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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.
 
AMENDED AND RESTATED SENIOR SECURED CONVERTIBLE PROMISSORY NOTE
 
Dated:  March 12,
2009                                                                                        $5,600,000
 
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 Five Million Six Hundred Thousand Dollars ($5,600,000) hereunder,
together with interest and all other obligations outstanding hereunder.
 
All payments under or pursuant to this Senior Secured Convertible 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 shall be due and payable on December 10, 2009 (the “Maturity Date”)
or at such earlier time as provided herein.  This note amends and restates, but
does not extinguish, impair, novate or discharge the obligations evidenced by,
that certain Senior Secured Convertible Promissory Note dated December 10, 2008
(the “Closing Date”) in the original principal amount of Five Million Six
Hundred Thousand Dollars ($5,600,000) executed by the Company in favor of the
Holder.
 
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 the Closing
Date (the “Purchase Agreement”), 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.  Interest on the original principal amount of this Note in
the amount of $616,000 calculated at the rate of eleven percent (11%) per annum
for the period commencing on the Closing Date through the scheduled Maturity
Date on an unconditional, non-refundable, original issue discount basis shall be
paid in full on the Closing Date.  Furthermore,
 

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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 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 and on all unpaid interest from the date of the Event of Default.
 
Section 1.3 Payment of Principal; Prepayment.  The principal amount shall be
paid as follows: (a) the principal amount of One Million Dollars ($1,000,000)
shall due and payable on December 24, 2008, (b) upon the release to Maker of any
funds (the amount of such funds, the “Escrow Release Funds”) held in escrow in
connection with the sale of Accurel Systems International Corp. to Evans
Analytical Group, LLC, the lesser of (i) the principal amount of One Million
Dollars ($1,000,000) or (ii) the principal amount of the Escrow Release Funds
shall be immediately due and payable; and (c) the remaining principal balance
plus all outstanding interest and all other amounts due and owing hereunder
shall be paid in full on the Maturity Date.  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 dated as of the Closing
Date 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
 
CONVERSION; ANTIDILUTION
 
Section 3.1 Conversion Option.  At any time and from time to time on or after
the Issuance Date (as defined below), this Note shall be convertible (in whole
or in part), at the option of the Holder (the “Conversion Option”), into such
number of fully paid and non-assessable shares of Common Stock (the “Conversion
Rate”) as is determined by dividing (x) that portion of the outstanding
principal balance plus any accrued but unpaid interest under this Note as of
such date that the Holder elects to convert by (y) the Conversion Price (as
defined in Section 3.2 hereof) then in effect on the date on which the Holder
delivers a notice of conversion (the “Conversion Notice”), duly executed, to the
Company (the “Conversion Date”), provided, however, that the Conversion Price
shall be subject to adjustment as described in Section 3.6 below.  The Holder
shall deliver this Note to the Company at the address designated in the Purchase
Agreement at such time that this Note is fully converted.  With respect to
partial conversions of this Note, the Company shall keep written records of the
amount of this Note converted as of each Conversion Date.
 
Section 3.2 Conversion Price.  The term “Conversion Price” shall mean eighteen
cents ($0.18), subject to adjustment under Section 3.6 hereof (the “Set Price”).
 
Section 3.3  
Mechanics of Conversion.

 
(a) Not later than three (3) Trading Days after any Conversion Date, the Company
or its designated transfer agent, as applicable, shall issue and deliver to the
Depository Trust Company (“DTC”) account on the Holder’s behalf via the Deposit
Withdrawal Agent Commission System (“DWAC”) as specified in the Conversion
Notice, registered in the name of the Holder or its affiliates, for the number
of shares of Common Stock to which the Holder shall be entitled.  In the
alternative, not later than three (3) Trading Days after any Conversion Date,
the Company or its designated transfer agent, as applicable, shall deliver to
the applicable Holder by express courier a certificate or certificates which
shall be free of restrictive legends and trading restrictions (other than those
required by Section 5.1 of the Purchase Agreement)
 
