Document:

Exhibit 10.2

 

REGISTRATION
RIGHTS AGREEMENT

 

This Registration Rights Agreement (this “Agreement”)
is made and entered into as of September 30, 2005, by and between Implant
Sciences Corporation, a Massachusetts corporation (the “Company”), and Laurus
Master Fund, Ltd. (the “Purchaser”).

 

This Agreement is made pursuant to the Securities
Purchase Agreement, dated as of the date hereof, by and between the Purchaser
and the Company (as amended, modified or supplemented from time to time, the “Securities
Purchase Agreement”), and pursuant to the Series D Preferred Stock and the
Warrants referred to therein.

 

The Company and the Purchaser hereby agree as follows:

 

1.             Definitions. 
Capitalized terms used and not otherwise defined herein that are defined
in the Securities Purchase Agreement shall have the meanings given such terms
in the Securities Purchase Agreement.  As
used in this Agreement, the following terms shall have the following meanings:

 

“Commission”
means the Securities and Exchange Commission.

 

“Common Stock”
means shares of the Company’s common stock, par value $0.01 per share.

 

“Effectiveness Date”
means (i) with respect to the initial Registration Statement required to
be filed hereunder, a date no later than one hundred twenty (120) days
following the date hereof and (ii) with respect to each additional
Registration Statement required to be filed hereunder, a date no later than
thirty (30) days following the applicable Filing Date.

 

“Effectiveness Period”
has the meaning set forth in Section 2(a).

 

“Exchange Act”
means the Securities Exchange Act of 1934, as amended, and any successor
statute.

 

“Filing Date”
means, with respect to (i) the Registration Statement required to be filed
hereunder in respect of the shares of Common Stock issuable upon  conversion of the Note, a date no later than
thirty (30) days following the date hereof, (ii) the shares of Common
Stock issuable upon exercise of any Warrant, the date which is [thirty (30)
days] after the date of the issuance of such Warrant, and (iii) the shares
of Common Stock issuable to the Holder as a result of adjustments to the Fixed
Conversion Price or Exercise Price, as the case may be, made pursuant to the Series D
Preferred Stock or the Warrant or otherwise, thirty (30) days after the
occurrence such event or the date of the adjustment of the Fixed Conversion
Price or Exercise Price, as the case may be.

 

 

“Holder” or “Holders” means the Purchaser or any of its affiliates or
transferees to the extent any of them hold Registrable Securities, other than
those purchasing Registrable Securities in a market transaction.

 

“Indemnified Party”
has the meaning set forth in Section 5(c).

 

“Indemnifying Party”
has the meaning set forth in Section 5(c).

 

 “Proceeding” means an action, claim, suit, investigation or
proceeding (including, without limitation, an investigation or partial
proceeding, such as a deposition), whether commenced or threatened.

 

“Prospectus”
means the prospectus included in the Registration Statement (including, without
limitation, a prospectus that includes any information previously omitted from
a prospectus filed as part of an effective registration statement in reliance
upon Rule 430A promulgated under the Securities Act), as amended or
supplemented by any prospectus supplement, with respect to the terms of the
offering of any portion of the Registrable Securities covered by the
Registration Statement, and all other amendments and supplements to the
Prospectus, including post-effective amendments, and all material incorporated
by reference or deemed to be incorporated by reference in such Prospectus.

 

“Registrable Securities”
means the shares of Common Stock issued upon the conversion of the  Series D Preferred Stock and issuable
upon exercise of the Warrants.

 

“Registration Statement”
means each registration statement required to be filed hereunder, including the
Prospectus therein, amendments and supplements to such registration statement
or Prospectus, including pre- and post-effective amendments, all exhibits
thereto, and all material incorporated by reference or deemed to be
incorporated by reference in such registration statement.

 

“Rule 144”
means Rule 144 promulgated by the Commission pursuant to the Securities
Act, as such Rule may be amended from time to time, or any similar rule or
regulation hereafter adopted by the Commission having substantially the same
effect as such Rule.

 

“Rule 415”
means Rule 415 promulgated by the Commission pursuant to the Securities
Act, as such Rule may be amended from time to time, or any similar rule or
regulation hereafter adopted by the Commission having substantially the same
effect as such Rule.

 

“Securities Act”
means the Securities Act of 1933, as amended, and any successor statute.

 

“Securities Purchase
Agreement” has the meaning given to such term in the Preamble
hereto.

 

“Series D Preferred Stock” has the meaning set
forth in the Securities Purchase Agreement.

 

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“Trading Market”
means any of the NASD Over The Counter Bulletin Board, NASDAQ SmallCap Market,
the NASDAQ National Markets System, the American Stock Exchange or the New York
Stock Exchange.

 

“Warrants” means
the Common Stock purchase warrants issued in connection with the Securities
Purchase Agreement, whether on the date hereof or thereafter.

 

2.             Registration.

 

(a)           On
or prior to the Filing Date the Company shall prepare and file with the
Commission a Registration Statement covering the Registrable Securities for a
selling stockholder resale offering to be made on a continuous basis pursuant
to Rule 415.  The Registration
Statement shall be on Form S-3 (except if the Company is not then eligible
to register for resale the Registrable Securities on Form S-3, in which
case such registration shall be on another appropriate form in accordance
herewith).  The Company shall cause each
Registration Statement to become effective and remain effective as provided
herein.  The Company shall use its
reasonable commercial efforts to cause each Registration Statement to be
declared effective under the Securities Act as promptly as possible after the
filing thereof, but in any event no later than the Effectiveness Date.  The Company shall use its reasonable
commercial efforts to keep each Registration Statement continuously effective
under the Securities Act until the date which is the earlier date of when (i) all
Registrable Securities have been sold or (ii) all Registrable Securities
covered by such Registration Statement may be sold immediately without
registration under the Securities Act and without volume restrictions pursuant
to Rule 144(k), as determined by the counsel to the Company pursuant to a
written opinion letter to such effect, addressed and acceptable to the Company’s
transfer agent and the affected Holders (the “Effectiveness Period”).

 

(b)           If:  (i) any Registration Statement is not
filed on or prior to the applicable Filing Date; (ii) a Registration
Statement filed hereunder is not declared effective by the Commission by the
applicable Effectiveness Date; (iii) after a Registration Statement is
filed with and declared effective by the Commission, a Discontinuation Event
(as hereafter defined) shall occur and be continuing, or such Registration
Statement ceases to be effective (by suspension or otherwise) as to all
Registrable Securities to which it is required to relate at any time prior to
the expiration of the Effectiveness Period (without being succeeded immediately
by an additional registration statement filed and declared effective), for a
period of time which shall exceed 30 days in the aggregate per year or more
than 20 consecutive calendar days (defined as a period of 365 days commencing
on the date the Registration Statement is declared effective); or (iv) the
Common Stock is not listed or quoted, or is suspended from trading on any
Trading Market for a period of three (3) consecutive Trading Days
(provided the Company shall not have been able to cure such trading suspension
within 30 days of the notice thereof or list the Common Stock on another
Trading Market); (any such failure or breach being referred to as an “Event,”
and for purposes of clause (i) or (ii) the date on which such Event
occurs, or for purposes of clause (iii) the date which such 30 day or 20
consecutive day period (as the

 

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case may be) is exceeded, or for purposes of clause (iv) the date
on which such three (3) Trading Day period is exceeded, being referred to
as “Event Date”), then as partial relief for the damages to the Purchaser by
reason of the occurrence of any such Event (which remedy shall not be exclusive
of any other remedies available at law or in equity), the Company shall pay to
the Purchaser for each day that an Event has occurred and is continuing, an
amount in cash as liquidated damages and not as a penalty, equal to
one-thirtieth (1/30th) of the product of: (A) the then
outstanding principal amount of the Series D Preferred Stock multiplied by
(B) 0.01; provided, however, that the Company shall not be obligated
to pay any liquidated damages to the Holder pursuant to this Article 9 of
this Agreement if a Non-Registration Event occurs as a result of the SEC
raising an issue with respect to the Holder or with respect to the structure of
the transaction contemplated by this Agreement.

