Exhibit 10.31

 

 

 

LOAN AND SECURITY AGREEMENT

ADVANCED POWER TECHNOLOGY, INC., ADVANCED POWER
TECHNOLOGY RF, INC., ADVANCED POWER TECHNOLOGY
COLORADO, INC. AND ADVANCED POWER TECHNOLOGY RF-
PENNSYLVANIA, INC.

 

 

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TABLE OF CONTENTS

 

1

ACCOUNTING AND OTHER TERMS

 

 

 

 

2

LOAN AND TERMS OF PAYMENT

 

 

2.1

Promise to Pay

 

 

2.2

Termination of Commitment to Lend

 

 

2.3

Overadvances

 

 

2.4

Interest Rate, Payments

 

 

2.5

Fees

 

 

 

 

 

3

CONDITIONS OF LOANS

 

 

3.1

Conditions Precedent to Initial Credit Extension

 

 

3.2

Conditions Precedent to all Credit Extensions

 

 

 

 

 

4

CREATION OF SECURITY INTEREST

 

 

4.1

Grant of Security Interest

 

 

4.2

Authorization of File

 

 

 

 

 

5

REPRESENTATIONS AND WARRANTIES

 

 

5.1

Due Organization and Authorization

 

 

5.2

Collateral

 

 

5.3

Litigation

 

 

5.4

No Material Adverse Change in Financial Statements

 

 

5.5

Solvency

 

 

5.6

Regulatory Compliance

 

 

5.7

Investments in Subsidiaries

 

 

5.8

Full Disclosure

 

 

 

 

 

6

AFFIRMATIVE COVENANTS

 

 

6.1

Government Compliance

 

 

6.2

Financial Statements, Reports, Certificates

 

 

6.3

Inventory; Returns

 

 

6.4

Taxes

 

 

6.5

Insurance

 

 

6.6

Primary Accounts

 

 

6.7

Financial Covenants

 

 

6.8

Registration of Intellectual Property Rights

 

 

6.9

Further Assurances

 

 

 

 

 

7

NEGATIVE COVENANTS

 

 

7.1

Dispositions

 

 

7.2

Changes in Business, Ownership, Management or Locations of Collateral

 

 

7.3

Mergers or Acquisitions

 

 

7.4

Indebtedness

 

 

7.5

Encumbrance

 

 

7.6

Distributions; Investments

 

 

7.7

Transactions with Affiliates

 

 

7.8

Subordinated Debt

 

 

7.9

Compliance

 

 

 

 

 

8

EVENTS OF DEFAULT

 

 

8.1

Payment Default

 

 

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8.2

Covenant Default

 

 

8.3

Material Adverse Change

 

 

8.4

Attachment

 

 

8.5

Insolvency

 

 

8.6

Other Agreements

 

 

8.7

Judgments

 

 

8.8

Misrepresentations

 

 

 

 

 

9

BANK’S RIGHTS AND REMEDIES

 

 

9.1

Rights and Remedies

 

 

9.2

Power of Attorney

 

 

9.3

Bank Expenses

 

 

9.4

Bank’s Liability for Collateral

 

 

9.5

Remedies Cumulative

 

 

9.6

Demand Waiver

 

 

 

 

 

10

NOTICES

 

 

 

 

11

CHOICE OF LAW, VENUE AND JURY TRIAL WAIVER

 

 

 

 

12

GENERAL PROVISIONS

 

 

12.1

Successors and Assigns

 

 

12.2

Indemnification

 

 

12.3

Time of Essence

 

 

12.4

Severability of Provision

 

 

12.5

Amendments in Writing, Integration

 

 

12.6

Counterparts

 

 

12.7

Survival

 

 

12.8

Confidentiality

 

 

12.9

Attorneys’ Fees, Costs and Expenses

 

 

 

 

 

13

DEFINITIONS

 

 

13.1

Definitions

 

 

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This LOAN AND SECURITY AGREEMENT dated as of the Effective Date, between SILICON
VALLEY BANK (“Bank”), whose address is 3003 Tasman Drive, Santa Clara,
California 95054 and ADVANCED POWER TECHNOLOGY, INC., ADVANCED POWER TECHNOLOGY
COLORADO, INC., ADVANCED POWER TECHNOLOGY RF-PENNSYLVANIA, INC. and ADVANCED
POWER TECHNOLOGY RF, INC. (Advanced Power Technology, Inc., Advanced Power
Technology Colorado, Inc., Advanced Power Technology RF-Pennsylvania, Inc. and
Advanced Power Technology RF, Inc. may be collectively referred to as
“Borrower”), whose address is 405 S.W. Columbia Street, Bend, OR  97702,
provides the terms on which Bank will lend to Borrower and Borrower will repay
Bank.  The parties agree as follows:

 

1                                         ACCOUNTING AND OTHER TERMS

 

Accounting terms not defined in this Agreement will be construed following GAAP.
Calculations and determinations must be made following GAAP.  The term
“financial statements” includes the notes and schedules.  The terms “including”
and “includes” always mean “including (or includes) without limitation,” in this
or any Loan Document.

 

2                                         LOAN AND TERMS OF PAYMENT

 

2.1                               Promise to Pay.

 

Borrower promises to pay Bank the unpaid principal amount of all Credit
Extensions and interest on the unpaid principal amount of the Credit Extensions.

 

2.1.1                     Revolving Advances.

 

(a)  Bank will make Advances not exceeding the Committed Revolving Line. 
Amounts borrowed under this Section may be repaid and reborrowed during the term
of this Agreement.

 

(b)  To obtain an Advance, Borrower must notify Bank by facsimile or telephone
by 12:00 p.m. Pacific Time on the Business Day the Advance is to be made. 
Borrower must promptly confirm the notification by delivering to Bank the
Payment/Advance Form attached as Exhibit B.  Bank will credit Advances to
Borrower’s deposit account.  Bank may make Advances under this Agreement based
on instructions from a Responsible Officer or his or her designee or without
instructions if the Advances are necessary to meet Obligations, which have
become due.  Bank may rely on any telephone notice given by a person whom Bank
believes is a Responsible Officer or designee. Borrower will indemnify Bank for
any loss Bank suffers due to such reliance.

 

(c)  The Committed Revolving Line terminates on the Revolving Maturity Date,
when all Advances are immediately payable.

 

2.1.2                     Cash Management Services.

 

Borrower may use up to $290,000 for Bank’s cash management services, which may
include merchant services in the sum of up to $285,000 and business credit card
services in the sum of up to $5,000 (the “Cash Management Services Sublimit”). 
All amounts Bank pays for any Cash Management Services will not be treated as
Advances under the Committed Revolving Line.

 

2.2                               Termination of Commitment to Lend.

 

Bank’s obligation to lend the undisbursed portion of the Obligations will
terminate if, in Bank’s sole discretion, there has been a material adverse
change in the general affairs, management, results of operation, condition
(financial or otherwise) or the prospect of repayment of the Obligations, or
there has been any material adverse deviation by Borrower from the most

 

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recent business plan of Borrower presented to and accepted by Bank prior to the
execution of this Agreement.

 

2.3                               Overadvances.

 

If Borrower’s Obligations under Section 2.1.1 exceed the Committed Revolving
Line, Borrower must immediately pay Bank the excess.

 

2.4                               Interest Rate, Payments.

 

2.4.1                     As to Advances.

 

(a)  Interest Rate.  Advances accrue interest on the outstanding principal
balance at a per annum rate equal to the applicable Prime Rate Margin above the
Prime Rate or, if Borrower elects, at the applicable LIBOR Rate Margin above the
LIBOR Rate in accordance with the terms of the Libor Supplement to Agreement,
which is incorporated by this reference. Any change in the Prime Rate Margin
shall take effect as of the first day of the month after Bank’s receipt of
Borrower’s Compliance Certificate which requires the Prime Rate Margin to be
changed based on the Adjusted Quick Ratio calculation.  Any change in the LIBOR
Rate Margin based on changes in the Adjusted Quick Ratio calculation shall not
affect any existing LIBOR Rate Loans (as defined in the LIBOR Supplement to
Agreement), but shall take effect with respect to any LIBOR Rate election made
by Borrower after Bank’s receipt of the Borrower’s Compliance Certificate. 
After an Event of Default, Obligations accrue interest at 5 percent above the
rate effective immediately before the Event of Default.  The interest rate
increases or decreases when the Prime Rate changes.  Interest is computed on a
360 day year for the actual number of days elapsed.

 

(b)  Payments.  (i) If interest is based on the Prime Rate plus the applicable
Prime Rate Margin, then interest due on the Committed Revolving Line is payable
on the 14th of each month; and (ii) if interest is based on the LIBOR Rate plus
the applicable LIBOR Rate Margin, then interest on each LIBOR Rate Loan (defined
in the LIBOR Supplement to Agreement) shall be payable on the earlier of ninety
days after the date the LIBOR Rate Loan was made or the last day of the Interest
Period (defined in the LIBOR Supplement to Agreement) for such Loan; provided
however that with respect to a LIBOR Rate Loan with a six-month Interest Period,
Interest shall be payable ninety days after the date the LIBOR Rate Loan was
made and shall also be payable on the last day of the six-month Interest
Period.  Payments received after 12:00 noon Pacific Time are considered received
at the opening of business on the next Business Day.  When a payment is due on a
day that is not a Business Day, the payment is due the next Business Day and
additional interest shall accrue.

 

2.4.2                     Request to Debit Accounts.

 

Bank may debit any of Borrower’s deposit accounts including Account Number
                                             for principal and interest payments
or any amounts Borrower owes Bank when due.  Bank will notify Borrower when it
debits Borrower’s accounts.  These debits are not a set-off.

 

2.5                               Fees.

 

Borrower will pay:

 

(a)  Facility Fee.  A fully earned, non-refundable Facility Fee of $20,000 for
the Committed Revolving Line due on the Effective Date;

 

(b)  Unused Line Fee.  In the event, in any calendar quarter (or portion thereof
at the beginning and end of the term hereof), the average daily principal
balance of the Advances

 

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outstanding during the quarter is less than the Committed Revolving Line,
Borrower shall pay to Bank an unused line fee in an amount equal to 0.20% per
annum on the difference between the Committed Revolving Line and the average
daily principal balance of the Advances outstanding during the quarter, which
unused line fee shall be computed and paid quarterly, in arrears, on the first
day of the following month.

 

(b)  Bank Expenses. All Bank Expenses (including reasonable attorneys’ fees and
reasonable expenses) incurred through and after the date of this Agreement, are
payable when due.

 

3                                         CONDITIONS OF LOANS

 

3.1                               Conditions Precedent to Initial Credit
Extension.

 

Bank’s obligation to make the initial Credit Extension is subject to the
condition precedent that it receive the agreements, documents and fees it
requires.

 

3.2                               Conditions Precedent to all Credit Extensions.

 

Bank’s obligations to make each Credit Extension, including the initial Credit
Extension, is subject to the following:

 

(a)  timely receipt of any Payment/Advance Form; and

 

(b)  the representations and warranties in Section 5 must be materially true on
the date of the Payment/Advance Form and on the effective date of each Credit
Extension and no Event of Default may have occurred and be continuing, or result
from the Credit Extension.  Each Credit Extension is Borrower’s representation
and warranty on that date that the representations and warranties of Section 5
remain true.

