EXHIBIT 10.2


 


BIOJECT MEDICAL
TECHNOLOGIES INC.


 


SECURITY AGREEMENT


 


THIS SECURITY AGREEMENT, dated as of March
8, 2006 (this “Security
Agreement”), is made by and among Bioject Medical Technologies
Inc., an Oregon corporation (“BJT”), Bioject, Inc., an Oregon corporation and a
wholly owned subsidiary of BJT (“Sub”, and together with BJT, the “Grantors”, each
individually, a “Grantor”,
and the secured parties listed on the signature pages hereto (each, a “Secured Party”
and, collectively, the “Secured
Parties”).


 


RECITALS


 


A.            Each Secured Party has
made and has agreed to make certain advances of money and to extend certain
financial accommodation to BJT as evidenced by those certain convertible
promissory notes executed or to be executed by BJT in favor of each Secured
Party pursuant to that certain Note and Warrant Purchase Agreement (the “Purchase Agreement”)
of even date herewith by and between BJT and the Secured Parties, (each, a “Note”
and, collectively, the “Notes”), such advances and
financial accommodations being referred to herein as the “Loans”.


 


B.            The Secured Parties
are willing to make the Loans to BJT, but only upon the condition, among
others, that each Grantor shall have executed and delivered to the Secured
Parties this Security Agreement.


 


AGREEMENT


 


NOW, THEREFORE, in order to induce the
Secured Parties to make the Loans and for other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, and
intending to be legally bound, each Grantor hereby represents, warrants,
covenants and agrees as follows:


 


1.  DEFINED TERMS. When used in this Security Agreement,
the following terms shall have the following meanings (such meanings being
equally applicable to both the singular and plural forms of the terms defined):


 


“Bankruptcy Code”
means Title 11 of the United States Code, as amended or modified from time to
time.


 


“Collateral” shall
have the meaning assigned to such term in Section
2 of this Security Agreement.


 


“Contracts” means all
contracts (including any customer, vendor, supplier, service or maintenance
contract), leases, licenses, undertakings, purchase orders, permits, franchise
agreements or other agreements (other than any right evidenced by Chattel
Paper, Documents or Instruments), whether in written or electronic form, in or
under which Grantor now holds or hereafter acquires any right, title or
interest, including, without limitation, with respect to an Account, any
agreement relating to the terms of payment or the terms of performance thereof.


 


“Copyright License”
means any agreement, whether in written or electronic form, in which either
Grantor now holds or hereafter acquires any interest, granting any right in or
to any Copyright or Copyright registration (whether a Grantor is the licensee
or the licensor thereunder) including, without limitation, licenses pursuant to
which either Grantor has obtained the exclusive right to use a copyright owned
by a third party.


 


“Copyrights” means all
of the following now owned or hereafter acquired or created (as a work for hire
for the benefit of either Grantor) by either Grantor or in which either Grantor
now holds or hereafter acquires or receives any right or interest, in whole or
in part: (a) all copyrights, whether registered or unregistered, held pursuant
to the laws of the United States, any State thereof or any other country; (b)
registrations, applications, recordings and proceedings in the United States
Copyright Office or in any similar office or agency of the United States, any
State thereof or any other country; (c) any continuations, renewals or
extensions thereof; (d) any registrations to be issued


 

















 


in any
pending applications, and shall include any right or interest in and to work
protectable by any of the foregoing which are presently or in the future owned,
created or authorized (as a work for hire for the benefit of either Grantor) or
acquired by either Grantor, in whole or in part; (e) prior versions of works
covered by copyright and all works based upon, derived from or incorporating
such works; (f) income, royalties, damages, claims and payments now and
hereafter due and/or payable with respect to copyrights, including, without
limitation, damages, claims and recoveries for past, present or future
infringement; (g) rights to sue for past, present and future infringements of
any copyright; and (h) any other rights corresponding to any of the foregoing
rights throughout the world.


 


“Event of Default”
shall have the meaning ascribed to such term in the Purchase Agreement.


 


“Intellectual Property”
means any intellectual property, in any medium, of any kind or nature
whatsoever, now or hereafter owned or acquired or received by either Grantor or
in which either Grantor now holds or hereafter acquires or receives any right
or interest, and shall include, in any event, any Copyright, Trademark, Patent,
trade secret, customer list, internet domain name (including any right related
to the registration thereof), proprietary or confidential information, mask
work, source, object or other programming code, invention (whether or not
patented or patentable), technical information, procedure, design, knowledge,
know-how, software, data base, data, skill, expertise, recipe, experience,
process, model, drawing, material or record.


 


“License” means any
Copyright License, Patent License, Trademark License or other license of rights
or interests, whether in-bound or out-bound, whether in written or electronic
form, now or hereafter owned or acquired or received by either Grantor or in
which either Grantor now holds or hereafter acquires or receives any right or
interest, and shall include any renewals or extensions of any of the foregoing
thereof.


