EXHIBIT 10.1

 

Partners for Growth

 

2006 Term Loan and Security Agreement

 

Borrower:

 

Bioject Medical Technologies Inc.

Address:

 

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

 

 

 

Borrower:

 

Bioject, Inc.

Address:

 

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

 

 

 

Date:

 

March 29, 2006

 

 

THIS 2006 TERM LOAN AND SECURITY AGREEMENT (“Agreement”) is entered into on the
above date between PARTNERS FOR GROWTH, L.P. (“PFG”), whose address is 180
Pacific Avenue, San Francisco, CA 94111 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 has paid to 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 therefor is deemed delivered 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 and validly existing 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.

 

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.

 

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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.   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. 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, 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;

 

(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;

 

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(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.

 

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

 

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(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.

 

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

 

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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 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

 

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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.

 

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

 

“Bridge Notes” has the meaning set forth in Section 8 of the Schedule.

 

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

 

“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

 

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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 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.

 

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“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.

 

“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 (including for the avoidance of doubt, the
Existing PFG Loans, as described in the Schedule); and

 

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

 

(iii) Subordinated Debt;

 

(iv) Indebtedness owing to the Bridge Lenders under the Bridge Notes, so long as
such Indebtedness is subordinated to the Obligations;

 

(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
have been reported to PFG in writing.

 

“Permitted Investments” are:

 

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

 

(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

 

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(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;

 

(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;

 

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(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 the Bridge Lenders securing obligations under the Bridge
Notes, so long as such liens are subordinated to the liens of PFG.

 

“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.

 

“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 (which for the avoidance of doubt includes the Bridge
Notes).

 

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 or electronic mail, 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 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 or electronic mail, 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.

 

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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 (not to exceed
$30,000), 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.

 

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.

 

13

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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, notwithstanding the parties’ determination that it shall
be governed by New York 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:

 

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.

 

14

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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 YOU 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/Andrew W. Kahn

 

 

Jim O’Shea, President

 

 

Name:

Andrew W. Kahn

 

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

 

 

15

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Partners For Growth

 

Schedule to

 

2006 Term Loan and Security Agreement

 

Borrower:

 

Bioject Medical Technologies Inc.

Address:

 

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

 

 

 

Borrower:

 

Bioject, Inc.

Address:

 

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

 

 

 

Date:

 

March 29, 2006

 

This Schedule forms an integral part of the 2006 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 $1,250,000, which shall
be funded in its entirety on the date hereof

The Principal Amount of the Loan and all other monetary Obligations shall be
repaid on the Maturity Date.

 

 

PFG Conversion:

At any time prior to the Maturity Date, PFG may at its option convert the
principal amount of and all accrued and unpaid interest under this Loan (or any
part thereof) into Bioject Medical Technologies Inc.’s  (“BMTI”) common stock
(the “Conversion Stock”) at a conversion price equal to the lower of (a) $1.37
per share (subject to adjustment, as set forth below) or (b) the price per share
at which the promissory notes issued pursuant to that certain Note and Warrant
Purchase Agreement between BMTI and the purchasers thereunder dated March 8,
2006 convert into BMTI’s Series E Preferred Stock (or, failing BMTI stockholder
approval, such other securities into which such notes become convertible) (the
“Conversion Price”). The Conversion Price and the Conversion Stock are subject
to adjustment for stock splits, combinations, reclassifications and similar
transactions. PFG may exercise its right to convert the Loan or part thereof by
telecopying or otherwise delivering an executed and completed notice specifying
the portion of the Loan to be converted into Conversion Stock (a “Conversion
Notice”). Any fractional shares will be paid in cash. Each date on which a
Conversion Notice is telecopied or delivered to BMTI in accordance with the
provisions hereof shall be deemed a  Conversion Date. Pursuant to the terms of
the Conversion Notice, the BMTI will issue stock certificates for the Conversion
Stock within five (5) business days of the delivery of the Conversion Notice.
The conversion of the Loan into Conversion Stock is subject only to the approval
of such transaction by BMTI’s stockholders, which approval BMTI agrees to use
its best efforts to obtain at the BMTI 2006 Annual Meeting. In the event that
the requisite percentage of BMTI stockholders do not approve the issue of
Conversion Stock (and the Warrants (as defined in the “Prepayment” clause
below)) at the earlier of the BMTI 2006 Annual Meeting or July 31, 2006, the
Loan shall be due upon demand by PFG.