 

4                                         CREATION OF SECURITY INTEREST

 

4.1                               Grant of Security Interest.

 

Borrower grants Bank a continuing security interest in all presently existing
and later acquired Collateral to secure all Obligations and performance of each
of Borrower’s duties under the Loan Documents.  Except for Permitted Liens, any
security interest will be a first priority security interest in the Collateral. 
If this Agreement is terminated, Bank’s lien and security interest in the
Collateral will continue until Borrower fully satisfies its Obligations.

 

4.2                               Authorization to File.

 

Borrower authorizes Bank to file financing statements without notice to
Borrower, with all appropriate jurisdictions, as Bank deems appropriate, in
order to perfect or protect Bank’s interest in the Collateral.

 

5                                         REPRESENTATIONS AND WARRANTIES

 

Borrower represents and warrants as follows:

 

5.1                               Due Organization and Authorization.

 

Each Borrower and each Subsidiary is duly existing and in good standing in its
state of formation and qualified and licensed to do business in, and in good
standing in, any state in which the conduct of its business or its ownership of
property requires that it be qualified, except where the failure to do so could
not reasonably be expected to cause a Material Adverse Change.

 

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Borrower has not changed its state of formation or its organizational structure
or type or any organizational number (if any) assigned by its jurisdiction of
formation.

 

The execution, delivery and performance of the Loan Documents have been duly
authorized, and do not conflict with Borrower’s formation documents, nor
constitute an event of default under any material agreement by which Borrower is
bound.  Borrower is not in default under any agreement to which or by which it
is bound in which the default could reasonably be expected to cause a Material
Adverse Change.

 

5.2                               Collateral.

 

Borrower has good title to the Collateral, free of Liens except Permitted Liens
or Borrower has Rights to each asset that is Collateral.  Borrower has no other
deposit account, other than the deposit accounts described in the Schedule.  The
Accounts are bona fide, existing obligations, and the service or property has
been performed or delivered to the account debtor or its agent for immediate
shipment to and unconditional acceptance by the account debtor.  The Collateral
is not in the possession of any third party bailee (such as at a warehouse).  In
the event that Borrower, after the date hereof, intends to store or otherwise
deliver the Collateral to such a bailee, then Borrower will receive the prior
written consent of Bank and such bailee must acknowledge in writing that the
bailee is holding such Collateral for the benefit of Bank.  Borrower has no
notice of any actual or imminent Insolvency Proceeding of any account debtor. 
All Inventory is in all material respects of good and marketable quality, free
from material defects.  Borrower is the sole owner of the Intellectual Property,
except for non-exclusive licenses granted to its customers in the ordinary
course of business.  Each Patent is valid and enforceable and no part of the
Intellectual Property has been judged invalid or unenforceable, in whole or in
part, and no claim has been made that any part of the Intellectual Property
violates the rights of any third party, except to the extent such claim could
not reasonably be expected to cause a Material Adverse Change.

 

5.3                               Litigation.

 

Except as shown in the Schedule, there are no actions or proceedings pending or,
to the knowledge of Borrower’s Responsible Officers, threatened by or against
any Borrower or any Subsidiary in which a likely adverse decision could
reasonably be expected to cause a Material Adverse Change.

 

5.4                               No Material Adverse Change in Financial
Statements.

 

All consolidated financial statements for Borrower, and any Subsidiary,
delivered to Bank fairly present in all material respects Borrower’s
consolidated financial condition and Borrower’s consolidated results of
operations.  There has not been any material deterioration in Borrower’s
consolidated financial condition since the date of the most recent financial
statements submitted to Bank.

 

5.5                               Solvency.

 

The fair salable value of Borrower’s assets (including goodwill minus
disposition costs) exceeds the fair value of its liabilities; the Borrower is
not left with unreasonably small capital after the transactions in this
Agreement; and Borrower is able to pay its debts (including trade debts) as they
mature.

 

5.6                               Regulatory Compliance.

 

Borrower is not an “investment company” or a company “controlled” by an
“investment company” under the Investment Company Act.  Borrower is not engaged
as one of its important activities in extending credit for margin stock (under
Regulations T and U of the Federal Reserve

 

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Board of Governors).  Borrower has complied in all material respects with the
Federal Fair Labor Standards Act.  Borrower has not violated any laws,
ordinances or rules, the violation of which could reasonably be expected to
cause a Material Adverse Change.  None of Borrower’s or any Subsidiary’s
properties or assets has been used by Borrower or any Subsidiary or, to the best
of Borrower’s knowledge, by previous Persons, in disposing, producing, storing,
treating, or transporting any hazardous substance other than legally.  Borrower
and each Subsidiary has timely filed all required tax returns and paid, or made
adequate provision to pay, all material taxes, except those being contested in
good faith with adequate reserves under GAAP.  Borrower and each Subsidiary has
obtained all consents, approvals and authorizations of, made all declarations or
filings with, and given all notices to, all government authorities that are
necessary to continue its business as currently conducted, except where the
failure to do so could not reasonably be expected to cause a Material Adverse
Change.

 

5.7                               Investments in Subsidiaries.

 

Borrower does not own any stock, partnership interest or other equity securities
except for Permitted Investments.

 

5.8                               Full Disclosure.

 

No written representation, warranty or other statement of Borrower in any
certificate or written statement given to Bank (taken together with all such
written certificates and written statements to Bank) contains any untrue
statement of a material fact or omits to state a material fact necessary to make
the statements contained in the certificates or statements not misleading.  It
being recognized by Bank that the projections and forecasts provided by Borrower
in good faith and based upon reasonable assumptions are not viewed as facts and
that actual results during the period or periods covered by such projections and
forecasts may differ from the projected and forecasted results.

 

6                                         AFFIRMATIVE COVENANTS

 

Borrower will do all of the following for so long as Bank has an obligation to
lend, or there are outstanding Obligations:

 

6.1                               Government Compliance.

 

Borrower will maintain its and all Subsidiaries’ legal existence and good
standing in its jurisdiction of formation and maintain qualification in each
jurisdiction in which the failure to so qualify would reasonably be expected to
cause a material adverse effect on Borrower’s business or operations.  Borrower
will comply, and have each Subsidiary comply, with all laws, ordinances and
regulations to which it is subject, noncompliance with which could have a
material adverse effect on Borrower’s business or operations or would reasonably
be expected to cause a Material Adverse Change.

 

6.2                               Financial Statements, Reports, Certificates.

 

(a)  Borrower will deliver to Bank:  (i) within 5 days of filing, copies of all
statements, reports and notices made available to Borrower’s security holders or
to any holders of Subordinated Debt and all reports on Form 10-K, 10-Q and 8-K
filed with the Securities and Exchange Commission; (ii) a prompt report of any
legal actions pending or threatened against any Borrower or any Subsidiary that
could result in damages or costs to Borrower or any Subsidiary of $100,000 or
more; (iii) budgets, sales projections, operating plans or other financial
information Bank reasonably requests; and (iv) prompt notice of any material
change in the composition of the Intellectual Property or knowledge of an event
that materially adversely affects the value of the Intellectual Property.

 

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(b)  Within 30 days after the last day of each month, Borrower will deliver to
Bank with the monthly financial statements a Compliance Certificate signed by a
Responsible Officer in the form of Exhibit C.

 

6.3                               Inventory; Returns.

 

Borrower will keep all Inventory in good and marketable condition, free from
material defects.  Returns and allowances between Borrower and its account
debtors will follow Borrower’s customary practices, as they exist at execution
of this Agreement.  Borrower must promptly notify Bank of all returns,
recoveries, disputes and claims that involve more than $50,000.

 

6.4                               Taxes.

 

Borrower will make, and cause each Subsidiary to make, timely payment of all
material federal, state, and local taxes or assessments and will deliver to
Bank, on demand, appropriate certificates attesting to the payment.

 

6.5                               Insurance.

 

Borrower will keep its business and the Collateral insured for risks and in
amounts, as Bank may reasonably request.  Insurance policies will be in a form,
with companies, and in amounts that are satisfactory to Bank in Bank’s
reasonable discretion.  All property policies will have a lender’s loss payable
endorsement showing Bank as an additional loss payee and all liability policies
will show the Bank as an additional insured and provide that the insurer must
give Bank at least 20 days notice before canceling its policy.  At Bank’s
request, Borrower will deliver certified copies of policies and evidence of all
premium payments.  Proceeds payable under any policy will, at Bank’s option, be
payable to Bank on account of the Obligations.

 

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 the cost is
added to your contract or loan balance, the interest rate on the underlying
contract or loan will apply to this added amount.  The effective date of
coverage may be the date your prior coverage lapsed or the date you failed to
provide proof of coverage.

 

This coverage we purchased 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.

 

6.6                               Primary Accounts.

 

Borrower will maintain its primary depository and operating accounts with Bank.

 

6.7                               Financial Covenants.

 

Borrower will maintain as of the last day of each month:

 

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(i)                                     Quick Ratio (Adjusted).  A ratio of
Quick Assets to Current Liabilities of at least 1.85 to 1.00.

 

(ii)                                  Tangible Net Worth.  A Tangible Net Worth
of at least $35,000,000 plus (a) 100% of all equity or capital contributed to
Borrower and all Subordinated Debt; and (b) 50% of all positive quarterly net
income (adjusted quarterly).

 

6.8                               Registration of Intellectual Property Rights.

 

Borrower shall provide written notice to Bank of any application filed by
Borrower to register any Copyrights or Mask Works with the United States
Copyright Office within 30 days of any such filing.  Borrower shall provide
written notice to Bank of any application filed by Borrower in the United States
Patent Trademark Office for a patent or to register a trademark or service mark
within 30 days of any such filing.

 

Borrower will (i) protect, defend and maintain the validity and enforceability
of the Intellectual Property and promptly advise Bank in writing of material
infringements and (ii) not allow any Intellectual Property to be abandoned,
forfeited or dedicated to the public without Bank’s written consent.

 

6.9                               Further Assurances.

 

Borrower will execute any further instruments and take further action as Bank
reasonably requests to perfect or continue Bank’s security interest in the
Collateral or to effect the purposes of this Agreement.

 

7                                         NEGATIVE COVENANTS

 

For so long as Bank has an obligation to lend or there are any outstanding
Obligations, Borrower shall not, without Bank’s prior written consent (which
shall be a matter of its good faith business judgment), do any of the following:

 

7.1                               Dispositions.

 

Convey, sell, lease, transfer or otherwise dispose of (collectively “Transfer”),
or permit any of its Subsidiaries to Transfer, all or any part of its business
or property, except for Transfers (i) of Inventory in the ordinary course of
business; (ii) of non-exclusive licenses and similar arrangements for the use of
the property of Borrower or its Subsidiaries in the ordinary course of business;
or (iii) of worn-out or obsolete Equipment.

 

7.2                               Changes in Business, Ownership, Management or
Locations of Collateral.

 

Engage in or permit any of its Subsidiaries to engage in any business other than
the businesses currently engaged in by Borrower or reasonably related thereto or
have a material change in its ownership or management of greater than 25%. 
Borrower will not, without at least 30 days prior written notice, relocate its
chief executive office, change its state of formation (including
reincorporation), change its organizational number or name or add any new
offices or business locations (such as warehouses) in which Borrower maintains
or stores over $5,000 in Collateral.

