FIRST AMENDMENT TO NOTE AND WARRANT PURCHASE AGREEMENT
EXHIBIT
10.1
FIRST
AMENDMENT TO
This
First Amendment to Note and Warrant Purchase Agreement (“Amendment”) is made as of the
1st
day of July, 2009 by and between Implant Sciences Corporation, a Massachusetts
corporation (the “Company”), and DMRJ Group LLC,
a Delaware limited liability company (the “Investor”).
BACKGROUND
A. Company
and Investor are parties to a certain Note and Warrant Purchase Agreement dated
as of December 10, 2008 (as modified and amended from time to time, the “Purchase Agreement”) pursuant
to which, among other things, Investor purchased a note with an aggregate
principal amount of $5,600,000. The Purchase Agreement and all
instruments, documents and agreements executed in connection therewith, or
related thereto are referred to herein collectively as the “Transaction
Documents”. All capitalized terms not otherwise defined herein
shall have the meaning ascribed thereto in the Purchase Agreement.
B. On
December 24, 2008, Company repaid $1,000,000 of the outstanding aggregate
principal amount of the Note.
C. Company
has requested that Investor purchase an additional note issued by Company
pursuant to the Purchase Agreement
D. Investor
has agreed to purchase such additional note and Company and Investor have agreed
to amend the terms and conditions of the Transaction Documents, each pursuant to
the terms and conditions of this Amendment.
NOW, THEREFORE, with the foregoing
Background incorporated by reference and made a part hereof and intending to be
legally bound, the parties agree as follows:
1. Amendments.
(a) Purchase and Sale of Additional
Note.
(i) Upon
the terms and conditions contained herein and in the Purchase Agreement, Company
shall issue and sell to Investor, and Investor shall purchase from Company, an
additional senior secured promissory note in the aggregate principal amount of
$1,000,000.
(ii) Upon
satisfaction of the terms and conditions set forth herein, Company shall issue
to Investor a promissory note, substantially in the form of Exhibit A hereto (the
“Additional Note”), in
the aggregate principal amount of $1,000,000), and Investor shall advance, as
payment in full for the Additional Note, the sum of $1,000,000. The
Investor is permitted to deduct and retain from the advance made on the date
hereof the costs, fees and expenses of Investor incurred in connection with the
transactions contemplated hereby, including reasonable diligence and legal fees
and expenses.
(iii) The
proceeds from the sale of the Additional Note hereunder shall be used by the
Company for working capital and ordinary course general corporate purposes not
inconsistent with or prohibited by any covenant in the Transaction
Documents.
(iv) The
Additional Note shall be deemed a “Transaction Document” under the Purchase
Agreement.
(b) Contingency
Plan. In the event Company has not obtained net proceeds from
the issuance and sale by the Company of its debt or equity securities upon
terms, conditions and documentation acceptable to Investor in its sole
discretion of (i) $1,000,000 by July 24, 2009 and (ii) to the extent that
Company has satisfied the requirements of clause (i) above, an additional
$2,000,000 by August 21, 2009, Company will immediately engage in a sale process
satisfactory to Investor in its sole discretion by implementing the Contingency
Plan (as defined in Section 3(f)), including, without limitation, conditions,
timing and milestones which may be established by Investor, including, without
limitation, the engagement, at the Company’s expense, of a third party
investment banker acceptable to the Investor in its sole and absolute
discretion.
(c) Series F Preferred
Stock.
(i) The
Company shall adopt and file with the Secretary of the Commonwealth of the
Commonwealth of Massachusetts on or before the effectiveness
hereof the Certificate of Designations in the form of Exhibit B hereto (the
“Certificate of
Designations”).
(ii) Upon the
terms and conditions set forth herein and in the Purchase Agreement, on the date
hereof, the Company shall issue to the Investor 871,763 shares of Series F
Convertible Preferred Stock of the Company (the “Series F Preferred
Stock”).
(iii) If the
Company does not obtain net proceeds of at least $3,000,000 from the issuance
and sale of its debt and/or equity in one or more transactions by August 31,
2009, the Company shall, upon the terms and conditions set forth herein and in
the Purchase Agreement, on September 1, 2009, issue to the Investor an
additional 774,900 shares of Series F Preferred Stock.
(iv) The
Series F Preferred Stock and the shares of Common Stock issuable upon conversion
of the Series F Preferred Stock (the “Series F Conversion Shares”)
shall be “Securities” as such term is used in the Purchase
Agreement.
(v) All
references to “Warrant Shares” in Section 3.27 of the Purchase Agreement are
hereby amended to refer to “Warrant Shares, Conversion Shares (as such term is
defined in the Note) and Series F Conversion Shares”.
(vi) The
Company shall, at its next annual meeting of its shareholders, or upon the
earlier request of the Investor, use commercially reasonable efforts to obtain
all necessary corporate approvals to amend its Articles of Organization to
authorize a sufficient number of shares of Common Stock as may be necessary for
the issuance of the Series F Conversion Shares.
(d) Anti-Dilution. For
so long as the Note or the Additional Note remain outstanding, the Company shall
not issue additional shares of Common Stock, or other securities convertible
into or exercisable for Common Stock, (other than shares issuable upon the
conversion or exercise of outstanding securities, or reserved under a Plan by
the Company, which shares have
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been
included in Section 2.1(c)(i) of the Updated Disclosure Schedule (as defined
below)), unless the Company simultaneously issues to the Investor the number of
shares of Series F Preferred Stock necessary to result in the number of shares
of Common Stock into which the Series F Preferred Stock held by the
Investor may be converted representing the same percentage ownership of the
Company on a fully diluted basis after such issuance as immediately prior
thereto.
2. Representations and
Warranties. Company represents and warrants to Investor
that:
(a) All
warranties and representations made to the Investors under the Purchase
Agreement and the Transaction Documents are true and correct as to the date
hereof unless they specifically relate to an earlier date in which case they
shall be true and correct as of such date, other than as set forth on the
disclosure schedules (the “Updated Disclosure Schedules”)
attached hereto (the numbers of which shall correspond to the numbers of the
disclosure schedules to the Purchase Agreement); notwithstanding the foregoing,
the representations and warranties made as of the Closing Date in Section 2.1(c)
of the Purchase Agreement shall be made as of the date hereof.
(b) The
Company and the Guarantors (as applicable) have the requisite corporate power
and authority to enter into and perform this Amendment and to issue and sell the
Series F Preferred Stock in accordance with the terms hereof. The
execution, delivery and performance of this Amendment by the Company and the
consummation by it of the transactions contemplated hereby have been duly and
validly authorized by all necessary corporate action, no further consent or
authorization of the Company, its Board of Directors, stockholders or any other
third party is required. When executed and delivered by the Company
and the Guarantors, this Amendment shall constitute a valid and binding
obligation of the Company enforceable against the Company in accordance with its
terms, except as such enforceability may be limited by applicable bankruptcy,
reorganization, moratorium, liquidation, conservatorship, receivership or
similar laws relating to, or affecting generally the enforcement of, creditor’s
rights and remedies or by other equitable principles of general
application.
(c) The
number of shares of Common Stock issued and outstanding, on a fully diluted
basis on the date hereof (prior to the issuance of the Series F Preferred Stock
hereunder) is 49,399,878, and is as set forth in Section 2.1(c)(1) of the
Updated Disclosure Schedule.
(d) This
Amendment, the Additional Note, all other documents, instruments and agreements
executed in connection with this Amendment and any assignment, instrument,
document, or agreement executed and delivered in connection herewith, will be
valid, binding, and enforceable in accordance with its respective
terms.
