OMNIBUS AMENDMENT
Exhibit
10.2
This
Omnibus Amendment (this “Amendment”), dated as of
October 31, 2008, by and between Implant Sciences Corporation, a Massachusetts
corporation (the “Company”) and LV
Administrative Services, Inc., as administrative and collateral agent (the
“Agent”) for each of
Laurus Master Fund, Ltd., a Cayman Islands company (“Laurus”) and Valens Offshore
SPV I, Ltd., a Cayman Islands company (“Valens Offshore” and together
with Agent, the “Holders” and each, a “Holder”) amends (i) that
certain Securities Purchase Agreement, dated as of September 29, 2005, by and
between the Company and Laurus (as amended, restated, modified and/or
supplemented from time to time, the “Purchase Agreement”) pursuant
to which Laurus purchased from Company shares of its Series D Cumulative
Convertible Preferred Stock (the “Preferred Stock”) as issued
pursuant to that certain Certificate of Vote of Directors Establishing a Class
or Series of Stock, $0.10 Par Value Per Share (as amended, restated, modified,
and/or supplemented from time to time, the “Certificate of Designations”,
together with the Purchase Agreement, Preferred Stock and the other Related
Agreements referred to in the Purchase Agreement, the “Documents”), which Preferred
Stock was subsequently assigned in full to Valens Offshore, and (ii) the
Certificate of Designations. Capitalized terms used but not defined
herein shall have the meanings given them in the Purchase Agreement, Preferred
Stock or Certificate of Designations, as applicable.
RECITALS
WHEREAS,
on the Mandatory Repayment Date (i.e. October 24, 2008), the Company failed to
redeem in full the outstanding shares of Preferred Stock from the Holder
pursuant to the terms of the Certificate of Designations and such breach was
adequately noticed to the Company and thereafter continued though the applicable
cure period for such breach resulting in an Event of Default;
WHEREAS,
pursuant to Section 9 of the Certificate of Designations, as a result of the
failure by the Company redeem the Preferred Stock on the Mandatory Redemption
Date, the Company is instead required to redeem the Preferred Stock at a rate of
one hundred thirty (130%) percent of the outstanding Stated Value of the
outstanding shares of Preferred Stock at the time of such redemption (the “Redemption Amount”) plus all
accrued and unpaid dividends;
WHEREAS, as of the date hereof, the
Company has acknowledged that as a result of its failure to redeem the Preferred
Stock on the Mandatory Redemption Date, the Redemption Amount has been increased
pursuant to the terms of the Preferred Stock to $2,461,267.90 plus all accrued
and unpaid dividends; and
WHEREAS,
the Company and the Holders have agreed to make certain changes to the Documents
in order to permit the Company to redeem the Preferred Stock over time pursuant
to the terms set forth below;
NOW, THEREFORE, in consideration of the
above, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
-1-
1. Outstanding
Obligations. Company hereby affirms and acknowledges that as
of the date hereof the amount necessary to redeem the Preferred Stock in full is
$2,461,267.90, together with accrued and unpaid dividends thereon and costs and
expenses (collectively, the “Amount”) and (ii) the Amount
is a valid obligation of Company and is due and owing without defense, claim,
setoff or counterclaim of any kind or nature whatsoever.
2. Amendment to Purchase
Agreement (i) The last two sentences of Section 1 of the
Purchase Agreement are hereby amended and restated in its entirety to read as
follows:
“The Preferred Stock will have a new
Mandatory Redemption Date (as defined in the Preferred Stock) of April 10,
2009. Collectively, the Preferred Stock and Warrant (as defined in
Section 2) and Common Stock issuable upon conversion of the Preferred Stock and
exercise of the Warrant are referred to as the “Securities”.”
and, (ii) the first sentence of Section
8.3 of the Purchase Agreement is hereby amended and restated in its entirety to
read as follows:
“8.3 Optional
Redemption. The Company will have the option of redeeming any
outstanding Stated Value of the Preferred Stock (“Optional Redemption”) by
paying to the Purchaser 100% of such amount, together with accrued but unpaid
dividends thereon and any and all other sums due, accrued or payable to the
Purchaser arising under this Agreement, Certificate of Vote of Directors or any
other document delivered herewith (“Redemption Amount”)
outstanding on the day notice of redemption (“Notice of Redemption”) is
delivered to a Purchaser (“Redemption
Date”).
3. Deemed Restatement of
Certificate of Designation. As between the Company and the
Holders, (i) Section 10 of Exhibit A to the Certificate of Designations shall be
deemed to read in its entirety as follows:
“10. Mandatory Redemption.
