EXHIBIT 10.46
AMENDED AND RESTATED
SUBORDINATED PROMISSORY NOTE
$2,050,000.00
August 24, 2007
New
York, New York
For good and valuable consideration,
the receipt of which is hereby
acknowledged, Air Industries Group, Inc., a Delaware corporation
(the
"Company"), promises to pay to the order of John Gantt and Lugenia
Gantt or
their assigns (collectively, the "Holder"), the principal sum of
Two Million
Fifty Thousand Dollars ($2,050,000.00), as such amount may be
increased pursuant
to Section 1(d) of this Note, together with interest thereon as
provided for
herein, which shall be payable as follows: $25,000 on each of
October 31, 2008
and December 31, 2008, an additional $50,000 on March 31, 2009,
followed by 19
equal consecutive quarterly installments of $100,000, commencing on
June 30,
2009 and continuing through December 31, 2013, payable on the last
business day
of each March, June, September and December, commencing June 30,
2009, and
continuing through and including December 31, 2013, and a final
payment of
$50,000 on March 31, 2014, or, if earlier, (ii) when, upon or after
the
occurrence of an Event of Default (as defined below), such amount
is declared
due and payable by the Holder or made automatically due and payable
in
accordance with the terms hereof (the "Maturity Date").
Interest shall be accrue on any
portion of the principal amount of this
Note outstanding from time to time until payment thereof in full,
at a simple
rate of seven percent (7%) per annum, commencing on August 24,
2008.
Notwithstanding the foregoing, effective upon and during the
continuance of
occurrence of an Event of Default (as hereinafter defined), the
outstanding
balance of any amount owed under this Note shall bear interest
("Default
Interest") at the rate of eleven percent (11%) per annum, with the
Default
Interest accruing from and including such date of the occurrence of
an Event of
Default. Interest shall be calculated on the basis of a 365/366 day
year and the
actual number of days elapsed. In no event shall the Holder hereof,
or any
permitted successor or assign, be entitled to receive, collect or
retain any
amount of interest paid hereon in excess of that permitted by
applicable law.
This Note may be prepaid in whole or
in part at any time. All payments
made pursuant to this Note shall be applied first to reimbursable
expenses
(including the expenses and costs described in Section 4(f) below),
interest
accrued, if any, and then principal.
This Note is issued pursuant to that
certain Stock Purchase Agreement,
dated as of March 9, 2007, as amended by Amendment No.1 thereto
dated as of
August 2, 2007 (the "Stock Purchase Agreement"), entered into
between the
Company and the Holder, and as the terms of this Note as originally
issued were
further amended by a letter dated August 14, 2008 signed by the
Company and the
Holder.
The following is a statement of
rights of the Holder and the conditions to
which this Note is subject, and to which the Holder, by acceptance
of this Note,
agrees:
1
<PAGE>
1. Subordination. (a) This Note will
be subordinate and inferior to the
Company's Senior Indebtedness (as hereinafter defined). The Company
for itself,
its successors and assigns, covenants and agrees and the Holder of
this Note,
for himself, his successors and assigns, by his acceptance of this
Note likewise
covenants and agrees that, to the extent provided below, the
payment of all
amounts due pursuant to this Note is hereby expressly subordinated
and junior in
right of payment to the extent and in the manner hereinafter set
forth, to the
Company's Senior Indebtedness. As used herein, the term "Senior
Indebtedness"
shall mean the principal of, and interest and premium, if any, on
any and all,
(i) indebtedness of the Company for borrowed money or obligations
with respect
to which the Company is a guarantor, to banks, insurance companies,
or other
financial institutions or entities regularly engaged in the
business of lending
money, in each case as in effect as of the date hereof or as may be
borrowed
hereafter for working capital of the Company or one of its
subsidiaries, or the
acquisition by the Company of one or more businesses, and (ii) any
such
indebtedness or any debentures, notes or other evidence of
indebtedness issued
in exchange for or to refinance such Senior Indebtedness, or any
indebtedness
arising from the satisfaction of such Senior Indebtedness by a
guarantor,
provided that such indebtedness issued in exchange for or to
refinance Senior
Indebtedness or arising from the satisfaction of Senior
Indebtedness by a
Guarantor is on commercially reasonable terms as of the date of
incurrence not
to exceed the principal amount under such Senior Indebtedness and
provided
further that the Company provides the Holder with prior written
notice of such
action.
