EXHIBIT 10.2
 
 

Original Issue Date:  November 27, 2012   $225,000.00

 
                                                                                                                 

GREEN BALLAST, INC.
12% SENIOR UNSECURED NOTE
 
    This 12% Senior Unsecured Note of Green Ballast, Inc., a Delaware
corporation (the “Company”), having its principal place of business at 2620
Thousand Oaks Blvd., Suite 4000, Memphis, Tennessee 38118 (the “Note”), is duly
authorized and validly issued.
 
    FOR VALUE RECEIVED, the Company promises to pay to GREEN BALLAST LLC, a
Tennessee limited liability company, or its registered assigns (the “Holder”),
or shall have paid pursuant to the terms hereunder, on or before February 16,
2013 (the “Maturity Date”) or such earlier date as this Note is required or
permitted to be repaid as provided hereunder, the principal sum of $225,000.00,
and to pay interest to the Holder on the aggregate outstanding principal amount
of this Note in accordance with the provisions hereof.       
 
    This Note is subject to the following additional provisions:
 
    Section 1.                     Definitions. For the purposes hereof, in
addition to the terms defined elsewhere in this Note the following terms shall
have the following meanings:

“Affiliate” means any Person that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common control with an
individual or entity, as such terms are used in and construed under Rule 405
under the Securities Act of 1933, as amended.

“Bankruptcy Event” means any of the following events: (a) the Company or any
Subsidiary thereof commences a case or other proceeding under any bankruptcy,
reorganization, arrangement, adjustment of debt, relief of debtors, dissolution,
insolvency or liquidation or similar law of any jurisdiction relating to the
Company or any Subsidiary thereof; (b) there is commenced against the Company or
any Subsidiary thereof any such case or proceeding that is not dismissed within
60 days after commencement; (c) the Company or any Subsidiary thereof is
adjudicated insolvent or bankrupt or any order of relief or other order
approving any such case or proceeding is entered; (d) the Company or any
Subsidiary thereof suffers any appointment of any custodian or the like for it
or any substantial part of its property that is not discharged or stayed within
60 calendar days after such appointment; (e) the Company or any Subsidiary
thereof makes a general assignment for the benefit of creditors; (f) the Company
or any Subsidiary thereof calls a meeting of its creditors with a view to
arranging a composition, adjustment or restructuring of its debts; or (g) the
Company or any Subsidiary thereof, by any act or failure to act, expressly
indicates its consent to, approval of or acquiescence in any of the foregoing or
takes any corporate or other action for the purpose of effecting any of the
foregoing.

 
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“Business Day” means any day except any Saturday, any Sunday, any day which
shall be a federal legal holiday in the United States or any day on which
banking institutions in the State of New York are authorized or required by law
or other governmental action to close.

“Change of Control Transaction” means the occurrence after the date hereof of
any of (i) an acquisition after the date hereof by an individual or legal entity
or “group” (as described in Rule 13d-5(b)(1) promulgated under the Securities
Exchange Act of 1934, as amended) of effective control (whether through legal or
beneficial ownership of capital stock of the Company, by contract or otherwise)
of in excess of 33% of the voting securities of the Company (other than by the
holder of Notes), or (ii) the Company merges into or consolidates with any other
entity, or any entity merges into or consolidates with the Company and, after
giving effect to such transaction, the stockholders of the Company immediately
prior to such transaction own less than 66% of the aggregate voting power of the
Company or the successor entity of such transaction, or (iii) the Company sells
or transfers all or substantially all of its assets to a third party and the
stockholders of the Company immediately prior to such transaction own less than
66% of the aggregate voting power of the acquiring entity immediately after the
transaction, or (iv) a replacement at one time or within a three year period of
more than one-half of the members of the Company’s board of directors which is
not approved by a majority of those individuals who are members of the board of
directors on the date hereof (or by those individuals who are serving as members
of the board of directors on any date whose nomination to the board of directors
was approved by a majority of the members of the board of directors who are
members on the date hereof), or (v) the execution by the Company of an agreement
to which the Company  is a party or by which it is bound, providing for any of
the events set forth in clauses (i) through (iv) above.

“Event of Default” shall have the meaning set forth in Section 5.

“Fundamental Transaction” means any Change of Control Transaction.

“Late Fees” shall have the meaning set forth in Section 2(d).

