MODIFICATION, WAIVER AND CONSENT AGREEMENT
Exhibit
10.2
This Modification, Waiver and Consent
Agreement is made this 17th day of December, 2008 (“Agreement”) among IDO
Security Inc., a Nevada corporation (the “Company”), and the signatories
hereto who are Subscribers under a Subscription Agreement with the Company dated
on or about December 24, 2007 (“Subscription Agreement”).
WHEREAS, the Company is contemplating
an additional investment of an aggregate of up to $1,351,137.50 Purchase Price
in promissory Notes, Preferred Stock and Warrants of the Company
(“New Financing”); and
WHEREAS, the Company is in default of
material terms of the Transaction Documents and the Subscribers may elect to
exercise their rights to accelerate the Maturity Date of the Notes and foreclose
on the Collateral under the Security Agreement.
NOW THEREFORE, in consideration of the
promises and mutual covenants contained herein and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto hereby consent and agree as follows:
1.
All capitalized terms herein shall have the meanings ascribed to them in the
Transaction Documents (as defined in the Subscription Agreement).
2.
The undersigned consent to the New Financing and to the amendment of all
Schedules, Exhibits and documents including but not limited to the Collateral
Agent Agreement, Security Agreement, and the Intercreditor and Modification
Agreement to include the New Financing and to subordinate Subscribers’ security
interest and to authorize the Collateral Agent to make additional filings at the
discretion of the Collateral Agent to memorialize the first priority security
interest to be granted, to the investors in the New Financing.
3.
Annexed hereto is Amended Schedules A-1(Junior Lenders) and A-2 (Senior Lenders)
to the Security Agreement and Collateral Agent Agreement which will replace the
current Schedule A.
4.
The undersigned Subscribers waive the rights granted to them pursuant to Section
12(a), Right of First Refusal, of the Subscription Agreement, only to the extent
such rights relate to the New Financing but do not waive the anti-dilution
rights and protections contained in Section 12(b) Favored Nations Provision of
the Subscription Agreement and in the Transaction Documents.
5.
Subscribers hereby agree and consent to the issuance by the Company of up to
100,000 shares of the Company’s Common Stock (or securities convertible into
common stock) to service providers.
6.
Subscribers agree to waive through December 31, 2008 the Company’s defaults of
the terms of the Transaction Documents but do not waive any liquidated
damages.
7.
Company acknowledges, agrees and represents that in connection with the New
Financing the rights and provisions of Section 12(b) Favored Nations Provision
of the Subscription Agreement, Section 3.4 (d) of the Note and Section 3.4 of
the Warrant shall apply to the Securities issued and issuable to Subscribers
pursuant to the Subscription Agreement and Transaction Documents.
8.
The Company acknowledges and agrees that the New Financing will not result in
the commencement of a new holding period pursuant to Rule 144 for any person
holding Securities of the Company or having the right to receive Securities of
the Company.
9.
The
following Section 2.1 of the Notes dated December 24, 2007 shall be
deleted
2.1. Payment of Monthly Amount in
Cash or Common Stock. Subject to Section 3.2 hereof, the
Borrower, at the Borrower’s election, shall pay the Monthly Amount (i) in cash
in an amount equal to 110% of the Principal Amount component of the Monthly
Amount and 100% of all other components of the Monthly Amount, within four (4)
business days after the applicable Repayment Date, or (ii) in registered Common
Stock at an applied conversion rate equal to the lesser of (A) the Fixed
Conversion Price (as defined in section 3.1 hereof), or (B) seventy-five percent
(75%) of the average of the closing bid price of the common stock as reported by
Bloomberg L.P. for the Principal Market for the ten trading days preceding the
date a Notice of Conversion, if any, [as described in Section 3.3a] is given to
the Borrower by Holder after Borrower notifies Holder of its election to pay the
Monthly Amount with shares of Common Stock pursuant to the following
sentence. The Borrower must send notice to the Holder by confirmed
telecopier not later than 6:00 P.M., New York City time on the twenty-second
trading day preceding a Repayment Date notifying Holder of Borrower’s election
to pay the Monthly Redemption Amount in cash or Common Stock. The
Notice must state the amount of cash to be paid and include supporting
calculations. If the Borrower elects to pay the Monthly Amount with
Common Stock and if the Holder does not give Notice of Conversion then the
Repayment Date shall be deemed the Conversion Date and the Conversion Price
shall be the lessor of (A) the Fixed Conversion Price (as defined in section 3.1
hereof) or (B) seventy five (75%) of the average of the closing bid price for
the five trading days preceding the Repayment Date. Until fifteen
(15) trading days after notice is given by the Borrower that the Borrower has
elected to pay the Monthly Amount with Common Stock, the holder may elect to
defer such payment of Common Stock until the Holder has elected to deliver a
Notice of Conversion with respect to such Monthly Amount. The
Conversion Price with respect to such deferred Monthly Amount shall be the
Conversion Price set forth above in subsection (ii) of this Section
2.1. Amounts paid with shares of Common Stock must be delivered to
the Holder as described in Section 3.3(b). Elections by
the Borrower must be made to all Other Holders in proportion to the relative
Note principal held by the Holder and the Other Holders. If such
notice is not timely sent or if the Monthly Redemption Amount is not timely
delivered, then Holder shall have the right, instead of the Company, to elect at
any time from when such notice was required to be given until the applicable
Repayment Date whether to be paid in cash or Common Stock. Such
Holder’s election shall not be construed to be a waiver of any default by
Borrower relating to non-timely compliance by Borrower with any of its
obligations under this Note.
