UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K

 

CURRENT REPORT

 

Pursuant to Section 13 OR 15(d) of the Securities Exchange Act of 1934

 

Date of Report:

(Date of earliest event reported)

 

October 21, 2015

 

 

Saleen Automotive, Inc.

(Exact name of registrant as specified in charter)

 

Nevada

(State or other Jurisdiction of Incorporation)

 

333-176388		45-2808694
(Commission File Number)		(IRS Employer Identification No.)

 

2375 Wardlow Road

Corona, CA 92882

(Address of Principal Executive Offices and zip code)

 

(800) 888-8945

(Registrant’s telephone
number, including area code)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of registrant under any of the following provisions:

 

[  ]  Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

[  ]  Soliciting material pursuant to Rule 14a-12(b) under the Exchange Act (17 CFR 240.14a-12(b))

 

[  ]  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

[  ]  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 

Item 1.01 Entry into a Material Definitive Agreement.

 

On October 21, 2015, we entered into a Binding Letter of Intent (the “LOI”) with SM Funding Group, Inc. (“SM Funding”), W-Net Fund I, L.P., and Steve Saleen, pursuant to which the parties agreed to the terms of certain financing transactions with our company.

 

Under the terms of the LOI, our company and SM Funding will enter into a definitive purchase agreement whereby SM Funding or its affiliates will purchase from our company senior convertible secured notes (the “Senior Notes”) in the aggregate amount of up to $2,000,000, but not less than $1,000,000, with an initial advance of $1,000,000 (including funds previously advanced by SM Funding for our benefit) occurring within 7 business days after the execution of the LOI. As of October 27, 2015, we have received aggregate advances of approximately $600,000 under the LOI that will be evidenced by Senior Notes. The Senior Notes will have a term of 12 months, bear interest at a rate of 12% per annum, and will be, at the holder’s option, convertible into shares of preferred stock (“Preferred Stock”), to be issued by us in the Offering described below. The Senior Notes will be secured by all of our assets and will be senior to our outstanding debt held by the subordinated creditors party to the Subordination Agreement referred to below (such subordinated creditors, the “Existing Lenders”). Until we enter into definitive agreements for the initial closing of the Secured Notes financing, we have agreed not to engage in extraordinary transactions without SM Funding’s prior consent.

 

Pursuant to the LOI, we also agreed to issue to SM Funding or its affiliates, for each $1,000,000 of principal funded under the Senior Notes, (i) one Black Label Mustang or acceptable equivalent, and (ii) $200,000 of Preferred Stock upon the closing of the Offering, provided that such issuance of Preferred Stock will not increase the aggregate percentage of beneficial ownership of our company allocated under the LOI to SM Funding, its affiliates and other investors in the Offering, as a group (collectively, the “SM Funding Group”), upon the consummation of the Offering.

 

Concurrent with our entry into the LOI, we entered into a Subordination Agreement with SM Funding and the Existing Lenders to memorialize the senior position of the Senior Notes relative to the notes held by the Existing Lenders.

 

Under the terms of the LOI, our company will also offer to SM Funding or its affiliates that are accredited investors, in a private placement, up to $10,000,000 (the “Target Amount”) of Preferred Stock (the “Offering”), provided that the Offering may close for minimum proceeds of $8,000,000 (the “Minimum Amount”), including the conversion of the principal and interest under the Senior Notes. SM Funding may elect to purchase the difference between the Target Amount and the Minimum Amount through the issuance to us of a one-year promissory note bearing interest at a rate of 5% per annum. Following completion of the Offering, each SM Funding investor will receive perquisites, in the form of a company-manufactured vehicle designed by our company, provided that such investor invests a minimum amount to be mutually determined by our company and SM Funding.

 

 

At the closing of the Offering, we will obtain and maintain, for a period of no less than 5 years from the date of the closing of the Offering, a $15,000,000 key man life insurance policy on Steve Saleen, which shall irrevocably name SM Funding as the beneficiary thereof. Proceeds of the policy in excess of $10,000,000 would be delivered to our company.

 

We will also pay consulting fees to Cyrano Group Inc., an affiliate of SM Funding, in the amount of $25,000 per month for a period of not less than 24 months following the closing of the Offering at the Minimum Amount.

 

The transactions contemplated under the LOI are subject to customary conditions to closing, including, without limitation, completion of due diligence by SM Funding to its satisfaction.

 

In connection with the Offering we will enter into a registration rights agreement with the investors in the Offering whereby we will undertake, promptly following the closing of the Offering, to file a registration statement registering the shares of our common stock underlying the shares of Preferred Stock sold in the Offering, subject to the requirements of Rule 415 promulgated under the Securities Act of 1933, as amended.

 

In connection with the Offering, the outstanding principal and accrued interest under the notes held by the Existing Lenders will automatically convert into shares of Preferred Stock upon the closing of the Offering for the Minimum Amount in a manner consistent with the post-Offering capitalization outlined in the LOI.

 

Pursuant to the LOI, upon completion of the Offering at the Target Amount, the SM Funding Group will collectively beneficially own 60.9% of our company (including shares of Preferred Stock issuable to SM Funding for each $1,000,000 or principal funded under the Senior Notes as set forth above), the Existing Lenders will beneficially own 26.1% of our company (pursuant to the conversion of their notes into shares of Preferred Stock), Steve Saleen will beneficially own 10% of our company (excluding a warrant to purchase 5% of our outstanding shares of common stock), and all other stockholders will beneficially own 3% of our company. The definitive agreements will require us to file an amendment to our Articles of Incorporation, within a reasonable amount of time after the closing of the Offering, to increase our authorized shares of common stock to an amount sufficient to allow the conversion of all issued shares of Preferred Stock into Common Stock.

 

Following execution of the LOI, SM Funding will have a period of 45 days (on an exclusive basis) to complete the financing under the Senior Notes. Following completion of such financing, SM funding will have a period of 90 days (on an exclusive basis) to complete the Offering. During each exclusivity period, we are prohibited from, directly or indirectly, soliciting or entertaining offers from, negotiating with or in any manner encouraging, discussing, accepting or considering any proposal of any other person relating to any type of financing transaction, or selling, disposing of or hypothecating any of our subsidiaries, their assets or businesses, in whole or in part, whether through direct purchase, merger, consolidation or other business combination (other than sales of inventory in the ordinary course) without SM Funding’s prior written approval.

 

 

The LOI may be terminated by mutual written consent of our company and SM Funding, upon written notice from SM Funding that the results of its due diligence investigation are not satisfactory, or upon written notice by any party to the other parties if the financing under the Senior Notes in the amount of at least $1,000,000 has not been completed within 7 business days following the execution of the LOI. Upon termination of the LOI the parties will have no further obligations under the LOI, except for confidentiality and disclosure obligations set forth in the LOI.

 

Except for the transactions under the agreements described above and the purchase by the Existing Lenders of notes issued by us, the terms of which have been previously disclosed, none of the other parties had any material relationship with us.

 

The foregoing is a summary of the terms of the LOI, does not purport to be complete, and is subject to and qualified in its entirety by reference to the text of the LOI, which has been filed as an exhibit to this Current Report on Form 8-K.

