Exhibit 10.1

 

Partners for Growth

 

Term Loan and Security Agreement

 

Borrower:

Bioject Medical Technologies, Inc.

Address:

211 Somerville Road, Route 202N, Bedminster, NJ 07921

 

 

Borrower:

Bioject, Inc.

Address:

20245 S.W. 95th Ave., Tualatin, OR 97062

 

 

Date:

December 15, 2004

 

 

THIS TERM LOAN AND SECURITY AGREEMENT is entered into on the above date between
PARTNERS FOR GROWTH, L.P. (“PFG”), whose address is 560 Mission Street, 3rd
floor, San Francisco, CA 94105 and the borrowers named above (jointly and
severally, the “Borrower”), whose chief executive office is located at the above
address, respectively. The Schedule to this Agreement (the “Schedule”) being
signed by the parties concurrently, is an integral part of this Agreement. 
(Definitions of certain terms used in this Agreement are set forth in Section 7
below.)

 

1.                                       LOANS.

 

1.1  Loans.  PFG will make a loan to Borrower (the “Loan”) in the amount shown
on the Schedule, provided no Default or Event of Default has occurred and is
continuing.

 

1.2  Interest.  All Loans and all other monetary Obligations shall bear interest
at the rate shown on the Schedule, except where expressly set forth to the
contrary in this Agreement.  Interest shall be payable monthly, on the last day
of the month.

 

1.3  Fees.  Borrower shall pay PFG the fees shown on the Schedule, which are in
addition to all interest and other sums payable to PFG and are not refundable.

 

1.4  [INTENTIONALLY LEFT BLANK]

 

1.5  Late Fee.  If any payment of accrued interest for any month is not made
within three Business Days after the date a bill therefore is sent by PFG to
Borrower, or if any payment of principal or any other payment is not made within
three Business Days after the date due, Borrower shall pay PFG a late payment
fee equal to 5% of the amount of such late payment.  The provisions of this
paragraph shall not be construed as PFG’s consent to Borrower’s failure to pay
any amounts when due, and PFG’s acceptance of any such late payments shall not
restrict PFG’s exercise of any remedies arising out of any such failure.

 

2.  SECURITY INTEREST.

 

2.1  Grant of Security Interest.  To secure the payment and performance of all
of the Obligations when due, Borrower hereby grants to PFG a security interest
in all of the following (collectively, the “Collateral”):  all right, title and
interest of Borrower in and to all of the following, whether now owned or
hereafter arising or acquired and wherever located: all Accounts; all Inventory;
all Equipment; all Deposit Accounts; all General Intangibles (including without
limitation all Intellectual Property); all Investment Property; all Other
Property; the Real Property; and any and all claims, rights and interests in any
of the above, and all guaranties and security for any of the above, and all
substitutions and replacements for, additions, accessions, attachments,
accessories, and improvements to, and proceeds (including proceeds of any
insurance policies, proceeds of proceeds and claims against third parties) of,
any and all of the above, and all Borrower’s books relating to any and all of
the above.

 

2.2  Specified Contracts Excluded.  Notwithstanding anything herein to the
contrary, the security interest granted under this Section 2 shall not attach to
any of the following (“Specified Contracts”):  any lease, license, contract,
property rights or

 

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agreement to which Borrower is a party or any of its rights or interests
thereunder if and for so long as the grant of such security interest shall
constitute or result in any of the following (other than to the extent that any
such term would be ineffective under the Code or any other applicable law or
principles of equity):  (i) the abandonment, invalidation or unenforceability of
any right, title or interest of Borrower therein, or (ii) in a breach or
termination pursuant to the terms of, or a default under, any such lease,
license, contract property rights or agreement; provided however that such
security interest shall attach immediately at such time as the condition causing
such abandonment, invalidation or unenforceability shall be remedied and to the
extent severable, shall attach immediately to any portion of such lease,
license, contract, property rights or agreement that does not result in any of
the consequences specified in (i) or (ii) above. Except as disclosed on Exhibit
A hereto, Borrower represents and warrants to PFG that there are no Specified
Contracts which are material to Borrower’s business or grant Borrower rights in
Intellectual Property which is licensed by the Borrower to its customers or
incorporated in products licensed or sold by the Borrower to its customers. 
Borrower shall not, hereafter, without PFG’s prior written consent, enter into
any Specified Contract which is material to Borrower’s business or grants
Borrower rights in Intellectual Property which is licensed by the Borrower to
its customers or incorporated in products licensed or sold by the Borrower to
its customers.

 

3.  REPRESENTATIONS, WARRANTIES AND COVENANTS OF BORROWER.

 

In order to induce PFG to enter into this Agreement and to make Loans, Borrower
represents and warrants to PFG as follows, and Borrower covenants that the
following representations will continue to be true, and that Borrower will at
all times comply with all of the following covenants, throughout the term of
this Agreement and until all Obligations have been paid and performed in full:

 

3.1  Corporate Existence and Authority.  Borrower is and will continue to be,
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation.  Borrower is and will continue to be
qualified and licensed to do business in all jurisdictions in which any failure
to do so would result in a Material Adverse Change.  The execution, delivery and
performance by Borrower of this Agreement, and all other documents contemplated
hereby (i) have been duly and validly authorized, (ii) are enforceable against
Borrower in accordance with their terms (except as enforcement may be limited by
equitable principles and by bankruptcy, insolvency, reorganization, moratorium
or similar laws relating to creditors’ rights generally), and (iii) do not
violate Borrower’s articles or certificate of incorporation, or Borrower’s
by-laws, or any law or any material agreement or instrument which is binding
upon Borrower or its property, and (iv) do not constitute grounds for
acceleration of any material indebtedness or obligation under any agreement or
instrument which is binding upon Borrower or its property.

 

3.2  Name; Trade Names and Styles.  As of the date hereof, the name of Borrower
set forth in the heading to this Agreement is its correct name, as set forth in
its Articles or Certificate of Incorporation.  Listed in the Representations are
all prior names of Borrower and all of Borrower’s present and prior trade names
as of the date hereof.  Borrower shall give PFG 30 days’ prior written notice
before changing its name or doing business under any other name.  Borrower has
complied, and will in the future comply, in all material respects, with all laws
relating to the conduct of business under a fictitious business name, if
applicable to Borrower.

 

3.3  Place of Business; Location of Collateral.  As of the date hereof, the
address set forth in the heading to this Agreement is Borrower’s chief executive
office.  In addition, as of the date hereof, Borrower has places of business and
Collateral is located only at the locations set forth in the Representations. 
Borrower will give PFG at least 30 days prior written notice before opening any
additional place of business, changing its chief executive office, or moving any
of the Collateral to a location other than Borrower’s Address or one of the
locations set forth in the Representations, except that Borrower may maintain
sales offices in the ordinary course of business at which not more than a total
of $10,000 fair market value of Equipment is located.

 

3.4  Title to Collateral; Perfection; Permitted Liens.

 

(a)          Borrower is now, and will at all times in the future be, the sole
owner of all the Collateral, except for items of Equipment which are leased to
Borrower.  The Collateral now is and will remain free and clear of any and all
liens, charges, security interests, encumbrances and adverse claims, except for
Permitted Liens.  PFG now has, and will continue to have, a first-priority
perfected and enforceable security interest in all of the Collateral, subject
only to the Permitted Liens, and Borrower will at all times defend PFG and the
Collateral against all claims of others.

 

(b)         Borrower has set forth in the Representations all of Borrower’s
Deposit Accounts, and Borrower will give PFG five Business Days advance written
notice before establishing any new Deposit Accounts and will cause the
institution where any such new Deposit Account is maintained to execute and
deliver to PFG a control agreement in form sufficient to perfect PFG’s security
interest in the Deposit Account and otherwise satisfactory to PFG in its good
faith business judgment.

 

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(c)          In the event that Borrower shall at any time after the date hereof
have any commercial tort claims against others, which it is asserting, and in
which the potential recovery exceeds $100,000, Borrower shall promptly notify
PFG thereof in writing and provide PFG with such information regarding the same
as PFG shall request (unless providing such information would waive the
Borrower’s attorney-client privilege).  Such notification to PFG shall
constitute a grant of a security interest in the commercial tort claim and all
proceeds thereof to PFG, and Borrower shall execute and deliver all such
documents and take all such actions as PFG shall request in connection
therewith.

 

(d)         Whenever any Collateral is located upon premises in which any third
party has an interest, including real property leased by Borrower, Borrower
shall, whenever requested by PFG, use commercially reasonable efforts to cause
such third party to execute and deliver to PFG, in form acceptable to PFG, such
waivers and subordinations as PFG shall specify in its good faith business
judgment.  Borrower will keep in full force and effect, and will comply with all
material terms of, any lease of real property where any of the Collateral now or
in the future may be located.

 

3.5  Maintenance of Collateral.  Borrower will maintain the Collateral in good
working condition (ordinary wear and tear excepted), and Borrower will not use
the Collateral for any unlawful purpose.  Borrower will immediately advise PFG
in writing of any material loss or damage to the Collateral.

 

3.6  Books and Records.  Borrower has maintained and will maintain at Borrower’s
Address complete and accurate books and records, comprising an accounting system
in accordance with GAAP.

