2006 ESPP Plan Document


    Exhibit
      4.1

    


    


    IMPLANT
      SCIENCES CORPORATION

    2006
      EMPLOYEE STOCK PURCHASE PLAN

    


     

    1. PURPOSE.

     

    The
      Implant Sciences Corporation 2006 Employee Stock Purchase Plan (the "Plan")
      is
      intended to provide a method whereby employees of Implant Sciences Corporation
      (the "Company") will have an opportunity to acquire an ownership interest (or
      increase an existing ownership interest) in the Company through the purchase
      of
      shares of the Common Stock of the Company. It is the intention of the Company
      that the Plan qualifies as an "employee stock purchase plan" under Section
      423
      of the Internal Revenue Code of 1986, as amended (the "Code"). The provisions
      of
      the Plan shall, accordingly, be construed so as to extend and limit
      participation in a manner consistent with the requirements of that section
      of
      the Code.

     

     

    2. DEFINITIONS.

     

    	(a)  	
            "Compensation"
              means, for the purpose of any Offering (as hereinafter defined) pursuant
              to this Plan, base pay in effect as of the Offering Commencement Date
              (as
              hereinafter defined). Compensation shall not include any deferred
              compensation other than contributions by an individual through a salary
              reduction agreement to a cash or deferred plan pursuant to Section
              401(k)
              of the Code or to a cafeteria plan pursuant to Section 125 of the
              Code.

          


     

    	(b)  	
            "Board"
              means the Board of Directors of the
              Company.

          


     

    	(c)  	
            "Common
              Stock" means the common stock, $0.10 par value per share, of the
              Company.

          


     

    	(d)  	
            "Company"
              shall also include any Parent or Subsidiary of Implant Sciences
              Corporation designated by the Board of Directors of the Company (the
              "Board").

          


     

    	(e)  	
            "Employee"
              means any person who is customarily employed at least 20 hours per
              week
              and more than five months in a calendar year by the
              Company.

          


     

    	(f)  	
            “Offering
              commencement date” means January 1 or July
              1.

          


     

    	(g)  	
            “Offering
              termination date” means June 30 for a January 1 offering commencement date
              or December 31 for a July 1 offering commencement
              date.

          


     

    	(h)  	
            "Parent"
              shall mean any present or future corporation which is or would constitute
              a "parent corporation" as that term is defined in Section 424 of the
              Code.

          


     

    	(i)  	
            "Plan
              Administrator" shall consist of the Board or, if appointed by the Board,
              a
              committee consisting of at least two Outside Directors who shall be
              members of the Board, but who are not employees of the Company or of
              any
              parent or subsidiary of the Company.

          


     

    	(j)  	
            "Subsidiary"
              shall mean any present or future corporation which is or would constitute
              a "subsidiary corporation" as that term is defined in Section 424 of
              the
              Code.

          


     

     

    3. ELIGIBILITY.

     

    	(a)  	
            Participation
              in the Plan is completely voluntary. Participation in any one or more
              of
              the Offerings under the Plan shall neither limit, nor require,
              participation in any other Offering.

          


     

    	(b)  	
            Each
              Employee shall be eligible to participate in the Plan on the first
              Offering Commencement Date, as hereinafter defined, following the
              completion of one year of continuous service with the Company.
              Notwithstanding the foregoing, no Employee shall be granted an option
              under the Plan:

          


     

    	(i)  	
            if,
              immediately after the grant, such Employee would own stock, and/or
              hold
              outstanding options to purchase stock, possessing 5% or more of the
              total
              combined voting power or value of all classes of stock of the Company
              or
              any Parent or Subsidiary; for purposes of this Paragraph the rules
              of
              Section 424(d) of the Code shall apply in determining stock ownership
              of
              any Employee; or

          


     

    	(ii)  	
            which
              permits such Employee's rights to purchase stock under all Section
              423
              employee stock purchase plans of the Company and any Parent or Subsidiary
              to accrue at a rate that exceeds $25,000 of the fair market value of
              the
              stock (determined at the time such option is granted) for each calendar
              year in which such option is outstanding; for purposes of this Paragraph,
              the rules of Section 423(b)(8) of the Code shall
              apply.

          


     

     

    4. OFFERING
      DATES.

     

    The
      right
      to purchase stock hereunder shall be made available by a series of offerings
      (the "Offering" or "Offerings") to Employees eligible in accordance with
      Paragraph 3 hereof. The Plan Administrator will, in its discretion, determine
      the applicable date of commencement ("Offering Commencement Date") and
      termination date ("Offering Termination Date") for each Offering. Participation
      in any one or more of the Offerings under the Plan shall neither limit, nor
      require, participation in any other Offering.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    5. PARTICIPATION.

