CREDIT AGREEMENT

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THIS CREDIT AGREEMENT , dated as of September 4, 2009 (this “ Agreement ”), is among IMPLANT SCIENCES CORPORATION , a Massachusetts corporation as borrower (“ Borrower ”), C ACQUISITION CORP. ,   a Delaware corporation, ACCUREL SYSTEMS INTERNATIONAL CORPORATION , a California corporation, and IMX ACQUISITIONS CORP. ,   a Delaware corporation, as guarantors (each a “ Guarantor ” and collectively “ Guarantors ” and together with Borrower, collectively, “ Loan Parties ” and each individually a “ Loan Party ”), and DMRJ GROUP, LLC (“ Lender ”).

A.   Borrower desires to borrow funds from Lender for working capital purposes, which borrowings and other Obligations (as defined herein) are to be secured by the Collateral (as defined herein).

B.   Subject to the terms and conditions hereinafter set forth, Lender has indicated its willingness to make loans to Borrower; provided , however , that Lender is only willing to make loans to Borrower subject to satisfaction of certain conditions as set forth herein.

NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:

As used herein, the following terms shall have the meanings herein indicated:

1.1   Account means each of the Funding Account and the Collection Account.

1.2   Account Bank means TD Bank, N.A. or such other bank which maintains one or more of the Accounts as may be selected by Borrower, subject to Lender’s approval.

1.3   Account Control Agreements means, collectively, the Account Control Agreements, dated as of the date hereof, between Borrower, Lender and the Account Bank pertaining to the Funding Account and the Collection Account, and each other Account Control Agreement, if any, entered into among Borrower, Lender and a bank in connection herewith; provided that each such Account Control Agreement shall be in form and substance satisfactory to Lender.

1.4   Advance has the meaning set forth in Section 2.1 .

1.5   Advance Date has the meaning set forth in Section 2.2 .

1.6   Advance Period means the period commencing on the Closing Date and ending on the earlier of (a) October 31, 2009 and (b) the Termination Date.

1.7   Advance Request has the meaning set forth in Section 2.2 .

1.8   Affected Party means Lender and its respective successors and assigns.

1.9   Affiliate means, in respect of any Person, (a) any other Person directly or indirectly holding 10% or more of any class of Capital Stock of that Person, (b) any other Person 10% or more of any class of whose Capital Stock is held directly or indirectly by that Person, and (c) any other Person that, directly or indirectly, controls or is controlled by or is under common control with such Person; and for the purpose of this definition, “control” (including, with correlative meanings, the terms “controlled by” and “under common control with”) means the power to direct, or cause to be directed, the management and policies of a Person whether through the ownership of securities or interests or by contract or otherwise.

1.10   Agreement means this Credit Agreement, including any Schedules and Exhibits hereto.

1.11   Applicable Law means all provisions of statutes, laws, rules, regulations, ordinances, writs, interpretations, injunctions and orders of any Governmental Authority applicable to any Person, property, transaction or event, and all orders and decrees of all courts and arbitrators in proceedings or actions in which the Person in question is a party or which such property, transaction or event is the subject including applicable federal, state and local laws and regulations.

1.12   Articles of Organization shall have the meaning set forth in Section 4.5 .

1.13   Blocked Account shall have the meaning set forth in Section 5.1(r)

1.14   Borrowing Certificate means a certificate from an authorized Officer of Borrower relating to a proposed Advance, in the form attached hereto as Exhibit A , which certificate shall contain the following certifications of an Officer on behalf of Borrower: (a) as to Borrower’s compliance with all covenants set forth in the Transaction Documents; (b) that all representations and warranties of Borrower set forth in the Transaction Documents are true and correct in all material respects as if made on the date thereof (except to the extent already qualified by materiality or Material Adverse Effect, in which case such representations and warranties shall be true and correct in all respects as if made on the date thereof); (c) that no Default or Event of Default shall have occurred and be continuing or would result from the proposed Advance; (d) the Funding Conditions have been satisfied in full (as determined by Lender in its sole and absolute discretion); and (e) as to such other information as Lender may request in connection with any proposed borrowing hereunder.

1.15   Budget shall have the meaning set forth in Section 5.1(e)(vi) .

1.16   Business Day means any day banking transactions can be conducted in New York City, NY, USA and does not include any day which is a federal or state holiday in such location or Rosh Hashanah (both days) or Yom Kippur.

1.17   Bylaws shall have the meaning set forth in Section 4.5 .

1.18   Capital Stock means, with respect to any Person, any and all shares, interests, participations or other equivalents (however designated) of such Person’s capital stock or partnership, limited liability company or other equity interests at any time outstanding, and any and all rights, warrants or options exchangeable for or convertible into such capital stock or other interests.

1.19   Change of Control means the occurrence of any of the following events in one or a series of transactions:

(a)   the consolidation, merger or other business combination of the Borrower with or into another Person (other than (A) pursuant to a migratory merger effected solely for the purpose of changing the jurisdiction of incorporation of the Borrower or (B) a consolidation, merger or other business combination in which holders of the Borrower’s voting power immediately prior to the transaction continue after the transaction to hold, directly or indirectly, the voting power of the surviving entity or entities necessary to elect a majority of the members of the board of directors (or their equivalent if other than a corporation) of such entity or entities);

(b)   the sale or transfer of more than fifty percent (50%) of the Borrower’s assets (based on the fair market value as determined in good faith by the Borrower’s Board of Directors) other than inventory in the ordinary course of business in one or a related series of transactions;

(c)   closing of a purchase, tender or exchange offer made to the holders of more than fifty percent (50%) of the outstanding shares of Common Stock in which more than fifty percent (50%) of the outstanding shares of Common Stock were tendered and accepted; or

(d)   the issuance by the Borrower in one or more related or unrelated transactions of any shares, Options (other than Options granted to employees and consultants pursuant to any employee stock benefit, option, purchase or similar plan approved by the Borrower’s Board of Directors), warrants (other than the Warrants (as defined in the Note and Warrant Purchase Agreement)), interests, participations, or other equivalents (regardless of how designated) of the Borrower, whether voting or nonvoting, including Common Stock, preferred stock or any other “equity security” (as such term is defined in Rule 3a11-1 of the General Rules and Regulations promulgated by the Commission under the Exchange Act) or any equity contribution in received by the Borrower, which in the aggregate results in Net Cash Proceeds in excess of $500,000.