 

3.7  Financial Condition, Statements and Reports.  All financial statements now
or in the future delivered to PFG have been, and will be, prepared in conformity
with GAAP (subject, in the case of unaudited interim statements, to year-end
adjustments and the absence of footnotes) and now and in the future will fairly
present the results of operations and financial condition of Borrower in all
material respects, in accordance with GAAP (subject, in the case of unaudited
interim statements, to year-end adjustments and the absence of footnotes), at
the times and for the periods therein stated.  Between the last date covered by
any such statement provided to PFG and the date hereof, there has been no
Material Adverse Change.

 

3.8  Tax Returns and Payments; Pension Contributions.  Borrower has timely
filed, and will timely file, all required tax returns and reports, and Borrower
has timely paid, and will timely pay, all foreign, federal, state and local
taxes, assessments, deposits and contributions now or in the future owed by
Borrower.  Borrower may, however, defer payment of any of the foregoing which
are contested by Borrower in good faith, provided that Borrower (i) contests the
same by appropriate proceedings promptly and diligently instituted and
conducted, (ii) notifies PFG in writing of the commencement of, and any material
development in any such proceedings, and (iii) posts bonds or takes any other
steps required to stay the enforcement of any such lien upon any of the
Collateral against which such foreign, federal, state or local authority could
then proceed.  Borrower is unaware of any claims or adjustments proposed for any
of Borrower’s prior tax years which could result in additional taxes becoming
due and payable by Borrower.  Borrower has paid, and shall continue to pay all
amounts necessary to fund all present and future pension, profit sharing and
deferred compensation plans in accordance with their terms, and Borrower has not
and will not withdraw from participation in, permit partial or complete
termination of, or permit the occurrence of any other event with respect to, any
such plan which could reasonably be expected to result in any liability of
Borrower, including any liability to the Pension Benefit Guaranty Corporation or
its successors or any other governmental agency.

 

3.9  Compliance with Law.  Borrower has, to the best of its knowledge, complied,
and will comply, in all material respects, with all provisions of all foreign,
federal, state and local laws and regulations applicable to Borrower, including,
but not limited to, those relating to Borrower’s ownership of real or personal
property, the conduct and licensing of Borrower’s business, and all
environmental matters.

 

3.10  Litigation.  There is no claim, suit, litigation, proceeding or
investigation pending or (to best of Borrower’s knowledge) threatened against or
affecting Borrower in any court or before any governmental agency (or any basis
therefor known to Borrower) which could reasonably be expected to result, either
separately or in the aggregate, in any Material Adverse Change.  Borrower will
promptly inform PFG in writing of any claim, proceeding, litigation or
investigation in the future threatened or instituted against Borrower involving
$250,000 or more in the aggregate for all such claims, proceedings, litigation
or investigation.

 

3.11  Use of Proceeds.  All proceeds of all Loans shall be used solely for
lawful business purposes.  Borrower is not purchasing or carrying any “margin
stock” (as defined in Regulation U of the Board of Governors of the Federal
Reserve System) and no part of the proceeds of any Loan will be used to purchase
or carry any “margin stock” or to extend credit to others for the purpose of
purchasing or carrying any “margin stock.”

 

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3.12  No Default.  At the date hereof, no Default or Event of Default has
occurred, and no Default or Event of Default will have occurred after giving
effect to any Loans being made concurrently herewith.

 

4.  ADDITIONAL DUTIES OF BORROWER.

 

4.1  Financial and Other Covenants.  Borrower shall at all times comply with the
financial and other covenants set forth in the Schedule.

 

4.2.  Remittance of Proceeds. Subject to the rights of the Senior Lender, all
proceeds arising from the disposition of any Collateral shall be delivered, in
kind, by Borrower to PFG in the original form in which received by Borrower not
later than the following Business Day after receipt by Borrower, to be applied
to the Obligations in such order as PFG shall determine; provided that, if no
Default or Event of Default has occurred and is continuing, Borrower shall not
be obligated to remit to PFG (i) the proceeds of Accounts arising in the
ordinary course of business, (ii) the proceeds of the sale of Inventory in the
ordinary course of business, (iii) the proceeds of the sale of Permitted
Investments which are promptly reinvested in other Permitted Investments, the
proceeds of the sale of Equipment to the extent such proceeds are reinvested in
Equipment of comparable utility within six (6) months of such sale, or the
proceeds of the sale of worn out or obsolete Equipment disposed of by Borrower
in good faith in an arm’s length transaction for an aggregate purchase price of
$50,000 or less (for all such transactions in any fiscal year).  Borrower agrees
that it will not commingle proceeds of Collateral with any of Borrower’s other
funds or property, but will hold such proceeds separate and apart from such
other funds and property and in an express trust for PFG, except as set forth
above, and subject to the rights of the Senior Lender.  Nothing in this
Section limits the restrictions on disposition of Collateral set forth elsewhere
in this Agreement.

 

4.3  Insurance.  Borrower shall, at all times insure all of the tangible
personal property Collateral and carry such other business insurance, with
insurers reasonably acceptable to PFG, in such form and amounts as PFG may
reasonably require and as are customary and in accordance with standard
practices for Borrower’s industry and locations, and Borrower shall provide
evidence of such insurance to PFG.  All such insurance policies shall name PFG
as an additional loss payee, and shall contain a lenders loss payee endorsement
in form reasonably acceptable to PFG.  Upon receipt of the proceeds of any such
insurance, subject to the rights of the Senior Lender, PFG shall apply such
proceeds in reduction of the Obligations as PFG shall determine in its good
faith business judgment, except that, provided no Default or Event of Default
has occurred and is continuing, at the direction of Borrower, PFG shall release
to Borrower insurance proceeds of any such Collateral with respect to which the
insurance proceeds were paid.  PFG may require reasonable assurance that the
insurance proceeds so released will be so used.  If Borrower fails to provide or
pay for any insurance, PFG may, but is not obligated to, obtain the same at
Borrower’s expense.  Borrower shall promptly deliver to PFG copies of all
material reports made to insurance companies.

 

4.4  Reports.  Borrower, at its expense, shall provide PFG with the written
reports set forth in the Schedule, and such other written reports with respect
to Borrower (including budgets, projections, operating plans and other financial
documentation), as PFG shall from time to time reasonably request in its good
faith business judgment.

 

4.5  Access to Collateral, Books and Records.  At reasonable times, and on one
Business Day’s notice, PFG, or its agents, shall have the right to inspect the
Collateral, and the right to audit and copy Borrower’s books and records. The
foregoing inspections and audits shall be at Borrower’s expense for one such
inspection and one such audit each year and the charge therefor shall be $750
per person per day (or such higher amount as shall represent PFG’s then current
standard charge for the same), plus reasonable out-of-pocket expenses. The PFG
costs of any such inspections and audits in excess of one each year shall be at
PFG’s expense; provided, however, that upon the occurrence and during the
continuance of an Event of Default, Borrower shall be liable for the costs of
all such inspections.  In no event shall Borrower be required to disclose to PFG
any document or information (i) where disclosure is prohibited by applicable law
or any agreement binding on Borrower, or (ii) is subject to attorney-client or
similar privilege or constitutes attorney work product. If Borrower is
withholding any information under the preceding sentence, it shall so advise PFG
in writing, giving PFG a general description of the nature of the information
withheld and the basis upon which it is withheld.

 

4.6  Negative Covenants.  Except as may be permitted in the Schedule, Borrower
shall not, without PFG’s prior written consent (which shall be a matter of its
good faith business judgment), do any of the following:

 

(i) merge or consolidate with another corporation or entity;

 

(ii) acquire any assets, except in the ordinary course of business, or make any
Investments other than Permitted Investments;

 

(iii) enter into any other transaction outside the ordinary course of business;

 

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(iv) sell or transfer any Collateral (including without limitation and sale or
transfer of Collateral which is then leased back by Borrower), except for (A)
the sale of Inventory in the ordinary course of Borrower’s business, and except
for the sale of obsolete or unneeded Equipment and the sale and replacement of
Equipment, in each case, in the ordinary course of business, (B) the sale of,
and reinvestment of such sale proceeds in, Permitted Investments, (C) the
granting of Permitted Liens, and (D) the licensing of Intellectual Property in
the ordinary course of business;

 

(v) store any Inventory or other Collateral with any warehouseman or other third
party, unless Borrower has used commercially reasonable efforts to comply with
the provisions of Section 3.4(d) above and has notified PFG of such action or
proposed action;

 

(vi) sell any Inventory on a sale-or-return, guaranteed sale, consignment, or
other contingent basis;

 

(vii) make any loans of any money or other assets, other than Permitted
Investments;

 

(viii) incur any Indebtedness, other than Permitted Indebtedness;

 

(ix) guarantee or otherwise become liable with respect to the obligations of
another party or entity other than the endorsements of checks and other similar
instruments in the ordinary course of Borrower’s business;

 

(x) pay or declare any dividends on Borrower’s stock (except for dividends
payable solely in stock of Borrower);

 

(xi) redeem, retire, purchase or otherwise acquire, directly or indirectly, any
of Borrower’s stock;

 

(xii) engage, directly or indirectly, in any business other than the businesses
currently engaged in by Borrower or reasonably related thereto; or

 

(xiii) dissolve or elect to dissolve.

 

Transactions permitted by the foregoing provisions of this Section are only
permitted if no Default or Event of Default would occur as a result of such
transaction.

