Exhibit 10.3

 

NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS EXERCISABLE
HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE
SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR
REASONABLY ACCEPTABLE TO THE COMPANY TO SUCH EFFECT, THE SUBSTANCE OF WHICH
SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.

 

COMMON STOCK PURCHASE WARRANT

 

To Purchase                        Shares of Common Stock of

 

Implant Sciences Corporation

 

THIS COMMON STOCK PURCHASE WARRANT (the “Warrant”) CERTIFIES that, for value
received, PacificWave Partners Limited (the “Holder”), is entitled, upon the
terms and subject to the limitations on exercise and the conditions hereinafter
set forth, at any time on or after the 6 month anniversary of the date of
issuance of this Warrant (the “Initial Exercise Date”) and on or prior to the
five year anniversary of the Initial Exercise Date (the “Termination Date”) but
not thereafter, to subscribe for and purchase from Implant Sciences Corporation,
a Massachusetts corporation (the “Company”), up to              shares (the
“Warrant Shares”) of Common Stock, par value $0.10 per share, of the Company
(the “Common Stock”).  The purchase price of one share of Common Stock (the
“Exercise Price”) under this Warrant shall be $9.35, subject to adjustment
hereunder.  The Exercise Price and the number of Warrant Shares for which the
Warrant is exercisable shall be subject to adjustment as provided herein.

 

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1.  TITLE TO WARRANT.  PRIOR TO THE TERMINATION DATE AND SUBJECT TO COMPLIANCE
WITH APPLICABLE LAWS AND SECTION 7 OF THIS WARRANT, THIS WARRANT AND ALL RIGHTS
HEREUNDER ARE TRANSFERABLE, IN WHOLE OR IN PART, AT THE OFFICE OR AGENCY OF THE
COMPANY BY THE HOLDER IN PERSON OR BY DULY AUTHORIZED ATTORNEY, UPON SURRENDER
OF THIS WARRANT TOGETHER WITH THE ASSIGNMENT FORM ANNEXED HERETO PROPERLY
ENDORSED.  THE TRANSFEREE SHALL SIGN AN INVESTMENT LETTER IN FORM AND SUBSTANCE
REASONABLY SATISFACTORY TO THE COMPANY.

 

2.  AUTHORIZATION OF SHARES.  THE COMPANY COVENANTS THAT ALL WARRANT SHARES
WHICH MAY BE ISSUED UPON THE EXERCISE OF THE PURCHASE RIGHTS REPRESENTED BY THIS
WARRANT WILL, UPON EXERCISE OF THE PURCHASE RIGHTS REPRESENTED BY THIS WARRANT,
BE DULY AUTHORIZED, VALIDLY ISSUED, FULLY PAID AND NONASSESSABLE AND FREE FROM
ALL TAXES, LIENS AND CHARGES IN RESPECT OF THE ISSUE THEREOF (OTHER THAN TAXES
IN RESPECT OF ANY TRANSFER OCCURRING CONTEMPORANEOUSLY WITH SUCH ISSUE).

 

3.  EXERCISE OF WARRANT.

 

(a)  Exercise of the purchase rights represented by this Warrant may be made at
any time or times on or after the Initial Exercise Date and on or before the
Termination Date by delivery to the Company of a duly executed facsimile copy of
the Notice of Exercise Form annexed  hereto (or such other office or agency of
the Company as it may designate by notice in writing to the registered Holder at
the address of such Holder appearing on the books of the Company); provided,
however, within 5 Trading Days (“Trading Day” means a day on which the Common
Stock is traded on the Nasdaq SmallCap Market, the American Stock Exchange, the
New York Stock Exchange, the Nasdaq National Market or the OTC Bulletin Board)
of the date said Notice of Exercise is delivered to the Company, the Holder
shall have surrendered this Warrant to the Company and the Company shall have
received  payment of the aggregate Exercise Price of the shares thereby
purchased by wire transfer or cashier’s check drawn on a United States bank. 
Certificates for shares purchased hereunder shall be transmitted by the transfer
agent of the Company to the Holder by crediting the account of the Holder’s
prime broker with the Depository Trust Company through its Deposit Withdrawal
Agent Commission (“DWAC”) system within 3 Trading Days from the delivery to the
Company of the Notice of Exercise Form, surrender of this Warrant and payment of
the aggregate Exercise Price as set forth above (“Warrant Share Delivery
Date”).  This Warrant shall be deemed to have been exercised on the date the
Exercise Price is received by the Company.  The Warrant Shares shall be deemed
to have been issued, and Holder or any other person so designated to be named
therein shall be deemed to have become a holder of record of such shares for all
purposes, as of the date the Warrant has been exercised by payment to the
Company of the Exercise Price and all taxes required to be paid by the Holder,
if any, pursuant to Section 5 prior to the issuance of such shares, have been
paid.

 

(B)  IF THIS WARRANT SHALL HAVE BEEN EXERCISED IN PART, THE COMPANY SHALL, AT
THE TIME OF DELIVERY OF THE CERTIFICATE OR CERTIFICATES REPRESENTING WARRANT
SHARES, DELIVER TO HOLDER A NEW WARRANT EVIDENCING THE RIGHTS OF HOLDER TO
PURCHASE THE UNPURCHASED

 

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WARRANT SHARES CALLED FOR BY THIS WARRANT, WHICH NEW WARRANT SHALL IN ALL OTHER
RESPECTS BE IDENTICAL WITH THIS WARRANT.

