Exhibit 10.4


 


EXECUTION COPY


 


SECURITY AGREEMENT


 


This Security Agreement
(this “Agreement”), is made as of 4th day of December, 2015 by and between PositiveID Corporation, a Delaware
corporation (the “Secured Party”); and Thermomedics, Inc., a Nevada corporation (“Debtor”) (together, the
“Parties”).


 


RECITALS:


 


A. The Debtor, Secured
Party and Sanomedics, Inc., a Delaware corporation and sole owner of the Debtor (“Sano”) have entered into that certain
Management Services and Control Agreement dated as of the date hereof (“MSA”) in connection with that certain Stock
Purchase Agreement dated October 21, 2015 by and among the Secured Party and Sano, as amended (“Purchase Agreement”).


 


B. Pursuant to Sections
2.02(a) and 2.03(b)(i) of the Purchase Agreement, the Secured Party agreed to advance the Cash Purchase Price less certain amounts
as set forth in the Purchase Agreement to Sano as of the date hereof (the “Purchase Price Advance”).


 


C. Pursuant to Section
5 of the MSA, the Secured Party has agreed to advance funds (the “MSA Advance” and together with the Purchase Price
Advance, the “Advance”) to the Debtor on an as needed basis.


 


D. The obligation of the
Secured Party to make the Advance is subject to the condition that the Debtor grant to and create in favor of the Secured Party
a security interest in and lien upon all business assets and rights of the Debtor as hereinafter provided; and


 


E. In order to induce the
Secured Party to make the Advance to Debtor, the Debtor has agreed to the provisions set forth in this Agreement.


 


NOW, THEREFORE, in consideration
of and as an inducement to the Secured Party to make the Advance to Debtor, the parties hereto, intending to be legally bound,
covenant and agree as follows:


 


Section 1.              Definitions.


 


(a)           Certain
Definitions. In addition to the words and terms defined elsewhere in this Agreement, the following words and terms shall have
the following meanings, respectively, unless the context hereof otherwise clearly requires:


 


(i)          “Collateral”
shall mean all personal property and assets of Debtor, including, without limitation, all of the following items, whether now owned
or now due, or in which the Debtor has an interest or hereafter, at anytime in the future, acquired, arising or to become due,
or in which the Debtor obtains an interest, and all products, proceeds, replacements, substitutions and accessions of or to any
of the following, which to the extent not defined below, shall have the meanings given to them under the Uniform Commercial Code
as enacted in the State of Florida or as enacted in the state in which such Collateral is located:


 


		A.	all accounts and accounts receivable;



 


		B.	all inventory (including raw materials, work-in-process, finished goods and supplies;



 




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		C.	all contract rights;



 


		D.	all general intangibles (including, without limitation, payment intangibles, software, trademarks,
patents, copyrights or other intellectual property rights of Debtor);



 


		E.	all equipment (including all machinery, furniture and fixtures);



 


		F.	all goods;



 


		G.	all chattel paper (whether tangible or electronic);



 


		H.	all fixtures;



 


		I.	all investment property (including, without limitation, all financial assets, certificated and
uncertificated securities, securities accounts and security entitlements);



 


		J.	all letter-of-credit rights;



 


		K.	all rights under judgments, all commercial tort claims and choses in action;



 


		L.	all books, records and information relating to the Collateral and/or to the operation of the Debtor’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;



 


		M.	all instruments, promissory notes, documents of title, documents, policies and certificates of
insurance, securities, deposits, deposit accounts, money, cash or other property;



 


		N.	all federal, state and local tax refunds and/or abatements to which the Debtor is or becomes entitled
no matter how or when arising, including not limited to any loss carryback tax refunds;



 


		O.	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-P) or otherwise;
and



 


		P.	all liens, guaranties, rights, remedies and privileges pertaining to any of the foregoing (A-P)
including the right of stoppage in transit.



 


(ii)         “Obligations”
means all indebtedness of the Debtor to the Secured Party arising on or after the date hereof under the Advance, both principal
and interest, and any and all extensions, renewals, re-financing or re-funding, in whole or in part, thereof.


 


(iii)        “Event(s)
of Default” shall mean any default or material breach of the terms, conditions or covenants of this Agreement, the MSA, or
the Purchase Agreement. The Secured Party and the Debtor agree and acknowledge that for purposes of the Purchase Price Advance
(as well as the MSA Advance as set forth in the MSA), an Event of Default shall include the event described in Section 11 of the
MSA.


 




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(b)          Other
Definitions. Words and terms defined in the MSA shall, unless the context hereof otherwise clearly requires, have the same
meanings herein as provided in the MSA.


