Exhibit 10.73
SECURITY AGREEMENT
This Security Agreement, made as of the 28th of August , 2003 is
entered into by and between Laurus Master Fund, Ltd. ("Laurus") and Implant
Sciences Corporation, a Massachusetts company (the "Company") (the "Agreement").
1. To secure the payment of all Obligations (as hereafter defined), the
Company hereby grants to Laurus a continuing security interest in all of the
following property now owned or at any time hereafter acquired by the Company,
or in which the Company now has or at any time in the future may acquire any
right, title or interest (the "Collateral"): all accounts (the "Accounts"),
inventory, equipment, goods, documents, instruments (including, without
limitation, promissory notes), contract rights, general intangibles (including,
without limitation, payment intangibles), chattel paper, supporting obligations,
investment property, letter-of-credit rights, trademarks and tradestyles in
which the Company now has or hereafter may acquire any right, title or interest,
all proceeds and products thereof (including, without limitation, proceeds of
insurance) and all additions, accessions and substitutions thereto or therefor.
Terms used in this paragraph which are defined in the Uniform Commercial Code as
enacted and in effect from time to time in the Commonwealth of Massachusetts
(the "Code") are used herein as so defined in the Code.
2. The term "Obligations" as used herein shall mean and include all
debts, liabilities and obligations owing by the Company to Laurus and all loans,
advances, extensions of credit, endorsements, guaranties, benefits and/or
financial accommodations heretofore or hereafter made, granted or extended by
Laurus to the Company or which Laurus has or will become obligated to make,
grant or extend to us or for the Company's account or any of its accounts and
any and all interest, charges and/or expenses heretofore or hereafter owing by
the Company to Laurus and any and all renewals or extensions of any of the
foregoing, no matter how or when arising, direct or indirect, absolute or
contingent, liquidated or unliquidated, and whether under any present or future
agreement or instruments between the Company, Laurus and any or all subsidiaries
or otherwise, including, without limitation, all obligations owing by the
Company to Laurus under the Securities Purchase Agreement of even date herewith
and related Series B Preferred Stock in the original Stated Value of $1,500,000
(as amended, modified and supplemented from time to time, the "Preferred
Stock").
3. The Company hereby warrants and covenants to Laurus that: (a) it is
a corporation validly existing, in good standing and formed under the laws of
the Commonwealth of Massachusetts and it will provide Laurus thirty days prior
written notice of any change in its state of formation; (b) it is the lawful
owner of the Collateral, and has the sole right to grant a security interest
therein and will defend the Collateral against all claims and demands of all
persons and entities; (c) it will keep the Collateral free and clear of all
attachments, levies, taxes, liens, security interests and encumbrances of every
kind and nature; (d) it will not without Laurus' prior written consent, sell,
exchange or otherwise dispose of the Collateral or any of the Company's rights
therein or permit any lien or security interest to attach to same, except that
created by this Agreement or sales of inventory or the disposition of obsolete
or worn out equipment in the ordinary course of business or otherwise sell the
Collateral in excess of $150,000, in the ordinary course of business ; (e) it
will allow Laurus and/or Laurus'
representatives free access to and the right of inspection of the Company's
premises where the books and records relating to the Collateral are located; and
(f) it hereby indemnifies and saves Laurus harmless from all loss, costs,
damage, liability and/or expense, including reasonable attorneys' fees, that
Laurus may sustain or incur to enforce payment, performance or fulfillment of
any of the Obligations or in the enforcement of this Agreement or in the
prosecution or defense of any action or proceeding either against Laurus or the
Company concerning any matter growing out of or in connection with this
Agreement and/or any of the Obligations and/or any of the Collateral.
4. Laurus agrees to terminate the security interest in the Collateral
upon the Company tendering the final payment in satisfaction of the Obligations.
Laurus agrees to join with the Company in executing termination statements and
other instruments pursuant to the Code in form satisfactory to the Company and
in executing such other documents or instruments as may be required or deemed
necessary by the Company for purposes of terminating the security interest in
the Collateral.