 

(C)  THE HOLDER SHALL NOT HAVE THE RIGHT TO EXERCISE ANY PORTION OF THIS
WARRANT, PURSUANT TO SECTION 3(A) OR OTHERWISE, TO THE EXTENT THAT AFTER GIVING
EFFECT TO SUCH ISSUANCE AFTER EXERCISE, THE HOLDER (TOGETHER WITH THE HOLDER’S
AFFILIATES), AS SET FORTH ON THE APPLICABLE NOTICE OF EXERCISE, WOULD
BENEFICIALLY OWN IN EXCESS OF 4.99% OF THE NUMBER OF SHARES OF THE COMMON STOCK
OUTSTANDING IMMEDIATELY AFTER GIVING EFFECT TO SUCH ISSUANCE.  FOR PURPOSES OF
THE FOREGOING SENTENCE, THE NUMBER OF SHARES OF COMMON STOCK BENEFICIALLY OWNED
BY THE HOLDER AND ITS AFFILIATES SHALL INCLUDE THE NUMBER OF SHARES OF COMMON
STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT WITH RESPECT TO WHICH THE
DETERMINATION OF SUCH SENTENCE IS BEING MADE, BUT SHALL EXCLUDE THE NUMBER OF
SHARES OF COMMON STOCK WHICH WOULD BE ISSUABLE UPON (A) EXERCISE OF THE
REMAINING, NONEXERCISED PORTION OF THIS WARRANT BENEFICIALLY OWNED BY THE HOLDER
OR ANY OF ITS AFFILIATES AND (B) EXERCISE OR CONVERSION OF THE UNEXERCISED OR
NONCONVERTED PORTION OF ANY OTHER SECURITIES OF THE COMPANY (INCLUDING, WITHOUT
LIMITATION, ANY OTHER WARRANTS) SUBJECT TO A LIMITATION ON CONVERSION OR
EXERCISE ANALOGOUS TO THE LIMITATION CONTAINED HEREIN BENEFICIALLY OWNED BY THE
HOLDER OR ANY OF ITS AFFILIATES.  EXCEPT AS SET FORTH IN THE PRECEDING SENTENCE,
FOR PURPOSES OF THIS SECTION 3(C), BENEFICIAL OWNERSHIP SHALL BE CALCULATED IN
ACCORDANCE WITH SECTION 13(D) OF THE EXCHANGE ACT, IT BEING ACKNOWLEDGED BY
HOLDER THAT THE COMPANY IS NOT REPRESENTING TO HOLDER THAT SUCH CALCULATION IS
IN COMPLIANCE WITH SECTION 13(D) OF THE EXCHANGE ACT AND HOLDER IS SOLELY
RESPONSIBLE FOR ANY SCHEDULES REQUIRED TO BE FILED IN ACCORDANCE THEREWITH.  TO
THE EXTENT THAT THE LIMITATION CONTAINED IN THIS SECTION 3(C) APPLIES, THE
DETERMINATION OF WHETHER THIS WARRANT IS EXERCISABLE (IN RELATION TO OTHER
SECURITIES OWNED BY THE HOLDER) AND OF WHICH A PORTION OF THIS WARRANT IS
EXERCISABLE SHALL BE IN THE SOLE DISCRETION OF SUCH HOLDER, AND THE SUBMISSION
OF A NOTICE OF EXERCISE SHALL BE DEEMED TO BE SUCH HOLDER’S DETERMINATION OF
WHETHER THIS WARRANT IS EXERCISABLE (IN RELATION TO OTHER SECURITIES OWNED BY
SUCH HOLDER) AND OF WHICH PORTION OF THIS WARRANT IS EXERCISABLE, IN EACH CASE
SUBJECT TO SUCH AGGREGATE PERCENTAGE LIMITATION, AND THE COMPANY SHALL HAVE NO
OBLIGATION TO VERIFY OR CONFIRM THE ACCURACY OF SUCH DETERMINATION.  FOR
PURPOSES OF THIS SECTION 3(C), IN DETERMINING THE NUMBER OF OUTSTANDING SHARES
OF COMMON STOCK, THE HOLDER MAY RELY ON THE NUMBER OF OUTSTANDING SHARES OF
COMMON STOCK AS REFLECTED IN (X) THE COMPANY’S MOST RECENT FORM 10-QSB OR FORM
10-KSB, AS THE CASE MAY BE, (Y) A MORE RECENT PUBLIC ANNOUNCEMENT BY THE COMPANY
OR (Z) ANY OTHER NOTICE BY THE COMPANY OR THE COMPANY’S TRANSFER AGENT SETTING
FORTH THE NUMBER OF SHARES OF COMMON STOCK OUTSTANDING.  UPON THE WRITTEN OR
ORAL REQUEST OF THE HOLDER, THE COMPANY SHALL WITHIN TWO TRADING DAYS CONFIRM
ORALLY AND IN WRITING TO THE HOLDER THE NUMBER OF SHARES OF COMMON STOCK THEN
OUTSTANDING.  IN ANY CASE, THE NUMBER OF OUTSTANDING SHARES OF COMMON STOCK
SHALL BE DETERMINED AFTER GIVING EFFECT TO THE CONVERSION OR EXERCISE OF
SECURITIES OF THE COMPANY, INCLUDING THIS WARRANT, BY THE HOLDER OR ITS
AFFILIATES SINCE THE DATE AS OF WHICH SUCH NUMBER OF OUTSTANDING SHARES OF
COMMON STOCK WAS REPORTED.