 

Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.

 

As noted above, to date we have borrowed $600,000 from SM Funding pursuant to the LOI on the terms described above, which are incorporated herein by reference.

 

Item 9.01 Financial Statements and Exhibits.

 

(d) Exhibits.

 

	10.1	Binding Letter of Intent executed October 21, 2015, among Saleen Automotive, Inc., SM Funding Group, Inc., W-Net Fund I, L.P., and Steven Saleen.
	10.2	Subordination Agreement dated October 21, 2015, among W-Net Fund I, L.P., other holders of Saleen Automotive, Inc.’s secured debt, Saleen Automotive, Inc. and SM Funding Group, Inc.

 

 

SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

	SALEEN AUTOMOTIVE, INC.
Date: October 27, 2015	By:	/s/ Steve Saleen
		Steve Saleen
		Chief Executive Officer

 

 

SALEEN AUTOMOTIVE, INC.

 

BINDING LETTER OF INTENT

 

The purpose of this binding letter of intent (“Letter of Intent”) is to set forth the present mutual understandings among (i) SM Funding Group, Inc. (“SM Funding”), (ii) Saleen Automotive, Inc. (“Company”), (iii) David Weiner, parties affiliated with David Weiner (inclusive of W-Net Fund I, L.P.) and other holders of the Company’s secured indebtedness set forth on Schedule I hereto (collectively, the “Existing Lenders”), and (iv) Steven Saleen (“Saleen”). Each of SM Funding, the Existing Lenders, Saleen and the Company may from time to time be referred to as a “Party” and collectively, the “Parties”. The Parties acknowledge that they intend to enter into certain definitive agreements pursuant to this Letter of Intent, and that until fully integrated definitive agreements (the “Definitive Agreements”) and other related documents have been prepared, authorized, executed and delivered by and among the Parties, this Letter of Intent shall bind all Parties to this Letter of Intent in accordance with the terms and conditions stated herein unless terminated in compliance with the provisions set forth herein. All amounts are in United States Dollars.

 

Proposed Transactions

 

Bridge		The Company and SM Funding shall enter into a definitive purchase agreement (the “Purchase Agreement”) whereby SM Funding or parties affiliated with SM Funding shall purchase from the Company senior convertible secured promissory notes (the “Senior Notes”) in the aggregate amount of $2,000,000, but not less than $1,000,000. The Senior Notes shall (i) be payable to SM Funding, or order, (ii) have a 12 month term, and (iii) bear interest in an annual amount of 12% payable together with principal on the maturity date (the “Bridge Financing”). The outstanding principal under the Senior Notes and any accrued and unpaid interest thereon shall, at the holder’s option, be convertible into shares of preferred stock of the Company to be issued in the Offering described below.   The Senior Notes shall be secured by all of the assets of the Company and will be senior to any other outstanding debt of the Company, including the secured notes in the outstanding principal amount of $2,501,612 held by the Existing Lenders (the “Existing Notes”), but excluding the secured indebtedness held by Citizens Business Bank in the principal amount of $358,704. Concurrently with execution of this Letter of Intent, the Parties shall enter or shall have entered into a Subordination Agreement (the “Subordination Agreement”) confirming SM Funding as senior secured lender and Existing Lenders as subordinated creditors. The Company at its option may repay or force conversion of the Senior Notes, if still outstanding, at any time after 180 days following the issuance date of the Senior Notes on seven days’ written notice to the holders thereof.

 

 

		Within seven (7) business days following the execution of this Letter of Intent, SM Funding shall advance or have advanced $1,000,000 to Company as the initial funding of the Bridge Financing. Funds advanced by or on behalf of SM Funding to W-Net Fund I, L.P. or David Weiner for benefit of the Company under this Letter of Intent are deemed to be and shall be treated for all purposes as part of the Bridge Financing. For each $1 million of Senior Notes purchased by SM Funding, the Company shall also issue to SM Funding (or its designee) $200,000 of Preferred Stock upon the closing of the Offering at no less than the Minimum Amount (as defined below), computed at the price paid by investors in the Offering, provided that the aggregate percentage of beneficial ownership allocated hereunder to SM Funding shall not exceed the percentage of SM Funding set forth below under “Capitalization.”
		The Existing Lenders and SM Funding shall, prior to or concurrently with the initial closing of the Bridge Financing, enter into a subordination agreement pursuant to which all of the Existing Notes shall become subordinated and junior to the lien of the Senior Notes.

  

Private Placement		The target amount to be invested by SM Funding or its affiliates, or at the option of SM Funding to be raised pursuant to the private placement offering (“Offering”) of shares of preferred stock of the Company (the “Shares”) hall be $10,000,000 (the “Target Amount”). Notwithstanding the foregoing, the Offering may close if a minimum of $8,000,000, inclusive of the conversion of principal and interest under the Senior Notes, is obtained for the Company (the “Minimum Amount”). SM Funding may elect to purchase the difference between the Target Amount and the Minimum Amount with the proceeds of a one year note advanced by the Company to SM Funding bearing interest at the rate of 5% per annum. The Company shall enter into a registration rights agreement with the investors in the Offering whereby the Company will undertake promptly following close of the Offering to file a registration statement with the Securities and Exchange Commission to register the Shares for resale (the “Registration Statement”) and will cause the Registration Statement to become effective as soon as practicable thereafter, subject to the requirements of Rule 415 promulgated under the Securities Act of 1933, as amended.

 

 

		For each $1 million of Senior Notes purchased by SM Funding under this Letter of Intent the Company shall deliver to SM Funding or its designee one Black Label Mustang or acceptable equivalent.
Preferred Shares		The Shares shall have a liquidation preference equal to the original purchase price therefor and shall be convertible into shares of Common Stock of the Company consistent with the “Capitalization” section below.
Preferred Shares		The Shares shall have a liquidation preference equal to the original purchase price therefor and shall be convertible into shares of Common Stock of the Company consistent with the “Capitalization” section below.
Mandatory Conversion of Existing Notes		All of the unpaid principal and accrued and unpaid interest of the Existing Notes, together with the unpaid principal and accrued and unpaid on the other unsecured convertible notes of the Company identified on Schedule I hereto, shall automatically convert into Shares upon the closing of the Offering at the Minimum Amount in a manner consistent with the “Capitalization” section below.
Capitalization		The Company is authorized to issue up to 2,500,000,000 shares of common stock (the “Common Stock”) and 1,000,000 shares of Preferred Stock (the “Preferred Stock”), of which a total of 489,959,781 shares of Common Stock and 384,211.645 shares of Super Voting Preferred Stock, convertible into common stock at ratio of 1,000:1, are currently issued and outstanding. Additionally, 13,459,000 shares of Common Stock have been set aside for issuance under an Omnibus Incentive Plan. The Company has issued and outstanding $4,992,552 principal amount of convertible promissory notes.
		The outstanding shares of Super Voting Preferred Stock shall convert into Common Stock of the Company in accordance with the terms thereof, on or about October 20, 2015, upon the filing of the Certificate of Amendment to the Certificate of Incorporation of the Company increasing the authorized shares of Common Stock of the Company to 2,500,000,000 shares, as set forth in the Company’s Information Statement on Schedule 14C filed with the Securities and Exchange Commission on September 30, 2015.

