IMPLANT SCIENCES CORPORATION AND CERTAIN OF ITS SUBSIDIARIES MASTER SECURITY AGREEMENT
IMPLANT
SCIENCES CORPORATION AND CERTAIN OF ITS SUBSIDIARIES
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To:
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Laurus
Master Fund, Ltd.
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c/o
M&C
Corporate Services Limited
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House
South
Church
Street
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Town
Grand
Cayman,
Cayman Islands
Date:
December 29, 2006
To
Whom
It May Concern:
1. To
secure
the payment of all Obligations (as hereafter defined), Implant Sciences
Corporation a Massachusetts corporation (the “Company”), each other entity party
hereto and each other entity that is required to enter into this Master Security
Agreement (each an “Assignor” and, collectively, the “Assignors”) hereby assigns
and grants to Laurus a continuing security interest in all of the following
property now owned or at any time hereafter acquired by such Assignor, or in
which such Assignor now has or at any time in the future may acquire any right,
title or interest (the “Collateral”): all cash, cash equivalents, accounts,
accounts receivable, deposit accounts, inventory, equipment, goods, fixtures,
documents, instruments (including, without limitation, promissory notes),
contract rights, general intangibles (including, without limitation, payment
intangibles and an absolute right to license on terms no less favorable than
those current in effect among such Assignor’s affiliates), chattel paper,
supporting obligations, investment property (including, without limitation,
all
partnership interests, limited liability company membership interests and all
other equity interests owned by any Assignor), letter-of-credit rights,
trademarks, trademark applications, tradestyles, patents, patent applications,
copyrights, copyright applications and other intellectual property in which
such
Assignor 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.
In the event any Assignor wishes to finance the acquisition in the ordinary
course of business of any hereafter acquired equipment and has obtained a
written commitment from an unrelated third party financing source to finance
such equipment, Laurus shall release its security interest on such hereafter
acquired equipment so financed by such third party financing source. Except
as
otherwise defined herein, all capitalized terms used herein shall have the
meanings provided such terms in the Securities Purchase Agreement referred
to
below.
2. The
term
“Obligations” as used herein shall mean and include all debts, liabilities and
obligations owing by each Assignor to Laurus arising under, out of, or in
connection with: (i) that certain Securities Purchase Agreement dated as of
the
date hereof by and between the Company and Laurus (the “Securities Purchase
Agreement”) and (ii) the Related Agreements referred to in the Securities
Purchase Agreement (the Securities Purchase Agreement and each Related Agreement
as each may be amended, modified, restated or supplemented from time to time,
collectively, the “Documents”), and in connection with any documents,
instruments or agreements relating to or executed in connection with the
Documents or any documents, instruments or agreements referred to therein or
otherwise, and in connection with any other indebtedness, obligations or
liabilities of each such Assignor to Laurus, whether now existing or hereafter
arising, direct or indirect, liquidated or unliquidated, absolute or contingent,
due or not due and whether under, pursuant to or evidenced by a note, agreement,
guaranty, instrument or otherwise, including, without limitation, obligations
and liabilities of each Assignor for post-petition interest, fees, costs and
charges that accrue after the commencement of any case by or against such
Assignor under any bankruptcy, insolvency, reorganization or like proceeding
(collectively, the “Debtor Relief Laws”) in each case, irrespective of the
genuineness, validity, regularity or enforceability of such Obligations, or
of
any instrument evidencing any of the Obligations or of any collateral therefor
or of the existence or extent of such collateral, and irrespective of the
allowability, allowance or disallowance of any or all of the Obligations in
any
case commenced by or against any Assignor under any Debtor Relief
Law.