 

4.  NO FRACTIONAL SHARES OR SCRIP.  NO FRACTIONAL SHARES OR SCRIP REPRESENTING
FRACTIONAL SHARES SHALL BE ISSUED UPON THE EXERCISE OF THIS WARRANT.  AS TO ANY
FRACTION OF A SHARE WHICH HOLDER WOULD OTHERWISE BE ENTITLED TO PURCHASE UPON
SUCH EXERCISE, THE COMPANY SHALL

 

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PAY A CASH ADJUSTMENT IN RESPECT OF SUCH FINAL FRACTION IN AN AMOUNT EQUAL TO
SUCH FRACTION MULTIPLIED BY THE EXERCISE PRICE.

 

5.  CHARGES, TAXES AND EXPENSES.  ISSUANCE OF CERTIFICATES FOR WARRANT SHARES
SHALL BE MADE WITHOUT CHARGE TO THE HOLDER FOR ANY ISSUE OR TRANSFER TAX OR
OTHER INCIDENTAL EXPENSE IN RESPECT OF THE ISSUANCE OF SUCH CERTIFICATE, ALL OF
WHICH TAXES AND EXPENSES SHALL BE PAID BY THE COMPANY, AND SUCH CERTIFICATES
SHALL BE ISSUED IN THE NAME OF THE HOLDER OR IN SUCH NAME OR NAMES AS MAY BE
DIRECTED BY THE HOLDER; PROVIDED, HOWEVER, THAT IN THE EVENT CERTIFICATES FOR
WARRANT SHARES ARE TO BE ISSUED IN A NAME OTHER THAN THE NAME OF THE HOLDER,
THIS WARRANT WHEN SURRENDERED FOR EXERCISE SHALL BE ACCOMPANIED BY THE
ASSIGNMENT FORM ATTACHED HERETO DULY EXECUTED BY THE HOLDER; AND THE COMPANY MAY
REQUIRE, AS A CONDITION THERETO, THE PAYMENT OF A SUM SUFFICIENT TO REIMBURSE IT
FOR ANY TRANSFER TAX INCIDENTAL THERETO.

 

6.  CLOSING OF BOOKS.  THE COMPANY WILL NOT CLOSE ITS STOCKHOLDER BOOKS OR
RECORDS IN ANY MANNER WHICH PREVENTS THE TIMELY EXERCISE OF THIS WARRANT,
PURSUANT TO THE TERMS HEREOF.

 

7.  TRANSFER, DIVISION AND COMBINATION.

 

(A)  SUBJECT TO COMPLIANCE WITH ANY APPLICABLE SECURITIES LAWS AND THE
CONDITIONS SET FORTH IN SECTIONS 1 AND 7(E) HEREOF, THIS WARRANT AND ALL RIGHTS
HEREUNDER ARE TRANSFERABLE, IN WHOLE OR IN PART, UPON SURRENDER OF THIS WARRANT
AT THE PRINCIPAL OFFICE OF THE COMPANY, TOGETHER WITH A WRITTEN ASSIGNMENT OF
THIS WARRANT SUBSTANTIALLY IN THE FORM ATTACHED HERETO DULY EXECUTED BY THE
HOLDER OR ITS AGENT OR ATTORNEY AND FUNDS SUFFICIENT TO PAY ANY TRANSFER TAXES
PAYABLE UPON THE MAKING OF SUCH TRANSFER.  UPON SUCH SURRENDER AND, IF REQUIRED,
SUCH PAYMENT, THE COMPANY SHALL EXECUTE AND DELIVER A NEW WARRANT OR WARRANTS IN
THE NAME OF THE ASSIGNEE OR ASSIGNEES AND IN THE DENOMINATION OR DENOMINATIONS
SPECIFIED IN SUCH INSTRUMENT OF ASSIGNMENT, AND SHALL ISSUE TO THE ASSIGNOR A
NEW WARRANT EVIDENCING THE PORTION OF THIS WARRANT NOT SO ASSIGNED, AND THIS
WARRANT SHALL PROMPTLY BE CANCELLED.  A WARRANT, IF PROPERLY ASSIGNED, MAY BE
EXERCISED BY A NEW HOLDER FOR THE PURCHASE OF WARRANT SHARES WITHOUT HAVING A
NEW WARRANT ISSUED.

 

(B)  THIS WARRANT MAY BE DIVIDED OR COMBINED WITH OTHER WARRANTS UPON
PRESENTATION HEREOF AT THE AFORESAID OFFICE OF THE COMPANY, TOGETHER WITH A
WRITTEN NOTICE SPECIFYING THE NAMES AND DENOMINATIONS IN WHICH NEW WARRANTS ARE
TO BE ISSUED, SIGNED BY THE HOLDER OR ITS AGENT OR ATTORNEY.  SUBJECT TO
COMPLIANCE WITH SECTION 7(A), AS TO ANY TRANSFER WHICH MAY BE INVOLVED IN SUCH
DIVISION OR COMBINATION, THE COMPANY SHALL EXECUTE AND DELIVER A NEW WARRANT OR
WARRANTS IN EXCHANGE FOR THE WARRANT OR WARRANTS TO BE DIVIDED OR COMBINED IN
ACCORDANCE WITH SUCH NOTICE.

