THIS PROMISSORY NOTE IS SUBORDINATED TO ANY PRESENT OR FUTURE INDEBTEDNESS OWING FROM THE MAKER TO BANK OF AMERICA, N.A. AND ITS ASSIGNS, AND MAY BE ENFORCED ONLY IN ACCORDANCE WITH THAT CERTAIN SUBORDINATION AGREEMENT DATED FEBRUARY 22, 2010, BETWEEN...
THIS
PROMISSORY NOTE IS SUBORDINATED TO ANY PRESENT OR FUTURE INDEBTEDNESS OWING FROM
THE MAKER TO BANK OF AMERICA, N.A. AND ITS ASSIGNS, AND MAY BE ENFORCED ONLY IN
ACCORDANCE WITH THAT CERTAIN SUBORDINATION AGREEMENT DATED FEBRUARY 22, 2010,
BETWEEN TAG HOLDINGS, LLC AND BANK OF AMERICA, N.A.
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US
$8,251,076.00
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February 22,
2010
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For Value
Received, THE
KEYW HOLDING
CORPORATION, a
Maryland corporation (“Company”),
hereby promises to pay to the order of TAG Holdings, LLC, a Virginia
limited liability company (“Seller”),
in lawful money of the United States of America and in immediately available
funds, the principal sum of EIGHT MILLION TWO HUNDRED FIFTY ONE
THOUSAND SEVENTY SIX DOLLARS (US $8,251,076.00) together with accrued and
unpaid interest thereon, each due and payable on the dates and in the manner set
forth below. This Subordinated Unsecured Promissory Note (this “Note”) is
made in connection with that certain Contribution Agreement, dated as of the
date hereof (the “Contribution
Agreement”), by
and among Company, Seller, the members of Seller, The Analysis Group, LLC, a
Virginia limited liability company, and certain other parties
thereto. All capitalized terms used but not defined herein shall have
the respective meanings assigned thereto in the Contribution
Agreement.
1. Principal
Repayment. Subject to Section 7 hereof, the outstanding
principal amount of this Note shall be due and payable on the earlier of (i)
February 28, 2011; (ii) seven (7) days following an IPO Event (as defined
below); or (iii) simultaneous with a Change of Control (as defined below) (the
“Maturity
Date”). Notwithstanding the foregoing, all principal payments
in respect of this Note shall be subject to Section 8 of the Contribution
Agreement, the Subordination Agreement (as defined below), and subject to the
provisions hereunder.
2. Definitions. For
purposes of this Note, (A) a “Change of
Control” shall mean (i) any change, in a single or series of related
transactions, of fifty percent (50%) or more of the combined voting power
of all classes of the voting equity or other economic interests (including
assets) of any member or members of the HoldCo Group whose revenue,
individually or combined, is equal to or greater than fifty percent (50%)
of the aggregate revenue of all members of the HoldCo Group immediately prior to
such transaction or series of related transactions; provided, that the
issuance of the equity of a member of the HoldCo Group as
consideration in connection with such member's acquisition of assets,
equity or other property of another Person or Persons shall not in any event
constitute a Change of Control, or (ii) (x) a sale, or other
disposition of a majority of the assets of Company, (y) a transfer or sale of
more than fifty percent (50%) of the combined voting power of all classes of the
voting equity of Company, or (z) a merger or consolidation involving
Company in which Company's voting equity interests outstanding immediately prior
to such merger or consolidation are converted by virtue of the merger into other
property, whether in the form of securities, cash or otherwise, and a third
party controls Company as a result, (B) “HoldCo
Group” shall
mean Company or any direct or indirect subsidiary of Company and (C) “IPO
Event” shall
mean the consummation of an initial public offering pursuant to an effective
registration statement under the Securities Act of 1933 of any member of HoldCo
Group.