1.20   Closing Date means the date hereof.

1.21   Code means the Internal Revenue Code of 1986, as amended from time to time, and all regulations promulgated and rulings issued thereunder.

1.22   Collateral means all property and proceeds thereof now owned or hereafter acquired by any Loan Party or any other Person who has granted a Lien to Lender, in or upon which a Lien now or hereafter exists in favor of Lender, as security for the Obligations.

1.23   Collection Account means the account of Borrower that is located at the Account Bank, control of which is provided for in an Account Control Agreement, and which account is acknowledged and agreed to in writing by Lender as being the “Collection Account” for the purpose of this Agreement.

1.24   Collections means, with respect to each Receivable and all other Collateral, all cash collections and other cash proceeds of such Receivable or such other Collateral, including, without limitation, all (a) payments or repayments of any nature, and any applicable late fees, in any such case, received and collected on such Receivable, (b) proceeds received by virtue of the liquidation of such Receivable, net of expenses incurred in connection with such liquidation, (c) proceeds received under any insurance policy with respect to such Receivable, (d) other proceeds, including recoveries or collections of any deficiency balance, relating to such Receivable, (e) all cash proceeds of the Collateral, and (f) any other amounts received at the Collection Account in respect of a Receivable.

1.25   Commission means the United States Securities and Exchange Commission.

1.26   Commission Documents has the meaning set forth in Section 4.6 .

1.27   Common Stock means the common stock, par value $0.10 per share, of the Borrower.

1.28   Concentration Account means that certain deposit account #7928416333 of Lender located at TD Bank, N.A., or such other deposit account which Lender shall identify as the “Concentration Account” for the purpose of this Agreement.

1.29   Conditions Precedent means all of the conditions set forth in Article III .

1.30   Current Ratio has the meaning set forth in Section 5.1(u) .

1.31   Default means any event that with the passage of time or the giving of notice or both would be an Event of Default.

1.32   Default Rate has the meaning set forth in Section 2.5(e) .

1.33   Dollars and $ means United States dollars.

1.34   Environmental Laws means all applicable laws relating to the protection of the environment including, without limitation, all requirements pertaining to reporting, licensing, permitting, controlling, investigating or remediating emissions, discharges, releases or threatened releases of hazardous substances, chemical substances, pollutants, contaminants or toxic substances, materials or wastes, whether solid, liquid or gaseous in nature, into the air, surface water, groundwater or land, or relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of hazardous substances, chemical substances, pollutants, contaminants or toxic substances, material or wastes, whether solid, liquid or gaseous in nature.

1.35   ERISA means the Employee Retirement Income Security Act of 1974, as amended, and the regulations promulgated and rulings issued thereunder.

1.36   ERISA Affiliate means any Person who is a member of any Loan Party’s control group, or who is under common control with any Loan Party, within the meaning of Section 414(b) or (c) of the Code (and Sections 414(m) and (o) of the Code for purposes of provisions relating to Section 412 of the Code) and the regulations promulgated and rulings issued thereunder.

1.37   ERISA Event means (a) a Reportable Event with respect to a Pension Plan; (b) a withdrawal by any Loan Party or any ERISA Affiliate from a Pension Plan subject to Section 4063 of ERISA during a plan year in which it was a substantial employer (as defined in Section 4001(a)(2) of ERISA) or a cessation of operations which is treated as such a withdrawal under Section 4062(e) of ERISA; (c) a complete or partial withdrawal by any Loan Party or any ERISA Affiliate from a Multiemployer Plan or notification that a Multiemployer Plan is in reorganization or receipt by any Loan Party or any ERISA Affiliate of notice that a Multiemployer Plan is, or is expected to be in endangered or critical status within the meaning of Section 305 of ERISA; (d) the filing of a notice of intent to terminate, the treatment of a Pension Plan amendment as a termination under Section 4041 or 4041A of ERISA, or the commencement of proceedings by the PBGC to terminate a Pension Plan or Multiemployer Plan; (e) an event or condition which might reasonably be expected to constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan or Multiemployer Plan; (f) a determination that any Pension Plan is, or is expected to be, in “at-risk” status (as defined in Section 303(i)(4)(A) of ERISA or Section 430(i)(4)(A) of the Code); or (g) the imposition of any liability under Title IV of ERISA, other than PBGC premiums due but not delinquent under Section 4007 of ERISA, upon Borrower or any ERISA Affiliate.

1.38   Evaluation Date has the meaning set forth in Section 4.21 of this Agreement.

1.39   Event of Default has the meaning set forth in Article VII of this Agreement or in any other Transaction Document.

1.40   Exchange Act means the Securities Exchange Act of 1934, as amended.

1.41   Excluded Taxes means, with respect to Lender, Taxes imposed on or measured by its overall net income (however denominated), and franchise taxes imposed on it (in lieu of net income taxes), by the jurisdiction (or any political subdivision thereof) under the laws of which Lender is organized or in which its principal office is located, and branch profits or similar taxes.

1.42   Existing Security Agreement means that certain Security Agreement dated as of December 10, 2008 among the Loan Parties and Lender.

1.43   Expenses means all documented out of pocket costs and expenses of Lender (including, without limitation, accounting fees, audit fees, attorneys’ fees, UCC search fees, appraisal fees, underwriting fees, documentation costs and expenses and filing fees and

1.44   Facility has the meaning set forth in Section 2.1 .

1.45   Facility Limit means $3,000,000.

1.46   Financial Statements means balance sheets, profit and loss statements, statements of cash flows and statements of equityholders’ equity prepared in comparative form with respect to the corresponding period of the preceding fiscal year and prepared in accordance with GAAP.

1.47   Funding Account means that certain deposit account #7930880419 located at the Account Bank.

1.48   Funding Conditions has the meaning assigned to such term in Section 3.2 .

1.49   GAAP means all applicable generally accepted accounting principles of the Accounting Principles Board of the American Institute of Certified Public Accountants and the Financial Accounting Standards Board.