5. The Company shall be in default under this Agreement upon the
happening of any of the following events or conditions (each, a "Default"): (a)
it shall fail to pay when due or punctually perform any of the Obligations; (b)
any covenant, warranty, representation or statement made or furnished to Laurus
by the Company or on its behalf was false in any material respect when made or
furnished and such failure shall have a material adverse effect on the Company;
(c) it shall fail to comply with any term or provision set forth in this
Agreement and such failure (to the extent not covered by any other clause of
this Section 5) shall remain uncured for a period of two (2) business days after
the date on which Laurus notified the Company of such failure unless the Company
can not remedy such default within such time period; (d) a default shall occur
under the Preferred Stock or (e) default shall occur under any other document,
instrument or agreement between Laurus and the Company and/or security issued in
connection therewith, which such default is not cured within any applicable cure
or grace period.
6. Upon the occurrence of any Default and at any time thereafter,
Laurus may declare all Obligations immediately due and payable and Laurus shall
have the remedies of a secured party provided in the Code, this Agreement and
other applicable law. Upon the occurrence of any Default and at any time
thereafter, Laurus will have the right to take possession of the Collateral and
to maintain such possession on our premises or to remove the Collateral or any
part thereof to such other premises as you may desire, including, without
limitation, the right to contact account debtors liable in respect of the
Accounts for the purpose of engaging in collection activities with respect
thereto. Upon Laurus' request, the Company shall assemble the Collateral and
make it available to Laurus at a place designated by Laurus. If any notification
of intended disposition of any Collateral is required by law, such notification,
if mailed, shall be deemed properly and reasonably given if mailed at least ten
business days before such disposition, postage prepaid, addressed to us either
at our address shown herein or at any address appearing on Laurus' records for
the Company. Any proceeds of any disposition of any of the Collateral shall be
applied by Laurus to the payment of all expenses in connection with the sale of
the Collateral, including reasonable attorneys' fees and other legal expenses
and disbursements and the reasonable expense of retaking, holding, preparing for
sale, selling, and the like, and any balance of such proceeds may be applied by
Laurus toward the payment of the
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Obligations in such order of application as Laurus may elect, and the Company
shall be liable for any deficiency.
7. If the Company defaults in the performance or fulfillment of any of
the terms, conditions, promises, covenants, provisions or warranties on our part
to be performed or fulfilled under or pursuant to this Agreement, Laurus may, at
its sole option without waiving its right to enforce this Agreement according to
its terms, immediately or at any time thereafter and without notice to the
Company, perform or fulfill the same or cause the performance or fulfillment of
the same for the Company's account and at its sole cost and expense, and the
cost and expense thereof (including reasonable attorneys' fees) shall be added
to the Obligations and shall be payable on demand with interest thereon at the
highest rate permitted by law.
8. Upon the occurrence of an Event of Default, the Company appoints
Laurus, any of its officers, employees or any other person or entity whom Laurus
may designate as the Company's attorney, with power to execute such documents in
its behalf and to supply any omitted information and correct patent errors in
any documents executed by the Company or on its behalf; to file financing
statements against the Company covering the Collateral; to sign the Company's
name on public records; and to do all other things Laurus deem necessary to
carry out this Agreement. The Company hereby ratifies and approves all acts of
the attorney and neither Laurus nor the attorney will be liable for any acts of
commission or omission, nor for any error of judgment or mistake of fact or law.
This power being coupled with an interest, is irrevocable so long as any
Obligations remains unpaid.
9. No delay or failure on Laurus' part in exercising any right,
privilege or option hereunder shall operate as a waiver of such or of any other
right, privilege, remedy or option, and no waiver whatever shall be valid unless
in writing, signed by Laurus and then only to the extent therein set forth, and
no waiver by Laurus of any default shall operate as a waiver of any other
default or of the same default on a future occasion. Laurus' books and records
containing entries with respect to the Obligations shall be admissible in
evidence in any action or proceeding, shall be binding upon the Company for the
purpose of establishing the items therein set forth and shall constitute prima
facie proof thereof. Laurus shall have the right to enforce any one or more of
the remedies available to Laurus, successively, alternately or concurrently. The
Company agrees to join with Laurus in executing financing statements or other
instruments pursuant to the Code in form satisfactory to Laurus and in executing
such other documents or instruments as may be required or deemed necessary by
Laurus for purposes of affecting or continuing Laurus' security interest in the
Collateral.
