Document:

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

 

6

 

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,

 

7

 

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.

 

[REMAINDER OF PAGE INTENTIONALLY
LEFT BLANK)

 

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 OfficerExhibit 10.46

 

 

 

RELIANT TECHNOLOGIES, INC.

 

LOAN AND SECURITY AGREEMENT

 

 

 

This
LOAN AND SECURITY AGREEMENT is entered into as of August 26, 2004, by and
between COMERICA BANK (“Bank”) and RELIANT TECHNOLOGIES, INC. (“Borrower”).

 

RECITALS

 

Borrower
wishes to obtain credit from time to time from Bank, and Bank desires to extend
credit to Borrower. This Agreement sets forth the terms on which Bank will
advance credit to Borrower, and Borrower will repay the amounts owing to Bank.

 

AGREEMENT

 

The
parties agree as follows:

 

1.             DEFINITIONS
AND CONSTRUCTION.

 

1.1           Definitions. As
used in this Agreement, the following terms shall have the following
definitions:

 

“Accounts” means all presently existing and hereafter
arising accounts, contract rights, payment intangibles, and all other forms of
obligations owing to Borrower arising out of the sale or lease of goods
(including, without limitation, the licensing of software and other technology)
or the rendering of services by Borrower, 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.

 

“Advance” or “Advances” means a cash advance or cash advances
under the Revolving Facility.

 

“Affiliate” means, with respect to any Person, any
Person that owns or controls directly or indirectly such Person, any Person
that controls or is controlled by or is under common control with such Person,
and each of such Person’s senior executive officers, directors, and general and
limited partners.

 

“Bank Expenses” means all:  reasonable costs or expenses (including
reasonable attorneys’ fees and expenses) incurred in connection with the
preparation, negotiation, administration, and enforcement of the Loan
Documents; reasonable Collateral audit fees; and Bank’s reasonable attorneys’
fees and expenses incurred in amending, enforcing or defending the Loan
Documents (including fees and expenses of appeal), incurred before, during and
after an Insolvency Proceeding, whether or not suit is brought.

 

“Borrowers Books” means all of Borrower’s books and
records including:  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.

 

“Borrowing Base” means an amount equal to eighty
percent (80%) of Eligible Accounts, and eighty percent (80%) of Eligible
Inventory (provided, that Advances based upon Eligible Inventory shall not
exceed One Million Five Hundred Thousand Dollars ($1,500,000)), all as
determined by Bank with reference to the most recent Borrowing Base Certificate
delivered by Borrower.

 

“Business Day” means any day that is not a Saturday,
Sunday, or other day on which banks in the State of California are authorized
or required to close.

 

“Change in Control” shall mean a transaction in which
any “person” or “group” (within the meaning of Section 13(d) and 14(d)(2) of the
Securities Exchange Act of 1934) becomes the “beneficial owner” (as defined in
Rule 13d-3 under the Securities Exchange Act of 1934), directly or indirectly,
of a sufficient number of shares of all classes of stock then outstanding of
Borrower ordinarily entitled to vote in the election of directors,

 

1

 

empowering such “person” or “group” to elect a
majority of the Board of Directors of Borrower, who did not have such power
before such transaction.

 

“Closing Date” means the date of this Agreement.

 

“Code” means the California Uniform Commercial Code.

 

“Collateral” means the property described on Exhibit
A attached hereto.

 

“Contingent Obligation” means, as applied to any
Person, any direct or indirect liability, contingent or otherwise, of that
Person with respect to (i) any indebtedness, lease, dividend, letter of credit
or other obligation of another, including, without limitation, any such
obligation directly or indirectly guaranteed, endorsed, co-made or discounted
or sold with recourse by that Person, or in respect of which that Person is
otherwise directly or indirectly liable; (ii) any obligations with respect to
undrawn letters of credit, corporate credit cards, or merchant services issued
or provided for the account of that Person; and (iii) all obligations arising
under any interest rate, currency or commodity swap agreement, interest rate
cap agreement, interest rate collar agreement, or other agreement or
arrangement designed to protect such Person against fluctuation in interest
rates, currency exchange rates or commodity prices; provided, however, that the
term “Contingent Obligation” shall not include endorsements for collection or
deposit in the ordinary course of business. The amount of any Contingent
Obligation shall be deemed to be an amount equal to the stated or determined
amount of the primary obligation in respect of which such Contingent Obligation
is made or, if not stated or determinable, the maximum reasonably anticipated
liability in respect thereof as determined by such Person in good faith;
provided, however, that such amount shall not in any event exceed the maximum
amount of the obligations under the guarantee or other support arrangement.

 

“Credit Extension” means each Advance or any other
extension of credit by Bank for the benefit of Borrower hereunder.

 

“Current Liabilities” means, as of any applicable
date, all amounts that should, in accordance with GAAP, be included as current
liabilities on the consolidated balance sheet of Borrower and its Subsidiaries,
as at such date, plus, to the extent not already included therein, all
outstanding Credit Extensions made under this Agreement, including all
Indebtedness that is payable upon demand or within one year from the date of
determination thereof unless such Indebtedness is renewable or extendible at
the option of Borrower or any Subsidiary to a date more than one year from the
date of determination.

 

“Daily Balance” means the amount of the Obligations
owed at the end of a given day.

 

“Eligible Accounts” means those Accounts that arise in
the ordinary course of Borrower’s business that comply with all of Borrower’s
representations and warranties to Bank set forth in Section 5.4; provided, that
standards of eligibility may be fixed and revised from time to time by Bank in
Bank’s good faith business judgment and upon prior written notification thereof
to Borrower in accordance with the provisions hereof. Unless otherwise agreed
to by Bank, Eligible Accounts shall not include the following:

 

(a)           Accounts that the
account debtor has failed to pay within ninety (90) days of invoice date;

 

(b)           Accounts with respect
to an account debtor, twenty-five percent (25%) of whose Accounts the account
debtor has failed to pay within ninety (90) days of invoice date;

 

(c)           Accounts with respect
to which the account debtor is an officer, employee, or agent of Borrower;

 

(d)           Accounts with respect
to which goods are placed on consignment, guaranteed sale, sale or return, sale
on approval, bill and hold, or other terms by reason of which the payment by
the account debtor may be conditional;

 

2

 

(e)           Accounts with respect
to which the account debtor is an Affiliate of Borrower;

 

(f)            Accounts with respect
to which the account debtor does not have its principal place of business in
the United States, except for Eligible Foreign Accounts;

 

(g)           Accounts with respect
to which the account debtor is the United States or any department, agency, or
instrumentality of the United States;

 

(h)           Accounts with respect
to which Borrower is liable to the account debtor for goods sold or services
rendered by the account debtor to Borrower or for deposits or other property of
the account debtor held by Borrower, but only to the extent of any amounts
owing to the account debtor against amounts owed to Borrower;

 

(i)            Accounts with respect
to an account debtor, including Subsidiaries and Affiliates, whose total
obligations to Borrower exceed twenty-five percent (25%) of all Accounts, to the
extent such obligations exceed the aforementioned percentage, except as
approved in writing by Bank;

 

(j)            Accounts with respect
to which the account debtor disputes liability or makes any claim with respect
thereto as to which Bank believes, in its sole discretion, that there may be a
basis for dispute (but only to the extent of the amount subject to such dispute
or claim), or is subject to any Insolvency Proceeding, or becomes insolvent, or
goes out of business; and

 

(k)           Accounts the collection
of which Bank reasonably determines to be doubtful.

 

“Eligible Foreign Accounts” means Accounts with
respect to which the account debtor does not have its principal place of
business in the United States and that (i) are supported by one or more letters
of credit in an amount and of a tenor, and issued by a financial institution,
acceptable to Bank, or (ii) that Bank approves on a case-by-case basis.

 

“Eligible Inventory” means those Inventory items which
are finished products or raw materials that could become finished products
within seventy two (72) hours and in all cases which Bank has not reasonably
determined are obsolete and which are approved by Bank for inclusion in the
Borrowing Base which approval shall not be unreasonably withheld.

 

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

 

“ERISA” means the Employee Retirement Income Security
Act of 1974, as amended, and the regulations thereunder.

 

“Event of Default” has the meaning assigned in Article
8.

 

“GAAP” means generally accepted accounting principles
as in effect from time to time.

 

“Indebtedness” means (a) all indebtedness for borrowed
money or the deferred purchase price of property or services, including without
limitation reimbursement and other obligations with respect to surety bonds and
letters of credit, (b) all obligations evidenced by notes, bonds, debentures or
similar instruments, (c) all capital lease obligations and (d) all Contingent
Obligations.

 

“Insolvency Proceeding” means any proceeding commenced
by or against any person or entity under any provision of the United States
Bankruptcy Code, as amended, or under any other bankruptcy or insolvency law,
including assignments for the benefit of creditors, formal or informal
moratoria, compositions, extension generally with its creditors, or proceedings
seeking reorganization, arrangement, or other relief.

 

3

 

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

 

“IRC” means the Internal Revenue Code of 1986, as
amended, and the regulations thereunder.

 

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

 

“Loan Documents” means, collectively, this Agreement,
any note or notes executed by Borrower, and any other agreement entered into in
connection with this Agreement, all as amended or extended from time to time.

 

“Material Adverse Effect” means a material adverse
effect on (i) the business operations or condition (financial or otherwise) of
Borrower and its Subsidiaries taken as a whole or (ii) the ability of Borrower
to repay the Obligations or otherwise perform its obligations under the Loan
Documents or (iii) the value or priority of Bank’s security interests in the
Collateral.

 

“Negotiable Collateral” means all of Borrower’s present
and future letters of credit of which it is a beneficiary, notes, drafts,
instruments, securities, documents of title, and chattel paper, and Borrower’s
Books relating to any of the foregoing.

 

“Obligations” means all debt, principal, interest,
Bank Expenses and other amounts owed to Bank by Borrower pursuant to this
Agreement or any other agreement, whether absolute or contingent, due or to
become due, now existing or hereafter arising, including any interest that
accrues after the commencement of an Insolvency Proceeding and including any
debt, liability, or obligation owing from Borrower to others that Bank may have
obtained by assignment or otherwise; provided “Obligations” shall not include
any obligations of Borrower under the terms of any warrants provided to Bank in
connection with this Agreement.

 

“Periodic Payments” means all installments or similar
recurring payments that Borrower may now or hereafter become obligated to pay
to Bank pursuant to the terms and provisions of any instrument, or agreement
now or hereafter in existence between Borrower and Bank.

 

“Permitted Indebtedness” means:

 

(a)           Indebtedness of
Borrower in favor of Bank arising under this Agreement or any other Loan
Document;

 

(b)           Indebtedness existing
on the Closing Date and disclosed in the Schedule;

 

(c)           Indebtedness secured by
a lien described in clause (c) of the defined term “Permitted Liens,” provided
(i) such Indebtedness does not exceed the lesser of the cost or fair market
value of the equipment financed with such Indebtedness;

 

(d)           Subordinated Debt;

 

4

 

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

 

(f)            Indebtedness other
than Indebtedness described in clauses (a) through (e) of this definition of
Permitted Indebtedness, provided such Indebtedness shall not exceed One Hundred
Thousand Dollars ($100,000) in the aggregate at any given time; and

 

(g)           Extensions,
refinancings and renewals of any items of Permitted Indebtedness, provided that
the principal amount is not increased or the terms modified to impose more
burdensome terms upon Borrower or its Subsidiary, as the case may be.

 

“Permitted Investment” means:

 

(a)           Investments existing on
the Closing Date disclosed in the Schedule;

 

(b)           (i) 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; (ii) 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, (iii) certificates of deposit maturing no more than one (1)
year from the date of investment therein issued by Bank and (iv) Banks money
market accounts;

 

(c)           Investments in
Subsidiaries provided that the aggregate amount of such Investments does not
exceed Two Hundred Thousand Dollars ($200,000) at any given time;

 

(d)           Repurchases of stock
from former employees or directors of Borrower under the terms of applicable
repurchase agreements; provided that no Event of Default has occurred, is
continuing or would exist after giving effect to the repurchases and that the
aggregate amount of such repurchases does not exceed One Hundred Fifty Thousand
Dollars ($150,000) during any fiscal year;

 

(e)           Investments accepted in
connection with Permitted Transfers;

 

(f)            Investments consisting
of (i) travel advances and employee relocation loans and other employee loans
and advances in the ordinary course of business, and (ii) loans to employees
relating to the purchase of equity securities of Borrower or its Subsidiaries
pursuant to employee stock purchase plan agreements approved by Borrower’s
Board of Directors; provided that the aggregate amount of such Investments does
not exceed One Million Dollars ($1,000,000) during any fiscal year;

 

(g)           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
Borrower’s business;

 

(h)           Investments consisting
of notes receivable of, or prepaid royalties and other credit extensions, to
customers and suppliers who are not Affiliates, in the ordinary course of
business;

 

(i)            Non-cash Investments
in joint ventures, partnerships or collaborations with any third party; and

 

(j)            Investments made
pursuant to Borrower’s investment policy which has been approved by Borrower’s
Board of Directors and Bank;

 

(k)           Investments not
otherwise permitted under Section 7.7 which do not exceed One Hundred Thousand
Dollars ($100,000) in the aggregate during the term of this Agreement.

 

“Permitted Liens” means the following:

 

5

 

(a)           Any Liens existing on
the Closing Date and disclosed in the Schedule or arising under this Agreement
or the other Loan Documents;

 

(b)           Liens for taxes, fees,
assessments or other governmental charges or levies, either not delinquent or
being contested in good faith by appropriate proceedings, provided the same
have no priority over any of Bank’s security interests;

 

(c)           Liens (i) upon or in
any equipment which was not financed by Bank 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 (ii) 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;

 

(d)           Liens incurred in
connection with the extension, renewal or refinancing of the indebtedness
secured by Liens of the type described in clauses (a) through (c) 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;

 

(e)           Liens arising from
judgments, decrees or attachments in circumstances not constituting an Event of
Default under Sections 8.4 or 8.8;

 

(f)            Leases or subleases
and licenses or sublicenses granted to others which do not interfere in any
material respect with the business of Borrower and its Subsidiaries taken as a
whole;

 

(g)           Deposits in the
ordinary course of business under worker’s compensation, unemployment
insurance, social security and other similar laws, or to secure the performance
of bids, tenders or contracts (other than for the repayment of borrowed money)
or to secure indemnity, performance or other similar bonds for the performance
of bids, tenders or contracts (other than for the repayment of borrowed money)
or to secure statutory obligations (other than liens arising under ERISA or
environmental liens) or surety or appeal bonds, or to secure indemnity,
performance or other similar bonds;

 

(h)           Liens in favor of
customs and revenue authorities arising in the ordinary course of Borrower’s
business or by operation of law to secure payments of custom duties in
connection with the importation of goods;

 

(i)            Liens of materialmen,
mechanics, warehousemen, carriers, artisan’s or other similar Liens arising in
the ordinary course of Borrower’s business or by operation of law, which are
not past due or which are being contested in good faith by appropriate
proceedings and for which reserves have been established in accordance with
GAAP; and

 

(j)            Liens in favor of
other financial institutions arising in connection with Borrower’s deposit
accounts held at such institutions, provided that Bank has a prior perfected
security interest in the amounts held in such deposit accounts.

 

“Permitted Transfer” means the conveyance, grant,
sale, lease, transfer or disposition by Borrower or any Subsidiary of:

 

(a)           Inventory in the
ordinary course of business;

 

(b)           non-exclusive licenses
and similar arrangements for the use of the property of Borrower or its
Subsidiaries in the ordinary course of business;

 

(c)           exclusive licenses in
specific fields of use not related to Borrower’s primary business;

 

6

 

(d)           surplus, worn-out or
obsolete Equipment not financed by Bank; or

 

(e)           transfers from any
Subsidiary to Borrower;

 

(f)            transfers of
investment property of Borrower for the sole purpose of obtaining replacement
investment property with the proceeds of such transfer; or

 

(g)           other assets of
Borrower or its Subsidiaries which do not in the aggregate exceed One Hundred
Thousand Dollars ($100,000) during any fiscal year.

 

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

 

“Prime Rate” means the variable rate of interest, per
annum, most recently announced by Bank, as its “prime rate,” whether or not
such announced rate is the lowest rate available from Bank.

 

“Quick Assets “ means, at any date as of which the
amount thereof shall be determined, the unrestricted cash and cash-equivalents
and Eligible Accounts of Borrower determined in accordance with GAAP.

 

“Responsible Officer” means each of the Chief
Executive Officer, the Chief Operating Officer, the Chief Financial Officer,
any Vice President, the Treasurer and the Controller of Borrower.

