Document:

Exhibit 10.4

 

EXHIBIT D

 

NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS
EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR
THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR
REASONABLY ACCEPTABLE TO THE COMPANY TO SUCH EFFECT, THE SUBSTANCE OF WHICH
SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. 
THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
ACCOUNT WITH A REGISTERED BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL
INSTITUTION THAT IS AN “ACCREDITED INVESTOR” AS DEFINED IN RULE 501(a) UNDER
THE SECURITIES ACT.

 

ADDITIONAL INVESTMENT RIGHT

 

To Purchase                     
Shares of Common Stock of

 

Implant
Sciences Corporation

 

THIS ADDITIONAL
INVESTMENT RIGHT (the “Additional Investment Right”) CERTIFIES that, for
value received,                           
(the “Holder”), is entitled, upon the terms and subject to the
limitations on exercise and the conditions hereinafter set forth, at any time
on or after the six month anniversary of the date of the Purchase Agreement (the
“Initial Exercise Date”) and on or prior to the later of (a) the 6 month
anniversary of the Effective Date and (b) the 6 month anniversary of the
Initial Exercise Date, but in no event after the 5 year anniversary of the date
of the Purchase Agreement (the “Termination Date”) but not thereafter,
to subscribe for and purchase from Implant Sciences Corporation, a Massachusetts
corporation (the “Company”), up to                         
shares (the “Additional Investment Right Shares”) of Common Stock, par
value $0.10 per share, of the Company (the “Common Stock”).  The purchase price of one share of Common
Stock (the “Exercise Price”) under this Additional Investment Right
shall be $8.50, subject to adjustment hereunder. 
The Exercise Price and the number of Additional Investment Right Shares
for which the Additional Investment Right is exercisable shall be subject to
adjustment as provided herein. Capitalized
terms used and not otherwise defined herein shall have the meanings set forth
in that certain Securities Purchase Agreement (the “Purchase Agreement”),
dated March 3, 2005 among the Company and the purchasers signatory
thereto.

 

1

 

1.  Title to Additional Investment Right.  Prior to the Termination Date and subject to
compliance with applicable laws and Section 7 of this Additional
Investment Right, this Additional Investment Right and all rights hereunder are
transferable, in whole or in part, at the office or agency of the Company by
the Holder in person or by duly authorized attorney, upon surrender of this Additional
Investment Right together with the Assignment Form annexed hereto properly
endorsed.  The transferee shall sign an
investment letter in form and substance reasonably satisfactory to the Company.

 

2.  Authorization of Shares.  The Company covenants that all Additional
Investment Right Shares which may be issued upon the exercise of the purchase
rights represented by this Additional Investment Right will, upon exercise of
the purchase rights represented by this Additional Investment Right, be duly
authorized, validly issued, fully paid and nonassessable and free from all
taxes, liens and charges in respect of the issue thereof (other than taxes in
respect of any transfer occurring contemporaneously with such issue).

 

3.  Exercise of Additional Investment Right.

 

(a)  Exercise of the purchase rights represented
by this Additional Investment Right may be made at any time or times on or
after the Initial Exercise Date and on or before the Termination Date by
delivery to the Company of a duly executed facsimile copy of the Notice of
Exercise Form annexed hereto (or such other office or agency of the Company as
it may designate by notice in writing to the registered Holder at the address
of such Holder appearing on the books of the Company); provided, however, no
issuance of Additional Investment Right Shares shall take place unless, within
5 Trading Days of the date said Notice of Exercise is delivered to the Company,
the Holder shall have surrendered this Additional Investment Right to the
Company and the Company shall have received payment of the aggregate Exercise
Price of the shares thereby purchased by wire transfer or cashier’s check drawn
on a United States bank.  Certificates
for shares purchased hereunder shall be transmitted by the transfer agent of
the Company to the Holder by crediting the account of the Holder’s prime broker
with the Depository Trust Company through its Deposit Withdrawal Agent
Commission (“DWAC”) system within 3 Trading Days from the delivery to
the Company of the Notice of Exercise Form, surrender of this Additional
Investment Right and payment of the aggregate Exercise Price as set forth above
(“Additional Investment Right Share Delivery Date”).  This Additional Investment Right shall be
deemed to have been exercised on the date the Exercise Price is received by the
Company.  The Additional Investment Right
Shares shall be deemed to have been issued, and Holder or any other person so
designated to be named therein shall be deemed to have become a holder of
record of such shares for all purposes, as of the date the Additional
Investment Right has been exercised by surrender of the Additional Investment
Right and payment to the Company of the Exercise Price and all taxes required
to be paid by the Holder, if any, pursuant to Section 5 prior to the
issuance of such shares, have been paid and received by the Company.  If the Company fails to cause its transfer
agent to transmit to the Holder through the DWAC system a certificate or
certificates representing the Additional Investment Right Shares pursuant to
this Section 3(a) by the Additional Investment Right

 

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Share Delivery Date, then the Holder will have the
right to rescind such exercise; provided, however, if the Company
delivers the Additional Investment Right Shares after the Additional Investment
Right Share Delivery Date and prior to a rescission by the Holder, Holder’s
right to rescind shall only be effective if exercised prior to the 2nd
Trading Day after delivery of the Additional Investment Right Shares to the
Holder; provided, further, if the Holder rescinds such exercise
after delivery, the Holder shall promptly return such Additional Investment
Right Shares to the Company.  In addition
to any other rights available to the Holder, if the Company fails to cause its
transfer agent to transmit to the Holder through the DWAC system a certificate
or certificates representing the Additional Investment Right Shares pursuant to
an exercise by the Additional Investment Right Share Delivery Date, and if
after such day the Holder is required by its broker to purchase (in an open
market transaction or otherwise) shares of Common Stock to deliver in
satisfaction of a sale by the Holder of the Additional Investment Right Shares
which the Holder anticipated receiving upon such exercise (a “Buy-In”),
then the Company shall (1) pay in cash to the Holder the amount by which (x)
the Holder’s total purchase price (including brokerage commissions, if any) for
the shares of Common Stock so purchased exceeds (y) the amount obtained by
multiplying (A) the number of Additional Investment Right Shares that the
Company was required to deliver to the Holder in connection with the exercise
at issue times (B) the price at which the sell order giving rise to such
purchase obligation was executed, and (2) at the option of the Holder, either
reinstate the portion of the Additional Investment Right and equivalent number
of Additional Investment Right Shares for which such exercise was not honored
or deliver to the Holder the number of shares of Common Stock that would have
been issued had the Company timely complied with its exercise and delivery
obligations hereunder.  For example, if
the Holder purchases Common Stock having a total purchase price of $11,000 to
cover a Buy-In with respect to an attempted exercise of shares of Common Stock
with an aggregate sale price giving rise to such purchase obligation of
$10,000, under clause (1) of the immediately preceding sentence the Company
shall be required to pay the Holder $1,000. The Holder shall provide the
Company written notice indicating the amounts payable to the Holder in respect
of the Buy-In, together with applicable confirmations and other evidence reasonably
requested by the Company.  Nothing herein
shall limit a Holder’s right to pursue any other remedies available to it
hereunder, at law or in equity including, without limitation, a decree of
specific performance and/or injunctive relief with respect to the Company’s
failure to timely deliver certificates representing shares of Common Stock upon
exercise of the Additional Investment Right as required pursuant to the terms
hereof.

 

(b)  If this Additional
Investment Right shall have been exercised in part, the Company shall, at the
time of delivery of the certificate or certificates representing Additional
Investment Right Shares, deliver to Holder a new Additional Investment Right
evidencing the rights of Holder to purchase the unpurchased Additional Investment
Right Shares called for by this Additional Investment Right, which new Additional
Investment Right shall in all other respects be identical with this Additional
Investment Right.