     

    Any
      eligible Employee may become a participant by completing a payroll deduction
      authorization form provided by the Company and filing it with the office of
      the
      Company's Treasurer 20 days prior to an applicable Offering Commencement Date,
      as determined by the Plan Administrator pursuant to Paragraph 4. A participant
      who obtains shares of Common Stock in one Offering will be deemed to have
      elected to participate in each subsequent Offering, provided such participant
      is
      eligible to participate during each such subsequent Offering and provided that
      such participant has not specifically elected not to participate in such
      subsequent Offering. Such participant will also be deemed to have authorized
      the
      same payroll deductions under Paragraph 6 hereof for each such subsequent
      Offering as in the immediately preceding Offering; provided however, that,
      during the enrollment period prior to each new Offering, the participant may
      elect to change the participant's payroll deductions by submitting a new payroll
      deduction authorization form. 

     

     

    6. PAYROLL
      DEDUCTIONS.

     

    	(a)  	
            At
              the time a participant files his authorization for a payroll deduction,
              he
              shall elect to have deductions made from his pay on each payday during
              any
              Offering in which he is a participant at a specified percentage of
              his
              Compensation as determined on the applicable Offering Commencement
              Date;
              said percentage shall be in increments of one percent up to a maximum
              percentage of ten percent.

          


     

    	(b)  	
            Payroll
              deductions for a participant shall commence on the applicable Offering
              Commencement Date when his authorization for a payroll deduction becomes
              effective and subject to the last sentence of Paragraph 5 shall end
              on the
              Offering Termination Date of the Offering to which such authorization
              is
              applicable unless sooner terminated by the participant as provided
              in
              Paragraph 10.

          


     

    	(c)  	
            All
              payroll deductions made for a participant shall be credited to his
              account
              under the Plan. A participant may not make any separate cash payment
              into
              such account. 

          


     

    	(d)  	
            A
              participant may withdraw from the Plan at any time during the applicable
              Offering period.

          


     

     

    7. GRANTING
      OF OPTION.

     

    	(a)  	
            On
              the Offering Commencement Date of each Offering, a participating Employee
              shall be deemed to have been granted an option to purchase a maximum
              number of shares of the Common Stock equal to an amount determined
              as
              follows: 85% of the market value per share of the Common Stock on the
              applicable Offering Commencement Date shall be divided into an amount
              equal to the percentage of the Employee's Compensation which he has
              elected to have withheld (but no more than 10%) multiplied by the
              Employee's Compensation over the Offering period. Such market value
              per
              share of the Common Stock shall be determined as provided in clause
              (i) of
              Paragraph 7(b).

          


     

    	(b)  	
            The
              option price of the Common Stock purchased with payroll deductions
              made
              during each such Offering for a participant therein shall be the lower
              of:
              

          


     

    	(i)  	
            85%
              of the closing price per share on the Offering Commencement Date as
              reported by a nationally recognized stock exchange, or, if the Common
              Stock is not listed on such an exchange, as reported by the National
              Association of Securities Dealers Automated Quotation System ("Nasdaq")
              National Market System or, if the Common Stock is not listed on the
              Nasdaq
              National Market System but is otherwise publicly traded over-the-counter,
              85% of the mean of the bid and asked prices per share on the Offering
              Commencement Date or, if the Common Stock is not traded over-the-counter,
              85% of the fair market value on the Offering Commencement Date as
              determined by the Plan Administrator; and


          


     

    	(ii)  	
            85%
              of the closing price per share on the Offering Termination Date as
              reported by a nationally recognized stock exchange, or, if the Common
              Stock is not listed on such an exchange, as reported by the Nasdaq
              National Market System or, if the Common Stock is not listed on the
              Nasdaq
              National Market System but is otherwise publicly traded over-the-counter,
              85% of the mean of the bid and asked prices per share on the Offering
              Termination Date or, if the Common Stock is not traded over-the-counter,
              85% of the fair market value on the Offering Termination Date as
              determined by the Plan Administrator.

          


     

     

    8. EXERCISE
      OF OPTION.

     

    	(a)  	
            Unless
              a participant gives written notice to the Treasurer of the Company
              as
              hereinafter provided, his option for the purchase of Common Stock with
              payroll deductions made during any Offering will be deemed to have
              been
              exercised automatically on the Offering Termination Date applicable
              to
              such Offering for the purchase of the number of full shares of Common
              Stock which the accumulated payroll deductions in his account at that
              time
              will purchase at the applicable option price (but not in excess of
              the
              number of shares for which options have been granted the Employee pursuant
              to Paragraph 7(a) and any pro rata allocation to such participant under
              Paragraph 12(a)), and any excess in his account at that time, other
              than
              amounts representing fractional shares, will be returned to
              him.