1.50   Governmental Authority means the government of the United States of America or any political subdivision thereof, whether state, federal or local, and any agency, authority, instrumentality, regulatory body, court, administrative court or judge, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government.

1.51   Guaranty means that certain Guaranty to be delivered by each of the Guarantors, dated as of the date hereof, substantially in the form of Exhibit B .

1.52   Indebtedness means, with respect to any Person, (a) all obligations for borrowed money, (b) all obligations evidenced by bonds, debentures, notes, or other similar instruments and all reimbursement or other obligations in respect of letters of credit, bankers acceptances, current swap agreements, interest rate hedging agreements, interest rate swaps, or other financial products, (c) all capital lease obligations that exceed $50,000 in the aggregate in any fiscal year, (d) all obligations or liabilities secured by a lien or encumbrance on any asset of such Person, irrespective of whether such obligation or liability is assumed, (e) all obligations for the deferred purchase price of assets, together with trade debt and other accounts payable that exceed $50,000 in the aggregate in any fiscal year, (f) all synthetic leases, (g) all obligations with respect to redeemable stock and redemption or repurchase obligations under any capital stock or other equity securities issued by such Person, (h) all reimbursement obligations and other liabilities of such Person with respect to surety bonds (whether bid, performance or otherwise), letters of credit, banker’s acceptances, drafts or similar documents or instruments issued for such Person’s account, (i) indebtedness of any partnership or joint venture in which such Person is a general partner or a joint venturer to the extent such Person is liable therefore as a result of such Person’s ownership interest in such entity, except to the extent that the terms of such indebtedness expressly provide that such Person is not liable therefore or such Person has no liability therefore as a matter of law, (j) trade debt and other account payables which remain unpaid more than one

1.53   Indemnified Party has the meaning assigned to such term in Section 6.1 .

1.54   Indemnified Taxes means Taxes other than Excluded Taxes.

1.55   Indemnity Claim has the meaning set forth in Section 6.2 .

1.56   Indemnity Matter has the meaning set forth in Section 6.1 .

1.57   Interest Expense means the interest expense of Loan Parties as would be shown on a statement of earnings and cash flow of Borrower for any measurement period prepared in accordance with GAAP, including without limitation all scheduled payments of interest on Indebtedness (specifically including the interest component of payment with respect to capital leases) and all fees (to the extent carried as interest expense on the financial statements of Borrower), as shown on a statement of income for Borrower for any measurement period prepared in accordance with GAAP.  For purposes of calculating Interest Expense, it shall be assumed that any guaranty constituting Indebtedness will require payments of interest, if any, in the amounts as called for in the underlying obligation which is the subject of the guaranty.

1.58   Interest Paid means any interest actually paid in cash by Borrower under Section 2.5(b) of this Agreement.

1.59   Investment means, with respect to any Person, all investments (by capital contribution or otherwise) in any other Person, or any extension of credit, loan, advance, purchase or repurchase of stock or other ownership interest, any Indebtedness or all or a substantial part of the assets or property of any Person, bonds, notes, debentures or other securities, or otherwise, and whether existing on the date of this Agreement or thereafter made, but such term shall not include the cash surrender value of life insurance policies on the lives of officers or employees, excluding amounts due from customers for services or products delivered or sold in the ordinary course of business.

1.60   Investment Property means all “investment property” (as defined in the Code) including, without limitation, (a) all securities, whether certificated or uncertificated, including stocks, bonds, interests in limited liability companies, partnership interests, treasuries, certificates of deposit, and mutual fund shares; (b) all securities entitlements of Borrower (or if referring to another Person, of such other Person), including the rights of Borrower (or if referring to another Person, of such other Person) to any securities account and the financial assets held by a securities intermediary in such securities account and any free credit balance or other money owing by any securities intermediary with respect to that account; (c) all securities accounts held by Borrower (or if referring to another Person, by such other Person); (d) all commodity contracts held by Borrower (or if referring to another Person, by such other Person);

1.61   IP Security Agreements means the Patent Security Agreement by and among the Loan Parties and the Lender, substantially in the form of Exhibit B attached to the Security Agreement, together with any Copyright Security Agreement or Trademark Security Agreement subsequently entered into by the Borrower or any Subsidiary and the Lender pursuant to the terms of the Security Agreement.

1.62   Lender-Related Persons has the meaning set forth in Section 6.1 .

1.63   Lien means any lien, security interest, mortgage, debenture, pledge, charge, claim, assignment by way of security, hypothecation or other encumbrance of any kind granted or permitted by a Person or arising by operation of law, in respect of any Person’s property or assets, or any consignment or capital lease of property by such Person as consignee or lessee or any other security agreement, trust or arrangement, having the effect of security for the payment or performance of any debt, liability or obligation.

1.64   Loan Parties has the meaning set forth in the introduction to this Agreement.

1.65   Management Consultant shall have the meaning set forth in Section 5.1(o)(i) .

1.66   Material Adverse Effect means any material adverse effect on the business, operations, properties or financial condition of the Borrower and its Subsidiaries (taken together as a whole) and/or any condition, circumstance, or situation that would prohibit or otherwise materially interfere with the ability of any Loan Party to perform any of its obligations under this Agreement or any of the Transaction Documents in any material respect.

1.67   Material Agreements means any written or oral contract, instrument, agreement, commitment, obligation, plan or arrangement, filed or required to be filed with the Commission.

1.68   Maturity Date means December 10, 2009.

1.69   Maximum Rate means the maximum rate or amount of interest that Lender is allowed to contract for, charge, take, reserve or receive under Applicable Law.

1.70   Minimum Balance has the meaning set forth in   Section 5.1(r) .

1.71   Multiemployer Plan means a “multiemployer plan,” within the meaning of Section 4001(a)(3) of ERISA, to which any Loan Party or any ERISA Affiliate makes, is making, or is obligated to make contributions or, during the preceding three calendar years, has made, or been obligated to make, contributions.

