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Exhibit 10.13
SECURITY AGREEMENT
Inventory, Accounts, Equipment and Other Property
/ / United States Trust Company /X/ USTrust
▇▇/▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
May 1, 1996
Implant Sciences Corporation, ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇-▇▇▇▇, a corporation under the laws of Massachusetts (hereinafter, the
"Borrower"), and the Bank checked above (hereinafter, the "Bank") make this
agreement in consideration of the mutual covenants contained herein and benefits
to be derived herefrom.
ARTICLE ▇. ▇▇▇▇▇ OF SECURITY INTEREST
1.1 To secure the Borrower's prompt, punctual, and faithful performance
of all and each of the Borrower's Liabilities (as the term is defined herein) to
the Bank, Borrower hereby grants to the Bank a continuing security interest in
and to, and assigns to the Bank, the following, and each item thereof, whether
now owned or now due, or in which the borrower has an interest or hereafter, at
any time in the future, acquired, arising, or to become due, or in which the
Borrower obtains an interest, and all products,proceeds, substitutions, and
accession of or to any of the following (all of which, together with anyother
property in which the Bank may in the future be granted a security interest
pursuant hereto, is referred to hereinafter as the "Collateral"):
(a) All Accounts and Accounts Receivable;
(b) All Inventory;
(c) All Contract Rights;
(d) All General Intangibles;
(e) All Equipment;
(f) All Farm Products;
(g) All Goods;
(h) All Chattel Paper;
(i) All Fixtures;
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(j) All books, records, and information relating to the
Collateral and/or to the operation of the Borrower's business, and all rights of
access to such books, records, and information and all property in which such
books, records, and information are stored, recorded, and maintained;
(k) All Instruments, Documents of Title, Documents, policies
and certificates of insurance, Securities, deposits, deposit accounts, money,
cash, or other property;
(l) All federal, state, and local tax refunds and/or
abatements to which the Borrower is, or becomes entitled, no matter how or when
arising, including, but not limited to any carryback tax refunds;
(m) All insurance proceeds, refunds, and premium rebates,
including, without limitation, proceeds of fire and credit insurance, whether
any of such proceeds, refunds, and premium rebates, arise out of any of the
foregoing (a through l), or otherwise;
(n) All liens, guarantees, rights, remedies, and privileges
pertaining to any of the foregoing (a through m) including the right of stoppage
in transit.
1.2 The within grant of a security interest is in addition to, and
supplemental of, any security interest previously granted by the Borrower to the
Bank and shall continue in full force and effect applicable to all Liabilities
and to any future advances made by the Bank to or on behalf of the Borrower
until this Agreement is specifically terminated in writing by a duly authorized
officer of the Bank.
1.3 "Proceeds" include, without limitation, "Proceeds" as defined
in the Uniform Commercial Code as adopted in Massachusetts (hereinafter, the
"UCC") and also, insurance proceeds and each type of property described in
Sections 1.1(a) through and including 1-1(n).
1.4 Any exceptions to the security interest granted the Bank
herein are described in SCHEDULE A, annexed hereto.
ARTICLE 2. CERTAIN DEFINITIONS
As herein used, the following terms have the following meanings.
2.1 "Liability" and "Liabilities" include, without limitation, any
and all liabilities, debts, and obligations of the Borrower to the Bank and any
and all liabilities, debts, and obligations of every endorser, guarantor, and
surety of the Borrower to the Bank, each of every kind, nature and description
now existing or hereafter arising, whether under this Agreement or otherwise.
"Liabilities" also includes, without limitation, each obligation to repay all
loans, advances, indebtedness, notes, obligations, overdrafts, and amounts now
or hereafter at any time owing by the Borrower to the Bank (including all future
advances or the like, whether or not given pursuant to a commitment by the
Bank), whether or not any of such are liquidated, unliquidated, primary,
secondary, secured, unsecured, direct, indirect, absolute, contingent, or of any
other type, nature, or description, or by reason of any cause of action which
the Bank may hold as against the Borrower. "Liabilities" also includes, without
limitation, all notes and other obligations of the Borrower now
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or hereafter assigned to or held by the Bank, each of every kind, nature and
description. "Liabilities" also includes, without limitation, all interest and
other amounts which may be charged to the Borrower and/or which may be due from
the Borrower to the Bank from time to time: all fees and charges in connection
with any account maintained by the Borrower with the Bank or any service
rendered by the Bank; and all costs and expenses incurred or paid by the Bank in
respect of this and any other agreement between the Borrower and the Bank or
instrument or document furnished by the Borrower to the Bank (including, without
limitation Costs of Collection, attorneys' reasonable fees, and all court and
litigation cost and expenses). "Liabilities" also includes, without limitation,
any and all obligations of the Borrower to act to refrain from acting in
accordance with the terms, provisions, and covenants of this Agreement and of
any other agreement between the Borrower and the Bank or instrument or document
furnished by the Borrower to the Bank. As used herein, the term "indirect"
includes, without limitation, all obligations and liabilities which the Bank may
incur or become liable for, on account of, or as a result of any transactions
between the Bank and the Borrower including, without limitation, any which may
arise out of any Letter of Credit or acceptance, or similar instrument issued or
obligation incurred by the Bank for the Account of the Borrower, any which may
arise out of any action brought or threatened against the Bank by the Borrower,
any guarantor or endorser of the Liabilities of the Borrower, or by any other
person in connection with the Liabilities, and any obligation of the Borrower
which may arise as endorser or guarantor of any * party, or as obligor to any
third party which obligation has been endorsed, participated or assigned to the
Bank. The term "indirect" also refers to any direct or contingent liabilities of
the Borrower to make payment towards any obligation held by the Bank, including,
without limitation, on account of any industrial revenue bond) to the extent so
held by the Bank. The Bank's books and records shall be prima facie evidence of
the Borrower's indebtedness to the Bank.
