Document:

aeti-ex102_96.htm

 

Exhibit 10.2 

 

THE SECURITY REPRESENTED HEREBY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES LAWS OF ANY STATE (COLLECTIVELY, THE “LAWS”).  THE SECURITY MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF EITHER (I) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITY UNDER THE APPLICABLE LAWS OR (II) AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE ISSUER, IN FORM, SUBSTANCE AND SCOPE REASONABLY ACCEPTABLE TO THE ISSUER, TO THE EFFECT THAT SUCH REGISTRATION IS NOT REQUIRED DUE TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE APPLICABLE LAWS.

 

 

DATE OF ISSUANCE: As of March 23, 2017

 

$6,500,000.00

 

AMERICAN ELECTRIC TECHNOLOGIES, INC., 

M&I ELECTRIC INDUSTRIES, INC. 

AND 

SOUTH COAST ELECTRIC SYSTEMS, LLC

 

 

AMENDED AND RESTATED SENIOR SECURED TERM NOTE 

 

 

This Amended and Restated Senior Secured Term Note (the “Note”) is jointly issued by American Electric Technologies, Inc., a Florida corporation, M&I Electric Industries, Inc., a Texas corporation, and South Coast Electric Systems, LLC, a Delaware limited liability company (each a “Borrower;” collectively, the “Borrowers”), pursuant to that certain Note Purchase Agreement (the “NPA”) dated March 23, 2017, and that certain Transaction Modification Agreement (the “TMA”) dated concurrently herewith, in each case by and among the Borrowers and HD Special-Situations III, LP (the “Lender”).  Capitalized terms used herein and not otherwise defined shall have the meanings set forth in the NPA and the TMA. 

 

1.Payment Obligation.   

 

(a)For value received, the Borrowers jointly and severally promise to pay to the Lender or its permitted successors and assigns as to this Note (collectively, the “Holder”), (i) the principal amount of Six Million Five Hundred Thousand Dollars ($6,500,000.00) and (ii) interest on the outstanding principal amount at the rate of eleven and a half percent (11.5%) per annum (the “Rate”), payable as described below.  The principal amount of this Note, together with all accrued and unpaid interest, shall be due and payable forty-eight (48) months after the “Date of Issuance” shown above (the “Maturity Date”); provided, however, that:

 

 

 

 

(i)   the Maturity Date may be extended up to two (2) times by twelve (12) months each time, in each case upon the written consent of the Holder and the Borrowers, in their sole discretion;  

 

(ii)   that in the event of the occurrence of an Event of Default, including any Event of Default based on a failure to meet the CCR required by the NPA, the Borrowers shall collectively pay monthly principal amortization payments on this Note that are the greater of (A) seventy-five percent (75%) of the monthly Free Cash Flow (as defined below) or (B) Seventy-five Thousand Dollars ($75,000.00), such payments to continue until the Event of Default has been cured or waived or all principal with respect to this Note has been paid in full.  For purposes of the foregoing, “Free Cash Flow” shall mean AETI’s consolidated EBITDA (in accordance with GAAP) during the applicable (i.e. preceding) month, minus interest, capital expenditures not to exceed $83,333.00 for any month during 2017 and any calendar year thereafter, and cash taxes paid for that month, all determined on a consolidated basis.  During such time as payments are owed by the Borrowers under this clause (ii), the Borrowers shall calculate such Free Cash Flow and shall collectively pay such amount as is owed under this clause within five (5) business days (as defined in the NPA) after the end of the succeeding month.  Such remedy shall be in addition to all other rights and remedies available to the Holder under the Closing Documents, as well as any other rights or remedies afforded by law or equity; and 

 

(iii)concurrent with the interest payment due hereunder for the month of April 2018 and continuing with each monthly interest payment thereafter until this Note has been paid in full, the Borrower shall also amortize the principal amount of this Note by including a payment of at least Thirty Thousand Dollars ($30,000.00).

 

(b)Interest on this Note in the amount of Nineteen Thousand Four Hundred Seventy-five and 81/100 Dollars ($19,475.81), representing pro-rated interest for the period from the Closing Date through March 31, 2017, shall be pre-paid by the Borrowers upon execution hereof (which pre-payment shall be non-refundable); thereafter, monthly interest on the outstanding principal amount of this Note shall be due and payable monthly in arrears on the first business day of each month during the period that this Note remains outstanding, commencing on May 1, 2017.  Accrual of interest on the outstanding principal amount shall commence on the “Date of Issuance” shown above and shall continue until full payment of the outstanding principal amount has been made or duly provided for. 