3. Interest Rate and
Payments. Company further promises to pay interest on the
outstanding principal amount of this Note from the date hereof until payment in
full at an interest rate equal to eight percent (8%) per annum, compounded
quarterly, and such interest shall be payable in full on the date that the
principal amount hereof is required to be paid hereunder. All
computations of interest shall be made by Seller on the basis of a year of 360
days based upon the actual number of days elapsed. Notwithstanding
the foregoing, all interest payments and late charges in respect of this Note
shall be subject to Section 8 of the Contribution Agreement, the Subordination
Agreement, and subject to the provisions hereunder.
4. Place of
Payment. All amounts payable hereunder shall be payable in
immediately available funds to Seller at the address or to the wire transfer
account designated by Seller by prior written notice, which notice shall contain
wire transfer instructions, if applicable.
5. Application of
Payments. Payment on this Note received by Seller shall be
applied first to late payment charges or other sums owned to Seller hereunder,
next to accrued interest, and thereafter to the outstanding balance of the
principal amount hereof.
6. Capital Gains Rate Change
Payment. In the event that any principal, and/or other
payment (other than interest) under this Note is paid after December 31, 2010,
the amount of any such payment shall be increased by an amount equal to (i) the
amount of such payment multiplied by (ii) the
difference, if any, between (a) the U.S. federal long-term capital gains tax
rate applicable to Seller on the date that such payment is made and (b) the U.S.
federal long-term capital gains tax rate applicable to payments made in calendar
year 2010 (the "CGRC
Payment"). Any CGRC Payment payable hereunder shall be due and
payable by Company to Seller on the date that any principal payment is required
to be paid pursuant to this Note. In the event that the U.S. federal
long-term capital gains tax rate applicable to Seller on the date that such
payment is made is less than the U.S. federal long-term capital gains tax rate
applicable to payments made in calendar year 2010, the amount of any payment
under this Note shall be decreased by an amount equal to (i) the amount of such
payment multiplied by
(ii) the difference, if any, between (a) the U.S. federal long-term capital
gains tax rate applicable to Seller on the date that such payment is made and
(b) the U.S. federal long-term capital gains tax rate applicable to payments
made in calendar year 2010.
7. Prepayment. Company may, at its option at
any time and from time to time hereafter, prepay, in whole or part, without
premium or penalty, the outstanding principal amount of this Note, together with
accrued but unpaid interest on such principal amount to the date of
prepayment.
8. Default. Each of
the following events shall be an “Event of
Default” hereunder:
(a) if
Company shall fail to pay timely any of the principal or interest due under this
Note on the date the same becomes due and payable and such default is not cured
within five (5) days following written notice thereof by Seller to
Company;
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(b) if
Company shall fail to perform, in the time and manner required, any of its
obligations or covenants under, or shall fail to comply with any of the
provisions of, this Note, which does not involve the failure to make a payment
when due (be it principal or interest), and such default is not cured within
thirty (30) days following written notice thereof by Seller to
Company;
(c) if
a default or event of default with respect to any Senior Debt (as defined in
Section 12 below) has occurred and is continuing and the holders of such Senior
Debt have accelerated the maturity of such Senor Debt;
(d) if
any member of HoldCo Group files any petition or commences any case or other
proceeding with respect thereto for relief under any bankruptcy, reorganization,
arrangement, insolvency, readjustment of debt, liquidation, or moratorium law or
any other law for the relief of, or relating to, debtors, now or hereafter in
effect, or makes any assignment for the benefit of creditors, or admits in
writing its inability to pay or generally fails to pay its debts as they mature
or become due, or takes any corporate action in furtherance of any of the
foregoing; or
(e) if
an involuntary petition is filed or any case or other proceeding is commenced
against any member of HoldCo Group (unless such petition is dismissed or
discharged within ninety (90) days) under any bankruptcy, reorganization,
arrangement, insolvency, adjustment of debt, liquidation or moratorium statute
now or hereafter in effect, or a custodian, receiver, trustee, liquidator,
assignee for the benefit of creditors (or other similar official) is applied for
or appointed for any member of HoldCo Group or is applied for or appointed to
take possession, custody or control of any property of such member of HoldCo
Group.
