Contract
Exhibit
10.3
THIS
WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE HEREOF HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”) OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT AND UNDER APPLICABLE
STATE SECURITIES LAWS OR IMPLANT SCIENCES CORPORATION SHALL HAVE RECEIVED AN
OPINION OF COUNSEL THAT REGISTRATION OF SUCH SECURITIES UNDER THE SECURITIES ACT
AND UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES LAWS IS NOT
REQUIRED.
WARRANT
TO PURCHASE
SHARES OF
COMMON STOCK
OF
IMPLANT
SCIENCES CORPORATION
Expires
December 10, 2013
No.:
W-1 Number of Shares: 1,000,000
Date of
Issuance: December 10, 2008
FOR VALUE
RECEIVED, subject to the provisions hereinafter set forth, the undersigned,
Implant Sciences Corporation., a Massachusetts corporation (together with its
successors and assigns, the “Issuer”), hereby
certifies that DMRJ Group LLC or its registered assigns is entitled to
subscribe for and purchase, during the period specified in this Warrant, up to
One Million (1,000,000) shares (subject to adjustment as hereinafter provided)
of the duly authorized, validly issued, fully paid and non-assessable Common
Stock of the Issuer, at an exercise price per share equal to the Warrant Price
then in effect, subject, however, to the provisions and upon the terms and
conditions hereinafter set forth. Capitalized terms used in this
Warrant and not otherwise defined herein shall have the respective meanings
specified in Section 9 hereof.
1. Term. The
right to subscribe for and purchase shares of Warrant Stock represented hereby
shall commence on December 10, 2008 and shall expire at 5:00 p.m., eastern time,
on December 10, 2013 (such period being the “Term”).
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2.
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Method of Exercise
Payment; Issuance of New Warrant; Transfer and
Exchange.
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(a) Time of
Exercise. The purchase rights represented by this Warrant may
be exercised in whole or in part at any time and from time to time during the
Term commencing on December 10, 2008.
(b) Method of
Exercise. The Holder hereof may exercise this Warrant, in
whole or in part, by the surrender of this Warrant (with the exercise form
attached hereto duly executed) at the principal office of the Issuer, and by the
payment to the Issuer of an amount of consideration therefor equal to the
Warrant Price in effect on the date of such exercise multiplied by the number of
shares of Warrant Stock with respect to which this Warrant is then being
exercised, payable at such Holder’s election (i) by certified or official bank
check or by wire transfer to an account designated by the Issuer, (ii) by
“cashless exercise” in accordance with the provisions of subsection (c) of this
Section 2, or (iii) by a combination of the foregoing methods of payment
selected by the Holder of this Warrant.
(c) Cashless
Exercise. Notwithstanding any provisions herein to the
contrary, if the Per Share Market Value of one share of Common Stock is greater
than the Warrant Price (at the date of calculation as set forth below), in lieu
of exercising this Warrant by payment of cash, the Holder may exercise this
Warrant by a cashless exercise and shall receive the number of shares of Common
Stock equal to an amount (as determined below) by surrender of this Warrant at
the principal office of the Issuer together with the properly endorsed Notice of
Exercise in which event the Issuer shall issue to the Holder a number of shares
of Common Stock computed using the following formula:
X = Y - (A)(Y)
B
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Where
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X
=
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the
number of shares of Common Stock to be issued to the
Holder.
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Y
=
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the
number of shares of Common Stock purchasable upon exercise of all of the
Warrant or, if only a portion of the Warrant is being exercised, the
portion of the Warrant being
exercised.
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A
=
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the
Warrant Price.
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B
= the Per Share
Market Value of one share of Common Stock.
Notwithstanding
anything herein to the contrary, on the last day of the Term, this Warrant shall
be automatically exercised via cashless exercise pursuant to this Section
2(c).
(d) Issuance of Stock
Certificates. In the event of any exercise of the rights
represented by this Warrant in accordance with and subject to the terms and
conditions hereof, (i) certificates for the shares of Warrant Stock so purchased
shall be dated the date of such exercise and delivered to the Holder hereof
within a reasonable time, not exceeding three (3) Trading Days after such
exercise (the “Delivery Date”) or,
if the Issuer’s Securities are eligible for such
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manner of
delivery, then at the request of the Holder, issued and delivered to the
Depository Trust Company (“DTC”) account on the
Holder’s behalf via the Deposit Withdrawal Agent Commission System (“DWAC”), within a
reasonable time, not exceeding three (3) Trading Days after such exercise, and
the Holder hereof shall be deemed for all purposes to be the Holder of the
shares of Warrant Stock so purchased as of the date of such exercise and (ii)
unless this Warrant has expired, a new Warrant representing the number of shares
of Warrant Stock, if any, with respect to which this Warrant shall not then have
been exercised (less any amount thereof which shall have been canceled in
payment or partial payment of the Warrant Price as hereinabove provided) shall
also be issued to the Holder hereof at the Issuer’s expense within such
time.
(e) Transferability of
Warrant. Subject to Section 2(g), this Warrant may be
transferred, in whole or in part, by a Holder without the consent of the
Issuer. If transferred pursuant to this paragraph, this Warrant may
be transferred on the books of the Issuer by the Holder hereof in person or by
the Holder’s duly authorized attorney, upon surrender of this Warrant at the
principal office of the Issuer, properly endorsed (by the Holder executing an
assignment in the form attached hereto) and upon payment of any necessary
transfer tax or other governmental charge imposed upon such
transfer. This Warrant is exchangeable at the principal office of the
Issuer for Warrants for the purchase of the same aggregate number of shares of
Warrant Stock, each new Warrant to represent the right to purchase such number
of shares of Warrant Stock as the Holder hereof shall designate at the time of
such exchange. All Warrants issued on transfers or exchanges shall be
dated the Original Issue Date and shall be identical with this Warrant except as
to the number of shares of Warrant Stock issuable pursuant thereto.
(f) Continuing Rights of
Xxxxxx. The Issuer will, at the time of or at any time after
each exercise of this Warrant, upon the request of the Holder hereof,
acknowledge in writing the extent, if any, of its continuing obligation to
afford to such Holder all rights to which such Holder shall continue to be
entitled after such exercise in accordance with the terms of this Warrant, provided that if any
such Holder shall fail to make any such request, the failure shall not affect
the continuing obligation of the Issuer to afford such rights to such
Holder.