 


(c)          Construction.
Unless the context of this Agreement otherwise clearly requires, references to the plural include the singular, the singular the
plural and the part the whole, and “or” has the inclusive meaning represented by the phrase “and/or”. The
words “hereof”, “herein”, “hereunder” and similar terms in this Agreement refer to this Agreement
as a whole and not to any particular provision of this Agreement. The section and other headings contained in this Agreement are
for reference purposes only and shall not control or affect the construction of this Agreement or the interpretation hereof in
any respect. Section, subsection and exhibit references are to this Agreement unless otherwise specified.


 


Section 2.            Security
Interest. Debtor, on the terms set forth in this Agreement and as security for the full and timely payment of the Obligations
in accordance with the terms thereof and of the instruments now or hereafter evidencing the Obligations, hereby grants to the Secured
Party a continuing security interest, under the Uniform Commercial Code (as in effect on the date hereof and as amended from time
to time hereafter) of each state having jurisdiction from time to time with respect to all or any portion of the Collateral (the
“Code”), in and a lien on the Collateral. In addition to all the rights given to the Secured Party by the MSA, the
Purchase Agreement and this Agreement, the Secured Party shall have all the rights and remedies of a secured party under the Code.
In connection with the grant of security interest made hereby, Debtor hereby authorizes Secured Party to file or cause to be filed
one or more financing statements, amendments to financing statements and/or in lieu financing statements with any filing office
for the purpose of perfecting or continuing the perfection of the security interest in the Collateral.


 


Section 3.            Principles
Applicable to the Collateral. The parties agree that, at all times during the term of this Agreement, the following provisions
shall be applicable to the Collateral:


 


(a)          The
Debtor covenants and agrees that it will keep accurate and complete books and records concerning the Collateral owned by it in
accordance with generally accepted accounting principles, consistently applied.


 


(b)          The
Secured Party shall have the right to review the books and records of the Debtor pertaining to the Collateral and to copy and make
excerpts therefrom, all at such times and as often as the Secured Party may reasonably request.


 


(c)          The
Debtor shall keep (i) its principal place of business and its chief executive office, (ii) its records concerning the Collateral,
and (iii) its Collateral at the address set forth on the first page of this Agreement and/or at the address of the Collateral and
at no other location without the prior written consent of the Secured Party.


 


(d)          Notwithstanding
the security interest in the Collateral granted to and created in favor of the Secured Party under this Agreement, the Debtor shall
have the right, until one or more Events of Default beyond any applicable grace period shall occur and be continuing or shall exist,
to sell, lease or otherwise dispose of the Collateral in the ordinary course of the Debtor’s business.


 




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(e)          Notwithstanding
the security interest in the Collateral granted to and created in favor of the Secured Party under this Agreement and subject to
the terms of the MSA and the Purchase Agreement, the Debtor shall have the right, until such time as the Secured Party shall have
notified the Debtor that it has revoked such right based upon an Event of Default beyond any applicable grace period at its own
cost and expense to collect any and all accounts of the Debtor comprising the Collateral (the “Accounts”).


 


(f)          The
Secured Party shall have the right after a default has occurred under the MSA beyond applicable grace periods (i) to revoke the
right of the Debtor granted under subsection (e) of this Section 3 by written notice to the Debtor to such effect, (ii) to take
over and direct collection of any and all Accounts and Collateral of the Debtor, as applicable, (iii) to give notice of the Secured
Party's security interest in such Accounts and Collateral to any or all persons obligated to the Debtor thereon, (iv) to direct
such persons to make payment of such Accounts directly to the Secured Party and (v) to take control of such Accounts and any proceeds
thereof and Collateral.


 


(g)          The
Secured Party shall have the right after a default has occurred under the MSA beyond applicable grace periods to cause a non-interest
bearing bank account entitled “Cash Collateral Account” (the “Collateral Account”) to be opened and maintained
for the Debtor by the Secured Party at any bank of its choosing. All cash proceeds received by the Secured Party from the Debtor
pursuant to subsection (h) of this Section 3 or directly from persons obligated on Accounts pursuant to subsection (f) of this
Section 3 shall be deposited in the Collateral Account as further security for the payment of the Obligations. The Secured Party
shall have sole dominion and control over all funds deposited in the Collateral Account, and such funds may be withdrawn therefrom
only by the Secured Party.


