IMPLANT SCIENCES CORPORATION ACCUREL SYSTEMS INTERNATIONAL CORPORATION BRIDGE BANK, N.A. AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
IMPLANT
SCIENCES CORPORATION
ACCUREL
SYSTEMS INTERNATIONAL CORPORATION
C
ACQUISITION CORP.
BRIDGE
BANK, N.A.
AMENDED
AND RESTATED
This
Amended
and Restated Loan And Security Agreement
is
entered into as of January 3, 2007, by and between Bridge
Bank, N.A.
(“Bank”)
and Implant
Sciences Corporation,
a
Massachusetts corporation (“Implant”), Accurel
Systems International Corporation,
a
California corporation (“Accurel”), and C
Acquisition Corp.
a
Delaware corporation (“Acquisition”) (each of Implant, Accurel and Acquisition
are individually referred to herein as a “Borrower” and collectively, the
“Borrowers”).
Recitals
Borrowers
wish to obtain credit from time to time from Bank, and Bank desires to extend
credit to Borrowers.
Bank,
Implant and Acquisition are parties to that Business Financing Agreement dated
as of June 1, 2005 as amended from time to time (the “Original Agreement”). The
parties wish to amend and restate the terms of the Original Agreement. This
Agreement sets forth the terms on which Bank will advance credit to Borrowers,
and Borrowers will repay the amounts owing to Bank.
Agreement
The
parties agree as follows:
1. Definitions
and Construction.
1.1 Definitions.
As used
in this Agreement, the following terms shall have the following
definitions:
“Accounts”
means all presently existing and hereafter arising accounts, contract rights,
payment intangibles, and all other forms of obligations owing to a Borrower
arising out of the sale or lease of goods (including, without limitation, the
licensing of software and other technology) or the rendering of services by
a
Borrower, whether or not earned by performance, and any and all credit
insurance, guaranties, and other security therefor, as well as all merchandise
returned to or reclaimed by a Borrower and Borrower’s Books relating to any of
the foregoing.
“Advance”
or “Advances” means a cash advance or cash advances under the Revolving
Facility.
“Affiliate”
means, with respect to any Person, any Person that owns or controls directly
or
indirectly such Person, any Person that controls or is controlled by or is
under
common control with such Person, and each of such Person’s senior executive
officers, directors, and partners.
“Bank
Expenses” means all: reasonable costs or expenses (including reasonable
attorneys’ fees and expenses) incurred in connection with the preparation,
negotiation, administration, and enforcement of the Loan Documents; reasonable
Collateral audit fees; and Bank’s reasonable attorneys’ fees and expenses
incurred in amending, enforcing or defending the Loan Documents (including
fees
and expenses of appeal), incurred before, during and after an Insolvency
Proceeding, whether or not suit is brought.
“Borrower’s
Books” means all of Borrowers’ books and records including: ledgers; records
concerning a Borrower’s assets or liabilities, the Collateral, business
operations or financial condition; and all computer programs, or tape files,
and
the equipment, containing such information.
“Borrowing
Base” means an amount equal to eighty percent (80%) of Eligible Accounts
plus,
an
amount equal to the lesser of $1,000,000 or forty percent (40%) of Eligible
Inventory (valued at the lower of cost or wholesale fair market value), as
determined by Bank with reference to the most recent Borrowing Base Certificate
delivered by Borrowers.
“Business
Day” means any day that is not a Saturday, Sunday, or other day on which banks
in the State of California are authorized or required to close.
“Change
in Control” shall mean a transaction in which any “person” or “group” (within
the meaning of Section 13(d) and 14(d)(2) of the Securities Exchange Act of
1934) becomes the “beneficial owner” (as defined in Rule 13d-3 under the
Securities Exchange Act of 1934), directly or indirectly, of a sufficient number
of shares of all classes of stock then outstanding of a Borrower ordinarily
entitled to vote in the election of directors, empowering such “person” or
“group” to elect a majority of the Board of Directors of a Borrower, who did not
have such power before such transaction.
“Closing
Date” means the date of this Agreement.
“Code”
means the California Uniform Commercial Code, as amended or supplemented from
time to time.
“Collateral”
means all personal property of Borrower whether presently existing or hereafter
created or acquired, and wherever located, including, but not limited
to:
(a)
all
accounts (including health-care-insurance receivables), chattel paper (including
tangible and electronic chattel paper), deposit accounts, documents (including
negotiable documents), equipment (including all accessions and additions
thereto), general intangibles (including payment intangibles and software),
intellectual property, copyrights, trademarks, patents, goodwill, goods
(including fixtures), instruments (including promissory notes), inventory
(including all goods held for sale or lease or to be furnished under a contract
of service, and including returns and repossessions), investment property
(including securities and securities entitlements), letter of credit rights,
money, and all of Borrower’s books and records with respect to any of the
foregoing, and the computers and equipment containing said books and records;
and
(b)
any
and
all cash proceeds and/or noncash proceeds of any of the foregoing, including,
without limitation, insurance proceeds, and all supporting obligations and
the
security therefor or for any right to payment. All terms above have the meanings
given to them in the Code.
“Contingent
Obligation” means, as applied to any Person, any direct or indirect liability,
contingent or otherwise, of that Person with respect to (i) any
indebtedness, lease, dividend, letter of credit or other obligation of another;
(ii) any obligations with respect to undrawn letters of credit, corporate
credit cards, or merchant services issued or provided for the account of that
Person; and (iii) all obligations arising under any agreement or
arrangement designed to protect such Person against fluctuation in interest
rates, currency exchange rates or commodity prices; provided, however, that
the
term “Contingent Obligation” shall not include endorsements for collection or
deposit in the ordinary course of business. The amount of any Contingent
Obligation shall be deemed to be an amount equal to the stated or determined
amount of the primary obligation in respect of which such Contingent Obligation
is made or, if not stated or determinable, the maximum reasonably anticipated
liability in respect thereof as determined by Bank in good faith; provided,
however, that such amount shall not in any event exceed the maximum amount
of
the obligations under the guarantee or other support arrangement.
“Copyrights”
means any and all copyright rights, copyright applications, copyright
registrations and like protections in each work or authorship and derivative
work thereof.
“Credit
Extension” means each Advance, Term Loan, Letter of Credit, or any other
extension of credit by Bank for the benefit of a Borrower
hereunder.
“Current
Assets” means, as of any applicable date, all amounts that should, in accordance
with GAAP, be included as current assets on the consolidated balance sheet
of
Borrowers and its Subsidiaries as at such date.
“Current
Liabilities” means, as of any applicable date, all amounts that should, in
accordance with GAAP, be included as current liabilities on the consolidated
balance sheet of Borrowers and its Subsidiaries, as at such date, plus, to
the
extent not already included therein, all outstanding Credit Extensions made
under this Agreement.
“Daily
Balance” means the amount of the Obligations owed at the end of a given
day.
“Eligible
Accounts” means those Accounts that arise in the ordinary course of a Borrower’s
business that comply with all of Borrowers’ representations and warranties to
Bank set forth in Section 5.4;
provided, that standards of eligibility may be fixed and revised from time
to
time by Bank in Bank’s reasonable judgment and upon notification thereof to
Borrowers in accordance with the provisions hereof. Unless otherwise agreed
to
by Bank, Eligible Accounts shall not include the following:
(a) Accounts
that the account debtor has failed to pay within ninety (90) days of invoice
date;
(b) Accounts
with respect to an account debtor, thirty-five percent (35%) of whose Accounts
the account debtor has failed to pay within ninety (90) days of invoice
date;
(c) Accounts
with respect to which the account debtor is an officer, employee, or agent
of a
Borrower;
(d) Accounts
with respect to which goods are placed on consignment, guaranteed sale, sale
or
return, sale on approval, ▇▇▇▇ and hold, or other terms by reason of which
the
payment by the account debtor may be conditional;
(e) Accounts
with respect to which the account debtor is an Affiliate of a
Borrower;
(f) Accounts
with respect to which the account debtor does not have its principal place
of
business in the United States, except for Eligible Foreign
Accounts;
(g) Accounts
with respect to which the account debtor is the United States or any department,
agency, or instrumentality of the United States, to the extent such Accounts
in
the aggregate exceed $500,000;
(h) Accounts
with respect to which a Borrower is liable to the account debtor for goods
sold
or services rendered by the account debtor to such Borrower or for deposits
or
other property of the account debtor held by such Borrower, but only to the
extent of any amounts owing to the account debtor against amounts owed to such
Borrower;
(i) Accounts
with respect to an account debtor, including Subsidiaries and Affiliates, whose
total obligations to Borrowers exceed thirty percent (30%) of all Accounts,
to
the extent such obligations exceed the aforementioned percentage, except as
approved in writing by Bank;
(j) Accounts
with respect to which the account debtor disputes liability or makes any claim
with respect thereto as to which Bank believes, in its sole discretion, that
there may be a basis for dispute (but only to the extent of the amount subject
to such dispute or claim), or is subject to any Insolvency Proceeding, or
becomes insolvent, or goes out of business; and
(k) Accounts
the collection of which Bank reasonably determines to be doubtful.
“Eligible
Foreign Accounts” means Accounts with respect to which the account debtor does
not have its principal place of business in the United States and that
(i) are supported by one or more letters of credit in an amount and of a
tenor, and issued by a financial institution, acceptable to Bank, or
(ii) that Bank reasonably approves on a case-by-case basis.
“Eligible
Inventory” means raw materials and finished goods Inventory approved by Bank
from time to time, measured at Borrowers’ cost. Unless otherwise agreed to by
Bank, the following shall not be Eligible Inventory:
(a) Perishable
goods;
(b) Consigned
Inventory;
(c) Obsolete
goods;
(d) Inventory
affected by a Borrower’s non-compliance with the Fair Labor Standards
Act;
(e) Supplies,
packaging, customized Inventory with narrow distribution channels;
(f) Work
in
progress;
(g) Inventory
related to industries that Bank determines upon notice to Borrowers from time
to
time to be undesirable; and
(h) Other
Inventory that Bank reasonably determines from time to time to be
ineligible.
“Equipment”
means all present and future machinery, equipment, tenant improvements,
furniture, fixtures, vehicles, tools, parts and attachments in which a Borrower
has any interest.
“ERISA”
means the Employee Retirement Income Security Act of 1974, as amended, and
the
regulations thereunder.
“Event
of
Default” has the meaning assigned in Article 8.
“GAAP”
means generally accepted accounting principles as in effect from time to
time.
“Indebtedness”
means (a) all indebtedness for borrowed money or the deferred purchase
price of property or services, including without limitation reimbursement and
other obligations with respect to surety bonds and letters of credit,
(b) all obligations evidenced by notes, bonds, debentures or similar
instruments, (c) all capital lease obligations and (d) all Contingent
Obligations.
“Insolvency
Proceeding” means any proceeding commenced by or against any person or entity
under any provision of the United States Bankruptcy Code, as amended, or under
any other bankruptcy or insolvency law, including assignments for the benefit
of
creditors, formal or informal moratoria, compositions, extension generally
with
its creditors, or proceedings seeking reorganization, arrangement, or other
relief.
“Intellectual
Property Collateral” means all of each Borrower’s right, title, and interest in
and to the following:
(a) Copyrights,
Trademarks and Patents;
(b) Any
and
all trade secrets, and any and all intellectual property rights in computer
software and computer software products now or hereafter existing, created,
acquired or held;
(c) Any
and
all design rights which may be available to Borrowers now or hereafter existing,
created, acquired or held;
(d) Any
and
all claims for damages by way of past, present and future infringement of any
of
the rights included above, with the right, but not the obligation, to ▇▇▇ for
and collect such damages for said use or infringement of the intellectual
property rights identified above;
(e) All
licenses or other rights to use any of the Copyrights, Patents or Trademarks,
and all license fees and royalties arising from such use to the extent permitted
by such license or rights;
(f) All
amendments, renewals and extensions of any of the Copyrights, Trademarks or
Patents; and
(g) All
proceeds and products of the foregoing, including without limitation all
payments under insurance or any indemnity or warranty payable in respect of
any
of the foregoing.
“Inventory”
means all inventory in which Borrowers have or acquire any interest, including
work in process and finished products intended for sale or lease or to be
furnished under a contract of service, of every kind and description now or
at
any time hereafter owned by or in the custody or possession, actual or
constructive, of a Borrower, including such inventory as is temporarily out
of
its custody or possession or in transit and including any returns upon any
accounts or other proceeds, including insurance proceeds, resulting from the
sale or disposition of any of the foregoing and any documents of title
representing any of the above, and Borrower’s Books relating to any of the
foregoing.
“Investment”
means any beneficial ownership of (including stock, partnership interest or
other securities) any Person, or any loan, advance or capital contribution
to
any Person.
“IRC”
means the Internal Revenue Code of 1986, as amended, and the regulations
thereunder.
“Lien”
means any mortgage, lien, deed of trust, charge, pledge, security interest
or
other encumbrance.
“Loan
Documents” means, collectively, this Agreement, any note or notes executed by
Borrowers, and any other agreement entered into in connection with this
Agreement, all as amended or extended from time to time.
