Exhibit 10.4

THIS NOTE HAS NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF
1933, AS AMENDED (THE “U.S. SECURITIES ACT”) OR ANY STATE SECURITIES LAWS OR THE
SECURITIES LAWS OF ANY JURISDICTION. THE HOLDER HEREOF, BY PURCHASING SUCH NOTE,
AGREES FOR THE BENEFIT OF THE COMPANY THAT THIS NOTE MAY BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED ONLY (A) TO THE COMPANY, (B) OUTSIDE THE UNITED STATES IN
AN OFFSHORE TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 OF REGULATION S
UNDER THE U.S. SECURITIES ACT TO A PERSON THAT IS NOT A U.S. PERSON WHO AGREES
TO RESTRICTIONS ON RESALE THAT ARE CONSISTENT WITH THE REQUIREMENTS OF
REGULATION S UNDER THE U.S. SECURITIES ACT, (C) FOLLOWING THE DISTRIBUTION
COMPLIANCE PERIOD REQUIRED UNDER RULE 903 OF REGULATION S UNDER THE SECURITIES
ACT, IN THE UNITED STATES OR TO OR FOR THE ACCOUNT OR BENEFIT OF A U.S. PERSON
OR PERSONS IN THE UNITED STATES PURSUANT TO AN AVAILABLE EXEMPTION UNDER THE
SECURITIES ACT AND IN COMPLIANCE WITH APPLICABLE STATE SECURITIES LAWS IN A
TRANSACTION THAT IS EXEMPT FROM REGISTRATION UNDER THE U.S. SECURITIES ACT AND
ANY APPLICABLE STATE SECURITIES LAWS OR OTHER REGULATIONS GOVERNING THE OFFER
AND SALE OF SECURITIES, OR (D) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT,
AND THE HOLDER HAS, PRIOR TO SUCH SALE, FURNISHED TO THE COMPANY AN OPINION OF
COUNSEL, OF RECOGNIZED STANDING, OR OTHER EVIDENCE OF EXEMPTION, IN EITHER CASE,
REASONABLY SATISFACTORY TO THE COMPANY. HEDGING TRANSACTIONS INVOLVING THE
SECURITIES REPRESENTED HEREBY MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE
U. S. SECURITIES ACT.

API TECHNOLOGIES CORP.

SECURED PROMISSORY NOTE

 

USD $                       January [20] [22], 2010

FOR VALUE RECEIVED, the undersigned, API TECHNOLOGIES CORP. (the “Company”), a
Delaware corporation, hereby promises to pay to the order of [name of investor,
a                      corporation or registered assigns (“Holder”), the
principal sum of                                          ($            ) (or
such lesser amounts as may be outstanding from time to time under this Note) on
the Maturity Date, as defined in Section 1 below. Unless otherwise set forth
herein, all references to $ means United States dollars.

This Note is one of a series of Secured Promissory Notes made of even date
herewith or that may be made after the date hereof in each case by the Company
to evidence the Company’s indebtedness in connection with a transaction relating
to the purchase of the assets of Kuchera Defense Systems, Inc., KII Inc. and
Kuchera Industries LLC (collectively “Kuchera”) by the Company and certain of
its subsidiaries (collectively, the “Buyers”) (this Note, together with all such
other Secured Promissory Notes as may be outstanding from time to time, the
“Notes”).

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1. Maturity. This Note shall be due and payable upon the earlier to occur (the
“Maturity Date”) of: (i) March 8, 2010, in the event the Buyers do not purchase
substantially all of the assets of Kuchera from Kuchera by February 26, 2010,
and (b) January [20] [22], 2013.

2. Interest. Interest shall accrue on the unpaid principal balance hereof and on
any interest payment that is not made when due at the rate of fifteen percent
(15%) per annum (the “Base Rate”) until the principal amount of this Note is
paid in full. Accrued interest shall be due and payable quarterly, on the last
day of each calendar quarter, March 31, June 30, September 30 and December 31,
of each year, with a final payment of accrued and unpaid interest due and
payable on the Maturity Date. Upon the occurrence and during the continuation of
an Event of Default (as defined herein) interest shall accrue on all unpaid
amounts due hereunder, including without limitation interest, at the rate of the
Base Rate plus three percent (3%). If a judgment is entered against the Company
on this Note, the amount of the judgment so entered shall bear interest at the
highest rate authorized by law as of the date of the entry of the judgment.

