EXHIBIT 10.70
SECURITY AGREEMENT
This Security Agreement, made as of the 7th day of October, 2002 is entered
into by and between Laurus Master Fund, Ltd. ("Laurus") and Implant Sciences
Corporation, a Massachusetts company (the "Company") (the "Agreement").
1. To secure the payment of all Obligations (as hereafter defined), the
Company hereby grants to Laurus a continuing security interest in all of the
following property now owned or at any time hereafter acquired by the Company,
or in which the Company now has or at any time in the future may acquire any
right, title or interest (the "Collateral"): all accounts (the "Accounts"),
inventory, equipment, goods, documents, instruments (including, without
limitation, promissory notes), contract rights, general intangibles (including,
without limitation, payment intangibles), chattel paper, supporting obligations,
investment property, letter-of-credit rights, trademarks and tradestyles in
which the Company now has or hereafter may acquire any right, title or interest,
all proceeds and products thereof (including, without limitation, proceeds of
insurance) and all additions, accessions and substitutions thereto or therefor.
Terms used in this paragraph which are defined in the Uniform Commercial Code as
enacted and in effect from time to time in the State of New York (the "Code")
are used herein as so defined in the Code.
2. The term "Obligations" as used herein shall mean and include all debts,
liabilities and obligations owing by the Company to Laurus and all loans,
advances, extensions of credit, endorsements, guaranties, benefits and/or
financial accommodations heretofore or hereafter made, granted or extended by
Laurus to the Company or which Laurus has or will become obligated to make,
grant or extend to us or for the Company's account or any of its accounts and
any and all interest, charges and/or expenses heretofore or hereafter owing by
the Company to Laurus and any and all renewals or extensions of any of the
foregoing, no matter how or when arising, direct or indirect, absolute or
contingent, liquidated or unliquidated, and whether under any present or future
agreement or instruments between the Company, Laurus and any or all subsidiaries
or otherwise, including, without limitation, all obligations owing by the
Company to Laurus under the Securities Purchase Agreement of even date herewith
and related Series A Preferred Stock in the original Stated Value of $2,500,000
(as amended, modified and supplemented from time to time, the "Preferred
Stock").
3. The Company hereby warrants and covenants to Laurus that: (a) it is a
corporation validly existing, in good standing and formed under the laws of the
Commonwealth of Massachusetts and it will provide Laurus thirty days prior
written notice of any change in its state of formation; (b) it is the lawful
owner of the Collateral, and has the sole right to grant a security interest
therein and will defend the Collateral against all claims and demands of all
persons and entities; (c) it will keep the Collateral free and clear of all
attachments, levies, taxes, liens, security interests and encumbrances of every
kind and nature; (d) it will not without Laurus' prior written consent, sell,
exchange or otherwise dispose of the Collateral or any of the Company's rights
therein or permit any lien or security interest to attach to same, except that
created by this Agreement or sales of inventory or the disposition of obsolete
or worn out equipment in the ordinary course of business; (e) it will allow
Laurus and/or Laurus' representatives free access to and the right of inspection
of the Company's premises where the books and records relating to the Collateral
are located; and (f) it hereby indemnifies and saves Laurus harmless from all
loss, costs, damage, liability and/or expense, including reasonable
attorneys' fees, that Laurus may sustain or incur to enforce payment,
performance or fulfillment of any of the Obligations or in the enforcement of
this Agreement or in the prosecution or defense of any action or proceeding
either against Laurus or the Company concerning any matter growing out of or in
connection with this Agreement and/or any of the Obligations and/or any of the
Collateral.
4. Laurus agrees to terminate the security interest in the Collateral upon
the Company tendering the final payment in satisfaction of the Obligations.
Laurus agrees to join with the Company in executing termination statements and
other instruments pursuant to the Code in form satisfactory to the Company and
in executing such other documents or instruments as may be required or deemed
necessary by the Company for purposes of terminating the security interest in
the Collateral.