(g) Compliance with Securities
Laws.
(i) The
Holder of this Warrant, by acceptance hereof, acknowledges that this Warrant and
the shares of Warrant Stock to be issued upon exercise hereof are being acquired
solely for the Holder’s own account and not as a nominee for any other party,
and for investment, and that the Holder will not offer, sell or otherwise
dispose of this Warrant or any shares of Warrant Stock to be issued upon
exercise hereof except pursuant to an effective registration statement, or an
exemption from registration, under the Securities Act and any applicable state
securities laws.
(ii) Except
as provided in paragraph (iii) below, this Warrant and all certificates
representing shares of Warrant Stock issued upon exercise hereof shall be
stamped or imprinted with a legend in substantially the following
form:
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THIS
WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE HEREOF HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”) OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT AND UNDER APPLICABLE
STATE SECURITIES LAWS OR IMPLANT SCIENCES CORPORATION SHALL HAVE RECEIVED AN
OPINION OF COUNSEL THAT REGISTRATION OF SUCH SECURITIES UNDER THE SECURITIES ACT
AND UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES LAWS IS NOT
REQUIRED.
(iii) The
restrictions imposed by this subsection (g) upon the transfer of this Warrant or
the shares of Warrant Stock to be purchased upon exercise hereof shall terminate
(A) when such securities shall have been resold pursuant to an effective
registration statement under the Securities Act, (B) upon the Issuer’s receipt
of an opinion of counsel, in form and substance reasonably satisfactory to the
Issuer, addressed to the Issuer to the effect that such restrictions are no
longer required to ensure compliance with the Securities Act and state
securities laws, or (C) upon the Issuer’s receipt of other evidence reasonably
satisfactory to the Issuer that such registration and qualification under the
Securities Act and state securities laws are not required. Whenever such
restrictions shall cease and terminate as to any such securities, the Holder
thereof shall be entitled to receive from the Issuer (or its transfer agent and
registrar), without expense (other than applicable transfer taxes, if any), new
Warrants (or, in the case of shares of Warrant Stock, new stock certificates) of
like tenor not bearing the applicable legend required by paragraph (ii) above
relating to the Securities Act and state securities laws.
(h) Buy In.
In addition to any other rights
available to the Holder, if the Issuer fails to cause its transfer agent to
transmit to the Holder a certificate or certificates representing the
Warrant Stock pursuant to an exercise on or before the Delivery Date (or, in the
case of any exercise of this Warrant after the six month anniversary of the
Original Issue Date, any such certificate representing Warrant Stock contains
any legend restricting transfer (including any legend set forth in Section
2(g)(ii) above)), and if after such date the Holder is required by its broker to
purchase (in an open market transaction or otherwise) shares of Common Stock to
deliver in satisfaction of a sale by the Holder of the Warrant Stock which the
Holder anticipated receiving upon such exercise (a “Buy-In”), then the
Issuer shall (1) pay in cash to the Holder the amount by which (x) the Holder’s
total purchase price (including brokerage commissions, if any) for the shares of
Common Stock so purchased exceeds (y) the amount obtained by multiplying (A) the
number of shares of Warrant Stock that the Issuer was required to deliver to the
Holder in connection with the exercise at issue times, (B) the price at which
the sell order giving rise to such purchase obligation was executed, and (2) at
the option of the Holder, either reinstate the
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portion
of the Warrant and equivalent number of shares of Warrant Stock for which such
exercise was not honored or deliver to the Holder the number of shares of Common
Stock that would have been issued had the Issuer timely complied with its
exercise and delivery obligations hereunder. For example, if the
Holder purchases Common Stock having a total purchase price of $11,000 to cover
a Buy-In with respect to an attempted exercise of shares of Common Stock with an
aggregate sale price giving rise to such purchase obligation of $10,000, under
clause (1) of the immediately preceding sentence the Issuer shall be required to
pay the Holder $1,000. The Holder shall provide the Issuer written
notice indicating the amounts payable to the Holder in respect of the Buy-In,
together with applicable confirmations and other evidence reasonably requested
by the Issuer. Nothing herein shall limit a Holder’s right to pursue
any other remedies available to it hereunder, at law or in equity including,
without limitation, a decree of specific performance and/or injunctive relief
with respect to the Issuer’s failure to timely deliver certificates representing
shares of Common Stock upon exercise of this Warrant as required pursuant to the
terms hereof.
3. Stock Fully Paid;
Reservation and Listing of Shares; Covenants.
(a) Stock Fully
Paid. The Issuer represents, warrants, covenants and agrees
that all shares of Warrant Stock which may be issued upon the exercise of this
Warrant or otherwise hereunder will, upon issuance, be duly authorized, validly
issued, fully paid and non-assessable and free from all taxes, liens and charges
created by or through Issuer. The Issuer further covenants and agrees
that during the period within which this Warrant may be exercised, the Issuer
will at all times have authorized and reserved for the purpose of the issue upon
exercise of this Warrant a number of shares of Common Stock equal to at least
150% of the aggregate number of shares of Common Stock exercisable hereunder to
provide for the exercise of this Warrant (without regard to limitations on
exercisability set forth in Section 8).
(b) Reservation. If
any shares of Common Stock required to be reserved for issuance upon exercise of
this Warrant or as otherwise provided hereunder require registration or
qualification with any governmental authority under any federal or state law
before such shares may be so issued, the Issuer will in good faith use its best
efforts as expeditiously as possible at its expense to cause such shares to be
duly registered or qualified. If the Issuer shall list any shares of
Common Stock on any securities exchange or market it will, at its expense, list
thereon, maintain and increase when necessary such listing, of, all shares of
Warrant Stock from time to time issued upon exercise of this Warrant or as
otherwise provided hereunder, and, to the extent permissible under the
applicable securities exchange’s rules, all unissued shares of Warrant Stock
which are at any time issuable hereunder, so long as any shares of Common Stock
shall be so listed. The Issuer will also so list on each securities
exchange or market, and will maintain such listing of, any other securities
which the Holder of this Warrant shall be entitled to receive upon the exercise
of this Warrant if at the time any securities of the same class shall be listed
on such securities exchange or market by the Issuer.
