Document:

imxform8k090708_ex10-2.htm

    

      EXHIBIT
10.2

       

      THE
SECURITIES REPRESENTED BY THIS CERTIFICATE (THE “SECURITIES”) HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”)
OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT AND UNDER APPLICABLE
STATE SECURITIES LAWS OR IMPLANT SCIENCES CORPORATION SHALL HAVE RECEIVED AN
OPINION OF COUNSEL THAT REGISTRATION OF SUCH SECURITIES UNDER THE SECURITIES ACT
AND UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES LAWS IS NOT
REQUIRED.

       

      SENIOR
SECURED PROMISSORY NOTE

       

      
        	
                Dated: 

              	
                 July
      1, 2009                                                                                    $1,000,000

              

      

       

      For value
received, IMPLANT SCIENCES CORPORATION, a corporation organized under the laws
of the Commonwealth of Massachusetts (the “Maker” or the “Company”), hereby
promises to pay to the order of DMRJ GROUP, LLC, a Delaware limited liability
company, with an address at 152 West 57th Street,
4th
Floor, New York, NY 10019 (together with its successors, representatives, and
assigns, the “Holder”), in
accordance with the terms hereinafter provided, the principal amount of One
Million Dollars ($1,000,000) hereunder, together with interest and all other
obligations outstanding hereunder.

       

      All
payments under or pursuant to this Senior Secured Promissory Note (this “Note”) shall be made
in United States Dollars in immediately available funds to the Holder at the
address of the Holder first set forth above or at such other place as the Holder
may designate from time to time in writing to the Maker or by wire transfer of
funds to the Holder’s account, instructions for which are attached hereto as
Exhibit
A.  The outstanding principal balance of this Note plus all
outstanding interest and all other amounts owing hereunder shall be due and
payable on December 10, 2009 (the “Maturity Date”) or at
such earlier time as provided in Section 1.3 below.

       

      ARTICLE
I

       

      Section
1.1 Purchase
Agreement.  This Note has been executed and delivered pursuant
to the Note and Warrant Purchase Agreement, dated as of December 10, 2008 (as
amended, modified, replaced or restated from time to time, the “Purchase
Agreement”), by and between the Maker and the Holder (as an Investor) and is the
Additional Note referenced in that certain First Amendment to Note and Warrant
Purchase Agreement, dated as of the date hereof, by and between the Maker and
the Holder (as an Investor).  Capitalized terms used and not otherwise
defined herein shall have the meanings set forth for such terms in the Purchase
Agreement.

       

      Section
1.2 Interest.  The
Maker will pay interest to the Holder, payable on the Maturity Date or at such
earlier time as payment is made pursuant, at a rate equal to the lesser of two
and one half percent (2.5%) per month (prorated for partial months) and the
maximum applicable legal rate per annum, computed on the basis of a 360-day year
of twelve (12) thirty-

       

       

      
        
           

        

        
           

          
            

          

        

        
           

        

         

        day
months on the outstanding principal balance of the Note. Furthermore, upon the
occurrence of an Event of Default (as defined below) described in Sections
2.1(a), (h) or (i), the Maker will pay interest to the Holder, payable on
demand, additional default rate interest at a rate equal to the lesser of three
percent (3%) per month (prorated for partial months) and the maximum applicable
legal rate per annum, computed on the basis of a 360-day year of twelve (12)
thirty-day months on the outstanding principal balance of the Note and on all
unpaid interest from the date of the Event of Default.

      

       

      Section
1.3 Payment of Principal;
Prepayment.  The outstanding principal balance of this Note and
all other amounts owing hereunder shall be due and payable upon the Maker
receiving net proceeds of at least $3,000,000 from the issuance and sale, in one
or more transactions, of its debt and/or equity.  Notwithstanding the
foregoing, the principal balance hereunder and all other amounts may be payable
in full at such earlier time upon acceleration of this Note in accordance with
the terms hereof.  Any amount of principal repaid hereunder may not be
reborrowed.  The Maker may prepay all or any portion of the principal
amount of this Note in an amount equal to the sum of (i) 100% of the amount of
the principal prepayment, and (ii) all outstanding interest and all other
amounts due and owing hereunder, upon not less than three (3) Business Days
prior written notice to the Holder, without other penalty or
premium.  This Note is further subject to mandatory prepayment at the
option of the Holder as set forth in Article 4 hereof.

       

      Section
1.4 Security
Documents.  The obligations of the Maker hereunder are secured
by a continuing security interest in substantially all of the assets of the
Maker pursuant to the terms of a Security Agreement by and between the Maker and
the Holder and other collateral documents.

       

      Section
1.5 Payment on Non-Business
Days.  Whenever any payment to be made shall be due on a
Saturday, Sunday or a public holiday under the laws of the State of New York,
such payment shall be due on the next succeeding Business Day and such next
succeeding day shall be included in the calculation of the amount of accrued
interest payable on such date.

       

      Section
1.6 Transfer.  This
Note may be transferred or sold, and may also be pledged, hypothecated or
otherwise granted as security, by the Holder; provided, however, that any
transfer or sale of this Note must be in compliance with any applicable
securities laws.

       

      Section
1.7 Replacement.  Upon
receipt of a duly executed, notarized and unsecured written statement from the
Holder with respect to the loss, theft or destruction of this Note (or any
replacement hereof) and a standard indemnity, or, in the case of a mutilation of
this Note, upon surrender and cancellation of such Note, the Maker shall issue a
new Note, of like tenor and amount, in lieu of such lost, stolen, destroyed or
mutilated Note.

       

      Section
1.8 Use of
Proceeds.  The Maker shall use the proceeds of this Note as set
forth in the Purchase Agreement.