The Corporation shall redeem the shares of Series D Preferred Stock, including
accrued but unpaid dividends thereon, no later than April 10, 2009 (the
“Mandatory Redemption Date”).”
and, (ii)
clause (a) of Section 4 of Exhibit A to the Certificate of Designations shall be
deemed to read in its entirety as follows:
“(a) Redemption
Payments. Subject to the terms of this Section 4, on each date set
forth in the table below under the heading “Repayment Date” (each, a
“Repayment Date”), the
Corporation shall redeem the original Stated Value of the Series D Preferred
Stock (to the extent such amount has not been converted pursuant to Section 6
below) by the amount set forth in the table below under the
-2-
heading
“Redemption Amount” (each, a “Monthly Redemption Amount”)
together with the dividend accrued to date on such portion of the original
Stated Value plus any and all payments due and owing but not previously paid
under the Securities Purchase Agreement dated September 30, 2005 between the
Corporation and Laurus Master Fund, Ltd. (as amended, modified and/or
supplemented from time to time, the “Purchase Agreement”) and the
Related Agreements referred to therein (together with the relevant Monthly
Redemption Amount, the “Monthly
Amount”), in accordance with Section 4(b) below.
|
Repayment
Date
|
Redemption
Amount
|
Remaining
Stated Value
|
|
October
31, 2008
|
$517,984.90
|
$1,943,283.00
|
|
November
28, 2008
|
$800,000.00
|
$1,143,283.00
|
|
December
19, 2008
|
$250,000.00
|
$893,283.00
|
|
January
16, 2008
|
$250,000.00
|
$643,283.00
|
|
February
13, 2008
|
$250,000.00
|
$393,283.00
|
|
March
13, 2008
|
$250,000.00
|
$143,283.00
|
|
Mandatory
Redemption Date
|
$143,283.00
|
$0
|
4. Partial Stock Payment of
October Redemption Amount. Notwithstanding anything herein or
in any other Document to the contrary, with respect to the Monthly Redemption
Amount due and payable to the Holder on October 31, 2008 (the “October Redemption Amount”),
at the Company’s election and subject to satisfaction of the Conditions (as
defined in Exhibit
A hereto), up to $267,984.90 of such amount may be paid through the
issuance by the Company to the Holder of 929,535 shares of its Common Stock (the
“Redemption Stock
Payment”). Holder represents and warrants to the Company
that:
(a) Holder is
an “Accredited Investor,” as that term is defined in Rule 501 of Regulation D
promulgated under the Securities Act of 1933, as amended (the “Securities
Act”).
(b) Holder is
acquiring the shares of Common Stock to be issued pursuant to the Redemption
Stock Payment for investment for the account of Holder, and not with a view
toward resale or other distribution thereof. Holder acknowledges that
such shares have not been registered under the Securities Act and, therefore,
cannot be resold unless they are subsequently registered under the Securities
Act or unless an exemption from such registration is
available. Holder further acknowledges that, until so registered or
transferred pursuant to the provisions of Rule 144 under the Securities Act, all
certificates evidencing any of such shares will bear a legend, prominently
stamped or printed thereon, reading substantially as follows:
-3-
These
securities have not been registered under the Securities Act of 1933, as amended
(the “Securities Act”), or applicable state securities laws. These
securities have been acquired for investment and not with a view to their
distribution or resale, and may not be sold, pledged, or otherwise transferred
without an effective registration statement for such securities under the
Securities Act and applicable state securities laws, or an opinion of counsel
satisfactory to the Company to the effect that such registration is not
required.
(c) In
agreeing to accept the Redemption Stock Payment, Holder has relied only on
statements and information contained in the reports and other documents filed by
the Company with the Securities and Exchange Commission (the “SEC Reports”). No
statements, promises, warranties or representations have been made to Holder
concerning such shares, the Company, its business or prospects, or other
matters, by the Company, the Company’s officers or employees, or any other
person or entity, except as set forth herein or in the SEC Reports.
5. Application of Core Systems
Sale Proceeds. The Company hereby covenants and agrees that
within two (2) business days of the consummation of the sale of substantially
all of the assets and/or equity of C Acquisition Corporation (d/b/a Core
Systems), a wholly-owned Subsidiary of the Company, by the Company to any third
party, which sale shall require the prior written consent of the Holders, the
Company shall redeem the original Stated Value of the Series D Preferred Stock
by an amount equal to no less than $800,000.00 (the “Sale Proceeds Redemption
Amount”). The Sale Proceeds Redemption Amount shall first be
applied by the Holders to reduce accrued and unpaid dividends under the
Preferred Stock and then to reduce the Monthly Redemption Amounts in
chronological order of maturity.