“Material
Adverse Effect” means a material adverse effect on (i) the business,
operations, condition (financial or otherwise) or prospects of Borrowers and
their Subsidiaries taken as a whole or (ii) the ability of Borrowers to
repay the Obligations or otherwise perform its obligations under the Loan
Documents or (iii) the value or priority of Bank’s security interests in
the Collateral.
“Negotiable
Collateral” means all of each Borrower’s letters of credit of which such
Borrower is a beneficiary, notes, drafts, instruments, securities, documents
of
title, and chattel paper, and each Borrower’s Books relating to any of the
foregoing.
“Obligations”
means all debt, principal, interest, Bank Expenses and other amounts owed to
Bank by Borrowers pursuant to this Agreement or any other agreement, whether
absolute or contingent, due or to become due, now existing or hereafter arising,
including any interest that accrues after the commencement of an Insolvency
Proceeding and including any debt, liability, or obligation owing from Borrowers
to others that Bank may have obtained by assignment or otherwise.
“Patents”
means all patents, patent applications and like protections including without
limitation improvements, divisions, continuations, renewals, reissues,
extensions and continuations-in-part of the same.
“Periodic
Payments” means all installments or similar recurring payments that Borrowers
may now or hereafter become obligated to pay to Bank pursuant to the terms
and
provisions of any instrument, or agreement now or hereafter in existence between
Borrowers and Bank.
“Permitted
Indebtedness” means:
(a) Indebtedness
of Borrowers in favor of Bank arising under this Agreement or any other Loan
Document;
(b) Indebtedness
existing on the Closing Date and disclosed in the Schedule;
(c) Indebtedness
secured by a lien described in clause (c)
of the
defined term “Permitted Liens,” provided (i) such Indebtedness does not
exceed the lesser of the cost or fair market value of the equipment financed
with such Indebtedness and (ii) such Indebtedness does not exceed $100,000
in the aggregate at any given time;
(d) Indebtedness
owing to Laurus Master Fund; and
(e) Subordinated
Debt.
“Permitted
Investment” means:
(a) Investments
existing on the Closing Date disclosed in the Schedule; and
(b) (i) marketable
direct obligations issued or unconditionally guaranteed by the United States
of
America or any agency or any State thereof maturing within one (1) year from
the
date of acquisition thereof, (ii) commercial paper maturing no more than
one (1) year from the date of creation thereof and currently having rating
of at
least A-2 or P-2 from either Standard & Poor’s Corporation or
▇▇▇▇▇’▇ Investors Service, (iii) certificates of deposit maturing no more
than one (1) year from the date of investment therein issued by Bank and
(iv) Bank’s money market accounts.
“Permitted
Liens” means the following:
(a) Any
Liens
existing on the Closing Date and disclosed in the Schedule or arising under
this
Agreement or the other Loan Documents;
(b) Liens
for
taxes, fees, assessments or other governmental charges or levies, either not
delinquent or being contested in good faith by appropriate proceedings, provided
the same have no priority over any of Bank’s security interests;
(c) Liens
(i) upon or in any equipment which was not financed by Bank acquired or
held by Borrowers or any of their Subsidiaries to secure the purchase price
of
such equipment or indebtedness incurred solely for the purpose of financing
or
leasing the acquisition of such equipment, or (ii) existing on such
equipment at the time of its acquisition, provided that the Lien is confined
solely to the property so acquired and improvements thereon, and the proceeds
of
such equipment;
(d) Liens
upon or in any equipment acquired by or leased by Accurel from FEI Company
in an
aggregate amount not to exceed $2,000,000; and
(e) Liens
incurred in connection with the extension, renewal or refinancing of the
indebtedness secured by Liens of the type described in clauses (a) through
(c)
above, provided that any extension, renewal or replacement Lien shall be limited
to the property encumbered by the existing Lien and the principal amount of
the
indebtedness being extended, renewed or refinanced does not
increase.
“Person”
means any individual, sole proprietorship, partnership, limited liability
company, joint venture, trust, unincorporated organization, association,
corporation, institution, public benefit corporation, firm, joint stock company,
estate, entity or governmental agency.
“Prime
Rate” means the variable rate of interest, per annum, that appears in The Wall
Street Journal on the date of measurement whether or not such rate is the lowest
rate available from Bank.
“Responsible
Officer” means each of the Chief Executive Officer and the Chief Financial
Officer of each Borrower.
“Revolving
Facility” means the facility under which Borrowers may request Bank to issue
Advances, as specified in Section 2.1(a)
hereof.
“Revolving
Line” means a credit extension of up to Five Million Dollars
($5,000,000).
“Revolving
Maturity Date” means January 3, 2009.
“Schedule”
means the schedule of exceptions attached hereto and approved by Bank, if
any.
“Subordinated
Debt” means any debt incurred by a Borrower that is subordinated to the debt
owing by Borrowers to Bank on terms acceptable to Bank (and identified as being
such by Borrowers and Bank).
“Subsidiary”
means any corporation, company or partnership in which (i) any general
partnership interest or (ii) more than 50% of the stock or other units of
ownership which by the terms thereof has the ordinary voting power to elect
the
Board of Directors, managers or trustees of the entity, at the time as of which
any determination is being made, is owned by Borrower, either directly or
through an Affiliate.
“Tangible
Net Worth” means at any date as of which the amount thereof shall be determined,
the sum of the capital stock and additional paid-in capital plus retained
earnings (or minus accumulated deficit) of Borrowers and their Subsidiaries
minus intangible assets, plus Subordinated Debt, on a consolidated basis
determined in accordance with GAAP.
“Trademarks”
means any trademark and servicemark rights, whether registered or not,
applications to register and registrations of the same and like protections,
and
the entire goodwill of the business of Borrowers connected with and symbolized
by such trademarks.
1.2 Accounting
Terms.
All
accounting terms not specifically defined herein shall be construed in
accordance with GAAP and all calculations made hereunder shall be made in
accordance with GAAP. When used herein, the terms “financial statements” shall
include the notes and schedules thereto.
2. Loan
and Terms Of Payment.
2.1 Credit
Extensions.
Borrowers
promise to pay to the order of Bank, in lawful money of the United States of
America, the aggregate unpaid principal amount of all Credit Extensions made
by
Bank to Borrowers hereunder. Borrowers shall also pay interest on the unpaid
principal amount of such Credit Extensions at rates in accordance with the
terms
hereof.
(a) Revolving
Advances.
(i) Subject
to and upon the terms and conditions of this Agreement, a Borrower may request
Advances in an aggregate outstanding amount not to exceed the lesser of
(i) the Revolving Line or (ii) the Borrowing Base, minus,
in each
case, the Term Loan, the
aggregate face amount of all outstanding Letters of Credit and
the
Credit Card Exposure. Subject to the terms and conditions of this Agreement,
amounts borrowed pursuant to this Section 2.1(a)
may be
repaid and reborrowed at any time prior to the Revolving Maturity Date, at
which
time all Advances under this Section 2.1(a)
shall be
immediately due and payable. Borrowers may prepay any Advances without penalty
or premium.
(ii) Whenever
a Borrower desires an Advance, a Borrower will notify Bank by facsimile
transmission or telephone no later than 3:00 p.m. Pacific time, on the
Business Day that the Advance is to be made. Each such notification shall be
promptly confirmed by a Payment/Advance Form in substantially the form of
Exhibit A
hereto.
Bank is authorized to make Advances under this Agreement, based upon
instructions received from a Responsible Officer or a designee of a Responsible
Officer, or without instructions if in Bank’s discretion such Advances are
necessary to meet Obligations which have become due and remain unpaid. Bank
shall be entitled to rely on any telephonic notice given by a person who Bank
reasonably believes to be a Responsible Officer or a designee thereof, and
Borrowers shall indemnify and hold Bank harmless for any damages or loss
suffered by Bank as a result of such reliance. Bank will credit the amount
of
Advances made under this Section 2.1(a)
to
Borrower’s deposit account.
(b) Term
Loan.
(i) Subject
to and upon the terms and conditions of this Agreement, Bank agrees to make
a
Term Loan to Borrowers on the Closing Date in the amount up to the lesser of
(i)
$2,500,000 or (ii) the Borrowing Base (the “Term Loan”). The Term Loan includes
a refinancing of a principal amount of $1,000,000 that Bank advanced under
the
Original Agreement.
(ii) The
Term
Loan shall be payable in thirty (30) equal monthly installments of principal,
plus all accrued interest, beginning on January 10, 2007, and continuing on
the
same day of each month thereafter through June 10, 2009, at which time all
amounts owing under this Section 2.1(b)
and any
other amounts owing under this Agreement shall be immediately due and payable.
(c) Letters
of Credit.
Subject
to the terms and conditions of this Agreement, at any time prior to the
Revolving Maturity Date, Bank agrees to issue letters of credit for the account
of a Borrower (each, a “Letter of Credit” and collectively, the “Letters of
Credit”) in an aggregate outstanding face amount not to exceed the lesser of the
Revolving Line or the Borrowing Base minus,
in each
case, the Term Loan and the aggregate amount of the outstanding Advances,
provided that the aggregate face amount of all outstanding Letters of Credit
shall not exceed $500,000. All Letters of Credit shall be, in form and
substance, acceptable to Bank in its sole discretion and shall be subject to
the
terms and conditions of Bank’s form of standard application and letter of credit
agreement (the “Application”), which Borrowers hereby agree to execute. On any
drawn but unreimbursed Letter of Credit, the unreimbursed amount shall be deemed
an Advance under Section 2.1(a), but shall bear interest at a floating rate
equal to the Prime Rate plus 2.0%. At any time, and in any case by the Revolving
Maturity Date, Borrower shall secure in cash all obligations under any
outstanding Letters of Credit in an amount equal to 110% of the face amount
of
the Letters of Credit, on terms acceptable to Bank, in which case the
cash-secured Letter of Credit shall be excluded from outstanding Credit
Extensions in the calculation of availability under Section 2.1. The obligation
of Borrowers to reimburse Bank for drawings made under Letters of Credit shall
be absolute, unconditional and irrevocable, and shall be performed strictly
in
accordance with the terms of this Agreement, the Application, and such Letters
of Credit, under all circumstances whatsoever. Borrowers shall indemnify,
defend, protect, and hold Bank harmless from any loss, cost, expense or
liability, including, without limitation, reasonable attorneys’ fees, arising
out of or in connection with any Letters of Credit, except for expenses caused
by Bank’s gross negligence or willful misconduct.
2.2 Overadvances.
If the
aggregate amount of the outstanding Advances and Term Loan plus
the
aggregate face amount of all outstanding Letters of Credit and the Credit Card
Exposure exceeds the lesser of the Revolving Line or the Borrowing Base at
any
time, Borrowers shall immediately pay to Bank, in cash, the amount of such
excess.
2.3 Interest
Rates, Payments, and Calculations.
(a) Interest
Rates.
(i) Advances.
Except
as set forth in Section 2.3(b),
the
Advances shall bear interest, on the outstanding Daily Balance thereof, at
a
rate equal to one-half of one percent (0.50%) above the Prime Rate.
(ii) Term
Loan.
Except
as set forth in Section 2.3(b),
the
Term Loan shall bear interest, on the outstanding Daily Balance thereof, at
a
rate equal to one percent (1.0%) above the Prime Rate.
(b) Late
Fee; Default Rate.
If any
payment is not made on the date such payment is due, Borrowers shall pay Bank
a
late fee equal to the lesser of (i) five percent (5%) of the amount of such
unpaid amount or (ii) the maximum amount permitted to be charged under
applicable law. All Obligations shall bear interest, from and after the
occurrence and during the continuance of an Event of Default, at a rate equal
to
five (5) percentage points above the interest rate applicable immediately prior
to the occurrence of the Event of Default.
(c) Payments.
Interest hereunder shall be due and payable on the tenth calendar day of each
month during the term hereof. Bank shall, at its option, charge such interest,
all Bank Expenses, and all Periodic Payments against any of Borrowers’ deposit
accounts or against the Revolving Line, in which case those amounts shall
thereafter accrue interest at the rate then applicable hereunder. Any interest
not paid when due shall be compounded by becoming a part of the Obligations,
and
such interest shall thereafter accrue interest at the rate then applicable
hereunder. All payments shall be free and clear of any taxes, withholdings,
duties, impositions or other charges, to the end that Bank will receive the
entire amount of any Obligations payable hereunder, regardless of source of
payment.
(d) Computation.
In the
event the Prime Rate is changed from time to time hereafter, the applicable
rate
of interest hereunder shall be increased or decreased, effective as of the
day
the Prime Rate is changed, by an amount equal to such change in the Prime Rate.
All interest chargeable under the Loan Documents shall be computed on the basis
of a three hundred sixty (360) day year for the actual number of days
elapsed.
2.4 Crediting
Payments.
Prior
to the occurrence of an Event of Default, Bank shall credit a wire transfer
of
funds, check or other item of payment to such deposit account or Obligation
as
Borrowers specify. After the occurrence of an Event of Default, the receipt
by
Bank of any wire transfer of funds, check, or other item of payment shall be
immediately applied to conditionally reduce Obligations, but shall not be
considered a payment on account unless such payment is of immediately available
federal funds or unless and until such check or other item of payment is honored
when presented for payment. Notwithstanding anything to the contrary contained
herein, any wire transfer or payment received by Bank after 12:00 noon
Pacific time shall be deemed to have been received by Bank as of the opening
of
business on the immediately following Business Day. Whenever any payment to
Bank
under the Loan Documents would otherwise be due (except by reason of
acceleration) on a date that is not a Business Day, such payment shall instead
be due on the next Business Day, and additional fees or interest, as the case
may be, shall accrue and be payable for the period of such
extension.