 

(C)  THE COMPANY SHALL PREPARE, ISSUE AND DELIVER AT ITS OWN EXPENSE (OTHER THAN
TRANSFER TAXES) THE NEW WARRANT OR WARRANTS UNDER THIS SECTION 7.

 

(D)  THE COMPANY AGREES TO MAINTAIN, AT ITS AFORESAID OFFICE, BOOKS FOR THE
REGISTRATION AND THE REGISTRATION OF TRANSFER OF THE WARRANTS.

 

(E)  IF, AT THE TIME OF THE SURRENDER OF THIS WARRANT IN CONNECTION WITH ANY
TRANSFER OF THIS WARRANT, THE TRANSFER OF THIS WARRANT SHALL NOT BE REGISTERED
PURSUANT TO AN

 

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EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND UNDER APPLICABLE
STATE SECURITIES OR BLUE SKY LAWS, THE COMPANY MAY REQUIRE, AS A CONDITION OF
ALLOWING SUCH TRANSFER (I) THAT THE HOLDER OR TRANSFEREE OF THIS WARRANT, AS THE
CASE MAY BE, FURNISH TO THE COMPANY A WRITTEN OPINION OF COUNSEL (WHICH OPINION
SHALL BE IN FORM, SUBSTANCE AND SCOPE CUSTOMARY FOR OPINIONS OF COUNSEL IN
COMPARABLE TRANSACTIONS) TO THE EFFECT THAT SUCH TRANSFER MAY BE MADE WITHOUT
REGISTRATION UNDER THE SECURITIES ACT AND UNDER APPLICABLE STATE SECURITIES OR
BLUE SKY LAWS, (II) THAT THE HOLDER OR TRANSFEREE EXECUTE AND DELIVER TO THE
COMPANY AN INVESTMENT LETTER IN FORM AND SUBSTANCE ACCEPTABLE TO THE COMPANY AND
(III) THAT THE TRANSFEREE BE AN “ACCREDITED INVESTOR” AS DEFINED IN RULE
501(A)(1), (A)(2), (A)(3), (A)(7), OR (A)(8) PROMULGATED UNDER THE SECURITIES
ACT OR A QUALIFIED INSTITUTIONAL BUYER AS DEFINED IN RULE 144A(A) UNDER THE
SECURITIES ACT.

 

8.  NO RIGHTS AS SHAREHOLDER UNTIL EXERCISE.  THIS WARRANT DOES NOT ENTITLE THE
HOLDER TO ANY VOTING RIGHTS OR OTHER RIGHTS AS A SHAREHOLDER OF THE COMPANY
PRIOR TO THE EXERCISE HEREOF.  UPON THE SURRENDER OF THIS WARRANT AND THE
PAYMENT OF THE AGGREGATE EXERCISE PRICE, THE WARRANT SHARES SO PURCHASED SHALL
BE AND BE DEEMED TO BE ISSUED TO SUCH HOLDER AS THE RECORD OWNER OF SUCH SHARES
AS OF THE CLOSE OF BUSINESS ON THE LATER OF THE DATE OF SUCH SURRENDER OR
PAYMENT.

 

9.  LOSS, THEFT, DESTRUCTION OR MUTILATION OF WARRANT.  THE COMPANY COVENANTS
THAT UPON RECEIPT BY THE COMPANY OF EVIDENCE REASONABLY SATISFACTORY TO IT OF
THE LOSS, THEFT, DESTRUCTION OR MUTILATION OF THIS WARRANT OR ANY STOCK
CERTIFICATE RELATING TO THE WARRANT SHARES, AND IN CASE OF LOSS, THEFT OR
DESTRUCTION, OF INDEMNITY OR SECURITY REASONABLY SATISFACTORY TO IT (WHICH, IN
THE CASE OF THE WARRANT, SHALL NOT INCLUDE THE POSTING OF ANY BOND), AND UPON
SURRENDER AND CANCELLATION OF SUCH WARRANT OR STOCK CERTIFICATE, IF MUTILATED,
THE COMPANY WILL MAKE AND DELIVER A NEW WARRANT OR STOCK CERTIFICATE OF LIKE
TENOR AND DATED AS OF SUCH CANCELLATION, IN LIEU OF SUCH WARRANT OR STOCK
CERTIFICATE.

 

10.  SATURDAYS, SUNDAYS, HOLIDAYS, ETC.  IF THE LAST OR APPOINTED DAY FOR THE
TAKING OF ANY ACTION OR THE EXPIRATION OF ANY RIGHT REQUIRED OR GRANTED HEREIN
SHALL BE A SATURDAY, SUNDAY OR A LEGAL HOLIDAY, THEN SUCH ACTION MAY BE TAKEN OR
SUCH RIGHT MAY BE EXERCISED ON THE NEXT SUCCEEDING DAY NOT A SATURDAY, SUNDAY OR
LEGAL HOLIDAY.