 


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


 


“Patent License” means
any agreement, whether in written or electronic form, in which either Grantor
now holds or hereafter acquires any interest, granting any right with respect
to any invention on which a Patent is in existence (whether a Grantor is the
licensee or the licensor thereunder).


 


“Patents” means all of
the following in which either Grantor now holds or hereafter acquires any
interest: (a) all letters patent of the United States or any other country, all
registrations and recordings thereof and all applications for letters patent of
the United States or any other country, including, without limitation,
registrations, recordings and applications in the United States Patent and
Trademark Office or in any similar office or agency of the United States, any
State thereof or any other country; (b)all reissues, divisions, continuations,
renewals, continuations-in-part or extensions thereof; (c) all petty patents,
divisionals and patents of addition; (d) all patents to issue in any such
applications; (e) income, royalties, damages, claims and payments now and
hereafter due and/or payable with respect to patents, including, without
limitation, damages, claims and recoveries for past, present or future
infringement; and (f) rights to sue for past, present and future infringements
of any patent.


 


“Permitted Lien”
means: (a) deposits or pledges to secure obligations under workmen’s
compensation, social security or similar laws, or under unemployment insurance;
(b) deposits or pledges to secure bids, tenders, contracts (other than
contracts for the payment of money), leases, statutory obligations, surety and
appeal bonds and other obligations of like nature arising in the ordinary
course of business; (c) mechanic’s, workmen’s, materialmen’s or other like
Liens arising in the ordinary course of business with respect to obligations
which are not due, or which are being contested in good faith by appropriate
proceedings which suspend the collection thereof and in respect of which
adequate reserves have been made (provided that such proceedings do not, in
Purchasers’ sole discretion, involve any substantial risk of the sale, loss or
forfeiture of such property or assets or any interest therein); (d) Liens and
encumbrances in favor of Purchaser; and (e) Liens in favor of Partners for Growth,
L.P. (“PFG”),
securing (i) indebtedness for Borrowed Money not in excess of the amount
specified in Section 8.1(d) hereof (the “PFG Lien”) and (ii) outstanding indebtedness
(the principal amount of which shall not exceed $1,250,000) and any other amounts
payable to PFG pursuant to documents dated after the date hereof.


 


“Pro Rata” means, as
to any Secured Party at any time, the percentage equivalent at such time of
such Secured Party’s aggregate unpaid principal amount of Loans, divided by the
combined aggregate unpaid principal amount of all Loans of all Secured Parties.


 


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


 


“Secured Obligations”
means (a) all liabilities of the Company to the Purchasers, including, without
limitation: (a) indebtedness evidenced under the Notes, repayment of the Loans
and all other liabilities and obligations of every kind or nature whatsoever of
the Company to the Purchasers, whether now existing or hereafter incurred,
joint or several, matured or unmatured, direct or indirect, primary or
secondary, related or unrelated, due or to become due, including but not
limited to, any extensions, modifications, substitutions, increases and
renewals thereof, (b) the payment of all amounts advanced by any Purchaser to
preserve, protect, defend, and enforce its rights under this Agreement and in
the following property in accordance with the terms of this Agreement, and (c)
the payment of all expenses incurred by any Purchaser in connection therewith
(collectively, the “Obligations”)


 


“Secured Party Majority Interest”
means any Secured Party or group of Secured Parties holding at least fifty
percent (50%) of the outstanding and unpaid principal amount under all Loans of
all Secured Parties.


 


 “Security Agreement” means this Security
Agreement and all Schedules hereto, as the same may from time to time be
amended, modified, supplemented or restated.


 


“Trademark License”
means any agreement, whether in written or electronic form, in which either
Grantor now holds or hereafter acquires any interest, granting any right in and
to any Trademark or Trademark registration (whether Grantor is the licensee or
the licensor thereunder).


 


“Trademarks” means any
of the following in which either Grantor now holds or hereafter acquires any
interest: (a) any trademarks, tradenames, corporate names, company names,
business names, trade styles, service marks, logos, other source or business
identifiers, prints and labels on which any of the foregoing have appeared or
appear, designs and general intangibles of like nature, now existing or
hereafter adopted or acquired, all registrations and recordings thereof and any
applications in connection therewith, including, without limitation,
registrations, recordings and applications in the United States Patent and
Trademark Office or in any similar office or agency of the United States, any
State thereof or any other country (collectively, the “Marks”); (b) any
reissues, extensions or renewals thereof; (c) the goodwill of the business
symbolized by or associated with the Marks; (d) income, royalties, damages,
claims and payments now and hereafter due and/or payable with respect to the
Marks, including, without limitation, damages, claims and recoveries for past,
present or future infringement; and (e) rights to sue for past, present and
future infringements of the Marks.