       

       

      
        
           

        

        
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      ARTICLE
II

       

      EVENTS OF DEFAULT;
REMEDIES

       

      Section
2.1 Events of
Default.  The occurrence of any of the following events shall
be an “Event of
Default” under this Note:

       

      (a) any
failure to make any payment of the principal amount, interest or any other
monetary obligation under this Note, as and when the same shall be due and
payable (whether on the Maturity Date or by acceleration or otherwise);
or

       

      (b) the Maker
shall fail to observe or perform any other condition, covenant or agreement
contained in this Note and such failure continues for a period of ten (10) days
after the earlier of (i) the date on which such failure first becomes known to
any officer of the Maker or (ii) notice thereof is given to the Maker by Holder;
or

       

      (c) the
suspension from listing, without subsequent listing on any one of, or the
failure of the Common Stock to be listed on at least one of the OTC Bulletin
Board, the Nasdaq Capital Markets, the Nasdaq Global Market, the Nasdaq Global
Select Market, The New York Stock Exchange, Inc. or the NYSE Alternext Exchange
for a period of five (5) consecutive Trading Days, such a suspension to only
constitute an Event of Default if the Holder provides the Maker written
notification that it deems such suspension to be an Event of Default;
or

       

      (d) the Maker
shall default in the performance or observance of any undertaking, covenant,
condition or agreement contained in Sections 3.5, 3.6, 3.12, 3.13, 3.15, 3.16,
3.19, 3.20, 3.22, 3.24, 3.30, and 3.31 of the Purchase
Agreement;  or

       

      (e) the Maker
shall default in the performance or observance of any undertaking, covenant,
condition or agreement contained in the Purchase Agreement (other than Sections
3.5, 3.6, 3.12, 3.13, 3.15, 3.16, 3.19, 3.20, 3.22, 3.24, 3.30, and 3.31 of the
Purchase Agreement) or any other Transaction Document and such failure continues
for a period of ten (10) days after the earlier of (i) the date on which such
failure first becomes known to any officer of the Maker or (ii) notice thereof
is given to the Maker by Holder;  or

       

      (f) any
representation or warranty made by the Maker herein or in the Purchase Agreement
or any other Transaction Document shall prove to have been false or incorrect or
breached in a material respect on the date as of which made; or

       

      (g)  (A)
a default in any payment of any amount or amounts of principal of or interest on
any Indebtedness of the Maker (other than the Indebtedness hereunder), the
aggregate principal amount of which Indebtedness is in excess of $50,000 or (B) a default in the
observance or performance of any other agreement or condition relating to any
Indebtedness or contained in any instrument or agreement evidencing, securing or
relating thereto, or any other event shall occur or condition exist, the effect
of which default or other event or condition is to cause, or to permit, after
any applicable grace period, the holder or holders or beneficiary
or

       

       

      
        
           

        

        
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        beneficiaries
of such Indebtedness to cause with the giving of notice if required, such
Indebtedness to become due prior to its stated maturity; or

      

       

      (h) the Maker
shall (i) apply for or consent to the appointment of, or the taking of
possession by, a receiver, custodian, trustee or liquidator of itself or of all
or a substantial part of its property or assets, (ii) make a general assignment
for the benefit of its creditors, (iii) commence a voluntary case under the
United States Bankruptcy Code (as now or hereafter in effect) or under the
comparable laws of any jurisdiction (foreign or domestic), (iv) file a petition
seeking to take advantage of any bankruptcy, insolvency, moratorium,
reorganization or other similar law affecting the enforcement of creditors’
rights generally, (v) acquiesce in writing to any petition filed against it in
an involuntary case under United States Bankruptcy Code (as now or hereafter in
effect) or under the comparable laws of any jurisdiction (foreign or domestic),
(vi) issue a notice of bankruptcy or winding down of its operations or issue a
press release regarding same, or (vii) take any action under the laws of any
jurisdiction (foreign or domestic) analogous to any of the foregoing;
or

       

      (i) a
proceeding or case shall be commenced in respect of the Maker, without its
application or consent, in any court of competent jurisdiction, seeking (i) the
liquidation, reorganization, moratorium, dissolution, winding up, or composition
or readjustment of its debts, (ii) the appointment of a trustee, receiver,
custodian, liquidator or the like of Maker or of all or any substantial part of
Maker’s assets or (iii) similar relief in respect of it under any law providing
for the relief of debtors, and such proceeding or case described in clause (i),
(ii) or (iii) shall continue undismissed, or unstayed and in effect, for a
period of thirty (30) days or any order for relief shall be entered in an
involuntary case under United States Bankruptcy Code (as now or hereafter in
effect) or under the comparable laws of any jurisdiction (foreign or domestic)
against the Maker or action under the laws of any jurisdiction (foreign or
domestic) analogous to any of the foregoing shall be taken with respect to the
Maker and shall continue undismissed, or unstayed and in effect for a period of
sixty (60) days; or

       

      (j) a
judgment or judgments in the aggregate amount exceeding $50,000 is/are entered
against the Maker and not dismissed or discharged within twenty (20) days
following the entry thereof; or

       

      (k) the Maker
shall cease to actively conduct its business operations for a period of five (5)
consecutive Business Days other than in connection with temporary shutdown
during the last two weeks of December 2008; or

       

      (l) any
material portion of the properties or assets of the Maker is seized by any
governmental authority; or

       

      (m) the Maker
is indicted for the commission of any criminal activity.