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representing the number of shares of Common Stock being acquired upon the
conversion of this Note (the “Delivery Date”).  Notwithstanding the foregoing to
the contrary, the Company or its transfer agent shall only be obligated to issue
and deliver the shares to the DTC on the Holder’s behalf via DWAC (or
certificates free of restrictive legends) if such conversion is in connection
with a sale and the Holder has complied with the applicable prospectus delivery
requirements (as evidenced by documentation furnished to and reasonably
satisfactory to the Company) or such shares may be sold pursuant to Rule 144 or
other exemption under the Securities Act.  If in the case of any Conversion
Notice such certificate or certificates are not delivered to or as directed by
the applicable Holder by the Delivery Date, the Holder shall be entitled by
written notice to the Company at any time on or before its receipt of such
certificate or certificates thereafter, to rescind such conversion, in which
event the Company shall immediately return this Note tendered for conversion,
whereupon the Company and the Holder shall each be restored to their respective
positions immediately prior to the delivery of such notice of revocation, except
that any amounts described in Sections 3.3(b) and (c) shall be payable through
the date notice of rescission is given to the Company.
 
(b) The Company understands that a delay in the delivery of the shares of Common
Stock upon conversion of this Note beyond the Delivery Date could result in
economic loss to the Holder.  If the Company fails to deliver to the Holder such
shares via DWAC (or, if applicable, certificates) by the Delivery Date, the
Company shall pay to such Holder, in cash, an amount per Trading Day for each
Trading Day until such shares are delivered via DWAC or certificates are
delivered (if applicable), together with interest on such amount at a rate of
10% per annum, accruing until such amount and any accrued interest thereon is
paid in full, equal to the greater of (A) 2% of the aggregate principal amount
of the Notes requested to be converted for each Trading Day and (B) $2,000 per
day (which amount shall be paid as liquidated damages and not as a
penalty).  Nothing herein shall limit a Holder’s right to pursue actual damages
for the Company’s failure to deliver certificates representing shares of Common
Stock upon conversion within the period specified herein and such Holder shall
have the right to pursue all remedies available to it at law or in equity
(including, without limitation, a decree of specific performance and/or
injunctive relief).  Notwithstanding anything to the contrary contained herein,
the Holder shall be entitled to withdraw a Conversion Notice, and upon such
withdrawal the Company shall only be obligated to pay the liquidated damages
accrued in accordance with this Section 3.3(b) through the date the Conversion
Notice is withdrawn.
 
(c) In addition to any other rights available to the Holder, if the Company
fails to cause its transfer agent to transmit via DWAC or transmit to the Holder
a certificate or certificates representing the shares of Common Stock issuable
upon conversion of this Note (the “Conversion Shares”) on or before the Delivery
Date, and if after such date the Holder is required by its broker to purchase
(in an open market transaction or otherwise) shares of Common Stock to deliver
in satisfaction of a sale by the Holder of the shares of Common Stock issuable
upon conversion of this Note which the Holder anticipated receiving upon such
conversion (a “Buy-In”), then the Company shall (1) pay in cash to the Holder
the amount by which (x) the Holder’s total purchase price (including brokerage
commissions, if any) for the shares of Common Stock so purchased exceeds (y) the
amount obtained by multiplying (A) the number of shares of Common Stock issuable
upon conversion of this Note that the Company was
 
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required to deliver to the Holder in connection with the conversion at issue
times (B) the price at which the sell order giving rise to such purchase
obligation was executed, and (2) at the option of the Holder, either reinstate
the portion of the Note and equivalent number of shares of Common Stock for
which such conversion was not honored or deliver to the Holder the number of
shares of Common Stock that would have been issued had the Company timely
complied with its conversion and delivery obligations hereunder.  For example,
if the Holder purchases Common Stock having a total purchase price of $11,000 to
cover a Buy-In with respect to an attempted conversion of shares of Common Stock
with an aggregate sale price giving rise to such purchase obligation of $10,000,
under clause (1) of the immediately preceding sentence the Company shall be
required to pay the Holder $1,000. The Holder shall provide the Company written
notice indicating the amounts payable to the Holder in respect of the Buy-In,
together with applicable confirmations and other evidence reasonably requested
by the Company.  Nothing herein shall limit a Holder’s right to pursue any other
remedies available to it hereunder, at law or in equity including, without
limitation, a decree of specific performance and/or injunctive relief with
respect to the Company’s failure to timely deliver certificates representing
shares of Common Stock upon conversion of this Note as required pursuant to the
terms hereof.
 
