THIS AGREEMENT is made and entered into
November 24, 2008, at Sunnyvale, California, by and between C ACQUISITION CORP.,
a Delaware corporation ("Secured Party") and CORE SYSTEMS INCORPORATED, a
California corporation ("Debtor").
has executed a Promissory Note in favor of Secured Party in the principal amount
of $1,625,000 (the "Note") incident to the purchase of the business assets of
desires to secure the performance of all obligations to Secured Party under the
Note by granting to Secured Party a security interest in the collateral
described in this Agreement.
NOW, THEREFORE, the parties agree as
1. Grant of Security Interest;
Priority. Debtor hereby grants to Secured Party a security
interest in the property described in paragraph 2 to secure Debtor's obligations
under the Note and under this Agreement. Secured Party acknowledges
and agrees that the security interest granted hereunder shall be subordinate to
any security interest in the collateral granted by Debtor to secure indebtedness
to an institutional lender for business purposes, and Secured Party agrees to
execute any document or agreement reasonably necessary to give effect to such
however, that such agreement shall permit the payment of
principal and interest on the Note in accordance with its terms for so long as
such institutional lender has not declared Debtor to be in default of its
obligations to such institutional lender.
2. Collateral. The
property ("collateral") which is subject to the security interest created hereby
consists of a present and continuing interest in all of the Debtor’s property
and asset of every kind and description, whether now owned or hereafter
acquired, including without limitation the following:
(a) All accounts receivable,
deposit accounts, general intangibles, or other rights to payment of Debtor;
(b) All furniture, fixtures, leasehold
improvements, intellectual property, business equipment, supplies, inventory and
other tangible and intangible assets of Debtor now or at any time prior to the
termination of this Security Agreement owned or acquired by
together with all improvements, replacements, accessions, and additions to
Obligations. This Security Agreement secures payment of all
existing and future indebtedness and liability of Debtor to Secured Party under
the Note, and the performance of all obligations of Debtor to Secured Party
under this Security Agreement.
4. Covenants. Debtor
covenants and agrees:
(a) To perform and pay when
due all obligations to Secured Party under the Note and this Security
(b) To pay all expenses,
including attorneys fees, incurred by Secured Party in the perfection,
preservation, enforcement, and exercise of its rights under this Security
(c) Except as permitted in
Section 1 of this Agreement, not to sell, permit liens on, lease, transfer, or
otherwise dispose or encumber the collateral except, before the occurrence of a
default, for cash proceeds of accounts collected in the ordinary course of
(d) To perform all acts
necessary to maintain, preserve, and protect the collateral.
(e) To execute and deliver
to Secured Party all financing statements and other documents that Secured Party
requests, in order to maintain a perfected security interest in the
(f) To carry at all times
insurance coverage with respect to the collateral which is reasonably acceptable
to Secured Party.
maintain Debtor’s corporate existence as a California corporation.
to change Debtor’s legal name unless Secured Party shall have received not less
than 30 days prior written notice from Debtor of such proposed change in its
corporate name, which notice shall accurately set forth the new
to change Debtor’s chief executive office, or open up any new locations at which
collateral may be held, unless Secured Party shall have received not less than
30 days prior written notice from Debtor of such proposed change, which notice
shall accurately set forth the address of its new chief executive office or
5. Default. Debtor
will be in default under this Agreement if:
(a) Debtor fails to pay any
amount due under the Note or under the Asset Purchase Agreement dated November
14, 2008, as amended by Amendment dated November 24, 2008, by and among Debtor,
Secured Party and Implant Sciences Corporation, or any other event of default
described in the Note occurs.
(b) Debtor breaches any of
the covenants, representations, or provisions of this Security
(c) There is a seizure or
attachment of, or a levy on, any of the collateral.
(d) Debtor ceases
operations, is dissolved, or becomes insolvent.
6. Remedies. When
an event of default occurs Secured Party may:
(a) Declare the unpaid
balance of principal and interest under the Note immediately due and payable,
without demand, presentment, protest or notice to Debtor, all of which Debtor
(b) Exercise all rights and
remedies available to a secured creditor after default, including but not
limited to the rights and remedies of secured creditors under the California
Uniform Commercial Code.
7. Termination. This
Security Agreement will terminate and the security interest hereby created shall
be extinguished upon payment in full of all principal and interest due under the
Note, and the performance of all obligations to Secured Party under this
Fees. Debtor will pay all costs and expenses, including
reasonable attorneys fees, incurred by Secured Party in the collection of all
sums due under the Note, and the enforcement of obligations under this Security
9. Non-Waiver. No
waiver by Secured Party of any breach or default will be a waiver of any breach
or default occurring later. A waiver will be valid only if it is in
writing and signed by Secured Party.
10. Assignment. This
Security Agreement will bind and benefit the successors and assignees of the
parties, but Debtor may not assign its rights or obligations under this Security
Agreement without Secured Party's prior written consent.
Law. This Agreement will be governed by the laws of the State
Agreement. This Security Agreement is the entire agreement,
any prior agreements or understandings, between Secured Party and Debtor
relating to the collateral. Any modification of this Security
Agreement must be in writing and signed by all parties.
13. Notice. Notices
under this Security Agreement are considered to be served two days after they
are deposited in the United States mail, with prepaid, first class postage,
addressed as follows:
c/o Implant Sciences
WITNESS WHEREOF, the parties to this Agreement have executed it on the day and
year first above written.
ACQUISITION CORP., a Delaware corporation
By: /s/ Phillip C.
By: /s/ D. W.