 

(c)The Borrowers may prepay all or any portion of the outstanding principal amount of this Note at any time upon thirty (30) days prior written notice to the Holder.  If one or more prepayments aggregating in excess of $1,500,000.00 (the “Prepayment Threshold”) are made on this Note within one year of the Date of Issuance (the “Make-Whole Period”), the prepayment which causes the Prepayment Threshold to be exceeded shall be accompanied by a make-whole payment equivalent to a 11.5% annual yield on the pre-paid amount that is in excess of the Prepayment Threshold for the portion of the Make-Whole Period that will remain after the date that the prepayment is made (with such calculation to exclude any fees paid to the Holder).  For example, if $3,750,000.00 of the principal amount of this Note is paid in full exactly six months 

 

 

after the Date of Issuance (leaving six months left in the Make-Whole Period), the make-whole payment required by this paragraph shall be $158,125.00.  Any amortization payment required under any provision of this Note shall not be considered a “prepayment” for purposes of this paragraph. 

 

2.Provisions as to Payment.  

 

(a)Payments on this Note are payable to the Holder in whose name this Note (or one or more successor Notes) is registered on the records of the Borrowers regarding registration and transfer of this Note (the “Note Register”); provided, however, that the Borrowers’ obligations to a transferee of this Note arise only if such transfer is made in accordance with the terms and conditions of the NPA.  

 

(b)Payments on this Note are payable in immediately available funds in currency of the United States of America at the address last appearing on the Note Register of the Borrowers as designated in writing by the Holder hereof from time-to-time.  The Borrowers shall collectively pay the outstanding principal amount and all accrued and unpaid interest due upon this Note on the Maturity Date, less any amounts required by law to be deducted or withheld, to the Holder of this Note appearing of record as of the fifth business day prior to the Maturity Date and addressed to such Holder at the last address appearing on the Note Register. The forwarding of such funds shall constitute full payment of all outstanding principal and accrued interest hereunder and shall satisfy and discharge the liability for principal and interest on this Note to the extent of such payment plus any amounts so deducted or withheld.  Unless otherwise expressly provided herein, all payments shall be credited first to reimburse the Holder for any cost or expense reimbursable hereunder, then to the payment of accrued interest, and finally to the payment of principal.

 

3.Transfer of Note; Restrictions. 

 

(a)      The Holder understands and acknowledges by its acceptance hereof that (i) this Note has not been, and is not being, registered under the 1933 Act or any state securities laws, and may not be offered for sale, sold, assigned or transferred except as provided in the NPA and (ii) no Borrower or any other individual or entity is under any obligation to register this Note under the 1933 Act or any state securities laws or to comply with the terms and conditions of any exemption thereunder.  By acceptance of this Note, the Holder agrees to be subject to and bound by all of the agreements between the Borrowers and the Lender set forth in the NPA.  

 

(b)       Prior to presentation of this Note for transfer, the Borrowers and any agent of the Borrowers may treat the person in whose name this Note is duly registered on the Note Register as the Holder hereof for the purpose of receiving payments as herein provided and for all other purposes, whether or not this Note be overdue, and no Borrower or any such agent shall be affected or bound by notice to the contrary. 

 

4.Obligations of the Borrowers Herein Are Unconditional.   The Borrowers’ joint and several obligations to repay this Note at the time, place, interest rate and in the currency hereinabove stated is absolute and unconditional.  This Note and all other instruments now or hereafter issued in replacement of this Note on the same or similar terms are direct obligations of 

 

 

each of the Borrowers.

 

5.Waiver of Demand, Presentment, etc.   To the extent permitted by law, the Borrowers hereby expressly waive demand and presentment for payment, notice of nonpayment, protest, notice of protest, notice of dishonor, bringing of suit and diligence in taking any action to collect amounts called for hereunder and shall be directly and primarily liable for the timely payment of all sums owing and to be owing hereunder, regardless of and without any notice, diligence, act or omission as or with respect to the collection of any amount called for herein.  No delay or omission of the Holder in exercising any right or remedy hereunder shall constitute a waiver of any such right or remedy.  A waiver on one occasion shall not operate as a bar to, or waiver of, any such right or remedy on any future occasions.

 

6.Attorneys’ Fees; Reimbursable Expenses.  In the event it should become necessary for the Holder to engage counsel to enforce this Note, the Borrowers jointly and severally agree to pay the reasonable attorneys’ fees and costs of the Holder, irrespective of whether suit is brought, including, without limitation, any and all pre-judgment and post-judgment attorneys’ fees and costs incurred (including, without limitation, fees and costs reasonably incurred in connection with any matter arising under Title 11 of the United States Code).  In addition, the Borrowers jointly and severally agree to pay for all of the Holder’s other reasonable and customary out-of-pocket costs incurred in connection with the enforcement of this Note, including, without limitation, all of the Holder’s consultants’ fees, appraisers’ fees, accountants’ fees, and trustee’s fees.