       

      Section
2.2 Remedies Upon An Event of
Default.  If an Event of Default shall have occurred and shall
be continuing, the Holder may at any time at its option (a) declare the entire
unpaid principal balance of this Note, together with all interest accrued
hereon, plus fees and expenses, due and payable, and thereupon, the same shall
be accelerated and so due and

       

       

      
        
           

        

        
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        payable,
without presentment, demand, protest, or notice, all of which are hereby
expressly unconditionally and irrevocably waived by the Maker; provided,
however, that upon the occurrence of an Event of Default described in Sections
2.1 (h) or (i) above, the outstanding principal balance and accrued interest
hereunder, plus fees and expenses, shall be immediately and automatically due
and payable, and/or (b) exercise or otherwise enforce any one or more of the
Holder’s rights, powers, privileges, remedies and interests under this Note, the
Purchase Agreement, the Security Agreement or other Transaction Document or
applicable law.  No course of delay on the part of the Holder shall
operate as a waiver thereof or otherwise prejudice the right of the
Holder.  No remedy conferred hereby shall be exclusive of any other
remedy referred to herein or now or hereafter available at law, in equity, by
statute or otherwise.  Upon and after an Event of Default of the
type described in Sections 2.1(a), (h) or (i), this Note shall bear interest at
the default rate set forth in Section 1.2 hereof.

      

       

      ARTICLE
III

       

      PREPAYMENT

      Section
3.1 Prepayment.

       

      (a) Prepayment Option Upon Major
Transaction.  In addition to all other rights of the Holder
contained herein, simultaneous with the occurrence of a Major Transaction (as
defined below), the Holder shall have the right, at the Holder’s option, to
require the Maker to prepay the Note in cash at a price equal to the sum of (i)
one hundred percent (100%) of the aggregate principal amount of this Note plus
all accrued and unpaid interest (if any), and (ii) all other fees, costs,
expenses, liquidated damages or other amounts (if any) owing in respect of this
Note and the other Transaction Documents (the “Major Transaction Prepayment
Price”); provided, however, in the case of a Major Transaction described in
Section 3.1(b)(iv) below, the Major Transaction Prepayment Price shall be equal
to the lesser of (x) the amount described in clauses (i) and (ii) of this
Section 3.1(a) or (y) 100% of the aggregate amount of cash received (directly or
indirectly) from time to time (whether as initial consideration or through the
payment or disposition of deferred consideration) by or on behalf of Maker in
connection with such Major Transaction after deducting therefrom only reasonable
fees, commissions, and expenses related thereto and required to be paid by the
Maker in connection with such Major Transaction to the extent, but only to the
extent, that the amounts so deducted are, at the time of receipt of such cash,
actually paid or payable to a Person that is not an affiliate of Maker and are
properly attributable to such Major Transaction (the “Net Cash
Proceeds”).

       

      (b) “Major
Transaction.”  A “Major Transaction” shall be deemed to have
occurred at such time as any of the following events:

       

      (i) the
consolidation, merger or other business combination of the Maker with or into
another Person (other than (A) pursuant to a migratory merger effected solely
for the purpose of changing the jurisdiction of incorporation of the Maker or
(B) a consolidation, merger or other business combination in which holders of
the Maker’s voting power immediately prior to the transaction continue after the
transaction to hold, directly or indirectly, the voting

       

       

      
        
           

        

        
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        power of
the surviving entity or entities necessary to elect a majority of the members of
the board of directors (or their equivalent if other than a corporation) of such
entity or entities);

      

       

      (ii) the sale
or transfer of more than fifty percent (50%) of the Maker’s assets (based on the
fair market value as determined in good faith by the Maker’s Board of Directors)
other than inventory in the ordinary course of business in one or a related
series of transactions;

       

      (iii) closing
of a purchase, tender or exchange offer made to the holders of more than fifty
percent (50%) of the outstanding shares of Common Stock in which more than fifty
percent (50%) of the outstanding shares of Common Stock were tendered and
accepted; or

       

      (iv) the
issuance by the Maker in one or more related or unrelated transactions of any
shares, Options (other than Options granted to employees and consultants
pursuant to any employee stock benefit, option, purchase or similar plan
approved by the Company’s Board of Directors), warrants (other than the
Warrants), interests, participations, or other equivalents (regardless of how
designated) of the Maker, whether voting or nonvoting, including Common Stock,
preferred stock or any other “equity security” (as such term is defined in Rule
3a11-1 of the General Rules and Regulations promulgated by the Commission under
the Exchange Act) or any equity contribution in received by the Company, which
in the aggregate results in Net Cash Proceeds in excess of
$500,000.

       

      (c) Mechanics of Prepayment at
Option of Holder Upon Major Transaction.  No sooner than
fifteen (15) days nor later than ten (10) days prior to the consummation of a
Major Transaction, but not prior to the public announcement of such Major
Transaction, the Maker shall deliver written notice thereof via facsimile and
overnight courier (“Notice of Major Transaction”) to the Holder of this
Note.  At any time after receipt of a Notice of Major Transaction (or,
in the event a Notice of Major Transaction is not delivered at least ten (10)
days prior to a Major Transaction, at any time within ten (10) days prior to a
Major Transaction), the Holder of this Note may require the Maker to prepay,
effective immediately prior to the consummation of such Major Transaction, the
Note by delivering written notice thereof via facsimile and overnight courier
(“Notice of Prepayment at Option of the Holder Upon Major Transaction”) to the
Maker, which Notice of Prepayment at Option of Holder Upon Major Transaction
shall indicate the applicable Major Transaction Prepayment Price, as calculated
pursuant to Section 3.1(a) above.

       

      (d) Payment of Prepayment
Price.  Upon the Maker’s receipt of a Notice(s) of Prepayment
at Option of Holder Upon Major Transaction from the Holder of this Note, the
Maker shall immediately notify the Holder of this Note by facsimile of the
Maker’s receipt of such Notice(s) of Prepayment at Option of Holder Upon Major
Transaction and the Maker shall deliver the Major Transaction Prepayment Price
immediately prior to or contemporaneous with the consummation of the Major
Transaction.  If the Maker shall fail to prepay the Note submitted for
prepayment (other than pursuant to a dispute as to the arithmetic calculation of
the Prepayment Price) immediately prior to or contemporaneous with the
consummation of the Major Transaction, in addition to any remedy the Holder of
this Note may have under this Note and the Purchase Agreement, the Major
Transaction Prepayment Price payable in respect of the

       

       

      
        
           

        

        
          -6-

          
            

          

        

        
           

        

         

        Note not
prepaid shall bear interest at the rate of two and one half percent (2.5%) per
month (prorated for partial months) until paid in full.