and
replaced with the following:
2.1 Payment of Monthly Amount in
Cash or Common Stock. Subject
to Section 3.2 hereof, the Borrower, at the Borrower’s election, shall pay
the Monthly Amount (i) in cash in an amount equal to 110% of the Principal
Amount component of the Monthly Amount and 100% of all other components of the
Monthly Amount, within four (4) business days after the applicable Repayment
Date, or (ii) in registered Common Stock at an applied conversion rate equal to
the lesser of (A) the Fixed Conversion Price (as defined in section 3.1 hereof),
or (B) seventy-five percent (75%) of the average of the closing bid price of the
common stock as reported by Bloomberg L.P. for the Principal Market for the five
trading days preceding the date a Notice of Conversion, if any, [as described in
Section 3.3a] is given to the Borrower by Holder after Borrower notifies Holder
of its election to pay the Monthly Amount with shares of Common Stock pursuant
to the following sentence. The Borrower must send notice to the
Holder by confirmed telecopier not later than 6:00 P.M., New York City time on
the twenty-second trading day preceding a Repayment Date notifying Holder of
Borrower’s election to pay the Monthly Redemption Amount in cash or Common
Stock. The Notice must state the amount of cash to be paid and
include supporting calculations. If the Borrower elects to pay the
Monthly Amount with Common Stock and if the Holder does not give Notice of
Conversion then the Repayment Date shall be deemed the Conversion Date and the
Conversion Price shall be the lessor of (A) the Fixed Conversion Price (as
defined in section 3.1 hereof) or (B) seventy five (75%) of the average of the
closing bid price for the five trading days preceding the Repayment Date.
Borrower must give Holder fifteen (15) trading days notice prior to each
Repayment Date if Borrower will pay the Monthly Amount in cash, otherwise such
payment will be made by delivery of shares of Common Stock. The
foregoing sentence notwithstanding such Monthly Amount if to be paid with shares
of Common Stock will be automatically deferred (“Deferred Payment”) unless the
Holder gives notice to the Borrower at least five (5) days before a Repayment
Date that the Holder will accept payment of such Monthly Amount in the form of
Common Stock. The Conversion Price of each Deferred Payment will be
the lesser of (i) the Conversion Price (as defined in Section 3.1 hereof), or
(ii) seventy-five percent (75%) of the average of the closing bid prices of the
Common Stock as reported by Bloomberg L.P. for the Principal Market for the five
(5) trading days preceding the date a Notice of Conversion (a form of which is
annexed as Exhibit A to this Note) is given by Holder to the Borrower with respect to such
Deferred Payment. Amounts paid with shares of Common Stock must be
delivered to the Holder as described in Section 3.3(b). Elections by
the Borrower must be made to all Other Holders in proportion to the relative
Note principal held by the Holder and the Other Holders. The
foregoing notwithstanding, no amount payable hereunder may be paid in shares of
Common Stock by the Borrower without the consent of the Holder after and during
the pendency of an Event of Default (or an event that with the passage of time
or the giving of notice could become an Event of Default), unless waived in
writing by the Holder. Common Stock delivered pursuant to this
Section 2 must be immediately resellable and transferable by the Holder without
any additional holding period.
10. All
other terms of the Transaction Documents shall remain unamended and in full
force and effect.
11. This
Agreement constitutes the entire agreement among the parties, and supersedes all
prior and contemporaneous agreements and understandings of the parties in
connection herewith. No changes, modifications, terminations or
waivers of any of the provisions hereof shall be binding unless in writing and
signed by all of the parties thereto.
12. Except
as expressly modified pursuant to this Agreement, the terms of each Note remains
unchanged and in full force and effect.
13. This
Agreement may be executed in separate counterparts, each of which when so
executed shall be deemed to be an original and all of which taken together shall
constitute one and the same agreement. This Agreement may also be
executed by either party hereto by facsimile signature, which shall be deemed to
be an original signature of such party hereon.
[THE
REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
IN
WITNESS WHEREOF, the undersigned have executed and delivered this Modification,
Waiver & Consent as of the date first written above.
|
"COMPANY"
|
"THE
COLLATERAL AGENT"
|
||||
|
XXXXXXX
X. XXXXXXX
|
|||||
|
a
Nevada corporation
|
|||||
|
By:
|
|
|
|||
|
Its:
|
|
||||
|
Name
of Subscriber (Print):
|
|||||
|
|
|||||
|
By:
|
|
||||
|
Print
Name of Signator:
|
|
||||