 

11.  ADJUSTMENTS OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES.  THE NUMBER AND
KIND OF SECURITIES PURCHASABLE UPON THE EXERCISE OF THIS WARRANT AND THE
EXERCISE PRICE SHALL BE SUBJECT TO ADJUSTMENT FROM TIME TO TIME UPON THE
HAPPENING OF ANY OF THE FOLLOWING.  IN CASE THE COMPANY SHALL (I) PAY A DIVIDEND
IN SHARES OF COMMON STOCK OR MAKE A DISTRIBUTION IN SHARES OF COMMON STOCK TO
HOLDERS OF ITS OUTSTANDING COMMON STOCK, (II) SUBDIVIDE ITS OUTSTANDING SHARES
OF COMMON STOCK INTO A GREATER NUMBER OF SHARES, (III) COMBINE ITS OUTSTANDING
SHARES OF COMMON STOCK INTO A SMALLER NUMBER OF SHARES OF COMMON STOCK, OR (IV)
ISSUE ANY SHARES OF ITS CAPITAL STOCK IN A RECLASSIFICATION OF THE COMMON STOCK,
THEN THE NUMBER OF WARRANT SHARES PURCHASABLE UPON EXERCISE OF THIS WARRANT
IMMEDIATELY PRIOR THERETO SHALL BE ADJUSTED SO THAT THE HOLDER SHALL BE ENTITLED
TO RECEIVE THE KIND AND NUMBER OF WARRANT SHARES OR OTHER SECURITIES OF THE
COMPANY WHICH IT WOULD HAVE OWNED OR HAVE BEEN ENTITLED TO RECEIVE HAD SUCH
WARRANT BEEN EXERCISED IN ADVANCE THEREOF.  UPON EACH SUCH ADJUSTMENT OF THE
KIND AND NUMBER OF WARRANT SHARES OR OTHER SECURITIES OF THE COMPANY WHICH ARE
PURCHASABLE HEREUNDER, THE HOLDER SHALL THEREAFTER BE ENTITLED TO PURCHASE THE
NUMBER OF WARRANT SHARES OR OTHER SECURITIES

 

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RESULTING FROM SUCH ADJUSTMENT AT AN EXERCISE PRICE PER WARRANT SHARE OR OTHER
SECURITY OBTAINED BY MULTIPLYING THE EXERCISE PRICE IN EFFECT IMMEDIATELY PRIOR
TO SUCH ADJUSTMENT BY THE NUMBER OF WARRANT SHARES PURCHASABLE PURSUANT HERETO
IMMEDIATELY PRIOR TO SUCH ADJUSTMENT AND DIVIDING BY THE NUMBER OF WARRANT
SHARES OR OTHER SECURITIES OF THE COMPANY THAT ARE PURCHASABLE PURSUANT HERETO
IMMEDIATELY AFTER SUCH ADJUSTMENT.  AN ADJUSTMENT MADE PURSUANT TO THIS
PARAGRAPH SHALL BECOME EFFECTIVE IMMEDIATELY AFTER THE EFFECTIVE DATE OF SUCH
EVENT RETROACTIVE TO THE RECORD DATE, IF ANY, FOR SUCH EVENT.

 

12.  REORGANIZATION, RECLASSIFICATION, MERGER, CONSOLIDATION OR DISPOSITION OF
ASSETS.  IN CASE THE COMPANY SHALL REORGANIZE ITS CAPITAL, RECLASSIFY ITS
CAPITAL STOCK, CONSOLIDATE OR MERGE WITH OR INTO ANOTHER CORPORATION (WHERE THE
COMPANY IS NOT THE SURVIVING CORPORATION OR WHERE THERE IS A CHANGE IN OR
DISTRIBUTION WITH RESPECT TO THE COMMON STOCK OF THE COMPANY), OR SELL, TRANSFER
OR OTHERWISE DISPOSE OF ITS PROPERTY, ASSETS OR BUSINESS TO ANOTHER CORPORATION
AND, PURSUANT TO THE TERMS OF SUCH REORGANIZATION, RECLASSIFICATION, MERGER,
CONSOLIDATION OR DISPOSITION OF ASSETS, SHARES OF COMMON STOCK OF THE SUCCESSOR
OR ACQUIRING CORPORATION, OR ANY CASH, SHARES OF STOCK OR OTHER SECURITIES OR
PROPERTY OF ANY NATURE WHATSOEVER (INCLUDING WARRANTS OR OTHER SUBSCRIPTION OR
PURCHASE RIGHTS) IN ADDITION TO OR IN LIEU OF COMMON STOCK OF THE SUCCESSOR OR
ACQUIRING CORPORATION (“OTHER PROPERTY”), ARE TO BE RECEIVED BY OR DISTRIBUTED
TO THE HOLDERS OF COMMON STOCK OF THE COMPANY, THEN THE HOLDER SHALL HAVE THE
RIGHT THEREAFTER TO RECEIVE, AT THE OPTION OF THE HOLDER, UPON EXERCISE OF THIS
WARRANT, THE NUMBER OF SHARES OF COMMON STOCK OF THE SUCCESSOR OR ACQUIRING
CORPORATION OR OF THE COMPANY, IF IT IS THE SURVIVING CORPORATION, AND OTHER
PROPERTY RECEIVABLE UPON OR AS A RESULT OF SUCH REORGANIZATION,
RECLASSIFICATION, MERGER, CONSOLIDATION OR DISPOSITION OF ASSETS BY A HOLDER OF
THE NUMBER OF SHARES OF COMMON STOCK FOR WHICH THIS WARRANT IS EXERCISABLE
IMMEDIATELY PRIOR TO SUCH EVENT. IN THE CASE OF ANY SUCH REORGANIZATION,
RECLASSIFICATION, MERGER, CONSOLIDATION OR DISPOSITION OF ASSETS, THE SUCCESSOR
OR ACQUIRING CORPORATION (IF OTHER THAN THE COMPANY) SHALL EXPRESSLY ASSUME THE
DUE AND PUNCTUAL OBSERVANCE AND PERFORMANCE OF EACH AND EVERY COVENANT AND
CONDITION OF THIS WARRANT TO BE PERFORMED AND OBSERVED BY THE COMPANY AND ALL
THE OBLIGATIONS AND LIABILITIES HEREUNDER, SUBJECT TO SUCH MODIFICATIONS AS MAY
BE DEEMED APPROPRIATE (AS DETERMINED IN GOOD FAITH BY RESOLUTION OF THE BOARD OF
DIRECTORS OF THE COMPANY) IN ORDER TO PROVIDE FOR ADJUSTMENTS OF WARRANT SHARES
FOR WHICH THIS WARRANT IS EXERCISABLE WHICH SHALL BE AS NEARLY EQUIVALENT AS
PRACTICABLE TO THE ADJUSTMENTS PROVIDED FOR IN THIS SECTION 12.  FOR PURPOSES OF
THIS SECTION 12, “COMMON STOCK OF THE SUCCESSOR OR ACQUIRING CORPORATION” SHALL
INCLUDE STOCK OF SUCH CORPORATION OF ANY CLASS WHICH IS NOT PREFERRED AS TO
DIVIDENDS OR ASSETS OVER ANY OTHER CLASS OF STOCK OF SUCH CORPORATION AND WHICH
IS NOT SUBJECT TO REDEMPTION AND SHALL ALSO INCLUDE ANY EVIDENCES OF
INDEBTEDNESS, SHARES OF STOCK OR OTHER SECURITIES WHICH ARE CONVERTIBLE INTO OR
EXCHANGEABLE FOR ANY SUCH STOCK, EITHER IMMEDIATELY OR UPON THE ARRIVAL OF A
SPECIFIED DATE OR THE HAPPENING OF A SPECIFIED EVENT AND ANY WARRANTS OR OTHER
RIGHTS TO SUBSCRIBE FOR OR PURCHASE ANY SUCH STOCK.  THE FOREGOING PROVISIONS OF
THIS SECTION 12 SHALL SIMILARLY APPLY TO SUCCESSIVE REORGANIZATIONS,
RECLASSIFICATIONS, MERGERS, CONSOLIDATIONS OR DISPOSITION OF ASSETS.