3. Payments. Payments of both principal and interest shall be made at the
principal executive office of the Company, or such other place as the holder
hereof shall designate to the Company in writing, in lawful money of the United
States of America. Payments shall be made pro rata among all holders of Notes in
accordance with the outstanding principal balances of their Notes.

So long as no Event of Default has occurred in this Note, all payments hereunder
shall first be applied to interest, then to principal. Upon the occurrence of an
Event of Default in this Note, all payments hereunder shall first be applied to
costs pursuant to Section 11.4, then to interest and the remainder to principal.

4. Registration, Transfer and Exchange of Notes. The Company will keep at its
principal office a register in which it will provide for the registration of and
transfer of this Note, at its own expense (excluding transfer taxes). If this
Note is surrendered at said office or at the place of payment named in this Note
for registration of transfer or exchange (accompanied in the case of
registration of transfer or exchange by a written instrument of transfer in form
satisfactory to the Company duly executed by or on behalf of the holder), the
Company, at its expense, will deliver in exchange one or more new notes in
denominations of $10,000 or larger multiples of $1,000, as requested by the
holder for the aggregate unpaid principal amount. Any note or notes issued in a
transfer or exchange shall carry the same rights to increase notes surrendered.
The Holder agrees that prior to making any sale, transfer, pledge, assignment,
hypothecation, or other disposition (each, a “Transfer”) of this Note, the
Holder shall give written notice to the Company describing the manner in which
any such proposed Transfer is to be made and providing such additional
information and documentation regarding the Transfer as the Company reasonably
requests. If the Company so requests, the Holder shall at his expense provide
the Company with an opinion of counsel (which counsel must be reasonably
satisfactory to the Company), in form and substance satisfactory to the Company,
that the proposed Transfer complies with applicable federal and state securities
laws. The Company shall have no obligation to Transfer this Note unless the
Holder thereof has complied with the foregoing provisions, and any such
attempted Transfer shall be null and void.

 

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5. Registered Owner. Prior to due presentation for registration of transfer, the
Company may treat the person in whose name this Note is registered as the owner
and holder of such Note for the purpose of receiving payment of principal of,
and interest on, such Note and for all other purposes.

6. Prepayment.

6.1 Optional Prepayment. The Company, at its option, may prepay in whole or in
part the principal amount of this Note at any time; provided, however that if
any such prepayment occurs (a) on or before January [20] [22], 2011 (the
“Anniversary Date”) and such Prepayment Date is not the Maturity Date, the
Company shall pay to Holder an additional amount equal to the amount of interest
that would have accrued on such prepaid amount from and after such Prepayment
Date through the Anniversary Date or (b) on any date after the Anniversary Date
but prior to the Maturity Date, the Company shall pay to Holder an additional
amount equal to 2% of such prepaid amount (the amounts described in the
preceding clauses (a) and (b) constituting “Prepayment Premium”). The Company
shall give Holder not less than 10 days written notice prior to any pre-payment
of this Note (the “Prepayment Notice”). The Prepayment Notice shall specify the
date upon (“Prepayment Date”) and the place at which, payment may be obtained
and shall call upon the Holder to surrender this Note to the Company in the
manner and at the place designated. On the Prepayment Date, the Holder shall
surrender this Note to the Company in the manner and at the place designated in
the Prepayment Notice, and thereupon prepayment shall be made to Holder and this
Note shall be cancelled. In the event that less than all the principal amount of
this Note is prepaid, upon surrender of this Note to the Company, the Company
shall execute and deliver to Holder a new note or notes in principal amount
equal to the unpaid principal amount of this Note. The Company shall, at the
time of any such prepayment, pay to the holder of this Note all interest accrued
and unpaid to the Prepayment Date plus any applicable Prepayment Premium.

6.2 Cessation of Rights. From and after the Prepayment Date, unless there has
been a default under the Prepayment Notice, all interest on the redeemed
principal amount shall cease to accrue and all rights of Holder as a Holder of
this Note shall cease with respect to the principal amount prepaid and, with
respect to such amount, this Note thereafter shall not be deemed to be
outstanding for any purpose whatsoever. By acceptance of this Note, Holder
agrees to execute and deliver such documents as may be reasonably requested from
time to time by the Company in order to implement the foregoing provisions of
this Section.

7. Covenants of the Company. The Company covenants and agrees that it shall not,
without the prior written approval of the Holder:

7.1 Obtain or incur any indebtedness or other monetary obligations that are
senior to or on parity with the Note other than Permitted Senior Debt.