3. Each
Assignor hereby jointly and severally represents, warrants and covenants to
Laurus that:
(a) it
is a
corporation, partnership or limited liability company, as the case may be,
validly existing, in good standing and formed under the respective laws of
its
jurisdiction of formation set forth on Schedule A, and each Assignor will
provide Laurus thirty (30) days’ prior written notice of any change in any of
its respective jurisdiction of formation;
(b) its
legal
name is as set forth in its Certificate of Incorporation or other organizational
document (as applicable) as amended through the date hereof and as set forth
on
Schedule A, and it will provide Laurus thirty (30) days’ prior written notice of
any change in its legal name;
(c) its
organizational identification number (if applicable) is as set forth on Schedule
A hereto, and it will provide Laurus thirty (30) days’ prior written notice of
any change in its organizational identification number;
(d) it
is the
lawful owner of its Collateral and it 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;
(e) it
will
keep its Collateral free and clear of all attachments, levies, taxes, liens,
security interests and encumbrances of every kind and nature (“Encumbrances”),
except (i) Encumbrances securing the Obligations and (ii) Encumbrances securing
indebtedness of each such Assignor not to exceed $50,000 in the aggregate for
all such Assignors so long as all such Encumbrances are removed or otherwise
released to Laurus’ satisfaction within ten (10) days of the creation
thereof;
or (ii)
indebtedness of an Assignor to each of Bridge Bank and Comerica Bank as set
forth on Schedule 3(e) attached hereto;
(f) it
will,
at its and the other Assignors’ joint and several cost and expense keep the
Collateral in good state of repair (ordinary wear and tear excepted) and will
not waste or destroy the same or any part thereof other than ordinary course
discarding of items no longer used or useful in its or such other Assignors’
business;
(g) it
will
not, without Laurus’ prior written consent, sell, exchange, lease or otherwise
dispose of any Collateral, whether by sale, lease or otherwise, except for
the
sale of inventory in the ordinary course of business and for the disposition
or
transfer in the ordinary course of business during any fiscal year of obsolete
and worn-out equipment or equipment no longer necessary for its ongoing needs,
having an aggregate fair market value of not more than $75,000 and only to
the
extent that:
(i) the
proceeds of each such disposition are used to acquire replacement Collateral
which is subject to Laurus’ second priority perfected security interest, or are
used to repay the Obligations or to pay general corporate expenses;
or
(ii) following
the occurrence of an Event of Default which continues to exist the proceeds
of
which are remitted to Laurus to be held as cash collateral for the
Obligations;
(h) it
will
insure or cause the Collateral to be insured in Laurus’ name (as an additional
insured and loss payee) against loss or damage by fire, theft, burglary,
pilferage, loss in transit and such other hazards as Laurus shall specify in
amounts and under policies by insurers acceptable to Laurus and all premiums
thereon shall be paid by such Assignor and the policies delivered to Laurus.
If
any such Assignor fails to do so, Laurus may procure such insurance and the
cost
thereof shall be promptly reimbursed by the Assignors, jointly and severally,
and shall constitute Obligations;
(i) it
will
at all reasonable times allow Laurus or Laurus’ representatives free access to
and the right of inspection of the Collateral;
(j) such
Assignor (jointly and severally with each other Assignor) 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 and/or
in
the enforcement of this Master Security Agreement or in the prosecution or
defense of any action or proceeding either against Laurus or any Assignor
concerning any matter growing out of or in connection with this Master Security
Agreement, and/or any of the Obligations and/or any of the Collateral except
to
the extent caused by Laurus’ own gross negligence or willful misconduct (as
determined by a court of competent jurisdiction in a final and nonappealable
decision).