 

7.3                               Mergers or Acquisitions.

 

Merge or consolidate, or permit any of its Subsidiaries to merge or consolidate,
with any other Person, or acquire, or permit any of its Subsidiaries to acquire,
all or substantially all of the capital stock or property of another Person,
except where (i) no Event of Default has occurred

 

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and is continuing or would result from such action during the term of this
Agreement and (ii) such transaction would not result in a decrease of more than
25% of Tangible Net Worth.  A Subsidiary may merge or consolidate into another
Subsidiary or into Borrower.

 

7.4                               Indebtedness.

 

Create, incur, assume, or be liable for any Indebtedness, or permit any
Subsidiary to do so, other than Permitted Indebtedness.

 

7.5                               Encumbrance.

 

Create, incur, or allow any Lien on any of its property, or assign or convey any
right to receive income, including the sale of any Accounts, or permit any of
its Subsidiaries to do so, except for Permitted Liens, or permit any Collateral
not to be subject to the first priority security interest granted here, subject
to Permitted Liens.

 

7.6                               Distributions; Investments.

 

Directly or indirectly acquire or own any Person, or make any Investment in any
Person, other than Permitted Investments, or permit any of its Subsidiaries to
do so.  Pay any dividends or make any distribution or payment or redeem, retire
or purchase any capital stock.

 

7.7                               Transactions with Affiliates.

 

Directly or indirectly enter into or permit to exist any material transaction
with any Affiliate of Borrower except for transactions that are in the ordinary
course of Borrower’s business, upon fair and reasonable terms that are no less
favorable to Borrower than would be obtained in an arm’s length transaction with
a non-affiliated Person.

 

7.8                               Subordinated Debt.

 

Make or permit any payment on any Subordinated Debt, except under the terms of
the Subordinated Debt, or amend any provision in any document relating to the
Subordinated Debt without Bank’s prior written consent.

 

7.9                               Compliance.

 

Become an “investment company” or a company controlled by an “investment
company,” under the Investment Company Act of 1940 or undertake as one of its
important activities extending credit to purchase or carry margin stock, or use
the proceeds of any Credit Extension for that purpose; fail to meet the minimum
funding requirements of ERISA, permit a Reportable Event or Prohibited
Transaction, as defined in ERISA, to occur; fail to comply with the Federal Fair
Labor Standards Act or violate any other law or regulation, if the violation
could reasonably be expected to have a material adverse effect on Borrower’s
business or operations or would reasonably be expected to cause a Material
Adverse Change, or permit any of its Subsidiaries to do so.

 

8                                         EVENTS OF DEFAULT

 

Any one of the following is an Event of Default:

 

8.1                               Payment Default.

 

If Borrower fails to pay any of the Obligations within 3 days after their due
date, however, during such period no Credit Extensions will be made;

 

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8.2                               Covenant Default.

 

(a)  If Borrower fails to perform any obligation under Sections 6.2 or 6.7 or
violates any of the covenants contained in Section 7 of this Agreement, or

 

(b)  If Borrower fails or neglects to perform, keep, or observe any other
material term, provision, condition, covenant, or agreement contained in this
Agreement, in any of the Loan Documents, or in any other present or future
agreement between Borrower and Bank and as to any default under such other term,
provision, condition, covenant or agreement that can be cured, has failed to
cure such default within ten (10) days after the occurrence thereof; provided,
however, that if the default cannot by its nature be cured within the ten (10)
day period or cannot after diligent attempts by Borrower be cured within such
ten (10) day period, and such default is likely to be cured within a reasonable
time, then Borrower shall have an additional reasonable period (which shall not
in any case exceed thirty (30) days) to attempt to cure such default, and within
such reasonable time period the failure to have cured such default shall not be
deemed an Event of Default (provided that no Credit Extensions will be made
during such cure period);

 

8.3                               Material Adverse Change.

 

If there (i) occurs a material adverse change in the business, operations, or
financial condition of the Borrower, or (ii) is a material impairment of the
prospect of repayment of any portion of the Obligations; or (iii) is a material
impairment of the value or priority of Bank’s security interests in the
Collateral (the foregoing being defined as a “Material Adverse Change”).

 

8.4                               Attachment.

 

If any material portion of Borrower’s assets is attached, seized, levied on, or
comes into possession of a trustee or receiver and the attachment, seizure or
levy is not removed in 10 days, or if Borrower is enjoined, restrained, or
prevented by court order from conducting a material part of its business or if a
judgment or other claim becomes a Lien on a material portion of Borrower’s
assets, or if a notice of lien, levy, or assessment is filed against any of
Borrower’s assets by any government agency and not paid within 10 days after
Borrower receives notice.  These are not Events of Default if stayed or if a
bond is posted pending contest by Borrower (but no Credit Extensions will be
made during the cure period);

 

8.5                               Insolvency.

 

If Borrower becomes insolvent or if Borrower begins an Insolvency Proceeding or
an Insolvency Proceeding is begun against Borrower and not dismissed or stayed
within 30 days (but no Credit Extensions will be made before any Insolvency
Proceeding is dismissed);

 

8.6                               Other Agreements.

 

If there is a default in any agreement between Borrower and a third party that
gives the third party the right to accelerate any Indebtedness exceeding
$100,000 or that could cause a Material Adverse Change;

 

8.7                               Judgments.

 

If a money judgment(s) in the aggregate of at least $50,000 is rendered against
Borrower and is unsatisfied and unstayed for 10 days (but no Credit Extensions
will be made before the judgment is stayed or satisfied);

 

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8.8                               Misrepresentations.

 

If Borrower or any Person acting for Borrower makes any material
misrepresentation or material misstatement now or later in any warranty or
representation in this Agreement or in any writing delivered to Bank or to
induce Bank to enter this Agreement or any Loan Document; or

 

9                                         BANK’S RIGHTS AND REMEDIES

 

9.1                               Rights and Remedies.

 

When an Event of Default occurs and continues Bank may, without notice or
demand, do any or all of the following:

 

(a)  Declare all Obligations immediately due and payable (but if an Event of
Default described in Section 8.5 occurs all Obligations are immediately due and
payable without any action by Bank);

 

(b)  Stop advancing money or extending credit for Borrower’s benefit under this
Agreement or under any other agreement between Borrower and Bank;

 

(c)  Settle or adjust disputes and claims directly with account debtors for
amounts, on terms and in any order that Bank considers advisable; notify any
Person owing Borrower money of Bank’s security interest in the funds and verify
the amount of the Account.  Borrower must collect all payments in trust for Bank
and, if requested by Bank, immediately deliver the payments to Bank in the form
received from the account debtor, with proper endorsements for deposit;

 

(d)  Make any payments and do any acts it considers necessary or reasonable to
protect its security interest in the Collateral.  Borrower will assemble the
Collateral if Bank requires and make it available as Bank designates.  Bank may
enter premises where the Collateral is located, take and maintain possession of
any part of the Collateral, and pay, purchase, contest, or compromise any Lien
which appears to be prior or superior to its security interest and pay all
expenses incurred. Borrower grants Bank a license to enter and occupy any of its
premises, without charge, to exercise any of Bank’s rights or remedies;

 

(e)  Bank may place a ‘hold’ on any account maintained with Bank and deliver a
notice of exclusive control, any entitlement order, or other directions or
instructions pursuant to any control agreement or similar agreements providing
control of any Collateral.  Apply to the Obligations (i) any balances and
deposits of Borrower it holds, or (ii) any amount held by Bank owing to or for
the credit or the account of Borrower;

 

(f)  Ship, reclaim, recover, store, finish, maintain, repair, prepare for sale,
advertise for sale, and sell the Collateral.  Bank is granted a non-exclusive,
royalty-free license or other right to use, without charge, Borrower’s labels,
Patents, Copyrights, Mask Works, rights of use of any name, trade secrets, trade
names, Trademarks, service marks, and advertising matter, or any similar
property as it pertains to the Collateral, in completing production of,
advertising for sale, and selling any Collateral and, in connection with Bank’s
exercise of its rights under this Section, Borrower’s rights under all licenses
and all franchise agreements inure to Bank’s benefit; and

 

(g)  Dispose of the Collateral according to the Code.

 

9.2                               Power of Attorney.

 

Effective only when an Event of Default occurs and continues, Borrower
irrevocably appoints Bank as its lawful attorney to: (i) endorse Borrower’s name
on any checks or other forms of payment or security; (ii) sign Borrower’s name
on any invoice or bill of lading for any Account or drafts against account
debtors, (iii) make, settle, and adjust all claims under Borrower’s

 

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insurance policies; (iv) settle and adjust disputes and claims about the
Accounts directly with account debtors, for amounts and on terms Bank determines
reasonable; and (v) transfer the Collateral into the name of Bank or a third
party as the Code permits.  Bank may exercise the power of attorney to sign
Borrower’s name on any documents necessary to perfect or continue the perfection
of any security interest regardless of whether an Event of Default has
occurred.  Bank’s appointment as Borrower’s attorney in fact, and all of Bank’s
rights and powers, coupled with an interest, are irrevocable until all
Obligations have been fully repaid and performed and Bank’s obligation to
provide Credit Extensions terminates.

 

9.3                               Bank Expenses.

 

If Borrower fails to pay any amount or furnish any required proof of payment to
third persons, Bank may make all or part of the payment or obtain insurance
policies required in Section 6.5, and take any action under the policies Bank
deems prudent.  Any amounts paid by Bank are Bank Expenses and immediately due
and payable, bearing interest at the then applicable rate and secured by the
Collateral.  No payments by Bank are deemed an agreement to make similar
payments in the future or Bank’s waiver of any Event of Default.

 

9.4                               Bank’s Liability for Collateral.

 

If Bank complies with reasonable banking practices and Section 9-207 of the
Code, it is not liable for: (a) the safekeeping of the Collateral; (b) any loss
or damage to the Collateral; (c) any diminution in the value of the Collateral;
or (d) any act or default of any carrier, warehouseman, bailee, or other
person.  Except as provided above, Borrower bears all risk of loss, damage or
destruction of the Collateral.

 

9.5                               Remedies Cumulative.

 

Bank’s rights and remedies under this Agreement, the Loan Documents, and all
other agreements are cumulative.  Bank has all rights and remedies provided
under the Code, by law, or in equity.  Bank’s exercise of one right or remedy is
not an election, and Bank’s waiver of any Event of Default is not a continuing
waiver.  Bank’s delay is not a waiver, election, or acquiescence.  No waiver is
effective unless signed by Bank and then is only effective for the specific
instance and purpose for which it was given.

 

9.6                               Demand Waiver.

 

Borrower waives demand, notice of default or dishonor, notice of payment and
nonpayment, notice of any default, nonpayment at maturity, release, compromise,
settlement, extension, or renewal of accounts, documents, instruments, chattel
paper, and guarantees held by Bank on which Borrower is liable.

 

10                                  NOTICES

 

All notices or demands by any party about this Agreement or any other related
agreement must be in writing and be personally delivered or sent by an overnight
delivery service, by certified mail, postage prepaid, return receipt requested,
or by telefacsimile to the addresses set forth at the beginning of this
Agreement.  A party may change its notice address by giving the other party
written notice.

 

11                                  CHOICE OF LAW, VENUE AND JURY TRIAL WAIVER

 

Oregon law governs the Loan Documents without regard to principles of conflicts
of law.  Borrower and Bank each submit to the exclusive jurisdiction of the
State and Federal courts in Multnomah County, Oregon.