1.72   Net Cash Proceeds means 100% of the aggregate amount of cash received (directly or indirectly) from time to time (whether as initial consideration or through the payment or disposition of deferred consideration) by or on behalf of Borrower in connection with a transaction or series of transactions after deducting therefrom only reasonable fees, commissions, and expenses related thereto and required to be paid by the Borrower in connection with such

1.73   Net Income means for any period, the aggregate net income (or loss) of Loan Parties for such period on a consolidated basis determined in accordance with GAAP, provided , the following items shall be excluded from the calculation of Net Income: (a) after-tax gains and losses from asset sales or abandonment or reserves relating thereto; (b) items classified as extraordinary, nonrecurring or unusual gains, losses or charges, and the related tax effects, each determined in accordance with GAAP; (c) the net income of any Person acquired in a “pooling of interests” transaction accrued prior to the date it becomes a Subsidiary of a Loan Party or is merged or consolidated with a Loan Party or any Subsidiary of a Loan Party; (d) the net income (but not loss) of any Loan Party or any Subsidiary of a Loan Party to the extent that the declaration of dividends, the making of intercompany loans or similar payments by that Subsidiary of that income is restricted by a contract, operation of law or otherwise; (e) the net income of any Person, other than a Loan Party or a Subsidiary of a Loan Party, except to the extent of cash dividends or distributions paid to a Loan Party or a Subsidiary of a Loan Party by such Person; (f) any restoration to income of any contingency reserve; (g) income or loss attributable to discontinued operations (including operations disposed of during such period whether or not such operations were classified as discontinued); and (h) income attributable to insurance proceeds, condemnation awards or litigation awards or settlements.

1.74   Net Profits Interest has the meaning set forth in Section 2.7 .

1.75   Net Profits Paid means any Net Profits Interest actually paid in cash by Borrower under Section 2.7 of this Agreement.

1.76   Net Profits Payment Date means each Advance Date and the Termination Date.

1.77   Net Profits means, with respect to Loan Parties for the period commencing on the date hereof through the Termination Date, the Net Income after taxes of Loan Parties for such period plus the sum of the following (to the extent deducted in the computation of such Net Income): (a) depreciation expense; (b) amortization expense; (c) Interest Expense; and (d) income taxes, all as shown on a statement of income for Borrower for any measurement period on a consolidated basis prepared in accordance with GAAP.

1.78   Note has the meaning set forth in Section 2.3 .

1.79   Note and Warrant Purchase Agreement means that certain Note and Warrant Purchase Agreement dated as of December 10, 2008 between Borrower and Lender, as has been and may hereafter be amended, supplemented, restated or otherwise modified from time to time.

1.80   Note and Warrant Purchase Agreement Documents means the Transaction Documents (as defined in the Note and Warrant Purchase Agreement, as has been and may hereafter be amended, supplemented, restated or otherwise modified from time to time).

1.81   Obligations shall mean, without duplication, all present and future obligations, Indebtedness and liabilities of any Loan Party to Lender or any of its affiliates at any time and

1.82   Officer means Glenn Bolduc, in his capacity as the President of Borrower, and Roger Deschenes, in his capacity as the Vice President, Finance of Borrower.

1.83   Officer’s Certificate means a certificate to be delivered by the Borrower, dated as of the Closing Date, substantially in the form of Exhibit C attached hereto.

1.84   Opinion of Counsel means a written opinion of counsel in form and substance acceptable to Lender.

1.85   Other Taxes means all present or future stamp or documentary taxes or any other excise, goods and services, sales or property taxes, charges or similar levies arising from any payment made hereunder or under any other Transaction Document or from the execution, delivery, performance or enforcement of, or otherwise with respect to, this Agreement or any other Transaction Document.

1.86   Payment Date means the first day of each calendar month.

1.87   PBGC means the Pension Benefit Guaranty Corporation and any entity succeeding to any or all of its functions under ERISA.

1.88   Pension Plan means a pension plan (as defined in Section 3(2) of ERISA) subject to Title IV of ERISA (other than a Multiemployer Plan) which any Loan Party or any ERISA Affiliate sponsors, maintains, or to which it makes, is making, or is obligated to make contributions, or in the case of a multiple employer plan (as described in Section 4064(a) of ERISA) has made contributions at any time during the immediately preceding five (5) plan years.

1.89   Permitted Liens means the individual and collective reference to the following: (a) Liens for taxes, assessments and other governmental charges or levies not yet due or Liens for taxes, assessments and other governmental charges or levies being contested in good faith and by appropriate proceedings for which adequate reserves (in the good faith judgment of the management of the Borrower) have been established in accordance with GAAP; (b) Liens imposed by law which were incurred in the ordinary course of the Borrower’s business, such as carriers’, warehousemen’s and mechanics’ Liens, statutory landlords’ Liens, and other similar Liens arising in the ordinary course of the Borrower’s business, and which (x) do not individually or in the aggregate materially detract from the value of such property or assets or materially impair the use thereof in the operation of the business of the Borrower and its

1.90   Person means any individual, sole proprietorship, joint venture, corporation, partnership, limited liability company, association, joint-stock company, trust, banking association, unincorporated organization, cooperative, estate or Governmental Authority or any agency or political subdivision thereof or any other entity of any kind or nature whatsoever.

1.91   Plan means an employee benefit plan (as defined in Section 3(3) of ERISA) that any Loan Party or any of its ERISA Affiliates sponsors or maintains or to which any Loan Party or any of its ERISA Affiliates makes, is making, or is obligated to make contributions other than a Pension Plan or Multiemployer Plan.

1.92   Receivable means an account as defined in the UCC.

1.93   Reportable Event means, any of the events set forth in Section 4043(b) of ERISA or the regulations thereunder, other than any such event for which the thirty (30) day notice requirement under ERISA has been waived in regulations issued by the PBGC.

1.94   Right means, with respect to any Person, any rights, remedies, powers, privileges and/or benefits of such Person whether at law or in equity.

1.95   Securities Act means the Securities Act of 1933, as amended.

1.96   Security Agreement means that certain Security Agreement, dated as of the Closing Date, from Loan Parties in favor of Lender, substantially in the form of Exhibit D attached hereto.

