SECOND AMENDMENT TO SENIOR SECURED NOTES AND SUBSCRIPTION AGREEMENT
Exhibit
10.2
SECOND
AMENDMENT TO SENIOR SECURED NOTES AND SUBSCRIPTION AGREEMENT
THIS
SECOND AMENDMENT TO SENIOR SECURED NOTES AND SUBSCRIPTION AGREEMENT (this
“Second Amendment”) is made and entered into as of June 24, 2009 (the “Effective
Date”) by and among ADVANCE NANOTECH, INC. (the “Company”) and the holder
identified herein (the “Holder”), and is made with reference to the
following:
A. Company
and Holder have entered into a Senior Secured Note, a Subscription Agreement and
a First Amendment to Senior Secured Notes and Subscription Agreement (as the
same may hereafter be amended, modified, extended and/or restated from time to
time, the “Senior Note Agreements”).
B. Company
has requested that Holder modify the Senior Note Agreements to reflect an
increase in the maximum amount from $1,000,000 to $3,000,000 an extension of the
expiration date from June30, 2009 to August 31, 2009 and authorization to add an
optional conversion feature at the sole discretion of the Company.
C.
The addition of a provision authorizing the Company’s Board of Directors to
reduce its total current membership from 9 to 5, of which one (1) shall be an
individual nominated by the Holders.
X. Xxxxxx
has agreed to amend the Senior Note Agreements as set forth below and in
connection with the execution and delivery of this Second
Amendment.
NOW,
THEREFORE, in consideration of the premises and the agreements, conditions and
covenants contained herein and other good and valuable consideration the receipt
and sufficiency of which is hereby acknowledged, the parties hereto hereby agree
as follows:
1. Terms Defined in Senior Note
Agreements. All capitalized terms used in this Second
Amendment and not otherwise defined herein shall have the meanings assigned to
them in the Senior Note Agreements.
2. For
purposes hereof, “Effective Date” means June 24, 2009.
3. Effective
as of the Effective Date, Paragraph 1 of the Senior Secured Note, as amended by
the First Amendment, shall be deleted in its entirety and replaced with the
following:
FOR VALUE
RECEIVED, ADVANCE NANOTECH, INC., a Delaware corporation (hereinafter called
“Borrower” or the “Company”), hereby promises to pay to the holders identified
in Annex A (the
“Holders”), at the respective address set forth in Annex A hereto, or
order, without demand, the principal amount, as set forth opposite each Holder’s
respective name in Annex A hereto, up to
a maximum aggregate principal amount of $3,000,000 (the “Principal”), with
accrued and unpaid interest thereon, on August 31, 2009 (the “Maturity Date”),
if not paid sooner.
4. Effective
as of the Effective Date, the Subscription Agreement shall be modified to
reflect a maturity date of August 31, 2009 under both Option 1 and Option
2.
1
5. Effective
as of the Effective Date, Section 1.5 of the Senior Secured Note, as amended by
the First Amendment, shall be added as follows:
Section
1.5. Convertibility. At
the election of the Company in its sole discretion and upon the satisfactory
completion of certain events as described in this Section 1.5, the principal and
interest accrued through the date of conversion under the Senior Secured Notes
at any time prior to the Maturity Date, shall be convertible into common shares
of the Company at a per share price equal to $0.05 ten days from notice being
provided by the Company to the Holder of its intention to do so.
If Holder
is also a holder of 8% Senior Secured Convertible Notes and Warrants, then such
Holder hereby agrees to conversion of the principal and interest accrued through
the date of conversion of Holder’s 8% Senior Secured Convertible
Notes and agrees to waive price protection provisions as set forth in
Article II Section 2.1(c)D of the 8% Senior Secured Convertible Note and Section
3.4 of the Common Stock Purchase Warrant upon execution of this Second
Amendment. At the election of the Company, and upon satisfactory
completion of certain events as described in this section 1.5, Holder will
convert amounts owing under the 8% Senior Secured Convertible Notes and Warrants
to common shares based on the following conversion prices:
|
Conversion
Price
|
|
|
Amounts
up to 200% of the principal amount of such Holder’s investment in the
Senior Secured Note
|
$0.05
|
|
Remaining
amounts of 8% Senior Secured Convertible Notes and
Warrants
|
$0.15
|
By
way of example, for every $1.00 subscribed in the Senior Secured Note (which is
convertible at the Company’s election at $.05 per share) the equivalent of $2.00
in the 8% Senior Secured Convertible Notes and Warrants will also convert at
$.05. Such Waiver and Conversion Agreement shall become effective only upon
satisfaction of the provisions set forth in Section 1.5(a) through
1.5(c).
The
amounts owing to Holders under the Senior Secured Notes and Holders who are also
holders of 8% Senior Secured Convertible Notes and Warrants shall be convertible
as set forth above upon completion of all of the following:
1.5(a) Delivery
of notice of the Company’s election to convert the amounts outstanding under the
Senior Secured Notes
1.5(b) Evidence
of receipt of consent from 100% of the lenders in the 8% Senior Secured
Convertible Notes and Warrants to waive all price protection provisions as set
forth in both the 8% Senior Secured Convertible Notes and Warrants
2
1.5(c) Evidence
of receipt of conversion notices for at least 75% of all 8% Senior Secured
Convertible Notes
6. Effective
on the Effective Date, Section 3.7 of the Senior Secured Note, as amended by the
First Amendment, shall be deleted and replaced in its entirety with the
following:
3.7 Board
Composition. Within 10 days of the earlier of (i) completion
of receipt of subscriptions for $3,000,000 of Senior Secured Notes, including
amounts already funded under the Senior Secured Notes or (ii) July 31, 2009, the
Company shall take all actions necessary and within its authority under the
Company’s existing corporate bylaws to reduce the number of current members of
its Board of Directors to five (5), until which time one
(1) member is appointed by majority vote of the Holders of Senior Secured
Notes, after which the Company will reduce the number of existing
members to four so as to have a total board membership of five. In the event
that the Company is unable to satisfy this condition within the time period
stipulated due to circumstances beyond the Company’s control, including but not
limited to requirements set forth in the Company’s corporate bylaws, it shall
proceed with the fulfillment of this condition at the earliest possible
time.
7. Conditions
Precedent. The satisfaction of the following shall be
conditions precedent to the effectiveness of this Amendment:
7.1 Amendment. Lender
shall have received this Amendment, duly executed by Borrower.
8. Full Force and
Effect. Except as amended hereby, the Senior Note Documents
shall remain unaltered and in full force and effect.
9. Counterparts. This
First Amendment may be executed in multiple counterparts, each of which shall
constitute an original and all of which, taken together, shall constitute but
one and the same instrument.
10. Governing
Law. This First Amendment shall be governed by, and construed
in accordance with, the laws of the State of New York.
IN
WITNESS WHEREOF, the parties hereto have executed this Second Amendment by their
respective duly authorized officers as of the date first above
written.
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“COMPANY”
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|||
| ADVANCE NANOTECH INC, a Delaware corporation | |||
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|
By:
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/s/ Xxxxxx X. Xxxx | |
| Name: | Xxxxxx X. Xxxx | ||
| Its: | Chief Financial Officer | ||
| “HOLDER” | |||
| { } | |||
| By: | /s/ Xxxxx XxXxxxx | ||
| Name: | Xxxxx XxXxxxx | ||
| Xxxxxxx & Xxxxxx LLC | |||
| By: | /s/ Xxxxxx X. Xxxxxxx | ||
| Name: | Xxxxxx X. Xxxxxxx | ||
| Its: | Manager | ||
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