2.5 Fees.
Borrowers shall pay to Bank the following:
(a) Facility
Fee.
On the
Closing Date, a Facility Fee equal to $37,500, which shall be nonrefundable;
and
(b) Bank
Expenses.
On the
Closing Date, all Bank Expenses incurred through the Closing Date, including
reasonable attorneys’ fees and expenses and, after the Closing Date, all Bank
Expenses, including reasonable attorneys’ fees and expenses, as and when they
are incurred by Bank.
2.6 Term.
This
Agreement shall become effective on the Closing Date and, subject to
Section 12.7,
shall
continue in full force and effect for so long as any Obligations remain
outstanding or Bank has any obligation to make Credit Extensions under this
Agreement. Notwithstanding the foregoing, Bank shall have the right to terminate
its obligation to make Credit Extensions under this Agreement immediately and
without notice upon the occurrence and during the continuance of an Event of
Default. Notwithstanding termination, Bank’s Lien on the Collateral shall remain
in effect for so long as any Obligations are outstanding.
3. Conditions
of Loans.
3.1 Conditions
Precedent to Initial Credit Extension.
The
obligation of Bank to make the initial Credit Extension is subject to the
condition precedent that Bank shall have received, in form and substance
satisfactory to Bank, the following:
(a) this
Agreement;
(b) a
certificate of the Secretary of each Borrower with respect to incumbency and
resolutions authorizing the execution and delivery of this
Agreement;
(c) an
intellectual property security agreement from each Borrower;
(d) a
warrant
to purchase stock issued by Implant;
(e) an
affirmation of subordination (Laurus Master Fund):
(f) subordination
agreement (Laurus Master Fund);
(g) blank
stock powers representing Borrowers’ interest in CardioTech International, Inc.
and CorNova;
(h) agreement
to provide insurance;
(i) instrument
of assignment;
(j) payment
of the fees and Bank Expenses then due specified in Section 2.5
hereof;
(k) current
financial statements of each Borrower;
(l) an
audit
of the Collateral, the results of which shall be satisfactory to Bank;
and
(m) such
other documents, and completion of such other matters, as Bank may reasonably
deem necessary or appropriate.
3.2 Conditions
Precedent to all Credit Extensions.
The
obligation of Bank to make each Credit Extension, including the initial Credit
Extension, is further subject to the following conditions:
(a) timely
receipt by Bank of the Payment/Advance Form as provided in
Section 2.1;
and
(b) the
representations and warranties contained in Section 5
shall be
true and correct in all material respects on and as of the date of such
Payment/Advance Form and on the effective date of each Credit Extension as
though made at and as of each such date, and no Event of Default shall have
occurred and be continuing, or would exist after giving effect to such Credit
Extension. The making of each Credit Extension shall be deemed to be a
representation and warranty by Borrower on the date of such Credit Extension
as
to the accuracy of the facts referred to in this Section 3.2.
4. Creation
of Security Interest.
4.1 Grant
of Security Interest.
Each
Borrower grants and pledges to Bank a continuing security interest in all
presently existing and hereafter acquired or arising Collateral in order to
secure prompt repayment of any and all Obligations and in order to secure prompt
performance by Borrowers of each of its covenants and duties under the Loan
Documents. Except as set forth in the Schedule, such security interest
constitutes a valid, first priority security interest in the presently existing
Collateral, and will constitute a valid, first priority security interest in
Collateral acquired after the date hereof.
4.2 Delivery
of Additional Documentation Required.
Each
Borrower shall from time to time execute and deliver to Bank, at the request
of
Bank, all Negotiable Collateral, all financing statements and other documents
that Bank may reasonably request, in form satisfactory to Bank, to perfect
and
continue the perfection of Bank’s security interests in the Collateral and in
order to fully consummate all of the transactions contemplated under the Loan
Documents.
Borrowers from time to time may deposit with Bank specific time deposit accounts
to secure specific Obligations. Borrowers authorize Bank to hold such balances
in pledge and to decline to honor any drafts thereon or any request by a
Borrower or any other Person to pay or otherwise transfer any part of such
balances for so long as the Obligations are outstanding.
4.3 Right
to Inspect.
Bank
(through any of its officers, employees, or agents) shall have the right, upon
reasonable prior notice, from time to time during Borrowers’ usual business
hours but no more than twice a year (unless an Event of Default has occurred
and
is continuing), to inspect Borrowers’ Books and to make copies thereof and to
check, test, and appraise the Collateral in order to verify Borrowers’ financial
condition or the amount, condition of, or any other matter relating to, the
Collateral.
5. Representations
and Warranties.
Each
Borrower represents and warrants as follows:
5.1 Due
Organization and Qualification.
Borrower and each Subsidiary is a corporation duly existing under the laws
of
its state of incorporation and qualified and licensed to do business in any
state in which the conduct of its business or its ownership of property requires
that it be so qualified.
5.2 Due
Authorization; No Conflict.
The
execution, delivery, and performance of the Loan Documents are within Borrower’s
powers, have been duly authorized, and are not in conflict with nor constitute
a
breach of any provision contained in Borrower’s Articles of Incorporation or
Bylaws, nor will they constitute an event of default under any material
agreement to which Borrower is a party or by which Borrower is bound. Borrower
is not in default under any material agreement to which it is a party or by
which it is bound.
5.3 No
Prior Encumbrances.
Borrower has good and marketable title to its property, free and clear of Liens,
except for Permitted Liens.
5.4 Bona
Fide Eligible Accounts.
The
Eligible Accounts are bona fide existing obligations. The property and services
giving rise to such Eligible Accounts has been delivered or rendered to the
account debtor or to the account debtor’s agent for immediate and unconditional
acceptance by the account debtor. Borrower has not received notice of actual
or
imminent Insolvency Proceeding of any account debtor that is included in any
Borrowing Base Certificate as an Eligible Account.
5.5 Merchantable
Inventory.
All
Inventory is in all material respects of good and marketable quality, free
from
all material defects, except for Inventory for which adequate reserves have
been
made.
5.6 Intellectual
Property Collateral.
Borrower is the sole owner of the Intellectual Property Collateral, except
for
non-exclusive licenses granted by Borrower to its customers in the ordinary
course of business. Each of the Patents is valid and enforceable, and no part
of
the Intellectual Property Collateral has been judged invalid or unenforceable,
in whole or in part, and no claim has been made that any part of the
Intellectual Property Collateral violates the rights of any third party. Except
as set forth in the Schedule, Borrower’s rights as a licensee of intellectual
property do not give rise to more than five percent (5%) of its gross revenue
in
any given month, including without limitation revenue derived from the sale,
licensing, rendering or disposition of any product or service. Except as set
forth in the Schedule, Borrower is not a party to, or bound by, any agreement
that restricts the grant by Borrower of a security interest in Borrower’s rights
under such agreement.
5.7 Name;
Location of Chief Executive Office.
Except
as disclosed in the Schedule, Borrower has not done business under any name
other than that specified on the signature page hereof. The chief executive
office of Borrower is located at the address indicated in
Section 10
hereof.
All
Borrower’s Inventory and Equipment is located only at the location set forth in
Section 10 hereof and at Borrower’s premises in Sunnyvale,
California.
5.8 Litigation.
Except
as set forth in the Schedule, there are no actions or proceedings pending by
or
against Borrower or any Subsidiary before any court or administrative agency
in
which an adverse decision could have a Material Adverse Effect, or a material
adverse effect on Borrower’s interest or Bank’s security interest in the
Collateral.
5.9 No
Material Adverse Change in Financial Statements.
All
consolidated and consolidating financial statements related to Borrower and
any
Subsidiary that Bank has received from Borrower fairly present in all material
respects Borrower’s financial condition as of the date thereof and Borrower’s
consolidated and consolidating results of operations for the period then ended.
There has not been a material adverse change in the consolidated or the
consolidating financial condition of Borrower since the date of the most recent
of such financial statements submitted to Bank.
5.10 Solvency,
Payment of Debts.
Borrower is solvent and able to pay its debts (including trade debts) as they
mature.
5.11 Regulatory
Compliance.
Borrower and each Subsidiary have met the minimum funding requirements of ERISA
with respect to any employee benefit plans subject to ERISA, and no event has
occurred resulting from Borrower’s failure to comply with ERISA that could
result in Borrower’s incurring any material liability. Borrower is not an
“investment company” or a company “controlled” by an “investment company” within
the meaning of the Investment Company Act of 1940. Borrower is not engaged
principally, or as one of the important activities, in the business of extending
credit for the purpose of purchasing or carrying margin stock (within the
meaning of Regulations T and U of the Board of Governors of the Federal
Reserve System). Borrower has complied with all the provisions of the Federal
Fair Labor Standards Act. Borrower has not violated any statutes, laws,
ordinances or rules applicable to it, violation of which could have a Material
Adverse Effect.
5.12 Environmental
Condition.
Except
as disclosed in the Schedule, none of Borrower’s or any Subsidiary’s properties
or assets has ever been used by Borrower or any Subsidiary or, to the best
of
Borrower’s knowledge, by previous owners or operators, in the disposal of, or to
produce, store, handle, treat, release, or transport, any hazardous waste or
hazardous substance other than in accordance with applicable law; to the best
of
Borrower’s knowledge, none of Borrower’s properties or assets has ever been
designated or identified in any manner pursuant to any environmental protection
statute as a hazardous waste or hazardous substance disposal site, or a
candidate for closure pursuant to any environmental protection statute; no
lien
arising under any environmental protection statute has attached to any revenues
or to any real or personal property owned by Borrower or any Subsidiary; and
neither Borrower nor any Subsidiary has received a summons, citation, notice,
or
directive from the Environmental Protection Agency or any other federal, state
or other governmental agency concerning any action or omission by Borrower
or
any Subsidiary resulting in the releasing, or otherwise disposing of hazardous
waste or hazardous substances into the environment.
5.13 Taxes.
Borrower and each Subsidiary have filed or caused to be filed all tax returns
required to be filed, and have paid, or have made adequate provision for the
payment of, all taxes reflected therein.
5.14 Subsidiaries.
Borrower does not own any stock, partnership interest or other equity securities
of any Person, except for Permitted Investments set forth on the
Schedule.
5.15 Government
Consents.
Borrower and each Subsidiary have obtained all material consents, approvals
and
authorizations of, made all declarations or filings with, and given all notices
to, all governmental authorities that are necessary for the continued operation
of Borrower’s business as currently conducted.
5.16 Deposit
and Investment Accounts.
Except
as disclosed on the Schedule, none of Borrower’s nor any Subsidiary’s Investment
Property is maintained or invested with a Person other than Bank.
5.17 Full
Disclosure.
No
representation, warranty or other statement made by Borrower in any certificate
or written statement furnished to Bank contains any untrue statement of a
material fact or omits to state a material fact necessary in order to make
the
statements contained in such certificates or statements not
misleading.
6. Affirmative
Covenants.
Each
Borrower shall do all of the following:
6.1 Good
Standing.
Borrower shall maintain its and each of its Subsidiaries’ corporate existence
and good standing in its jurisdiction of incorporation and maintain
qualification in each jurisdiction in which it is required under applicable
law.
Borrower shall maintain, and shall cause each of its Subsidiaries to maintain,
in force all licenses, approvals and agreements, the loss of which could have
a
Material Adverse Effect.
6.2 Government
Compliance.
Borrower shall meet, and shall cause each Subsidiary to meet, the minimum
funding requirements of ERISA with respect to any employee benefit plans subject
to ERISA. Borrower shall comply, and shall cause each Subsidiary to comply,
with
all statutes, laws, ordinances and government rules and regulations to which
it
is subject, noncompliance with which could have a Material Adverse
Effect.
6.3 Financial
Statements, Reports, Certificates.
Borrower shall deliver the following to Bank: (a) as soon as available, but
in any event within thirty (30) days after the end of each calendar month,
a
company prepared consolidated balance sheet, income, and cash flow statement
covering Borrower’s consolidated operations during such period, prepared in
accordance with GAAP, consistently applied, in a form acceptable to Bank and
certified by a Responsible Officer; (b) as soon as available, but in any
event within one hundred eighty (180) days after the end of Borrower’s fiscal
year, audited consolidated financial statements of Borrower prepared in
accordance with GAAP, consistently applied, together with an unqualified opinion
on such financial statements of an independent certified public accounting
firm
reasonably acceptable to Bank; (c) copies of all statements, reports and notices
sent or made available generally by Borrower to its security holders or to
any
holders of Subordinated Debt and, if applicable, all reports on Forms 10-K
and 10-Q filed with the Securities and Exchange Commission; (d) promptly
upon receipt of notice thereof, a report of any legal actions pending or
threatened against Borrower or any Subsidiary that could result in damages
or
costs to Borrower or any Subsidiary of Fifty Thousand Dollars ($50,000) or
more;
(e) as soon as available, but in any event within thirty (30) days prior to
fiscal year end, annual forecasts approved by the Borrower’s Board of Directors;
(f) such budgets, sales projections, operating plans or other financial
information as Bank may reasonably request from time to time;
and (g)
within ten (10) Business Days after the reasonable request of Bank, a report
signed by Borrower, in form reasonably acceptable to Bank, listing any
applications or registrations that Borrower has made or filed in respect of
any
Patents, Copyrights or Trademarks and the status of any active or pending
material United States applications or registrations, as well as any material
change in Borrower’s Intellectual Property Collateral (other than foreign
applications and registrations), including but not limited to any subsequent
ownership right of Borrower in or to any Trademark, Patent or Copyright not
specified in Exhibits A, B, and C of any Intellectual Property Security
Agreement delivered to Bank by Borrower in connection with this
Agreement.