(c) Covenants. The
Issuer shall not by any action including, without limitation, amending the
Articles of Organization or the by-laws of the Issuer, or through any
reorganization, transfer of assets, consolidation, merger, dissolution, issue or
sale of securities or any other action, avoid or seek to avoid the observance or
performance of any of the terms of this
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Warrant,
but will at all times in good faith assist in the carrying out of all such terms
and in the taking of all such actions as may be necessary or appropriate to
protect the rights of the Holder hereof against dilution (to the extent
specifically provided herein) or impairment. Without limiting the
generality of the foregoing, the Issuer will (i) not increase the par value of
its Common Stock to exceed the then effective Warrant Price, (ii) not amend or
modify any provision of the Certificate Articles of Organization or by-laws of
the Issuer in any manner that would adversely affect the rights of the Holders
of the Warrants, (iii) take all such action as may be reasonably necessary in
order that the Issuer may validly and legally issue fully paid and nonassessable
shares of Common Stock, free and clear of any liens, claims, encumbrances and
restrictions (other than as provided herein) upon the exercise of this Warrant,
and (iv) use its best efforts to obtain all such authorizations, exemptions or
consents from any public regulatory body having jurisdiction thereof as may be
reasonably necessary to enable the Issuer to perform its obligations under this
Warrant.
(d) Loss, Theft, Destruction of
Warrants. Upon receipt of evidence satisfactory to the Issuer
of the ownership of and the loss, theft, destruction or mutilation of any
Warrant and, in the case of any such loss, theft or destruction, upon receipt of
indemnity or security satisfactory to the Issuer or, in the case of any such
mutilation, upon surrender and cancellation of such Warrant, the Issuer will
make and deliver, in lieu of such lost, stolen, destroyed or mutilated Warrant,
a new Warrant of like tenor and representing the right to purchase the same
number of shares of Common Stock.
4. Adjustment of Warrant Price
and Warrant Share Number. The number of shares of Common Stock
for which this Warrant is exercisable, and the price at which such shares may be
purchased upon exercise of this Warrant, shall be subject to adjustment from
time to time as set forth in this Section 4. The Issuer shall give the Holder
notice of any event described below which requires an adjustment pursuant to
this Section 4 in accordance with Section 5.
(a) Recapitalization,
Reorganization, Reclassification, Consolidation, Merger or
Sale.
(i) In
case the Issuer after the Original Issue Date shall do any of the following
(each, a “Triggering
Event”): (a) consolidate with or merge into any other Person and the
Issuer shall not be the continuing or surviving corporation of such
consolidation or merger, or (b) permit any other Person to consolidate with or
merge into the Issuer and the Issuer shall be the continuing or surviving Person
but, in connection with such consolidation or merger, any Capital Stock of the
Issuer shall be changed into or exchanged for Securities of any other Person or
cash or any other property, or (c) transfer all or substantially all of its
properties or assets to any other Person, or (d) effect a capital reorganization
or reclassification of its Capital Stock, then, and in the case of each such
Triggering Event, proper provision shall be made so that, upon the basis and the
terms and in the manner provided in this Warrant, the Holder of this Warrant
shall be entitled upon the exercise hereof at any time after the consummation of
such Triggering Event, to the extent this Warrant is not exercised prior to such
Triggering Event, to receive at the Warrant Price in effect at the time
immediately prior to the consummation of such Triggering Event in lieu of the
Common Stock issuable upon such exercise of this Warrant prior to such
Triggering Event, the Securities, cash and property to which such
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Holder
would have been entitled upon the consummation of such Triggering Event if such
Holder had exercised the rights represented by this Warrant (without giving
effect to the limitations on exercise set forth in Section 8 hereof) immediately
prior thereto (including the right to elect the type of consideration, if
applicable), subject to adjustments (subsequent to such corporate action) as
nearly equivalent as possible to the adjustments provided for elsewhere in this
Section 4. Unless the surviving entity in any such Triggering Event
is a public company under the Securities Exchange Act of 1934, the common equity
securities of which are traded or quoted on a national securities exchange or
the OTC Bulletin Board (a “Qualifying Entity”),
the Holder, at its option, shall be permitted to require that the Issuer pay to
the Holder an amount equal to the Black-Scholes value of this
Warrant.
(ii) Notwithstanding
anything contained in this Warrant to the contrary and so long as the surviving
entity is a Qualifying Entity, the Issuer will not be deemed to have
effected any Triggering Event if, prior to the consummation thereof,
each Person (other than the Issuer) which may be required to deliver any
Securities, cash or property upon the exercise of this Warrant as provided
herein shall assume, by written instrument delivered to the Holder of this
Warrant and reasonably satisfactory to the Holder, (A) the obligations of the
Issuer under this Warrant (and if the Issuer shall survive the consummation of
such Triggering Event, such assumption shall be in addition to, and shall not
release the Issuer from, any continuing obligations of the Issuer under this
Warrant) and (B) the obligation to deliver to such Holder such shares of
Securities, cash or property as, in accordance with the foregoing provisions of
this subsection (a), such Holder shall be entitled to receive, and such Person
shall have similarly delivered to such Holder, an opinion of counsel for such
Person, which shall be reasonably satisfactory to the Holder, stating that this
Warrant shall thereafter continue in full force and effect and the terms hereof
(including, without limitation, all of the provisions of this subsection (a))
shall be applicable to the Securities, cash or property which such Person may be
required to deliver upon any exercise of this Warrant or the exercise of any
rights pursuant hereto.
(b) Stock Dividends,
Subdivisions and Combinations. If at any time the Issuer
shall:
(i) set
a record date or take a record of the holders of its Common Stock for the
purpose of entitling them to receive a dividend payable in, or other
distribution of, shares of Common Stock,
(ii) subdivide
its outstanding shares of Common Stock into a larger number of shares of Common
Stock, or
(iii) combine
its outstanding shares of Common Stock into a smaller number of shares of Common
Stock,
then (1)
the number of shares of Common Stock for which this Warrant is exercisable
immediately after the occurrence of any such event shall be adjusted to equal
the number of shares of Common Stock which a record holder of the same number of
shares of Common Stock for which this Warrant is exercisable immediately prior
to the occurrence of such event would
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own or be
entitled to receive after the happening of such event (without giving effect to
the limitations on exercise set forth in Section 8 hereof), and (2) the Warrant
Price then in effect shall be adjusted to equal (A) the Warrant Price then in
effect multiplied by the number of shares of Common Stock for which this Warrant
is exercisable immediately prior to the adjustment (without giving effect to the
limitations on exercise set forth in Section 8 hereof) divided by (B) the number
of shares of Common Stock for which this Warrant is exercisable immediately
after such adjustment (without giving effect to the limitations on exercise set
forth in Section 8 hereof).