 

(c)           Within
three business days of the Effectiveness Date, the Company shall cause its
counsel to issue a blanket opinion in the form attached hereto as Exhibit A,
to the transfer agent stating that the shares are subject to an effective
registration statement and can be reissued free of restrictive legend upon
notice of a sale by the Purchaser and confirmation by the Purchaser that it has
complied with the prospectus delivery requirements, provided that the Company
has not advised the transfer agent orally or in writing that the opinion has
been withdrawn. Copies of the blanket opinion required by this Section 2(c) shall
be delivered to the Purchaser within the time frame set forth above.

 

3.             Registration Procedures. 
If and whenever the Company is required by the provisions hereof to
effect the registration of any Registrable Securities under the Securities Act,
the Company will, as expeditiously as possible:

 

(a)           prepare
and file with the Commission a Registration Statement with respect to such
Registrable Securities, respond as promptly as possible to any comments
received from the Commission, and use its best efforts to cause the
Registration Statement to become and remain effective for the Effectiveness
Period with respect thereto, and promptly provide to the Purchaser copies of
all filings and Commission letters of comment relating thereto;

 

(b)           prepare
and file with the Commission such amendments and supplements to the
Registration Statement and the Prospectus used in connection therewith as may
be necessary to comply with the provisions of the Securities Act with respect
to the disposition of all Registrable Securities covered by such Registration
Statement and to keep such Registration Statement effective until the
expiration of the Effectiveness Period applicable to such Registration
Statement;

 

(c)           furnish
to the Purchaser such number of copies of the Registration Statement and the
Prospectus included therein (including each preliminary Prospectus) as the
Purchaser reasonably may request to facilitate the public sale or disposition
of the Registrable Securities covered by the Registration Statement;

 

(d)           use
its commercially reasonable efforts to register or qualify the Purchaser’s
Registrable Securities covered by such Registration Statement under the

 

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securities or “blue sky” laws of such jurisdictions within the United
States as the Purchaser may reasonably request, provided, however, that the
Company shall not for any such purpose be required to qualify generally to
transact business as a foreign corporation in any jurisdiction where it is not
so qualified or to consent to general service of process in any such
jurisdiction;

 

(e)           list
the Registrable Securities covered by such Registration Statement with any
securities exchange on which the Common Stock of the Company is then listed;

 

(f)            immediately
notify the Purchaser at any time when a Prospectus relating thereto is required
to be delivered under the Securities Act, of the happening of any event of
which the Company has knowledge as a result of which the Prospectus contained
in such Registration Statement, as then in effect, includes an untrue statement
of a material fact or omits to state a material fact required to be stated
therein or necessary to make the statements therein not misleading in light of
the circumstances then existing; and

 

(g)           make
available for inspection by the Purchaser and any attorney, accountant or other
agent retained by the Purchaser, all publicly available, non-confidential
financial and other records, pertinent corporate documents and properties of
the Company, and cause the Company’s officers, directors and employees to
supply all publicly available, non-confidential information reasonably
requested by the attorney, accountant or agent of the Purchaser.

 

4.             Registration Expenses. 
All expenses relating to the Company’s compliance with Sections 2 and 3
hereof, including, without limitation, all registration and filing fees,
printing expenses, fees and disbursements of counsel and independent public
accountants for the Company, fees and expenses (including reasonable counsel
fees) incurred in connection with complying with state securities or “blue sky”
laws, fees of the NASD, transfer taxes, fees of transfer agents and registrars,
fees of, and disbursements incurred by, one counsel for the Holders, are called
“Registration Expenses”. All selling commissions applicable to the sale of
Registrable Securities, including any fees and disbursements of any special
counsel to the Holders beyond those included in Registration Expenses, are
called “Selling Expenses.”  The Company
shall only be responsible for all Registration Expenses.

 

5.             Indemnification.

 

(a)           In
the event of a registration of any Registrable Securities under the Securities
Act pursuant to this Agreement, the Company will indemnify and hold harmless
the Purchaser, and its officers, directors and each other person, if any, who
controls the Purchaser within the meaning of the Securities Act, against any
losses, claims, damages or liabilities, joint or several, to which the
Purchaser, or such persons may become subject under the Securities Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions
in respect thereof) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in any Registration
Statement under which such Registrable Securities were registered under the
Securities Act pursuant to this Agreement, any preliminary Prospectus or final
Prospectus contained therein, or any amendment or supplement thereof, or arise
out of or are based

 

5

 

upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and will reimburse the Purchaser, and each such person for any
reasonable legal or other expenses incurred by them in connection with
investigating or defending any such loss, claim, damage, liability or action; provided,
however, that the Company will not be liable in any such case if and to
the extent that any such loss, claim, damage or liability arises out of or is
based upon an untrue statement or alleged untrue statement or omission or
alleged omission so made in conformity with information furnished by or on
behalf of the Purchaser or any such person in writing specifically for use in
any such document.

 

(b)           In
the event of a registration of the Registrable Securities under the Securities
Act pursuant to this Agreement, the Purchaser will indemnify and hold harmless
the Company, and its officers, directors and each other person, if any, who
controls the Company within the meaning of the Securities Act, against all
losses, claims, damages or liabilities, joint or several, to which the Company
or such persons may become subject under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact which was furnished in writing by the Purchaser
to the Company expressly for use in (and such information is contained in) the
Registration Statement under which such Registrable Securities were registered
under the Securities Act pursuant to this Agreement, any preliminary Prospectus
or final Prospectus contained therein, or any amendment or supplement thereof,
or arise out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse the Company and each such
person for any reasonable legal or other expenses incurred by them in
connection with investigating or defending any such loss, claim, damage,
liability or action, provided, however, that the Purchaser will
be liable in any such case if and only to the extent that any such loss, claim,
damage or liability arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission so made in conformity
with information furnished in writing to the Company by or on behalf of the
Purchaser specifically for use in any such document.  Notwithstanding the provisions of this
paragraph, the Purchaser shall not be required to indemnify any person or
entity in excess of the amount of the aggregate net proceeds received by the
Purchaser in respect of Registrable Securities in connection with any such
registration under the Securities Act.