4. The
occurrence of any of the following events or conditions shall constitute an
“Event of Default” under this Master Security Agreement:
(a) any
covenant or any other term or condition of this Master Security Agreement is
breached in any material respect and such breach, to the extent subject to
cure,
shall continue without remedy for a period of fifteen (15) days after the
occurrence thereof;
(b) any
representation or warranty, or statement made or furnished to Laurus under
this
Master Security Agreement by any Assignor or on any Assignor’s behalf should
prove to any time be false or misleading in any material respect on the date
as
of which made or deemed made;
(c) the
loss,
theft, substantial damage, destruction, sale or encumbrance to or of any of
the
Collateral or the making of any levy, seizure or attachment thereof or thereon
except to the extent:
(i) such
loss
is covered by insurance proceeds which are used to replace the item or repay
Laurus; or
(ii) said
levy, seizure or attachment does not secure indebtedness in excess of $100,000
in the aggregate for all Assignors and such levy, seizure or attachment has
been
removed or otherwise released within ten (10) days of the creation or the
assertion thereof;
(d) an
Event
of Default shall have occurred under and as defined in any
Document.
5. Upon
the
occurrence of any Event of 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 Uniform Commercial Code as in effect
in the State of New York, this Agreement and other applicable law. Upon the
occurrence of any Event of Default and at any time thereafter, Laurus will
have
the right to take possession of the Collateral and to maintain such possession
on any Assignor’s premises or to remove the Collateral or any part thereof to
such other premises as Laurus may desire. Upon Laurus’ request, each Assignor
shall assemble or cause the Collateral to be assembled 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 (10) days
before such disposition, postage prepaid, addressed to the applicable Assignor
either at such Assignor’s address shown herein or at any address appearing on
Laurus’ records for such Assignor. 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 expenses 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 each Assignor shall be liable
for any deficiency. For the avoidance of doubt, following the occurrence and
during the continuance of an Event of Default, Laurus shall have the immediate
right to withdraw any and all monies contained in any deposit account in the
name of any Assignor and controlled by Laurus and apply same to the repayment
of
the Obligations (in such order of application as Laurus may elect).
6. If
any
Assignor defaults in the performance or fulfillment of any of the terms,
conditions, promises, covenants, provisions or warranties on such Assignor’s
part to be performed or fulfilled under or pursuant to this Master Security
Agreement, Laurus may, at its option without waiving its right to enforce this
Master Security Agreement according to its terms, immediately or at any time
thereafter and without notice to any Assignor, perform or fulfill the same
or
cause the performance or fulfillment of the same for each Assignor’s joint and
several account and at each Assignor’s joint and several 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, or, at Laurus’ option, debited by Laurus from
any other deposit accounts in the name of any Assignor and controlled by
Laurus.
7. With
effect solely upon the occurrence and during the continuance of an Event of
Default beyond any applicable grace period, each Assignor appoints Laurus,
any
of Laurus’ officers, employees or any other person or entity whom Laurus may
designate as such Assignor’s attorney, with power to execute such documents in
each such Assignor’s behalf and to supply any omitted information and correct
patent errors in any documents executed by any Assignor or on any Assignor’s
behalf; to file financing statements against such Assignor covering the
Collateral (and, in connection with the filing of any such financing statements,
describe the Collateral as “all assets and all personal property, whether now
owned and/or hereafter acquired” (or any substantially similar variation
thereof)); to sign such Assignor’s name on public records; and to do all other
things Laurus deem necessary to carry out this Master Security Agreement. Each
Assignor 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 other than gross
negligence or willful misconduct (as determined by a court of competent
jurisdiction in a final and non-appealable decision). This power being coupled
with an interest, is irrevocable so long as any Obligations remains unpaid.
8. 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 each Assignor for the purpose of establishing
the items therein set forth and shall constitute prima facie proof thereof,
absent manifest error. Laurus shall have the right to enforce any one or more
of
the remedies available to Laurus, successively, alternately or concurrently.
Each Assignor agrees to join with Laurus in executing such documents or other
instruments to the extent required by the Uniform Commercial 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.
9. THIS
MASTER SECURITY AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE
AND PERFORMED IN SUCH STATE, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.
All of the rights, remedies, options, privileges and elections given to Laurus
hereunder shall inure to the benefit of Laurus’ 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 Laurus’ parent, whether now
existing or hereafter created or acquired, and all of the terms, conditions,
promises, covenants, provisions and warranties of this Agreement shall inure
to
the benefit of each of the foregoing, and shall bind the representatives,
successors and assigns of each Assignor.