1.97   Security Documents means (a) the Guaranty, (b) the Security Agreement, (c) the Account Control Agreements, (d) the IP Security Agreements and (e) all other documents, certificates and instruments from time to time securing or guaranteeing the Obligations under the Transaction Documents, or relating to the perfection or priority of any such security interest or guaranty, including, without limitation, all security agreements, financing statements, fixture filings and chattel mortgages, title insurance policies and endorsements, segregated account and depository account agreements, blocked account agreements, control agreements, copies of leases, landlord waivers, bailee agreements, and other agreements affecting the Collateral, insurance certificates and endorsements, and other documentation relative to the liens and security interests in the Collateral as Lender may request.

1.98   Subsidiary means, with respect to any Person, any other Person of which at least 50% of the securities or other ownership interests having ordinary voting power (absolutely or contingently) for the election of directors or other Persons performing similar functions of such corporation, limited liability company, partnership or other entity (irrespective of whether or not at the time securities or other ownership interests of any other class or classes of such corporation, limited liability company, partnership or other entity shall have voting power by

1.99   Taxes means all taxes, assessments, fees, levies, imposts, duties, deductions, withholdings, or other charges of any nature whatsoever from time to time or at any time imposed by any Applicable Law or Governmental Authority.

1.100   Termination Date means earlier of (a) the Maturity Date, (b) the date on which the Obligations, or any part thereof, are accelerated (or deemed accelerated) in accordance with Article VIII or (c) the date on which Borrower notifies Lender of its election to terminate the Facility at such time as all Obligations have been indefeasibly paid in full in cash.

1.101   Transaction Documents means this Agreement, the Note, the Security Documents, the Officer’s Certificate and any other agreements, notes, guaranties, certificates, instruments or other documents delivered pursuant to or therewith, as each may be amended, modified, replaced or restated from time to time.

1.102   UCC means the Uniform Commercial Code as in effect in the relevant jurisdiction, as amended from time to time.

1.103   Voidable Transfer has the meaning set forth in Section 9.23 .

1.104   Welfare Plan means a “welfare plan,” as such term is defined in Section 3(1) of ERISA

2.1   Credit Facility .  Subject to and in reliance upon the terms, conditions, representations and warranties contained in this Agreement, Lender hereby establishes a revolving credit facility (the “ Facility ”) for Borrower pursuant to which Lender may, in Lender’s sole discretion, make loans during the Advance Period to Borrower in one or more advances (the “ Advances ”) for uses expressly permitted under Section 2.12 hereto; provided , however , that in no event shall (a) the aggregate principal balance or all Advances exceed the Facility Limit, (b) the amount of any Advance be less than $100,000, (c) any Advance be available after the Advance Period, and (d) any Advance be made until the Funding Conditions for such Advance have been satisfied.

2.2   Borrowing Procedures.   Borrower shall request each Advance by delivering to Lender a written notice (by facsimile or an electronic format acceptable to Lender) (an “ Advance Request ”) to Lender specifying (i) the amount of the requested Advance, (ii) the proposed date of funding of the Advance (which shall be a Business Day) (the “ Advance Date ”), and (iii) the aggregate amount of Net Profits generated by the Loan Parties since the Closing Date through such Advance Request.  Each Advance Request shall be in substantially the form attached hereto as Exhibit E , shall be delivered together with an executed Borrowing Certificate and must be received by Lender no later than noon (New York City time) five (5) Business Days prior to the applicable Advance Date.  In the event that Lender elects to fund the Advance and

2.3   Promissory Note.   All Advances made by Lender shall be evidenced by a promissory note executed by Borrower in favor of Lender in form and substance satisfactory to Lender (the “ Note ”).

2.4   Manner of Payments.   All payments made by or on behalf of Borrower to Lender under this Agreement or the other Transaction Documents on account of principal, interest or otherwise shall, unless otherwise specified in this Agreement or by Lender in writing, be made directly by Borrower or via wire transfer on behalf of Borrower to Lender and shall be received by Lender on each related due date not later than noon (New York City time), in immediately available funds, in the Collection Account or such other account or place as Lender shall direct, in immediately available funds.  If any payment by or on behalf of Borrower under this Agreement or the other Transaction Documents is to be made on a day that is not a Business Day, such payment shall be made on the next succeeding Business Day and such extension of time will in such case be included in computing interest in connection with such payment.  All payments shall be made by Borrower to Lender without offset, deduction, defense or counterclaim.

2.5   Interest and Other Payments.

(a)   Borrower shall pay to Lender interest on the outstanding principal amount of the Advances at a rate equal to the lesser of 25% per annum and the Maximum Rate (which interest accruing at the Maximum Rate shall compound at the maximum frequency permitted under Applicable Law).

(b)   On each Payment Date, Borrower shall pay to Lender, with respect to each Advance, all accrued and unpaid interest on the outstanding Obligations.

(c)   [Intentionally Omitted]

(d)   At all times after the occurrence and during the continuation of any Event of Default, interest shall be payable on demand.  If interest in excess of the Maximum Rate is at any time received by Lender, as determined by a court of competent jurisdiction, such excess shall be applied against other outstanding Obligations.

(e)   At the option of Lender, following any Event of Default and to the extent permitted by Applicable Law, all Obligations shall bear interest at the per annum rate set forth in Section 2.5(a) plus 5% (the “ Default Rate ”) until paid, regardless of whether such payment is made before or after entry of a judgment, provided that the Default Rate shall never exceed the Maximum Rate.

