Exhibit 10.45


 


LOAN AND SECURITY AGREEMENT


 


This LOAN AND SECURITY AGREEMENT, dated as of April 2, 2004 (this
“Loan Agreement), is entered by and
between RELIANT TECHNOLOGIES, INC., a Delaware
corporation (“Borrower”); and PINNACLE VENTURES, L.L.C. as agent (“Agent”) for the lenders identified on Schedule 1 hereto
(such lenders, together with their respective successors and assigns are
referred to hereinafter each individually as a “Lender”
and collectively as the “Lenders”),
and the Lenders.  Capitalized terms used
and not otherwise defined in this Loan Agreement shall have the respective
meanings given to such terms in Article 10.


 


In
consideration of the covenants, conditions and agreements set forth herein and
intending to be legally bound, the parties agree as follows:


 


Article 1.    THE LOANS.


 


Section 1.01         Commitment. 
Subject to the terms and conditions of this Loan Agreement, Lenders
agree to advance to Borrower (the “Advances”):
(i) from time to time on or prior to June 30, 2004, a single term loan in
an aggregate principal amount of Three Million Dollars ($3,000,000), (ii) from
time to time on or prior to December 31, 2004, a single term loan in aggregate
principal amount of One Million Five Hundred Thousand ($1,500,000) and (iii) from
time to time on or prior to March 31, 2005 (the “Funding
Termination Date”), a single term loan in an aggregate principal
amount of One Million Five Hundred Thousand Dollars ($1,500,000).  Borrower may prepay Advances in accordance
with Section 1.02(d).


 


Section 1.02         Interest
and Payments.


 


(a)          Interest.  Borrower shall pay interest in advance on the
unpaid principal amount of each Advance from the date of such Advance until
such Advance is paid in full, at a per annum rate of interest equal to the
Prime Rate determined as of the date of such Advance plus five hundred fifty
(550) basis points, based upon a year of 360 days and actual days elapsed.  If Borrower pays interest on such Advance
which is determined to be in excess of the then legal maximum rate, then that
portion of each interest payment representing an amount in excess of the then
legal maximum rate shall be deemed a payment of principal and applied against
the principal of the Advance.


 


(b)         Payments of Principal and
Interest.


 


(i)             For the first Advance of $3,000,000,
Borrower shall make nine (9) equal payments of interest only (payable in
advance) on the first Business Day of each month.  Thereafter, Borrower shall make twenty-seven
(27) equal payments of principal and interest (payable in advance) on the first
Business Day of each month (each a “Payment Date”)
until the Advance is paid in full.  The
amount of each such payment shall be sufficient to fully amortize the principal
and interest due on the applicable Advance over such twenty-seven (27) month
period.


 


(ii)          For the subsequent Advances,
Borrower shall make thirty-six (36) equal payments of principal and interest
(payable in advance) on the first Business Day of each month (each a “Payment Date”) until the Advance is
paid in full.  The amount of each such
payment shall be sufficient to fully amortize the principal and interest due on
the applicable Advance over such thirty-six (36) month period.


 


(c)          Interim Interest Payment.  For each Advance, unless the Funding Date is
a Payment Date, Borrower shall make an advance payment of interest on the
Funding Date for the period from the Funding Date to the first Payment Date.


 

















 


(d)         Prepayment.  Upon five (5) Business Days’ prior written
notice to Agent, Borrower may, at its option, at any time, prepay all and not
less than all of the Advances, in an amount equal to the outstanding principal
amounts of the Advances, together with a make-whole premium equal to the
present value of all scheduled but unpaid interest payments discounted at a
rate equal to the current yield of U.S. Treasury securities with a maturity
closest to the remaining term of the Advance plus 1.00% (the “Premium”).


 


Section 1.03         Use of
Proceeds; the Advances and the Notes; Disbursement.


 


(a)          Use of Proceeds.  The proceeds of the Advances shall be used
for general corporate purposes.


 


(b)         The Advances and the Notes.  The obligation of Borrower to repay the
aggregate unpaid principal amount of and interest on each Advance shall be
evidenced by a Note setting forth the principal amount of such Advance and the
payments due.  Agent shall keep a record
of the payments made under each Note on its books which records shall be prima
fade evidence of the amounts paid under the Notes absent manifest error.  Any failure by Agent to obtain or retain such
a Note shall not limit or otherwise affect the obligations of Borrower to pay
amounts due hereunder with respect to an Advance.


 


(c)          Disbursement.  Subject to the satisfaction of the conditions
set forth in this Loan Agreement, each Lender shall disburse its pro rata
portion of each Advance to the account of Borrower as specified in Section 9.06.


 


Section 1.04         Other
Payment Terms.


 


(a)          Place and Manner.  All regularly scheduled payments due to the
Lenders shall be effected by automatic debit of the appropriate funds from
Borrowers Primary Operating Account. 
Borrower shall make all other payments due to the Lenders in lawful
money of the United States, in immediately available funds, at the address for
payments specified in Section 9.06.


 


(b)         Date.  Whenever any payment due hereunder shall fall
due on a day other than a Business Day, such payment shall be made on the next
succeeding Business Day, and such extension of time shall be included in the
computation of interest or fees, as the case may be.


 


(c)          Default Rate.  If any amounts required to be paid by
Borrower under this Loan Agreement or the other Transaction Documents
(including principal or interest payable on the Advance, any fees or other
amounts) remain unpaid after such amounts are due, Borrower shall pay interest
on the aggregate, outstanding principal balance hereunder from the date due
until such past due amounts are paid in full, at a per annum rate equal to the
Default Rate.  All computations of such
interest shall be based on a year of 360 days and actual days elapsed.


 


(d)         Commitment Fee.  Agent has received a commitment fee from
Borrower in the amount of $30,000 (the “Commitment Fee”).  The Commitment Fee is fully earned and will
be retained by Agent to be applied toward the Agent’s expenses and reasonable
fees of Agent’s counsel.


 


Article 2.    CREATION OF SECURITY
INTEREST.


 


Section 2.01         Grant of
Security Interest.  Borrower grants and pledges to Agent on
behalf of all Lenders a continuing security interest in all presently existing
and hereafter acquired or arising Collateral in order to secure prompt payment
of any and all Obligations and in order to secure prompt performance by
Borrower of each of its covenants and duties under the Transaction
Documents.  Subject to Permitted Liens,
such security interest constitutes a valid, first priority security interest in
the presently existing Collateral, and will constitute a valid, first priority
security interest in Collateral acquired after the date hereof.  Notwithstanding termination of this Loan Agreement,
Agent’s Lien on the Collateral shall remain in effect for so long as any
Obligations are


 


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outstanding;
provided that upon payment in full by Borrower of all Obligations, upon
Borrower’s request, Agent shall file a termination statement sufficient to
release Agent’s lien on the Collateral,


 


Section 2.02         Liabilities
Unconditional.  Borrower is and shall remain absolutely and
unconditionally liable for the performance of its obligations under the Transaction
Documents, including without limitation any deficiency by reason of the failure
of the Collateral to satisfy all amounts due to Agent or the Lenders under any
Transaction Document.


 


Article 3.    CLOSING.


 


Section 3.01         Conditions
to Closing.  The obligation of Lenders to fund an Advance
shall be subject to the following conditions precedent:


 


(a)          Conditions to Closing.  Agent shall have received in connection with
the Closing in form and substance satisfactory to Agent:


 


(i)             This Loan Agreement, duly
executed by Borrower;


 


(ii)          Copies, certified by the
Secretary or Assistant Secretary of Borrower, of: (A) the Certificate of
Incorporation and Bylaws of Borrower (as amended to the date of this Loan
Agreement), (B) the resolutions adopted by Borrower’s board of directors
authorizing the transaction and the documents being executed in connection
therewith, and (C) the incumbency of the officers executing this Loan
Agreement and the other Transaction Documents on behalf of Borrower.


 


(iii)       Good Standing Certificate(s)
(including tax status if available) with respect to Borrower from Borrower’s
state of incorporation and principal place of business, if different, (each) as
of a date acceptable to Agent


 


(iv)      Evidence of the insurance
coverage required by Section 5.06 of this Loan Agreement.


 


(v)         All necessary consents of
shareholders and other third parties with respect to the subject matter of the
Loan Agreement and the other documents being executed in connection therewith.


 


(vi)      A Warrant Purchase Agreement in
the form provided by Agent and agreed to by Borrower, duly executed by
Borrower.


 


(vii)   The Warrants to be issued to the
designees of the Lenders in forms provided by Agent and agreed to by Borrower,
duly executed by Borrower.


 


(viii) A Management Rights Agreement in
the form provided by Agent and agreed to by Borrower, duly executed by
Borrower.


 


(ix)        Agreements sufficient to perfect
a security interest in Borrower’s deposit accounts and securities accounts
executed by each applicable bank or other financial institution, in forms
reasonably acceptable to Agent.


 


(b)         Conditions to Funding of Each
Advance.  Prior to the funding of each Advance, the
following conditions with respect to such Advance shall have been satisfied by
Borrower or waived by Agent:


 


(i)             Borrower shall have executed and
delivered a Note in the form of Exhibit A prepared by Agent setting forth
the terms of the Advance.


 


(ii)          No Event of Default or Default
shall have occurred and be continuing.


 


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(iii)       In Agent’s sole discretion, no
event or condition shall exist that has had or would be reasonably expected to
have a Material Adverse Effect.


 


(iv)      The representations and
warranties contained in this Loan Agreement and the other Transaction Documents
to which Borrower is a party shall be true and correct in all material respects
as if made on the date of funding of the Advance and the items listed on any
schedule shall be reasonably acceptable to Agent, except to the extent such
representations and warranties expressly refer to an earlier date, in which
case they shall be true and correct in all material respects as of such earlier
date.


 


(v)         Each of the Transaction
Documents shall be in full force and effect.


 


(vi)      Borrower shall have provided to
Agent such documents, instruments and agreements, including financing
statements or amendments to financing statements, as Agent shall reasonably
request to evidence the perfection and priority of the security interests
granted to Agent.


 


Article 4.    REPRESENTATIONS AND
WARRANTIES OF BORROWER.


 


Borrower represents and warrants to Agent that:


 


Section 4.01         Due
Incorporation, Qualification, etc.  Each of Borrower and
its Subsidiaries (i) is a corporation duly organized, validly existing and
in good standing under the laws of its state of incorporation; (ii) has
the power and authority to own, lease and operate its properties and carry on
its business as now conducted; and (iii) is duly qualified, licensed to do
business and in good standing as a foreign corporation in each jurisdiction
where the failure to be so qualified or licensed would reasonably be expected
to have a Material Adverse Effect.


 


Section 4.02         Authority. 
The execution, delivery and performance by Borrower of each Transaction
Document to be executed by Borrower and the consummation of the transactions
contemplated thereby (i) are within the power of Borrower and (ii) have
been duly authorized by all necessary actions on the part of Borrower.


 


Section 4.03         Enforceability. 
Each Transaction Document executed, or to be executed, by Borrower has
been, or will be, duly executed and delivered by Borrower and constitutes, or
will constitute, a legal, valid and binding obligation of Borrower, enforceable
against Borrower in accordance with its terms, except as limited by bankruptcy,
insolvency or other similar laws of general application relating to or
affecting the enforcement of creditors’ rights generally, general principles of
equity or public policies against exculpation, indemnification or contribution.


 


Section 4.04         Non-Contravention. 
The execution and delivery by Borrower of the Transaction Documents
executed by Borrower and the performance and consummation of the transactions
contemplated thereby do not and will not (i) violate the articles or
certificate of incorporation, bylaws or other governing documents of Borrower;
(ii) violate any Requirement of Law applicable to Borrower; (iii) violate
any provision of, or result in the breach or the acceleration of, or entitle
any other Person to accelerate (whether after the giving of notice or lapse of
time or both), any material Contractual Obligation of Borrower; or (iv) result
in the creation or imposition of any Lien upon any property, asset or revenue
of Borrower (except such Liens as may be created in favor of Agent pursuant to
this Loan Agreement or the other Transaction Documents except in the case of
(i) — (iv), to the extent such violation, breach, acceleration, creation
or imposition could not reasonably be expected to have a Material Adverse
Effect.


 


Section 4.05         Approvals. 
No consent, approval, order or authorization of, or registration,
declaration or filing with, any Governmental Authority or other Person
(including, without limitation, the shareholders of any Person) is required in
connection with the execution and delivery of the Transaction Documents
executed by Borrower and the performance and consummation of the transactions
contemplated thereby.


 


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Section 4.06         No
Violation or Default.  None of Borrower or
Borrower’s Subsidiaries is in violation of or in default with respect to (i) the
articles or certificate of incorporation, bylaws or other governing documents
of Borrower or such Subsidiary, as applicable; (ii) any Requirement of
Law; or (iii) any Contractual Obligation (nor is there any waiver in
effect which, if not in effect, would result in such a violation or default),
where, in each case, such violation or default, individually, or together with
all such violations or defaults, would reasonably be expected to have a
Material Adverse Effect.  Without
limiting the generality of the foregoing, neither Borrower nor Borrower’s
Subsidiaries (A) has violated any Environmental Laws, (B) has any
liability under any Environmental Laws or (C) has received notice or other
communication of an investigation or is under investigation by any Governmental
Authority having authority to enforce Environmental Laws, where such violation,
liability or investigation would reasonably be expected to have a Material
Adverse Effect.  No Event of Default or
Default has occurred and is continuing.


 


Section 4.07         Litigation. 
No actions (including, without limitation, derivative actions), suits,
proceedings or investigations are pending or, to the knowledge of Borrower,
threatened against Borrower or Borrower’s Subsidiaries at law or in equity in
any court or before any other Governmental Authority which if adversely
determined (i) would reasonably be expected (alone or in the aggregate) to
have a Material Adverse Effect or (ii) seeks to enjoin, either directly or
indirectly, the execution, delivery or performance by Borrower of the
Transaction Documents or the transactions contemplated thereby.


 


Section 4.08         Title. 
Borrower has good and marketable title to all Collateral, free and clear
of all Liens, other than Permitted Liens. 
Borrower has no other deposit accounts or securities accounts, other
than the deposit accounts and securities accounts described in Schedule 2.  Except as described in Schedule 2,
the Collateral is not in the possession of any third party bailee (such as at a
warehouse).  All Inventory is in all
material respects of good and marketable quality, and, to the knowledge of
Borrower, free from material defects.


 


Section 4.09         Financial
Statements.  The Financial Statements of Borrower which
have been delivered to Agent (i) are in accordance with the books and
records of Borrower and its Subsidiaries, which have been maintained in
accordance with good business practice; (ii) have been prepared in
conformity with generally accepted accounting principles; and (iii) fairly
present in all material respects the consolidated financial position of
Borrower as of the dates presented therein and the results of operations,
changes in financial positions or cash flows, as the case may be, for the
periods presented therein.  As of the
date hereof, none of Borrower or any of Borrower’s Subsidiaries has any
contingent obligations, liability for taxes or other outstanding obligations
which are material in the aggregate, except as disclosed in the most recent
audited Financial Statements (including the notes thereto) furnished by
Borrower to Agent prior to the date hereof.


 


Section 4.10         Taxes. 
Each of Borrower and its Subsidiaries has filed or caused to be filed
all tax returns that are required to be filed by it except where the failure to
do so would not reasonably be expected to have a Material Adverse Effect.  Borrower and Borrower’s Subsidiaries have
paid, or made provision for the payment of, all Taxes which have or may have
become due pursuant to said returns or otherwise, except such Taxes, if any,
which are being contested in good faith and as to which adequate reserves
(determined in accordance with generally accepted accounting principles) have been
provided or which would not reasonably be expected to have a Material Adverse
Effect if unpaid.


 


Section 4.11         Catastrophic
Events; Labor Disputes.  Neither Borrower nor
Borrower’s Subsidiaries and none of their properties is or has been affected by
any fire, explosion, accident, strike, lockout or other labor dispute, drought,
storm, hail, earthquake, embargo, act of God or other casualty that would
reasonably be expected to have a Material Adverse Effect.  There are no disputes presently subject to grievance
procedure, arbitration or litigation under any of the collective bargaining
agreements, employment contracts or employee welfare or incentive plans to
which Borrower or Borrower’s Subsidiaries is a party, and there are no strikes,
lockouts, work stoppages or slowdowns, or, to the best knowledge of Borrower,
jurisdictional disputes or organizing activity occurring or threatened which
would reasonably be expected to have a Material Adverse Effect.


 


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Section 4.12         No
Material Adverse Effect.  No event has
occurred and no condition exists (excluding general economic conditions) which
would reasonably be expected to have a Material Adverse Effect.


 


Section 4.13         First
Priority.  Assuming the timely filing of financing
statements covering the Collateral, the security interest granted hereby
constitutes a first priority security interest in and Lien on all of the
Collateral, subject only to Permitted Liens.


 


Section 4.14         Principal
Place of Business.  Borrower is incorporated in the jurisdiction
stated in the first sentence of this Loan Agreement, and the office where
Borrower will keep all records and files regarding the Collateral is set forth
in Section 9.07.  Except as
disclosed on Schedule 2, Borrower has not done business under any
name other than that specified on the signature page hereof.  All Borrower’s Inventory and Equipment is
located only at the locations set forth in Section 9.07 or on Schedule 2
or at such other locations as are permitted under Section 5.12.