2.2 "Costs of Collection" includes, without limitation, all
attorneys' reasonable fees and out-of-pocket expenses incurred by the Bank's
attorneys, and all costs incurred by the Bank in the administration of the
Liabilities, this Agreement, and all other instruments and agreements executed
in connection with or relating to the Liabilities including, without limitation,
costs and expenses associated with travel on behalf of the Bank. Costs of
Collection also includes, without limitation, all attorneys' reasonable fees,
out-of-pocket expenses incurred by the Bank's attorneys and all costs and
expenses incurred by the Bank, including, without limitation, costs and expenses
associated with travel on behalf of the Bank, which costs and expenses are
directly or indirectly related to or in respect of the Bank's efforts to
preserve, protect, collect, or enforce the Collateral, the Liabilities and/or
the Bank's Rights and Remedies or any of the Bank's Rights and Remedies against
or in respect of any guarantor or other person liable in respect of the
Liabilities (whether or not suit is instituted in connection with such efforts).
The Costs of Collection shall be to the Liabilities of the Borrower to the Bank,
as if such had been lent, advanced, and credited by the Bank to, or for the
benefit of, the Borrower.
2.3 "Accounts" and "Accounts Receivable" include, without
limitation, "Accounts" as defined in the UCC and also all accounts, accounts
receivable, notes, drafts, acceptances, and other forms of obligation and
receivables and rights to payment for credit extended and for goods sold or
leased, or services rendered, whether or not yet earned by performance, all
Inventory which gave rise thereto, and all rights associated with such
Inventory, including the right of stoppage in transit, all reclaimed, returned,
rejected, or repossessed Inventory, (if any) the sale of which gave rise to any
Account.
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2.4 "Inventory" includes, without limitation, "inventory" as
defined in the UCC and also all goods, wares, merchandise, raw materials, work
in process, finished goods, and all packaging, advertising, shipping materials,
and documents related to any of the foregoing and all labels , and other
devices, names, or marks affixed or to be affixed thereto for identifying or
selling the same, and other personal property of every description held for sale
or lease or furnished or to be furnished under a contract or contracts of sale
or service by the Borrower, or used or consumed or to be used or consumed in the
Borrower's business, and all goods of and said description which are in transit,
and all returned, repossessed and rejected goods of said description, and all
such goods of said description which are detained from or rejected for entry
into the United States, and all documents (whether or not negotiable) which
represent any of the foregoing.
2.5 "Contract Rights" includes, without limitation, "contract
rights" as now or formerly outlined in the UCC and also any right to payment
under a contract not yet earned by performance and not evidenced by an
instrument or Chattel Paper.
2.6 "General Intangibles" includes, without limitation, "general
intangibles" as defined in the UCC, and also all rights to payment for credit
extended, deposits, amounts due to the Borrower, credit memoranda in favor of
the Borrower, warranty claims, all means and vehicles of investment or hedging,
including, without limitation, options, warrants, and futures contracts,
records, customer lists, goodwill, causes of action, judgements, payments under
any settlement or other agreement, literary rights, rights to performance,
royalties, licence fees, franchise fees, rights of admission, licenses,
franchises, permits, certificates of convenience and necessity, and similar
rights granted by any governmental authority, copyrights, trade marks, trade
names, service marks, patents, patent applications, patents pending, and other
intellectual property, developmental ideas and concepts, proprietary processes,
blueprints, drawings, designs, diagrams, plans, reports, charts, catalogues,
manuals, technical data, computer programs, computer records, computer software,
rights of access to computer record service bureaus, service bureau computer
contracts, and computer data, proposals, costs estimates, and other
reproductions on paper, or otherwise, of any and all concepts or ideas, and any
matter related to, or connected with, the design, development, manufacture,
sale, marketing, leasing, or use of any or all property produced, sold, or
leased, by the Borrower or credit extended or services performed, by the
Borrower, whether intended for an individual customer or the general business of
the Borrower, or used or useful in connection with research by the Borrower.
2.7 The term "Related Entity" refers to any corporation, trust,
partnership, joint venture, or other enterprise which is a parent,
brother-sister, subsidiary, or affiliate of the Borrower or could have such
enterprise tax returns or financial statements consolidated with the Borrower's,
or could be a member of the same controlled group of corporations (within the
meaning of Section 1563 of the Internal Revenue Code of 1954) of which the
Borrower is a member.
2.8 "Equipment" includes, without limitation, "equipment" as
described in the UCC, and also all motor vehicles, rolling stock, machinery,
office equipment, plant equipment, tools, store fixtures, furniture, and other
goods, property, and assets which are used and or were purchased for use in the
operation or furtherance of the Borrower's business.
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2.9 "Farm Products", "Goods", "Chattel Paper", "Instruments",
"Documents of Title", "Documents", "Securities", "Fixtures" and "Account
Debtors" each has the same meaning respectively given that term in the UCC.
2.10 "Receivables collateral" refer to that portion of the
collateral which consists of the Borrower's Accounts, Accounts Receivable,
Contract Rights, General Intangibles, Chattel Paper, Instruments, documents of
Title, Documents, Securities, letters of credit, and bankers acceptances, and
any rights to payment now held or in which the Borrower has an interest or
hereafter acquired, or in which the Borrower obtains an interest.
ARTICLE 3. REPRESENTATIONS, WARRANTIES AND COVENANTS
3.1 The Borrower shall pay when due (or on demand if so payable)
and promptly, punctually, and faithfully shall perform each Liability.