2.6   Computation of Interest.   Interest shall be calculated on the basis of a three hundred sixty (360) day year and the actual number of days elapsed.  Further, for the purpose of computing interest, all items of payment in immediately available funds received by Lender shall be applied by Lender against the Obligations on the Business Day immediately following the

2.7   Net Profits Interest .  As additional compensation to Lender for its extensions of credit under this Agreement, Borrower shall pay to Lender on each Net Profits Payment Date an amount equal to 50% of the aggregate Net Profits generated by Loan Parties between the Closing Date through such Net Profits Payment Date less any amounts previously paid to Lender pursuant to this Agreement as either Interest Paid and/or any Net Profits Paid prior to such Net Profits Payment Date (the “ Net Profits Interest ”) (the Advance Request delivered to Lender on or about such date, as applicable, shall include calculations of the Net Profits from the Closing Date through such date in reasonable detail, together with such other information necessary or reasonably requested to support such calculations).  The payment of Net Profits Interest shall apply to all Net Profits generated by Loan Parties between the Closing Date and Termination Date.  Borrower’s obligation to pay Net Profits Interest to Lender shall exist regardless of, and shall not be diminished by, the actual amount outstanding, if any, under this Agreement and regardless of whether there are any claims, defenses or offsets, it being understood that said obligation is not subject to any rights, claims, defenses or offsets, each of which are knowingly, expressly and unequivocally waived by Borrower with respect to the obligations contained in this paragraph.

2.8   Principal Payments.   Notwithstanding anything to the contrary contained herein, any unpaid principal balance of the Advances and any accrued and unpaid interest and all other Obligations, including without limitation, the Net Profits Interest shall be due and payable on the Termination Date.

2.9   Cash Management; Distribution of Funds.   (a) Borrower shall establish and maintain, at its expense, the Funding Account and the Collection Account.  Borrower shall instruct, or shall cause all payments in respect of Receivables to be deposited in the Collection Account (either directly by wire transfer or electronic funds transfer).  In addition, Borrower shall promptly (and in any event not later than one (1) Business Day following receipt thereof) remit to the Collection Account all Collections, if any, received by Borrower.  Borrower shall not permit funds other than Collections to be deposited into the Collection Account.  If any such funds are nevertheless deposited into the Collection Account, Borrower shall promptly identify such funds for segregation.  Borrower shall not, and shall not permit any Person to, commingle Collections or other funds to which Lender is entitled with any other funds.  The Collection Account, and all funds on deposit therein, shall, at all times, be subject to an Account Control Agreement pursuant to which (i) Lender has “control” (within the meaning of the applicable UCC) over such Accounts and all funds on deposit therein and (ii) Lender, Borrower and Account Bank shall agree to cause all funds in the Collection Account in excess of a minimum balance to be swept into the Concentration Account on a daily basis.  Borrower shall have no right of access to or withdrawal from the Collection Account.

(b)   (i)  Subject to Section 2.9(b)(ii) , on each Payment Date or Net Profits Payment Date, Lender shall distribute, or cause to be distributed, the funds on deposit in the Concentration Account representing the cash proceeds of Collateral in the following order:

first , to Lender an amount equal to all costs and expenses then owing to Lender;

second , to Lender all amounts owing under Section 2.5 herein;

third , to Lender an amount equal to the Net Profits Interest;

fourth, to Lender all amounts owing consisting of accrued but unpaid interest owing pursuant to or under the Note and Warrant Purchase Agreement Documents;

fifth , to Lender an amount equal to the aggregate principal amount of the Obligations outstanding under this Agreement;

sixth , unless otherwise required by Applicable Law, to the Borrower’s Operating Account, an amount equal to any surplus after giving effect to the distributions made pursuant to clauses first through fifth of this Section 2.9(b)(i) , for use by the Borrower.

(ii)   Notwithstanding anything to the contrary contained in Section 2.9(b)(i) or in any other provision of this Agreement or the other Transaction Documents, during the existence of an Event of Default, Lender may apply all payments and proceeds of Collateral to the Obligations in any order as determined by Lender in its sole discretion.

2.10   No Termination.   This Agreement shall not be deemed to be terminated solely because the Obligations may from time to time be paid in full.

2.11   Voluntary Principal Prepayments.   Advances may be prepaid in whole or in part prior to the applicable Payment Dates.  In the event that Borrower proposes to make any prepayment, Borrower shall give Lender at least five (5) Business Days prior written notice thereof.

2.12   Use of Proceeds.   Borrower shall use the proceeds of each Advance solely for working capital purposes that are consistent with all Applicable Laws.

2.13   Borrower’s Loan Account .

(a)   Lender shall maintain one or more loan account(s) on its books in which shall be recorded (i) all Advances and other Obligations and the Collateral, (ii) all payments made by or on behalf of Borrower and (iii) all other appropriate debits and credits as provided in this Agreement, including interest, costs and expenses.  All entries in the loan account(s) shall be made in accordance with Lender’s customary practices as in effect from time to time.

(b)   Upon the reasonable request of Borrower and at reasonable intervals, Lender shall render to Borrower a statement setting forth the balance in the Borrower’s loan account(s) maintained by Lender for Borrower pursuant to the provisions of this Agreement, including

3.1   Initial Advance.   Lender has indicated that it does not intend to make the initial Advance unless Lender has received all of the following items described in this Section 3.1 , in each case, in form and substance satisfactory to Lender, and unless Borrower has complied with all of the following conditions and terms described in this Section 3.1 , in each case, to the satisfaction of Lender (unless waived in writing in any instance):

(a)   Lender shall have received a fully executed copy of (i) this Agreement, (ii) the Note, (iii) each other Transaction Document, and (iv) such other documents and instruments as Lender may request;

(b)   Each of the representations and warranties of the Loan Parties in this Agreement, the Note and Warrant Purchase Agreement Documents and the other Transaction Documents shall be true and correct in all respects as of the Closing Date, except for representations and warranties that speak as of a particular date, which shall be true and correct in all respects as of such date;

(c)   The Loan Parties shall have performed, satisfied and complied in all material respects with all covenants, agreements and conditions required by this Agreement, the Note and Warrant Purchase Agreement Documents and the other Transaction Documents to be performed, satisfied or complied with by the Loan Parties at or prior to the Closing Date;

(d)   No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental authority of competent jurisdiction which prohibits the consummation of any of the transactions contemplated by this Agreement;

(e)   No action, suit or proceeding before any arbitrator or any governmental authority shall have been commenced, and no investigation by any governmental authority shall have been threatened, against any Loan Party or any Subsidiary of a Loan Party, or any of the officers, directors or affiliates of any Loan Party or any Subsidiary of a Loan Party seeking to restrain, prevent or change the transactions contemplated by this Agreement, or seeking damages in

