Ex. 10.22
SECURITY AGREEMENT
SECURITY AGREEMENT, made as of the 10th day of October, 2001, by IMPLANT
SCIENCES CORPORATION, a Massachusetts corporation ("Grantor"), in favor of
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CARDIOTECH INTERNATIONAL, INC., a Massachusetts corporation ("Grantee").
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W I T N E S S E T H:
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WHEREAS, on the date hereof, Grantee is making a loan to Grantor, in the
principal amount of up to FIVE HUNDRED THOUSAND DOLLARS ($500,000.00) (the
"Loan"), which is evidenced by a term grid note of even date herewith, in the
principal amount of up to FIVE HUNDRED THOUSAND DOLLARS ($500,000.00) made by
Grantor in favor of Grantee (the "Note") and secured by and entitled to the
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benefits of, among other things, (i) a Credit Line Letter, dated as of the date
hereof, executed by Grantor and Grantee (the "Loan Agreement"), (ii) this
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Security Agreement, and (iii) a Guaranty, dated as of the date hereof, executed
by Xxxxxxx X. Xxxxxx in favor of Grantee;
WHEREAS, it is a condition precedent to the execution and the delivery of
the Loan Agreement by Grantee and the making of the Loan by Grantee that Grantor
shall have executed and delivered to Grantee a security agreement securing the
obligations of Grantor to Grantee under the Loan Agreement, the Note and other
documents relating to the Loan (collectively, the "Loan Documents");
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WHEREAS, as an inducement to Grantee to the execution and the delivery of
the Loan Agreement by Grantee and the making of the Loan by Grantee, Grantor
has agreed to enter into this Agreement.
NOW, THEREFORE, in consideration of the premises and the agreements herein
and in order to induce Grantee to make and maintain the Loan, Grantor, intending
to be legally bound, hereby agrees with Grantee as follows:
SECTION 1. Definitions. Reference is hereby made to the Loan Agreement, the
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Note and the other Loan Documents for a statement of the terms thereof. All
terms used in this Agreement which are defined in Article 9 of the Uniform
Commercial Code (the "UCC") currently in effect in the Commonwealth of
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Massachusetts and which are not otherwise defined herein shall have the same
meanings as set forth therein. All capitalized terms used and not defined
herein or in the UCC shall have the meanings ascribed to them in the Loan
Agreement.
SECTION 2. Grant of Security Interest. As collateral security for all of
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the Obligations (as defined in Section 3 hereof), Grantor hereby pledges and
assigns to Grantee, and grants to Grantee a continuing security interest in, all
personal property and fixtures of such Grantor, wherever located and whether now
or hereafter existing and whether now owned or hereafter acquired, of every kind
and description, tangible or intangible (the "Collateral"), including, without
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limitation, the following:
(a) all of Grantor's right, title and interest in and to all equipment of
any kind, wherever located and whether now or hereafter existing and whether now
owned or hereafter acquired and all parts there-of and accessions thereto being
(collectively, the "Equipment");
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(b) all of Grantor's right, title and interest in and to all inventory of
any kind, in all of its forms, wherever located and whether now or hereafter
existing and whether now owned or here-after acquired, and raw materials and
works in process therefor, finished goods thereof, and materials used or
consumed in the manufacture or production thereof (including, without
limitation, goods in which Grantor has an interest in mass or a joint or other
interest or right of any kind), and goods which are returned to or repossessed
by Grantor, and all accessions thereto, products thereof and documents therefor
(any and all such inventory, accessions, products and documents being
herein-after collectively referred to as the "Inventory");
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(c) all of Grantor's right, title and interest in and to all accounts,
whether now or hereafter existing and whether now owned or hereafter acquired,
arising out of or in connection with the sale or lease of goods or the rendering
of services located at the premises or other facilities owned by Grantor or
otherwise, including, without limitation, all rights now or hereafter existing
and securing or otherwise relating to any such accounts (collectively,
"Accounts");
(d) all of Grantor's right, title and interest in and to (i) all contract
rights, chattel paper, instruments, documents, general intangibles and other
rights or obligations of any kind, whether now or hereafter existing and whether
now owned or hereafter acquired, arising out of or in connection with the sale
or lease of goods or the rendering of services located at the premises or other
facilities owned by Grantor or otherwise, including, without limitation, (i) all
rights relating to the performance by or for Grantor of management, advisory,
consulting or other similar services, (ii) all rights relating to the sale or
other transfer of property to, or the construction, renovation or other
improvement of property by or for, Grantor or any of its affiliates, (iii) all
rights relating to any partnership in which Grantor has any interest as a
general or limited partner or otherwise, including all moneys due from time to
time in respect thereof, and (iv) all rights relating to any lease to which
Grantor is a party as lessee or lessor, including all moneys due from time to
time in respect thereof, and (v) all rights now or hereafter existing in and to
all security agreements, leases and other contracts, now or hereafter existing
and securing or otherwise relating to any such contract rights, chattel paper,
instruments, documents, general intangibles or other rights or obligations (any
and all such contract rights, chattel paper, instruments, documents, general
intangibles and rights and obligations being hereinafter collectively referred
to as the "General Intangibles";
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(e) all patents, patent registrations, patent applications pending,
trademarks, trademark registrations, trademark applications pending, service
marks, service xxxx registrations, service xxxx applications pending, processes,
formulas, royalties, licenses, sublicenses, rights, trade secrets and other
intellectual property held or hereafter acquired by Grantor including, without
limitation, registrations, recordings and applications in the United States
Patent and Trademark Office or any similar governmental agency in any foreign
country (which Grantor has adopted and used and is using or hereafter acquires
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or under which Grantor is licensed), as well as all other trademarks,
tradenames, fictitious business names, business names, company names, business
identifiers, prints, labels, trade styles and service marks not registered, and
trade dresses, including logos and/or designs, (all the foregoing being referred
to herein collectively as the "Marks"), together with the registrations and
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right to all renewals, reissues and extensions thereof, the goodwill of the
business of Grantor symbolized by the Marks, and any and all causes of action
which may exist by reason of infringement or dilution thereof, or injury to the
associated goodwill, with the right to xxx for and collect said damages and the
right to collect all royalties under any license agreements with respect to any
such Marks;
(f) all copyrights, copyright registrations and copyright applications now
held or hereafter acquired by Grantor, including, without limitation, any United
States copyrights to which Grantor now or hereafter has an interest (all the
foregoing being referred to herein collectively as the "Copyrights");
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(g) all software and source codes and documentations and other rights
relating thereto now held or hereafter acquired by Grantor (collectively,
"Software");
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(h) all proceeds of any and all of the foregoing Collateral in whatever form
and, to the extent not otherwise included, all payments under insurance (whether
or not Grantee is the loss payee thereof), or any indemnity, warranty or
guaranty, payable by reason of loss or damage to or otherwise with respect to
any of the foregoing Collateral;
in each case, howsoever Grantor's interest therein may arise or appear (whether
by ownership, security interest, claim or otherwise).
