Document:

Exhibit 10.6

 

IMPLANT SCIENCES CORPORATION AND CERTAIN OF ITS
SUBSIDIARIES

MASTER SECURITY AGREEMENT

 

To:                              Laurus
Master Fund, Ltd.

c/o M&C Corporate Services Limited

P.O. Box 309 GT

Ugland House

South Church Street

George Town

Grand Cayman, Cayman Islands

 

Date: September 30,
2005

 

To Whom It May
Concern:

 

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

 

2.             The term “Obligations”
as used herein shall mean and include all debts, liabilities and obligations
owing by each Assignor to Laurus arising under, out of, or in connection with:
(i) that certain Securities Purchase Agreement dated as of the date hereof by
and between the Company and Laurus (the “Securities Purchase Agreement”) and
(ii) the Related Agreements

 

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

2

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

3

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

4

 

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

 

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

 

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

 

9.             THIS MASTER
SECURITY AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE
AND PERFORMED IN SUCH

 

5

 

STATE, WITHOUT
REGARD TO PRINCIPLES OF CONFLICTS OF LAWS. 
All of the rights, remedies, options, privileges and elections given to
Laurus hereunder shall inure to the benefit of Laurus’ successors and
assigns.  The term “Laurus” as herein
used shall include Laurus, any parent of Laurus’, any of Laurus’ subsidiaries
and any co-subsidiaries of Laurus’ parent, whether now existing or hereafter
created or acquired, and all of the terms, conditions, promises, covenants,
provisions and warranties of this Agreement shall inure to the benefit of each
of the foregoing, and shall bind the representatives, successors and assigns of
each Assignor.

 

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

 

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

 

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

 

6

 

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

 

	
   

  	
  Very truly yours,

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  IMPLANT SCIENCES CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ Anthony Armini

  	
   

  
	
   

  	
  Name: Anthony Armini

  
	
   

  	
  Title: President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  C ACQUISITION CORPORATION

  
	
   

  	
  By:

  	
    /s/ Anthony Armini

  	
   

  
	
   

  	
  Name: Anthony Armini

  
	
   

  	
  Title: Chief Executive Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   ACCUREL SYSTEMS 

  INTERNATIONAL CORPORATION

  
	
   

  	
  By:

  	
    /s/ Anthony Armini

  	
   

  
	
   

  	
  Name: Anthony Armini

  
	
   

  	
  Title: Chief Executive Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  ACKNOWLEDGED:

  
	
   

  	
   

  
	
   

  	
  LAURUS MASTER FUND, LTD.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Laurus Master Fund

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title

  
						

 

7

 

SCHEDULE A

 

	
  Entity

  	
   

  	
  Jurisdiction
  of 

  Formation

  	
   

  	
  Organization
  Identification

  Number

  
	
  C Acquisition Corporation

  	
   

  	
  Delaware

  	
   

  	
  201688021

  
	
  Accurel Systems International Corporation

  	
   

  	
  California

  	
   

  	
  770213856

  

 

Schedule 3(c)

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

Line of Credit with Bridge Bank
in the amount of $1.5 millionExhibit 10.7

 

STOCK PLEDGE AGREEMENT

 

This Stock Pledge Agreement
(this “Agreement”), dated as of September 30, 2005, among Laurus Master
Fund, Ltd. (the “Pledgee”), Implant Sciences Corporation, a
Massachusetts corporation (the “Company”), and each of the other
undersigned parties (other than the Pledgee) (the Company and each such other
undersigned party, a “Pledgor” and collectively, the “Pledgors”).

 

BACKGROUND

 

The Company has entered
into a Securities Purchase Agreement, dated as of September 30, 2005 (as
amended, modified, restated or supplemented from time to time, the “Securities
Purchase Agreement”), pursuant to which the Pledgee provides or will
provide certain financial accommodations to the Company.

 

In order to induce the
Pledgee to provide or continue to provide the financial accommodations
described in the Securities Purchase Agreement, each Pledgor has agreed to
pledge and grant a security interest in the collateral described herein to the
Pledgee on the terms and conditions set forth herein.

 

NOW, THEREFORE, in
consideration of the premises and for other good and valuable consideration the
receipt of which is hereby acknowledged, the parties hereto agree as follows:

 

1.             Defined Terms.  All capitalized terms used herein which are
not defined shall have the meanings given to them in the Securities Purchase
Agreement.

 

2.             Pledge and Grant
of Security Interest.  To secure the
full and punctual payment and performance of (the following clauses (a) and
(b), collectively, the “Obligations”) (a) the obligations under the
Securities Purchase Agreement and the Related Agreements referred to in the
Securities Purchase Agreement (the Securities Purchase Agreement and the
Related Agreements, as each may be amended, restated, modified and/or
supplemented from time to time, collectively, the “Documents”) and (b)
all other obligations and liabilities of each Pledgor to the Pledgee 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 (in each case, irrespective of the genuineness, validity, regularity
or enforceability of such Obligations, or of any instrument evidencing any of
the Obligations or of any collateral therefor or of the existence or extent of
such collateral, and irrespective of the allowability, allowance or
disallowance of any or all of such in any case commenced by or against any
Pledgor under Title 11, United States Code, including, without limitation,
obligations of each Pledgor 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), each Pledgor hereby pledges, assigns, hypothecates,
transfers and grants a security interest to Pledgee in all of the following
(the “Collateral”):

 

 

(a)           the shares of stock set
forth on Schedule A annexed hereto and expressly made a part hereof
(together with any additional shares of stock or other equity interests
acquired by any Pledgor, the “Pledged Stock”), the certificates
representing the Pledged Stock and all dividends, cash, instruments and other
property or proceeds from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of the Pledged Stock;

 

(b)           all additional shares
of stock of any issuer (each, an “Issuer”) of the Pledged Stock from
time to time acquired by any Pledgor in any manner, including, without
limitation, stock dividends or a distribution in connection with any increase
or reduction of capital, reclassification, merger, consolidation, sale of
assets, combination of shares, stock split, spin-off or split-off (which shares
shall be deemed to be part of the Collateral), and the certificates
representing such additional shares, and all dividends, cash, instruments and
other property or proceeds from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of such shares; and

 

(c)           all options and rights,
whether as an addition to, in substitution of or in exchange for any shares of
any Pledged Stock and all dividends, cash, instruments and other property or
proceeds from time to time received, receivable or otherwise distributed in
respect of or in exchange for any or all such options and rights.

 

3.             Delivery of
Collateral.  All certificates
representing or evidencing the Pledged Stock shall be delivered to and held by
or on behalf of Pledgee pursuant hereto and shall be accompanied by duly executed
instruments of transfer or assignments in blank, all in form and substance
satisfactory to Pledgee.  Each Pledgor
hereby authorizes the Issuer upon demand by the Pledgee to deliver any
certificates, instruments or other distributions issued in connection with the
Collateral directly to the Pledgee, in each case to be held by the Pledgee,
subject to the terms hereof.  Upon the
occurrence and during the continuance of an Event of Default (as defined
below), the Pledgee shall have the right, during such time in its discretion
and without notice to the Pledgor, to transfer to or to register in the name of
the Pledgee or any of its nominees any or all of the Pledged Stock.  In addition, the Pledgee shall have the right
at such time to exchange certificates or instruments representing or evidencing
Pledged Stock for certificates or instruments of smaller or larger
denominations.

 

4.             Representations
and Warranties of each Pledgor.  Each
Pledgor jointly and severally represents and warrants to the Pledgee (which
representations and warranties shall be deemed to continue to be made until all
of the Obligations have been paid in full and each Document and each agreement
and instrument entered into in connection therewith has been irrevocably
terminated) that:

 

(a)           the execution, delivery
and performance by each Pledgor of this Agreement and the pledge of the
Collateral hereunder do not and will not result in any violation of any
agreement, indenture, instrument, license, judgment, decree, order, law,
statute, ordinance or other governmental rule or regulation applicable to any
Pledgor;

 

(b)           this Agreement
constitutes the legal, valid, and binding obligation of each Pledgor
enforceable against each Pledgor in accordance with its terms;

 

2

 