 

“Revolving Facility” means the facility under which
Borrower may request Bank to issue Advances, as specified in Section 2.1(a)
hereof.

 

“Revolving Line” means a credit extension of up to Two
Million Dollars ($2,000,000).

 

“Revolving Maturity Date” means August 25, 2005.

 

“Schedule” means the schedule of exceptions attached
hereto and approved by Bank, if any.

 

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

 

“Subsidiary” means any corporation, company or partnership
in which (i) any general partnership interest or (ii) more than 50% of the
stock or other units of ownership which by the terms thereof has the ordinary
voting power to elect the Board of Directors, managers or trustees of the
entity, at the time as of which any determination is being made, is owned by
Borrower, either directly or through an Affiliate.

 

1.2           Accounting Terms.
All accounting terms not specifically defined herein shall be construed in
accordance with GAAP and all calculations made hereunder shall be made in
accordance with GAAP. When used herein, the terms “financial statements” shall
include the notes and schedules thereto.

 

2.             LOAN
AND TERMS OF PAYMENT.

 

2.1           Credit Extension.

 

Borrower promises to pay to the order of Bank, in
lawful money of the United States of America, the aggregate unpaid principal
amount of all Credit Extensions made by Bank to Borrower hereunder. Borrower
shall also pay interest on the unpaid principal amount of such Credit
Extensions at rates in accordance with the terms hereof.

 

7

 

(a)           Revolving Advances.

 

(i)            Subject to and upon
the terms and conditions of this Agreement, Borrower may request Advances in an
aggregate outstanding amount not to exceed the lesser of (i) the Revolving Line
or (ii) the Borrowing Base. Subject to the terms and conditions of this
Agreement, amounts borrowed pursuant to this Section 2.1(a) may be repaid and
reborrowed at any time prior to the Revolving Maturity Date, at which time all
Advances under this Section 2.1(a) shall be immediately due and payable. Borrower
may prepay any Advances without penalty or premium.

 

(ii)           Whenever Borrower
desires an Advance, Borrower will notify Bank by facsimile transmission or
telephone no later than 3:00 p.m. Pacific time, on the Business Day that the
Advance is to be made. Each such notification shall be promptly confirmed by a
Payment/Advance Form in substantially the form of Exhibit B hereto. Bank is
authorized to make Advances under this Agreement, based upon instructions
received from a Responsible Officer or a designee of a Responsible Officer, or
without instructions if in Banks discretion such Advances arc necessary to meet
Obligations which have become due and remain unpaid. Bank shall be entitled to
rely on any telephonic notice given by a person who Bank reasonably believes to
be a Responsible Officer or a designee thereof, and Borrower shall indemnify
and hold Bank harmless for any damages or loss suffered by Bank as a result of
such reliance. Bank will credit the amount of Advances made under this Section
2.1(a) to Borrower’s deposit account.

 

2.2           Overadvances. If
the aggregate amount of the outstanding Advances exceeds the lesser of the
Revolving Line or the Borrowing Base at any time, Borrower shall immediately
pay to Bank, in cash, the amount of such excess.

 

2.3           Interest Rates,
Payments, and Calculations.

 

(a)           Interest Rates.

 

(i)            Advances. Except
as set forth in Section 2.3(b), the Advances shall bear interest, on the
outstanding Daily Balance thereof, at a rate equal to one percent (1.00%) above
the Prime Rate.

 

(b)           Late Fee:  Default Rate. If any payment is not made
within ten (10) days after the date such payment is due, Borrower shall pay
Bank a late fee equal to the lesser of (i) five percent (5%) of the amount of
such unpaid amount or (ii) the maximum amount permitted to be charged under
applicable law. All Obligations shall bear interest, from and after the
occurrence and during the continuance of an Event of Default, at a rate equal
to five (5) percentage points above the interest rate applicable immediately
prior to the occurrence of the Event of Default.

 

(c)           Payments. Interest
hereunder shall be due and payable on the last calendar day of each month
during the term hereof. Bank shall, at its option, charge such interest, all
Bank Expenses, and all Periodic Payments against any of Borrower’s deposit
accounts or against the Revolving Line, in which case those amounts shall
thereafter accrue interest at the rate then applicable hereunder. Any interest
not paid when due shall be compounded by becoming a part of the Obligations,
and such interest shall thereafter accrue interest at the rate then applicable
hereunder. All payments shall be free and clear of any taxes, withholdings,
duties, impositions or other charges, to the end that Bank will receive the
entire amount of any Obligations payable hereunder, regardless of source of
payment.

 

(d)           Computation. In
the event the Prime Rate is changed from time to time hereafter, the applicable
rate of interest hereunder shall be increased or decreased, effective as of the
day the Prime Rate is changed, by an amount equal to such change in the Prime
Rate. All interest chargeable under the Loan Documents shall be computed on the
basis of a three hundred sixty (360) day year for the actual number of days
elapsed.

 

2.4           Crediting Payments.
Prior to the occurrence and continuance of an Event of Default, Bank shall
credit a wire transfer of funds, check or other item of payment to such deposit
account or Obligation as

 

8

 

Borrower specifies. After the occurrence and during
the continuance of an Event of Default, the receipt by Bank of any wire
transfer of funds, check, or other item of payment shall be immediately applied
to conditionally reduce Obligations, but shall not be considered a payment on
account unless such payment is of immediately available federal funds or unless
and until such check or other item of payment is honored when presented for
payment. Notwithstanding anything to the contrary contained herein, any wire
transfer or payment received by Bank after 12:00 noon Pacific time shall be
deemed to have been received by Bank as of the opening of business on the
immediately following Business Day. Whenever any payment to Bank under the Loan
Documents would otherwise be due (except by reason of acceleration) on a date
that is not a Business Day, such payment shall instead be due on the next
Business Day, and additional fees or interest, as the case may be, shall accrue
and be payable for the period of such extension.

 

2.5           Fees. Borrower
shall pay to Bank the following:

 

(a)           Commitment Fee. On
the Closing Date, a Commitment Fee equal to Ten Thousand Dollars ($10,000),
which shall be nonrefundable; and

 

(b)           Bank Expenses. On
the Closing Date, all Bank Expenses incurred through the Closing Date,
including reasonable attorneys’ fees and expenses and, after the Closing Date,
all Bank Expenses, including reasonable attorneys’ fees and expenses, as and
when they become due.

 

2.6           Additional Costs.
After the date hereof, in case any law, regulation, treaty or official
directive or the interpretation or application thereof by any court or any
governmental authority charged with the administration thereof or the compliance
with any guideline or request of any central bank or other governmental
authority (whether or not having the force of law):

 

(a)           subjects Bank to any
tax with respect to payments of principal or interest or any other amounts
payable hereunder by Borrower or otherwise with respect to the transactions
contemplated hereby (except for taxes on the overall net income of Bank imposed
by the United States of America or any political subdivision thereof);

 

(b)           imposes, modifies or
deems applicable any deposit insurance, reserve, special deposit or similar
requirement against assets held by, or deposits in or for the account of, or
loans by, Bank; or

 

(c)           imposes upon Bank any
other condition with respect to its performance under this Agreement,

 

and
the result of any of the foregoing is to increase the cost to Bank, reduce the
income receivable by Bank or impose any expense upon Bank with respect to the
Obligations, Bank shall notify Borrower thereof. Borrower agrees to pay to Bank
the amount of such increase in cost, reduction in income or additional expense
as and when such cost, reduction or expense is incurred or determined, upon
presentation by Bank of a statement of the amount and setting forth Banks
calculation thereof, all in reasonable detail, which statement shall be deemed
true and correct absent manifest error.

 

2.7           Term. This
Agreement shall become effective on the Closing Date and, subject to Section
13.7, shall continue in full force and effect for so long as any Obligations
remain outstanding or Bank has any obligation to make Credit Extensions under
this Agreement. Notwithstanding the foregoing, Bank shall have the right to
terminate its obligation to make Credit Extensions under this Agreement
immediately and without notice upon the occurrence and during the continuance
of an Event of Default. Notwithstanding termination, Bank’s Lien on the
Collateral shall remain in effect for so long as any Obligations are
outstanding.

 

3.             CONDITIONS
OF LOANS.

 

3.1           Conditions Precedent
to Initial Credit Extension. The obligation of Bank to make the initial
Credit Extension is subject to the condition precedent that Bank shall have
received, in form and substance satisfactory to Bank, the following:

 

9

 

(a)           this Agreement;

 

(b)           a certificate of the
Secretary of Borrower with respect to incumbency and resolutions authorizing
the execution and delivery of this Agreement;

 

(c)           UCC National Form
Financing Statement (drafted by Bank or its counsel);

 

(d)           a warrant to purchase
stock;

 

(e)           evidence of or
authorization for termination of any Liens other than Permitted Liens;

 

(f)            securities and/or
deposit account control agreements with respect to any such accounts permitted
hereunder to be maintained outside Bank;

 

(g)           intercreditor
agreement;

 

(h)           agreement to provide
insurance;

 

(i)            payment of the fees
and Bank Expenses then due specified in Section 2.5 hereof;

 

(j)            current financial
statements of Borrower including Borrower’s 2005 Fiscal Year projections
approved by Borrower’s board of directors;

 

(k)           an audit of the
Collateral, the results of which shall be satisfactory to Bank; and

 

(l)            such other documents,
and completion of such other matters, as Bank may reasonably deem necessary or
appropriate.

 

3.2           Conditions Precedent
to all Credit Extensions. The obligation of Bank to make each Credit
Extension, including the initial Credit Extension, is further subject to the
following conditions:

 

(a)           timely receipt by Bank
of the Payment/Advance Form as provided in Section 2.1; and

 

(b)           the representations and
warranties contained in Section 5 shall be true and correct in all material
respects on and as of the date of such Payment/Advance Form and on the
effective date of each Credit Extension as though made at and as of each such
date, and no Event of Default shall have occurred and be continuing, or would
exist after giving effect to such Credit Extension (provided, however, that
those representations and warranties expressly referring to another date shall
be true, correct and complete in all material respects as of such date). The
making of each Credit Extension shall be deemed to be a representation and
warranty by Borrower on the date of such Credit Extension as to the accuracy of
the facts referred to in this Section 3.2.

 

4.             CREATION
OF SECURITY INTEREST.

 

4.1           Grant of Security
Interest. Borrower grants and pledges to Bank a continuing security
interest in all presently existing and hereafter acquired or arising Collateral
in order to secure prompt repayment of any and all Obligations and in order to
secure prompt performance by Borrower of each of its covenants and duties under
the Loan Documents. Except for Permitted Liens, such security interest
constitutes a valid, first priority security interest in the presently existing
Collateral, and, except for Permitted Liens, will constitute a valid, first
priority security interest in Collateral acquired after the date hereof. Borrower
also hereby agrees to not sell, transfer, assign, mortgage, pledge, lease,
grant a security interest in, or encumber any of its intellectual property.

 

4.2           Delivery of
Additional Documentation Required. Borrower shall from time to time execute
and deliver to Bank, at the request of Bank, all Negotiable Collateral, all
financing statements and other

 

10

 

documents that Bank may reasonably request, in form
satisfactory to Bank, to perfect and continue the perfection of Bank’s security
interests in the Collateral and in order to fully consummate all of the
transactions contemplated under the Loan Documents. Borrower from time to time
may deposit with Bank specific time deposit accounts to secure specific
Obligations. Borrower authorizes Bank to hold such balances in pledge and to
decline to honor any drafts thereon or any request by Borrower or any other
Person to pay or otherwise transfer any part of such balances for so long as
the Obligations are outstanding.

 

4.3           Right to Inspect.
Bank (through any of its officers, employees, or agents) shall have the right,
upon reasonable prior notice, from time to time during Borrower’s usual
business hours but no more than twice a year (unless an Event of Default has
occurred and is continuing), to inspect Borrower’s Books and to make copies
thereof and to check, test, and appraise the Collateral in order to verify
Borrower’s financial condition or the amount, condition of, or any other matter
relating to, the Collateral.

 

4.4           Termination of
Financing Statement. Upon final payment in full by Borrower of all of the
Obligations, and upon written request therefor by Borrower, Bank shall, within
a reasonable time, authorize Borrower to file a termination statement with
respect to the Collateral.

 

5.             REPRESENTATIONS
AND WARRANTIES.

 

Borrower represents and warrants as follows:

 

5.1           Due Organization and
Qualification. Borrower and each Subsidiary is a corporation duly existing
under the laws of its state of incorporation and qualified and licensed to do
business in any state in which the failure to be so qualified or licensed could
be reasonably likely to have a Material Adverse Effect.

 

5.2           Due Authorization; No
Conflict. The execution, delivery, and performance of the Loan Documents
are within Borrower’s powers, have been duly authorized, and are not in
conflict with nor constitute a breach of any provision contained in Borrower’s
Certificate of Incorporation or Bylaws, nor will they constitute an event of
default under any material agreement to which Borrower is a party or by which
Borrower is bound, Borrower is not in default under any material agreement to
which it is a party or by which it is bound.

 

5.3           No Prior
Encumbrances. Borrower has good and marketable title to its property, free
and clear of Liens, except for Permitted Liens.

 

5.4           Bona Fide Eligible
Accounts. The Eligible Accounts are bona fide existing obligations. The
property and services giving rise to such Eligible Accounts has been delivered
or rendered to the account debtor or to the account debtor’s agent for
immediate and unconditional acceptance by the account debtor. Borrower has not
received notice of actual or imminent Insolvency Proceeding of any account
debtor that is included in any Borrowing Base Certificate as an Eligible
Account.

 

5.5           Merchantable
Inventory. All Inventory is in all material respects of good and marketable
quality, free from all material defects, except for Inventory for which
adequate reserves have been made.

 

5.6           Intellectual
Property. Except as set forth in the Schedule, Borrower is the sole owner
of its patents, trademarks, copyrights and other intellectual property, except
for non-exclusive licenses granted to Borrower or by Borrower to its customers
in the ordinary course of business. To the best of Borrower’s knowledge, each
of Borrower’s patents is valid and enforceable, and no part of its intellectual
property has been judged invalid or unenforceable, in whole or in part, and,
except as set forth in the Schedule, no claim has been made that any part of
its intellectual property violates the rights of any third party.

 

5.7           Name; Location of
Chief Executive Office. Except as disclosed in the Schedule, Borrower has
not done business under any name other than that specified on the signature
page hereof. The chief executive office of Borrower is located at the address
indicated in Section 10 hereof. All Borrower’s Inventory and Equipment is
located only at the location set forth in Section 10 hereof.

 

11

 

5.8           Litigation. Except
as set forth in the Schedule, there are no actions or proceedings pending by or
against Borrower or any Subsidiary before any court or administrative agency in
which an adverse decision could have a Material Adverse Effect, or a material
adverse effect on Borrower’s interest or Banks security interest in the Collateral.

 

5.9           No Material Adverse
Change in Financial Statements. Except as set forth on the Schedule, all
consolidated and consolidating financial statements related to Borrower and any
Subsidiary that Bank has received from Borrower fairly present in all material
respects Borrower’s financial condition as of the date thereof and Borrower’s
consolidated and consolidating results of operations for the period then ended.
There has not been a material adverse change in the consolidated or the
consolidating financial condition of Borrower since the date of the most recent
of such financial statements submitted to Bank.

 

5.10         Solvency, Payment of
Debts. Borrower is solvent and able to pay its debts (including trade
debts) as they mature.

 

5.11         Regulatory Compliance.
Borrower and each Subsidiary have met the minimum funding requirements of ERISA
with respect to any employee benefit plans subject to ERISA, and no event has
occurred resulting from Borrower’s failure to comply with ERISA that could
result in Borrower’s incurring any material liability. Borrower is not an “investment
company” or a company “controlled” by an “investment company” within the
meaning of the Investment Company Act of 1940. Borrower is not engaged
principally, or as one of the important activities, in the business of
extending credit for the purpose of purchasing or carrying margin stock (within
the meaning of Regulations T and U of the Board of Governors of the Federal
Reserve System). Borrower has complied with all the provisions of the Federal
Fair Labor Standards Act. Borrower has not violated any statutes, laws,
ordinances or rules applicable to it, violation of which could have a Material
Adverse Effect.

 

5.12         Environmental
Condition. Except as disclosed in the Schedule, none of Borrower’s or any
Subsidiary’s properties or assets has ever been used by Borrower or any
Subsidiary or, to the best of Borrower’s knowledge, by previous owners or
operators, in the disposal of, or to produce, store, handle, treat, release, or
transport, any hazardous waste or hazardous substance other than in accordance
with applicable law; to the best of Borrower’s knowledge, none of Borrower’s
properties or assets has ever been designated or identified in any manner
pursuant to any environmental protection statute as a hazardous waste or
hazardous substance disposal site, or a candidate for closure pursuant to any
environmental protection statute; no lien arising under any environmental
protection statute has attached to any revenues or to any real or personal property
owned by Borrower or any Subsidiary; and neither Borrower nor any Subsidiary
has received a summons, citation, notice, or directive from the Environmental
Protection Agency or any other federal, state or other governmental agency
concerning any action or omission by Borrower or any Subsidiary resulting in
the releasing, or otherwise disposing of hazardous waste or hazardous
substances into the environment.

 

5.13         Taxes. Except as
set forth in the Schedule, Borrower and each Subsidiary have filed or caused to
be filed all tax returns required to be filed, and have paid, or have made
adequate provision for the payment of, all taxes reflected therein, except such
taxes as are being contested in good faith with adequate reserves in accordance
with GAAP.

 

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

 

5.15         Government Consents;
Borrower and each Subsidiary have obtained all consents, approvals and
authorizations of, made all declarations or filings with, and given all notices
to, all governmental authorities that are necessary for the continued operation
of Borrower’s business as currently conducted, the failure to obtain which
could have a Material Adverse Effect.

 

5.16         Accounts. Not more
than sixty five percent (65%) of the total dollar value of the assets in
Borrower’s or any Subsidiary’s depository, operating, or investment accounts is
maintained or invested with a Person other than Bank.

 

12

 

5.17         Full Disclosure. No
representation, warranty or other statement made by Borrower in any certificate
or written statement furnished to Bank contains any untrue statement of a
material fact or omits to state a material fact necessary in order to make the
statements contained in such certificates or statements not misleading.

 

6.             AFFIRMATIVE
COVENANTS.

 

Borrower covenants and agrees that, until payment in
full of all outstanding Obligations, and for so long as Bank may have any
commitment to make a Credit Extension hereunder, Borrower shall do all of the
following:

 

6.1           Good Standing. Borrower
shall maintain its and each of its Subsidiaries’ corporate existence and good
standing in its jurisdiction of incorporation and maintain qualification in
each jurisdiction in which the failure to be so qualified could reasonably be
expected to have a Material Adverse Effect. Borrower shall maintain, and shall
cause each of its Subsidiaries to maintain, in force all licenses, approvals
and agreements, the loss of which could have a Material Adverse Effect.

 

6.2           Government
Compliance. Borrower shall meet, and shall cause each Subsidiary to meet,
the minimum funding requirements of ERISA with respect to any employee benefit
plans subject to ERISA. Borrower shall comply, and shall cause each Subsidiary
to comply, with all statutes, laws, ordinances and government rules and
regulations to which it is subject, noncompliance with which could have a
Material Adverse Effect.

 

6.3           Financial Statements,
Reports, Certificates. Borrower shall deliver the following to Bank:  (a) as soon as available, but in any event
within thirty (30) days after the end of each calendar month, a company
prepared consolidated balance sheet, income, and cash flow statement covering
Borrower’s consolidated operations during such period, prepared in accordance
with GAAP (except for the absence of footnotes and subject to year end adjustments),
consistently applied, in a form acceptable to Bank and certified by a Responsible
Officer; (b) as soon as available, but in any event within one hundred twenty
(120) days after the end of Borrower’s fiscal year, audited consolidated
financial statements of Borrower prepared in accordance with GAAP, consistently
applied, together with an unqualified opinion on such financial statements of
an independent certified public accounting firm reasonably acceptable to Bank
(except that with respect to Borrower’s 2003 Fiscal Year, such statements shall
be delivered no later than August 15, 2004); (c) copies of all statements,
reports and notices sent or made available generally by Borrower to its
security holders or to any holders of Subordinated Debt and, if applicable, all
reports on Forms 10-K and 10-Q filed with the Securities and Exchange Commission;
(d) promptly upon receipt of notice thereof, a report of any legal actions
pending or threatened against Borrower or any Subsidiary that could result in
damages or costs to Borrower or any Subsidiary of Fifty Thousand Dollars
($50,000) or more; and (e) such budgets, sales projections, operating plans or
other financial information as Bank may reasonably request from time to time.

 

Within
thirty (30) days after the last day of each month, Borrower shall deliver to
Bank a Borrowing Base Certificate signed by a Responsible Officer in
substantially the form of Exhibit C hereto, together with aged listings of
accounts receivable and accounts payable.

 

Borrower
shall deliver to Bank with the monthly financial statements, a Compliance
Certificate signed by a Responsible Officer in substantially the form of Exhibit
D hereto.

 

Bank
shall have a right from time to time hereafter to audit Borrower’s Accounts and
appraise Collateral at Borrower’s expense, provided that such audits or
appraisals will be conducted no more often than every six (6) months unless an
Event of Default has occurred and is continuing and shall not, in any case,
cost more than $2,000 per audit or appraisal.

 

6.4           Inventory; Returns.
Borrower shall keep all Inventory in good and marketable condition, free from
all material defects except for Inventory for which adequate reserves have been
made. Returns and allowances, if any, as between Borrower and its account
debtors shall be on the same basis and in accordance with

 

13

 

the usual customary practices of Borrower, as they
exist at the time of the execution and delivery of this Agreement. Borrower
shall promptly notify Bank of all returns and recoveries and of all disputes
and claims, where the return, recovery, dispute or claim involves more than
Fifty Thousand Dollars ($50,000).

 

6.5           Taxes. Borrower
shall make, and shall cause each Subsidiary to make, due and timely payment or
deposit of all material federal, state, and local taxes, assessments, or
contributions required of it by law, and will execute and deliver to Bank, on
demand, appropriate certificates attesting to the payment or deposit thereof;
and Borrower will make, and will cause each Subsidiary to make, timely payment
or deposit of all material tax payments and withholding taxes required of it by
applicable laws, including, but not limited to, those laws concerning F.I.C.A.,
F.U.T.A., state disability, and local, state, and federal income taxes, and
will, upon request, furnish Bank with proof satisfactory to Bank indicating
that Borrower or a Subsidiary has made such payments or deposits; provided that
Borrower or a Subsidiary need not make any payment if the amount or validity of
such payment is contested in good faith by appropriate proceedings and is
reserved against (to the extent required by GAAP) by Borrower.

 

6.6           Insurance.

 

(a)           Borrower, at its
expense, shall keep the Collateral insured against loss or damage by fire,
theft, explosion, sprinklers, and all other hazards and risks, and in such
amounts, as ordinarily insured against by other owners in similar businesses
conducted in the locations where Borrowers business is conducted on the date
hereof. Borrower shall also maintain insurance relating to Borrower’s business,
ownership and use of the Collateral in amounts and of a type that are customary
to businesses similar to Borrower’s.

 

(b)           All such policies of
insurance shall be in such form, with such companies, and in such amounts as
are reasonably satisfactory to Bank. All such policies of property insurance
shall contain a lender’s loss payable endorsement, in a form satisfactory to
Bank, showing Bank as an additional loss payee thereof, and all liability
insurance policies shall show the Bank as an additional insured and shall
specify that the insurer must give at least twenty (20) days notice to Bank
before canceling its policy for any reason. Upon Bank’s request, Borrower shall
deliver to Bank certified copies of such policies of insurance and evidence of
the payments of all premiums therefor. All proceeds payable under any such
policy shall, at the option of Bank, be payable to Bank to be applied on
account of the Obligations.

 

6.7           Accounts. Borrower
shall maintain and shall cause each of its Subsidiaries to maintain not less
than thirty five percent (35%) of its total cash and investments in depository,
operating, and investment accounts with Bank and/or Comerica Securities, Inc
and within 30 days of the Closing Date, Borrower shall close Account Nos. 104756246559
and 10475790600 held at U.S. Bank and shall transfer all funds held in such
accounts to an account held at Bank.

 

6.8           Quick Ratio. Borrower
shall maintain at all times, measured as of the last day of each calendar
month, a ratio of Quick Assets to Current Liabilities plus, to the
extent not already included therein, all Indebtedness (including without
limitation any Contingent Obligations) owing from Borrower to Bank of at least
1.25 to 1.00.

 

6.9           Performance to Plan.
Borrower shall achieve Net Income (determined in accordance with GAAP) of not
less than eighty percent (80%) of the applicable amount of Net Income set out
in Borrower’s Plan and shall not suffer Net Losses (determined in accordance
with GAAP) in excess of one hundred twenty percent (120%) of the applicable
amount of Net Losses set out in Borrower’s Plan, measured on a monthly basis. As
used herein, “Borrower’s Plan” means a) through September 30, 2004, those
certain financial projections for Borrower’s 2004 Fiscal Year attached hereto
as Annex I and b) thereafter, those certain financial projections delivered to
Bank for each of Borrower’s subsequent fiscal years in form and substance
reasonably acceptable to Bank.

 

6.10         Further Assurances.
At any time and from time to time Borrower shall execute and deliver such
further instruments and take such further action as may reasonably be requested
by Bank to effect the purposes of this Agreement.

 

14

 

7.             NEGATIVE.
COVENANTS.

 

Borrower covenants and agrees that, so long as any
credit hereunder shall be available and until payment in full of the
outstanding Obligations or for so long as Bank may have any commitment to make
any Credit Extensions, Borrower will not do any of the following:

 

7.1           Dispositions. Convey,
sell, lease, transfer or otherwise dispose of (collectively, a “Transfer”), or
permit any of its Subsidiaries to Transfer, all or any part of its business or
property, including its intellectual property, other than Permitted Transfers.

 

7.2           Change in Business; Change
in Control or Executive Office. Engage in any business, or permit any of
its Subsidiaries to engage in any business, other than the businesses currently
engaged in by Borrower and any business substantially similar or related
thereto (or incidental thereto); or cease to conduct business in the manner
conducted by Borrower as of the Closing Date; or suffer or permit a Change in
Control; or without thirty (30) days prior written notification to Bank,
relocate its chief executive office or state of incorporation or change its
legal name; or without Bank’s prior written consent, change the date on which
its fiscal year ends.

 

7.3           Mergers or
Acquisitions. Without Bank’s prior written consent which shall not be
unreasonably withheld, merge or consolidate, or permit any of its Subsidiaries
to merge or consolidate, with or into any other business organization, or
acquire, or permit any of its Subsidiaries to acquire, all or substantially all
of the capital stock or property of another Person (other than Permitted
Investments).

 

7.4           Indebtedness. Create,
incur, assume or be or remain liable with respect to any Indebtedness, or
permit any Subsidiary so to do, other than Permitted Indebtedness.

 

7.5           Encumbrances. Create,
incur, assume or suffer to exist any Lien with respect to any of its property,
including its intellectual property, or assign or otherwise convey any right to
receive income, including the sale of any Accounts, or permit any of its
Subsidiaries so to do, except for Permitted Liens. Except as disclosed on the
Schedule, Agree with any Person other than Bank not to grant a security
interest in, or otherwise encumber, any of its property, or permit any
Subsidiary to do so.

 

7.6           Distributions. Pay
any dividends or make any other distribution or payment on account of or in
redemption, retirement or purchase of any capital stock, or permit any of its
Subsidiaries to do so, except that Borrower may (i) pay dividends in capital
stock, (ii) repurchase the stock of former employees pursuant to stock repurchase
agreements as long as an Event of Default does not exist prior to such
repurchase or would not exist after giving effect to such repurchase, (iii)
convert any of its convertible securities (including warrants) into other
securities pursuant to the terms of such convertible securities, (iv)
distribute securities to employees on the exercise of their options, or (iv)
make other such distributions, to the extent not otherwise prohibited herein
and provided that the aggregate amount of such other distributions does not
exceed Two Hundred Thousand Dollars ($100,000) during the term of this
Agreement.

 

7.7           Investments. Directly
or indirectly acquire or own, or make any Investment in or to any Person, or
permit any of its Subsidiaries so to do, other than Permitted Investments; or
maintain or invest any of its property with a Person other than Bank or permit
any of its Subsidiaries to do so unless such Person has entered into an account
control agreement with Bank in form and substance satisfactory to Bank; 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.

 

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

 

7.9           Subordinated Debt.
Make any payment in respect of any Subordinated Debt, or permit any of its
Subsidiaries to make any such payment, except in compliance with the terms of
such Subordinated Debt,

 

15

 

or amend any provision contained in any documentation
relating to the Subordinated Debt without Bank’s prior written consent which
shall not be unreasonably withheld.

 

7.10         Inventory and
Equipment. Store the Inventory or the Equipment having a value in excess of
$ 10,000 with a bailee, warehouseman, or other third party unless the third
party has been notified of Banks security interest and Bank (a) has received an
acknowledgment from the third party that it is holding or will hold the
Inventory or Equipment for Bank’s benefit or (b) is in pledge possession of the
warehouse receipt, where negotiable, covering such Inventory or Equipment. Store
or maintain any Equipment or Inventory at a location other than the location
set forth in Section 10 of this Agreement

 

7.11         Compliance. Become
an “investment company” or be controlled by an “investment company,” within the
meaning of the Investment Company Act of 1940, or become principally engaged
in, or undertake as one of its important activities, the business of extending
credit for the purpose of purchasing or carrying margin stock, or use the
proceeds of any Credit Extension for such purpose. Fail to meet the minimum
funding requirements of ERISA, permit a Reportable Event or Prohibited
Transaction, as defined in ERISA, to occur, fail to comply with the Federal
Fair Labor Standards Act or violate any law or regulation, which violation
could have a Material Adverse Effect, or a material adverse effect on the
Collateral or the priority of Banks Lien on the Collateral, or permit any of
its Subsidiaries to do any of the foregoing.

 

7.12         Negative Pledge
Agreements. Except as set forth in the Schedule, 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.

 

8.             EVENTS
OF DEFAULT.

 

Any one or more of the following events shall
constitute an Event of Default by Borrower under this Agreement:

 

8.1           Payment Default.
If Borrower fails to pay, when due, any of the Obligations;

 

8.2           Covenant Default.

 

(a)           If Borrower fails to
perform any obligation under Article 6 or violates any of the covenants
contained in Article 7 of this Agreement; or

 

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

 

8.3           Material Adverse
Effect. If there occurs any circumstance or circumstances that could have a
Material Adverse Effect;

 

8.4           Attachment. If
any material portion of Borrower’s assets is attached, seized, subjected to a
writ or distress warrant, or is levied upon, or comes into the possession of
any trustee, receiver or person acting in a similar capacity and such
attachment, seizure, writ or distress warrant or levy has not been removed,
discharged or rescinded within ten (10) days, or if Borrower is enjoined,
restrained, or in any way prevented by court order from continuing to conduct
all or any material part of its business affairs, or if a judgment or other
claim becomes a lien or encumbrance upon any material portion of Borrower’s
assets, or if a notice of lien, levy, or assessment is filed of

 

16

 

record with respect to any material portion of
Borrower’s assets by the United States Government, or any department, agency,
or instrumentality thereof, or by any state, county, municipal, or governmental
agency, and the same is not paid within ten (10) days after Borrower receives
notice thereof, provided that none of the foregoing shall constitute an Event
of Default where such action or event is stayed or an adequate bond has been
posted pending a good faith contest by Borrower (provided that no Credit
Extensions will be required to be made during such cure period);

 

8.5           Insolvency. If
Borrower becomes insolvent, or if an Insolvency Proceeding is commenced by
Borrower, or if an Insolvency Proceeding is commenced against Borrower and is
not dismissed or stayed within thirty (30) days (provided that no Credit
Extensions will be made prior to the dismissal of such Insolvency Proceeding);

 

8.6           Other Agreements.
If there is a default or other failure to perform in any agreement to which
Borrower is a party or by which it is bound resulting in a right by a third
party or parties, whether or not exercised, to accelerate the maturity of any
Indebtedness in an amount in excess of One Hundred Thousand Dollars ($100,000)
or which could have a Material Adverse Effect;

 

8.7           Subordinated Debt.
If Borrower makes any payment on account of Subordinated Debt, except to the
extent such payment is allowed under any subordination agreement entered into
with Bank;

 

8.8           Judgments. If a
judgment or judgments for the payment of money in an amount, individually or in
the aggregate, of at least One Hundred Thousand Dollars ($100,000) shall be
rendered against Borrower and shall remain unsatisfied and unstayed for a
period of ten (10) days (provided that no Credit Extensions will be made prior
to the satisfaction or stay of such judgment); or

 

8.9           Misrepresentations.
If any material misrepresentation or material misstatement exists now or hereafter
in any warranty or representation set forth herein or in any certificate
delivered to Bank by any Responsible Officer pursuant to this Agreement or to
induce Bank to enter into this Agreement or any other Loan Document