 


Section 4.15         Intellectual
Property.  Borrower is the sole owner of the
Intellectual Property, except for non-exclusive licenses granted by Borrower to
its customers in the ordinary course of business.  No part of the Intellectual Property has been
judged invalid or unenforceable, in whole or in part, and to the knowledge of
Borrower no claim has been made that any part of the Intellectual Property
violates the rights or any third party.


 


Section 4.16         Investments. 
Borrower does not own any Investments in any Person, except for
Permitted Investments.


 


Article 5.    COVENANTS OF
BORROWER.


 


While any Obligations remain outstanding:


 


Section 5.01         Financial
Statements.  Borrower shall provide to Agent the financial
statements specified in this Section 5.01, prepared in accordance with
generally accepted accounting principles, consistently applied (except, in the
case of unaudited financial statements, for the absence of footnotes and normal
year-end adjustments); provided, however, that after the effective
date of the initial registration statement covering a public offering of
Borrower’s securities, Borrower shall only be required to deliver those
financial statements required to be filed by the Securities and Exchange
Commission, to be provided as soon as practicable and no less frequently than
quarterly.


 


(a)          As soon as practicable (and in
any event within thirty (30) days after the end of each month), an unaudited
balance sheet as of the end of such month and unaudited statements of income or
loss, retained earnings or deficit, cash flows and capital structure of
Borrower for such month, certified by Borrower’s Chief Executive Officer or
Chief Financial Officer fairly to present in all material respects the data
reflected therein.


 


(b)         As soon as practicable (and in
any event within one hundred twenty (120) days after the end of each fiscal
year), audited balance sheets as of the end of such year (consolidated if
applicable), and related statements of income or loss, retained earnings or
deficit, cash flows and capital structure of Borrower for such year, setting
forth in comparative form the corresponding figures for the preceding fiscal
year, and accompanied by an audit report and unqualified opinion of the
independent certified public accountants of recognized national standing
selected by Borrower.


 


Section 5.02         Other
Information.  Borrower shall promptly provide to Agent: (a)
copies of all board packages delivered to its board of directors in connection
with board meetings or otherwise (provided that Borrower shall not be required
to provided highly confidential or proprietary information that would be
illegal for Borrower to disclose to Agent), (b) notice of all actions, suits
and proceedings before any court or governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign, which suits or
proceedings if decided adversely to Borrower would reasonably be expected to
result in costs or


 


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damages
to Borrower of One Hundred Thousand Dollars ($100,000) or more, (c) notice of
any Default, Event of Default, Event of Loss, or any matter which has resulted
or would reasonably expected to result in a Material Adverse Effect, and (d)
any additional information (including but not limited to tax returns, income
statements, balance sheets, and names of principal creditors) as Agent shall
reasonably request which is necessary to evaluate Borrower’s continuing
financial obligations.


 


Section 5.03         Corporate
Identity.  Borrower shall notify Agent in writing thirty
(30) days prior to any change in Borrower’s principal place of business or
chief executive office and any change of Borrower’s name, identity or corporate
structure.


 


Section 5.04         Equity
Investment.  Borrower shall permit Agent and the Lenders,
at their option, to purchase in Borrower’s next round of equity financing the
securities sold in such equity financing at the same price and on the same
terms as paid and received by the lead investor of the equity financing in an
aggregate amount of up to the lesser of $1,000,000 or ten percent (10%) of the
aggregate amount of the equity financing; provided that neither Agent, nor the
Lenders, nor any of their respective Affiliates shall have any right to
participate in any manner in the negotiation of the terms of such round of
equity financing.  Borrower agrees that
it shall notify Agent promptly upon the execution by Borrower of a term sheet
or letter of intent setting forth the terms and conditions of such financing
and in any event within five (5) days of such execution.  Agent and the Lenders may assign this right
of purchase to their Affiliates.


 


Section 5.05         Authorization
for Automated Clearinghouse Funds Transfer. 
Borrower shall (i) authorize Agent to initiate debit entries to Borrower’s
account specified in Section 9.06 (“Borrower’s Primary
Operating Account”) through Automated Clearinghouse (“ACH”) transfers, in order to satisfy
regularly scheduled payments of principal, interest and fees; (ii) provide
Agent at least thirty (30) days notice of any change in Borrower’s Primary
Operating Account; and (iii) grant Agent any additional authorizations
necessary to begin ACH debits from a new account which becomes Borrower’s
Primary Operating Account.


 


Section 5.06         Insurance. 
Borrower shall, at its own expense, maintain the following types of
insurance, with companies with an A-5 Best rating or better, in amounts
acceptable to Agent:


 


(a)          All Risk.  “All risk” insurance against loss or damage
to the Collateral.  The deductible shall
not exceed $25,000.  The policy shall
name Agent as sole loss payee with respect to the Collateral, shall not be
invalidated by any action of or breach of warranty by Borrower of any provision
thereof and shall waive subrogation against Agent.


 


(b)         General Liability Insurance.  Commercial general liability insurance
(including contractual liability, products liability and completed operations
coverages) reasonably satisfactory to Agent. 
The limit of liability shall be at least $2,000,000 per occurrence.  The policy shall be without deductible,
except for products liability coverage which may have a deductible up to
$25,000.  The policy(ies) shall name
Agent as additional insured in the full amount of Borrower’s liability coverage
limits (or the coverage limits of any successor to Borrower or such successor’s
parent which is providing coverage), be primary and without contribution as
respects any insurance carried by Agent and contain cross liability and
severability of interest clauses.


 


(c)          Other Insurance.  Such other insurance against risks of loss
and with terms as shall be reasonably required by Agent.


 


All policies of insurance shall provide that Agent
shall be given thirty (30) days notice of cancellation of coverage.  This notice provision shall be without
qualification.  On or prior to the first
Funding Date and prior to each policy renewal, Borrower shall furnish to Agent,
certificates of insurance or other evidence satisfactory to Agent that
insurance complying with all of the above requirements is in effect.


 


Section 5.07         Taxes and
Other Liabilities.  Borrower shall pay all Indebtedness when due;
pay all Taxes and other governmental or regulator assessments before
delinquency or before any penalty attaches thereto,


 


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except
as may be contested in good faith by the appropriate procedures and for which
Borrower shall maintain appropriate reserves; and timely file all required tax
returns.


 


Section 5.08         Title. 
Borrower shall promptly notify Agent in writing of any event which
materially affects the value of the Collateral, the ability of Borrower or
Agent to dispose of the Collateral, or the rights or remedies of Agent in
relation thereto, including, but not limited to, the levy of any legal process
against the Collateral.  Upon request by
Agent, Borrower shall deliver to Agent any and all evidence of ownership of,
and certificates of title to, any and all of the Equipment


 


Section 5.09         Further
Identification of Collateral.  Borrower shall
promptly advise Agent of any material change in the composition of the
Collateral, and shall furnish to Agent from time to time such statements and
schedules further identifying and describing the Collateral.  Borrower shall also furnish to Agent from
time to time such statements and schedules further identifying and describing
the Collateral and such other reports in connection with the Collateral as
Agent may reasonably request, all in reasonable detail.


 


Section 5.10         Good
Repair.  Borrower shall keep and maintain all Collateral
in good operating condition and repair, subject to ordinary wear and tear, make
all necessary repairs thereto and replacement of parts thereof so that the
value and operating efficiency thereof shall at all times be maintained and
preserved in all material respects; and Borrower shall keep books and records
with respect to the Collateral, including maintenance records, which are
complete and accurate in all material respects.


 


Section 5.11         Loss;
Damage; Destruction and Seizure.


 


(a)          If while payment Obligations are
outstanding any item of Collateral is lost, stolen, destroyed, damaged beyond
repair or seized by a Governmental Authority (an “Event
of Loss”), then, at Borrower’s option, either (i) Agent
shall receive from the proceeds of insurance maintained pursuant to Section 5.06,
from any award paid by the seizing Governmental Authority or, to the extent not
received from the proceeds of insurance or award or both, from Borrower, on or
before the next scheduled payment date succeeding such Event of Loss, an amount
equal to the replacement value of the item of Collateral subject to the Event
of Loss which shall be held as additional Collateral for the Advance, or (ii) if
no Event of Default has occurred and is continuing, Borrower may use any such
proceeds to purchase an item of Collateral to replace the item of Collateral
which was subject to the Event of Loss and such replacement Collateral shall
become part of the Collateral.  On the
date of receipt by Agent of the amount specified hereinabove with respect to
each such item of Collateral subject to an Event of Loss, the provisions of
this Loan Agreement shall terminate as to such Collateral.  Pending Borrower’s election of the options
set forth above, any proceeds of insurance maintained by Borrower with respect
to the Collateral pursuant to Section 5.06 and received by Borrower shall
be paid to Agent promptly upon their receipt by Borrower.  If any proceeds of insurance or awards
received from Governmental Authorities are in excess of the amount owed under
this Section 5.11(a), Agent shall promptly remit to Borrower the amount in
excess of the amount to be held by Agent.


 


(b)         So long as no Event of Default
has occurred and is continuing, any proceeds of insurance maintained pursuant
to Section 5.06 received by Agent or Borrower with respect to an item of
Collateral the repair of which is practicable shall, at the election of
Borrower, be applied either to the repair or replacement of such Collateral or,
upon Agent ‘s receipt of evidence of the repair or replacement of the
Collateral reasonably satisfactory to Agent, to the reimbursement of Borrower
for the cost of such repair or replacement. 
All replacement parts and equipment acquired by Borrower in replacement
of Collateral pursuant to this Section 5.12 shall immediately become part
of the Collateral upon acquisition by Borrower. 
Borrower shall take such actions and provide such documentation as may
be reasonably requested by Agent to protect and preserve Agent ‘s first
priority security interest in the Collateral, subject only to Permitted Liens,
and otherwise to avoid any impairment of Agent ‘s rights under the Transaction
Documents, in connection with such repair or replacement.


 


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Section 5.12         Collateral
Control.  Borrower shall not (i) terminate, waive
or release any material right with respect to any Collateral, or (ii) remove
any items of Collateral from Borrower’s facility located at the address
specified in Section 9.07, the locations specified on Schedule 2,
or such other address agreed to in writing by Lender.


 


Section 5.13         Liens; No
Disposition of Collateral.  Borrower shall not (i) in
any way hypothecate or create or permit to exist any Lien with respect to any
of its or its Subsidiaries’ property, except for Permitted Liens, (ii) permit
the inclusion in any contract to which it or a Subsidiary becomes a party of
any provisions that could restrict or invalidate the creation of a security
interest in any of Borrower’s or such Subsidiary’s property, or (iii) sell,
transfer, assign, pledge, collaterally assign, exchange, or otherwise dispose
of (collectively, a “Transfer”), or permit any of its Subsidiaries to Transfer,
all or any part of its business or property, other than Transfers: (A) of
Inventory in the ordinary course of business, (B) of non-exclusive
licenses and similar arrangements for the use of the property of Borrower or
its Subsidiaries in the ordinary course of business, (C) of exclusive
licenses in specific fields of use that are not related to Borrower’s primary
business; (D)of worn-out or obsolete Equipment, or (E) by Borrower in an
aggregate amount not to exceed $50,000 on an annual basis.


 


Section 5.14         Mergers
and Acquisitions.  Without the prior written consent of Agent,
Borrower shall not be acquired by any “person” (as such term is used in Section 13(d)
and 14(d) of the Securities Exchange Act of 1934), whether by merger or
consolidation, or through a transaction or series of transactions pursuant to
which the holders of Borrower’s voting Equity Securities do not hold at least
50% of the voting power of Borrower or any resulting Person after such
transaction or transactions, or through the sale of all or substantially all of
its assets, unless (i) the Obligations are assumed or guarantied by a
Person which is the ultimate parent entity (the “Acquirer”)
of the acquiring Person and (ii) the Acquirer is a creditworthy entity (as
determined by Agent in its sole and reasonable discretion).


 


Section 5.15         Distributions. 
Prior to the effective date of the initial registration statement
covering a public offering of Borrower’s securities, without the prior written
consent of Agent, Borrower shall not (i) pay any dividends or make any
distributions on its Equity Securities; (ii) purchase, redeem, retire,
defease or otherwise acquire for value any of its Equity Securities (other than
repurchases pursuant to the terms of employee stock purchase plans, employee
restricted stock agreements or similar arrangements in an aggregate amount not
to exceed $150,000); (iii) return any capital to any holder of its Equity
Securities as such; (iv) make any distribution of assets, Equity
Securities, obligations or securities to any holder of its Equity Securities as
such; or (v) set apart any sum for any such purpose; provided, however,
Borrower may declare dividends payable solely in common stock or may convert
any of its convertible securities into other securities pursuant to the terms
of such convertible securities.


 


Section 5.16         Indebtedness. 
Borrower shall not, and shall not permit its Subsidiaries to, create,
incur, assume or suffer to exist any Indebtedness, other than Permitted
Indebtedness.


 


Section 5.17         Investments. 
Borrower shall not, and shall not permit its Subsidiaries to, directly
or indirectly acquire or own, or make any Investment in or to any Person other
than Permitted Investments; or suffer or permit any Subsidiary to be a party
to, or be bound by, an agreement that restricts such Subsidiary from paying
dividends or otherwise distributing property to Borrower.


 


Section 5.18         Transactions
with Affiliates.  Borrower shall not, and shall not permit its
Subsidiaries to, directly or indirectly enter into or permit to exist any
material transaction with any Affiliate, except for transactions that are in
the ordinary course of such Person’s business, upon fair and reasonable terms
that are no less favorable to Borrower, or such Subsidiary, than would be
obtained in an arms’ length transaction with a non-affiliated Person; provided
that the foregoing restriction shall not apply to (i) any transaction
between Borrower and any of its Subsidiaries or between any Subsidiaries that
is not otherwise prohibited by this Loan Agreement, (ii) reasonable and
customary fees paid to members of the board of directors of Borrower and its
Subsidiaries, (iii) compensation arrangements and benefit plans for
officers and other employees of Borrower and its Subsidiaries entered into or
maintained in the ordinary course of business,


 


9

















 


(iv)
distributions permitted pursuant to Section 5.15 above, and (v) existing
Indebtedness to Howe Enterprises described on Schedule 2 hereto.


 


Section 5.19         Indebtedness
Payments.  Borrower shall not prepay, redeem, purchase,
defease or otherwise satisfy in any manner prior to the scheduled repayment
thereof any Indebtedness for borrowed money (other than amounts due or
permitted to be prepaid under this Loan Agreement) or any lease obligations, (ii) amend,
modify or otherwise change the terms of any Indebtedness (other than the
Advances) or lease obligations so as to accelerate the scheduled repayment
thereof or (iii) repay any Indebtedness to officers, directors or
shareholders.  Not withstanding the
foregoing, Borrower may prepay in whole or in part (i) existing Indebtedness to
Howe Enterprises described on Schedule 2 hereto, (ii) Permitted
Indebtedness described in clause (vi) of the defined term Permitted
Indebtedness, and (iii) other Indebtedness not to exceed $200,000 in
aggregate.


 


Section 5.20         Accounts. 
Borrower shall not, and shall not permit its Subsidiaries to, maintain
any deposit accounts or securities accounts except accounts with respect to
which Agent has obtained an agreement with the bank or other financial
institution sufficient to perfect a security interest in such deposit accounts
or securities accounts.


 


Section 5.21         Post-Closing
Matters.  Borrower shall deliver to Lender within five
(5) Business Days of the date of this Agreement a legal opinion of counsel to
Borrower covering the matters set forth in Exhibit C hereto in form and
substance reasonably satisfactory to Agent.


 


Article 6.    PRESERVATION OF
COLLATERAL BY AGENT.


 


Should
Borrower fail or refuse to make any payment, perform or observe any other
covenant, condition or obligation, or take any other action which Borrower is
obligated under any Transaction Document to make, perform, observe, take or do
at the time or in the manner provided in any Transaction Document, then at
Agent ‘s sole and absolute discretion, without notice to or demand upon
Borrower and without releasing Borrower from any obligation, covenant or
condition in any Transaction Document, Agent may make, perform, observe, take
or do the same in such manner and to such extent as Agent may deem necessary to
protect its security interest in or the value of the Collateral.  In furtherance of the foregoing rights,
Borrower does hereby irrevocably appoint Agent (which appointment is coupled
with an interest), the true and lawful attorney-in-fact of Borrower with full
power of substitution, for it and in its name (i) to perform (but Agent
shall not be obligated to and shall incur no liability to Borrower or any third
party for failure to perform) any act which Borrower is obligated by this Loan
Agreement to perform, (ii) to ask, demand, collect, receive, receipt for,
sue for, compound and give acquittance for any and all rents, issues, profits,
avails, distributions, income, payment draws and other sums in which a security
interest is granted under Section 2.01 with full power to settle, adjust
or compromise any claim thereunder as fully as if Agent were Borrower itself,
(iii) to receive payment of and to endorse the name of Borrower to any
items of Collateral (including checks, drafts and other orders for the payment
of money) that come into Agent’s possession or under Agent ‘s control,
(iv) to make all demands, consents and waivers, or take any other action
with respect to, the Collateral, (v) in Agent ‘s discretion, to file any
claim or take any other action or institute proceedings, either in its own name
or in the name of Borrower or otherwise, which Agent may reasonably deem
necessary or appropriate to protect and preserve the right, title and interest
of Agent in and to the Collateral, and (vi) to otherwise act with respect
thereto as though Agent were the outright owner of the Collateral; provided,
however, that the power of attorney herein granted shall be exercisable
only upon the occurrence and during the continuation of a Default or an Event
of Default.  Notwithstanding the
foregoing, except where an Event of Default has occurred and is continuing,
Agent shall use its best efforts, to the extent practicable under the
circumstances, to notify Borrower prior to taking any such actions; provided,
however, that any failure by Agent to do so shall not constitute a waiver by
Agent of its right to take any action hereunder.  Borrower agrees to reimburse Agent upon
demand for all reasonable costs and expenses, including attorneys’ fees and
expenses, which Agent may incur while acting as Borrower’s attorney in fact or
otherwise under this Article 6, all of which costs and expenses are included
within the Obligations.


