EXHIBIT 10.51
KOLAR, INC.
AMENDED AND RESTATED
8% CONVERTIBLE SUBORDINATED PROMISSORY NOTE
$4,000,000 JUNE 25, 2002
1. Kolar, Inc., a Delaware corporation (the "Maker"), for value received, and
without presentment or demand, hereby promises to pay to RALOK, INC. (formerly
Kolar Machine, Inc.), or registered assigns (the "Payee") on or before September
30, 2003 or such other date as shall be established pursuant to Section 16 of
this Note ("Maturity Date"), the principal sum of FOUR MILLION AND NO/100
DOLLARS ($4,000,000 - hereafter the "Principal Sum") by wire transfer of
immediately available United States funds.
2. Amendment and Restatement of Prior Note. This Note amends, restates and
supersedes, in its entirety, the 8% Convertible Subordinated Promissory Note
originally issued by the Maker to the Payee dated October 9, 1997, as the same
was amended by amendments dated February 15, 2001 and May 4, 2001, respectively
(collectively, the "Prior Note"). The Prior Note was issued pursuant an Asset
Purchase Agreement dated October 9, 1997, between Maker, Payee, CPI
Aerostructures, Inc. ("CPI") and Daniel Liguori ("Liguori"). The terms of the
Asset Purchase Agreement are incorporated herein by reference. Capitalized terms
used in this Note shall have the meanings ascribed to them in the Asset Purchase
Agreement unless otherwise defined herein.
3. Prior Interest Amount. Unpaid and accrued interest in respect of the Prior
Note is $898,035.00 as of June 30,2002 ("Prior Interest Amount").
4. Interest Payments. Interest on the Prior Interest Amount and on the Principal
Sum and on any interest not paid by the first day of each month following the
month in which this Note is executed shall be compounded monthly. Interest shall
not exceed the maximum amount permitted by law. Payments due pursuant to this
Section are hereafter collectively referred to as "Interest". Interest shall be
paid on the Maturity Date, or if all or a portion of this Note is prepaid
pursuant to Section 5 below, on the Prepayment Date, with respect to (a) the
Principal Amount, and (b) the Prior Interest Amount, in each case at the rate of
eight percent (8%) per annum, computed in each case from and after the date
hereof through the date on which such payment is made.
5. Prepayment. Maker may prepay this Note in full, or in part, by delivering at
least thirty-five (35) days' prior written notice of prepayment ("Prepayment
Notice") to Payee. If Maker delivers a Prepayment Notice, Payee may exercise its
right to purchase CPI Common Shares pursuant to Section 7 below by delivering to
Maker a notice in the form attached hereto (the "Conversion Notice") not later
than thirty (30) days after Maker's Prepayment Notice is delivered. If Payee
does not timely deliver a Conversion Notice, then Maker shall, on the
thirty-fifth (35th) day after delivery of the Prepayment Notice, pay the portion
of the Principal Sum of this Note specified in the Prepayment Notice together
with all accrued and unpaid Interest computed through the date prepayment is
made. Any sum paid by the Maker shall be applied as required under Section 6.
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6. Application of Payments. If, on any date a prepayment is made in respect of
this Note pursuant to Section 5 which is less than the aggregate of the
outstanding Prior Interest Amount, outstanding Principal Sum and all Interest
due on such date, then the entire such payment shall be applied, first to the
aggregate Interest due, second to the Prior Interest Amount, and third, to the
Principal Sum.
7. Right to Convert to CPI Shares.
(i) Maker and CPI hereby grant to the Payee the right to purchase from
CPI up to 333,334 Common Shares of CPI, $.001 par value ("CPI Common Shares").
The conversion rate ("Conversion Rate") of $12.00 per share (an aggregate
purchase price of $4,000,000 for 333,334 CPI Common Shares), is subject to
adjustment, as described below in Section 9. For avoidance of doubt, the
Conversion Rate stated in the immediately preceding sentence reflects a one for
three reverse stock split that was effective on May 3, 1999. Payee may exercise
its right to purchase such CPI Common Shares during the term of this Note, in
whole or in part, but in not less than 33,000 share increments, by giving
written notice of exercise to Maker prior to the Maturity Date.