 

(c)  The Holder
shall not have the right to exercise any portion of this Additional Investment
Right, pursuant to Section 3(a) or otherwise, to the extent that after
giving effect to such issuance after exercise, the Holder (together with the
Holder’s

 

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affiliates), as set forth on the applicable Notice of Exercise, would
beneficially own in excess of 4.99% of the number of shares of the Common Stock
outstanding immediately after giving effect to such issuance.  For
purposes of the foregoing sentence, the number of shares of Common Stock
beneficially owned by the Holder and its affiliates shall include the number of
shares of Common Stock issuable upon exercise of this Additional Investment
Right with respect to which the determination of such sentence is being made,
but shall exclude the number of shares of Common Stock which would be issuable
upon (A) exercise of the remaining, nonexercised portion of this Additional
Investment Right beneficially owned by the Holder or any of its affiliates and
(B) exercise or conversion of the unexercised or nonconverted portion of any
other securities of the Company (including, without limitation, any other Additional
Investment Rights) subject to a limitation on conversion or exercise analogous
to the limitation contained herein beneficially owned by the Holder or any of
its affiliates.  Except as set forth in the preceding sentence, for
purposes of this Section 3(c), beneficial ownership shall be calculated in
accordance with Section 13(d) of the Exchange Act, it being acknowledged
by Holder that the Company is not representing to Holder that such calculation
is in compliance with Section 13(d) of the Exchange Act and Holder is
solely responsible for any schedules required to be filed in accordance
therewith.  To the extent that the
limitation contained in this Section 3(c) applies, the determination of
whether this Additional Investment Right is exercisable (in relation to other
securities owned by the Holder) and of which a portion of this Additional
Investment Right is exercisable shall be in the sole discretion of such Holder,
and the submission of a Notice of Exercise shall be deemed to be such Holder’s
determination of whether this Additional Investment Right is exercisable (in
relation to other securities owned by such Holder) and of which portion of this
Additional Investment Right is exercisable, in each case subject to such
aggregate percentage limitation, and the Company shall have no obligation to
verify or confirm the accuracy of such determination.  For purposes of this Section 3(c), in
determining the number of outstanding shares of Common Stock, the Holder may
rely on the number of outstanding shares of Common Stock as reflected in (x)
the Company’s most recent Form 10-QSB or Form 10-KSB, as the case may be, (y) a
more recent public announcement by the Company or (z) any other notice by the
Company or the Company’s Transfer Agent setting forth the number of shares of
Common Stock outstanding.  Upon the written or oral request of the Holder,
the Company shall within two Trading Days confirm orally and in writing to the
Holder the number of shares of Common Stock then outstanding.  In any
case, the number of outstanding shares of Common Stock shall be determined
after giving effect to the conversion or exercise of securities of the Company,
including this Additional Investment Right, by the Holder or its affiliates
since the date as of which such number of outstanding shares of Common Stock
was reported.

 

(d)  If at any
time after one year from the date of issuance of this Additional Investment
Right there is no effective Registration Statement registering the resale of
the Additional Investment Right Shares by the Holder, then this Additional
Investment Right may also be exercised at such time by means of a “cashless
exercise” in which the Holder shall be entitled to receive a certificate for
the number of Additional Investment Right Shares equal to the quotient obtained
by dividing [(A-B) (X)] by (A), where:

 

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(A) = the Closing Price on
the Trading Day immediately preceding the date of such election;

 

(B) =  the Exercise Price of this Additional
Investment Right, as adjusted; and

 

(X) = the number of
Additional Investment Right Shares issuable upon exercise of this Additional
Investment Right in accordance with the terms of this Additional Investment
Right by means of a cash exercise rather than a cashless exercise.

  (e)   .

 

4.  No Fractional Shares or Scrip.  No fractional shares or scrip representing
fractional shares shall be issued upon the exercise of this Additional
Investment Right.  As to any fraction of
a share which Holder would otherwise be entitled to purchase upon such
exercise, the Company shall pay a cash adjustment in respect of such final
fraction in an amount equal to such fraction multiplied by the Exercise Price.

 

5.  Charges, Taxes and Expenses.  Issuance of certificates for Additional
Investment Right Shares shall be made without charge to the Holder for any
issue or transfer tax or other incidental expense in respect of the issuance of
such certificate, all of which taxes and expenses shall be paid by the Company,
and such certificates shall be issued in the name of the Holder or in such name
or names as may be directed by the Holder; provided, however,
that in the event certificates for Additional Investment Right Shares are to be
issued in a name other than the name of the Holder, this Additional Investment
Right when surrendered for exercise shall be accompanied by the Assignment Form
attached hereto duly executed by the Holder; and the Company may require, as a
condition thereto, the payment of a sum sufficient to reimburse it for any
transfer tax incidental thereto.

 

6.  Closing of Books.  The Company will not close its stockholder
books or records in any manner which prevents the timely exercise of this Additional
Investment Right, pursuant to the terms hereof.

 

7.  Transfer, Division and Combination.

 

(a)  Subject to
compliance with any applicable securities laws and the conditions set forth in
Sections 1 and 7(e) hereof and to the provisions of Section 4.1 of the
Purchase Agreement, this Additional Investment Right and all rights hereunder
are transferable, in whole or in part, upon surrender of this Additional
Investment Right at the principal office of the Company, together with a
written assignment of this Additional Investment Right substantially in the
form attached hereto duly executed by the Holder or its agent or attorney and
funds sufficient to pay any transfer taxes payable upon the making of such
transfer.  Upon such surrender and, if
required, such payment, the Company shall execute and deliver a new Additional
Investment Right or Additional Investment Rights in the name of the assignee or
assignees and in the denomination or denominations specified in such instrument
of assignment, and shall issue to the assignor a new Additional Investment
Right evidencing the portion of this Additional Investment Right not so
assigned, and this Additional Investment Right shall promptly be cancelled.

 

5

 

A Additional Investment Right, if
properly assigned, may be exercised by a new holder for the purchase of Additional
Investment Right Shares without having a new Additional Investment Right
issued.

 

(b)  This Additional
Investment Right may be divided or combined with other Additional Investment
Rights upon presentation hereof at the aforesaid office of the Company,
together with a written notice specifying the names and denominations in which
new Additional Investment Rights are to be issued, signed by the Holder or its
agent or attorney.  Subject to compliance
with Section 7(a), as to any transfer which may be involved in such
division or combination, the Company shall execute and deliver a new Additional
Investment Right or Additional Investment Rights in exchange for the Additional
Investment Right or Additional Investment Rights to be divided or combined in
accordance with such notice.

 

(c)  The Company
shall prepare, issue and deliver at its own expense
(other than transfer taxes) the new Additional Investment Right or Additional
Investment Rights under this Section 7.

 

(d)  The Company
agrees to maintain, at its aforesaid office, books for the registration and the
registration of transfer of the Additional Investment Rights.

 

(e)  If, at the time of the surrender of this
Additional Investment Right in connection with any transfer of this Additional
Investment Right, the transfer of this Additional Investment Right shall not be
registered pursuant to an effective registration statement under the Securities
Act and under applicable state securities or blue sky laws, the Company may
require, as a condition of allowing such transfer (i) that the Holder or
transferee of this Additional Investment Right, as the case may be, furnish to
the Company a written opinion of counsel (which opinion shall be in form,
substance and scope customary for opinions of counsel in comparable
transactions) to the effect that such transfer may be made without registration
under the Securities Act and under applicable state securities or blue sky
laws, (ii) that the holder or transferee execute and deliver to the Company an
investment letter in form and substance acceptable to the Company and (iii)
that the transferee be an “accredited investor” as defined in Rule 501(a)(1),
(a)(2), (a)(3), (a)(7), or (a)(8) promulgated under the Securities Act or a
qualified institutional buyer as defined in Rule 144A(a) under the Securities
Act.

 

8.  No Rights as Shareholder until Exercise.  This Additional Investment Right does not
entitle the Holder to any voting rights or other rights as a shareholder of the
Company prior to the exercise hereof. 
Upon the surrender of this Additional Investment Right and the payment
of the aggregate Exercise Price (or by means of a cashless exercise), the Additional
Investment Right Shares so purchased shall be and be deemed to be issued to
such Holder as the record owner of such shares as of the close of business on
the later of the date of such surrender or payment.

 

9.  Loss, Theft, Destruction or Mutilation of Additional
Investment Right.  The Company
covenants that upon receipt by the Company of evidence reasonably satisfactory
to it of the loss, theft, destruction or mutilation of this Additional
Investment Right or any stock

 

6

 

certificate relating to
the Additional Investment Right Shares, and in case of loss, theft or
destruction, of indemnity or security reasonably satisfactory to it (which, in
the case of the Additional Investment Right, shall not include the posting of
any bond), and upon surrender and cancellation of such Additional Investment
Right or stock certificate, if mutilated, the Company will make and deliver a
new Additional Investment Right or stock certificate of like tenor and dated as
of such cancellation, in lieu of such Additional Investment Right or stock
certificate.

 

10.  Saturdays, Sundays, Holidays, etc.  If the last or appointed day for the taking
of any action or the expiration of any right required or granted herein shall
be a Saturday, Sunday or a legal holiday, then such action may be taken or such
right may be exercised on the next succeeding day not a Saturday, Sunday or
legal holiday.

