Form of Master Security Agreement


    IMPLANT
      SCIENCES CORPORATION AND CERTAIN OF ITS SUBSIDIARIES

    MASTER
      SECURITY AGREEMENT

     

    


    
      	
              To:

            	
              Laurus
                Master Fund, Ltd.

            


    

        c/o
      M&C
      Corporate Services Limited

        P.O.
      Box 309
      GT

        Ugland
      House

        South
      Church
      Street

        George
      Town

        Grand
      Cayman,
      Cayman Islands

     

    Date:
      December 29, 2006

     

    To
      Whom
      It May Concern:

     

    1.  To
      secure
      the payment of all Obligations (as hereafter defined), Implant Sciences
      Corporation a Massachusetts corporation (the “Company”), each other entity party
      hereto and each other entity that is required to enter into this Master Security
      Agreement (each an “Assignor” and, collectively, the “Assignors”) hereby assigns
      and grants to Laurus a continuing security interest in all of the following
      property now owned or at any time hereafter acquired by such Assignor, or in
      which such Assignor now has or at any time in the future may acquire any right,
      title or interest (the “Collateral”): all cash, cash equivalents, accounts,
      accounts receivable, deposit accounts, inventory, equipment, goods, fixtures,
      documents, instruments (including, without limitation, promissory notes),
      contract rights, general intangibles (including, without limitation, payment
      intangibles and an absolute right to license on terms no less favorable than
      those current in effect among such Assignor’s affiliates), chattel paper,
      supporting obligations, investment property (including, without limitation,
      all
      partnership interests, limited liability company membership interests and all
      other equity interests owned by any Assignor), letter-of-credit rights,
      trademarks, trademark applications, tradestyles, patents, patent applications,
      copyrights, copyright applications and other intellectual property in which
      such
      Assignor now has or hereafter may acquire any right, title or interest, all
      proceeds and products thereof (including, without limitation, proceeds of
      insurance) and all additions, accessions and substitutions thereto or therefor.
      In the event any Assignor wishes to finance the acquisition in the ordinary
      course of business of any hereafter acquired equipment and has obtained a
      written commitment from an unrelated third party financing source to finance
      such equipment, Laurus shall release its security interest on such hereafter
      acquired equipment so financed by such third party financing source. Except
      as
      otherwise defined herein, all capitalized terms used herein shall have the
      meanings provided such terms in the Securities Purchase Agreement referred
      to
      below.

     

    2.  The
      term
“Obligations” as used herein shall mean and include all debts, liabilities and
      obligations owing by each Assignor to Laurus arising under, out of, or in
      connection with: (i) that certain Securities Purchase Agreement dated as of
      the
      date hereof by and between the Company and Laurus (the “Securities Purchase
      Agreement”) and (ii) the Related Agreements referred to in the Securities
      Purchase Agreement (the Securities Purchase Agreement and each Related Agreement
      as each may be amended, modified, restated or supplemented from time to time,
      collectively, the “Documents”), and in connection with any documents,
      instruments or agreements relating to or executed in connection with the
      Documents or any documents, instruments or agreements referred to therein or
      otherwise, and in connection with any other indebtedness, obligations or
      liabilities of each such Assignor to Laurus, whether now existing or hereafter
      arising, direct or indirect, liquidated or unliquidated, absolute or contingent,
      due or not due and whether under, pursuant to or evidenced by a note, agreement,
      guaranty, instrument or otherwise, including, without limitation, obligations
      and liabilities of each Assignor for post-petition interest, fees, costs and
      charges that accrue after the commencement of any case by or against such
      Assignor under any bankruptcy, insolvency, reorganization or like proceeding
      (collectively, the “Debtor Relief Laws”) in each case, irrespective of the
      genuineness, validity, regularity or enforceability of such Obligations, or
      of
      any instrument evidencing any of the Obligations or of any collateral therefor
      or of the existence or extent of such collateral, and irrespective of the
      allowability, allowance or disallowance of any or all of the Obligations in
      any
      case commenced by or against any Assignor under any Debtor Relief
      Law.