 


(h)          Upon
notice by the Secured Party to the Debtor that the Collateral Account has been opened in accordance with subsection (g) of this
Section 3, the Debtor shall cause all cash proceeds collected by it to be delivered to the Secured Party forthwith upon receipt,
in the original form in which received, bearing such endorsements or assignments by the Debtor as may be necessary to permit collection
thereof by the Secured Party, and for such purpose the Debtor hereby irrevocably authorizes and empowers the Secured Party, its
officers, employees and authorized agents, to endorse and sign the name of the Debtor on all checks, drafts, money orders or other
media of payment so delivered and such endorsements or assignments shall, for all purposes, be deemed to have been made by the
Debtor prior to any endorsement or assignment thereof by the Secured Party. The Secured Party may use any convenient or customary
means for the purpose of collecting such checks, drafts, money orders or other media of payment.


 


Section 4.            Certain
Covenants. Until payment in full of the Obligations, the Debtor agrees that:


 


(a)          The
Debtor has and will have good and marketable title to the Collateral from time to time owned or acquired by it, free and clear
of all liens, encumbrances and security interests, except security interests granted to and created in favor of the Secured Party.
The Debtor will defend such title against the claims and demands of all persons.


 


(b)          The
Debtor will not, without the prior written consent of the Secured Party: (i) borrow against the Collateral from any person, firm
or corporation other than the Secured Party, (ii) create, incur, assume or suffer to exist any mortgage, lien, charge or encumbrance
on, or security interest in, or pledge of or conditional sale or other title retention agreement with respect to any of the Collateral,
except the security interest created hereunder, (iii) permit any levy or attachment to be made against any of the Collateral except
a levy or attachment relating to this Agreement unless removed within sixty (60) days after written notice by Secured Party to
Debtor, (iv) permit any financing statement to be on file with respect to any of the Collateral, except financing statements in
favor of the Secured Party, or (v) permit any transfer of Collateral without the consent of the Secured Party.


 




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(c)           The
Debtor will faithfully preserve and protect the Secured Party’s security interest in the Collateral and will, at its own
cost and expense, cause said security interest to be perfected and continued perfected, and for such purpose the Debtor will from
time to time at the request of the Secured Party execute and file or record, or cause to be filed or recorded, such instruments,
documents and notices, including, without limitation, financing statements and continuation statements, as the Secured Party may
deem necessary or advisable in order to perfect and continue perfected said security interest. The Debtor will do all such other
acts and things and execute and deliver all such other instruments and documents, including, without limitation, further security
agreements, pledges and assignments, as the Secured Party may reasonably deem necessary or advisable from time to time in order
to perfect and preserve the priority of said security interest as a first lien security interest in the Collateral prior to the
rights of all persons therein or thereto. The Secured Party is hereby appointed attorney-in-fact for the Debtor to do all acts
and things which it may deem necessary or advisable to preserve, perfect and continue perfected its security interest in the Collateral,
including, without limitation, the signing of financing and other similar statements.


 


Section 5.              Events
of Default.


 


(a)           If
one or more Events of Default shall occur, then the Secured Party may forthwith proceed to exercise any one or more of the rights
and remedies afforded a secured party by the Code and such other rights and remedies which it may have at law or in equity, under
this Agreement, all of which rights and remedies shall, to the full extent permitted by law, be cumulative. Without limitation
upon the foregoing, the Secured Party shall have the right without demand or prior notice to the Debtor or any other person, except
as otherwise required by law (and if notice is required by law, after thirty (30) days’ prior written notice to the Debtor
at its address hereinafter set forth) and without prior judicial hearing or legal proceedings, all of which the Debtor hereby expressly
waives:


 


(i)          to
enter any premises where Collateral is located and to take possession and control of the same;


 


(ii)         to
enforce collection, at the Debtor’s expense and either in the name of the Secured Party or the name of the Debtor, of any
or all of the Accounts by suit or otherwise, to surrender, release or exchange all or any part thereof, or to compromise or extend
or renew (whether or not longer than the original period) any indebtedness thereunder;


 


(iii)        to
take over and perform any contract of the Debtor and to take control of any and all Accounts and proceeds arising therefrom;


 


(iv)        to
sell all or any portion of the Collateral at public or private sale at such place or places and at such time or times and in such
manner and upon such terms, whether for cash or credit, as the Secured Party in its sole discretion may determine; and


 


(v)         to
endorse in the name of the Debtor any instrument, howsoever received by the Secured Party, representing proceeds of any of the
Collateral.