 

4.7  Litigation Cooperation.  Should any third-party suit or proceeding be
instituted by or against PFG with respect to any Collateral or relating to
Borrower, Borrower shall, without expense to PFG, make available Borrower and
its officers, employees and agents and Borrower’s books and records, to the
extent that PFG may deem them reasonably necessary in order to prosecute or
defend any such suit or proceeding.

 

4.8  Changes.  Borrower agrees to notify PFG in writing of any changes in the
information set forth in the Representations.

 

4.9  Further Assurances.  Borrower agrees, at its expense, on request by PFG, to
execute all documents and take all actions, as PFG, may, in its good faith
business judgment, deem necessary or useful in order to perfect and maintain
PFG’s perfected first-priority security interest in the Collateral (subject to
Permitted Liens), and in order to fully consummate the transactions contemplated
by this Agreement.

 

5.  TERM.

 

5.1  Maturity Date.  This Agreement shall continue in effect until the maturity
date set forth on the Schedule (the “Maturity Date”), subject to Sections 5.2
and 5.3 below.

 

5.2  Early Termination.  This Agreement may be terminated prior to the Maturity
Date as follows:  (i) by Borrower, effective three Business Days after written
notice of termination is given to PFG; or (ii) by PFG at any time after the
occurrence and during the continuance of an Event of Default.  There is no
termination fee or prepayment penalty.

 

5.3  Payment of Obligations.  On the Maturity Date or on any earlier effective
date of termination, Borrower shall pay and perform in full all Obligations,
whether evidenced by installment notes or otherwise, and whether or not all or
any part of such Obligations are otherwise then due and payable. Notwithstanding
any termination of this Agreement, all of PFG’s security interests in all of the
Collateral and all of the terms and provisions of this Agreement shall continue
in full force and effect until all Obligations have been paid and performed in
full; provided that PFG may, in its sole discretion, refuse to make any further
Loans after termination.  No termination shall in any way affect or impair any
right or remedy of PFG, nor shall any such termination relieve Borrower of any
Obligation to PFG, until all of the Obligations have been paid and performed in
full.  Upon payment and performance in full of all the Obligations and
termination of this Agreement, PFG shall promptly terminate its financing
statements with respect to the Borrower and deliver to Borrower such other
documents as may be required to fully terminate PFG’s security interests.

 

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6.  EVENTS OF DEFAULT AND REMEDIES.

 

6.1  Events of Default.  The occurrence of any of the following events shall
constitute an “Event of Default” under this Agreement, and Borrower shall give
PFG immediate written notice thereof:

 

(a) Any warranty, representation, statement, report or certificate made or
delivered to PFG by Borrower or any of Borrower’s officers, employees or agents,
now or in the future, shall be untrue or misleading in a material respect when
made or deemed to be made; or

 

(b) Borrower shall fail to pay any Loan or any interest thereon or any other
monetary Obligation within three (3) Business Days after the date due or fail to
pay any other monetary Obligation within five (5) Business Days after the date
due; or

 

(c) Borrower shall fail to comply with the financial covenants set forth in the
Schedule (if any), or shall breach any of the provisions of Section 4.6 hereof,
or shall fail to perform any other non-monetary Obligation which by its nature
cannot be cured, or shall fail to permit PFG to conduct an inspection or audit
as provided in Section 4.5 hereof or shall fail to timely provide PFG with
reports due under Section 6 of the Schedule within five Business Days after the
date due; or

 

(d) Borrower shall fail to perform any other non-monetary Obligation which is
capable of cure, which failure is not cured within ten (10) Business Days after
the date due; provided, such cure period may be extended for such additional
period as PFG may determine in its good faith discretion (i) if Borrower is
diligently pursuing a cure that is likely to result in a cure and (ii) that
repayment of Obligations or PFG’s security is not affected by the granting of
additional time to cure; or

 

(e) any levy, assessment, attachment, seizure, lien or encumbrance (other than a
Permitted Lien) is made on all or any part of the Collateral which is not cured
within ten (10) Business Days after the earlier to occur of (i) the occurrence
of the same, or (ii) Borrower’s knowledge of the same; or

 

(f) any default or event of default occurs under any obligation secured by a
Permitted Lien, which is not cured within any applicable cure period or waived
in writing by the holder of the Permitted Lien; or

 

(g) Borrower breaches any material contract or obligation, which has resulted or
reasonably may be expected to result in a Material Adverse Change; or

 

(h) Dissolution, termination of existence, insolvency or business failure of
Borrower; or appointment of a receiver, trustee or custodian, for all or any
part of the property of, assignment for the benefit of creditors by, or the
commencement of any proceeding by Borrower under any reorganization, bankruptcy,
insolvency, arrangement, readjustment of debt, dissolution or liquidation law or
statute of any jurisdiction, now or in the future in effect, or Borrower shall
generally not pay its debts as they become due, or Borrower shall conceal,
remove or transfer any part of its property, with intent to hinder, delay or
defraud its creditors, or make or suffer any transfer of any of its property
which may be fraudulent under any bankruptcy, fraudulent conveyance or similar
law; or

 

(i) the commencement of any proceeding against Borrower or any guarantor of any
of the Obligations under any reorganization, bankruptcy, insolvency,
arrangement, readjustment of debt, dissolution or liquidation law or statute of
any jurisdiction, now or in the future in effect, which is not cured by the
dismissal thereof within 45 days after the date commenced; or

 

(j) revocation or termination of, or limitation or denial of liability upon, any
guaranty of the Obligations or any attempt to do any of the foregoing, or
commencement of proceedings by any guarantor of any of the Obligations under any
bankruptcy or insolvency law; or

 

(k) revocation or termination of, or limitation or denial of liability upon, any
pledge of any certificate of deposit, securities or other property or asset of
any kind pledged by any third party to secure any or all of the Obligations, or
any attempt to do any of the foregoing, or commencement of proceedings by or
against any such third party under any bankruptcy or insolvency law; or

 

(l) Borrower makes any payment on account of any indebtedness or obligation
which has been subordinated to the Obligations (other than as permitted in the
applicable subordination agreement), or if any Person who has subordinated such
indebtedness or obligations terminates or in any way limits his subordination
agreement; or

 

(m) there shall occur, without the prior written consent of PFG, a Change in
Control,; or

 

(n) a Material Adverse Change shall occur.

 

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PFG may cease making any Loans hereunder during any of the cure periods provided
above, and thereafter if an Event of Default has occurred and is continuing.

 

6.2  Remedies.  Upon the occurrence and during the continuance of any Event of
Default, PFG, at its option, and without notice or demand of any kind except as
specified below (all of which are hereby expressly waived by Borrower), may do
any one or more of the following: (a) Cease making Loans or otherwise extending
credit to Borrower under this Agreement or any other Loan Document; (b) Upon
notice to Borrower (which may be on the same day) accelerate and declare all or
any part of the Obligations to be immediately due, payable, and performable,
notwithstanding any deferred or installment payments allowed by any instrument
evidencing or relating to any Obligation; (c) Take possession of any or all of
the Collateral wherever it may be found, and for that purpose Borrower hereby
authorizes PFG without judicial process to enter onto any of Borrower’s premises
without interference to search for, take possession of, keep, store, or remove
any of the Collateral, and remain on the premises or cause a custodian to remain
on the premises in exclusive control thereof, without charge for so long as PFG
deems it necessary, in its good faith business judgment, in order to complete
the enforcement of its rights under this Agreement or any other agreement;
provided, however, that should PFG seek to take possession of any of the
Collateral by court process, Borrower hereby irrevocably waives: (i) any bond
and any surety or security relating thereto required by any statute, court rule
or otherwise as an incident to such possession; (ii) any demand for possession
prior to the commencement of any suit or action to recover possession thereof;
and (iii) any requirement that PFG retain possession of, and not dispose of, any
such Collateral until after trial or final judgment; (d) Require Borrower to
assemble any or all of the Collateral and make it available to PFG at places
designated by PFG which are reasonably convenient to PFG and Borrower, and to
remove the Collateral to such locations as PFG may deem advisable; (e) Complete
the processing, manufacturing or repair of any Collateral prior to a disposition
thereof and, for such purpose and for the purpose of removal, PFG shall have the
right to use Borrower’s premises, vehicles, hoists, lifts, cranes, and other
Equipment and all other property without charge; (f) Sell, lease or otherwise
dispose of any of the Collateral, in its condition at the time PFG obtains
possession of it or after further manufacturing, processing or repair, at one or
more public and/or private sales, in lots or in bulk, for cash, exchange or
other property, or on credit, and to adjourn any such sale from time to time
without notice other than oral announcement at the time scheduled for sale.  PFG
shall have the right to conduct such disposition on Borrower’s premises without
charge, for such time or times as PFG deems reasonable, or on PFG’s premises, or
elsewhere and the Collateral need not be located at the place of disposition.
 PFG may directly or through any affiliated company purchase or lease any
Collateral at any such public disposition, and if permissible under applicable
law, at any private disposition.  Any sale or other disposition of Collateral
shall not relieve Borrower of any liability Borrower may have if any Collateral
is defective as to title or physical condition or otherwise at the time of sale;
(g) Demand payment of, and collect any Accounts and General Intangibles
comprising Collateral and, in connection therewith, Borrower irrevocably
authorizes PFG to endorse or sign Borrower’s name on all collections, receipts,
instruments and other documents, to take possession of and open mail addressed
to Borrower and remove therefrom payments made with respect to any item of the
Collateral or proceeds thereof, and, in PFG’s good faith business judgment, to
grant extensions of time to pay, compromise claims and settle Accounts and the
like for less than face value; (h) Exercise any and all rights under any present
or future control agreements relating to Deposit Accounts or Investment
Property; and (i) Demand and receive possession of any of Borrower’s federal and
state income tax returns and the books and records utilized in the preparation
thereof or referring thereto.  All reasonable attorneys’ fees, expenses, costs,
liabilities and obligations incurred by PFG with respect to the foregoing shall
be added to and become part of the Obligations, shall be due on demand, and
shall bear interest at a rate equal to the highest interest rate applicable to
any of the Obligations.  Without limiting any of PFG’s rights and remedies, from
and after the occurrence and during the continuance of any Event of Default, the
interest rate applicable to the Obligations shall be increased by an additional
four percent per annum (the “Default Rate”).