     

    3.  Each
      Assignor hereby jointly and severally represents, warrants and covenants to
      Laurus that:

     

    (a)  it
      is a
      corporation, partnership or limited liability company, as the case may be,
      validly existing, in good standing and formed under the respective laws of
      its
      jurisdiction of formation set forth on Schedule A, and each Assignor will
      provide Laurus thirty (30) days’ prior written notice of any change in any of
      its respective jurisdiction of formation;

     

    (b)  its
      legal
      name is as set forth in its Certificate of Incorporation or other organizational
      document (as applicable) as amended through the date hereof and as set forth
      on
      Schedule A, and it will provide Laurus thirty (30) days’ prior written notice of
      any change in its legal name;

     

    (c)  its
      organizational identification number (if applicable) is as set forth on Schedule
      A hereto, and it will provide Laurus thirty (30) days’ prior written notice of
      any change in its organizational identification number;

     

    (d)  it
      is the
      lawful owner of its Collateral and it has the sole right to grant a security
      interest therein and will defend the Collateral against all claims and demands
      of all persons and entities;

     

    (e)  it
      will
      keep its Collateral free and clear of all attachments, levies, taxes, liens,
      security interests and encumbrances of every kind and nature (“Encumbrances”),
      except (i) Encumbrances securing the Obligations and (ii) Encumbrances securing
      indebtedness of each such Assignor not to exceed $50,000 in the aggregate for
      all such Assignors so long as all such Encumbrances are removed or otherwise
      released to Laurus’ satisfaction within ten (10) days of the creation
      thereof;
      or (ii)
      indebtedness of an Assignor to each of Bridge Bank and Comerica Bank as set
      forth on Schedule 3(e) attached hereto;

     

    (f)  it
      will,
      at its and the other Assignors’ joint and several cost and expense keep the
      Collateral in good state of repair (ordinary wear and tear excepted) and will
      not waste or destroy the same or any part thereof other than ordinary course
      discarding of items no longer used or useful in its or such other Assignors’
business;

     

    (g)  it
      will
      not, without Laurus’ prior written consent, sell, exchange, lease or otherwise
      dispose of any Collateral, whether by sale, lease or otherwise, except for
      the
      sale of inventory in the ordinary course of business and for the disposition
      or
      transfer in the ordinary course of business during any fiscal year of obsolete
      and worn-out equipment or equipment no longer necessary for its ongoing needs,
      having an aggregate fair market value of not more than $75,000 and only to
      the
      extent that:

     

    (i)  the
      proceeds of each such disposition are used to acquire replacement Collateral
      which is subject to Laurus’ second priority perfected security interest, or are
      used to repay the Obligations or to pay general corporate expenses;
      or

     

    (ii)  following
      the occurrence of an Event of Default which continues to exist the proceeds
      of
      which are remitted to Laurus to be held as cash collateral for the
      Obligations;

     

    (h)  it
      will
      insure or cause the Collateral to be insured in Laurus’ name (as an additional
      insured and loss payee) against loss or damage by fire, theft, burglary,
      pilferage, loss in transit and such other hazards as Laurus shall specify in
      amounts and under policies by insurers acceptable to Laurus and all premiums
      thereon shall be paid by such Assignor and the policies delivered to Laurus.
      If
      any such Assignor fails to do so, Laurus may procure such insurance and the
      cost
      thereof shall be promptly reimbursed by the Assignors, jointly and severally,
      and shall constitute Obligations;

     

    (i)  it
      will
      at all reasonable times allow Laurus or Laurus’ representatives free access to
      and the right of inspection of the Collateral; 

     

    (j)  such
      Assignor (jointly and severally with each other Assignor) hereby indemnifies
      and
      saves Laurus harmless from all loss, costs, damage, liability and/or expense,
      including reasonable attorneys’ fees, that Laurus may sustain or incur to
      enforce payment, performance or fulfillment of any of the Obligations and/or
      in
      the enforcement of this Master Security Agreement or in the prosecution or
      defense of any action or proceeding either against Laurus or any Assignor
      concerning any matter growing out of or in connection with this Master Security
      Agreement, and/or any of the Obligations and/or any of the Collateral except
      to
      the extent caused by Laurus’ own gross negligence or willful misconduct (as
      determined by a court of competent jurisdiction in a final and nonappealable
      decision).