(e) The Board
of Directors of the Company has determined, in good faith, that the
consideration received by the Company from the Investor for the shares of Series
F Preferred stock issued pursuant hereto is not less than the fair market value
of such shares, taking into account all fees, expenses and standard market
discounts.
3. Effectiveness
Conditions. This Amendment shall be effective upon completion
of the following conditions precedent (all documents to be in form and substance
satisfactory to Investor and Investor’s counsel):
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(a) Execution
and delivery by Company and each Person who delivered a Guarantee to Investor at
Closing (each a “Guarantor” and collectively,
the “Guarantors”) to
Investor of this Amendment;
(b) Execution
and delivery by Company to Investor of the Additional Note;
(c) The
filing of the Certificate of Designations with the Secretary of the Commonwealth
of the Commonwealth of Massachusetts;
(d) Delivery
by Company to Investor of a secretary’s certificate, dated as of the date
hereof, as to (i) the resolutions adopted by the Board of Directors approving
the transactions contemplated hereby, (ii) the Articles of Organization, (iii)
the Bylaws, each as in effect as of the date hereof, and (iv) the authority and
incumbency of the officers of the Company executing this Amendment, the
Additional Note and any other documents required to be executed or delivered in
connection therewith;
(e) Delivery
by Company to Investor of an opinion of counsel to the Company, dated the date
hereof, substantially in the form provided to Investor on the Closing
Date;
(f) Delivery
by Company to Investor of detailed financial and operational business plan to
minimize cash expenses and maximize strategic value in the event Company’s fund
raising initiatives of at least $1,000,000 by July 24, 2009, 2009 and $2,000,000
by August 21, 2009 are not realized (the “Contingency Plan”);
and
(g) Execution
and/or delivery by Company of all agreements, instruments and documents
requested by Investor to effectuate and implement the terms hereof and the
Transaction Documents.
4. Authorized Capital.
The Company shall not, directly or indirectly, (i) merge into or with or
consolidate with any other Person (other than into the Company or a Subsidiary
of the Company) or permit any other Person (other than the Company or a
Subsidiary of the Company) to merge into or with or consolidate with it; (ii)
declare any dividends or make any distributions to the holders of Common Stock
or redeem, retire, defease, purchase or otherwise acquire for value any shares
of Common Stock; (iv) wind up, liquidate or dissolve or (v) agree to
do any of the foregoing (collectively, a “Major Transaction”) unless (x)
there are available a sufficient number of authorized and unissued of Common
Stock to allow for the issuance of the Series F Conversion Shares and sufficient
time available prior to the consummation of such Major Transaction to effect a
conversion of the Series F Preferred Stock or (y) the definitive agreement or
corporate action relating to such Major Transaction provides that any payment
per share to be made to the holders of Series F Preferred Stock on an
as-converted basis shall be no less than the payment per share to be made to the
holders of Common Stock.
5. Expenses. The
Company shall pay any and all costs, fees and expenses of Investor (including
without limitation, attorneys’ fees) in connection with this Amendment and the
transaction contemplated hereby.
6. No
Waiver. The Investor reserves all of its rights and remedies
arising with respect to any and all defaults or events of defaults under the
Transaction Documents that may be in existence on the date hereof, regardless of
whether such defaults or events of default have been
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identified,
or which may occur in the future. The Investor has not modified, is
not waiving and has not agreed to forbear in the exercise of, any of its present
or future rights and remedies. No action taken or claimed to be taken
by the Investor will constitute such a waiver, modification or agreement to
forbear.
7. Ratification of Loan
Documents. Except as expressly set forth herein, all of the
terms and conditions of the Purchase Agreement and Transaction Documents are
hereby ratified and confirmed and continue unchanged and in full force and
effect. All references to the Purchase Agreement shall mean the
Purchase Agreement as modified by this Amendment.