  

 

		Upon completion of the Offering at the Target Amount, assuming the conversion of the Shares into Common Stock, the beneficial ownership of the Company shall be:

 

Name		Percentage
(i) SM Funding Group			60.9	%*
(ii) Existing Lenders***			26.1	%
(iii) Saleen			10	%**
(iv) All others as a group			3	%

 

		In the event the Offering is completed for less than the Target Amount, the percentage ownership of SM Funding Group shall be proportionately reduced, and the percentages for all of the other Parties shall be proportionately increased.
		* Includes shares of Preferred Stock issuable to SM Funding for each $1 million of Senior Notes purchased by it, as described above under “Bridge.”   ** Excludes Warrant to purchase 5% of outstanding common stock to be issued to Steve Saleen upon the closing of the Offering. To the extent necessary, Saleen shall surrender shares of Common Stock, or preferred stock, to the Company for cancellation to achieve the percentages set forth above.   *** Includes conversion of unsecured convertible notes set forth on Schedule I hereto.   The Definitive Documents will require the Company to file a Certificate of Amendment to its Certificate of Incorporation, within a reasonable time after the closing of the Offering, increasing its authorized shares of Common Stock to an amount sufficient to allow the conversion into Common Stock of the Shares issued in the Offering.

 

 

SM Funding Perquisites		Following the completion of the Offering, each SM Funding investor will receive perquisites, in the form of a Company manufactured vehicle designated by the Company, provided that such investor invests a minimum amount to be mutually determined by Company and SM Funding.
Key Man Life Insurance		At the closing of the Offering, the Company shall obtain and maintain for a period of no less than five years (the “Initial Term”) from the date of the closing of the Offering $15,000,000 key man life insurance policy on Saleen (the “Saleen Life Policy”). The Saleen Life Policy shall irrevocably name SM Funding as the beneficiary thereof for the Initial Term. Proceeds of the Saleen Life Policy in excess of $10,000,000 would be delivered to the Company.
Consulting Fees		The Company shall pay consulting fees to Cyrano Group Inc., an affiliate of SM Funding, in the amount of $25,000 per month for a period of not less than 24 months commencing on first business day of the month that follows completion of the Offering, subject to the closing of the Offering at the Minimum Amount.
Certain Conditions to Closing		The closing of the transactions contemplated hereby shall be subject to customary conditions to close for transactions of this type as more particularly set forth in the related transaction documents. Without limitation on the foregoing, closing of transactions shall be subject to:

 

	(i)	Completion of due diligence by and to the satisfaction of SM Funding.
	(ii)	Execution by the Parties of Definitive Agreements
	(iii)	Approval by the requisite vote of the Board of Directors and stockholders of the Company if required under the Nevada Revised Statutes and the Company’s charter documents.
	(iv)	Such other terms as the Parties may mutually find to be reasonable and appropriate.

 

 

Intellectual Property		Other than as set forth in that certain Intellectual Property License Agreement entered into on June 5, 2015 with Saleen Motors International LLC, a Delaware limited liability company that is a wholly owned subsidiary of GreenTech Automotive, Inc., the Company retains the sole and exclusive right to use, sublicense and otherwise benefit from all of the Company’s intellectual property, including without limitation the exclusive right to the “Saleen” name.
Accredited Investors; Unregistered Securities		The Offering shall be made solely to “accredited investors” within the meaning of the federal securities laws. The Parties agree and acknowledge that the proposed offer and issuance of the Shares in the Offering will be exempt from registration under the Securities Act of 1933, as amended, and that any shares of the Company’s common or preferred stock issued in connection with this transaction shall be restricted securities within the meaning of the federal securities laws and that certificates evidencing the Shares shall bear an appropriate restrictive legend.
Termination		This binding Letter of Intent may be terminated:   (i) by mutual written consent of the Company and SM Funding;   (ii) upon written notice from SM Funding that results of due diligence are not satisfactory; or   (iii) upon written notice by any Party to the other Parties if the Bridge Financing in the amount of at least $1 million has not been completed within five (5) business days following the execution of this Letter of Intent.   Upon termination, the parties hereto will have no further obligations hereunder, except for provisions of Confidentiality and Disclosure sections as set forth herein.
Due Diligence		SM Funding has commenced, and intends to continue, its due diligence investigation of the prospects, business, assets, contracts, rights, liabilities, liens, and obligations of the Company, including operational, financial, marketing, employee, legal, regulatory and other related matters.

 

 

Exclusivity		For a period of 45 days after this Letter of Intent is fully executed, SM Funding will have a period of exclusivity to complete the Bridge Financing. Following the completion of the Bridge Financing, SM Funding will have a period of 90 days exclusivity to complete the Offering (each such exclusivity period is, the “Exclusivity Period”). During the Exclusivity Period, the Company and its subsidiaries shall not, directly or indirectly, through any representative or otherwise, solicit or entertain offers from, negotiate with or in any manner encourage, discuss, accept or consider any proposal of any other person relating to any type of financing transaction, or sell, dispose or hypothecate any of its subsidiaries, their assets or businesses, in whole or in part, whether through direct purchase, merger, consolidation or other business combination (other than sales of inventory in the ordinary course) without prior written approval of SM Funding.
Expenses		Each of the Company and SM Funding and the Existing Lenders shall be responsible for and bear all of their respective costs and expenses (including any broker’s, finder’s, counsel and investment banking fees) incurred in connection with the transactions, including expenses of its representatives incurred at any time in connection with pursuing or consummating the transaction. Upon closing of the Offering at the Minimum Amount, SM Funding Group shall be reimbursed in full by the Company for all out of pocket expenses, not to exceed $200,000.
Governing Law		The terms of the transaction and all other matters relating to the transaction will be governed by the laws of the State of California, without regard to the conflicts of law provisions thereof.
Access		The Company and its subsidiaries shall provide to SM Funding complete access to the facilities, books and records of the Company and its subsidiaries and shall cause the directors, employees, accountants and other agents and representatives (each a Representative and collectively, the “Representatives”) of the Company and its subsidiaries to cooperate fully with SM Funding and SM Funding’s Representatives in connection with the SM Funding’s due diligence investigation of the Company and its subsidiaries and the Company’s and its subsidiaries’ assets, contracts, liabilities, operations, records and other aspects of its business. SM Funding shall be under no obligation to continue with its due diligence investigation or negotiations regarding the Offering if, at any time, the results of its due diligence investigation are not satisfactory to SM Funding for any reason in its sole discretion. In that case, SM Funding shall give a written notice to the Company, following which the Exclusivity provisions of this Letter of Intent shall terminate.