 

1

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BMTI-Initiated

 

Conversion:

At any time prior to the Maturity Date, BMTI may initiate a conversion of the
Loan into Conversion Stock by delivering a notice (the “BMTI Conversion Notice”)
to PFG, so long as all of the following conditions have been demonstrably met:

 

 

 

(i) the Conversion Stock must be freely tradable either pursuant to a
registration statement covering such common stock or Rule 144 (without volume
limitation);

 

 

 

(ii) the Conversion Stock must have traded above 300% of the Conversion Price
for twenty (20) consecutive trading days prior to delivery of the BMTI
Conversion Notice;

 

 

 

(iii) the number of shares of Conversion Stock issuable pursuant to the Borrower
Conversion Notice may not exceed 50% of the average daily trading volume for
BMTI’s common stock over the ten (10) consecutive trading days period
immediately prior to the delivery of the BMTI Conversion Notice; and

 

 

 

(iv) if BMTI initiates a conversion of the Loan in part, at least 5 Business
Days must lapse between such conversion and any other Borrower-initiated
conversion under this Section, which subsequent conversion is conditioned on
preconditions (i) through (iii) being satisfied.

 

 

 

Each BMTI Conversion Notice shall include, inter alia, a statement or
calculation of compliance with the preconditions to BMTI conversion as set forth
in clauses (i) through (iv) above.

 

 

Registration:

Conversion Stock issuable pursuant to a BMTI and/or PFG-initiated conversion,
common stock issuable as payment of interest and common stock issuable under the
Warrants (as defined in the “Prepayment” clause, below) shall be registered on
the same registration statement on Form S-3 as the shares of common stock
issuable upon conversion of BMTI’s Series E Preferred Stock (or failing the
issue of Series E Preferred Stock or another preferred equity financing, on a
registration statement on Form S-3 to be filed within 60 days of shareholder
approval of conversion of the Loan and the issuance of the Warrants).

 

 

Prepayment:

Borrower may prepay the Loan plus all accrued but unpaid interest in whole or in
part at any time, without penalty, subject to compliance with the following
provisions. At the time any prepayment is made, and subject to the shareholder
approval referred to above, BMTI shall issue PFG a warrant to purchase that
number of shares of BMTI’s common stock as would be issued at such time if BMTI
or PFG had converted that portion of the Loan that is equal to the prepayment
(each a “Warrant” and all such Warrants collectively, “Warrants”). The exercise
price of the Warrant(s) shall be equal to the Conversion Price. The expiration
date of each Warrant issued under this clause shall be the Maturity Date
(ignoring any early termination of the Loan due to prepayment or otherwise). The
form of Warrant shall be in substantially the form of the warrant issued to PFG
in connection with the Existing PFG Loans (as defined in Section 8 of this
Schedule).

 

 

2. INTEREST.

 

Interest Rate (Section 1.2):

 

 

A rate equal to the Prime Rate per annum, measured monthly and applied to the
average daily aggregate amount outstanding under this Agreement each month.
Interest shall be calculated 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. Accrued interest
for each month shall be payable monthly, on the first day of each month for
interest accrued during the prior month. PFG shall have the right to adjust the
rate applicable to amounts outstanding hereunder as and when the Prime Rate
changes, but may elect in its sole discretion to reflect any such changes on a
monthly basis.

 

 

 

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

 

2

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After shareholder approval of the conversion of the Loan and for so long as the
holders of the Series E Preferred Stock of Bioject Medical Technologies Inc.
(“BMTI”) have the right to receive dividends payable in shares of Series E
Preferred Stock of BMTI, PFG shall have the right to receive from time to time,
at its option, as payment of interest for any month, common stock of BMTI rather
than cash. The number of shares of common stock issuable shall be calculated as
interest accrued during the month divided by the Conversion Price. BMTI common
stock issuable in lieu of cash interest shall be issued not later than 5
business days after the end of each month. For example, if $1,000 in interest is
due to PFG for the month of February, then 729 shares of BMTI common stock would
be issued to PFG not later than the fifth business day of March. Any fractional
shares will be paid in cash.

 

 

3. FEES (Section 1.3):

 

 

 

Diligence Fee:

$25,000 fee payable to PFG, non-refundable.

 

 

4. MATURITY DATE

 

(Section 5.1):

March    , 2011

 

 

5. FINANCIAL COVENANTS

 

(Section 4.1):

NONE

 

 

6. REPORTING.

 

(Section 4.4):

 

 

 

 

Borrower shall provide PFG with the following, as and when requested by PFG:

 

 

 

(a)

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

 

 

 

 

(b)

Monthly Compliance Certificates, within ten (10) Business Days after the end of
each month, in such form as PFG shall reasonably specify, signed by the Chief
Financial Officer of Borrower (or, if there is no Chief Financial Officer, the
Secretary of Borrower or such other person who has been vested by the Board of
Directors with the duties and responsibilities of the Chief Financial Officer),
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 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.