(c)           (i) all Pledged Stock
owned by each Pledgor is set forth on Schedule A hereto and (ii) each
Pledgor is the direct and beneficial owner of each share of the Pledged Stock;

 

(d)           all of the shares of
the Pledged Stock have been duly authorized, validly issued and are fully paid
and nonassessable;

 

(e)           no consent or approval
of any person, corporation, governmental body, regulatory authority or other
entity, is or will be necessary for (i) the execution, delivery and performance
of this Agreement, (ii) the exercise by the Pledgee of any rights with respect
to the Collateral or (iii) the pledge and assignment of, and the grant of a
security interest in, the Collateral hereunder;

 

(f)            there are no pending
or, to the best of Pledgor’s knowledge, threatened actions or proceedings
before any court, judicial body, administrative agency or arbitrator which may
materially adversely affect the Collateral;

 

(g)           each Pledgor has the
requisite power and authority to enter into this Agreement and to pledge and
assign the Collateral to the Pledgee in accordance with the terms of this
Agreement;

 

(h)           each Pledgor owns each
item of the Collateral and, except for the pledge and security interest granted
to Pledgee hereunder, the Collateral shall be, immediately following the
closing of the transactions contemplated by the Documents, free and clear of
any other security interest, mortgage, pledge, claim, lien, charge,
hypothecation, assignment, offset or encumbrance whatsoever (collectively, “Liens”);

 

(i)            there are no
restrictions on transfer of the Pledged Stock contained in the certificate of
incorporation or by-laws (or equivalent organizational documents) of the Issuer
or otherwise which have not otherwise been enforceably and legally waived by
the necessary parties;

 

(j)            none of the Pledged
Stock has been issued or transferred in violation of the securities
registration, securities disclosure or similar laws of any jurisdiction to
which such issuance or transfer may be subject;

 

(k)           the pledge and assignment
of the Collateral and the grant of a security interest under this Agreement
vest in the Pledgee all rights of each Pledgor in the Collateral as
contemplated by this Agreement; and

 

(l)            The Pledged Stock
constitutes one hundred percent (100%) of the issued and outstanding shares of
capital stock of each Issuer.

 

5.             Covenants.  Each Pledgor jointly and severally covenants
that, until the Obligations shall be indefeasibly satisfied in full and each
Document and each agreement and instrument entered into in connection therewith
is irrevocably terminated:

 

3

 

(a)           No Pledgor will sell,
assign, transfer, convey, or otherwise dispose of its rights in or to the
Collateral or any interest therein; nor will any Pledgor create, incur or
permit to exist any Lien whatsoever with respect to any of the Collateral or
the proceeds thereof other than that created hereby.

 

(b)           Each Pledgor will, at
its expense, defend Pledgee’s right, title and security interest in and to the
Collateral against the claims of any other party.

 

(c)           Each Pledgor shall at
any time, and from time to time, upon the written request of Pledgee, execute
and deliver such further documents and do such further acts and things as
Pledgee may reasonably request in order to effectuate the purposes of this
Agreement including, but without limitation, delivering to Pledgee, upon the
occurrence of an Event of Default, irrevocable proxies in respect of the
Collateral in form satisfactory to Pledgee. 
Until receipt thereof, upon an Event of Default that has occurred and is
continuing beyond any applicable grace period, this Agreement shall constitute
Pledgor’s proxy to Pledgee or its nominee to vote all shares of Collateral then
registered in each Pledgor’s name.

 

(d)           No Pledgor will consent
to or approve the issuance of (i) any additional shares of any class of capital
stock or other equity interests of the Issuer; or (ii) any securities
convertible either voluntarily by the holder thereof or automatically upon the
occurrence or nonoccurrence of any event or condition into, or any securities
exchangeable for, any such shares, unless, in either case, such shares are
pledged as Collateral pursuant to this Agreement.