          


     

    	(b)  	
            Fractional
              shares will not be issued under the Plan and any accumulated payroll
              deductions which would have been used to purchase fractional shares
              shall
              be automatically carried forward to the next Offering unless the
              participant elects, by written notice to the Treasurer of the Company,
              to
              have the excess cash returned to him.

          


     

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    9. DELIVERY.

     

    The
      Company will deliver to each participant (as promptly as possible after the
      appropriate Offering Termination Date), a certificate representing the Common
      Stock purchased upon exercise of his option.

     

     

    10. WITHDRAWALS
      AND TERMINATION.

     

    	(a)  	
            Prior
              to the Offering Termination Date for an Offering, any participant may
              withdraw the payroll deductions credited to his account under the Plan
              for
              such Offering by giving written notice to the Treasurer of the Company.
              All of the participant's payroll deductions credited to such account
              will
              be paid to him promptly after receipt of notice of withdrawal, without
              interest, and no future payroll deductions will be made from his pay
              during such Offering. The Company will treat any attempt to borrow
              by a
              participant on the security of accumulated payroll deductions as an
              election to withdraw such deductions.

          


     

    	(b)  	
            Except
              as set forth in Paragraph 6(d), a participant's election not to
              participate in, or withdrawal from, any Offering will not have any
              effect
              upon his eligibility to participate in any succeeding Offering or in
              any
              similar plan which may hereafter be adopted by the
              Company.

          


     

    	(c)  	
            Upon
              termination of the participant's employment for any reason, including
              retirement but excluding death, the payroll deductions credited to
              his
              account will be returned to him, or, in the case of his death, to the
              person or persons entitled thereto under Paragraph
              14.

          


     

    	(d)  	
            Upon
              termination of the participant's employment because of death, his
              beneficiary (as defined in Paragraph 14) shall have the right to elect,
              by
              written notice given to the Company's Treasurer prior to the expiration
              of
              a period of 90 days commencing with the date of the death of the
              participant, either: 

          


     

    	(i)  	
            to
              withdraw all of the payroll deductions credited to the participant's
              account under the Plan; or 

          


     

    	(ii)  	
            to
              exercise the participant's option for the purchase of stock on the
              Offering Termination Date next following the date of the participant's
              death for the purchase of the number of full shares which the accumulated
              payroll deductions in the participant's account at the date of the
              participant's death will purchase at the applicable option price (subject
              to the limitation contained in Paragraph 7(a)), and any excess in such
              account will be returned to said beneficiary. In the event that no
              such
              written notice of election shall be duly received by the Company's
              Treasurer, the beneficiary shall automatically be deemed to have elected
              to withdraw the payroll deductions credited to the participant's account
              at the date of the participant's death and the same will be paid promptly
              to said beneficiary.

          


     

     

    11. INTEREST.

     

    No
      interest will be paid or allowed on any money paid into the Plan or credited
      to
      the account of any participating Employee.

     

     

    12. STOCK.

     

    	(a)  	
            The
              maximum number of shares of Common Stock available for issuance and
              purchase by Employees under the Plan, subject to adjustment upon changes
              in capitalization of the Company as provided in Paragraph 17, shall
              be
              500,000 shares of Common Stock. If the total number of shares for which
              options are exercised on any Offering Termination Date in accordance
              with
              Paragraph 8 exceeds the maximum number of shares for the applicable
              Offering, the Company shall make a pro rata allocation of the shares
              available for delivery and distribution in an equitable manner, and
              the
              balances of payroll deductions credited to the account of each participant
              under the Plan shall be returned to the participant.
              

          


     

    	(b)  	
            The
              participant will have no interest in stock covered by his option until
              such option has been exercised.

          


     

     

    13. ADMINISTRATION.

     

    The
      Plan
      shall be administered by the Plan Administrator. The interpretation and
      construction of any provision of the Plan and adoption of rules and regulations
      for administering the Plan shall be made by the Plan Administrator.
      Determinations made by the Plan Administrator with respect to any matter or
      provision contained in the Plan shall be final, conclusive and binding upon
      the
      Company and upon all participants, their heirs or legal representatives. Any
      rule or regulation adopted by the Plan Administrator shall remain in full force
      and effect unless and until altered, amended, or repealed by the Plan
      Administrator.

