ARTICLE 6

Beneficiary(ies)

6.1

Beneficiary Designation: Each Participant may, at any time, designate one or more Beneficiaries to receive the Participant’s Change of Control Payment in the event of the Participant’s death. A Participant may make an initial Beneficiary designation, or change an existing Beneficiary designation without the consent of the previously designated Beneficiary, by completing, signing and dating a form approved by the Committee as a beneficiary designation form and submitting the completed, signed and dated form to the Committee before the Participant’s death. Upon acceptance by the Committee of a Participant’s Beneficiary designation form, all Beneficiary designations previously filed by that Participant shall automatically be canceled.

6.2

No Designated Beneficiary or no Surviving Designated Beneficiary:  If the Participant has not designated a Beneficiary or the Participant’s designated Beneficiary(ies) do not survive the Participant, the Participant’s Change of Control Payment shall be paid to the Participant’s spouse, or if there is no spouse, to the Participant’s estate.

ARTICLE 7

Taxation of Payments

7.1

Withholding Taxes:  The Company may withhold from the Participant's benefit payment hereunder the amount which it determines is necessary to satisfy its obligation to withhold federal, state and local income taxes or other taxes or amounts required to be withheld.

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7.2

Section 4999 Gross-Up Payments.  If the total of all “payments in the nature of compensation” (as that term is defined in the regulations issued under Section 280G of the Code) to or for the benefit of the Participant (whether pursuant to the Plan or otherwise), determined on a pre-tax basis and before the application of the adjustment or gross-up provisions of this Section 7.2 (the “Participant's Parachute Payments”) would subject the Participant to the excise tax levied on certain “excess parachute payments” under Section 4999 of the Code, the Company shall pay to the Participant an additional payment (the “Section 4999 Gross-Up Payment”) in an amount such that after reduction for all taxes, including the excise tax described in Section 4999 of the Code with respect to the Section 4999 Gross-Up Payment, the remaining amount equals the excise tax described in Section 4999 of the Code and all related interest and penalties due with respect to the Participant's Parachute Payments.

Any Section 4999 Gross-Up Payment shall be paid in connection with or as soon as practicable after the remittance to the applicable taxing authorities of the underlying taxes and in all events not later than the close of the calendar year following the calendar year in which such remittance takes place. Payments under the Plan (including any payments pursuant to Section 8.2 hereof) shall be made without regard to whether the deductibility of such payments (or any other payments to or for the benefit of the Participant) would be limited or precluded by Section 280G of the Code and without regard to whether such payments (or any other payments) would subject the Participant to the excise tax levied on certain “excess parachute payments” under Section 4999 of the Code.

7.3

7.4

Assumed Tax Bracket:  For purposes of determining the amount of the Section 4999 Gross-Up Payment and the Section 409A Gross-Up Payment, the Participant or the Participant’s Beneficiary shall be deemed to pay federal income tax and employment taxes at the highest marginal rate of federal income and employment taxation in the calendar year in which the Section 4999 Gross-Up Payment and the Section 409A Gross-Up Payment is to be made and state and local income taxes at the highest marginal rate of taxation in the state and locality of the Participant or the Participant’s Beneficiary’s domicile for income tax purposes on the date the Section 4999 Gross-Up Payment and the Section 409A Gross-Up Payment is made, net of the maximum reduction in federal income taxes that may be obtained from the deduction of such state and local taxes.

7.5

Determination of Excise Tax:  All determinations of Section 4999 Gross-Up Payments and

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Section 409A Gross-Up Payments that are required to be made under this Article 7 shall be made by such public accounting firm as may be retained by the Company. The determination by such accounting firm shall be final and conclusive, absent manifest error.  

7.6

Claim by Internal Revenue Service:  As soon as practicable, a Participant shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would result in the imposition of the excise tax under Section 4999 of the Code or a Section 409A Tax. If the Company notifies the Participant in writing that it desires to contest such claim, the Participant shall cooperate in all reasonable ways with the Company in such contest and the Company shall be entitled to participate in all proceedings relating to such claim; provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold the Participant harmless, on an after-tax basis, for any excise, employment or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses.

ARTICLE 8

Miscellaneous

8.1

No Mitigation and Burden of Proof:  Except as otherwise expressly provided for in this Plan, no payment payable hereunder shall be subject to offset including, but not limited to, amounts in respect of any claims which the Company may have against the Participant, provided, however, the amount payable hereunder to any Participant shall be reduced by any amounts payable to such Participant from the Company or any Affiliate pursuant to any other severance plan or policy (including any employment agreement).