      

       

      ARTICLE
IV

       

      MISCELLANEOUS

       

      Section
4.1 Notices.  Any
notice, demand, request, waiver or other communication required or permitted to
be given hereunder shall be in writing and shall be effective (a) upon hand
delivery, telecopy or facsimile at the address or number designated in the
Purchase Agreement (if delivered on a Business Day during normal business hours
where such notice is to be received), or the first Business Day following such
delivery (if delivered other than on a Business Day during normal business hours
where such notice is to be received) or (b) on the second Business Day following
the date of mailing by express courier service, fully prepaid, addressed to such
address, or upon actual receipt of such mailing, whichever shall first
occur.

       

      Section
4.2 Governing
Law.  This Note shall be governed by and construed in
accordance with the internal laws of the State of New York, without giving
effect to any of the conflicts of law principles which would result in the
application of the substantive law of another jurisdiction.  This Note
shall not be interpreted or construed with any presumption against the party
causing this Note to be drafted.

       

      Section
4.3 Headings.  Article
and section headings in this Note are included herein for purposes of
convenience of reference only and shall not constitute a part of this Note for
any other purpose.

       

      Section
4.4 Remedies, Characterizations,
Other Obligations, Breaches and Injunctive Relief.  The
remedies provided in this Note shall be cumulative and in addition to all other
remedies available under this Note, at law or in equity (including, without
limitation, a decree of specific performance and/or other injunctive relief), no
remedy contained herein shall be deemed a waiver of compliance with the
provisions giving rise to such remedy and nothing herein shall limit a holder’s
right to pursue actual damages for any failure by the Maker to comply with the
terms of this Note.  Amounts set forth or provided for herein with
respect to payments and the like (and the computation thereof) shall be the
amounts to be received by the holder thereof and shall not, except as expressly
provided herein, be subject to any other obligation of the Maker (or the
performance thereof).  The Maker acknowledges that a breach by it of
its obligations hereunder will cause irreparable and material harm to the Holder
and that the remedy at law for any such breach may be inadequate. Therefore the
Maker agrees that, in the event of any such breach or threatened breach, the
Holder shall be entitled, in addition to all other available rights and
remedies, at law or in equity, to seek and obtain such equitable relief,
including but not limited to an injunction restraining any such breach or
threatened breach, without the necessity of showing economic loss and without
any bond or other security being required.

       

       

      
        
           

        

        
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      Section
4.5 Enforcement
Expenses.  The Maker agrees to pay all costs and expenses
incurred from time to time by the Holder with respect to any modification,
consent or waiver of the provisions of this Note or the Transaction Documents
and any enforcement of this Note and the Transaction Documents, including,
without limitation, reasonable attorneys’ fees and expenses.

       

      Section
4.6 Amendments.

       

      (a) This Note
may not be modified or amended in any manner except in writing executed by the
Maker and the Holder.

       

      (b) To the
extent that amendments to this Note are required in connection with the filing
of a listing application with the American Stock Exchange in connection with the
transactions contemplated hereby, the Maker and the Holder shall cooperate in
good faith to reach mutually acceptable resolutions with regard to such
amendments, without penalty; provided that the Holder has, in its sole
discretion, determined such amendments to be advisable.

       

      Section
4.7 Compliance with Securities
Laws.

       

      (a) The
Holder of this Note acknowledges that this Note is being acquired solely for the
Holder’s own account and not as a nominee for any other party, and for
investment, and that the Holder shall not offer, sell or otherwise dispose of
this Note except in accordance with applicable law.

       

      (b) The
Holder is an “accredited investor” (as defined in Rule 501 of Regulation D under
the Securities Act), and such Holder has such experience in business and
financial matters that it is capable of evaluating the merits and risks of an
investment in the Securities.  The Holder is not required to be
registered as a broker-dealer under Section 15 of the Exchange Act and it is not
a broker-dealer.  The Holder acknowledges that an investment in the
Securities is speculative and involves a high degree of risk.

       

      Section
4.8 Consent to
Jurisdiction.  Each of the Maker and the Holder (i) hereby
irrevocably submits to the exclusive jurisdiction of the United States District
Court sitting in the Southern District of New York and the courts of the State
of New York located in New York county for the purposes of any suit, action or
proceeding arising out of or relating to this Note and (ii) hereby waives, and
agrees not to assert in any such suit, action or proceeding, any claim that it
is not personally subject to the jurisdiction of such court, that the suit,
action or proceeding is brought in an inconvenient forum or that the venue of
the suit, action or proceeding is improper.  Each of the Maker and the
Holder consents to process being served in any such suit, action or proceeding
by mailing a copy thereof to such party at the address in effect for notices to
it under the Purchase Agreement and agrees that such service shall constitute
good and sufficient service of process and notice thereof.  Nothing in
this Section 4.8 shall affect or limit any right to serve process in any other
manner permitted by law.

       

      Section
4.9 Binding
Effect.  This Note shall be binding upon, inure to the benefit
of and be enforceable by the Maker, the Holder and their respective successors
and

       

       

      
        
           

        

        
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        permitted
assigns.  The Maker shall not delegate or transfer this Note or any
obligations or undertakings contained in this Note.

      

       

      Section
4.10 Failure or Indulgence Not
Waiver.  No failure or delay on the part of the Holder in the
exercise of any power, right or privilege hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such power, right or
privilege preclude other or further exercise thereof or of any other right,
power or privilege.

       

      Section
4.11 Maker Waivers; Dispute
Resolution.