 

6.3  Standards for Determining Commercial Reasonableness.  Borrower and PFG
agree that a sale or other disposition (collectively, “sale”) of any Collateral
which complies with the following standards will conclusively be deemed to be
commercially reasonable:  (i) Notice of the sale is given to Borrower at least
ten days prior to the sale, and, in the case of a public sale, notice of the
sale is published at least five days before the sale in a newspaper of general
circulation in the county where the sale is to be conducted; (ii) Notice of the
sale describes the collateral in general, non-specific terms; (iii) The sale is
conducted at a place designated by PFG, with or without the Collateral being
present; (iv) The sale commences at any time between 8:00 a.m. and 6:00 p.m.; 
(v) Payment of the purchase price in cash or by cashier’s check or wire transfer
is required; (vi) With respect to any sale of any of the Collateral, PFG may
(but is not obligated to) direct any prospective purchaser to ascertain directly
from Borrower any and all information concerning the same.  PFG shall be free to
employ other methods of noticing and selling the Collateral, in its discretion,
if they are commercially reasonable.

 

6.4  Power of Attorney.  Upon the occurrence and during the continuance of any
Event of Default, without limiting PFG’s other rights and remedies, Borrower
grants to PFG an irrevocable power of attorney coupled with an interest,
authorizing and

 

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permitting PFG (acting through any of its employees, attorneys or agents) at any
time, at its option, but without obligation, with or without notice to Borrower,
and at Borrower’s expense, to do any or all of the following, in Borrower’s name
or otherwise, but PFG agrees that if it exercises any right hereunder, it will
do so in good faith and in a commercially reasonable manner:  (a) Execute on
behalf of Borrower any documents that PFG may, in its good faith business
judgment, deem advisable in order to perfect and maintain PFG’s security
interest in the Collateral, or in order to exercise a right of Borrower or PFG,
or in order to fully consummate all the transactions contemplated under this
Agreement, and all other Loan Documents; (b) Execute on behalf of Borrower, any
invoices relating to any Account, any draft against any Account Debtor and any
notice to any Account Debtor, any proof of claim in bankruptcy, any Notice of
Lien, claim of mechanic’s, materialman’s or other lien, or assignment or
satisfaction of mechanic’s, materialman’s or other lien; (c) Take control in any
manner of any cash or non-cash items of payment or proceeds of Collateral;
endorse the name of Borrower upon any instruments, or documents, evidence of
payment or Collateral that may come into PFG’s possession; (d) Endorse all
checks and other forms of remittances received by PFG; (e) Pay, contest or
settle any lien, charge, encumbrance, security interest and adverse claim in or
to any of the Collateral, or any judgment based thereon, or otherwise take any
action to terminate or discharge the same; (f) Grant extensions of time to pay,
compromise claims and settle Accounts and General Intangibles for less than face
value and execute all releases and other documents in connection therewith; (g)
Pay any sums required on account of Borrower’s taxes or to secure the release of
any liens therefor, or both; (h) Settle and adjust, and give releases of, any
insurance claim that relates to any of the Collateral and obtain payment
therefor; (i) Instruct any third party having custody or control of any books or
records belonging to, or relating to, Borrower to give PFG the same rights of
access and other rights with respect thereto as PFG has under this Agreement;
and (j) Take any action or pay any sum required of Borrower pursuant to this
Agreement and any other Loan Documents.  Any and all reasonable sums paid and
any and all reasonable costs, expenses, liabilities, obligations and attorneys’
fees incurred by PFG with respect to the foregoing shall be added to and become
part of the Obligations, shall be payable on demand, and shall bear interest at
a rate equal to the highest interest rate applicable to any of the Obligations. 
In no event shall PFG’s rights under the foregoing power of attorney or any of
PFG’s other rights under this Agreement be deemed to indicate that PFG is in
control of the business, management or properties of Borrower.

 

6.5  Application of Proceeds.  All proceeds realized as the result of any sale
of the Collateral shall be applied by PFG first to the reasonable costs,
expenses, liabilities, obligations and attorneys’ fees incurred by PFG in the
exercise of its rights under this Agreement, second to the interest due upon any
of the Obligations, and third to the principal of the Obligations, in such order
as PFG shall determine in its sole discretion.  Any surplus shall be paid to
Borrower or other persons legally entitled thereto; Borrower shall remain liable
to PFG for any deficiency.  If, PFG, in its good faith business judgment,
directly or indirectly enters into a deferred payment or other credit
transaction with any purchaser at any sale of Collateral, PFG shall have the
option, exercisable at any time, in its good faith business judgment, of either
reducing the Obligations by the principal amount of purchase price or deferring
the reduction of the Obligations until the actual receipt by PFG of the cash
therefor.

 

6.6  Remedies Cumulative.  In addition to the rights and remedies set forth in
this Agreement, PFG shall have all the other rights and remedies accorded a
secured party under the Code and under all other applicable laws, and under any
other instrument or agreement now or in the future entered into between PFG and
Borrower, and all of such rights and remedies are cumulative and none is
exclusive.  Exercise or partial exercise by PFG of one or more of its rights or
remedies shall not be deemed an election, nor bar PFG from subsequent exercise
or partial exercise of any other rights or remedies.  The failure or delay of
PFG to exercise any rights or remedies shall not operate as a waiver thereof,
but all rights and remedies shall continue in full force and effect until all of
the Obligations have been fully paid and performed.

 

7.                                       Definitions.  AS USED IN THIS
AGREEMENT, THE FOLLOWING TERMS HAVE THE FOLLOWING MEANINGS:

 

“Account Debtor” means the obligor on an Account.

 

“Accounts” means all present and future “accounts” as defined in the California
Uniform Commercial Code in effect on the date hereof with such additions to such
term as may hereafter be made, and includes without limitation all accounts
receivable and other sums owing to Borrower.

 

 “Affiliate” means, with respect to any Person, a relative, partner,
shareholder, director, officer, or employee of such Person, or any parent or
subsidiary of such Person, or any Person controlling, controlled by or under
common control with such Person.

 

“Borrower Address” shall mean the address(es) listed on the first page of this
Loan and Security Agreement for each Borrower.

 

“Business Day” means a day on which PFG is open for business.

 

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“Change in Control” means: (1) a dissolution, liquidation, or sale of all or
substantially all of the assets of Borrower; (2) a merger or consolidation in
which Borrower is not the surviving corporation; (3) a reverse merger in which
Borrower is the surviving corporation but the shares of the Borrower’s common
stock outstanding immediately preceding the merger are converted by virtue of
the merger into other property, whether in the form of securities, cash or
otherwise; (4) an expression of intent to acquire control notified to Borrower
under Section 13(d)(1)(C) of the U.S. Securities Exchange Act of 1934, as
amended, which acquisition is subsequently effected; or (5) a change in control
of Borrower effected by a successful tender offer for more than 50% of the
outstanding voting securities of Borrower.

 

“Code” means the Uniform Commercial Code as adopted and in effect in the State
of California from time to time.

 

“Collateral” has the meaning set forth in Section 2 above.

 

“continuing” and “during the continuance of” when used with reference to a
Default or Event of Default means that the Default or Event of Default has
occurred and has not been either waived in writing by PFG or cured within any
applicable cure period.

 

“Default” means any event which with notice or passage of time or both, would
constitute an Event of Default.

 

“Default Rate” has the meaning set forth in Section 6.2 above.

 

“Deposit Accounts” means all present and future “deposit accounts” as defined in
the California Uniform Commercial Code in effect on the date hereof with such
additions to such term as may hereafter be made, and includes without limitation
all general and special bank accounts, demand accounts, checking accounts,
savings accounts and certificates of deposit.

 

 “Equipment” means all present and future “equipment” as defined in the
California Uniform Commercial Code in effect on the date hereof with such
additions to such term as may hereafter be made, and includes without limitation
all machinery, fixtures, goods, vehicles (including motor vehicles and
trailers), and any interest in any of the foregoing.

 

“Event of Default” means any of the events set forth in Section 6.1 of this
Agreement.

 

“GAAP” means generally accepted accounting principles consistently applied.

 

“General Intangibles” means all present and future “general intangibles” as
defined in the California Uniform Commercial Code in effect on the date hereof
with such additions to such term as may hereafter be made, and includes without
limitation all Intellectual Property, payment intangibles, royalties, contract
rights, goodwill, franchise agreements, purchase orders, customer lists, route
lists, telephone numbers, domain names, claims, income tax refunds, security and
other deposits, options to purchase or sell real or personal property, rights in
all litigation presently or hereafter pending (whether in contract, tort or
otherwise), insurance policies (including without limitation key man, property
damage, and business interruption insurance), payments of insurance and rights
to payment of any kind.

