Document:

ex10-2.htm

    Exhibit
10.2

     

    SECOND
AMENDMENT TO SENIOR SECURED NOTES AND SUBSCRIPTION AGREEMENT

     

    THIS
SECOND AMENDMENT TO SENIOR SECURED NOTES AND SUBSCRIPTION AGREEMENT (this
“Second Amendment”) is made and entered into as of June 24, 2009 (the “Effective
Date”) by and among ADVANCE NANOTECH, INC. (the “Company”) and the holder
identified herein (the “Holder”), and is made with reference to the
following:

     

    A.           Company
and Holder have entered into a Senior Secured Note, a Subscription Agreement and
a First Amendment to Senior Secured Notes and Subscription Agreement (as the
same may hereafter be amended, modified, extended and/or restated from time to
time, the “Senior Note Agreements”).

     

    B.           Company
has requested that Holder modify the Senior Note Agreements to reflect an
increase in the maximum amount from $1,000,000 to $3,000,000 an extension of the
expiration date from June30, 2009 to August 31, 2009 and authorization to add an
optional conversion feature at the sole discretion of the Company.

     

    C.           
The addition of a provision authorizing the Company’s Board of Directors to
reduce its total current membership from 9 to 5, of which one (1) shall be an
individual nominated by the Holders.

     

    D.           Holder
has agreed to amend the Senior Note Agreements as set forth below and in
connection with the execution and delivery of this Second
Amendment.

     

     NOW,
THEREFORE, in consideration of the premises and the agreements, conditions and
covenants contained herein and other good and valuable consideration the receipt
and sufficiency of which is hereby acknowledged, the parties hereto hereby agree
as follows:

     

    1.           Terms Defined in Senior Note
Agreements.  All capitalized terms used in this Second
Amendment and not otherwise defined herein shall have the meanings assigned to
them in the Senior Note Agreements.

     

    2.           For
purposes hereof, “Effective Date” means June 24, 2009.

     

    3.           Effective
as of the Effective Date, Paragraph 1 of the Senior Secured Note, as amended by
the First Amendment, shall be deleted in its entirety and replaced with the
following:

     

    FOR VALUE
RECEIVED, ADVANCE NANOTECH, INC., a Delaware corporation (hereinafter called
“Borrower” or the “Company”), hereby promises to pay to the holders identified
in Annex A (the
“Holders”), at the respective address set forth in Annex A hereto, or
order, without demand, the principal amount, as set forth opposite each Holder’s
respective name in Annex A hereto, up to
a maximum aggregate principal amount of $3,000,000 (the “Principal”), with
accrued and unpaid interest thereon, on August 31, 2009 (the “Maturity Date”),
if not paid sooner.

     

    4.           Effective
as of the Effective Date, the Subscription Agreement shall be modified to
reflect a maturity date of August 31, 2009 under both Option 1 and Option
2.

     

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

       

    

    5.           Effective
as of the Effective Date, Section 1.5 of the Senior Secured Note, as amended by
the First Amendment, shall be added as follows:

     

    Section
1.5.       Convertibility.  At
the election of the Company in its sole discretion and upon the satisfactory
completion of certain events as described in this Section 1.5, the principal and
interest accrued through the date of conversion under the Senior Secured Notes
at any time prior to the Maturity Date, shall be convertible into common shares
of the Company at a per share price equal to $0.05 ten days from notice being
provided by the Company to the Holder of its intention to do so.

     

    If Holder
is also a holder of 8% Senior Secured Convertible Notes and Warrants, then such
Holder hereby agrees to conversion of the principal and interest accrued through
the date of conversion of Holder’s 8% Senior Secured Convertible
Notes  and agrees to waive price protection provisions as set forth in
Article II Section 2.1(c)D of the 8% Senior Secured Convertible Note and Section
3.4 of the Common Stock Purchase Warrant upon execution of this Second
Amendment. At the election of the Company,  and upon satisfactory
completion of certain events as described in this section 1.5, Holder will
convert amounts owing under the 8% Senior Secured Convertible Notes and Warrants
to common shares based on the following conversion prices:

    

    
      	 
      	
              Conversion

              Price

               

            
	
              Amounts
      up to 200% of the principal amount of such Holder’s investment in the
      Senior Secured Note

               

            	
               

              $0.05

            
	
              Remaining
      amounts of 8% Senior Secured Convertible Notes and
Warrants

            	
               

              $0.15

            
	 
      	 
      

    

     

    

     

     By
way of example, for every $1.00 subscribed in the Senior Secured Note (which is
convertible at the Company’s election at $.05 per share) the equivalent of $2.00
in the 8% Senior Secured Convertible Notes and Warrants will also convert at
$.05. Such Waiver and Conversion Agreement shall become effective only upon
satisfaction of the provisions set forth in Section 1.5(a) through
1.5(c).