3.2 (a) This section applies if the Borrower has advised the Bank that
the Borrower is a corporation. The Borrower presently is and shall hereafter
remain in good standing as a corporation in that State indicated in the Preamble
of this Agreement and is and shall hereafter remain duly qualified and in good
standing in every other State in which, by reason of the nature or location of
the Borrower's assets or operation of the Borrower's business, such
qualification may be necessary. The execution and delivery of this Agreement and
of any other instruments or documents executed in connection herewith constitute
representations by the individual signing this Agreement and said instruments,
or documents and by the Borrower that such execution and delivery have received
all corporation authorization as may be necessary to permit such execution and
delivery to, and that they do bind the Borrower.
(b) Each Related Entity listed on EXHIBIT B, annexed hereto.
The Borrower shall provide the Bank with prior written notice of any entity's
becoming or ceasing to be a Related Entity.
3.3 This section applies if the Borrower has advised the Bank that
the Borrower is a partnership. The names and addresses of all partners of the
Borrower are set forth on EXHIBIT B, annexed hereto. The execution and delivery
of this Agreement and of any other instruments executed in connection herewith
constitute representations by the individual signing this Agreement and said
instruments and by the Borrower that such execution and delivery are made with
the authorization of the general partners of the Borrower, and, to the extent
required, the limited partners of the Borrower, and that they do bind the
Borrower and any successor to the Borrower. The Borrower shall provide the Bank
with prior written notice of the admission or withdrawal of any partner to or
from the Borrower.
3.4(a) EXHIBIT C annexed hereto, constitutes a listing of:
(i) all trade names and trade styles under which the
Borrower presently conducts its business
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(ii) all legal names and legal statuses such as a
corporation or partnership under which the Borrower
ever conducted its business.
(iii) all entities and/or persons with whom the Borrower
ever consolidated or merged, or from whom the
Borrower ever acquired in a single transaction or in
a series of related transactions substantially all of
such entity's or person's assets.
(b) Except upon not less than twenty-one (21) days prior
written notice given the Bank, the Borrower will not undertake or commit to
undertake any action such that the results that action, if undertaken prior to
the date of this Agreement, would have been reflected on EXHIBIT C.
3.5 The Borrower is, and hereafter remain, the owner of the
Collateral free and clear of all liens, encumbrances, attachments, security
interests, purchase money, security interest, mortgages, and charges with the
exception of (a) the security interest created herein, and the security interest
and other encumbrances (if any) listed on EXHIBIT D, annexed hereto, the
Borrower does not presently, and shall not hereafter have possession of any
property on consignment. The Borrower shall timely pay all of the Borrower's
indebtedness, mortgages, liens, other encumbrances which are secured by the
security interest which is superior to that granted the Bank herein.
3.6 The Collateral, and the books, records, and papers of Borrower
pertaining thereto, are kept and maintained solely at, and have never been kept
or maintained at any location other than, the principal executive offices of
Borrower stated above, and at those locations which are listed on EXHIBIT F,
annexed hereto which EXHIBIT includes all service bureaus with which any such
records are maintained. Except to accomplish sales of Inventory in ordinary
course of business and to utilize such of the Collateral as is removed from such
locations in the ordinary course of business (such as motor vehicles). The
Collateral will not be removed from said principal executive offices or those
locations listed on EXHIBIT E at which Collateral is presently located.
3.7 There is not presently pending or threatened by or against the
Borrower nor shall there be pending or threatened in the future any suit,
action, proceeding, or investigation which if determined adversely to the
Borrower, would have a material adverse effect upon the Borrower's financial
condition or ability to conduct its business as such business is presently
conducted.
3.8 (a) The Borrower shall accord the Bank and the Bank's
representatives with access from time to time as the Bank and such
representatives may require to all properties owned by or over which the
Borrower has control. The Bank, and the Bank's representatives, shall have the
right, and the Borrower will permit the Bank and such representatives from time
to time as the Bank and such representatives may request to examine, inspect,
copy, and make extracts from any and all of the Collateral, and any and all of
the Borrower's books, records, electronically stored data, papers, and files.
The Borrower shall make available to the Bank any copying facilities which the
Borrower has.
(b) The Borrower hereby authorizes the Bank and the Bank's
representatives to inspect, copy, duplicate, review, cause to be reduced to hard
copy, run off, draw off, and otherwise to use any and all computer or
electronically stored information or data which relates to the
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Borrower, which information or data is in the possession of the Borrower or any
services bureau, contractor, or other person, and directs any such services
bureau, contractor, or other person fully to cooperate with the Bank and the
Bank's representatives with respect thereto.
(c) The Borrower authorizes the Bank to verify the Collateral
or any portion thereof, including verification with Account Debtors, and/or with
the Borrower's computer billing companies, collection agencies, and accountants
and to sign the name of the Borrower on any notice to the borrower's Account
Debtors or on any notice relative to the verification of the Collateral.
3.9 The Borrower shall provide the Bank with such information concerning
the borrower, the Collateral, the operation of the Borrower's business, and the
Borrower's financial condition as the Bank may request from time to time as more
particularly provided in the Loan Agreement of even date between the Borrower
and the Bank. All financial information so provided the Bank by the Borrower
shall be prepared in accordance with generally accepted accounting principles
applied consistently in the preparation thereof and with prior periods and shall
fairly reflect the matters described therein.
3.10 Borrower shall have and maintain at all times insurance covering
such risks, in such amounts, containing such terms, in such forms, for such
periods, and written by such companies as may be satisfactory to the Bank. All
such insurance shall provide for a minimum of twenty (20) days written notice of
cancellation to the Bank and all such insurance which covers the Collateral
shall include such endorsement in favor of the Bank as the Bank may specify.