“LOM” means Loewen, Ondaatje, McCutcheon USA, Ltd.

“LOM Notes” means all promissory notes executed by the Company to the order of
such persons as have made loans to the Company under the financing arranged by
LOM.

“Mandatory Default Amount” means the sum of (i) 115% of the outstanding
principal amount of this Note, plus 100% of accrued and unpaid interest hereon,
and (ii) all other amounts, costs, expenses and liquidated damages due in
respect of this Note.
 
“Memphis Courts” shall have the meaning set forth in Section 6(d).

 
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“Original Issue Date” means the date of the issuance of this Note, regardless of
any transfers of any Note and regardless of the number of instruments which may
be issued to evidence this Note.

“Permitted Indebtedness” means (a) the indebtedness evidenced by the Note, the
2011 Notes, and the LOM Notes (b) lease obligations and purchase money
indebtedness incurred in connection with the acquisition of capital assets and
lease obligations with respect to newly acquired or leased assets, (c) purchase
order non-convertible (nor otherwise equity-linked) debt financing in which a
third party lender advances funds solely for financing the manufacture,
production and/or purchase of inventory pursuant to purchase orders previously
received by the Company, repayment of which is (i) secured solely by such
inventory manufactured, produced or purchased and accounts receivables from the
sales thereof, and (ii) due promptly following such sales, and (d) indebtedness
that is acceptable to the Holder in its sole and absolute discretion.

“Permitted Lien” means the individual and collective reference to the following:
(a) Liens for taxes, assessments and other governmental charges or levies not
yet due or Liens for taxes, assessments and other governmental charges or levies
being contested in good faith and by appropriate proceedings for which adequate
reserves (in the good faith judgment of the management of the Company) have been
established in accordance with generally accepted account principles; (b) Liens
imposed by law which were incurred in the ordinary course of the Company’s
business, such as carriers’, warehousemen’s and mechanics’ Liens, statutory
landlords’ Liens, and other similar Liens arising in the ordinary course of the
Company’s business, and which (x) do not individually or in the aggregate
materially detract from the value of such property or assets or materially
impair the use thereof in the operation of the business of the Company and its
consolidated Subsidiaries or (y) are being contested in good faith by
appropriate proceedings, which proceedings have the effect of preventing for the
foreseeable future the forfeiture or sale of the property or asset subject to
such Lien; (c) Liens incurred in connection with Permitted Indebtedness under
clauses (a), (b) and (c) thereunder, provided that such Liens are not secured by
assets of the Company or its Subsidiaries other than the assets so acquired or
leased.
 
“Subsidiary” means any direct or indirect subsidiary of the Company formed or
acquired after the date hereof.

“2011 Notes” means that certain 8% Senior Secured Note, and that certain 8%
Senior Convertible Note, each issued by the Company on or about April 15, 2011,
and each in the principal amount of $1,800,000, to the Holder and to Gemini
Master Fund, LTD, respectively.

Section 2.                              Interest; Outstanding Amounts; No
Prepayment.

a) Interest Rate.  Interest shall accrue daily on the outstanding principal
amount of this Note at a rate per annum equal to 12%.

 
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b) Payment of Interest.  On the Maturity Date, the Company shall pay to the
Holder any accrued but unpaid interest hereunder.
 
c) Interest Calculations. Interest shall be calculated on the basis of a 360-day
year and actual days elapsed, and shall accrue daily commencing on the Original
Issue Date until payment in full of the outstanding principal, together with all
accrued and unpaid interest, liquidated damages and other amounts which may
become due hereunder, has been made.  Interest hereunder will be paid to the
person or entity in whose name this Note is registered on the records of the
Company regarding registration and transfers of this Note.

d) Late Fees.  All overdue accrued and unpaid interest to be paid hereunder,
when not paid within 10 calendar days of the due date therefor, shall entail a
late fee at an interest rate equal to the lesser of 18% per annum or the maximum
rate permitted by applicable law (“Late Fees”) which shall accrue daily from the
date such interest is due hereunder through and including the date of actual
payment in full.

e) Amounts Outstanding.  The Holder of this Note is authorized to record the
date and amount of the loan evidenced  by this Note, the date and amount of each
payment or prepayment of principal hereof and the interest rate with respect
thereto on a separate schedule, and any such schedule shall be conclusive and
binding for all purposes absent manifest error; provided, however, that the
failure of the Holder to make any such recordation or endorsement shall not
affect the obligations of the Company hereunder.

f) Prepayment.  The Company may prepay any portion of the principal amount of
this Note without the prior written consent of the Holder.