 

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BORROWER AND BANK EACH WAIVE THEIR RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE
OF ACTION ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY CONTEMPLATED
TRANSACTION, INCLUDING CONTRACT, TORT, BREACH OF DUTY AND ALL OTHER CLAIMS. 
THIS WAIVER IS A MATERIAL INDUCEMENT FOR BOTH PARTIES TO ENTER INTO THIS
AGREEMENT.  EACH PARTY HAS REVIEWED THIS WAIVER WITH ITS COUNSEL.

 

12                                  GENERAL PROVISIONS

 

12.1                        Successors and Assigns.

 

This Agreement binds and is for the benefit of the successors and permitted
assigns of each party.  Borrower may not assign this Agreement or any rights
under it without Bank’s prior written consent, which may be granted or withheld
in Bank’s discretion.  Bank has the right, without the consent of or notice to
Borrower, to sell, transfer, negotiate, or grant participation in all or any
part of, or any interest in, Bank’s obligations, rights and benefits under this
Agreement.

 

12.2                        Indemnification.

 

Borrower will indemnify, defend and hold harmless Bank and its officers,
employees, and agents against:  (a) all obligations, demands, claims, and
liabilities asserted by any other party in connection with the transactions
contemplated by the Loan Documents; and (b) all losses or Bank Expenses
incurred, or paid by Bank from, following, or consequential to transactions
between Bank and Borrower (including reasonable attorneys fees and expenses),
except for losses caused by Bank’s gross negligence or willful misconduct.

 

12.3                        Time of Essence.

 

Time is of the essence for the performance of all obligations in this Agreement.

 

12.4                        Severability of Provision.

 

Each provision of this Agreement is severable from every other provision in
determining the enforceability of any provision.

 

12.5                        Amendments in Writing, Integration.

 

All amendments to this Agreement must be in writing and signed by Borrower and
Bank.  This Agreement represents the entire agreement about this subject matter,
and supersedes prior negotiations or agreements.  All prior agreements,
understandings, representations, warranties, and negotiations between the
parties about the subject matter of this Agreement merge into this Agreement and
the Loan Documents.

 

12.6                        Counterparts.

 

This Agreement may be executed in any number of counterparts and by different
parties on separate counterparts, each of which, when executed and delivered,
are an original, and all taken together, constitute one Agreement.

 

12.7                        Survival.

 

All covenants, representations and warranties made in this Agreement continue in
full force while any Obligations remain outstanding.  The obligations of
Borrower in Section 12.2 to indemnify Bank will survive until all statutes of
limitations for actions that may be brought against Bank have run.

 

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12.8                        Confidentiality.

 

In handling any confidential information, Bank will exercise the same degree of
care that it exercises for its own proprietary information, but disclosure of
information may be made (i) to Bank’s subsidiaries or affiliates in connection
with their business with Borrower, (ii) to prospective transferees or purchasers
of any interest in the loans (provided, however, Bank shall use commercially
reasonable efforts in obtaining such prospective transferee or purchasers
agreement of the terms of this provision), (iii) as required by law, regulation,
subpoena, or other order, (iv) as required in connection with Bank’s examination
or audit and (v) as Bank considers appropriate exercising remedies under this
Agreement.  Confidential information does not include information that either:
(a) is in the public domain or in Bank’s possession when disclosed to Bank, or
becomes part of the public domain after disclosure to Bank; or (b) is disclosed
to Bank by a third party, if Bank does not know that the third party is
prohibited from disclosing the information.

 

12.9                        Attorneys’ Fees, Costs and Expenses.

 

In any action or proceeding between Borrower and Bank arising out of the Loan
Documents, the prevailing party will be entitled to recover its reasonable
attorneys’ fees and other reasonable costs and expenses incurred at trial, on
appeal and in any arbitration or bankruptcy proceeding, in addition to any other
relief to which it may be entitled.

 

12.10                 Joint and Several Obligations.

 

If Borrower consists of more than one person or entity, all Obligations of
Borrower under this Agreement shall be joint and several, and all references to
Borrower shall mean each and every Borrower.

 

13                                  DEFINITIONS

 

13.1                        Definitions.

 

In this Agreement:

 

“Accounts” are all existing and later arising accounts, contract rights, and
other obligations owed Borrower in connection with its sale or lease of goods
(including licensing software and other technology) or provision of services,
all credit insurance, guaranties, other security and all merchandise returned or
reclaimed by Borrower and Borrower’s Books relating to any of the foregoing, as
such definition may be amended from time to time according to the Code.

 

“Advance” or “Advances” is a loan advance (or advances) under the Committed
Revolving Line.

 

“Affiliate” of a Person is a Person that owns or controls directly or indirectly
the Person, any Person that controls or is controlled by or is under common
control with the Person, and each of that Person’s senior executive officers,
directors, partners and, for any Person that is a limited liability company,
that Person’s managers and members.

 

“Bank Expenses” are all audit fees and expenses and reasonable costs and
expenses (including reasonable attorneys’ fees and expenses) for preparing,
negotiating, administering, defending and enforcing the Loan Documents
(including appeals or Insolvency Proceedings).

 

“Borrower’s Books” are all Borrower’s books and records including ledgers,
records regarding Borrower’s assets or liabilities, the Collateral, business
operations or financial condition and all computer programs or discs or any
equipment containing the information.

 

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“Business Day” is any day that is not a Saturday, Sunday or a day on which the
Bank is closed.

 

“Cash Management Services” are defined in Section 2.1.2.

 

“Code” is the Oregon Uniform Commercial Code, as applicable.

 

“Collateral” is the property described on Exhibit A.

 

“Committed Revolving Line” is an Advance of up to $10,000,000.

 

“Contingent Obligation” is, for any Person, any direct or indirect liability,
contingent or not, of that Person for (i) any indebtedness, lease, dividend,
letter of credit or other obligation of another such as an obligation directly
or indirectly guaranteed, endorsed, co-made, discounted or sold with recourse by
that Person, or for which that Person is directly or indirectly liable; (ii) any
obligations for undrawn letters of credit for the account of that Person; and
(iii) all obligations from any interest rate, currency or commodity swap
agreement, interest rate cap or collar agreement, or other agreement or
arrangement designated to protect a Person against fluctuation in interest
rates, currency exchange rates or commodity prices;  but “Contingent Obligation”
does not include endorsements in the ordinary course of business.  The amount of
a Contingent Obligation is the stated or determined amount of the primary
obligation for which the Contingent Obligation is made or, if not determinable,
the maximum reasonably anticipated liability for it determined by the Person in
good faith; but the amount may not exceed the maximum of the obligations under
the guarantee or other support arrangement.

 

“Copyrights” are all copyright rights, applications or registrations and like
protections in each work of authorship or derivative work, whether published or
not (whether or not it is a trade secret) now or later existing, created,
acquired or held.

 

“Credit Extension” is each Advance or any other extension of credit by Bank for
Borrower’s benefit.

 

“Current Liabilities” are the aggregate amount of Borrower’s Total Liabilities
that mature within one (1) year and all outstanding Advances hereunder.

 

“Effective Date” is the date Bank executes this Agreement.

 

“Equipment” is all present and future machinery, equipment, tenant improvements,
furniture, fixtures, vehicles, tools, parts and attachments in which Borrower
has any interest.

 

“ERISA” is the Employment Retirement Income Security Act of 1974, and its
regulations.

 

“GAAP” is generally accepted accounting principles.

 

“Indebtedness” is (a) indebtedness for borrowed money or the deferred price of
property or services, such as reimbursement and other obligations for surety
bonds and letters of credit, (b) obligations evidenced by notes, bonds,
debentures or similar instruments, (c) capital lease obligations and (d)
Contingent Obligations.

 

“Insolvency Proceeding” are proceedings by or against any Person under the
United States Bankruptcy Code, or any other bankruptcy or insolvency law,
including assignments for the benefit of creditors, compositions, extensions
generally with its creditors, or proceedings seeking reorganization,
arrangement, or other relief.

 

“Intellectual Property” is all of Borrower’s:

 

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(a)  Copyrights, Trademarks, Patents, and Mask Works including amendments,
renewals, extensions, and all licenses or other rights to use and all license
fees and royalties from the use;

 

(b)  Any trade secrets and any intellectual property rights in computer software
and computer software products now or later existing, created, acquired or held;

 

(c)  All design rights that may be available to Borrower now or later created,
acquired or held;

 

(d)  Any claims for damages (past, present or future) for infringement of any of
the rights above, with the right, but not the obligation, to sue and collect
damages for use or infringement of the intellectual property rights above;

 

All proceeds and products of the foregoing, including all insurance, indemnity
or warranty payments.

 

“Inventory” is present and future inventory in which Borrower has any interest,
including merchandise, raw materials, parts, supplies, packing and shipping
materials, work in process and finished products intended for sale or lease or
to be furnished under a contract of service, of every kind and description now
or later owned by or in the custody or possession, actual or constructive, of
Borrower, including inventory temporarily out of its custody or possession or in
transit and including returns on any accounts or other proceeds (including
insurance proceeds) from the sale or disposition of any of the foregoing and any
documents of title.

 

“Investment” is any beneficial ownership of (including stock, partnership
interest or other securities) any Person, or any loan, advance or capital
contribution to any Person.

 

“LIBOR Rate Margin” means the following:  (a) if the Adjusted Quick Ratio is
greater than or equal to 3.00 to 1.00, then the LIBOR Rate Margin is 1.75%; (b)
if the Adjusted Quick Ratio is less than 3.00 to 1.00 and greater than 2.50 to
1.00, then the LIBOR Rate Margin is 2.00%; and (c) if the Adjusted Quick Ratio
is less than or equal to 2.50 to 1.00, then the LIBOR Rate Margin is 2.25%.

 

“Lien” is a mortgage, lien, deed of trust, charge, pledge, security interest or
other encumbrance.

 

“Loan Documents” are, collectively, this Agreement, any note, or notes or
guaranties executed by Borrower or Guarantor, and any other present or future
agreement between Borrower and/or for the benefit of Bank in connection with
this Agreement, all as amended, extended or restated.

 

“Mask Works” are all mask works or similar rights available for the protection
of semiconductor chips, now owned or later acquired.

 

“Material Adverse Change” is defined in Section 8.3.

 

“Obligations” are debts, principal, interest, Bank Expenses and other amounts
Borrower owes Bank now or later, including cash management services, letters of
credit and foreign exchange contracts, if any and including interest accruing
after Insolvency Proceedings begin and debts, liabilities, or obligations of
Borrower assigned to Bank.

 

“Patents” are patents, patent applications and like protections, including
improvements, divisions, continuations, renewals, reissues, extensions and
continuations-in-part of the same.

 

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“Permitted Indebtedness” is:

 

(a)  Borrower’s indebtedness to Bank under this Agreement or any other Loan
Document;

 

(b)  Indebtedness existing on the Effective Date and shown on the Schedule;

 

(c)  Subordinated Debt;

 

(d)  Indebtedness to trade creditors incurred in the ordinary course of
business; and

 

(e)  Indebtedness secured by Permitted Liens.