 


“UCC” means the
Uniform Commercial Code as the same may from time to time be in effect in the
State of New York (and each reference in this Security Agreement to an Article
thereof (denoted as a Division of the UCC as adopted and in effect in the State
of New York) shall refer to that Article (or Division, as applicable) as from
time to time in effect, which in the case of Article 9 shall include and refer
to Revised Article 9 from and after the date Revised Article 9 shall become
effective in the State of New York); provided,
however, in the event that, by reason of mandatory provisions of
law, any or all of the attachment, perfection or priority of the Secured
Parties’ security interest in any Collateral is governed by the Uniform
Commercial Code as in effect in a jurisdiction other than the State of New
York, the term “UCC” shall mean
the Uniform Commercial Code (including the Articles thereof) as in effect at
such time in such other jurisdiction for purposes of the provisions hereof
relating to such attachment, perfection or priority and for purposes of
definitions related to such provisions.


 


In
addition, the following terms shall be defined terms having the meaning set
forth for such terms in the UCC: “Account” (including health-care-insurance
receivables), “Account Debtor”, “Chattel Paper” (including tangible and
electronic chattel paper), “Commercial Tort Claims”, “Commodity Account”, “Deposit
Account”, “Documents”, “Equipment” (including all accessions and additions
thereto), “Fixtures”, “General Intangible” (including payment intangibles and
software), “Instrument”, “Inventory” (including all goods held for sale or
lease or to be furnished under a contract of service, and including returns and
repossessions), “Investment Property” (including securities and securities
entitlements), “Letter-of-Credit Right” (whether or not the letter of credit is
evidenced by a writing), “Payment Intangibles”, “Proceeds”, “Promissory Notes”,
“Securities Account”, and “Supporting Obligations”. Each of the foregoing
defined terms shall include all of such items now owned, or hereafter acquired,
by either Grantor.


 


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2.  GRANT OF SECURITY INTEREST. As collateral security for
the full, prompt, complete and final payment and performance when due (whether
at stated maturity, by acceleration or otherwise) of all the Secured
Obligations and in order to induce the Secured Parties to cause the Loans to be
made, each Grantor hereby assigns, conveys, mortgages, pledges, hypothecates
and transfers to the Secured Parties, and hereby grants to the Secured Parties,
a security interest in all of each Grantor’s right, title and interest in, to
and under the following, whether now owned or hereafter acquired, (all of which
being collectively referred to herein as the “Collateral”):


 


(a) All Accounts of each Grantor;


 


(b) All Chattel Paper of each Grantor;


 


(c) All Commercial Tort Claims of each Grantor;


 


(d) All Contracts of each Grantor;


 


(e) All Deposit Accounts of each Grantor;


 


(f) All Documents of each Grantor;


 


(g) All Equipment of each Grantor;


 


(h) All Fixtures of each Grantor;


 


(i) All General Intangibles of each Grantor,
including, without limitation, Payment Intangibles, all Copyrights, Patents,
Trademarks, Licenses, designs, drawings, technical information, marketing
plans, customer lists, trade secrets, proprietary or confidential information,
inventions (whether or not patentable), procedures, know-how, models and data;


 


(j) All Instruments of each Grantor, including,
without limitation, Promissory Notes;


 


(k) All Inventory of each Grantor;


 


(l) All Investment Property of each Grantor;


 


(m) All Letter-of Credit Rights of each Grantor;


 


(n) All Supporting Obligations of each Grantor;


 


(o) All property of each Grantor held by any Secured
Party, or any other party for whom any Secured Party is acting as agent
hereunder, including, without limitation, all property of every-description now
or hereafter in the possession or custody of or in transit to any Secured Party
or such other party for any purpose, including, without limitation,
safekeeping, collection or pledge, for the account of either Grantor, or as to
which either Grantor may have any right or power;


 


(p) All capital stock of Sub owned by BJT,


 


(q) All other goods and personal property of each
Grantor, wherever located, whether tangible or intangible, and whether now
owned or hereafter acquired, existing, leased or consigned by or to Grantor;


 


(r) All Real Property; and


 


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(s) To the extent not otherwise included, all Proceeds
of each of the foregoing and all accessions to, substitutions and replacements
for and rents, profits and products of each of the foregoing.


 


Notwithstanding
the foregoing provisions of this Section 2,
the grant, assignment and transfer of a security interest as provided herein
shall not extend to, and the term “Collateral”
shall not include:  (a) “intent-to-use”
trademarks at all times prior to the first use thereof, whether by the actual
use thereof in commerce, the recording of a statement of use with the United
States Patent and Trademark Office or otherwise or (c) any Contract, Instrument
or Chattel Paper in which either Grantor has any right, title or interest if
and to the extent such Contract, Instrument or Chattel Paper includes a
provision containing a restriction on assignment such that the creation of a
security interest in the right, title or interest of either Grantor therein
would be prohibited and would, in and of itself, cause or result in a default
thereunder enabling another person party to such Contract, Instrument or
Chattel Paper to enforce any remedy with respect thereto; provided that the
foregoing exclusion shall not apply if (i) such prohibition has been waived or
such other person has otherwise consented to the creation hereunder of a
security interest in such Contract, Instrument or Chattel Paper or (ii) such
prohibition would be rendered ineffective pursuant to Sections 9-407(a) or
9-408(a) of the UCC, as applicable and as then in effect in any relevant
jurisdiction, or any other applicable law (including the Bankruptcy Code) or
principles of equity); provided further that immediately upon the
ineffectiveness, lapse or termination of any such provision, the Collateral
shall include, and each Grantor shall be deemed to have granted a security
interest in, all its rights, title and interests in and to such Contract,
Instrument or Chattel Paper as if such provision had never been in effect; and
provided further that the foregoing exclusion shall in no way be construed so
as to limit, impair or otherwise affect any Secured Party’s unconditional
continuing security interest in and to all rights, title and interests of
Grantor in or to any payment obligations or other rights to receive monies due
or to become due under any such Contract, Instrument or Chattel Paper and in
any such monies and other proceeds of such Contract, Instrument or Chattel
Paper.