     

    The
amounts owing to Holders under the Senior Secured Notes and Holders who are also
holders of 8% Senior Secured Convertible Notes and Warrants shall be convertible
as set forth above upon completion of all of the following:

     

    1.5(a)                      Delivery
of notice of the Company’s election to convert the amounts outstanding under the
Senior Secured Notes

     

    1.5(b)                      Evidence
of receipt of consent from 100% of the lenders in the 8% Senior Secured
Convertible Notes and Warrants to waive all price protection provisions as set
forth in both the 8% Senior Secured Convertible Notes and Warrants

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

       

    

    1.5(c)                      Evidence
of receipt of conversion notices for at least 75% of all 8% Senior Secured
Convertible Notes

     

    6.            Effective
on the Effective Date, Section 3.7 of the Senior Secured Note, as amended by the
First Amendment, shall be deleted and replaced in its entirety with the
following:

     

    3.7          Board
Composition.  Within 10 days of the earlier of (i) completion
of receipt of subscriptions for $3,000,000 of Senior Secured Notes, including
amounts already funded under the Senior Secured Notes or (ii) July 31, 2009, the
Company shall take all actions necessary and within its authority under the
Company’s existing corporate bylaws to reduce the number of current members of
its Board of Directors to  five (5), until which time  one
(1) member is appointed by majority vote of the Holders of Senior Secured
Notes,  after which the Company will reduce the number of existing
members to four so as to have a total board membership of five. In the event
that the Company is unable to satisfy this condition within the time period
stipulated due to circumstances beyond the Company’s control, including but not
limited to requirements set forth in the Company’s corporate bylaws, it shall
proceed with the fulfillment of this condition at the earliest possible
time.

     

    7.           Conditions
Precedent.  The satisfaction of the following shall be
conditions precedent to the effectiveness of this Amendment:

     

    7.1         Amendment.  Lender
shall have received this Amendment, duly executed by Borrower.

     

    8.           Full Force and
Effect.  Except as amended hereby, the Senior Note Documents
shall remain unaltered and in full force and effect.

     

    9.           Counterparts.  This
First Amendment may be executed in multiple counterparts, each of which shall
constitute an original and all of which, taken together, shall constitute but
one and the same instrument.

     

    10.         Governing
Law.  This First Amendment shall be governed by, and construed
in accordance with, the laws of the State of New York.

     

    

     

    IN
WITNESS WHEREOF, the parties hereto have executed this Second Amendment by their
respective duly authorized officers as of the date first above
written.

    

     

    
      
        
          
            
              
                
                  
                    
                      
                        
                          
                            
                              
                                
                                  
                                    
                                      
                                        
                                          
                                            
                                              
                                                
                                                  	
                                                        	
                                                          “COMPANY”

                                                        	 
	 	 	 
	 	ADVANCE
      NANOTECH INC, a Delaware corporation	 
	 	 	 	 
	
                                                           

                                                        	
                                                          By:
      

                                                        	/s/ Thomas P.
      Finn	 
	 	Name: 	Thomas P.
    Finn	 
	 	Its:	Chief
      Financial Officer	 
	 	 	 	 
	 	 	 	 
	 	“HOLDER” 	 
	 	 	 	 
	 	{                 }	 
	 	 	 	 
	 	 	 	 
	 	By:   	/s/
      Kevin McGrath	 
	 	Name:   	Kevin
      McGrath	 
	 	 	 	 
	 	Ingalls
      & Snyder LLC	 
	 	 	 	 
	 	By: 	/s/
      Thomas O. Boucher	 
	 	Name:  	Thomas
      O. Boucher	 
	 	Its:  	Manager	 

                                                

                                              

                                            

                                          

                                        

                                      

                                    

                                  

                                

                              

                            

                          

                        

                      

                    

                  

                

              

            

          

        

      

    

     

    3ex10-3.htm

    Exhibit
10.3

     

    THIRD
AMENDMENT TO SENIOR SECURED NOTES AND SUBSCRIPTION AGREEMENT

     

               This
THIRD AMENDMENT TO SENIOR SECURED NOTES AND SUBSCRIPTION AGREEMENT (this “Amendment”),
dated as of September 18, 2009, is by and among Advance Nanotech, Inc., a
Delaware corporation (the “Company”), and the holder of Notes listed on the
signature page hereto (the “Holder”).