 

“Permitted Investments” are:

 

(a)  Investments shown on the Schedule and existing on the Effective Date; and

 

(b)  (i) marketable direct obligations issued or unconditionally guaranteed by
the United States or its agency or any State maturing within 1 year from its
acquisition, (ii) 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 (iii) Bank’s certificates of deposit
issued maturing no more than 1 year after issue.

 

“Permitted Liens” are:

 

(a)  Liens existing on the Effective Date and shown on the Schedule or arising
under this Agreement or other Loan Documents;

 

(b)  Liens for taxes, fees, assessments or other government charges or levies,
either not delinquent or being contested in good faith and for which Borrower
maintains adequate reserves on its Books, if they have no priority over any of
Bank’s security interests;

 

(c)  Purchase money Liens (i) on Equipment acquired or held by Borrower or its
Subsidiaries incurred for financing the acquisition of the Equipment, or (ii)
existing on equipment when acquired, if the Lien is confined to the property and
improvements and the proceeds of the equipment;

 

(d)  Licenses or sublicenses granted in the ordinary course of Borrower’s
business and any interest or title of a licensor or under any license or
sublicense, if the licenses and sublicenses permit granting Bank a security
interest;

 

(e)  Leases or subleases granted in the ordinary course of Borrower’s business,
including in connection with Borrower’s leased premises or leased personal
property;

 

(f)  Liens incurred in the extension, renewal or refinancing of the indebtedness
secured by Liens described in (a) through (c), but any extension, renewal or
replacement Lien must be limited to the property encumbered by the existing Lien
and the principal amount of the indebtedness may not increase.

 

“Person” is any individual, sole proprietorship, partnership, limited liability
company, joint venture, company association, trust, unincorporated organization,
association, corporation, institution, public benefit corporation, firm, joint
stock company, estate, entity or government agency.

 

“Prime Rate” is Bank’s most recently announced “prime rate,” even if it is not
Bank’s lowest rate.

 

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“Prime Rate Margin” means the following:  (a) if the Adjusted Quick Ratio is
greater than or equal to 3.00 to 1.00, then the Prime Rate Margin is -.25%; and
(b) if the Adjusted Quick Ratio is less than 3.00 to 1.00, then the Prime Rate
Margin is 0.00%.

 

“Quick Assets” is, on any date, the Borrower’s consolidated, unrestricted cash,
cash equivalents, short-term investments in available-for-sale securities and
net-billed accounts receivable determined according to GAAP.

 

“Responsible Officer” is each of the Chief Executive Officer, the President, the
Chief Financial Officer and the Controller of Borrower.

 

“Revolving Maturity Date” is June 30, 2006.

 

“Rights”, as applied to the Collateral, means the Borrower’s rights and
interests in, and powers with respect to, that Collateral, whatever the nature
of those rights, interests and powers and, in any event, including Borrower’s
power to transfer rights in such Collateral to Bank.

 

“Schedule” is any attached schedule of exceptions.

 

“Subordinated Debt” is debt incurred by Borrower subordinated to Borrower’s
indebtedness owed to Bank and which is reflected in a written agreement in a
manner and form acceptable to Bank and approved by Bank in writing.

 

“Subsidiary” is for any Person, or any other business entity of which more than
50% of the voting stock or other equity interests is owned or controlled,
directly or indirectly, by the Person or one or more Affiliates of the Person.

 

“Tangible Net Worth” is, on any date, the consolidated total assets of Borrower
and its Subsidiaries minus, (i) any amounts attributable to (a) goodwill, (b)
intangible items such as unamortized debt discount and expense, patents, trade
and service marks and names, copyrights and research and development expenses
except prepaid expenses, and (c) reserves not already deducted from assets, and
(ii) Total Liabilities.

 

“Total Liabilities” is on any day, obligations that should, under GAAP, be
classified as liabilities on Borrower’s consolidated balance sheet, including
all Indebtedness, and current portion Subordinated Debt allowed to be paid, but
excluding all other Subordinated Debt.

 

“Trademarks” are trademark and servicemark rights, registered or not,
applications to register and registrations and like protections, and the entire
goodwill of the business of Borrower connected with the trademarks.

 

[Signature page follows]

 

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UNDER OREGON LAW, MOST AGREEMENTS, PROMISES AND COMMITMENTS MADE BY BANK
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 BANK TO BE ENFORCEABLE.

 

BORROWER:

 

ADVANCED POWER TECHNOLOGY, INC.

 

 

By:

 

 

 

 

 

Title:

 

 

 

 

 

 

 

 

ADVANCED POWER TECHNOLOGY RF, INC.

 

 

 

 

 

 

By:

 

 

 

 

 

Title:

 

 

 

 

 

 

 

 

ADVANCED POWER TECHNOLOGY COLORADO, INC.

 

 

 

 

 

 

By:

 

 

 

 

 

Title:

 

 

 

 

 

 

 

 

ADVANCED POWER TECHNOLOGY RF-PENNSYLVANIA, INC.

 

 

 

 

 

 

By:

 

 

 

 

 

Title:

 

 

 

 

 

 

 

 

BANK:

 

 

 

 

SILICON VALLEY BANK

 

 

 

 

 

 

 

By:

 

 

 

 

 

Title:

 

 

 

 

 

Effective Date:

 

 

 

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EXHIBIT A

 

The Collateral consists of all of Borrower’s right, title and interest in and to
the following whether owned now or hereafter arising and whether the Borrower
has rights now or hereafter has rights therein and wherever located:

 

All goods and equipment now owned or hereafter acquired, including, without
limitation, all machinery, fixtures, vehicles (including motor vehicles and
trailers), and any interest in any of the foregoing, and all attachments,
accessories, accessions, replacements, substitutions, additions, and
improvements to any of the foregoing, wherever located;

 

All inventory, now owned or hereafter acquired, including, without limitation,
all merchandise, raw materials, parts, supplies, packing and shipping materials,
work in process and finished products including such inventory as is temporarily
out of Borrower’s custody or possession or in transit and including any returns
upon any accounts or other proceeds, including insurance proceeds, resulting
from the sale or disposition of any of the foregoing and any documents of title
representing any of the above;

 

All contract rights and general intangibles (as such definitions may be amended
from time to time according to the Code), now owned or hereafter acquired,
including, without limitation, goodwill, trademarks, servicemarks, trade styles,
trade names, patents, patent applications, leases, license agreements, franchise
agreements, blueprints, drawings, purchase orders, customer lists, route lists,
infringements, claims, computer programs, computer discs, computer tapes,
literature, reports, catalogs, design rights, income tax refunds, payments of
insurance and rights to payment of any kind;

 

All now existing and hereafter arising accounts, contract rights, royalties,
license rights and all other forms of obligations owing to Borrower arising out
of the sale or lease of goods, the licensing of technology or the rendering of
services by Borrower (as such definitions may be amended from time to time
according to the Code) whether or not earned by performance, and any and all
credit insurance, insurance (including refund) claims and proceeds, guaranties,
and other security thereof, as well as all merchandise returned to or reclaimed
by Borrower;

 

All documents, cash, deposit accounts, securities, securities entitlements,
securities accounts, investment property, financial assets, letters of credit,
letter of credit rights, certificates of deposit, instruments and chattel paper
and electronic chattel paper now owned or hereafter acquired and Borrower’s
Books relating to the foregoing;

 

All copyright rights, copyright applications, copyright registrations and like
protections in each work of authorship and derivative work thereof, whether
published or unpublished, now owned or hereafter acquired; all trade secret
rights, including all rights to unpatented inventions, know-how, operating
manuals, license rights and agreements and confidential information, now owned
or hereafter acquired; all mask work or similar rights available for the
protection of semiconductor chips, now owned or hereafter acquired; all claims
for damages by way of any past, present and future infringement of any of the
foregoing; and

 

All Borrower’s Books relating to the foregoing and any and all claims, rights
and interests in any of the above and all substitutions for, additions and
accessions to and proceeds thereof.

 

Notwithstanding the foregoing, the Collateral shall not be deemed to include any
copyrights, copyright applications, copyright registrations and like protection
in each work of authorship and derivative work thereof, whether published or
unpublished, now owned or hereafter acquired; any patents, patent applications
and like protections including without limitation improvements, divisions,
continuations, renewals, reissues, extensions and continuations-in-part of the
same, trademarks, servicemarks and applications therefor, whether registered or
not, and the goodwill of the business of Borrower connected with and symbolized
by such trademarks, any trade secret rights, including any rights to unpatented
inventions, know-how, operating manuals, license rights and agreements and
confidential information, now owned or hereafter acquired; or any claims for
damage by way of any past,

 

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

 

present and future infringement of any of the foregoing (collectively, the
“Intellectual Property”), except that the Collateral shall include the proceeds
of all the Intellectual Property that are accounts, (i.e. accounts receivable)
of Borrower, or general intangibles consisting of rights to payment, if a
judicial authority (including a U.S. Bankruptcy Court) holds that a security
interest in the underlying Intellectual Property is necessary to have a security
interest in such accounts and general intangibles of Borrower that are proceeds
of the Intellectual Property, then the Collateral shall automatically, and
effective as of the Effective Date, include the Intellectual Property to the
extent necessary to permit perfection of Bank’s security interest in such
accounts and general intangibles of Borrower that are proceeds of the
Intellectual Property.

 

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

 

EXHIBIT B

 

LOAN PAYMENT/ADVANCE REQUEST FORM

DEADLINE FOR SAME DAY PROCESSING IS 12:00 P.S.T.

Fax To:

 

Date:

 

 

 

LOAN PAYMENT:

Advanced Power Technology, Inc., Advanced Power Technology RF, Inc., Advanced
Power Technology Colorado, Inc. and Advanced Power Technology RF-Pennsylvania,
Inc.  (Borrower)

 

From Account #

 

 

 

To Account #

 

 

 

(Deposit Account #)

 

 

(Loan Account #)

 

 

 

 

Principal $

 

  and/or Interest $

 

 

 

All Borrower’s representation and warranties in the Loan and Security Agreement
are true, correct and complete in all material respects up to and including the
date of the transfer request for a loan payment, but those representations and
warranties expressly referring to another date shall be true, correct and
complete in all material respects as of that date:

 

Authorized Signature:

 

Phone Number:

 

 

LOAN ADVANCE:

Complete Outgoing Wire Request section below if all or a portion of the funds
from this loan advance are for an outgoing wire.

 

From Account #

 

 

 

To Account #

 

 

 

(Loan Account #)

 

 

(Deposit Account #)

 

 

 

 

Amount of Advance $

 

 

 

 

 

All Borrower’s representation and warranties in the Loan and Security Agreement
are true, correct and complete in all material respects up to and including the
date of the transfer request for an advance, but those representations and
warranties expressly referring to another date shall be true, correct and
complete in all material respects as of that date:

 

Authorized Signature:

 

  Phone Number:

 

 

OUTGOING WIRE REQUEST

Complete only if all or a portion of funds from the loan advance above are to be
wired.

Deadline for same day processing is 12:00pm, P.S.T.

 

Beneficiary Name:

 

 

 

Amount of Wire: $

 

 

 

 

 

 

 

 

 

 

 

Beneficiary Bank:

 

 

 

Account Number:

 

 

 

 

 

 

 

 

 

 

 

City and State:

 

 

 

 

 

 

 

 

 

Beneficiary Bank Transit (ABA) #:

 

 

Beneficiary Bank Code (Swift, Sort, Chip, etc.