8.2

Legal Fees:  The Company shall reimburse all costs and expenses, including attorneys' fees, of the Participant in connection with any legal proceedings relating to the Plan; provided, however, the Company shall not reimburse such costs and expenses for the Participant if (a) prior to the initiation of any proceedings by the Participant, such Participant fails to specify in writing all claims relating to the Plan and to provide the Committee with thirty (30) days to address such claims, or (b) the judge or other individual presiding over the proceedings affirmatively finds that (i) the Participant did not initiate such proceedings in good faith, or (ii) if applicable, the Participant violated in any material respect the terms of the agreement set forth on Appendix B.

8.3

Successors:  If the Company shall be merged into or consolidated with another entity, the provisions of this Plan shall be binding upon and inure to the benefit of the entity surviving such merger or resulting from such consolidation. The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Company to expressly assume and agree to perform the duties set forth hereunder in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place (including but not limited to Section 8.6 hereof).

8.4

Indemnification.  In addition to such other rights of indemnification as they may have as members of the Board or the Committee, the members of the Board and the Committee shall be indemnified by the Company against all costs and expenses reasonably incurred by them in connection with any action, suit or proceeding to which they or any of them may be party by reason of any action taken or failure to act under or in connection with the Plan and against all amounts paid by them in settlement thereof (provided such settlement is approved by independent legal counsel selected by the Company) or paid by them in satisfaction of a judgment in any such

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action, suit or proceeding, except a judgment based upon a finding that such member was not acting in good faith on the reasonable belief that he or she was acting in the best interests of the Company; provided that upon the institution of any such action, suit or proceeding, a Committee or Board member shall, in writing, give the Company notice thereof and an opportunity, at its own expense, to handle and defend the same before such Committee or Board member undertakes to handle and defend it on such member's own behalf.

8.5

Plan Expenses:  Any expenses of administering the Plan shall be borne by the Company.

8.6

Survival:  Notwithstanding any provision in the Plan to the contrary, the obligations hereunder to the Participants which arise due to a Change of Control shall survive any termination of the Plan and shall be binding upon the Company.

8.7

Notice:  All notices and other communications required or permitted hereunder shall be in writing and shall be deemed to have been duly given upon receipt, or five (5) days after deposit in the United States mail, registered or certified and return receipt requested, for delivery to the Participant at the last known address specified in the Company's records, by electronic mail or facsimile, upon electronic confirmation of receipt.

Any notice required to come from the Committee shall be deemed to be satisfied by a notice from an authorized officer of the Company following approval by the Committee of the action described in such notice.

8.8

Governing Law:  The validity, construction and effect to the Plan and any actions taken under or relating to the Plan shall be determined in accordance with the laws of the Commonwealth of Massachusetts.

8.9

Section 409A:  Notwithstanding any other provision hereunder:

(a)

The Plan and all benefit payments hereunder shall be construed and applied consistent with the applicable requirements for exemption from, or for complying with, Section 409A of the Code.  

(b)

Except as otherwise expressly provided for under the Plan, any reimbursement under the Plan to a Participant shall be paid or provided consistent with the Treasury Regulations under Section 409A of the Code.

8.10

No Effect on Employment.  Nothing contained in this Plan shall be construed to limit or restrict the right of the Company to terminate the Participant’s employment at any time, with or without cause or notice, or to increase or decrease the Participant’s compensation from the rate of compensation in existence at the time such person became a Participant hereunder.

8.11

Case and Gender:  Wherever required by the context of this Plan, the singular or plural case and the masculine, feminine and neuter genders shall be interchangeable.

8.12

Captions:  The captions used in this Plan are intended for descriptive and reference purposes only and are not intended to affect the meaning of any Section hereunder.

8.13

Arbitration.  If any dispute shall arise between a Participant and the Company with reference to the interpretation of this Plan or the rights of any party with respect to the Plan, the dispute shall be referred to arbitration under the National Rules for the Resolution of Employment Disputes of

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the American Arbitration Association. The arbitration shall take place in the Commonwealth of Massachusetts and the arbitration proceedings will be governed by the rules of the American Arbitration Association, as applicable. The decision of the arbitrator shall be final and binding upon the Participant and the Company, and judgment upon the award rendered by the arbitrator may be entered by any court having jurisdiction thereof. Notwithstanding the foregoing, the Company does not waive its rights to specifically enforce in court, the obligations set forth in agreements set forth on Appendix B and specifically, the Company may file and sustain a claim in court to enforce such rights.

The Company hereby delivers and the Participant hereby acknowledges receipt of a copy of the Implant Sciences Corporation Change of Control Payment Plan.

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APPENDIX A

ELIGIBLE INDIVIDUAL (PARTICIPANTS) AND CHANGE IN CONTROL PAYMENTS

The Change of Control Payment is Agreed to by the Company and the Participant this 7th day of September, 2012.

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APPENDIX B

AGREEMENT RELATED TO NONDISCLOSURE, NONCOMPETITION AND OTHER MATTERS

This Agreement is made this 7th day of September, 2012 between Implant Sciences Corporation, a Massachusetts corporation and _________________ (the “Executive”).