     

    W
I T N E S S E T H

     

               A.           Company
and Holder have entered into a Senior Secured Note dated as of September 18,
2009 (the “Note”) and a Subscription Agreement dated as of April 9, 2009 (the
“Subscription Agreement”), as each has been amended by that certain First
Amendment to Senior Secured Notes and Subscription Agreement, dated as of June
15, 2009 (“First
Amendment”), and that certain Second Amendment to Senior Secured Notes and
Subscription Agreement, dated as of June 24, 2009 (“Second Amendment”) (as each
of the same may hereafter be amended, modified, extended and/or restated from
time to time, collectively, the “Senior Note Agreements”).

     

               B.           Company
has requested that Holder modify the Senior Note Agreements to extend the
Maturity Date and provide that interest on the Note may be payable in shares of
common stock of Company’s subsidiary, Owlstone Nanotech Inc., a Delaware
corporation (“Owlstone”), and Holder has requested that Owlstone grant a
security interest in additional collateral for the benefit of the
Holder.

     

               C.           Company
and Holder have agreed to amend the Senior Note Agreements as set forth below
and in connection with the execution and delivery of this
Amendment.

     

               NOW,
THEREFORE, in consideration of the premises and the agreements, conditions and
covenants contained herein and other good and valuable consideration the receipt
and sufficiency of which is hereby acknowledged, the parties hereto hereby agree
as follows:

     

    
      	
              1.

            	
              Defined
      Terms.  All capitalized terms used but not defined herein
      shall have the meanings set forth therefor in the Senior
      Agreements.

            

    

     

    
      	
              2.

            	
              Amendment.

            

    

     

    
      	
               
      

            	
              a.

            	
              Paragraph
      1 of the Note is hereby amended by substituting the following for the
      Maturity Date of “August 31, 2009” appearing therein:  “October
      15, 2009”; provided, however, that if, prior to October 15, 2009, (A) the
      holders of all outstanding Senior Secured Convertible Notes issued by
      Company during the calendar years 2007 and 2008 (the “Prior Notes”) shall
      have executed and delivered to Company a waiver (the “Waiver”) to (i) give
      up all rights with respect to the price protection anti-dilution
      provisions in the Prior Notes and the warrants issued with the Prior Notes
      and (ii) modify the mandatory conversion provision of the Prior Notes to
      provide for mandatory conversion thereof upon the conversion of the Senior
      Secured Note, or (B) the Company closes on a capital investment of at
      least 1,000,000 dollars, then such Maturity Date shall be amended to be
      “November 15, 2009”.

            

    

     

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

       

    

    
      	
               
      

            	
              b.

            	
              Option
      1 and Option 2 of the Subscription Agreement are hereby amended by
      substituting the following for the Maturity Date of “August 31, 2009”
      appearing therein:  “October 15, 2009”; provided, however, that
      if, prior to October 15, 2009, (A) the holders of all Prior Notes shall
      have executed a Waiver, or (B) the Company closes on a capital
      investment of at least 1,000,000 dollars, then such Maturity Date shall be
      amended to be “November 15,
      2009”.

            

    

     

    
      	
               
      

            	
              c.

            	
              Section
      1.2(b) of the Note is hereby amended and restated in its entirety as
      follows:

            

    

     

                          (b)           All
accrued interest will be payable in shares of common stock, par value
$0.001 per share, of Owlstone Nanotech, Inc., a Delaware corporation
(“Owlstone Common Stock”).  The number of shares of Owlstone Common
Stock to be issued shall be determined by dividing the aggregate accrued
interest on the Note by $0.25.

     

    
      	
               
      

            	
              d.