(ii) The Conversion Notice shall specify the portion of the Principal
Sum to be converted. Payee need not deliver this Note to the Maker and the
purchase price for the CPI Common Shares delivered to Payee shall be paid by
application of a portion of the outstanding Principal Sum of this Note to the
purchase price, and Maker shall deliver to Payee a certificate representing the
number of CPI Common Shares purchased. Accrued, but unpaid interest due under
this Note, including Prior Interest, shall not be discharged upon any
conversion. As soon as practicable after the delivery of the Conversion Notice,
the Company shall deliver to the Payee, or on its written order, to a third
party (if an exemption for transfer to such person is then available), a
certificate or certificates for the number of full number of CPI Common Shares
issuable upon the conversion of this Note or portion thereof. Such conversion
shall be deemed to have been effected on the day the Conversion Notice is
received by the Maker (the "Conversion Date"). Subject to issuance and delivery
of the CPI Common Shares, the rights of the Payee as to the portion of the Note
converted shall cease, and the person or persons in whose name or names any
certificate for CPI Common Shares shall be issuable upon such Conversion shall
be deemed to have become the holder or holders of record of the Shares
represented thereby, all as of the Conversion Date.
(iii) No fractional CPI Common Shares or scrip shall be issued upon
conversion of all or part of this Note. Any fractional share interests shall be
rounded up to a full CPI Common Share.
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8. Reductions in Principal Sum Upon Conversion. The Principal Sum of this Note
shall be decreased, on a dollar for dollar basis, equal to the purchase price
for the common shares of CPI issued upon conversion or partial conversion of
this Note. Such reduction shall be effective as of the Conversion Date as
established pursuant to Section 7.
9. Adjustment of Conversion Rate. The Conversion Rate shall be subject to
adjustment from time to time as follows:
(i) If the number of CPI Common Shares outstanding at any time after
the date hereof is increased by a stock dividend or other distribution of
securities to CPI's shareholders without consideration (other than a
distribution of rights to purchase securities for cash) payable in CPI Common
Shares or by a subdivision or split-up of CPI common shares, then, immediately
following the date of such stock dividend, distribution, subdivision or
split-up, the Conversion Rate shall be appropriately decreased so that the
number of CPI Common Shares issuable on conversion of this Note shall be
increased in direct proportion to such increase in outstanding shares.
(ii) If the number of CPI Common Shares outstanding at any time after
the date hereof is decreased by a combination or a reverse stock split, then
immediately following the date of such combination or reverse stock split the
Conversion Rate shall be appropriately increased so that the number of CPI
Common Shares issuable on the Conversion Date shall be decreased in direct
proportion to such decrease in outstanding shares.
(iii) If any consolidation or merger of CPI with or into another
entity, or the sale of all or substantially all of its assets to another entity
shall be effected, or in case of any capital reorganization or reclassification
of the capital stock of CPI, then, as a condition of such consolidation, merger
or sale, reorganization or reclassification of the capital stock of CPI, lawful
and adequate provision shall be made whereby the Payee shall thereafter have the
right to receive upon the terms and conditions specified herein and in the
document governing any such transaction, and in lieu of the CPI Common Shares
immediately theretofore receivable upon the conversion of the Notes, such shares
of stock, or of securities, interests or assets (other than cash) as may be
issued or payable with respect to or in exchange for a number of outstanding CPI
Common Shares equal to the number of CPI Common Shares immediately theretofore
so receivable by the Payee had such consolidation, merger, sale, reorganization
or reclassification not taken place, and in any such case appropriate provision
shall be made with respect to the rights and interests of the Payee to the end
that the provisions hereof (including without limitation provisions for
adjustment of the Conversion Rate) shall thereafter be applicable, as nearly as
may be in relation to any shares of stock, securities, interests or assets
thereafter deliverable upon the exercise of such conversion rights. The
provisions of this paragraph shall not prevent, or cause any adjustment of the
Conversion Rate on account of, a sale by CPI of the stock of any of its
subsidiaries.
(iv) The Conversion Rate shall not be subject to adjustment for any
other reason including, but not limited to, the issuance of any shares, options,
warrants or derivative securities issued by CPI to any of its employees,
directors or consultants, or in any transaction other than one provided for in
Subsections (i), (ii) or (iii) above.