 

11.  Adjustments of Exercise Price and
Number of Additional Investment Right Shares; Stock Splits, etc.  The number and kind of securities purchasable
upon the exercise of this Additional Investment Right and the Exercise Price
shall be subject to adjustment from time to time upon the happening of any of
the following.  In case the Company shall
(i) pay a dividend in shares of Common Stock or make a distribution in shares
of Common Stock to holders of its outstanding Common Stock, (ii) subdivide its
outstanding shares of Common Stock into a greater number of shares, (iii)
combine its outstanding shares of Common Stock into a smaller number of shares
of Common Stock, or (iv) issue any shares of its capital stock in a
reclassification of the Common Stock, then the number of Additional Investment
Right Shares purchasable upon exercise of this Additional Investment Right
immediately prior thereto shall be adjusted so that the Holder shall be
entitled to receive the kind and number of Additional Investment Right Shares
or other securities of the Company which it would have owned or have been
entitled to receive had such Additional Investment Right been exercised in
advance thereof.  Upon each such
adjustment of the kind and number of Additional Investment Right Shares or
other securities of the Company which are purchasable hereunder, the Holder
shall thereafter be entitled to purchase the number of Additional Investment
Right Shares or other securities resulting from such adjustment at an Exercise
Price per Additional Investment Right Share or other security obtained by multiplying
the Exercise Price in effect immediately prior to such adjustment by the number
of Additional Investment Right Shares purchasable pursuant hereto immediately
prior to such adjustment and dividing by the number of Additional Investment
Right Shares or other securities of the Company that are purchasable pursuant
hereto immediately after such adjustment. 
An adjustment made pursuant to this paragraph shall become effective
immediately after the effective date of such event retroactive to the record date,
if any, for such event.

 

12.  Reorganization, Reclassification,
Merger, Consolidation or Disposition of Assets.  In case the Company shall reorganize its
capital, reclassify its capital stock, consolidate or merge with or into
another corporation (where the Company is not the surviving corporation or
where there is a change in or distribution with respect to the Common Stock of
the Company), or sell, transfer or otherwise dispose of its property, assets or
business to another corporation and, pursuant to the terms of such
reorganization, reclassification, merger, consolidation or disposition of
assets, shares of common stock of the successor or acquiring corporation, or
any cash, shares of stock or other securities or property of any nature
whatsoever (including warrants or other subscription or purchase rights) in
addition to or in lieu of common stock of the successor or acquiring
corporation (“Other Property”), are to be
received by or distributed to the holders of Common Stock of the Company, then
the Holder shall have the right thereafter to

 

7

 

receive,
at the option of the Holder, upon exercise of this Additional Investment Right,
the number of shares of Common Stock of the successor or acquiring corporation
or of the Company, if it is the surviving corporation, and Other Property
receivable upon or as a result of such reorganization, reclassification,
merger, consolidation or disposition of assets by a Holder of the number of
shares of Common Stock for which this Additional Investment Right is
exercisable immediately prior to such event. In case of any such
reorganization, reclassification, merger, consolidation or disposition of
assets, the successor or acquiring corporation (if other than the Company) and,
if an entity different from the successor or acquiring entity, the entity whose
capital stock or assets the holders of the Common Stock of the Company are
entitled to receive as a result of such consolidation, merger or sale or
conveyance, shall expressly assume the due and
punctual observance and performance of each and every covenant and condition of
this Additional Investment Right to be performed and observed by the Company
and all the obligations and liabilities hereunder, subject to such modifications
as may be deemed appropriate (as determined in good faith by resolution of the
Board of Directors of the Company) in order to provide for adjustments of Additional
Investment Right Shares for which this Additional Investment Right is
exercisable which shall be as nearly equivalent as practicable to the
adjustments provided for in this Section 12.  For purposes of this Section 12, “common
stock of the successor or acquiring corporation” shall include stock of such
corporation of any class which is not preferred as to dividends or assets over
any other class of stock of such corporation and which is not subject to
redemption and shall also include any evidences of indebtedness, shares of
stock or other securities which are convertible into or exchangeable for any
such stock, either immediately or upon the arrival of a specified date or the
happening of a specified event and any warrants or other rights to subscribe
for or purchase any such stock.  The
foregoing provisions of this Section 12 shall similarly apply to
successive reorganizations, reclassifications, mergers, consolidations or
disposition of assets.

 

13.  Voluntary Adjustment by the Company.  The Company may at any time during the term
of this Additional Investment Right reduce the then current Exercise Price to
any amount and for any period of time deemed appropriate by the Board of
Directors of the Company.

 

14.  Notice of Adjustment.  Whenever the number of Additional Investment
Right Shares or number or kind of securities or other property purchasable upon
the exercise of this Additional Investment Right or the Exercise Price is
adjusted, as herein provided, the Company shall give notice thereof to the
Holder, which notice shall state the number of Additional Investment Right
Shares (and other securities or property) purchasable upon the exercise of this
Additional Investment Right and the Exercise Price of such Additional
Investment Right Shares (and other securities or property) after such
adjustment, setting forth a brief statement of the facts requiring such
adjustment and setting forth the computation by which such adjustment was made.

 

15.  Notice of Corporate Action.  If at any time:

 

(a)                                  the
Company shall take a record of the holders of its Common Stock for the purpose
of entitling them to receive a dividend or other distribution, or any right to
subscribe for or purchase any evidences of its indebtedness, any shares of
stock of any class or any other securities or property, or to receive any other
right, or

 

8

 

(b)                                 there
shall be any capital reorganization of the Company, any reclassification or
recapitalization of the capital stock of the Company or any consolidation or
merger of the Company with, or any sale, transfer or other disposition of all
or substantially all the property, assets or business of the Company to,
another corporation or,

 

(c)                                  there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Company;

 

then, in any one or more of such cases, the Company shall use its best
efforts to give to Holder (i) at least 20 days’ prior written notice of the
date on which a record date shall be selected for such dividend, distribution
or right or for determining rights to vote in respect of any such reorganization,
reclassification, merger, consolidation, sale, transfer, disposition,
liquidation or winding up, and (ii) in the case of any such reorganization,
reclassification, merger, consolidation, sale, transfer, disposition,
dissolution, liquidation or winding up, at least 20 days’ prior written notice
of the date when the same shall take place. 
Such notice in accordance with the foregoing clause also shall specify
(i) the date on which any such record is to be taken for the purpose of such dividend,
distribution or right, the date on which the holders of Common Stock shall be
entitled to any such dividend, distribution or right, and the amount and
character thereof, and (ii) the date on which any such reorganization,
reclassification, merger, consolidation, sale, transfer, disposition,
dissolution, liquidation or winding up is to take place and the time, if any
such time is to be fixed, as of which the holders of Common Stock shall be
entitled to exchange their Additional Investment Right Shares for securities or
other property deliverable upon such disposition, dissolution, liquidation or
winding up.  Each such written notice
shall be sufficiently given if addressed to Holder at the last address of
Holder appearing on the books of the Company and delivered in accordance with Section 17(d).  In no case shall lack of notice under the
terms of this provision invalidate any action taken by the Company.

 

16.  Authorized Shares.  The Company covenants that during the period
the Additional Investment Right is outstanding, it will reserve from its
authorized and unissued Common Stock a sufficient number of shares to provide
for the issuance of the Additional Investment Right Shares upon the exercise of
any purchase rights under this Additional Investment Right.  The Company further covenants that its
issuance of this Additional Investment Right shall constitute full authority to
its officers who are charged with the duty of executing stock certificates to
execute and issue the necessary certificates for the Additional Investment
Right Shares upon the exercise of the purchase rights under this Additional
Investment Right.  The Company will take
all such reasonable action as may be necessary to assure that such Additional
Investment Right Shares may be issued as provided herein without violation of
any applicable law or regulation, or of any requirements of the Trading Market
upon which the Common Stock may be listed.

 

Except and to the extent as waived or consented to by
the Holder, the Company shall not by any action, including, without limitation,
amending its certificate of incorporation or through any reorganization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms of this Additional Investment Right, but
will at all times in good faith assist in the carrying out of all such terms
and in the taking of all such actions as may be necessary or

 

9

 

appropriate to protect the rights
of Holder as set forth in this Additional Investment Right against
impairment.  Without limiting the
generality of the foregoing, the Company will (a) not increase the par value of
any Additional Investment Right Shares above the amount payable therefor upon
such exercise immediately prior to such increase in par value, (b) take all
such action as may be necessary or appropriate in order that the Company may
validly and legally issue fully paid and nonassessable Additional Investment
Right Shares upon the exercise of this Additional Investment Right, and (c) use
commercially reasonable efforts to obtain all such authorizations, exemptions
or consents from any public regulatory body having jurisdiction thereof as may
be necessary to enable the Company to perform its obligations under this Additional
Investment Right.

 

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

 

17.  Miscellaneous.

 

(a)  Jurisdiction.  All questions concerning the construction,
validity, enforcement and interpretation of this Additional Investment Right
shall be determined in accordance with the provisions of the Purchase
Agreement.