       

      (a) Except as
otherwise specifically provided herein, the Maker and all others that may become
liable for all or any part of the obligations evidenced by this Note, hereby
waive presentment, demand, notice of nonpayment, protest and all other demands’
and notices in connection with the delivery, acceptance, performance and
enforcement of this Note, and do hereby consent to any number of renewals of
extensions of the time or payment hereof and agree that any such renewals or
extensions may be made without notice to any such persons and without affecting
their liability herein and do further consent to the release of any person
liable hereon, all without affecting the liability of the other persons, firms
or Maker liable for the payment of this Note, AND DO HEREBY WAIVE TRIAL BY
JURY.

       

      (b) No delay
or omission on the part of the Holder in exercising its rights under this Note,
or course of conduct relating hereto, shall operate as a waiver of such rights
or any other right of the Holder, nor shall any waiver by the Holder of any such
right or rights on any one occasion be deemed a waiver of the same right or
rights on any future occasion.

       

      (c) THE MAKER
ACKNOWLEDGES THAT THE TRANSACTION OF WHICH THIS NOTE IS A PART IS A COMMERCIAL
TRANSACTION, AND TO THE EXTENT ALLOWED BY APPLICABLE LAW, HEREBY WAIVES ITS
RIGHT TO NOTICE AND HEARING WITH RESPECT TO ANY PREJUDGMENT REMEDY WHICH THE
HOLDER OR ITS SUCCESSORS OR ASSIGNS MAY DESIRE TO USE.

       

      Section
4.12 Definitions.  Capitalized
terms used herein and not defined shall have the meanings set forth in the
Purchase Agreement.  For the purposes hereof, the following terms
shall have the following meanings:

       

      “Business Day”
(whether or not capitalized) shall mean any day banking transactions can be
conducted in New York City, NY, USA and does not include any day which is a
federal or state holiday in such location.

       

      “Company” means
Implant Sciences Corporation, a Massachusetts corporation.

       

      “Person” means an
individual or a corporation, partnership, trust, incorporated or unincorporated
association, joint venture, limited liability company, joint stock company,
government (or an agency or political subdivision thereof) or other entity of
any kind.

       

      [Signature appears on following
page]

      
        
          
            

            

             

          

           

        

        
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      IN WITNESS WHEREOF, each Maker
has caused this Note to be duly executed by its duly authorized officer as of
the date first above indicated.

       

      

      IMPLANT
SCIENCES CORPORATION

      

      

      By:           /s/
Glenn D. Bolduc

      Name: Glenn D. Bolduc

      Title: Chairman &
CEO

      

      

      
        
          
            [SIGNATURE
PAGE TO SENIOR SECURED

            PROMISSORY
NOTE]

            S-1

            

             

          

           

        

        
           

          
            

          

        

        
           

        

      

      EXHIBIT
A

      

      WIRE
INSTRUCTIONS

       

      

       

      Wire instructions for DMRJ
Group, LLC

       

      Bank:

       

      ABA#:

       

      Account
Name:

       

      Account
Number:

       

      
        
          
            EXHIBIT
Aproteo_8k-ex1001.htm

    Exhibit
10.1

     

     

     

    FORBEARANCE AGREEMENT AND
GENERAL RELEASE

     

     

    THIS FORBEARANCE AGREEMENT AND
GENERAL RELEASE (“Agreement”),
dated as of July 6th, 2009,
is entered by and among FIDEsprit AG, a Swiss corporation (“Borrower”),
Axel J. Kutscher (“Guarantor”)
and Proteo, Inc., a Nevada corporation (“Proteo”
and together with Borrower and Guarantor, the “Parties”),
with reference to the facts as set forth in the Recitals:

     

    RECITALS

     

    A.           WHEREAS, pursuant to that certain
Preferred Stock Purchase Agreement dated June 9, 2008 (the “Stock Purchase
Agreement”), Borrower purchased 600,000 shares of Proteo’s Series A
Preferred Stock in consideration of Borrower’s delivering to Proteo a promissory
note of even date therewith in the original principal amount of $3,600,000 (as
amended and modified from time to time, the “Note”, the
original of which is attached hereto as Exhibit
A).  Capitalized terms used but not defined herein shall have
the meanings given to such terms in the Stock Purchase Agreement.

     

    B.           WHEREAS, Borrowers obligations
under the Note have been guaranteed (the “Guaranty”) by the Guarantor, the
original of which is attached hereto as Exhibit B.

     

    C.           WHEREAS, Borrower is currently
in default under the Note for failing to make all of the scheduled principal and
interest payments under the Note and for not paying the Note in full by its due
date of March 31, 2009 (collectively, the “Events of
Default”).

     

    D.           WHEREAS, Proteo, Borrower and
Guarantor desire to enter into this Forbearance Agreement to set forth the terms
and conditions upon which Proteo agrees to forbear from enforcing its rights
under the Note as a result of the Events of Default.

     

    AGREEMENT

     

    1.           RECITALS.  The
Recitals are incorporated herein by and through this reference, and the Parties
agree that the facts recited above are true and correct.

     

    2.           ACKNOWLEDGMENT OF
DEBT.  Borrower and Guarantor hereby acknowledge and agree
that, as of July 6th, 2009,
Borrower is obligated to Proteo under the Note for the aggregate sum of
$1,940,208 (representing the unpaid principal balance plus all other amounts due
under the Note as of July 6th, 2009)
(the “Indebtedness”).

     

    3.           CONFIRMATIONS OF NOTE AND
GUARANTEE.  Borrower and Guarantor hereby confirm the validity
and effectiveness of the Note and Guaranty, as modified hereby. This
acknowledgment and confirmation shall in no way be deemed to constitute a
requirement or admission by Proteo that any such acknowledgment or confirmation
is required to maintain the effectiveness of the Note and Guaranty, no such
acknowledgment and confirmation being so required. Except as may be expressly
modified herein, each of the Note and Guaranty shall remain in full force and
effect.