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10. Investment Intent. Payee represents that it is acquiring this Note and will
acquire any CPI Common Shares pursuant to the exercise of its rights hereunder,
until the registration of such CPI Common Shares, for investment and not with a
view to the sale or distribution thereof. Maker and CPI shall afford Payee and
its representatives the opportunity to ask questions of and receive answers from
representatives of Maker and CPI with regard to the business and operations of
CPI prior to the exercise of its rights to purchase CPI Common Shares hereunder.
Payee agrees that it will not rely upon any representations, written or
oral, of any person in connection with the exercise of its rights to purchase
CPI Common Shares hereunder unless such representations are made in writing and
delivered to Payee prior to its exercise of its rights hereunder.
All certificates issued to Payee upon conversion, if issued prior to
the registration of the CPI Common Shares represented thereby, shall bear the
following legend:
The shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended (the
"Act"), and may not be sold, transferred, pledged,
hypothecated or otherwise disposed of in the absence of (i) an
effective registration statement under the Act, or (ii) an
opinion of counsel reasonably satisfactory to the issuer and
its counsel that registration is not required under the Act.
Notwithstanding the foregoing, the Maker,CPI and Payee hereby
acknowledge that nothing in this paragraph of this Note shall
diminish the rights and obligations of the parties hereto set
forth in a Registration Rights Agreement entered into on or
about October 9, 1997 and incorporated herein by reference.
11. Events of Default. In the event that the Principal Sum, the Prior Interest
Amount and Interest thereon is not paid on or before its Maturity Date, or upon
acceleration, or if CPI Common Shares are not issued hereunder within seven (7)
calendar days of delivery by Payee of a Conversion Notice, or (b) there has been
an acceleration under the Amended and Restated Credit Agreement between CPI
Aerostructures, Inc., Kolar, Inc., the several banks and other financial
institutions or entities from time to time parties thereto and JPMorgan Chase
Bank, as Administrative Agent (the "Credit Agreement") or or if an obligation is
payable on demand, a demand has been made, or (c) if the Maker shall enter into
an assignment for the benefit of creditors, or admit in writing its inability to
pay its debts as they become due, or commence a voluntary bankruptcy proceeding,
or there is an order of relief entered in any involuntary bankruptcy case
against the Maker or if the Maker shall seek or consent to or acquiesce in the
appointment of any trustee or receiver for itself or any substantial part of its
property, and if such voluntary or involuntary proceeding is not terminated,
dismissed or concluded in a manner not adverse to Maker within sixty (60) days
of the commencement of such proceeding, then, and in any such event (such events
constituting both singly and collectively an "Event of Default"), the Payee at
its option may by written notice to Maker (1) declare this Note to be due and
payable in full, whereupon the same shall forthwith mature and become due and
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payable, without presentment, demand, protest or further notice, all of which
are hereby waived. During the period during which an Event of Default shall have
occurred and shall be continuing the interest rate on the unpaid Principal Sum
and the Prior Interest Amount shall equal the greater of 12% per annum or two
(2) percentage points above the prime rate of JPMorgan Chase Bank, but shall not
exceed 18% per annum. In no event shall any interest payable under this Note
exceed the maximum interest rate permitted by law, and any interest collected
hereunder that may be in excess of such rate shall be applied to the reduction
first, of the Prior Interest Amount, and second, of the Principal Sum, or shall
be returned to Maker in the event that the Prior Interest Amount and the
Principal Sum shall have been paid in full. The liability of the Maker and any
endorser hereunder shall be unconditional and, except as set forth herein, shall
not be in any manner affected by any indulgence whatsoever granted or consented
to by the Payee hereof, including without limitation, an extension of time,
renewal, waiver or other modification. Any failure of the Payee hereof to
exercise any right hereunder shall not be construed as a waiver of the right to
exercise the same or any other right at any time and from time to time.