Such endorsement shall provide that the insurance to the extent of the Bank's
interest therein shall not be impaired or invalidated, in whole or in part, by
reason of any act or neglect of the borrower or by the failure of the Borrower
to comply with any warranty or condition of the policy. In the event of the
failure by the Borrower to provide and maintain insurance as herein provided,
the Bank may, at its option, provide such insurance. The borrower shall furnish
to the Bank certificates or other evidence satisfactory to the Bank concerning
compliance by the Borrower with the foregoing insurance provisions. The Borrower
shall advise the Bank of each claim made by the Borrower under any policy of
insurance which covers the Collateral and will permit the Bank, at the Bank's
option in each instance, to the exclusion of the borrower, to conduct the
adjustment of each such claim. Originals of all such policies shall be delivered
to and held by the Bank. The Borrower hereby appoints the Bank as the Borrower's
attorney to obtain, adjust, settle, and cancel any insurance described in this
section and to endorse in favor of the Bank any and all drafts and other
instruments with respect to such insurance. The within appointment, being
coupled with an interest, is irrevocable until this Agreement is terminated by a
written instrument executed by a duly authorized officer of the Bank. The Bank
shall not be liable on account of any exercise pursuant to said power except for
any exercise in actual wilful misconduct and bad faith. The Bank may apply any
proceeds of such insurance against the Liabilities whether or not such have
matured, in such order of application as the Bank may determine.
3.11 The Borrower promptly shall pay, as they become due and payable,
all taxes and unemployment contributions and other charges of any kind or nature
levied, assessed or claimed against the Borrower or the Collateral by any person
or entity whose claim could result in the lien upon the assets of the Borrower
or by any governmental authority, including without limitation, liens arising in
connection with hazardous material, as referenced in Section 3.13, below;
properly shall
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exercise any trust responsibilities imposed upon the Borrower by reason of
withholding from employees pay and timely shall make all contributions and other
payments as may be required pursuant to any employee benefit plan now or
hereafter established by the Borrower. At its option, the Bank may, but shall
not be obligated to pay any taxes, unemployment contributions, and any and all
other charges levied upon the Borrower or the Collateral by any person or entity
or governmental authority, and make any contributions or other payments on
account of the Borrower's employee benefit plan as the Bank, in the Bank's
discretion, may deem necessary or desirable, to protect, maintain, preserve,
collect, or realize upon any or all of the Collateral or the value thereof or
any right or remedy pertaining thereto.
3.12 The Borrower is in compliance, and shall hereafter comply with and
use its assets in compliance with, all statutes, regulations, ordinances,
directives, and orders of any federal, state, municipal, and other governmental
authority which has or claims jurisdiction over the Borrower, any of the
Borrower's assets, or any person in any capacity under which the Borrower would
be responsible for the conduct of such person.
3.13 (a) The Borrower has never occupied or operated a site or vessel
on which any hazardous materials or oil was stored or transported without
compliance with all statutes, regulations, ordinances, directives, and orders of
every federal, state, municipal and other governmental authority which has or
claims jurisdiction relative thereto, (site, vessel, and hazardous materials
respectively being defined in Mass. Gen Laws Ch. 21E), disposed of, transported,
or arranged for the transport of any hazardous material or oil without
compliance with all such statutes, regulations, ordinances, directives, and
orders, been legally responsible for any release of threat of release of any
hazardous material or oil, received notification of any potential or known
release or threat of release of any hazardous material or oil from any site or
vessel occupied or operated by the Borrower and/or of the incurrence of any
expense or loss in connection with the assessment containment, or removal of any
release or threat of release of any hazardous material or oil from any such site
or vessel.
(b) The Borrower shall not dispose of any hazardous material
or oil on any site or vessel occupied or operated by the Borrower; not store on
any site or vessel occupied or operated by the Borrower, or transport or arrange
for the transport of any hazardous material or oil except if such storage or
transport is in the ordinary course of the Borrower's business and is in
compliance with all such statues, regulations, ordinances, directives and
orders, take all such action, including, without limitation, the conducting of
engineering tests to confirm that no hazardous material or oil is or ever was
disposed of on any site or vessel occupied or operated by the Borrower, provide
the Bank with written notice, upon the intended storage or transport of any
hazardous material or oil by the Borrower, upon the Borrower's obtaining
knowledge or notice of any potential or known release or threat of release of
any hazardous material or oil at or from any site or vessel occupied or operated
by the Borrower, and/or upon the Borrower's obtaining knowledge of any
incurrence of any expense or loss by the governmental authority in connection
with the assessment, containment, or removal of any hazardous material or oil
for which expense or loss the Borrower may be liable.
3.14 The Borrower shall not sell, offer to sell, lease, or otherwise
transfer or dispose of the Collateral or any part thereof or any interest
therein, provided, however, the Borrower may use the
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Receivables Collateral and sell or lease the Inventory in the ordinary conduct
of the Borrower's business, subject to all provisions hereof.
3.15 The Borrower shall not:
(a) pay any dividend, other than a common stock dividend of
the Borrower's own capital stock.
(b) own, redeem, retire, purchase or acquire any of the
Borrower's capita stock.
(c) invest in or purchase any stock or securities or rights to
purchase such stock or securities of any corporation or other entity.
(d) merge or consolidate or be merged or consolidated with or
into any other corporation or other entity.
3.16 The Borrower shall execute and deliver to the Bank such
instruments and shall do all such things from time to time hereafter as the Bank
may request to carry into effect the provisions and intent of this Agreement, to
protect and perfect the Bank's security interest in any to the Collateral, and
to comply with all applicable statutes and laws, and to facilitate the
collection and/or enforcement of Receivables Collateral. Contemporaneous with
the execution of this Security Agreement, the Borrower shall execute all such
instruments as may be required by the Bank with respect to the perfection of the
security interests granted herein, including without limitation, financing
statements in such form and to be filed in accordance with the provisions of the
Uniform Commercial Code in such State or States as the Bank may determine, and
applications for notations of the Bank as lien holder, mortgagee, or the like,
on such certificates or similar instruments as may have been issued with respect
to the Borrower's ownership of one or more items of the Collateral. A carbon,
photographic, or other reproduction of this Agreement or of any financing
statement or other instrument executed pursuant to his Section shall be
sufficient for filing to perfect the security interest granted herein.