(f)   The Lender shall have received an Opinion of Counsel, dated the Closing Date, substantially in the form of Exhibit F hereto, with such exceptions and limitations as shall be reasonably acceptable to counsel to the Lender;

(g)   Lender shall have received a good standing certificate issued by the Secretary of State or comparable officer of the jurisdiction of formation, as applicable, as of a recent date acceptable to Lender, evidencing the legal existence and good standing of Borrower;

(h)   Each of the Loan Parties shall have delivered to the Lender a secretary’s certificate, dated as of the Closing Date, as to (i) the resolutions adopted by the Board of Directors of such Loan Party approving the transactions contemplated hereby, (ii) the Articles of Organization or comparable formation documents, duly certified by the Secretary of State or comparable officer of the jurisdiction of incorporation as of a recent date acceptable to Lender, (iii) the Bylaws or comparable organizational document, each as in effect as of the Closing Date, and (iv) the authority and incumbency of the officers of such Loan Party executing the Transaction Documents and any other documents required to be executed or delivered in connection therewith;

(i)   On the Closing Date, the Borrower shall have delivered to the Lender a certificate signed by an executive officer on behalf of the Borrower, dated as of the Closing Date, (A) confirming the accuracy of the Loan Parties’ representations, warranties and covenants as of such date, (B) confirming the compliance by the Loan Parties with the conditions precedent set forth in paragraphs (b)-(e) and (j) of this Section 3.1 as of the Closing Date and (C) certifying that no Event of Default or Default has occurred and is continuing, or would result from the making of the initial Advance;

(j)   Except as disclosed on Schedule 4.9 hereto, no Material Adverse Effect shall have occurred since December 31, 2008;

(k)   The Borrower shall have permitted Lender to make such audits and inspections as the Lender deems reasonably appropriate and the Lender is satisfied, in its reasonable discretion, with the results thereof.  Such audits and inspections by the Lender shall not affect any of the representations and warranties made by the Loan Parties in this Agreement or any of the Transaction Documents and shall not, under any circumstances constitute a waiver of the Lender’s indemnification rights under Article VI hereof, or otherwise relieve the Loan Parties of any liability thereunder;

(l)   The Borrower shall have paid the fees and expenses described in Section 9.11 of this Agreement (including, without limitation, the Expenses);

(m)   The Loan Parties shall have obtained all consents, approvals, or waivers from all governmental authorities, third parties and Loan Party security holders necessary for the execution, delivery and performance of this Agreement and the Transaction Documents and the transactions contemplated hereby and thereby;

(n)   Lender shall have received copies of UCC, tax and judgment lien reports (the expense of which shall be paid directly by Borrower) from all jurisdictions requested by Lender, covering such periods as Lender may request and listing effective financing statements and tax and judgment liens filed against Borrower, together with copies of all financing statements or liens disclosed in such reports, and none of such financing statements (except those filed in favor of Lender and the holders of Permitted Liens) or liens shall refer to the Collateral, unless releases therefor, in form and substance satisfactory to Lender, have been obtained, and UCC-3 termination statements have been filed, on or prior to the Closing Date;

(o)   Lender shall have received evidence satisfactory to it that all security interests in favor of Lender in the Collateral are fully perfected, first priority security interests and are subject to no other liens or adverse claims other than Permitted Liens;

(p)   Lender shall have received a fully executed copy of an Account Control Agreement in respect of (i) the Collection Account and (ii) the Funding Account;

(q)   Lender shall have received a fully executed copy of a consent letter or amendment to the Note and Warrant Purchase Agreement Documents consenting to the transactions contemplated hereby and by the Transaction Documents; and

(r)   all other terms and conditions of this Agreement and the other Transaction Documents and each other document executed in connection herewith or therewith shall have been complied with, except to the extent expressly waived in writing by Lender.

3.2   Each Advance.   Lender shall not be obligated to make any Advance (including the initial Advance) unless the following conditions have been satisfied (such conditions the “ Funding Conditions ”):

(a)   Lender shall have received an Advance Request with respect to such proposed Advance together with a detailed calculation of the aggregate cumulative Net Profits and a completed Borrowing Certificate, and each statement or certification made by Borrower in the Advance Request and the Borrowing Certificate shall be true and correct on the Advance Date;

(b)   At the time of each Advance (i) the representations and warranties made in this Agreement, the Note and Warrant Purchase Agreement Documents and in Transaction Documents shall be, in the case of the initial Advance, true and correct in all respects as of the date of the initial Advance, and in the case of any subsequent Advance, true and correct in all material respects as of the date of such Advance (except to the extent already qualified by materiality or Material Adverse Effect, in which case such representations and warranties shall be true and correct in all respects, and except for representations and warranties that are only made as of a specific earlier date), and (ii) no Default or Event of Default shall have occurred and be continuing, or would result from the making of the Advance;

(c)   The making of each Advance shall be permitted by all Applicable Law;

(d)   All conditions related to any Advance shall have been met in a manner satisfactory to Lender, and, if requested by Lender, Borrower shall have delivered to Lender

(e)   From the date of the Borrower’s most recent audited financial statements delivered to Lender, no Material Adverse Effect shall have occurred; and

(f)   Lender shall have received such other items, in form and substance satisfactory to Lender, as Lender may request.

Each of the Loan Parties represents and warrants to Lender as follows:

4.1   Organization, Good Standing and Power .  The Borrower is a corporation duly incorporated, validly existing and in good standing under the laws of the Commonwealth of Massachusetts and has the requisite corporate power to own, lease and operate its properties and assets and to conduct its business as it is now being conducted.  Each Guarantor and Subsidiary of a Guarantor is a corporation duly incorporated, validly existing and in good standing under the laws or its jurisdiction of incorporation and laws of the jurisdictions set forth on Schedule 4.7 and has the requisite corporate power to own, lease and operate its properties and assets and to conduct its business as it is now being conducted.  The Borrower does not have any direct or indirect Subsidiaries or own securities of any kind in any other entity except as set forth on Schedule 4.7 hereto.  The Borrower and each such Subsidiary is duly qualified as a foreign corporation, limited liability company or limited partnership to do business and is in good standing in every other jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary except for any jurisdiction(s) (alone or in the aggregate) in which the failure to be so qualified would not reasonably be expected to have a Material Adverse Effect.