 

(b)  Restrictions.  The Holder acknowledges that the Additional
Investment Right Shares acquired upon the exercise of this Additional
Investment Right, if not registered, will have restrictions upon resale imposed
by state and federal securities laws.

 

(c)  Nonwaiver
and Expenses.  No course of dealing
or any delay or failure to exercise any right hereunder on the part of Holder
shall operate as a waiver of such right or otherwise prejudice Holder’s rights,
powers or remedies, notwithstanding all rights
hereunder terminate on the Termination Date. 
If the Company willfully and knowingly fails to comply with any
provision of this Additional Investment Right, which results in any material
damages to the Holder, the Company shall pay to Holder such amounts as shall be
sufficient to cover any costs and expenses including, but not limited to,
reasonable attorneys’ fees, including those of appellate proceedings, incurred
by Holder in collecting any amounts due pursuant hereto or in otherwise
enforcing any of its rights, powers or remedies hereunder.

 

(d)  Notices.  Any notice, request or other document
required or permitted to be given or delivered to the Holder by the Company
shall be delivered in accordance with the notice provisions of the Purchase
Agreement.

 

(e)  Limitation
of Liability.  No provision hereof,
in the absence of any affirmative action by Holder to exercise this Additional
Investment Right or purchase Additional Investment Right Shares, and no
enumeration herein of the rights or privileges of Holder, shall give rise to
any liability of Holder for the purchase price of any Common

 

10

 

Stock or as a stockholder of the Company, whether such liability is
asserted by the Company or by creditors of the Company.

 

(f)   Remedies. 
Holder, in addition to being entitled to exercise all rights granted by
law, including recovery of damages, will be entitled to specific performance of
its rights under this Additional Investment Right.  The Company agrees that monetary damages
would not be adequate compensation for any loss incurred by reason of a breach
by it of the provisions of this Additional Investment Right and hereby agrees
to waive the defense in any action for specific performance that a remedy at
law would be adequate.

 

(g)   Successors and Assigns.  Subject to applicable securities laws, this Additional
Investment Right and the rights and obligations evidenced hereby shall inure to
the benefit of and be binding upon the successors of the Company and the
successors and permitted assigns of Holder. 
The provisions of this Additional Investment Right are intended to be
for the benefit of all Holders from time to time of this Additional Investment
Right and shall be enforceable by any such Holder or holder of Additional
Investment Right Shares.

 

(h)   Amendment. 
This Additional Investment Right may be modified or amended or the
provisions hereof waived with the written consent of the Company and the
Holder.

 

(i)   Severability.  Wherever possible, each provision of this Additional
Investment Right shall be interpreted in such manner as to be effective and
valid under applicable law, but if any provision of this Additional Investment
Right shall be prohibited by or invalid under applicable law, such provision
shall be ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provisions or the remaining provisions of
this Additional Investment Right.

 

(j)   Headings. 
The headings used in this Additional Investment Right are for the
convenience of reference only and shall not, for any purpose, be deemed a part
of this Additional Investment Right.

 

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

 

11

 

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

 

 

Dated:  March 4, 2005

 

 

	
   

  	
  IMPLANT SCIENCES CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
  A. J. Armini

  
	
   

  	
   

  	
  Title:

  	
  President and CEO

  

 

12

 

NOTICE OF EXERCISE

 

To:                              Implant
Sciences Corporation

 

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

 

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

 

[  ] in lawful
money of the United States; or

 

[ ] the cancellation of such number of Additional
Investment Right Shares as is necessary, in accordance with the formula set
forth in subsection 2(c), to exercise this Additional Investment Right
with respect to the maximum number of Additional Investment Right Shares
purchasable pursuant to the cashless exercise procedure set forth in subsection 3(d).

 

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

 

 

 

The Additional Investment Right Shares shall be delivered to the
following:

 

 

 

 

 

 

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

 

	
   

  	
  [PURCHASER]

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
  Dated:

  	
   

  	
   

  
						

 

 

ASSIGNMENT FORM

 

(To assign the foregoing AIR, execute

this form and supply required information. 

Do not use this form to exercise the AIR.)

 

FOR VALUE
RECEIVED, the foregoing Additional Investment Right and all rights evidenced
thereby are hereby assigned to

 

                                                                                              
whose address is                                                                                                                               .

 

Dated:                              ,
              

 

 

	
   

  	
  Holder’s Signature:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Holder’s Address:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  

 

 

	
  Signature Guaranteed:

  	
   

  	
   

  

 

 

NOTE:  The signature to this
Assignment Form must correspond with the name as it appears on the face of the Additional
Investment Right, without alteration or enlargement or any change whatsoever,
and must be guaranteed by a bank or trust company.  Officers of corporations and those acting in
a fiduciary or other representative capacity should file proper evidence of
authority to assign the foregoing Additional Investment Right.EXHIBIT 10.5

 

EXHIBIT A

 

REGISTRATION RIGHTS AGREEMENT

 

This Registration Rights Agreement (this “Agreement”)
is made and entered into as of March 3, 2005, by and among Implant
Sciences Corporation, a Massachusetts corporation (the “Company”), and
the purchasers signatory hereto (each such purchaser, a “Purchaser” and
collectively, the “Purchasers”).

 

This Agreement is made pursuant to the Securities
Purchase Agreement, dated as of the date hereof among the Company and the
Purchasers (the “Purchase Agreement”).

 

The Company and the Purchasers hereby agree as
follows:

 

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

 

“Advice” shall have the meaning set forth in Section 6(d).

 

“Effectiveness Date” means, with respect to the
Registration Statement required to be filed hereunder, the earlier of (a) the
90th calendar day following the date of the Purchase Agreement (or
the 120th calendar day in the event of a review by the Commission of
the Registration Statement) and (b) the fifth Trading Day following the date on
which the Company is notified by the Commission that the Registration Statement
will not be reviewed or is no longer subject to further review and comments.

 

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

 

“Event” shall have the meaning set forth in Section 2(b).

 

“Event Date” shall have the meaning set forth
in Section 2(b).

 

“Filing Date” means, with respect to the
Registration Statement required to be filed hereunder, the 40th
calendar day following the date of the Purchase Agreement.

 

“Holder” or “Holders” means the holder
or holders, as the case may be, from time to time of Registrable Securities.

 

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

 

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

 

“Losses” shall have the meaning set forth in Section 5(a).

 

1

 

“Plan of Distribution” shall have the meaning
set forth in Section 2(a).

 

“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 all of the
Shares, the Warrant Shares and the Additional Investment Right Shares, together
with any shares of Common Stock issued or issuable upon any stock split,
dividend or other distribution, recapitalization or similar event with respect
to the foregoing.

 

“Registration Statement” means the registration
statements required to be filed hereunder, including (in each case) the
Prospectus, amendments and supplements to the 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 the registration statement.

 

“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 purpose and effect as such Rule.

 

“Rule 424” means Rule 424 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 purpose and effect as such Rule.

 

“Selling Shareholder Questionnaire” shall have
the meaning set forth in Section 3(a).

 

2.                                       Registration.

 

(a)                                  On
or prior to the Filing Date, the Company shall use its best efforts to prepare
and file with the Commission the Registration Statement covering the resale of
all of the Registrable Securities for an offering to be made on a continuous
basis pursuant to Rule 415.  The
Registration Statement required hereunder 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 the Registration shall be on another appropriate
form in accordance herewith).  The
Registration Statement required hereunder shall contain

 

2

 

substantially
the “Plan of Distribution” attached hereto as Annex A.  Subject to the terms of this Agreement, the
Company shall use its best efforts to cause the Registration Statement to be
declared effective under the Securities Act as promptly as possible after the
filing thereof, but in any event not later than the Effectiveness Date, and
shall use its best efforts to keep the Registration Statement continuously
effective under the Securities Act until the date when all Registrable
Securities covered by the Registration Statement have been sold or may be sold
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”). 
The Company shall immediately notify the Holders via facsimile of the
effectiveness of the Registration Statement on the same day that the Company
receives notification of the effectiveness from the Commission.  Failure to so notify the Holder within 1
Trading Day of such notification shall be deemed an Event under Section 2(b).