3.17 The Borrower shall
(a) keep the Collateral in good order and repair.
(b) not waste or destroy or suffer the waste or
destruction of the Collateral of any part thereof, and
(c) not use any of the Collateral in violation of any
policy insurance thereon.
3.18 The Borrower shall not indirectly do or cause to be done any
act which, if done directly by the Borrower, would breach any covenant contained
herein or in any other agreement between Borrower and the Bank.
3.19 The within representations, covenants, and warranties are in
addition to any others, previously, presently, or hereafter made by the Borrower
to or with the Bank in any other instrument.
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ARTICLE 4. COLLECTION OF ACCOUNTS, ACCOUNTS RECEIVABLE, CONTRACT RIGHTS AND
OTHER COLLATERAL
4.1 At any time and whether or not an Event of Default has occurred
hereunder.
(a) The Bank may notify any of the Borrower's account or
contract debtors, either in the name of the Bank or the Borrower, to make
payment directly to the Bank or such other address as may be specified by the
Bank, and may advise any person of the Bank's security interest in and to the
Collateral, and may collect directly from the obligors thereon, all amounts due
on account of the Collateral; and
(b) At the Bank's request, the Borrower will provide written
notification to any or all of the Borrower's account or contract debtors
concerning the Bank's security interest in the Collateral and will request that
such account or contract debtors forward payment thereof directly to the Bank.
4.2 Upon and after notification to the Borrower from the Bank
(whether or not an Event of Default has occurred hereunder and whether or not
any notification has been given the Borrower's account debtors pursuant to
Section 4-1, above), the Borrower
(a) shall hold any proceeds and collection of any of the
Collateral in trust for Bank, and shall not commingle such proceeds or
collections with any other funds of the Borrower; and
(b) shall deliver each of the following duly endorsed, assigned
or otherwise made payable to the Bank: (i) all such proceeds to the Bank
immediately upon the receipt thereof by the Borrower in the identical form
received, and (ii) all security or collateral for, guarantees of, letters of
credit, trade and bankers' acceptances, and similar letters and instruments in
respect of any of the Collateral.
4.3 The Borrower hereby irrevocably constitutes and appoints the
Bank as the borrower's true and lawful attorney, (whether or not an Event of
Default has occurred hereunder and whether or not any notification has been
given the Borrower's account debtors pursuant to Section 4-1 above), with full
power of substitution, to convert the collateral into cash at the sole risk,
cost and expense of the Borrower, but for the sole benefit of the Bank. The
rights and powers granted the Bank by the within appointment include but are not
limited to the right and power to:
(a) prosecute, defend, compromise, or release any action
relating to the Collateral.
(b) sign change of address forms to change the address to which
the Borrower's mail is to be sent as the Bank shall designate; receive and open
the Borrower's mail; remove any Collateral therefrom and turnover such mail
(other than such collateral), either to the Borrower, or to any trustee in
bankruptcy, receiver, assignee for the benefit of creditors of the Borrower, or
other legal representative of the borrower whom the Bank determines to be the
appropriate person to whom to so turn over such mail;
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(c) endorse the name of the Borrower in favor of the Bank upon
any and all checks, drafts, notes, acceptances, or other items or instruments;
signed and endorse the name of the Borrower on, and receive as secured party,
any of the collateral, any invoices, schedules of Collateral, freight or express
receipts, or bills of lading, storage receipts, warehouse receipts, or other
documents of title of a same or different nature relating to the Collateral.
(d) sign the name of the Borrower on any notice to the
Borrower's Account Debtors or verification of the Receivables Collateral; sign
the Borrower's name on any proof of the claim in bankruptcy against Account
Debtors, notices of lien, claims of mechanics liens, or assignments or releases
of mechanic lien security the Accounts;
(e) take all such action as may be necessary to obtain the
payment of any letter of credit of which the Borrower is a beneficiary;
(f) repair, manufacture, assemble, complete, package, deliver,
alter or supply goods, if any, necessary to fulfill in whole or in part the
purchase order of any customer of the Borrower;
(g) use, license, or transfer any or all General Intangibles of
the Borrower.
(h) sign and file or record any financing or other statement in
order to perfect or protect the Bank's security interest in the Collateral.
4.4 In connection with all powers of attorney included in this
Agreement, the borrower hereby grants unto the Bank full power to do any all
things necessary or appropriate, in connection with the exercise of such powers
as fully and effectually as the Borrower might or could do, and hereby ratifying
all that said attorney shall do or cause to be done by virtue of this Agreement.
4.5 The Bank shall not be obligated to do any of the acts or
exercise any of the powers authorized herein, but if the Bank elects to do any
such act or to exercise any of such powers shall not be accountable for more
than it actually receives as a result of such execution of power, and shall not
be responsible to the Borrower except for the Bank's actual wilful misconduct
and bad faith.
4.6 All of the powers of attorney set forth in this Agreement shall
not be affected by any disability or incapacity suffered by the Borrower and
shall survive same. All powers conferred upon the Bank by this Agreement, being
coupled with an interest, shall be irrevocable until this Agreement is
terminated by a written instrument executed by a duly authorized officer of the
Bank.