9. Default Interest
Rate. Upon and from the occurrence of any Event of Default
throughout the time that such Event of Default continues and remains uncured and
that any portion of the outstanding principal amount of this Note or any CGRC
Payment remains unpaid and outstanding, such outstanding principal amount and
outstanding CGRC Payment will bear interest at the rate equal to fourteen
percent (14%) per annum.
10. Remedies. Upon
the occurrence of
an Event of Default the then-outstanding principal balance of this Note,
together with any accrued but unpaid interest on such principal amount and all
other sums payable, shall at the option of Seller become immediately due and
payable. Notwithstanding the foregoing, if there shall occur an Event
of Default under Section 8(d) or 8(e) above, the then-outstanding principal
balance of this Note, together with any accrued but unpaid interest on such
principal amount and all other sums payable, shall become immediately due and
payable without any action on the part of Seller.
11. Payment of
Stock. In the event that, notwithstanding the terms of the
Subordination Agreement (or any other subordination agreement), Company does not
pay the principal amount of this Note and all accrued but unpaid interest under
this Note on the Maturity Date, Company shall pay Seller an aggregate of One
Hundred Forty Thousand (140,000) shares of common stock of
Company.
3
12. Subordination. The
rights of Seller under this Note are expressly subordinate to the indebtedness
and other obligations to Bank of America, N.A. (the “Bank”)
pursuant to the terms of the that certain subordination agreement, dated
February 22, 2010 executed by Seller and accepted by the Bank and Company,
subordinating this Note to the Bank’s indebtedness (the “Subordination
Agreement”), and to Company’s future non-affiliated lenders of Senior
Debt to the extent provided in any future subordination agreement Seller enters
into pursuant to the terms of this Section 12; provided that any future
subordinations shall exclude Company’s obligations under Sections 1(ii) and
1(iii) hereof and shall incorporate the limitations of this Section 12. Without
limiting the terms of the Subordination Agreement, by accepting this Note,
Seller hereby agrees, upon the written request of Company, to enter into
additional subordination agreements containing such commercially reasonable
terms and conditions as Seller and such lender(s) mutually agree upon (which
terms and conditions may be less restrictive than those in the Subordination
Agreement) for the purposes of subordinating payment of the indebtedness
evidenced by this Note to any other future senior or mezzanine secured
indebtedness of Company held by the Bank or another financial institution
(collectively “Senior
Debt”); provided, that no such future subordination agreements shall
contain terms and conditions more adverse to Seller or more restrictive with
respect to Seller’s right to payments hereunder, than those contained in the
Subordination Agreement.
13. Covenants of
Company. Until all principal hereunder is paid in full,
together with all interest and any CGRC Payment required to be paid on the date
of such payment, Company agrees to comply with the following
covenants:
(a) Company
shall cause this Note to be senior in right of payment to any other subordinated
notes or indebtedness for borrowed money incurred by Company in connection with
any future acquisition of other entities or assets by Company (excluding third
party mezzanine financing from institutional lenders, which excluded lenders
shall not include the sellers of any entity or assets acquired by Company or
their affiliates);
(b) Company
shall not redeem or purchase securities in Company from any equity holder of
Company (other than Seller) without the prior written consent of Seller until
this Note is paid in full except for any repurchases of Capital Stock of Company
in an aggregate amount not to exceed $500,000 without the prior written consent
of the lender providing the Senior Debt;
(c) At
the time Company delivers to the holders of Senior Debt any reports or financial
statements required under the documentation evidencing the Senior Debt
(including any reports or financial statements required to be delivered to the
Bank), it shall deliver copies of such reports and financial statements to
Seller; and
(d) Company
shall promptly provide the Bank (and any other lender providing Senior Debt) all
compliance certificates and other materials required by the Subordination
Agreement (or other subordination agreement entered into by Seller with respect
to the Senior Debt) to permit the payment of amounts due to Seller by the
Company.