Within
thirty (30) days after the last day of each month, Borrower shall deliver to
Bank a Borrowing Base Certificate signed by a Responsible Officer in
substantially the form of Exhibit B
hereto,
together with aged listings of accounts receivable and accounts
payable.
Borrower
shall deliver to Bank with the monthly financial statements a Compliance
Certificate signed by a Responsible Officer in substantially the form of
Exhibit C
hereto.
Bank
shall have a right from time to time hereafter to audit Borrower’s Accounts and
appraise Collateral at Borrower’s expense, provided that such audits will be
conducted no more often than every twelve (12) months unless an Event of Default
has occurred and is continuing.
6.4 Inventory;
Returns.
Borrower shall keep all Inventory in good and marketable condition, free from
all material defects except for Inventory for which adequate reserves have
been
made. Returns and allowances, if any, as between Borrower and its account
debtors shall be on the same basis and in accordance with the usual customary
practices of Borrower, as they exist at the time of the execution and delivery
of this Agreement. Borrower shall promptly notify Bank of all returns and
recoveries and of all disputes and claims, where the return, recovery, dispute
or claim involves more than One Hundred Thousand Dollars
($100,000).
6.5 Taxes.
Borrower shall make, and shall cause each Subsidiary to make, due and timely
payment or deposit of all material federal, state, and local taxes, assessments,
or contributions required of it by law, and will execute and deliver to Bank,
on
demand, appropriate certificates attesting to the payment or deposit thereof;
and Borrower will make, and will cause each Subsidiary to make, timely payment
or deposit of all material tax payments and withholding taxes required of it
by
applicable laws, including, but not limited to, those laws concerning F.I.C.A.,
F.U.T.A., state disability, and local, state, and federal income taxes, and
will, upon request, furnish Bank with proof satisfactory to Bank indicating
that
Borrower or a Subsidiary has made such payments or deposits; provided that
Borrower or a Subsidiary need not make any payment if the amount or validity
of
such payment is contested in good faith by appropriate proceedings and is
reserved against (to the extent required by GAAP) by Borrower.
6.6 Insurance.
(a) Borrower,
at its expense, shall keep the Collateral insured against loss or damage by
fire, theft, explosion, sprinklers, and all other hazards and risks, and in
such
amounts, as ordinarily insured against by other owners in similar businesses
conducted in the locations where Borrower’s business is conducted on the date
hereof. Borrower shall also maintain insurance relating to Borrower’s business,
ownership and use of the Collateral in amounts and of a type that are customary
to businesses similar to Borrower’s.
(b) All
such
policies of insurance shall be in such form, with such companies, and in such
amounts as are reasonably satisfactory to Bank. All such policies of property
insurance shall contain a lender’s loss payable endorsement, in a form
satisfactory to Bank, showing Bank as an additional loss payee thereof, and
all
liability insurance policies shall show the Bank as an additional insured and
shall specify that the insurer must give at least twenty (20) days notice to
Bank before canceling its policy for any reason. Upon Bank’s request, Borrower
shall deliver to Bank certified copies of such policies of insurance and
evidence of the payments of all premiums therefor. All proceeds payable under
any such policy shall, at the option of Bank, be payable to Bank to be applied
on account of the Obligations.
6.7 Accounts.
Borrower shall maintain and shall cause each of its Subsidiaries to maintain
its
primary depository, operating, and investment accounts with Bank.
6.8 Current
Ratio.
Beginning with the month end following the Closing Date, Borrowers shall
maintain at all times a ratio of Current Assets to Current Liabilities, of
at
least 1.25 to 1.00.
6.9 Tangible
Net Worth.
As of
the last day of each fiscal quarter, Borrower shall maintain at all times a
Tangible Net Worth of not less than Five Million Dollars ($5,000,000).
6.10 Planned
Revenue.
Borrower shall maintain quarterly revenue of at least 80% of the projections
previously provided to Bank on December 14, 2006.
6.11 Registration
of Intellectual Property Rights.
(a) Borrower
shall register or cause to be registered on an expedited basis (to the extent
not already registered) with the United States Patent and Trademark Office
or
the United States Copyright Office, as the case may be, those registrable
intellectual property rights now owned or hereafter developed or acquired by
Borrower, to the extent that Borrower, in its reasonable business judgment,
deems it appropriate to so protect such intellectual property
rights.
(b) Borrower
shall promptly give Bank written notice of any applications or registrations
of
intellectual property rights filed with the United States Patent and Trademark
Office, including the date of such filing and the registration or application
numbers, if any.
(c) Borrower
shall (i) give Bank not less than 30 days prior written notice of the filing
of
any applications or registrations with the United States Copyright Office,
including the title of such intellectual property rights to be registered,
as
such title will appear on such applications or registrations, and the date
such
applications or registrations will be filed; (ii) prior to the filing of any
such applications or registrations, execute such documents as Bank may
reasonably request for Bank to maintain its perfection in such intellectual
property rights to be registered by Borrower; (iii) upon the request of Bank,
either deliver to Bank or file such documents simultaneously with the filing
of
any such applications or registrations; (iv) upon filing any such applications
or registrations, promptly provide Bank with a copy of such applications or
registrations together with any exhibits, evidence of the filing of any
documents requested by Bank to be filed for Bank to maintain the perfection
and
priority of its security interest in such intellectual property rights, and
the
date of such filing.
(d) Borrower
shall execute and deliver such additional instruments and documents from time
to
time as Bank shall reasonably request to perfect and maintain the perfection
and
priority of Bank’s security interest in the Intellectual Property Collateral.
(e) Borrower
shall (i) protect, defend and maintain the validity and enforceability of the
trade secrets, Trademarks, Patents and Copyrights, (ii) use commercially
reasonable efforts to detect infringements of the Trademarks, Patents and
Copyrights and promptly advise Bank in writing of material infringements
detected and (iii) not allow any material Trademarks, Patents or Copyrights
to
be abandoned, forfeited or dedicated to the public without the written consent
of Bank, which shall not be unreasonably withheld.
(f) Bank
may
audit Borrower’s Intellectual Property Collateral to confirm compliance with
this Section 6.12, provided such audit may not occur more often than once per
year, unless an Event of Default has occurred and is continuing. Bank shall
have
the right, but not the obligation, to take, at Borrower’s sole expense, any
actions that Borrower is required under this Section 6.12 to take but which
Borrower fails to take, after 15 days’ notice to Borrower. Borrower shall
reimburse and indemnify Bank for all reasonable costs and reasonable expenses
incurred in the reasonable exercise of its rights under this Section
6.12.
6.12 Consent
of Inbound Licensors.
Other
than licenses of data in the ordinary course, prior to or within a reasonable
period of time after entering into or becoming bound by any license or
agreement, Borrower shall: (i) provide written notice to Bank of the material
terms of such license or agreement with a description of its likely impact
on
Borrower’s business or financial condition; and (ii) in good faith use
commercially reasonable efforts to obtain the consent of, or waiver by, any
person whose consent or waiver is necessary for Borrower’s interest in such
licenses or contract rights to be deemed Collateral and for Bank to have a
security interest in it that might otherwise be restricted by the terms of
the
applicable license or agreement, whether now existing or entered into in the
future, provided, however, that the failure to obtain any such consent or waiver
shall not constitute a default under this Agreement. See Schedule for current
license agreements.
6.13 Further
Assurances.
At any
time and from time to time Borrower shall execute and deliver such further
instruments and take such further action as may reasonably be requested by
Bank
to effect the purposes of this Agreement.
7. Negative
Covenants.
Each
Borrower will not do any of the following:
7.1 Dispositions.
Convey,
sell, lease, transfer or otherwise dispose of (collectively, a “Transfer”), or
permit any of its Subsidiaries to Transfer, all or any part of its business
or
property, other than: (i) Transfers of Inventory in the ordinary course of
business; (ii) Transfers of non-exclusive licenses and similar arrangements
for the use of the property of Borrower or its Subsidiaries in the ordinary
course of business; or (iii) Transfers of worn-out or obsolete Equipment
which was not financed by Bank.
7.2 Change
in Business; Change in Control or Executive Office.
Engage
in any business, or permit any of its Subsidiaries to engage in any business,
other than the businesses currently engaged in by Borrower and any business
substantially similar or related thereto (or incidental thereto); or cease
to
conduct business in the manner conducted by Borrower as of the Closing Date;
or
suffer or permit a Change in Control; or without thirty (30) days prior written
notification to Bank, relocate its chief executive office or state of
incorporation or change its legal name; or without Bank’s prior written consent,
change the date on which its fiscal year ends.
7.3 Mergers
or Acquisitions.
Merge
or consolidate, or permit any of its Subsidiaries to merge or consolidate,
with
or into any other business organization, or acquire, or permit any of its
Subsidiaries to acquire, all or substantially all of the capital stock or
property of another Person.
7.4 Indebtedness.
Create,
incur, assume or be or remain liable with respect to any Indebtedness, or permit
any Subsidiary so to do, other than Permitted Indebtedness.
7.5 Encumbrances.
Create,
incur, assume or suffer to exist any Lien with respect to any of its property,
or assign or otherwise convey any right to receive income, including the sale
of
any Accounts, or permit any of its Subsidiaries so to do, except for Permitted
Liens, or agree with any Person other than Bank not to grant a security interest
in, or otherwise encumber, any of its property, or permit any Subsidiary to
do
so.
7.6 Distributions.
Pay any
dividends or make any other distribution or payment on account of or in
redemption, retirement or purchase of any capital stock, or permit any of its
Subsidiaries to do so, except that (i) Borrower may repurchase the stock of
former employees pursuant to stock repurchase agreements and (ii) Borrower
may
pay dividends to Laurus Master Fund in amounts equal to the regularly scheduled
payments of Dividends pursuant to Section 3 of the Terms of Series D Cumulative
Convertible Preferred Stock and regularly scheduled payments of Monthly
Redemption Amounts pursuant to Section 4(a), in each case as specified in
Exhibit A to the Certificate of Vote of Directors dated September 30, 2005
as
long as an Event of Default does not exist prior to such repurchase or payment,
or would not exist after giving effect to such repurchase or payment.
7.7 Investments.
Directly or indirectly acquire or own, or make any Investment in or to any
Person, or permit any of its Subsidiaries so to do, other than Permitted
Investments; or maintain or invest any of its property with a Person other
than
Bank or permit any of its Subsidiaries to do so unless such Person has entered
into an account control agreement with Bank in form and substance satisfactory
to Bank; or suffer or permit any Subsidiary to be a party to, or be bound by,
an
agreement that restricts such Subsidiary from paying dividends or otherwise
distributing property to Borrower.
7.8 Transactions
with Affiliates.
Directly or indirectly enter into or permit to exist any material transaction
with any Affiliate of Borrower except for transactions that are in the ordinary
course of Borrower’s business, upon fair and reasonable terms that are no less
favorable to Borrower than would be obtained in an arm’s length transaction with
a non-affiliated Person.
7.9 Subordinated
Debt.
Make
any payment in respect of any Subordinated Debt, or permit any of its
Subsidiaries to make any such payment, except in compliance with the terms
of
such Subordinated Debt, or amend any provision contained in any documentation
relating to the Subordinated Debt without Bank’s prior written
consent.
7.10 Inventory
and Equipment.
Store
the Inventory or the Equipment with a bailee, warehouseman, or other third
party
unless the third party has been notified of Bank’s security interest and Bank
(a) has received an acknowledgment from the third party that it is holding
or
will hold the Inventory or Equipment for Bank’s benefit or (b) is in pledge
possession of the warehouse receipt, where negotiable, covering such Inventory
or Equipment. Store or maintain any Equipment or Inventory at a location other
than the location set forth in Section 10 of this Agreement.
7.11 Compliance.
Become
an “investment company” or be controlled by an “investment company,” within the
meaning of the Investment Company Act of 1940, or become principally engaged
in,
or undertake as one of its important activities, the business of extending
credit for the purpose of purchasing or carrying margin stock, or use the
proceeds of any Credit Extension for such purpose. Fail to meet the minimum
funding requirements of ERISA, permit a Reportable Event or Prohibited
Transaction, as defined in ERISA, to occur, fail to comply with the Federal
Fair
Labor Standards Act or violate any law or regulation, which violation could
have
a Material Adverse Effect, or a material adverse effect on the Collateral or
the
priority of Bank’s Lien on the Collateral, or permit any of its Subsidiaries to
do any of the foregoing.