10. Each
Assignor hereby consents and agrees that the state of federal courts located
in
the County of New York, State of New York shall have exclusive jurisdiction
to
hear and determine any claims or disputes between Assignor, on the one hand,
and
Laurus, on the other hand, pertaining to this Master Security Agreement or
to
any matter arising out of or related to this Master Security Agreement,
provided, that Laurus and each Assignor acknowledges that any appeals from
those
courts may have to be heard by a court located outside of the County of New
York, State of New York, and further provided, that nothing in this Master
Security Agreement shall be deemed or operate to preclude Laurus from bringing
suit or taking other legal action in any other jurisdiction to collect, the
Obligations, to realize on the Collateral or any other security for the
Obligations, or to enforce a judgment or other court order in favor of Laurus.
Each Assignor expressly submits and consents in advance to such jurisdiction
in
any action or suit commenced in any such court, and each Assignor hereby waives
any objection which it may have based upon lack of personal jurisdiction,
improper venue or forum non conveniens.
Each
Assignor hereby waives personal service of the summons, complaint and other
process issues in any such action or suit and agrees that service of such
summons, complaint and other process may be made by registered or certified
mail
addressed to such assignor at the address set forth on the signature lines
hereto and that service so made shall be deemed completed upon the earlier
of
such Assignor’s actual receipt thereof or three (3) days after deposit in the
U.S. mails, proper postage prepaid.
The
parties desire that their disputes be resolved by a judge applying such
applicable laws. Therefore, to achieve the best combination of the benefits
of
the judicial system and of arbitration, the parties hereto waive all rights
to
trial by jury in any action, suite, or proceeding brought to resolve any
dispute, whether arising in contract, tort, or otherwise between Laurus, and/or
any Assignor arising out of, connected with, related or incidental to the
relationship established between them in connection with this Master Security
Agreement or the transactions related hereto.
11. It
is
understood and agreed that any person or entity that desires to become an
Assignor hereunder, or is required to execute a counterpart of this Master
Security Agreement after the date hereof pursuant to the requirements of any
Document, shall become an Assignor hereunder by (x) executing a Joinder
Agreement in form and substance satisfactory to Laurus, (y) delivering
supplements to such exhibits and annexes to such Documents as Laurus shall
reasonably request and (z) taking all actions as specified in this Master
Security Agreement as would have been taken by such Assignor had it been an
original party to this Master Security Agreement, in each case with all
documents required above to be delivered to Laurus and with all documents and
actions required above to be taken to the reasonable satisfaction of
Laurus.
12. All
notices from Laurus to any Assignor shall be sufficiently given if mailed or
delivered to such Assignor’s address set forth below.
Very
truly yours,
IMPLANT
SCIENCES CORPORATION
By:
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇
Name:
▇▇▇▇▇
▇.
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Title:
VP
and
CFO
Address: ▇▇▇
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▇▇▇▇▇▇▇▇▇,
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C
ACQUISITION CORPORATION
By:
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇
Name:
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▇.
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Title:
Treasurer
Address:
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▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
ACCUREL
SYSTEMS INTERNATIONAL CORPORATION
By:
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇
Name:
▇▇▇▇▇
▇.
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Title:
Treasurer
Address:
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
ACKNOWLEDGED:
LAURUS
MASTER FUND, LTD.
By:
Name:
Title
Exhibit
10.6 Form of Master Security Agreement.doc
SCHEDULE
A
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Entity
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Jurisdiction
of
Formation
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Organization
Identification Number
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C
Acquisition Corporation
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Delaware
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Accurel
Systems International Corporation
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California
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Schedule
3(e)
Term
Note
with Comerica Bank in the amount of approximately $1.3 million
Line
of
Credit with Bridge Bank in the amount of $5.0 million