     

    
      
         

      

      
        1

        
          

        

      

      
         

      

    

     

    4.           ACKNOWLEDGMENT OF DEFAULTS AND
WAIVERS.  Borrower and Guarantor hereby acknowledge and agree
that Borrower is currently in default under the Note, among other reasons, by
reason of those Events of Default described in Paragraph C of the Recitals (all
of such Events of Default shall collectively be referred to as "Defaults”) hereinabove.
Borrower and Guarantor hereby knowingly and voluntarily waive any and all rights
they may have, if any, to contest or dispute the validity of, or to cure, the
Defaults or the exercise of any rights of Proteo. Borrower and Guarantor hereby
further acknowledge and agree that in entering into this Agreement, Proteo is
relying upon the acknowledgment by Borrower and Guarantor of the existence of
the Defaults and their waiver of any right to dispute the existence thereof or
to contest any enforcement of Proteo’s rights based thereon.

     

    5.           LIMITED SUFFERANCE OF DEFAULTS;
FORBEARANCE.  Borrower has requested that Proteo enter into
this Agreement and forbear from exercising its rights under the Note and
Guaranty as to afford Borrower limited additional time to pay the outstanding
Indebtedness. Subject to Borrower’s prompt and continual compliance with the
payment requirements set forth in Paragraph 6 below, Proteo hereby agrees to
allow the Defaults under the Note existing as of the date hereof to continue to
exist and further agrees to forebear from relying thereon to enforce any of
its rights and
remedies under the Note and Guaranty, all subject to the terms and conditions of
this Agreement, until the Indebtedness is paid in full (“Forbearance Period”), at which
time the Forbearance Period shall automatically terminate. As long as Borrower
does not breach any term or condition of this Agreement or no additional default
occurs or exists under the Note or Guaranty during the Forbearance Period,
Lender agrees to forbear from exercising any and all of its remedies under the
Note and Guaranty and this Agreement; provided however, if a breach of this
Agreement occurs or an event of default (other than the Defaults) occurs or
exists under the Note or Guaranty, then, without notice by Proteo to Borrower or
Guarantors and at Proteo’s option, the Forbearance Period shall terminate and
Proteo shall have the right to enforce its remedies under the Note and Guaranty,
this Agreement, any agreement executed concurrently herewith, or at law or
equity; and provided, further, that upon the failure of Borrower to satisfy any
of the terms and conditions of this Agreement, or upon the occurrence of any
subsequent event of default hereunder, under any agreement executed concurrently
herewith, or, under the Note or Guaranty, the foregoing agreement to forbear by
Proteo shall be of no further force and effect, shall be deemed rescinded,
revoked and terminated and the Defaults shall be revived and reinstated, and
shall be deemed to have occurred and to exist as if such forbearance had not
been granted, with all rights and remedies of Proteo under the Note and
Guaranty, as hereinafter modified, based upon the Defaults, revived as if Proteo
had never forborne from enforcement. Proteo may thereafter enforce its rights
pursuant to the terms of the Note, Guaranty, and pursuant to applicable law, and
exercise such other rights and remedies as may be available to Proteo at law, in
equity, or otherwise.

     

    6.           TERMS AND
CONDITIONS.  In consideration of Proteo’s forbearance pursuant
to Paragraph 5 above, Borrower agrees to and shall pay the Indebtedness to
Proteo by making monthly payments in the amount of $140,000 commencing on the
first business day of September 2009 and continuing on the first business day of
each succeeding month thereafter until the entire Indebtedness is paid in
full.

     

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

     

    All payments must be in lawful money of
the United States of America, free from any offset, deduction or
counterclaim.  Checks constitute payment only when collected,
deposited and credited to Proteo’s bank account.

     

    Nothing contained herein is intended
to, nor shall it be deemed to, relieve Borrower or Guarantor of any of their
respective obligations under the Note or Guaranty, nor shall it modify the legal
relationship of Borrower and Guarantor with respect to Proteo.

     

    7.           NO NOVATION.  The
Parties further agree that in no event shall the effect of this Agreement be
deemed to be a novation of the Note or Guaranty, the intent of the Parties
hereunder being to amend the Note and Guaranty and to confirm the obligations
(including the Indebtedness) of Borrower and Guarantor under the Note and
Guaranty, as amended hereby, with all of the terms and provisions of the Note
and Guaranty in full force and effect save and except those modified by this
Agreement.

     

    8.           CROSS
DEFAULTS.  Borrower and Guarantor hereby agree and confirm
that, at Proteo’s option, the occurrence of an event of default under and set
forth in this Agreement shall be a default under each of the Note and Guaranty
and, to the extent necessary, the Note and Guaranty are hereby irrevocably
amended to effect such cross defaults. Borrower and Guarantor additionally agree
and confirm that, at Proteo’s option, the occurrence of an event of default
(other than the Defaults) under the Note and Guaranty shall be a default under
this Agreement.

     

    9.           EVENTS OF
DEFAULT.  Any failure by Borrower or Guarantors or Pledgors to
comply with any terms and conditions of this Agreement, together with each of
the events of default contained within the Note and Guaranty (other than the
Defaults), shall constitute an event of default hereunder.

     

    10.        REMEDIES.  Upon the
occurrence of an event of default (as set forth in Paragraph 9, above), or the
termination of the Forbearance Period Proteo shall have the right to enforce its
remedies under the Note, Guaranty, this Agreement, or under any of the documents
executed concurrently herewith, at law or in equity, and, at its election,
exercise any and all rights and remedies provided for under the Note, Guaranty
or herein, and terminate its obligations under this Agreement.

     

    11.        GOVERNING LAW.  This
Agreement and the Note and Guaranty shall be deemed to have been made in the
State of California and the validity, enforceability, construction,
interpretation and enforcement of this Agreement and the Note and Guaranty and
the rights of the Parties thereto shall be determined under, governed by and
construed in accordance with the laws of the State of California, without regard
to the principles of conflicts of law. If any provision of this Agreement or its
exhibits shall be determined to be invalid, void or illegal, such provision
shall be construed and amended in a manner which would permit its enforcement,
but in no event shall such provision affect, impair or invalidate any other
provision hereof. In the event that any interest rate set forth in the Note shall be in
excess of the maximum rate allowed by law, the Note Documents shall be deemed to
be modified to provide for the maximum interest rate allowed by
law.