     

    4.  The
      occurrence of any of the following events or conditions shall constitute an
      “Event of Default” under this Master Security Agreement:

     

    (a)  any
      covenant or any other term or condition of this Master Security Agreement is
      breached in any material respect and such breach, to the extent subject to
      cure,
      shall continue without remedy for a period of fifteen (15) days after the
      occurrence thereof;

     

    (b)  any
      representation or warranty, or statement made or furnished to Laurus under
      this
      Master Security Agreement by any Assignor or on any Assignor’s behalf should
      prove to any time be false or misleading in any material respect on the date
      as
      of which made or deemed made;

     

    (c)  the
      loss,
      theft, substantial damage, destruction, sale or encumbrance to or of any of
      the
      Collateral or the making of any levy, seizure or attachment thereof or thereon
      except to the extent:

     

    (i)  such
      loss
      is covered by insurance proceeds which are used to replace the item or repay
      Laurus; or

     

    (ii)  said
      levy, seizure or attachment does not secure indebtedness in excess of $100,000
      in the aggregate for all Assignors and such levy, seizure or attachment has
      been
      removed or otherwise released within ten (10) days of the creation or the
      assertion thereof;

     

    (d)  an
      Event
      of Default shall have occurred under and as defined in any
      Document.

     

    5.  Upon
      the
      occurrence of any Event of Default and at any time thereafter, Laurus may
      declare all Obligations immediately due and payable and Laurus shall have the
      remedies of a secured party provided in the Uniform Commercial Code as in effect
      in the State of New York, this Agreement and other applicable law. Upon the
      occurrence of any Event of Default and at any time thereafter, Laurus will
      have
      the right to take possession of the Collateral and to maintain such possession
      on any Assignor’s premises or to remove the Collateral or any part thereof to
      such other premises as Laurus may desire. Upon Laurus’ request, each Assignor
      shall assemble or cause the Collateral to be assembled and make it available
      to
      Laurus at a place designated by Laurus. If any notification of intended
      disposition of any Collateral is required by law, such notification, if mailed,
      shall be deemed properly and reasonably given if mailed at least ten (10) days
      before such disposition, postage prepaid, addressed to the applicable Assignor
      either at such Assignor’s address shown herein or at any address appearing on
      Laurus’ records for such Assignor. Any proceeds of any disposition of any of the
      Collateral shall be applied by Laurus to the payment of all expenses in
      connection with the sale of the Collateral, including reasonable attorneys’ fees
      and other legal expenses and disbursements and the reasonable expenses of
      retaking, holding, preparing for sale, selling, and the like, and any balance
      of
      such proceeds may be applied by Laurus toward the payment of the Obligations
      in
      such order of application as Laurus may elect, and each Assignor shall be liable
      for any deficiency. For the avoidance of doubt, following the occurrence and
      during the continuance of an Event of Default, Laurus shall have the immediate
      right to withdraw any and all monies contained in any deposit account in the
      name of any Assignor and controlled by Laurus and apply same to the repayment
      of
      the Obligations (in such order of application as Laurus may elect).

     

    6.  If
      any
      Assignor defaults in the performance or fulfillment of any of the terms,
      conditions, promises, covenants, provisions or warranties on such Assignor’s
      part to be performed or fulfilled under or pursuant to this Master Security
      Agreement, Laurus may, at its option without waiving its right to enforce this
      Master Security Agreement according to its terms, immediately or at any time
      thereafter and without notice to any Assignor, perform or fulfill the same
      or
      cause the performance or fulfillment of the same for each Assignor’s joint and
      several account and at each Assignor’s joint and several cost and expense, and
      the cost and expense thereof (including reasonable attorneys’ fees) shall be
      added to the Obligations and shall be payable on demand with interest thereon
      at
      the highest rate permitted by law, or, at Laurus’ option, debited by Laurus from
      any other deposit accounts in the name of any Assignor and controlled by
      Laurus.