 

7.Events of Default.    Each of the following shall constitute an “Event of Default” under this Note:

 

(a)the Borrowers shall fail to make timely payment of any amount of principal or interest then due and owing under this Note or any Borrower shall itself provide the Holder with written notice that one or more of the Borrowers has failed to perform or observe any term,  condition, agreement or obligation under any of the Closing Documents;

 

(b)except as covered by clause (a) above, a Borrower shall fail to make timely payment of any amount then due and owing under any of the Closing Documents to which it is a party, and the same shall continue uncured for a period of three (3) business days after the date payment became due;

 

(c)except as covered by clause (a) above, any of the representations or warranties made by a Borrower in any of the Closing Documents, or in any certificate or other written statement heretofore or hereafter furnished by or on behalf of a Borrower in connection with any of the Closing Documents, shall be false or misleading in any material respect at the time made and the Holder shall have provided written notice to that Borrower of the alleged misrepresentation or breach of warranty and the same shall continue uncured for a period of fifteen (15) business days after the Borrower’s receipt of such written notice;  

 

 

 

(d)if a Borrower shall fail to perform or observe, in any material respect, any term,  

 

 

condition, agreement or obligation under any of the Closing Documents not covered by clause (a), (b) or (c) above and the Holder shall have provided written notice to that Borrower of the alleged failure and the same shall continue uncured for a period of thirty (30) days after the Borrower’s receipt of such written notice, unless such default cannot reasonably be cured within such thirty (30) day period, in which case, no Event of Default shall be deemed to have occurred so long as the Borrower commences to cure such default within such thirty (30) day period and diligently pursues such cure to completion within sixty (60) days of the Borrower’s receipt of such written notice; 

 

(e)a Borrower shall (i) become insolvent, (ii) admit in writing its inability to pay its debts generally or as they become due, (iii) make an assignment for the benefit of creditors or commence proceedings for its dissolution or (iv) apply for, or consent to the appointment of, a trustee, liquidator, or receiver for all or a substantial part of its property or business;

 

(f)a trustee, liquidator or receiver shall be appointed for a Borrower, or for a substantial part of its property or business, without its consent and such appointment is not discharged within sixty (60) days after such appointment; 

 

(g)any governmental agency, or any court of competent jurisdiction at the instance of any governmental agency, shall assume custody or control of the whole or any substantial portion of the assets of a Borrower and such custody or control shall not be released within sixty (60) days thereafter; 

 

(h)any final money judgment, writ of attachment, or similar process in excess of Two Hundred Fifty Thousand Dollars ($250,000) in the aggregate (and not covered by insurance) shall be entered against a Borrower, or any of its assets, and shall remain unpaid, unvacated, unbonded or unstayed for a period of thirty (30) business days after the entry date thereof or an appeal or appropriate proceeding for review thereof is taken within such period and a stay of execution pending such appeal is obtained; 

 

(i)bankruptcy, reorganization, insolvency or liquidation proceedings or other proceedings for relief under any bankruptcy law or any law for the relief of debtors shall be instituted by or against a Borrower and, if instituted against a Borrower, shall not be dismissed within sixty (60) days after such institution, or a Borrower shall by any action or answer approve of, consent to, or acquiesce in any such proceedings or admit the material allegations of, or default in answering a petition filed in, any such proceeding; 

 

(j)the occurrence of any event of default or other event triggering acceleration of, or a right to accelerate, any indebtedness by a Borrower, or any of its subsidiaries, under any note, agreement or other instrument, whether such indebtedness now exists or is hereafter created, if such indebtedness is not subject to a subordination agreement with the Holder and the principal amount of such indebtedness exceeds, individually or in the aggregate, Two Hundred Fifty Thousand Dollars ($250,000); or

 

 

(k)the Holder reasonably believes that there has been a material adverse change in (i) any of the assets, liabilities, sales, financial condition, business or operations of the Borrowers 

 

 

and their subsidiaries (taken as a whole), (ii) the Borrowers’ ability (taken as a whole) to repay this Note or (iii) the Holder’s rights and remedies under the Closing Documents.

 

At any time during the occurrence of an Event of Default, and in each and every such case, unless such Event of Default shall have been cured or waived in writing by the Holder, in its sole discretion (which waiver in one instance shall not be deemed to be a waiver in another instance or for any other prior or subsequent Event of Default), at the option of the Holder and in the Holder’s sole discretion, the Holder may immediately accelerate the maturity hereof, whereupon all principal and accrued interest hereunder shall be immediately due and payable, without presentment, demand, protest or notice of any kind, all of which are hereby expressly waived by the Borrowers (anything herein or in any other instrument to the contrary notwithstanding) and the Holder may immediately enforce any and all of its rights and remedies provided herein or in any of the other applicable Closing Documents, or any other rights or remedies afforded by law or equity.  During the continuance of an Event of Default, the Rate shall automatically increase by four percent (4.0%), which shall be imposed retroactively to the first day of the month in which the Event of Default was reported until the first date thereafter upon which there shall be no Event of Default.  For avoidance of doubt, if an Event of Default occurred in January and such Event of Default is disclosed in the Borrowers’ monthly financial statements delivered to the Lender on February 15, then the default rate of interest provided for herein shall apply to the outstanding principal of this Note as of February 1 through the first date thereafter upon which there shall be no Event of Default.

 

8.Security.    Repayment of this Note is secured by the Security Agreements, the Deed of Trust, the Pledge Agreement and/or any other agreements now or hereafter entered into by a Borrower or any other individual or entity to secure and/or guarantee the payment of this Note.  Therefore, an Event of Default under the terms of this Note shall be grounds for enforcement of the Holder’s rights under the Security Agreements, the Deed of Trust, the Pledge Agreement and/or any such other agreements.

 

9.Enforceability; Maximum Interest Rate.

 

(a)In case any provision of this Note is held by a court of competent jurisdiction to be excessive in scope or otherwise invalid or unenforceable, such provision shall be adjusted rather than voided, if possible, so that it is enforceable to the maximum extent possible, and the validity and enforceability of the remaining provisions of this Note shall not in any way be affected or impaired thereby.  

 

(b)Notwithstanding anything to the contrary contained in this Note, the Borrowers shall not be obligated to pay, and the Holder shall not be entitled to charge, collect, receive, reserve or take interest (“interest” being defined, for purposes of this paragraph, as the aggregate of all charges which constitute interest under applicable law that are contracted for, charged, reserved, received or paid under this Note) in excess of the maximum rate allowed by applicable law (the “Maximum Lawful Rate”).  During any period of time in which the Rate exceeds such Maximum Lawful Rate, interest shall accrue and be payable only at such Maximum Lawful Rate; provided, however, that if at any time thereafter the Rate is less than the Maximum Lawful Rate, the Borrowers shall, to the extent permitted by law, continue to pay interest to the account of the Holder at the Maximum Lawful Rate until such time as the total interest received by the 

 

 

Holder is equal to the total interest which the Holder would have received had the Rate been (but for the operation of this provision) the interest rate payable.  Thereafter, the interest rate payable for the account of the Holder shall be the Rate unless and until the Rate again would exceed the Maximum Lawful Rate, in which event this provision shall again apply.  In no event shall the total interest received by the Holder exceed the amount which the Holder could lawfully have received had the interest been calculated for the term during which the Holder actually received interest from the Borrowers at the Maximum Lawful Rate.  If the Holder has received interest hereunder in excess of the Maximum Lawful Rate, such excess amount shall be applied to the reduction of the principal balance hereof or to other amounts (other than interest) payable hereunder to the Holder, and if no such principal or other amounts are then outstanding, such excess or part thereof remaining shall be repaid by the Holder to the Borrowers.  For purposes of this Section, the term “applicable law” shall mean the laws of  California (without giving effect to applicable principles of conflict of law), and to the extent controlling, laws of the United States of America. 

 

10.Entire Agreement.  This Note, together with the other applicable Closing Documents and any exhibits or schedules attached thereto, and any addenda to any of the foregoing, constitute the full and entire understanding between the Borrowers and the Holder with respect to the subject matter hereof and thereof and supersede all prior negotiations, agreements and understandings, written or oral, with respect to such subject matter.  No provision of this Note shall be amended, waived, discharged or terminated other than by a written instrument signed by the Borrowers and the Holder.

 

11.Governing Law.     This Note shall be governed by and construed in accordance with the laws of California without giving effect to applicable principles of conflict of law. 

 

  12.Headings.   The headings of this Note are for convenience of reference and shall not form a part of, or affect the interpretation of, this Note.  

 

13.Successors and Permitted Assigns. The Borrowers shall not assign any of their rights or obligations hereunder and any such assignment shall be absolutely void.  Subject to the transfer restrictions contained in the NPA, the Holder may assign and/or participate any of its interest in this Note to any individual or entity.  Each reference herein to powers or rights of the Holder shall also be deemed a reference to the same power or right of such assignees, to the extent of the interest assigned to them. All the covenants, agreements, representations and warranties contained in this Note shall bind the Borrowers and the Holder and their respective administrators, distributees, successors and permitted assigns, including any individual or entity to whom the Holder has granted a participation interest in this Note.

 

14.No Strict Construction.  The Borrowers agree that they have had sufficient opportunity to review and comment on the provisions of this Note.  As a result, any uncertainty or ambiguity existing herein shall not be interpreted against the Borrowers or the Holder. 

 

15.Waiver of Jury Trial.  THE BORROWERS AND THE HOLDER EACH WAIVE, TO THE EXTENT PERMITTED BY LAW, ANY RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING RELATING TO THIS NOTE. 

 

 

 

IN WITNESS WHEREOF, the Borrowers have caused this Note to be duly executed by their authorized persons as of the Date of Issuance.

 

The Borrowers:

 

	

	
             

	
 
	
 
	
AMERICAN ELECTRIC TECHNOLOGIES, INC.