 

 

Conduct of Business		Until the initial closing of the Bridge Financing documents (consisting of securities purchase agreement, senior convertible promissory note, security agreement and subordination agreement, and such other documents deemed necessary or appropriate by the parties, collectively, the “Bridge Documents”) have been duly executed and delivered or this Letter of Intent has been terminated, the Company and its subsidiaries shall conduct their respective businesses only in the ordinary course, and not to engage in any extraordinary transactions without SM Funding’s prior consent, including:   (i) not disposing of any of its assets;   (ii) not materially increasing the annual level of compensation of any employee, and not increasing the annual level of compensation of any person whose total combined compensation from the Company and any subsidiary in the last preceding fiscal year exceeded $75,000, and not granting any unusual or extraordinary bonuses, benefits or other forms of direct or indirect compensation to any employee, officer, director or consultant, except in amounts in keeping with past practices by formulas or otherwise;   (iii) not increasing, terminating, amending or otherwise modifying any plan for the benefit of employees;   (iv) not paying any dividends, redeeming any securities, or otherwise causing assets of the Company or any of its subsidiaries to be distributed to any of its shareholders, except by way of compensation to employees who are also shareholders within the limitations set forth in clause (ii) above; and   (v) not borrowing any funds, under existing credit lines or otherwise, except as reasonably necessary for the ordinary operation of the Company’s or its subsidiaries’ businesses in a manner in keeping with historical practices.

 

 

Disclosure		Except as and to the extent required by law, without the prior written consent of the other Parties, no Party to this Letter of Intent (or any of its subsidiaries) shall, and each shall direct its Representatives not to, directly or indirectly, make any public comment, statement or communication with respect to, or otherwise disclose or permit the disclosure of the existence of discussions regarding a possible transaction between the Parties or any of the terms, conditions or other aspects of the transaction proposed in this Letter of Intent. Notwithstanding the foregoing the Company may make such filings with the Securities and Exchange Commission as may be required upon advice of its legal counsel. Each Party agrees to cooperate with the others in making such timely, accurate and appropriate disclosures.
Confidentiality		Except as and to the extent required by law, each Party agrees that it shall not disclose or use, and it shall cause its Representatives not to disclose or use, any Confidential Information (as defined below) with respect to any other Party furnished, or to be furnished, by a Party or its Representatives to any other Party or any other Party’s Representatives in connection herewith at any time or in any manner other than in connection with its evaluation of the Transaction. For purposes of this section, “Confidential Information” means any information about a Party stamped “confidential” or identified in writing as such to the first Party by the another Party; provided, however, that Confidential Information does not include information which the first Party can demonstrate (i) is generally available to or known by the public other than as a result of improper disclosure by the first Party or (ii) is obtained by the first Party from a source other than the other Party, provided that such source was not bound by a duty of confidentiality to the other Party or another Party with respect to such information. If this Letter of Intent is terminated, the Parties shall promptly return to each other any Confidential Information in their possession.   Each Party hereto hereby acknowledges that it is familiar with, and hereby agrees that it will advise its representatives who are informed as to the matters which are the subject of this Agreement concerning the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the rules and regulations promulgated thereunder; and agrees that it will neither use, nor cause any person to use, any Confidential Information in contravention of the Exchange Act, and the rules and regulations promulgated thereunder, including, without limitation, Rule 10b-5 and Rule 14e-3 thereunder.
Letter of Intent Priority		This Letter of Intent supersedes all prior and contemporaneous agreements and understandings, inducements or conditions, whether expressed or implied, oral or written (collectively, the “Commitments”) and, in the event of a conflict between the provisions of this Letter of Intent and any of the Commitments, the terms and provisions of this Letter of Intent shall govern.

 

[Signature Page Follows]

 

 

The foregoing accurately summarizes the understandings and agreements of the Parties with respect to the matters covered by this binding Letter of Intent. This document may be executed in counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument. Facsimile, digital image and electronic signatures shall constitute valid signatures for all purposes.

 

SM FUNDING:
By:
Name:
Title:
COMPANY:
By:
Name:	Steven Saleen
Title:	Chief Executive Officer
W-NET FUND I, L.P.
By:
Name:	David Weiner
Title:
STEVEN SALEEN
By:
	Steven Saleen, an individual

  

 

SCHEDULE I

 

Existing Note Holders

 

						Principal				Accrd. Int.				Total
		Maturity
		Date				Balance				Balance				Balance
SECURED
Europa International			6/25/2017				1,162,310				83,395				1,245,705
Kartic Enterprises, Inc.			6/25/2017				50,000				3,013				53,013
W-Net Fund I L.P.			6/25/2017				750,000				39,489				789,489
Gardner Syndication Mngt. Inc			6/25/2017				39,410				1,951				41,361
W-Net Fund I L.P.			1/20/2019				255,600				3,320				258,920
Europa International			1/20/2019				244,292				3,092				247,384
							2,501,612				134,260				2,635,872

  

Other Notes to Convert upon Closing of Offering

 

UNSECURED
W Net Fund I L.P.			3/27/2017				700,000				57,482				757,482
Europa International			3/28/2017				1,000,000				87,835				1,087,835
Philpot Family Trust			3/28/2017				100,000				8,783				108,783
Mapstead			3/31/2017				150,000				13,089				163,089
Adam Liebross			4/1/2017				250,000				21,815				271,815
W-Net Fund I L.P. (KBM drip)			OPEN				77,000				101				77,101
							2,277,000				189,106				2,466,106

 

 

 

 

SUBORDINATION AGREEMENT

 

THIS SUBORDINATION AGREEMENT (this “Subordination Agreement”), is entered into as of October    , 2015, by and among W-Net Fund I L.P., and those other parties named on the signature pages hereto (collectively the “Subordinated Creditors”); Saleen Automotive, Inc., a Nevada corporation (“Debtor”) and SM Funding Group, Inc., a Delaware corporation as senior lender (the “Senior Creditor”).

 

RECITALS

 

A. Debtor and Senior Creditor will or have entered into a binding Letter of Intent dated as of the date hereof pursuant to which Senior Creditor has loaned or caused to be loaned funds to Debtor; it is further contemplated that the Debtor will issue senior convertible promissory notes and preferred shares (or similar securities) to Senior Creditor (collectively, the “Senior Loans”).

 

B. It is contemplated that Senior Loans of up to $2,000,000 in principal amount (“Maximum Principal Amount”) will be made to the Debtor.

 

C. Debtor is indebted to Subordinated Creditors in the principal amount shown on Schedule I (the “Subordinated Debt”).

 

D. Senior Creditor requires that Subordinated Creditors and Debtor execute this Agreement as a condition to lending funds to the Debtor constituting Senior Loans.

 

AGREEMENT

 

NOW, THEREFORE, in order to induce Senior Creditor to loan funds to the Debtor which shall constitute Senior Loans, and for other good and valuable consideration, the receipt and sufficiency of which hereby are acknowledged, the parties hereto hereby agree as follows.

 

Section 1. Interpretation.

 

(a) Definitions. Unless otherwise expressly provided in this Subordination Agreement, each term set forth in Schedule II, when used in this Subordination Agreement, shall have the respective meaning given to that term in Schedule II or in the provision of this Subordination Agreement referenced in Schedule II.