5. The Company shall be in default under this Agreement upon the happening
of any of the following events or conditions (each, a "Default"): (a) it shall
fail to pay when due or punctually perform any of the Obligations; (b) any
covenant, warranty, representation or statement made or furnished to Laurus by
the Company or on its behalf was false in any material respect when made or
furnished and such failure shall have a material adverse effect on the Company;
(c) it shall fail to comply with any term or provision set forth in this
Agreement and such failure (to the extent not covered by any other clause of
this Section 4) shall remain uncured for a period of two (2) business days after
the date on which Laurus notified the Company of such failure; and (d) a default
shall occur under the Preferred Stock.
6. Upon the occurrence of any Default and at any time thereafter, Laurus
may declare all Obligations immediately due and payable and Laurus shall have
the remedies of a secured party provided in the Code, this Agreement and other
applicable law. Upon the occurrence of any Default and at any time thereafter,
Laurus will have the right to take possession of the Collateral and to maintain
such possession on our premises or to remove the Collateral or any part thereof
to such other premises as you may desire, including, without limitation, the
right to contact account debtors liable in respect of the Accounts for the
purpose of engaging in collection activities with respect thereto. Upon Laurus'
request, the Company shall assemble the Collateral and make it available to
Laurus at a place designated by Laurus. If any notification of intended
disposition of any Collateral is required by law, such notification, if mailed,
shall be deemed properly and reasonably given if mailed at least ten business
days before such disposition, postage prepaid, addressed to us either at our
address shown herein or at any address appearing on Laurus' records for the
Company. Any proceeds of any disposition of any of the Collateral shall be
applied by Laurus to the payment of all expenses in connection with the sale of
the Collateral, including reasonable attorneys' fees and other legal expenses
and disbursements and the reasonable expense of retaking, holding, preparing for
sale, selling, and the like, and any balance of such proceeds may be applied by
Laurus toward the payment of the Obligations in such order of application as
Laurus may elect, and the Company shall be liable for any deficiency.
7. If the Company defaults in the performance or fulfillment of any of the
terms, conditions, promises, covenants, provisions or warranties on our part to
be performed or fulfilled under or pursuant to this Agreement, Laurus may, at
its sole option without waiving its right to enforce this Agreement according to
its terms, immediately or at any time thereafter and without
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notice to the Company, perform or fulfill the same or cause the performance or
fulfillment of the same for the Company's account and at its sole cost and
expense, and the cost and expense thereof (including reasonable attorneys' fees)
shall be added to the Obligations and shall be payable on demand with interest
thereon at the highest rate permitted by law.
8. The Company appoints Laurus, any of its officers, employees or any other
person or entity whom Laurus may designate as the Company's attorney, with power
to execute such documents in its behalf and to supply any omitted information
and correct patent errors in any documents executed by the Company or on its
behalf; to file financing statements against the Company covering the
Collateral; to sign the Company's name on public records; and to do all other
things Laurus deem necessary to carry out this Agreement. The Company hereby
ratifies and approves all acts of the attorney and neither Laurus nor the
attorney will be liable for any acts of commission or omission, nor for any
error of judgment or mistake of fact or law. This power being coupled with an
interest, is irrevocable so long as any Obligations remains unpaid.
9. No delay or failure on Laurus' part in exercising any right, privilege
or option hereunder shall operate as a waiver of such or of any other right,
privilege, remedy or option, and no waiver whatever shall be valid unless in
writing, signed by Laurus and then only to the extent therein set forth, and no
waiver by Laurus of any default shall operate as a waiver of any other default
or of the same default on a future occasion. Laurus' books and records
containing entries with respect to the Obligations shall be admissible in
evidence in any action or proceeding, shall be binding upon the Company for the
purpose of establishing the items therein set forth and shall constitute prima
facie proof thereof. Laurus shall have the right to enforce any one or more of
the remedies available to Laurus, successively, alternately or concurrently. The
Company agrees to join with Laurus in executing financing statements or other
instruments pursuant to the Code in form satisfactory to Laurus and in executing
such other documents or instruments as may be required or deemed necessary by
Laurus for purposes of affecting or continuing Laurus' security interest in the
Collateral.