 

13.  VOLUNTARY ADJUSTMENT BY THE COMPANY.  THE COMPANY MAY AT ANY TIME DURING
THE TERM OF THIS WARRANT REDUCE THE THEN CURRENT EXERCISE PRICE TO ANY AMOUNT
AND FOR ANY PERIOD OF TIME DEEMED APPROPRIATE BY THE BOARD OF DIRECTORS OF THE
COMPANY.

 

14.  NOTICE OF ADJUSTMENT.  WHENEVER THE NUMBER OF WARRANT SHARES OR NUMBER OR
KIND OF SECURITIES OR OTHER PROPERTY PURCHASABLE UPON THE EXERCISE OF THIS
WARRANT OR THE EXERCISE

 

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PRICE IS ADJUSTED, AS HEREIN PROVIDED, THE COMPANY SHALL GIVE NOTICE THEREOF TO
THE HOLDER, WHICH NOTICE SHALL STATE THE NUMBER OF WARRANT SHARES (AND OTHER
SECURITIES OR PROPERTY) PURCHASABLE UPON THE EXERCISE OF THIS WARRANT AND THE
EXERCISE PRICE OF SUCH WARRANT SHARES (AND OTHER SECURITIES OR PROPERTY) AFTER
SUCH ADJUSTMENT, SETTING FORTH A BRIEF STATEMENT OF THE FACTS REQUIRING SUCH
ADJUSTMENT AND SETTING FORTH THE COMPUTATION BY WHICH SUCH ADJUSTMENT WAS MADE.

 

15.  AUTHORIZED SHARES.  THE COMPANY COVENANTS THAT DURING THE PERIOD THE
WARRANT IS OUTSTANDING, IT WILL RESERVE FROM ITS AUTHORIZED AND UNISSUED COMMON
STOCK A SUFFICIENT NUMBER OF SHARES TO PROVIDE FOR THE ISSUANCE OF THE WARRANT
SHARES UPON THE EXERCISE OF ANY PURCHASE RIGHTS UNDER THIS WARRANT.  THE COMPANY
FURTHER COVENANTS THAT ITS ISSUANCE OF THIS WARRANT SHALL CONSTITUTE FULL
AUTHORITY TO ITS OFFICERS WHO ARE CHARGED WITH THE DUTY OF EXECUTING STOCK
CERTIFICATES TO EXECUTE AND ISSUE THE NECESSARY CERTIFICATES FOR THE WARRANT
SHARES UPON THE EXERCISE OF THE PURCHASE RIGHTS UNDER THIS WARRANT.  THE COMPANY
WILL TAKE ALL SUCH REASONABLE ACTION AS MAY BE NECESSARY TO ASSURE THAT SUCH
WARRANT SHARES MAY BE ISSUED AS PROVIDED HEREIN WITHOUT VIOLATION OF ANY
APPLICABLE LAW OR REGULATION, OR OF ANY REQUIREMENTS OF THE TRADING MARKET UPON
WHICH THE COMMON STOCK MAY BE LISTED.