(c) Adjustment upon Issuance of
shares of Common Stock. If at any time the Issuer issues or
sells, or in accordance with this Section 4(c) is deemed to have issued or sold,
any shares of Common Stock (including the issuance or sale of shares of Common
Stock owned or held by or for the account of the Issuer for a consideration per
share (the "New
Issuance Price") less than a price (the "Applicable Price")
equal to the Warrant Price in effect immediately prior to such issue or sale or
deemed issuance or sale (the foregoing a "Dilutive Issuance"),
then immediately after such Dilutive Issuance, the Warrant Price then in effect
shall be reduced to an amount equal to the New Issuance Price. Upon
each such adjustment of the Warrant Price hereunder, the number of shares of
Warrant Stock shall be adjusted to the number of shares of Common Stock
determined by multiplying the Warrant Price in effect immediately prior to such
adjustment by the number of shares of Common Stock acquirable upon exercise of
this Warrant immediately prior to such adjustment and dividing the product
thereof by the Warrant Price resulting from such adjustment. For
purposes of determining the adjusted Warrant Price under this Section 4(c), the
following shall be applicable:
(i) Issuance of
Options. If the Issuer in any manner grants any options to
purchase Common Stock (“Options”), other than
Options granted to employees and consultants pursuant to any employee stock
benefit, option, purchase or similar plan approved by the Board, and
the lowest price per share for which one share of Common Stock is issuable upon
the exercise of any such Option or upon conversion, exercise or exchange of any
stock or securities (other than Options) directly or indirectly convertible into
or exercisable or exchangeable for shares of Common Stock (“Convertible
Securities”) issuable upon exercise of any such Option is less than the
Applicable Price, then such share of Common Stock shall be deemed to be
outstanding and to have been issued and sold by the Issuer at the time of the
granting or sale of such Option for such price per share. For
purposes of this Section 4(c)(i), the "lowest price per share for which one
share of Common Stock is issuable upon exercise of such Options or upon
conversion, exercise or exchange of such Convertible Securities issuable upon
exercise of any such Option" shall be equal to the sum of the lowest amounts of
consideration (if any) received or receivable by the Issuer with respect to any
one share of Common Stock upon the granting or sale of the Option, upon exercise
of the Option and upon conversion, exercise or exchange of any Convertible
Security issuable upon exercise of such Option. No further adjustment
of the Warrant Price or number of shares of Warrant Stock shall be made upon the
actual issuance of such shares of Common Stock or of such Convertible Securities
upon the exercise of such Options or upon the actual issuance of such shares of
Common Stock upon conversion, exercise or exchange of such Convertible
Securities.
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(ii) Issuance of Convertible
Securities. If the Issuer in any manner issues or sells any
Convertible Securities and the lowest price per share for which one share of
Common Stock is issuable upon the conversion, exercise or exchange thereof is
less than the Applicable Price, then such share of Common Stock shall be deemed
to be outstanding and to have been issued and sold by the Issuer at the time of
the issuance or sale of such Convertible Securities for such price per
share. For the purposes of this Section 4(c)(ii), the "lowest price
per share for which one share of Common Stock is issuable upon the conversion,
exercise or exchange thereof" shall be equal to the sum of the lowest amounts of
consideration (if any) received or receivable by the Issuer with respect to one
share of Common Stock upon the issuance or sale of the Convertible Security and
upon conversion, exercise or exchange of such Convertible
Security. No further adjustment of the Warrant Price or number of
shares of Warrant Stock shall be made upon the actual issuance of such shares of
Common Stock upon conversion, exercise or exchange of such Convertible
Securities, and if any such issue or sale of such Convertible Securities is made
upon exercise of any Options for which adjustment of this Warrant has been or is
to be made pursuant to other provisions of this Section 4(c), no further
adjustment of the Warrant Price or number of shares of Warrant Stock shall be
made by reason of such issue or sale.
(iii) Change in Option Price or
Rate of Conversion. If the purchase price provided for in any
Options, the additional consideration, if any, payable upon the issue,
conversion, exercise or exchange of any Convertible Securities, or the rate at
which any Convertible Securities are convertible into or exercisable or
exchangeable for shares of Common Stock increases or decreases at any time, the
Warrant Price and the number of shares of Warrant Stock in effect at the time of
such increase or decrease shall be adjusted to the Warrant Price and the number
of shares of Common Stock issuable upon exercise of this Warrant which would
have been in effect at such time had such Options or Convertible Securities
provided for such increased or decreased purchase price, additional
consideration or increased or decreased conversion rate, as the case may be, at
the time initially granted, issued or sold. For purposes of this
Section 4(c)(iii), if the terms of any Option or Convertible Security that was
outstanding as of the date of issuance of this Warrant are increased or
decreased in the manner described in the immediately preceding sentence, then
such Option or Convertible Security and the shares of Common Stock deemed
issuable upon exercise, conversion or exchange thereof shall be deemed to have
been issued as of the date of such increase or decrease. No
adjustment pursuant to this Section 4(c) shall be made if such adjustment would
result in an increase of the Warrant Price then in effect or a decrease in the
number of shares Warrant Stock.