 


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3.  RIGHTS OF SECURED
PARTIES; COLLECTION OF ACCOUNTS.


 


(a) Notwithstanding anything contained in this
Security Agreement to the contrary, each Grantor expressly agrees that it shall
remain liable under each of its Contracts and each of its Licenses to observe
and perform all the conditions and obligations to be observed and performed by
it thereunder and that it shall perform all of its duties and obligations
thereunder, all in accordance with and pursuant to the terms and provisions of
each such Contract or License. No Secured Party shall have any obligation or
liability under any Contract or License by reason of or arising out of this
Security Agreement or the granting to the Secured Parties of a lien therein or
the receipt by any Secured Party of any payment relating to any Contract or
License pursuant hereto, nor shall any Secured Party be required or obligated
in any manner to perform or fulfill any of the obligations of either Grantor
under or pursuant to any Contract or License, or to make any payment, or to
make any inquiry as to the nature or the sufficiency of any payment received by
it or the sufficiency of any performance by any party under any Contract or
License, or to present or file any claim, or to take any action to collect or
enforce any performance or the payment of any amounts which may have been
assigned to it or to which it may be entitled at any time or times.


 


(b) The Secured Parties authorize each Grantor to
collect its Accounts. Upon the occurrence and during the continuance of any
Event of Default, at the request of a Secured Party Majority Interest, each
Grantor shall deliver all original and other documents evidencing and relating
to the performance of labor or service which created such Accounts, including,
without limitation, all original orders, invoices and shipping receipts.


 


(c) Any Secured Party may at any time, upon the
occurrence and during the continuance of any Event of Default and the written
consent of a Purchaser Majority Interest, notify Account Debtors of each Grantor,
parties to the Contracts of either Grantor, obligors in respect of Instruments
of each Grantor and obligors in respect of Chattel Paper of each Grantor that
the Accounts and the right, title and interest of either Grantor in and under
such Contracts, Instruments and Chattel Paper have been assigned to the Secured
Parties and that payments shall be made directly to Secured Parties. Upon the
request of a Secured Party Majority Interest, each Grantor shall so notify such
Account Debtors, parties to such Contracts, obligors in respect of such
Instruments and obligors in respect of such Chattel Paper. Upon the occurrence
and during the continuance of any Event of Default, any Secured Party may, in
its name or in the name of other Secured Parties, communicate with such Account
Debtors, parties to such Contracts, obligors in respect of such Instruments and
obligors in respect of such Chattel Paper to verify with such parties, to such
Secured Party’s satisfaction, the existence, amount and terms of any such Accounts,
Contracts, Instruments or Chattel Paper.


 


4.  REPRESENTATIONS AND WARRANTIES. Each Grantor hereby
represents and warrants to the Secured Parties that:


 


(a) Except for the liens described in Schedule A attached hereto, the security
interest granted to the Secured Parties under this Security Agreement and
Permitted Liens, and other than joint ownership in any of the Collateral
described on Schedule D attached
hereto, each Grantor is the sole legal and equitable owner of each item of the
Collateral in which it purports to grant a security interest hereunder.


 


(b) Except for the PFG Lien and as listed on Schedule A attached hereto, no effective
security agreement, financing statement, equivalent security or lien instrument
or continuation statement covering all or any part of the Collateral exists,
except such as may have been filed by either Grantor in favor of the Secured
Parties pursuant to this Security Agreement and except for Permitted Liens.


 


(c) Grantor’s taxpayer identification number is, and
chief executive office, principal place of business, and the place where
Grantor maintains its records concerning the Collateral are presently located
at the address set forth on the signature page hereof. The Collateral, other
than Deposit Accounts, Securities Accounts, Commodity Accounts and motor
vehicles and other mobile goods of the type contemplated in Section 9103(3)(a)
of the UCC, is presently located at such address and at such additional
addresses set forth on Schedule B
attached hereto.