8. Events
of Default.
Any
one
or more of the following events shall constitute an Event of Default under
this
Agreement:
8.1 Payment
Default.
If
Borrowers fail to pay, when due, any of the Obligations;
8.2 Covenant
Default.
(a) If
Borrowers fail to perform any obligation under Article 6 or violates any of
the
covenants contained in Article 7 of this Agreement; or
(b) If
Borrowers fail or neglects to perform or observe any other material term,
provision, condition, covenant contained in this Agreement, in any of the Loan
Documents, or in any other present or future agreement between a Borrower and
Bank and as to any default under such other term, provision, condition or
covenant that can be cured, has failed to cure such default within ten days
after Borrower receives notice thereof or any officer of a Borrower becomes
aware thereof; provided, however, that if the default cannot by its nature
be
cured within the ten day period or cannot after diligent attempts by Borrower
be
cured within such ten day period, and such default is likely to be cured within
a reasonable time, then Borrower shall have an additional reasonable period
(which shall not in any case exceed 30 days) to attempt to cure such default,
and within such reasonable time period the failure to have cured such default
shall not be deemed an Event of Default but no Credit Extensions will be
made.
8.3 Material
Adverse Effect.
If
there occurs any circumstance or circumstances that could have a Material
Adverse Effect;
8.4 Attachment.
If any
portion of a Borrower’s assets is attached, seized, subjected to a writ or
distress warrant, or is levied upon, or comes into the possession of any
trustee, receiver or person acting in a similar capacity and such attachment,
seizure, writ or distress warrant or levy has not been removed, discharged
or
rescinded within ten (10) days, or if a Borrower is enjoined, restrained, or
in
any way prevented by court order from continuing to conduct all or any material
part of its business affairs, or if a judgment or other claim becomes a lien
or
encumbrance upon any material portion of a Borrower’s assets, or if a notice of
lien, levy, or assessment is filed of record with respect to any of such
Borrower’s assets by the United States Government, or any department, agency, or
instrumentality thereof, or by any state, county, municipal, or governmental
agency, and the same is not paid within ten (10) days after such Borrower
receives notice thereof, provided that none of the foregoing shall constitute
an
Event of Default where such action or event is stayed or an adequate bond has
been posted pending a good faith contest by Borrowers (provided that no Credit
Extensions will be required to be made during such cure period);
8.5 Insolvency.
If a
Borrower becomes insolvent, or if an Insolvency Proceeding is commenced by
a
Borrower, or if an Insolvency Proceeding is commenced against a Borrower and
is
not dismissed or stayed within thirty (30) days (provided that no Credit
Extensions will be made prior to the dismissal of such Insolvency
Proceeding);
8.6 Other
Agreements.
If
there is a default or other failure to perform in any agreement to which a
Borrower is a party or by which it is bound resulting in a right by a third
party or parties, whether or not exercised, to accelerate the maturity of any
Indebtedness in an amount in excess of Fifty Thousand Dollars ($50,000) or
which
could have a Material Adverse Effect;
8.7 Judgments.
If a
judgment or judgments for the payment of money in an amount, individually or
in
the aggregate, of at least Fifty Thousand Dollars ($50,000) shall be rendered
against a Borrower and shall remain unsatisfied and unstayed for a period of
ten
(10) days (provided that no Credit Extensions will be made prior to the
satisfaction or stay of such judgment); or
8.8 Misrepresentations.
If any
material misrepresentation or material misstatement exists now or hereafter
in
any warranty or representation set forth herein or in any certificate delivered
to Bank by any Responsible Officer pursuant to this Agreement or to induce
Bank
to enter into this Agreement or any other Loan Document.
9. Bank’s
Rights and Remedies.
9.1 Rights
and Remedies.
Upon
the occurrence and during the continuance of an Event of Default, Bank may,
at
its election, without notice of its election and without demand, do any one
or
more of the following, all of which are authorized by Borrowers:
(a) Declare
all Obligations, whether evidenced by this Agreement, by any of the other Loan
Documents, or otherwise, immediately due and payable (provided that upon the
occurrence of an Event of Default described in Section 8.5,
all
Obligations shall become immediately due and payable without any action by
Bank);
(b) Cease
advancing money or extending credit to or for the benefit of Borrowers under
this Agreement or under any other agreement between a Borrower and
Bank;
(c) Settle
or
adjust disputes and claims directly with account debtors for amounts, upon
terms
and in whatever order that Bank reasonably considers advisable;
(d) Make
such
payments and do such acts as Bank considers necessary or reasonable to protect
its security interest in the Collateral. Borrowers agree to assemble the
Collateral if Bank so requires, and to make the Collateral available to Bank
as
Bank may designate. Borrowers authorize Bank to enter the premises where the
Collateral is located, to take and maintain possession of the Collateral, or
any
part of it, and to pay, purchase, contest, or compromise any encumbrance,
charge, or lien which in Bank’s determination appears to be prior or superior to
its security interest and to pay all expenses incurred in connection therewith.
With respect to any of a Borrower’s owned premises, each Borrower hereby grants
Bank a license to enter into possession of such premises and to occupy the
same,
without charge, in order to exercise any of Bank’s rights or remedies provided
herein, at law, in equity, or otherwise;
(e) Set
off
and apply to the Obligations any and all (i) balances and deposits of a
Borrower held by Bank, or (ii) indebtedness at any time owing to or for the
credit or the account of a Borrower held by Bank;
(f) Ship,
reclaim, recover, store, finish, maintain, repair, prepare for sale, advertise
for sale, and sell (in the manner provided for herein) the Collateral. Bank
is
hereby granted a license or other right, solely pursuant to the provisions
of
this Section 9.1,
to use,
without charge, each Borrower’s labels, patents, copyrights, rights of use of
any name, trade secrets, trade names, trademarks, service marks, and advertising
matter, or any property of a similar nature, as it pertains to the Collateral,
in completing production of, advertising for sale, and selling any Collateral
and, in connection with Bank’s exercise of its rights under this
Section 9.1,
each
Borrower’s rights under all licenses and all franchise agreements shall inure to
Bank’s benefit;
(g) Dispose
of the Collateral by way of one or more contracts or transactions, for cash
or
on terms, in such manner and at such places (including each Borrower’s premises)
as Bank determines is commercially reasonable, and apply any proceeds to the
Obligations in whatever manner or order Bank deems appropriate;
(h) Bank
may
credit bid and purchase at any public sale; and
(i) Any
deficiency that exists after disposition of the Collateral as provided above
will be paid immediately by Borrowers.
9.2 Power
of Attorney. Effective
only upon the occurrence and during the continuance of an Event of Default,
each
Borrower irrevocably appoints Bank (and any of Bank’s designated officers, or
employees) as such Borrower’s true and lawful attorney to: (a) send requests for
verification of Accounts or notify account debtors of Bank’s security interest
in the Accounts; (b) endorse such Borrower’s name on any checks or other forms
of payment or security that may come into Bank’s possession; (c) sign such
Borrower’s name on any invoice or ▇▇▇▇ of lading relating to any Account, drafts
against account debtors, schedules and assignments of Accounts, verifications
of
Accounts, and notices to account debtors; (d) dispose of any Collateral; (e)
make, settle, and adjust all claims under and decisions with respect to such
Borrower’s policies of insurance; (f) settle and adjust disputes and claims
respecting the accounts directly with account debtors, for amounts and upon
terms which Bank determines to be reasonable; and (g) to file, in its sole
discretion, one or more financing or continuation statements and amendments
thereto, relative to any of the Collateral. The appointment of Bank as each
Borrower’s attorney in fact, and each and every one of Bank’s rights and powers,
being coupled with an interest, is irrevocable until all of the Obligations
have
been fully repaid and performed and Bank’s obligation to provide Credit
Extensions hereunder is terminated.
9.3 Accounts
Collection.
At any
time after the occurrence of an Event of Default, Bank may notify any Person
owing funds to a Borrower of Bank’s security interest in such funds and verify
the amount of such Account. Borrowers shall collect all amounts owing to a
Borrower for Bank, receive in trust all payments as Bank’s trustee, and
immediately deliver such payments to Bank in their original form as received
from the account debtor, with proper endorsements for deposit.
9.4 Bank
Expenses.
If a
Borrower fails to pay any amounts or furnish any required proof of payment
due
to third persons or entities, as required under the terms of this Agreement,
then Bank may do any or all of the following after reasonable notice to
Borrowers: (a) make payment of the same or any part thereof; (b) set
up such reserves under a loan facility in Section 2.1 as Bank deems necessary
to
protect Bank from the exposure created by such failure; or (c) obtain and
maintain insurance policies of the type discussed in Section 6.6
of this
Agreement, and take any action with respect to such policies as Bank deems
prudent. Any amounts so paid or deposited by Bank shall constitute Bank
Expenses, shall be immediately due and payable, and shall bear interest at
the
then applicable rate hereinabove provided, and shall be secured by the
Collateral. Any payments made by Bank shall not constitute an agreement by
Bank
to make similar payments in the future or a waiver by Bank of any Event of
Default under this Agreement.
9.5 Bank’s
Liability for Collateral.
So long
as Bank complies with reasonable banking practices, Bank shall not in any way
or
manner be liable or responsible for: (a) the safekeeping of the Collateral;
(b) any loss or damage thereto occurring or arising in any manner or
fashion from any cause; (c) any diminution in the value thereof; or
(d) any act or default of any carrier, warehouseman, bailee, forwarding
agency, or other person whomsoever. All risk of loss, damage or destruction
of
the Collateral shall be borne by Borrowers.
9.6 Remedies
Cumulative.
Bank’s
rights and remedies under this Agreement, the Loan Documents, and all other
agreements shall be cumulative. Bank shall have all other rights and remedies
not inconsistent herewith as provided under the Code, by law, or in equity.
No
exercise by Bank of one right or remedy shall be deemed an election, and no
waiver by Bank of any Event of Default on a Borrower’s part shall be deemed a
continuing waiver. No delay by Bank shall constitute a waiver, election, or
acquiescence by it. No waiver by Bank shall be effective unless made in a
written document signed on behalf of Bank and then shall be effective only
in
the specific instance and for the specific purpose for which it was
given.
9.7 Demand;
Protest.
Each
Borrower waives demand, protest, notice of protest, notice of default or
dishonor, notice of payment and nonpayment, notice of any default, nonpayment
at
maturity, release, compromise, settlement, extension, or renewal of accounts,
documents, instruments, chattel paper, and guarantees at any time held by Bank
on which a Borrower may in any way be liable.
10. Notices.
Unless
otherwise provided in this Agreement, all notices or demands by any party
relating to this Agreement or any other agreement entered into in connection
herewith shall be in writing and (except for financial statements and other
informational documents which may be sent by first-class mail, postage prepaid)
shall be personally delivered or sent by a recognized overnight delivery
service, certified mail, postage prepaid, return receipt requested, or by
telefacsimile to a Borrower or to Bank, as the case may be, at its addresses
set
forth below:
If
to a
Borrower:
IMPLANT
SCIENCES CORPORATION
▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇, #▇
▇▇▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
Attn:
▇▇▇▇▇ ▇▇▇▇, CFO
FAX:
(▇▇▇) ▇▇▇-▇▇▇▇
If
to
Bank
Bridge
Bank, N.A.
▇▇
▇▇▇▇▇▇▇ ▇▇▇▇.
▇▇▇
▇▇▇▇,
▇▇ ▇▇▇▇▇
Attn:
▇▇▇▇ ▇▇▇▇▇▇▇▇
FAX:
(▇▇▇) ▇▇▇-▇▇▇▇
The
parties hereto may change the address at which they are to receive notices
hereunder, by notice in writing in the foregoing manner given to the
other.
11. CHOICE
OF LAW AND VENUE; JURY TRIAL WAIVER.
This
Agreement shall be governed by, and construed in accordance with, the internal
laws of the State of California, without regard to principles of conflicts
of
law. Each Borrower and Bank hereby submits to the exclusive jurisdiction of
the
state and Federal courts located in the County of Santa ▇▇▇▇▇, State of
California. EACH BORROWER AND BANK EACH HEREBY WAIVE THEIR RESPECTIVE RIGHTS
TO
A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF ANY
OF
THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING
CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW
OR
STATUTORY CLAIMS. EACH PARTY RECOGNIZES AND AGREES THAT THE FOREGOING WAIVER
CONSTITUTES A MATERIAL INDUCEMENT FOR IT TO ENTER INTO THIS AGREEMENT. EACH
PARTY REPRESENTS AND WARRANTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL
COUNSEL AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS
FOLLOWING CONSULTATION WITH LEGAL COUNSEL.
If
the
jury waiver set forth in Section is not enforceable, then any dispute,
controversy or claim arising out of or relating to this Agreement, the Loan
Documents or any of the transactions contemplated therein shall be settled
by
judicial reference pursuant to Code of Civil Procedure Section 638 et seq.
before a referee sitting without a jury, such referee to be mutually acceptable
to the parties or, if no agreement is reached, by a referee appointed by the
Presiding Judge of the California Superior Court for Santa ▇▇▇▇▇ County. This
Section shall not restrict a party from exercising remedies under the Code
or
from exercising pre-judgment remedies under applicable law.