     

     

    14. DESIGNATION
      OF BENEFICIARY.

     

    A
      participant shall file with the Treasurer of the Company a written designation
      of a beneficiary who is to receive any Common Stock and/or cash under the Plan.
      Such designation of beneficiary may be changed by the participant at any time
      by
      written notice. Upon the death of a participant and upon receipt by the Company
      of proof of the identity and existence at the participant's death of a
      beneficiary validly designated by him under the Plan, the Company shall deliver
      such Common Stock and/or cash to such beneficiary. In the event of the death
      of
      a participant and in the absence of a beneficiary validly designated under
      the
      Plan who is living at the time of such participant's death, the Company shall
      deliver such Common Stock and/or cash to the executor or administrator of the
      estate of the participant. No beneficiary shall, prior to the death of the
      participant by whom he has been designated, acquire any interest in the Common
      Stock and/or cash credited to the participant under the Plan.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    15. TRANSFERABILITY.

     

    Neither
      payroll deductions credited to a participant's account nor any rights with
      regard to the exercise of an option or the receipt of Common Stock under the
      Plan may be assigned, transferred, pledged, or otherwise disposed of in any
      way
      by the participant other than by will or the laws of descent and distribution.
      Any such attempted assignment, transfer, pledge, or other disposition shall
      be
      without effect, except that the Company may treat such act as an election to
      withdraw funds in accordance with Paragraph 10. 

     

     

    16. USE
      OF FUNDS.

     

    All
      payroll deductions received or held by the Company under this Plan may be used
      by the Company for any corporate purposes (to the extent not returned to the
      participant if elected by the participant prior to the end of the period),
      and
      the Company shall not be obligated to segregate such payroll
      deductions.

     

     

    17. EFFECT
      OF CHANGES OF COMMON STOCK.

     

    If
      the
      Company shall subdivide or reclassify the Common Stock which has been or may
      be
      subject to options under this Plan, or shall declare thereon any dividend
      payable in shares of such Common Stock, or shall take any other action of a
      similar nature affecting such Common Stock, then the number and class of shares
      of Common Stock which may thereafter be subject to options under the Plan (in
      the aggregate and to any participant) shall be adjusted accordingly and in
      the
      case of each option outstanding at the time of any such action, the number
      and
      class of shares which may thereafter be purchased pursuant to such option and
      the option price per share shall be adjusted to such extent as may be determined
      by the Plan Administrator, with the approval of independent public accountants
      and counsel, to be necessary to preserve the rights of the holder of such
      option.

     

     

    18. AMENDMENT
      OR TERMINATION.

     

    The
      Board
      may at any time terminate or amend the Plan. No such termination shall affect
      options previously granted, nor may an amendment make any change in any option
      theretofore granted which would adversely affect the rights of any participant
      holding options under the Plan without the consent of such
      participant.

     

     

    19. NOTICES.

     

    All
      notices or other communications by a participant to the Company under or in
      connection with the Plan shall be deemed to have been duly given when received
      by the Treasurer of the Company.

     

     

    20. MERGER
      OR CONSOLIDATION.

     

    If
      the
      Company shall at any time merge into or consolidate with another corporation,
      the holder of each option then outstanding will thereafter be entitled to
      receive at the next Offering Termination Date upon the exercise of such option,
      in lieu of the number of shares of Common Stock as to which such option shall
      be
      exercisable, the number and class of shares of stock or other securities or
      property to which such holder would have been entitled pursuant to the terms
      of
      the agreement of merger or consolidation if, immediately prior to such merger
      or
      consolidation, such holder had been the holder of record of a number of shares
      of Common Stock equal to the number of shares for which such option was
      exercisable. In accordance with this Paragraph and Paragraph 17, the Plan
      Administrator shall determine the kind and amount of such securities or property
      which such holder of an option shall be entitled to receive. A sale of all
      or
      substantially all of the assets of the Company shall be deemed a merger or
      consolidation for the foregoing purposes.

     

     

    21. GOVERNMENTAL
      AND OTHER REGULATIONS.

     

    The
      Plan,
      and the grant and exercise of the rights to purchase shares hereunder, and
      the
      Company's obligation to sell and deliver shares upon the exercise of rights
      to
      purchase shares, shall be subject to all applicable federal, state and foreign
      laws, rules and regulations, and to such approvals by any regulatory or
      governmental agency as may, in the opinion of counsel for the Company, be
      required. The Plan shall be governed by, and construed and enforced in
      accordance with, the provisions of Sections 421, 423 and 424 of the Code and
      the
      substantive laws of The Commonwealth of Massachusetts. In the event of any
      inconsistency between such provisions of the Code and any such laws, such
      provisions of the Code shall govern to the extent necessary to preserve
      favorable federal income tax treatment afforded employee stock purchase plans
      under Section 423 of the Code.