 

“good faith business judgment” means honesty in fact and good faith (as defined
in Section 1201 of the Code) in the exercise of PFG’s business judgment.

 

“including” means including (but not limited to).

 

“Indebtedness” means (a) indebtedness for borrowed money or the deferred
purchase price of property or services (other than trade payables arising in the
ordinary course of business), (b) obligations evidenced by bonds, notes,
debentures or other similar instruments, (c) reimbursement obligations in
connection with letters of credit, and (d) capital lease obligations.

 

 “Intellectual Property” means all present and future: (a) copyrights, copyright
rights, copyright applications, copyright registrations and like protections in
each work of authorship and derivative work thereof, whether published or
unpublished, (b) trade secret rights, including all rights to unpatented
inventions and know-how, and confidential information; (c) mask work or similar
rights available for the protection of semiconductor chips; (d) patents, patent
applications and like protections including without limitation improvements,
divisions, continuations, renewals, reissues, extensions and
continuations-in-part of the same; (e) trademarks, servicemarks, trade styles,
and trade names, whether or not any of the foregoing are registered, and all
applications to register and registrations of the same and like protections, and
the entire goodwill of the business of Borrower connected with and symbolized by
any such trademarks; (f) computer software and computer software products; (g)
designs and design rights; (h) technology; (i) all claims for damages by way of
past, present and future infringement of any of the rights included above; and
(j) all licenses or other rights to use any property or rights of a type
described above.

 

“Inventory” means all present and future “inventory” as defined in the
California Uniform Commercial Code in effect on the date hereof with such
additions to such term as may hereafter be made, and includes without limitation
all merchandise, raw materials, parts, supplies, packing and shipping materials,
work in process and finished products, including without

 

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limitation such inventory as is temporarily out of Borrower’s custody or
possession or in transit and including any returned goods and any documents of
title representing any of the above.

 

“Investment” means any beneficial ownership interest in any Person (including
any stock, partnership interest or other equity or debt securities issued by any
Person), and any loan, advance or capital contribution to any Person.

 

“Investment Property” means all present and future investment property,
securities, stocks, bonds, debentures, debt securities, partnership interests,
limited liability company interests, options, security entitlements, securities
accounts, commodity contracts, commodity accounts, and all financial assets held
in any securities account or otherwise, and all options and warrants to purchase
any of the foregoing, wherever located, and all other securities of every kind,
whether certificated or uncertificated.

 

“Loan Documents” means, collectively, this Agreement, the Representations, and
all other present and future documents, instruments and agreements between PFG
and Borrower, including, but not limited to those relating to this Agreement,
and all amendments and modifications thereto and replacements therefor.

 

“Material Adverse Change” means any of the following: (i) a material adverse
change in the business, operations, or financial or other condition of the
Borrower (in the case of two Borrowers, such entities taken as a whole), or (ii)
a material impairment of the prospect of repayment of any portion of the
Obligations; or (iii) a material impairment of the value or priority of PFG’s
security interests in the Collateral.

 

“Obligations” means all present and future Loans, advances, debts, liabilities,
obligations, guaranties, covenants, duties and indebtedness at any time owing by
Borrower to PFG, whether evidenced by this Agreement or any note or other
instrument or document, or otherwise, whether arising from an extension of
credit, opening of a letter of credit, banker’s acceptance, loan, guaranty,
indemnification or otherwise, whether direct or indirect (including, without
limitation, those acquired by assignment and any participation by PFG in
Borrower’s debts owing to others), absolute or contingent, due or to become due,
including, without limitation, all interest, charges, expenses, fees, attorney’s
fees, expert witness fees, audit fees, collateral monitoring fees, closing fees,
facility fees, termination fees, minimum interest charges and any other sums
chargeable to Borrower under this Agreement or under any other Loan Documents,
provided however, that for purposes of the termination of this Agreement at the
Maturity Date as set forth in Section 4 of the Schedule or upon Borrower’s
termination of this Agreement by prepayment under Section 1 of the Schedule, the
term “Obligations” shall not be construed to require Borrower’s payment of
Indebtedness arising under the Senior Loan Documents.

 

“Other Property” means the following as defined in the California Uniform
Commercial Code in effect on the date hereof with such additions to such term as
may hereafter be made, and all rights relating thereto: all present and future
“commercial tort claims” (including without limitation any commercial tort
claims identified in the Representations), “documents”, “instruments”,
“promissory notes”, “chattel paper”, “letters of credit”, “letter-of-credit
rights”, “fixtures”, “farm products” and “money”; and all other goods and
personal property of every kind, tangible and intangible, whether or not
governed by the California Uniform Commercial Code.

 

“Payment” means all checks, wire transfers and other items of payment received
by for credit to Borrower’s outstanding Obligations.

 

“Permitted Indebtedness” means

 

(i) the Loans and other Obligations; and

 

(ii) Indebtedness existing on the date hereof and shown on Exhibit A hereto;

 

(iii) Subordinated Debt;

 

(iv) Indebtedness owing to Senior Lender not to exceed the Senior Debt Limit
specified in the Schedule;

 

(v) other Indebtedness secured by Permitted Liens;

 

(vi) reimbursement obligations in respect of letters of credit in an aggregate
face amount outstanding not to exceed $300,000 at any time outstanding, which
has been reported to PFG in writing, and, in the case of reimbursement
obligations to the Senior Lender in respect of letters of credit which do not
exceed the Senior Debt Limit (taking into account all other Indebtedness to
Senior Lender).

 

“Permitted Investments” are:

 

(i) Investments (if any) shown on the Exhibit A and existing on the date hereof;

 

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(ii) marketable direct obligations issued or unconditionally guaranteed by the
United States or its agency or any State maturing within 1 year from its
acquisition;

 

(iii) commercial paper maturing no more than 1 year after its creation and
having the highest rating from either Standard & Poor’s Corporation or Moody’s
Investors Service, Inc; and

 

(iv) bank certificates of deposit issued maturing no more than 1 year after
issue; and

 

(v) other investments (except for common stock of Borrower) consistent with
Borrower’s Investment Policy attached hereto as Exhibit A.

 

“Permitted Liens” means the following:

 

(i) purchase money security interests in specific items of Equipment;

 

(ii) leases of specific items of Equipment;

 

(iii) liens for taxes not yet payable, or being contested in the manner
contemplated in Section 3.8 above;

 

(iv)  subject to the written consent of PFG on a case by case basis that such
event(s) shall not give rise to an Event of Default, which consent may be given
or withheld in PFG’s business judgment or subject to such conditions as PFG may
determine in good faith, liens for fees, assessments, or other charges of a
governmental authority, provided that the payment of such fees, assessments, or
other charges of a governmental authority referenced in this clause (iv) that
are due and payable are being contested in good faith and by appropriate
proceedings diligently pursued and as to which adequate financial reserves have
been established in accordance with GAAP on Borrower’s books and records and a
stay of enforcement of any such lien is in effect;

 

(v) liens on deposits made by Borrower in the ordinary course of business in
connection with, or to secure payment of, obligations under worker’s
compensation, unemployment insurance, social security, and other similar laws,
or to secure the performance of bids, tenders, or contracts (other than for the
repayment of Indebtedness) or to secure indemnity, performance, or other similar
bonds for the performance of bids, tenders, or contracts (other than for the
repayment of Indebtedness) or to secure statutory obligations (other than Liens
arising under ERISA or Environmental Liens) or surety or appeal bonds, or to
secure indemnity, performance, or other similar bonds;

 

(vi) liens constituting encumbrances in the nature of reservations, exceptions,
encroachments, easements, rights of way, covenants running with the land, and
other similar title exceptions or encumbrances affecting any Real Property,
provided that any such liens do not in the aggregate materially interfere with
the use of such Real Property in the ordinary conduct of Borrower’s business;

 

(vii) liens arising from judgments and attachments in connection with court
proceedings, provided that (a) the attachment or enforcement of such liens would
not otherwise result in an Event of Default hereunder, (b) such liens are being
contested in good faith by appropriate proceedings diligently pursued, (c)
adequate financial reserves have been established on Borrower’s books and
records in accordance with GAAP, (d) no Collateral with an aggregate value in
excess of $250,000 is subject to a material risk of loss or forfeiture, and (e)
a stay of execution pending appeal or proceeding for review is in effect;

 

(viii) any additional security interests and liens consented to in writing by
PFG, which consent may be withheld in its good faith business judgment. PFG will
have the right to require, as a condition to its consent under this subparagraph
(iv), that the holder of the additional security interest or lien sign an
intercreditor agreement on PFG’s then standard form, acknowledge that the
security interest is subordinate to the security interest in favor of PFG, and
agree not to take any action to enforce its subordinate security interest so
long as any Obligations remain outstanding, and that Borrower agree that any
uncured default in any obligation secured by the subordinate security interest
shall also constitute an Event of Default under this Agreement;

 

(ix) security interests being terminated substantially concurrently with this
Agreement;

 

(x) liens of materialmen, mechanics, warehousemen, carriers, or other similar
liens arising in the ordinary course of business and securing obligations which
are not delinquent; provided, that Borrower may, however, defer payment of any
of the foregoing which are contested by Borrower in good faith, provided that
Borrower (a) contests the same by appropriate proceedings promptly and
diligently instituted and conducted, (b) notifies PFG in writing of the
commencement of, and any material development in, any such proceedings which
involved $250,000 either individually or in the aggregate, and (c) posts bonds
or takes any other steps required to stay the enforcement of any such lien upon
any of the Collateral against which such person could then proceed;

 

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(xi) liens incurred in connection with the extension, renewal or refinancing of
the indebtedness secured by liens of the type described above in clauses (i) or
(ii) above or clause (xiv) below, provided that any extension, renewal or
replacement lien is limited to the property encumbered by the existing lien and
the principal amount of the indebtedness being extended, renewed or refinanced
does not increase;

 

(xii) liens in favor of customs and revenue authorities which secure payment of
customs duties in connection with the importation of goods;

 

(xiii) statutory, common law or contractual liens of depository institutions or
institutions holding securities account (including rights of set-off) securing
only customary charges and fees in connection with such accounts; and

 

(xiv) liens in favor of Senior Lender securing an amount not in excess of the
Senior Debt Limit.