 

6.             Voting Rights and
Dividends.  In addition to the
Pledgee’s rights and remedies set forth in Section 8 hereof, in case an Event
of Default shall have occurred and be continuing, beyond any applicable cure
period, the Pledgee shall (i) be entitled to vote the Collateral, (ii) be
entitled to give consents, waivers and ratifications in respect of the
Collateral (each Pledgor hereby irrevocably constituting and appointing the
Pledgee, with full power of substitution, the proxy and attorney-in-fact of
each Pledgor for such purposes) and (iii) be entitled to collect and receive
for its own use cash dividends paid on the Collateral.  No Pledgor shall be permitted to exercise or
refrain from exercising any voting rights or other powers if, in the reasonable
judgment of the Pledgee, such action would have a material adverse effect on
the value of the Collateral or any part thereof; and, provided, further,
that each Pledgor shall give at least five (5) days’ written notice of the
manner in which such Pledgor intends to exercise, or the reasons for refraining
from exercising, any voting rights or other powers other than with respect to
any election of directors and voting with respect to any incidental
matters.  Following the occurrence of an
Event of Default, all dividends and all other distributions in respect of any
of the Collateral, shall be delivered to the Pledgee to hold as Collateral and
shall, if received by any Pledgor, be received in trust for the benefit of the
Pledgee, be segregated from the other property or funds of any other Pledgor,
and be forthwith delivered to the Pledgee as Collateral in the same form as so
received (with any necessary endorsement).

 

7.             Event of Default.  An “Event of Default” under this Agreement
shall occur upon the happening of any of the following events:

 

4

 

(a)           An “Event of Default”
under any Document or any agreement or note related to any Document shall have
occurred and be continuing beyond any applicable cure period;

 

(b)           Any Pledgor shall
default in the performance of any of its obligations under any Document,
including, without limitation, this Agreement, and such default shall not be
cured during the cure period applicable thereto;

 

(c)           Any representation or
warranty of any Pledgor made herein, in any Document or in any agreement,
statement or certificate given in writing pursuant hereto or thereto or in
connection herewith or therewith shall be false or misleading in any material
respect;

 

(d)           Any portion of the
Collateral is subjected to a levy of execution, attachment, distraint or other
judicial process or any portion of the Collateral is the subject of a claim
(other than by the Pledgee) of a Lien or other right or interest in or to the
Collateral and such levy or claim shall not be cured, disputed or stayed within
a period of fifteen (15) business days after the occurrence thereof; or

 

(e)           Any Pledgor shall (i)
apply for, consent to, or suffer to exist the appointment of, or the taking of
possession by, a receiver, custodian, trustee, liquidator or other fiduciary of
itself or of all or a substantial part of its property, (ii) make a general
assignment for the benefit of creditors, (iii) commence a voluntary case under
any state or federal bankruptcy laws (as now or hereafter in effect), (iv) be
adjudicated a bankrupt or insolvent, (v) file a petition seeking to take
advantage of any other law providing for the relief of debtors, (vi) acquiesce
to, or fail to have dismissed, within thirty (30) days, any petition filed
against it in any involuntary case under such bankruptcy laws, or (vii) take
any action for the purpose of effecting any of the foregoing.

 

8.             Remedies.  In case an Event of Default shall have
occurred and is continuing, the Pledgee may:

 

(a)           Transfer any or all of
the Collateral into its name, or into the name of its nominee or nominees;

 

(b)           Exercise all corporate
rights with respect to the Collateral including, without limitation, all rights
of conversion, exchange, subscription or any other rights, privileges or
options pertaining to any shares of the Collateral as if it were the absolute
owner thereof, including, but without limitation, the right to exchange, at its
discretion, any or all of the Collateral upon the merger, consolidation,
reorganization, recapitalization or other readjustment of the Issuer thereof,
or upon the exercise by the Issuer of any right, privilege or option pertaining
to any of the Collateral, and, in connection therewith, to deposit and deliver
any and all of the Collateral with any committee, depository, transfer agent,
registrar or other designated agent upon such terms and conditions as it may
determine, all without liability except to account for property actually
received by it; and

 

5

 

(c)           Subject to any
requirement of applicable law, sell, assign and deliver the whole or, from time
to time, any part of the Collateral at the time held by the Pledgee, at any
private sale or at public auction, with or without demand, advertisement or
notice of the time or place of sale or adjournment thereof or otherwise (all of
which are hereby waived, except such notice as is required by applicable law
and cannot be waived), for cash or credit or for other property for immediate
or future delivery, and for such price or prices and on such terms as the
Pledgee in its sole discretion may determine, or as may be required by
applicable law.