ARTICLE 5. DEFAULT
Upon the occurrence of any one or more of the following events therein,
("Events of Default"), any and all Liabilities of the Borrower to the Bank shall
become immediately due and payable, at the option of the Bank and without notice
or demand. The occurrence of any such Event of Default shall also constitute,
without notice or demand, a default under all other agreements between the Bank
and the Borrower and instruments, documents, and papers given the Bank by the
Borrower, whether such agreements, instruments, or papers now exist or hereafter
arise.
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5.1 The failure by the Borrower to pay upon demand (or when due, if
not payable on demand) any of the Liabilities.
5.2 The failure of the Borrower to promptly, punctually, and
faithfully perform, discharge, or comply with any of the Liabilities.
5.3 The determination by the Bank that any representation or
warranty heretofore, now, or hereafter made by the Borrower to the Bank, in any
document, instrument, agreement or paper was not true or accurate when given.
5.4 The occurrence of any event such that any indebtedness of the
Borrower from any lender other than the Bank could be accelerated,
notwithstanding that such acceleration has not taken place.
5.5 The occurrence of any Event of default under any agreement
between the Bank and the Borrower or instrument or paper given the Bank by the
Borrower, whether such agreement, instrument or paper now exists or hereafter
arises (notwithstanding that the Bank may not have exercised its rights upon
default under any such other agreement, instrument or paper).
5.6 Any act by, against, or relating to the Borrower, or its
property or assets, which act constitutes the application for, consent to, or
sufferance of the appointment of a receiver, trustee or other person, pursuant
to court action or otherwise, over all, or any part of the Borrower's property;
the granting of any trust mortgage or execution of an assignment for the benefit
of the creditors of the Borrower or the occurrence of any other voluntary or
involuntary liquidation or extension of debt agreement for the Borrower; the
failure by the Borrower to generally pay the debts of the Borrower as they
mature; adjudication of bankruptcy or insolvency relative to the Borrower; the
entry of an order for relief or similar order with respect to the Borrower in
any proceeding pursuant to the Bankruptcy Reform Act of 1978 (commonly referred
to as the Bankruptcy Code) or any other federal bankruptcy law; the filing of
any complaint, application or petition by or against the Borrower initiating any
matter in which the Borrower is or may be granted any relief from the debts of
the Borrower pursuant to the Bankruptcy Code or other insolvency statute or
procedure; the calling or sufferance of a meeting of creditors of the Borrower;
the meeting by the Borrower with a formal or informal creditors' committee; the
offering by or entering into by the Borrower of any composition, extension, or
any other arrangement seeking relief or extension for the debts of the Borrower,
or the initiation of any other judicial or non-judicial proceeding or agreement
by, against, or including the Borrower which seeks or intends to accomplish a
reorganization or arrangement with creditors.
5.7 The imposition of any lien upon any assets of the Borrower or
the entry of any judgment against the Borrower, which lien is not discharged or
judgment is not satisfied or appealed from (with execution or similar process
stayed) within fifteen (15) days of its imposition or entry.
5.8 The occurrence of any event or circumstance with respect to the
Borrower such that the Bank deems itself insecure.
5.9 The entry of any court order which enjoins, restrains, or in any
way prevents the Borrower from conducting all or any part of its business
affairs in the ordinary course.
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5.10 The service of any process upon the Bank seeking to attach by
mesne or trustee process any funds of the Borrower on deposit with the Bank.
5.11 Any change in the identity, authority, or responsibilities of
any person having management or policy authority with respect to the Borrower
and/or any direct or indirect change in the ownership of the capital stock of
the Borrower from that existing at the execution of this Agreement.
5.12 The occurrence of any loss, theft, damage, destruction, sale
(other than sales in the ordinary course of business) or encumbrance to or of
any of the assets of the Borrower.
5.13 Any act by or against, or relating to the Borrower or its assets
pursuant to which any creditor of the Borrower seeks to reclaim or repossess or
reclaims or repossesses, all or any portion of the Borrower's assets.
5.14 The death, termination of existence, dissolution, winding up, or
liquidation of the Borrower.
5.15 The occurrence of any of the foregoing Events of Default with
respect to any guarantor, endorser, or surety to the Bank of the Liabilities, or
the occurrence of any of the foregoing Events of Default with respect to any
parent (if the Borrower is a corporation), subsidiary, or affiliate of the
Borrower, as if such guarantor, endorser, surety, parent, subsidiary, or
affiliate were the "Borrower" described therein.
5.16 The termination of any guaranty by any guarantor of the
Liabilities.
ARTICLE 6. RIGHTS AND REMEDIES UPON DEFAULT
In addition to all of the rights, remedies, powers, privileges, and
discretions which the Bank is provided prior to the occurrence of an Event of
Default, the Bank shall have the following Rights and Remedies upon the
occurrence of any event of Default.
6.1 Upon the occurrence of any Event of Default, as described above,
and at any time thereafter, the Bank shall have all of the Rights and Remedies
of a secured party upon default under the UCC, in addition to which the Bank
shall have all of the following Rights and Remedies:
(a) To collect the Receivables Collateral with or without the
taking of possession of any of the Collateral; and/or
(b) To take possession of all or any portion of the Collateral;
and/or
(c) To sell, lease, or otherwise dispose of any or all of the
Collateral, in its then condition or following such preparation or processing as
the Bank deems advisable and with or without the taking of possession of any of
the Collateral;
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(d) To apply the Receivables Collateral or the proceeds of the
Collateral towards (but not necessarily in complete satisfaction of) the
Liabilities.
6.2 Any sale or other disposition of the Collateral may be at public
or private sale upon such terms and in such manner as the Bank deems advisable,
having due regard to compliance with any statute or regulation which might
affect, limit, or apply to the Bank's disposition of the collateral. The Bank
may conduct any such sale or other disposition of the Collateral upon the
Borrower's premises. Unless the Collateral is perishable or threatens to decline
speedily in value, or is of a type customarily sold on a recognized market (in
which event the Bank shall provide the Borrower with such notice as may be
practicable under the circumstances), the Bank shall give the Borrower at least
the greater of the minimum notice required by law or seven (7) days prior
written notice of the date, time, and place of any proposed public sale, and of
the date after which any private sale or other disposition of the Collateral may
be made. The Bank may purchase the Collateral, or any portion of it at any sale
held under this Article.