SECTION 3. Security for Obligations. The security interest created hereby
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in the Collateral constitutes continuing collateral security for all of the
following obligations, whether now existing or hereafter incurred (the
"Obligations"):
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(a) the prompt payment by Grantor, as and when due and payable, of all
amounts from time to time owing by it hereunder or in respect of the Note, the
Loan Agreement and the other Loan Documents; and
(b) the due performance and observance by Grantor of all of its obligations
from time to time existing in respect of this Agreement and the other Loan
Documents.
SECTION 4. Representations and Warranties. Grantor represents and warrants
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to Grantee as follows:
(a) Grantor (i) is a corporation duly organized, validly existing and in
good standing under the laws of the Commonwealth of Massachusetts, and (ii) has
all necessary licenses, authorizations, registrations, permits and approvals and
all requisite corporate power and authority, to own its properties and carry on
its business as presently conducted. Grantor is duly qualified as a foreign
corporation and is in good standing in such states or jurisdictions in which the
business conducted by it and the location of its assets require it to qualify as
a foreign corporation.
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(b) The execution, delivery and performance by Grantor of this Agreement and
of the other Loan Documents (i) do not and will not violate any provision of any
applicable law or regulation or of any order, writ, judgment, injunction or
decree of the United States, the Commonwealth of Massachusetts or any political
subdivision thereof, or any agency, department, commission, board, bureau or
instrumentality which exercises or claims to have jurisdiction over Grantor or
any of its properties, (ii) do not and will not violate any provision of the
charter or By-Laws of Grantor, (iii) will not violate, be in conflict with, or
result in a breach of or constitute (with or without the giving of notice or the
passage of time or both) a default under any material indenture, agreement, or
other instrument to which Grantor is a party or by which Grantor or any of its
properties or assets are or may be bound, and (iv) except as otherwise
contemplated by the Loan Documents, will not result in the creation or
imposition of any lien, charge or encumbrance upon, or any security interest in,
any of Grantor's properties or assets.
(c) Grantor has all requisite corporate power and authority, and has taken
all necessary corporate action to authorize, execute, deliver and perform this
Agreement and the other Loan Documents. Each of this Agreement and the other
Loan Documents has been duly executed and delivered by Grantor and is a legal,
valid and binding obligation of Grantor, enforceable against Grantor in
accordance with its terms.
(d) Grantor has previously delivered to Grantee (i) resolutions of the Board
of Directors of Grantor, certified by its secretary, authorizing the execution
and delivery of this Agreement and any other Loan Documents and the transactions
contemplated hereby and thereby, and such resolutions are in full force and
effect and have not been modified, amended or rescinded and (ii) Granto's
charter documents certified by the Secretary of the Commonwealth of
Massachusetts and Grantor's secretary, and By-Laws of Grantor certified by its
secretary, all of which are in full force and effect and have not been modified,
amended or rescinded.
(e) None of the Accounts is evidenced by a promissory note or other
instrument. Set forth as Schedule I hereto is a complete and correct list of
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each trade name used by Grantor.
(f) Grantor has delivered to Grantee complete and correct copies of all
written contracts of Grantor included in the Collateral, all as described in
Schedule II hereto, including all schedules and exhibits thereto. Each such
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contract sets forth the entire agreement and understanding of the parties
thereto relating to the subject matter thereof, and there are no other
agreements, arrangements or understandings, written or oral, relating to the
matters covered thereby or the rights of Grantor or any of its affiliates in
respect thereof. Each such contract now existing is, and each other such
Contract will be, the legal, valid and binding obligation of the parties
thereto, enforceable against such parties in accordance with its terms. No
default thereunder by any such party has occurred, nor does any defense, offset,
deduction or counter-claim exist thereunder in favor of any such party.
(g) Grantor is and will be at all times the owner of its respective
Collateral free and clear of any lien except for (i) the security interest
created by this Agreement and (ii) the security interests and other
en-cumbrances described in Schedule III hereto. No effective financing
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statement or other instrument similar in effect covering all or any part of the
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Collateral is on file in any recording or filing office except (i) such as may
have been filed in favor of Grantee relating to this Agreement and (ii) such as
may have been filed to perfect or protect any security interest or encumbrance
described in Schedule III hereto.