6. Lock
up. In consideration of good and valuable consideration,
receipt of which is hereby acknowledged, without the prior written consent of
the Company, Holder hereby agrees (a) for the period commencing on the date
hereof and ending on April 30, 2009 (the “Lock-up Period”), not to sell,
offer to sell, contract to sell, grant any option to purchase or otherwise
transfer or dispose of, pledge, hypothecate or otherwise transfer, directly or
indirectly, any shares constituting the Redemption Stock Payment (the “Stock Payment Shares” and,
each a “Stock Payment
Share”). Notwithstanding anything contained herein to the
contrary, the foregoing restrictions (a) shall not be applicable and shall have
no further force or effect (i) following the occurrence and during the
continuance of an Event of Default or (ii) in the event the Company shall effect
a reorganization, consolidate with or merge into any other entity or transfer
all or substantially all of its properties or assets and (b) shall not apply to
transfers in a private transaction including, without limitation, as a bona fide
gift or gifts, provided that the transferee thereof agrees to be bound in
writing by the restrictions set forth herein.
7. Buy Back
Option. In consideration of good and valuable consideration,
receipt of which is hereby acknowledged, solely during the Lock-up Period, the
Company may make a single election, upon delivery to the Holder of no less than
five (5) business days prior written notice (a “Buy Back Notice”), to purchase
from the Holder up to fifty percent (50%) of the Stock Payment Shares issued to
Holder by paying to Holder for
-4-
each such
Stock Payment Share a price in cash equal to 110% of volume weighted average
price of the Stock Payment Shares as reported by Bloomberg, L.P. on the
Principal Market for the fifteen (15) day period immediately preceding (but
also including) the date upon which the Holder receives the Buy Back
Notice (the “Buy Back Payment
Amount”). The Buy Back Notice shall be required to include a
representation and warranty from the Company that as of the date of delivery of
the Buy Back Notice, all material non-public information relating to the Company
shall have been publicly disclosed (the “Buy Back
Rep”). In the event of a breach by the Company of the
Buy Back Rep, the Holder shall be entitled, but not required, to make within
ninety (90) days of its receipt of the original Buy Back Notice, a demand of the
Company, and the Company shall immediately upon receipt of such demand, pay to
Holder in cash, an amount equal to the remainder of (i) the product of (1) each
Stock Payment Share sold to the Company pursuant to the original Buy Back Notice
multiplied
by (2) 110% of
volume weighted average price of the Stock Payment Shares as reported by
Bloomberg, L.P. on the Principal Market for the fifteen (15) day period
immediately preceding (but also including) any date elected by the Holder within
the ninety (90) day period following receipt by the Holder of the original Buy
Back Notice, less (ii) the Buy
Back Payment Amount to the extent previously paid by the Company to the
Holder. All documentation reasonably deemed necessary by Holder to
evidence such purchase by Company under this Section 7 (a “Buy Back”) shall be required
to be in form and substance satisfactory to Holder in all
respects. All costs and expenses associated with a Buy Back shall be
an obligation of and paid for by the Company.
8. Effectiveness. The
amendments set forth above shall be effective as of October 31, 2008 (the “Amendment Effective Date”)
once (i) the Company, the Holders and the Agent shall have executed and the
Company shall have delivered to the Agent its counterpart to this Amendment and
(ii) the Company shall have paid and/or delivered to the Holder the October
Redemption Amount. Upon the
effectiveness of this Amendment, the Event of Default relating to the missed
October 24, 2008 Mandatory Redemption Date referred to in the recitals to this
Amendment shall be deemed to have been cured; provided that, such cure shall in
no way result in a reduction to the amount described in Section 1
above.
9. No Other
Changes. Except as specifically set forth in this Amendment,
there are no other amendments, modifications or waivers to the Documents, and
all of the other related forms, and the terms and provisions of the Documents
and other related forms shall remain in full force and effect. From and
after the date first written above, all references to the Documents shall be
deemed to be references to the Documents as modified hereby.
10. Miscellaenous. The
Company hereby represents and warrants to the Holders that other than as
contemplated by this Amendment (i) no Event of Default (as defined in the
Purchase Agreement) exists on the date hereof, (ii) on the date hereof, all
representations, warranties and covenants made by the Company under the
Documents are true, correct and complete, and (iii) on the date hereof, the
Company’s covenant requirements have been met under the
Documents.
11. Successors; Governing Law;
Counterparts. This Amendment shall be binding upon the parties
hereto and their respective successors and permitted assigns and shall inure to
the benefit of and be enforceable by each of the parties hereto and
their
-5-
respective
successors and permitted assigns. THIS AMENDMENT SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF NEW YORK. This Amendment
may be executed in any number of counterparts, each of which shall be an
original, but all of which shall constitute one instrument.
[signature
page follows]
-6-
IN WITNESS WHEREOF, the parties have
caused this Amendment to be signed as of the date first written
above.
IMPLANT
SCIENCES CORPORATION
By: /s/ Xxxxx X.
Bolduc_____________
Name: Xxxxx
X. Xxxxxx
Title: Chief
Financial Officer
LAURUS
MASTER FUND, LTD.