12. Payment to Registered Payees. Amounts due pursuant to this Note will be paid
only to the Payee in whose name this Note is registered at the close of business
on the Maturity Date, or, if all or any portion hereof is prepaid ("Prepayment
Date"), on a record date ("Record Date") for such Prepayment Date, which Record
Date shall be ten (10) business days next preceding such Prepayment Date
13. Transfer of Note.
(i) Subject to the terms hereof, the surrender of this Note for
registration of transfer may be made by delivering this Note duly endorsed and
accompanied by a written instrument of assignment in the form attached hereto
(the "Assignment"), duly executed by the Payee or his attorney duly authorized
in writing. A transfer that complies with all of the provisions of this Section
shall be deemed effective as of the date set forth in the Assignment.
(ii) As a condition to the transfer of CPI Common Shares, the holder
requesting to so transfer shall execute appropriate investment letters and other
documents as may be reasonably required by the Maker and its counsel to assure
that the shares of CPI Common Shares are transferred only in compliance with
applicable securities laws.
(iii) As soon as practicable after delivery of the Assignment to the
Maker, one or more new Notes of authorized denominations, and for the same
aggregate principal amount, will be issued by the Maker to the designated
transferee or transferees.
(iv) No service charge shall be made for any such registration of
transfer or exchange, but the Maker may require payment of a sum sufficient to
cover any tax or other governmental charges payable in connection therewith.
(v) Notwithstanding the above, this Note may be transferred to Liguori
and shall be registered in his name without cost or expense to Liguori and
without the requirement that Payee, Maker or Liguori execute any investment
letters or other documents (other than an instrument of assignment) to effect
such change.
(vi) If the Principal Sum and/or Prior Interest Amount has been reduced
at the time such transfer is requested, the Maker shall issue to the transferee
a new Note of like tenor ("New Note") reflecting the reduced Prior Interest
Amount and Principal Sum, and, if any CPI Common Shares have been issued
pursuant to a Conversion Notice, the Reduced Principal Sum resulting from such
conversion and appropriate changes in Section 7 reflecting the reduced amount of
CPI Common Shares remaining available upon conversion. If all of the CPI Common
Shares available for issuance upon conversion have been issued, the New Note
shall be amended to eliminate references to conversion.
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(vii) If this Note is lost, misplaced or destroyed, the Maker will
issue a replacement note to then then-registered Payee upon presentation to the
Maker of an appropriate affidavit of loss, indemnity and, in Maker's reasonable
discretion, an indemnity bond, in such form and in such amount as Maker shall
reasonably require.
14. Transfer of CPI Common Shares. As a condition to the transfer of CPI Common
Shares, the transferee shall execute appropriate investment letters and other
documents as may be reasonably required by the Maker and its counsel to assure
that the CPI Common Shares are transferred only in compliance with applicable
securities laws.
15. SUBORDINATION. ALL INDEBTEDNESS EVIDENCED HEREBY IS SUBORDINATED TO OTHER
INDEBTEDNESS PURSUANT TO, AND TO THE EXTENT PROVIDED IN, AND IS OTHERWISE
SUBJECT TO THE TERMS OF, THE INTERCREDITOR AND SUBORDINATION AGREEMENT, DATED AS
OF OCTOBER 9, 1997 (THE "SUBORDINATION AGREEMENT"), AS THE SAME HAS BEEN AMENDED
AS OF THE DATE HEREOF AND AS THE SAME AS THE SAME MAY HEREAFTER BE AMENDED,
SUPPLEMENTED OR OTHERWISE MODIFIED FROM TIME TO TIME, AMONG CPI AEROSTRUCTURES
INC., KOLAR, INC., AND JPMORGAN CHASE BANK (FORMERLY THE CHASE MANHATTAN BANK),
AS ADMINISTRATIVE AGENT FOR THE LENDERS PARTIES TO THE AMENDED AND RESTATED
SENIOR CREDIT AGREEMENT REFERRED TO IN THE SUBORDINATION AGREEMENT AS AMENDED,
AND THE HOLDERS FROM TIME TO TIME OF THE OBLIGATIONS ARISING UNDER THE
SUBORDINATED LOAN DOCUMENTS REFERRED TO IN THE SUBORDINATION AGREEMENT,
INCLUDING, WITHOUT LIMITATION, HEREUNDER.