 

“Person” means any individual, sole proprietorship, partnership, joint venture,
trust, unincorporated organization, association, corporation, government, or any
agency or political division thereof, or any other entity.

 

“Real Property” means that certain land, building, structures, appurtenances,
improvements, fixtures and personal property on or within the real property
located at postal address: 211 Somerville Road, Route 202N, Bedminster, New
Jersey 07921.

 

“Representations” means the written Representations and Warranties provided by
Borrower to PFG referred to in the Schedule.

 

“Senior Lender” has the meaning set forth in Section 8 of the Schedule.

 

“Senior Loan Documents” has the meaning set forth in Section 8 of the Schedule.

 

“Subordinated Debt” means debt incurred by Borrower subordinated to Borrower’s
debt to PFG (pursuant to a subordination agreement entered into between PFG,
Borrower and the subordinated creditor), on terms acceptable to PFG in its
absolute discretion.

 

Other Terms.  All accounting terms used in this Agreement, unless otherwise
indicated, shall have the meanings given to such terms in accordance with GAAP,
consistently applied.  All other terms contained in this Agreement, unless
otherwise indicated, shall have the meanings provided by the Code, to the extent
such terms are defined therein.

 

8.                                       GENERAL PROVISIONS.

 

8.1  Confidentiality.  PFG agrees to use the same degree of care that it
exercises with respect to its own proprietary information, to maintain the
confidentiality of any and all proprietary, trade secret or confidential
information provided to or received by PFG from the Borrower, which indicates
that it is confidential, including business plans and forecasts, non-public
financial information, confidential or secret processes, formulae, devices and
contractual information, customer lists, and employee relation matters, provided
that PFG may disclose such information (i) to its officers, directors,
employees, attorneys, accountants, affiliates, participants, prospective
participants, assignees and prospective assignees, and such other Persons to
whom PFG shall at any time be required to make such disclosure in accordance
with applicable law or legal process, and (ii) in its good faith business
judgment in connection with the enforcement of its rights or remedies after an
Event of Default, or in connection with any dispute with Borrower or any other
Person relating to Borrower.  The confidentiality agreement in this
Section supersedes any prior confidentiality agreement of PFG relating to
Borrower.

 

8.2  Interest Computation.  In computing interest on the Obligations, all
Payments received after 12:00 Noon, Pacific Time, on any day shall be deemed
received on the next Business Day.

 

8.3 Payments. All Payments may be applied, and in PFG’s good faith business
judgment reversed and re-applied, to the Obligations, in such order and manner
as PFG shall determine in its good faith business judgment.

 

8.4  Monthly Accountings.  PFG shall provide Borrower monthly with an account of
advances, charges, expenses and payments made pursuant to this Agreement.  Such
account shall be deemed correct, accurate and binding on Borrower and an account
stated (except for reverses and reapplications of payments made and corrections
of errors discovered by PFG), unless Borrower notifies PFG in writing to the
contrary within 90 days after such account is rendered, describing the nature of
any alleged errors or omissions.

 

8.5  Notices.  All notices to be given under this Agreement shall be in writing
and shall be given either personally, or by reputable private delivery service,
or by regular first-class mail, or certified mail return receipt requested, or
by fax to the most recent fax number a party has for the other party (and if by
fax, sent concurrently by one of the other methods provided herein), addressed
to PFG or Borrower at the addresses shown in the heading to this Agreement, or
at any other address designated in writing by one party to the other party. All
notices shall be deemed to have been given upon delivery in the case

 

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of notices personally delivered, or at the expiration of one Business Day
following delivery to the private delivery service, or two Business Days
following the deposit thereof in the United States mail, with postage prepaid,
or on the first business day of receipt during business hours in the case of
notices sent by fax, as provided herein.

 

8.6  Severability.  Should any provision of this Agreement be held by any court
of competent jurisdiction to be void or unenforceable, such defect shall not
affect the remainder of this Agreement, which shall continue in full force and
effect.

 

8.7  Integration.  This Agreement and such other written agreements, documents
and instruments as may be executed in connection herewith are the final, entire
and complete agreement between Borrower and PFG and supersede all prior and
contemporaneous negotiations and oral representations and agreements, all of
which are merged and integrated in this Agreement.  There are no oral
understandings, representations or agreements between the parties which are not
set forth in this Agreement or in other written agreements signed by the parties
in connection herewith.

 

8.8  Waivers; Indemnity.  The failure of PFG at any time or times to require
Borrower to strictly comply with any of the provisions of this Agreement or any
other Loan Document shall not waive or diminish any right of PFG later to demand
and receive strict compliance therewith.  Any waiver of any default shall not
waive or affect any other default, whether prior or subsequent, and whether or
not similar.  None of the provisions of this Agreement or any other Loan
Document shall be deemed to have been waived by any act or knowledge of PFG or
its agents or employees, but only by a specific written waiver signed by an
authorized officer of PFG and delivered to Borrower.  Borrower waives the
benefit of all statutes of limitations relating to any of the Obligations or
this Agreement or any other Loan Document, and Borrower waives demand, protest,
notice of protest and notice of default or dishonor, notice of payment and
nonpayment, release, compromise, settlement, extension or renewal of any
commercial paper, instrument, account, General Intangible, document or guaranty
at any time held by PFG on which Borrower is or may in any way be liable, and
notice of any action taken by PFG, unless expressly required by this Agreement.
Borrower hereby agrees to indemnify PFG and its affiliates, subsidiaries,
parent, directors, officers, employees, agents, and attorneys, and to hold them
harmless from and against any and all claims, debts, liabilities, demands,
obligations, actions, causes of action, penalties, and related costs and
expenses (including reasonable attorneys’ fees), of every kind, which they may
sustain or incur based upon or arising out of any of the Obligations, or any
relationship or agreement between PFG and Borrower, or any other matter,
relating to Borrower or the Obligations; provided that this indemnity shall not
extend to damages proximately caused by the indemnitee’s own gross negligence or
willful misconduct.  Notwithstanding any provision in this Agreement to the
contrary, the indemnity agreement set forth in this Section shall survive any
termination of this Agreement and shall for all purposes continue in full force
and effect.

 

8.9  No Liability for Ordinary Negligence.  Neither PFG, nor any of its
directors, officers, employees, agents, attorneys or any other Person affiliated
with or representing PFG shall be liable for any claims, demands, losses or
damages, of any kind whatsoever, made, claimed, incurred or suffered by Borrower
or any other party through the ordinary negligence of PFG, or any of its
directors, officers, employees, agents, attorneys or any other Person affiliated
with or representing PFG, but nothing herein shall relieve PFG from liability
for its own gross negligence or willful misconduct.

 

8.10  Amendment.  The terms and provisions of this Agreement may not be waived
or amended, except in a writing executed by Borrower and a duly authorized
officer of PFG.

 

8.11  Time of Essence.  Time is of the essence in the performance by Borrower of
each and every obligation under this Agreement.

 

8.12  Attorneys’ Fees and Costs.  Borrower shall reimburse PFG for all
reasonable attorneys’ fees and all filing, recording, search, title insurance,
appraisal, audit, and other reasonable costs incurred by PFG: (a) in connection
with the preparation, negotiation and closing of this Agreement, and (b) any
future amendments, consents, waivers or supplements to this Agreement, and (c)
upon the occurrence and during the continuance of a Default or an Event of
Default, to (i) obtain legal advice in connection with this Agreement or
Borrower; (ii) enforce, or seek to enforce, any of its rights hereunder; (iii)
prosecute actions against, or defend actions by, Account Debtors; (iv) commence,
intervene in, or defend any action or proceeding; (v) initiate any complaint to
be relieved of the automatic stay in bankruptcy; file or prosecute any probate
claim, bankruptcy claim, third-party claim, or other claim; (vi) examine, audit,
copy, and inspect any of the Collateral or any of Borrower’s books and records;
(vii) protect, obtain possession of, lease, dispose of, or otherwise enforce
PFG’s security interest in, the Collateral; and (viii) otherwise represent PFG
in any litigation relating to Borrower. If either PFG or Borrower files any
lawsuit against the other predicated on a breach of this Agreement, the
prevailing party in such action shall be entitled to recover its reasonable
costs and attorneys’ fees, including (but not limited to) reasonable attorneys’
fees and costs incurred in the enforcement of, execution upon or defense of any
order, decree, award or judgment.  All attorneys’ fees and costs to which PFG
may be entitled pursuant to this Paragraph shall immediately become part of
Borrower’s Obligations, shall be due on demand, and shall bear interest at a
rate equal to the highest interest rate applicable to any of the Obligations.