Section 3.                      Registration of Transfers and Exchanges.  Prior
to due presentment for transfer to the Company of this Note, the Company and any
agent of the Company may treat the Holder in whose name this Note is duly
registered on the records of the Company as the owner hereof for the purpose of
receiving payment as herein provided and for all other purposes, whether or not
this Note is overdue, and neither the Company nor any such agent shall be
affected by notice to the contrary.
 
Section 4.                      Negative Covenants. As long as any portion of
this Note remains outstanding, the Company shall not, and shall not permit any
of its Subsidiaries, to directly or indirectly:

a) other than Permitted Indebtedness, enter into, create, incur, assume,
guarantee or suffer to exist any indebtedness for borrowed money of any kind,
including but not limited to, a guarantee, on or with respect to any of its
property or assets now owned or hereafter acquired or any interest therein or
any income or profits therefrom;
 
 
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b) other than Permitted Liens, enter into, create, incur, assume or suffer to
exist any Liens of any kind, on or with respect to any of its property or assets
now owned or hereafter acquired or any interest therein or any income or profits
therefrom;

c) repay, repurchase or offer to repay, repurchase or otherwise acquire any
indebtedness for borrowed money, other than regularly scheduled principal and
interest payments as such terms are in effect as of the Closing Date;

d) repay, repurchase or offer to repay, repurchase or otherwise acquire any
indebtedness to any current or former employees, officers or directors of the
Company (other than for reimbursement of Company business expenses advanced by
such person);

e) enter into any transaction with any Affiliate of the Company which is
required to be disclosed in a public filing with the Securities and Exchange
Commission unless such transaction is made on an arm’s-length basis and
expressly approved by a majority of the disinterested directors of the Company
(even if less than a quorum otherwise required for board approval); or

f) enter into any agreement with respect to any of the foregoing.
 
Section 5.                      Events of Default.

a) “Event of Default” means, wherever used herein, any of the following events
(whatever the reason for such event and whether such event shall be voluntary or
involuntary or effected by operation of law or pursuant to any judgment, decree
or order of any court, or any order, rule or regulation of any administrative or
governmental body):
 
i.   any default in the payment of (A) the principal amount under this Note, the
2011 Notes, or the LOM Notes, or (B) interest liquidated damages and other
amounts owing under this Note, the 2011 Notes or the LOM Notes, as and when the
same shall become due and payable (whether on the Maturity Date or by
acceleration or otherwise) which default is not cured within 3 business days;
 
ii. the Company shall fail to observe or perform any other covenant or agreement
contained in this Note which failure is not cured, if possible to cure, within
30 days after notice of such failure is delivered by the Holder or by any other
holder of this Note, or after the Company has become or should have become aware
of such failure, whichever is earlier;

iii. a default or event of default (subject to any grace or cure period provided
in the applicable agreement, document or instrument) shall occur under any other
material agreement, lease, document or instrument to which the Company or any
Subsidiary is obligated (and not otherwise covered below);

 
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iv. the Company or any Subsidiary shall be subject to a Bankruptcy Event;
 
v. the Company or any Subsidiary shall default on any of its obligations under
any mortgage, credit agreement or other facility, indenture agreement, factoring
agreement or other instrument under which there may be issued, or by which there
may be secured or evidenced, any indebtedness for borrowed money or money due
under any long term leasing or factoring arrangement that (a) involves an
obligation greater than $50,000, whether such indebtedness now exists or shall
hereafter be created, and (b) results in such indebtedness becoming or being
declared due and payable prior to the date on which it would otherwise become
due and payable;

vi. the Company shall be a party to any Change of Control Transaction or shall
agree to sell or dispose of all or in excess of 33% of its assets in one
transaction or a series of related transactions (whether or not such sale would
constitute a Change of Control Transaction);

vii. if any security agreement relating to the 2011 Notes ceases to be in full
force and effect (including failure to create a valid and perfected first
priority lien on and security interest in all the collateral therefor and
intellectual property rights of the Company and its Subsidiaries) at any time
for any reason;

viii. any material adverse change in the condition, value or operation of a
material portion of said collateral or intellectual property rights;

ix. any monetary judgment, writ or similar final process shall be entered or
filed against the Company, any Subsidiary or any of their respective properties
or other assets for more than $50,000, and such judgment, writ or similar final
process shall remain unvacated, unbonded or unstayed for a period of 45 calendar
days; or

x. any Event of Default under any of this Note, the 2011 Notes, or the LOM
Notes.