Section 3.4 Ownership Cap and Certain Conversion Restrictions. Notwithstanding
anything to the contrary set forth in Section 3 of this Note, at no time may the
Holder convert all or a portion of this Note if the number of shares of Common
Stock to be issued pursuant to such conversion, when aggregated with all other
shares of Common Stock owned by the Holder at such time, would result in the
Holder beneficially owning (as determined in accordance with Section 13(d) of
the Exchange Act and the rules thereunder) in excess of 4.99% of the then issued
and outstanding shares of Common Stock outstanding at such time; provided,
however, that upon the Holder providing the Company with 61 days’ prior written
notice that the Holder would like to waive Section 3.4 of this Note with regard
to any or all shares of Common Stock issuable upon conversion of this Note, this
Section 3.4 shall be of no force or effect with regard to all or a portion of
the Note referenced in the waiver notice.
 
Section 3.5 Trading Market Regulation.  The Company shall not be obligated to
issue any shares of Common Stock upon conversion of this Note if the issuance of
such shares of Common Stock would exceed the aggregate number of shares of
Common Stock which the Company may issue upon conversion or exercise, as
applicable, of the Notes and Warrants in the aggregate without breaching the
Company’s obligations under the rules or regulations of any applicable Trading
Market, except that such limitation shall not apply in the event that the
Company (A) obtains the approval of its stockholders as required by the
applicable rules of such Trading Market for issuances of Common Stock in excess
of such amount or (B) obtains a written opinion from outside counsel to the
Company that such approval is not required, which opinion shall be reasonably
satisfactory to the Holder.
 
Section 3.6 Adjustment of Conversion Price.
 
(a) Until the Note has been paid in full or converted in full, the Set Price
shall be subject to adjustment from time to time as follows (but shall not be
increased, other than pursuant to Section 3.6(a)(i) hereof):
 
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(i) Adjustment for Stock Dividends, Subdivisions and Combinations.  If at any
time the Company shall:
 

(1) set a record date or take a record of the holders of its Common Stock for
the purpose of entitling them to receive a dividend payable in, or other
distribution of, shares of Common Stock,
 
(2) subdivide its outstanding shares of Common Stock into a larger number of
shares of Common Stock, or
 
(3) combine its outstanding shares of Common Stock into a smaller number of
shares of Common Stock,
 
then (1) the number of Conversion Shares immediately after the occurrence of any
such event shall be adjusted to equal the number of shares of Common Stock which
a record holder of the same number of shares of Common Stock for which this Note
may be converted immediately prior to the occurrence of such event would own or
be entitled to receive after the happening of such event (without giving effect
to the limitations on exercise set forth in Section 3.4 hereof), and (2) the Set
Price then in effect shall be adjusted to equal (A) the Set Price then in effect
multiplied by the number of shares of Common Stock for which this Note may be
converted immediately prior to the adjustment (without giving effect to the
limitations on exercise set forth in Section 3.4 hereof) divided by (B) the
number of shares of Common Stock for which this Note may be converted
immediately after such adjustment (without giving effect to the limitations on
exercise set forth in Section 3.4 hereof).
 
(ii) Adjustment upon Issuance of shares of Common Stock.  If at any time the
Company issues or sells, or in accordance with this Section 3.6(a)(ii) is deemed
to have issued or sold, any shares of Common Stock (including the issuance or
sale of shares of Common Stock owned or held by or for the account of the
Company for a consideration per share (the "New Issuance Price") less than a
price (the "Applicable Price") equal to the Set Price in effect immediately
prior to such issue or sale or deemed issuance or sale (the foregoing a
"Dilutive Issuance"), then immediately after such Dilutive Issuance, the Set
Price then in effect shall be reduced to an amount equal to the New Issuance
Price.  Upon each such adjustment of the Set Price hereunder, the number of
Conversion Shares shall be adjusted to the number of shares of Common Stock
determined by multiplying the Set Price in effect immediately prior to such
adjustment by the number of Conversion Shares acquirable upon conversion of this
Note immediately prior to such adjustment and dividing the product thereof by
the Set Price resulting from such adjustment.  For purposes of determining the
adjusted Set Price under this Section 3.6, the following shall be applicable:
 
(1) Issuance of Options.  If the Company in any manner grants any options to
purchase Common Stock (“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, and the lowest price per
share for which one share of Common Stock is issuable upon the exercise of any
such Option or upon conversion,
 
