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


 


10





















 


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;


 


11





















 


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);


 


12





















 


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


 


13





















 


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.


 


14





















 


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.


 


15





















 


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.


 


16





















 


“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:


 


17





















 


(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.


 


18





















 


“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.


 


19





















 


“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]


 


20





















 


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:

  	
   

  	
   

  
						



 


21





















 


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

  	
   

  	
   

  	
   

  	
   

  
													



 





















 





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:

  	
   

  
					



 





















 


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: