Document:

First Amendment to Note and Security Agreement

 Exhibit 10.1 

Execution Copy 

FIRST AMENDMENT TO NOTE AND SECURITY AGREEMENTS 

This Amendment to Note, dated as of December 22, 2009 (this “Amendment”), is entered into by and among API
TECHNOLOGIES CORP., a Delaware corporation (“Company”) f/k/a API Nanotronics Corp., ICARUS INVESTMENT CORPORATION, as a Holder and as Collateral Agent, the holders of the several notes, dated as of June 23, 2009, issued by
Company (each a “Holder” and collectively the “Holders”) and the subsidiaries of Company party to the Security Agreements. 

BACKGROUND 

A. The Holders made a loan to Company in an aggregate principal amount of Three Million Six Hundred Fifty Thousand dollars ($3,650,000)
(the “Loan”). The Loan is evidenced, governed and secured by (i) those certain Secured Convertible Promissory Notes, each dated as of June 23, 2009 (as amended, restated, supplemented or otherwise modified from time to
time, the “Notes”), by Company in favor of the respective Holders, (ii) that certain Security Agreement, dated as of June 23, 2009 (as amended, restated, supplemented or otherwise modified from time to time, the
“US Security Agreement”), by and among Company, API Cryptek, Inc., National Hybrid, Inc., Keytronics, Inc., Filtran Inc., Pace Technology, Inc., API Nanofabrication and Research Corporation, API Electronics Inc., TM Systems II,
Inc., and the Collateral Agent, (iii) that certain General Security Agreement, dated as of June 23, 2009 (as amended, restated, supplemented or otherwise modified from time to time, the “Filtran Security Agreement”), by
and between Filtran Limited and Collateral Agent, (iv) that certain General Security Agreement, dated as of July 7, 2009 (as amended, restated, supplemented or otherwise modified from time to time, the “Emcon Security
Agreement” and together with the Filtran Security Agreement, the “Canadian Security Agreements”; the Canadian Security Agreements and the US Security Agreement collectively constituting the “Security
Agreements”; the Security Agreements and the Notes collectively constituting the “Note Documents”), by and among Emcon2007 Holdco Inc., Emcon Emanation Control Ltd. and the Collateral Agent. 

B. Company and certain of its subsidiaries are contemplating (i) incurring additional indebtedness to finance acquisitions or to
provide for general working capital needs and (ii) granting liens on their respective assets to secure any such additional indebtedness. 

C. Company wishes to amend the Notes and Security Agreements to permit the incurrence of such additional indebtedness and the granting of
liens on the assets of Company and its subsidiaries. 
 D. Each Holder and the Collateral Agent are willing and have agreed to
permit the incurrence of such additional indebtedness and the granting of such liens. 
 AGREEMENT 

In consideration of the premises and the mutual agreements contained in this Amendment, the parties agree as follows: 

1. Defined Terms. Unless otherwise defined in this Amendment, all capitalized terms used herein as defined terms shall have the
meanings given to them in the applicable Note Documents. 

 2. Amendment to Notes. Each Note is hereby amended as follows (such amendments to be
effective as of the date of this Amendment): 
 (a) Section 8.1 is deleted in its entirety and replaced by the following:

 “8.1 Obtain or incur any indebtedness or other monetary obligations that are senior to or on parity with
the Note other than Permitted Senior Debt.” 
 (b) Section 8.2 is deleted in its entirety and replaced by the
following: 
 “8.2 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).” 
 (c) The
following is added as Sections 8.3, 8.4 and 8.5: 
 “8.3 ‘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. 

8.4 ‘US Security Agreement’ shall mean that certain Security Agreement, dated as of June 23, 2009, by and
among Collateral Agent and the pledging parties from time to time party thereto, as such agreement may be amended, restated, supplemented or otherwise modified from time to time. 

8.5 ‘Canadian Security Agreements’ shall mean each of (a) that certain General Security Agreement, dated as
of June 23, 2009, by and among Collateral Agent and the pledging parties from time to time party thereto and (b) that certain General Security Agreement, dated as of July 7, 2009, by and among Collateral Agent and the pledging parties
from time to time party thereto, in each case, 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.” 

(d) Section 11 is amended by (i) deleting the phrase “a Security Agreement (the ‘Security Agreement’) dated the
date hereof among Holder and the Company and the Subsidiaries” in the first sentence thereof and replacing it with the phrase “one or more security 

 

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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” and (ii) deleting “Security Agreement” in the second sentence thereof and replacing it with “Security Agreements”. 

3. Amendment to US Security Agreement. The definition of “Permitted Liens” found in Section 17(c) of the US
Security Agreement is amended by (a) deleting the word “and” immediately preceding the phrase “(xii) leases or subleases granted to others”, and (b) inserting the following clause immediately after the phrase “or
any interest or title of a lessor under any lease”: 
 “and (xiii) any liens created or granted in
connection with any Permitted Senior Debt”. 
 4. Amendment to Canadian Security Agreements. The Canadian Security
Agreement is hereby amended as follows (such amendments to be effective as of the date of this Amendment): 
 (a)
Section 1.2 is amended by deleting such section in its entirety and replacing it with the following: 

“1.2 Terms Incorporated by Reference – Unless stated otherwise, terms not defined in this
Agreement, but defined in the Act or the Notes and used in this Agreement shall have the same meanings as in the Act or Notes, as applicable.” 

(b) The definition of “Permitted Encumbrances” found in Section 1.1(d) of each Canadian Security Agreement is amended by
(a) deleting the period at the end of clause (xii) thereof and replacing it with “; and” and (b) inserting the following clause after clause (xii): 

“(xiii) any liens created or granted in connection with any Permitted Senior Debt.” 

5. Agreement among Holders and Collateral Agent. Notwithstanding anything to the contrary in that certain Intercreditor and
Collateral Agency Agreement, dated as of June 23, 2009 (as amended, restated, supplemented or otherwise modified from time to time, including by this Amendment, the “Intercreditor Agreement”), the Holders and Collateral Agent hereby
agree that Collateral Agent shall have the power and authority to enter into, on its own behalf and on behalf of the Holders, one or more subordination and/or intercreditor agreements (each, as amended, restated, supplemented or otherwise modified
from time to time, a “Permitted Senior Debt Subordination Agreement”) with the lenders of Permitted Senior Debt or their agents or representatives, under which the Collateral Agent may subordinate the liens granted to the Collateral Agent
for the benefit of the Holders to Permitted Liens or Permitted Encumbrances created or granted to secure Permitted Senior Debt or otherwise and agree to restrict or limit the rights of the Collateral Agent, on behalf of the Holders, to exercise
remedies under the Notes and Collateral Documents while any such Permitted Senior Debt is outstanding. Each Holder agrees that, upon request by the Collateral Agent, it shall execute or acknowledge in writing its

  

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agreement to be bound by any such Permitted Senior Debt Subordination Agreement. Upon the Collateral Agent’s entering into any Permitted Senior Debt Subordination Agreement, each Holder
shall be bound by such Permitted Senior Debt Subordination Agreement as if it were a party thereto, and each Holder agrees that it shall not, by itself or in cooperation with any other person or entity, challenge the validity of or seek in any way
to avoid the requirements of any such Permitted Senior Debt Subordination Agreement. The Collateral Agent shall not be required to take any action requested by one or more Holders (including “Requisite Lenders” (as defined in the
Intercreditor Agreement) or all Holders) if, in the Collateral Agent’s sole judgment, any such action would not be permitted under any Permitted Senior Debt Subordination Agreement then in effect. 

6. Additional Covenant. Company hereby agrees that on or before December 31, 2009, it shall issue to each Holder its Pro Rata
Share of 250,000 warrants of the Company with an exercise price equal to the closing price of the Company’s shares on the OTC Bulletin Board as of the date hereof. If the number of warrants resulting from such calculation is not a whole number,
the number of warrants shall be rounded down to the nearest whole number. Each Holder’s “Pro Rata Share” shall be equal to the result, expressed as a percentage, of (a) the aggregate outstanding principal amount of such
Holder’s Note divided by (b) the aggregate outstanding principal amount of all Notes. The expiration date of the warrants shall be the maturity date of the Notes. Company and each Holder hereby agree that noncompliance with this covenant
shall constitute an Event of Default under the Notes. 
 7. Conditions Precedent. This Amendment shall become effective
upon the execution and delivery of this Amendment by the Holders, Collateral Agent, Company and the subsidiaries of Company party to a Security Agreement. 

8. Counterparts. This Amendment may be signed upon any number of counterparts with the same effect as if the signatures thereto
and hereto were upon the same instrument. Facsimile copies of signature shall be treated as original signatures for all purposes under this Amendment. 

9. Governing Law. This Amendment shall be governed by and construed in accordance with the internal laws of the State of Delaware
without giving effect to choice of law principles of such State. 
 10. Headings. The headings of the various paragraphs
in this Amendment are for convenience of reference only and shall not be deemed to modify or restrict the terms or provisions hereof. 

[signature pages follow] 
  

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 IN WITNESS WHEREOF, the parties have executed this Amendment as of the date first
above written. 
  

			
	API TECHNOLOGIES CORP.
		
	By:	 	 /s/ Phillip DeZwirek

	Name:	 	 Phillip DeZwirek

	Title:	 	  

	
	API CRYPTEK, INC.
		
	By:	 	 /s/ Phillip DeZwirek

	Name:	 	 Phillip DeZwirek

	Title:	 	  

	
	NATIONAL HYBRID, INC.
		
	By:	 	 /s/ Phillip DeZwirek

	Name:	 	 Phillip DeZwirek

	Title:	 	  

	
	KEYTRONICS, INC.
		
	By:	 	 /s/ Phillip DeZwirek

	Name:	 	 Phillip DeZwirek

	Title:	 	  

	
	FILTRAN INC.
		
	By:	 	 /s/ Phillip DeZwirek

	Name:	 	 Phillip DeZwirek

	Title:	 	  

	
	PACE TECHNOLOGY, INC.
		
	By:	 	 /s/ Phillip DeZwirek

	Name:	 	 Phillip DeZwirek

	Title:	 	  

 

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	API NANOFABRICATION AND RESEARCH CORPORATION
		
	By:	 	 /s/ Phillip DeZwirek

	Name:	 	 Phillip DeZwirek

	Title:	 	  

	
	API ELECTRONICS INC.
		
	By:	 	 /s/ Phillip DeZwirek

	Name:	 	 Phillip DeZwirek

	Title:	 	  

	
	TM SYSTEMS II, INC.
		
	By:	 	 /s/ Phillip DeZwirek

	Name:	 	 Phillip DeZwirek

	Title:	 	  

	
	FILTRAN LIMITED
		
	By:	 	 /s/ Phillip DeZwirek

	Name:	 	 Phillip DeZwirek

	Title:	 	  

	
	EMCON2007 HOLDCO INC.
		
	By:	 	 /s/ Phillip DeZwirek

	Name:	 	 Phillip DeZwirek

	Title:	 	  

	
	EMCON EMANATION CONTROL LTD.
		
	By:	 	 /s/ Phillip DeZwirek

	Name:	 	 Phillip DeZwirek

	Title:	 	  

 

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	 ICARUS INVESTMENT CORPORATION,

as Collateral Agent and a Holder

		
	By:	 	 /s/ Jason DeZwirek

	Name:	 	 Jason DeZwirek

	Title:	 	  

 

 7Promissory Note

 Exhibit 10.2 

PROMISSORY NOTE 
  

			
	$10,000,000.00	 	January 20, 2010

FOR VALUE RECEIVED, API Systems, Inc., a Delaware corporation (“Systems”), API Defense, Inc., a Delaware corporation
(“API Defense”), API Defense USA Inc., a Delaware corporation (“API USA” and collectively, with Systems and API Defense, the “Makers” or when the context requires, each individually, a
“Maker”), promise to pay to the order of Kuchera Defense Systems, Inc. a Pennsylvania corporation (“K Defense”), KII Inc., a Pennsylvania corporation (“KII”) and Kuchera Industries LLC, a
Pennsylvania limited liability company (“K Industries” and collectively with K Defense and KII, the “Payees” or when the context requires, each individually, a “Payee”), the principal sum of Ten
Million and No/100 Dollars ($10,000,000.00), lawful money of the United States of America, together with interest from the date hereof, at the rates and on the terms set forth herein, as follows: 

1. INTEREST RATE. From and including the Closing Date (hereinafter defined), this Note shall bear interest on the Principal
Balance (hereinafter defined) at a rate of five percent (5%) per annum (the “Interest Rate”). Interest at the Interest Rate shall be calculated on the basis of the actual number of days elapsed and a 365 day year. 

2. TERMS OF PAYMENT. 

(a) Monthly Interest Installments – Initial Interest Rate. On the fifteenth
(15th) day of each of the next immediately succeeding
five (5) calendar months (that is, on the fifteenth
(15th) day of each of February, March, April, May and
June of 2010), the Makers shall pay to the Payees installments of interest calculated the product of (i) (the product of the Interest Rate and the unpaid balance of the Principal Balance) divided by 365, multiplied by (ii) the number of
days in the period covered by such installment period (each an “Monthly Interest Installment”). Each such Monthly Interest Installment shall include the first day of the payment period and exclude the last day of the payment period.
For example, the payment for the first installment due on February 15, 2010 would include payment for January 15 and exclude payment for February 15 for a total of 31 days. 

(b) Balloon Payment. THE MAKERS ACKNOWLEDGE AND AGREE THAT THE PAYMENT SCHEDULE RELATING TO THE MONTHLY INTEREST INSTALLMENTS
WILL NOT AMORTIZE THE PRINCIPAL BALANCE DURING THE TERM OF THIS NOTE AND WILL RESULT IN A “BALLOON PAYMENT” ON THE MATURITY DATE. 

3. MATURITY DATE. Notwithstanding any provision to the contrary contained herein, the entire Principal Balance, together with all
accrued and unpaid interest 

 
thereon and any other unpaid sums due and owing under this Note and the Loan Documents, shall be due, payable and paid on the later to occur of (hereinafter referred to as the “Maturity
Date”) (a) December 31, 2010 and (b) the lifting of K Defense from the Excluded Parties List System (www.epls.gov) resulting from the December 22, 2009 suspension, without presentment or demand. 

4. DEFINITIONS. 

(a) Assets. The term “Assets”, as used herein, has the meaning given to it in the Purchase Agreement, and
includes any and all after acquired contracts relating to the Business. 
 (b) Business. The term
“Business”, as used herein, as the meaning given to it in the Purchase Agreement. 
 (c) Closing Date.
The term “Closing Date”, as used herein, has the meaning given to it in the Purchase Agreement. 
 (d)
Principal Balance. The term “Principal Balance”, as used herein, means the outstanding and unpaid principal sum or amount of this Note. 

(e) Purchase Agreement. The term “Purchase Agreement”, as used herein, means that certain Asset Purchase
Agreement, of even date hereof, by and among API Technologies Corp., a Delaware corporation, the Makers, the Payees, and William Kuchera and Ronald Kuchera. 

5. PLACE OF PAYMENT. The Monthly Interest Installments and all other sums due hereunder and under the Loan Documents shall be
payable at Kuchera Defense Systems, Inc., 1125 Weaver Road, Johnston, PA 15904, or at such other place as the Payees from time to time may designate to Makers in writing, delivered to Makers at API Technologies Corp., 220 Smithtown Ave., Ronkonkoma,
NY 11779. 
 6. PREPAYMENT. The Makers shall have the right to prepay the Principal Balance, in whole or part;
provided, however, that Makers shall have given the Payees at least thirty (30) days’ prior written notice of Makers’ intention to make such prepayment and the amount of such prepayment, if partial, and provided,
further, that any such prepayment is accompanied by payment of all accrued and unpaid interest on the amount so prepaid to the date of prepayment. 

7. SECURITY. Makers acknowledge and agree that payment of this Note is secured by a first priority lien and security interest in
the Assets, as evidenced by (i) that certain Security Agreement, of even date hereof, by and among the Makers and the Payees (the “Security Agreement”), and (ii) those certain UCC-1 financing statements naming the Makers
as debtor and the Payees as secured parties, intended to be recorded forthwith (collectively referred to as the “Financing Statements”). All of the agreements, conditions, covenants, provisions and stipulations contained in the
aforesaid Security Agreement and Financing Statements, all of even date herewith, collectively referred to as the “Loan Documents”, are 

 

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hereby made a part of this Note to the same extent and with the same force and effect as if they were fully set forth herein, and the Makers covenant and agree to keep and perform them, or cause
them to be kept and performed, strictly in accordance with their terms. 
 8. DEFAULT; JOINT AND SEVERAL LIABILITY.

 (a) It is understood that the following defaults shall constitute events of default hereunder and are hereinbefore and
hereinafter referred to as an “Event of Default” or “Events of Default”: (i) a default in the payment, in immediately available and collectible funds, of any Monthly Interest Installment, any payment of the
Principal Balance when due, or any other monetary sum due hereunder or under the Loan Documents and such default is not fully cured within five (5) days, after the Makers receive written notice from the Payees of such default, or (ii) a
default in the performance of any of the non-monetary agreements, conditions, covenants, provisions or stipulations contained in this Note or in the Security Agreement and such default is not cured within thirty (30) days after receipt of
written notice thereof or, if longer, such cure period as is otherwise provided in this Note or the Loan Documents. Upon the occurrence of an Event of Default hereunder or under the Security Agreement, the Payees, at their option and without notice
to the Makers, and in addition to any other remedy available to the Payees under the Security Agreement or otherwise, may declare immediately due and payable the entire Principal Balance with interest accrued thereon at the applicable Interest Rate
to the date of such Event of Default, and all other sums due by Maker hereunder or under the Loan Documents, anything herein or in the Loan Documents to the contrary notwithstanding; and payment thereof may be enforced and recovered in whole or in
part at any time by one or more of the remedies provided to the Payees in this Note or in the Security Agreement or any other remedy provided at law or equity. In such case, the Payees may also recover all costs of suit and other expenses in
connection therewith, together with reasonable attorney’s fees for collection, together with interest on any judgment obtained by the Payees at the rate of ten percent (10%) from and after the date of any such judgment. 

(b) If an Event of Default occurs during the term of this Note, the Makers acknowledge and agree that they each are jointly and
severally liable for the entire Principal Balance with interest accrued thereon at the applicable Interest Rate. 
 9.
GENERAL PROVISIONS. 
 (a) No judgment or judgment obtained against less than all of the Makers shall be a bar to a
subsequent judgment or judgments against one or more of the Makers against whom judgment has not been obtained. 
 (b) The
remedies of the Payees as provided herein, or in the Loan Documents, and the warrants contained herein or in the Loan Documents shall be cumulative and concurrent, and may be pursued singularly, successively, or together at the sole discretion of
the Payees, and may be exercised as often as occasion therefor shall occur; and the failure to exercise any such right or remedy shall in no event be construed as a waiver or release thereof. 

(c) The Makers and all endorsers, sureties and guarantors, if any, hereby jointly and severally waive presentment for payment, demand,
notice of demand, notice 
  

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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, unless specifically required herein or in the Loan Documents, and they agree that the liability of each of them shall be unconditional, without regard to the liability of any other party, and shall not be affected in any manner by any
indulgence, extension of time, renewal, waiver or modification granted or consented to by the Payees. The Maker and all endorsers, sureties, and guarantors, if any, consent to any and all extensions of time, renewals, waivers or modifications that
may be granted by the Payees with respect to the payment or other provisions of this Note, and to the release of the collateral or any part thereof, with or without substitution and agree that additional makers, endorsers, guarantors, or sureties
may become parties hereto without notice to them or affecting their liability hereunder. 
 (d) The Payees shall not be deemed,
by any act of omission or commission, to have waived any of its rights or remedies hereunder unless such waiver is in writing and signed by the Payees, and then only to the extent specifically set forth in the writing. A waiver on one event shall
not be construed as continuing or as a bar to or waiver of any right or remedy to a subsequent event. 
 (e) If any term or
provision of this Note or the application thereof to any person, property or circumstance shall to any extent be invalid or unenforceable as to the remainder of this Note, then the application of such term or provision to persons, properties and
circumstances other than those as to which it is invalid or unenforceable, shall not be affected thereby, and each term and provision of this Note shall be valid and enforceable to the fullest extent permitted by law. 

(f) Notwithstanding anything to the contrary contained in this Note or in the Loan Documents, the effective rate of interest on the
obligation evidenced by this Note shall not exceed the lawful maximum rate of interest permitted to be paid. Without limiting the generality of the foregoing, if the interest charged under this Note results in an effective rate of interest higher
than that lawfully permitted to be paid, then such charges shall be reduced by the sum sufficient to result in an effective rate of interest no greater than the maximum effective rate of interest permitted by law and any amount that would exceed the
highest lawful rate already received and held by the Payees shall be applied to a reduction of principal (without premium or penalty) and not to the payment of interest. 

(g) Part of the consideration for the loan evidenced by this Note is that the loan (i) is and shall be deemed made under, and
governed by and construed in accordance with the internal law of the Commonwealth of Pennsylvania, and (ii) may be enforceable in the State Courts of Pennsylvania, with an action commenced in the Court of Common Pleas of Somerset County or
Cambria County, Pennsylvania, and/or in the United States District Court of said Commonwealth in whose jurisdiction Somerset County and Cambria County lies. Maker hereby waives any claim that either Pittsburgh, Somerset or Johnstown, Pennsylvania is
an inconvenient forum and any claim that any action or proceeding arising out of or relating to this Note and commenced in the aforesaid Courts lacks proper venue. 

(h) Whenever used, the singular number shall include the plural, the plural the singular, the use of any gender shall be applicable to
all genders, the word “Payee” shall be deemed to include the successors and assigns of any applicable Payee, and the word “Maker” shall be deemed to include the successors and assigns of any applicable Maker. 

 

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 (i) The captions preceding the text of the paragraphs or subparagraphs of this Note are
inserted only for convenience of reference and shall not constitute a part of this Note, nor shall they in any way affect its meaning, construction or effect. 

[Remainder of page left blank intentionally.] 

 

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 IN WITNESS WHEREOF, this Note has been duly signed and delivered by the undersigned at the
place and as of the day and year first above written. 
 MAKERS: 

 

			
	API SYSTEMS, INC., a Delaware corporation
		
	By:	 	 /s/ Stephen Pudles

		
	Name:	 	 Stephen Pudles

		
	Title:	 	 Chief Executive Officer

	
	API DEFENSE, INC., a Delaware corporation
		
	By:	 	 /s/ Stephen Pudles

		
	Name:	 	 Stephen Pudles

		
	Title:	 	 Chief Executive Officer

	
	API DEFENSE USA INC., a Delaware corporation
		
	By:	 	 /s/ Stephen Pudles

		
	Name:	 	 Stephen Pudles

		
	Title:	 	 Chief Executive Officer

[Signature page to $10,000,000.00 Promissory Note]

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