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exercise or exchange of any stock or securities (other than Options) directly or
indirectly convertible into or exercisable or exchangeable for shares of Common
Stock (“Convertible Securities”) issuable upon exercise of any such Option is
less than the Applicable Price, then such share of Common Stock shall be deemed
to be outstanding and to have been issued and sold by the Company at the time of
the granting or sale of such Option for such price per share.  For purposes of
this Section 3.6(a)(ii)(1), the "lowest price per share for which one share of
Common Stock is issuable upon exercise of such Options or upon conversion,
exercise or exchange of such Convertible Securities issuable upon exercise of
any such Option" shall be equal to the sum of the lowest amounts of
consideration (if any) received or receivable by the Company with respect to any
one share of Common Stock upon the granting or sale of the Option, upon exercise
of the Option and upon conversion, exercise or exchange of any Convertible
Security issuable upon exercise of such Option.  No further adjustment of the
Set Price or number of Conversion Shares shall be made upon the actual issuance
of such shares of Common Stock or of such Convertible Securities upon the
exercise of such Options or upon the actual issuance of such shares of Common
Stock upon conversion, exercise or exchange of such Convertible Securities.
 
(2) Issuance of Convertible Securities.  If the Company in any manner issues or
sells any Convertible Securities and the lowest price per share for which one
share of Common Stock is issuable upon the conversion, exercise or exchange
thereof is less than the Applicable Price, then such share of Common Stock shall
be deemed to be outstanding and to have been issued and sold by the Company at
the time of the issuance or sale of such Convertible Securities for such price
per share.  For the purposes of this Section 3.6(a)(ii)(2), the "lowest price
per share for which one share of Common Stock is issuable upon the conversion,
exercise or exchange thereof" shall be equal to the sum of the lowest amounts of
consideration (if any) received or receivable by the Company with respect to one
share of Common Stock upon the issuance or sale of the Convertible Security and
upon conversion, exercise or exchange of such Convertible Security.  No further
adjustment of the Set Price or number of Conversion Shares shall be made upon
the actual issuance of such shares of Common Stock upon conversion, exercise or
exchange of such Convertible Securities, and if any such issue or sale of such
Convertible Securities is made upon exercise of any Options for which adjustment
of this Note has been or is to be made pursuant to other provisions of this
Section 3.6, no further adjustment of the Set Price or number of Conversion
Shares shall be made by reason of such issue or sale.
 
(3) Change in Option Price or Rate of Conversion.  If the purchase price
provided for in any Options, the additional consideration, if any, payable upon
the issue, conversion, exercise or exchange of any Convertible Securities, or
the rate at which any Convertible Securities are convertible into or exercisable
or exchangeable for shares of Common Stock increases or decreases at any time,
the Set Price and the number of Conversion Shares in effect at the time of such
increase or decrease shall be adjusted to the Set Price and the number of shares
of Common Stock issuable upon conversion of this Note which would have been in
effect at such time had such Options or Convertible Securities provided for such
increased or decreased purchase price, additional consideration or increased or
decreased conversion rate, as the case may be, at the time initially granted,
issued or sold.  For purposes of this Section 3.6(a)(ii)(3), if the terms of any
Option or Convertible Security that was outstanding as of the
 
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date of issuance of this Note are increased or decreased in the manner described
in the immediately preceding sentence, then such Option or Convertible Security
and the shares of Common Stock deemed issuable upon exercise, conversion or
exchange thereof shall be deemed to have been issued as of the date of such
increase or decrease.  No adjustment pursuant to this Section 3.6(a)(ii)(3)
shall be made if such adjustment would result in an increase of the Set Price
then in effect or a decrease in the number of Conversion Shares.
 
