Exhibit 10.2

 

THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR OTHERWISE DISPOSED OF
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND
APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN APPLICABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH LAWS.

 

SUBORDINATED PROMISSORY NOTE

 

$1,719,706.50

May 16, 2009

 

FOR VALUE RECEIVED, the undersigned, Hy-Tech Machine, Inc., a Delaware
corporation (including its successors, the “Borrower”), hereby promises to pay
to the order of Hy-Tech Holdings, Inc., a Delaware corporation (successor in
interest by merger to Hy-Tech Machine, Inc., a Pennsylvania corporation) (the
“Holder”), in lawful money of the United States of America and in immediately
available funds the principal sum of One Million Seven Hundred Nineteen Thousand
Seven Hundred Six and Fifty One-Hundredths ($1,719,706.50) Dollars, together
with interest on the unpaid principal balance at the rate and on the terms and
conditions provided in this subordinated promissory note (the “Note”).

 

1.             ACQUISITION AGREEMENT.  THIS NOTE EVIDENCES PAYMENT OF A PORTION
OF THE PURCHASE PRICE PAYABLE UNDER THAT CERTAIN ASSET PURCHASE AGREEMENT, DATED
AS OF FEBRUARY 12, 2007 (THE “ORIGINAL PURCHASE AGREEMENT”), BY AND AMONG
HOLDER, QUALITY GEAR HOLDINGS, INC., A DELAWARE CORPORATION (SUCCESSOR IN
INTEREST BY MERGER TO QUALITY GEAR & MACHINE, INC., A PENNSYLVANIA CORPORATION
(TOGETHER WITH HOLDER, “SELLERS”), HTM ASSOCIATES, A PENNSYLVANIA GENERAL
PARTNERSHIP (“HTM”), ROBERT H. OBER, ELIZABETH SMAIL, JAMES J. BROWNE, DANIEL
BERG AND JAMES HOHMAN (COLLECTIVELY, THE “SHAREHOLDERS”) AND HY-TECH MACHINE,
INC., A DELAWARE CORPORATION (“BORROWER”), AS AMENDED BY THAT CERTAIN AMENDMENT
NO. 1 TO THE ORIGINAL PURCHASE AGREEMENT, DATED AS OF JUNE 26, 2009, BY AND
BETWEEN THE SELLERS, HTM, THE SHAREHOLDERS AND BORROWER (THE “AMENDED PURCHASE
AGREEMENT”). THIS NOTE IS THE PROMISSORY NOTE REFERRED TO IN THE AMENDED
PURCHASE AGREEMENT. UNLESS OTHERWISE DEFINED HEREIN, CAPITALIZED TERMS USED IN
THIS NOTE HAVE THE SAME MEANINGS SET FORTH IN THE AMENDED PURCHASE AGREEMENT.

 

2.             INTEREST; PRINCIPAL.  INTEREST ON THE UNPAID PRINCIPAL BALANCE OF
THIS NOTE SHALL ACCRUE (I) FROM THE DATE HEREOF AT THE RATE OF SIX (6.0%)
PERCENT PER ANNUM, (II) FROM AND AFTER ANY PAYMENT DATE, AS DEFINED HEREIN, BY
WHICH THE APPLICABLE INSTALLMENT PAYMENT, AS DEFINED HEREIN, HAS NOT BEEN MADE
AND CONTINUING UNTIL SUCH INSTALLMENT PAYMENT IS MADE, OR DURING THE CONTINUANCE
OF AN EVENT OF DEFAULT PURSUANT TO SECTION 6(B), (C), (D) OR (E), AT THE RATE
SET FORTH IN (I) PLUS SIX (6.0%) PERCENT, OR (III) IF LESS THAN THE RATES
APPLICABLE UNDER (I) AND (II), THE MAXIMUM RATE PERMITTED BY LAW.  INTEREST
SHALL BE CALCULATED ON THE BASIS OF A 365 DAY YEAR FOR THE ACTUAL DAYS ELAPSED. 
THE BORROWER SHALL PAY TO THE HOLDER ALL ACCRUED INTEREST ON EACH PAYMENT DATE
(AS DEFINED BELOW). SUBJECT TO THE TERMS AND CONDITIONS HEREOF, THE BORROWER
SHALL REPAY THE OUTSTANDING PRINCIPAL SUM HEREUNDER IN SIX (6) INSTALLMENTS OF
TWO HUNDRED EIGHTY SIX THOUSAND SIX HUNDRED EIGHTEEN ($286,618) DOLLARS (EACH,
AN “INSTALLMENT PAYMENT”) ON EACH OF THE DATES SET FORTH BELOW (EACH, A “PAYMENT
DATE”):

 

AUGUST 16, 2009;

NOVEMBER 16, 2009;

FEBRUARY 16, 2010;

MAY 16, 2010;

AUGUST 16, 2010; AND

NOVEMBER 16, 2010.