 

Each Pledgor hereby
waives and releases any and all right or equity of redemption, whether before
or after sale hereunder.  At any such
sale, unless prohibited by applicable law, the Pledgee may bid for and purchase
the whole or any part of the Collateral so sold free from any such right or
equity of redemption.  All moneys
received by the Pledgee hereunder, whether upon sale of the Collateral or any
part thereof or otherwise, shall be held by the Pledgee and applied by it as
provided in Section 10 hereof.  No
failure or delay on the part of the Pledgee in exercising any rights hereunder
shall operate as a waiver of any such rights nor shall any single or partial
exercise of any such rights preclude any other or future exercise thereof or
the exercise of any other rights hereunder. 
The Pledgee shall have no duty as to the collection or protection of the
Collateral or any income thereon nor any duty as to preservation of any rights
pertaining thereto, except to apply the funds in accordance with the
requirements of Section 10 hereof.  The
Pledgee may exercise its rights with respect to property held hereunder without
resort to other security for or sources of reimbursement for the
Obligations.  In addition to the
foregoing, Pledgee shall have all of the rights, remedies and privileges of a
secured party under the Uniform Commercial Code of New York (the “UCC”)
regardless of the jurisdiction in which enforcement hereof is sought.

 

9.             Private Sale.  Each Pledgor recognizes that the Pledgee may
be unable to effect (or to do so only after delay which would adversely affect
the value that might be realized from the Collateral) a public sale of all or
part of the Collateral by reason of certain prohibitions contained in the
Securities Act, and may be compelled to resort to one or more private sales to
a restricted group of purchasers who will be obliged to agree, among other
things, to acquire such Collateral for their own account, for investment and
not with a view to the distribution or resale thereof.  Each Pledgor agrees that any such private
sale may be at prices and on terms less favorable to the seller than if sold at
public sales and that such private sales shall be deemed to have been made in a
commercially reasonable manner.  Each
Pledgor agrees that the Pledgee has no obligation to delay sale of any
Collateral for the period of time necessary to permit the Issuer to register the
Collateral for public sale under the Securities Act.

 

10.           Proceeds of Sale.  The proceeds of any collection, recovery,
receipt, appropriation, realization or sale of the Collateral shall be applied
by the Pledgee as follows:

 

(a)           First, to the payment
of all costs, reasonable expenses and charges of the Pledgee and to the
reimbursement of the Pledgee for the prior payment of such costs, reasonable
expenses and charges incurred in connection with the care and safekeeping of
the Collateral (including, without limitation, the reasonable expenses of any
sale or any other disposition of any of the Collateral), attorneys’ fees and
reasonable expenses, court costs, any other fees or expenses incurred or
expenditures or advances made by Pledgee in the protection, enforcement or
exercise of its rights, powers or remedies hereunder;

 

6

 

(b)           Second, to the payment
of the Obligations, in whole or in part, in such order as the Pledgee may
elect, whether or not such Obligations is then due;

 

(c)           Third, to such persons,
firms, corporations or other entities as required by applicable law including,
without limitation, Section 9-615(a)(3) of the UCC; and

 

(d)           Fourth, to the extent
of any surplus to the Pledgors or as a court of competent jurisdiction may
direct.

 

In the event that the
proceeds of any collection, recovery, receipt, appropriation, realization or
sale are insufficient to satisfy the Obligations, each Pledgor shall be jointly
and severally liable for the deficiency plus the costs and fees of any attorneys
employed by Pledgee to collect such deficiency.

 

11.           Waiver of Marshaling.  Each Pledgor hereby waives any right to
compel any marshaling of any of the Collateral.