10. This Agreement shall be governed by and construed in accordance
with the laws of the State of New York and cannot be terminated orally. All of
the rights, remedies, options, privileges and elections given to Laurus
hereunder shall enure to the benefit of its successors and assigns. The term
"Laurus" as herein used shall include Laurus, any parent of Laurus, any of
Laurus' subsidiaries and any co-subsidiaries of its parent, whether now existing
or hereafter created or acquired, and all of the terms, conditions, promises,
covenants, provisions and warranties of this Agreement shall enure to the
benefit of and shall bind the representatives, successors and assigns of each of
the Company and them. Laurus and the Company hereby (a) waive any and all right
to trial by jury in litigation relating to this Agreement and the Company agrees
not to assert any counterclaim in such litigation, (b) submit to the
nonexclusive
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jurisdiction of the state and federal courts located in the State of New York
and (c) waive any objection Laurus or the Company may have as to the bringing or
maintaining of such action with any such court.
11. All notices and other communications hereunder shall be deemed
given three (3) business days after delivered or deposited in the mails, first
class postage prepaid (provided, however, that notices given by telegram, telex
or telefax shall be deemed given when dispatched by telegram, telex or telefax,
as the case may be) and if to (a) the Company addressed as set forth beneath the
Company's name on the signature page unless the Company shall give notice in
writing of a different address or telefax number in the manner provided herein,
with a copy to Ellenoff Xxxxxxxx and Schole LLP, 000 Xxxxxxxxx Xxxxxx Xxx Xxxx,
Xxx Xxxx 00000 Attention: Xxxxx X. Xxxxxxxx, Esq. Facsimile number (212)
370-7889 and (b) Laurus, at the address set forth for Laurus on the last page of
this Agreement unless Laurus shall give the Company notice in writing of a
different address.
12. No amendment, modification, termination, or waiver of any provision
of this Agreement shall be effective unless the same shall be in writing and
signed by Laurus, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.
13. No course of dealing between Laurus and the Company, nor any
failure or delay on Laurus' part in exercising any right, power, or remedy under
this Agreement shall operate as a waiver thereof; nor shall any single or
partial exercise of any such right, power, or remedy preclude any other or
further exercise thereof or the exercise of any other right, power, or remedy
under this Agreement. The rights and remedies provided in this Agreement and the
Preferred Stock are cumulative, and are not exclusive of any other rights,
powers, privileges, or remedies, now or hereafter existing, at law or in equity
or otherwise. The Company hereby waives in favor of Laurus all suretyship
defenses and waives notice of (a) acceptance hereof and of all notices and
demands of any kind to which the Company may be entitled and (b) presentment to
or demand of payment from anyone whomsoever liable upon the Accounts or the
Obligations, protest, notices of presentment, non-payment or protest and notice
of any sale of the Collateral or any default of any sort. The Company further
waives all of the Company's rights of subrogation, reimbursement, indemnity,
exoneration, contribution or any other claim which any of the Company or Laurus
may now or hereafter have against any party liable for the Obligations.
14. Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions of this Agreement or affecting the validity or
enforceability of such provision in any other jurisdiction. In no event shall
any payments hereunder (if deemed interest under applicable law or regulation)
exceed the maximum rate permitted under applicable law or regulation. If any
provision of this Agreement is in contravention of any such law or regulation,
then such provision shall be deemed amended to provide for interest at said
maximum rate and any excess amount shall be applied to the Obligations in such
order as Laurus shall elect.
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IMPLANT SCIENCES CORPORATION
By: /s/ XXXXXXX X. XXXXXX
--------------------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: President
Address: 000 Xxxxxxx Xxxx, #0
Xxxxxxxxx, Xxxxxxxxxxxxx 00000
LAURUS MASTER FUND, LTD.
By: /s/ XXXXX GRIN
--------------------------------------------
Name: Xxxxx Grin
Title: Partner
Address: c/o Ironshore Corporate Services, Ltd.
X.X. Xxx 0000 G.T.
Queensgate House
South Church Street
Grand Cayman, Cayman Islands
[Security Agreement Signature Page]
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