b)  Remedies Upon Event of Default. If any Event of Default occurs, the
outstanding principal amount of this Note, plus accrued but unpaid interest,
liquidated damages and other amounts owing in respect thereof through the date
of acceleration, shall become, at the Holder’s election, immediately due and
payable in cash at the Mandatory Default Amount.  After the occurrence and
during the continuance of any Event of Default, the interest rate on this Note
shall accrue at an interest rate equal to the lesser of 18% per annum or the
maximum rate permitted under applicable law.  Upon the payment in full of the
Mandatory Default Amount, the Holder shall promptly surrender this Note to or as
directed by the Company.  In connection with such acceleration described herein,
the Holder need not provide, and the Company hereby waives, any presentment,
demand, protest or other notice of any kind, and the Holder may immediately and
without expiration of any grace period enforce any and all of its rights and
remedies hereunder and all other remedies available to it under applicable
law.  Such acceleration may be rescinded and annulled by Holder at any time
prior to payment hereunder and the Holder shall have all rights as a holder of
the Note until such time, if any, as the Holder receives full payment pursuant
to this Section 5(b).  No such rescission or annulment shall affect any
subsequent Event of Default or impair any right consequent thereon.

 
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Section 6.                      Miscellaneous.
 
  a)  Notices.    Any and all notices or other communications or deliveries to
be provided by the Holder hereunder, shall be in writing and delivered
personally, by facsimile, by email or sent by a nationally recognized overnight
courier service, addressed to the Company, at the address set forth above, or
such other facsimile number, email or address as the Company may specify for
such purpose by notice to the Holder delivered in accordance with this
Section.  Any and all notices or other communications or deliveries to be
provided by the Company hereunder shall be in writing and delivered personally,
by facsimile, by email or sent by a nationally recognized overnight courier
service addressed to each Holder at the facsimile number or address of the
Holder appearing on the books of the Company, or if no such facsimile number,
email or address appears, at the principal place of business of the Holder.  Any
notice or other communication or deliveries hereunder shall be deemed given and
effective on the earliest of (i) the date of transmission, if such notice or
communication is delivered via facsimile or email at the facsimile number  or
email address specified to such party prior to 8:30 p.m. (Memphis time), (ii)
the date immediately following the date of transmission, if such notice or
communication is delivered via facsimile or email at the facsimile number  or
email address specified to such party between 8:30 p.m. (Memphis time) and 11:59
p.m. (Memphis time) on any date, (iii) the second Business Day following the
date of mailing, if sent by U.S. nationally recognized overnight courier
service, or (iv) upon actual receipt by the party to whom such notice is
required to be given.  The address for such notices and communications shall be
as set forth on the first page of this Note.
 
b)  Absolute Obligation. Except as expressly provided herein, no provision of
this Note shall alter or impair the obligation of the Company, which is absolute
and unconditional, to pay the principal of, liquidated damages and accrued
interest, as applicable, on this Note at the time, place, and rate, and in the
coin or currency, herein prescribed.  This Note is a direct debt obligation of
the Company.
 
c)     Lost or Mutilated Note.  If this Note shall be mutilated, lost, stolen or
destroyed, the Company shall execute and deliver, in exchange and substitution
for and upon cancellation of a mutilated Note, or in lieu of or in substitution
for a lost, stolen or destroyed Note, a new Note for the principal amount of
this Note so mutilated, lost, stolen or destroyed, but only upon receipt of
evidence of such loss, theft or destruction of such Note, and of the ownership
hereof, reasonably satisfactory to the Company, as well as an affidavit and
indemnification agreement in form and substance reasonably acceptable to the
Company.