 

 

 

 

 (For International Wire Only)

 

 

 

 

 

Intermediary Bank:

 

 

 

Transit (ABA) #:

 

 

 

 

 

 

 

 

 

 

 

For Further Credit to:

 

 

 

 

 

 

 

Special Instruction:

 

 

 

 

By signing below, I (we) acknowledge and agree that my (our) funds transfer
request shall be processed in accordance with and subject to the terms and
conditions set forth in the agreements(s) covering funds transfer service(s),
which agreements(s) were previously received and executed by me (us).

 

Authorized Signature:

 

 

 

2nd Signature (If Required):

 

 

 

 

 

 

 

Print Name/Title:

 

 

 

Print Name/Title:

 

 

 

 

 

 

 

Telephone #

 

 

 

Telephone #

 

 

 

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

 

Schedule to Loan and Security Agreement

 

The exact correct corporate name of Borrower is (attach a copy of the formation
documents, e.g., articles, partnership agreement):

 

 

 

Borrower’s State of formation:

 

 

 

Borrower has operated under only the following other names (if none, so state):

 

 

All other address at which the Borrower does business are as follows (attach
additional sheets if necessary and include all warehouse

addresses):

 

 

Borrower has deposit accounts and/or investment accounts located only at the
following institutions:

 

List Acct. Numbers:

 

 

Liens existing on the Effective Date and disclosed to and accepted by Bank in
writing:

 

 

 

 

Investments existing on the Effective Date and disclosed to and accepted by Bank
in writing:

 

 

 

 

Subordinated Debt:

 

 

 

 

Indebtedness on the Effective Date and disclosed to and consented to by Bank in
writing:

 

 

 

 

The following is a list of the Borrower’s copyrights (including copyrights of
software) that are registered with the United States

Copyright Office. (Please include name of the copyright and registration number
and attach a copy of the registration):

 

 

 

 

The following is a list of all software that the Borrower sells, distributes or
licenses to others, which is not registered with the United

States Copyright Office. (Please include versions that are not registered:

 

 

 

 

The following is a list of all of the Borrower’s patents that are registered
with the United States Patent Office. (Please include name of

the patent and registration number and attach a copy of the registration.):

 

 

 

 

The following is a list of all of the Borrower’s patents which are pending with
the United States Patent Office. (Please include name of

the patent and a copy of the application.):

 

 

 

 

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

 

The following is a list of all of the Borrower’s registered trademarks. (Please
include name of the trademark and a copy of the

registration.):

 

 

 

Borrower is not subject to litigation that would have a material adverse effect
on the Borrower’s financial condition, except the

following (attach additional comments, if needed):

 

 

 

 

Tax ID Number

 

 

 

Organizational Number, if any:

 

 

 

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

 

EXHIBIT C

COMPLIANCE CERTIFICATE

 

TO:

 

SILICON VALLEY BANK

 

 

3003 Tasman Drive

 

 

Santa Clara, CA 95054

 

 

 

FROM:

 

ADVANCED POWER TECHNOLOGY, INC., ADVANCED POWER TECHNOLOGY RF, INC.,
ADVANCED POWER TECHNOLOGY COLORADO, INC. AND ADVANCED POWER TECHNOLOGY
RF-PENNSYLVANIA, INC.

 

The undersigned Responsible Officer of ADVANCED POWER TECHNOLOGY, INC., ADVANCED
POWER TECHNOLOGY RF, INC., ADVANCED POWER TECHNOLOGY COLORADO, INC. AND ADVANCED
POWER TECHNOLOGY RF-PENNSYLVANIA, INC. (collectively “Borrower”) certifies that
under the terms and conditions of the Loan and Security Agreement between
Borrower and Bank (the “Agreement”), (i) Borrower is in complete compliance for
the period ending                                 with all required covenants
except as noted below and (ii) all representations and warranties in the
Agreement are true and correct in all material respects on this date.  In
addition, the undersigned certifies that Borrower, and each Subsidiary, has
timely filed all required tax returns and paid, or made adequate provision to
pay, all material taxes, except those being contested in good faith with
adequate reserves under GAAP.  Attached are the required documents supporting
the certification.  The Officer certifies that these are prepared in accordance
with Generally Accepted Accounting Principles (GAAP) consistently applied from
one period to the next except as explained in an accompanying letter or
footnotes.  The Responsible Officer acknowledges that no borrowings may be
requested at any time or date of determination that Borrower is not in
compliance with any of the terms of the Agreement, and that compliance is
determined not just at the date this certificate is delivered.

 

Please indicate compliance status by circling Yes/No under “Complies” column.

 

Reporting Covenant

 

Required

 

Complies

 

 

 

 

 

10-Q, 10-K and 8-K

 

Within 5 days after filing with SEC

 

Yes

No

 

 

 

 

 

 

Financial Covenant

 

Required

 

Actual

 

Complies

 

 

 

 

 

 

 

Maintain on a Monthly Basis:

 

 

 

 

 

 

Minimum Quick Ratio (Adjusted)

 

1.85:1.00

 

      :1.00

 

Yes

No

Minimum Tangible Net Worth

 

$

35,000,000

*

$

             

 

Yes 

No

 

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

*plus (a) 100% of all equity or capital contributed to Borrower and all
Subordinated Debt; and (b) 50% of all positive quarterly net income (adjusted
quarterly).

 

Have there been updates to Borrower’s intellectual property?

Yes / No

 

Borrower only has deposit accounts located at the following institutions:

 

.

 

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

 

Comments Regarding Exceptions: See Attached.

 

BANK USE ONLY

 

 

 

 

 

 

 

Received by:

 

 

 

Sincerely,

 

AUTHORIZED SIGNER

 

 

 

Date:

 

 

 

ADVANCED POWER TECHNOLOGY, INC., ADVANCED POWER

 

 

 

TECHNOLOGY RF, INC., ADVANCED POWER TECHNOLOGY

Verified:

 

 

COLORADO, INC. AND ADVANCED POWER TECHNOLOGY

AUTHORIZED SIGNER

 

RF-PENNSYLVANIA, INC.

 

 

Date:

 

 

 

 

 

 

 

 

 

 

SIGNATURE

 

Compliance Status:

Yes

No

 

 

 

 

 

 

 

 

 

 

TITLE

 

 

 

 

 

 

 

 

 

 

 

 

 

 

DATE

 

 

 

 

 

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

 

[g61761kg03image002.jpg]

SILICON VALLEY BANK

 

PRO FORMA INVOICE FOR LOAN CHARGES

 

BORROWER:                                                                                  
ADVANCED POWER TECHNOLOGY, INC., ADVANCED POWER TECHNOLOGY RF, INC., ADVANCED
POWER TECHNOLOGY COLORADO, INC. AND ADVANCED POWER TECHNOLOGY RF-PENNSYLVANIA,
INC.

 

LOAN OFFICER:

 

Ron Sherman

 

 

 

 

 

 

 

 

 

DATE:

 

March       , 2005

 

 

 

 

 

 

 

 

 

 

 

Revolving Loan Fee

 

$

20,000.00

 

 

 

UCC Search and Filing Fees

 

1,555.00

 

 

 

 

 

 

 

 

 

Less Deposit

 

$

5,000.00

 

 

 

 

 

 

 

 

 

TOTAL FEE DUE

 

$

16,555.00

 

 

Legal Fee for professional services
rendered by Harrang Long Gary
Rudnick

 

To be
billed

 

 

 

 

 

Costs estimate (including UCC
searches)

 

 

 

 

 

 

 

 

 

 

 

Total

 

To be
billed

 

 

Please indicate the method of payment:

 

{              }                        A check for the total amount is
attached.

 

{              }                        Debit DDA #
                                 for the total amount.

 

{              }                        Loan proceeds

 

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

 

Borrower:  ADVANCED POWER TECHNOLOGY, INC., ADVANCED POWER TECHNOLOGY RF, INC.,
ADVANCED POWER TECHNOLOGY COLORADO, INC. AND ADVANCED POWER TECHNOLOGY RF
PENNSYLVANIA, INC.

 

By:

 

 

 

 

 

(Authorized Signer)

 

 

 

 

 

 

 

 

 

Silicon Valley Bank

(Date)

 

 

Account Officer’s Signature

 

 

 

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

 

CORPORATE BORROWING RESOLUTION

 

Borrower:

 

ADVANCED POWER TECHNOLOGY, INC.
405 S.W. Columbia Street
Bend, OR 97702

 

Bank:

 

Silicon Valley Bank
3003 Tasman Drive
Santa Clara, CA 95054-1191

 

 

I, the Secretary or Assistant Secretary of ADVANCED POWER TECHNOLOGY, INC.
(“Borrower”), CERTIFY that Borrower is a corporation existing under the laws of
the State of Delaware.

 

I certify that at a meeting of Borrower’s Directors (or by other authorized
corporate action) duly held the following resolutions were adopted.

 

It is resolved that any one of the following officers of Borrower, whose name,
title and signature is below:

 

NAMES

 

POSITIONS

 

ACTUAL SIGNATURES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

may act for Borrower and:

 

Borrow Money.  Borrow money from Silicon Valley Bank (“Bank”).

 

Execute Loan Documents.  Execute any loan documents Bank requires.

 

Grant Security.  Grant Bank a security interest in any of Borrower’s assets.

 

Negotiate Items.  Negotiate or discount all drafts, trade acceptances,
promissory notes, or other indebtedness in which Borrower has an interest and
receive cash or otherwise use the proceeds.

 

Letters of Credit.  Apply for letters of credit from Bank.

 

Foreign Exchange Contracts.  Execute spot or forward foreign exchange contracts.

 

Issue Warrants.  Issue warrants for Borrower’s stock.

 

Further Acts.  Designate other individuals to request advances, pay fees and
costs and execute other documents or agreements (including documents or
agreement that waive Borrowers right to a jury trial) they think necessary to
effectuate these Resolutions.

 

Further resolved that all acts authorized by these Resolutions and performed
before they were adopted are ratified. These Resolutions remain in effect and
Bank may rely on them until Bank receives written notice of their revocation.

 

I certify that the persons listed above are Borrower’s officers with the titles
and signatures shown following their names and that these resolutions have not
been modified are currently effective.

 

CERTIFIED TO AND ATTESTED BY:

 

X

 

 

 

*Secretary or Assistant Secretary

 

 

X

 

 

 

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

*NOTE: In case the Secretary or other certifying officer is designated by the
foregoing resolutions as one of the signing officers, this resolution should
also be signed by a second Officer or Director of Borrower.

 

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

 

CORPORATE BORROWING RESOLUTION

 

Borrower:

 

ADVANCED POWER
TECHNOLOGY RF, INC.
405 S.W. Columbia Street
Bend, OR 97702

 

Bank:

 

Silicon Valley Bank
3003 Tasman Drive
Santa Clara, CA 95054-1191

 

 

I, the Secretary or Assistant Secretary of ADVANCED POWER TECHNOLOGY RF, INC.
(“Borrower”), CERTIFY that Borrower is a corporation existing under the laws of
the State of Delaware.

 

I certify that at a meeting of Borrower’s Directors (or by other authorized
corporate action) duly held the following resolutions were adopted.

 

It is resolved that any one of the following officers of Borrower, whose name,
title and signature is below:

 

NAMES

 

POSITIONS

 

ACTUAL SIGNATURES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

may act for Borrower and:

 

Borrow Money.  Borrow money from Silicon Valley Bank (“Bank”).