 


10

















 


Article 7.    EVENTS OF DEFAULT.


 


Section 7.01         Events of
Default.  The occurrence of any of the following shall
constitute an “Event of Default” under the
Transaction Documents:


 


(a)          Failure to Pay.  Borrower shall fail to pay when due any
principal, interest or other payment required under the terms of this Loan
Agreement or any other Transaction Document on the date due and such payment
shall not have been made within three (3) Business Days of the due date; or


 


(b)         Insurance.  Borrower or any of its Subsidiaries shall
fail to observe or perform any covenant set forth in Section 5.06 and such
failure shall continue for a period of five (5) Business Days after notice
thereof is given to Borrower by Agent; or


 


(c)          Breaches of Other Covenants.  Borrower or any of its Subsidiaries shall
fail to perform or observe (i) any of the terms, covenants or agreements
contained in Sections 5.03, 5.05, 5.06 or 5.11 through 5.21 hereof or (ii) any
other term, covenant, or agreement contained in any Transaction Document (other
than the other Events of Default specified in this Article 7) and such failure
remains unremedied for the earlier of twenty (20) days from (x) the date on
which the Agent has given the Borrower written notice of such failure and (y)
the date on which the Borrower knew or should have known of such failure;
provided that, if after such twenty (20) day period, Borrower reasonably
believes that such failure can be remedied within a reasonable period of time,
Borrower shall be provided with an additional period of ten (10) days to remedy
such failure; or


 


(d)         Representations and Warranties.  Any representation, warranty, certificate, or
other statement (financial or otherwise) made or furnished by or on behalf of
Borrower to Agent in writing in connection with this Loan Agreement or any of
the other Transaction Documents, or as an inducement to Agent or Lenders to
enter into the Transaction Documents, shall be false, incorrect, incomplete or
misleading in any material respect when made or furnished; or


 


(e)          Other Payment Obligations.  Borrower or any of its Subsidiaries shall
fail to make any payment when due under the terms of any Indebtedness to be
paid by such Person (excluding this Loan Agreement and the other Transaction
Documents but including any other Indebtedness of Borrower or any of its
Subsidiaries to Agent or any Lender) and such failure shall continue beyond any
period of grace provided with respect thereto, or shall default in the
observance or performance of any other agreement, term or condition contained
in any such Indebtedness (subject to any applicable cure period), and the
effect of such failure or default is to cause, or permit the holder or holders
thereof to cause Indebtedness in an aggregate amount of Two Hundred Thousand
Dollars ($200,000) or more to become due prior to its stated date of maturity;
or


 


(f)            Voluntary Bankruptcy or
Insolvency Proceedings.  Borrower or any of its Subsidiaries shall (i) apply
for or consent to the appointment of a receiver, trustee, liquidator or
custodian of itself or of all or a substantial part of its property, (ii) be
unable, or admit in writing its inability, to pay its debts generally as they
mature, (iii) make a general assignment for the benefit of its or any of
its creditors, (iv) be dissolved or liquidated in full or in part, (v) become
insolvent (as such term may be defined or interpreted under any applicable
statute), (vi) commence a voluntary case or other proceeding seeking
liquidation, reorganization or other relief with respect to itself or its debts
under any bankruptcy, insolvency or other similar law now or hereafter in
effect or consent to any such relief or to the appointment of or taking
possession of its property by any official in an involuntary case or other
proceeding commenced against it, or (vii) take any action for the purpose
of affecting any of the foregoing; or


 


(g)         Involuntary Bankruptcy or
Insolvency Proceedings.  Proceedings for the appointment of a
receiver, trustee, liquidator or custodian of Borrower or any of its
Subsidiaries or of all or a substantial part of the property thereof, or an
involuntary case or other proceedings seeking liquidation, reorganization


 


11

















 


or other relief
with respect to Borrower or any of its Subsidiaries or the debts thereof under
any bankruptcy, insolvency or other similar law now or hereafter in effect
shall be commenced and an order for relief entered or such proceeding shall not
be dismissed or discharged within forty five (45) days of commencement; or


 


(h)         Judgments.  A final judgment or order for the payment of
money in excess of Two Hundred Thousand Dollars ($200,000) shall be rendered
against Borrower or any of its Subsidiaries and the same shall remain
undischarged for a period of thirty (30) days during which execution shall not
be effectively stayed, or any judgment, writ, assessment, warrant of
attachment, or execution or similar process shall be issued or levied against a
substantial part of the property of Borrower or any of its Subsidiaries and
such judgment, writ, or similar process shall not be released, stayed, vacated
or otherwise dismissed within thirty (30) days after issue or levy; or


 


(i)             Transaction Documents.  Any Transaction Document or any material term
thereof shall cease to be, or be asserted by Borrower not to be, a legal, valid
and binding obligation of Borrower enforceable in accordance with its terms or
if the Liens of Agent in the Collateral shall cease to be or shall not be
valid, first priority perfected Liens, subject only to Permitted Liens, or
Borrower shall assert that such Liens are not valid, first priority and
perfected Liens, subject only to Permitted Liens.


 


Article 8.    AGENT’S RIGHTS AND
REMEDIES


 


Section 8.01         Rights of
Agent upon Default.  Upon the occurrence
or existence of any Event of Default (other than an Event of Default referred
to in Sections 7.01(f) and 7.01(g)) and at any time thereafter during the
continuance of such Event of Default, Agent may, by written notice to Borrower,
declare all outstanding Obligations, including, without limitation, the
noncancelable obligation to make each payment scheduled to be made under Sections
1.02(b), 1.02(c) and 1.02(d), payable by Borrower hereunder to be immediately
due and payable without presentment, demand, protest or any other notice of any
kind, all of which are hereby expressly waived, anything contained herein or in
the Notes to the contrary notwithstanding. 
Upon the occurrence or existence of any Event of Default described in Sections
7.01(f) and 7.01(g), immediately and without notice, all outstanding
Obligations, including, without limitation, the noncancelable obligation to
make each payment scheduled to be made under Sections 1.02(b), 1.02(c) and
1.02(d), payable by Borrower hereunder shall automatically become immediately
due and payable, without presentment, demand, protest or any other notice of
any kind, all of which are hereby expressly waived, anything contained herein
or in the Notes to the contrary notwithstanding.


 


Section 8.02         Rights
Regarding Collateral.  Borrower agrees that
when any Event of Default has occurred and is continuing, Lenders or Agent, on
behalf of Lenders, shall have the rights, options, duties and remedies of a
secured party as permitted by law and, in addition to and without limiting the
foregoing, Lenders or Agent may, at the election of Lenders, exercise any one
or more or all, and in any order, of the remedies herein set forth, including
the following: (i) Agent or Lenders, personally or by agents or attorneys,
shall have the right (subject to compliance with any applicable mandatory legal
requirements) to require Borrower to assemble the Collateral and make it
available to Agent at a place to be reasonably designated by Agent in
California or to take immediate possession of the Collateral, or any portion
thereof, and for that purpose may pursue the same wherever it may be found, and
may enter any premises of Borrower, with or without notice, demand, process of
law or legal procedure, to the extent permitted by applicable law, and search
for, take possession of, remove, keep and store the same, or use and operate or
lease the same until sold; (ii) Agent or Lenders may, if at the time such
action may be lawful and always subject to compliance with any mandatory legal
requirements, either with or without taking possession and either before or
after taking possession, without instituting any legal proceedings whatsoever,
having first given notice of such sale by registered or certified mail to
Borrower once at least ten (10) days prior to the date of such sale, and having
first given any other notice which may be required by law, sell and dispose of
the Collateral, or any part thereof, at a private sale or at public auction, to
the highest bidder, in one lot as an entirety or in separate lots, and either
for cash or on credit and on such terms as Lenders may determine, and at any
place (whether or not it be the location of the Collateral or any part thereof)
designated in the notice referred to above. 
Agent and its agents and any


 


12

















 


purchasers
at or after foreclosure are hereby granted a non-exclusive, irrevocable,
perpetual, fully paid, royalty-free license or other right, solely pursuant to
the provisions of this Section 8.02, to use, without charge, Borrowers
intellectual property that remains embedded or contained in the Collateral,
including without limitation, labels, patents, copyrights, rights of use of any
name, trade secrets, trade names, trademarks, service marks, and advertising
matter, or any property of a similar nature, now or at any time hereafter owned
or acquired by Borrower or in which Borrower now or at any time hereafter has
any rights; provided, however, such license shall only be
exercisable in connection with the disposition of Collateral upon Agent’s or Lenders’
exercise of their remedies hereunder.  To
the extent permitted by applicable law, any such sale or sales may be adjourned
from time to time by announcement at the time and place appointed for such sale
or sales, or for any such adjourned sale or sales, without further published
notice, and Borrower, Agent, Lenders, or the holder or holders of the Note, or
of any interest therein, may bid and become the purchaser at any such sale; and
(iii) Agent or Lenders may proceed to protect and enforce this Loan
Agreement and the other Transaction Documents by suit or suits or proceedings
in equity, at law or in bankruptcy, and whether for the specific performance of
any covenant or agreement herein contained or in execution or aid of any power
herein granted; or for foreclosure hereunder, or for the appointment of a
receiver or receivers for any real property security or any part thereof, or
for the recovery of judgment for the Obligations or for the enforcement of any
other proper, legal or equitable remedy available under applicable law.  With respect to any of Borrower’s owned
premises, Borrower hereby grants Agent a license to enter into possession of
such premises and to occupy the same, without charge, for up to one hundred
twenty (120) days in order to exercise any of Agent’s or Lenders’ rights or
remedies provided herein, at law, in equity, or otherwise.


 


Section 8.03         Agent’s
Liability for Collateral.  So long as Agent
complies with its obligations, if any, under the Code, neither Agent nor
Lenders shall in any way or manner be liable or responsible for: (i) the
safekeeping of the Collateral; (ii) any loss or damage thereto occurring
or arising in any manner of fashion from any cause other than Agent’s or such
Lender’s gross negligence or willful misconduct; (iii) any diminution in
the value thereof; or (iv) any act or default of any carrier,
warehouseman, bailee, forwarding agency, or other Person whomsoever.  All risk of loss, damage or destruction of
the Collateral shall be borne by Borrower.


 


Section 8.04         Application
of Collateral Proceeds.  The proceeds and/or
avails of the Collateral, or any part thereof, and the proceeds and the avails
of any remedy hereunder (as well as any other amounts of any kind held by Agent
at the time of, or received by Agent after, the occurrence of an Event of
Default hereunder) shall be paid to and applied as follows: (i) First, to
the payment of reasonable costs and expenses, including all amounts expended to
preserve the value of the Collateral, of foreclosure or suit, if any, and of
such sale and the exercise of any other rights or remedies, and of all proper
fees, expenses, liability and advances, including reasonable legal expenses and
attorneys’ fees, incurred or made hereunder by Agent or Lenders; (ii) Second,
to the payment to Lenders pro rata in accordance with the Advance Percentages
of the amounts then owing or unpaid on the Notes, including each payment
scheduled to be made under Sections 1.02(b), 1.02(c) and 1.02(d) of this
Agreement; (iii) Third, to the payment of other amounts then payable to
Agent or Lenders under any of the Transaction Documents; and (iv) Fourth,
to the payment of the surplus, if any, to Borrower, its successors and assigns,
or to whomsoever may be lawfully entitled to receive the same.  In the event that, notwithstanding the
foregoing, proceeds and/or avails of the Collateral, shall be received by a
Lender in excess of its ratable share, then the portion of such payment or
distribution in excess of such Lender’s ratable share shall be received by such
Lender in trust for and shall be promptly paid over to the other Lenders
ratably for application to the payments of amounts due to the other Lenders.


 


Section 8.05         Reinstatement
of Rights.  If Agent shall have proceeded to enforce any
right under this Loan Agreement or any other Transaction Document by
foreclosure, sale, entry or otherwise, and such proceedings shall have been
discontinued or abandoned for any reason or shall have been determined
adversely, then and in every such case (unless otherwise ordered by a court of
competent jurisdiction), Agent shall be restored to its former position and its
rights hereunder with respect to the property subject to the security interest
created under this Loan Agreement shall be reinstated.


 


13

















 


Section 8.06         Agency for
Perfection.  Each Lender hereby appoints Agent and each
other Lender as agent and bailee for the purpose of perfecting the security
interests in and Liens upon the Collateral in assets which, in accordance with
the California Uniform Commercial Code, can be perfected only by possession or
control (or where the security interest of a secured party with possession or
control has priority over the security interest of another secured party) and
Agent and each Lender hereby acknowledges that it holds possession or control
of any such Collateral for the benefit of the Agent as secured party.  Should any Lender obtain possession or
control of any such Collateral, such Lender shall notify the Agent thereof,
and, promptly upon the Agent’s request therefor shall deliver possession or
control of such Collateral to the Agent or in accordance with the Agent’s
instructions.  Borrower by its execution
and delivery of this Loan Agreement hereby consents to the foregoing.


 


Article 9.    MISCELLANEOUS.


 


Section 9.01         Modifications,
Amendments or Waivers.  The provisions of
any Transaction Document may be modified, amended or waived only by a written
instrument signed by the parties thereto.


 


Section 9.02         No Implied
Waivers; Cumulative Remedies; Writing Required. 
No delay or failure of Agent or any Lender in exercising any right,
power or remedy hereunder shall affect or operate as a waiver thereof; nor
shall any single or partial exercise thereof or any abandonment or discontinuance
of steps to enforce such a right, power or remedy preclude any further exercise
thereof or of any other right, power or remedy. 
The rights and remedies hereunder of Agent and the Lenders are
cumulative and not exclusive of any rights or remedies which they would
otherwise have.  Any waiver, permit,
consent or approval of any kind or character on the part of Agent or any Lender
of any breach or default under this Loan Agreement or any such waiver of any provision
or condition of this Loan Agreement must be in writing and shall be effective
only in the specified instance and to the extent specifically set forth in such
writing.


 


Section 9.03         Reimbursement. 
Borrower shall reimburse Agent and the Lenders for all reasonable costs
and expenses, including without limitation, reasonable attorneys’ fees and
disbursements expended or incurred in any arbitration, mediation, judicial
reference, legal action or otherwise in connection with (i) the amendment
and enforcement of the Transaction Documents, including without limitation
during any workout, attempted workout and/or in connection with the rendering
of legal advice as to Agent’s or Lenders’ rights, remedies and obligations
under the Transaction Documents, (ii) collecting any sum which becomes due
Agent or Lender under any Transaction Document, (iii) any proceeding for
declaratory relief, any counterclaim to any proceeding, or any appeal, or (v) the
protection, preservation or enforcement of any rights of Agent or Lender.  For the purpose of this section, attorneys’
fees shall include, without limitation, fees incurred in connection with the
following: (1) contempt proceedings; (2) discovery, (3) any motion, proceeding
or other activity of any kind in connection with an insolvency proceeding; (4)
garnishment, levy, and debtor and third party examinations; and (5)
post-judgment motions and proceedings of any kind, including without
limitation, any activity taken to collect or enforce any judgment.  All of the foregoing costs and expenses shall
be payable by Borrower upon demand by Agent, and if not paid within thirty (30)
days of presentation of invoices shall bear interest at the highest applicable
Default Rate.  Notwithstanding the
foregoing, Borrower shall not be responsible for reimbursement of costs or
expenses related to disputes solely between and among Lenders and Agent.