4.2   Authorization; Enforcement .  Each Loan Party has the requisite corporate power and authority to enter into and perform this Agreement, the Note, the Security Agreement, the Officer’s Certificate, the IP Security Agreements and the Guaranty.  The execution, delivery and performance of the Transaction Documents by the Loan Parties and the consummation by them of the transactions contemplated thereby have been duly and validly authorized by all necessary corporate action, and, except as set forth on Schedule 4.2 , no further consent or authorization of the Loan Parties, their Board of Directors, stockholders or any other third party is required.  When executed and delivered by the Loan Parties, each of the Transaction Documents shall constitute a valid and binding obligation of the Loan Parties enforceable against the applicable Loan Party in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, reorganization, moratorium, liquidation, conservatorship, receivership or similar laws relating to, or affecting generally the enforcement of, creditor’s rights and remedies or by other equitable principles of general application.

4.3   Capitalization .  The authorized capital stock and the issued and outstanding shares of capital stock of the Borrower as of the Closing Date is set forth on Schedule 4.3(i)

4.4   Issuance of Note .  The Note has been duly authorized by all necessary corporate action and, when paid for or issued in accordance with the terms hereof, the Note shall be validly issued and outstanding, free and clear of all liens, encumbrances and rights of refusal of any kind.

4.5   No Conflicts .  The execution, delivery and performance of the Transaction Documents by the Loan Parties, the performance by the Borrower of its obligations under the Note and the consummation by the Loan Parties of the transactions contemplated hereby and thereby do not and will not (i) violate or conflict with any provision of the Borrower’s Amended and Restated Articles of Organization (the “ Articles of Organization ”) or Bylaws (the “ Bylaws ”), each as amended to date, or any other Loan Party’s comparable charter documents, (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, mortgage, deed of trust, indenture, note, bond, license, lease agreement, instrument or obligation to which the Borrower, any other Loan Party or any of their Subsidiaries is a party or by which the Borrower, any other Loan Party or any of their Subsidiaries’ respective properties or assets are bound, (iii) result in a violation of any federal, state, local or foreign statute, rule, regulation, order, judgment or decree (including federal and state securities laws and regulations) applicable to the Borrower, any other Loan Party or any of their Subsidiaries or by which any property or asset of the Borrower, any other Loan Party or any of its Subsidiaries are bound or affected, or (iv) create or impose a lien,

4.6   Commission Documents, Financial Statements .  The Common Stock of the Borrower is registered pursuant to Section 12(b) or 12(g) of the Exchange Act, and, except as set forth on Schedule 4.6 , the Borrower has timely filed all reports, schedules, forms, statements and other documents required to be filed by it with the Commission pursuant to the reporting requirements of the Exchange Act (all of the foregoing including filings incorporated by reference therein being referred to herein as the “ Commission Documents ”).  Except as set forth on Schedule 4.6 , each Commission Document complied in all material respects with the requirements of the Exchange Act and the rules and regulations of the Commission promulgated thereunder and other federal, state and local laws, rules and regulations applicable to such documents, and the Commission Documents did not, as of their respective filing dates, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.  Except as set forth on Schedule 4.6 , as of their respective dates, the financial statements of the Borrower included in the Commission Documents complied as to form in all material respects with applicable accounting requirements and the published rules and regulations of the Commission or other applicable rules and regulations with respect thereto.  Such financial statements have been prepared in accordance with GAAP applied on a consistent basis during the periods involved (except (i) as may be otherwise indicated in such financial statements or the notes thereto or (ii) in the case of unaudited interim statements, to the extent they may not include footnotes or may be condensed or summary statements), and fairly present in all material respects the financial position of the Borrower and its Subsidiaries as of the dates thereof and the results of operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments).

4.7   Subsidiaries .   Schedule 4.7 hereto sets forth each Subsidiary of the Borrower, showing the jurisdiction of its incorporation or organization and showing the percentage of each person’s ownership of the outstanding stock or other interests of such Subsidiary.  All of the outstanding shares of capital stock of each Subsidiary have been duly authorized and validly issued, and are fully paid and nonassessable.

4.8   Name; Prior Names.   The complete and exact legal name of each Loan Party is set forth on the signature page to this Agreement.  Neither Borrower nor any other Loan Party has transacted business under any other corporate or trade name within the last five years, been a party to any merger, combination or consolidation or acquired all or substantially all of the assets of any Person other than as set forth on Schedule 4.8 .

4.9   No Material Adverse Change .  Except as disclosed in the Commission Documents or on Schedule 4.9 hereto, since December 31, 2008, the Borrower has not experienced or suffered any Material Adverse Effect.  There are no facts or conditions relating to the Transaction Documents, any of the Collateral or the financial condition and business of any Loan Party that would, individually or collectively, cause a Material Adverse Effect.

4.10   Licenses, Registrations and Approvals.   Each Loan Party possesses all necessary authority and has obtained all the licenses, registrations and approvals necessary for the conduct of such Loan Party’s business in each jurisdiction where such Loan Party operates, and to continue to conduct its business as presently conducted and as expected to be conducted in each jurisdiction and for the performance of such Loan Party’s obligations hereunder and under each of the Transaction Documents to which such Loan Party is a party and all such licenses, registrations and approvals are in full force and effect, except, in each case, as could not reasonably be expected to have a Material Adverse Effect.

4.11   Ability to Perform.   No Loan Party believes, nor does any Loan Party nor have any reason or cause to believe, that it cannot perform each and every one of its obligations under this Agreement and under the other Transaction Documents.

4.12   No Undisclosed Liabilities .  Except as disclosed on Schedule 4.12 hereto, since December 31, 2008, none of the Borrower, any other Loan Party nor any of their Subsidiaries has incurred any liabilities, obligations, claims or losses (whether liquidated or unliquidated, secured o