	
 
	
 
	
 
	
 

	
Date: November 13, 2017
	
 
	
 
	
 
	
By: 
	
 
	
/s/ Charles M. Dauber

	
 
	
 
	
 
	
 
	
 
	
 
	
Charles M. Dauber

	
 
	
 
	
 
	
 
	
 
	
 
	
President and CEO

	
Date: November 13, 2017
	
 
	
 
	
 
	
By: 
	
 
	
/s/ William B. Brod

	
 
	
 
	
 
	
 
	
 
	
 
	
William B. Brod

	
 
	
 
	
 
	
 
	
 
	
 
	
Senior Vice President and CFO

 

	
 
	
 
	
M&I ELECTRIC INDUSTRIES, INC.

	
 
	
 
	
 
	
 

	
Date: November 13, 2017
	
 
	
 
	
 
	
By: 
	
 
	
/s/ Charles M. Dauber

	
 
	
 
	
 
	
 
	
 
	
 
	
Charles M. Dauber

	
 
	
 
	
 
	
 
	
 
	
 
	
President and CEO

	
Date: November 13, 2017
	
 
	
 
	
 
	
By: 
	
 
	
/s/ William B. Brod

	
 
	
 
	
 
	
 
	
 
	
 
	
William B. Brod

	
 
	
 
	
 
	
 
	
 
	
 
	
Senior Vice President and CFO

	
 
	
 
	
 

SOUTH COAST ELECTRIC SYSTEMS, LLC.

	
 
	
 
	
 
	
 

	
Date: November 13, 2017
	
 
	
 
	
 
	
By: 
	
 
	
/s/ Charles M. Dauber

	
 
	
 
	
 
	
 
	
 
	
 
	
Charles M. Dauber

	
 
	
 
	
 
	
 
	
 
	
 
	
President and CEO

	
Date: November 13, 2017
	
 
	
 
	
 
	
By: 
	
 
	
/s/ William B. Brod

	
 
	
 
	
 
	
 
	
 
	
 
	
William B. Brod

	
 
	
 
	
 
	
 
	
 
	
 
	
Senior Vice President and CFOaeti-ex103_94.htm

 

Exhibit 10.3 

 

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES LAWS OF ANY STATE (COLLECTIVELY, THE “LAWS”). THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF EITHER (I) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE APPLICABLE LAWS OR (II) AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE ISSUER IN FORM, SUBSTANCE AND SCOPE REASONABLY ACCEPTABLE TO THE ISSUER, TO THE EFFECT THAT SUCH REGISTRATION IS NOT REQUIRED DUE TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE APPLICABLE LAWS.

 

 

AMERICAN ELECTRIC TECHNOLOGIES, INC.

 

WARRANT TO PURCHASE COMMON STOCK

 

     Warrant No.                                                             Number of Shares: 500,000                         

 

Date of Issuance: November 13, 2017

 

American Electric Technologies, Inc., a Florida corporation (the “Company”), hereby certifies that, for value received, HD Special-Situations III, LP, a Delaware limited partnership, and its permitted assigns, as the registered holder hereof (the “Holder”), is entitled, subject to the terms set forth below, to purchase from the Company upon surrender of this Warrant to Purchase Common Stock (the “Warrant”), at any time after the date of issuance shown above (the “Date of Issuance”), but not after 5:00 P.M. California time on the Expiration Date (as defined herein), Five Hundred Thousand (500,000) fully paid and nonassessable shares of Common Stock (as defined herein) of the Company (each a “Warrant Share” and collectively the “Warrant Shares”) at a purchase price (the “Warrant Exercise Price”) equal to $2.26 per share.  Both the number of Warrant Shares purchasable hereunder and the Warrant Exercise Price are subject to adjustment as provided in Section 10 below.

 

Section 1.   Definitions.

 

(a)   The following terms used in this Warrant shall have the following meanings:

 

“Common Stock” means (i) the Company’s $0.001 par value common stock and (ii) any capital stock into which such common stock shall have been changed or any capital stock resulting from a reclassification of such common stock.

 

“Expiration Date” means the date which is five (5) years from the Date of Issuance or, if such date falls on a Saturday, Sunday or other day on which banks are required or authorized to be closed in the State of California (a “Holiday”), the next succeeding date that is not a Holiday.

 

 

 

 

 

 

“Market Price” means the average of the closing stock prices for the Common Stock for the ten trading days immediately prior to the date on which a Notice of Exercise is delivered to the Company, as reported on the trading market on which the Common Stock may then be quoted, if any such trading market may exist.

 

“Note Purchase Agreement” shall mean the Note Purchase Agreement dated March 23, 2017, by and among the Company, M&I Electric Industries, Inc., South Coast Electric Systems, LLC and HD Special-Situations III, LP.

 

“Securities Act” means the Securities Act of 1933, as amended.

 

“TMA” shall mean the Transaction Modification Agreement dated concurrently herewith by and among the Company, M&I Electric Industries, Inc., South Coast Electric Systems, LLC and HD Special-Situations III, LP.

 

(b)   Other definitional provisions:

 

(i)     Except as otherwise specified herein, all references herein (A) to the Company shall be deemed to include the Company’s successors and (B) to any applicable law shall be deemed references to such applicable law as the same may be amended or supplemented from time to time.