 

12.           No Waiver.  Any and all of the Pledgee’s rights with
respect to the Liens granted under this Agreement shall continue unimpaired,
and Pledgor shall be and remain obligated in accordance with the terms hereof,
notwithstanding (a) the bankruptcy, insolvency or reorganization of any
Pledgor, (b) the release or substitution of any item of the Collateral at any
time, or of any rights or interests therein, or (c) any delay, extension of
time, renewal, compromise or other indulgence granted by the Pledgee in
reference to any of the Obligations. 
Each Pledgor hereby waives all notice of any such delay, extension,
release, substitution, renewal, compromise or other indulgence, and hereby
consents to be bound hereby as fully and effectively as if such Pledgor had
expressly agreed thereto in advance.  No
delay or extension of time by the Pledgee in exercising any power of sale,
option or other right or remedy hereunder, and no failure by the Pledgee to
give notice or make demand, shall constitute a waiver thereof, or limit, impair
or prejudice the Pledgee’s right to take any action against any Pledgor or to
exercise any other power of sale, option or any other right or remedy.

 

13.           Expenses.  The Collateral shall secure, and each Pledgor
shall pay to Pledgee on demand, from time to time, all reasonable costs and
expenses, (including but not limited to, reasonable attorneys’ fees and costs,
taxes, and all transfer, recording, filing and other charges) of, or incidental
to, the custody, care, transfer, administration of the Collateral or any other
collateral, or in any way relating to the enforcement, protection or
preservation of the rights or remedies of the Pledgee under this Agreement or
with respect to any of the Obligations.

 

14.           The Pledgee
Appointed Attorney-In-Fact and Performance by the Pledgee.  Upon the occurrence of an Event of Default,
each Pledgor hereby irrevocably constitutes and appoints the Pledgee as such
Pledgor’s true and lawful attorney-in-fact, with full power of substitution, to
execute, acknowledge and deliver any instruments and to do in such Pledgor’s
name, place and stead, all such acts, things and deeds for and on behalf of and
in the name of such Pledgor, which such Pledgor could or might do or which the
Pledgee may deem necessary, desirable or convenient to accomplish the purposes
of this Agreement, including, without limitation, to execute such instruments
of assignment or transfer or orders and to register, convey or otherwise
transfer title to the Collateral into the Pledgee’s name.  Each Pledgor hereby ratifies and confirms

 

7

 

all that said
attorney-in-fact may so do and hereby declares this power of attorney to be
coupled with an interest and irrevocable. 
If any Pledgor fails to perform any agreement herein contained, the
Pledgee may itself perform or cause performance thereof, and any costs and
expenses of the Pledgee incurred in connection therewith shall be paid by the
Pledgors as provided in Section 10 hereof.

 

15.           Waivers.  THE
PARTIES HERETO DESIRES THAT THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH
APPLICABLE LAWS.  THEREFORE, TO ACHIEVE
THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION,
THE PARTIES HERETO WAIVE ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, SUIT, OR
PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE, WHETHER ARISING IN CONTRACT, TORT,
OR OTHERWISE BETWEEN LAURUS, AND/OR ANY COMPANY ARISING OUT OF, CONNECTED WITH,
RELATED OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THEN IN
CONNECTION WITH THIS AGREEMENT, ANY OTHER DOCUMENT OR THE TRANSACTIONS RELATED
HERETO OR THERETO.

 

16.           Recapture.  Notwithstanding anything to the contrary in
this Agreement, if the Pledgee receives any payment or payments on account of
the Obligations, 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 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, common law or equitable
doctrine, then to the extent of any sum not finally retained by the Pledgee,
each Pledgor’s obligations to the Pledgee shall be reinstated and this
Agreement shall remain in full force and effect (or be reinstated) until
payment shall have been made to Pledgee, which payment shall be due on demand.

 

17.           Captions.  All captions in this Agreement are included
herein for convenience of reference only and shall not constitute part of this
Agreement for any other purpose.

 

18.           Miscellaneous.

 

(a)           This Agreement
constitutes the entire and final agreement among the parties with respect to
the subject matter hereof and may not be changed, terminated or otherwise
varied except by a writing duly executed by the parties hereto.

 

(b)           No waiver of any term
or condition of this Agreement, whether by delay, omission or otherwise, shall
be effective unless in writing and signed by the party sought to be charged,
and then such waiver shall be effective only in the specific instance and for
the purpose for which given.