 

(c)           Promptly
after receipt by a party entitled to claim indemnification hereunder (an “Indemnified
Party”) of notice of the commencement of any action, such Indemnified Party
shall, if a claim for indemnification in respect thereof is to be made against
a party hereto obligated to indemnify such Indemnified Party (an “Indemnifying
Party”), notify the Indemnifying Party in writing thereof, but the omission so
to notify the Indemnifying Party shall not relieve it from any liability which
it may have to such Indemnified Party other than under this Section 5(c) and
shall only relieve it from any liability which it may have to such Indemnified
Party under this Section 5(c) if and to the extent the Indemnifying
Party is prejudiced by such omission. In case any such action shall be brought
against any Indemnified Party and it shall notify the Indemnifying Party of the
commencement thereof, the Indemnifying Party shall be entitled to participate
in

 

6

 

and, to the extent it shall wish, to assume and undertake the defense
thereof with counsel satisfactory to such Indemnified Party, and, after notice
from the Indemnifying Party to such Indemnified Party of its election so to
assume and undertake the defense thereof, the Indemnifying Party shall not be
liable to such Indemnified Party under this Section 5(c) for any
legal expenses subsequently incurred by such Indemnified Party in connection
with the defense thereof; if the Indemnified Party retains its own counsel,
then the Indemnified Party shall pay all fees, costs and expenses of such
counsel, provided, however, that, if the defendants in any such
action include both the Indemnified Party and the Indemnifying Party and the
Indemnified Party shall have reasonably concluded that there may be reasonable
defenses available to it which are different from or additional to those
available to the Indemnifying Party or if the interests of the Indemnified
Party reasonably may be deemed to conflict with the interests of the
Indemnifying Party, the Indemnified Party shall have the right to select one
separate counsel and to assume such legal defenses and otherwise to participate
in the defense of such action, with the reasonable expenses and fees of such
separate counsel and other expenses related to such participation to be
reimbursed by the Indemnifying Party as incurred.

 

(d)           In
order to provide for just and equitable contribution in the event of joint
liability under the Securities Act in any case in which either (i) the
Purchaser, or any officer, director or controlling person of the Purchaser,
makes a claim for indemnification pursuant to this Section 5 but it is
judicially determined (by the entry of a final judgment or decree by a court of
competent jurisdiction and the expiration of time to appeal or the denial of
the last right of appeal) that such indemnification may not be enforced in such
case notwithstanding the fact that this Section 5 provides for
indemnification in such case, or (ii) contribution under the Securities
Act may be required on the part of the Purchaser or such officer, director or
controlling person of the Purchaser in circumstances for which indemnification
is provided under this Section 5; then, and in each such case, the Company
and the Purchaser will contribute to the aggregate losses, claims, damages or
liabilities to which they may be subject (after contribution from others) in
such proportion so that the Purchaser is responsible only for the portion
represented by the percentage that the public offering price of its securities
offered by the Registration Statement bears to the public offering price of all
securities offered by such Registration Statement, provided, however,
that, in any such case, (A) the Purchaser will not be required to
contribute any amount in excess of the public offering price of all such
securities offered by it pursuant to such Registration Statement; and (B) no
person or entity guilty of fraudulent misrepresentation (within the meaning of Section 10(f) of
the Act) will be entitled to contribution from any person or entity who was not
guilty of such fraudulent misrepresentation.

 

6.             Representations and Warranties.

 

(a)           The
Common Stock is registered pursuant to Section 12(b) or 12(g) of
the Exchange Act and, except with respect to certain matters which the Company
has disclosed to the Purchaser on Schedule 4.21 to the Securities Purchase
Agreement, the Company has timely filed all proxy statements, reports,
schedules, forms, statements and other documents required to be filed by it
under the Exchange Act.  The Company has
filed (i) its Annual Report on Form 10-K for its fiscal year ended June 30,
2004 and (ii)

 

7

 

its Quarterly Report on Form 10-Q for the fiscal quarter ended March 31,
2005 (collectively, the “SEC Reports”). 
Each SEC Report was, at the time of its filing, in substantial
compliance with the requirements of its respective form and none of the SEC
Reports, nor the financial statements (and the notes thereto) included in the
SEC Reports, as of their respective filing dates, contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.  The financial statements of the Company
included in the SEC Reports comply as to form in all material respects with
applicable accounting requirements and the published rules and regulations
of the Commission or other applicable rules and regulations with respect
thereto.  Such financial statements have
been prepared in accordance with generally accepted accounting principles (“GAAP”)
applied on a consistent basis during the periods involved (except (i) as
may be otherwise indicated in such financial statements or the notes thereto or
(ii) in the case of unaudited interim statements, to the extent they may
not include footnotes or may be condensed) and fairly present in all material
respects the financial condition, the results of operations and the cash flows
of the Company and its subsidiaries, on a consolidated basis, as of, and for,
the periods presented in each such SEC Report.

 

(b)           The
Common Stock is listed for trading on the American Stock Exchange and satisfies
all requirements for the continuation of such listing, and the Company shall do
all things necessary for the continuation of such listing. The Company has not
received any notice that its Common Stock will be delisted from the American
Stock Exchange (except for prior notices which have been fully remedied) or
that the Common Stock does not meet all requirements for the continuation of
such listing.

 

(c)           Neither
the Company, nor any of its affiliates, nor any person acting on its or their
behalf, has directly or indirectly made any offers or sales of any security or
solicited any offers to buy any security under circumstances that would cause
the offering of the Securities pursuant to the Securities Purchase Agreement to
be integrated with prior offerings by the Company for purposes of the Securities
Act which would prevent the Company from selling the Common Stock pursuant to Rule 506
under the Securities Act, or any applicable exchange-related stockholder
approval provisions, nor will the Company or any of its affiliates or
subsidiaries take any action or steps that would cause the offering of the
Securities to be integrated with other offerings.

 

(d)           The
Warrants, the Series D Preferred Stockand the shares of Common Stock which
the Purchaser may acquire pursuant to the Warrants and the Series D
Preferred Stockare all restricted securities under the Securities Act as of the
date of this Agreement.  The Company will
not issue any stop transfer order or other order impeding the sale and delivery
of any of the Registrable Securities at such time as such Registrable
Securities are registered for public sale or an exemption from registration is
available, except as required by federal or state securities laws.

 

(e)           The
Company understands the nature of the Registrable Securities issuable upon the
conversion of the Series D Preferred Stockand the exercise of the Warrant
and recognizes that the issuance of such Registrable Securities may have a
potential dilutive

 

8

 

effect.  The Company specifically
acknowledges that its obligation to issue the Registrable Securities is binding
upon the Company and enforceable regardless of the dilution such issuance may
have on the ownership interests of other shareholders of the Company.

 

(f)            Except
for agreements made in the ordinary course of business, there is no agreement
that has not been filed with the Commission as an exhibit to a registration
statement or to a form required to be filed by the Company under the Exchange
Act, the breach of which could reasonably be expected to have a material and
adverse effect on the Company and its subsidiaries, or would prohibit or
otherwise interfere with the ability of the Company to enter into and perform
any of its obligations under this Agreement in any material respect.

 

(g)           The
Company will at all times have authorized and reserved a sufficient number of
shares of Common Stock for the full conversion of the Series D Preferred
Stockand exercise of the Warrants.

