makers to the Holder pursuant to this Note shall, at any time, be in excess
of the maximum rate of interest permissible by law. In the event such payments
of default interest or other consideration provided for in this Note shall
result in an effective rate of interest which, for any period of time, is in
excess of the limit of the usury or any other law applicable to the indebtedness
evidenced hereby, all sums in excess of those lawfully collectible as interest
for the period in question shall, without further agreement or notice between or
by any party hereto be applied to principal immediately upon receipt of such
monies by the Holder hereof with the same force and effect as though the Makers
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had specifically designated such and the Holder had agreed to accept such extra
payments as a principal payment, without premium. This provision shall control
every other obligation of the Makers and the Holder.
[SIGNATURES APPEAR ON THE FOLLOWING PAGE]
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IN WITNESS WHEREOF, the Makers have executed and delivered this Promissory
Note on the date first written above.
ENGLOBAL CORPORATION,
a Nevada corporation
By: /s/ William A. Coskey
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William A. Coskey, P.E.
Its Chairman of the Board, President
and Chief Executive Officer
ENGLOBAL AUTOMATION GROUP, INC.,
a Texas corporation
By: /s/ William A. Coskey
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William A. Coskey, P.E.
Its Chief Executive Officer
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