            	
              Section
      4 of each Note is hereby amended and restated in its entirety as
      follows:

            

    

     

               4.           Security
Interest.   This Note is secured by a first priority
security interest granted to a collateral agent for the benefit of the holders
of Notes pursuant to (i) a Pledge and Security Agreement, dated as of April 9,
2009, between the Company and the Collateral Agent and (ii) a Security
Agreement, dated as of September 18, 2009, between Owlstone and the Collateral
Agent.

     

    
      	
              3.

            	
              Amendments
      to New Subscription Documents.  On or about the date hereof,
      Holder is entering into a new subscription agreement with Company (the
      “New Subscription Agreement”) and Company is issuing a new note to Holder
      (the “New Note”), each substantially similar to the Subscription Agreement
      and Note previously executed and delivered.  Holder and Company
      hereby agree that the New Subscription Agreement and New Note shall, upon
      their execution and delivery, immediately be amended by the applicable
      provisions in the First Amendment, Second Amendment and this Amendment, in
      seriatim, as though the New Subscription Agreement and New Note were a
      “Subscription Agreement” and “Senior Secured Note” referred to therein,
      respectively.

            

    

     

    
      	
              4.

            	
              Waiver
      of Defaults.  In consideration of the issuance of the warrants
      contemplated by Section 4.c hereof, Holder hereby waives any and all
      Events of Default that exist under the Senior Note Agreements excluding
      the Company’s requirement to reduce the number of Board Members to five
      (5) people.

            

    

     

    
      	
              5.

            	
              Conditions
      Precedent.  The satisfaction of the following shall be
      conditions precedent to the effectiveness of this
    Amendment:

            

    

     

    
      	
               
      

            	
              a.

            	
              Amendment.  This
      Amendment shall have been duly executed by Holder and
    Company.

            

    

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

       

    

    
      	
               
      

            	
              b.

            	
              Security
      Agreement.  A Security Agreement shall have been duly
      executed by Owlstone and a collateral agent for the benefit of
      Holder.

            

    

     

    
      	
               
      

            	
              c.

            	
              Owlstone
      Warrants.  Owlstone shall have issued warrants to Holder
      equal to one share of Owlstone Common Stock for each $1.00 of Note held by
      Holder, which warrants shall have a per share exercise price of $0.25 and
      a term of five years.

            

    

     

    
      	
              6.

            	
              No Other
      Changes. Except as explicitly amended by this Amendment, all of the
      terms and conditions of the Senior Note Agreements shall remain in full
      force and effect.

            

    

     

    
      	
              7.

            	
              Governing
      Law.  This Amendment shall be governed by, and construed
      in accordance with, the laws of the State of New
  York.

            

    

     

    
      	
              8.

            	
              Counterparts; Multiple
      Originals.  This Amendment may be executed in any number
      of counterparts, all of which together shall constitute an agreement
      binding on each of the signatories hereto.  Each signed copy
      shall be an original, but all of them together shall represent the same
      agreement.

            

    

     

    
      	
              9.

            	
              Headings.  The
      headings of this Amendment have been inserted only for convenience to
      facilitate reference and are not intended to describe, interpret, define
      or limit the scope, extent or intent of this Amendment or any provision
      hereof.

            

    

     

    

     

    [SIGNATURE
PAGE FOLLOWS]

    

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

       

    

     

               IN WITNESS WHEREOF, Company
and Holder have signed this Amendment as of the date first set forth
above.

     

    
      
        	 	
                “COMPANY”

              	 
	 	 	 
	 	ADVANCE
      NANOTECH INC, a Delaware corporation	 
	 	 	 	 
	
                 

              	
                By:
      

              	/s/ Thomas P.
      Finn	 
	 	Name: 	Thomas P.
    Finn	 
	 	Its:	Chief
      Financial Officer	 
	 	 	 	 
	 	 	 	 
	 	“HOLDER” 	 
	 	 	 	 
	 	{                 }	 
	 	 	 	 
	 	 	 	 
	 	By:   	/s/
      Kevin McGrath	 
	 	Name:   	Kevin
      McGrath	 
	 	 	 	 
	 	Ingalls
      & Snyder LLC	 
	 	 	 	 
	 	By: 	/s/
      Thomas O. Boucher	 
	 	Name:  	Thomas
      O. Boucher	 
	 	Its:  	Manager	 

      

4

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