 

7.             Miscellaneous.

 

(a)           Remedies.  In the
event of a breach by the Company or by a Holder, of any of their respective
obligations under this Agreement, each Holder or the Company, as the case may
be, in addition to being entitled to exercise all rights granted by law and
under this Agreement, including recovery of damages, will be entitled to
specific performance of its rights under this Agreement.

 

(b)           No Piggyback on Registrations.  Except as and to the extent specified in Schedule 7(b) hereto,
neither the Company nor any of its security holders (other than the Holders in
such capacity pursuant hereto) may include securities of the Company in any
Registration Statement other than the Registrable Securities, and the Company
shall not after the date hereof enter into any agreement providing any such
right for inclusion of shares in the Registration Statement to any of its
security holders.  Except as and to the
extent specified in Schedule 7(b) hereto, the Company has not
previously entered into any agreement granting any registration rights with
respect to any of its securities to any person or entity that have not been
fully satisfied.

 

(c)           Compliance.  Each
Holder covenants and agrees that it will comply with the prospectus delivery
requirements of the Securities Act as applicable to it in connection with sales
of Registrable Securities pursuant to the Registration Statement.

 

(d)           Discontinued Disposition. 
Each Holder agrees by its acquisition of such Registrable Securities
that, upon receipt of a notice from the Company of the occurrence of a
Discontinuation Event (as defined below), such Holder will forthwith
discontinue disposition of such Registrable Securities under the applicable
Registration Statement until such Holder’s receipt of the copies of the
supplemented Prospectus and/or amended Registration Statement or until it is
advised in writing (the “Advice”) by the Company that the use of the applicable
Prospectus may be resumed, and, in either case, has received copies of any
additional or supplemental filings that are incorporated or deemed

 

9

 

to be incorporated by reference in such Prospectus or Registration
Statement. The Company may provide appropriate stop orders to enforce the
provisions of this paragraph.  For
purposes of this Agreement, a “Discontinuation Event” shall mean (i) when
the Commission notifies the Company whether there will be a “review” of such
Registration Statement and whenever the Commission comments in writing on such
Registration Statement (the Company shall provide true and complete copies thereof
and all written responses thereto to each of the Holders); (ii) any
request by the Commission or any other Federal or state governmental authority
for amendments or supplements to such Registration Statement or Prospectus or
for additional information; (iii) the issuance by the Commission of any
stop order suspending the effectiveness of such Registration Statement covering
any or all of the Registrable Securities or the initiation of any Proceedings
for that purpose; (iv) the receipt by the Company of any notification with
respect to the suspension of the qualification or exemption from qualification
of any of the Registrable Securities for sale in any jurisdiction, or the
initiation or threatening of any Proceeding for such purpose; and/or (v) the
occurrence of any event or passage of time that makes the financial statements
included in such Registration Statement ineligible for inclusion therein or any
statement made in such Registration Statement or Prospectus or any document
incorporated or deemed to be incorporated therein by reference untrue in any
material respect or that requires any revisions to such Registration Statement,
Prospectus or other documents so that, in the case of such Registration
Statement or Prospectus, as the case may be, it will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.

 

(e)           Piggy-Back Registrations. 
If at any time during the Effectiveness Period there is not an effective
Registration Statement covering all of the Registrable Securities and the
Company shall determine to prepare and file with the Commission a registration
statement relating to an offering for its own account or the account of others
under the Securities Act of any of its equity securities, other than on Form S-4
or Form S-8 (each as promulgated under the Securities Act) or their then
equivalents relating to equity securities to be issued solely in connection
with any acquisition of any entity or business or equity securities issuable in
connection with stock option or other employee benefit plans, then the Company
shall send to each Holder written notice of such determination and, if within
fifteen (15) days after receipt of such notice, any such Holder shall so
request in writing, the Company shall include in such registration statement
all or any part of such Registrable Securities such Holder requests to be
registered to the extent the Company may do so without violating registration
rights of others which exist as of the date of this Agreement, subject to
customary underwriter cutbacks applicable to all holders of registration rights
and subject to obtaining any required consent of any selling stockholder(s) to
such inclusion under such registration statement.

 

(f)            Amendments and Waivers. 
The provisions of this Agreement, including the provisions of this
sentence, may not be amended, modified or supplemented, and waivers or consents
to departures from the provisions hereof may not be given, unless the same
shall be in writing and signed by the Company and the Holders of the then
outstanding Registrable Securities. 
Notwithstanding the foregoing, a waiver or consent

 

10

 

to depart from the provisions hereof with respect to a matter that
relates exclusively to the rights of certain Holders and that does not directly
or indirectly affect the rights of other Holders may be given by Holders of at
least a majority of the Registrable Securities to which such waiver or consent
relates; provided, however, that the provisions of this sentence
may not be amended, modified, or supplemented except in accordance with the
provisions of the immediately preceding sentence.

 

(g)           Notices.  Any notice
or request hereunder may be given to the Company or the Purchaser at the
respective addresses set forth below or as may hereafter be specified in a
notice designated as a change of address under this Section 7(g).  Any notice or request hereunder shall be
given by registered or certified mail, return receipt requested, hand delivery,
overnight mail, Federal Express or other national overnight next day carrier
(collectively, “Courier”) or telecopy (confirmed by mail).  Notices and requests shall be, in the case of
those by hand delivery, deemed to have been given when delivered to any party
to whom it is addressed, in the case of those by mail or overnight mail, deemed
to have been given three (3) business days after the date when deposited
in the mail or with the overnight mail carrier, in the case of a Courier, the
next business day following timely delivery of the package with the Courier,
and, in the case of a telecopy, when confirmed. 
The address for such notices and communications shall be as follows:

 

	
   

  	
  If to the Company:

  	
  Implant Sciences
  Corporation

  
	
   

  	
   

  	
  Attention:

  	
  Chief Financial Officer

  
	
   

  	
   

  	
  Facsimile:

  	
  (781) 246-3561

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  107 Audubon Rd. #5

  
	
   

  	
   

  	
  Wakefield, MA 01880

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  with a copy to:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Attention:

  
	
   

  	
   

  	
  Facsimile:

  
	
   

  	
   

  	
   

  
	
   

  	
  If to a Purchaser:

  	
  To the address set
  forth under such Purchaser name on the signature pages hereto.

  
	
   

  	
   

  	
   

  
	
   

  	
  If to any other Person who is

  	
   

  
	
   

  	
  then the registered Holder:

  	
  To the address of such
  Holder as it appears in the stock transfer books of the Company

  
					

 

or such other address as may be designated in writing
hereafter in accordance with this Section 7(g) by such Person.

 

(h)           Successors and Assigns. 
This Agreement shall inure to the benefit of and be binding upon the successors
and permitted assigns of each of the parties and shall

 

11

 

inure to the benefit of each Holder. 
The Company may not assign its rights or obligations hereunder without
the prior written consent of each Holder. 
Each Holder may assign their respective rights hereunder in the manner
and to the persons and entities as permitted under the Series D Preferred
Stockand the Securities Purchase Agreement.

 

(i)            Execution and Counterparts. 
This Agreement may be executed in any number of counterparts, each of
which when so executed shall be deemed to be an original and, all of which
taken together shall constitute one and the same agreement.  In the event that any signature is delivered
by facsimile transmission, such signature shall create a valid binding
obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile
signature were the original thereof.