 


Section 9.04         Indemnification. 
Borrower agrees upon demand to pay or reimburse Agent and the Lenders
for all liabilities, obligations and out-of-pocket expenses, including reasonable
fees and expenses of counsel for Agent and the Lenders, from time to time
arising in connection with the enforcement or collection of sums due under the
Transaction Documents.  Borrower shall
indemnify, reimburse and hold Agent and the Lenders and their permitted
assigns, each of Agent’s, Lenders’ or their permitted assigns’ partners, and
each of their respective successors, assigns, agents, officers, directors,
shareholders, servants, agents and employees harmless from and against all
liabilities, losses, damages, actions, suits, demands, claims of any kind and
nature (including claims relating to environmental discharge, cleanup or
compliance), all costs and expenses whatsoever to the extent they may be
incurred or suffered by such indemnified party in connection therewith
(including reasonable attorneys’ fees and expenses), fines, penalties (and
other charges of applicable


 


14

















 


governmental
authorities), licensing fees relating to any item of Collateral, damage to or
loss of use of property (including consequential or special damages to third
parties or damages to Borrower’s property), or bodily injury to or death of any
person (including any agent or employee of Borrower) (each, a “Claim”), directly or indirectly
relating to or arising out of the use of the proceeds of the Advance, including
acquisition, use, ownership, operation, possession, control, storage, return or
condition of any item of Equipment constituting Collateral (regardless of
whether such item of Equipment is at the time in the possession of Borrower),
the falsity of any representation or warranty of Borrower or Borrower’s failure
to comply with the terms of this Loan Agreement or any other Transaction
Document.  The foregoing indemnity shall
cover, without limitation, (i) any Claim in connection with a design or
other defect (latent or patent) in any item of Equipment constituting
Collateral, (ii) any Claim for infringement of any patent, copyright,
trademark or other intellectual property right, (iii) any Claim resulting
from the presence on or under or the escape, seepage, leakage, spillage,
discharge, emission or release of any Hazardous Materials from any item of
Equipment financed by an Advance or constituting Collateral, including any Claims
asserted or arising under any Environmental Law, or (iv) any Claim for
negligence or strict or absolute liability in tort; provided, however,
that Borrower shall not indemnify Agent or any Lender (or any other indemnified
Person referred to in the foregoing clause) for any liability incurred by such
Person as a direct result of that Person’s or another indemnified Person’s
gross negligence or willful misconduct. 
Such indemnities shall continue in full force and effect,
notwithstanding the expiration or termination of this Loan Agreement.  Upon Agent’s written demand, Borrower shall
assume and diligently conduct, at its sole and reasonable cost and expense, the
entire defense of Agent or any Lender and its permitted assigns, each of Agent’s,
Lenders’ or their permitted assigns’ partners, and each of their respective
successors, assigns, agents, officers, directors, shareholders, servants,
agents and employees against any indemnified Claim described in this Section 9.04.  Borrower shall not settle or compromise any
Claim against or involving Agent or any Lender without first obtaining such
Person’s written consent thereto, which consent shall not be unreasonably
withheld.  The obligations in this Section 9.04
shall survive payment of all other Obligations until all applicable statute of
limitation periods with respect to actions that may be brought against Agent or
Lenders have run.  All amounts owing
under this Section 9.04 shall be paid within thirty (30) days after
written demand.


 


Section 9.05         Limitation
on Damages.  NOTWITHSTANDING ANYTHING TO THE CONTRARY
CONTAINED IN THIS LOAN AGREEMENT OR ANYWHERE ELSE, BORROWER AGREES THAT IT
SHALL NOT SEEK FROM AGENT OR ANY LENDER UNDER ANY THEORY OF LIABILITY
(INCLUDING ANY THEORY IN TORTS), ANY SPECIAL, INDIRECT, CONSEQUENTIAL OR
PUNITIVE DAMAGES.


 


Section 9.06         Disbursements
and Payments.


 


(a)          Disbursements.  Lenders shall disburse each Advance to
Borrower according to the following account and wire transfer instructions:


 


	
  Credit:

  	
   

  	
  Reliant Technologies, Inc.

  
	
  Bank Name:

  	
   

  	
  US Bank

  
	
  Bank Address:

  	
   

  	
  1212 East Wayzata Blvd., Wayzata MN 55391

  
	
  Account Number

  	
   

  	
  104756246559

  
	
  ABA Routing Number:

  	
   

  	
  091000022

  
	
  Reference:

  	
   

  	
  Pinnacle Advance

  



 


(b)         Regularly Scheduled Payments.  All regularly scheduled payments due to Agent
shall be effected by automatic debit of the appropriate funds from Borrowers
primary operating account set forth below:


 


	
  Credit:

  	
   

  	
  Reliant Technologies, Inc,

  
	
  Bank Name:

  	
   

  	
  US Bank

  
	
  Bank Address:

  	
   

  	
  1212 East Wayzata Blvd., Wayzata MN 55391

  
	
  Account Number:

  	
   

  	
  104756246559

  
	
  ABA Routing Number

  	
   

  	
  091000022

  
	
  Reference:

  	
   

  	
  Pinnacle Advance

  



 


15

















 


(c)          Other Payments.  All payments to Agent other than regularly
scheduled payments may be made via wire transfer as follows:


 


Wire Transfer
Payment


 


	
  Credit:

  	
   

  	
  Pinnacle Ventures L.L.C.

  
	
  Bank Name:

  	
   

  	
  Bank of America

  
	
  Bank Address:

  	
   

  	
  2180 Sand Hill Road

  
	
   

  	
   

  	
  Menlo Park, CA 94025

  
	
  Account Number:

  	
   

  	
  13681-02769

  
	
  ABA Routing Number:

  	
   

  	
  121000358

  
	
  Reference:

  	
   

  	
  Reliant Technologies, Inc.

  



 


Section 9.07         Notices. 
All notices and other communications given to or made upon any party
hereto in connection with this Loan Agreement shall be in writing and (except
for financial statements and other informational documents which may be sent by
email) shall be delivered by certified mail, postage prepaid, return receipt
requested, by a nationally recognized overnight courier, or by prepaid
facsimile or personally delivered to the respective parties, as follows:


 


	
  Borrower:

  	
   

  	
  RELIANT TECHNOLOGIES, INC.

  
	
   

  	
   

  	
  5375 Mira Sorrento Place, Suite 100

  
	
   

  	
   

  	
  San Diego, CA 92121

  
	
   

  	
   

  	
  Telephone: 858-622-0900

  
	
   

  	
   

  	
  Telecopier: 858-622-9678

  
	
   

  	
   

  	
  Attention: Derek Howe

  
	
   

  	
   

  	
   

  
	
  Agent

  	
   

  	
  PINNACLE VENTURES, L.L.C.

  
	
   

  	
   

  	
  2882 Sand Hill Road, Suite

  
	
   

  	
   

  	
  125 Menlo Park, CA 94025

  
	
   

  	
   

  	
  Telephone: (650) 926-7800

  
	
   

  	
   

  	
  Telecopier: (650) 926-7801

  
	
   

  	
   

  	
  Email: rsavoie@pinnacleven.com

  
	
   

  	
   

  	
  Attention: Chief Financial Officer

  



 


or in accordance with any subsequent written direction
from either party to the other.  All such
notices and other communications shall, except as otherwise expressly herein
provided, be effective when received; or in the case of delivery by messenger
or overnight delivery service, when left at the appropriate address.


 


Section 9.08         Lenders
and Allocations of Advances.  Notwithstanding
anything herein to the contrary, each Lender severally commits to make such
Lender’s Advance Percentage of each Advance. 
No Lender shall have liability for the commitment to make Advances of
any other Lender.  Borrower agrees that
by notice to Borrower, Agent may reallocate the Advance Percentages among the
Lenders or among the Lenders and other investment funds affiliated with
Agent.  Whether or not specified in any
provision of this Loan Agreement, all references to Agent in this Loan Agreement
shall mean Agent for the benefit of the Lenders unless the context otherwise
requires.


 


Section 9.09         Severability. 
If any provision of any Transaction Document is held invalid or
unenforceable to any extent or in any application, the remainder of such
Transaction Document and all other Transaction Documents, or the application of
such provision to different Persons or circumstances or in different
jurisdictions, shall not be affected thereby.


 


16

















 


Section 9.10         Reliance
by Agent and the Lenders.  All covenants,
agreements, representations and warranties made herein by Borrower shall be
deemed to be material to and have been relied upon by Agent and the Lenders,
notwithstanding investigation by Agent.


 


Section 9.11         No
Set-Offs by Borrower.  All sums payable by
Borrower pursuant to this Loan Agreement or any of the other Transaction
Documents shall be payable without notice or demand and shall be payable
without set-off or reduction of any manner whatsoever.


 


Section 9.12         Survival. 
All representations, warranties, covenants and agreements of Borrower
contained herein or made in writing in connection herewith shall survive the
execution and delivery of the Transaction Documents, the making of Advances
hereunder, the granting of security and the issuance of the Notes.


 


Section 9.13         Confidentiality. 
Agent and the Lenders agree to hold non-public information received in
confidence and shall not disclose such information to third parties except to
their employees, members, partners or the partners of their respective
affiliated investment funds, their lenders, and professional advisors to the
foregoing, including attorneys and accountants, and others under a similar duty
of confidentiality, and as Agent may deem necessary in its reasonable judgment
to satisfy its legal obligations or to enforce Agent’s or Lenders’ rights under
any Transaction Document.


 


Section 9.14         Choice of
Law and Venue; Jury Trial Waiver.  THIS LOAN AGREEMENT
SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF
THE STATE OF CALIFORNIA, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.  BORROWER, AGENT AND THE LENDERS HEREBY SUBMIT
TO THE EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS LOCATED IN THE
NORTHERN DISTRICT OF CALIFORNIA.  BORROWER,
AGENT AND THE LENDERS HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF
ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF ANY OF THE
TRANSACTION DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN,
INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER
COMMON LAW OR STATUTORY CLAIMS.


 


Section 9.15         Successors
and Assigns.  This Loan Agreement and the other Transaction
Documents shall be binding upon and inure to the benefit of Agent and the
Lenders, all future holders of the Note, Borrower and their respective
successors and permitted assigns, except that Borrower may not assign or
transfer its rights hereunder or thereunder or any interest herein or therein
without the prior written consent of Agent. 
Agent or Lenders may assign all or any portion of their rights hereunder
and under one or more Notes to any of their respective affiliated investment
funds or, upon notice to Borrower, to any one or more financial institutions or
funds or an agent or trustee for such financial institutions or funds (an “Assignee”) and may sell to any of
its affiliated investment funds or to any one or more financial institutions or
funds or an agent or trustee for such financial institutions or funds (a “Participant”) participation
interests in Agents or Lenders’ rights hereunder and under one or more Notes,
provided that no such Assignee or Participant shall be a competitor of Borrower
and that each such Assignee shall expressly assume all obligations of a Lender
hereunder.  Agent and the Lenders may
disclose the Transaction Documents and any other financial or other information
relating to Borrower or any Subsidiary to any potential Assignee or
Participant, provided that such Assignee or Participant agrees to protect the
confidentiality of such documents and information using the same measures that
it uses to protect its own confidential information.


 


Section 9.16         Counterparts. 
This Loan Agreement may be executed in any number of counterparts and by
different parties hereto on separate counterparts, each of which, when so
executed and delivered, shall be an original, but all such counterparts shall
together constitute one and the same instrument.


 


Section 9.17         Further
Assurances.  Borrower will, at its own expense, from time
to time do, execute, acknowledge and deliver all and every further acts, deeds,
conveyances, transfers and assurances, and all financing and continuation
statements and similar notices, reasonably necessary or proper for the
perfection of the security interest being herein provided for in the
Collateral, whether now owned or hereafter acquired.


 


17

















 


Section 9.18         Entire
Agreement.  This Loan Agreement and each of the other
Transaction Documents, taken together, constitute and contain the entire
agreement of Borrower, Agent and the Lenders and supersede any and all prior
agreements, negotiations, correspondence, understandings and communications
among the parties, whether written or oral, respecting the subject matter
hereof.


 


Article 10.    DEFINITIONS.


 


All
terms defined in the Code shall have the respective meanings specified in the
Code.  In addition, for purposes of this
Loan Agreement the following capitalized terms shall have the meanings set
forth below:


 


“Advance” shall have the meaning set
forth in Section 1.01 of this Loan Agreement.


 


“Advance Percentage” shall mean, with
respect to a Lender, the percentage of each Advance specified opposite such
Lender’s name on Schedule 1 hereto.


 


“Affiliate” shall mean any Person
that owns or controls directly or indirectly ten percent (10%) or more of the
stock of another entity, any Person that controls or is controlled by or is
under common control with such Persons or any Affiliate of such Persons and
each of such Person’s officers, directors, members, joint venturers or
partners.  When used with respect to a
Lender, Affiliate shall also include any Affiliate of Agent.


 


“Borrower’s Books” means all of
Borrower’s books and records including without limitation: ledgers; records
concerning Borrower’s assets or liabilities, the Collateral, business
operations or financial condition; and all computer programs, or tape files,
and the equipment, containing such information.


 


“Borrower’s Primary Operating Account”
shall have the meaning set forth in Section 5.05 of this Loan Agreement.


 


“Business Day” shall mean any day on
which commercial banks are not authorized or required to close in San
Francisco, California.


 


“Closing” shall mean the date, time
and place as the parties may agree for the consummation of the initial Advance
contemplated hereby.


 


“Code” shall mean the Uniform
Commercial Code as in effect from time to time in the state of California.


 


“Collateral” shall mean property
described on Exhibit B attached hereto.


 


“Contractual Obligation” of any
Person shall mean, any indenture, note, security, deed of trust, mortgage,
security agreement, lease, guaranty, instrument, contract, agreement or other
form of obligation or undertaking to which such Person is a party or by which
such Person or any of its property is bound.


 


“Copyrights” shall mean any and all
copyright rights, copyright applications, copyright registrations and like
protections in each work or authorship and derivative work thereof, whether
published or unpublished and whether or not the same also constitutes a trade
secret, now or hereafter existing, created, acquired or held.


 


“Default” shall mean any event or
circumstance not yet constituting an Event of Default but which, with the
giving of any notice or the lapse of any period of time or both, would become
an Event of Default.


 


“Default Rate” shall mean, as of any
date of determination, an interest rate per annum equal to three percent (3%)
in excess of the rate per annum otherwise applicable on such date.


 


18

















 


“Environmental Laws” means all
Requirements of Law relating to the protection of human health or the
environment, including, without limitation, (i) all Requirements of Law,
pertaining to reporting, licensing, permitting, investigation, and remediation
of emissions, discharges, releases, or threatened releases of hazardous
materials, chemical substances, pollutants, contaminants, or hazardous or toxic
substances, materials or wastes whether solid, liquid, or gaseous in nature,
into the air, surface water, groundwater, or land, or relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling of chemical substances, pollutants, contaminants, or
hazardous or toxic substances, materials, or wastes, whether solid, liquid, or
gaseous in nature; and (ii) all Requirements of Law pertaining to the
protection of the health and safety of employees or the public.


 


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


 


“Equity Securities” of any Person
means (i) all common stock, preferred stock, participations, shares,
partnership interests, membership interests or other equity interests in and of
such Person (regardless of how designated and whether or not voting or
non-voting) and (ii) all warrants, options and other rights to acquire any
of the foregoing.


 


“Event of Default” shall have the
meaning set forth in Article 7 of this Loan Agreement.


 


“Event of Loss” shall have the
meaning set forth in Section 5.12(a) of this Loan Agreement.


 


“Financial Statements” shall mean,
with respect to any accounting period for any Person, statements of operations,
retained earnings and cash flow of such Person for such period, and balance
sheets of such Person as of the end of such period, setting forth in each case
in comparative form figures for the corresponding period in the preceding
fiscal year if such period is less than a full fiscal year or, if such period
is a full fiscal year, corresponding figures from the preceding fiscal year,
all prepared in reasonable detail and in accordance with generally accepted
accounting principles, except in the case of unaudited Financial Statements,
for the absence of footnotes and normal year-end adjustments.  Unless otherwise indicated, each reference to
Financial Statements of any Person shall be deemed to refer to Financial
Statements prepared on a consolidated basis.


 


“Funding Date” means any date on
which an Advance is made to or on account of Borrower under this Loan
Agreement.


 


“Funding Termination Date” shall have
the meaning set forth in Section 1.01 of this Loan Agreement.


 


“Governmental Authority” shall mean
any domestic or foreign national, state or local government, any political
subdivision thereof, any department, agency, authority or bureau of any of the
foregoing, or any other entity exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to government


 


“Governmental Rule” shall mean any
law, rule, regulation, ordinance, order, code interpretation, judgment, decree,
directive, guidelines, policy or similar form of decision of any Governmental
Authority.


 


“Indebtedness” of any Person shall
mean and include the aggregate amount of, without duplication (i) all
obligations of such Person for borrowed money, (ii) all obligations of
such Person evidenced by bonds, debentures, notes or other similar instruments,
(iii) all obligations of such Person to pay the deferred purchase price of
property or services (other than accounts payable incurred in the ordinary
course of business determined in accordance with generally accepted accounting
principles), (iv) all obligations under capital leases of such Person, (v) all
obligations or liabilities of others secured by a Lien on any asset of such
Person, whether or not such obligation or liability is assumed, (vi) all
guaranties of such Person of the obligations of another Person; (vii) all
obligations created or arising under any conditional sale or other title


 


19

















 


retention
agreement with respect to property acquired by such Person (even if the rights
and remedies of the seller or lender under such agreement upon an event of
default are limited to repossession or sale of such property), (viii) net
exposure under any interest rate swap, currency swap, forward, cap, floor or
other similar contract that is not entered to in connection with a bona fide hedging
operation that provides offsetting benefits to such Person, which agreements
shall be marked to market on a current basis, (ix) all reimbursement and
other payment obligations, contingent or otherwise, in respect of letters of
credit.