(iv) Calculation of Consideration
Received. In case any Option is issued in connection with the
issue or sale of other securities of the Issuer, together comprising one
integrated transaction in which no specific consideration is allocated to such
Options by the parties thereto, the Options will be deemed to have been issued
for a consideration of $0.01. If any shares of Common Stock, Options
or Convertible Securities are issued or sold or deemed to have been issued or
sold for cash, the consideration received therefor will be deemed to be the net
amount received by the Issuer therefor. If any shares of Common
Stock, Options or Convertible Securities are issued or sold for a
consideration
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other
than cash, the amount of such consideration received by the Issuer will be the
fair value of such consideration, except where such consideration consists of
securities, in which case the amount of consideration received by the Issuer
will be the closing sale price of such security on the date of
receipt. If any shares of Common Stock, Options or Convertible
Securities are issued to the owners of the non-surviving entity in connection
with any merger in which the Issuer is the surviving entity, the amount of
consideration therefor will be deemed to be the fair value of such portion of
the net assets and business of the non-surviving entity as is attributable to
such shares of Common Stock, Options or Convertible Securities, as the case may
be. The fair value of any consideration other than cash or securities
will be determined jointly by the Issuer and the Holders. If such
parties are unable to reach agreement within ten (10) days after the occurrence
of an event requiring valuation (the "Valuation Event"),
the fair value of such consideration will be determined within five (5) Business
Days after the tenth (10th) day
following the Valuation Event by an independent, reputable appraiser jointly
selected by the Issuer and the Holders. The determination of such
appraiser shall be final and binding upon all parties absent manifest error and
the fees and expenses of such appraiser shall be borne by the
Issuer.
(d) Certain Other
Distributions. If at any time the Issuer shall set a record
date or take a record of the holders of its Common Stock for the purpose of
entitling them to receive any dividend or other distribution
of:
(i) cash
(other than a cash dividend payable out of earnings or earned surplus legally
available for the payment of dividends under the laws of the jurisdiction of
incorporation of the Issuer),
(ii) any
evidences of its indebtedness, any shares of stock of any class or any other
securities or property of any nature whatsoever (other than cash or Common
Stock), or
(iii) any
warrants or other rights to subscribe for or purchase any evidences of its
indebtedness, any shares of stock of any class or any other securities or
property of any nature whatsoever (other than cash or Common
Stock),
then (1)
the number of shares of Common Stock for which this Warrant is exercisable shall
be adjusted to equal the product of the number of shares of Common Stock for
which this Warrant is exercisable immediately prior to such adjustment (without
giving effect to the limitations on exercise set forth in Section 8 hereof)
multiplied by a fraction (A) the numerator of which shall be the Per Share
Market Value of Common Stock at the date of taking such record and (B) the
denominator of which shall be such Per Share Market Value minus the amount
allocable to one share of Common Stock of any such cash so distributable and of
the fair value (as determined in good faith by the Board of Directors of the
Issuer and supported by an opinion from an investment banking firm reasonably
acceptable to the Holder) of any and all such evidences of indebtedness, shares
of stock, other securities or property or warrants or other subscription or
purchase rights so distributable, and (2) the Warrant Price then in effect shall
be adjusted to equal (A) the Warrant Price then in effect multiplied by the
number of shares of Common Stock
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for which
this Warrant is exercisable immediately prior to the adjustment (without giving
effect to the limitations on exercise set forth in Section 8 hereof) divided by
(B) the number of shares of Common Stock for which this Warrant is exercisable
immediately after such adjustment (without giving effect to the limitations on
exercise set forth in Section 8 hereof). A reclassification of the
Common Stock (other than a change in par value, or from par value to no par
value or from no par value to par value) into shares of Common Stock and shares
of any other class of stock shall be deemed a distribution by the Issuer to the
holders of its Common Stock of such shares of such other class of stock within
the meaning of this Section 4(c) and, if the outstanding shares of Common Stock
shall be changed into a larger or smaller number of shares of Common Stock as a
part of such reclassification, such change shall be deemed a subdivision or
combination, as the case may be, of the outstanding shares of Common Stock
within the meaning of Section 4(b).
(d) Other Provisions applicable
to Adjustments under this Section. The following provisions
shall be applicable to the making of adjustments of the number of shares of
Common Stock for which this Warrant is exercisable and the Warrant Price then in
effect provided for in this Section 4:
(i) Fractional
Interests. In computing adjustments under this Section 4,
fractional interests in Common Stock shall be taken into account to the nearest
one one-hundredth (1/100th) of a
share.
(ii) When Adjustment Not
Required. If the Issuer shall take a record of the holders of
its Common Stock for the purpose of entitling them to receive a dividend or
distribution or subscription or purchase rights and shall, thereafter and before
the distribution to stockholders thereof, legally abandon its plan to pay or
deliver such dividend, distribution, subscription or purchase rights, then
thereafter no adjustment shall be required by reason of the taking of such
record and any such adjustment previously made in respect thereof shall be
rescinded and annulled.
(e) Form of Warrant after
Adjustments. The form of this Warrant need not be changed
because of any adjustments in the Warrant Price or the number and kind of
securities purchasable upon exercise of this Warrant.
(f) Escrow of
Property. If after any property becomes distributable pursuant
to this Section 4 by reason of the taking of any record of the holders of Common
Stock, but prior to the occurrence of the event for which such record is taken,
and the Holder exercises this Warrant, such property shall be held in escrow for
the Holder by the Issuer to be distributed to the Holder upon and to the extent
that the event actually takes place, upon payment of the then current Warrant
Price. Notwithstanding any other provision to the contrary herein, if
the event for which such record was taken fails to occur or is rescinded, then
such escrowed property shall be returned to the Issuer.
5. Notice of
Adjustments. Whenever the Warrant Price or Warrant Share
Number shall be adjusted pursuant to Section 4 hereof (for purposes of this
Section 5, each an “adjustment”), the Issuer shall cause its Chief
Financial Officer to prepare and execute a
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certificate
setting forth, in reasonable detail, the event requiring the adjustment, the
amount of the adjustment, the method by which such adjustment was calculated
(including a description of the basis on which the Board made any determination
hereunder), and the Warrant Price and Warrant Share Number after giving effect
to such adjustment, and shall cause copies of such certificate to be delivered
to the Holder of this Warrant promptly after each adjustment. Any
dispute between the Issuer and the Holder of this Warrant with respect to the
matters set forth in such certificate may at the option of the Holder of this
Warrant be submitted to one of the national accounting firms currently known as
the “big four” selected by the Holder, provided that the
Issuer shall have ten (10) days after receipt of notice from such Holder of its
selection of such firm to object thereto, in which case such Holder shall select
another such firm and the Issuer shall have no such right of objection, and
provided further that all
costs of such engagement shall be borne by the Issuer. The firm
selected by the Holder of this Warrant as provided in the preceding sentence
shall be instructed to deliver a written opinion as to such matters to the
Issuer and such Holder within thirty (30) days after submission to it of such
dispute. Such opinion shall be final and binding on the parties
hereto.