 

(j)            Governing Law, Jurisdiction and Waiver of Jury Trial.  THIS 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 LAW.  The
Company hereby consents and agrees that the state or federal courts located in
the County of New York, State of New York shall have exclusion jurisdiction to
hear and determine any Proceeding between the Company, on the one hand, and the
Purchaser, on the other hand, pertaining to this Agreement or to any matter
arising out of or related to this Agreement; provided, that the
Purchaser and the Company acknowledge 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 Agreement
shall be deemed or operate to preclude the Purchaser from bringing a Proceeding
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 the Purchaser. 
The Company expressly submits and consents in advance to such
jurisdiction in any Proceeding commenced in any such court, and the Company
hereby waives any objection which it may have based upon lack of personal
jurisdiction, improper venue or forum non conveniens.  The Company hereby waives personal service of
the summons, complaint and other process issued in any such Proceeding and
agrees that service of such summons, complaint and other process may be made by
registered or certified mail addressed to the Company at the address set forth
in Section 7(g) and that service so made shall be deemed completed
upon the earlier of the Company’s actual receipt thereof or three (3) days
after deposit in the U.S. mails, proper postage prepaid.  The parties hereto 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 Proceeding brought to resolve any
dispute, whether arising in contract, tort, or otherwise between the Purchaser
and/or the Company arising out of, connected with, related or incidental to the
relationship established between then in connection with this Agreement.  If either party hereto shall commence a
Proceeding to enforce any provisions of this Agreement, the Securities Purchase
Agreement or any other Related Agreement, then the prevailing party in such
Proceeding shall be reimbursed by the other party for its reasonable attorneys’

 

12

 

fees and other costs and expenses incurred with the investigation,
preparation and prosecution of such Proceeding.

 

(k)           Cumulative Remedies. 
The remedies provided herein are cumulative and not exclusive of any
remedies provided by law.

 

(l)            Severability.  If any
term, provision, covenant or restriction of this Agreement is held by a court
of competent jurisdiction to be invalid, illegal, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions set forth herein
shall remain in full force and effect and shall in no way be affected, impaired
or invalidated, and the parties hereto shall use their reasonable efforts to
find and employ an alternative means to achieve the same or substantially the
same result as that contemplated by such term, provision, covenant or
restriction. It is hereby stipulated and declared to be the intention of the
parties that they would have executed the remaining terms, provisions,
covenants and restrictions without including any of such that may be hereafter
declared invalid, illegal, void or unenforceable.

 

(m)          Headings.  The
headings in this Agreement are for convenience of reference only and shall not
limit or otherwise affect the meaning hereof.

 

[Balance of page intentionally
left blank;

signature page follows]

 

13

 

IN WITNESS WHEREOF, the parties have executed this
Registration Rights Agreement as of the date first written above.

 

 

	
  IMPLANT SCIENCES CORPORATION

  	
  LAURUS MASTER FUND, LTD.

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Anthony J. Armini

  	
   

  	
  By:

  	
  /s/ Laurus Master Fund

  	
   

  
	
  Name:

  	
  Anthony Armini

  	
   

  	
  Name:

  
	
  Title:

  	
  President

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
  Address for Notices:

  
	
   

  	
   

  
	
   

  	
  825 Third Avenue, 14th Floor

  
	
   

  	
  New York, NY 10022

  
	
   

  	
  Attention:David Grin

  
	
   

  	
  Facsimile:212-541-4434

  
									

 

14

 

EXHIBIT A

 

               
    , 200    

 

Re:Implant Sciences
Corporation. Registration Statement on Form S-3

 

Ladies and Gentlemen:

 

As counsel to Implant Sciences Corporation, a                   
corporation (the “Company”), we have been requested to render our opinion to
you in connection with the resale by the individuals or entitles listed on Schedule A
attached hereto (the “Selling Stockholders”), of an aggregate of                  shares
(the “Shares”) of the Company’s Common Stock.

 

A Registration Statement on Form S-3 under the
Securities Act of 1933, as amended (the “Act”), with respect to the resale of
the Shares was declared effective by the Securities and Exchange Commission on
[date].  Enclosed is the Prospectus dated
[date].  We understand that the Shares
are to be offered and sold in the manner described in the Prospectus.

 

Based upon the foregoing, upon request by the Selling
Stockholders at any time while the registration statement remains effective, it
is our opinion that the Shares have been registered for resale under the Act
and new certificates evidencing the Shares upon their transfer or
re-registration by the Selling Stockholders may be issued without restrictive
legend.  We will advise you if the
registration statement is not available or effective at any point in the
future.

 

	
   

  	
  Very truly yours,

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  [Company counsel]

  

 

 

Schedule A to Exhibit A

 

	
  Selling
  Stockholder

  	
   

  	
  Shares

  Being Offered

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  

 

 

SCHEDULE 7(b)Exhibit 10.3

 

SUBSIDIARY
GUARANTY

 

	
  New
  York, New York

  	
   

  	
  September 30, 2005

  

 

FOR VALUE RECEIVED, and in consideration of preferred
stock purchases from, or credit otherwise extended or to be extended by Laurus
Master Fund, Ltd. (“Laurus”) to or for the account of Implant Sciences
Corporation, a Massachusetts corporation (the “Parent”) and each of C
Acquisition Corporation, a Delaware corporation (d/b/a Core Systems), and
Accurel Systems International Corporation, a California Corporation, and
together with the Parent, the “Companies” and each, a “Company”) from time to
time and at any time and for other good and valuable consideration and to
induce Laurus, in its discretion, to purchase such preferred stock or make
other extensions of credit and to make or grant such renewals, extensions,
releases of collateral or relinquishments of legal rights as Laurus may deem
advisable, each of the undersigned (and each of them if more than one, the
liability under this Guaranty being joint and several) (jointly and severally
referred to as “Guarantors” or “the undersigned”) unconditionally guaranties to
Laurus, its successors, endorsees and assigns the prompt payment when due
(whether by acceleration or otherwise) of all present and future obligations
and liabilities of any and all kinds of each Company to Laurus and of all
instruments of any nature evidencing or relating to any such obligations and
liabilities upon which such Company or one or more parties and such Company is
or may become liable to Laurus, whether incurred by such Company as maker,
endorser, drawer, acceptor, guarantors, accommodation party or otherwise, and
whether due or to become due, secured or unsecured, absolute or contingent,
joint or several, and however or whenever acquired by Laurus, whether arising
under, out of, or in connection with (i) that certain Securities Purchase
Agreement dated as of the date hereof by and between the Parent and Laurus (the
“Securities Purchase Agreement”) and (ii) each Related Agreement referred
to in the Securities Purchase Agreement (the Securities Purchase Agreement and
each Related Agreement, as each may be amended, modified, restated and/or
supplemented from time to time, are collectively referred to herein as the “Documents”),
or 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, or any other obligations or liabilities of
such Company 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 (all of which are herein collectively referred to as
the “Obligations”), and 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 Company under Title 11, United States Code, including, without
limitation, obligations or indebtedness of any Company for post-petition interest,
fees, costs and charges that would have accrued or been added to the
Obligations but for the commencement of such case.  Terms not otherwise defined herein shall have
the meaning assigned such terms in the Securities Purchase Agreement, as
applicable.  In furtherance of the
foregoing, the undersigned hereby agrees as follows:

 

 

1.             No
Impairment.  Laurus may at any time
and from time to time, either before or after the maturity thereof, without
notice to or further consent of the undersigned, extend the time of payment of,
exchange or surrender any collateral for, renew or extend any of the
Obligations or increase or decrease the interest rate thereon, or any other
agreement with any Company or with any other party to or person liable on any
of the Obligations, or interested therein, for the extension, renewal, payment,
compromise, discharge or release thereof, in whole or in part, or for any
modification of the terms thereof or of any agreement between Laurus and any
Company or any such other party or person, or make any election of rights
Laurus may deem desirable under the United States Bankruptcy Code, as amended,
or any other federal or state bankruptcy, reorganization, moratorium or
insolvency law relating to or affecting the enforcement of creditors’ rights
generally (any of the foregoing, an “Insolvency Law”) without in any way
impairing or affecting this Guaranty. 
This Guaranty shall be effective regardless of the subsequent
incorporation, merger or consolidation of any Company, or any change in the
composition, nature, personnel or location of any Company and shall extend to
any successor entity to each Company, including a debtor in possession or the
like under any Insolvency Law.

 

2.             Guaranty
Absolute.  Subject to Section 5(c) hereof,
each of the undersigned jointly and severally guarantees that the Obligations
will be paid strictly in accordance with the terms of the Documents and/or any
other document, instrument or agreement creating or evidencing the Obligations,
regardless of any law, regulation or order now or hereafter in effect in any
jurisdiction affecting any of such terms or the rights of any Company with
respect thereto.  Guarantors hereby
knowingly accept the full range of risk encompassed within a contract of “continuing
guaranty” which risk includes the possibility that a Company will contract
additional obligations and liabilities for which Guarantors may be liable
hereunder after such Company’s financial condition or ability to pay its lawful
debts when they fall due has deteriorated, whether or not such Company has
properly authorized incurring such additional obligations and liabilities.  The undersigned acknowledge that (i) no
oral representations, including any representations to extend credit or provide
other financial accommodations to any Company, have been made by Laurus to
induce the undersigned to enter into this Guaranty and (ii) any extension
of credit to any Company shall be governed solely by the provisions of the
Documents.  The liability of each of the
undersigned under this Guaranty shall be absolute and unconditional, in
accordance with its terms, and shall remain in full force and effect without
regard to, and shall not be released, suspended, discharged, terminated or
otherwise affected by, any circumstance or occurrence whatsoever, including,
without limitation: (a) any waiver, indulgence, renewal, extension,
amendment or modification of or addition, consent or supplement to or deletion
from or any other action or inaction under or in respect of the Documents or any
other instruments or agreements relating to the Obligations or any assignment
or transfer of any thereof, (b) any lack of validity or enforceability of
any Document or other documents, instruments or agreements relating to the
Obligations or any assignment or transfer of any thereof, (c) any
furnishing of any additional security to Laurus or its assignees or any
acceptance thereof or any release of any security by Laurus or its assignees, (d) any
limitation on any party’s liability or obligation under the Documents or any
other documents, instruments or agreements relating to the Obligations or any
assignment or transfer of any thereof or any invalidity or unenforceability, in
whole or in part, of any such document, instrument or agreement or any term thereof,
(e) any bankruptcy, insolvency, reorganization, composition, adjustment,
dissolution, liquidation or other like proceeding relating to any Company, or
any action taken with respect to this Guaranty by any

 

2

 

trustee or receiver, or
by any court, in any such proceeding, whether or not the undersigned shall have
notice or knowledge of any of the foregoing, (f) any exchange, release or
nonperfection of any collateral, or any release, or amendment or waiver of or
consent to departure from any guaranty or security, for all or any of the
Obligations or (g) any other circumstance which might otherwise constitute
a defense available to, or a discharge of, the undersigned.  Any amounts due from the undersigned to
Laurus shall bear interest until such amounts are paid in full at the highest
rate then applicable to the Obligations. 
Obligations include post-petition interest whether or not allowed or
allowable.

 

3.             Waivers.

 

(a)           This
Guaranty is a guaranty of payment and not of collection.  Laurus shall be under no obligation to
institute suit, exercise rights or remedies or take any other action against
any Company or any other person or entity liable with respect to any of the
Obligations or resort to any collateral security held by it to secure any of
the Obligations as a condition precedent to the undersigned being obligated to
perform as agreed herein and each of the Guarantors hereby waives any and all
rights which it may have by statute or otherwise which would require Laurus to
do any of the foregoing.  Each of the
Guarantors further consents and agrees that Laurus shall be under no obligation
to marshal any assets in favor of Guarantors, or against or in payment of any
or all of the Obligations.  Each of the
undersigned hereby waives all suretyship defenses and any rights to interpose
any defense, counterclaim or offset of any nature and description which the
undersigned may have or which may exist between and among Laurus, any Company
and/or the undersigned with respect to the undersigned’s obligations under this
Guaranty, or which any Company may assert on the underlying debt, including but
not limited to failure of consideration, breach of warranty, fraud, payment
(other than cash payment in full of the Obligations), statute of frauds,
bankruptcy, infancy, statute of limitations, accord and satisfaction, and
usury.

 

(b)           Each of
the undersigned further waives (i) notice of the acceptance of this
Guaranty, of the extensions of credit, and of all notices and demands of any
kind to which the undersigned may be entitled, including, without limitation,
notice of adverse change in any Company’s financial condition or of any other
fact which might materially increase the risk of the undersigned and (ii) presentment
to or demand of payment from anyone whomsoever liable upon any of the
Obligations, protest, notices of presentment, non-payment or protest and notice
of any sale of collateral security or any default of any sort.

 

(c)           Notwithstanding
any payment or payments made by the undersigned hereunder, or any setoff or
application of funds of the undersigned by Laurus, the undersigned shall not be
entitled to be subrogated to any of the rights of Laurus against any Company or
against any collateral or guarantee or right of offset held by Laurus for the
payment of the Obligations, nor shall the undersigned seek or be entitled to
seek any contribution or reimbursement from any Company in respect of payments
made by the undersigned hereunder, until all amounts owing to Laurus by each
Company on account of the Obligations are indefeasibly paid in full and Laurus’
obligation to extend credit pursuant to the Documents has been irrevocably
terminated.  If, notwithstanding the

 

3

 

foregoing, any amount shall be paid to the undersigned on account of
such subrogation rights at any time when all of the Obligations shall not have
been paid in full and Laurus’ obligation to extend credit pursuant to the
Documents shall not have been terminated, such amount shall be held by the
undersigned in trust for Laurus, segregated from other funds of the
undersigned, and shall forthwith upon, and in any event within two (2) business
days of, receipt by the undersigned, be turned over to Laurus in the exact form
received by the undersigned (duly endorsed by the undersigned to Laurus, if
required), to be applied against the Obligations, whether matured or unmatured,
in such order as Laurus may determine, subject to the provisions of the
Documents.  Any and all present and
future obligations and liabilities of each Company to any of the undersigned
are hereby waived and postponed in favor of, and subordinated to the full
payment and performance of, all Obligations of each Company to Laurus.