 


“Intellectual Property” shall mean: (i) Copyrights,
Trademarks, Patents, and Mask Works; (ii) any and all trade secrets, and
any and all intellectual property rights in computer software and computer
software products now or hereafter existing, created, acquired or held; (iii) any
and all design rights which may be available to Borrower now or hereafter
existing, created, acquired or held; (iv) any and all claims for damages
by way of past, present and future infringement of any of the rights included
above, with the right, but not the obligation, to sue for and collect such
damages for said use or infringement of the intellectual property rights
identified above; (v) all licenses or other rights to use any of the
Copyrights, Patents, Trademarks, or Mask Works, and all license fees and
royalties arising from such use; (vi) all amendments, renewals and
extensions of any of the Copyrights, Trademarks, Patents or Mask Works; and (vii) all
proceeds and products of the foregoing, including without limitation all
payments under insurance or any indemnity or warranty payable in respect of any
of the foregoing.


 


“Inventory” shall mean all 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 at any time hereafter
owned by or in the custody or possession, actual or constructive, of Borrower,
including such inventory as is temporarily out of its 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, and
Borrower’s Books relating to any of the foregoing.


 


“Investment” means the purchase or
acquisition of any capital stock, equity interest, or any obligations or other
securities of, or any interest in, any Person, or the extension of any advance,
loan, extension of credit or capital contribution to, or any other investment
in, any Person.


 


“Lien” shall mean, with respect to
any property, any security interest, mortgage, pledge, lien, claim, charge or
other encumbrance in, of, or on such property or the income therefrom,
including, without limitation, the interest of a vendor or lessor under a
conditional sale agreement, capital lease or other title retention agreement,
or any agreement to provide any of the foregoing, and the filing of any
financing statement or similar instrument under the Code or comparable law of
any jurisdiction.


 


“Loan Agreement” shall mean this Loan
and Security Agreement, as amended, restated or otherwise modified from time to
time.


 


“Management Rights Agreement” shall
mean a management rights agreement entered into by Borrower and Agent
contemporaneously with the execution of this Loan Agreement.


 


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


 


“Material Adverse Effect” shall mean
a material adverse effect on (i) the business, assets, operations, or
financial or other condition of Borrower and its Subsidiaries, taken as a
whole; (ii) the ability of Borrower and its Subsidiaries to pay or perform
the Obligations in accordance with the terms of this Loan Agreement and the
other Transaction Documents and to avoid an Event of Default under any
Transaction Document; or (iii) the rights and remedies of any Lender under
this Loan Agreement, the other Transaction Documents.


 


20

















 


“Note” shall mean a promissory note
or notes of Borrower substantially in the form attached as Exhibit A
hereto.


 


“Obligations” shall mean and include
all loans, advances, debts, liabilities, and obligations, including, without
limitation, the noncancelable obligation to make each payment scheduled to be
made under Sections 1.02(b), 1.02(c) and 1.02(d), howsoever arising, owed by
Borrower to Lenders of every kind and description (whether or not evidenced by
any note or instrument and whether or not for the payment of money), now
existing or hereafter arising under or pursuant to the terms of this Loan
Agreement or the other Transaction Documents, including, without limitation,
all interest, fees, charges, expenses, attorneys’ fees and costs and
accountants’ fees and costs chargeable to and payable by Borrower hereunder and
thereunder, in each case, whether direct or indirect, absolute or contingent,
due or to become due, and whether or not arising after the commencement of a
proceeding under Title 11 of the United States Code (11 U.S.C. Section 101
et seq.), as amended from time to time
(including post-petition interest) and whether or not allowed or allowable as a
claim in any such proceeding.


 


“Patents” means all patents, patent
applications and like protections, including without limitation improvements,
divisions, continuations, renewals, reissues, extensions and
continuations-in-part of the same.


 


“Payment Date” shall have the meaning
set forth in Section 1.02(b) of this Loan Agreement


 


“Permitted Indebtedness” shall mean:
(i) Indebtedness of Borrower in favor of Lenders arising under this Loan
Agreement or any other Transaction Document; (ii) Indebtedness existing at
Closing and disclosed on Schedule 2; (iii) Indebtedness
secured by a lien described in clause (vi)(A) of the defined term “Permitted
Liens,” provided (A) such Indebtedness does not exceed the lesser of the
cost or fair market value of the equipment financed with such Indebtedness, (B) such
Indebtedness does not exceed $250,000 in the aggregate at any given time, and (C) the
holder of such Indebtedness agrees to waive any rights of set off such holder
may have with respect to such Indebtedness in the deposit or investment
accounts of Borrower and its Subsidiaries on terms reasonably satisfactory to
Agent; (iv) Subordinated Debt; (v) Indebtedness incurred for the
acquisition of supplies or inventory on normal trade credit; (vi) Indebtedness
in connection with a formula-based working capital line of credit with a bank
or other institutional lender in which the amount of the Indebtedness does not
exceed the lesser of: (A) 90% of the amount of Borrower’s accounts
receivable and Inventory shown on its balance sheet in accordance with
generally accepted accounting principles or (B) $4,000,000, (vii) other
Indebtedness of Borrower in an aggregate outstanding amount not to exceed
$100,000 at any time and (vii) extensions, refinancings, modifications,
amendments and restatements of any item of Permitted Indebtedness (i) through
(vii) above.


 


“Permitted Investments” shall mean: (i) Investments
existing at Closing disclosed on Schedule 2; (ii) (A) marketable
direct obligations issued or unconditionally guaranteed by the United States of
America or any agency or any State thereof maturing within one (1) year from
the date of acquisition thereof, (B) commercial paper maturing no more
than one (1) year from the date of creation thereof and currently having rating
of at least A-2 or P-2 from either Standard & Poor’s Corporation or Moody’s
Investors Service, Inc., and (C) certificates of deposit maturing no more
than one (1) year from the date of investment therein; (iii) temporary
advances to cover incidental expenses in the ordinary course of business; (iv) investments
in joint ventures, strategic alliances, licensing and similar arrangements
customary in Borrower’s industry and which do not require Borrower to assume or
otherwise become liable for the obligations of any third party not directly
related to or arising out of such arrangement or require Borrower to transfer
ownership of non-cash assets to such joint venture or other entity; (v) Investments
consisting of (A) travel advances, employee relocation loans and other
employee loans and advances in the ordinary course of business not to exceed
$100,000 and (B) non-cash loans to employees, officers or directors
relating to the purchase of equity securities of Borrower pursuant to employee
stock purchase plans or arrangements approved by Borrower’s board of directors;
(vi) Investments (including debt obligations) received in connection with
the bankruptcy or reorganization of customers or suppliers and in settlement of
delinquent obligations of, and other disputes with, customers or suppliers
arising in the ordinary course of business; (vii) Investments consisting
of notes receivable or, prepaid royalties and other credit obligations to
customers and suppliers who are not Affiliates,


 


21

















 


in the
ordinary course of business; and (viii) other Investments in an aggregate
amount not to exceed $200,000 at any time.


 


“Permitted Liens” shall mean and
include: (i) Liens in favor of Agent; (ii) Liens existing at Closing
and disclosed on Schedule 2; (iii) other Liens subordinated to
the Liens in favor of Agent; (iv) Liens of carriers, warehousemen,
mechanics, materialmen, vendors, and landlords incurred in the ordinary course
of business for sums not overdue or being contested in good faith, provided
provision is made to the reasonable satisfaction of Agent for the eventual
payment thereof if subsequently found payable; (v) leases or subleases and
licenses or sublicenses granted in the ordinary course of Borrower’s business;
(vi) Liens (A) upon or in any Equipment which was acquired or held by
Borrower or any of its Subsidiaries to secure the purchase price of such
Equipment or indebtedness incurred solely for the purpose of financing the
acquisition of such Equipment, or (B) existing on such equipment at the
time of its acquisition, provided that the Lien is confined solely to the
property so acquired and improvements thereon, and the proceeds of such
equipment; (vii) bankers’ liens, rights of setoff and similar Liens incurred on
deposits made in the ordinary course of business; (viii) Liens arising
from judgments, decrees or attachments in circumstances not constituting an
Event of Default; (ix) Liens for taxes or other Taxes not at the time
delinquent or thereafter payable without penalty or being contested in good
faith, provided provision is made to the reasonable satisfaction of Agent for
the eventual payment thereof if subsequently found payable; (x) Liens in favor
of customs and revenue authorities arising as a matter of law to secure
payments of customs duties in connection with the importation of goods; (xi) Liens
on insurance proceeds in favor of insurance companies granted solely as
security for financed premiums; (xii) Liens on accounts receivable and
Inventory securing Indebtedness permitted under clause (vi) of the definition
of Permitted Indebtedness, and (xiii) Liens to secure payment of workers
compensation, employment insurance, old age pensions or other social security
obligations of Borrower in the ordinary course of business, and (xiv) Liens
incurred in connection with the extension, renewal or refinancing of the
indebtedness secured by Liens of the type described in clauses (i), (ii),
(iii), (vi), (ix) and (xii) above, provided that any extension,
renewal or replacement Lien shall be limited to the property encumbered by the
existing Lien and the principal amount of the indebtedness being extended,
renewed or refinanced does not increase.


 


“Person” shall mean and include an
individual, a partnership, a corporation (including a business trust), a joint
stock company, a limited liability company, an unincorporated association, a
joint venture or other entity or a Governmental Authority.


 


“Prime Rate” shall mean the prime
rate published in the Wall Street Journal dated as of the applicable Funding
Date.


 


“Requirement of Law” applicable to
any Person shall mean (i) any Governmental Rule applicable to such Person,
(ii) any license, permit, approval or other authorization granted by any
Governmental Authority to or for the benefit of such Person and (iii) any
judgment, decision or determination of any Governmental Authority or
arbitrator, in each case applicable to or binding upon such Person or any of
its property or to which such Person or any of its property is subject.


 


“Subordinated Debt” shall mean any
debt incurred by Borrower that is subordinated to the debt owing by Borrower to
Lenders on terms reasonably acceptable to Lenders (and identified as being such
by Borrower and Lenders).


 


“Subsidiary” of any Person shall mean
(i) any corporation of which more than fifty percent (50%) of the issued
and outstanding equity securities having ordinary voting power to elect a
majority of the Board of Directors of such corporation (irrespective of whether
at the time capital stock of any other class or classes of such corporation
shall or might have voting power upon the occurrence of any contingency) is at
the time directly or indirectly owned or controlled by such Person, by such
Person and one or more of its other Subsidiaries or by one or more of such
Person’s other Subsidiaries, (ii) any partnership, joint venture, or other
association of which more than fifty percent (50%) of the equity interest
having the power to vote, direct or control the management of such partnership,
joint venture or other association is at the time owned and controlled by such
Person, by such Person and one or more of the other Subsidiaries or by one or
more of


 


22

















 


such
Person’s other subsidiaries and (iii) any other Person included in the
financial statements of such Person on a consolidated basis.  Any reference to a Subsidiary without
designation of the ownership of such Subsidiary shall be deemed to refer to a
Subsidiary of Borrower.


 


“Tax” or “Taxes”
means any present or future tax, levy, impost, duty, charge, fee, deduction or
withholding of any nature and whatever called, by whomsoever, on whomsoever and
wherever imposed, levied, collected, withheld or assessed, including interest,
penalties, additions to tax and any similar liabilities with respect thereto;
except that, in the case of a Lender, there shall be excluded (i) taxes
that are imposed on the overall net income or net profits (including franchise
taxes imposed in lieu thereof) (a) by the United States, (b) by any other
Governmental Authority under the laws of which such Lender is organized or has
its principal office or maintains its applicable lending office, or (c) by any
jurisdiction solely as a result of a present or former connection between such
Lender and such jurisdiction (other than any such connection arising solely
from such Lender having executed, delivered or performed its obligations or
received a payment under, or enforced, any of the Transaction Documents), and
(ii) any branch profits taxes imposed by the United States or any similar
tax imposed by any other jurisdiction in which such Lender is located.


 


“Trademarks” means any trademark and
servicemark rights, whether registered or not, applications to register and
registrations of the same and like protections, and the entire goodwill of the
business of Borrower connected with and symbolized by such trademarks.


 


“Transaction Documents” shall mean,
collectively, the Loan Agreement, the Notes, the Management Rights Agreement,
the Warrant Purchase Agreement, the Warrants and the other documents executed
in connection herewith.


 


“Warrant” shall mean a warrant or
warrants to purchase capital stock of the Borrower issued by Borrower to an
Affiliate of Lenders pursuant to a Warrant Purchase Agreement contemporaneously
with the execution of this Loan Agreement.


 


“Warrant Purchase Agreement” shall
mean a warrant purchase agreement under which a Warrant is issued entered into
by Borrower and an Affiliate of Lenders contemporaneously with the execution of
this Loan Agreement.


 


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23

















 


IN
WITNESS WHEREOF, the parties hereto have executed this Loan Agreement as of the
date first written above.


 


	
  AGENT:

  	
  BORROWER:

  
	
   

  	
   

  
	
  PINNACLE VENTURES, L.L.C.,

  	
  RELIANT TECHNOLOGIES, INC.,

  
	
  a Delaware limited liability company

  	
  a Delaware corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Robert N. Savoie

  	
   

  	
  By:

  	
  /s/ Roger Howe

  	
   

  
	
   

  	
   

  
	
  Name:

  	
  Robert N. Savoie

  	
  Name:

  	
  Roger Howe

  	
   

  
	
   

  	
   

  	
   

  
	
  Title:

  	
  Chief Financial Officer

  	
  Title:

  	
  Chairman and CFO

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  LENDERS:

  	
   

  
	
   

  	
   

  
	
  PINNACLE VENTURES I-A (SUB) (Q), LP.,

  	
   

  
	
  a Delaware limited partnership

  	
   

  
	
  PINNACLE VENTURES I-B, L.P.,

  	
   

  
	
  a Delaware limited partnership

  	
   

  
	
  PINNACLE VENTURES I AFFILIATES, L.P.,

  	
   

  
	
  a Delaware limited partnership

  	
   

  
	
   

  	
   

  
	
  By:

  	
  Pinnacle Ventures Management I, L.L.C.,

  	
   

  
	
   

  	
  their general partner

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Robert N. Savoie

  	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  Name: Robert N. Savoie

  	
   

  
	
   

  	
   

  	
   

  
	
  Title:

  	
  Chief Financial Officer

  	
   

  
										



 


24














 


SECURED PROMISSORY NOTE


 


	
  $3,000,000.00

  	
   

  	
  Dated: April 16, 2004

  



 


FOR
VALUE RECEIVED, the undersigned, RELIANT TECHNOLOGIES, INC. (“Borrower”), a
Delaware corporation, HEREBY PROMISES TO PAY to the order of Pinnacle Ventures,
L.L.C. (“Agent”) for the account of the Lenders the principal amount of Three
Million Dollars ($3,000,000.00) or such lesser amount as shall equal the
aggregate outstanding principal balance of the Advance made by Agent on the
date hereof to Borrower pursuant to the Loan and Security Agreement referred to
below (the “Loan Agreement”), plus all payments arising under Sections 1.02(b)
(excluding the portion of the payments representing the original principal
amount), 1.02(c) and 1.02(d) of the Loan Agreement with respect to such
Advance, on the dates and in the amounts set forth in the Loan Agreement.  Capitalized terms used herein and not
otherwise defined have the respective meanings set forth in the Loan Agreement.


 


Payments
under this Note shall be made as follows:


 


	
  Interim Payment on Funding Date:

  	
   

  	
  $11,875.00

  
	
   

  	
   

  	
   

  
	
  9 monthly payments on the first Business Day of each
  month after the Funding Date

  	
   

  	
  $23,750.00, commencing May 1, 2004

  
	
   

  	
   

  	
   

  
	
  27 monthly payments on the first Business Day of
  each month after the Funding Date

  	
   

  	
  $122,873.66, commencing February 1, 2005

  



 


All
other payments due under this Note or under the Loan Agreement shall be payable
as and when specified in the Loan Agreement.


 


This
Note is one of the Notes referred to in, and is entitled to the benefits of,
the Loan and Security Agreement, dated as of April 2, 2004 between Borrower,
Agent and the Lenders.  This Note and the
obligation of Borrower to repay the unpaid principal amount of the Advance,
interest on the Advance, premium, if any, and all other amounts due Agent and
Lenders under the Loan Agreement is secured under the Loan Agreement.  This Note is subject to prepayment by
Borrower at any time on the terms set out in the Loan Agreement.


 


Presentment
for payment, demand, notice of protest and all other demands and notices of any
kind in connection with the execution, delivery, performance and enforcement of
this Note are hereby waived.


 


Borrower
shall pay all reasonable fees and expenses, including, without limitation,
reasonable attorneys’ fees and costs, incurred by Agent or any Lender in the
enforcement or attempt to enforce any of Borrower’s obligations hereunder not
performed when due.  This Note shall be
governed by, and construed and interpreted in accordance with, the laws of the
State of California.


 

















 


IN
WITNESS WHEREOF, Borrower has caused this Note to be duly executed by one of
its officers thereunto duly authorized an the date hereof.