 

Execute Loan Documents.  Execute any loan documents Bank requires.

 

Grant Security.  Grant Bank a security interest in any of Borrower’s assets.

 

Negotiate Items.  Negotiate or discount all drafts, trade acceptances,
promissory notes, or other indebtedness in which Borrower has an interest and
receive cash or otherwise use the proceeds.

 

Letters of Credit.  Apply for letters of credit from Bank.

 

Foreign Exchange Contracts.  Execute spot or forward foreign exchange contracts.

 

Issue Warrants.  Issue warrants for Borrower’s stock.

 

Further Acts.  Designate other individuals to request advances, pay fees and
costs and execute other documents or agreements (including documents or
agreement that waive Borrowers right to a jury trial) they think necessary to
effectuate these Resolutions.

 

Further resolved that all acts authorized by these Resolutions and performed
before they were adopted are ratified. These Resolutions remain in effect and
Bank may rely on them until Bank receives written notice of their revocation.

 

I certify that the persons listed above are Borrower’s officers with the titles
and signatures shown following their names and that these resolutions have not
been modified are currently effective.

 

CERTIFIED TO AND ATTESTED BY:

 

X

 

 

 

*Secretary or Assistant Secretary

 

 

X

 

 

 

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

*NOTE: In case the Secretary or other certifying officer is designated by the
foregoing resolutions as one of the signing officers, this resolution should
also be signed by a second Officer or Director of Borrower.

 

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

 

CORPORATE BORROWING RESOLUTION

 

Borrower:

 

ADVANCED POWER
TECHNOLOGY COLORADO, INC.
405 S.W. Columbia Street
Bend, OR 97702

 

Bank:

 

Silicon Valley Bank
3003 Tasman Drive
Santa Clara, CA 95054-1191

 

 

I, the Secretary or Assistant Secretary of ADVANCED POWER TECHNOLOGY COLORADO,
INC. (“Borrower”), CERTIFY that Borrower is a corporation existing under the
laws of the State of                              .

 

I certify that at a meeting of Borrower’s Directors (or by other authorized
corporate action) duly held the following resolutions were adopted.

 

It is resolved that any one of the following officers of Borrower, whose name,
title and signature is below:

 

NAMES

 

POSITIONS

 

ACTUAL SIGNATURES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

may act for Borrower and:

 

Borrow Money.  Borrow money from Silicon Valley Bank (“Bank”).

 

Execute Loan Documents.  Execute any loan documents Bank requires.

 

Grant Security.  Grant Bank a security interest in any of Borrower’s assets.

 

Negotiate Items.  Negotiate or discount all drafts, trade acceptances,
promissory notes, or other indebtedness in which Borrower has an interest and
receive cash or otherwise use the proceeds.

 

Letters of Credit.  Apply for letters of credit from Bank.

 

Foreign Exchange Contracts.  Execute spot or forward foreign exchange contracts.

 

Issue Warrants.  Issue warrants for Borrower’s stock.

 

Further Acts.  Designate other individuals to request advances, pay fees and
costs and execute other documents or agreements (including documents or
agreement that waive Borrowers right to a jury trial) they think necessary to
effectuate these Resolutions.

 

Further resolved that all acts authorized by these Resolutions and performed
before they were adopted are ratified. These Resolutions remain in effect and
Bank may rely on them until Bank receives written notice of their revocation.

 

I certify that the persons listed above are Borrower’s officers with the titles
and signatures shown following their names and that these resolutions have not
been modified are currently effective.

 

CERTIFIED TO AND ATTESTED BY:

 

X

 

 

 

*Secretary or Assistant Secretary

 

 

X

 

 

 

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

*NOTE: In case the Secretary or other certifying officer is designated by the
foregoing resolutions as one of the signing officers, this resolution should
also be signed by a second Officer or Director of Borrower.

 

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

 

CORPORATE BORROWING RESOLUTION

 

Borrower:

 

ADVANCED POWER TECHNOLOGY, RF-
PENNSYLVANIA, INC.
405 S.W. Columbia Street
Bend, OR 97702

 

Bank:

 

Silicon Valley Bank
3003 Tasman Drive
Santa Clara, CA 95054-1191

 

 

I, the Secretary or Assistant Secretary of ADVANCED POWER TECHNOLOGY
RF-PENNSYLVANIA, INC. (“Borrower”), CERTIFY that Borrower is a corporation
existing under the laws of the State of Delaware.

 

I certify that at a meeting of Borrower’s Directors (or by other authorized
corporate action) duly held the following resolutions were adopted.

 

It is resolved that any one of the following officers of Borrower, whose name,
title and signature is below:

 

NAMES

 

POSITIONS

 

ACTUAL SIGNATURES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

may act for Borrower and:

 

Borrow Money.  Borrow money from Silicon Valley Bank (“Bank”).

 

Execute Loan Documents.  Execute any loan documents Bank requires.

 

Grant Security.  Grant Bank a security interest in any of Borrower’s assets.

 

Negotiate Items.  Negotiate or discount all drafts, trade acceptances,
promissory notes, or other indebtedness in which Borrower has an interest and
receive cash or otherwise use the proceeds.

 

Letters of Credit.  Apply for letters of credit from Bank.

 

Foreign Exchange Contracts.  Execute spot or forward foreign exchange contracts.

 

Issue Warrants.  Issue warrants for Borrower’s stock.

 

Further Acts.  Designate other individuals to request advances, pay fees and
costs and execute other documents or agreements (including documents or
agreement that waive Borrowers right to a jury trial) they think necessary to
effectuate these Resolutions.

 

Further resolved that all acts authorized by these Resolutions and performed
before they were adopted are ratified. These Resolutions remain in effect and
Bank may rely on them until Bank receives written notice of their revocation.

 

I certify that the persons listed above are Borrower’s officers with the titles
and signatures shown following their names and that these resolutions have not
been modified are currently effective.

 

CERTIFIED TO AND ATTESTED BY:

 

X

 

 

 

*Secretary or Assistant Secretary

 

 

X

 

 

 

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

*NOTE: In case the Secretary or other certifying officer is designated by the
foregoing resolutions as one of the signing officers, this resolution should
also be signed by a second Officer or Director of Borrower.

 

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

 

RECORDING REQUESTED BY
AND WHEN RECORDED RETURN TO:
SILICON VALLEY BANK
3003 Tasman Drive
Santa Clara, CA  95054
Attn:  Loan Services

 

CONSENT TO REMOVAL OF PERSONAL PROPERTY

 

KNOW ALL PERSONS BY THESE PRESENTS:

 

(a)                                  The undersigned has an interest as owner
and landlord in the following described real property (the “Real Property”): 
SEE ATTACHMENT 1 ATTACHED HERETO FOR FULL LEGAL DESCRIPTION, commonly known as
405 S.W. Columbia Street, Bend, OR 97702.

 

(b)                                 ADVANCED POWER TECHNOLOGY, INC., ADVANCED
POWER TECHNOLOGY RF, INC., ADVANCED POWER TECHNOLOGY COLORADO, INC. AND ADVANCED
POWER TECHNOLOGY RF-PENNSYLVANIA, INC.  (collectively “Borrower”), whose address
is 405 S.W. Columbia Street, Bend, OR 97702, has entered into or will enter into
a Loan and Security Agreement with Silicon Valley Bank (“Bank”) dated as of the
Effective Date (as defined therein) (as amended and supplemented from time to
time, the “Loan Agreement”).  As a condition to entering into the Loan
Agreement, Bank requires that the undersigned consent to the removal by Bank of
the equipment and other assets covered by the Loan Agreement (hereinafter called
“Equipment”) from the Real Property.

 

NOW, THEREFORE, the undersigned consents to the placing of the Equipment on the
Real Property, and agrees with Bank as follows:

 

1.                                       The undersigned waives and releases
each and every right which undersigned now has, under applicable law or by
virtue of the lease for the Real Property now in effect, to levy or distrain
upon for rent, in arrears, in advance or both, or to claim or assert title to
the Equipment that is already on said Real Property, or may hereafter be
delivered or installed thereon.

 

2.                                       The Equipment shall be considered to be
personal property and shall not be considered part of the Real Property
regardless of whether or by what means it is or may become attached or affixed
to the Real Property.

 

3.                                       The undersigned will permit Bank, or
its agent or representative, to enter upon the Real Property for the purpose of
exercising any right they may have under the terms of the Loan Agreement or
otherwise, including, without limitation, the right to remove the Equipment;
provided, however, that if Bank, in removing the Equipment damage any
improvements of the undersigned on the Real Property, Bank will, at its expense,
cause same to be repaired.

 

4.                                       This agreement shall be binding upon
the heirs, successors and assigns of the undersigned and shall inure to the
benefit of each Bank and its respective successors and assigns.

 

IN WITNESS WHEREOF, the undersigned has executed this instrument
at                    , this               day of                   , 2005.

 

 

 

 

By:

 

 

 

 

 

 

Title:

 

 

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

 

RECORDING REQUESTED BY
AND WHEN RECORDED RETURN TO:
SILICON VALLEY BANK
3003 Tasman Drive
Santa Clara, CA  95054
Attn:  Loan Services

 

CONSENT TO REMOVAL OF PERSONAL PROPERTY

 

KNOW ALL PERSONS BY THESE PRESENTS:

 

(a)                                  The undersigned has an interest as owner
and landlord in the following described real property (the “Real Property”): 
SEE ATTACHMENT 1 ATTACHED HERETO FOR FULL LEGAL DESCRIPTION, commonly known as
296 SW Columbia Street, Suite C, Bend, OR 97702.

 

(b)                                 ADVANCED POWER TECHNOLOGY, INC., ADVANCED
POWER TECHNOLOGY RF, INC., ADVANCED POWER TECHNOLOGY COLORADO, INC. AND ADVANCED
POWER TECHNOLOGY RF-PENNSYLVANIA, INC.  (collectively “Borrower”), whose address
is 405 S.W. Columbia Street, Bend, OR 97702, has entered into or will enter into
a Loan and Security Agreement with Silicon Valley Bank (“Bank”) dated as of the
Effective Date (as defined therein) (as amended and supplemented from time to
time, the “Loan Agreement”).  As a condition to entering into the Loan
Agreement, Bank requires that the undersigned consent to the removal by Bank of
the equipment and other assets covered by the Loan Agreement (hereinafter called
“Equipment”) from the Real Property.

 

NOW, THEREFORE, the undersigned consents to the placing of the Equipment on the
Real Property, and agrees with Bank as follows:

 

1.                                       The undersigned waives and releases
each and every right which undersigned now has, under applicable law or by
virtue of the lease for the Real Property now in effect, to levy or distrain
upon for rent, in arrears, in advance or both, or to claim or assert title to
the Equipment that is already on said Real Property, or may hereafter be
delivered or installed thereon.

 

2.                                       The Equipment shall be considered to be
personal property and shall not be considered part of the Real Property
regardless of whether or by what means it is or may become attached or affixed
to the Real Property.

 

3.                                       The undersigned will permit Bank, or
its agent or representative, to enter upon the Real Property for the purpose of
exercising any right they may have under the terms of the Loan Agreement or
otherwise, including, without limitation, the right to remove the Equipment;
provided, however, that if Bank, in removing the Equipment damage any
improvements of the undersigned on the Real Property, Bank will, at its expense,
cause same to be repaired.