 

(ii)    When used in this Warrant, unless otherwise specified in a particular instance, the words “herein,” “hereof,” and “hereunder,” and words of similar import, shall refer to this Warrant as a whole and not to any specific provision of this Warrant, and the word “Section” shall refer to Sections of this Warrant unless otherwise specified.

 

(iii)   Whenever the context so requires, the neuter gender includes the masculine or feminine, and the singular number includes the plural, and vice versa.

 

(iv)    When used in this Warrant, “transfer” shall include any disposition of this Warrant or any Warrant Shares, or of any interest in either thereof, which would constitute a sale thereof within the meaning of the Securities Act or applicable state securities laws.

 

(v)Capitalized terms used herein and not otherwise defined shall have the meanings set forth in the Note Purchase Agreement and/or the TMA. 

 

Section 2.   Exercise of this Warrant.

 

(a)   Subject to the terms and conditions hereof, this Warrant may be exercised by Holder, as a whole or in part (except that this Warrant shall not be exercisable as to a fractional share), at any time prior to 5:00 p.m. California  time on the Expiration Date.  The rights represented by this Warrant shall  be exercised by Holder by (i) delivery of a written notice in the form attached hereto (a “Notice of Exercise”) of Holder's election to exercise this Warrant, which notice shall specify the number of Warrant Shares to be purchased, (ii) payment to the Company of an amount equal to the Warrant Exercise Price multiplied by the number of Warrant Shares as to which the 

 

 

Warrant is being exercised in immediately available funds (either by wire transfer or a certified or cashier’s check drawn on a United States bank) and (iii) the surrender of this Warrant, properly endorsed, at the principal office of the Company (or at such other agency or office of the Company as the Company may designate by notice to Holder).  The Company shall pay any issuance or transfer taxes that are applicable to any exercise of this Warrant. 

 

(b)    In addition, at any time prior to 5:00 p.m. on the Expiration Date, and notwithstanding anything to the contrary contained in this Warrant, at such time as the Market Price per share of the Common Stock exceeds the Warrant Exercise Price, this Warrant may be exercised by presentation and surrender of this Warrant to the Company in a cashless exercise, including a written calculation of the number of Warrant Shares to be issued upon such exercise in accordance with the terms hereof (a “Cashless Exercise”). In the event of a Cashless Exercise, in lieu of paying the Warrant Exercise Price, Holder shall surrender this Warrant for, and the Company shall issue in respect thereof, the number of Warrant Shares determined by multiplying the number of Warrant Shares to which Holder would otherwise be entitled by a fraction, the numerator of which shall be determined by subtracting the Warrant Exercise Price from the then current Market Price per share of  Common Stock, and the denominator of which shall be the then current Market Price per share of Common Stock.

 

(c)   Any Warrant Shares shall be deemed to be issued to Holder, as the record owner of such Warrant Shares, as of the date on which this Warrant shall have been surrendered, the completed Notice of Exercise shall have been delivered, and payment (or notice of an election to effect a Cashless Exercise) shall have been made for such Warrant Shares as set forth above, irrespective of the date of delivery of such share certificate, except that, if the date of such surrender and payment is a date when the stock transfer books of the Company are properly closed, such person shall be deemed to have become the holder of such Warrant Shares at the opening of business on the next succeeding date on which the stock transfer books are open.  For each exercise of the rights represented by this Warrant in compliance with this Section 2, a certificate or certificates for the Warrant Shares so purchased, registered in the name of, or as directed by, Holder, shall be delivered to, or as directed by, Holder within five (5) business days after such rights shall have been so exercised.

 

(d)   Unless this Warrant shall have expired or shall have been fully exercised, upon an exercise of this Warrant the Company shall issue a new Warrant identical in all respects to this Warrant except that it shall represent rights to purchase the number of Warrant Shares purchasable immediately prior to such exercise, less the number of Warrant Shares with respect to which this Warrant is exercised (or, in the case of a Cashless Exercise, the number of shares to which Holder would otherwise have been entitled). 

 

(e)   In the case of any dispute with respect to an exercise, the Company shall promptly issue such number of Warrant Shares as are not disputed in accordance with this Section. If such dispute only involves the number of Warrant Shares receivable by Holder under a Cashless Exercise, the Company shall submit the disputed calculations to an independent accounting firm reasonably acceptable to Holder within fifteen (15) business days of receipt of the Notice of Exercise. The accountant shall review the calculations and notify the Company and Holder of the 

 

 

results no later than fifteen (15) business days from the date it receives the disputed calculations. The accountant’s 

 

calculation shall be deemed conclusive absent manifest error. The Company shall then issue the appropriate number of shares of Common Stock in accordance with this Section.