     

    7.  With
      effect solely upon the occurrence and during the continuance of an Event of
      Default beyond any applicable grace period, each Assignor appoints Laurus,
      any
      of Laurus’ officers, employees or any other person or entity whom Laurus may
      designate as such Assignor’s attorney, with power to execute such documents in
      each such Assignor’s behalf and to supply any omitted information and correct
      patent errors in any documents executed by any Assignor or on any Assignor’s
      behalf; to file financing statements against such Assignor covering the
      Collateral (and, in connection with the filing of any such financing statements,
      describe the Collateral as “all assets and all personal property, whether now
      owned and/or hereafter acquired” (or any substantially similar variation
      thereof)); to sign such Assignor’s name on public records; and to do all other
      things Laurus deem necessary to carry out this Master Security Agreement. Each
      Assignor hereby ratifies and approves all acts of the attorney and neither
      Laurus nor the attorney will be liable for any acts of commission or omission,
      nor for any error of judgment or mistake of fact or law other than gross
      negligence or willful misconduct (as determined by a court of competent
      jurisdiction in a final and non-appealable decision). This power being coupled
      with an interest, is irrevocable so long as any Obligations remains unpaid.
      

     

    8.  No
      delay
      or failure on Laurus’ part in exercising any right, privilege or option
      hereunder shall operate as a waiver of such or of any other right, privilege,
      remedy or option, and no waiver whatever shall be valid unless in writing,
      signed by Laurus and then only to the extent therein set forth, and no waiver
      by
      Laurus of any default shall operate as a waiver of any other default or of
      the
      same default on a future occasion. Laurus’ books and records containing entries
      with respect to the Obligations shall be admissible in evidence in any action
      or
      proceeding, shall be binding upon each Assignor for the purpose of establishing
      the items therein set forth and shall constitute prima facie proof thereof,
      absent manifest error. Laurus shall have the right to enforce any one or more
      of
      the remedies available to Laurus, successively, alternately or concurrently.
      Each Assignor agrees to join with Laurus in executing such documents or other
      instruments to the extent required by the Uniform Commercial Code in form
      satisfactory to Laurus and in executing such other documents or instruments
      as
      may be required or deemed necessary by Laurus for purposes of affecting or
      continuing Laurus’ security interest in the Collateral.

     

    9.  THIS
      MASTER SECURITY AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN
      ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE
      AND PERFORMED IN SUCH STATE, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.
      All of the rights, remedies, options, privileges and elections given to Laurus
      hereunder shall inure to the benefit of Laurus’ successors and assigns. The term
“Laurus” as herein used shall include Laurus, any parent of Laurus’, any of
      Laurus’ subsidiaries and any co-subsidiaries of Laurus’ parent, whether now
      existing or hereafter created or acquired, and all of the terms, conditions,
      promises, covenants, provisions and warranties of this Agreement shall inure
      to
      the benefit of each of the foregoing, and shall bind the representatives,
      successors and assigns of each Assignor.

     

    10.  Each
      Assignor hereby consents and agrees that the state of federal courts located
      in
      the County of New York, State of New York shall have exclusive jurisdiction
      to
      hear and determine any claims or disputes between Assignor, on the one hand,
      and
      Laurus, on the other hand, pertaining to this Master Security Agreement or
      to
      any matter arising out of or related to this Master Security Agreement,
      provided, that Laurus and each Assignor acknowledges that any appeals from
      those
      courts may have to be heard by a court located outside of the County of New
      York, State of New York, and further provided, that nothing in this Master
      Security Agreement shall be deemed or operate to preclude Laurus from bringing
      suit or taking other legal action in any other jurisdiction to collect, the
      Obligations, to realize on the Collateral or any other security for the
      Obligations, or to enforce a judgment or other court order in favor of Laurus.
      Each Assignor expressly submits and consents in advance to such jurisdiction
      in
      any action or suit commenced in any such court, and each Assignor hereby waives
      any objection which it may have based upon lack of personal jurisdiction,
      improper venue or forum non conveniens.
      Each
      Assignor hereby waives personal service of the summons, complaint and other
      process issues in any such action or suit and agrees that service of such
      summons, complaint and other process may be made by registered or certified
      mail
      addressed to such assignor at the address set forth on the signature lines
      hereto and that service so made shall be deemed completed upon the earlier
      of
      such Assignor’s actual receipt thereof or three (3) days after deposit in the
      U.S. mails, proper postage prepaid.