 

(b) Headings. Headings in this Subordination Agreement are for convenience of reference only and are not part of the substance hereof.

 

(c) Plural Terms. All terms defined in this Subordination Agreement in the singular form shall have comparable meanings when used in the plural form and vice versa.

 

(d) Other Interpretive Provisions. References in this Subordination Agreement to any document, instrument or agreement (i) shall include all exhibits, schedules and other attachments thereto, (ii) shall include documents, instruments or agreements issued or executed in replacement thereof, and (iii) shall mean such document, instrument or agreement, or replacement or predecessor thereto, as amended, modified and supplemented from time to time and in effect at any given time. The words “include” and “including” and words of similar import when used in this Subordination Agreement shall not be construed to be limiting or exclusive.

 

Subordination Agreement Saleen SM Funding

 

 

Section 2. Subordination.

 

(a) Priorities. Senior Creditor and Subordinated Creditors hereby agree that the Subordinated Debt and Subordinated Debt Payments are and shall be subordinate to the Senior Debt and all required payments therein, to the extent and in the manner set forth herein, notwithstanding any applicable law to the contrary and notwithstanding anything to the contrary contained in any loan agreement, any Subordinated Debt Instrument or any other agreement to the contrary. All of the Senior Debt shall be deemed to have been made or incurred in reliance upon this Subordination Agreement.

 

(b) Restricted Actions. Except as otherwise expressly provided in Section 3, until all Senior Debt is indefeasibly paid in full in cash or converted into securities of the Debtor, (i) Debtor will not make, permit or cause and Subordinated Creditors will not accept, permit or cause any Subordinated Debt Payment; (ii) Subordinated Creditors will not demand payment on, accelerate the maturity of, or bring any action for the payment of the Subordinated Debt; institute or join with others in instituting any Debtor Relief Proceeding against Debtor; interfere with Senior Creditor’s Lien on the Collateral or take any other action to collect the Subordinated Debt or enforce its rights in connection therewith (provided that Subordinated Creditors may file a proof of claim in connection with a Debtor Relief Proceeding); and (iii) none of Debtor nor Subordinated Creditors will take any other action prejudicial to or inconsistent with the priorities and other rights granted to Senior Creditor hereunder.

 

(c) Turnover. Except for payments permitted to be made to Subordinated Creditors pursuant to Section 3 hereof, if any cash, cash equivalents, securities or other property should be received by Subordinated Creditors (or by any other Person for the benefit of Subordinated Creditors) as Subordinated Debt Payments, Subordinated Creditors shall immediately deliver (or cause to be delivered) the same to Senior Creditor in the form in which received, together with any endorsement, assignment or other writings necessary for Senior Creditor to realize the value thereof and to apply to the Senior Debt. Until such cash, cash equivalents, securities and other property received by Subordinated Creditors are so delivered to Senior Creditor (except for payments permitted to be made to Subordinated Creditors pursuant to Section 3 hereof), the same shall be held by Subordinated Creditors in trust for the benefit of Senior Creditor and shall not be co-mingled with any other property of Subordinated Creditors.

 

(d) Obligations of Debtor Unconditional. Subject to Sections 3 and 5 (v), nothing contained in this Subordination Agreement is intended to or shall impair, as between Debtor and Subordinated Creditors, the obligation of Debtor to pay the Subordinated Debt as and when due and payable in accordance with its terms, or is intended or shall affect the relative rights of Subordinated Creditors and creditors of Debtor other than Senior Creditor.

 

Subordination Agreement Saleen SM Funding

 

 

(e) Filing Proof of Claim, Forgiveness of Debt. In connection with any Debtor Relief Proceeding, Senior Creditor shall have the right to (i) file on behalf of Subordinated Creditors all claims or proofs of debt in respect of the Subordinated Debt in the form required (provided, however, that if a Subordinated Creditor files a claim or proof of claim prior to ten (10) business days before the expiration of the time, as provided by applicable statute, to file such claims or proofs of claim, then such Subordinated Creditor shall have the right to file such claims and proofs of claim); (ii) demand, sue for, collect or receive the payments and distributions in respect of any Subordinated Debt (provided, however, that if a Subordinated Creditors takes any such action no later than ten (10) business days after Senior Creditor make a written request, instructing Subordinated Creditors to take such action, then such Subordinated Creditor shall have the right to take any such actions); and (iii) file and prove all claims therefor and to take all such other action in the name of Subordinated Creditors or otherwise as Senior Creditor may determine to be necessary or appropriate for the enforcement of the provisions of this Section 2 (provided, however, that if a Subordinated Creditor takes any such action no later than ten (10) business days after Senior Creditor make a written request, instructing Subordinated Creditors to take such action, then such Subordinated Creditor shall have the right to take any such actions); (iv) vote on behalf of each Subordinated Creditor in respect of the Subordinated Debt (provided, however, that if a Subordinated Creditor shall vote in respect of its interested in the Subordinated Debt as determined and directed by Senior Creditor prior to ten (10) business days before the expiration of the time to exercise its right to so vote, as provided by applicable statute or by the applicable bankruptcy court, receiver or trustee, then such Subordinated Creditors shall have the right to so vote). In no event shall Subordinated Creditors waive, forgive, or cancel any claim relating to the Subordinated Debt which Subordinated Creditors may now or hereafter have against Debtor.

 

(f) Legend. Each original Subordinated Debt Instrument, and any other instrument evidencing the Subordinated Debt or any portion thereof, will be forthwith inscribed with a legend conspicuously indicating that payment thereon is subordinated to the claims of Senior Creditor pursuant to the terms of this Subordination Agreement, and upon the request of the Senior Creditor, each Subordinated Creditor will deliver copies of the Subordinated Debt Instruments in its possession to Senior Creditor. Any instrument evidencing any of the Subordinated Debtor any portion thereof which is hereafter executed will, on the date thereof, be inscribed with the aforesaid legend, and copies thereof will be delivered to Senior Creditor on the date of its execution or within five (5) business days thereafter.

 

Section 3. Permitted Actions. Notwithstanding anything to the contrary set forth in any Subordinated Debt Instrument or otherwise Debtor may pay, and Subordinated Creditors may receive, the Entire Subordinated Debt Instrument Balance, upon the sale of all or substantially all of the assets or stock of Debtor, provided, however, that, no such amounts may be paid to Subordinated Creditors unless Senior Creditor has been paid in full all of the Senior Debt prior to the payment to Subordinated Creditors of the Entire Subordinated Debt Instrument Balance, or each of the following has occurred:

 

(a) Senior Creditor has waived in writing its requirement that the Senior Debt be paid in full as a result of the occurrence of any such event;

 

Subordination Agreement Saleen SM Funding

 

 

(b) a recapitalization of Debtor has occurred in the amount of not less than the Entire Subordinated Debt Instrument Balance and upon terms satisfactory to Senior Creditor;

 

(c) no Debtor Relief Proceeding or Senior Debt Payment Default shall have commenced and be continuing as of the date of payment of the Entire Subordinated Debt Instrument Balance;

 

(d) no other default shall have been declared by Senior Creditor with respect to the Senior Debt in a written notice to Debtor (which shall not have been waived in writing) as of the date of payment of the Entire Subordinated Debt Instrument Balance; and

 

(e) ten (10) business days prior to such payment of the Entire Subordinated Debt Instrument Balance, Debtor shall have delivered to Senior Creditor financial statements for Debtor as of the last day of the immediately preceding calendar month, in form and substance satisfactory to Senior Creditor, together with a certification of the Chief Financial Officer of Debtor (which certification shall be true and correct as of the date thereof), confirming each of the matters set forth in clauses (a), (b), (c) and (d) above.