 

(c)           In the event that any
provision of this Agreement or the application thereof to any Pledgor or any
circumstance in any jurisdiction governing this Agreement shall, to any extent,
be invalid or unenforceable under any applicable statute, regulation, or rule
of law, such provision shall be deemed inoperative to the extent that it may
conflict therewith and shall be deemed modified to conform to such statute,
regulation or rule of law, and the remainder of this

 

8

 

Agreement and the
application of any such invalid or unenforceable provision to parties,
jurisdictions, or circumstances other than to whom or to which it is held
invalid or unenforceable shall not be affected thereby, nor shall same affect
the validity or enforceability of any other provision of this Agreement.

 

(d)           This Agreement shall be
binding upon each Pledgor, and each Pledgor’s successors and assigns, and shall
inure to the benefit of the Pledgee and its successors and assigns.

 

(e)           Any notice or other
communication required or permitted pursuant to this Agreement shall be given
in accordance with [the Securities Purchase Agreement] [the Security
Agreement].

 

(f)            THIS AGREEMENT AND THE
OTHER DOCUMENTS 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.

 

(g)           EACH PLEDGOR 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 PLEDGOR, ON THE ONE HAND, AND THE
PLEDGEE, ON THE OTHER HAND, PERTAINING TO THIS AGREEMENT OR ANY OF THE OTHER
DOCUMENTS OR TO ANY MATTER ARISING OUT OF OR RELATED TO THIS AGREEMENT OR ANY
OF THE OTHER DOCUMENTS, PROVIDED, THAT EACH PLEDGOR 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 AGREEMENT SHALL BE DEEMED OR OPERATE TO PRECLUDE THE
PLEDGEE FROM BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN ANY OTHER
JURISDICTION TO COLLECT THE INDEBTEDNESS, TO REALIZE ON THE COLLATERAL OR ANY
OTHER SECURITY FOR THE INDEBTEDNESS, OR TO ENFORCE A JUDGMENT OR OTHER COURT
ORDER IN FAVOR OF THE PLEDGEE.  EACH
PLEDGOR EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION
OR SUIT COMMENCED IN ANY SUCH COURT, AND EACH PLEDGOR HEREBY WAIVES ANY
OBJECTION WHICH IT MAY HAVE BASED UPON LACK OF PERSONAL JURISDICTION, IMPROPER
VENUE OR FORUM NON CONVENIENS. 
EACH PLEDGOR 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 PLEDGOR AT THE ADDRESS SET FORTH IN THE [THE SECURITIES PURCHASE AGREEMENT] [THE
SECURITY AGREEMENT] AND THAT SERVICE SO MADE SHALL BE DEEMED COMPLETED
UPON THE EARLIER OF THE SUCH PLEDGOR’S ACTUAL RECEIPT THEREOF OR THREE (3) DAYS
AFTER DEPOSIT IN THE U.S. MAILS, PROPER POSTAGE PREPAID.

 

9

 

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

 

(i)            This Agreement may be
executed in one or more counterparts, each of which shall be deemed an original
and all of which when taken together shall constitute one and the same
agreement.  Any signature delivered by a
party by facsimile transmission shall be deemed an original signature hereto.

 

[Remainder of Page
Intentionally Left Blank]

 

10

 

IN WITNESS WHEREOF, the
parties have duly executed this Agreement as of the day and year first written
above.

 

	
   

  	
  IMPLANT SCIENCES CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/Anthony Armini

  	
   

  
	
   

  	
  Name: Anthony Armini

  
	
   

  	
  Title: President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  LAURUS MASTER FUND, LTD.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ Laurus Master Fund

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title

  
					

 

11

 

SCHEDULE A to the
Stock Pledge Agreement

 

Pledged Stock

 

	
  Pledgor

  	
   

  	
  Issuer

  	
   

  	
  Class of
  Stock

  	
   

  	
  Stock
  Certificate 

  Number

  	
   

  	
  Par
  Value

  	
   

  	
  Number
  of 

  Shares

  	
   

  
	
  Implant Sciences 

  Corporation

  	
   

  	
  C Acquisition
  Corporation

  	
   

  	
  Delaware

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Implant Sciences 

  Corporation

  	
   

  	
  Accurel
  Systems International Corporation

  	
   

  	
  California

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