 


	
   

  	
  RELIANT TECHNOLOGIES, INC.,

  
	
   

  	
  a Delaware corporation,

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Roger Howe

  	
   

  
	
   

  	
   

  
	
   

  	
  Name:

  	
  Roger Howe

  	
   

  
	
   

  	
   

  
	
   

  	
  Title:

  	
  Chairman and CFO

  	
   

  
						



 

















 


EXHIBIT B


 


The
Collateral shall consist all right, title, interest, claims and demands of
Borrower in and to the following:


 


(a)           All goods and equipment
now owned or hereafter acquired, including, without limitation, all laboratory
equipment, computer equipment, office equipment, machinery, fixtures, vehicles,
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;


 


(b)           Ali 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, and Borrower’s books relating to any of the foregoing;


 


(c)           All contract rights,
general intangibles, health care insurance receivables, payment intangibles and
commercial tort claims, now owned or hereafter acquired, including, without
limitation, all patents, patent rights (and applications and registrations
therefor), trademarks and service marks (and applications and registrations
therefor), inventions, copyrights, mask works (and applications and
registrations therefor), trade names, trade styles, software and computer
programs, trade secrets, methods, processes, know how, drawings,
specifications, descriptions, and all memoranda, notes, and records with
respect to any research and development, goodwill, license agreements,
franchise agreements, blueprints, drawings, purchase orders, customer lists,
route lists, infringements, claims, computer programs, computer disks, computer
tapes, literature, reports, catalogs, design rights, income tax refunds,
payments of insurance and rights to payment of any kind and whether in tangible
or intangible form or contained on magnetic media readable by machine together
with all such magnetic media;


 


(d)           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
(subject, in each case, to the contractual rights of third parties to require
funds received by Borrower to be expended in a particular manner), whether or
not earned by performance, and any and all credit insurance, guaranties, and
other security therefor, as well as all merchandise returned to or reclaimed by
Borrower and Borrower’s books relating to any of the foregoing;


 


(e)           All documents, cash,
deposit accounts, letters of credit, letter of credit rights, supporting
obligations, certificates of deposit, instruments, chattel paper, electronic
chattel paper, tangible chattel paper and investment property, including, without
limitation, all securities, whether certificated, or uncertificated, security
entitlements, securities accounts, commodity contracts and commodity accounts,
and all financial assets held in any securities account or otherwise, wherever
located, now owned or hereafter acquired and Borrower’s books relating to the
foregoing; and


 


(f)            Any and all claims,
rights and interests in any of the above and all substitutions for, additions
and accessions to and proceeds thereof, including, without limitation, insurance,
condemnation, requisition or similar payments and the 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 (A) the proceeds of all the Intellectual Property that are
accounts, (i.e.  accounts receivable) of
Borrower, or general intangibles consisting of rights to payment, and (B) 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 date of Closing, include the Intellectual Property to
the extent necessary to permit perfection of Agent’s security interest in such
accounts and general intangibles of Borrower that are proceeds of the
Intellectual Property.


 

















 


EXHIBIT C


 


FORM OF OPINION


 


[Date]


 


PINNACLE
VENTURES, L.L.C.


 


PINNACLE
VENTURES I-A (SUB) (Q), L.P.


 


PINNACLE
VENTURES I-B, L.P.


 


PINNACLE
VENTURES I AFFILIATES, L.P.


 


Gentlemen:


 


We have acted as counsel for [BORROWER] (the “Borrower”)
in connection with the execution of the Loan and Security Agreement of even
date herewith (the “Loan Agreement”) among Borrower, PINNACLE VENTURES, L.L.C.
as agent (“Agent”) for lenders identified on Schedule 1 thereto (such
lenders, together with their respective successors and assigns are referred to
hereinafter each individually as a “Lender, and, collectively, as the “Lenders”)
and the transactions contemplated thereby. 
This opinion is being rendered to you pursuant to Section 3.01(a)(xi) of
the Loan Agreement.  Capitalized terms
not otherwise defined in this opinion have the meaning given them in the Loan
Agreement.


 


In connection with this opinion and our
representation, we have examined originals, or copies certified or otherwise
identified to our satisfaction, of the following:


 


(i)            The
Loan Agreement;


 


(ii)           The
Warrant and exhibits thereto dated as of [Date], issued by Borrower to Agent;


 


(iii)          The Warrant and exhibits thereto dated as of
[Date], issued by Borrower to Pinnacle Ventures I Affiliates, L.P.;


 


(iv)          The
Warrant Purchase Agreement dated as of [Date] by and between Borrower and
Agent;


 


(v)           The
Warrant Purchase Agreement dated as of [Date] by and between Borrower and
Pinnacle Ventures I Affiliates, L.P.;


 


(vi)          The
Management Rights Agreement dated as of [Date] by and between Borrower and
Agent;


 


(vii)         The Note executed in favor of Agent dated as
of [Date];


 


(viii)        The Account Control Agreement by and among                     
dated as of [Date];


 


(ix)           The
Restated Certificate of Incorporation and the Bylaws of Borrower, each as in
effect on the date hereof;


 


(x)            The
certificate of an officer of Borrower as to certain factual matters (“Officer
Certificate”);


 

















 


(xi)           Certificates
issued by the Secretary of State of the State of                                                     
dated                                               ,
200          , [and the
Secretary of State of the State of                                                     ,
dated                                           ,
200          ,] certifying
the good standing of Borrower;


 


(xii)          Such
other documents, records, and certificates as we have deemed necessary or
appropriate as a basis for the opinions hereafter expressed.


 


The Loan Agreement, the Notes and the Warrants are
hereinafter referred to as the “Transaction Documents.”


 


In such examinations we have assumed the genuineness
of all signatures, the authenticity of all documents submitted to us as
originals and the conformity to originals of all documents submitted to us as
certified, facsimile, telecopied or photostatic copies thereof.  As to certain matters of fact material to our
opinion, we have relied upon the Officer Certificate and upon your
representations in the Transaction Documents.


 


As used in this opinion, the expression “to the best
of our knowledge,” means the actual present knowledge or belief of those
attorneys in our firm who have or who are currently representing Borrower.  We have not undertaken any independent
investigation to determine the existence or nonexistence of other facts, and no
inference as to our knowledge of the existence or nonexistence of other facts
should be drawn from the fact of this firm’s representation of Borrower in
connection with the Transaction Documents.


 


Based upon and subject to the foregoing and subject to
the qualifications contained herein, we are of the opinion that:


 


1.             Borrower
is a corporation duly organized, validly existing and in good standing under
the laws of the State of Delaware [and is duly qualified to do business and in
good standing in the State of                           ].


 


2.             Borrower
has the requisite corporate power and authority to execute, deliver and perform
the Transaction Documents and to issue the Warrants, All action on the part of
Borrower, its directors and its shareholders necessary for the authorization,
execution, delivery and performance of the Transaction Documents, has been
taken.  The Transaction Documents have
been duly executed and delivered by an authorized officer of Borrower.


 


3.             The
execution, delivery and performance of the Transaction Documents do not
conflict with or violate any provision of Borrower’s Restated Certificate of
Incorporation or Bylaws or of applicable law and do not conflict with or
constitute a default under any provision of any judgment, writ, decree, order
or material agreement, indenture, or instrument to which Borrower is a party or
by which it is bound or require the consent or approval of, the giving of notice
to, the registration or filing with or the taking of any action in respect of
or by, any federal, state, or local government authority or agency or other
person, except for the filing of notices pursuant to federal and state
securities laws, which filings will be effected by the time required thereby.


 


4.             The
Transaction Documents constitute legal, valid and binding obligations of
Borrower, enforceable in accordance with their respective terms.


 


5.             To
our knowledge, there is no action, suit, audit, investigation, proceeding or
patent claim pending or threatened against Borrower in any court or before any
governmental commission, agency, board, or authority which might have a
material adverse effect on the business, condition, or operations of Borrower
or the ability of Borrower to perform its obligations under the Transaction
Documents.


 


6.             The
Series      Preferred Stock issuable upon exercise of the
Warrants have been duly authorized and reserved for issuance upon such
exercise, and when issued in accordance with the terms of the Warrants, will be
duly authorized, validly issued, fully paid and non-assessable.


 

















 


7.             The
shares of Common Stock issuable upon conversion of the Series     
Preferred Stock into which the Warrants are convertible, have been duly authorized
and reserved and for issuance, when so issued in accordance with the terms of
Borrower’s Restated Certificate of Incorporation, will be validly issued, fully
paid and non-assessable.


 


The opinions set forth above are subject to the
following additional qualifications, assumptions, limitations and exceptions:


 


(a)    The effect of bankruptcy,
insolvency, reorganization, fraudulent conveyance, moratorium and other similar
laws relating to or affecting the rights and remedies of creditors generally.


 


(b)    Limitations imposed by general
equitable principles upon the specific enforceability of any of the provisions
of the Transaction Documents and upon the availability of injunctive relief or
other equitable remedies.


 


(c)    We express no opinion as to
the enforceability of any choice of law provision in the documents.


 


(d)    We express no opinion as to
the compliance or noncompliance with applicable antifraud statutes under the
rules and regulations of state and federal securities laws concerning the
issuance of the Warrants.


 


(e)    We express no opinion herein
concerning any law other than the law of the State of                                       
[the general corporate law of the State of Delaware] and the federal laws of
the United States of America.


 


This opinion is furnished to you solely for your
benefit and may not be relied upon by any other person (other than assignees of
any of your rights) without our prior written consent, which consent shall not
be unreasonably withheld or delayed.


 


Very truly yours


 

















AMENDMENT NO. 1

TO LOAN AND SECURITY AGREEMENT


This AMENDMENT NO. 1 TO LOAN AND SECURITY AGREEMENT
(this “Amendment”), dated as of August 26, 2004, is entered into by and
among RELIANT TECHNOLOGIES, INC., a
Delaware corporation (the “Borrower”), Pinnacle Ventures, L.L.C. as
agent (“Agent”) for each of the lenders that is a signatory to this Amendment
(individually, a “Lender” and collectively, the “Lenders”), and
the Lenders.


WITNESSETH


WHEREAS, the Borrower, Agent and the Lenders are
parties to that certain Loan and Security Agreement, dated as of April 2,  2004 (as amended, restated, supplemented
or otherwise modified from time to time, the “Loan Agreement”); and


WHEREAS, subject to the satisfaction of the conditions
set forth herein, the Borrower, the Agent and the Lenders are willing to amend
the Loan Agreement on the terms set forth herein.


NOW, THEREFORE, for good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties agree
as follows:


1.             DEFINITIONS


Capitalized terms used herein and not otherwise
defined herein shall have the meanings ascribed to them in the Loan Agreement,
as amended hereby.


2.             AMENDMENT
TO LOAN AGREEMENT AND WAIVER


(a)            Article 5 of the Loan Agreement
hereby is amended by amending and restating clause (ii) of Section 5.13 in its
entirety so that such clause reads as follows: “(ii) permit the inclusion in
any contract to which it or a Subsidiary becomes a party of any provisions that
could restrict or invalidate the creation of a security interest in any of
Borrower’s or such Subsidiary’s property, other than pursuant to that certain
Loan and Security Agreement, dated as of August 26, 2004, by and between
Borrower and Comerica Bank.”


(b)           Article 10 of the Loan Agreement
hereby is amended by amending and restating clause (xii) of the definition of
the term “Permitted Liens” in its entirety so that such clause reads as
follows: “(xii) Liens on Borrower’s assets excluding Intellectual Property
securing Indebtedness permitted under clause (vi) of the definition of
Permitted indebtedness”.


(c)            Exhibit B of the Loan Agreement
hereby is amended by substituting Exhibit B attached hereto in lieu thereof.


(d)           Agent and the Lenders hereby waive
any Event of Default that occurred under the Loan Agreement by reason of
Borrower maintaining Account Numbers 1892037191 and 1892036649 at Comerica Bank
until the date hereof without having obtained an agreement with such bank
sufficient to perfect Agent’s, on behalf of the Lenders and itself, security
interest in such account.


3.             REPRESENTATIONS
AND WARRANTIES. Borrower hereby represents and warrants
to the Agents and the Lenders as follows:


(a)            It
has the requisite power and authority to execute and deliver this Amendment and
to perform its obligations hereunder and under the Transaction Documents to
which it is a party. The execution, delivery, and performance by it of this
Amendment and the performance by it of each Transaction Document to which it is
a party (i) have been duly approved by all necessary action and no


 

















other proceedings are necessary to consummate such transactions; and
(ii) are not in contravention of (A) any law, rule, or regulation, or any
order, judgment, decree, writ, injunction, or award of any arbitrator, court or
governmental authority binding on it, (B) the terms of its organizational
documents, or (C) any provision of any material contract or undertaking to
which it is a party or by which any of its properties may be bound or affected;


(b)           This
Amendment has been duly executed and delivered by Borrower. This Amendment and
each Transaction Document to which it is a party is its legal, valid and
binding obligation, enforceable against it in accordance with its terms, and is
in full force and effect except as such validity and enforceability is limited
by the laws of insolvency and bankruptcy, laws affecting creditors’ rights and
principles of equity applicable hereto;


(c)            No
injunction, writ, restraining order, or other order of any nature prohibiting,
directly or indirectly, the consummation of the transactions contemplated
herein has been issued and remains in force by any Governmental Authority
against Borrower, Agent or any Lender;


(d)           No
Default or Event of Default has occurred and is continuing on the date hereof
or as of the date of the effectiveness of this Amendment; and


(e)            The
representations and warranties in the Loan Agreement and the other Transaction
Documents are true and correct in all material respects on and as of the date
hereof, as though made on such date (except to the extent that such
representations and warranties relate solely to an earlier date).


4.             CONDITIONS
PRECEDENT TO AMENDMENT.


The satisfaction of each of the following shall
constitute conditions precedent to the effectiveness of this Amendment and each
and every provision hereof:


(a)            Agent
shall have received this Amendment, duly executed by the parties hereto, and
the same shall be in full force and effect;


(b)           The
representations and warranties in this Amendment and the Loan Agreement, as
amended by this Amendment, shall be true and correct in all respects on and as
of the date hereof, as though made on such date (except to the extent that such
representations and warranties relate solely to an earlier date);


(c)            No
Default or Event of Default shall have occurred and be continuing on the date
hereof or as of the date of the effectiveness of this Amendment; and


(d)           No
injunction, writ, restraining order, or other order of any nature prohibiting,
directly or indirectly, the consummation of the transactions contemplated
herein shall have been issued and remain in force by any Governmental Authority
against the Borrower, the Agent or the Lenders.


5.             GOVERNING
LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF CALIFORNIA, WITHOUT
REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.


6.             ENTIRE
AMENDMENT; EFFECT OF AMENDMENT. This  Amendment, and the terms and provisions
hereof, constitute the entire agreement among the parties pertaining to the
subject matter hereof and supersedes any and all prior or contemporaneous
agreements relating to the subject matter hereof. Except for the amendments to
the Loan Agreement expressly set forth in Section 2 hereof, the Loan
Agreement and other Transaction Documents shall remain unchanged and in full
force and effect. To the extent any terms or provisions of this Amendment
conflict with those of the Loan Agreement or


 


2

















 


other Transaction Documents, the terms and provisions of this Amendment
shall control. This Amendment is a Transaction Document.


7.             COUNTERPARTS;
TELECOPY EXECUTION. This Amendment may be executed in any
number of counterparts, all of which taken together shall constitute one and
the same instrument and any of the parties hereto may execute this Amendment by
signing any such counterpart. Delivery of an executed counterpart of this
Amendment by telecopy shall be equally as effective as delivery of an original
executed counterpart of this Amendment. Any party delivering an executed
counterpart of this Amendment by telecopy also shall deliver an original
executed counterpart of this Amendment, but the failure to deliver an original
executed counterpart shall not affect the validity, enforceability, and binding
effect of this Amendment.


8.             MISCELLANEOUS.


(a)            Upon
the effectiveness of this Amendment, each reference in the Loan Agreement to
“this Agreement”, “hereunder”, “herein”, “hereof” or words of like import
referring to the Loan Agreement shall mean and refer to the Loan Agreement as
amended by this Amendment.


(b)           Upon
the effectiveness of this Amendment, each reference in the Transaction
Documents to the “Loan Agreement”, “thereunder”, “therein”, “thereof” or words
of like import referring to the Loan Agreement shall mean and refer to the Loan
Agreement as amended by this Amendment.


[signature page follows]


 


 


3

















 


IN WITNESS WHEREOF, the parties hereto have executed
this Amendment as of the date first written above.