 

13

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8.13  Benefit of Agreement.  The provisions of this Agreement shall be binding
upon and inure to the benefit of the respective successors, assigns, heirs,
beneficiaries and representatives of Borrower and PFG; provided, however, that
Borrower may not assign or transfer any of its rights under this Agreement
without the prior written consent of PFG, and any prohibited assignment shall be
void.  No consent by PFG to any assignment shall release Borrower from its
liability for the Obligations.

 

8.14  Joint and Several Liability.  If Borrower consists of more than one
Person, their liability shall be joint and several, and the compromise of any
claim with, or the release of, any Borrower shall not constitute a compromise
with, or a release of, any other Borrower.

 

8.15  Limitation of Actions.  Any claim or cause of action by Borrower against
PFG, its directors, officers, employees, agents, accountants or attorneys, based
upon, arising from, or relating to this Loan Agreement, or any other Loan
Document, or any other transaction contemplated hereby or thereby or relating
hereto or thereto, or any other matter, cause or thing whatsoever, occurred,
done, omitted or suffered to be done by PFG, its directors, officers, employees,
agents, accountants or attorneys, shall be barred unless asserted by Borrower by
the commencement of an action or proceeding in a court of competent jurisdiction
by the filing of a complaint within one year after the first act, occurrence or
omission upon which such claim or cause of action, or any part thereof, is
based, and the service of a summons and complaint on an officer of PFG, or on
any other person authorized to accept service on behalf of PFG, within thirty
(30) days thereafter.  Borrower agrees that such one-year period is a reasonable
and sufficient time for Borrower to investigate and act upon any such claim or
cause of action.  The one-year period provided herein shall not be waived,
tolled, or extended except by the written consent of PFG in its sole
discretion.  This provision shall survive any termination of this Loan Agreement
or any other Loan Document.

 

8.16  Paragraph Headings; Construction.  Paragraph headings are only used in
this Agreement for convenience.  Borrower and PFG acknowledge that the headings
may not describe completely the subject matter of the applicable paragraph, and
the headings shall not be used in any manner to construe, limit, define or
interpret any term or provision of this Agreement. This Agreement has been fully
reviewed and negotiated between the parties and no uncertainty or ambiguity in
any term or provision of this Agreement shall be construed strictly against PFG
or Borrower under any rule of construction or otherwise.

 

8.17  Governing Law; Jurisdiction; Venue.  This Agreement and all acts and
transactions hereunder and all rights and obligations of PFG and Borrower shall
be governed by the laws of the State of New York.  As a material part of the
consideration to PFG to enter into this Agreement, Borrower (i) agrees that all
actions and proceedings relating directly or indirectly to this Agreement shall,
at PFG’s option, be litigated in courts located within California, and that the
exclusive venue therefor shall be San Francisco County; (ii) consents to the
jurisdiction and venue of any such court and consents to service of process in
any such action or proceeding by personal delivery or any other method permitted
by law; and (iii) waives any and all rights Borrower may have to object to the
jurisdiction of any such court, or to transfer or change the venue of any such
action or proceeding.

 

8.18  Mutual Waiver of Jury Trial.  BORROWER AND PFG EACH HEREBY WAIVE THE RIGHT
TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, ARISING OUT OF, OR IN
ANY WAY RELATING TO, THIS AGREEMENT OR ANY OTHER PRESENT OR FUTURE INSTRUMENT OR
AGREEMENT BETWEEN PFG AND BORROWER, OR ANY CONDUCT, ACTS OR OMISSIONS OF PFG OR
BORROWER OR ANY OF THEIR DIRECTORS, OFFICERS, EMPLOYEES, AGENTS, ATTORNEYS OR
ANY OTHER PERSONS AFFILIATED WITH PFG OR BORROWER, IN ALL OF THE FOREGOING
CASES, WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE.

 

8.19 Representations and warranties of PFG.  PFG has all requisite power and has
taken all requisite action to execute and deliver each of this Agreement and to
carry out and perform all of its obligations hereunder.  This Agreement has been
duly authorized, executed and delivered on behalf of Purchaser and constitutes
the valid and binding agreement of PFG, enforceable in accordance with its
terms, except (i) as limited by applicable bankruptcy, insolvency, 
reorganization or similar laws relating to or affecting the enforcement of
creditors’ rights generally and (ii) as limited by equitable principles
generally.  The consummation of the transactions contemplated herein and the
fulfillment of the terms herein will not result in a breach of any of the terms
or provisions of PFG’s partnership agreement or other relevant organizational
documents.

 

8.20  Provisions Relating to Oregon Law.  To the extent that all or any portion
of this Agreement is determined by a court of competent jurisdiction to be
subject to Oregon law, the following disclosures are made:

 

In compliance with Oregon law, the Borrower and any Guarantor(s) should read
carefully and acknowledge your receipt and understanding of the following
statement:

 

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UNDER OREGON LAW, MOST AGREEMENTS, PROMISES AND COMMITMENTS MADE BY US AFTER
NOVEMBER 3, 1989, CONCERNING LOANS AND OTHER CREDIT EXTENSIONS WHICH ARE NOT FOR
PERSONAL, FAMILY OR HOUSEHOLD PURPOSES OR SECURED SOLELY BY THE BORROWER’S
RESIDENCE MUST BE IN WRITING, EXPRESS CONSIDERATION AND BE SIGNED BY AN
AUTHORIZED REPRESENTATIVE OF LENDER TO BE ENFORCEABLE.

 

Under Oregon law, we are also required to notify you of certain matters related
to our right to place insurance on the property that is collateral for our loan
in certain circumstances.  In compliance with this law, please read carefully
and acknowledge your receipt and understanding of the following warning:

 

WARNING:  UNLESS YOU PROVIDE US WITH EVIDENCE OF THE INSURANCE COVERAGE AS
REQUIRED BY OUR CONTRACT OR LOAN AGREEMENT, WE MAY PURCHASE INSURANCE AT YOUR
EXPENSE TO PROTECT OUR INTEREST.  THIS INSURANCE MAY, BUT NEED NOT, ALSO PROTECT
YOUR INTEREST.  IF THE COLLATERAL BECOMES DAMAGED, THE COVERAGE WE PURCHASE MAY
NOT PAY ANY CLAIM YOU MAKE OR ANY CLAIM MADE AGAINST YOU.  YOU MAY LATER CANCEL
THIS COVERAGE BY PROVIDING EVIDENCE THAT YOU HAVE OBTAINED PROPERTY COVERAGE
ELSEWHERE.

 

YOU ARE RESPONSIBLE FOR THE COST OF ANY INSURANCE PURCHASED BY US.  THE COST OF
THIS INSURANCE MAY BE ADDED TO YOUR CONTRACT OR LOAN BALANCE.  IF THIS COST IS
ADDED TO YOUR CONTRACT OR LOAN BALANCE, THE INTEREST RATE PAYABLE UNDER THE
UNDERLYING LOAN WILL APPLY TO THIS ADDED AMOUNT.  THE EFFECTIVE DATE OF THE
COVERAGE MAY BE THE DATE YOUR PRIOR COVERAGE LAPSED OR THE DATE YOUR FAILED TO
PROVIDE PROOF OF COVERAGE.

 

THE COVERAGE WE PURCHASE MAY BE CONSIDERABLY MORE EXPENSIVE THAN INSURANCE YOU
CAN OBTAIN ON YOUR OWN AND MAY NOT SATISFY ANY NEED FOR PROPERTY DAMAGE COVERAGE
OR ANY MANDATORY LIABILITY INSURANCE REQUIREMENTS IMPOSED BY APPLICABLE LAW. 
(Each reference to “you” and “your” shall refer to Borrower and each reference
to “us” and “we” shall refer to Lender.)

 

 

Borrower:

PFG:

 

Bioject Medical Technologies Inc.

 

PARTNERS FOR GROWTH, L.P.

 

 

 

 

 

 

 

 

 

 

 

By

/s/ Jim O’ Shea

 

By

/s/ Lorraine Nield

 

 

 

Jim O’Shea, President

 

 

 

 

 

 

Name:

Lorraine Nield

 

 

By

/s/ Christine Farrell

 

 

 

 

Secretary or Ass’t Secretary

 

Title: Manager, Partners for Growth, LLC

 

 

 

 

Its General Partner

Borrower:

 

 

 

Bioject Inc.

 

 

 

 

 

 

 

 

 

 

 

 

 

By

/s/ Jim O’ Shea

 

 

 

 

Jim O’Shea, President

 

 

 

 

 

 

 

 

By

/s/ Christine Farrell

 

 

 

 

Secretary or Ass’t Secretary

 

 

 

 

Signature Page to Loan and Security Agreement

 

15

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Partners For Growth

 

Schedule to

 

Term Loan and Security Agreement

 

Borrower:

Bioject Medical Technologies, Inc.

Address:

211 Somerville Road, Route 202N, Bedminster, NJ 07921

 

 

Borrower:

Bioject, Inc.