 

Section 4. Representations and Warranties. Each Subordinated Creditorrepresents and warrants to Senior Creditor that (i) the execution, delivery and performance by such Subordinated Creditor of this Subordination Agreement are within the power of such Subordinated Creditor and have been duly authorized by all necessary actions on the part of such Subordinated Creditors (ii) this Subordination Agreement has been duly executed and delivered by such Subordinated Creditor and constitutes a legal, valid and binding obligation of such Subordinated Creditor, enforceable against such Subordinated Creditor in accordance with its terms; (iii) the execution, delivery and performance of this Subordination Agreement do not violate any Requirement of Law; (iv) no consent, approval, order or authorization of, or registration, declaration or filing with, any governmental authority or other Person (including the shareholders of any Person) is required in connection with the execution, delivery and performance of this Subordination Agreement by such Subordinated Creditor, except such consents, approvals, orders, authorizations, registrations, declarations and filings that are so required and which have been obtained and are in full force and effect; (v) the Subordinated Debt is owned by such Subordinated Creditor, free and clear of any Liens, other than inchoate statutory Liens arising under law and not in respect of overdue monetary obligations; (vi) the copies of the Subordinated Debt Instruments issued to such Subordinated Creditor attached hereto as Exhibit A are true and complete copies thereof, and such Subordinated Debt Instruments have not been further amended or supplemented; and (vii) no other Debt for borrowed money is payable by Debtor to Subordinated Creditors, with the exception of the Debt evidenced by each Subordinated Debt Instrument issued by Debtor in favor of such Subordinated Creditor.

 

Subordination Agreement Saleen SM Funding

 

 

Section 5. Covenants of Subordinated Creditors. Notwithstanding anything to the contrary herein, in any Subordinated Debt Instrument or in any other agreement, until the Senior Debt is indefeasibly paid in full in cash or converted into securities of the Debtor, each Subordinated Creditors hereby agrees (i) to perform all acts that may be reasonably necessary to maintain, preserve and protect its rights in the Subordinated Debt and the value of such rights; (ii) to procure, execute and deliver to Senior Creditor all endorsements, assignments and other writings necessary for Senior Creditor to realize the value of any property to which Senior Creditor is entitled hereunder; (iii) not to surrender or lose possession of (other than to Senior Creditor), sell, encumber, assign, grant or permit any Lien in (other than inchoate statutory Liens arising under law and not in respect of overdue monetary obligations) or otherwise transfer to any Person (other than Senior Creditor) any rights of Subordinated Creditors in the Subordinated Debt or any evidence thereof; (iv) to provide written notice to Senior Creditor of any Subordinated Debt Default; (v) to not amend or consent to the amendment of the payment provisions of its Subordinated Debt Instruments; and (vi) that Subordinated Creditors shall not claim any Lien upon any property or assets of Debtor as security for the Subordinated Debt.

 

Section 6. Authorized Actions. Subordinated Creditors authorize Senior Creditor in its discretion, without notice to Subordinated Creditors, irrespective of any change (including any change in the financial condition of Debtor, Subordinated Creditors, any guarantor or any other Person) or of any other event or circumstance, and without affecting or impairing in any way the obligations of Subordinated Creditors or the rights of Senior Creditor hereunder, from time to time to (a) compromise, extend, accelerate or otherwise change the time for payment or performance of, or otherwise change the terms of, the Senior Debt or any part thereof, including increase or decrease of the rate of interest thereon; (b) take and hold Collateral or other security for the payment or performance of the Senior Debt and exchange, enforce, waive or release any such Collateral or other security; (c) apply such Collateral or other security and direct the order or manner of sale thereof; (d) purchase such Collateral or other security at public or private sale; (e) otherwise exercise any right or remedy it may have against Debtor, any guarantor, any other Person or any Collateral or other security, including the right to foreclose upon any Collateral by judicial or nonjudicial sale; (f) settle, compromise with, release or substitute any one or more makers, endorsers or guarantors of the Senior Debt; or (g) assign any or all of the Senior Debt, this Subordination Agreement, or any related documents, instruments or agreements in whole or in part.

 

Section 7. Waiver. No right of Senior Creditor to enforce the subordination and other terms and conditions provided herein shall at any time in any way be prejudiced or impaired by any act or failure to act by Senior Creditor or by any non-compliance by Debtor with the terms and provisions and covenants herein regardless of any knowledge thereof Senior Creditor may have or otherwise be charged. Senior Creditor shall not be prejudiced in its right to enforce the subordination and other terms and conditions of the Subordinated Debt, by any act or failure to act by Debtor or anyone in custody of its assets or property. Without limiting the generality of the foregoing sentence of this Section 7, Subordinated Creditors waive (a) any right to require Senior Creditor to (i) proceed against Debtor, any guarantor or any other Person, (ii) proceed against or exhaust any Collateral or other security, or (iii) pursue any other remedy in Senior Creditor’s power whatsoever; (b) any defense resulting from the absence, impairment or loss of any right of reimbursement, subrogation, contribution or other right or remedy of Subordinated Creditors against Debtor, any guarantor, any other Person or any Collateral or other security, whether resulting from an election by the Senior Creditor to foreclose upon Collateral by nonjudicial sale, or otherwise; (c) any setoff or counterclaim of Debtor or any defense which results from any disability or other defense of Debtor or the cessation or stay of enforcement from any cause whatsoever of the liability of Debtor; (d) any right of subrogation, reimbursement or contribution, and right to enforce any remedy which Senior Creditor now has or may hereafter have against Debtor or any other Person, and any benefit of, and any right to participate in, any Collateral or other security now or hereafter received by Senior Creditor; (e) all presentments, demands for performance, notices of nonperformance, protests, notice of dishonor, and notices of acceptance of this Subordination Agreement; (f) any right to be informed by Senior Creditor of the financial condition of Debtor, any guarantor or any other Person or any change therein or any other circumstances bearing upon the risk of nonpayment or nonperformance of the Senior Debt. Subordinated Creditors have the ability and assume the responsibility for keeping informed of the financial condition of Debtor and any guarantors and of other circumstances affecting such nonpayment and nonperformance risks.