 

Except and to the extent as waived or consented to by the Holder, the Company
shall not by any action, including, without limitation, amending its certificate
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 of this Warrant, but will at all times in good faith assist in the
carrying out of all such terms and in the taking of all such actions as may be
necessary or appropriate to protect the rights of Holder as set forth in this
Warrant against impairment.  Without limiting the generality of the foregoing,
the Company will (a) not increase the par value of any Warrant Shares above the
amount payable therefor upon such exercise immediately prior to such increase in
par value, (b) take all such action as may be necessary or appropriate in order
that the Company may validly and legally issue fully paid and nonassessable
Warrant Shares upon the exercise of this Warrant, and (c) use commercially
reasonable efforts to obtain all such authorizations, exemptions or consents
from any public regulatory body having jurisdiction thereof as may be necessary
to enable the Company to perform its obligations under this Warrant.

 

Before taking any action which would result in an adjustment in the number of
Warrant Shares for which this Warrant is exercisable or in the Exercise Price,
the Company shall obtain all such authorizations or exemptions thereof, or
consents thereto, as may be necessary from any public regulatory body or bodies
having jurisdiction thereof.

 

16.  MISCELLANEOUS.

 

(A)  JURISDICTION.  ALL QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY,
ENFORCEMENT AND INTERPRETATION OF THIS WARRANT SHALL BE DETERMINED IN ACCORDANCE
WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK.

 

(B)  RESTRICTIONS.  THE HOLDER ACKNOWLEDGES THAT THE WARRANT SHARES ACQUIRED
UPON THE EXERCISE OF THIS WARRANT, IF NOT REGISTERED, WILL HAVE RESTRICTIONS
UPON RESALE IMPOSED BY STATE AND FEDERAL SECURITIES LAWS.

 

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(C)  NONWAIVER AND EXPENSES.  NO COURSE OF DEALING OR ANY DELAY OR FAILURE TO
EXERCISE ANY RIGHT HEREUNDER ON THE PART OF HOLDER SHALL OPERATE AS A WAIVER OF
SUCH RIGHT OR OTHERWISE PREJUDICE HOLDER’S RIGHTS, POWERS OR REMEDIES,
NOTWITHSTANDING ALL RIGHTS HEREUNDER TERMINATE ON THE TERMINATION DATE.  IF THE
COMPANY WILLFULLY AND KNOWINGLY FAILS TO COMPLY WITH ANY PROVISION OF THIS
WARRANT, WHICH RESULTS IN ANY MATERIAL DAMAGES TO THE HOLDER, THE COMPANY SHALL
PAY TO HOLDER SUCH AMOUNTS AS SHALL BE SUFFICIENT TO COVER ANY COSTS AND
EXPENSES INCLUDING, BUT NOT LIMITED TO, REASONABLE ATTORNEYS’ FEES, INCLUDING
THOSE OF APPELLATE PROCEEDINGS, INCURRED BY HOLDER IN COLLECTING ANY AMOUNTS DUE
PURSUANT HERETO OR IN OTHERWISE ENFORCING ANY OF ITS RIGHTS, POWERS OR REMEDIES
HEREUNDER.

 

(D)  NOTICES.  ANY NOTICE, REQUEST OR OTHER DOCUMENT REQUIRED OR PERMITTED TO BE
GIVEN OR DELIVERED TO THE HOLDER BY THE COMPANY SHALL BE IN WRITING AND SHALL BE
DEEMED GIVEN AND EFFECTIVE ON THE EARLIEST OF (I) THE DATE OF TRANSMISSION, IF
SUCH NOTICE OR COMMUNICATION IS DELIVERED VIA FACSIMILE AT THE FACSIMILE NUMBER
SET FORTH ON THE SIGNATURE PAGES ATTACHED HERETO PRIOR TO 6:30 P.M. (NEW YORK
CITY TIME) ON A TRADING DAY, (II) THE NEXT TRADING DAY AFTER THE DATE OF
TRANSMISSION, IF SUCH NOTICE OR COMMUNICATION IS DELIVERED VIA FACSIMILE AT THE
FACSIMILE NUMBER SET FORTH ON THE SIGNATURE PAGES ATTACHED HERETO ON A DAY THAT
IS NOT A TRADING DAY OR LATER THAN 6:30 P.M. (NEW YORK CITY TIME) ON ANY TRADING
DAY, (III) THE SECOND TRADING DAY FOLLOWING THE DATE OF MAILING, IF SENT BY U.S.
NATIONALLY RECOGNIZED OVERNIGHT COURIER SERVICE, OR (IV) UPON ACTUAL RECEIPT BY
THE HOLDER.  THE ADDRESS FOR SUCH NOTICES AND COMMUNICATIONS SHALL BE AS SET
FORTH ON THE SIGNATURE PAGE ATTACHED HERETO.

 

(D)  DELIVERED IN ACCORDANCE WITH THE NOTICE PROVISIONS OF THE PURCHASE
AGREEMENT.

 

(E)  LIMITATION OF LIABILITY.  NO PROVISION HEREOF, IN THE ABSENCE OF ANY
AFFIRMATIVE ACTION BY HOLDER TO EXERCISE THIS WARRANT OR PURCHASE WARRANT
SHARES, AND NO ENUMERATION HEREIN OF THE RIGHTS OR PRIVILEGES OF HOLDER, SHALL
GIVE RISE TO ANY LIABILITY OF HOLDER FOR THE PURCHASE PRICE OF ANY COMMON STOCK
OR AS A STOCKHOLDER OF THE COMPANY, WHETHER SUCH LIABILITY IS ASSERTED BY THE
COMPANY OR BY CREDITORS OF THE COMPANY.