 

(b)                                 If:
(i) a Registration Statement is not filed on or prior to the Filing Date, or
(ii) the Company fails to file with the Commission a request for acceleration
in accordance with Rule 461 promulgated under the Securities Act, within five
Trading Days of the date that the Company is notified (orally or in writing,
whichever is earlier) by the Commission that a Registration Statement will not
be “reviewed,” or is not subject to further review, or (iii) [INTENTIONALLY
DELETED], or (iv) a Registration Statement filed or required to be filed
hereunder is not declared effective by the Commission on or before the
Effectiveness Date, or (v) after a Registration Statement is first declared
effective by the Commission, it ceases for any reason to remain continuously
effective as to all Registrable Securities for which it is required to be
effective, or the Holders are not permitted to utilize the Prospectus therein
to resell such Registrable Securities, for in any such case 25 calendar
consecutive days but no more than an aggregate of 40 calendar days during any
12 month period (which need not be consecutive Trading Days) (subject to
tolling extension as provided by Section 3(k))(any such failure or breach
being referred to as an “Event,” and for purposes of clause (i) or (iv)
the date on which such Event occurs, or for purposes of clause (ii) the date on
which such five Trading Day period is exceeded, or for purposes of clause (v)
the date on which such 25 or 40 calendar day period, as applicable, is exceeded
being referred to as “Event Date”), then in addition to any other rights
the Holders may have hereunder or under applicable law, on each such Event Date
and, on each monthly anniversary of each such Event Date (if the applicable
Event shall not have been cured by such date) until the applicable Event is
cured, the Company shall pay to each Holder an amount in cash, as partial
liquidated damages and not as a penalty, equal to 2.0% of the aggregate
purchase price paid by such Holder pursuant to the Purchase Agreement for any
Registrable Securities then held by such Holder.  If the Company fails to pay any partial
liquidated damages pursuant to this Section in full within seven days
after the date payable, the Company will pay interest thereon at a rate of 18%
per annum (or such lesser maximum amount that is permitted to be paid by
applicable law) to the Holder, accruing daily from the date such partial
liquidated damages are due until such amounts, plus all such interest thereon,
are paid in full.  The partial liquidated
damages pursuant to the terms hereof shall apply on a daily pro-rata basis for
any portion of a month prior to the cure of an Event.

 

3

 

3.                                       Registration Procedures

 

In connection with the Company’s registration
obligations hereunder, the Company shall:

 

(a)                                  Not
less than five Trading Days prior to the filing of the Registration Statement
or any related Prospectus or any amendment or supplement thereto, the Company
shall, (i) furnish to the Holders copies of all such documents proposed to be
filed (including documents incorporated or deemed incorporated by reference to
the extent requested by such Person) which documents will be subject to the
review of such Holders, and (ii) cause its officers and directors, counsel and
independent certified public accountants to respond to such inquiries as shall
be necessary, in the reasonable opinion of respective counsel to conduct a
reasonable investigation within the meaning of the Securities Act.  The Company shall not file the Registration
Statement or any such Prospectus or any amendments or supplements thereto to
which the Holders of a majority of the Registrable Securities shall reasonably
object in good faith, provided that the Company is notified of such objection
in writing no later than 2 Trading Days after the Holders have been so
furnished copies of such documents.  Each
Holder agrees to furnish to the Company a completed Questionnaire in the form
attached to this Agreement as Annex B (a “Selling
Shareholder Questionnaire”) not less
than five Trading Days prior to the Filing Date or by the end of the fifth
Trading Day following the date on which such Holder receives draft materials in
accordance with this Section.  In the
event a Holder does not deliver the Selling Holder Questionnaire within such
time period, any liquidated damages that otherwise accrue as to such Holder
shall be tolled until such Selling Holder Questionnaire is received by the
Company.

 

(b)                                 (i)
Prepare and file with the Commission such amendments, including post-effective
amendments, to the Registration Statement and the Prospectus used in connection
therewith as may be necessary to keep the Registration Statement continuously
effective as to the applicable Registrable Securities for the Effectiveness
Period and prepare and file with the Commission such additional Registration
Statements in order to register for resale under the Securities Act all of the
Registrable Securities; (ii) cause the related Prospectus to be amended or
supplemented by any required Prospectus supplement, and as so supplemented or
amended to be filed pursuant to Rule 424; (iii) respond as promptly as
reasonably possible to any comments received from the Commission with respect
to the Registration Statement or any amendment thereto and, as promptly as
reasonably possible, upon request, provide the Holders true and complete copies
of all correspondence from and to the Commission relating to the Registration
Statement; and (iv) comply in all material respects with the provisions of the
Securities Act and the Exchange Act with respect to the disposition of all
Registrable Securities covered by the Registration Statement during the applicable
period in accordance with the intended methods of disposition by the Holders
thereof set forth in the Registration Statement as so amended or in such
Prospectus as so supplemented.

 

(c)                                  Notify
the Holders of Registrable Securities to be sold as promptly as reasonably
possible and (if requested by any such Person) confirm such notice in writing
promptly following the day (i)(A) when a Prospectus or any Prospectus
supplement or

 

4

 

post-effective amendment
to the Registration Statement is proposed to be filed; (B) when the Commission
notifies the Company whether there will be a “review” of the Registration
Statement and whenever the Commission comments in writing on the Registration
Statement (the Company shall upon request provide true and complete copies
thereof and all written responses thereto to each of the Holders); and (C) with
respect to the Registration Statement or any post-effective amendment, when the
same has become effective; (ii) of any request by the Commission or any other
Federal or state governmental authority during the period of effectiveness of
the Registration Statement for amendments or supplements to the Registration
Statement or Prospectus or for additional information; (iii) of the issuance by
the Commission or any other federal or state governmental authority of any stop
order suspending the effectiveness of the Registration Statement covering any
or all of the Registrable Securities or the initiation of any Proceedings for
that purpose; (iv) of 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 (v) of the
occurrence of any event or passage of time that makes the financial statements
included in the Registration Statement ineligible for inclusion therein or any
statement made in the 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 the Registration Statement,
Prospectus or other documents so that, in the case of the Registration Statement
or the 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.

 

(d)                                 Use
commercially reasonable efforts to avoid the issuance of, or, if issued, obtain
the withdrawal of (i) any order suspending the effectiveness of the
Registration Statement, or (ii) any suspension of the qualification (or exemption
from qualification) of any of the Registrable Securities for sale in any
jurisdiction, at the earliest practicable moment.

 

(e)                                  Furnish
to each Holder, without charge, at least one conformed copy of the Registration
Statement and each amendment thereto, including financial statements and
schedules, all documents incorporated or deemed to be incorporated therein by
reference to the extent requested by such Person, and all exhibits to the
extent requested by such Person (including those previously furnished or
incorporated by reference) promptly after the filing of such documents with the
Commission.

 

(f)                                    Promptly
deliver to each Holder, without charge, as many copies of the Prospectus or
Prospectuses (including each form of prospectus) and each amendment or
supplement thereto as such Persons may reasonably request in connection with
resales by the Holder of Registrable Securities.  Subject to the terms of this Agreement, the
Company hereby consents to the use of such Prospectus and each amendment or supplement
thereto by each of the selling Holders in connection with the offering and sale
of the Registrable Securities covered by such Prospectus and any amendment or
supplement thereto, except after the giving on any notice pursuant to Section 3(c).

 

5

 

(g)                                 Prior
to any resale of Registrable Securities by a Holder, use its commercially
reasonable efforts to register or qualify or cooperate with the selling Holders
in connection with the registration or qualification (or exemption from the
Registration or qualification) of such Registrable Securities for the resale by
the Holder under the securities or Blue Sky laws of such jurisdictions within
the United States as any Holder reasonably requests in writing, to keep the
Registration or qualification (or exemption therefrom) effective during the
Effectiveness Period and to do any and all other acts or things reasonably
necessary to enable the disposition in such jurisdictions of the Registrable
Securities covered by the Registration Statement; provided, that the
Company shall not be required to qualify generally to do business in any
jurisdiction where it is not then so qualified, subject the Company to any
material tax in any such jurisdiction where it is not then so subject or file a
general consent to service of process in any such jurisdiction.

 

(h)                                 If
NASDR Rule 2710 requires any broker-dealer to make a filing prior to executing
a sale by a Holder, make an Issuer Filing with the NASDR, Inc. Corporate
Financing Department pursuant to NASDR Rule 2710(b)(10)(A)(i)
and respond within five Trading Days to any comments received from NASDR in
connection therewith, and pay the filing fee required in connection therewith.

 

(i)                                     If
requested by the Holders, cooperate with the Holders to facilitate the timely
preparation and delivery of certificates representing Registrable Securities to
be delivered to a transferee pursuant to the Registration Statement, which
certificates shall be free, to the extent permitted by the Purchase Agreement,
of all restrictive legends, and to enable such Registrable Securities to be in
such denominations and registered in such names as any such Holders may
request.