     

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

     

    12.        COMPLETE AGREEMENT; INTEGRATION;
MERGER.  This Agreement and the Note, Guaranty and Stock
Purchase Agreement are intended by the Parties as the complete, integrated and
final expression of their agreement. All prior understandings, whether oral or
written, other than the Note, Guaranty and Stock Purchase Agreement, are hereby
merged into this
Agreement. This Agreement may only be amended by a writing executed by the
Parties. No oral amendment, waiver or other understanding with respect to the
subject matter of this Agreement shall be enforceable.

     

    13.        GENERAL RELEASE IN FAVOR OF
LENDER.  In consideration of the covenants and agreements
contained herein and for other good and valuable consideration, Borrower and
Guarantor agree as follows:

     

    Borrower and Guarantor, and each of
them, together with all of their affiliates, including without limitation their
affiliates, trusts, corporations, partnerships, agents, attorneys, heirs,
executors, administrators, successors, assigns, representatives, employees,
trustees, beneficiaries, officers, directors, partners, owners, members and
shareholders (collectively the “Releasors”) hereby release and
discharge Proteo and its affiliated corporations, agents, attorneys, heirs,
executors, administrators, successors, assigns, representatives, employees,
trustees, beneficiaries, officers, directors, owners, partners, members and
shareholders, with respect to any rights, claims, charges, demands, obligations,
damages, liabilities, costs, attorneys’ fees, expenses, or causes of action of
any nature, character and description, whatsoever, whether arising from or in
any way related to, the loan evidenced by the Note, the Guaranty and Stock
Purchase Agreement, the business of Releasors, and any and all transactions or
other matters in any way related to any of the foregoing, or otherwise arising
prior to the date hereof, whether known or unknown, anticipated or
unanticipated, sounding in tort, contract or any other theory, law or equity,
suspected or unsuspected, past or present.

     

    14.        WAIVER OF CALIFORNIA CIVIL CODE,
SECTION 1542.  The foregoing release extends to all claims
whether or not claimed or suspected and constitute a waiver of each and all the
provisions of the California Civil Code, Section 1542 (to the extent it would be
applicable), which reads as follows:

     

    A
GENERAL RELEASE DOES NOT EXTEND TO CLAIMSWHICH THE CREDITOR DOES NOT KNOW OR
SUSPECT TO EXISTIN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE,WHICH IF KNOWN
BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE
DEBTOR.

     

    RELEASORS HAVE READ AND UNDERSTOOD THE
FOREGOING AND INDICATE THAT FACT BY PLACING THEIR INITIALS, OR THE INITIALS OF
AN AUTHORIZED AGENT, BELOW:

     

     

      /s/
JAM                      /s/
AJK                    

    (Borrower)                                  (Guarantor)

     

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

     

    RELEASORS, AND EACH OF THEM, UNDERSTAND
AND ACKNOWLEDGE THAT THE SIGNIFICANCE AND CONSEQUENCE OF THIS WAIVER OF
CALIFORNIA CIVIL CODE, SECTION 1542, IS THAT EVEN IF THEY SHOULD EVENTUALLY
SUFFER ADDITIONAL DAMAGES ARISING OUT OF THE FACTS REFERRED TO ABOVE, THEY WILL
NOT BE ABLE TO MAKE ANY CLAIM FOR THOSE DAMAGES. FURTHERMORE, RELEASORS, AND
EACH OF THEM, ACKNOWLEDGE THAT THEY WILL NOT BE ABLE TO MAKE ANY CLAIM FOR
DAMAGES EVEN AS TO CLAIMS FOR DAMAGES THAT MAY EXIST AS OF THE DATE OF THIS
RELEASE BUT WHICH THEY DO NOT KNOW EXIST, AND WHICH, IF KNOWN, WOULD MATERIALLY
AFFECT THEIR DECISIONS TO EXECUTE THIS AGREEMENT, REGARDLESS OF WHETHER THEIR
LACK OF KNOWLEDGE IS THE RESULT OF IGNORANCE, OVERSIGHT, ERROR, NEGLIGENCE, OR
ANY OTHER CAUSE. RELEASORS COVENANT AND AGREE THAT THEY WILL FOREVER REFRAIN AND
FOREBEAR FROM BRINGING, COMMENCING OR PROSECUTING ANY AND ALL ACTIONS, LAWSUITS,
CLAIMS OR PROCEEDINGS WITH RESPECT TO ANY MATTER THAT HAS BEEN RELEASED HEREIN.
FURTHER, IT IS EXPRESSLY UNDERSTOOD AND AGREED
BY RELEASORS, THAT THE FACTS WITH RESPECT TO WHICH THIS AGREEMENT IS GIVEN MAY
HEREINAFTER TURN OUT TO BE OTHER THAN OR DIFFERENT FROM THE FACTS IN THAT
CONNECTION NOW KNOWN OR BELIEVED BY SAID PARTY TO BE TRUE, AND SAID PARTY
EXPRESSLY ASSUMES A RISK OF THE FACTS TURNING OUT TO BE SO DIFFERENT, AND AGREES
THAT THIS AGREEMENT SHALL BE IN ALL RESPECTS EFFECTIVE AND NOT SUBJECT TO
TERMINATION OR RESCISSION BY REASON OF ANY DIFFERENCE IN THE FACTS.

     

    15.         TOLLING OF STATUTE OF
LIMITATIONS.  Any and all statutes of limitations applicable to
any and all rights, causes of action, claims and
remedies, or equitable claim of laches, which Proteo has or might have against
Borrower and/or Guarantor arising out of or relating to the circumstances and
events described in the Recitals shall be and hereby are tolled and suspended
effective at all times on and after the date of this Agreement.