 


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(d) The name and address of each depository
institution at which Grantor maintains any Deposit Account and the account
number and account name of each such Deposit Account is listed on Schedule C attached hereto. The name and
address of each securities intermediary or commodity intermediary at which
Grantor maintains any Securities Account or Commodity Account and the account
number and account name is listed on Schedule
C attached hereto. Grantor agrees to amend Schedule C upon Required Lenders’ request
to reflect the opening of any additional Deposit Account, Securities Account or
Commodity Account, or closing or changing the account name or number on any
existing Deposit Account, Securities Account, or Commodity Account.


 


(e) All Copyrights, Copyright Licenses, Patents,
Patent Licenses, Trademarks and Trademark Licenses now owned or held by each
Grantor are listed on Schedule D
attached hereto.


 


5.  COVENANTS. Unless a Purchaser Majority Interest
otherwise consents (which consent shall not be unreasonably withheld), Grantor
covenants and agrees with the Secured Parties that from and after the date of
this Security Agreement and until the Secured Obligations have been performed
and paid in full:


 


5.1 Disposition
of Collateral. Except as permitted under Section 8.2 of the
Purchase Agreement, neither Grantor shall sell, lease, transfer or otherwise
dispose of any of the Collateral (each, a “Transfer”), or contract to do so,
including, without limitation, the granting of Licenses or other interests in
any of any Grantor’s Copyrights, Copyright Licenses, Patents, Patent Licenses,
Trademarks and Trademark Licenses other than (a) the sale of Inventory in the
ordinary course of business, (b) the disposal of worn-out or obsolete Equipment
and (c) Transfers of Collateral for fair market value as determined by BJT in
its good faith judgment, not exceeding $100,000 in the aggregate in any fiscal
year.


 


5.2 Change
of Jurisdiction of Organization, Relocation of Business. Neither
Grantor shall change its jurisdiction of organization or relocate its chief
executive office, principal place of business or its records from such
address(es) provided to the Secured Parties pursuant to Section 4(c) above
without at least thirty (30) days prior notice to the Secured Parties.


 


5.3 Limitation
on Liens on Collateral. Neither Grantor shall, directly or
indirectly, create, permit or suffer to exist, and each Grantor shall take
commercially reasonable actions to defend the Collateral against and take such
other action as is necessary to remove, any Lien on the Collateral, except (a)
Permitted Liens, (b) the Lien granted to the Secured Parties under this
Security Agreement and (c) the liens listed on Schedule A.


 


5.4 Insurance.
Each Grantor shall maintain insurance policies insuring the
Collateral against loss or damage from such risks and in such amounts and forms
consistent with its prior practice.


 


5.5 Taxes,
Assessments, Etc. Each Grantor shall pay promptly when due
all property and other taxes, assessments and government charges or levies
imposed upon, and all claims (including claims for labor, materials and
supplies) against, the Equipment, Fixtures or Inventory, except to the extent
the validity or amount thereof is being contested in good faith and adequate
reserves are being maintained in connection therewith.


 


5.6 Defense
of Intellectual Property. Each Grantor shall use commercially
reasonable efforts to (i) protect, defend and maintain the validity and
enforceability of all Copyrights, Copyrights Licenses, Patents, Patent
Licenses, Trademarks and Trademark Licenses material to Grantor’s business and
(ii) detect infringements of all Copyrights, Copyright Licenses, Patents,
Patent Licenses, Trademarks and Trademark Licenses material to Grantor’s business
and Grantor shall not permit any Copyright, Copyright License, Patent, Patent
License, Trademark or Trademark License material to either Grantor’s business
to lapse, be abandoned or to otherwise terminate unless BJT’s board of
directors in the exercise of its reasonable judgment and in good faith
determines that any of the foregoing is of inconsequential value.


 


5.7 Further
Assurances. At any time and from time to time, upon the
written request of a Secured Party Majority Interest, and at the sole expense
of BJT, each Grantor shall promptly and duly execute and deliver any and all
such further instruments and documents and take such further commercially
reasonable action as the Required Lenders may reasonably deem necessary to
obtain the full benefits of this Security Agreement,


 


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including, without
limitation, (a) executing, delivering and causing to be filed any financing or
continuation statements (including “in lieu” continuation statements) under the
UCC with respect to the security interests granted hereby, (b) at a Purchaser
Majority Interest’s reasonable request, placing the interest of the Secured
Parties as lienholder on the certificate of title (or similar evidence of
ownership) of any vehicle, watercraft or other Equipment constituting
Collateral owned by each Grantor which is covered by a certificate of title (or
similar evidence of ownership), (c) executing and delivering and using
commercially reasonable efforts to cause the applicable depository institution,
securities intermediary, commodity intermediary or issuer or nominated party
under a letter of credit to execute and deliver a collateral control agreement
with respect to any Deposit Account, Securities Account or Commodity Account or
Letter-of-Credit Right in or to which either Grantor has any right or interest,
(d) at a Secured Party Majority Interest’s reasonable request, using
commercially reasonable efforts to obtain acknowledgments from bailees having
possession of any Collateral and waivers of liens from landlords and mortgagees
of any location where any of the Collateral may from time to time be stored or
located, and (e) at a Secured Party Majority Interest’s request, written
guarantees of payment of the Secured Obligations in reasonable and customary
form. Each Grantor also hereby authorizes the Secured Parties to file any such
financing or continuation statement (including “in lieu” continuation
statements) without the signature of Grantor.