14. Governing Law. This
Note shall be governed by, and construed and enforced in accordance with, the
laws of the State of Maryland, excluding conflict of laws principles that would
cause the application of laws of any other jurisdiction.
15. Successors and
Assigns. The provisions of this Note shall inure to the
benefit of and be binding on any successor to Company and
Seller. This Note may not be assigned, transferred (by operation of
law or otherwise) or pledged by Seller without the prior written consent of
Company (which consent shall not be unreasonably conditioned, withheld or
delayed), provided that any such transferee, assignee or pledgee shall be
subject to all of the terms and conditions of this Note, including, without
limitation, Section 12 and any subordination agreement executed by Seller with
respect to this Note.
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16. Third Party
Beneficiaries. The provisions contained in Section 12 of this
Note are and will be for the benefit of any third party that is a holder of
Senior Debt; and, accordingly, any such third party shall have the right to
enforce such provisions of this Note.
17. Enforcement
Costs. Should the indebtedness represented by this Note or any
part hereof be collected in any proceeding, Seller shall be entitled to collect
its reasonable fees and costs incurred in such proceeding, including reasonable
attorneys’ fees. In addition, and without duplication, following an
Event of Default, Company shall be required to pay all reasonable attorney’s
fees and expenses incurred by Seller in enforcing and collecting this Note in
circumstances where suit is not brought, so long as the actions taken by Seller
are in compliance with and permitted under this Note or any other written
agreements signed by Seller regarding the indebtedness contemplated
hereby.
18. Waiver of Jury
Trial. THE COMPANY AND SELLER EACH HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT IT MAY HAVE TO A TRIAL BY JURY IN
RESPECT TO ANY LITIGATION BASED HEREON, OR ARISING OUT OF OR UNDER THIS NOTE, OR
ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN)
OR ACTIONS OF ANY PARTY IN CONNECTION WITH THIS NOTE.
19. Notice. All notices
hereunder shall be provided in the manner set forth in the Contribution
Agreement.
20. Waiver. Company
hereby expressly waives presentment for payment, demand, protest and notice of
dishonor and protest, and all other demands and notices in connection with the
delivery, acceptance, performance, default or enforcement of this
Note.
21. Commercial
Loan. Company acknowledges and warrants that the debt
evidenced hereby is a “commercial loan” within the meaning of Title 12 of the
Commercial Law Articles of the Annotated Code of Maryland.
22. Replacement of
Note. Upon receipt by Seller of evidence satisfactory to it of
the loss, theft, destruction, or mutilation of this Note and (in the case of
loss, theft or destruction) of an indemnity reasonably satisfactory to it, and
upon surrender and cancellation of this Note, if mutilated, Company will deliver
a new Note of like tenor in lieu of this Note. Any Note delivered in
accordance with this paragraph shall be dated as of the date of this
Note.
23. Entire Agreement;
Amendments. This Note, together with the Contribution
Agreement and the other Transaction Documents, constitutes the entire agreement
and understanding of the parties, and supersedes and replaces in their entirety
any prior discussions, agreements, etc., all of which are merged herein and
therein. None of the terms of this Note may be amended or
otherwise modified except by an agreement in writing executed by each of Company
and Seller.
5
In Witness
Whereof, this Subordinated Unsecured Promissory Note has been duly
executed as an instrument under seal as of the date first set forth
above.
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COMPANY:
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THE
KEYW HOLDING CORPORATION
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By:
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/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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Name:
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▇▇▇▇
▇. ▇▇▇▇▇▇▇
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Title:
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Chief
Financial Officer
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Acknowledged
and Agreed:
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SELLER:
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/s/ D. ▇▇▇▇▇▇▇ ▇▇▇▇▇
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TAG
Holdings, LLC
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Date
of Note: February 22, 2010
Payor: The
KEYW Holding Corporation
Principal
Amount: $8,251,076.00
Signature
Page to Promissory Note