16. Extensions or Reductions of Maturity Date; Modification of Subordination.
(i) The Maturity Date shall be extended to such date as shall be 90
days after the maturity date to which any of the Loans under the Credit
Agreement shall have been extended, or, if any portion of such Loans shall have
been refinanced, to 90 days after the maturity date of such refinanced Loans;
provided that such extension shall not be later than September 30, 2007, without
the consent of Payee.
(ii) Notwithstanding the forgoing, if pursuant to subsection (i) above
the Maturity Date is extended to a date which is after September 28, 2005
(respectively, the "Trigger Extension" and the "Trigger Extension Date"), the
subordination set forth in Section 15 above shall be modified to the extent
specified in Section 2 of the Amendment to the Intercreditor and Subordination
Agreement executed as of the date hereof.
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(iii) Notwithstanding the foregoing, if the obligations senior to
obligations owed to Payee under this Note are paid in full prior to the Maturity
Date, the Payee, at its option, may declare the Note immediately due and payable
in full.
17. Notices. All notices, requests and demands to or upon the Payee or the Maker
shall be delivered in the manner, and shall be deemed delivered on the dates
specified in Section 19 of the Subordination Agreement as amended.
18. Waiver of Presentment, etc. Maker hereby waives presentment for payment,
demand, protest, notice of protest, notice of nonpayment and diligence in
bringing suit and any other notice or demand of any kind or description, other
than as required by this Note.
19. Costs of Collection;Attorneys' Fees. Maker shall pay the costs and expenses
of collection, including, without limitation, reasonable attorneys fees.
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IN WITNESS WHEREOF, the Maker has caused this Amended and Restated Note
to be executed and delivered by its President on the date first above written.
KOLAR, INC.
By: /s/ Edward J. Fred
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Edward J. Fred, Executive Vice President
CPI AEROSTRUCTURES, INC. is executing this Amended and Restated Note
with respect to its rights and obligations set forth in Sections 5, 7, 9, 10, 11
and 14.
CPI AEROSTRUCTURES, INC.
By: /s/ Edward J. Fred
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Edward J. Fred, President
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STATE OF NEW YORK )
:ss:
COUNTY OF NEW YORK)
On the 25th day of June in the year 2002 before me, the undersigned,
personally appeared EDWARD J. FRED personally known to me or proved to me on
the basis of satisfactory evidence to be the individual(s) whose name(s) is
(are) subscribed to the within instrument and acknowledged to me that
he/she/they executed the same in his/her/their capacity(ies), and that by
his/her/their signature(s) on the instrument, the individual(s), or the person
upon behalf of which the individual(s) acted, executed the instrument.
/s/
Signature and Office of individual
taking acknowledgment
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ASSIGNMENT FORM
I, or we, hereby assign and transfer this
Note to: --------------------------------
Insert Percentage of "Aggregate
Due Amount" Transferred
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(Insert assignee's social security or tax ID number)
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(Print or type assignee's name, address and zip code)
and irrevocably appoint:
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as agent to transfer this Note on the books of the Issuer. The agent may
substitute another to act for him.
Date:
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(Print Name)
By:
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(Sign exactly as your name appears on the first page of the Note)
Signature Guaranteed:
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The Signature must be guaranteed by an officer of a commercial bank or trust
company or Member of an accepted medallion guaranty
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CONVERSION NOTICE
To Kolar, Inc.
The undersigned Payee of this Note hereby irrevocably
exercises the option to convert this Note, or the portion hereof (which is
_____________ Common Shares or $__________, or any integral multiple thereof)
below designated, into Common Shares of CPI Aerostructures, Inc. and directs
that the shares issuable and deliverable upon conversion, together with any Note
representing any unconverted principal amount hereof, be issued and delivered to
the registered Payee hereof unless a different name has been indicated below and
the undersigned's signature is guaranteed as indicated. If shares are to be
issued in the name of a person other than the undersigned, the undersigned will
pay all transfer taxes payable with respect thereto.
Dated:
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Principal Amount to be converted: $
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Total Conversion Price delivered to date $
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By:
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(Sign exactly as your name appears on the first page of this Note)
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Please print name and address (including zip code)
Social Security or other Taxpayer ID number:
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MEDALLION SIGNATURE GUARANTY (by a New York commercial bank or
trust company or member of an accepted medallion guaranty)