 


6.  RIGHTS AND REMEDIES UPON DEFAULT. Upon the occurrence
of any Event of Default and while such Event of Default is continuing:


 


(a) Upon the written consent of a Purchaser Majority
Interest, the Secured Parties may exercise in addition to all other rights and
remedies granted to it under this Security Agreement and the Purchase Agreement
all rights and remedies of a secured party under the UCC. Without limiting the
generality of the foregoing, each Grantor expressly agrees that in any such
event the Secured Parties, without demand of performance or other demand,
advertisement or notice of any kind (except the notice specified below of time
and place of public or private sale) to or upon either Grantor or any other
person, may (i) reclaim, take possession, recover, store, maintain, finish, repair,
prepare for sale or lease, shop, advertise for sale or lease and sell or lease
(in the manner provided herein) the Collateral, and in connection with the
liquidation of the Collateral and collection of the accounts receivable pledged
as Collateral, use any Trademark, Copyright, or process used or owned by either
Grantor and (ii) forthwith collect, receive, appropriate and realize upon the
Collateral, or any part thereof, and may forthwith sell, lease, assign, give an
option or options to purchase or sell or otherwise dispose of and deliver said
Collateral (or contract to do so), or any part thereof, in one or more parcels
at public or private sale or sales, at any exchange or broker’s board or at any
Secured Party’s offices or elsewhere at such prices as it may deem commercially
reasonable, for cash or on credit or for future delivery without assumption of
any credit risk. Each Grantor further agrees, at a Secured Party Majority
Interest’s request, to assemble its Collateral and make it available to the
Secured Parties at places which the Secured Parties shall reasonably select,
whether at a Grantor’s premises or elsewhere. The Secured Parties shall apply
the net proceeds of any such collection, recovery, receipt, appropriation,
realization or sale as provided in Section 6(e), below, with BJT remaining
liable for any deficiency remaining unpaid after such application. Each Grantor
agrees that the Secured Parties need not give more than thirty (30) days’
notice of the time and place of any public sale or of the time after which a
private sale may take place and that such notice is reasonable notification of
such matters.


 


(b) As to any Collateral constituting certificated
securities or uncertificated securities, if, at any time when Secured Parties
shall determine to exercise its right to sell the whole or any part of such
Collateral hereunder, such Collateral or the part thereof to be sold shall not,
for any reason whatsoever, be effectively registered under Securities Act of
1933, as amended (as so amended the “Act”), the Secured Parties may, in their
reasonable discretion (subject only to applicable requirements of law), sell
such Collateral or part thereof by private sale in such manner and under such
circumstances as the Secured Parties may deem necessary or advisable, but
subject to the other requirements of this Section 6(b), and shall not be
required to effect such registration or cause the same to be effected. Without
limiting the generality of the foregoing, in any such event the Secured Parties
may, in their discretion, (i) in accordance with applicable securities laws,
proceed to make such private sale notwithstanding that a registration statement
for the purpose of registering such Collateral or part thereof could be or
shall have been filed under the Act; (ii) approach and negotiate with a single
possible purchaser to effect such sale; and (iii) restrict such sale to a
purchaser who will represent and agree that such purchaser is purchasing for
its own account, for investment, and not with a view to the distribution or
sale of such Collateral or part thereof. In addition to a private sale as
provided above in this Section 6(b), if any of such Collateral shall not be
freely distributable to


 


8

















 


the public without
registration under the Act at the time of any proposed sale hereunder, then the
Secured Parties shall not be required to effect such registration or cause the
same to be effected but may, in their discretion (subject only to applicable
requirements of law), require that any sale hereunder (including a sale at
auction) be conducted subject to such restrictions as the Secured Parties may,
in their discretion, deem necessary or appropriate in order that such sale
(notwithstanding any failure so to register) may be effected in compliance with
the Bankruptcy Code and other laws affecting the enforcement of creditors’
rights and the Act and all applicable state securities laws.


 


(c) Each Grantor also agrees to pay all fees, costs
and expenses of the Secured Parties, including, without limitation, reasonable
attorneys’ fees, incurred in connection with the enforcement of any of its
rights and remedies hereunder.


 


(d) Each Grantor hereby waives presentment, demand,
protest or any notice (to the maximum extent permitted by applicable law) of
any kind in connection with this Security Agreement or any Collateral.