(b) Upon the acceleration of
any Senior Indebtedness or upon the
maturity of all or any portion of the principal amount of any
Senior
Indebtedness by lapse of time, acceleration or otherwise, all such
Senior
Indebtedness which has been so accelerated or matured shall first
indefeasibly
be paid in full before any payment is made by the Company or any
person acting
on behalf of the Company on account of any obligations evidenced by
this Note.
(c) The Company shall not pay any principal portion of this Note,
or
interest accrued thereon, before the scheduled due date thereof if
at such time
there exists a Blockage Event (as hereafter defined) and written
notice thereof
has been given to the Company and the Holder by the holders of the
Senior
Indebtedness.
(d) A "Blockage Event" is deemed to exist for the period of
time
commencing on the date of receipt by the Holder of written notice
of the
occurrence of a Default or an Event of Default (as defined in the
instruments
evidencing the Senior Indebtedness), which notice shall specify
such Default or
Event of Default, and ending on:
(i) the date such Default or Event of Default under the Senior
Indebtedness, as applicable, is cured or waived, provided that such
Default or
Event of Default is in the payment of any amount due thereunder;
or
(ii) in the case of any other Default or Event of Default
under the Senior Indebtedness, the earlier of (A) the date on which
such Default
or Event of Default shall have been cured or waived and (B) the
date that is 180
days after the occurrence of such Default or Event of Default,
provided that a
Blockage Event with respect to a single specified Default or Event
of Default
may be deemed to occur only once for each twelve-month period,
provided,
further, that no Default or Event of Default that existed at the
commencement
of, or during the pendency of, a Blockage Event shall serve as the
basis for the
institution of any subsequent Blockage Event.
2
<PAGE>
The Holder has the right, but not
the obligation, to cure any such Default
or Event of Default under Senior Indebtedness to the extent it can
be cured by
the payment of money. If the Holder shall have cured any such
Default or Event
of Default under Senior Indebtedness to the extent such Default or
Event of
Default can be cured by the payment of money, then such amount of
interest as
shall have accrued on this Note during the continuance of the
Blockage Event
(each, an "Additional Principal Amount") shall be added to the
aggregate
principal amount then owing to the Holder pursuant to this Note.
The Company
shall pay equal quarterly installments of each Additional Principal
Amount
pursuant to the first paragraph of this Note from the date such
Additional
Principal Amount is incurred pursuant to the first paragraph
through and
including August 31, 2011, subject to all principal amounts being
declared due
and payable or made automatically due and payable when, upon or
after the
occurrence of an Event of Default under this Note.
(e) At any time there exists a Blockage Event, (i) the Company
shall
not, directly or indirectly, make any payment of any part of this
Note, (ii) the
Holder shall not demand or accept from the Company or any other
person any such
payment or cancel, set-off or otherwise discharge any part of the
indebtedness
represented by this Note, and (iii) neither the Company nor the
Holder shall
otherwise take or permit any action prejudicial to or inconsistent
with the
priority position of any holder of Senior Indebtedness over the
Holder of this
Note.
(f) No right of any holder of Senior Indebtedness to enforce
the
subordination provisions of this obligation shall be impaired by
any act or
failure to act by the Company or the Holder or by their failure to
comply with
this Note or any other agreement or document evidencing, related to
or securing
the obligations hereunder. Without in any way limiting the
generality of the
preceding sentence, the holders of Senior Indebtedness may, at any
time and from
time to time, without the consent of or notice to the Holder,
without incurring
responsibility to the Holder and without impairing or releasing
the
subordination provided in this Note or the obligations of the
Holder to the
holders of Senior Indebtedness, do any one or more of the
following: (i) change
the manner, place or terms of payment of any Senior Indebtedness
provided that
such change does not materially impact Holder in an adverse manner;
(ii) sell,
exchange, release or otherwise deal with any property pledged,
mortgaged or
otherwise securing any Senior Indebtedness; (iii) release any
person or entity
liable in any manner for the collection of any Senior Indebtedness;
and (iv)
exercise or refrain from exercising any rights against the Company
or any other
person or entity.