 

Section 3.  Covenants as to Common Stock.     The Company covenants and agrees that all Warrant Shares which may be issued upon the exercise of the rights represented by this Warrant will, upon issuance, be validly issued, fully paid and nonassessable.  The Company further covenants and agrees that during the period within which the rights represented by this Warrant may be exercised, the Company shall at all times have authorized and reserved a sufficient number of shares of Common Stock to provide for the exercise of the rights then represented by this Warrant and that the par value of said shares will at all times be less than or equal to the applicable Warrant Exercise Price.  The representations, warranties and covenants of the Company set forth in Sections 6 and 7 of the TMA are hereby incorporated into this Warrant by reference and such provisions shall survive the repayment of the Note and other amounts due under the Note Purchase Agreement and/or the TMA.

 

Section 4.  Taxes.  The Company shall not be required to pay any tax or taxes attributable to the initial issuance of the Warrant Shares or any transfer involved in the issuance or delivery of any certificates for Warrant Shares in a name other than that of Holder or any permitted transferee of this Warrant.

 

Section 5.  Warrant Holder Not Deemed a Stockholder.   No Holder of this Warrant, as such, shall be entitled to vote or receive dividends or be deemed the holder of shares of the Company for any purpose, nor shall anything contained in this Warrant be construed to confer upon Holder, as such, any of the rights of a stockholder of the Company or any right to vote, give or withhold consent to any corporate action (whether any reorganization, issuance of stock, reclassification of stock, consolidation, merger, conveyance or otherwise), receive notice of meetings, receive dividends or subscription rights, or otherwise, prior to the issuance to Holder of the Warrant Shares which Holder is then entitled to receive upon the due exercise of this Warrant. Notwithstanding the foregoing, the Company shall provide Holder with copies of the same notices and other information given to the stockholders of the Company generally, contemporaneously with the delivery thereof to the stockholders.

 

Section 6.  No Limitation on Corporate Action.    No provisions of this Warrant and no right or option granted or conferred hereunder shall in any way limit, affect or abridge the exercise by the Company of any of its corporate rights or powers to recapitalize, amend its Articles of Incorporation, reorganize, consolidate or merge with or into another corporation, transfer all or any part of its property or assets, or exercise any other of its corporate rights and powers.

 

Section 7.  Representations of Holder.    By the acceptance of this Warrant, Holder represents that (i) it is acquiring this Warrant and the Warrant Shares for its own account for investment only and not with a view towards, or in connection with, the public sale or distribution thereof and (ii) it is an “accredited investor” as such term is defined in Rule 501(a) of Regulation 

 

 

D promulgated by the Securities and Exchange Commission under the Securities Act.  Upon exercise of this Warrant, Holder shall, if requested by the Company, confirm the foregoing representations in writing, in a form satisfactory to the Company.  If Holder cannot make such representations because they would be factually incorrect, it shall be a condition to Holder's exercise of this Warrant that the Company 

 

receive such other representations as the Company considers reasonably necessary to assure it that the issuance of the Warrant Shares shall not violate any federal or applicable state securities laws.

 

Section 8.  Representations of the Company.  The Company represents that it has the requisite power and authority to issue and sell this Warrant and perform it obligations under this Warrant in accordance with its terms.  The Company’s execution, delivery and performance of this Warrant have been duly authorized by the Company’s Board of Directors and no further consent or authorization of the Company, its stockholders, or any other  individual or entity, is required.  This Warrant (i) has been duly and validly authorized, executed and delivered by the Company and (ii) constitutes a valid and binding obligation of the Company enforceable against the Company in accordance with its terms, subject as to enforceability to general principles of equity and to bankruptcy, insolvency, moratorium and other similar laws affecting the enforcement of creditors’ rights generally. 

 

Section 9.  Restrictions on Transfer.     Holder understands that (i) this Warrant and the Warrant Shares have not been and are not being registered under the Securities Act or any state securities laws (other than as described in the Registration Rights Agreement entered into concurrently herewith (the “Registration Rights Agreement”)), and may not be offered for sale, sold, assigned or transferred except as provided in the TMA and the Registration Rights Agreement, and (ii) neither the Company nor any other individual or entity is under any obligation to register such securities (other than as described in the Registration Rights Agreement) under the Securities Act or any state securities laws or to comply with the terms and conditions of any exemption thereunder. 

 

Section 10.  Adjustments. 

 

(a)Reclassification, Reorganization and Certain Other Transactions. In case of any reclassification, capital reorganization or other change of outstanding shares of the Common Stock, or in case of any consolidation or merger of the Company with or into another corporation (other than a consolidation or merger in which the Company is the continuing corporation and which does not result in any reclassification, capital reorganization or other change of outstanding shares of Common Stock), the Company shall cause effective provision to be made so that Holder shall have the right thereafter, by exercising this Warrant, to purchase the kind and number of shares of stock or other securities or property (including cash) receivable upon such reclassification, capital reorganization or other change, consolidation or merger by a holder of the number of shares of Common Stock that could have been purchased upon exercise of this Warrant immediately prior to such reclassification, capital reorganization or other change, consolidation or merger.  The foregoing provisions shall similarly apply to successive reclassifications, capital reorganizations and other changes of outstanding shares of Common Stock and to successive consolidations or mergers. If the consideration received by the holders of Common Stock is other than cash, the value shall be as determined by the Company’s Board of Directors acting in good faith.