 
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          d)  Governing Law.  All questions concerning the construction,
validity, enforcement and interpretation of this Note shall be governed by and
construed and enforced in accordance with the internal laws of the State of
Tennessee, without regard to the principles of conflict of laws thereof.  Each
party agrees that all legal proceedings concerning the interpretation,
enforcement and defense of the transactions contemplated by this Note (whether
brought against a party hereto or its respective Affiliates, directors,
officers, shareholders, employees or agents) shall be commenced in the state and
federal courts sitting in the City of Memphis (the “Memphis Courts”).  Each
party hereto hereby irrevocably submits to the exclusive jurisdiction of the
Memphis Courts for the adjudication of any dispute hereunder or in connection
herewith or with any transaction contemplated hereby or discussed herein
(including with respect to the enforcement of this Note), and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of such Memphis Courts, or
such Memphis Courts are improper or inconvenient venue for such
proceeding.  Each party hereby irrevocably waives personal service of process
and consents to process being served in any such suit, action or proceeding by
mailing a copy thereof via registered or certified mail or overnight delivery
(with evidence of delivery) to such party at the address in effect for notices
to it under this Note and agrees that such service shall constitute good and
sufficient service of process and notice thereof.  Nothing contained herein
shall be deemed to limit in any way any right to serve process in any other
manner permitted by applicable law. Each party hereto hereby irrevocably waives,
to the fullest extent permitted by applicable law, any and all right to trial by
jury in any legal proceeding arising out of or relating to this Note or the
transactions contemplated hereby. If either party shall commence an action or
proceeding to enforce any provisions of this Note, then the prevailing party in
such action or proceeding shall be reimbursed by the other party for its
attorney’s fees and other costs and expenses reasonably incurred in the
investigation, preparation and prosecution of such action or proceeding.
 
        e)  Waiver; Amendments.  Any waiver by the Company or the Holder of a
breach of any provision of this Note shall not operate as or be construed to be
a waiver of any other breach of such provision or of any breach of any other
provision of this Note.  The failure of the Company or the Holder to insist upon
strict adherence to any term of this Note on one or more occasions shall not be
considered a waiver or deprive that party of the right thereafter to insist upon
strict adherence to that term or any other term of this Note.  Any waiver by the
Company or the Holder must be in writing.  No waiver hereunder shall be
effective without the prior written consent of all holders of Notes.  This Note
shall not be directly or indirectly effectively modified or amended without the
prior written consent of all holders of Notes.
 
         f)  Third Party Beneficiary.  Each holder of Notes other than the
Holder shall be a third party beneficiary of this Note and may enforce the terms
of this Note, it being understood that such other holder(s) is/are materially
relying on the terms of this Note.
 
 
 
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          g)  Successors and Assigns.  This Note may be assigned by the
Holder.  The Note may not be assigned by the Company, except to a successor in
the event of a Fundamental Transaction.  The Note shall be binding on and inure
to the benefit of the parties thereto and their respective successors and
assigns.
 
          h)  Severability.  If any provision of this Note is invalid, illegal
or unenforceable, the balance of this Note shall remain in effect, and if any
provision is inapplicable to any Person or circumstance, it shall nevertheless
remain applicable to all other Persons and circumstances.
 
        i)  Next Business Day.  Whenever any payment or other obligation
hereunder shall be due on a day other than a Business Day, such payment shall be
made on the next succeeding Business Day.
 
          j)  Headings.  The headings contained herein are for convenience only,
do not constitute a part of this Note and shall not be deemed to limit or affect
any of the provisions hereof.
 
          k)  Assumption.  Any successor to the Company or any surviving entity
in a Fundamental Transaction shall (i) assume, prior to such Fundamental
Transaction, all of the obligations of the Company under this Note, the Loan
Agreement and Security Agreement pursuant to written agreements in form and
substance satisfactory to the Holder (such approval not to be unreasonably
withheld or delayed) and (ii) issue to the Holder a new Note of such successor
entity evidenced by a written instrument substantially similar in form and
substance to this Note, including, without limitation, having a principal amount
and interest rate equal to the principal amount and the interest rate of this
Note and having similar ranking to this Note, which shall be satisfactory to the
Holder (any such approval not to be unreasonably withheld or delayed).  The
provisions of this Section 6(i) shall apply similarly and equally to successive
Fundamental Transactions and shall be applied without regard to any limitations
of this Note.

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IN WITNESS WHEREOF, the Company has caused this Note to be duly executed by a
duly authorized officer as of the date first above indicated.
 
 

  GREEN BALLAST, INC.

 
 
 

  By:  /s/ Mary F. Sharp     Name:  Mary F. Sharp     Title:  Secretary