8. Collateral. Company
and Guarantors hereby confirm and agree that all security interests and liens
granted to Investor pursuant to the Transaction Documents continue in full force
and effect and shall continue to secure the Obligations (as defined in the
Security Agreement), including all liabilities and obligations (primary,
secondary, direct, contingent, sole, joint or several) due or to become due, or
that are now or may be hereafter contracted or acquired, or owing, under the
Additional Note and any other instruments, agreements or other documents
executed and/or delivered in connection herewith or therewith, in each case,
whether now or hereafter existing, voluntary or involuntary, direct or indirect,
absolute or contingent, liquidated or unliquidated, whether or not jointly owed
with others, and whether or not from time to time decreased or extinguished and
later increased, created or incurred, and all or any portion of such obligations
or liabilities that are paid, to the extent all or any part of such payment is
avoided or recovered directly or indirectly from Investor as a preference,
fraudulent transfer or otherwise as such obligations may be amended,
supplemented, converted, extended or modified from time to time and without
limiting the generality of the foregoing, the term “Obligations”
shall include, without limitation: (i) principal of, and interest on, the
Additional Note and the loans extended pursuant thereto (including any interest
that accrues after the commencement of an Insolvency Proceeding regardless of
whether allowed or allowable in whole or in part as a claim in such Insolvency
Proceeding) and (ii) all amounts in respect of the foregoing that would be
payable but for the fact that the obligations to pay such amounts are
unenforceable or not allowable due to the existence of a bankruptcy,
reorganization or similar proceeding involving any Grantor (as defined in the
Security Agreement.
9. Acknowledgment of
Guarantors. By execution of this Amendment, each Guarantor
hereby acknowledges the terms and conditions of this Amendment and confirms that
Guarantors jointly and severally and absolutely and unconditionally guarantee,
as surety, all of Guarantied Obligations (as defined in the Guaranty from
Guarantors to Investor dated December 10, 2008) including all liabilities and
obligations (primary, secondary, direct, contingent, sole, joint or several) due
or to become due, or that are now or may be hereafter contracted or acquired, or
owing, under the Additional Note.
10. Governing
Law. This Amendment shall be governed by and construed in accordance
with the internal laws of the State of New York, without giving effect to any of
the conflicts of law principles which would result in the application of the
substantive law of another jurisdiction. This Amendment shall not be
interpreted or construed with any presumption against the party causing this
Amendment to be drafted.
11. Signatories: Each
individual signatory hereto represents and warrants that he or she is duly
authorized to execute this Amendment on behalf of his or her principal and that
he or she executes the Amendment in such capacity and not as a
party.
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12. Duplicate
Originals: Two or more duplicate originals of this Amendment
may be signed by the parties, each of which shall be an original but all of
which together shall constitute one and the same instrument. This
Amendment may be executed in counterparts, all of which counterparts taken
together shall constitute one completed fully executed
document. Signature by facsimile or PDF shall bind the parties
hereto.
[REMAINDER
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IN
WITNESS WHEREOF, the parties have executed this Amendment the day and year first
above written.
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Company:
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IMPLANT
SCIENCES CORPORATION
By:
/s/ Xxxxx X. Xxxxxx
Name: Xxxxx
X. Xxxxxx
Title: Chairman
& CEO
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Guarantors:
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C
ACQUISITION CORP.
By:
/s/ Xxxxx X. Xxxxxx
Name: Xxxxx
X. Xxxxxx
Title: President
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ACCUREL
SYSTEMS INTERNATIONAL CORPORATION
By:
/s/ Xxxxx X. Xxxxxx
Name: Xxxxx
X. Xxxxxx
Title: President
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IMX
ACQUISITION CORP.
By:
/s/ Xxxxx X. Xxxxxx
Name: Xxxxx
X. Xxxxxx
Title: President
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Investor:
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DMRJ
GROUP LLC
By:
/s/ Xxx Xxxxx
Name:
Xxx Xxxxx
Title: MD
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[SIGNATURE
PAGE TO FIRST AMENDMENT]