 

 

 

 

(c)

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.

 

 

 

 

(d)

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

 

3

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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.

 

 

 

 

(e)

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 March 29, 2006, previously
submitted to PFG (the “Representations”) is true and correct as of the date
hereof.

 

 

8. ADDITIONAL PROVISIONS

 

 

 

 

(a)

Bridge Lenders.   As used herein, “Bridge Lenders” means the holders of those
convertible subordinated promissory notes in the aggregate principal amount of
$1.5 million issued pursuant to the Note and Warrant Purchase Agreement, dated
March 8, 2006, between BMTI and such Bridge Lenders (the “Bridge Notes”).

 

 

 

 

(b)

Existing PFG Loans.   On the date hereof, PFG and Borrower are party to a Term
Loan and Security Agreement dated as of December 15, 2004, and a Loan and
Security Agreement dated as of December 15, 2004 (for a revolving line of
credit) and associated cross-corporate guarantees and security agreements (the
“Existing PFG Loans”). PFG and Borrower agree that the Loan made by PFG under
this Agreement is and shall be deemed to be included within the definition of
“Obligations” under the Existing PFG Loans, that PFG’s security interest in the
Collateral shall continue in the Obligations arising under this Agreement and
that the security interests and liens of PFG arising under this Agreement shall
be deemed to have attached and been perfected when made in connection with the
Existing PFG Loans, regardless of any repayment of the Existing PFG Loans made
after the date hereof.

 

 

 

 

(c)

Deposit Accounts.   Concurrently and to the extent not already done, 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,. Said control
agreements shall permit PFG, in its discretion, to withdraw from said Deposit
Accounts accrued interest on the Obligations monthly.

 

 

 

 

(d)

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

 

4

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

 

 

 

 

(e)

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) Borrower has entered or proposes to enter into an agreement to license or
sell the Intellectual Property requested to be released from PFG’s security
interest and lien; and

 

 

 

 

 

(iii)  upon each occasion of the Intellectual Property released from PFG’s
security interest and lien being sold or licensed, Borrower shall pay 50% (or
such lesser percentage as PFG may determine in its sole discretion) of any such
sales or licensing proceeds to PFG, which proceeds PFG will maintain as a
deposit against payment of Obligations (“Deposit”) and PFG’s security interest
and lien shall continue in said proceeds. If the Loan is converted, the Deposit
and all interest earned thereon will be promptly returned to Borrower. If the
Loan is not converted or is converted in part, PFG may apply the Deposit and all
interest earned thereon to the payment of outstanding Obligations in such manner
as PFG may determine in its discretion. For the avoidance of doubt, (A) the
parties agree that Borrower’s non-exclusive licensing of Intellectual Property
in the ordinary course of business does not require the release of PFG’s lien on
such Intellectual Property and, accordingly, the proceeds of such non-exclusive
licensing are not subject to this clause (e)(iii), and (B) the licensing of
Intellectual Property to a customer for its exclusive use with a particular drug
(or other injectable substance) that is one of such customer’s products shall be
deemed a non-exclusive license of Borrower’s Intellectual Property for purposes
hereof.

 

 

 

 

(f)

Additional Representations and Warranties of PFG.  PFG represents and warrants
to Borrower, with respect to itself and its purchase hereunder, as follows:

 

 

 

 

 

(i)  Investment Purpose.  PFG is purchasing certain equity rights evidenced by
this Agreement (together with the Conversion Stock and common stock issued under
the Warrants or as payment of interest, the “Equity Rights”) for its own account
for investment and not with a present view toward the public sale or
distribution thereof and has no intention of selling or distributing any of the
Equity Rights or any arrangement or understanding with any other persons
regarding the sale or distribution of such Equity Rights except as contemplated
by this Agreement or the Loan Documents and in compliance with the Securities
Act of 1933, as amended (the “Securities Act”). PFG will not, directly or
indirectly, offer, sell, pledge, transfer or otherwise dispose of (or solicit
any offers to buy, purchase or otherwise acquire or take a pledge of) any of the
Equity Rights except in

 

5

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accordance with the provisions of this Agreement or the Loan Documents and in
compliance with applicable securities laws.

 

 

 

 

 

(ii)  Purchaser Status. At the time PFG was offered the Equity Rights, it was,
and at the date hereof it is, and on each date on which it accepts a payment of
interest in the form of common stock or exercises any Warrant or option to
convert the Loan into Conversion Stock, it will be an “accredited investor” as
defined in Rule 501(a) under the Securities Act.