 

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If any such interest or principal payment is not permitted to be made under the
Subordination Agreement (as defined below), such amounts shall be paid on the
first Business Day that such payment is permitted to be made under the
Subordination Agreement.

 

3.             MANNER AND APPLICATION OF PAYMENT.  IF A PAYMENT TO BE MADE BY
THE BORROWER HEREUNDER SHALL BECOME DUE ON A SATURDAY, SUNDAY OR BANK HOLIDAY IN
EITHER NEW YORK CITY, NEW YORK, OR PITTSBURGH, PENNSYLVANIA, SUCH PAYMENT SHALL
BE MADE ON THE NEXT SUCCEEDING DAY THAT IS A BUSINESS DAY IN BOTH OF THE
ABOVE-REFERENCED CITIES.  ALL PAYMENTS OF PRINCIPAL AND INTEREST SHALL BE MADE
TO THE HOLDER IN IMMEDIATELY AVAILABLE FUNDS TO AN ACCOUNT DESIGNATED BY THE
HOLDER IN WRITING. ANY PAYMENT MADE HEREUNDER SHALL BE APPLIED FIRST TO COSTS
AND EXPENSES DUE HEREUNDER, THEN TO ACCRUED INTEREST AND THEREAFTER TO
PRINCIPAL.

 

4.             PREPAYMENT.  SUBJECT TO THE SUBORDINATION AGREEMENT,  BORROWER
MAY AT ITS OPTION, PREPAY THE OUTSTANDING PRINCIPAL BALANCE OF THIS NOTE, IN
WHOLE OR IN PART, AT ANY TIME OR, FROM TIME TO TIME, WITHOUT PREMIUM OR PENALTY;
PROVIDED, THAT ANY SUCH PREPAYMENT SHALL ALSO INCLUDE ALL ACCRUED BUT UNPAID
INTEREST ON THE NOTE THROUGH THE REPAYMENT DATE.

 

5.             SUBORDINATION.  ALL OBLIGATIONS UNDER THIS NOTE ARE SUBJECT TO
THE TERMS OF A SUBORDINATION AGREEMENT, DATED ON OR ABOUT JUNE 26, 2009, AMONG
THE BORROWER, THE HOLDER AND CITIBANK, N.A., AS ADMINISTRATIVE AGENT (AS
AMENDED, RESTATED, SUPPLEMENTED OR MODIFIED, FROM TIME TO TIME (THE
“SUBORDINATION AGREEMENT”).

 

6.             DEFAULT.  EACH OF THE FOLLOWING EVENTS SHALL BE AN “EVENT OF
DEFAULT” HEREUNDER:

 

(A)           THE BORROWER FAILS TO PAY ANY OF THE PRINCIPAL, INTEREST OR ANY
OTHER AMOUNTS PAYABLE UNDER THIS NOTE WHEN AND AS THE SAME BECOMES DUE AND
PAYABLE, WHICH IS NOT CURED WITHIN FIFTEEN (15) DAYS OF SUCH NONPAYMENT, EXCEPT
TO THE EXTENT SUCH PAYMENT IS NOT PERMITTED UNDER THE SUBORDINATION AGREEMENT;

 

(B)           THE BORROWER FILES ANY PETITION OR ACTION FOR RELIEF UNDER ANY
BANKRUPTCY, REORGANIZATION, INSOLVENCY OR MORATORIUM LAW OR ANY OTHER LAW FOR
THE RELIEF OF, OR RELATING TO, DEBTORS, NOW OR HEREAFTER IN EFFECT, OR SEEKS THE
APPOINTMENT OF A CUSTODIAN, RECEIVER, TRUSTEE (OR OTHER SIMILAR OFFICIAL) OF THE
BORROWER OR ALL OR ANY SUBSTANTIAL PORTION OF THE BORROWER’S ASSETS, OR MAKES
ANY ASSIGNMENT FOR THE BENEFIT OF CREDITORS OR TAKES ANY ACTION IN FURTHERANCE
OF ANY OF THE FOREGOING, OR FAILS TO GENERALLY PAY ITS DEBTS AS THEY BECOME DUE;

 