 


	
  AGENT:

  	
   

  	
  BORROWER:

  
	
  PINNACLE
  VENTURES, L.L.C.,

  a Delaware limited liability company

  	
   

  	
  RELIANT
  TECHNOLOGIES, INC.

  a Delaware corporation

  
	
   

  	
   

   

  	
   

  	
   

  	
   

  
	
  By: 

  	
  /s/ Robert N. Savoie

  	
   

  	
  By: 

  	
   

  
	
  Name: Robert N. Savoie

  	
   

  	
  Name:

  	
   

  
	
  Title: Chief Financial Officer

  	
   

  	
  Title:

  	
   

  



 


LENDERS:

PINNACLE VENTURES I-A (SUB) (Q), L.P.,

a Delaware limited partnership

PINNACLE VENTURES I-B, L.P.,

a Delaware limited partnership

PINNACLE VENTURES I AFFILIATES, L.P.,

a Delaware limited partnership


 


	
  By: 

  	
  Pinnacle Ventures Management I, L.L.C., 

  their general partner

  	
   

  	
   

  	
   

  
	
  By: 

  	
  /s/ Robert N. Savoie

  	
   

  	
   

  	
   

  
	
  Name: Robert N. Savoie

  	
   

  	
   

  	
   

  
	
  Title: Chief Financial Officer

  	
   

  	
   

  	
   

  



 

















EXHIBIT B


The Collateral shall consist of all right, title,
interest, claims and demands of Borrower in and to all personal property of
Borrower (herein referred to as “Borrower” or “Debtor”) whether presently
existing or hereafter created or acquired, and wherever located, including, but
not limited to:


(a)    all
accounts (including health-care-insurance receivables), chattel paper
(including tangible and electronic chattel paper), deposit accounts, documents
(including negotiable documents), equipment (including all accessions and
additions thereto), general intangibles (including payment intangibles and
software), goods (including fixtures), instruments (including promissory
notes), 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 rights, money, and all of Debtor’s books and
records with respect to any of the foregoing, and the computers and equipment
containing said books and records;


(b)    all common
law and statutory copyrights and copyright registrations, applications for registration,
now existing or hereafter arising, in the United States of America or in any
foreign jurisdiction, obtained or to be obtained on or in connection with any
of the forgoing, or any parts thereof or any underlying or component elements
of any of the forgoing, together with the right to copyright and all rights to
renew or extend such copyrights and the right (but not the obligation) of
Secured Party to sue in its own name and/or in the name of the Debtor for past,
present and future infringements of copyright (collectively, “Copyrights”);


(c)    all
trademarks, service marks, trade names and service names and the goodwill
associated therewith, together with the right to trademark and all rights to
renew or extend such trademarks and the right (but not the obligation) of
Secured Party to sue in its own name and/or in the name of the Debtor for past,
present and future infringements of trademark (collectively, “Trademarks”);


(d)    all (i)
patents and patent applications filed in the United States Patent and Trademark
Office or any similar office of any foreign jurisdiction, and interests under
patent license agreements, including, without limitation, the inventions and
improvements described and claimed therein, (ii) licenses pertaining to any
patent whether Debtor is licensor or licensee, (iii) income, royalties,
damages, payments, accounts and accounts receivable now or hereafter due and/or
payable under and with respect thereto, including, without limitation, damages
and payments for past, present or future infringements thereof, (iv) right (but
not the obligation) to sue in the name of Debtor and/or in the name of Secured
Party for past, present and future infringements thereof, (v) rights
corresponding thereto throughout the world in all jurisdictions in which such
patents have been issued or applied for, and (vi) reissues, divisions,
continuations, renewals, extensions and continuations-in-part with respect to
any of the foregoing (collectively, “Patents”); and


(e)    any and
all cash proceeds and/or noncash proceeds of any of the foregoing, including,
without limitation, insurance proceeds, and all supporting obligations and the
security therefor or for any right to payment. All terms above have the
meanings given to them in the California Uniform Commercial Code, as amended or
supplemented from time to time, including revised Division 9 of the Uniform
Commercial Code-Secured Transactions, added by Stats, 1999, c.991 (S.B. 45),
Section 35, operative July 1, 2001.


Notwithstanding the foregoing, (1) the Collateral
shall not include any Copyrights, Patents, Trademarks, source code and
applications therefor, now owned or hereafter acquired, or any claims for
damages by way of any past, present and future infringement of any of the
foregoing (collectively, the “Intellectual Property”); provided, however, that
the Collateral shall include all accounts and general intangibles that consist
of rights to payment and proceeds from the sale, licensing or disposition of
all or any part, or rights in, the foregoing (the “Rights to Payment”).
Notwithstanding the foregoing, 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 the Rights to Payment,
then the Collateral shall automatically, and effective as of the Closing Date,
include the Intellectual Property to the


 

















 


extent necessary to permit perfection of Bank’s
security interest in the Rights to Payment, and (2) the Collateral shall also
not include any property that (a) is nonassignable by its terms without the
consent of the  licensor thereof
(but only to the extent such prohibition on transfer is enforceable under
applicable law, including, without limitation, Sections 9406 and 9408 of the
Code), or (b) the granting of a security interest therein is contrary to
applicable law; provided that upon the cessation of any such restriction or
prohibition, such property shall automatically become part of the Collateral;
and provided further that the provisions of this paragraph shall in no case
exclude from the definition of “Collateral” any Accounts, proceeds of the
disposition of any property, or general intangibles consisting of rights to
payment, all of which shall at all times constitute “Collateral”.


 

















 


 


AMENDMENT NO. 2

TO LOAN AND SECURITY AGREEMENT


 


This AMENDMENT NO. 2 TO LOAN AND SECURITY AGREEMENT (this “Amendment”),
dated as of November 3, 2005, is entered into by and among RELIANT
TECHNOLOGIES, INC., a Delaware corporation (the “Borrower”),
Pinnacle Ventures, L.L.C. as agent (“Agent”) for each of the lenders
that is a signatory to this Amendment (individually, a “Lender” and
collectively, the “Lenders”), and the Lenders.


 


WITNESSETH


 


WHEREAS,
the Borrower, Agent and the Lenders are parties to that certain Loan and
Security Agreement, dated as of April 2, 2004, as amended by that certain
Amendment No. 1 to Loan and Security Agreement, dated as of August 26, 2004 (as
amended, restated, supplemented or otherwise modified from time to time, the “Loan
Agreement”); and


 


WHEREAS,
subject to the satisfaction of the conditions set forth herein, the Borrower,
the Agent and the Lenders are willing to amend the Loan Agreement on the terms
set forth herein.


 


NOW,
THEREFORE, for good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties agree as follows:


 


1.             DEFINITIONS.  Capitalized terms used herein and not
otherwise defined herein shall have the meanings ascribed to them in the Loan
Agreement, as amended hereby.


 


2.             AMENDMENT TO LOAN AGREEMENT.


 


(a)           Section 1.01 of the Loan Agreement is hereby amended and
restated in its entirety as follows:


 


“Section 1.01               Commitment.  Borrower promises to pay to Lenders, in
lawful money of the United States of America, the aggregate unpaid principal
amount of all Advances made by Lenders to Borrower hereunder.  Borrower also promises to pay to Lenders
interest on the unpaid principal amount of such Advances at rates in accordance
with the terms hereof.  Advances shall be
made not more often than monthly in amounts of no less than One Hundred
Thousand Dollars ($100,000).


 


Lenders have
advanced to Borrower on April 16, 2004, a term loan in an aggregate principal
amount of Three Million Dollars ($3,000,000) (the “Existing Advance”).  Subject to the terms and conditions of this
Loan Agreement, Lenders agree to advance to Borrower (i) upon closing of that
certain Amendment No. 2 to Loan and Security Agreement, dated as of October 28,
2005 (the “Second Amendment”), by and among Borrower, Agent and Lenders,
a single term loan in an aggregate principal amount of Three Million dollars
($3,000,000) (the “Initial Additional Advance”) and (ii) from time to time on
or prior to June 30, 2006, additional term loans in an aggregate principal
amount not to exceed Three Million Dollars ($3,000,000) (each, a “Subsequent
Additional Advance”, and together with the Initial Additional Advance, each, an
“Additional Advance”)  The
Additional Advances and the Existing Advances shall be collectively referred to
herein as the “Advances”, and each, an “Advance”.”


 


(b)           Section.  1.02 of the Loan Agreement is hereby amended
and restated in its entirety as follows:


 

















 


“Section 1.02               Interest and
Payments.


 


(a)           Interest.  Borrower shall pay interest in advance on the
unpaid principal amount of the Existing Advance from the date of the Existing
Advance until the Existing Advance is paid in full, at a rate of interest equal
to nine and one-half percent (9.50%) per annum, based upon a year of 360 days
and actual days elapsed.  Borrower shall
pay interest in advance on the unpaid principal amount of each Additional
Advance from the date of such Additional Advance until such Additional Advance
is paid in full, at a per annum rate of interest equal to the Prime Rate
determined as of the date of such Additional Advance plus 225 basis points,
based upon a year of 360 days and actual days elapsed.  If Borrower pays interest on any Advance
which is determined to be in excess of the then legal maximum rate, then that
portion of each interest payment representing an amount in excess of the then
legal maximum rate shall be deemed a payment of principal and applied against
the principal of such Advance.


 


(b)           Payments of
Principal and Interest.


 


(i)            For the Existing
Advance of Three Million Dollars ($3,000,000), Borrower shall make nine (9)
equal payments of interest only (payable in advance) on the first Business Day
of each month (each a “Payment Date”). 
Thereafter, Borrower shall make twenty-seven (27) equal payments of
principal and interest (payable in advance) on each Payment Date until such
Advance is paid in full.  The amount of
each such payment shall be sufficient to fully amortize the principal and
interest due on the applicable Advance over such twenty-seven (27) month
period.


 


(ii)           For the Initial
Additional Advance of Three Million Dollars ($3,000,000), Borrower shall make
six (6) equal payments of interest only (payable in advance) on each Payment
Date.  Thereafter, Borrower shall make
thirty (30) equal payments of principal and interest (payable in advance) on
each Payment Date from the date of such Advance until such Advance is paid in
full.  The amount of each such payment
shall be sufficient to fully amortize the principal and interest due on the
applicable Advance over such thirty (30) month period.


 


(iii)          For each Subsequent
Additional Advance, Borrower shall make three (3) equal payments of interest
only (payable in advance) on each Payment Date. 
Thereafter, Borrower shall make thirty-three (33) equal payments of principal
and interest (payable in advance) on each Payment Date until such Advance is
paid in full.  The amount of each such
payment shall be sufficient to fully amortize the principal and interest due on
the applicable Advance over such thirty-three (33) month period.


 


(c)           Interim Interest
Payment.  For each Advance, unless
the Funding Date is a Payment Date, Borrower shall make an advance payment of
interest on the Funding Date for the period from the Funding Date to the first
Payment Date.


 


(d)           Final Payment.  On the date on which the last payment is due
under Section 1.02(b) with respect to each Additional Advance, Borrower shall
pay to Agent, in addition to any remaining unpaid principal and accrued
interest and all other amounts previously due with respect to such Additional
Advance, an amount equal to three percent (3%) of the original principal amount
of such Additional Advance (the “Final Payment’).


 


2

















 


(e)           Prepayment.


 


(i)            Existinq Advance.  Upon five (5) Business Days’ prior written
notice to Agent, Borrower may, at its option, at any time, prepay all and not
less than all of the Existing Advance, in an amount equal to the outstanding
principal amounts of the Existing Advance, together with a make-whole premium
equal to the present value of all scheduled but unpaid interest payments
discounted at a rate equal to the current yield of U.S. Treasury securities
with a maturity closest to the remaining term of the Existing Advance plus
1.00% (the “Premium”).


 


(ii)           Additional Advances.  Upon five (5) Business Days’ prior written
notice to Agent, Borrower may, at its option, at any time, prepay all and not
less than all of the Additional Advances, in an amount equal to the outstanding
principal amounts of the Additional Advances, plus accrued and unpaid interest
thereon through and including the date of such prepayment, plus any other
amounts then due to Lenders


 


(c)           Article 10 of the Loan
Agreement hereby is amended by (A) amending and restating clause (vi) of the
definition of the term “Permitted Indebtedness” in its entirety so that such
clause reads as follows: “(vi) Indebtedness in connection with a formula-based
working capital line of credit with Comerica Bank in which the amount of the
Indebtedness does not exceed the lesser of: (A) 90% of the amount of Borrower’s
accounts receivable and Inventory shown on its balance sheet in accordance with
generally accepted accounting principles or (B) $4,000,000” and (B) adding the
following clause (viii) at the end of the definition of the term “Permitted
Indebtedness: “(viii) Indebtedness to Comerica Bank in addition to Indebtedness
permitted under clause (vi) hereof in an amount not to exceed $1,000,000
outstanding at any time.”


 


(d)           Article 10 of the Loan
Agreement hereby is further amended by adding the following clause (xv) at the
end of the definition of the term “Permitted Liens”: “(xv) Liens in favor of
Comerica Bank securing Indebtedness permitted under clause (viii) of the
definition of Permitted Indebtedness.”


 


3.             REPRESENTATIONS AND WARRANTIES.  Borrower hereby represents and warrants to
the Agents and the Lenders as follows:


 


(a)           It has the requisite
power and authority to execute and deliver this Amendment and to perform its
obligations hereunder and under the Transaction Documents to which it is a
party.  The execution, delivery, and
performance by it of this Amendment and the performance by it of each
Transaction Document to which it is a party (i) have been duly approved by all
necessary action on the part of Borrower and no other proceedings are necessary
to consummate such transactions on the part of Borrower; and (ii) are not in
contravention of (A) any Requirement of Law applicable to Borrower; or (B) any
provision of any material Contractual Obligation of Borrower; except, with
respect to each of the foregoing, that which could not be reasonably expected
to have a Material Adverse Effect;


 


(b)           This Amendment has been
duly executed and delivered by Borrower. 
This Amendment and each Transaction Document to which it is a party is
its legal, valid and binding obligation, enforceable against it in accordance
with its terms, and is in full force and effect except as such validity and
enforceability is limited by the laws of insolvency and bankruptcy, laws affecting
creditors’ rights and principles of equity applicable hereto;


 


(c)           No actions (including,
without limitation, derivative actions), suits, proceedings or investigations
are pending or, to the knowledge of Borrower, threatened against Borrower or
Borrower’s Subsidiaries at law or in equity in any court or before any other
Governmental Authority which if adversely determined (i) could reasonably be
expected (alone or in the aggregate) to have a Material Adverse Effect or (ii)
seeks to enjoin, either directly or indirectly, the execution, delivery or
performance by Borrower of the Transaction Documents or the transactions
contemplated thereby;


 


3

















 


(d)           No Default or Event of
Default has occurred and is continuing on the date hereof or as of the date of
the effectiveness of this Amendment; and


 


(e)           The representations and
warranties in the Loan Agreement and the other Transaction Documents are true
and correct in all material respects on and as of the date hereof, as though
made on such date (except to the extent that such representations and
warranties relate solely to an earlier date).


 


4.             CONDITIONS PRECEDENT TO AMENDMENT.  The satisfaction of each of the following
shall constitute conditions precedent to the effectiveness of this Amendment
and each and every provision hereof:


 


(a)           Agent shall have
received this Amendment, duly executed by the parties hereto, and the same
shall be in full force and effect;


 


(b)           Agent shall have
received a copy of all necessary consents of shareholders of Borrower and other
third parties with respect to the subject matter this Amendment and the other
documents being executed in connection herewith;


 


(c)           Agent shall have
received a Warrant Purchase Agreement in the form provided by Agent and agreed
to by Borrower, duly executed by Borrower;


 


(d)           Agent shall have
received the Warrants to be issued to the designees of the Lenders in forms
provided by Agent and agreed to by Borrower, duly executed by Borrower;


 


(e)           Agent shall have received
a commitment fee in the amount of $10,000, which fee shall be fully earned and
will be retained by Agent to be applied toward the Agent’s expenses and
reasonable fees of Agent’s counsel;


 


(f)            Agent shall have
received a consent from Comerica Bank with respect to the terms of this
Amendment, in form and substance reasonably acceptable to Agent;


 


(g)           The representations and
warranties in this Amendment and the Loan Agreement, as amended by this
Amendment, shall be true and correct in all material respects on and as of the
date hereof, as though made on such date (except to the extent that such
representations and warranties relate solely to an earlier date); and


 


(h)           No Default or Event of
Default shall have occurred and be continuing on the date hereof or as of the
date of the effectiveness of this Amendment.


 


5.             GOVERNING LAW.  THIS AMENDMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF CALIFORNIA,
WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.


 


6.             ENTIRE AMENDMENT; EFFECT OF AMENDMENT.  This Amendment, and the terms and provisions
hereof, constitute the entire agreement among the parties pertaining to the
subject matter hereof and supersedes any and all prior or contemporaneous
agreements relating to the subject matter hereof.  Except for the amendments to the Loan
Agreement expressly set forth in Section 2 hereof, the Loan Agreement and other
Transaction Documents shall remain unchanged and in full force and effect.  To the extent any terms or provisions of this
Amendment conflict with those of the Loan Agreement or other Transaction
Documents, the terms and provisions of this Amendment shall control.  This Amendment is a Transaction Document.


 


4

















 


7.             COUNTERPARTS; TELECOPY EXECUTION.  This Amendment may be executed in any number
of counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties hereto may execute this Amendment by signing
any such counterpart.  Delivery of an
executed counterpart of this Amendment by telecopy shall be equally as
effective as delivery of an original executed counterpart of this
Amendment.  Any party delivering an
executed counterpart of this Amendment by telecopy also shall deliver an
original executed counterpart of this Amendment, but the failure to deliver an
original executed counterpart shall not affect the validity, enforceability,
and binding effect of this Amendment.


 


8.             MISCELLANEOUS.


 


(a)           Upon the effectiveness
of this Amendment, each reference in the Loan Agreement to “this Agreement”, “hereunder”,
“herein”, “hereof or words of like import referring to the Loan Agreement shall
mean and refer to the Loan Agreement as amended by this Amendment.