 

9.             BANK’S
RIGHTS AND REMEDIES.

 

9.1           Rights and Remedies.
Upon the occurrence and during the continuance of an Event of Default, Bank
may, at its election, without notice of its election and without demand, do any
one or more of the following, all of which are authorized by Borrower:

 

(a)           Declare all
Obligations, whether evidenced by this Agreement, by any of the other Loan
Documents, or otherwise, immediately due and payable (provided that upon the
occurrence of an Event of Default described in Section 8.5, all Obligations
shall become immediately due and payable without any action by Bank);

 

(b)           Cease advancing money
or extending credit to or for the benefit of Borrower under this Agreement or
under any other agreement between Borrower and Bank;

 

(c)           Settle or adjust
disputes and claims directly with account debtors for amounts, upon terms and
in whatever order that Bank reasonably considers advisable;

 

(d)           Make such payments and
do such acts as Bank considers necessary or reasonable to protect its security
interest in the Collateral. Borrower agrees to assemble the Collateral if Bank
so requires, and to make the Collateral available to Bank as Bank may designate.
Borrower authorizes Bank to enter the premises where the Collateral is located,
to take and maintain possession of the Collateral, or any part of it, and to
pay, purchase, contest, or compromise any encumbrance, charge, or lien which in
Bank’s determination appears to be prior or superior to its security interest
and to pay all expenses incurred in connection therewith. With respect to any
of Borrower’s owned premises, Borrower hereby grants Bank a license to enter
into possession of such premises

 

17

 

and to occupy the same, without charge, in order to
exercise any of Bank’s rights or remedies provided herein, at law, in equity,
or otherwise;

 

(e)           Set off and apply to
the Obligations any and all (i) balances and deposits of Borrower held by Bank,
or (ii) indebtedness at any time owing to or for the credit or the account of
Borrower held by Bank;

 

(f)            Ship, reclaim,
recover, store, finish, maintain, repair, prepare for sale, advertise for sale,
and sell (in the manner provided for herein) the Collateral. Bank is hereby
granted a license or other right, solely pursuant to the provisions of this
Section 9.1, to use, without charge, Borrower’s 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, as it
pertains to the Collateral, in completing production of advertising for sale,
and selling any Collateral and, in connection with Bank’s exercise of its
rights under this Section 9.1, Borrower’s rights under all licenses and all
franchise agreements shall inure to Banks benefit;

 

(g)           Dispose of the
Collateral by way of one or more contracts or transactions, for cash or on
terms, in such manner and at such places (including Borrower’s premises) as
Bank determines is commercially reasonable, and apply any proceeds to the
Obligations in whatever manner or order Bank deems appropriate;

 

(h)           Bank may credit bid and
purchase at any public sale; and

 

(i)            Any deficiency that
exists after disposition of the Collateral as provided above will be paid
immediately by Borrower.

 

9.2           Power of /Attorney.
Effective only upon the occurrence and during the continuance of an Event of
Default, Borrower hereby irrevocably appoints Bank (and any of Bank’s
designated officers, or employees) as Borrower’s true and lawful attorney to:  (a) send requests for verification of
Accounts or notify account debtors of Bank’s security interest in the Accounts;
(b) endorse Borrower’s name on any checks or other forms of payment or security
that may come into Banks possession; (c) sign Borrower’s name on any invoice or
bill of lading relating to any Account, drafts against account debtors,
schedules and assignments of Accounts, verifications of Accounts, and notices
to account debtors; (d) dispose of any Collateral; (e) make, settle, and adjust
all claims under and decisions with respect to Borrower’s policies of
insurance; (f) settle and adjust disputes and claims respecting the accounts
directly with account debtors, for amounts and upon terms which Bank determines
to be reasonable; and (g) to file, in its sole discretion, one or more
financing or continuation statements and amendments thereto, relative to any of
the Collateral; provided Bank may exercise such power of attorney to sign the
name of Borrower on any of the documents described in Section 4.2 regardless of
whether an Event of Default has occurred. The appointment of Bank as Borrower’s
attorney in fact, and each and every one of Banks rights and powers, being
coupled with an interest, is irrevocable until all of the Obligations have been
fully repaid and performed and Bank’s obligation to provide Credit Extensions
hereunder is terminated.

 

9.3           Accounts Collection.
At any time during the term of this Agreement, Bank may notify any Person owing
funds to Borrower of Banks security interest in such funds and verify the
amount of such Account. Borrower shall collect all amounts owing to Borrower
for Bank, receive in trust all payments as Banks trustee, and immediately
deliver such payments to Bank in their original form as received from the
account debtor, with proper endorsements for deposit

 

9.4           Bank Expenses. If
Borrower fails to pay any amounts or furnish any required proof of payment due
to third persons or entities, as required under the terms of this Agreement,
then Bank may do any or all of the following after reasonable notice to
Borrower:  (a) make payment of the same
or any part thereof; (b) set up such reserves under a loan facility in Section
2.1 as Bank deems necessary to protect Bank from the exposure created by such
failure; or (c) obtain and maintain insurance policies of the type discussed in
Section 6.6 of this Agreement, and take any action with respect to such
policies as Bank deems prudent. Any amounts so paid or deposited by Bank shall
constitute Bank Expenses, shall be immediately due and payable, and shall bear
interest at the then applicable rate hereinabove provided, and shall be secured
by the Collateral. Any payments made by Bank

 

18

 

shall not constitute an agreement by Bank to make
similar payments in the future or a waiver by Bank of any Event of Default
under this Agreement.

 

9.5           Bank’s Liability for
Collateral. So long as Bank complies with reasonable banking practices,
Bank shall not in any way or manner be liable or responsible for:  (a) the safekeeping of the Collateral; (b)
any loss or damage thereto occurring or arising in any manner or fashion from
any cause; (c) any diminution in the value thereof; or (d) 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.

 

9.6           Remedies Cumulative.
Bank’s rights and remedies under this Agreement, the Loan Documents, and all
other agreements shall be cumulative. Bank shall have all other rights and
remedies not inconsistent herewith as provided under the Code, by law, or in
equity. No exercise by Bank of one right or remedy shall be deemed an election,
and no waiver by Bank of any Event of Default on Borrower’s part shall be
deemed a continuing waiver. No delay by Bank shall constitute a waiver,
election, or acquiescence by it. No waiver by Bank shall be effective unless
made in a written document signed on behalf of Bank and then shall be effective
only in the specific instance and for the specific purpose for which it was
given.

 

9.7           Demand; Protest.
Borrower waives demand, protest, notice of protest, notice of default or
dishonor, notice of payment and nonpayment, notice of any default, nonpayment
at maturity, release, compromise, settlement, extension, or renewal of
accounts, documents, instruments, chattel paper, and guarantees at any time
held by Bank on which Borrower may in any way be liable.

 

10.           NOTICES

 

Unless otherwise provided in this Agreement, all
notices or demands by any party relating to this Agreement or any other
agreement entered into in connection herewith shall be in writing and (except
for financial statements and other informational documents which may be sent by
first-class mail, postage prepaid) shall be personally delivered or sent by a
recognized overnight delivery service, certified mail, postage prepaid, return
receipt requested, or by telefacsimile to Borrower or to Bank, as the case may
be, at its addresses set forth below:

 

	
  If to Borrower:

  	
  RELIANT TECHNOLOGIES, INC.

  
	
   

  	
  5375 Mira Sorrento Place, Ste. 100

  
	
   

  	
  San Diego, CA 92121

  
	
   

  	
  Attn: Director of Finance/Controller

  
	
   

  	
  FAX: (858) 622-9678

  
	
   

  	
   

  
	
  If to Bank:

  	
  Comerica Bank

  
	
   

  	
  2321 Rosecrans Ave., Suite 5000

  
	
   

  	
  El Segundo, CA 90245

  
	
   

  	
  Attn: Manager

  
	
   

  	
  FAX: (310) 338-6110

  
	
   

  	
   

  
	
  with a copy to:

  	
  Comerica Bank

  
	
   

  	
  11512 El Camino Real, Suite 350

  
	
   

  	
  San Diego, CA 92130

  
	
   

  	
  Attn: Scott Foote – Vice President

  
	
   

  	
  FAX: (858)509-2365

  

 

The
parties hereto may change the address at which they are to receive notices
hereunder, by notice in writing in the foregoing manner given to the other.

 

11.           CHOICE
OF LAW AND VENUE; JURY TRIAL WAIVER.

 

This 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. Each of Borrower and Bank hereby submits to
the exclusive jurisdiction of the state and Federal courts located in the
County of Santa Clara, State of California.

 

19

 

BORROWER AND BANK EACH 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 LOAN 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. EACH PARTY RECOGNIZES AND AGREES THAT THE
FOREGOING WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR IT TO ENTER INTO THIS
AGREEMENT. EACH PARTY REPRESENTS AND WARRANTS THAT IT HAS REVIEWED THIS WAIVER
WITH ITS LEGAL COUNSEL AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY
TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL.

 

12.          JUDICIAL REFERENCE.

 

If and only if the jury trial waiver set forth in
Section 11 of this Agreement is invalidated for any reason by a court of law,
statute or otherwise, the reference provisions set forth below shall be
substituted in place of the jury trial waiver. So long as the jury trial waiver
remains valid, the reference provisions set forth in this Section shall be inapplicable.

 

12.1         Each controversy, dispute
or claim (each, a “Claim”) between the parties arising out of or relating to
this Agreement, any security agreement executed by Borrower in favor of Bank,
any note executed by Borrower in favor of Bank or any other document,
instrument or agreement executed by Borrower with or in favor of Bank
(collectively in this Section, the “Loan Documents”), other than (i) all
matters in connection with nonjudicial foreclosure of security interests in
real or personal property; or (ii) the appointment of a receiver or the
exercise of other provisional remedies (any of which may be initiated pursuant
to applicable law) that are not settled in writing within fifteen (15) days
after the date on which a party subject to the Loan Documents gives written
notice to all other parties that a Claim exists (the “Claim Date”) shall be
resolved by a reference proceeding in California in accordance with the
provisions of Section 638 et seq. of the California Code of Civil Procedure, or
their successor sections (“CCP”), which shall constitute the exclusive remedy
for the resolution of any Claim concerning the Loan Documents, including
whether such Claim is subject to the reference proceeding. Except as set forth
in this section, the parties waive the right to initiate legal proceedings
against each other concerning each such Claim. Venue for these proceedings
shall be in the Superior Court in the County where the real property, if any,
is located or in a County where venue is otherwise appropriate under state law
(the “Court”). By mutual agreement, the parties shall select a retired Judge of
the Court to serve as referee, and if they cannot so agree within fifteen (15)
days after the Claim Date, the Presiding Judge of the Court (or his or her representative)
shall promptly select the referee. A request for appointment of a referee may
be heard on an ex parte or expedited basis. The referee shall be appointed to
sit as a temporary judge, with all the powers for a temporary judge, as
authorized by law, and upon selection should take and subscribe to the oath of
office as provided for in Rule 244 of the California Rules of Court (or any
subsequently enacted Rule). Each party shall have one peremptory challenge
pursuant to CCP §170.6. Upon being selected, the referee shall (a) be requested
to set the matter for a status and trial-setting conference within fifteen (15)
days after the date of selection and (b) if practicable, try any and all issues
of law or fact and report a statement of decision upon them within ninety (90)
days of the date of selection. The referee will have power to expand or limit
the amount of discovery a party may employ. Any decision rendered by the
referee will be final, binding and conclusive, and judgment shall be entered
pursuant to CCP §644 in any court in the State of California having
jurisdiction. The parties shall complete all discovery no later than fifteen
(15) days before the first trial date established by the referee. The referee
may extend such period in the event of a party’s refusal to provide requested
discovery for any reason whatsoever, including, without limitation, legal
objections raised to such discovery or unavailability of a witness due to
absence or illness. No party shall be entitled to “priority” in conducting
discovery. Either party may take depositions upon seven (7) days written
notice, and shall respond to requests for production or inspection of documents
within ten (10) days after service. All disputes relating to discovery which
cannot be resolved by the parties shall be submitted to the referee whose
decision shall be final and binding upon the parties. Pending appointment of
the referee as provided herein, the Superior Court is empowered to issue
temporary and/or provisional remedies, as appropriate.

 

12.2         Except as expressly set
forth herein, the referee shall determine the manner in which the reference
proceeding is conducted including the time and place of all hearings, the order
of presentation of evidence, and all other questions that arise with respect to
the course of the reference proceeding. Except for trial, all proceedings and
hearings conducted before the referee shall be conducted without a court
reporter unless a party

 

20

 

requests a court reporter. The party making such a
request shall have the obligation to arrange for and pay for the court reporter.
Subject to the referee’s power to award costs to the prevailing party, the
parties shall equally bear the costs of the court reporter at the trial and the
referee’s expenses.

 

12.3         The referee shall
determine all issues in accordance with existing California case and statutory
law. California rules of evidence applicable to proceedings at law will apply
to the reference proceeding. The referee shall be empowered to enter equitable
as well as legal relief, to provide all temporary and/or provisional remedies
and to enter equitable orders that shall be binding upon the parties. At the
close of the reference proceeding, the referee shall issue a single judgment at
disposing of all the claims of the parties that are the subject of the
reference. The parties reserve the right (i) to contest or appeal from the
final judgment or any appealable order or appealable judgment entered by the
referee and (ii) to obtain findings of fact, conclusions of laws, a written
statement of decision, and (iii) to move for a new trial or a different
judgment, which new trial, if granted, shall be a reference proceeding under
this provision.

 

12.4         If the enabling legislation
which provides for appointment of a referee is repealed (and no successor
statute is enacted), any dispute between the parties that would otherwise be
determined by the reference procedure herein described will be resolved and
determined by arbitration conducted by a retired judge of the Court, in
accordance with the California Arbitration Act §1280 through §1294.2 of the CCP
as amended from time to time. The limitations with respect to discovery as set
forth in this Section shall apply to any such arbitration proceeding.

 

13.           GENERAL
PROVISIONS.

 

13.1         Successors and Assigns.
This Agreement shall bind and inure to the benefit of the respective successors
and permitted assigns of each of the parties; provided, however, that neither
this Agreement nor any rights hereunder may be assigned by Borrower without
Bank’s prior written consent, which consent may be granted or withheld in Banks
sole discretion. Bank shall have the right without the consent of or notice to
Borrower to sell, transfer, negotiate, or grant participation in all or any
part of, or any interest in, Bank’s obligations, rights and benefits hereunder.

 

13.2         Indemnification. Borrower
shall defend, indemnify and hold harmless Bank and its officers, employees, and
agents against (a) all obligations, demands, claims, and liabilities claimed or
asserted by any other party in connection with the transactions contemplated by
this Agreement; and (b) all losses or Bank Expenses in any way suffered,
incurred, or paid by Bank as a result of or in any way arising out of,
following, or consequential to transactions between Bank and Borrower whether
under this Agreement, or otherwise (including without limitation reasonable
attorneys’ fees and expenses), except for losses caused by Banks gross
negligence or willful misconduct.

 

13.3         Time of Essence. Time
is of the essence for the performance of all obligations set forth in this
Agreement.

 

13.4         Severability of
Provisions. Each provision of this Agreement shall be severable from every
other provision of this Agreement for the purpose of determining the legal
enforceability of any specific provision.

 

13.5         Amendments in Writing,
Integration. Neither this Agreement nor the Loan Documents can be amended
or terminated orally. All prior agreements, understandings, representations,
warranties, and negotiations between the parties hereto with respect to the
subject matter of this Agreement and the Loan Documents, if any, are merged
into this Agreement and the Loan Documents.

 

13.6         Counterparts. This
Agreement may be executed in any number of counterparts and by different
parties on separate counterparts, each of which, when executed and delivered,
shall be deemed to be an original, and all of which, when taken together, shall
constitute but one and the same Agreement.

 

13.7         Survival. All
covenants, representations and warranties made in this Agreement shall continue
in full force and effect so long as any Obligations remain outstanding or Bank
has any obligation to make

 

21

 

Credit Extensions to Borrower. The obligations of
Borrower to indemnify Bank with respect to the expenses, damages, losses, costs
and liabilities described in Section 13.2 shall survive until all applicable
statute of limitations periods with respect to actions that may be brought
against Bank have run.