Address:

20245 S.W. 95th Ave., Tualatin, OR 97062

 

 

Date:

December 15, 2004

 

This Schedule forms an integral part of the Term Loan and Security Agreement
between PARTNERS FOR GROWTH, L.P. and the above-borrower of even date.

 

1. LOAN (Section 1.1):

 

 

The Loan shall consist of a term loan in the amount of $3,000,000, which shall
be funded on the date hereof

 

The Principal Amount of the Loan shall be repaid in 36 equal principal payments
of $83,333 each, plus interest thereon, commencing on the first business day of
the month following the date hereof and continuing on the first day of each
month thereafter until the Maturity Date on which date the entire unpaid
principal balance of the Loan plus any and all accrued and unpaid interest shall
be paid.

 

The principal of the Loan may be prepaid at any time, in whole or in part,
without penalty. Prepayments shall be applied to the principal payments on the
Loan in inverse order of their maturity.

 

 

2. INTEREST.

 

Interest Rate (Section 1.2):

 

 

The Loan shall bear interest at a rate per annum equal to (i) the greater of
4.5% or the Prime Rate, plus (ii) 3%. Interest shall be based on the outstanding
balance due under the Loan during each month, calculated monthly on the basis of
a 360-day year and a year of twelve months of 30 days each for the actual number
of days elapsed in each month. Accrued interest for each month shall be payable
monthly, on the last day of the month.

 

“Prime Rate” means the rate quoted from time to time by Silicon Valley Bank as
its prime lending rate.

 

1

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3. FEES (Section 1.3):

 

 

 

Loan Fee:

$30,000, payable concurrently herewith.

 

 

4. MATURITY DATE

 

(Section 5.1):

December 14, 2007

 

 

5. FINANCIAL COVENANTS

 

(Section 4.1):

NONE

 

 

6. REPORTING.

 

(Section 4.4):

 

 

 

 

Borrower shall provide PFG with the following:

 

 

 

(a)

Monthly Borrowing Base Compliance Certificate, in such form as PFG shall
specify, within five (5) Business Days after the end of each month, and
borrowing base reports at such other times as PFG shall from time to time
request in its good faith business judgment.

 

 

 

 

(b)

Monthly accounts receivable agings, aged by invoice date, within five (5)
Business Days after the end of each month.

 

 

 

 

(c)

Monthly accounts payable agings, aged by invoice date, and outstanding or held
check registers, if any, within five (5) Business Days after the end of each
month.

 

 

 

 

(d)

Monthly reconciliations of accounts receivable agings (aged by invoice date),
and general ledger, within five (5) Business Days after the end of each month.

 

 

 

 

(e)

Monthly perpetual inventory reports for the Inventory valued on a first-in,
first-out basis at the lower of cost or market (in accordance with GAAP) or such
other inventory reports as are requested by PFG in its good faith business
judgment, all within ten (10) Business Days after the end of each month.

 

 

 

 

(f)

Monthly unaudited, management-prepared financial statements prepared in
accordance with GAAP, within ten (10) Business Days after the end of each month.

 

 

 

 

(g)

Monthly Compliance Certificates, within ten (10) Business Days after the end of
each month, in such form as PFG shall

 

2

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reasonably specify, signed by the Chief Financial Officer of Borrower,
certifying that as of the end of such month Borrower was in full compliance with
all of the terms and conditions of this Agreement, and setting forth
calculations showing compliance with the financial covenants set forth in this
Agreement and such other information as PFG shall reasonably request, including,
without limitation, a statement that at the end of such month there were no held
checks.

 

 

 

 

(h)

Quarterly financial statements, as soon as available, and in any event within
forty-five days after the end of each fiscal quarter of Borrower (other than the
last fiscal quarter in any year); provided, however, if Borrower files a form
10-Q with the Securities and Exchange Commission and the same is available
within said period through EDGAR, such availability will satisfy this
requirement.

 

 

 

 

(i)

A quarterly information update certificate, in the form of an update of the
Representations, within the earlier to occur of ten (10) Business Days after the
end of each fiscal quarter of Borrower or promptly following the knowledge of
any executive officer of Borrower that the Representations are no longer true,
complete and accurate.

 

 

 

 

(j)

Annual financial statements, as soon as available, and in any event within 120
days following the end of Borrower’s fiscal year, certified by, and with an
unqualified opinion of, independent certified public accountants reasonably
acceptable to PFG; provided, however, if Borrower files a form 10-K with the
Securities and Exchange Commission and the same is available within said period
through EDGAR, such availability will satisfy this requirement.

 

 

 

7. BORROWER INFORMATION:

 

 

 

 

 

 

Borrower represents and warrants that the information set forth in the
Representations and Warranties of the Borrower dated December 15, 2004,
previously submitted to PFG (the “Representations”) is true and correct as of
the date hereof.

 

 

 

8. ADDITIONAL PROVISIONS

 

 

 

 

 

 

(a)

Senior Lender.

 

 

(1)

Senior Lender. As used herein, “Senior Lender” means the holder of Borrower’s
revolving line

 

3

--------------------------------------------------------------------------------

 

 

 

 

of credit indebtedness arising under that certain Loan and Security Agreement
dated as of December 15, 2004, and “Senior Loan Documents” means all present and
future documents instruments and agreements entered into between Borrower and
Senior Lender or by third parties relating to Borrower and Senior Lender.

 

 

(2)

Senior Debt Limit. Borrower shall not permit the total Indebtedness of Borrower
to Senior Lender under the Senior Loan Documents to exceed $2,000,000 at any
time outstanding (the “Senior Debt Limit”), including, but not limited to,
monies borrowed by Borrower, interest on loans due from Borrower, fees and
expenses for which Borrower is obligated, sums due from Borrower in connection
with issuance of commercial letters of credit, issuance of forward contracts for
foreign exchange reserve, and any other direct or indirect financial
accommodation Senior Lender may provide to Borrower).

 

 

(3)

Senior Loan Documents. Borrower represents and warrants that it has provided PFG
with true and complete copies of all existing Senior Loan Documents, and
Borrower covenants that it will, in the future, provide PFG with true and
complete copies of any future Senior Loan Documents, including without
limitation any amendments to any existing Senior Loan Documents.

 

(b)

Deposit Accounts. Concurrently, Borrower shall cause the banks and other
institutions where its Deposit Accounts are maintained to enter into control
agreements with PFG, in form and substance satisfactory to PFG in its good faith
business judgment and sufficient to perfect PFG’s security interest in said
Deposit Accounts, subject to the security interest of the Senior Lender. Said
control agreements shall permit PFG, in its discretion, to withdraw from said
Deposit Accounts accrued interest on the Obligations monthly (subject to the
rights of the Senior Lender).

 

(c)

Lockbox. If requested to do so by PFG, Borrower shall direct each Account Debtor
(and each depository institution where proceeds of accounts receivable are on
deposit) to make payments with respect to all receivables to a lockbox account
established for PFG at such banking institution as PFG may notify (the
“Lockbox”) or to wire transfer payments to a cash collateral account that PFG
controls, as and when directed by PFG from time to time, at its option and at
the sole and exclusive discretion of the PFG. It will be considered an

 

4

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immediate Event of Default if the Lockbox is not set-up and operational within
30 days from the date of PFG ‘s request.

 

(d)

Conditional Release of Collateral from Security Interest. At any time prior to
the Maturity Date, Borrower may request that PFG release its security interest
and lien on all or part of Borrower’s Intellectual Property, and PFG shall
release such security interest and lien, provided, however, that Borrower’s
right to make such request and PFG’s obligation to honor such request shall be
expressly conditioned on the following:

 

 

(i) at the time of such request, no Event of Default has occurred and is
continuing and Borrower is otherwise in full compliance with its obligations to
PFG hereunder and under each other agreement between Borrower and PFG; and

 

 

(ii) the fair market value of the Real Property (as supported by a then current
appraisal) equals or exceeds the dollar amount of all Obligations outstanding;
and

 

 

(iii) any future requests for advances which would increase Obligations above
the fair market value of the Real Property may be declined by PFG or may be
conditioned upon a new security interest being granted by Borrower in such
Intellectual Property; and

 

 

(iv) upon each occasion of the Intellectual Property released from PFG’s
security interest and lien being sold or licensed, Borrower shall apply 50% (or
such lesser percentage as PFG may determine in its sole discretion) of any such
sales or

 

5

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licensing proceeds to payment of Obligations, in such manner and against such
outstanding Obligations as PFG shall determine.

 

 

Borrower:

PFG:

 

Bioject Medical Technologies Inc.

 

PARTNERS FOR GROWTH, L.P.

 

 

 

 

 

 

 

 

 

 

 

By

/s/ Jim O’ Shea

 

 

 

 

 

 

Jim O’Shea, President

 

By

/s/ Lorraine Nield

 

 

 

 

 

 

 

 

 

 

Name: Lorraine Nield

 

By

/s/ Christine Farrell

 

 

 

 

Secretary or Ass’t Secretary

 

Title: Manager, Partners for Growth, LLC

 

 

 

 

Its General Partner

Borrower:

 

 

 

Bioject, Inc.

 

 

 

 

 

 

 

 

 

 

 

 

 

By

/s/ Jim O’ Shea

 

 

 

 

Jim O’Shea, President

 

 

 

 

 

 

 

 

By

/s/ Christine Farrell

 

 

 

 

Secretary or Ass’t Secretary

 

 

 

6

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