FIRST AMENDMENT TO
NOTE AND WARRANT PURCHASE
AGREEMENT
This First Amendment to Note and Warrant
Purchase Agreement (“ Amendment ”) is made as of
the 1 st
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:
(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
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
representation