 

(j)                                     Upon
the occurrence of any event contemplated by Section 3(c)(v), as promptly
as reasonably possible, prepare a supplement or amendment, including a post-effective
amendment, to the Registration Statement or a supplement to the related
Prospectus or any document incorporated or deemed to be incorporated therein by
reference, and file any other required document so that, as thereafter
delivered, neither the Registration Statement nor such Prospectus will contain
an untrue statement of a material fact or omit 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. If the
Company notifies the Holders in accordance with clauses (ii) through (v) of Section 3(c)
above to suspend the use of any Prospectus until the requisite changes to such
Prospectus have been made, then the Holders shall suspend use of such
Prospectus.  The Company will use its
best efforts to ensure that the use of the Prospectus may be resumed as
promptly as is practicable.  The Company
shall be entitled to exercise its right under this Section 3(i) to suspend
the availability of a Registration Statement and Prospectus, subject to the
payment of liquidated damages pursuant to Section 2(b), for a period not
to exceed 90 days (which need not be consecutive days) in any 12 month period.

 

(k)                                  Comply
with all applicable rules and regulations of the Commission.

 

6

 

(l)                                     The
Company may require each selling Holder to furnish to the Company a certified
statement as to the number of shares of Common Stock beneficially owned by such
Holder and, if required by the Commission, the person thereof that has voting
and dispositive control over the Shares. During any periods that the Company is
unable to meet its obligations hereunder with respect to the registration of
the Registrable Securities solely because a Holder fails to furnish such
information within five Trading Days of the Company’s request, any liquidated
damages that are accruing at such time as to all Holders shall be tolled and
any Event that may otherwise occur solely because of such delay shall be
suspended as to all Holders, until such information is delivered to the
Company.

 

4.                                       Registration Expenses.  All fees
and expenses incident to the performance of or compliance with this Agreement
by the Company shall be borne by the Company whether or not any Registrable
Securities are sold pursuant to the Registration Statement.  The fees and expenses referred to in the
foregoing sentence shall include, without limitation, (i) all registration and
filing fees (including, without limitation, fees and expenses (A) with respect
to filings required to be made with the Trading Market on which the Common
Stock is then listed for trading, and (B) in compliance with applicable state
securities or Blue Sky laws reasonably agreed to by the Company in writing
(including, without limitation, fees and disbursements of counsel for the
Company in connection with Blue Sky qualifications or exemptions of the
Registrable Securities and determination of the eligibility of the Registrable
Securities for investment under the laws of such jurisdictions as requested by
the Holders) and (C) if not previously paid by the Company in connection with
an Issuer Filing, with respect to any filing that may be required to be made by
any broker through which a Holder intends to make sales of Registrable
Securities with NASD Regulation, Inc. pursuant to NASD Rule 2710, so long as
the broker is receiving no more than a customary brokerage commission in connection
with such sale, (ii) printing expenses (including, without limitation, expenses
of printing certificates for Registrable Securities and of printing
prospectuses if the printing of prospectuses is reasonably requested by the
holders of a majority of the Registrable Securities included in the
Registration Statement), (iii) messenger, telephone and delivery expenses, (iv)
fees and disbursements of counsel for the Company, (v) Securities Act liability
insurance, if the Company so desires such insurance, and (vi) fees and expenses
of all other Persons retained by the Company in connection with the
consummation of the transactions contemplated by this Agreement.  In addition, the Company shall be responsible
for all of its internal expenses incurred in connection with the consummation
of the transactions contemplated by this Agreement (including, without
limitation, all salaries and expenses of its officers and employees performing
legal or accounting duties), the expense of any annual audit and the fees and
expenses incurred in connection with the listing of the Registrable Securities
on any securities exchange as required hereunder. In no event shall the Company
be responsible for any broker or similar commissions or, except to the extent
provided for in the Transaction Documents, any legal fees or other costs of the
Holders.

 

5.                                       Indemnification

 

(a)                                  Indemnification
by the Company.  The Company shall,
notwithstanding any termination of this Agreement, indemnify and hold harmless
each Holder, the officers, directors, agents, brokers, investment advisors and
employees of each of them, each Person who controls any such Holder (within the
meaning of Section 15 of the

 

7

 

Securities Act or Section 20
of the Exchange Act) and the officers, directors, agents and employees of each
such controlling Person, to the fullest extent permitted by applicable law,
from and against any and all losses, claims, damages, liabilities, costs
(including, without limitation, reasonable attorneys’ fees) and expenses
(collectively, “Losses”), as incurred, arising out of or relating to any
untrue or alleged untrue statement of a material fact contained in the
Registration Statement, any Prospectus or any form of prospectus or in any
amendment or supplement thereto or in any preliminary prospectus, or arising
out of or relating to any omission or alleged omission of a material fact
required to be stated therein or necessary to make the statements therein (in
the case of any Prospectus or form of prospectus or supplement thereto, in
light of the circumstances under which they were made) not misleading, except
to the extent, but only to the extent, that (i) such untrue statements or
omissions are based solely upon information regarding such Holder furnished in
writing to the Company by such Holder expressly for use therein, or to the
extent that such information relates to such Holder or such Holder’s proposed
method of distribution of Registrable Securities and was reviewed and expressly
approved in writing by such Holder expressly for use in the Registration
Statement, such Prospectus or such form of Prospectus or in any amendment or
supplement thereto (it being understood that the Holder has approved Annex A
hereto for this purpose) or (ii) in the case of an occurrence of an event of
the type specified in Section 3(c)(ii)-(v), the use by such Holder of an
outdated or defective Prospectus after the Company has notified such Holder in
writing that the Prospectus is outdated or defective and prior to the receipt
by such Holder of the Advice contemplated in Section 6(d).  The Company shall notify the Holders promptly
of the institution, threat or assertion of any Proceeding of which the Company
is aware in connection with the transactions contemplated by this Agreement.

 

(b)                                 Indemnification
by Holders. Each Holder shall, severally and not jointly, indemnify and
hold harmless the Company, its directors, officers, agents and employees, each
Person who controls the Company (within the meaning of Section 15 of the
Securities Act and Section 20 of the Exchange Act), and the directors,
officers, agents or employees of such controlling Persons, to the fullest
extent permitted by applicable law, from and against all Losses, as incurred,
to the extent arising out of or based solely upon: (x) such Holder’s failure to
comply with the prospectus delivery requirements of the Securities Act or (y)
any untrue or alleged untrue statement of a material fact contained in any
Registration Statement, any Prospectus, or any form of prospectus, or in any
amendment or supplement thereto or in any preliminary prospectus, or arising
out of or relating to any omission or alleged omission of a material fact
required to be stated therein or necessary to make the statements therein not
misleading (i) to the extent, but only to the extent, that such untrue
statement or omission is contained in any information so furnished in writing
by such Holder to the Company specifically for inclusion in the Registration
Statement or such Prospectus or (ii) to the extent that (1) such untrue
statements or omissions are based solely upon information regarding such Holder
furnished in writing to the Company by such Holder expressly for use therein,
or to the extent that such information relates to such Holder or such Holder’s
proposed method of distribution of Registrable Securities and was reviewed and
expressly approved in writing by such Holder expressly for use in the
Registration Statement (it being understood that the Holder has approved Annex A
hereto for this purpose), such Prospectus or such form of Prospectus or in any
amendment or supplement thereto or (2) in the case of an

 

8

 

occurrence of an event of
the type specified in Section 3(c)(ii)-(v), the use by such Holder of an
outdated or defective Prospectus after the Company has notified such Holder in
writing that the Prospectus is outdated or defective and prior to the receipt
by such Holder of the Advice contemplated in Section 6(d).  In no event shall the liability of any
selling Holder hereunder be greater in amount than the dollar amount of the net
proceeds received by such Holder upon the sale of the Registrable Securities
giving rise to such indemnification obligation.

 

(c)                                  Conduct
of Indemnification Proceedings. If any Proceeding shall be brought or
asserted against any Person entitled to indemnity hereunder (an “Indemnified
Party”), such Indemnified Party shall promptly notify the Person from whom
indemnity is sought (the “Indemnifying Party”) in writing, and the
Indemnifying Party shall have the right to assume the defense thereof,
including the employment of counsel reasonably satisfactory to the Indemnified
Party and the payment of all fees and expenses incurred in connection with defense
thereof; provided, that the failure of any Indemnified Party to give such
notice shall not relieve the Indemnifying Party of its obligations or
liabilities pursuant to this Agreement, except (and only) to the extent that it
shall be finally determined by a court of competent jurisdiction (which
determination is not subject to appeal or further review) that such failure
shall have prejudiced the Indemnifying Party.