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(h) Except as set forth in Schedule IV hereto, there are not, in any court
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or before any arbitrator of any kind or before or by any governmental or
non-governmental body, any actions, suits or proceedings, pending or threatened
(nor, to the knowledge of Grantor, is there any basis therefor) against or in
any other way relating to or affecting (i) this Agreement or any other Loan
Document, or (ii) Grantor or the assets or properties of Grantor.
(i) No (a) consent, approval or authorization of, or registration,
declaration or filing with any governmental authority, or (b) consent, approval
or authorization (other than from Citizens Bank is required is required from any
other person or entity, in connection with or as a condition precedent to the
due and valid execution and delivery by Grantor of the Loan Documents to which
it is a party, the performance of its obligations hereunder, or to the legality,
validity, binding effect, performance or enforceability of any of the respective
terms, provisions or conditions thereof.
(j) This Agreement creates a valid security interest in favor of Grantee in
the Collateral as security for the Obligations. Grantee's having pos-session of
all instruments and cash constituting Collateral from time to time and the
filing of the financing statements required to be filed results in the
perfection of such security interest. Such security interest is, or in the case
of Collateral in which a Grantor obtains rights after the date hereof, will
be, a perfected, second priority security interest, subject only to the
security interests and other encumbrances of Citizens Bank. Such filings and
all other action necessary or desirable to perfect and protect such security
interest have been duly taken, except for Grantee's having possession of
instruments and cash constituting Collateral after the date hereof.
(k) Neither this Agreement, any Loan Document, the exhibits and schedules
hereto and thereto, nor any certificate or document furnished by Grantor,
hereunder or thereunder, contains any untrue statement of a material fact or
omits to state a material fact necessary in order to make the statements
contained herein or therein not misleading. There is no fact which Grantor has
not disclosed to Grantee in writing which would have an adverse effect that is
material to the business, assets, condition or operations (financial or
otherwise) or prospects of Grantor.
(l) Grantor owns or is licensed to use all Marks that it uses. Grantor is
not aware of any third party claim that any aspect of Grantor's present or
contemplated business operations infringes or will infringe any Xxxx.
(m) Grantor owns or is licensed to practice under all Copyrights that it now
owns, uses or practice under. Grantor is not aware of any third party claim
that any aspect of Grantor's present or contemplated business operations
infringes or will infringe any Copyright.
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(n) Grantor owns or is licensed to practice under all Software that it now
owns, uses or practice under. Grantor is not aware of any third party claim
that any aspect of Grantor's present or contemplated business operations
infringes or will infringe any Software.
SECTION 5. Covenants as to the Collateral. So long as any of the
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Obligations shall remain outstanding, unless Grantee shall otherwise consent in
writing:
(a) Further Assurances. Grantor will at its expense, at any time and from
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time to time, promptly execute and deliver all further instruments and documents
and take all further action that may be necessary or desirable or that Grantee
may request in order to (i) fully perfect and protect the security interest
purported to be created hereby, (ii) enable Grantee to exercise and enforce its
rights and remedies hereunder in respect of the Collateral or (iii) otherwise
effect the purposes of this Agreement, including, without limitation: (A)
marking conspicuously each chattel paper and each contract included in the
Collateral and, at the request of Grantee, each of its records pertaining to the
Collateral with a legend, in form and substance satisfactory to Grantee,
indicating that such chattel paper, contract or Collateral is subject to the
security interest created hereby, (B) if any Accounts shall be evidenced by a
promissory note or other instrument or chattel paper, delivering and pledging to
Grantee hereunder such note, instrument or chattel paper duly indorsed and
accompanied by executed instruments of transfer or assignment, all in form and
substance satisfactory to Grantee, (C) executing and filing such financing or
continuation statements, or amendments thereto, as may be necessary or desirable
or that Grantee may request in order to fully perfect and preserve the security
interest purported to be created hereby and (D) furnishing to Grantee from time
to time statements and schedules futher identifying and describing the
Collateral and such other reports in connection with the Collateral as Grantee
may reasonably request, all in reasonable detail.
(b) Jurisdiction of Organization; Change of Name. Grantor shall notify
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Grantee in writing five (5) business days prior to the filing of any instrument
which will have the effect of either changing the jurisdiction of organization
of Grantor or the Grantor's. At the end of each calendar quarter, Grantor shall
submit to Grantee a certificate certifying that Grantor's jurisdiction of
organization and Grantor's name have not been changed.
(c) Condition of Equipment. Grantor will cause its Equipment to be
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maintained and preserved in the same condition, repair and working order as when
acquired and in accordance with any manufacturer's manual, and will forthwith,
or in the case of any loss or damage to any such Equipment as quickly as
practicable after the occurrence thereof, make or cause to be made all repairs,
replacements, and other improvements in connection therewith which are necessary
or desirable or that Grantee may request to such end. Grantor will promptly
furnish to Grantee a statement respecting any loss or damage in excess of
$25,000 to any of its Equipment.
(d) Taxes. Grantor will pay promptly when due all property and other Taxes,
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imposed upon, and all claims (including claims for labor, materials and
supplies) against, its Equipment and Inventory, except to the extent the
validity thereof is being contested in good faith by proper proceedings which
stay the imposition of any penalty, fine or lien resulting from the non-payment
thereof and with respect to which adequate reserves have been set aside for the
payment thereof.