12. General
Provisions.
12.1 Successors
and Assigns.
This
Agreement shall bind and inure to the benefit of the respective successors
and
permitted assigns of each of the parties; provided, however, that neither this
Agreement nor any rights hereunder may be assigned by a Borrower without Bank’s
prior written consent, which consent may be granted or withheld in Bank’s sole
discretion. Bank shall have the right without the consent of or notice to
Borrowers to sell, transfer, negotiate, or grant participation in all or any
part of, or any interest in, Bank’s obligations, rights and benefits
hereunder.
12.2 Indemnification.
Each
Borrower shall defend, indemnify and hold harmless Bank and its officers,
employees, and agents against: (a) all obligations, demands, claims, and
liabilities claimed or asserted by any other party in connection with the
transactions contemplated by this Agreement; and (b) all losses or Bank
Expenses in any way suffered, incurred, or paid by Bank as a result of or in
any
way arising out of, following, or consequential to transactions between Bank
and
Borrowers whether under this Agreement, or otherwise (including without
limitation reasonable attorneys’ fees and expenses), except for losses caused by
Bank’s gross negligence or willful misconduct.
12.3 Time
of Essence.
Time is
of the essence for the performance of all obligations set forth in this
Agreement.
12.4 Severability
of Provisions.
Each
provision of this Agreement shall be severable from every other provision of
this Agreement for the purpose of determining the legal enforceability of any
specific provision.
12.5 Original
Agreements. Amendments in Writing, Integration.
Bank
waives Borrower’s failure to comply the minimum quick ratio covenant specified
in the Original Agreements. This Agreement amends and restates the terms of
the
Original Agreements. Neither this Agreement nor the Loan Documents can be
amended or terminated orally. All prior agreements, understandings,
representations, warranties, and negotiations between the parties hereto with
respect to the subject matter of this Agreement and the Loan Documents, if
any,
are merged into this Agreement and the Loan Documents, provided any financing
statements filed in connection with the Original Agreements shall continue
to
perfect Bank’s security interest in the Collateral.
12.6 Counterparts.
This
Agreement may be executed in any number of counterparts and by different parties
on separate counterparts, each of which, when executed and delivered, shall
be
deemed to be an original, and all of which, when taken together, shall
constitute but one and the same Agreement.
12.7 Survival.
All
covenants, representations and warranties made in this Agreement shall continue
in full force and effect so long as any Obligations remain outstanding or Bank
has any obligation to make Credit Extensions to Borrowers. The obligations
of
Borrowers to indemnify Bank with respect to the expenses, damages, losses,
costs
and liabilities described in Section 12.2
shall
survive until all applicable statute of limitations periods with respect to
actions that may be brought against Bank have run.
12.8 Confidentiality.
In
handling any confidential information Bank and all employees and agents of
Bank,
including but not limited to accountants, shall exercise the same degree of
care
that it exercises with respect to its own proprietary information of the same
types to maintain the confidentiality of any non-public information thereby
received or received pursuant to this Agreement except that disclosure of such
information may be made (i) to the subsidiaries or affiliates of Bank in
connection with their present or prospective business relations with Borrowers,
(ii) to prospective transferees or purchasers of any interest in the Loans,
provided that they have entered into a comparable confidentiality agreement
in
favor of Borrowers and have delivered a copy to Borrowers, (iii) as
required by law, regulations, rule or order, subpoena, judicial order or similar
order, (iv) as may be required in connection with the examination, audit or
similar investigation of Bank and (v) as Bank may determine in connection
with the enforcement of any remedies hereunder. Confidential information
hereunder shall not include information that either: (a) is in the public
domain or in the knowledge or possession of Bank when disclosed to Bank, or
becomes part of the public domain after disclosure to Bank through no fault
of
Bank; or (b) is disclosed to Bank by a third party, provided Bank does not
have actual knowledge that such third party is prohibited from disclosing such
information.
12.9 Effect
of Amendment and Restatement.
This
Agreement is intended to and does completely amend and restate, without
novation, the Original Agreement. All security interests granted under the
Original Agreement are hereby confirmed and ratified and shall continue to
secure all Obligations under this Agreement.
12.10 Patriot
Act.
To help
the government fight the funding of terrorism and money laundering activities,
Federal law requires all financial institutions to obtain, verify, and record
information that identifies each person who opens an account. WHAT THIS MEANS
FOR YOU: when you open an account, we will ask your name, address, date of
birth, and other information that will allow us to identify you. We may also
ask
to see your driver’s license or other identifying documents.
13. CO-BORROWER
PROVISIONS.
13.1 Primary
Obligation.
This
Agreement is a primary and original obligation of each Borrower and shall remain
in effect notwithstanding future changes in conditions, including any change
of
law or any invalidity or irregularity in the creation or acquisition of any
Obligations or in the execution or delivery of any agreement between Bank and
any Borrower. Each Borrower shall be liable for existing and future Obligations
as fully as if all of all Credit Extensions were advanced to such Borrower.
Bank
may rely on any certificate or representation made by any Borrower as made
on
behalf of, and binding on, all Borrowers, including without limitation
Disbursement Request Forms, Borrowing Base Certificates and Compliance
Certificates.
13.2 Enforcement
of Rights.
Borrowers are jointly and severally liable for the Obligations and Bank may
proceed against one or more of the Borrowers to enforce the Obligations without
waiving its right to proceed against any of the other Borrowers.
13.3 Borrowers
as Agents.
Each
Borrower appoints the other Borrower as its agent with all necessary power
and
authority to give and receive notices, certificates or demands for and on behalf
of both Borrowers, to act as disbursing agent for receipt of any Credit
Extensions on behalf of each Borrower and to apply to Bank on behalf of each
Borrower for Credit Extensions, any waivers and any consents. This authorization
cannot be revoked, and Bank need not inquire as to each Borrower’s authority to
act for or on behalf of Borrower.
13.4 Subrogation
and Similar Rights.
Notwithstanding any other provision of this Agreement or any other Loan
Document, each Borrower irrevocably waives all rights that it may have at law
or
in equity (including, without limitation, any law subrogating the Borrower
to
the rights of Bank under the Loan Documents) to seek contribution,
indemnification, or any other form of reimbursement from any other Borrower,
or
any other Person now or hereafter primarily or secondarily liable for any of
the
Obligations, for any payment made by the Borrower with respect to the
Obligations in connection with the Loan Documents or otherwise and all rights
that it might have to benefit from, or to participate in, any security for
the
Obligations as a result of any payment made by the Borrower with respect to
the
Obligations in connection with the Loan Documents or otherwise. Any agreement
providing for indemnification, reimbursement or any other arrangement prohibited
under this Section 14.4 shall be null and void. If any payment is made to a
Borrower in contravention of this Section 14.4, such Borrower shall hold such
payment in trust for Bank and such payment shall be promptly delivered to Bank
for application to the Obligations, whether matured or unmatured.
13.5 Waivers
of Notice.
Except
as otherwise provided in this Agreement, each Borrower waives notice of
acceptance hereof; notice of the existence, creation or acquisition of any
of
the Obligations; notice of an Event of Default; notice of the amount of the
Obligations outstanding at any time; notice of intent to accelerate; notice
of
acceleration; notice of any adverse change in the financial condition of any
other Borrower or of any other fact that might increase the Borrower’s risk;
presentment for payment; demand; protest and notice thereof as to any
instrument; default; and all other notices and demands to which the Borrower
would otherwise be entitled. Each Borrower waives any defense arising from
any
defense of any other Borrower, or by reason of the cessation from any cause
whatsoever of the liability of any other Borrower. Bank’s failure at any time to
require strict performance by any Borrower of any provision of the Loan
Documents shall not waive, alter or diminish any right of Bank thereafter to
demand strict compliance and performance therewith. Nothing contained herein
shall prevent Bank from foreclosing on the Lien of any deed of trust, mortgage
or other security instrument, or exercising any rights available thereunder,
and
the exercise of any such rights shall not constitute a legal or equitable
discharge of any Borrower. Each Borrower also waives any defense arising from
any act or omission of Bank that changes the scope of the Borrower’s risks
hereunder.
13.6 Subrogation
Defenses.
Each
Borrower hereby waives any defense based on impairment or destruction of its
subrogation or other rights against any other Borrower and waives all benefits
which might otherwise be available to it under California Civil Code Sections
2809, 2810, 2819, 2839, 2845, 2848, 2849, 2850, 2899, and 3433 and California
Code of Civil Procedure Sections 580a, 580b, 580d and 726, as those statutory
provisions are now in effect and hereafter amended, and under any other similar
statutes now and hereafter in effect.
13.7 Right
to Settle, Release.
(a) The
liability of Borrowers hereunder shall not be diminished by (i) any agreement,
understanding or representation that any of the Obligations is or was to be
guaranteed by another Person or secured by other property, or (ii) any release
or unenforceability, whether partial or total, of rights, if any, which Bank
may
now or hereafter have against any other Person, including another Borrower,
or
property with respect to any of the Obligations.
(b) Without
affecting the liability of any Borrower hereunder, Bank may (i) compromise,
settle, renew, extend the time for payment, change the manner or terms of
payment, discharge the performance of, decline to enforce, or release all or
any
of the Obligations with respect to a Borrower, (ii) grant other indulgences
to a
Borrower in respect of the Obligations, (iii) modify in any manner any documents
relating to the Obligations with respect to a Borrower, (iv) release, surrender
or exchange any deposits or other property securing the Obligations, whether
pledged by a Borrower or any other Person, or (v) compromise, settle, renew,
or
extend the time for payment, discharge the performance of, decline to enforce,
or release all or any obligations of any guarantor, endorser or other Person
who
is now or may hereafter be liable with respect to any of the
Obligations.
13.8 Subordination.
All
indebtedness of a Borrower now or hereafter arising held by another Borrower
is
subordinated to the Obligations and the Borrower holding the indebtedness shall
take all actions reasonably requested by Lender to effect, to enforce and to
give notice of such subordination.
IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as
of the date first above written.
|
Implant
Sciences Corporation
By:
/s/ ▇.▇. ▇▇▇▇▇▇
Title:
CEO
|
|
|
Accurel
Systems International Corporation
By:
/s/ ▇.▇. ▇▇▇▇▇▇
Title:
CEO
|
|
|
C
Acquisition Corp.
By:
/s/ ▇.▇. ▇▇▇▇▇▇
Title:
CEO
|
|
|
Bridge
Bank, N.A.
By:
Title:
|
611795
v8/HN .
EXHIBIT
A
LOAN
PAYMENT/ADVANCE TELEPHONE REQUEST FORM
DEADLINE
FOR SAME DAY PROCESSING IS 3:00 P.M., PACIFIC TIME
TO:BRIDGE
BANK ▇.▇.▇▇▇▇:
_______________
FAX
#:
(408) ▇▇▇-▇▇▇▇▇▇▇▇:
_______________
|
FROM:
Implant
Sciences Corporation; Accurel Systems International Corporation;
C
Acquisition Corp.
|
||
|
CLIENT
NAME (BORROWERS)
|
||
|
REQUESTED
BY:
|
||
|
AUTHORIZED
SIGNER’S NAME
|
||
|
AUTHORIZED
SIGNATURE:
|
||
|
PHONE
NUMBER:
|
||
|
FROM
ACCOUNT # ______________________ TO ACCOUNT #
|
||
|
REQUESTED
TRANSACTION TYPE
|
REQUEST
DOLLAR AMOUNT
|
|
|
$
|
||
|
PRINCIPAL
INCREASE (ADVANCE)
|
$
|
|
|
PRINCIPAL
PAYMENT (ONLY)
|
$
|
|
|
INTEREST
PAYMENT (ONLY)
|
$
|
|
|
PRINCIPAL
AND INTEREST (PAYMENT)
|
$
|
|
|
OTHER
INSTRUCTIONS:
|
||
|
All
representations and warranties of Borrowers stated in the Loan and
Security Agreement are true, correct and complete in all material
respects
as of the date of the telephone request for an Advance confirmed
by this
Borrowing Certificate; provided, however, that those representations
and
warranties expressly referring to another date shall be true, correct
and
complete in all material respects as of such date.
|
||
|
BANK
USE ONLY
|
||
|
TELEPHONE
REQUEST:
|
||
|
The
following person is authorized to request the loan payment transfer/loan
advance on the advance designated account and is known to
me.
|
||
|
Authorized
Requester
|
Phone
#
|
|
|
Received
By (Bank)
|
Phone
#
|
|
|
_____________________________________________
|
||
|
Authorized
Signature (Bank)
|
||
EXHIBIT
B
Borrowing
Base Certificate
|
Borrower:
IMPLANT
SCIENCES CORPORATION Lender:
Bridge Bank, N.A.
ACCUREL
SYSTEMS INTERNATIONAL CORPORATION
C
ACQUISITION CORP.