 

13.8         Confidentiality. In
handling any confidential information Bank and all employees and agents of
Bank, including but not limited to accountants, shall exercise the same degree
of care that it exercises with respect to its own proprietary information of
the same types to maintain the confidentiality of any non-public information
thereby received or received pursuant to this Agreement except that disclosure
of such information may be made (i) to the subsidiaries or affiliates of Bank
in connection with their present or prospective business relations with
Borrower, (ii) to prospective transferees or purchasers of any interest in the
Loans, provided that they have entered into a comparable confidentiality agreement
in favor of Borrower and have delivered a copy to Borrower, (iii) as required
by law, regulations, rule or order, subpoena, judicial order or similar order,
(iv) as may be required in connection with the examination, audit or similar
investigation of Bank and (v) as Bank may determine in connection with the
enforcement of any remedies hereunder. Confidential information hereunder shall
not include information that either:  (a)
is in the public domain or in the knowledge or possession of Bank when disclosed
to Bank, or becomes part of the public domain after disclosure to Bank through
no fault of Bank; or (b) is disclosed to Bank by a third party, provided Bank
does not have actual knowledge that such third party is prohibited from
disclosing such information.

 

[Balance of
Page Intentionally Left Blank]

 

22

 

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

 

	
   

  	
  RELIANT TECHNOLOGIES, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Roger Howe

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  Chairman and CFO

  
	
   

  	
   

  	
   

  
	
   

  	
  COMERICA BANK

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Signatory

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  SVP

  
					

 

 

[Signature
Page to Loan and Security Agreement]

 

 

	
  DEBTOR

  	
  RELIANT TECHNOLOGIES, INC.

  
	
   

  	
   

  
	
  SECURED PARTY:

  	
  COMERICA BANK

  

 

EXHIBIT A

 

COLLATERAL DESCRIPTION
ATTACHMENT

TO LOAN AND SECURITY AGREEMENT

 

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 al times
constitute “Collateral”.

 

 

EXHIBIT B

 

TECHNOLOGY
& LIFE SCIENCES DIVISION

LOAN ANALYSIS

LOAN ADVANCE/PAYDOWN REQUEST FORM

DEADLINE FOR SAME DAY
PROCESSING IS [3:00* P.M., Pacific Time/ 3:30 P.M. Eastern Time]

FORMULA BASED LINES: DEADLINE FOR NEXT
DAY PROCESSING IS [3:00* P.M., Pacific Time/ 330 P.M. Eastern Time]

DEADLINE FOR WIRE TRANSFERS IS [1:30 P.M., Pacific Time/ 3:30 P.M. Eastern
Time]

[*At month end and the day before a holiday, the cut off time is 1:30 P.M.,
Pacific Time]

 

	
  To: Loan Analysis

  	
  DATE:

  	
   

  	
   

  	
  TIME:

  	
   

  	
   

  
	
  FAX #: (650) 846-6840

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

	
  FROM:

  	
  RELIANT TECHNOLOGIES. INC.

  	
   

  	
  TELEPHONE REQUEST (For Bank
  Use Only):

  
	
   

  	
  Borrower’s Name

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  FROM:

  	
   

  	
   

  	
  The following person is
  authorized to request the loan payment transfer/loan advance on the
  designated account and is known to me.

  
	
   

  	
  Authorized Signer’s Name

  	
   

  
	
   

  	
   

  
	
  FROM:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Authorized Signer’s Name

  	
   

  	
  Authorized Request &
  Phone #

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  PHONE #:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Received by (Bank) &
  Phone #

  
	
  FROM ACCOUNT #:

  (please include Note number, if applicable)

  	
   

  
	
   

  	
   

  
	
  TO ACCOUNT #:

  (please include Note number, if applicable)

  	
  Authorized Signature (Bank)

  
	
   

  	
   

  
	
  REQUESTED TRANSACTION TYPE

  	
  REQUESTED DOLLAR AMOUNT

  	
  For Bank Use Only

  
	
   

  	
   

  	
   

  
	
  PRINCIPAL INCREASE*
  (ADVANCE)

  	
  $

  	
  Date Rec’d:

  
	
  PRINCIPAL PAYMENT (ONLY)

  	
  $

  	
  Time:

  
	
   

  	
   

  	
  Comp. Status:                      YES                          NO

  
	
  OTHER INSTRUCTIONS:

  	
   

  	
  Status Date:

  
	
   

  	
   

  	
  Time:

  
	
   

  	
   

  	
  Approval:

  
							

 

All representations and
warranties of Borrower stated in the Loan Agreement are true, correct and
complete in all material respects as of the date of the telephone request for
and advance confirmed by this Borrowing Certificate; provided, however, that
those representations and warranties the date expressly referring to another
date shall be true, correct and complete in all material respects as of such
date.

 

*IS THERE A WIRE REQUEST TIED TO
THIS LOAN ADVANCE?  (PLEASE CIRCLE ONE)                         YES                         NO

If YES, the Outgoing Wire Transfer Instructions must be completed below.

 

	
  OUTGOING WIRE TRANSFER
  INSTRUCTIONS

  	
  Fed Reference Number

  	
  Bank Transfer Number

  
	
   

  
	
  The items marked with an asterisk (*) are required to be completed.

  
	
   

  
	
  *Beneficiary Name

  	
   

  
	
  *Beneficiary Account Number

  	
   

  
	
  *Beneficiary Address

  	
   

  
	
  Currency Type

  	
  US
  DOLLARS ONLY

  
	
  *ABA Routing Number (9
  Digits)

  	
   

  
	
  *Receiving Institution Name

  	
   

  
	
  *Receiving Institution
  Address

  	
   

  
	
  *Wire Account

  	
  $

  
				

 

 

EXHIBIT C

 

BORROWING BASE
CERTIFICATE

 

	
  Borrower: RELIANT TECHNOLOGIES, INC.

  Comerica Bank

  	
   

  	
  Lender:

  
	
   

  	
   

  
	
  Commitment Amount: $2,000,000

  	
   

  

 

	
  ACCOUNTS
  RECEIVABLE

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.

  	
  Accounts
  Receivable Book Value as of    

  	
   

  	
   

  	
   

  	
  $

  	
             

  	
   

  
	
  2.

  	
  Additions
  (please explain on reverse)

  	
   

  	
   

  	
   

  	
  $

  	
             

  	
   

  
	
  3.

  	
  TOTAL
  ACCOUNTS RECEIVABLE

  	
   

  	
   

  	
   

  	
  $

  	
             

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ACCOUNTS
  RECEIVABLE DEDUCTIONS (without duplication)

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4.

  	
  Amounts over
  90 days due

  	
   

  	
  $

  	
             

  	
   

  	
   

  	
   

  
	
  5.

  	
  Balance of
  25% over 90 day accounts

  	
   

  	
  $

  	
             

  	
   

  	
   

  	
   

  
	
  6.

  	
  Concentration
  Limits

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  7.

  	
  Foreign
  Accounts

  	
   

  	
  $

  	
             

  	
   

  	
   

  	
   

  
	
  8.

  	
  Governmental
  Accounts

  	
   

  	
  $

  	
             

  	
   

  	
   

  	
   

  
	
  9.

  	
  Contra
  Accounts

  	
   

  	
  $

  	
             

  	
   

  	
   

  	
   

  
	
  10.

  	
  Demo
  Accounts

  	
   

  	
  $

  	
             

  	
   

  	
   

  	
   

  
	
  11.

  	
  Intercompany/Employee
  Accounts

  	
   

  	
  $

  	
             

  	
   

  	
   

  	
   

  
	
  12.

  	
  Other
  (please explain on reverse)

  	
   

  	
  $

  	
             

  	
   

  	
   

  	
   

  
	
  13.

  	
  TOTAL
  ACCOUNTS RECEIVABLE DEDUCTIONS

  	
   

  	
   

  	
   

  	
  $

  	
             

  	
   

  
	
  14.

  	
  Eligible
  Accounts (#3 minus #13)

  	
   

  	
   

  	
   

  	
  $

  	
             

  	
   

  
	
  15.

  	
  LOAN VALUE
  OF ACCOUNTS (80% of #14)

  	
   

  	
   

  	
   

  	
  $

  	
             

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  INVENTORY

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  16.

  	
  LOAN VALUE
  OF INVENTORY (80%; $1,500,000 max.)

  	
   

  	
   

  	
   

  	
  $

  	
             

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  BALANCES

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  17.

  	
  Maximum Loan
  Amount

  	
   

  	
   

  	
   

  	
  $

  	
  2,000,000

  	
   

  
	
  18.

  	
  Total Funds
  Available [Lesser of #17 or #15 plus #16]

  	
   

  	
   

  	
   

  	
  $

  	
             

  	
   

  
	
  19.

  	
  Present
  balance owing on Line of Credit

  	
   

  	
   

  	
   

  	
  $

  	
             

  	
   

  
	
  20.

  	
  RESERVE
  POSITION (#18 minus #19)

  	
   

  	
   

  	
   

  	
  $

  	
             

  	
   

  

 

The undersigned represents and warrants that the
foregoing is true, complete and correct, and that the information reflected in
this Borrowing Base Certificate complies with the representations and
warranties set forth in the Loan and Security Agreement between the undersigned
and Comerica Bank.

 

	
  RELIANT TECHNOLOGIES, INC.

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  
	
   

  	
  Authorized
  Signer

  
				

 

 

EXHIBIT D

COMPLIANCE CERTIFICATE

 

TO:                                                                            COMERICA
BANK

 

FROM:                                                         RELIANT
TECHNOLOGIES, INC.

 

The undersigned authorized Officer of RELIANT
TECHNOLOGIES, INC. hereby certifies that in accordance with the terms and
conditions of the Loan and Security Agreement between Borrower and Bank (the “Agreement”),
(i) Borrower is in complete compliance for the period ending                        
with all required covenants except as noted below and (ii) all representations
and warranties of Borrower stated in the Agreement are true and correct as of
the date hereof. Attached herewith are the required documents supporting the
above certification. The Officer further certifies that these are prepared in
accordance with Generally Accepted Accounting Principles (GAAP) and are
consistently applied from one period to the next except as explained in an
accompanying letter or footnotes.

 

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

 

	
  REPORTING COVENANTS

  	
   

  	
  REQUIRED

  	
   

  	
  COMPLIES

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Monthly financial
  statements

  	
   

  	
  Monthly, within 30 days

  	
   

  	
  YES

  	
   

  	
  NO

  
	
  Annual (CPA Audited - FY
  2003)

  	
   

  	
  August 15, 2004

  	
   

  	
  YES

  	
   

  	
  NO

  
	
  Annual (CPA Audited - FY
  2004 and thereafter)

  	
   

  	
  FYE within 120 days

  	
   

  	
  YES

  	
   

  	
  NO

  
	
  10K and 10Q

  	
   

  	
  (as applicable)

  	
   

  	
  YES

  	
   

  	
  NO

  
	
  A/R & A/P Agings,
  Borrowing Base Cert.

  	
   

  	
  Monthly, within 30 days

  	
   

  	
  YES

  	
   

  	
  NO

  
	
  A/R Audit

  	
   

  	
  Initial and Semi-Annual

  	
   

  	
  YES

  	
   

  	
  NO

  
	
  Total amount of Borrower’s
  cash and investments

  	
   

  	
  Amount $

  	
   

  	
  YES

  	
   

  	
  NO

  
	
  Total amount of Borrower’s
  cash and investments maintained with Bank

  	
   

  	
  Amount $

  	
   

  	
  YES

  	
   

  	
  NO

  

 

	
  FINANCIAL COVENANTS

  	
   

  	
  REQUIRED

  	
   

  	
  ACTUAL

  	
   

  	
  COMPLIES

  
	
  Measured on a Monthly
  Basis:

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Minimum Quick Ratio

  	
   

  	
  1.25:1.00

  	
   

  	
                :1.00

  	
   

  	
  YES

  	
   

  	
  NO

  
	
  Net Loss/Net Income to Plan

  	
   

  	
  $

  	
   

  	
   

  	
  $

  	
   

  	
   

  	
  YES

  	
   

  	
  NO

  
											

 

	
  Comments Regarding Exceptions:  See Attached.

  	
  BANK USE ONLY

  
	
   

  	
   

  
	
   

  	
  Received by:

  	
   

  	
   

  
	
  Sincerely,

  	
   

  	
  AUTHORIZED SIGNER

  	
   

  
	
   

  	
   

  
	
   

  	
  Date:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  SIGNATURE

  	
   

  	
  Verified:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  AUTHORIZED SIGNER

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  TITLE

  	
   

  	
  Date:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  DATE

  	
   

  	
  Compliance Status:                                          YES                          NO

  
								

 

FIRST AMENDMENT TO LOAN AND SECURITY AGREEMENT

This First Amendment to Loan and Security Agreement
(this “Amendment”) is entered into as of August 17,  2005, by and between COMERICA BANK (“Bank”) and RELIANT
TECHNOLOGIES, INC. (“Borrower”).

RECITALS

Borrower and Bank are parties to that certain Loan and
Security Agreement dated as of August 26, 2004, as amended from time to time
(the “Agreement”). The parties desire to amend the Agreement in accordance with
the terms of this Amendment.

NOW, THEREFORE, the parties agree as follows:

1. The following defined term in Section 1.1 of the
Agreement is hereby amended and restated in its entirety to read as follows:

“Revolving Maturity Date” means August 24, 2006.

2. Section 1.1 of the Agreement is hereby amended to
add the following new defined terms:

“Cash” means unrestricted cash and cash equivalents.

“Liquidity” means the sum of (1) Cash, plus (2)
Accounts as set forth in Borrower’s books.

“Tangible Net Worth” means at any date as of which the
amount thereof shall be determined, the sum of the capital stock, partnership
interest or limited liability company interest of Borrower and its Subsidiaries
minus intangible assets, determined in accordance with GAAP.

3. The defined terms “Current Liabilities” and “Quick
Assets” in Section 1.1 are hereby deleted in their entirety.

4. Section 6.8 of the Agreement is hereby amended and
restated in its entirety to read as follows:

“Bank Debt Liquidity Coverage. Borrower shall
maintain at all times, measured as of the last day of each calendar month, a
ratio of Liquidity to all Indebtedness to Bank of at least 1.50 to 1.00.”

5. Section 6.9 of the Agreement is hereby amended and
restated in its entirety to read as follows:

“Tangible Net Worth. Borrower shall maintain at
all times, measured as of the last day of each calendar month, a minimum
Tangible Net Worth of not less than $1.”

6. Exhibit D to the Agreement is amended and
restated in its entirety by Exhibit D attached hereto as Annex 1.

7. No course of dealing on the part of Bank or its officers,
nor any failure or delay in the exercise of any right by Bank, shall operate as
a waiver thereof, and any single or partial exercise of any such right shall
not preclude any later exercise of any such right. Bank’s failure at any time
to require strict performance by a Borrower of any provision shall not affect
any right of Bank thereafter to demand strict compliance and performance. Any
suspension or waiver of a right must be in writing signed by an officer of
Bank.

8. Unless otherwise defined, all initially capitalized
terms in this Amendment shall be as defined in the Agreement. The Agreement, as
amended hereby, shall be and remain in full force and effect in accordance with
its respective terms and hereby is ratified and confirmed in all respects.
Except as expressly set forth herein, the execution, delivery, and performance
of this Amendment shall not operate as a waiver of, or as an amendment of, any
right, power, or remedy of Bank under the Agreement, as in effect prior to the
date hereof.

 

 

1

 

9. Borrower represents and warrants that the
Representations and Warranties contained in the Agreement are true and correct
as of the date of this Amendment, and that no Event of Default has occurred and
is continuing.

10. As a condition to the effectiveness of this
Amendment, Bank shall have received, in form and substance satisfactory to
Bank, the following:

(a) this Amendment, duly executed by Borrower;

(b) a Certificate of the Secretary of Borrower with
respect to incumbency and resolutions authorizing the execution and delivery of
this Amendment;

(c) all reasonable Bank Expenses incurred through the
date of this Amendment, which may be debited from any of Borrower’s accounts;
and

(d) such other documents, and completion of such other
matters, as Bank may reasonably deem necessary or appropriate.

11. This Amendment may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one instrument.

[signature
page follows]

 

 

2

 

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

 

	
   

  	
   

  	
  RELIANT TECHNOLOGIES, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By: 

  	
  /s/ Harvard Sung

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Title: 

  	
  CFO

  

 

	
   

  	
   

  	
  COMERICA BANK

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By: 

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Title: 

  	
   

  

 

 

3

Corporation Resolutions and Incumbency Certification 

Authority to Procure Loans

I certify that I am the duly elected and qualified Secretary of RELIANT
TECHNOLOGIES, INC. and that the following is a true and correct copy of
resolutions duly adopted by the Board of Directors of the Corporation in
accordance with its bylaws and applicable statutes.