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(e) Insurance. (i) Grantor will, at its own expense, maintain insurance with
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respect to its Equipment and Inventory in such amounts, against such risks, in
such form and with such insurers, as shall be satisfactory to Grantee from time
to time. Each policy for liability insurance shall provide for all losses to be
paid on behalf of Grantee and Grantor as their respective interests may appear,
and each policy for property damage insurance shall provide for all losses
(except for losses of less than $25,000 per occurrence) to be paid directly to
Grantee. Each such policy shall in addition (A) name Grantor and Grantee as
insured parties thereunder (without any representation or warranty by or
obligation upon Grantee) as their interests may appear, (B) contain the
agreement by the insurer that any loss thereunder shall be pay-able to Grantee
notwithstanding any action, inaction or breach of representation or warranty by
Grantor, (C) provide that there shall be no recourse against Grantee for payment
of premiums or other amounts with respect thereto, and (D) provide that at least
30 days' prior written notice of cancellation or of lapse shall be given to
Grantee by the insurer. Grantor will, if so requested by Grantee, deliver to
Grantee original or duplicate policies of such insurance and, as often as
Grantee may reasonably request, a report of a reputable insurance broker with
respect to such insurance. Grantor will also, at the request of Grantee, duly
exercise and deliver instruments of assignment of such insurance policies and
cause the respective insurers to acknowledge notice of such assignment.
(ii) Reimbursement under any liability insurance maintained by Grantor
pursuant to this Section 5(e) may be paid directly to the person who shall have
incurred liability covered by such insurance. In the case of any loss involving
damage to Equipment or Inventory as to which paragraph (iii) of this Section
5(e) is not applicable, Grantor will make or cause to be made the necessary
repairs to or replacements of such Equipment or Inventory, and any proceeds of
insurance maintained by Grantor pursuant to this Section 5(e) shall be paid to
Grantor as reimbursement for the costs of such repairs or replacements.
(iii) Upon the occurrence and during the continuance of an Event of
Default (as hereinafter defined) or the actual or constructive total loss (in
excess of $25,000 per occurrence) of any Equipment or Inventory, all insurance
payments in respect of such Equipment or Inventory shall be paid to Grantee and
applied as specified in Section 8(b) hereof.
(f) Provisions Concerning the Accounts and General Intangibles.
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(i) Grantor will keep adequate records concerning all Accounts and General
Intangibles and permit representatives of Grantee at any reasonable time and
from time to time to inspect and make abstracts from such records.
(ii) Grantor will duly perform and observe all of its obligations under
each contract included in the Collateral and, except as other-wise provided in
this Subsection (f), continue to collect, at its own expense, all amounts due or
to become due under the Accounts. In connection with such collections, Grantor
may (and, at Grantee's direction, will) take such action as Grantor or Grantee
may deem necessary or advisable to enforce collection or performance of the
Accounts; provided, however, that Grantee shall have the right at any time, upon
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the occurrence and during the continuance of an Event of Default, and upon
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written notice to Grantor of its intention to do so, to notify the account
debtors or obligors under any Accounts of the assignment of such Accounts to
Grantee and to direct such account debtors or obligors to make payment of all
amounts due or to become due to Grantor thereunder directly to Grantee and, upon
such notification and at the expense of Grantor and to the extent permitted by
law, to enforce collection of any such Accounts and to adjust, settle or
compromise the amount or payment there-of, in the same manner and to the same
extent as Grantor might have done. After receipt by Grantor of the notice from
Grantee referred to in the proviso to the immediately preceding sentence, (A)
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all amounts and proceeds (including instruments) received by Grantor in respect
of the Accounts shall be received in trust for the benefit of Grantee hereunder,
shall be segregated from other funds of Grantor and shall be forthwith paid over
to Grantee in the same form as so received (with any necessary indorsement) to
be held as cash collateral and either (1) released to Grantor so long as no
Event of Default shall have occurred and be continuing or (2) if any Event of
Default shall have occurred and be continuing, applied as specified in Section
8(b) hereof, and (B) Grantor will not adjust, settle or compromise the amount or
payment of any Accounts or release wholly or partly any account debtor or
obligor thereof or allow any credit or discount thereon.
(iii) Upon the occurrence and during the continuance of any breach of or
default under any Related Contract referred to in Schedule II hereto by any
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party thereto other than Grantor, (A) Grantor will, promptly after obtaining
knowledge thereof, give Grantee written notice of the nature and duration
thereof, specifying what action, if any, it has taken and proposes to take
with respect thereto, (B) Grantor will not, without the prior written consent of
Grantee, declare or waive any such breach or default or affirmatively consent to
the cure thereof or exercise any of its remedies in respect thereof, and (C)
Grantor will, upon written instructions from Grantee and at Grantor's expense,
take such action as Grantee may deem necessary or advisable in respect thereof.
(iv) Grantor will, at its expense, promptly deliver to Grantee a copy of
each notice or other communication received by it by which any other party to
any Related Contract referred to in Schedule II hereto purports to exercise any
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of its rights or affect any of its obligations thereunder, together with a copy
of any reply by Grantor thereto.
(v) Grantor will not, without the prior written consent of Grantee,
cancel, terminate, amend, modify, or waive any provision of, any Related
Contract referred to in Schedule II hereto.
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(g) Transfers and Other Liens. Grantor will not (i) sell, assign (by
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operation of law or otherwise), exchange or otherwise dispose of any of the
Collateral or (ii) create or suffer to exist any liens or encumbrances, upon or
with respect to any of the Collateral except for (A) the security interest
created hereby and (B) the security interests and other encumbrances described
in Schedule III hereto.
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(h) Provisions Concerning the Marks.
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(i) Grantor hereby agrees not to divest itself of any right in or
affecting a Xxxx, whether or not such right is presently held by Grantor.
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(ii) Promptly upon learning thereof, Grantor shall notify Grantee in
writing of all pertinent details available to it, with respect to any
infringement or other violation of Grantor's right in any Xxxx, whether or not
such right is presently held by Grantor. As to each such instance, absent
Grantee's authorization to proceed otherwise, and to the extent permitted by
law, Grantor shall diligently pursue a remedy. Promptly upon learning thereof,
Grantor shall notify Grantee in writing of all pertinent details available to it
regarding any claim that Grantor's use of any Xxxx violates the property right
of another.