     

    15.1           Except
for the tolling of the statute of limitations applicable to Proteo’s rights,
causes of action, claims and remedies against each party set forth above,
nothing in this paragraph is intended to modify or amend the obligations of
Borrower and Guarantor to Proteo, including but not limited to, any other
agreement existing by, between or amongst the Borrower and Guarantor and Proteo,
or to be any waiver,
estoppel or election as any right claim, defense or objection of Proteo.
Any and all substantive rights of Proteo are hereby expressly
preserved.

     

    15.2.          It
is expressly
understood and agreed that nothing in this paragraph shall operate or be
construed to defeat or diminish Proteo’s right to file actions or prosecute
actions or any other claims against Borrower and Guarantor (in conformance with
the terms of this Agreement), without prior verbal or written notice, on any
issue, including but not limited to the matters discussed
hereinabove.

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

     

    16.        ADVICE OF
COUNSEL.  Each Party hereto represents that it/he has been
advised of the effect of the Agreement by its/his own attorneys, has
investigated the facts and is not relying upon any representation or
acknowledgment, whether oral or in writing, of any other Party hereto except as
contained herein.

     

    17.        RESCISSION. Except as provided
herein, each of the Parties hereto expressly waives any right to rescind the
Agreement.

     

    18         REIMBURSEMENT OF PROTEO’S LEGAL
FEES.  Borrower and Guarantor jointly and severally agree to
reimburse Proteo for the legal fees and expenses it has incurred in preparation
of this Agreement and related documents required as a result thereof in an
amount not to exceed $2,500.

     

    19.         GENERAL
PROVISIONS.

     

    19.1.    
Time is of the
Essence.  In all dealings hereunder or under the Note or
Guaranty, time is of the essence,

     

    19.2.    
Counterparts.  This
Agreement may be executed in counterparts and by different Parties on separate
counterparts, each of which when so executed and delivered shall be deemed to be
an original. All such counterparts, taken together, shall constitute but one and
the same Agreement. Signatures to this Agreement may be transmitted by
facsimile, each of which shall have the same effect as and be deemed an original
signature for purposes of this Agreement. This Agreement shall become effective
upon the execution of a counterpart of this Agreement by each of the Parties
hereto ("Effective
Date”).

     

    19.3.    
Successors and Third
Parties.  Each covenant set forth in this Agreement shall inure
to the benefit of and be binding upon the Parties to this Agreement together
with all of the affiliates, and each of them, and their successors and
assigns.

     

    
      
         

      

      
        6

        
          

        

      

      
         

      

    

     

    
      19.4.    
Meaning of Pronouns and Effect
of Captions.  As used in this Agreement and the attached
exhibits, the masculine, feminine and/or neuter gender, in the singular or
plural, shall be deemed to include the others whenever the text so requires.
Captions and paragraph headings are inserted solely for convenience and shall
not be deemed to restrict or limit the meaning of text.

       

      19.5.    
Construction.  Neither
this Agreement nor any uncertainty or ambiguity herein shall be construed or
resolved against any Party, whether under any rule of construction or otherwise.
On the contrary, this Agreement is the product of extensive negotiation among
the Parties hereto, has been reviewed by all Parties and their counsel, and
shall be construed and interpreted according to the ordinary meaning of the
words used so as to fairly accomplish the purposes and intentions of all
Parties.

    

     

    19.6.    
Attorneys Fees and
Costs.  If any legal action or other proceeding is brought for
the enforcement of this Agreement, the Note or the Guaranty, or because of an
alleged dispute in connection with any of the provisions of this Agreement, the
successful or prevailing Party shall be entitled to recover reasonable
attorneys' fees and other costs incurred in that action or proceeding, in
addition to any other relief to which it/he/she may be entitled.

     

    19.7.     
Notice.  Any
notices which may be required hereunder may be served personally, by overnight
delivery service which routinely obtains a signed receipt (e.g., DHL, Federal
Express or UPS), or by United States mail, postage pre-paid, to the addresses
set forth below. Notice shall be deemed effective on the date actually received
by the Parties, or three days after the same were deposited in the United States
mail.

     

    
      
        
          
            
              	
                      If
      to Proteo: 

                    	
                      PROTEO,
      INC.

                      
                        Birge
      Bargmann

                        Proteo
      Biotech AG

                        Am
      Kiel-Kanal 44

                        D-24106
      Kiel

                        Germany

                      

                    
	 	 
	
                      If
      to Borrower: 

                    	
                      FID
      Esprit AG

                      ATT:
      Juergen Muetzlitz

                      Rosengartenstr.
      4

                      CH-8608
      Bubikon

                      Switzerland

                    
	 	 
	
                      If
      to Guarantor: 

                    	
                      Axel
      Kutscher

                      Oetwilerstrasse
      29

                      CH-8634
      Hombrechtikon

                      Switzerland

                    

            

          

        

      

    

     

    

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

     

    IN WITNESS WHEREOF, the
Parties hereto have caused this Agreement to be entered into as of the date first set
forth hereinabove.

     

    
      
        
          	
                  "PROTEO"

                   

                  PROTEO,
      INC.

                  A
      Nevada corporation

                   

                   

                   /s/
      BIRGE
      BARGMANN                           
      

                  Birge
      Bargmann

                  President

                	
                  "BORROWER"

                   

                  FIDESPRIT
      AG

                   

                   

                   

                  /s/ JURGEN AUGUST
      MUTZLITZ                       
      

                  Jürgen
      August Mützlitz

                  President

                   

                   

                
	
                  "GUARANTOR"

                   

                   /s/
      AXEL J.
      KUTSCHER                                            
      

                  Axel
      J. Kutscher

                  an
      Individual

                	 
      

        

      

    

    

     

     

     

     

    8

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