 

An Indemnified Party shall have the right to employ
separate counsel in any such Proceeding and to participate in the defense
thereof, but the fees and expenses of such counsel shall be at the expense of
such Indemnified Party or Parties unless: 
(1) the Indemnifying Party has agreed in writing to pay such fees and
expenses; (2) the Indemnifying Party shall have failed promptly to assume the
defense of such Proceeding and to employ counsel reasonably satisfactory to
such Indemnified Party in any such Proceeding; or (3) the named parties to any
such Proceeding (including any impleaded parties) include both such Indemnified
Party and the Indemnifying Party, and such Indemnified Party shall reasonably
believe that a material conflict of interest is likely to exist if the same
counsel were to represent such Indemnified Party and the Indemnifying Party (in
which case, if such Indemnified Party notifies the Indemnifying Party in
writing that it elects to employ separate counsel at the expense of the
Indemnifying Party, the Indemnifying Party shall not have the right to assume
the defense thereof and the reasonable fees and expenses of one separate
counsel shall be at the expense of the Indemnifying Party).  The Indemnifying Party shall not be liable
for any settlement of any such Proceeding effected
without its written consent, which consent shall not be unreasonably
withheld.  No Indemnifying Party shall,
without the prior written consent of the Indemnified Party, effect any
settlement of any pending Proceeding in respect of which any Indemnified Party
is a party, unless such settlement includes an unconditional release of such
Indemnified Party from all liability on claims that are the subject matter of
such Proceeding.

 

Subject to the terms of this Agreement, all reasonable
fees and expenses of the Indemnified Party (including reasonable fees and expenses
to the extent incurred in connection with investigating or preparing to defend
such Proceeding in a manner not inconsistent with this Section) shall be paid
to the Indemnified Party, as incurred, within ten Trading Days of written
notice thereof to the Indemnifying Party; provided, that the

 

9

 

Indemnified Party shall promptly reimburse the
Indemnifying Party for that portion of such fees and expenses applicable to
such actions for which such Indemnified Party is not entitled to
indemnification hereunder, determined based upon the relative faults of the
parties.

 

(d)                                 Contribution.  If a claim for indemnification under Section 5(a)
or 5(b) is unavailable to an Indemnified Party (by reason of public policy or
otherwise), then each Indemnifying Party, in lieu of indemnifying such
Indemnified Party, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such Losses, in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Party and
Indemnified Party in connection with the actions, statements or omissions that
resulted in such Losses as well as any other relevant equitable
considerations.  The relative fault of such
Indemnifying Party and Indemnified Party shall be determined by reference to,
among other things, whether any action in question, including any untrue or
alleged untrue statement of a material fact or omission or alleged omission of
a material fact, has been taken or made by, or relates to information supplied
by, such Indemnifying Party or Indemnified Party, and the parties’ relative
intent, knowledge, access to information and opportunity to correct or prevent
such action, statement or omission.  The
amount paid or payable by a party as a result of any Losses shall be deemed to
include, subject to the limitations set forth in this Agreement, any reasonable
attorneys’ or other reasonable fees or expenses incurred by such party in
connection with any Proceeding to the extent such party would have been
indemnified for such fees or expenses if the indemnification provided for in
this Section was available to such party in accordance with its terms.

 

The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 5(d) were determined by
pro rata allocation or by any other method of allocation that does not take
into account the equitable considerations referred to in the immediately
preceding paragraph.  Notwithstanding the
provisions of this Section 5(d), no Holder shall be required to
contribute, in the aggregate, any amount in excess of the amount by which the
proceeds actually received by such Holder from the sale of the Registrable
Securities subject to the Proceeding exceeds the amount of any damages that
such Holder has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission, except in the case of
fraud by such Holder.

 

The indemnity and contribution agreements contained in
this Section are in addition to any liability that the Indemnifying
Parties may have to the Indemnified Parties.

 

6.                                       Miscellaneous

 

(a)                                  Remedies.  In the event of a breach by the Company or by
a Holder, of any of their 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.  The Company and each Holder agree that
monetary damages would not provide adequate compensation for any losses
incurred by reason of a

 

10

 

breach
by it of any of the provisions of this Agreement and hereby further agrees
that, in the event of any action for specific performance in respect of such
breach, it shall waive the defense that a remedy at law would be adequate.

 

(b)                                 No
Piggyback on Registrations.  Except
as set forth on Schedule 6(b) attached 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 a Registration
Statement other than the Registrable Securities.  No Person has any right to cause the Company
to effect the registration under the Securities Act of any securities of the
Company.  The Company shall not file any
other registration statement until after the Effective Date.

 

(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 any event of the kind described in Section 3(c),
such Holder will forthwith discontinue disposition of such Registrable
Securities under the 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 to be incorporated by reference in such Prospectus or Registration
Statement.  The Company will use its best
efforts to ensure that the use of the Prospectus may be resumed as promptly as
it practicable.  The Company agrees and
acknowledges that any periods during which the Holder is required to
discontinue the disposition of the Registrable Securities hereunder shall be
subject to the provisions of Section 2(b).

 

(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 the stock
option or other employee benefit plans, then the Company shall send to each
Holder a written notice of such determination and, if within fifteen days after
the date 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, subject to customary
underwriter cutbacks applicable to all holders of registration rights.

 

(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

 

11

 

same
shall be in writing and signed by the Company and each Holder of the then
outstanding Registrable Securities.

 

(g)                                 Notices.  Any and all notices or other communications
or deliveries required or permitted to be provided hereunder shall be made in
accordance with the provisions of the Purchase Agreement.

 

(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 inure to the benefit of each
Holder.  Each Holder may assign their
respective rights hereunder in the manner and to the Persons as permitted under
the 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.  All questions concerning the
construction, validity, enforcement and interpretation of this Agreement shall
be determined with the provisions of the Purchase Agreement.

 

(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 commercially
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.

 

(n)                                 Independent
Nature of Holders’ Obligations and Rights. 
The obligations of each Holder hereunder are several and not joint with
the obligations of any other Holder hereunder, and no Holder shall be
responsible in any way for the performance of the obligations of any other
Holder hereunder.  Nothing contained
herein or in any other agreement or document delivered at any closing, and no
action taken by any Holder pursuant hereto or thereto, shall be deemed to
constitute the Holders as a partnership, an association, a joint venture or any
other kind of entity, or create a presumption that the

 

12

 

Holders are in any way
acting in concert with respect to such obligations or the transactions
contemplated by this Agreement.  Each
Holder shall be entitled to protect and enforce its rights, including without
limitation the rights arising out of this Agreement, and it shall not be
necessary for any other Holder to be joined as an additional party in any
proceeding for such purpose.

 

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

 

13

 

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

 

	
   

  	
  IMPLANT SCIENCES CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
  A. J. Armini

  
	
   

  	
   

  	
  Title:

  	
  President and CEO

  

 

 

[SIGNATURE PAGE OF HOLDERS FOLLOWS]

 

 

[HOLDER’S SIGNATURE PAGE TO IMX RRA]

 

	
  Name of Holder:

  	
   

  	
   

  
	
  Signature
  of Authorized Signatory of Holder:

  	
   

  	
   

  
	
  Name of
  Authorized Signatory:

  	
   

  	
   

  
	
  Title of
  Authorized Signatory: 

  	
   

  	
   

  
								

 

 

[SIGNATURE PAGES CONTINUE]

 

15

 

ANNEX A

 

Plan of Distribution

 

The Selling Stockholders (the “Selling Stockholders”)
of the common stock (“Common Stock”) of Implant Sciences Corporation
(the “Company”) and any of their pledgees, assignees and
successors-in-interest may, from time to time, sell any or all of their shares
of Common Stock on any stock exchange, market or trading facility on which the
shares are traded or in private transactions. 
These sales may be at fixed or negotiated prices.  The Selling Stockholders may use any one or
more of the following methods when selling shares:

 

•                  ordinary
brokerage transactions and transactions in which the broker-dealer solicits
purchasers;

 

•                  block trades
in which the broker-dealer will attempt to sell the shares as agent but may
position and resell a portion of the block as principal to facilitate the
transaction;

 

•                  purchases by
a broker-dealer as principal and resale by the broker-dealer for its account;

 

•                  an exchange
distribution in accordance with the rules of the applicable exchange;

 

•                  privately
negotiated transactions;

 

•                  settlement
of short sales entered into after the date of this prospectus;

 

•                  broker-dealers
may agree with the Selling Stockholders to sell a specified number of such
shares at a stipulated price per share;

 

•                  a
combination of any such methods of sale;

 

•                  through the
writing or settlement of options or other hedging transactions, whether through
an options exchange or otherwise; or

 

•                  any other
method permitted pursuant to applicable law.

 

The Selling Stockholders may also sell shares under
Rule 144 under the Securities Act of 1933, as amended (the “Securities Act”),
if available, rather than under this prospectus.