(iii) As to all Marks as to which Grantor has or shall have title, and
at its own expense, Grantor shall comply with all requirements for maintaining
registration, including but not limited to the filing of affidavits of use and
applications for renewal of registration and shall pay all fees and
disbursements in connection therewith. Grantor shall not abandon any such
filing of an affidavit of use or any such application of renewal, prior to
exhaustion of all administrative and judicial remedies.
(iv) Grantor agrees to use its Marks in interstate commerce during the
time in which this Agreement is in effect sufficiently to preserve such Marks as
trademarks or service marks under the laws of the United States.
(v) If Grantor hereafter becomes the owner of any Xxxx, then within 30
days of becoming the owner of such Xxxx, or as soon thereafter as reasonable,
Grantor shall deliver to Grantee, a certificate or registration or copy of the
application, and a grant of security in such Xxxx in favor of Grantee,
confirming the grant thereof hereunder. If Grantor hereafter secures a license
under any Xxxx, then within 30 days of execution of the license agreement,
Grantor shall deliver to Grantee a copy of the certificate of registration or of
the application, and a grant of security in Grantor's rights under such
agreement, confirming the grant thereof hereunder. The form of any confirmatory
grants shall be substantially the same as the form hereof.
(vi) If an Event of Default shall occur and be continuing, Grantee may
by written notice to Grantor take any or all of the following actions: (A)
declare Grantor's entire right, title and interest in any Marks under which
Grantor has an interest to be vested in Grantee, in which event such right,
title and interest shall immediately vest in Grantee and Grantor shall execute
an assignment, in form and substance satisfactory to Grantee, of all its rights,
under such Marks to Grantee, (B) take and use or sell Grantor's rights in said
Marks, along with the goodwill and other assets secured under this Agreement,
and all other elements of Grantor's ongoing business symbolized by the Marks and
secured under this Agreement, and the right to carry on the business of Grantor
in connection with which these Marks have been used, and (C) direct Grantor to
refrain from using the Marks in any manner, directly of indirectly, and if
requested by Grantee, Grantor shall change its corporate name to eliminate
therefrom any use of any Xxxx, and execute any other and further documents which
Grantee may request further to confirm the foregoing and to transfer to Grantee
ownership of Grantor's rights to such Marks.
(i) Provisions Concerning Copyrights.
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(i) Grantor shall not divest itself of any rights under any Copyrights,
whether or not Grantor currently holds such rights.
(ii) Promptly upon learning thereof, Grantor shall notify Grantee in
writing of all pertinent details available to it, with respect to any
infringement or other violation of any Grantor's right under any Copyrights,
whether or not such right is presently held by Grantor. As to each such
instance, absent Grantee's authorization to proceed otherwise, and to the extent
permitted by law, Grantor shall diligently pursue a remedy. Promptly upon
learning thereof, Grantor shall notify Grantee in writing of all pertinent
details available to them regarding any claim that any activities of Grantor
infringes or otherwise violates the right of any third party with respect to any
Copyright.
(iii) If Grantor hereafter acquires rights in any Copyright, then
within 30 days of becoming the owner of such rights, or as soon thereafter as
reasonable, Grantor shall deliver to Grantee a copy of such Copyright and a
grant of security in such Grantor's rights under such Copyright, confirming the
grant thereof hereunder. The form of any confirmatory grants shall be
substantially the same as the form hereof.
(iv) If an Event of Default shall occur and be continuing, Grantee may
by written notice to Grantor take any or all of the following actions: (A)
declare Grantor's entire right, title and interest in each of the Copyrights to
be vested in Grantee, in which event such right, title and interest shall
immediately vest in Grantee and Grantor shall execute an assignment, in form and
substance satisfactory to Grantee, of all its rights, under such Copyrights to
Grantee, (B) take and practice or sell the Copyrights, and (C) direct Grantor to
refrain from using or practicing under the Copyrights in any manner, directly of
indirectly, and if requested by Grantee, execute any other and further documents
which Grantee may request further to confirm the foregoing and to transfer to
Grantee ownership of Grantor's rights to such Copyrights.
(j) Provisions Concerning Software.
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(i) Grantor shall not divest itself of any rights under any Software,
whether or not Grantor currently holds such rights.
(ii) Promptly upon learning thereof, Grantor shall notify Grantee in
writing of all pertinent details available to it, with respect to any
infringement or other violation of any Grantor's right under any Software,
whether or not such right is presently held by Grantor. As to each such
instance, absent Grantee's authorization to proceed otherwise, and to the extent
permitted by law, Grantor shall diligently pursue a remedy. Promptly upon
learning thereof, Grantor shall notify Grantee in writing of all pertinent
details available to them regarding any claim that any activities of Grantor
infringes or otherwise violates the right of any third party with respect to any
Software.
(iii) If Grantor hereafter acquires rights in any Software, then within
30 days of becoming the owner of such rights, or as soon thereafter as
reasonable, Grantor shall deliver to Grantee a copy of such Software and a grant
of security in such Grantor's rights under such Software, confirming the grant
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thereof hereunder. The form of any confirmatory grants shall be substantially
the same as the form hereof.
(iv) If an Event of Default shall occur and be continuing, Grantee may
by written notice to Grantor take any or all of the following actions: (A)
declare Grantor's entire right, title and interest in each of the Software to be
vested in Grantee, in which event such right, title and interest shall
immediately vest in Grantee and Grantor shall execute an assignment, in form and
substance satisfactory to Grantee, of all its rights, under such Software to
Grantee, (B) take and practice or sell the Software, and (C) direct Grantor to
refrain from using or practicing under the Software in any manner, directly of
indirectly, and if requested by Grantee, execute any other and further documents
which Grantee may request further to confirm the foregoing and to transfer to
Grantee ownership of Grantor's rights to such Software.