 


(e) The Proceeds of any sale, disposition or other
realization upon all or any part of the Collateral shall be distributed by the
Secured Parties in the following order of priorities:


 


FIRST, to each Secured Party in an amount
sufficient to pay in full the reasonable costs of such Secured Party in
connection with such sale, disposition or other realization, including all
fees, costs, expenses, liabilities and advances incurred or made by any Secured
Party in connection therewith, including, without limitation, reasonable
attorneys’ fees;


 


SECOND, to the Secured Parties in amounts
proportional to the Pro Rata share of the then unpaid Secured Obligations of
each Secured Party; and


 


FINALLY, upon payment in full of the
Secured Obligations, to BJT, Sub or their respective representatives, in
accordance with the UCC or as a court of competent jurisdiction may direct.


 


(f) The costs of enforcing or pursuing any right or
remedy hereunder, including without limitation any repossession, sale,
possession and management (including, without limitation, reasonable attorneys’
fees), and distribution shall be borne Pro Rata by the Secured Parties. Each
Secured Party shall reimburse the other Secured Parties, as applicable, for its
Pro Rata share of all such costs promptly upon demand.


 


7.  ACTIONS BY THE SECURED PARTIES AND AMENDMENTS. All
actions, omissions and decisions of the Secured Parties hereunder or any
amendment of this Security Agreement (each called herein an “Act of the Secured Parties”)
shall be determined by and require the written consent of a Secured Party
Majority Interest. Each Secured Party shall take such actions and execute such
documents as may be necessary to confirm or accomplish any Act of the Secured
Parties.


 


8.  UNEQUAL PAYMENT BY GRANTOR. Each Secured Party agrees
that if it shall obtain or receive, through the exercise of any right granted
to the Secured Parties under this Security Agreement, under the Notes and
Purchase Agreement or by applicable law, including, but not limited to any
right of set-off, any secured claim under Section 506 of the Bankruptcy Code or
any other security or interest, any payment or payments greater than its Pro Rata
share of all Loans, as measured immediately prior to the receipt of such
payment or payments, then (a) such Secured Party shall promptly purchase at par
(and shall be deemed to have thereupon purchased) from other Secured Parties, a
participation in the Loans of such other Secured Parties, so that each Secured
Party shall have received payments in proportion to its Pro Rata share
immediately prior to such transactions and (b) such other adjustments shall be
made from time to time as shall be equitable to ensure that the Secured Parties
share the benefits of such payment on a Pro Rata basis. The term “Loan” as used
in this paragraph shall include accrued interest thereon.


 


9.  INDEMNITY. Each Grantor agrees to defend, indemnify and
hold harmless the Secured Parties and their officers, employees, and agents
against (a) all obligations, demands, claims, and liabilities claimed or
asserted by any other party in connection with the transactions contemplated by
this Security Agreement and (b) all losses or


 


9

















 


expenses in any way suffered, incurred, or paid by any
Secured Party as a result of or in any way arising out of, following or
consequential to transactions between any Secured Party and either Grantor,
whether under this Security Agreement or otherwise (including without
limitation, reasonable attorneys fees and expenses), except for losses arising
from or out of such Secured Party’s gross negligence or willful misconduct.


 


10. REINSTATEMENT. This
Security Agreement shall remain in full force and effect and continue to be
effective should any petition be filed by or against each Grantor for
liquidation or reorganization, should either Grantor become insolvent or make
an assignment for the benefit of creditors or should a receiver or trustee be
appointed for all or any significant part of such Grantor’s property and
assets, and shall continue to be effective or be reinstated, as the case may
be, if at any time payment and performance of the Secured Obligations, or any
part thereof, is, pursuant to applicable law, rescinded or reduced in amount,
or must otherwise be restored or returned by any obligee of the Secured
Obligations, whether as a “voidable preference,” “fraudulent conveyance,” or
otherwise, all as though such payment or performance had not been made. In the
event that any payment, or any part thereof, is rescinded, reduced, restored or
returned, the Secured Obligations shall be reinstated and deemed reduced only
by such amount paid and not so rescinded, reduced, restored or returned.


 


11. MISCELLANEOUS.


 


11.1        Waivers; Modifications. None of
the terms or provisions of this Security Agreement may be waived, altered,
modified or amended except by an instrument in writing, duly executed by BJT
and a Secured Party Majority Interest. Each Secured Party acknowledges that
because this Security Agreement may be amended with the consent of a Secured
Party Majority Interest, each Secured Party’s rights hereunder may be amended
or waived without such Secured Party’s consent.


 


11.2        Termination of this Security Agreement. Subject
to Section 10 hereof, this
Security Agreement shall automatically terminate upon the payment and
performance in full of the Secured Obligations. Upon the termination of this
Agreement, each Grantor is authorized to file such termination statements or
other instruments it deems reasonably necessary to evidence the termination of
the security interest granted pursuant to this Security Agreement and the
Secured Parties agree to cooperate with such reasonable requests as each
Grantor may make in connection therewith.