 

Broker dealers engaged by the Selling Stockholders may
arrange for other brokers dealers to participate in sales.  Broker dealers may receive commissions or
discounts from the Selling Stockholders (or, if any broker dealer acts as agent
for the purchaser of shares, from the purchaser) in amounts to be negotiated,
but, except as set forth in a supplement to this Prospectus, in the case of an
agency transaction not in excess of a customary brokerage commission in compliance
with NASDR Rule 2440; and in the case of a principal transaction a markup or
markdown in compliance with NASDR IM-2440.

 

16

 

In connection with the sale of our common stock or
interests therein, the Selling Stockholders may enter into hedging transactions
with broker-dealers or other financial institutions, which may in turn engage
in short sales of the common stock in the course of hedging the positions they
assume.  The Selling Stockholders may
also sell shares of our common stock short and deliver these securities to
close out their short positions, or loan or pledge the common stock to
broker-dealers that in turn may sell these securities.  The Selling Stockholders may also enter into
option or other transactions with broker-dealers or other financial
institutions or the creation of one or more derivative securities which require
the delivery to such broker-dealer or other financial institution of shares
offered by this prospectus, which shares such broker-dealer or other financial
institution may resell pursuant to this prospectus (as supplemented or amended
to reflect such transaction).

 

The Selling Stockholders and any brokerdealers or
agents that are involved in selling the shares may be deemed to be “underwriters”
within the meaning of the Securities Act in connection with such sales.  In such event, any commissions received by
such brokerdealers or agents and any profit on the resale of the shares
purchased by them may be deemed to be underwriting commissions or discounts
under the Securities Act.  Each Selling
Stockholder has informed the Company that it does not have any written or oral
agreement or understanding, directly or indirectly, with any person to
distribute the Common Stock. In no event shall any broker-dealer receive fees,
commissions and markups which, in the aggregate, would exceed eight percent
(8%).

 

The Company is required to pay certain fees and
expenses incurred by the Company incident to the registration of the shares.  The Company has agreed to indemnify the
Selling Stockholders against certain losses, claims, damages and liabilities,
including liabilities under the Securities Act.

 

Because Selling Stockholders may be deemed to be “underwriters”
within the meaning of the Securities Act, they will be subject to the
prospectus delivery requirements of the Securities Act.  In addition, any securities covered by this
prospectus which qualify for sale pursuant to Rule 144 under the Securities Act
may be sold under Rule 144 rather than under this prospectus.  Each Selling Stockholder has advised us that
they have not entered into any written or oral agreements, understandings or
arrangements with any underwriter or broker-dealer regarding the sale of the
resale shares.  There is no underwriter
or coordinating broker acting in connection with the proposed sale of the
resale shares by the Selling Stockholders.

 

We agreed to keep this prospectus effective until the
earlier of (i) the date on which the shares may be resold by the Selling
Stockholders without registration and without regard to any volume limitations
by reason of Rule 144(k) under the Securities Act or any other rule of similar
effect or (ii) all of the shares have been sold pursuant to the prospectus or
Rule 144 under the Securities Act or any other rule of similar effect.  The resale shares will be sold only through
registered or licensed brokers or dealers if required under applicable state
securities laws. In addition, in certain states, the resale shares may not be
sold unless they have been registered or qualified for sale in the applicable
state or an exemption from the registration or qualification requirement is
available and is complied with.

 

17

 

Under applicable rules and regulations under the
Exchange Act, any person engaged in the distribution of the resale shares may
not simultaneously engage in market making activities with respect to our
common stock for a period of two business days prior to the commencement of the
distribution.  In addition, the Selling
Stockholders will be subject to applicable provisions of the Exchange Act and
the rules and regulations thereunder, including Regulation M, which may limit
the timing of purchases and sales of shares of our common stock by the Selling
Stockholders or any other person.  We
will make copies of this prospectus available to the Selling Stockholders and
have informed them of the need to deliver a copy of this prospectus to each
purchaser at or prior to the time of the sale.

 

18

 

Annex B

 

Implant Sciences Corporation

 

Selling Securityholder Notice and Questionnaire

 

The
undersigned beneficial owner of common stock, par value $0.10 per share (the “Common
Stock”), of Implant Sciences Corporation, a Massachusetts corporation (the “Company”),
(the “Registrable Securities”) understands that the Company has filed or
intends to file with the Securities and Exchange Commission (the “Commission”)
a registration statement on Form S-3 (the “Registration Statement”) for
the registration and resale under Rule 415 of the Securities Act of 1933, as
amended (the “Securities Act”), of the Registrable Securities, in
accordance with the terms of the Registration Rights Agreement, dated as of March ___,
2005 (the “Registration Rights Agreement”), among the Company and the
Purchasers named therein.  A copy of the
Registration Rights Agreement is available from the Company upon request at the
address set forth below.  All capitalized
terms not otherwise defined herein shall have the meanings ascribed thereto in
the Registration Rights Agreement.

 

Certain
legal consequences arise from being named as a selling securityholder in the
Registration Statement and the related prospectus.  Accordingly, holders and beneficial owners of
Registrable Securities are advised to consult their own securities law counsel
regarding the consequences of being named or not being named as a selling
securityholder in the Registration Statement and the related prospectus.

 

NOTICE

 

The
undersigned beneficial owner (the “Selling Securityholder”) of
Registrable Securities hereby elects to include the Registrable Securities
owned by it and listed below in Item 3 (unless otherwise specified under such
Item 3) in the Registration Statement.

 

19

 

The undersigned hereby
provides the following information to the Company and represents and warrants
that such information is accurate:  

 

QUESTIONNAIRE

 

1.                                      Name.

 

(a)                                  Full
Legal Name of Selling Securityholder

 

 

 

(b)                                 Full
Legal Name of Registered Holder (if not the same as (a) above) through which
Registrable Securities Listed in Item 3 below are held:

 

 

 

(c)                                  Full
Legal Name of Natural Control Person (which means a natural person who directly
you indirectly alone or with others has power to vote
or dispose of the securities covered by the questionnaire):

 

 

 

2.              Address for Notices to Selling
Securityholder:

 

 

 

 

Telephone:

Fax:

Contact
Person:

 

3.              Beneficial
Ownership of Registrable Securities:  

 

(a)                                  Type
and Principal Amount of Registrable Securities beneficially owned:

 

 

 

 

 

20

 

4.              Broker-Dealer Status:  

 

(a)                                  Are you a broker-dealer?  

 

Yes   o           No  o

 

Note:                   If yes, the Commission’s staff has indicated that you
should be identified as an underwriter in the Registration Statement.  

 

(b)                                 Are you an affiliate of a broker-dealer?  

 

Yes   o           No  o

 

(c)                                  If you are an affiliate of a
broker-dealer, do you certify that you bought the Registrable Securities in the
ordinary course of business, and at the time of the purchase of the Registrable
Securities to be resold, you had no agreements or understandings, directly or
indirectly, with any person to distribute the Registrable Securities?  

 

Yes   o           No  o

 

Note:                   If no, the Commission’s staff has indicated that you
should be identified as an underwriter in the Registration Statement.  

 

5.              Beneficial Ownership of Other
Securities of the Company Owned by the Selling Securityholder.  

 

Except as set forth below in this
Item 5, the undersigned is not the beneficial or registered owner of any
securities of the Company other than the Registrable Securities listed above in
Item 3.  

 

(a)                                  Type and Amount of Other Securities
beneficially owned by the Selling Securityholder:

 

 

 

 

21

 

6.              Relationships with the Company:  

 

Except as
set forth below, neither the undersigned nor any of its affiliates, officers,
directors or principal equity holders (owners of 5% of more of the
equity securities of the undersigned) has held any position or office or has
had any other material relationship with the Company (or its predecessors or
affiliates) during the past three years.  

 

State any exceptions here:

 

 

 

 

The
undersigned agrees to promptly notify the Company of any inaccuracies or
changes in the information provided herein that may occur subsequent to the
date hereof at any time while the Registration Statement remains effective.  

 

By
signing below, the undersigned consents to the disclosure of the information
contained herein in its answers to Items 1 through 6 and the inclusion of such
information in the Registration Statement and the related prospectus.  The undersigned understands that such
information will be relied upon by the Company in connection with the
preparation or amendment of the Registration Statement and the related
prospectus.  

 

IN
WITNESS WHEREOF the undersigned, by authority duly given, has caused this
Notice and Questionnaire to be executed and delivered either in person or by
its duly authorized agent.  

 

	
  Dated:

  	
   

  	
   

  	
  Beneficial
  Owner:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
  Title:

  
						

 

PLEASE FAX A COPY OF THE COMPLETED AND EXECUTED NOTICE
AND QUESTIONNAIRE, AND RETURN THE ORIGINAL BY OVERNIGHT MAIL, TO:   

 

22

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