7.2 Allow, suffer or cause to exist any lien, claim, security interest or
encumbrance on the Company’s property or assets, other than Permitted Liens (as
defined in the US Security Agreement)

 

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7.3 “Permitted Senior Debt” shall mean any and all debt or other monetary
obligations incurred by the Company or any of its subsidiaries in connection
with (i) any line of credit or other working capital facility or (ii) any
acquisition of the stock or assets of another individual or entity, together
with, in each case, (x) any refinancings thereof and (y) any guarantees thereof
or other contingent obligations relating thereto.

7.4 “US Security Agreement” shall mean that certain Security Agreement, dated as
of January 20, 2010, by and among Collateral Agent and the pledging parties from
time to time party thereto, as such agreement may be amended, restated,
supplemented (including by entry into separate security agreements pursuant to
the terms thereof) or otherwise modified from time to time.

7.5 “Canadian Security Agreement” shall mean that certain General Security
Agreement, dated as of January 20, 2010, by and among Collateral Agent and the
pledging parties from time to time party thereto, as such agreements may be
amended, restated, supplemented (including by entry into separate security
agreements pursuant to the terms thereof) or otherwise modified from time to
time.

8. Events of Default.

8.1 Occurrences of Events of Default. Each of the following events shall
constitute an “Event of Default” for purposes of this Note:

(a) if the Company fails to pay any amount payable under this Note and such
default is not cured within ten (10) days of written notice from the Holder;

(b) if the Company breaches any of its representations, warranties or covenants
set forth in this Note and such breach is not cured within thirty (30) days of
notice of such breach;

(c) the commencement of an involuntary case against the Company or any of its
subsidiaries under any applicable bankruptcy, insolvency or other similar law
now or hereafter in effect, or the appointing of a receiver, liquidator,
assignee, custodian, trustee or similar official of the Company or for any
substantial part of the Company or one of its subsidiary’s property, or ordering
the winding-up or liquidation of the Company or one of its subsidiary’s affairs;

(d) if the Company or any of its subsidiaries shall commence a voluntary case
under any applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, or shall consent to the entry of an order for relief in an
involuntary case under any such law, or shall consent to the appointment of or
taking possession by a receiver, liquidator, assignee, trustee, custodian or
similar official of the Company or its subsidiary or for any substantial part of

 

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the Company or one of its subsidiary’s property, or shall make any general
assignment for the benefit of creditors, or shall take any corporate action in
furtherance of any of the foregoing; or

(e) if the Company’s business shall fail, as determined in good faith by the
Holder and evidenced by the Company’s inability to pay its ongoing debts as such
debts become due.

8.2 Acceleration Upon Event of Default. If any Event of Default shall have
occurred and be continuing, for any reason whatsoever (and whether such
occurrence shall be voluntary or involuntary or come about or be effected by
operation of law or otherwise), the unpaid principal amount of, and the accrued
interest on, this Note shall automatically become immediately due and payable,
without presentment, demand, protest or other requirements of any kind, all of
which are hereby expressly waived by the Company.

9. Investment Representations of the Holder. With respect to the purchase of
this Note, the Holder hereby represents and warrants to the Company as follows:

9.1 Experience. The Holder has substantial experience in evaluating and
investing in private placement transactions of securities in companies similar
to the Company so that it is capable of evaluating the merits and risks of its
investment in the Company and has the capacity to protect its own interests.

9.2 Not a U.S. Person. The Holder is not a U.S. Person as defined in Rule 902 of
Regulation S under the Securities Act of 1933 (the “Act”) and was not formed for
the purpose of investing in securities not registered under the Act;

9.3 Own Account. The Holder is not acquiring the Note for the account or benefit
of a U.S. Person;

9.4 Offer Location. The offer to purchase the Note of the Company was made to
the Holder outside of the United States;

9.5 Regulation S. All subsequent offers and sales of the Note and the common
stock issuable pursuant to the warrants issued in connection herewith shall be
made in compliance with the resale provisions of Regulation S under the Act,
pursuant to Rule 144 promulgated thereunder, pursuant to another applicable
exemption from registration under the Act, or pursuant to an effective
registration statement (however, no registration rights are granted hereby); and
in each case, in accordance with any applicable state securities laws. In any
case, neither the Note nor the common stock issuable pursuant to the warrants
issued in connection herewith will be resold or transferred to a U.S. person(s)
or for the account or benefit of a U.S. person or within the United States until
the end of the six month period distribution compliance commencing on the later
of (i) the date of the subscription agreement relating to this Note and (ii) the
date the Holder’s subscription funds have been received by the Company and
thereafter cannot be sold to a U.S. person, for the account or benefit of a U.S.
person or within the United States, unless the Shares are registered under the
Act or are exempt from the registration requirements of the Act;

 

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9.6 Registration Exemption. The Holder understands that the Note is being
offered and sold to it in reliance on the exemption from the registration
requirements of United States federal and state securities laws;

9.7 Representations True. The Holder understands that the Company is relying
upon the truth and accuracy of the representations, warranties, agreement and
understandings of the Holder set forth herein in order to determine the
applicability of such exemption and the suitability of the Holder to acquire the
Note.

9.8 Access to Data. The Holder has had an opportunity to discuss the Company’s
business, management and financial affairs with the Company’s management and has
also had an opportunity to ask questions of the Company’s officers, which
questions were answered to its satisfaction.

9.9 Intercreditor Agreement. The Holder agrees that by acceptance of this Note
it is and will be bound by the terms and conditions of that certain Collateral
Agency and Intercreditor Agreement, dated as of the date hereof (as amended,
restated, supplemented, or otherwise modified from time to time, the
“Intercreditor Agreement”), regardless of whether or not the Holder was an
original party to such Intercreditor Agreement.

10. Security. This Promissory Note is secured by one or more security agreements
(as amended, restated, supplemented or otherwise modified from time to time, the
“Security Agreements”) among the Collateral Agent, the Company and/or certain
subsidiaries of the Company. This Promissory Note, the Security Agreements and
any and all other agreements presently existing or hereafter entered into which
evidence and/or secure any indebtedness from the Company to Holder shall
hereinafter be collectively referred to as the “Loan Documents.” The terms,
covenants, conditions, provisions, stipulations and agreements of the Loan
Documents are hereby made a part of this Note, to the same extent and with the
same effect as if they were fully set forth herein. The Company does hereby
covenant to abide by and comply with each and every term, covenant, condition,
provision, stipulation and agreement set forth in the Loan Documents.

11. Miscellaneous.

11.1 Invalidity of Any Provision. If any provision or part of any provision of
this Note shall for any reason be held invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall not affect any
other provisions of this Note and this Note shall be construed as if such
invalid, illegal or unenforceable provisions or part hereof had never been
contained herein, but only to the extent of its invalidity, illegality or
unenforceability.

11.2 Governing Law. The Note shall be governed in all respects by the laws of
the State of Delaware, excluding its conflict of laws.

 

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11.3 Notices. Any notice or other communication required or permitted hereunder
shall be in writing and shall be deemed to have been duly given (i) on the date
of delivery if delivered personally, (ii) one (1) business day after
transmission by facsimile transmission with a written confirmation copy sent by
first class mail, or (iii) five (5) days after mailing if mailed by first class
mail, to the following addresses:

 

If to the Company:    API Technologies Corp.   

229 Colonnade Road

Ottawa, Ontario

K2E 7K3 Canada

Attention: Chief Financial Officer

And if to the Holder, to the address or facsimile number of Holder as set forth
on the Company’s records, or such other address as the Holder has provided to
the Company by notice duly given.

11.4 Collection. If the indebtedness represented by this Note or any part
thereof is collected at law or in equity or in bankruptcy, receivership or other
judicial proceedings or if this Note is placed in the hands of attorneys for
collection after the occurrence of an Event of Default, the Company agrees to
pay, in addition to the outstanding principal and accrued interest payable
hereon, reasonable attorneys’ fees and costs incurred by the Holder, or on
behalf of the Holder by a representative of the Holder.

11.5 Successors and Assigns. The rights and obligations of the Company and the
Holder shall be binding upon and benefit the successors, assigns, heirs,
administrators and transferees of the parties.