Copy of Resolutions:

Be it Resolved, That:

1.                          Any
one (1) of the following CEO, CFO (insert titles only) of the Corporation
are/is authorized, for, on behalf of,
and in the name of the Corporation to:

(a)                    Negotiate and
procure loans, letters of credit and other credit or financial accommodations
from Comerica Bank (“Bank”), a Michigan banking corporation, including, without
limitation, that certain Loan and Security Agreement dated as of August 26,
2004, as amended by that certain First Amendment to Loan and Security Agreement
dated August 17, 2005, as may subsequently be amended from time to time.

(b)                   Discount with
the Bank, commercial or other business paper belonging to the Corporation made
or drawn by or upon third parties, without limit as to amount;

(c)                    Purchase,
sell, exchange, assign, endorse for transfer and/or deliver certificates and/or
instruments representing stocks, bonds, evidences of Indebtedness or other
securities owned by the Corporation, whether or not registered in the name of
the Corporation;

(d)                   Give security
for any liabilities of the Corporation to the Bank by grant, security interest,
assignment, lien, deed of trust or mortgage upon any real or personal property,
tangible or intangible of the Corporation;

(e)                    Issue a
warrant or warrants to purchase the Corporation’s capital stock; and

(f)                      Execute and
deliver in form and content as may be required by the Bank any and all notes,
evidences of Indebtedness, applications for letters of credit, guaranties,
subordination agreements, loan and security agreements, financing statements, assignments,
liens, deeds of trust, mortgages, trust receipts and other agreements,
instruments or documents to carry out the purposes of these Resolutions, any or
all of which may relate to all or to substantially all of the Corporation’s
property and assets.

2.                          Bank
be and is authorized and directed to pay the proceeds of any such loans or
discounts as directed by the persons so authorized to sign, whether so payable
to the order of any of said persons in their individual capacities or not, and
whether such proceeds are deposited to the individual credit of any of said
persons or not;

3.                          Any
and all agreements, instruments and documents previously executed and acts and
things previously done to carry out the purposes of these Resolutions are
ratified, confirmed and approved as the act or acts of the Corporation.

4.                          These
Resolutions shall continue in force, and the Bank may consider the holders of
said offices and their signatures to be and continue to be as set forth in a
certified copy of these Resolutions delivered to the Bank, until notice to the
contrary in writing is duly served on the Bank (such notice to have no effect
on any action previously taken by the Bank in reliance on these Resolutions).

 

 

1

 

5.                          Any
person, corporation or other legal entity dealing with the Bank may rely upon a
certificate signed by an officer of the Bank to effect that these Resolutions
and any agreement, instrument or document executed pursuant to them are still
in full force and effect and binding upon the Corporation.

6.                          The
Bank may consider the holders of the offices of the Corporation and their
signatures, respectively, to be and continue to be as set forth in the
Certificate of the Secretary of the Corporation until notice to the contrary in
writing is duly served on the Bank.

I further certify that the above Resolutions are in full force and
effect as of the date of this Certificate; that these Resolutions and any
borrowings or financial accommodations under these Resolutions have been
properly noted in the corporate books and records, and have not been rescinded,
annulled, revoked or modified; that neither the foregoing Resolutions nor any
actions to be taken pursuant to them are or will be in contravention of any provision
of the articles of incorporation or bylaws of the Corporation or of any
agreement, indenture or other instrument to which the Corporation is a party or
by which it is bound; and that neither the certificate of incorporation nor
bylaws of the Corporation nor any agreement, indenture or other instrument to
which the Corporation is a party or by which it is bound require the vote or
consent of shareholders of the Corporation to authorize any act, matter or
thing described in the foregoing Resolutions.

I further certify that the following named persons have been duly
elected to the offices set opposite their respective names, that they continue
to hold these offices at the present time, and that the signatures which appear
below are the genuine, original signatures of each respectively:

(PLEASE SUPPLY GENUINE
SIGNATURES OF AUTHORIZED SIGNERS BELOW)

 

	
  NAME
  (Type or Print)

  	
   

  	
  TITLE

  	
   

  	
  SIGNATURE

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  HARVARD SUNG

  	
   

  	
  CFO

  	
   

  	
  /s/ Harvard Sung

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  DENNIS CONDON

  	
   

  	
  CEO

  	
   

  	
  /s/ Dennis
  Condon

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

In Witness Whereof, I have affixed my name as Secretary and have caused
the corporate seal (where available) of said Corporation to be affixed on
August 17, 2005.

 

	
   

  	
   

  	
   

  	
  /s/ Harvard Sung

  
	
   

  	
   

  	
   

  	
  Secretary

  

 

	
  The Above Statements are Correct.

  	
   

  	
   

  	
  /s/ Dennis Condon

  
	
   

  	
   

  	
   

  	
  SIGNATURE OF OFFICER OR DIRECTOR OR, IF NONE, A
  SHAREHOLDER OTHER THAN SECRETARY WHEN SECRETARY IS AUTHORIZED TO SIGN ALONE.

  

Failure to complete the above when the Secretary is authorized to sign
alone shall constitute a certification by the Secretary that the Secretary is
the sole Shareholder, Director and Officer of the Corporation.

 

 

2

Annex I

EXHIBIT D

COMPLIANCE CERTIFICATE

 

	
  TO:  

  	
  COMERICA BANK

  
	
   

  	
   

  
	
  FROM:

  	
  RELIANT TECHNOLOGIES,
  INC.

  

The undersigned authorized Officer of RELIANT
TECHNOLOGIES, INC. (“Borrower”), hereby certifies that in accordance with the
terms and conditions of the Loan and Security Agreement between Borrower and
Bank (as such agreement may be amended, modified or supplemented from time to
time, the “Agreement”), (i) Borrower is in complete compliance for the period ending                                              
with all required covenants except as noted below and (ii) all
representations and warranties of Borrower stated in the Agreement are true and
correct in all material respects as of the date hereof. Attached herewith are
the required documents supporting the above certification. The Officer further
certifies that these are prepared in accordance with Generally Accepted
Accounting Principles (GAAP) and are consistently applied from one period to
the next except as explained in an accompanying letter or footnotes.

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

 

	
  REPORTING COVENANTS

  	
   

  	
  REQUIRED

  	
   

  	
  COMPLIES

  	
   

  
	
  Monthly financial statements

  	
   

  	
  Monthly,
  within 30 days

  	
   

  	
  YES

  	
   

  	
  NO

  	
   

  
	
  Annual (CPA Audited — FY 2004)

  	
   

  	
  September
  15, 2005

  	
   

  	
  YES

  	
   

  	
  NO

  	
   

  
	
  Annual (CPA Audited — FY 2005 and
  thereafter)

  	
   

  	
  FYE within
  120 days

  	
   

  	
  YES

  	
   

  	
  NO

  	
   

  
	
  10K and 10Q

  	
   

  	
  (as
  applicable)

  	
   

  	
  YES

  	
   

  	
  NO

  	
   

  
	
  A/R & A/P Agings, Borrowing Base Cert.

  	
   

  	
  Monthly,
  within 30 days

  	
   

  	
  YES

  	
   

  	
  NO

  	
   

  
	
  A/R and Inventory Audit

  	
   

  	
  Initial and
  Semi-Annual

  	
   

  	
  YES

  	
   

  	
  NO

  	
   

  
	
  Total amount of Borrower’s cash and
  investments

  	
   

  	
  Amount $

  	
   

  	
  YES

  	
   

  	
  NO

  	
   

  
	
  Total amount of Borrower’s cash and
  investments maintained with Bank

  	
   

  	
  Amount $

  	
   

  	
  YES

  	
   

  	
  NO

  	
   

  

 

	
  FINANCIAL COVENANTS

  	
   

  	
  REQUIRED

  	
   

  	
  ACTUAL

  	
   

  	
  COMPLIES

  	
   

  
	
  Measured on a Monthly Basis:

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Minimum Bank Debt Liquidity Coverage

  	
   

  	
  1.50:1.00

  	
   

  	
                 :1.00

  	
   

  	
  YES

  	
   

  	
  NO

  	
   

  
	
  Minimum TNW

  	
   

  	
  $1.00

  	
   

  	
  $

  	
   

  	
  YES

  	
   

  	
  NO

  	
   

  

Comments Regarding Exceptions: See Attached.

 

 

Exhibit D - Page 1

 

The Officer further acknowledges that at any time
Borrower is not in compliance with all the terms set forth in the Agreement,
including, without limitation, the financial covenants, no credit extensions
will be made.

Very truly yours,

 

	
   

  	
   

  	
   

  	
  BANK USE ONLY

  
	
   

  	
   

  	
  Rec’d By:

  	
   

  
	
  Authorized Signer

  	
   

  	
  Date:

  	
   

  
	
   

  	
   

  	
   

  	
  Reviewed By:

  	
   

  
	
  Name:

  	
   

  	
   

  	
  Date:

  	
   

  
	
   

  	
   

  	
   

  	
  Financial Compliance Status:
             YES/NO

  
	
  Title: 

  	
   

  	
   

  	
   

  	
   

  

 

 

Exhibit D - Page 2

 

WAIVER AND SECOND
AMENDMENT TO LOAN AND SECURITY AGREEMENT

 

This
Waiver and Second Amendment to Loan and Security Agreement (this “Waiver and
Amendment”) is entered into as of November 3, 2005, by and between COMERICA
BANK (“Bank”) and RELIANT TECHNOLOGIES, INC. (“Borrower”).

 

RECITALS

 

A.                                   Borrower
and Bank are parties to that certain Loan and Security Agreement dated as of
August 26, 2004, as amended from time to time, as amended by the First
Amendment to Loan and Security Agreement dated August 17, 2005 (as amended, the
“Agreement”). The parties desire to amend the Agreement in accordance with the
terms of this Waiver and Amendment.

 

B.                                     Certain
Events of Default have occurred and are existing under Section 8.2(a) of the
Agreement due to Borrower’s breach of the monthly reporting requirements set
forth in Section 6.3(a) of the Agreement for the months ending June, July and
August 2005 (such Events of Default hereinafter are referred to collectively as
the “Existing Events of Default”).

 

C.                                     Borrower
has requested that Bank waive the Existing Events of Default, increase the
amount of the Revolving Line, add an additional Term Loan, and make certain
other modifications to the Agreement.

 

NOW,
THEREFORE, the parties agree as follows:

 

1.                                       Any
and all initially-capitalized terms used in this Waiver and Amendment without
definition shall have their respective meanings specified in the Agreement.

 

2.                                       Bank
hereby waives each of the Existing Events of Default. Such waiver by Bank shall
constitute a waiver of only the Existing Events of Default and shall not be a
waiver of Borrower’s failure to comply with the monthly reporting requirements
set forth in Section 6.3(a) of the Agreement for any other month end other than
those specified in Recital B.

 

3.                                       The
following defined terms in Section 1.1 of the Agreement hereby are amended or
restated as follows:

 

“‘Credit Extension’ means
each Advance, the Term Advance or any other extension by Bank to or for the
benefit of Borrower hereunder.”

 

“‘Revolving Line’ means a
credit extension of up to Four Million Dollars ($4,000,000).”

 

“‘Term Maturity Date’
means February 3, 2009.”

 

“‘Term Advance’ means a
cash advance under the Term Loan.”

 

“‘Term Loan’ means a
Credit Extension of up to One Million Dollars ($1,000,000).”

 

“‘Waiver and Amendment’
means the Waiver and Second Amendment to Loan and Security Agreement, dated as
of November 3, 2005, by and between Bank and Borrower.”

 

4.                                       Section
6.7 of the Agreement is hereby amended and restated in its entirety to read as
follows:

 

“Borrower shall maintain
and shall cause each of its Subsidiaries to maintain not less than fifty
percent (50%) of its total cash and investments in depository, operating, and
investment accounts with Bank and/or Comerica Securities, Inc and within 30
days of the Closing Date, Borrower shall close

 

 

Account Nos.
104756246559 and 10475790600 held at U.S. Bank and shall transfer all funds
held in such accounts to an account held at Bank.”

 

5.                                       A
new Section 2.1(b) is added to the Agreement to read in its entirety as
follows:

 

“(b)                           Term
Loan.

 

(i)                                     Subject
to and upon the terms and conditions of this Agreement, concurrently with the
execution of the Waiver and Amendment, Bank shall make a Term Loan to the
Borrower in a single advance in the original principal amount of One Million
Dollars ($1,000,000).

 

(ii)                                  Interest
shall accrue from the date the Term Advance is made at the rate specified in
Section 2.3(a), and shall be payable in accordance with Section 2.3(c). All
amounts outstanding under the Term Advance shall be due and payable in equal
monthly installments of principal on the last day of each month, commencing on
February 28, 2006, until the Term Maturity Date, at which time all amounts
owing under this Section 2.1(b) shall be immediately due and payable. All
amounts borrowed pursuant to this Section 2.1(b) once repaid may not be
reborrowed at any time prior to the Term Maturity Date. Borrower may prepay the
Term Advance, in whole or in part, from time to time, without penalty or
premium.”

 

6.                                       Sections
2.3(a) and (c) of the Agreement are hereby amended and restated in their
entireties to read as follows:

 

“(a)                            Interest
Rate.

 

(i)                                     Revolving
Line. Except as set forth in Section 2.3(b), the Advances shall bear
interest, on the outstanding daily balance thereof, at a variable rate equal to
one percent (1.00%) above the Prime Rate; and

 

(ii)                                  Term
Loan. Except as set forth in Section 2.3(b), the Term Advance shall bear
interest, on the outstanding daily balance thereof, at a variable rate equal to
two percent (2.00%) above the Prime Rate.”

 

“(c)                            Payments.

 

(i)                                     Revolving
Line. Interest hereunder shall be due and payable on the last calendar day
of each month during the term hereof. Bank shall, at its option, charge such
interest, all Bank Expenses, and all Periodic Payments against any of Borrower’s
deposit accounts or against the Revolving Line, in which case those amounts
shall thereafter accrue interest at the rate then applicable hereunder. Any
interest not paid when due shall be compounded by becoming a part of the
Obligations, and such interest shall thereafter accrue interest at the rate
then applicable hereunder. All payments shall be free and clear of any taxes,
withholdings, duties, impositions or other charges, to the end that Bank will
receive the entire amount of any Obligations payable hereunder, regardless of
source of payment.

 

(ii)                                  Term
Loan. Interest hereunder shall be due and payable on the last calendar day
of each month during the term hereof. Bank shall, at its option, charge such
interest, all Bank Expenses, and all Periodic Payments against any of Borrower’s
deposit accounts, in which case those amounts shall thereafter accrue interest
at the rate then applicable hereunder. Any interest not paid when due shall be
compounded by becoming a part of the Obligations, and such interest shall
thereafter accrue interest at the rate then applicable hereunder. All payments
shall be free and clear of any taxes, withholdings, duties, impositions or
other charges, to the end that Bank will receive the entire amount of any
Obligations payable hereunder, regardless of source of payment.”

 

7.                                       Section
6.8 of the Agreement is hereby amended and restated in its entirety to read as
follows:

 

2

 

“Bank Debt Liquidity
Coverage. Borrower shall maintain at all times, measured as of the last day
of each calendar month, a ratio of Liquidity to all Indebtedness to Bank of at
least 1.25 to 1.00.”

 

8.                                       Section
6.9 of the Agreement is hereby amended and restated in its entirety to read as
follows:

 

“Maximum Net Loss. Borrower shall not suffer
net losses in excess of the following amounts for the respective periods
(measured quarterly):

 

	
  Quarter Ending

  	
   

  	
  Maximum
  Net Loss

  
	
  December 31, 2005

  	
   

  	
  ($3,000,000)

  
	
  March 31, 2006

  	
   

  	
  ($2,500,000) and

  
	
  June 30, 2006, and the last day of each fiscal
  quarter thereafter

  	
   

  	
  ($750,000)

  

 

9.                                       Exhibits
C and D to the Agreement are deleted and replaced with Exhibits C
and D attached hereto.

 

10.                                 The
first paragraph of the Schedule of Exceptions to the Agreement referencing
Permitted Indebtedness is hereby amended and restated as follows:

 

“Indebtedness in the aggregate principal amount of
$9,000,000 incurred in connection with that certain Loan and Security
Agreement, dated as of April 2, 2004, as amended by that First Amendment to
Loan and Security Agreement, dated August 26, 2004, as further amended by that
Amendment No. 2 to Loan and Security Agreement dated November 3, 2005, by and
between Borrower, Pinnacle Ventures, L.L.C., as agent, and Pinnacle Ventures
I-A (Sub) (Q), L.P., Pinnacle Ventures I-B, L.P., and Pinnacle Ventures I
Affiliates, L.P., as lenders.”

 

11.                                 Notwithstanding
anything to the contrary set forth in Section 6.3(b) of the Agreement, Borrower
shall deliver to Bank audited annual financial statements for Borrower’s fiscal
year ending December 31, 2004, on or before November 30, 2005.