(4) Calculation of Consideration Received.  In case any Option is issued in
connection with the issue or sale of other securities of the Company, together
comprising one integrated transaction in which no specific consideration is
allocated to such Options by the parties thereto, the Options will be deemed to
have been issued for a consideration of $0.01.  If any shares of Common Stock,
Options or Convertible Securities are issued or sold or deemed to have been
issued or sold for cash, the consideration received therefor will be deemed to
be the net amount received by the Company therefor.  If any shares of Common
Stock, Options or Convertible Securities are issued or sold for a consideration
other than cash, the amount of such consideration received by the Company will
be the fair value of such consideration, except where such consideration
consists of securities, in which case the amount of consideration received by
the Company will be the closing sale price of such security on the date of
receipt.  If any shares of Common Stock, Options or Convertible Securities are
issued to the owners of the non-surviving entity in connection with any merger
in which the Company is the surviving entity, the amount of consideration
therefor will be deemed to be the fair value of such portion of the net assets
and business of the non-surviving entity as is attributable to such shares of
Common Stock, Options or Convertible Securities, as the case may be.  The fair
value of any consideration other than cash or securities will be determined
jointly by the Company and the Holder.  If such parties are unable to reach
agreement within ten (10) days after the occurrence of an event requiring
valuation (the "Valuation Event"), the fair value of such consideration will be
determined within five (5) Business Days after the tenth (10th) day following
the Valuation Event by an independent, reputable appraiser jointly selected by
the Company and the Holder.  The determination of such appraiser shall be final
and binding upon all parties absent manifest error and the fees and expenses of
such appraiser shall be borne by the Company.
 
(iii) Certain Other Distributions.  If at any time the Company shall set a
record date or take a record of the holders of its Common Stock for the purpose
of entitling them to receive any divi­dend or other distribution of:
 
(1) cash (other than a cash dividend payable out of earnings or earned surplus
legally available for the payment of dividends under the laws of the
jurisdiction of incorporation of the Company),
 
(2) any evidences of its indebtedness, any shares of stock of any class or any
other securities or property of any nature whatsoever (other than cash or Common
Stock), or
 
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(3) any warrants or other rights to subscribe for or purchase any evidences of
its indebtedness, any shares of stock of any class or any other securities or
property of any nature whatsoever (other than cash or Common Stock),
 
then (1) the number of Conversion Shares may shall be adjusted to equal the
product of the number of shares of Common Stock for which this Note may be
converted immediately prior to such adjustment (without giving effect to the
limitations on exercise set forth in Section 3.4 hereof) multiplied by a
fraction (A) the numerator of which shall be the Closing Bid Price of Common
Stock at the date of taking such record and (B) the denominator of which shall
be such Closing Bid Price minus the amount allocable to one share of Common
Stock of any such cash so distributable and of the fair value (as determined in
good faith by the Board of Directors of the Company and supported by an opinion
from an investment banking firm reasonably acceptable to the Holder) of any and
all such evidences of indebtedness, shares of stock, other securities or
property or warrants or other subscription or purchase rights so distributable,
and (2) the Set Price then in effect shall be adjusted to equal (A) the Set
Price then in effect multiplied by the number of shares of Common Stock for
which this Note may be converted immediately prior to the adjustment (without
giving effect to the limitations on exercise set forth in Section 3.4 hereof)
divided by (B) the number of shares of Common Stock for which this Note may be
converted immediately after such adjustment (without giving effect to the
limitations on exercise set forth in Section 3.4 hereof).  A reclassification of
the Common Stock (other than a change in par value, or from par value to no par
value or from no par value to par value) into shares of Common Stock and shares
of any other class of stock shall be deemed a distribution by the Company to the
holders of its Common Stock of such shares of such other class of stock within
the meaning of this Section 3.6(a) and, if the outstanding shares of Common
Stock shall be changed into a larger or smaller number of shares of Common Stock
as a part of such reclassification, such change shall be deemed a subdivision or
combination, as the case may be, of the outstanding shares of Common Stock
within the meaning of Section 3.6(a).

(b) Other Provisions applicable to Adjustments under this Section.  The
following provisions shall be applicable to the making of adjustments of the
number of shares of Common Stock for which this Note may be converted and the
Set Price then in effect provided for in this Section 3.6:
 
(i) Fractional Interests.  In computing adjustments under this Section 3.6,
fractional interests in Common Stock shall be taken into account to the nearest
one one-hundredth (1/100th) of a share.
 
(ii) When Adjustment Not Required.  If the Company shall take a record of the
holders of its Common Stock for the purpose of entitling them to receive a
dividend or distribution or subscription or purchase rights and shall,
thereafter and before the distribution to stockholders thereof, legally abandon
its plan to pay or deliver such dividend, distribution, subscription or purchase
rights, then thereafter no adjustment shall be required by reason of the taking
of such record and any such adjustment previously made in respect thereof shall
be rescinded and annulled.
 