6. Fractional
Shares. No fractional shares of Warrant Stock will be issued
in connection with any exercise hereof, but in lieu of such fractional shares,
the Issuer shall at its option either (a) make a cash payment therefor equal in
amount to the product of the applicable fraction multiplied by the Per Share
Market Value then in effect or (b) issue one whole share in lieu of such
fractional share.
7. [Reserved.]
8. Certain Exercise
Restrictions.
(a) Notwithstanding
anything to the contrary set forth in this Warrant, at no time may a holder of
this Warrant exercise this Warrant if the number of shares of Common Stock to be
issued pursuant to such exercise would exceed, when aggregated with all other
shares of Common Stock owned by such holder at such time, the number of shares
of Common Stock which would result in such holder beneficially owning (as
determined in accordance with Section 13(d) of the Securities Exchange Act
of 1934, as amended, and the rules thereunder) in excess of 4.99% of all of the
Common Stock outstanding at such time; provided, however, that upon a holder of
this Warrant providing the Issuer with sixty-one (61) days notice (pursuant to
Section 13 hereof) that such holder would like to waive this
Section 8(a) with regard to any or all shares of Common Stock issuable upon
exercise of this Warrant, this Section 8(a) will be of no force or effect
with regard to all or a portion of the Warrant referenced in such notice;
provided, further, that this Section 8(b) shall be of no further force or effect
during the sixty-one (61) days immediately preceding the expiration of the term
of this Warrant.
(b) Notwithstanding
anything to the contrary set forth in this Warrant, at no time may a holder of
this Warrant exercise this Warrant if the number of shares of Common Stock to be
issued pursuant to such exercise would exceed, when aggregated with all other
shares of Common Stock owned by such holder at such time, the number of shares
of Common Stock which would result in such holder beneficially owning (as
determined in accordance with Section 13(d) of the Securities Exchange Act
of 1934, as amended, and the rules thereunder) in excess of 9.99% of all of the
Common Stock outstanding at such time; provided, however, that
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upon a
holder of this Warrant providing the Issuer with sixty-one (61) days notice
(pursuant to Section 13 hereof) that such holder would like to waive this
Section 8(b) with regard to any or all shares of Common Stock issuable upon
exercise of this Warrant, this Section 8(b) will be of no force or effect
with regard to all or a portion of the Warrant referenced in such notice;
provided, further, that this Section 8(b) shall be of no further force or effect
during the sixty-one (61) days immediately preceding the expiration of the term
of this Warrant.
9. Definitions. For
the purposes of this Warrant, the following terms have the following
meanings:
“Articles of
Organization” means the Amended and Restated Articles of Organization of
the Issuer, as amended, as in effect on the Original Issue Date, and as
hereafter from time to time amended, modified, supplemented or restated in
accordance with the terms hereof and thereof and pursuant to applicable
law.
“Board” means the
Board of Directors of the Issuer.
“Business Day” means,
even if not capitalized, any day banking transactions can be conducted in New
York City, New York, and does not include any day which is a federal
or state holiday in New York City, New York.
“Capital Stock” means
and includes (i) any and all shares, interests, participations or other
equivalents of or interests in (however designated) corporate stock, including,
without limitation, shares of preferred or preference stock, (ii) all
partnership interests (whether general or limited) in any Person which is a
partnership, (iii) all membership interests or limited liability company
interests in any limited liability company, and (iv) all equity or ownership
interests in any Person of any other type.
“Common Stock” means
the Common Stock, par value $0.10 per share, of the Issuer and any other Capital
Stock into which such stock may hereafter be changed.
“Governmental
Authority” means any governmental, regulatory or self-regulatory entity,
department, body, official, authority, commission, board, agency or
instrumentality, whether federal, state or local, and whether domestic or
foreign.
“Holders” mean the
Persons who shall from time to time own any Warrant. The term
“Holder” means one of the Holders.
“Independent
Appraiser” means a nationally recognized or major regional investment
banking firm or firm of independent certified public accountants of recognized
standing (which may be the firm that regularly examines the financial statements
of the Issuer) that is regularly engaged in the business of appraising the
Capital Stock or assets of corporations or other entities as going concerns, and
which is not affiliated with either the Issuer or the Holder of any
Warrant.
“Issuer” means Implant
Sciences Corporation, a Massachusetts corporation, and its
successors.
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“Original Issue Date”
means December 10, 2008.
“OTC Bulletin Board”
means the over-the-counter electronic bulletin board.
“Person” means an
individual, corporation, limited liability company, partnership, joint stock
company, trust, unincorporated organization, joint venture, Governmental
Authority or other entity of whatever nature.
“Per Share Market
Value” means on any particular date (a) the last trading price on any
national securities exchange on which the Common Stock is listed, or, if there
is no such price, the closing bid price for a share of Common Stock, either in
the over-the-counter market, as reported by the OTC Bulletin Board or in the
National Quotation Bureau Incorporated or similar organization or agency
succeeding to its functions of reporting prices) at the close of business on
such date, or (b) if the Common Stock is not then reported by the OTC Bulletin
Board or the National Quotation Bureau Incorporated (or similar organization or
agency succeeding to its functions of reporting prices), then the average of the
“Pink Sheet” quotes for the Common Stock on such date, or (c) if the Common
Stock is not then publicly traded the fair market value of a share of Common
Stock on such date as determined by the Board in good faith; provided, however, that the
Holder, after receipt of the determination by the Board, shall have the right to
select, jointly with the Issuer, an Independent Appraiser, in which case, the
fair market value shall be the determination by such Independent Appraiser; and
provided, further that all
determinations of the Per Share Market Value shall be appropriately adjusted for
any stock dividends, stock splits or other similar transactions during the
period between the date as of which such market value was required to be
determined and the date it is finally determined. The determination
of fair market value shall be based upon the fair market value of the Issuer
determined on a going concern basis as between a willing buyer and a willing
seller and taking into account all relevant factors determinative of value, and
shall be final and binding on all parties. In determining the fair
market value of any shares of Common Stock, no consideration shall be given to
any restrictions on transfer of the Common Stock imposed by agreement or by
federal or state securities laws, or to the existence or absence of, or any
limitations on, voting rights.