6.3 In connection with the Bank's exercise of the Bank's rights
under this Article, the Bank may enter upon, occupy, and use any premises owned
or occupied by the Borrower, and may exclude the Borrower from such premises or
portion thereof as may have been so entered upon, occupied, or used by the Bank.
The Bank shall not be required to remove any of the Collateral from any such
premises upon the Bank's taking possession thereof, and may render any
Collateral unusable to the Borrower. In no event shall the Bank be liable to the
Borrower for use of occupancy by the Bank of any premises pursuant to this
Article, nor for any charge (such as wages for the Borrower's employees and
utilities) incurred in connection with the Bank's exercise of the Bank's Rights
and Remedies.
6.4 The Borrower hereby grants to the Bank a nonexclusive
irrevocable license to use, apply, and affix any trademark, tradename, logo, or
the like in which the Borrower now or hereafter has rights, such license being
with respect to the Bank's exercise of the rights hereunder including, without
limitation, in connection with any completion of the manufacture of Inventory or
sale or other disposition of Inventory.
6.5 Upon the occurrence of any Event of Default, the Bank may
require the Borrower to assemble the Collateral and make it available to the
Bank at the Borrower's sole risk and expense at a place or places which are
reasonably convenient to both the Bank and Borrower.
6.6 The rights, remedies, powers, privileges, and discretions of the
Bank hereunder therein, (the "Bank's Rights and Remedies") shall be cumulative
and non exclusive of any rights or remedies which it would otherwise have. No
delay or omission by the Bank in exercising or enforcing any of the Bank's
Rights and Remedies shall operate as, or constitute, a waiver thereof. No waiver
by the Bank of any Event of Default or of any default under any other agreement
shall operate as a waiver of any other default hereunder or under any other
agreement. No single or partial exercise of any of the Bank's Rights or
Remedies, and no other agreement or transaction, of whatever nature entered into
between the Bank and the Borrower at any time, either express or implied, shall
preclude any other or further exercise of the Bank's Rights and Remedies. No
waiver by the Bank of any of the Bank's Rights and Remedies on any one occasion
shall be deemed a waiver on any subsequent occasion, nor shall it be deemed a
continuing waiver. All of the Bank's
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Rights and Remedies and all of the Bank's rights, remedies, powers, privileges,
and discretions under any other agreement or transaction are cumulative, and not
alternative or exclusive, and may be exercised by the Bank at such time or times
and in such order of preference as the Bank in its sole discretion may
determine.
ARTICLE 7. GENERAL
7.1 Any and all deposits or other sums at any time credited by or
due to the Borrower from the Bank or any of its banking or lending affiliates or
any bank acting as a participant under or any loan arrangement between the Bank
and the Borrower, and any cash, securities, instruments, or other property of
the Borrower in the possession of the Bank, or any of its banking or lending
affiliates, and any bank acting as a participant under any loan arrangement
between the Bank and the Borrower, whether for safekeeping, or otherwise, or in
transit to or from the Bank or any of its banking or lending affiliates or any
such participant, or in the possession of any third party acting on the Bank's
behalf (regardless of the reason the Bank had received the same or whether the
Bank has conditionally released the same) shall at all times, constitute
security for any and all Liabilities, and may be applied or set off against such
Liabilities at any time whether or not the Liabilities are then due or whether
or not other collateral is available to the Bank.
7.2 (a) The Borrower WAIVES notice of non-payment, demand,
presentment, protest, and all forms of demand and notice, both with respect to
the Liabilities and the Collateral.
(b) The Borrower, if entitled to it, WAIVES the right to notice
and/or hearing prior to the exercise of the Bank's rights upon default.
7.3 The Bank shall have no duty as to the collection or protection
of the Collateral beyond the safe custody of such of the Collateral as may come
into possession of the Bank and shall have no duty as to the preservation of
rights against prior parties or any other rights pertaining thereto. The Bank's
Rights and Remedies may be exercised without resort or regard to any other
source of satisfaction of the Liabilities.
7.4 All notices and other correspondence to the Borrower by the Bank
in connection with this Agreement shall be deemed effective upon mailing to the
Borrower's address found at beginning of this Agreement, which address may be
changed on seven (7) days written notice given the Bank by the Borrower. All
notices and other correspondence to the Bank by the Borrower in connection with
this Agreement shall be to the Bank's principal office, or as the Bank may
otherwise specify from time to time, and shall be sent by certified mail, return
receipt requested.
7.5 This Agreement shall be binding upon the Borrower and the
Borrower's heirs, executors, administrators, representatives, successors, and
assigns and shall enure to the benefit of the Bank and the Bank's successors and
assigns. In the event that the Bank assigns or transfers its rights under this
Agreement, the assignee shall thereupon succeed to and become vested with all
rights, powers, privileges, and duties of the Bank hereunder and the Bank shall
thereupon be discharged and relieved from its duties and obligations hereunder.
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7.6 Any determination that any provision of this Agreement of any
application thereof is invalid, illegal, or unenforceable in any respect in any
instance shall not affect the validity, legality and enforceability of such
provision in any other instance, or the validity, legality, or enforceability of
any other provision of this Agreement.
7.7 This Agreement and all other instruments executed in connection
herewith incorporates all discussions and negotiations between the Borrower and
the Bank, either express or implied, concerning the matters included herein and
in such other instruments, any custom or usage to the contrary notwithstanding.