10. This Agreement shall be governed by and construed in accordance with
the laws of the State of New York and cannot be terminated orally. All of the
rights, remedies, options, privileges and elections given to Laurus hereunder
shall enure to the benefit of its successors and assigns. The term "Laurus" as
herein used shall include Laurus, any parent of Laurus, any of Laurus'
subsidiaries and any co-subsidiaries of its parent, whether now existing or
hereafter created or acquired, and all of the terms, conditions, promises,
covenants, provisions and warranties of this Agreement shall enure to the
benefit of and shall bind the representatives, successors and assigns of each of
the Company and them. Laurus and the Company hereby (a) waive any and all right
to trial by jury in litigation relating to this Agreement and the Company agrees
not to assert any counterclaim in such litigation, (b) submit to the
nonexclusive jurisdiction of the state and federal courts located in the State
of New York and (c) waive any objection Laurus or the Company may have as to the
bringing or maintaining of such action with any such court.
11. All notices and other communications hereunder shall be deemed given
three (3) business days after delivered or deposited in the mails, first class
postage prepaid (provided, however, that notices given by telegram, telex or
telefax shall be deemed given when dispatched
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by telegram, telex or telefax, as the case may be) and if to (a) the Company
addressed as set forth beneath the Company's name on the signature page unless
the Company shall give notice in writing of a different address or telefax
number in the manner provided herein, with a copy to ▇▇▇▇▇ ▇▇▇▇ LLP ▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq. and (b) Laurus,
at the address set forth for Laurus on the last page of this Agreement unless
Laurus shall give the Company notice in writing of a different address.
12. No amendment, modification, termination, or waiver of any provision of
this Agreement shall be effective unless the same shall be in writing and signed
by Laurus, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.
13. No course of dealing between Laurus and the Company, nor any failure or
delay on Laurus' part in exercising any right, power, or remedy under this
Agreement shall operate as a waiver thereof; nor shall any single or partial
exercise of any such right, power, or remedy preclude any other or further
exercise thereof or the exercise of any other right, power, or remedy under this
Agreement. The rights and remedies provided in this Agreement and the Preferred
Stock are cumulative, and are not exclusive of any other rights, powers,
privileges, or remedies, now or hereafter existing, at law or in equity or
otherwise. The Company hereby waives in favor of Laurus all suretyship defenses
and waives notice of (a) acceptance hereof and of all notices and demands of any
kind to which the Company may be entitled and (b) presentment to or demand of
payment from anyone whomsoever liable upon the Accounts or the Obligations,
protest, notices of presentment, non-payment or protest and notice of any sale
of the Collateral or any default of any sort. The Company further waives all of
the Company's rights of subrogation, reimbursement, indemnity, exoneration,
contribution or any other claim which any of the Company or Laurus may now or
hereafter have against any party liable for the Obligations.
14. Any provision of this Agreement which is prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions of this Agreement or affecting the validity or enforceability of such
provision in any other jurisdiction. In no event shall any payments hereunder
(if deemed interest under applicable law or regulation) exceed the maximum rate
permitted under applicable law or regulation. If any provision of this Agreement
is in contravention of any such law or regulation, then such provision shall be
deemed amended to provide for interest at said maximum rate and any excess
amount shall be applied to the Obligations in such order as Laurus shall elect.
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IMPLANT SCIENCES CORPORATION
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President
Address: ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, #▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
LAURUS MASTER FUND, LTD.
By: /s/ ▇▇▇▇▇ Grin
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Name: ▇▇▇▇▇ Grin
Title: Director
Address: c/o Ironshore Corporate Services, Ltd.
▇.▇. ▇▇▇ ▇▇▇▇ G.T.
Queensgate House
South Church Street
Grand Cayman, Cayman Islands
[Security Agreement Signature Page]
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