“Purchase Agreement”
means the Note and Warrant Purchase Agreement dated as of December 10, 2008
among the Issuer and the Holder.
“Securities” means any
debt or equity securities of the Issuer, whether now or hereafter authorized,
any instrument convertible into or exchangeable for Securities or a Security,
and any option, warrant or other right to purchase or acquire any
Security. “Security” means one of the Securities.
“Securities Act” means
the Securities Act of 1933, as amended, or any similar federal statute then in
effect.
-14-
“Subsidiary” means any
corporation at least 50% of whose outstanding Voting Stock, and a limited
liability company at least 50% of whose membership interests, shall at the time
be owned directly or indirectly by the Issuer or by one or more of its
Subsidiaries.
“Term” has the meaning
specified in Section 1 hereof.
“Trading Day” means
(a) a day on which the Common Stock is traded on the OTC Bulletin Board, or (b)
if the Common Stock is not traded on the OTC Bulletin Board, a day on which the
Common Stock is quoted in the over-the-counter market as reported by the
National Quotation Bureau Incorporated (or any similar organization or agency
succeeding its functions of reporting prices); provided, however, that in the
event that the Common Stock is not listed or quoted as set forth in (a) or (b)
hereof, then Trading Day shall mean any day except Saturday, Sunday and any day
which shall be a legal holiday or a day on which banking institutions in the
State of New York are authorized or required by law or other government action
to close.
“Voting Stock” means,
as applied to the Capital Stock of any corporation, Capital Stock of any class
or classes (however designated) having ordinary voting power for the election of
a majority of the members of the Board of Directors (or other governing body) of
such corporation, other than Capital Stock having such power only by reason of
the happening of a contingency.
“Warrants” means the
Warrants issued and sold pursuant to the Purchase Agreement, including, without
limitation, this Warrant, and any other warrants of like tenor issued in
substitution or exchange for any thereof pursuant to the provisions of Section
2(c), 2(d) or 2(e) hereof or of any of such other Warrants.
“Warrant
Consideration” has the meaning specified in Section 4(i)(i)
hereof.
“Warrant Price” means
U.S. $0.26, as such price may be adjusted from time to time as shall result from
the adjustments specified in this Warrant, including Section 4
hereto.
“Warrant Share Number”
means at any time the aggregate number of shares of Warrant Stock which may at
such time be purchased upon exercise of this Warrant, after giving effect to all
prior adjustments and increases to such number made or required to be made under
the terms hereof.
“Warrant Stock” means
Common Stock issuable upon exercise of any Warrant or Warrants or otherwise
issuable pursuant to any Warrant or Warrants.
10. Other
Notices. In case at any time:
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(A)
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the
Issuer shall make any distributions to the holders of Common Stock;
or
|
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|
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(B)
|
the
Issuer shall authorize the granting to all holders of its Common Stock of
rights to subscribe for or purchase any shares of Capital Stock of any
class or other rights; or
|
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(C)
|
there
shall be any reclassification of the Capital Stock of the Issuer;
or
|
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(D)
|
there
shall be any capital reorganization by the Issuer;
or
|
|
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(E)
|
there
shall be any (i) consolidation or merger involving the Issuer or (ii)
sale, transfer or other disposition of all or substantially all of the
Issuer’s property, assets or business (except a merger or other
reorganization in which the Issuer shall be the surviving corporation and
its shares of Capital Stock shall continue to be outstanding and unchanged
and except a consolidation, merger, sale, transfer or other disposition
involving a wholly-owned Subsidiary);
or
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(F)
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there
shall be a voluntary or involuntary dissolution, liquidation or winding-up
of the Issuer or any partial liquidation of the Issuer or distribution to
holders of Common Stock;
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then, in
each of such cases, the Issuer shall give written notice to the Holder of the
date on which (i) the books of the Issuer shall close or a record shall be taken
for such dividend, distribution or subscription rights or (ii) such
reorganization, reclassification, consolidation, merger, disposition,
dissolution, liquidation or winding-up, as the case may be, shall take
place. Such notice also shall specify the date as of which the
holders of Common Stock of record shall participate in such dividend,
distribution or subscription rights, or shall be entitled to exchange their
certificates for Common Stock for securities or other property deliverable upon
such reorganization, reclassification, consolidation, merger, disposition,
dissolution, liquidation or winding-up, as the case may be. Such
notice shall be given at least ten (10) days prior to the action in question and
not less than ten (10) days prior to the record date or the date on which the
Issuer’s transfer books are closed in respect thereto. The Holder
shall have the right to send two (2) representatives selected by it to each
meeting, who shall be permitted to attend, but not vote at, such meeting and any
adjournments thereof. This Warrant entitles the Holder to receive
copies of all financial and other information distributed or required to be
distributed to the holders of the Common Stock.
11. Amendment and
Waiver. Any term, covenant, agreement or condition in this
Warrant may be amended, or compliance therewith may be waived (either generally
or in a particular instance and either retroactively or prospectively), by a
written instrument or written instruments executed by the Issuer and the Holder.
If this Warrant shall have been transferred in part or otherwise subdivided into
two or more Warrants, then any term, covenant, agreement or condition in this
Warrant may be amended, or compliance therewith may be waived
(either
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generally
or in a particular instance and either retroactively or prospectively), by a
written instrument or written instruments executed by the Issuer and the Holders
of a majority in interest of the Warrants.
12. Governing
Law. THIS
WARRANT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK, WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF
LAW.