WHEREAS, Executive acknowledges that the Company could be significantly harmed if the Executive solicits the Company’s employees, clients, or customers, or discloses any proprietary or confidential business information of the Company.

NOW, THEREFORE, in consideration of the continued employment of the Executive by the Company and the protection afforded Executive by being designated a “Participant” under Implant Sciences Corporation Change of Control Payment Plan (the “Plan”) (whether or not benefit payments are ever triggered thereunder), the Executive and the Company agree as follows:

1.

Proprietary Information.

(a)

Executive agrees that all information and know-how, whether or not in writing, of a private, secret or confidential nature concerning the Company’s business or financial affairs (collectively, “Proprietary Information”) is and shall be the exclusive property of the Company.  By way of illustration, but not limitation, Proprietary Information may include inventions, products, processes, methods, techniques, formulas, designs, drawings, slogans, tests, logos, ideas, practices, projects, developments, plans, research data, financial data, personnel data, computer programs and codes, and customer and supplier lists.  Executive will not disclose any Proprietary Information to others outside the Company except in the performance of his duties or use the same for any unauthorized purposes without written approval by an officer of the Company, either during or after his employment, unless and until such Proprietary Information has become public knowledge or generally known within the industry without fault by Executive, or unless otherwise required by law.

(b)

Executive agrees that all files, letters, memoranda, reports, records, data, sketches, drawings, laboratory notebooks, program listings, or other written, photographic, electronic or other material containing Proprietary Information, whether created by Executive or others, which shall come into his custody or possession, shall be and are the exclusive property of the Company to be used by Executive only in the performance of his duties for the Company.

(c)

Executive agrees that his obligation not to disclose or use information, know-how and records of the types set forth in paragraphs (a) and (b) above, also extends to such types of information, know-how, records and tangible property of subsidiaries and joint ventures of the Company, customers of the Company or suppliers to the Company or other third parties who may have disclosed or entrusted the same to the Company or to Executive in the course of the Company’s business.

2.

Inventions.

(a)

Executive shall disclose promptly to an officer or to attorneys of the Company in writing any idea, invention, work of authorship, whether patentable or unpatentable, copyrightable or uncopyrightable, including, but not limited to, any computer program,

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software, command structure, code, documentation, compound, genetic or biological material, formula, manual, device, improvement, method, process, discovery, concept, algorithm, development, secret process, machine or contribution (any of the foregoing items hereinafter referred to as an "Invention") Executive may conceive, make, develop or work on, in whole or in part, solely or jointly with others. The disclosure required by this Section applies (a) during the period of Executive’s employment with the Company and for one year thereafter; (b) with respect to all Inventions whether or not they are conceived, made, developed or worked on by Executive during Executive’s regular hours of employment with the Company; (c) whether or not the Invention was made at the suggestion of the Company; (d) whether or not the Invention was reduced to drawings, written description, documentation, models or other tangible form; and (e) whether or not the Invention is related to the general line of business engaged in by the Company.

(b)

Executive hereby assigns to the Company without royalty or any other further consideration Executive’s entire right, title and interest in and to all Inventions which Executive conceives, makes, develops or works on during employment and for one year thereafter, except those Inventions that Executive develops entirely on Executive’s own time after the date of this Agreement without using the Company's equipment, supplies, facilities or trade secret information unless those Inventions either (a) relate at the time of conception or reduction to practice of the Invention to the Company's business, or actual or demonstrably anticipated research or development of the Company; or (b) result from any work performed by Executive for the Company.

(c)

Executive will make and maintain adequate and current written records of all Inventions. These records shall be and remain the property of the Company.

(d)

Subject to Section 4, Executive will assist the Company in obtaining, maintaining and enforcing patents and other proprietary rights in connection with any Invention covered by Section 1.  Executive further agrees that his obligations under this Section shall continue beyond the termination of his employment with the Company, but if he is called upon to render such assistance after the termination of such employment, he shall be entitled to a fair and reasonable rate of compensation for such assistance. Executive shall, in addition, be entitled to reimbursement of any expenses incurred at the request of the Company relating to such assistance.

3.

Prior Contracts and Inventions; Information Belonging to Third Parties.  

(a)

Executive represents that there are no contracts to assign Inventions between any other person or entity and Executive.  

(b)

Executive further represents that (a) Executive is not obligated under any consulting, employment or other agreement which would affect the Company's rights or my duties under this Agreement, (b) there is no action, investigation, or proceeding pending or threatened, or any basis therefor known to me involving Executive’s prior employment or any consultancy or the use of any information or techniques alleged to be proprietary to any former employer, and (c) the performance of Executive’s duties as an employee of the Company will not breach, or constitute a default under any agreement to which Executive is bound, including, without limitation, any agreement limiting the use or disclosure of proprietary information acquired in confidence prior to engagement by the Company.