 

4.             Security.  All sums at any time to the credit of the
undersigned and any property of the undersigned in Laurus’ possession or in the
possession of any bank, financial institution or other entity that directly or
indirectly, through one or more intermediaries, controls or is controlled by,
or is under common control with, Laurus (each such entity, an “Affiliate”)
shall be deemed held by Laurus or such Affiliate, as the case may be, as
security for any and all of the undersigned’s obligations and liabilities to
Laurus and to any Affiliate of Laurus, no matter how or when arising and
whether under this or any other instrument, agreement or otherwise.

 

5.             Representations
and Warranties.  Each of the
undersigned hereby jointly and severally represents and warrants (all of which
representations and warranties shall survive until all Obligations are
indefeasibly satisfied in full and the Documents have been irrevocably
terminated), that:

 

(a)           Corporate
Status.  It is a corporation,
partnership or limited liability company, as the case may be, duly formed,
validly existing and in good standing under the laws of its jurisdiction of
formation indicated on the signature page hereof and has full power,
authority and legal right to own its property and assets and to transact the business
in which it is engaged.

 

(b)           Authority
and Execution.  It has full power,
authority and legal right to execute and deliver, and to perform its
obligations under, this Guaranty and has taken all necessary corporate,
partnership or limited liability company, as the case may be, action to
authorize the execution, delivery and performance of this Guaranty.

 

(c)           Legal,
Valid and Binding Character.  This
Guaranty constitutes its legal, valid and binding obligation enforceable in
accordance with its terms, except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other laws of
general application affecting the enforcement of creditor’s rights and general
principles of equity that restrict the availability of equitable or legal
remedies.

 

(d)           Violations.  The execution, delivery and performance of
this Guaranty will not violate any requirement of law applicable to it or any
contract, agreement or instrument to which it is a party or by which it or any
of its property is bound or result in

 

4

 

the creation or imposition of any mortgage, lien or other encumbrance
other than in favor of Laurus on any of its property or assets pursuant to the
provisions of any of the foregoing, which, in any of the foregoing cases, could
reasonably be expected to have, either individually or in the aggregate, a
Material Adverse Effect.

 

(e)           Consents
or Approvals.  No consent of any
other person or entity (including, without limitation, any creditor of the
undersigned) and no consent, license, permit, approval or authorization of,
exemption by, notice or report to, or registration, filing or declaration with,
any governmental authority is required in connection with the execution, delivery,
performance, validity or enforceability of this Guaranty by it, except to the
extent that the failure to obtain any of the foregoing could not reasonably be
expected to have, either individually or in the aggregate, a Material Adverse
Effect.

 

(f)            Litigation.  No litigation, arbitration, investigation or
administrative proceeding of or before any court, arbitrator or governmental
authority, bureau or agency is currently pending or, to the best of its
knowledge, threatened (i) with respect to this Guaranty or any of the
transactions contemplated by this Guaranty or (ii) against or affecting
it, or any of its property or assets, which, in each of the foregoing cases, if
adversely determined, could reasonably be expected to have a Material Adverse
Effect.

 

(g)           Financial
Benefit.  It has derived or expects
to derive a financial or other advantage from each and every loan, advance or
extension of credit made under the Documents or other Obligation incurred by
the Companies to Laurus.

 

(h)           Solvency.  As of the date of this Guaranty, (a) the
fair saleable value of its assets exceeds its liabilities and (b) it is
meeting its current liabilities as they mature.

 

6.             Acceleration.

 

(a)           If any
breach of any covenant or condition or other event of default shall occur and
be continuing under any agreement made by any Company or any of the undersigned
to Laurus, or either any Company or any of the undersigned should at any time
become insolvent, or make a general assignment, or if a proceeding in or under
any Insolvency Law shall be filed or commenced by, or in respect of, any of the
undersigned, or if a notice of any lien, levy, or assessment is filed of record
with respect to any assets of any of the undersigned by the United States of
America or any department, agency, or instrumentality thereof, or if any taxes
or debts owing at any time or times hereafter to any one of them becomes a lien
or encumbrance upon any assets of the undersigned in Laurus’ possession, or
otherwise, any and all Obligations shall for purposes hereof, at Laurus’
option, be deemed due and payable without notice notwithstanding that any such
Obligation is not then due and payable by the Companies.

 

(b)           Each of
the undersigned will promptly notify Laurus of any default by such undersigned
in its respective performance or observance of any term or condition of any
agreement to which the undersigned is a party if the effect of such default is
to cause, or permit the holder of any obligation under such agreement to cause,
such obligation to

 

5

 

become due prior to its stated maturity and, if such an event occurs,
Laurus shall have the right to accelerate such undersigned’s obligations
hereunder.

 

7.             Payments
from Guarantors.  Laurus, in its sole
and absolute discretion, with or without notice to the undersigned, may apply
on account of the Obligations any payment from the undersigned or any other
guarantors, or amounts realized from any security for the Obligations, or may
deposit any and all such amounts realized in a non-interest bearing cash
collateral deposit account to be maintained as security for the Obligations.

 

8.             Costs.  The undersigned shall pay on demand, all
costs, fees and expenses (including expenses for legal services of every kind)
relating or incidental to the enforcement or protection of the rights of Laurus
hereunder or under any of the Obligations.

 

9.             No
Termination.  This is a continuing
irrevocable guaranty and shall remain in full force and effect and be binding
upon the undersigned, and each of the undersigned’s successors and assigns,
until all of the Obligations have been indefeasibly paid in full and Laurus’
obligation to extend credit pursuant to the Documents has been irrevocably
terminated.  If any of the present or
future Obligations are guarantied by persons, partnerships, corporations or
other entities in addition to the undersigned, the death, release or discharge
in whole or in part or the bankruptcy, merger, consolidation, incorporation,
liquidation or dissolution of one or more of them shall not discharge or affect
the liabilities of any undersigned under this Guaranty.

 

10.           Recapture.  Anything in this Guaranty to the contrary
notwithstanding, if Laurus receives any payment or payments on account of the
liabilities guaranteed hereby, which payment or payments or any part thereof
are subsequently invalidated, declared to be fraudulent or preferential, set
aside and/or required to be repaid to a trustee, receiver, or any other party
under any Insolvency Law, common law or equitable doctrine, then to the extent
of any sum not finally retained by Laurus, the undersigned’s obligations to
Laurus shall be reinstated and this Guaranty shall remain in full force and
effect (or be reinstated) until payment shall have been made to Laurus, which
payment shall be due on demand.

 

11.           Books
and Records.  The books and records
of Laurus showing the account between Laurus and each Company shall be
admissible in evidence in any action or proceeding, shall be binding upon the
undersigned for the purpose of establishing the items therein set forth and
shall constitute prima facie proof thereof.

 

12.           No
Waiver.  No failure on the part of
Laurus to exercise, and no delay in exercising, any right, remedy or power
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise by Laurus of any right, remedy or power hereunder preclude any other
or future exercise of any other legal right, remedy or power.  Each and every right, remedy and power hereby
granted to Laurus or allowed it by law or other agreement shall be cumulative
and not exclusive of any other, and may be exercised by Laurus at any time and
from time to time.