 

12.                                 No
course of dealing on the part of Bank or its officers, nor any failure or delay
in the exercise of any right by Bank, shall operate as a waiver thereof, and
any single or partial exercise of any such right shall not preclude any later
exercise of any such right. Bank’s failure at any time to require strict
performance by a Borrower of any provision shall not affect any right of Bank
thereafter to demand strict compliance and performance. Any suspension or
waiver of a right must be in writing signed by an officer of Bank.

 

13.                                 Unless
otherwise defined, all initially capitalized terms in this Waiver and Amendment
shall be as defined in the Agreement. The Agreement, as amended hereby, shall
be and remain in full force and effect in accordance with its respective terms
and hereby is ratified and confirmed in all respects. Except as expressly set
forth herein, the execution, delivery, and performance of this Waiver and
Amendment shall not operate as a waiver of, or as an amendment of, any right,
power, or remedy of Bank under the Agreement, as in effect prior to the date
hereof.

 

14.                                 Borrower
represents and warrants that the Representations and Warranties contained in
the Agreement are true and correct in all material respects as of the date of
this Waiver and Amendment, and that no Event of Default has occurred and is
continuing.

 

15.                                 As
a condition to the effectiveness of this Waiver and Amendment, Bank shall have
received, in form and substance satisfactory to Bank, the following:

 

(a)                                  this
Waiver and Amendment, duly executed by Borrower;

 

(b)                                 a
Certificate of the Secretary of Borrower with respect to incumbency and
resolutions authorizing the execution and delivery of this Waiver and
Amendment;

 

3

 

(c)                                  an
amendment and affirmation of Subordination and Intercreditor Agreement;

 

(d)                                 a
warrant to purchase 13,333 shares of common stock of Borrower,

 

(c)                                  an
agreement to provide insurance;

 

(f)                                    an
amendment fee at to Five Thousand Dollars ($5,000), which shall be
nonrefundable;

 

(g)                                 all
reasonable Bank Expenses incurred through the data of this Waiver and
Amendment, which may be debited from any of Borrower’s accounts; and

 

(h)                                 such
other documents, and completion of such other matters, as Bank may reasonably
deem necessary or appropriate,

 

16.                                 This
Waiver and Amendment may be executed in two or more counterparts, each of which
shall be deemed an original, but all of which together shall constitute one
instrument.

 

IN WITNESS WHEREOF, the undersigned have executed this
Waiver and Amendment as of the first date above written.

 

	
   

  	
  RELIANT TECHNOLOGIES, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Harvard Sung

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  CFO

  
	
   

  	
   

  	
   

  
	
   

  	
  COMERICA BANK

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ R. Cunningham

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  SVP

  
					

 

4

 

EXHIBIT C

 

BORROWING BASE
CERTIFICATE

 

	
  Borrower: RELIANT TECHNOLOGIES, INC.

  Comerica Bank

  	
   

  	
  Lender:

  
	
   

  	
   

  
	
  Commitment Amount: $4,000,000

  	
   

  

 

	
  ACCOUNTS
  RECEIVABLE

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.

  	
  Accounts
  Receivable Book Value as of    

  	
   

  	
   

  	
   

  	
  $

  	
             

  	
   

  
	
  2.

  	
  Additions
  (please explain on reverse)

  	
   

  	
   

  	
   

  	
  $

  	
             

  	
   

  
	
  3.

  	
  TOTAL
  ACCOUNTS RECEIVABLE

  	
   

  	
   

  	
   

  	
  $

  	
             

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ACCOUNTS
  RECEIVABLE DEDUCTIONS (without duplication)

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4.

  	
  Amounts over
  90 days due

  	
   

  	
  $

  	
             

  	
   

  	
   

  	
   

  
	
  5.

  	
  Balance of
  25% over 90 day accounts

  	
   

  	
  $

  	
             

  	
   

  	
   

  	
   

  
	
  6.

  	
  Concentration
  Limits

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  7.

  	
  Foreign
  Accounts

  	
   

  	
  $

  	
             

  	
   

  	
   

  	
   

  
	
  8.

  	
  Governmental
  Accounts

  	
   

  	
  $

  	
             

  	
   

  	
   

  	
   

  
	
  9.

  	
  Contra
  Accounts

  	
   

  	
  $

  	
             

  	
   

  	
   

  	
   

  
	
  10.

  	
  Demo
  Accounts

  	
   

  	
  $

  	
             

  	
   

  	
   

  	
   

  
	
  11.

  	
  Intercompany/Employee
  Accounts

  	
   

  	
  $

  	
             

  	
   

  	
   

  	
   

  
	
  12.

  	
  Other
  (please explain on reverse)

  	
   

  	
  $

  	
             

  	
   

  	
   

  	
   

  
	
  13.

  	
  TOTAL
  ACCOUNTS RECEIVABLE DEDUCTIONS

  	
   

  	
   

  	
   

  	
  $

  	
             

  	
   

  
	
  14.

  	
  Eligible
  Accounts (#3 minus #13)

  	
   

  	
   

  	
   

  	
  $

  	
             

  	
   

  
	
  15.

  	
  LOAN VALUE
  OF ACCOUNTS (80% of #14)

  	
   

  	
   

  	
   

  	
  $

  	
             

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  INVENTORY

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  16.

  	
  LOAN VALUE
  OF INVENTORY (80%; $1,500,000 max.)

  	
   

  	
   

  	
   

  	
  $

  	
             

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  BALANCES

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  17.

  	
  Maximum Loan
  Amount

  	
   

  	
   

  	
   

  	
  $

  	
  4,000,000

  	
   

  
	
  18.

  	
  Total Funds
  Available [Lesser of #17 or #15 plus #16]

  	
   

  	
   

  	
   

  	
  $

  	
             

  	
   

  
	
  19.

  	
  Present
  balance owing on Line of Credit

  	
   

  	
   

  	
   

  	
  $

  	
             

  	
   

  
	
  20.

  	
  RESERVE
  POSITION (#18 minus #19)

  	
   

  	
   

  	
   

  	
  $

  	
             

  	
   

  

 

The undersigned represents and warrants that the
foregoing is true, complete and correct, and that the information reflected in
this Borrowing Base Certificate complies with the representations and
warranties set forth in the Loan and Security Agreement between the undersigned
and Comerica Bank.

 

	
  RELIANT TECHNOLOGIES, INC.

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  
	
   

  	
  Authorized
  Signer

  
				

 

 

EXHIBIT D

 

COMPLIANCE CERTIFICATE

 

TO:                                                                            COMERICA
BANK

 

FROM:                                                         RELIANT
TECHNOLOGIES, INC.

 

The
undersigned authorized Officer of RELIANT TECHNOLOGIES, INC. (“Borrower”),
hereby certifies that in accordance with the terms and conditions of the Loan
and Security Agreement between Borrower and Bank (as such agreement may be
amended, modified or supplemented from time to time, the “Agreement”), (i)
Borrower is in complete compliance for the period ending                                with
all required covenants except as noted below and (ii) all representations and
warranties of Borrower stated in the Agreement are true and correct in all
material respects as of the date hereof. Attached herewith are the required
documents supporting the above certification. The Officer further certifies
that these are prepared in accordance with Generally Accepted Accounting
Principles (GAAP) and are consistently applied from one period to the next
except as explained in an accompanying letter or footnotes.

 

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

 

	
  REPORTING COVENANTS

  	
   

  	
  REQUIRED

  	
   

  	
  COMPLIES

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Monthly financial statements

  	
   

  	
  Monthly, within 30 days

  	
   

  	
  YES

  	
   

  	
  NO

  
	
  Annual (CPA Audited - FY 2004)

  	
   

  	
  November 30, 2005

  	
   

  	
  YES

  	
   

  	
  NO

  
	
  Annual (CPA Audited - FY 2005 and thereafter)

  	
   

  	
  FYE within 120 days

  	
   

  	
  YES

  	
   

  	
  NO

  
	
  10K and 10Q

  	
   

  	
  (as applicable)

  	
   

  	
  YES

  	
   

  	
  NO

  
	
  A/R & A/P Agings, Borrowing Base Cert.

  	
   

  	
  Monthly, within 30 days

  	
   

  	
  YES

  	
   

  	
  NO

  
	
  A/R and Inventory Audit

  	
   

  	
  Initial and Semi-Annual

  	
   

  	
  YES

  	
   

  	
  NO

  
	
  Total amount of Borrower’s cash and investments

  	
   

  	
  Amount $

  	
   

  	
  YES

  	
   

  	
  NO

  
	
  Total amount of Borrower’s cash and investments
  maintained with Bank

  	
   

  	
  Amount $

  	
   

  	
  YES

  	
   

  	
  NO

  

 

	
  FINANCIAL COVENANTS

  	
   

  	
  REQUIRED

  	
   

  	
  ACTUAL

  	
   

  	
  COMPLIES

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Maintain at all Times; Measured on a Monthly Basis
  unless otherwise indicated

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Minimum Bank Debt Liquidity Coverage

  	
   

  	
  1.25:1.00

  	
   

  	
               :1.00

  	
   

  	
  YES

  	
   

  	
  NO

  
	
  Net Loss (Measured on a Quarterly Basis):

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  FQE 12/31/05

  	
   

  	
  $

  	
  (3,000,000

  	
  )

  	
  $

  	
   

  	
  YES

  	
   

  	
  NO

  
	
  FQE 3/31/06

  	
   

  	
  $

  	
  (2,500,000

  	
  )

  	
  $

  	
   

  	
  YES

  	
   

  	
  NO

  
	
  FQE 6/30/06, and all FQE thereafter

  	
   

  	
  $

  	
  (750,000

  	
  )

  	
  $

  	
   

  	
  YES

  	
   

  	
  NO

  

 

 

Comments Regarding Exceptions: See Attached.

 

 

The Officer further acknowledges that at any time
Borrower is not in compliance with all the terms set forth in the Agreement,
including, without limitation, the financial covenants, no credit extensions
will be made.

 

Very truly yours,

 

 

	
   

  	
  BANK USE ONLY

  
	
   

  	
   

  	
  Rec’d By:

  	
   

  	
   

  
	
  Authorized Signer

  	
  Date:

  	
   

  	
   

  
	
   

  	
  Reviewed By:

  	
   

  	
   

  
	
  Name:

  	
   

  	
  Date:

  	
   

  	
   

  
	
  Title:

  	
   

  	
  Financial Compliance Status:                                       YES
  / NO

  

 

2

 

Corporation Resolutions and
Incumbency Certification

Authority to Procure Loans

 

I certify that I am the duly elected and qualified
Secretary of RELIANT TECHNOLOGIES, INC., and that the following is a true and
correct copy of resolutions duly adopted by the Board of Directors of the
Corporation in accordance with its bylaws and applicable statutes.

 

Copy of Resolutions:

 

Be it Resolved, That:

 

1.                                       Any
one (1) of the following                                                       
(insert titles only) of the Corporation are/is authorized, for, on behalf of,
and in the name of the Corporation to:

 

(a)                                  Negotiate
and procure loans, letters of credit and other credit or financial
accommodations from Comerica Bank (“Bank”), a Michigan banking corporation,
including, without limitation, that certain Loan and Security Agreement dated
as of August 26, 2004, as amended by that certain First Amendment to Loan and
Security Agreement dated August 17, 2005, and as amended by that certain Waiver
and Second Amendment to Loan and Security Agreement, dated November 3, 2005, as
may subsequently be amended from time to time.

 

(b)                                 Discount
with the Bank, commercial or other business paper belonging to the Corporation
made or drawn by or upon third parties, without limit as to amount;

 

(c)                                  Purchase,
sell, exchange, assign, endorse for transfer and/or deliver certificates and/or
instruments representing stocks, bonds, evidences of Indebtedness or other
securities owned by the Corporation, whether or not registered in the name of
the Corporation;

 

(d)                                 Give
security for any liabilities of the Corporation to the Bank by grant, security
interest, assignment, lien, deed of trust or mortgage upon any real or personal
property, tangible or intangible of the Corporation;

 

(e)                                  Issue
a warrant or warrants to purchase the Corporation’s capital stock; and

 

(f)                                    Execute
and deliver in form and content as may be required by the Bank any and all
notes, evidences of Indebtedness, applications for letters of credit,
guaranties, subordination agreements, loan and security agreements, financing
statements, assignments, liens, deeds of trust, mortgages, trust receipts and
other agreements, instruments or documents to carry out the purposes of these
Resolutions, any or all of which may relate to all or to substantially all of
the Corporation’s property and assets.

 

2.                                       Said
Bank be and it is authorized and directed to pay the proceeds of any such loans
or discounts as directed by the persons so authorized to sign, whether so
payable to the order of any of said persons in their individual capacities or
not, and whether such proceeds are deposited to the individual credit of any of
said persons or not;

 

3.                                       Any
and all agreements, instruments and documents previously executed and acts and
things previously done to carry out the purposes of these Resolutions are
ratified, confirmed and approved as the act or acts of the Corporation.

 

4.                                       These
Resolutions shall continue in force, and the Bank may consider the holders of
said offices and their signatures to be and continue to be as set forth in a
certified copy of these Resolutions delivered to the Bank, until notice to the
contrary in writing is duly served on the Bank (such notice to have no effect
on any action previously taken by the Bank in reliance on these Resolutions).

 

1

 

5.                                       Any
person, corporation or other legal entity dealing with the Bank may rely upon a
certificate signed by an officer of the Bank to effect that these Resolutions
and any agreement, instrument or document executed pursuant to them are still
in full force and effect and binding upon the Corporation.

 

6.                                       The
Bank may consider the holders of the offices of the Corporation and their
signatures, respectively, to be and continue to be as set forth in the
Certificate of the Secretary of the Corporation until notice to the contrary in
writing is duly served on the Bank.

 

I further certify that the above Resolutions are in
full force and effect as of the date of this Certificate; that these
Resolutions and any borrowings or financial accommodations under these
Resolutions have been properly noted in the corporate books and records, and
have not been rescinded, annulled, revoked or modified; that neither the
foregoing Resolutions nor any actions to be taken pursuant to them are or will
be in contravention of any provision of the articles of incorporation or bylaws
of the Corporation or of any agreement, indenture or other instrument to which
the Corporation is a party or by which it is bound; and that neither the
certificate of incorporation nor bylaws of the Corporation nor any agreement,
indenture or other instrument to which the Corporation is a party or by which
it is bound require the vote or consent of shareholders of the Corporation to
authorize any act, matter or thing described in the foregoing Resolutions.

 

I further certify that the following named persons
have been duly elected to the offices set opposite their respective names, that
they continue to hold these offices at the present time, and that the
signatures which appear below are the genuine, original signatures of each
respectively:

 

(PLEASE SUPPLY GENUINE SIGNATURES
OF AUTHORIZED SIGNERS BELOW)

 

	
  NAME (Type or Print)

  	
   

  	
  TITLE

  	
   

  	
  SIGNATURE

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  

 

In Witness Whereof, I have affixed my name as
Secretary and have caused the corporate seal (where available) of said
Corporation to be affixed on November 3, 2005.

 

	
   

  	
   

  
	
   

  	
  Secretary

  

 

 

The
Above Statements are Correct.                             SIGNATURE
OF OFFICER OR DIRECTOR OR, IF NONE, A SHAREHOLDER OTHER THAN SECRETARY WHEN
SECRETARY IS AUTHORIZED TO SIGN ALONE.

 

Failure to complete the above when the Secretary
is authorized to sign alone shall constitute a certification by the Secretary
that the Secretary is the sole Shareholder, Director and Officer of the
Corporation.

 

2

 

COMERICA BANK

Member FDIC

ITEMIZATION OF AMOUNT FINANCED

DISBURSEMENT INSTRUCTIONS

(Term Loan)

 

Name(s): Reliant Technologies, Inc., a Delaware
corporation                                                                  Date:
November 3, 2005

 

	
   

  	
  $1,000,000 credited to deposit account No.           
  when Term Loan Advances are requested or disbursed to Borrower by cashiers
  check or wire transfer

  

Amounts paid to others on your behalf:

 

	
                                                  $

  	
  to Comerica Bank for Document Fee

  
	
   

  	
   

  
	
                                                  $

  	
  to Bank counsel fees and expenses

  
	
   

  	
   

  
	
                                                  $

  	
  to 

  
	
   

  	
   

  
	
                                                  $

  	
  to 

  
	
   

  	
   

  
	
                                                  $

  	
  TOTAL (AMOUNT FINANCED)

  

 

Upon consummation of this transaction, this document
will also serve as the authorization for Comerica Bank to disburse the loan
proceeds as stated above.