By:
Laurus Capital Management, LLC, its investment manager
By: /s/ Xxxxxxx
Regan_______________
Name: Xxxxxxx
Xxxxx
Title: Authorized
Signatory
VALENS
OFFSHORE SPV I, LTD.
By:
Valens Capital Management, LLC, its investment manager
By: /s/ Xxxxxxx
Regan_______________
Name: Xxxxxxx
Xxxxx
Title: Authorized
Signatory
LV
ADMINISTRATIVE SERVICES,
INC.
as Agent
By:
Laurus Capital Management, LLC, its investment manager
By: /s/ Xxxxxxx
Regan_______________
Name: Xxxxxxx
Xxxxx
Title: Authorized
Signatory
-7-
EXHIBIT
A
Section
1. For purposes of this Amendment,
“Conditions” shall mean as of the date of the Redemption Stock Payment in shares
of Common Stock (each, a “Payment Date”): (i) no Event
of Default (other than the Existing Defaults) shall exist and be continuing
under the Documents; (ii) all representations, warranties and covenants made by
the Company in connection with the Documents shall be true, correct and complete
as of the date of such payment; (iii) all representations, warranties and
covenants set forth in Section 2 below shall be true, correct and complete as of
such date of payment, (iv) the Company agrees to cooperate with the Holders in
connection with all resales pursuant to Rule 144 under the Securities Act of
1933, as amended (the “Securities Act”) and provide
legal opinions necessary to allow such resales and (v) the issuance of such
Common Stock to the Holders will not result in beneficial ownership by the
Holders and their Affiliates of any amount greater than 9.99% of the then
outstanding shares of Common Stock of the Parent. As used herein, the
term “Affiliate” means any
person or entity that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common control with a
person or entity, as such terms are used in and construed under Rule 144 under
the Securities Act. For purposes of the second preceding sentence,
beneficial ownership shall be determined in accordance with Section 13(d) of the
Securities Exchange Act of 1934, as amended, and Regulations 13D-G
thereunder. For any reason at any time, upon written or oral request
of any Holder, the Company shall within one (1) business day confirm orally and
in writing to such Holder the number of shares of Common Stock outstanding as of
any given date.
Section
2. The Company hereby represents, warrants and
agrees as of the date hereof and, if a different date, on each Payment Date,
that:
|
1.
|
The
Company has full power and authority to enter into and to consummate this
Amendment and to issue the Payment Shares in accordance with the terms
hereof. The execution and delivery of this Amendment by the
Company and the consummation by the Company of the transactions
contemplated hereby (the “Transactions”),
including, without limitation, the issuance of the Payment Shares have
been duly authorized by the Company’s Board of Directors and no further
consent or authorization is required by the Company, its Board of
Directors or its stockholders. This Amendment has been duly and
validly executed and delivered by the Company and constitutes the legal,
valid and binding obligation of the Company and is enforceable in
accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, moratorium, reorganization or similar
laws in effect that affect the enforcement of creditors' rights generally
and by equitable limitations on the availability of specific remedies. The
Payment Shares are duly authorized and, upon issuance in accordance with
the terms hereof, shall be validly issued and free from all taxes, liens
and charges with respect to the issue thereof and the Payment Shares shall
be fully paid and nonassessable with the Holders being entitled to all
rights accorded to a holder of common stock of the Company and shall be
freely tradeable subject to applicable securities
regulation. The issuance by the Company of the Payment Shares
is exempt from registration under the Securities Act of 1933, as
amended.
|
-8-
|
2.
|
The
execution, delivery and performance by the Company of this Amendment and
consummation by the Company of the Transactions evidenced by this
Amendment do not and will not: (i) violate the organizational documents of
the Company; (ii) violate any decree or judgment of any court or other
governmental authority applicable to or binding on the Company; (iii)
violate any provision of any federal or state statute, rule or regulation
which is, to the Company’s knowledge, applicable to the Company; (iv)
violate any provision of any securities exchange on which the Common Stock
of the Company is then listed or (iv) violate any contract to which the
Company is a party or by which the Company or any of their assets or
properties are bound. No consent or approval of, or filing
with, any governmental authority, regulatory authority, securities
exchange or other person or entity not a party hereto is required for the
execution, delivery and performance by the Company of this Amendment or
the consummation of the
Transactions.
|
|
3.
|
The
Company acknowledges and agrees that no Holder is (i) an officer or
director of any Company (ii) an "affiliate" of any Company (as defined in
Rule 144) or (iii) to the knowledge of any Company, a "beneficial owner"
of more than 10% of the Common Stock (as defined for purposes of Rule
13d-3 of the Securities Exchange Act of 1934, as
amended.
|
|
4.
|
The
Company has taken no action that would give rise to any claim by any
person for brokerage commissions, finder's fees or similar payments
relating to this Amendment or the
Transaction.
|
-9-