 

 

 

 

 

(iii)  Reliance on Exemptions. PFG understands that the Equity Rights are being
offered and sold to it in reliance upon specific exemptions from, or
non-application of, the registration requirements of United States federal and
state securities laws and that Borrower is relying upon the truth and accuracy
of, and PFG’s compliance with, the representations, warranties, agreements,
acknowledgments and understandings of PFG set forth herein in order to determine
the availability of such exemptions and the eligibility of PFG to acquire the
Equity Rights.

 

 

 

 

 

(iv)  Information. PFG acknowledges that is has been afforded (A) the
opportunity to ask such questions as it has deemed necessary of, and to receive
answers from, representatives of Borrower concerning the terms and conditions of
the offering of the Equity Rights and the merits and risks of investing in the
Equity Rights; (B) access to information about Borrower and its financial
condition, results of operations, businesses, properties, management and
prospects sufficient to enable it to evaluate its investment in the Equity
Rights, including, without limitation, Borrower’s reports required to be filed
with the Securities and Exchange Commission (“SEC”), and PFG has had the
opportunity to review such documents; and (C) the opportunity to obtain such
additional information that Borrower possesses or can acquire without
unreasonable effort or expense that is necessary to make an informed investment
decision with respect to the investment.

 

 

 

 

 

(v)  Acknowledgement of Risk. PFG acknowledges and understands that its
investment in the Equity Rights involves a significant degree of risk,
including, without limitation, the risks set forth in Borrower’s reports
required to be filed with the SEC. PFG is able to bear the economic risk of
holding the Equity Rights for an indefinite period, and has knowledge and
experience in financial and business matters such that it is capable of
evaluating the risks of the investment in the Equity Rights. PFG has, in
connection with its decision to purchase the Equity Rights and with respect to
all matters relating to this Agreement and the Loan Documents and the
transactions contemplated hereby and thereby, relied solely upon the advice of
its own counsel and has not relied upon or consulted any counsel to Borrower.
PFG is not purchasing the Equity Rights as a result of any form of general
solicitation or general advertising within the meaning of Rule 502(c) under the
Securities Act.

 

 

 

 

 

(vi) Transfer or Resale. PFG understands that (A) the Conversion Stock and
common stock issuable in connection with this Agreement have not been, and are
not being, registered under the Securities Act (other than as contemplated in
Section 1 of this Schedule) or any applicable state securities laws and,
consequently, PFG may have to bear the risk of owning such securities for an
indefinite period of time because such securities may not be transferred unless
(I) the resale of such securities is covered by an effective registration
statement under the Securities Act or exempt from the registration requirements
thereof or (II) PFG has delivered to Borrower an opinion of counsel to PFG (in
form, substance and scope customary for opinions of counsel in comparable
transactions) to the effect that such securities to be sold or transferred
may be sold or transferred pursuant to an exemption from such registration; and
(B) except as set forth in Section 1 of this Schedule, neither Borrower nor any
other person is under any

 

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obligation to register the resale of any such securities under the Securities
Act or any state or foreign securities laws or to comply with the terms and
conditions of any exemption thereunder.

 

 

 

 

 

(vii) Legends. PFG understands that any certificate representing, or other
evidence of, the Conversion Stock and common stock issuable under the Warrants
or as payment of interest may bear a restrictive legend in substantially the
following form (and, until such time as there is a registration statement in
effect covering such Conversion Stock and common stock, a stop-transfer order
may be placed against transfer of such securities):

 

 

 

 

 

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED WITH THE SECURITIES
AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE OF THE UNITED
STATES IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE “SECURITIES ACT”) AND ACCORDINGLY, MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED, HYPOTHECATED, TRANSFERRED OR ASSIGNED EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES
ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT
TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO
THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY
ACCEPTABLE TO THE COMPANY.

 

 

 

 

 

(viii)  Residency. PFG is a resident of the jurisdiction set forth next to its
name in the heading to this Agreement.

 

 

Borrower:

PFG:

 

 

Bioject Medical Technologies Inc.

PARTNERS FOR GROWTH, L.P.

 

 

 

 

By

/s/ Jim O’Shea

 

 

 

Jim O’Shea, President

By

/s/ Andrew W. Kahn

 

 

 

By

/s/ Christine Farrell

 

Name:

Andrew W. Kahn

 

 

Secretary or Ass’t Secretary

 

 

Title: Manager, Partners for Growth, LLC

 

Its General Partner

 

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