 


11.3        Successor and Assigns. This
Security Agreement and all obligations of each Grantor hereunder shall be
binding upon the successors and assigns of each Grantor, and shall, together
with the rights and remedies of the Secured Parties hereunder, inure to the
benefit of the Secured Parties, any future holder of any of the indebtedness
and their respective successors and assigns. No sales of participations, other
sales, assignments, transfers or other dispositions of any agreement governing
or instrument evidencing the Secured Obligations or any portion thereof or
interest therein shall in any manner affect the lien granted to the Secured
Parties hereunder.


 


11.4        Governing Law. In all respects,
including all matters of construction, validity and performance, this Security
Agreement and the Secured Obligations arising hereunder shall be governed by,
and construed and enforced in accordance with, the laws of the State of New
York, without regard to the principles thereof regarding conflict of laws,
except to the extent that the UCC provides for the application of the law of
either Grantor’s state.


 


[Signature
pages follow.]


 


10

















 


IN WITNESS WHEREOF, each of the parties
hereto has caused this Security Agreement to be executed and delivered by its
duly authorized officer on the date first set forth above.


 


	
  ADDRESS OF GRANTOR

  	
  BIOJECT MEDICAL TECHNOLOGIES INC.

  
	
   

  	
   

  
	
  211 Somerville Road (Route
  202 North)

  	
   

  	
  By:

  	
    /s/ JOHN GANDOLFO

  
	
  Bedminster, New Jersey

  	
   

  	
   

  	
  Name:

  	
  John Gandolfo

  
	
   

  	
   

  	
   

  	
  Title:

  	
  Chief
  Financial Officer and Vice

  
	
   

  	
   

  	
   

  	
   

  	
  President,
  Finance

  
	
   

  	
   

  	
   

  
	
  TAXPAYER IDENTIFICATION NUMBER OF

  GRANTOR

  	
  JURISDICTION OF ORGANIZATION OF

  GRANTOR

  
	
   

  	
   

  
	
  93-1099680

  	
  Oregon

  
	
   

  	
   

  
	
   

  	
   

  
	
  ADDRESS OF GRANTOR

  	
  BIOJECT INC.

  
	
   

  	
   

  
	
  211 Somerville Road (Route
  202 North)

  	
   

  	
  By:

  	
    /s/ JOHN GANDOLFO

  
	
  Bedminster, New Jersey

  	
   

  	
   

  	
  Name:

  	
  John Gandolfo

  
	
   

  	
   

  	
   

  	
  Title:

  	
  Chief
  Financial Officer

  
	
   

  	
   

  
	
  TAXPAYER IDENTIFICATION NUMBER OF

  GRANTOR

  	
  JURISDICTION OF ORGANIZATION OF

  GRANTOR

  
	
   

  	
   

  
	
  93-0881020

  	
  Oregon

  



 


11

















 


	
   

  	
   

  	
  ACCEPTED
  AND ACKNOWLEDGED BY:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  PURCHASER:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  LIFE
  SCIENCES OPPORTUNITIES FUND II, L.P.,

  
	
   

  	
   

  	
  a
  Delaware limited partnership

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  LOF Partners, LLC,

  
	
   

  	
   

  	
   

  	
  its general manager

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
    /s/ JAMES
  C. GALE

  
	
   

  	
   

  	
   

  	
  Name:

  	
  James C. Gale

  
	
   

  	
   

  	
   

  	
  Title:

  	
  Managing Partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  PURCHASER:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  LIFE
  SCIENCES OPPORTUNITIES FUND II

  (Institutional), L.P.,

  
	
   

  	
   

  	
  a
  Delaware limited partnership

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  LOF Partners, LLC,

  
	
   

  	
   

  	
   

  	
  its general manager

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
    /s/ JAMES
  C. GALE

  
	
   

  	
   

  	
   

  	
   

  	
  Name:

  	
  James C. Gale

  
	
   

  	
   

  	
   

  	
   

  	
  Title:

  	
  Managing Partner

  
											



 


12

















 


	
   

  	
   

  	
  PURCHASER:

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  SANDERS
  OPPORTUNITY FUND, L.P.,

  
	
   

  	
   

  	
  a
  Delaware limited partnership

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  SOF Management, LLC,

  
	
   

  	
   

  	
   

  	
  its general partner

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
    /s/ BRAD D.
  SANDERS

  
	
   

  	
   

  	
   

  	
   

  	
  Name:

  	
  Brad D. Sanders

  
	
   

  	
   

  	
   

  	
   

  	
  Title:

  	
  Director of Fund
  Administration

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  PURCHASER:

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  SANDERS
  OPPORTUNITY FUND (Institutional),

  L.P.,

  
	
   

  	
   

  	
  a Delaware
  limited partnership

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  SOF Management, LLC,

  
	
   

  	
   

  	
   

  	
  its general manager

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
    /s/ BRAD D.
  SANDERS

  
	
   

  	
   

  	
   

  	
   

  	
  Name:

  	
  Brad D. Sanders

  
	
   

  	
   

  	
   

  	
   

  	
  Title:

  	
  Director of Fund
  Administration

  



 


13