 


(b)           Upon the effectiveness
of this Amendment, each reference in the Transaction Documents to the “Loan
Agreement”, “thereunder”, “therein”, “thereof’ or words of like import
referring to the Loan Agreement shall mean and refer to the Loan Agreement as
amended by this Amendment.


 


[signature page follows]


 


5

















 


IN
WITNESS WHEREOF, the parties hereto have executed this Amendment as of the date
first written above.


 


	
  AGENT:

  	
  BORROWER:

  
	
   

  	
   

  
	
  PINNACLE VENTURES, L.L.C.,

  	
  RELIANT TECHNOLOGIES, INC.

  
	
  a Delaware limited liability company

  	
  a Delaware corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/Robert N. Savoie

  	
   

  	
  By:

  	
             /s/Harvard
  Sung

  	
   

  
	
   

  	
   

  
	
  Name: Robert N. Savoie

  	
  Name: Harvard Sung

  
	
   

  	
   

  
	
  Title: Chief Financial Officer

  	
  Title: Chief Financial Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
  LENDERS:

  	
   

  
	
  PINNACLE VENTURES IA (SUB) (Q), L.P.,

  	
   

  
	
  a Delaware limited partnership

  	
   

  
	
  PINNACLE VENTURES I-B, L.P.,

  	
   

  
	
  a Delaware limited partnership

  	
   

  
	
  PINNACLE VENTURES I AFFILIATES, L,P.,

  	
   

  
	
  a Delaware limited partnership

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  Pinnacle Ventures Management I, L.L.C.,

  	
   

  
	
   

  	
  their general partner

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/Robert N. Savoie

  	
   

  	
   

  
	
   

  	
   

  
	
  Name: Robert N. Savoie

  	
   

  
	
   

  	
   

  
	
  Title: Chief Financial Officer

  	
   

  
							



 

















 


AMENDMENT NO. 3

TO LOAN AND SECURITY AGREEMENT


 


This AMENDMENT NO. 3 TO LOAN AND SECURITY
AGREEMENT (this “Amendment”), dated as of August 20, 2007, is
entered into by and among RELIANT TECHNOLOGIES, INC.,
a Delaware corporation (the “Borrower”), Pinnacle Ventures, L.L.C. as
agent (“Agent”) for each of the lenders that is a signatory to this
Amendment (individually, a “Lender” and collectively, the “Lenders”),
and the Lenders.


 


WITNESSETH


 


WHEREAS, the Borrower, Agent and the Lenders are parties to that
certain Loan and Security Agreement, dated as of April 2, 2004, as amended by
that certain Amendment No. 1 to Loan and Security Agreement, dated as of August
26, 2004, and that certain Amendment No. 2 to Loan and Security Agreement,
dated as of November 3, 2005 (as amended, restated, supplemented or otherwise
modified from time to time, the “Loan Agreement”); and


 


WHEREAS, subject to the satisfaction of the conditions set forth
herein, the Borrower, the Agent and the Lenders are willing to amend the Loan
Agreement on the terms set forth herein.


 


NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:


 


1.             DEFINITIONS.  Capitalized terms used herein and not
otherwise defined herein shall have the meanings ascribed to them in the Loan
Agreement, as amended hereby.


 


2.             AMENDMENT
TO LOAN AGREEMENT.


 


(a)           Section
1.01 of the Loan Agreement is hereby amended and restated in its entirety as
follows:


 


“Section 1.01                       Commitment.  Borrower promises to pay to Lenders, in
lawful money of the United States of America, the aggregate unpaid principal
amount of all Advances made by Lenders to Borrower hereunder.  Borrower also promises to pay to Lenders
interest on the unpaid principal amount of such Advances at rates in accordance
with the terms hereof.  Advances shall be
made not more often than monthly in amounts of no less than One Hundred
Thousand Dollars ($100,000).  Lenders
have advanced to Borrower (a) on April 16, 2004, a term loan in an aggregate
principal amount of Three Million Dollars ($3,000,000) (“Advance 1”),
(b) on November 4, 2005, a term loan in an aggregate principal amount of Three
Million Dollars ($3,000,000) (“Advance 2”), and (c) on February 21, 2006, a
term loan in an aggregate principal amount of One Million Dollars ($1,000,000)
(“Advance 3,” and collectively with Advance 1 and Advance 2, the “Existing
Advances”).  Subject to the terms and
conditions of this Loan Agreement, Lenders agree to advance to Borrower (i)
from time to time on or prior to December 31, 2007, additional term loans in an
aggregate principal amount of Two Million Five Hundred Thousand Dollars
($2,500,000) (each, a “Tranche 1 Additional Advance”) and (ii) from time to
time on or prior to March 31, 2008, additional term loans in an aggregate
principal amount not to exceed Two Million Five Hundred Thousand Dollars
($2,500,000) (each, a “Tranche 2 Additional Advance”, and together with the
Tranche 1 Additional Advances, each, an “Additional Advance”)  The Additional Advances and the Existing
Advances shall be collectively referred to herein as the “Advances”, and each,
an “Advance”.”


 


(b)           Section
1.02 of the Loan Agreement is hereby amended and restated in its entirety as
follows:


 


“Section 1.02                       Interest
and Payments.


 


(a)           Interest.


 


(i)            Advance
1.  Borrower shall pay interest in
advance on the unpaid principal amount of Advance 1 from the date of such
Advance until such Advance is paid in


 

















 


full, at a rate of interest equal to nine and one-half percent (9.50%)
per annum, based upon a year of 360 days and actual days elapsed.


 


(ii)           Advances
2 and 3.  Borrower shall pay interest
in advance on the unpaid principal amount of Advance 2 and Advance 3 from the
date of such Advance until such Advance is paid in full, at a per annum rate of
interest equal to the Prime Rate determined as of the date of such Advance plus
225 basis points, based upon a year of 360 days and actual days elapsed.


 


(iii)          Additional
Advances.  Borrower shall pay
interest in advance on the unpaid principal amount of each Additional Advance
from the date of such Advance until such Advance is paid in full, at a per
annum rate of interest equal to the Prime Rate determined as of the date of
such Advance plus 225 basis points, based upon a year of 360 days and actual
days elapsed.


 


(iv)          Excess
Interest.  If Borrower pays interest
on any Advance which is determined to be in excess of the then legal maximum
rate, then that portion of each interest payment representing an amount in
excess of the then legal maximum rate shall be deemed a payment of principal
and applied against the principal of such Advance.


 


(b)           Payments
of Principal and Interest.


 


(i)            For
Advance 1 in the amount of Three Million Dollars ($3,000,000), Borrower shall
make nine (9) equal payments of interest only (payable in advance) on the first
Business Day of each month (each a “Payment Date”). Thereafter, Borrower
shall make twenty-seven (27) equal payments of principal and interest (payable
in advance) on each Payment Date until such Advance is paid in full.  The amount of each such payment shall be
sufficient to fully amortize the principal and interest due on the applicable
Advance over such twenty-seven (27) month period.


 


(ii)           For
Advance 2 in the amount of Three Million Dollars ($3,000,000), Borrower shall
make six (6) equal payments of interest only (payable in advance) on each
Payment Date. Thereafter, Borrower shall make thirty (30) equal payments of
principal and interest (payable in advance) on each Payment Date from the date
of such Advance until such Advance is paid in full.  The amount of each such payment shall be
sufficient to fully amortize the principal and interest due on the applicable
Advance over such thirty (30) month period.


 


(iii)          For
Advance 3 in the amount of One Million Dollars ($1,000,000), Borrower shall
make three (3) equal payments of interest only (payable in advance) on each
Payment Date. Thereafter, Borrower shall make thirty-three (33) equal payments
of principal and interest (payable in advance) on each Payment Date until such
Advance is paid in full.  The amount of
each such payment shall be sufficient to fully amortize the principal and
interest due on the applicable Advance over such thirty-three (33) month
period.


 


(iii)          For
each Additional Advance, Borrower shall make six (6) equal payments of interest
only (payable in advance) on each Payment Date. Thereafter, Borrower shall make
thirty (30) equal payments of principal and interest (payable in advance) on
each Payment Date until such Advance is paid in full.  The amount of each such payment shall be
sufficient to fully amortize the principal and interest due on the applicable Advance
over such thirty (30) month period.


 


(c)           Interim Interest
Payment.  For each Advance, unless
the Funding Date is a Payment Date, Borrower shall make an advance payment of
interest on the Funding Date for the period from the Funding Date to the first
Payment Date.


 


(d)           Final Payment.  On the date on which the last payment is due
under Section 1.02(b) with respect to Advance 2, Advance 3 and each
Additional Advance, Borrower shall pay to


 


2

















 


Agent, in addition
to any remaining unpaid principal and accrued interest and all other amounts
previously due with respect to such Advance, an amount equal to three percent
(3%) of the original principal amount of such Advance (each, a “Final Payment”).


 


(e)           Prepayment.  Upon five (5) Business Days’ prior written
notice to Agent, Borrower may, at its option, at any time, prepay all and not
less than all of Advances, in an amount equal to the outstanding principal
amounts of all Advances; plus all accrued and unpaid interest thereon through
and including the date of such prepayment; plus (i) with respect to Advance 1,
a make-whole premium equal to the present value of all scheduled but unpaid
interest payments discounted at a rate equal to the current yield of U.S. Treasury
securities with a maturity closest to the remaining term of such Advance plus
1.00%, and (ii) with respect to Additional Advances, a premium on the
outstanding principal amount equal to (A) 6%, if such Advance is prepaid on or
prior to the date that is 1 year from the date of funding such Advance, (B) 3%,
if such Advance is prepaid after the date that is 1 year from but on or prior
to the date that is 2 years from the date of funding such Advance, and (C) 1%,
if such Advance is prepaid at any time after the date that is 2 years from the
date of funding such Advance; plus the Final Payments; plus any other amounts
then due to Lenders.


 


(c)           Article
10 of the Loan Agreement hereby is amended by amending and restating clause
(vi) of the definition of the term “Permitted Indebtedness” in its entirety so
that such clause reads as follows: “(vi) Indebtedness in connection with a
formula-based working capital line of credit with Comerica Bank in which the
amount of the Indebtedness does not exceed the lesser of: (A) 90% of the amount
of Borrower’s accounts receivable and Inventory shown on its balance sheet in
accordance with generally accepted accounting principles or (B) $8,000,000.”


 


3.             REPRESENTATIONS
AND WARRANTIES.  Borrower hereby
represents and warrants to the Agents and the Lenders as follows:


 


(a)           It
has the requisite power and authority to execute and deliver this Amendment and
to perform its obligations hereunder and under the Transaction Documents to
which it is a party.  The execution,
delivery, and performance by it of this Amendment and the performance by it of
each Transaction Document to which it is a party (i) have been duly approved by
all necessary action on the part of Borrower and no other proceedings are
necessary to consummate such transactions on the part of Borrower; and (ii) are
not in contravention of (A) any Requirement of Law applicable to Borrower; or
(B)  any provision of any material Contractual Obligation of Borrower;
except, with respect to each of the foregoing, that which could not be
reasonably expected to have a Material Adverse Effect;


 


(b)           This
Amendment has been duly executed and delivered by Borrower.  This Amendment and each Transaction Document
to which it is a party is its legal, valid and binding obligation, enforceable
against it in accordance with its terms, and is in full force and effect except
as such validity and enforceability is limited by the laws of insolvency and
bankruptcy, laws affecting creditors’ rights and principles of equity
applicable hereto;


 


(c)           No
actions (including, without limitation, derivative actions), suits, proceedings
or investigations are pending or, to the knowledge of Borrower, threatened
against Borrower or Borrower’s Subsidiaries at law or in equity in any court or
before any other Governmental Authority which if adversely determined
(i) could reasonably be expected (alone or in the aggregate) to have a
Material Adverse Effect or (ii) seeks to enjoin, either directly or
indirectly, the execution, delivery or performance by Borrower of the
Transaction Documents or the transactions contemplated thereby;


 


(d)           No
Default or Event of Default has occurred and is continuing on the date hereof
or as of the date of the effectiveness of this Amendment; and


 


3

















 


(e)           The
representations and warranties in the Loan Agreement and the other Transaction
Documents are true and correct in all material respects on and as of the date
hereof, as though made on such date (except to the extent that such representations
and warranties relate solely to an earlier date).


 


4.             CONDITIONS
PRECEDENT TO AMENDMENT.  The
satisfaction of each of the following shall constitute conditions precedent to
the effectiveness of this Amendment and each and every provision hereof:


 


(a)           Agent
shall have received this Amendment, duly executed by the parties hereto, and
the same shall be in full force and effect;


 


(b)           Agent
shall have received a copy of all necessary consents of shareholders of
Borrower and other third parties with respect to the subject matter this
Amendment and the other documents being executed in connection herewith;


 


(c)           Agent
shall have received the Warrant Purchase Agreements in the form provided by
Agent and agreed to by Borrower, duly executed by Borrower;


 


(d)           Agent
shall have received the Warrants to be issued to the designees of the Lenders
in forms provided by Agent and agreed to by Borrower, duly executed by
Borrower;


 


(e)           Agent
shall have received a commitment fee in the amount of $10,000, which fee shall
be fully earned and will be retained by Agent to be applied toward the Agent’s
expenses and reasonable fees of Agent’s counsel;


 


(f)            Agent
shall have received a consent from Comerica Bank with respect to the terms of
this Amendment, in form and substance reasonably acceptable to Agent;


 


(g)           The
representations and warranties in this Amendment and the Loan Agreement, as
amended by this Amendment, shall be true and correct in all material respects
on and as of the date hereof, as though made on such date (except to the extent
that such representations and warranties relate solely to an earlier date); and


 


(h)           No
Default or Event of Default shall have occurred and be continuing on the date
hereof or as of the date of the effectiveness of this Amendment.


 


5.             GOVERNING LAW.  THIS AMENDMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF CALIFORNIA,
WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.


 


6.             ENTIRE AMENDMENT;
EFFECT OF AMENDMENT.  This
Amendment, and the terms and provisions hereof, constitute the entire agreement
among the parties pertaining to the subject matter hereof and supersedes any
and all prior or contemporaneous agreements relating to the subject matter
hereof.  Except for the amendments to the
Loan Agreement expressly set forth in Section 2 hereof, the Loan Agreement and
other Transaction Documents shall remain unchanged and in full force and
effect.  To the extent any terms or
provisions of this Amendment conflict with those of the Loan Agreement or other
Transaction Documents, the terms and provisions of this Amendment shall
control.  This Amendment is a Transaction
Document.


 


7.             COUNTERPARTS;
TELECOPY EXECUTION.  This
Amendment may be executed in any number of counterparts, all of which taken
together shall constitute one and the same instrument and any of the parties
hereto may execute this Amendment by signing any such counterpart.  Delivery of an executed counterpart of


 


4

















 


this Amendment by telecopy
shall be equally as effective as delivery of an original executed counterpart
of this Amendment.  Any party delivering
an executed counterpart of this Amendment by telecopy also shall deliver an
original executed counterpart of this Amendment, but the failure to deliver an
original executed counterpart shall not affect the validity, enforceability,
and binding effect of this Amendment.


 


8.             MISCELLANEOUS.


 


(a)           Upon
the effectiveness of this Amendment, each reference in the Loan Agreement to
“this Agreement”, “hereunder”, “herein”, “hereof” or words of like import
referring to the Loan Agreement shall mean and refer to the Loan Agreement as
amended by this Amendment.


 


(b)           Upon
the effectiveness of this Amendment, each reference in the Transaction
Documents to the “Loan Agreement”, “thereunder”, “therein”, “thereof” or words
of like import referring to the Loan Agreement shall mean and refer to the Loan
Agreement as amended by this Amendment.


 


[signature page follows]


 


5

















 


IN WITNESS WHEREOF, the parties hereto have executed this Amendment as
of the date first written above.


 


	
  AGENT:

  	
  BORROWER:

  
	
   

  	
   

  
	
  PINNACLE VENTURES, L.L.C.,

  	
  RELIANT TECHNOLOGIES, INC.

  
	
  a Delaware limited liability company

  	
  a Delaware corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
     /s/ Robert N. Savoie

  	
   

  	
  By:

  	
     /s/ Andrew Galligan

  	
   

  
	
   

  	
   

  
	
  Name: Robert N. Savoie

  	
  Name: Andrew Galligan

  
	
   

  	
   

  
	
  Title: Chief Financial Officer

  	
  Title: Chief Financial Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
  LENDERS:

  	
   

  
	
   

  	
   

  
	
  PINNACLE VENTURES I-A (SUB) (Q), L.P.,

  	
   

  
	
  a Delaware limited partnership

  	
   

  
	
  PINNACLE VENTURES I-B, L.P.,

  	
   

  
	
  a Delaware limited partnership

  	
   

  
	
  PINNACLE VENTURES I AFFILIATES, L.P.,

  	
   

  
	
  a Delaware limited partnership

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  Pinnacle Ventures Management I, L.L.C.,

  
	
   

  	
  their general partner

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
     /s/ Robert N. Savoie

  	
   

  
	
   

  	
   

  
	
  Name: Robert N. Savoie

  	
   

  
	
   

  	
   

  
	
  Title: Chief Financial Officer