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(c) Form of Note after Adjustments.  The form of this Note need not be changed
because of any adjustments in the Set Price or the number and kind of securities
purchasable upon conversion of this Note.
 
(d) Escrow of Property.  If after any property becomes distributable pursuant to
this Section 3.6 by reason of the taking of any record of the holders of Common
Stock, but prior to the occurrence of the event for which such record is taken,
and the Holder converts this Note, such property shall be held in escrow for the
Holder by the Company to be distributed to the Holder upon and to the extent
that the event actually takes place, upon payment of the then current Set
Price.  Notwithstanding any other provision to the contrary herein, if the event
for which such record was taken fails to occur or is rescinded, then such
escrowed property shall be returned to the Company.
 
(e) No Impairment.  The Company shall not, by amendment of its Articles of
Incorporation or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed hereunder by the Company, but will at all times in good
faith, assist in the carrying out of all the provisions of this Section 3.6 and
in the taking of all such action as may be necessary or appropriate in order to
protect the Conversion Rights of the Holder against impairment.  In the event
the Holder shall elect to convert the Note as provided herein, the Company
cannot refuse conversion based on any claim that the Holder or any one
associated or affiliated with the Holder has been engaged in any violation of
law, violation of an agreement to which the Holder is a party or for any reason
whatsoever, unless, an injunction from a court, or notice, restraining and or
adjoining conversion of the Note shall have issued and the Company posts a
surety bond for the benefit of the Holder in an amount equal to one hundred
fifty percent (150%) of the amount of the Notes, which bond shall remain in
effect until the completion of arbitration/litigation of the dispute and the
proceeds of which shall be payable to the Holder (as liquidated damages) in the
event it obtains judgment.
 
(f) Certificates as to Adjustments.  Upon occurrence of each adjustment or
readjustment of the Conversion Price or number of shares of Common Stock
issuable upon conversion of this Note pursuant to this Section 3.6, the Company
at its expense shall promptly compute such adjustment or readjustment in
accordance with the terms hereof and furnish to the Holder a certificate setting
forth such adjustment and readjustment, showing in detail the facts upon which
such adjustment or readjustment is based.  The Company shall, upon written
request of the Holder, at any time, furnish or cause to be furnished to the
Holder a like certificate setting forth such adjustments and readjustments, the
applicable Conversion Price in effect at the time, and the number of shares of
Common Stock and the amount, if any, of other securities or property which at
the time would be received upon the conversion of this Note.  Notwithstanding
the foregoing, the Company shall not be obligated to deliver a certificate
unless such certificate would reflect an increase or decrease of at least one
percent (1%) of such adjusted amount.
 
(f)           Issue Taxes.  The Company shall pay any and all issue and other
taxes, excluding federal, state or local income taxes, that may be payable in
respect of any issue or delivery of shares of Common Stock on conversion of this
Note pursuant thereto; provided,
 
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however, that the Company shall not be obligated to pay any transfer taxes
resulting from any transfer requested by the Holder in connection with any such
conversion.
 
(g)           Fractional Shares.  No fractional shares of Common Stock shall be
issued upon conversion of this Note.  In lieu of any fractional shares to which
the Holder would otherwise be entitled, the Company shall pay cash equal to the
product of such fraction multiplied by the average of the Closing Bid Prices of
the Common Stock for the five (5) consecutive Trading Days immediately preceding
the Conversion Date.
 
(h)           Reservation of Common Stock.  The Company shall at all times when
this Note shall be outstanding, reserve and keep available out of its authorized
but unissued Common Stock, such number of shares of Common Stock as shall from
time to time be sufficient to effect the conversion of this Note and all
interest accrued thereon; provided that the number of shares of Common Stock so
reserved shall at no time be less than one hundred fifty percent (150%) of the
number of shares of Common Stock for which this Note and all interest accrued
thereon are at any time convertible.  The Company shall, from time to time in
accordance with Delaware law, increase the authorized number of shares of Common
Stock if at any time the unissued number of authorized shares shall not be
sufficient to satisfy the Company’s obligations under this Section 3.6(h).
 