 

Subordination Agreement Saleen SM Funding

 

 

Section 8. Attorney-in-Fact. Subordinated Creditors hereby irrevocably appoint the Senior Creditor as their attorney-in-fact and agree that, after the commencement of any Debtor Relief Proceeding, Senior Creditor may perform (but Senior Creditor shall not be obligated to and shall incur no liability to Subordinated Creditors or Debtor or any other Person for failure so to do) any act which Subordinated Creditors is obligated by this Subordination Agreement to perform but have not performed in accordance with this Subordination Agreement, and to exercise such other rights and powers as Subordinated Creditors might exercise with respect to the Subordinated Debt, including the right to (a) collect by legal proceedings or otherwise and endorse, receive and receipt for all dividends, interest, payments, proceeds and other sums and property now or hereafter payable on or on account of the Subordinated Debt; (b) collect all payments and distributions made in any Debtor Relief Proceeding on account of the Subordinated Debt and apply the same to the Senior Debt; (c) vote claims relating to the Subordinated Debt in any Debtor Relief Proceeding; and (d) take any other action in any Debtor Relief Proceeding in connection with the Subordinated Debt.

 

Section 9. Default. If any representation or warranty in this Subordination Agreement or in any instrument evidencing or securing the Senior Debt proves to have been materially false when made, or, in the event of a material breach by Debtor or Subordinated Creditors in the performance of any of the terms of this Subordination Agreement or any instrument or agreement evidencing or securing the Senior Debt, all of the Senior Debt shall, at the option of Senior Creditor, become immediately due and payable without presentment, demand, protest, or notice of any kind, notwithstanding any time or credit otherwise allowed. At any time Subordinated Creditors fails to comply with any provision of this Subordination Agreement that is applicable to Subordinated Creditors, Senior Creditor may demand specific performance of this Subordination Agreement, whether or not Debtor has complied with this Subordination Agreement, and may exercise any other remedy available at law or equity.

 

Section 10. Miscellaneous.

 

(a) Notices. Except as otherwise set forth herein, all notices, requests and demands required or permitted to be made hereunder shall be in writing and sent by certified or registered mail, return receipt requested, or by express courier or delivery service (provided the same shall provide dated evidence of delivery), or by facsimile, if followed by an original sent by certified mail, registered mail, express courier or delivery service, shall be deemed given or made five (5) business days after mailing if sent by mail, one (1) business day after consignment to an express courier or delivery service, and upon sending thereof if sent by facsimile as provided above, and shall be directed as provided on the signature pages below.

 

Subordination Agreement Saleen SM Funding

 

 

	With a copy (not constituting a notice) to:
	Louis A. Wharton
	Stubbs Alderton & Markiles LLP
	15260 Ventura Blvd., 20th Floor
	Sherman Oaks, California 91403
	Tel: 818-444-4509
	Fax: 818-444-6309
	Zev Bomrind
	Fox Rothschild LLP
	100 Park Avenue, 15th Floor
	New York, New York 10017
	Tel: 212-878-7951
	Fax: 212-692-0940
	Aaron A. Grunfeld
	Law Offices of Aaron A. Grunfeld & Assoc.
	11111 Santa Monica Blvd., Suite 1840
	Los Angeles, California 90025
	Tel: 310-788-7577

 

or, as to any of the foregoing, at such other address as shall be designated by such party in a written notice to the other party hereto.

 

(b) Nonwaiver. No failure or delay on Senior Creditor’s part in exercising any right hereunder shall operate as a waiver thereof or of any other right nor shall any single or partial exercise of any such right preclude any other further exercise thereof or of any other right.

 

(c) Amendments and Waivers. Except as otherwise expressly provided herein, this Subordination Agreement may not be amended or modified, nor may any of its terms be waived, except by written instruments signed by the party or parties against which enforcement thereof is sought. Each waiver or consent under any provision hereof shall be effective only in the specific instances for the purpose for which given.

 

(d) Assignments. This Subordination Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns; provided, however, that Debtor may not assign its rights or delegate its duties hereunder without the prior written consent of Senior Creditor and substantially a majority interest of Subordinated Creditors. Senior Creditor may assign, through the sale of participation interests or otherwise, all or any part of its interest under this Subordination Agreement or any related documents upon notice to Subordinated Creditors and an agreement stating that such assignee or participant shall abide by the terms of this Subordination Agreement. Senior Creditor may disclose this Subordination Agreement and the related documents to any potential assignee or participant.

 

Subordination Agreement Saleen SM Funding

 

 

(e) Entire Agreement. This Subordination Agreement constitutes and expresses the entire understanding between the parties hereto with respect to the subject matter hereof, and supersedes all prior and contemporaneous agreements and understandings, inducements or conditions, whether express or implied, oral or written.

 

(f) Counterparts. This Subordination Agreement may be executed in any number of identical counterparts, any set of which signed by all parties hereto shall be deemed to constitute a complete, executed original for all purposes.

 

(g) Governing Law: Choice of Forum.

 

(i) California Law. This Subordination Agreement shall be interpreted and the rights and liabilities of the parties hereto determined in accordance with the internal laws and not the law of conflicts of the State of California.

 

(ii) Forum. Any legal action or proceeding with respect to this subordination agreement or any other loan document may be brought in the courts within the State of California or in any court of the United States within the State of California, and by execution and delivery of this Subordination Agreement, Debtor, Subordinated Creditors and Senior Creditor’s consent, for itself and in respect of its property, to the non-exclusive jurisdiction of those courts. Each of Debtor, Subordinated Creditors and Senior Creditor irrevocably waive any objection, including any objection to the laying of venue or based on the grounds of forum non conveniens, which it may now or hereafter have to the bringing of any action or proceeding in such jurisdiction in respect of this subordination agreement or any document related hereto.

 

Debtor and Subordinated Creditors hereby waives personal service of any and all process upon it and consents that all such service of process may be made by registered mail (return receipt requested) directed to such person at its address set forth on the signature lines below and service so made shall be deemed to be completed five (5) days after the same shall have been so deposited in the U.S. mails. Nothing contained herein shall affect the right of Senior Creditor to serve legal process by any other manner permitted by law.

 

(h) Further Assurances. From and after the date hereof, the parties shall, on request, cooperate with one another by furnishing any additional information, executing and delivering any additional documents and instruments, and doing any and all such other things as may be reasonably required by the parties or their counsel to consummate or otherwise implement the transactions contemplated by this Subordination Agreement.

 

[Signature Pages Follow]

 

Subordination Agreement Saleen SM Funding

 

 

IN WITNESS WHEREOF, the parties hereto have caused this Subordination Agreement to be executed as of the day and year first above written.