Commitment
Amount: $5,000,000
|
|
ACCOUNTS
RECEIVABLE
|
||
|
1. Accounts
Receivable Book Value as of ___
|
$___________
|
|
|
2. Additions
(please explain on reverse)
|
$___________
|
|
|
3. TOTAL
ACCOUNTS RECEIVABLE
|
$___________
|
|
|
ACCOUNTS
RECEIVABLE DEDUCTIONS (without duplication)
|
||
|
4. Amounts
over 90 days due
|
$___________
|
|
|
5. Balance
of 35% over 90 day accounts
|
$___________
|
|
|
6. Concentration
Limits
|
||
|
7. Foreign
Accounts
|
$___________
|
|
|
8. Governmental
Accounts
|
$___________
|
|
|
9. Contra
Accounts
|
$___________
|
|
|
10. Demo
Accounts
|
$___________
|
|
|
11. Intercompany/Employee
Accounts
|
$___________
|
|
|
12. Other
(please explain on reverse)
|
$___________
|
|
|
13. TOTAL
ACCOUNTS RECEIVABLE DEDUCTIONS
|
$___________
|
|
|
14. Eligible
Accounts (#3 minus #13)
|
$___________
|
|
|
15. LOAN
VALUE OF ACCOUNTS (80% of #14)
|
$___________
|
|
|
INVENTORY
|
||
|
16. Total
Value of Eligible Inventory
|
$___________
|
|
|
17. Lesser
of 40% of Eligible Inventory or $1,000,000*
|
$___________
|
|
|
BALANCES
|
||
|
18. Maximum
Loan Amount
|
$5,000,000
|
|
|
19. Total
Funds Available [Lesser of #18 or #15 plus #17]
|
$___________
|
|
|
20. Present
balance owing on Line of Credit
|
$___________
|
|
|
21. Outstanding
under Term Loan
|
$2,500,000
|
|
|
22. Outstanding
under Letters of Credit
|
||
|
23. Outstanding
under Credit Card Exposure
|
||
|
24. RESERVE
POSITION (#19 minus #20, #21,# 22 and #23)
|
$___________
|
|
*no
more
than $1,000,000 of the Borrowing Base shall be supported by Eligible
Inventory
The
undersigned represents and warrants that the foregoing is true, complete and
correct, and that the information reflected in this Borrowing Base Certificate
complies with the representations and warranties set forth in the Loan and
Security Agreement between the undersigned and Bridge Bank,
N.A..
|
IMPLANT
SCIENCES CORPORATION
|
ACCUREL
SYSTEMS INTERNATIONAL CORPORATION
|
|
By:
|
By:
|
|
Authorized
Signer
|
Authorized
Signer
|
|
C
ACQUISITION CORP.
|
|
|
By:
|
|
|
Authorized
Signer
|
EXHIBIT
C
Compliance
Certificate
TO: BRIDGE
BANK, N.A.
FROM: IMPLANT
SCIENCES CORPORATION, ACCUREL SYSTEMS INTERNATIONAL CORPORATION, C ACQUISITION
CORP.
The
undersigned authorized officer of IMPLANT SCIENCES CORPORATION, ACCUREL SYSTEMS
INTERNATIONAL CORPORATION, C ACQUISITION CORP. hereby certifies that in
accordance with the terms and conditions of the Loan and Security Agreement
between Borrower and Bank (the “Agreement”), (i) Borrower is in complete
compliance for the period ending _______________ with all required covenants
except as noted below and (ii) all representations and warranties of
Borrower stated in the Agreement are true and correct as of the date hereof.
Attached herewith are the required documents supporting the above certification.
The Officer further certifies that these are prepared in accordance with
Generally Accepted Accounting Principles (GAAP) and are consistently applied
from one period to the next except as explained in an accompanying letter or
footnotes.
Please
indicate compliance status by circling Yes/No under “Complies”
column.
|
Reporting
Covenant
|
Required
|
Complies
|
|||
|
Monthly
financial statements
|
Monthly
within 30 days
|
Yes
|
No
|
||
|
Annual
(CPA Audited)
|
FYE
within 180 days
|
Yes
|
No
|
||
|
10K
and 10Q
|
(as
applicable)
|
Yes
|
No
|
||
|
A/R
& A/P Agings, Borrowing Base Cert.
|
Monthly
within 30 days
|
Yes
|
No
|
||
|
A/R
Audit
|
Initial
and Annual
|
Yes
|
No
|
||
|
IP
Report
|
Quarterly
within 30 days
|
Yes
|
No
|
||
|
Financial
Covenant
|
Required
|
Actual
|
Complies
|
||
|
Minimum
Current Ratio
|
1.25:1.00
|
_____:1.00
|
Yes
|
No
|
|
|
Minimum
Tangible Net Worth
|
$5,000,000
|
$________
|
Yes
|
No
|
|
|
Planned
Quarterly Revenue
|
80%
of plan
|
___%
of plan
|
Yes
|
No
|
|
|
Comments
Regarding Exceptions:
See Attached.
|
BANK
USE ONLY
|
||||
|
Received
by:
|
|||||
|
Sincerely,
|
AUTHORIZED
SIGNER
|
||||
|
Date:
|
|||||
|
Verified:
|
|||||
|
SIGNATURE
|
AUTHORIZED
SIGNER
|
||||
|
Date:
|
|||||
|
TITLE
|
|||||
|
Compliance
Status
|
Yes
|
No
|
|||
|
DATE
|
|||||
SCHEDULE
OF EXCEPTIONS
Permitted
Indebtedness
(Section 1.1)
See
attachment A
Permitted
Investments
(Section 1.1)
CorNova 1,500,000
shares of common stock - private company
Cardio
Tech International 100,000
shares common stock - publicly traded - symbol “CTE”
Certificates
of Deposit through
Bridge Bank
Permitted
Liens
(Section 1.1)
See
same
attachment as in (Permitted Indebtedness)
Security
Interest (Section 4.1)
Laurus
Master Fund
Inbound
Licenses
(Section
5.6)
SpecMed
LLC royalty agreement regarding licensing of Company’s patent application number
10/997,050
Prior
Names
(Section 5.7)
None
Litigation
(Section
5.8)
Rapiscan
Systems (OSI)
Arbitration
with former owners of Accurel Systems
From
time
to time, we are subject to various claims, legal proceedings and investigations
covering a wide range of matters that arise in the ordinary course of our
business activities. Each of these matters is subject to various uncertainties.
On
or
about March 8, 2006, the Company commenced an arbitration under the Rules of
the
American Arbitration Association against Respondents ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ (“▇▇▇▇▇”)
and ▇▇▇▇ Sarkissisian (“▇▇▇▇”), seeking a total of $3,994,000 for
indemnification of various “Losses,” as defined in, and expressly allowed
pursuant to, a Stock Purchase Agreement dated March 9, 2005 (the “Agreement”),
between the Company, as the purchaser, Accurel Systems International Corporation
(“Accurel), and Majid and ▇▇▇▇, as the sellers of 100% of the issued and
outstanding shares of Accurel stock.
More
specifically, there are four claims asserted by the Company against Respondents:
(1) Damages of $3.4 million resulting from misrepresentations concerning the
loss of business from a key Accurel customer; (2) unauthorized withdrawals
in
the amount of approximately $276,000 from Accurel by the Respondents prior
to
the closing; (3) approximately $49,000 of disallowed transaction expenses that
the Respondents improperly received; and (4) undisclosed net liabilities
totaling approximately $269,000.
Respondents
have asserted counterclaims seeking “an aggregate amount in excess of
$1,750,000,” based on the allegedly “late payment” to Respondents of Company
stock and a Secured Promissory Note as part of the consideration for their
sale
of Accurel stock. The Company has filed a detailed denial of all
counterclaims.
The
arbitration is now in the discovery phase, and the hearing is scheduled for
February 2007.
At
this
early stage of the proceedings, particularly before the commencement of
depositions, it is difficult to assess the final outcome of this arbitration.
However, the Company believes that the counterclaims have no merit, and will
vigorously defend itself against such counterclaims.
On
March
23, 2005, we entered into a Development, Distribution and Manufacturing
Agreement (the “Rapiscan Agreement”) with Rapiscan Systems, Inc.
(“Rapiscan”). Under the terms of this agreement, we gave Rapiscan the
exclusive worldwide rights to market our Quantum SnifferTM portable
and benchtop trace detection devices under their private label. We also
agreed to give Rapiscan the exclusive worldwide rights to distribute certain
other new security products which we may develop in the future with their
funding, as well as rights, in some circumstances, to manufacture certain
components of the Quantum SnifferTM portable
and benchtop trace detection devices that they are able to sell.
On
March
24, 2006, the Company brought suit in the United States District Court in the
District of Massachusetts against Rapiscan and its parent, OSI Systems, Inc.
(“OSI”). The Company is requesting rescission of the Rapiscan Agreement, for
lack of performance and other grounds. In the alternative, the Company is
seeking termination of the Rapiscan Agreement due to material breaches of
contract and implied covenant of good faith and fair dealing and for damages
due
to Rapiscan’s breach of contract and the implied covenant of good faith and fair
dealing.
On
March
27, 2006, the Company received notice that Rapiscan filed a complaint against
the Company and its contract manufacturer, Columbia Tech, in the United States
District Court for the Central District of California, regarding the Rapiscan
Agreement. Rapiscan’s complaint against the Company is based upon claims of
breach of contract and breach of warranty and is requesting a decree for
specific performance, declaratory relief and injunctive relief. Rapiscan’s
complaint against Columbia Tech is based upon injunctive relief, declaratory
relief and tortuous interference with contractual relations. On April 12, 2006,
Rapiscan dismissed all claims against Columbia Tech.
As
of
August 18, 2006, as a result of motions made by both parties, the two lawsuits
have been consolidated in the United States District Court for the Central
District of California with the Company as plaintiff. Presently, discovery
is in
process. Rapiscan and OSI have filed a motion to dismiss certain of the
Company’s claims. As of October 30, 2006, the court has ruled that the Company’s
claim of breach of fiduciary duty was dismissed but OSI’s motion to dismiss all
other claims was denied.
Should
the Company be unsuccessful in prosecuting this matter, it may have a material
adverse effect on its business and results of operations. No revenue has been
recorded related to the Rapiscan Agreement.
We
may,
from time to time, be involved in other actual or potential proceedings that
we
consider to be in the normal course of our business. We do not believe that
any
of these proceedings will have a material adverse effect on our
business.
Environmental
Conditions
(Section
5.12)
N/A
Subsidiaries
(Section
5.14)
Other
stock ownership: see Permitted Investments section 1.1
Cardio
Tech International - 100,000 shares common stock - publicly traded - symbol
“CTE”
CorNova
-
1,500,000 shares common stock - private
Subsidiaries: C-Acquisition
Corporation (aka Core Systems) - 100% ownership
Accurel
Systems - 100% ownership
Accounts
(Section
5.16)
Other
bank accounts:
Bank
of
America (checking) #004602249511
Citizens
Bank (checking) #1130331331
Consent
of Inbound Licensors
(Section
6.12)
See
Section 5.6 above
611795
v8/HN .
611795
v8/HN
CORPORATE
RESOLUTIONS TO BORROW
|
Borrower: IMPLANT
SCIENCES CORPORATION
|
I,
the
undersigned Secretary or Assistant Secretary of IMPLANT SCIENCES CORPORATION
(the “Corporation”), HEREBY CERTIFY that the Corporation is organized and
existing under and by virtue of the laws of the Commonwealth of Massachusetts.
I
FURTHER
CERTIFY that attached hereto as Attachments 1 and 2 are true and complete
copies of the Articles of Incorporation, as amended, and the Restated Bylaws
of
the Corporation, each of which is in full force and effect on the date
hereof.
I
FURTHER
CERTIFY that at a meeting of the Directors of the Corporation, duly called
and
held, at which a quorum was present and voting (or by other duly authorized
corporate action in lieu of a meeting), the following resolutions (the
“Resolutions”) were adopted.
BE
IT
RESOLVED, that any one (1) of the following named officers, employees, or agents
of this Corporation, whose actual signatures are shown below:
|
NAMES
|
POSITION
|
ACTUAL
SIGNATURES
|
|
▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇
|
President
and CEO
|
|
|
▇▇▇▇▇
▇. ▇▇▇▇
|
Vice
President and CFO
|
|
acting
for and on behalf of this Corporation and as its act and deed be, and they
hereby are, authorized and empowered:
Borrow
Money.
To
borrow from time to time from Bridge Bank, N.A. (“Bank”), on such terms as may
be agreed upon between the officers, employees, or agents of the Corporation
and
Bank, such sum or sums of money as in their judgment should be borrowed, without
limitation.
Execute
Loan Documents.
To
execute and deliver to Bank that certain Loan and Security Agreement dated
as of
January 3, 2007 (the “Loan Agreement”) and any other agreement entered into
between Corporation and Bank in connection with the Loan Agreement, including
any amendments, all as amended or extended from time to time (collectively,
with
the Loan Agreement, the “Loan Documents”), and also to execute and deliver to
Bank one or more renewals, extensions, modifications, refinancings,
consolidations, or substitutions for the Loan Documents, or any portion
thereof.
Grant
Security.
To
grant a security interest to Bank in the Collateral described in the Loan
Documents, which security interest shall secure all of the Corporation’s
Obligations, as described in the Loan Documents.
Negotiate
Items.