SECTION 6. Additional Provisions Concerning the Collateral.
-----------------------------------------------
(a) Grantor hereby authorizes Grantee to file, without the signature of
Grantor where permitted by law, one or more financing or continuation
statements, and amendments thereto, relating to the Collateral.
(b) Grantor hereby irrevocably appoints Grantee as Grantor's attorney-in-fact
and proxy, with full authority in the place and stead of Grantor and in the name
of Grantor or otherwise, from time to time in Grantee's discretion, to take any
action and to execute any instrument which Grantee may deem necessary or
advisable to accomplish the purposes of this Agreement (subject to the rights of
Grantor under Section 5(f) hereof), including, without limitation: (i) to obtain
and adjust insurance required to be paid to Grantee pursuant to Section 5(e)
here-of, (ii) to ask, demand, collect, xxx for, recover, compound, receive and
give acquittance and receipts for moneys due and to become due under or in
respect of any Collateral, (iii) to receive, indorse, and collect any drafts or
other instruments, documents and chattel paper in connection with clause (i) or
(ii) above, and (iv) to file any claims or take any action or institute any
proceedings which Grantee may deem necessary or desirable for the collection of
any Col-lateral or otherwise to enforce the rights of Grantee with respect to
any Collateral.
(c) If Grantor fails to perform any agreement contained herein, Grantee may
itself perform, or cause performance of, such agreement or obligation, and the
expenses of Grantee incurred in connection therewith shall be pay-able by
Grantor pursuant to Section 8 hereof.
(d) The powers conferred on Grantee hereunder are solely to protect its
interest in the Collateral and shall not impose any duty upon it to exercise any
such powers. Other than the exercise of reasonable care to provide for the safe
custody of any Collateral in its possession and the accounting for moneys
actually received by it hereunder, Grantee shall have no duty as to any
Collateral. Grantee shall be deemed to have exercised reasonable care in the
custody and preservation of the Collateral in its possession if such Collateral
is accorded treatment substantially equal to that which Grantee accords its own
property, it being understood that Grantee shall not have responsibility for the
taking of any necessary steps to preserve rights against prior parties or any
other rights pertaining to any Collateral.
11
(e) Anything herein to the contrary notwithstanding, (i) Grantor shall
remain liable under the Related Contracts to the extent set forth therein to
perform all of its obligations thereunder to the same extent as if this
Agreement had not been executed, (ii) the exercise by Grantee of any of its
rights hereunder shall not release Grantor from any of its obligations under the
Related Contracts, and (iii) Grantee shall not have any obligation or liability
by reason of this Agreement under the Related Contracts nor shall Grantee be
obligated to perform any of the obligations or duties of Grantor thereunder or
to take any action to collect or enforce any claim for payment assigned
hereunder.
SECTION 7. Events of Default. Each of the following shall constitute an event
-----------------
of default (an "Event of Default") under this Agreement:
------------------
(a) default in the observance or performance of any of the terms, covenants
or conditions contained in this Agreement;
(b) should any representation, warranty or statement made in this Agreement
prove to be untrue, incorrect or misleading in any material respect;
(c) If Grantor (i) shall commence any case, proceeding or other action under
any law relating to bankruptcy, insolvency, reorganization or relief of debtors,
seeking to have an order for relief entered with respect to it, or seeking to
adjudicate Grantor a bankrupt or insolvent, or seeking reorganization,
arrangement, adjustment, winding-up, liquidation, dissolution, composition or
other relief with respect to Grantor or any of its debts, or seeking appointment
of a receiver, trustee, custodian or other similar official for Grantor or for
all or any substantial part of its assets, or Grantor shall make a general
assignment for the benefit of its creditors, or there shall be commenced against
Grantor any case, proceeding or other action of a nature referred to in this
Section (c), (ii) there shall be commenced against Grantor any case, proceeding
or other action seeking issuance of a warrant of attachment, execution,
distraint or similar process against all or any substantial part of the assets
of Grantor which results in the entry of an order for any such relief, or
Grantor shall take any action in furtherance of, or indicating its consent to,
approval of, or acquiescence in, any of the acts set forth in this Section (c)
or Grantor shall generally not, or shall be unable to, or shall admit in writing
its inability to, pay its debts as they become due, (iii) entry of a judgment in
excess of $25,000 against Grantor, (iv) failure to pay or remit any tax when
assessed or due unless contested in good faith; (v) dissolution of Grantor, (vi)
making a bulk transfer or sending notice of intent to do so, (vii) suspension or
liquidation of the usual business, or (viii) the occurrence of a default or
Event of Default (as such term is defined in the applicable document) under any
Loan Document or any other guarantee or security agreement guaranteeing or
securing any Grantor, or under any agreement, contract or instrument with any
lender;
(c) if there is an attachment or sequestration of any part of the Collateral
and the same is not discharged or bonded within ten (10) days;
(d) the occurrence of a default under any of the other Loan Documents and
the continuance thereof beyond any applicable grace period stated therein, if
any;
(e) if Grantor shall cease business operations;
12
(f) if Grantor shall merge or consolidate with any entity or sell, transfer
or otherwise dispose of any of its assets other than in the ordinary course of
business;
(g) if any provision of this Agreement or any other Loan Document to which
Grantor is a party shall at any time after their respective execution and
delivery and for any reason (except by their respective terms) cease to be in
full force and effect or the validity or enforceability thereof shall be
contested by Grantor, or Grantor shall deny that it has any further liability or
obligation under this Agreement or such other Loan Document, as the case may be,
except in accordance with their respective terms thereof; or
(h) the occurrence of a default under any of the loan documents described on
Schedule III hereto executed by Grantor and USTrust and the continuance thereof
-------------
beyond any applicable grace period stated therein, if any.