 

4.                                       This agreement shall be binding upon
the heirs, successors and assigns of the undersigned and shall inure to the
benefit of each Bank and its respective successors and assigns.

 

IN WITNESS WHEREOF, the undersigned has executed this instrument
at                   , this               day of                   , 2005.

 

 

 

 

By:

 

 

 

 

 

 

Title:

 

 

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RECORDING REQUESTED BY
AND WHEN RECORDED RETURN TO:
SILICON VALLEY BANK
3003 Tasman Drive
Santa Clara, CA  95054
Attn:  Loan Services

 

CONSENT TO REMOVAL OF PERSONAL PROPERTY

 

KNOW ALL PERSONS BY THESE PRESENTS:

 

(a)                                  The undersigned has an interest as owner
and landlord in the following described real property (the “Real Property”): 
SEE ATTACHMENT 1 ATTACHED HERETO FOR FULL LEGAL DESCRIPTION, commonly known
as                                                  Bend, OR 97702.

 

(b)                                 ADVANCED POWER TECHNOLOGY, INC., ADVANCED
POWER TECHNOLOGY RF, INC., ADVANCED POWER TECHNOLOGY COLORADO, INC. AND ADVANCED
POWER TECHNOLOGY RF-PENNSYLVANIA, INC.  (collectively “Borrower”), whose address
is 405 S.W. Columbia Street, Bend, OR  97702, has entered into or will enter
into a Loan and Security Agreement with Silicon Valley Bank (“Bank”) dated as of
the Effective Date (as defined therein) (as amended and supplemented from time
to time, the “Loan Agreement”).  As a condition to entering into the Loan
Agreement, Bank requires that the undersigned consent to the removal by Bank of
the equipment and other assets covered by the Loan Agreement (hereinafter called
“Equipment”) from the Real Property.

 

NOW, THEREFORE, the undersigned consents to the placing of the Equipment on the
Real Property, and agrees with Bank as follows:

 

1.                                       The undersigned waives and releases
each and every right which undersigned now has, under applicable law or by
virtue of the lease for the Real Property now in effect, to levy or distrain
upon for rent, in arrears, in advance or both, or to claim or assert title to
the Equipment that is already on said Real Property, or may hereafter be
delivered or installed thereon.

 

2.                                       The Equipment shall be considered to be
personal property and shall not be considered part of the Real Property
regardless of whether or by what means it is or may become attached or affixed
to the Real Property.

 

3.                                       The undersigned will permit Bank, or
its agent or representative, to enter upon the Real Property for the purpose of
exercising any right they may have under the terms of the Loan Agreement or
otherwise, including, without limitation, the right to remove the Equipment;
provided, however, that if Bank, in removing the Equipment damage any
improvements of the undersigned on the Real Property, Bank will, at its expense,
cause same to be repaired.

 

4.                                       This agreement shall be binding upon
the heirs, successors and assigns of the undersigned and shall inure to the
benefit of each Bank and its respective successors and assigns.

 

IN WITNESS WHEREOF, the undersigned has executed this instrument
at                   , this                 day of                     , 2005.

 

 

 

 

By:

 

 

 

 

 

 

Title:

 

 

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

 

RECORDING REQUESTED BY
AND WHEN RECORDED RETURN TO:
SILICON VALLEY BANK
3003 Tasman Drive
Santa Clara, CA  95054
Attn:  Loan Services

 

CONSENT TO REMOVAL OF PERSONAL PROPERTY

 

KNOW ALL PERSONS BY THESE PRESENTS:

 

(a)                                  The undersigned has an interest as owner
and landlord in the following described real property (the “Real Property”): 
SEE ATTACHMENT 1 ATTACHED HERETO FOR FULL LEGAL DESCRIPTION, commonly known as
3000 Oakmead Village Drive, Santa Clara, CA  95051-0808.

 

(b)                                 ADVANCED POWER TECHNOLOGY, INC., ADVANCED
POWER TECHNOLOGY RF, INC., ADVANCED POWER TECHNOLOGY COLORADO, INC. AND ADVANCED
POWER TECHNOLOGY RF-PENNSYLVANIA, INC.  (collectively “Borrower”), has entered
into or will enter into a Loan and Security Agreement with Silicon Valley Bank
(“Bank”) dated as of the Effective Date (as defined therein) (as amended and
supplemented from time to time, the “Loan Agreement”).  As a condition to
entering into the Loan Agreement, Bank requires that the undersigned consent to
the removal by Bank of the equipment and other assets covered by the Loan
Agreement (hereinafter called “Equipment”) from the Real Property.

 

NOW, THEREFORE, the undersigned consents to the placing of the Equipment on the
Real Property, and agrees with Bank as follows:

 

1.                                       The undersigned waives and releases
each and every right which undersigned now has, under applicable law or by
virtue of the lease for the Real Property now in effect, to levy or distrain
upon for rent, in arrears, in advance or both, or to claim or assert title to
the Equipment that is already on said Real Property, or may hereafter be
delivered or installed thereon.

 

2.                                       The Equipment shall be considered to be
personal property and shall not be considered part of the Real Property
regardless of whether or by what means it is or may become attached or affixed
to the Real Property.

 

3.                                       The undersigned will permit Bank, or
its agent or representative, to enter upon the Real Property for the purpose of
exercising any right they may have under the terms of the Loan Agreement or
otherwise, including, without limitation, the right to remove the Equipment;
provided, however, that if Bank, in removing the Equipment damage any
improvements of the undersigned on the Real Property, Bank will, at its expense,
cause same to be repaired.

 

4.                                       This agreement shall be binding upon
the heirs, successors and assigns of the undersigned and shall inure to the
benefit of each Bank and its respective successors and assigns.

 

IN WITNESS WHEREOF, the undersigned has executed this instrument
at                   , this                day of                   , 2005.

 

 

 

 

By:

 

 

 

 

 

 

Title:

 

 

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

 

RECORDING REQUESTED BY
AND WHEN RECORDED RETURN TO:
SILICON VALLEY BANK
3003 Tasman Drive
Santa Clara, CA  95054
Attn:  Loan Services

 

CONSENT TO REMOVAL OF PERSONAL PROPERTY

 

KNOW ALL PERSONS BY THESE PRESENTS:

 

(a)                                  The undersigned has an interest as owner
and landlord in the following described real property (the “Real Property”): 
SEE ATTACHMENT 1 ATTACHED HERETO FOR FULL LEGAL DESCRIPTION, commonly known as
140 Commerce Drive, Montgomeryville, PA  18936.

 

(b)                                 ADVANCED POWER TECHNOLOGY, INC., ADVANCED
POWER TECHNOLOGY RF, INC., ADVANCED POWER TECHNOLOGY COLORADO, INC. AND ADVANCED
POWER TECHNOLOGY RF-PENNSYLVANIA, INC.  (collectively “Borrower”), has entered
into or will enter into a Loan and Security Agreement with Silicon Valley Bank
(“Bank”) dated as of the Effective Date (as defined therein) (as amended and
supplemented from time to time, the “Loan Agreement”).  As a condition to
entering into the Loan Agreement, Bank requires that the undersigned consent to
the removal by Bank of the equipment and other assets covered by the Loan
Agreement (hereinafter called “Equipment”) from the Real Property.

 

NOW, THEREFORE, the undersigned consents to the placing of the Equipment on the
Real Property, and agrees with Bank as follows:

 

1.                                       The undersigned waives and releases
each and every right which undersigned now has, under applicable law or by
virtue of the lease for the Real Property now in effect, to levy or distrain
upon for rent, in arrears, in advance or both, or to claim or assert title to
the Equipment that is already on said Real Property, or may hereafter be
delivered or installed thereon.

 

2.                                       The Equipment shall be considered to be
personal property and shall not be considered part of the Real Property
regardless of whether or by what means it is or may become attached or affixed
to the Real Property.

 

3.                                       The undersigned will permit Bank, or
its agent or representative, to enter upon the Real Property for the purpose of
exercising any right they may have under the terms of the Loan Agreement or
otherwise, including, without limitation, the right to remove the Equipment;
provided, however, that if Bank, in removing the Equipment damage any
improvements of the undersigned on the Real Property, Bank will, at its expense,
cause same to be repaired.

 

4.                                       This agreement shall be binding upon
the heirs, successors and assigns of the undersigned and shall inure to the
benefit of each Bank and its respective successors and assigns.

 

IN WITNESS WHEREOF, the undersigned has executed this instrument
at                   , this                day of                   , 2005.

 

 

 

 

By:

 

 

 

 

 

 

Title:

 

 

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

 

RECORDING REQUESTED BY
AND WHEN RECORDED RETURN TO:
SILICON VALLEY BANK
3003 Tasman Drive
Santa Clara, CA  95054
Attn:  Loan Services

 

CONSENT TO REMOVAL OF PERSONAL PROPERTY

 

KNOW ALL PERSONS BY THESE PRESENTS:

 

(a)                                  The undersigned has an interest as owner
and landlord in the following described real property (the “Real Property”): 
SEE ATTACHMENT 1 ATTACHED HERETO FOR FULL LEGAL DESCRIPTION, commonly known as
                                                                           Colorado                   .

 

(b)                                 ADVANCED POWER TECHNOLOGY, INC., ADVANCED
POWER TECHNOLOGY RF, INC., ADVANCED POWER TECHNOLOGY COLORADO, INC. AND ADVANCED
POWER TECHNOLOGY RF-PENNSYLVANIA, INC.  (collectively “Borrower”), has entered
into or will enter into a Loan and Security Agreement with Silicon Valley Bank
(“Bank”) dated as of the Effective Date (as defined therein) (as amended and
supplemented from time to time, the “Loan Agreement”).  As a condition to
entering into the Loan Agreement, Bank requires that the undersigned consent to
the removal by Bank of the equipment and other assets covered by the Loan
Agreement (hereinafter called “Equipment”) from the Real Property.

 

NOW, THEREFORE, the undersigned consents to the placing of the Equipment on the
Real Property, and agrees with Bank as follows:

 

1.                                       The undersigned waives and releases
each and every right which undersigned now has, under applicable law or by
virtue of the lease for the Real Property now in effect, to levy or distrain
upon for rent, in arrears, in advance or both, or to claim or assert title to
the Equipment that is already on said Real Property, or may hereafter be
delivered or installed thereon.

 

2.                                       The Equipment shall be considered to be
personal property and shall not be considered part of the Real Property
regardless of whether or by what means it is or may become attached or affixed
to the Real Property.

 

3.                                       The undersigned will permit Bank, or
its agent or representative, to enter upon the Real Property for the purpose of
exercising any right they may have under the terms of the Loan Agreement or
otherwise, including, without limitation, the right to remove the Equipment;
provided, however, that if Bank, in removing the Equipment damage any
improvements of the undersigned on the Real Property, Bank will, at its expense,
cause same to be repaired.

 

4.                                       This agreement shall be binding upon
the heirs, successors and assigns of the undersigned and shall inure to the
benefit of each Bank and its respective successors and assigns.

 

IN WITNESS WHEREOF, the undersigned has executed this instrument
at                    , this                 day of                    , 2005.

 

 

 

 

By:

 

 

 

 

 

 

Title:

 

 

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