(i)           ­Regulatory Compliance.  If any shares of Common Stock to be
reserved for the purpose of conversion of this Note or any interest accrued
thereon require registration or listing with or approval of any governmental
authority, stock exchange or other regulatory body under any federal or state
law or regulation or otherwise before such shares may be validly issued or
delivered upon conversion, the Company shall, at its sole cost and expense, in
good faith and as expeditiously as possible, endeavor to secure such
registration, listing or approval, as the case may be.

ARTICLE IV

 
PREPAYMENT
 
Section 4.1 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 4.1(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 4.1(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
 
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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 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
 
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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 4.1(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 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 V

 
MISCELLANEOUS
 
Section 5.1 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 5.2 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 5.3 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 5.4 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
 
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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, conversion 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.
 
Section 5.5 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 5.6 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 5.7 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 5.8 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
 
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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 3.8
shall affect or limit any right to serve process in any other manner permitted
by law.
 
Section 5.9 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 permitted assigns.  The Maker shall not delegate or transfer this
Note or any obligations or undertakings contained in this Note.
 
Section 5.10 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 5.11 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.
 
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Section 5.12 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.
 
“Closing Bid Price” means, on any particular date (i) the last trading price per
share of the Common Stock on such date on the OTC Bulletin Board or another
registered national securities exchange on which the Common Stock is then
listed, or if there is no such price on such date, then the last trading price
on such exchange or quotation system on the date nearest preceding such date, or
(ii) if the Common Stock is not then listed or traded on a registered national
securities exchange or quoted on the OTC Bulletin Board, then the average of the
“Pink Sheet” quotes for the relevant conversion period, as determined in good
faith by the Holder, or (iii) if the Common Stock is not then publicly traded
the fair market value of a share of Common Stock as determined by the Holder and
reasonably acceptable to the Maker.

“Common Stock” means shares of common stock, par value $0.10 per share, of the
Company.
 
“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.
 
“Trading Day” means (a) a day on which the Common Stock is traded on the OTC
Bulletin Board or a registered national securities exchange, or (b) if the
Common Stock is not traded on the OTC Bulletin Board or a registered national
securities exchange, a day on which the Common Stock is quoted in the
over-the-counter market as reported by the National Quotation Bureau
Incorporated (or any similar organization or agency succeeding its functions of
reporting prices); provided, however, that in the event that the Common Stock is
not listed or quoted as set forth in (a) or (b) hereof, then Trading Day shall
mean any day except Saturday, Sunday and any day which shall be a legal holiday
or a day on which banking institutions in the State of New York are authorized
or required by law or other government action to close.

“Trading Market” means the Over the Counter Bulletin Board, the New York Stock
Exchange, the NYSE Alternext Exchange, the Nasdaq Capital Markets, the Nasdaq
Global Markets or the Nasdaq Global Select Market.

“Transaction Documents” means this Note, the Purchase Agreement, the Security
Agreement, and all other security documents or related agreements now or
hereafter entered into in connection with and/or as security for this Note and
all amendments and supplements thereto and replacements thereof and any other
Transaction Document (as that term is defined in the Purchase Agreement).
 
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[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/ Roger Deschenes
Roger Deschenes
Vice President - Finance

[SIGNATURE PAGE TO SENIOR SECURED
CONVERTIBLE PROMISSORY NOTE]
S-1

 
 
 

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EXHIBIT A

WIRE INSTRUCTIONS
 

 
Wire instructions for DMRJ Group, LLC
 
Bank:
 
ABA#:
 
Account Name:
 
Account Number:
 

EXHIBIT A

 
 
 

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EXHIBIT B

FORM OF
 
NOTICE OF CONVERSION
 
(To be Executed by the Registered Holder in order to Convert the Note)
 
The undersigned hereby irrevocably elects to convert $ ________________ of the
principal amount of the above Note No. ___ into shares of Common Stock of
Implant Sciences Corporation (the “Maker”) according to the conditions hereof,
as of the date written below.
 
Date of Conversion _________________________________________________________
 
Applicable Conversion Price __________________________________________________
 
Number of shares of Common Stock beneficially owned or deemed beneficially owned
by the Holder on the Date of Conversion: _________________________
 
Signature___________________________________________________________________
 
[Name]
 
Address:__________________________________________________________________
 
_______________________________________________________________________
 

 

 

 

 

EXHIBIT B

 
 
 

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