Grantor shall give prompt notice to Grantee of any default or Event of
Default hereunder.
SECTION 8. Remedies Upon Default. If an Event of Default shall have occurred
----------------------
and be continuing:
(a) Grantee may exercise in respect of the Collateral, in addition to other
rights and remedies provided for herein or otherwise available to it, all of the
rights and remedies of a secured party on default under the UCC (whether or not
the UCC applies to the affected Collateral), and also may (i) require Grantor
to, and Grantor hereby agrees that it will at its expense and upon request of
Grantee forthwith, assemble all or part of the Collateral as directed by Grantee
and make it available to Grantee at a place to be designated by Grantee and (ii)
without notice except as specified below, sell the Collateral or any part
thereof in one or more parcels at public or private sale, at any of Grantee's
offices or elsewhere, for cash, on credit or for future delivery, and at such
price or prices and upon such other terms as Grantee may deem commercially
reasonable. Grantor agrees that, to the extent notice of sale shall be required
by law, at least 10 days' notice to Grantor of the time and place of any public
sale or the time after which any private sale is to be made shall constitute
reasonable notification. Grantee shall not be obligated to make any sale of
Collateral regardless of notice of sale having been given. Grantee may adjourn
any public or private sale from time to time by announcement at the time and
place fixed therefor, and such sale may, without further notice, be made at the
time and place to which it was so adjourned.
(b) Any cash held by Grantee as Collateral and all cash proceeds received by
Grantee in respect of any sale of, collection from, or other realization upon,
all or any part of the Collateral may, in the discretion of Grantee, be held by
Grantee as collateral for, and/or then or at any time there-after applied (after
payment of any amounts payable to Grantee pursuant to Section 9 hereof) in whole
or in part by Grantee against, all or any part of the Obligations in such order
as Grantee shall elect. Any surplus of such cash or cash proceeds held by
Grantee and remaining after payment in full of all of the Obligations shall be
paid over to Grantor or to such person as may be lawfully entitled to receive
such surplus.
13
(c) The purchase money, proceeds or avails of any sale referred to or made
under or by virtue of this Section 8, together with any other sums which then
may be held by Grantee, whether under the provisions of this Section 8 or
otherwise, shall, except as herein expressly provided to the contrary, be
applied as follows:
First: To the payment of the costs and expenses of any such sale in
-----
such order as Grantee shall determine in its sole discretion,
including, without limitation, (i) any and all recording taxes or
fees, municipal and state transfer taxes payable, (ii) the costs and
expenses of entering upon, taking possession of, removing others from,
holding, operating and managing the Collateral any part thereof, as
the case may be, including, without limitation, compensation to
Grantee, its agents and counsel, (iii) the costs and expenses of any
judicial proceedings, (iv) the costs, expenses, liabilities and
advances made or incurred by Grantee under this Security Agreement,
and (v) all taxes, governmental impositions and other similar charges,
subject to which the Collateral shall have been sold.
Second: To the payment of the amount then due, owing or unpaid upon
------
the Note, first to interest (including, without limitation, any
interest compensation amounts, premium, fees and additional interest),
and then to principal, with interest on the unpaid principal at the
default rate from the due date of any such payment of principal until
the same is paid in full.
Third: To the payment of any other sums secured hereunder or required
-----
to be paid by Grantor pursuant to any provision of any other Loan
Documents.
Fourth: To the extent not prohibited by applicable law, to be set
------
aside by Grantee as adequate security in its judgment for the payment
of sums which would have been paid by application under clauses First
-----
through Third above to Grantee, arising out of an obligation or
-----
liability with respect to which Grantor has agreed to indemnify
Grantee, but which sums are not yet due and payable or liquidated.
Fifth: To the payment of the surplus, if any, to whomsoever may be
-----
lawfully entitled to receive the same.
SECTION 9. Indemnity and Expenses.
----------------------
(a) Grantor agrees to indemnify Grantee from and against any and all claims,
losses, obligations, liabilities and costs (including, without limitation,
reasonable attorneys' fees and expenses) suffered or incurred by Grantee arising
out of or resulting from this Agreement.
(b) Grantor will upon demand pay to Grantee the amount of any and all costs
and expenses, including the fees and disbursements of Grantee's counsel and of
any experts and Grantee's representatives, which Grantee may incur in connection
with (i) the administration of this Agreement, (ii) the custody, preservation,
use or operation of, or the sale of, collection from, or other realization
upon, any Collateral, (iii) the exercise or enforcement of any of the rights of
Grantee hereunder, or (iv) the failure by Grantor to perform or observe any of
the provisions hereof.
14
SECTION 10. Notices, Etc. All notices, requests, consents or other
--------------
communications provided for in or to be given under this Agreement shall be in
writing, may be delivered in person, by facsimile transmission (fax), by
overnight air courier or by certified or registered mail, and shall be deemed to
have been duly given and to have become effective (a) upon receipt if delivered
in person or by fax (and followed by the same or next business day of mailing of
such faxed notice by one of the other methods of delivery permitted hereunder),
(b) one day after having been delivered to an overnight air courier, or (c)
three days after having been deposited in the mails as certified or registered
mail, all fees prepaid, directed to the parties at the following addresses (or
at such other address as shall be given in writing by a party hereto):
If intended for Grantee:
Cardiotech International, Inc.