No such discussions or negotiations shall limit, modify, or otherwise affect the
provisions hereof. No modification, amendment, or waiver of any provision of
this Agreement or of any provision of any other agreement between the Borrower
and the Bank is effective unless executed in writing by the party to be charged
with such modification, amendment and waiver, and if such party be the Bank,
then by a duly authorized officer thereof.
7.8 The proceeds of any collection, sale, or disposition of the
Collateral, or of any other payments received hereunder, shall be applied toward
the Liabilities in such order and manner as the Bank determines in its sole
discretion, any statute, custom, or usage to the contrary notwithstanding. The
Borrower shall remain liable to the Bank for any deficiency remaining following
such application.
7.9 The Borrower shall pay on demand all Costs of Collection and all
expenses of the Bank in connection with the preparation, execution, and delivery
of this Agreement and of any other documents and agreements between the Borrower
and the Bank, whether now existing or hereafter arising, and all other expenses
which may be incurred by the Bank in preparing or amending this Agreement and
all other agreements, instruments, and documents related thereto, or otherwise
with respect to the Liabilities. The Borrower authorizes the Bank to pay all
such expenses and, without notice, to charge the same to any account of the
Borrower with the Bank.
7.10 All amounts which the Bank may advance under any of Sections 2.2,
3.8, 3.10, 3.11, and 7.9, above, or otherwise under this Agreement, shall be a
Liability, shall be repayable to the Bank with interest at the highest rate
charged the Borrower by the Bank, on demand, and may be charged by the Bank to
any account which the Borrower maintains with the Bank.
7.11 This Agreement and all other instruments, documents, and papers
which relate thereto which have been or may be hereinafter furnished the Bank
may be reproduced by the Bank by any photographic, photostatic, microfilm,
micro-card, miniature photographic, aerographic, or similar process, and the
Bank may destroy the original from which any document was so reproduced. Any
such reproduction shall be admissible in evidence as the original itself in any
judicial or administrative proceeding (whether or not the original is in
existence and whether or not such reproduction was made in the regular course of
business).
7.12 This Agreement and all rights and obligations hereunder, including
matters of construction, validity and performance, shall be governed by the laws
of the Commonwealth of Massachusetts. The Borrower submits itself to the
jurisdiction of the Courts of said Commonwealth for all purposes with respect to
this Agreement and the Borrower's relationship with the Bank.
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7.13 The Borrower shall indemnify, defend, and hold the Bank harmless
of and from any claim brought or threatened against the Bank by the Borrower,
any guarantor or endorser of the Liabilities, or any other person (as well as
from attorneys' fees and expenses in connection therewith) on account of the
Bank's relationship with the Borrower or any other guarantor or endorser of the
Liabilities (each of which may be defended, compromised, settled, or pursued by
the Bank with counsel of the Bank's selection, but at the expense of the
Borrower). The within indemnification shall survive payment of the Liabilities
and/or any termination, release, or discharge executed by the Bank in favor of
the Borrower.
7.14 This Agreement shall remain in full force and effect until
specifically terminated in writing by a duly authorized officer of the Bank.
Such termination by the Bank may be conditioned upon such further
indemnifications provided to the Bank by or on behalf of the Borrower as the
Bank may request. No termination pursuant to Section 7.14 shall affect the
indemnification provided in Section 7.13, above.
7.15 The failure by the Borrower to perform all and singular the
Borrower's obligations hereunder including, without limitation, those included
in Sections 3.14, 3.16, 4.1, 4.2, 4.3 and 6.5, above, will result in irreparable
harm to the Bank for which the Bank will have no adequate remedy at law.
Consequently, such obligations are specifically enforceable by the Bank.
7.16 It is intended that
(a) this Agreement take effect as a sealed instrument;
(b) the security interests created by this Agreement attach to all
of the Bank's assets now owned or hereafter acquired which are capable of being
subject to a security interest;
(c) the security interests created by this Agreement secure all
Liabilities of the Borrower to the Bank, whether now existing or hereafter
arising; and
(d) all costs and expenses incurred by the Bank in connection with
the Bank's relationship(s) with the Borrower shall be borne by the Borrower; and
(e) the Bank's consent to any action of the Borrower which is
prohibited unless such consent is given may be given or related by the Bank in
its sole discretion.
7.17 The Borrower acknowledges having received a copy of the within
Agreement.
ATTEST: IMPLANT SCIENCES CORPORATION
-----------------------------------
(Borrower)
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------ -------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, President and Treasurer
Print Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ / / United States Trust Company /X/ USTrust
-----------------
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By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇, III
---------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇, III Its Vice President
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SCHEDULES
The following Schedules to the within Security Agreement are respectively
described in the section indicated. Those Schedules in which no information has
been inserted shall be deemed to read "No-Exclusions" with respect to EXHIBIT A,
"Not Applicable" with respect to EXHIBIT B, and "None" with respect to EXHIBITS,
C, D, and E.
EXHIBIT A
Exceptions to Security Interest Granted (Section 1.4)
EXHIBIT B
Subsidiaries, Affiliates, and Parent Corporations (Section 3.2)
Names and Addresses of Partners (Section 3.3)
EXHIBIT C
Trade Names; legal status; etc. (Section 3.4)
EXHIBIT D
Other Encumbrances and Liens (Section 3.5)
EXHIBIT E
Locations (Section 3.6)
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SCHEDULE A
Equipment leased from, various companies
SCHEDULE B
None
SCHEDULE C
Borrower's legal name was changed in 1984 from Procion
Corporation to Surface Alloys Corporation and in 1987 from Surface Alloys
Corporation to Implant Sciences Corporation.
SCHEDULE D
Security Interest in equipment leased from various companies
SCHEDULE E
None
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