(C)           AN INVOLUNTARY PETITION IS FILED, OR ANY PROCEEDING OR CASE IS
COMMENCED, AGAINST THE BORROWER (UNLESS SUCH PROCEEDING OR CASE IS DISMISSED OR
DISCHARGED WITHIN SIXTY (60) DAYS OF THE FILING OR COMMENCEMENT THEREOF) UNDER
ANY BANKRUPTCY, REORGANIZATION, ARRANGEMENT, INSOLVENCY, ADJUSTMENT OF DEBT,
LIQUIDATION OR MORATORIUM STATUTE NOW OR HEREAFTER IN EFFECT, OR A CUSTODIAN,
RECEIVER, TRUSTEE, ASSIGNEE FOR THE BENEFIT OF CREDITORS (OR OTHER SIMILAR
OFFICIAL) IS APPLIED FOR, APPOINTED FOR THE BORROWER OR TO TAKE POSSESSION,
CUSTODY OR CONTROL OF ANY PROPERTY OF THE BORROWER, OR AN ORDER FOR RELIEF IS
ENTERED AGAINST THE BORROWER IN ANY OF THE FOREGOING;

 

(D)           THE BORROWER SHALL FAIL TO PERFORM ANY MATERIAL COVENANT,
CONDITION OR AGREEMENT UNDER THIS NOTE; OR

 

(E)           ANY REPRESENTATION OR WARRANTY MADE OR DEEMED MADE BY THE BORROWER
UNDER THIS NOTE SHALL HAVE BEEN FALSE OR MISLEADING IN ANY MATERIAL RESPECT WHEN
MADE OR DEEMED MADE;

 

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7.             REMEDIES.  UPON THE OCCURRENCE AND DURING THE CONTINUANCE OF AN
EVENT OF DEFAULT HEREUNDER:

 

(A)           ALL UNPAID PRINCIPAL, ACCRUED INTEREST AND OTHER AMOUNTS OWING
HEREUNDER SHALL, AT THE OPTION OF THE HOLDER, BE IMMEDIATELY DUE, PAYABLE AND
COLLECTIBLE BY THE HOLDER PURSUANT TO APPLICABLE LAW;

 

(B)           ANY AND ALL UNPAID PRINCIPAL, INTEREST OR OTHER AMOUNTS DUE UNDER
THIS NOTE SHALL THEREAFTER BEAR INTEREST AT THE MAXIMUM RATE SET FORTH IN
SECTION 2 HEREOF; AND

 

(C)           THE HOLDER MAY EXERCISE ANY AND ALL RIGHTS AND REMEDIES IT MAY
HAVE UNDER THIS NOTE OR UNDER APPLICABLE LAW.

 

All rights and remedies shall be cumulative and not exclusive.  The failure of
the holder hereof to exercise all or any of its rights, remedies, powers or
privileges hereunder or applicable law in any instance shall not constitute a
waiver thereof in that or any other instance.

 

8.             GOVERNING LAW; CONSENT TO JURISDICTION.  THIS NOTE AND ANY
DISPUTES HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO ANY CHOICE OR
CONFLICT OF LAW PROVISION OR RULE (WHETHER OF THE STATE OF NEW YORK OR ANY OTHER
JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF LAWS OF ANY JURISDICTION OTHER
THAN THOSE OF THE STATE OF NEW YORK.  EACH OF THE BORROWER AND THE HOLDER (A)
SUBMITS TO THE EXCLUSIVE JURISDICTION OF ANY STATE OR FEDERAL COURT SITTING IN
NEW YORK, NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO
THIS NOTE, (B) AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING
MAY BE HEARD AND DETERMINED ONLY IN ANY SUCH COURT, (C) WAIVES ANY CLAIM OF
INCONVENIENT FORUM OR OTHER CHALLENGE TO VENUE IN SUCH COURT, AND (D) AGREES NOT
TO BRING ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS NOTE IN ANY
OTHER COURT.

 

9.             SUCCESSORS AND ASSIGNS.  THIS NOTE AND ALL OBLIGATIONS OF THE
BORROWER HEREUNDER SHALL BE BINDING UPON THE SUCCESSORS AND ASSIGNS OF THE
BORROWER, AND SHALL, TOGETHER WITH THE RIGHTS AND REMEDIES OF THE HOLDER
HEREUNDER, INURE TO THE BENEFIT OF THE HOLDER, ANY FUTURE HOLDER OF THIS NOTE
AND THEIR RESPECTIVE SUCCESSORS AND ASSIGNS, PROVIDED, HOWEVER, THE BORROWER MAY
NOT TRANSFER OR ASSIGN ITS RIGHTS OR OBLIGATIONS HEREUNDER WITHOUT THE EXPRESS
WRITTEN CONSENT OF THE HOLDER, WHICH CONSENT MAY NOT BE UNREASONABLY WITHHELD OR
DELAYED AND ANY PURPORTED TRANSFER OR ASSIGNMENT BY THE BORROWER WITHOUT THE
HOLDER’S WRITTEN CONSENT SHALL BE NULL AND VOID. THE HOLDER MAY ASSIGN,
TRANSFER, PARTICIPATE OR ENDORSE ITS RIGHTS UNDER THIS NOTE.  UPON REQUEST, THE
BORROWER SHALL, AT THE EXPENSE OF THE HOLDER, EXECUTE AND DELIVER TO THE
ASSIGNEE OF THIS NOTE, A REPLACEMENT NOTE OF EQUAL AND LIKE TENOR IN AN AMOUNT
ASSIGNED TO AND ASSUMED BY SUCH ASSIGNEE.