     

    The
      parties desire that their disputes be resolved by a judge applying such
      applicable laws. Therefore, to achieve the best combination of the benefits
      of
      the judicial system and of arbitration, the parties hereto waive all rights
      to
      trial by jury in any action, suite, or proceeding brought to resolve any
      dispute, whether arising in contract, tort, or otherwise between Laurus, and/or
      any Assignor arising out of, connected with, related or incidental to the
      relationship established between them in connection with this Master Security
      Agreement or the transactions related hereto.

     

    11.  It
      is
      understood and agreed that any person or entity that desires to become an
      Assignor hereunder, or is required to execute a counterpart of this Master
      Security Agreement after the date hereof pursuant to the requirements of any
      Document, shall become an Assignor hereunder by (x) executing a Joinder
      Agreement in form and substance satisfactory to Laurus, (y) delivering
      supplements to such exhibits and annexes to such Documents as Laurus shall
      reasonably request and (z) taking all actions as specified in this Master
      Security Agreement as would have been taken by such Assignor had it been an
      original party to this Master Security Agreement, in each case with all
      documents required above to be delivered to Laurus and with all documents and
      actions required above to be taken to the reasonable satisfaction of
      Laurus.

     

    12.  All
      notices from Laurus to any Assignor shall be sufficiently given if mailed or
      delivered to such Assignor’s address set forth below.

     

    Very
      truly yours,

    


    IMPLANT
      SCIENCES CORPORATION

     

    By:          
      /s/ Diane J. Ryan      

    Name:      
      Diane
      J.
      Ryan

    Title:        
      VP
      and
      CFO

        Address:  107
      Audubon
      Road

      Wakefield,
      MA
      01880

    


    


    C
      ACQUISITION CORPORATION 

     

    By:          
      /s/ Diane J. Ryan      

    Name:     
      Diane
      J.
      Ryan

    Title:       
      Treasurer

    Address:
      1050 Kifer Road

         
      Sunnyvale, CA 94086

     

    


    ACCUREL
      SYSTEMS INTERNATIONAL CORPORATION 

    By:         
       /s/ Diane J. Ryan      

    Name:      
      Diane
      J.
      Ryan

    Title:        
      Treasurer

    Address:
      785 Lucerne Drive

             
      Sunnyvale, CA 94085

    


    ACKNOWLEDGED:

    


    LAURUS
      MASTER FUND, LTD.

    
 

    By:
            

    Name:

    Title

     

    



    
      
        
          Exhibit
            10.6 Form of Master Security Agreement.doc

        

        
        

      

      
        
        

        
          

        

      

      
        
        

        
        

      

    



     

    SCHEDULE
      A

     

    
      	
              Entity

            	
              Jurisdiction
                of 

              Formation

            	
              Organization
                Identification Number

            
	
              C
                Acquisition Corporation

            	
              Delaware

            	
              20-1688021

            
	
              Accurel
                Systems International Corporation

            	
              California

            	
              77-0213856

            
	 	 	 
	 	 	 
	 	 	 
	 	 	 
	 	 	 


    

    


    


    
      
         

      

      
         

        
          

        

      

      
         

      

    

    


    Schedule
      3(e)

    Term
      Note
      with Comerica Bank in the amount of approximately $1.3 million

    Line
      of
      Credit with Bridge Bank in the amount of $5.0 million