 

(F)  REMEDIES.  HOLDER, IN ADDITION TO BEING ENTITLED TO EXERCISE ALL RIGHTS
GRANTED BY LAW, INCLUDING RECOVERY OF DAMAGES, WILL BE ENTITLED TO SPECIFIC
PERFORMANCE OF ITS RIGHTS UNDER THIS WARRANT.  THE COMPANY AGREES THAT MONETARY
DAMAGES WOULD NOT BE ADEQUATE COMPENSATION FOR ANY LOSS INCURRED BY REASON OF A
BREACH BY IT OF THE PROVISIONS OF THIS WARRANT AND HEREBY AGREES TO WAIVE THE
DEFENSE IN ANY ACTION FOR SPECIFIC PERFORMANCE THAT A REMEDY AT LAW WOULD BE
ADEQUATE.

 

(G)  SUCCESSORS AND ASSIGNS.  SUBJECT TO APPLICABLE SECURITIES LAWS, THIS
WARRANT AND THE RIGHTS AND OBLIGATIONS EVIDENCED HEREBY SHALL INURE TO THE
BENEFIT OF AND BE BINDING UPON THE SUCCESSORS OF THE COMPANY AND THE SUCCESSORS
AND PERMITTED ASSIGNS OF HOLDER.  THE PROVISIONS OF THIS WARRANT ARE INTENDED TO
BE FOR THE BENEFIT OF ALL HOLDERS FROM TIME TO TIME OF THIS WARRANT AND SHALL BE
ENFORCEABLE BY ANY SUCH HOLDER OR HOLDER OF WARRANT SHARES.

 

8

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(H)  AMENDMENT.  THIS WARRANT MAY BE MODIFIED OR AMENDED OR THE PROVISIONS
HEREOF WAIVED WITH THE WRITTEN CONSENT OF THE COMPANY AND THE HOLDER.

 

(I)  SEVERABILITY.  WHEREVER POSSIBLE, EACH PROVISION OF THIS WARRANT SHALL BE
INTERPRETED IN SUCH MANNER AS TO BE EFFECTIVE AND VALID UNDER APPLICABLE LAW,
BUT IF ANY PROVISION OF THIS WARRANT SHALL BE PROHIBITED BY OR INVALID UNDER
APPLICABLE LAW, SUCH PROVISION SHALL BE INEFFECTIVE TO THE EXTENT OF SUCH
PROHIBITION OR INVALIDITY, WITHOUT INVALIDATING THE REMAINDER OF SUCH PROVISIONS
OR THE REMAINING PROVISIONS OF THIS WARRANT.

 

(J)  HEADINGS.  THE HEADINGS USED IN THIS WARRANT ARE FOR THE CONVENIENCE OF
REFERENCE ONLY AND SHALL NOT, FOR ANY PURPOSE, BE DEEMED A PART OF THIS WARRANT.

 

********************

 

9

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IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its
officer thereunto duly authorized.

 

 

Dated:  March 4, 2004

 

 

 

IMPLANT SCIENCES CORPORATION

 

 

 

 

 

By:

 

 

 

Name:

 

 

Title:

 

10

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NOTICE OF EXERCISE

 

To:                              Implant Sciences Corporation

 

(1)  The undersigned hereby elects to purchase                  Warrant Shares
of the Company pursuant to the terms of the attached Warrant (only if exercised
in full), and tenders herewith payment of the exercise price in full, together
with all applicable transfer taxes, if any.

 

(2)  Payment shall take the form of (check applicable box):

 

[  ] in lawful money of the United States; or

 

[ ] the cancellation of such number of Warrant Shares as is necessary, in
accordance with the formula set forth in subsection 3(d), to exercise this
Warrant with respect to the maximum number of Warrant Shares purchasable
pursuant to the cashless exercise procedure set forth in subsection 3(d).

 

(3)  Please issue a certificate or certificates representing said Warrant Shares
in the name of the undersigned or in such other name as is specified below:

 

 

The Warrant Shares shall be delivered to the following:

 

 

(4)  Accredited Investor.  The undersigned is an “accredited investor” as
defined in Regulation D under the Securities Act of 1933, as amended.

 

 

[PURCHASER]

 

 

 

 

 

By:

 

 

 

Name:

 

Title:

 

 

 

Dated:

 

 

 

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ASSIGNMENT FORM

 

(To assign the foregoing warrant, execute
this form and supply required information.
Do not use this form to exercise the warrant.)

 

 

FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced thereby are
hereby assigned to

 

                                                                                              
whose address is

 

                                                                                                                              .

 

                                                                                                                              

 

Dated:                              ,               

 

 

 

Holder’s Signature:

 

 

 

 

 

 

 

Holder’s Address:

 

 

 

 

 

 

 

 

 

 

 

 

Signature Guaranteed:

 

 

 

NOTE:  The signature to this Assignment Form must correspond with the name as it
appears on the face of the Warrant, without alteration or enlargement or any
change whatsoever, and must be guaranteed by a bank or trust company.  Officers
of corporations and those acting in a fiduciary or other representative capacity
should file proper evidence of authority to assign the foregoing Warrant.

 

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