To
draw, endorse, and discount with Bank all drafts, trade acceptances, promissory
notes, or other evidences of indebtedness payable to or belonging to the
Corporation or in which the Corporation may have an interest, and either to
receive cash for the same or to cause such proceeds to be credited to the
account of the Corporation with Bank, or to cause such other disposition of
the
proceeds derived therefrom as they may deem advisable.
Warrants.
To
issue Bank warrants to purchase the Corporation’s capital stock.
Letters
of Credit.
To
execute letter of credit applications and other related documents pertaining
to
Bank’s issuance of letters of credit.
Corporate
Credit Cards.
To
execute corporate credit card applications and agreements and other related
documents pertaining to Bank’s provision of corporate credit cards.
Further
Acts.
In the
case of lines of credit, to designate additional or alternate individuals as
being authorized to request advances thereunder, and in all cases, to do and
perform such other acts and things, to pay any and all fees and costs, and
to
execute and deliver such other documents and agreements as they may in their
discretion deem reasonably necessary or proper in order to carry into effect
the
provisions of these Resolutions.
BE
IT
FURTHER RESOLVED, that any and all acts authorized pursuant to these resolutions
and performed prior to the passage of these resolutions are hereby ratified
and
approved, that these Resolutions shall remain in full force and effect and
Bank
may rely on these Resolutions until written notice of their revocation shall
have been delivered to and received by Bank. Any such notice shall not affect
any of the Corporation’s agreements or commitments in effect at the time notice
is given.
I
FURTHER
CERTIFY that the officers, employees, and agents named above are duly elected,
appointed, or employed by or for the Corporation, as the case may be, and occupy
the positions set forth opposite their respective names; that the foregoing
Resolutions now stand of record on the books of the Corporation; and that the
Resolutions are in full force and effect and have not been modified or revoked
in any manner whatsoever.
IN
WITNESS WHEREOF, I have hereunto set my hand on January __, 2007 and attest
that
the signatures set opposite the names listed above are their genuine
signatures.
|
CERTIFIED
AND ATTESTED BY:
|
||
|
X
|
||
611795
v8/HN
CORPORATE
RESOLUTIONS TO BORROW
|
Borrower: ACCUREL
SYSTEMS INTERNATIONAL CORPORATION
|
I,
the
undersigned Secretary or Assistant Secretary of ACCUREL SYSTEMS INTERNATIONAL
CORPORATION (the “Corporation”), HEREBY CERTIFY that the Corporation is
organized and existing under and by virtue of the laws of the state of
California.
I
FURTHER
CERTIFY that attached hereto as Attachments 1 and 2 are true and complete
copies of the Articles of Incorporation, as amended, and the Restated Bylaws
of
the Corporation, each of which is in full force and effect on the date
hereof.
I
FURTHER
CERTIFY that at a meeting of the Directors of the Corporation, duly called
and
held, at which a quorum was present and voting (or by other duly authorized
corporate action in lieu of a meeting), the following resolutions (the
“Resolutions”) were adopted.
BE
IT
RESOLVED, that any one (1) of the following named officers, employees, or agents
of this Corporation, whose actual signatures are shown below:
|
NAMES
|
POSITION
|
ACTUAL
SIGNATURES
|
|
▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇
|
President
and CEO
|
|
|
▇▇▇▇▇
▇. ▇▇▇▇
|
Secretary
and Treasurer
|
|
acting
for and on behalf of this Corporation and as its act and deed be, and they
hereby are, authorized and empowered:
Borrow
Money.
To
borrow from time to time from Bridge Bank, N.A. (“Bank”), on such terms as may
be agreed upon between the officers, employees, or agents of the Corporation
and
Bank, such sum or sums of money as in their judgment should be borrowed, without
limitation.
Execute
Loan Documents.
To
execute and deliver to Bank that certain Loan and Security Agreement dated
as of
January 3, 2007 (the “Loan Agreement”) and any other agreement entered into
between Corporation and Bank in connection with the Loan Agreement, including
any amendments, all as amended or extended from time to time (collectively,
with
the Loan Agreement, the “Loan Documents”), and also to execute and deliver to
Bank one or more renewals, extensions, modifications, refinancings,
consolidations, or substitutions for the Loan Documents, or any portion
thereof.
Grant
Security.
To
grant a security interest to Bank in the Collateral described in the Loan
Documents, which security interest shall secure all of the Corporation’s
Obligations, as described in the Loan Documents.
Negotiate
Items.
To
draw, endorse, and discount with Bank all drafts, trade acceptances, promissory
notes, or other evidences of indebtedness payable to or belonging to the
Corporation or in which the Corporation may have an interest, and either to
receive cash for the same or to cause such proceeds to be credited to the
account of the Corporation with Bank, or to cause such other disposition of
the
proceeds derived therefrom as they may deem advisable.
Warrants.
To
issue Bank warrants to purchase the Corporation’s capital stock.
Letters
of Credit.
To
execute letter of credit applications and other related documents pertaining
to
Bank’s issuance of letters of credit.
Corporate
Credit Cards.
To
execute corporate credit card applications and agreements and other related
documents pertaining to Bank’s provision of corporate credit cards.
Further
Acts.
In the
case of lines of credit, to designate additional or alternate individuals as
being authorized to request advances thereunder, and in all cases, to do and
perform such other acts and things, to pay any and all fees and costs, and
to
execute and deliver such other documents and agreements as they may in their
discretion deem reasonably necessary or proper in order to carry into effect
the
provisions of these Resolutions.
BE
IT
FURTHER RESOLVED, that any and all acts authorized pursuant to these resolutions
and performed prior to the passage of these resolutions are hereby ratified
and
approved, that these Resolutions shall remain in full force and effect and
Bank
may rely on these Resolutions until written notice of their revocation shall
have been delivered to and received by Bank. Any such notice shall not affect
any of the Corporation’s agreements or commitments in effect at the time notice
is given.
I
FURTHER
CERTIFY that the officers, employees, and agents named above are duly elected,
appointed, or employed by or for the Corporation, as the case may be, and occupy
the positions set forth opposite their respective names; that the foregoing
Resolutions now stand of record on the books of the Corporation; and that the
Resolutions are in full force and effect and have not been modified or revoked
in any manner whatsoever.
IN
WITNESS WHEREOF, I have hereunto set my hand on January __, 2007 and attest
that
the signatures set opposite the names listed above are their genuine
signatures.
|
CERTIFIED
AND ATTESTED BY:
|
||
|
X
|
||
611795
v8/HN
CORPORATE
RESOLUTIONS TO BORROW
|
Borrower: C
ACQUISITION CORP.
|
I,
the
undersigned Secretary or Assistant Secretary of C ACQUISITION CORP. (the
“Corporation”), HEREBY CERTIFY that the Corporation is organized and existing
under and by virtue of the laws of the Commonwealth of Massachusetts.
I
FURTHER
CERTIFY that attached hereto as Attachments 1 and 2 are true and complete
copies of the Articles of Incorporation, as amended, and the Restated Bylaws
of
the Corporation, each of which is in full force and effect on the date
hereof.
I
FURTHER
CERTIFY that at a meeting of the Directors of the Corporation, duly called
and
held, at which a quorum was present and voting (or by other duly authorized
corporate action in lieu of a meeting), the following resolutions (the
“Resolutions”) were adopted.
BE
IT
RESOLVED, that any one (1) of the following named officers, employees, or agents
of this Corporation, whose actual signatures are shown below:
|
NAMES
|
POSITION
|
ACTUAL
SIGNATURES
|
|
▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇
|
President
and CEO
|
|
|
▇▇▇▇▇
▇. ▇▇▇▇
|
Vice
President and CFO
|
|
acting
for and on behalf of this Corporation and as its act and deed be, and they
hereby are, authorized and empowered:
Borrow
Money.
To
borrow from time to time from Bridge Bank, N.A. (“Bank”), on such terms as may
be agreed upon between the officers, employees, or agents of the Corporation
and
Bank, such sum or sums of money as in their judgment should be borrowed, without
limitation.
Execute
Loan Documents.
To
execute and deliver to Bank that certain Loan and Security Agreement dated
as of
January 3, 2007 (the “Loan Agreement”) and any other agreement entered into
between Corporation and Bank in connection with the Loan Agreement, including
any amendments, all as amended or extended from time to time (collectively,
with
the Loan Agreement, the “Loan Documents”), and also to execute and deliver to
Bank one or more renewals, extensions, modifications, refinancings,
consolidations, or substitutions for the Loan Documents, or any portion
thereof.
Grant
Security.
To
grant a security interest to Bank in the Collateral described in the Loan
Documents, which security interest shall secure all of the Corporation’s
Obligations, as described in the Loan Documents.
Negotiate
Items.
To
draw, endorse, and discount with Bank all drafts, trade acceptances, promissory
notes, or other evidences of indebtedness payable to or belonging to the
Corporation or in which the Corporation may have an interest, and either to
receive cash for the same or to cause such proceeds to be credited to the
account of the Corporation with Bank, or to cause such other disposition of
the
proceeds derived therefrom as they may deem advisable.
Warrants.
To
issue Bank warrants to purchase the Corporation’s capital stock.
Letters
of Credit.
To
execute letter of credit applications and other related documents pertaining
to
Bank’s issuance of letters of credit.
Corporate
Credit Cards.
To
execute corporate credit card applications and agreements and other related
documents pertaining to Bank’s provision of corporate credit cards.
Further
Acts.
In the
case of lines of credit, to designate additional or alternate individuals as
being authorized to request advances thereunder, and in all cases, to do and
perform such other acts and things, to pay any and all fees and costs, and
to
execute and deliver such other documents and agreements as they may in their
discretion deem reasonably necessary or proper in order to carry into effect
the
provisions of these Resolutions.
BE
IT
FURTHER RESOLVED, that any and all acts authorized pursuant to these resolutions
and performed prior to the passage of these resolutions are hereby ratified
and
approved, that these Resolutions shall remain in full force and effect and
Bank
may rely on these Resolutions until written notice of their revocation shall
have been delivered to and received by Bank. Any such notice shall not affect
any of the Corporation’s agreements or commitments in effect at the time notice
is given.
I
FURTHER
CERTIFY that the officers, employees, and agents named above are duly elected,
appointed, or employed by or for the Corporation, as the case may be, and occupy
the positions set forth opposite their respective names; that the foregoing
Resolutions now stand of record on the books of the Corporation; and that the
Resolutions are in full force and effect and have not been modified or revoked
in any manner whatsoever.
IN
WITNESS WHEREOF, I have hereunto set my hand on January __, 2007 and attest
that
the signatures set opposite the names listed above are their genuine
signatures.
|
CERTIFIED
AND ATTESTED BY:
|
||
|
X
|
||
611795
v8/HN
DISBURSEMENT
REQUEST AND AUTHORIZATION
|
Borrowers:
Implant Sciences Corporation; Accurel Systems International Corporation;
C
Acquisition Corp.
|
Bank: Bridge
Bank N.A.
|
LOAN
TYPE. This is a Variable Rate, Revolving Line of Credit of a principal amount
up
to $5,000,000.
PRIMARY
PURPOSE OF LOAN. The primary purpose of this loan is for business.
SPECIFIC
PURPOSE. The specific purpose of this loan is: working capital.
DISBURSEMENT
INSTRUCTIONS. Borrowers understand that no loan proceeds will be disbursed
until
all of Bank’s conditions for making the loan have been satisfied. Please
disburse the loan proceeds as follows:
|
Revolver
|
Term
Loan
|
||
|
Amount
paid to Borrowers directly:
|
$____________
|
$____________
|
|
|
Undisbursed
Funds
|
$____________
|
$____________
|
|
|
Principal
|
$____________
|
$____________
|
|
|
CHARGES
PAID IN CASH. Borrowers have paid or will pay in cash as agreed the
following charges:
|
|||
|
Prepaid
Finance Charges Paid in Cash:
|
|||
|
$37,500 Loan
Fee
|
|||
|
$____ Accounts
Receivables Audit
|
|||
|
Other
Charges Paid in Cash:
|
|||
|
$____ UCC
Search Fees
|
|||
|
$____ UCC
Filing Fees
|
|||
|
$____ Outside
Counsel Fees and Expenses (Estimate)
|
|||
|
Total
Charges Paid in Cash
|
|||
AUTOMATIC
PAYMENTS. Borrowers hereby authorize Bank automatically to deduct from
Borrowers’ account numbered ________________ the amount of any loan payment. If
the funds in the account are insufficient to cover any payment, Bank shall
not
be obligated to advance funds to cover the payment.
FINANCIAL
CONDITION. BY SIGNING THIS AUTHORIZATION, BORROWERS REPRESENT AND WARRANT TO
BANK THAT THE INFORMATION PROVIDED ABOVE IS TRUE AND CORRECT AND THAT THERE
HAS
BEEN NO ADVERSE CHANGE IN BORROWER’S FINANCIAL CONDITION AS DISCLOSED IN
BORROWERS’ MOST RECENT FINANCIAL STATEMENT TO BANK. THIS AUTHORIZATION IS DATED
AS OF JANUARY 3, 2007.
|
BORROWERS:
|
||
|
Implant
Sciences Corporation
|
Accurel
Systems International Corporation
|
|
|
Authorized
Officer
|
Authorized
Officer
|
|
|
C
Acquisition Corp.
|
||
|
Authorized
Officer
|