 


The Secured Party shall
apply the proceeds of any sale or other disposition of any realization of the Collateral after default first to the payment of
the reasonable costs and expenses incurred by the Secured Party in connection with such sale or other disposition or realization,
including reasonable attorneys’ fees and legal expenses, second to the repayment of the Obligations to the Secured Party,
whether on account of principal or interest or otherwise as the Secured Party in its sole discretion may elect, and then to the
payment of the balance, if any, as required by law. If the proceeds of any such sale or other disposition of the Collateral are
insufficient to pay the Obligations and the Secured Party’s reasonable costs hereunder or under the MSA, the Debtor shall
be liable for any deficiency.


 




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(b)           Upon
the occurrence of any Event of Default, the Debtor shall promptly upon demand by the Secured Party assemble the Collateral and
make it available to the Secured Party at a place to be designated by the Secured Party which shall be reasonably convenient to
both parties. The right of the Secured Party under this Section to have the Collateral assembled and made available to it is the
essence of this Agreement and the Secured Party may, at its election, enforce such right by any and all remedies available to the
Secured Party, including a bill in equity for specific performance.


 


Section 6.            Defeasance.
Upon payment in full of the Obligations and provided that Debtor shall not have any right to future advances under the MSA, this
Agreement shall terminate and be of no further force or effect. Until such time, however, this Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors and assigns.


 


Section 7.            Subrogation
and Marshaling. The Debtor hereby waives, surrenders and agrees not to claim or enforce, so long as the Obligations or any
portion thereof remains outstanding, (a) any right to be subrogated in whole or in part to any right or claim of the holder of
any part of the Obligations and (b) any right to require marshaling of any assets of the Debtor which right of subrogation or marshaling
might otherwise arise from any payment to the holder of any part of the Obligations arising out of the enforcement of the security
interest granted hereby, or any other mortgage or security interest granted by the Debtor or any other person to the Secured Party,
or the liquidation of or the realization upon the Collateral, any other collateral granted by the Debtor or any other person to
the Secured Party, or any part thereof.


 


Section 8.            Severability.
If any provision of this Agreement shall for any reason be held invalid or unenforceable, such invalidity or unenforceability shall
not affect any other provision hereof, but this Agreement shall be construed as if such invalid or unenforceable provision had
never been contained herein.


 


Section 9.            No
Waiver; Rights Cumulative. No failure or delay on the part of the Secured Party in exercising any right, remedy, power or privilege
hereunder shall operate as a waiver thereof or of any other right, remedy, power or privilege hereunder or under the MSA; nor shall
any single or partial exercise of any such right, remedy, power or privilege preclude any other or further exercise thereof or
of any other right, remedy, power or privilege. The rights and remedies of the Secured Party under this Agreement are cumulative
and not exclusive of any rights or remedies which it may otherwise have. No modification or waiver of any provision of this Agreement
nor consent to any departure by the Debtor therefrom shall be effective unless the same shall be in writing, and then such waiver
or consent shall be effective only in the specified instance and for the specific purpose for which given.


 


Section 10.           Notices.
Any notice, request, demand or other communication required or permitted hereunder shall be given in writing by delivering the
same in person to the intended addressee, by overnight courier service with guaranteed next day delivery or by certified United
States Mail, postage prepaid or telegram sent to the intended addressee at the applicable address as set forth within the Purchase
Agreement or to such different address as either Debtor or Secured Party shall have designated by written notice to the other sent
in accordance herewith. Such notices shall be deemed given when received or, if earlier, in the case of delivery by courier service
with guaranteed next day delivery, the next day or the day designated for delivery, or in the case of delivery by certified United
States mail, two days after deposit therein.


 




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Section 11.         Governing
Law. The Code shall govern the attachment, perfection and the effect of attachment and perfection of the Secured Party's interest
in the Collateral, and the rights, duties and obligations of the Debtor and the Secured Party with respect thereto. This Agreement
shall be deemed to be a contract under the laws of the state of Florida and the execution and delivery hereof and, to the extent
not inconsistent with the preceding sentence, the terms and provisions hereof, shall be governed by and construed in accordance
with the laws of the state of Florida.


 


Section 12.         Survival.
All representations, warranties, covenants and agreements contained herein or made in writing in connection herewith shall survive
the execution and delivery of this Agreement and the extension of the MSA.


 


EXECUTED under seal as of the date first above written.


 


	 	 	DEBTOR:
	 	 	 
	 	 	Thermomedics, Inc.
	 	 	 	 
	 	 	By:	/s/ Keith Houlihan
	Witness	 	Name: Keith Houlihan
	 	 	Title:   President
	 	 	 
	 	 	SECURED PARTY:
	 	 	 
	 	 	PositiveID Corporation
	 	 	 	 
	 	 	By: 	/s/ William J. Caragol
	Witness	 	Name: William J. Caragol
	 	 	Title:   Chief Executive Officer


 




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