 

 

 

(b)   Dividends and Stock Splits.    If and whenever the Company shall effect a stock dividend, a stock split, a stock combination, or a reverse stock split of the Common Stock, the number of Warrant Shares purchasable hereunder and the Warrant Exercise Price shall be proportionately adjusted in the manner determined by the Company's Board of Directors acting in good faith.  The number of shares, as so adjusted, shall be rounded to the nearest whole number and the Warrant Exercise Price shall be rounded to the nearest tenth of a cent.

 

Section 11.  Lost, Stolen, Mutilated or Destroyed Warrant.    If this Warrant is lost, stolen or destroyed, the Company shall, on receipt of an indemnification undertaking reasonably satisfactory to the Company, issue a new Warrant of like denomination and tenor as the Warrant so lost, stolen or destroyed.  In the event Holder asserts such loss, theft or destruction of this Warrant, the Company may require Holder to post a bond issued by a surety reasonably satisfactory to the Company with respect to the issuance of such new Warrant.

 

Section 12.   Notices.   Any and all communications required or permitted to be provided hereunder shall be in writing and shall be given and deemed effective as provided in the Note Purchase Agreement.  The addresses for such communications shall be as provided in the Note Purchase Agreement or such other addresses as may most recently have been designated in writing.

 

Section 13.  Miscellaneous.    This Warrant and any provision  hereof may be changed, waived, discharged, or terminated only by an instrument in writing signed by the party against which enforcement of such change, waiver, discharge or termination is sought. This Warrant shall be governed by and interpreted under the laws of the State of Florida, without regard to the principles of conflict of laws. Headings are for convenience only and shall not affect the meaning or construction of any of the provisions hereof. This Warrant shall be binding upon the Company and its successors and shall inure to the benefit of Holder and its successors and permitted assigns.

 

Section 14.    Waiver of Jury Trial.  THE PARTIES EACH WAIVE, TO THE EXTENT PERMITTED BY LAW, ANY RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING RELATING TO THIS WARRANT. 

 

Section 15.  Effect of Expiration Date.    This Warrant, in all events, shall be wholly void and of no effect after 5:00 p.m. California time on the Expiration Date, except that notwithstanding any other provisions hereof, the provisions of Sections 9 and 14 shall continue in full force and effect after such date as to any Warrant Shares or other securities issued upon the exercise of this Warrant.

 

IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed by its duly authorized officers as of the Date of Issuance.

 

  The Company:

	

	
             

	
 
	
 
	
AMERICAN ELECTRIC TECHNOLOGIES, INC.

	
 
	
 
	
 
	
 

	
Date: November 13, 2017
	
 
	
 
	
 
	
By: 
	
 
	
/s/ Charles M. Dauber

 

 

	
 
	
 
	
 
	
 
	
 
	
 
	
Charles M. Dauber

	
 
	
 
	
 
	
 
	
 
	
 
	
President and CEO

	
Date: November 13, 2017
	
 
	
 
	
 
	
By: 
	
 
	
/s/ William B. Brod

	
 
	
 
	
 
	
 
	
 
	
 
	
William B. Brod

	
 
	
 
	
 
	
 
	
 
	
 
	
Senior Vice President and CFO

 

NOTICE OF EXERCISE

 

AMERICAN ELECTRIC TECHNOLOGIES, INC.

 

The undersigned hereby exercises the right to purchase the number of Warrant Shares covered by the Warrant attached hereto as specified below according to the conditions thereof and herewith makes payment of $                       (unless effected by a Cashless Exercise in accordance with the terms of the Warrant), which constitutes the aggregate Warrant Exercise Price of such Warrant Shares pursuant to the terms and conditions of the Warrant.

 

(i)  The undersigned agrees not to offer, sell, transfer or otherwise dispose of any Common Stock obtained upon exercise of the Warrant except under circumstances that will not result in a violation of the 1933 Act or applicable state securities laws.

 

(ii)  The undersigned requests that the stock certificates for the Warrant Shares be issued, and a Warrant representing any unexercised portion hereof be issued, pursuant to the terms of the Warrant in the name of Holder and delivered to the undersigned at the address set forth below.

 

 

Dated:                       , _____.

 

 

	
 
	
                             ____________________________                                            (Name of Holder) 
	

 

	
         
	
By:   ___________________________

	
         
	
Title:                                                        

 

Address:  ___________________________________

	
            
	
    ___________________________________

	
         
	
      ___________________________________

 

 

Number of Warrant Shares being purchased for cash:  ________________________ 

 

 

Number of Warrant Shares being purchased by Cashless Exercise:  ________________________

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