 

SALEEN AUTOMOTIVE, INC.:
By:__________________________________
[Signature]
Name:_____________________________
Title:______________________________
Mailing Address:
_________________________________
_________________________________
_________________________________
Telephone No.:_____________________
Facsimile No:______________________
Email Address:_____________________

 

Subordination Agreement Saleen SM Funding

 

 

SUBORDINATED CREDITORS:

 

EUROPA INTERNATIONAL, INC.
By:__________________________________
[Signature]
Name:_____________________________
Title:______________________________
Mailing Address:
_________________________________
_________________________________
_________________________________
Telephone No.:_____________________
Facsimile No:______________________
Email Address:_____________________
KARTIC ENTERPRISES, INC.
By:__________________________________
[Signature]
Name:_____________________________
Title:______________________________
Mailing Address:
_________________________________
_________________________________
_________________________________
Telephone No.:_____________________
Facsimile No:______________________
Email Address:_____________________

 

Subordination Agreement Saleen SM Funding

 

 

W-NET FUND I, L.P.
By:__________________________________
[Signature]
Name:_____________________________
Title:______________________________
Mailing Address:
_________________________________
_________________________________
_________________________________
Telephone No.:_____________________
Facsimile No:______________________
Email Address:_____________________
GARDNER SYNDICATION MANAGEMENT INC.
By:__________________________________
[Signature]
Name:_____________________________
Title:______________________________
Mailing Address:
_________________________________
_________________________________
_________________________________
Telephone No.:_____________________
Facsimile No:______________________
Email Address:_____________________

 

Subordination Agreement Saleen SM Funding

 

 

SENIOR CREDITOR:

 

SM FUNDING GROUP, INC.
By:__________________________________
[Signature]
Name:_____________________________
Title:______________________________
Mailing Address:
_________________________________
_________________________________
_________________________________
Telephone No.:_____________________
Facsimile No:______________________
Email Address:_____________________

 

Subordination Agreement Saleen SM Funding

 

 

SCHEDULE I

 

Existing Note Holders

 

						Principal				Accrd. Int.				Total
		Maturity
		Date				Balance				Balance				Balance
SECURED
Europa International			6/25/2017				1,162,310				83,395				1,245,705
Kartic Enterprises, Inc.			6/25/2017				50,000				3,013				53,013
W-Net Fund I L.P.			6/25/2017				750,000				39,489				789,489
Gardner Syndication Mngmnt. Inc			6/25/2017				39,410				1,951				41,361
W-Net Fund I L.P.			1/20/2019				255,600				3,320				258,920
Europa International			1/20/2019				244,292				3,092				247,384
							2,501,612				134,260				2,635,872

 

Other Notes to Convert upon Closing of Offering

 

UNSECURED
W Net Fund I L.P.			3/27/2017				700,000				57,482				757,482
Europa International			3/28/2017				1,000,000				87,835				1,087,835
W-Net Fund I L.P. (KBM drip)			OPEN				77,000				101				77,101
							1,777,000				145,418				1,922,419

 

Subordination Agreement Saleen SM Funding

 

 

SCHEDULE II

Definitions

 

“Collateral” shall mean any assets of any Debtor or any other Person which is subject to a Lien in favor of Senior Creditor.

 

“Debt” shall mean, with respect to any Person, all loans, advances and indebtedness for borrowed money, howsoever arising, owed by such Person of every kind and description (whether or not evidenced by any note or instrument and whether or not for the payment of money), direct or indirect, absolute or contingent, due or to become due, now existing or hereafter arising, including all principal, interest, fees, taxes, charges, expenses (including attorneys’ fees) and other amounts payable in connection therewith, and all obligations and liabilities under guaranties.

 

“Debtor” shall have the meaning given to that term in the introductory paragraph hereof.

 

“Debtor Relief Proceeding” shall mean any suit, action, case or other proceeding commenced by, against or for Debtor or its property seeking the dissolution, liquidation, reorganization or other relief of Debtor or its Debt under any state, federal or foreign bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a receiver, trustee, liquidator, custodian or other similar official for Debtor or its property or any general assignment by Debtor for the benefit of its creditors.

 

“Entire Subordinated Debt Instrument Balance” shall mean the entire principal amount then payable to Subordinated Creditors, plus interest accrued thereon in accordance with the applicable Subordinated Debt Instrument.

 

“Lien” means any interest in property securing an obligation owed to, or a claim by, a Person other than the owner of the property, whether such interest is based on the common law, statute or contract, and, including, without limitation, a security interest, pledge or lien arising from a mortgage, deed of trust, encumbrance, pledge, hypothecation, assignment, deposit arrangement, agreement, security agreement, conditional sale or trust receipt or a lease, consignment or bailment for security purposes.

 

“Person” shall mean any natural person, corporation, partnership, firm, association, governmental authority or any other entity whether acting in an individual, fiduciary, or other capacity.

 

“Requirements of Law” shall mean, with respect to any Person, the articles or certificate of incorporation, bylaws, partnership agreement, trust agreement, operating agreement or other organizational or governing documents of such Person, and any material law, treaty, rule or regulation, or a final and binding determination, order, judgment or decree of any arbitrator, court or other governmental authority, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject.

 

“Senior Creditor” shall have the meaning given to such term in the introductory paragraph hereof.

 

Subordination Agreement Saleen SM Funding

 

 

“Senior Debt” shall mean (i) all Debt now or hereafter existing or owed by Debtor to Senior Creditor pursuant to senior secured promissory notes with a principal amount up to the Maximum Principal Amount, or any instruments or other documents executed by Debtor with or in favor of Senior Creditor in connection therewith, as such agreements may be amended, supplemented, modified, extended, restated or replaced, and whether for principal, premium, interest (including all interest accruing after the initiation of any Debtor Relief Proceeding, whether or not allowed), fees, expenses, indemnities or otherwise; and (ii) all Debt owed by Debtor to Senior Creditor in connection with any refinancing, refunding, restructuring or replacement of all or any part of the Senior Debt described in clause (i) (including all such Debt arising after the commencement of any Debtor Relief Proceeding).

 

“Senior Debt Payment Default” shall mean a default in the payment when due of principal or interest of the Senior Loans.

 

“Senior Loan” shall have the meaning given to such terms in the Recitals hereto.

 

“Subordinated Creditors” shall have the meaning given to that term in the introductory paragraph hereof.

 

“Subordinated Debt” shall mean (i) all Debt now or at any time owed by Debtor to the Subordinated Creditors, or any of them as set forth on Schedule I, or pursuant to any debt instrument (including all such Debt arising after the commencement of any Debtor Relief Proceeding); and (ii) all Debt owed by Debtor in connection with any permitted refinancing, refunding, restructuring or replacement of all or any part of the Debt described in clause (i) (including all such Debt arising after the commencement of any Debtor Relief Proceeding).

 

“Subordinated Debt Instrument” shall mean any promissory note or similar instrument evidencing the Subordinated Debt.

 

“Subordinated Debt Interest Payment” shall mean any Subordinated Debt Payment in respect of the interest payable in respect of the outstanding principal amount of any indebtedness owed to the Subordinated Creditors, or any of them.

 

“Subordinated Debt Payment” shall mean any direct or indirect payment, prepayment, reduction or discharge of any of the Subordinated Debt, whether such payment, prepayment, reduction or discharge is effected by Debtor, any guarantor of Subordinated Debt, any trustee or receiver for the estate or property of any of the foregoing or any other Person through direct payment, redemption, purchase, refinancing, setoff, cancellation, issuance of securities, any action on the Subordinated Debt Instrument, transfer of assets or distribution to creditors in any Debtor Relief Proceeding or otherwise.

 

Subordination Agreement Saleen SM Funding

 

 

EXHIBIT A

Subordinated Debt Instruments

 

 

Subordination Agreement Saleen SM Funding