11.6 Waivers. The Company and any endorsers, sureties, guarantors, and all
others who are, or may become liable for the payment hereof severally: (a) waive
presentment for payment, demand, notice of demand, notice of nonpayment or
dishonor, protest and notice of protest of this Note, and all other notices in
connection with the delivery, acceptance, performance, default, or enforcement
of the payment of this Note, (b) consent to all extensions of time, renewals,
postponements of time of payment of this Note or other modifications hereof from
time to time prior to or after the maturity date hereof, whether by acceleration
or in due course, without notice, consent or consideration to any of the
foregoing, (c) agree to any substitution, exchange, addition, or release of any
of the security for the indebtedness evidenced by this Note or the addition or
release of any party or person primarily or secondarily liable hereon, (d) agree
that Holder shall not be required first to institute any suit, or to exhaust its
remedies against the Company or any other person or party to become liable
hereunder or against the security in order to enforce the payment of this Note
and (e) agree that, notwithstanding the occurrence of any of the foregoing
(except by the express written release by Holder of any such person), the
Company shall be and remain, directly and primarily liable for all sums due
under this Note.

 

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11.7 Time. Time is of the essence in this Note.

11.8 Captions. The captions of sections of this Note are for convenient
reference only, and shall not affect the construction or interpretation of any
of the terms and provisions set forth in this Note.

11.9 Number and Gender. Whenever used in this Note, the singular number shall
include the plural, and the masculine shall include the feminine and the neuter,
and vice versa.

11.10 Remedies. All remedies of the Holder shall be cumulative and concurrent
and may be pursued singly, successively, or together at the sole discretion of
the Holder and may be exercised as often as occasion therefor shall arise. No
act of omission or commission of the Holder, including specifically any failure
to exercise any right, remedy or recourse shall be effective unless it is set
forth in a written document executed by the Holder and then only to the extent
specifically recited therein. A waiver or release with reference to one event
shall not be construed as continuing as a bar to or as a waiver or release of
any subsequent right, remedy, or recourse as to any subsequent event.

11.11 No Waiver by Holder. The acceptance by Holder of any payment under this
Note which is less than the amount then due or the acceptance of any amount
after the due date thereof, shall not be deemed a waiver of any right or remedy
available to Holder nor nullify the prior exercise of any such right or remedy
by Holder. None of the terms or provisions of this Note may be waived, altered,
modified or amended except by a written document executed by Holder and then
only to the extent specifically recited therein. No course of dealing or conduct
shall be effective waive, alter, modify or amend any of the terms or provisions
hereof. The failure or delay to exercise any right or remedy available to Holder
shall not constitute a waiver of the right of the Holder to exercise the same or
any other right or remedy available to Holder at that time or at any subsequent
time.

11.12 Submission to Jurisdiction. BORROWER, AND ANY ENDORSERS, SURETIES,
GUARANTORS AND ALL OTHERS WHO ARE, OR WHO MAY BECOME, LIABLE FOR THE PAYMENT
HEREOF SEVERALLY, IRREVOCABLY AND UNCONDITIONALLY (A) AGREE THAT ANY SUIT,
ACTION, OR OTHER LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS NOTE OR ANY
OTHER AGREEMENT, DOCUMENT OR INSTRUMENT DELIVERED PURSUANT TO, OR IN CONNECTION
WITH THIS NOTE SHALL BE BROUGHT AND MAINTAINED IN THE COURTS IN AND FOR SUFFOLK
COUNTY, NEW YORK, OR IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN
DISTRICT OF NEW YORK; (B) CONSENT TO THE EXCLUSIVE JURISDICTION OF SUCH COURTS
IN ANY SUCH SUIT, ACTION OR PROCEEDING; AND (C) WAIVE ANY OBJECTION WHICH IT OR
THEY MAY HAVE TO THE LAYING OF VENUE OF ANY SUCH SUIT, ACTION, OR PROCEEDING IN
ANY OF SUCH COURTS.

 

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11.13 Waiver of Trial by Jury. HOLDER AND BORROWER HEREBY KNOWINGLY,
IRREVOCABLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHT EITHER MAY HAVE TO A
TRIAL BY JURY IN RESPECT OF ANY ACTION, PROCEEDING OR COUNTERCLAIM BASED ON THIS
NOTE, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS NOTE OR ANY OTHER
DOCUMENT EXECUTED IN CONNECTION THEREWITH, OR ANY COURSE OF CONDUCT, COURSE OF
DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY HERETO.
THIS PROVISION IS A MATERIAL INDUCEMENT FOR HOLDER TO MAKE THE LOAN EVIDENCED BY
THIS NOTE.

[signature page follows]

 

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API TECHNOLOGIES CORP.,

a Delaware corporation

By:  

 

  Stephen Pudles   Chief Executive Officer

HOLDER

 

By:  

 

Signature:  

 

Title:  

 

 

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