 

13.           Waiver
of Jury Trial.  EACH OF THE
UNDERSIGNED DESIRES THAT ITS 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,
EACH OF THE UNDERSIGNED HERETO

 

6

 

WAIVES ALL RIGHTS TO
TRIAL BY JURY IN ANY ACTION, SUIT, OR PROCEEDING BROUGHT TO RESOLVE ANY
DISPUTE, WHETHER ARISING IN CONTRACT, TORT, OR OTHERWISE BETWEEN LAURUS, AND/OR
ANY OF THE UNDERSIGNED ARISING OUT OF, CONNECTED WITH, RELATED OR INCIDENTAL TO
THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH THIS GUARANTY, ANY
DOCUMENT OR THE TRANSACTIONS RELATED HERETO OR THERETO.

 

14.           Governing
Law; Jurisdiction.  THIS GUARANTY
CANNOT BE CHANGED OR TERMINATED ORALLY, AND 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.  EACH OF THE
UNDERSIGNED HEREBY CONSENTS AND AGREES THAT THE STATE OR 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 ANY OF THE UNDERSIGNED, ON
THE ONE HAND, AND LAURUS, ON THE OTHER HAND, PERTAINING TO THIS GUARANTY OR ANY
OF THE DOCUMENTS OR TO ANY MATTER ARISING OUT OF OR RELATED TO THIS GUARANTY OR
ANY OF THE DOCUMENTS; PROVIDED, THAT EACH OF THE UNDERSIGNED
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 GUARANTY 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 OF THE
UNDERSIGNED EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN
ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND EACH UNDERSIGNED HEREBY
WAIVES ANY OBJECTION WHICH IT MAY HAVE BASED UPON LACK OF PERSONAL
JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS.  EACH OF THE UNDERSIGNED HEREBY WAIVES
PERSONAL SERVICE OF THE SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED 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
UNDERSIGNED IN ACCORDANCE WITH SECTION 18 AND THAT SERVICE SO MADE SHALL
BE DEEMED COMPLETED UPON THE EARLIER OF SUCH UNDERSIGNED’S ACTUAL RECEIPT
THEREOF OR THREE (3) DAYS AFTER DEPOSIT IN THE U.S. MAILS, PROPER POSTAGE
PREPAID.

 

15.           Understanding
With Respect to Waivers and Consents. 
Each Guarantor warrants and agrees that each of the waivers and consents
set forth in this Guaranty is made voluntarily and unconditionally after
consultation with outside legal counsel and with full knowledge of its
significance and consequences, with the understanding that events giving rise
to any defense or right waived may diminish, destroy or otherwise adversely
affect rights which such Guarantor otherwise may have against any Company,
Laurus or any other person or entity or against any

 

7

 

collateral.  If, notwithstanding the intent of the parties
that the terms of this Guaranty shall control in any and all circumstances, any
such waivers or consents are determined to be unenforceable under applicable
law, such waivers and consents shall be effective to the maximum extent
permitted by law.

 

16.           Severability.  To the extent permitted by applicable law,
any provision of this Guaranty which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining provisions
hereof, and any such prohibition or unenforceability in any jurisdiction shall
not invalidate or render unenforceable such provision in any other
jurisdiction.

 

17.           Amendments,
Waivers.  No amendment or waiver of
any provision of this Guaranty nor consent to any departure by the undersigned
therefrom shall in any event be effective unless the same shall be in writing
executed by each of the undersigned directly affected by such amendment and/or
waiver and Laurus.

 

18.           Notice.  All notices, requests and demands to or upon
the undersigned, shall be in writing and shall be deemed to have been duly
given or made (a) when delivered, if by hand, (b) three (3) days
after being sent, postage prepaid, if by registered or certified mail, (c) when
confirmed electronically, if by facsimile, or (d) when delivered, if by a
recognized overnight delivery service in each event, to the numbers and/or
address set forth beneath the signature of the undersigned.

 

19.           Successors.  Laurus may, from time to time, without notice
to the undersigned, sell, assign, transfer or otherwise dispose of all or any
part of the Obligations and/or rights under this Guaranty.  Without limiting the generality of the
foregoing, Laurus may assign, or grant participations to, one or more banks,
financial institutions or other entities all or any part of any of the
Obligations.  In each such event, Laurus,
its Affiliates and each and every immediate and successive purchaser, assignee,
transferee or holder of all or any part of the Obligations shall have the right
to enforce this Guaranty, by legal action or otherwise, for its own benefit as
fully as if such purchaser, assignee, transferee or holder were herein by name
specifically given such right.  Laurus shall
have an unimpaired right to enforce this Guaranty for its benefit with respect
to that portion of the Obligations which Laurus has not disposed of, sold,
assigned, or otherwise transferred.

 

20.           Joinder.  It is understood and agreed that any person
or entity that desires to become a Guarantor hereunder, or is required to
execute a counterpart of this Guaranty after the date hereof pursuant to the
requirements of any Document, shall become a Guarantor 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/or as may be required by such joinder
agreement and (z) taking all actions as specified in this Guaranty as would
have been taken by such such Guarantor had it been an original party to this
Guaranty, 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.

 

21.           Release.  Nothing except indefeasible payment in full
of the Obligations shall release any of the undersigned from liability under
this Guaranty.

 

8

 

22.           Remedies
Not Exclusive.  The remedies
conferred upon Laurus in this Guaranty are intended to be in addition to, and
not in limitation of any other remedy or remedies available to Laurus under
applicable law or otherwise.

 

23.           Limitation
of Obligations under this Guaranty. 
Each Guarantor and Laurus (by its acceptance of the benefits of this
Guaranty) hereby confirms that it is its intention that this Guaranty not
constitute a fraudulent transfer or conveyance for purposes of the Bankruptcy
Code, the Uniform Fraudulent Conveyance Act of any similar Federal or state
law.  To effectuate the foregoing
intention, each Guarantor and Laurus (by its acceptance of the benefits of this
Guaranty) hereby irrevocably agrees that the Obligations guaranteed by such
Guarantor shall be limited to such amount as will, after giving effect to such
maximum amount and all other (contingent or otherwise) liabilities of such
Guarantor that are relevant under such laws and after giving effect to any
rights to contribution pursuant to any agreement providing for an equitable
contribution among such Guarantor and the other Guarantors (including this
Guaranty), result in the Obligations of such Guarantor under this Guaranty in
respect of such maximum amount not constituting a fraudulent transfer or
conveyance.

 

[REMAINDER OF THIS
PAGE IS BLANK.

SIGNATURE PAGE IMMEDIATELY FOLLOWS]

 

9

 

IN WITNESS WHEREOF, this Guaranty has been executed by
the undersigned as of the date and year here above written.

 

	
   

  	
  C ACQUISITION CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Anthony
  J. Armini

  
	
   

  	
  Name: Anthony Armini

  
	
   

  	
  Title: Chief Executive Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   ACCUREL SYSTEMS INTERNATIONAL CORPORATION

  
	
   

  	
   

  
	
   

  	
  By: /s/ Anthony J. Armini

  	
   

  
	
   

  	
  Name: Anthony Armini

  
	
   

  	
  Title: Chief Executive Officer

  
				

 

10

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