00-X Xxxxxxx Xxxxxx
Xxxxxx, XX 00000
Attention: Xxxxxxx Xxxxxxx
Tel: (000) 000-0000
Fax: (000) 000-0000
With a copy to:
Ellenoff Xxxxxxxx Schole & Cyruli, LLP
000 Xxxxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx Xxxxxxxx, Esq.
Tel: (000) 000-0000
Fax: (000) 000-0000
If intended for Grantor:
Implant Sciences Corporation
000 Xxxxxxx Xxxx
Xxxxxxxxx, Xxxxxxxxxxxxx 00000-0000
Tel: (000) 000-0000
Fax: (000) 000-0000
With a copy to:
Law Office of Xxxxx X. Xxxxxxxx LLC
000 Xxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxx. 00000
Attention: Xxxxx X. Xxxxxxxx, Esq.
Tel: (000) 000-0000
Fax: (000) 000-0000
15
SECTION 11. Consent to Jurisdiction; Service of Process; Waiver of Right of
---------------------------------------------------------------
Jury Trial.
----------
(a) Grantor hereby irrevocably submits to the jurisdiction of any state or
federal court located in the Commonwealth of Massachusetts located in or closest
in geographic proximity to Middlesex County, Massachusetts, in any action, suit
or proceeding brought against Grantor under or in connection with this Agreement
or any of the other Loan Documents, and hereby irrevocably waives, to the
fullest extent it may effectively do so, the defense of forum non convenience.
(b) Grantor and Grantee hereby waive the right of trial by jury in any
litigation arising hereunder.
SECTION 12. Miscellaneous.
-------------
(a) Any term, covenant, agreement or condition of this Agreement may be amended
or waived, and any departure there-from may be consented to, if, but only if,
such amendment, waiver or consent is in writing and signed by Grantee and, in
the case of any amendment, Grantor. Unless otherwise specified in such waiver
or consent, a waiver or consent given hereunder shall be effective only in the
specific instance and for the specific purpose for which given.
(b) The rights and remedies of Grantee, hereunder or under any other Loan
Document shall be cumulative and not exclusive of any rights or remedies which
Grantee would otherwise have, and no failure or delay by Grantee in exercising
any right shall operate as a waiver thereof, nor shall any single or partial
exercise of any power or right preclude its other or further exercise or the
exercise of any other power or right. The rights and remedies of Grantee
provided herein or in any other Loan Document against any person are not
conditional or contingent upon any attempt by Grantee to exercise any of its
rights and remedies under any other Loan Document against such party or against
any other person.
(c) 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 hereof or thereof or affecting the validity or enforceability of such
provision in any other jurisdiction. To the extent permitted by applicable law,
Grantor hereby waives any provision of law which renders any provision hereof
prohibited or unenforceable in any respect.
(d) This Agreement shall create a continuing security interest in the
Collateral and shall (i) remain in full force and effect until the payment in
full or release of the Obligations, and (ii) be binding on Grantor and its
successors and permitted assigns and shall inure, together with all rights and
remedies of Grantee hereunder, to the benefit of Grantee and its successors,
transferees and assigns. Without limiting the generality of clause (ii) of the
immediately preceding sentence, Grantee may from time to time assign to one or
more persons all or any part of or otherwise grant participations to one or more
persons in all or any part of the Loan and the Note, and Grantee may assign or
16
otherwise transfer any of its rights hereunder or under any other Loan Document
to any other such person, and the holder of any such assignment or
participation, if the assignment or participation agreement so provides, shall,
with respect thereto, be entitled to all of the rights and benefits of Grantee
hereunder or under the other Loan Documents. Grantee may, in connection with any
such assignment or participation or proposed assignment or participation,
disclose any non-public information relating to Grantor furnished by or on
behalf of Grantor to Grantee. None of the rights or obligations of Grantor
hereunder or any interest of Grantor herein may be assigned or otherwise
transferred with-out the prior written consent of Grantee, and no such attempted
assignment or transfer of any such obligation shall relieve Grantor therefrom
unless Grantee shall have consented to such release in a writing specifically
referring to the obligation from which Grantor is to be released.
(e) Upon the satisfaction in full of the Obligations, (i) this Agreement and
the security interest created hereby shall terminate and all rights to the
Collateral shall revert to Grantor, and (ii) Grantee will, upon Grantor's
request and at Grantor's expense, (A) return to Grantor such of the Collateral
as shall not have been sold or otherwise disposed of or applied pursuant to the
terms hereof and (B) execute and deliver to Grantor such documents as Grantor
shall reasonably request to evidence such termination.
(f) This Agreement and the other Loan Documents to which Grantor is a party
embody the entire agreement between Grantor and Grantee relating to the subject
matter thereof and supersede all prior agreements, representations and
understandings, if any, relating to the subject matter thereof.
(g) Section headings herein are included for convenience of reference only
and shall not constitute a part of this Agreement for any other purpose.
(h) This Agreement shall be governed by and construed in accordance with
the laws of the Commonwealth of Massachusetts with giving effect to the
principles of conflicts of law.
IN WITNESS WHEREOF, Grantor has caused this Agreement to be executed and
delivered by its officer there-unto duly authorized in favor of Grantee, as of
the date first above written.
IMPLANT SCIENCES CORPORATION
By: /s/ Xxxxxxx X. Xxxxxx
-----------------------
Xxxxxxx X. Xxxxxx
President
17
SCHEDULE I
TO
SECURITY AGREEMENT
Trade Names
-----------
18
SCHEDULE II
TO
SECURITY AGREEMENT
Contracts
---------
19
SCHEDULE III
TO
SECURITY AGREEMENT
Permitted Encumbrances
----------------------
20
SCHEDULE III
TO
SECURITY AGREEMENT
Permitted Encumbrances
----------------------
21
SCHEDULE IV
TO
SECURITY AGREEMENT
Litigation
----------
22