13. Notices. Any
and all notices or other communications or deliveries required or permitted to
be provided hereunder shall be in writing and shall be deemed given and
effective on the earlier of (i) the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile telephone number
specified for notice prior to 5:00 p.m., eastern time, on a Trading Day, (ii)
the Trading Day after the date of transmission, if such notice or communication
is delivered via facsimile at the facsimile telephone number specified for
notice later than 5:00 p.m., eastern time, on any date and earlier than 11:59
p.m., eastern time, on such date, (iii) the Trading Day following the date of
mailing, if sent by nationally recognized overnight courier service or (iv)
actual receipt by the party to whom such notice is required to be
given. The addresses for such communications shall be with respect to
the Holder of this Warrant or of Warrant Stock issued pursuant hereto, addressed
to such Holder at its last known address or facsimile number appearing on the
books of the Issuer maintained for such purposes, or with respect to the Issuer,
addressed to:
Implant Sciences
Corporation
000
Xxxxxxx Xxxx
Wakefield,
Massachusetts 01880
Attn: Xxxxxxx
X. Xxxxxx, President
Tel: (000)
000-0000
Fax: (000)
000-0000
with a
copy (which copy shall not constitute notice to the Issuer) to:
Xxxxx,
Xxxxxx-Xxxxx & Xxxxxxxxx, P.C.
Reservoir
Place
0000
Xxxxxxx Xxxx
Waltham,
Massachusetts 02451
Attn: Xxxx
X. Xxxxxx, Esq.
Tel: (000)
000-0000
Fax: (000)
000-0000
Copies of
notices to the Holder shall be sent to it at DMRJ Group, LLC, c/o Platinum
Partners Value Arbitrage Fund L.P., 000 X. 00xx Xx.,
00xx
Xxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention: Xxxxxx X. Xxxxx, Tel No.: (000)
000-0000, Fax No.: (000) 000-0000. Any party hereto may from time to
time change its address for notices by giving at least ten (10) days written
notice of such changed address to the other party hereto.
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14. Warrant
Agent. The Issuer may, by written notice to each Holder of
this Warrant, appoint an agent having an office in New York, New York for the
purpose of issuing shares of Warrant Stock on the exercise of this Warrant
pursuant to subsection (b) of Section 2 hereof, exchanging this Warrant pursuant
to subsection (d) of Section 2 hereof or replacing this Warrant pursuant to
subsection (d) of Section 3 hereof, or any of the foregoing, and thereafter any
such issuance, exchange or replacement, as the case may be, shall be made at
such office by such agent.
15. Remedies. The
Issuer stipulates that the remedies at law of the Holder of this Warrant in the
event of any default or threatened default by the Issuer in the performance of
or compliance with any of the terms of this Warrant are not and will not be
adequate and that, to the fullest extent permitted by law, such terms may be
specifically enforced by a decree for the specific performance of any agreement
contained herein or by an injunction against a violation of any of the terms
hereof or otherwise.
16. Successors and
Assigns. This Warrant and the rights evidenced hereby shall
inure to the benefit of and be binding upon the successors and assigns of the
Issuer, the Holder hereof and (to the extent provided herein) the Holders of
Warrant Stock issued pursuant hereto, and shall be enforceable by any such
Holder or Holder of Warrant Stock.
17. Modification and
Severability. If, in any action before any court or agency
legally empowered to enforce any provision contained herein, any provision
hereof is found to be unenforceable, then such provision shall be deemed
modified to the extent necessary to make it enforceable by such court or
agency. If any such provision is not enforceable as set forth in the
preceding sentence, the unenforceability of such provision shall not affect the
other provisions of this Warrant, but this Warrant shall be construed as if such
unenforceable provision had never been contained herein.
18. Headings. The
headings of the Sections of this Warrant are for convenience of reference only
and shall not, for any purpose, be deemed a part of this Warrant.
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the Issuer
has executed this Warrant as of the day and year first above
written.
IMPLANT SCIENCES
CORPORATION
By: /s/Xxxxxxx X.
Xxxxxx
Name: Xxxxxxx X.
Xxxxxx
Title: President
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WARRANT
EXERCISE
FORM
IMPLANT
SCIENCES CORPORATION
The
undersigned _______________, pursuant to the provisions of the within Warrant,
hereby elects to purchase _____ shares of Common Stock of Implant Sciences
Corporation covered by the within Warrant.
Dated:
_________________ Signature ___________________________
Address _____________________
_____________________
Number of
shares of Common Stock beneficially owned or deemed beneficially owned by the
Holder on the date of Exercise: _________________________
The
undersigned is an “accredited investor” as defined in Regulation D under the
Securities Act of 1933, as amended.
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The
undersigned intends that payment of the Warrant Price shall be made as
(check one):
|
Cash
Exercise_______
Cashless
Exercise_______
If the
Holder has elected a Cash Exercise, the Holder shall pay the sum of $________ by
certified or official bank check (or via wire transfer) to the Issuer in
accordance with the terms of the Warrant.
If the
Holder has elected a Cashless Exercise, a certificate shall be issued to the
Holder for the number of shares equal to the whole number portion of the product
of the calculation set forth below, which is ___________.
X = Y -
(A)(Y)
B
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Where:
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The
number of shares of Common Stock to be issued to the Holder
__________________(“X”).
|
The
number of shares of Common Stock purchasable upon exercise of all of the Warrant
or, if only a portion of the Warrant is being exercised, the portion of the
Warrant being exercised ___________________________ (“Y”).
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The
Warrant Price ______________ (“A”).
|
The Per
Share Market Value of one share of Common
Stock _______________________ (“B”).
ASSIGNMENT
FOR VALUE
RECEIVED, _________________ hereby sells, assigns and transfers unto
__________________ the within Warrant and all rights evidenced thereby and does
irrevocably constitute and appoint _____________, attorney, to transfer the said
Warrant on the books of the within named corporation.
Dated:
_________________ Signature ___________________________
Address _____________________
_____________________
PARTIAL
ASSIGNMENT
FOR VALUE
RECEIVED, _________________ hereby sells, assigns and transfers unto
__________________ the right to purchase _________ shares of Warrant Stock
evidenced by the within Warrant together with all rights therein, and does
irrevocably constitute and appoint ___________________, attorney, to transfer
that part of the said Warrant on the books of the within named
corporation.
Dated:
_________________ Signature ___________________________
Address _____________________
_____________________
FOR USE
BY THE ISSUER ONLY:
This
Warrant No. W-___ canceled (or transferred or exchanged) this _____ day of
___________, _____, shares of Common Stock issued therefor in the name of
_______________, Warrant No. W-_____ issued for ____ shares of Common Stock in
the name of _______________.
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130355.01002/6688373v.5