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(c)

 Executive will not, in connection with Executive’s employment by the Company, use or disclose to the Company any confidential, trade secret or other proprietary information of any previous employer or other person to which Executive is not lawfully entitled.

4.

Noncompetition and Nonsolicitation.

(a)

During the Employment Period and for a period of twelve (12) months after the termination of Executive’s employment with the Company for any reason, Executive will not directly or indirectly, absent the Company’s prior written approval, render services of a business, professional or commercial nature to any other person or entity in the area of trace explosives detection surface modification services to the medical device and semiconductor industries or such other services or products provided by the Company a the time employment terminates in the (same geographical area where the Company does business at the time this covenant is in effect) (or where the Company has made, as of the effective date of termination, active plans to do business), whether such services are for compensation or otherwise, whether alone or in conjunction with others, as an employee, as a partner, or as a shareholder (other than as the holder of not more than 1% of the combined voting power of the outstanding stock of a public company), officer or director of any corporation or other business entity, or as a trustee, fiduciary or in any other similar representative capacity.

(b)

During the Employment Period and for a period of twelve (12) months after the termination of Executive’s employment for any reason, Executive will not, directly or indirectly, recruit, solicit or induce, or attempt to recruit, solicit or induce any employee or employees of the Company to terminate their employment with, or otherwise cease their relationship with, the Company.

(c)

During the Employment Period and for a period of twelve (12) months after termination of Executive’s employment for any reason, Executive will not, directly or indirectly, contact, solicit, divert or take away, or attempt to solicit, contact, divert or take away, the business or patronage of any of the clients, customers or accounts, or prospective clients, customers or accounts, of the Company.

5.

If any restriction set forth in this Section is found by any court of competent jurisdiction to be unenforceable because it extends for too long a period of time or over too great a range of activities or in too broad a geographic area, it shall be interpreted to extend only over the maximum period of time, range of activities or geographic area as to which it may be enforceable.

6.

The restrictions contained in this Section are necessary for the protection of the business and goodwill of the Company and are considered by Executive to be reasonable for such purpose.  Executive agrees that any breach of this Section will cause the Company substantial and irrevocable damage and therefore, in the event of any such breach, in addition to such other remedies which may be available, the Company shall have the right to seek specific performance and injunctive relief.  The Company shall be entitled to recover its reasonable attorneys’ fees in the event it prevails in such an action.  

7.

Notices.

All notices required or permitted under this Agreement shall be in writing and shall be deemed effective upon receipt or five (5) days after deposit in the United States Post Office, by registered or certified mail, postage prepaid, return receipt requested, addressed to the other party at the address shown

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below, by electronic mail or facsimile, upon electronic confirmation of receipt, or at such other address or addresses as either party shall designate to the other in accordance with this Section:

The Company:

Implant Sciences Corporation

600 Research Drive

Wilmington, MA 01887

Attention: Chief Financial Officer

The Executive:

Home Address as reflected on Company records or electronic email or facsimile provided from time to time by Executive.

8.

Pronouns.

Whenever the context may require, any pronouns used in this Agreement shall include the corresponding masculine, feminine or neuter forms, and the singular forms of nouns and pronouns shall include the plural, and vice versa.

9.

Entire Agreement.

This Agreement constitutes the entire agreement between the parties and supersedes all prior agreements and understandings, whether written or oral, relating to the subject this of this Agreement.

10.

Amendment.

This Agreement may be amended or modified only by a written instrument executed by both the Company and the Executive.

11.

Law.

This Agreement shall be construed, interpreted and enforced in accordance with the laws of the Commonwealth of Massachusetts.

12.

Successors and Assigns.

This Agreement shall be binding upon and inure to the benefit of both parties and their respective successors and assigns, including any corporation with which or into which the Company may be merged or which may succeed to its assets or business, provided, however, that the obligations of the Executive are personal and shall not be assigned by him or her.

13.

Miscellaneous.

13.1

No delay or omission by the Company in exercising any right under this Agreement shall operate as a waiver of that or any other right. A waiver or consent given by the Company on any one occasion shall be effective only in that instance and shall not be construed as a bar or waiver of any right on any other occasion.

13.2

The captions of the sections of this Agreement are for convenience of reference only and in no way define, limit or affect the scope or substance of any section of this Agreement.

13.3

In case any provision of this Agreement shall be invalid, illegal or otherwise unenforceable, the validity, legality and enforceability of the remaining provisions shall in no way be

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affected or impaired thereby.

13.4

Nothing contained in this Agreement shall be construed to limit or restrict the right of Company to terminate an Executive’s employment at any time, with or without cause or notice, or to increase or decrease an Executive’s compensation from the rate of compensation in existence on the date hereof.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date and year set forth above.

IMPLANT SCIENCES CORPORATION

By:

EXECUTIVE

Name:

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