 

10.           WAIVER OF JURY TRIAL.  THE BORROWER AND THE HOLDER EACH WAIVES ITS
RIGHT TO A JURY TRIAL WITH RESPECT TO ANY ACTION OR CLAIM ARISING OUT OF ANY
DISPUTE IN CONNECTION WITH THIS NOTE, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THE
PERFORMANCE OF ANY SUCH RIGHTS OR OBLIGATIONS.  THE BORROWER (I) CERTIFIES THAT
NEITHER THE HOLDER NOR ANY REPRESENTATIVE, AGENT OR ATTORNEY OF THE HOLDER HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT THE HOLDER WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS AND (II) ACKNOWLEDGES THAT, IN
ENTERING INTO THIS NOTE, THE HOLDER IS RELYING UPON, AMONG OTHER THINGS, THE
FOREGOING WAIVERS AND CERTIFICATIONS.

 

11.           ENTIRE AGREEMENT; AMENDMENTS; INVALIDITY.  THIS NOTE, THE AMENDED
PURCHASE AGREEMENT, THE SUBORDINATION AGREEMENT, THE SECURITY AGREEMENT AND THE
MORTGAGE CONSTITUTE THE ENTIRE AGREEMENT AND UNDERSTANDING OF THE PARTIES, AND
SUPERSEDE AND REPLACE IN THEIR ENTIRETY ANY PRIOR DISCUSSIONS, AGREEMENTS, ETC.,
ALL OF WHICH ARE MERGED HEREIN AND THEREIN.  NONE OF THE TERMS OF THIS NOTE

 

3

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MAY BE AMENDED OR OTHERWISE MODIFIED EXCEPT BY AN INSTRUMENT EXECUTED BY EACH OF
THE BORROWER AND THE HOLDER. IF ANY TERM OF THIS NOTE SHALL BE HELD TO BE
INVALID, ILLEGAL OR UNENFORCEABLE, THE VALIDITY OF ALL OTHER TERMS HEREOF SHALL
IN NO WAY BE AFFECTED THEREBY, AND THIS NOTE SHALL BE CONSTRUED AND BE
ENFORCEABLE AS IF SUCH INVALID, ILLEGAL OR UNENFORCEABLE TERM HAD NOT BEEN
INCLUDED HEREIN.

 

12.           NOTICES.  ALL NOTICES, DEMANDS AND OTHER COMMUNICATIONS PROVIDED
FOR OR PERMITTED HEREUNDER SHALL BE MADE IN WRITING AS SET FORTH IN THE AMENDED
PURCHASE AGREEMENT.

 

13.           COUNTERPARTS.  THIS NOTE MAY BE EXECUTED IN ANY NUMBER OF
COUNTERPARTS (INCLUDING BY FACSIMILE), ALL OF WHICH TAKEN TOGETHER SHALL
CONSTITUTE ONE AND THE SAME INSTRUMENT AND ANY OF THE PARTIES HERETO MAY EXECUTE
THIS NOTE BY SIGNING ANY SUCH COUNTERPART SIGNATURE PAGE OR COUNTERPART.

 

[Signature page follows on next page.]

 

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IN WITNESS WHEREOF, the Borrower has caused this Note to be duly executed as of
the date first above written.

 

 

HY-TECH MACHINE, INC.

 

 

 

 

 

 

By:

/s/ Joseph A. Molino, Jr.

 

Name:

Joseph A. Molino, Jr.

 

Title:

Vice President

 

 

GUARANTY

 

For good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, and pursuant to that certain Guaranty executed as of
February 12, 2007, P&F Industries, Inc., a Delaware corporation, hereby
guarantees the prompt and faithful performance of all of the Borrower’s
obligations under the terms of the foregoing Note.  This Guaranty has been
executed as of the date first set forth above.

 

P&F INDUSTRIES, INC.

 

 

By:

/s/ Joseph A. Molino, Jr.

 

Name:

Joseph A. Molino, Jr.

 

Title:

Vice President, Chief Operating Officer and Chief Financial Officer

 

 

ACKNOWLEDGMENT

 

The undersigned hereby acknowledges and agrees to the terms of this Note, as of
the date first set forth above.

 

HY-TECH HOLDINGS, INC.

 

 

By:

/s/ Robert Ober

 

Name:

Robert Ober

 

Title:

President

 

 

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