 

	
   

  	
   

  	
   

  	
   

  
	
  Signature

  	
   

  	
  Signature

  

 

 

AGREEMENT TO PROVIDE INSURANCE

 

	
  TO:                            COMERICA
  BANK

  attn:  Deni M. Snider, MC 4770

  75 E. Trimble Road

  San Jose, CA 95131

  	
  Date:  November
  3, 2005

  

  Borrower:    RELIANT
  TECHNOLOGIES,

  INC.

  

 

In
consideration of a loan in the amount of $5,000,000, secured by all tangible
personal property including inventory and equipment.

 

We
agree to obtain adequate insurance coverage to remain in force during the term
of the loan.

 

We
also agree to advise the below named agent to add Comerica Bank as the loss
payee on the Lender’s loss payable endorsement to our new or existing insurance
policy(s), and to furnish Bank at above address with a copy of such policy(s)
and endorsements and any subsequent renewal policies.

 

We
understand that the policy must contain:

 

1.                                       Fire
and extended coverage in an amount sufficient to cover:

 

The amount of the
loan, OR

 

All existing
encumbrances, whichever is greater,

 

2.                                       Lender’s
“Loss Payable” Endorsement Form 438 BFU in favor of Comerica Bank, or any other
form acceptable to Bank.

 

INSURANCE INFORMATION

 

	
  Insurance
  Co./Agent

  	
  Telephone No.:

  
	
   

  	
   

  
	
  Agent’s
  Address:

  	
   

  
	
   

  	
   

  
	
  Signature
  of Obligor:

  	
   

  	
   

  
	
   

  	
   

  
	
  Signature
  of Obligor:

  	
   

  	
   

  
				

 

 

	
  FOR BANK USE ONLY

  
	
   

  
	
  INSURANCE VERIFICATION: Date:

  	
   

  
	
   

  
	
  Person Spoken to:

  	
   

  
	
   

  
	
  Policy Number:

  	
   

  
	
   

  
	
  Effective From:

  	
   

  	
   To:

  	
   

  
	
   

  
	
  Verified by:

  	
   

  
								

 

 

WAIVER AND THIRD
AMENDMENT TO LOAN AND SECURITY AGREEMENT

 

This
Waiver and Third Amendment to Loan and Security Agreement (this “Amendment”) is
entered into as of October 30, 2006 by and between COMERICA BANK (“Bank”) and
RELIANT TECHNOLOGIES, INC. (“Borrower”).

 

RECITALS

 

Borrower
and Bank are parties to that certain Loan and Security Agreement dated as of
August 26, 2004, as amended from time to time, including as amended by that
certain first Amendment to Loan and Security Agreement dated August 17, 2005,
that certain Waiver and Second Amendment to Loan and Security Agreement dated
as of November 3 2005, that certain waiver letter dated as August 10, 2006, and
that certain bilateral agreement dated as of August 21, 2006 (collectively, the
“Agreement”). The parties desire to amend the Agreement in accordance with the
terms of this Amendment.

 

NOW,
THEREFORE, the parties agree as follows:

 

1.                                       Any
and all initially-capitalized terms used in this Amendment without definition
shall have their respective meanings specified in the Agreement.

 

2.                                       Bank
hereby waives Borrower’s violation of Section 6.9 of the Agreement (Maximum Net
Loss covenant) for the quarter ended September 30, 2006 only. This waiver is
specific as to content and time, shall be limited precisely as written, and
shall not constitute a waiver of any other current or future Default or Event
of Default or breach of any covenant Contained in the Agreement or the terms
and conditions of any other Loan Documents. Bank expressly reserves all of its
various rights, remedies, powers and privileges under the Agreement and the
other Loan Documents due to any other Default or breach not waived herein.

 

3.                                       The
following defined terms in Section 1.1 of the Agreement hereby are amended and
restated as follows:

 

“‘Borrowing Base’ means
an amount equal to eighty percent (80%) of Eligible Accounts, and forty percent
(40%) of Eligible Inventory (provided, that Advances based upon Eligible
Inventory shall not exceed One Million Five Hundred Thousand Dollars
($1,500,000)), all as determined by Bank with reference to the most recent
Borrowing Base Certificate delivered by Borrower.”

 

“‘Cash’ means
unrestricted cash and cash equivalents held to accounts with Bank and/or
Comerica Securities (so long as such accounts are subject to a control
agreement acceptable to Bank), but excluding the cash security held by Bank for
that certain $176,882.94 standby letter of credit.”

 

“‘Liquidity’ means the
sum of (i) Cash, plus (2) net Accounts as determined by Bank with
reference to the most recent Borrowing Base Certificate delivered by Borrower.”

 

“‘Revolving Maturity Date’
means October 24, 2007.”

 

4.                                       The
following new defined terms are hereby added to Section 1.1 of the Agreement in
alphabetical order:

 

“‘Profitability’ means
net income after tax excluding non cash stock based compensation expenses, to
be calculated based on a quarterly basis until two consecutive quarters of
Profitability, at which time Profitability will be calculated based on trailing
twelve months basis.”

 

5.                                       In
connection with Borrower’s obligation to provide Bank with financial
projections pursuant to Section 6.3 of the Agreement, Borrower by November 30,
2006 shall deliver to Bank its financial projections (approved by Borrower’s
board of directors) for the 12 month period following the date of this
Amendment, with such projections to be in form and substance reasonably acceptable
to Bank.

 

 

6.                                       Section
6.8 of the Agreement is hereby amended and restated in its entirety to read as
follows:

 

“6.8                           Alternative
Covenant Structure. Borrower at all times shall fulfill the requirements of
either Covenant Structure A or Covenant Structure B below:

 

(a)                                  Covenant Structure A:

 

(i)                                     Bank
Debt Liquidity Coverage. Borrower shall maintain at all times, measured as
of the last day of each calendar month, a ratio of Liquidity to all
Indebtedness to Bank of at least 1.25 to 1.00; and

 

(ii)                                  Profitability.
Borrower shall have Profitability (measured quarterly) for the respective
periods below in excess of the amount corresponding to such period:

 

	
  Quarter Ending

  	
   

  	
  Profitability

  
	
  December 31, 2006

  	
   

  	
  $

  	
  1

  
	
   

  	
   

  	
   

  
	
  Each quarter-ended period thereafter

  	
   

  	
  Amounts to be reasonably determined by Bank
  after January 15, 2007 based upon financial projections to be
  provided by Borrower to Bank prior to November 30, 2006.

  

 

OR

 

(b)                                 Covenant Structure B:

 

(i)                                     Bank
Debt/Cash Coverage. At all times commencing November 30, 2006, a ratio of
Cash to all Indebtedness to Bank of at least 1.15 to 1.00. Borrower covenants
transfer sufficient cash from UBS Warburg to be in compliance with this
covenant as of November 30, 2006.”

 

7.                                       Section
6.9 of the Agreement is hereby amended and restated in its entirety to read as
follows:

 

“6.9                           Intentionally
Omitted.”

 

8.                                       The
Bank’s primary notice address set forth in Section 10 of the Agreement is
hereby amended to read in its entirety as follows:

 

“if to Bank:                                                                                    Comerica
Bank

75 East Trimble Road, M/C 4770

San Jose, CA 95131

Attn: Manager

FAX (408) 451-8586”

 

9.                                       Sections
11 and 12 of the Agreement are hereby amended and restated to read in their
entirety to read as follows:

 

“11                              CHOICE
OF LAW AND VENUE; JURY TRIAL WAIVER.

 

This Agreement shall be governed by, and construed in
accordance with, the internal laws of the Sate of California, without regard to
principles of conflicts of law. Each of Borrower and Bank hereby submits to the
exclusive jurisdiction of the state and Federal courts located in the County of
Santa Clara, State of California. THE UNDERSIGNED ACKNOWLEDGE THAT THE RIGHT TO
TRIAL BY JURY IS A CONSTITUTIONAL

 

2

 

ONE, BUT THAT IT MAY BE WAIVED UNDER CERTAIN
CIRCUMSTANCES. TO THE EXTENT PERMITTED BY LAW, EACH PARTY, AFTER CONSULTING (OR
HAVING HAD THE OPPORTUNITY TO CONSULT) WITH COUNSEL OF ITS CHOICE, KNOWINGLY
AND VOLUNTARILY, AND FOR THE MUTUAL BENEFIT OF ALL PARTIES, WAIVES ANY RIGHT TO
TRIAL BY JURY IN THE EVENT OF LITIGATION ARISING OUT OF OR RELATED TO THIS
AGREEMENT OR ANY OTHER DOCUMENT, INSTRUMENT OR AGREEMENT BETWEEN THE
UNDERSIGNED PARTIES.

 

12.                                 JUDICIAL
REFERENCE PROVISION.

 

12.1                           In
the event the Jury Trial Waiver set forth above is not enforceable, the parties
elect to proceed under this Judicial Reference Provision.

 

12.2                           With
the exception of the items specified in clause (c), below, any controversy,
dispute or claim (each, a “Claim”) between the parties arising out of or
relating to this Agreement or any other document, instrument or agreement
between the undersigned parties (collectively in this Section, the “Comerica
Documents”), will be resolved by a reference proceeding in California in
accordance with the provisions of Sections 638 et seq. of the California Code
of Civil Procedure (“CCP”), or their successor sections, which shall constitute
the exclusive remedy for the resolution of any Claim, including whether the
Claim is subject to the reference proceeding. Except as otherwise provided in
the Comerica Documents, venue for the reference proceeding will be in the state
or federal Court in the county or district where the real property involved in
the action, if any, is located or in the state or federal court in the county
or district where venue is otherwise appropriate under applicable law (the “Court”).

 

12.3                           The
matters that shall not be subject to a reference are the following:  (i) nonjudicial foreclosure of any security
interests in real or personal property, (ii) exercise of self-help remedies
(including, without limitation, set-off), (iii) appointment of a receiver and
(iv) temporary provisional or ancillary remedies, including, without
limitation, writs of attachment, writs of possession, temporary restraining
orders or preliminary injunctions). This reference provision does not limit the
right of any party to exercise or oppose any of the rights and remedies
described in clauses (i) and (ii) or to seek or oppose from a court of
competent jurisdiction any of the items described in clauses (iii) and (iv). The
exercise of, or opposition to, any of those items does not waive the right of
any party to a reference pursuant to this reference provision as provided
herein.

 

12.4                           The
referee shall be a retired judge or justice selected by mutual written
agreement of the parties. If the parties do not agree within ten (10) days of a
written request to do so by any party, then, upon request of any party, the
referee shall be selected by the Presiding Judge of the Court (or his or her
representative). A request for appointment of a referee may be heard on an ex
parte or expedited basis, and the parties agree that irreparable harm would
result if ex parte relief is not granted. Pursuant to CCP § 170.6, each party
shall have one peremptory challenge to the referee selected by the Presiding
Judge of the Court (or his or her representative).

 

12.5                           The
parties agree that time is of the essence in conducting the reference
proceedings. Accordingly, the referee shall be requested, subject to change in
the time periods specified herein for good cause shown, to (i) set the matter
for a status and trial-setting conference within fifteen (15) days after the
date of selection of the referee, (ii) if practicable, try all issues of law or
fact within one hundred twenty (120) days after the date of the conference and
(iii) report a statement of decision within twenty (20) days after the matter
has been submitted for decision.

 

12.6                           The
referee will have power to expand or limit the amount and duration of discovery.
The referee may set or extend discovery deadlines or cutoffs for good cause,
including a party’s failure to provide requested discovery for any reason
whatsoever. Unless otherwise ordered based upon good cause shown, no party
shall be entitled to “priority” in conducting discovery, depositions may by
taken by either party upon seven (7) days written notice, and all other
discovery shall be responded to within fifteen (15) days after service. All
disputes relating to discovery which cannot be resolved by the parties shall be
submitted to the referee whose decision shall be final and binding.

 

3

 

12.7                           Except
as expressly set forth herein, the referee shall determine the manner in which
the reference proceeding is conducted including the time and place of hearings,
the order of presentation of evidence, and all other questions that arise with
respect to the course of the reference proceeding. All proceedings and hearings
conducted before the referee, except for trial, shall be conducted without a
court reporter, except that when any party so requests, a court reporter will
be used at any hearing conducted before the referee, and the referee will be
provided a courtesy copy of the transcript. The party making such a request
shall have the obligation to arrange for and pay the court reporter. Subject to
the referee’s power to award costs to the prevailing party, the parties will
equally share the cost of the referee and the court reporter at trial.

 

12.8                           The
referee shall be required to determine all issues in accordance with existing
case law and the statutory laws of the State of California. The rules of
evidence applicable to proceedings at law in the State of California will be
applicable to the reference proceeding. The referee shall be empowered to enter
equitable as well as legal relief, enter equitable orders that will be binding
on the parties and rule on any motion which would be authorized in a court
proceeding, including without limitation motions for summary judgment or
summary adjudication. The referee shall issue a decision at the close of the
reference proceeding which disposes of all claims of the parties that are the
subject of the reference. Pursuant to CCP § 644, such decision shall be entered
by the Court as a judgment or an order in the same manner as if the action had
been tried by the Court and any such decision will be final, binding and
conclusive. The parties reserve the right to appeal from the final judgment or
order or from any appealable decision or order entered by the referee. The
parties reserve the right to findings of fact, conclusions of laws, a written
statement of decision, and the right to move for a new trial or a different
judgment, which new trial, if granted, is also to be a reference proceeding
under this provision.

 

12.9                           If
the enabling legislation which provides for appointment of a referee is
repealed (and no successor statute is enacted), any dispute between the parties
that would otherwise be determined by reference procedure will be resolved and
determined by arbitration. The arbitration will be conducted by a retired judge
or justice, in accordance with the California Arbitration Act § 1280 through §
1294.2 of the CCP as amended from time to time. The limitations with respect to
discovery set forth above shall apply to any such arbitration proceeding.

 

12.10                     THE PARTIES
RECOGNIZE AND AGREE THAT ALL CONTROVERSIES, DISPUTES AND CLAIMS RESOLVED UNDER
THIS REFERENCE PROVISION WILL BE DECIDED BY A REFEREE AND NOT BY A JURY. AFTER
CONSULTING (OR HAVING HAD THE OPPORTUNITY TO CONSULT) WITH COUNSEL OF ITS OWN
CHOICE, EACH PARTY KNOWINGLY AND VOLUNTARILY, AND FOR THE MUTUAL BENEFIT OF ALL
PARTIES, AGREES THAT THIS REFERENCE PROVISION WILL APPLY TO ANY CONTROVERSY,
DISPUTE OR CLAIM BETWEEN OR AMONG THEM ARISING OUT OF OR IN ANY WAY RELATED TO,
THIS AGREEMENT OR THE OTHER COMERICA DOCUMENTS.

 

10.                                 No
course of dealing on the part of Bank or its officers, nor any failure or delay
in the exercise of any right by Bank, shall operate as a waiver thereof, and
any single or partial exercise of any such right shall not preclude any later
exercise of any such right. Bank’s failure at any time to require strict
performance by a Borrower of any provision shall not affect any right of Bank
thereafter to demand strict compliance and performance. Any suspension or
waiver of a right must be in writing signed by an officer of Bank.

 

11.                                 Unless
otherwise defined, all initially capitalized terms in this Amendment shall be
as defined in the agreement. The Agreement, as amended hereby, shall be and
remain in full force and effect in accordance with its respective terms and
hereby is ratified and confirmed in all respects. Except as expressly set forth
herein, the execution, delivery, and performance of this Amendment shall not
operate as a waiver of, or as an amendment of, any right, power, or remedy of
Bank under the Agreement, as in effect prior to the date hereof.

 

12.                                 Borrower
represents and warrants that the Representations and Warranties contained in
the Agreement are true and correct in all material respects as of the date of
this Amendment, and that no Event of Default has occurred and is continuing.

 

13.                                 As
a condition to the effectiveness of this Amendment, Bank shall have received,
in form and substance satisfactory to Bank, the following:

 

4

 

(a)                                  this
Amendment, duly executed by Borrower;

 

(b)                                 a
Certificate of the Secretary of Borrower with respect to incumbency and
resolutions authorizing the execution and delivery of this Amendment;

 

(c)                                  all
reasonable Bank Expenses incurred through the date of this Amendment, which may
be debited from any of Borrower’s accounts; and

 

(d)                                 such
other documents, and completion of such other matters, as Bank may reasonably
deem necessary or appropriate.

 

14.                                 This
Amendment may be executed in two or more counterparts, each of which shall be
deemed an original, but all of which together shall constitute one instrument.

 

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

 

	
   

  	
  RELIANT TECHNOLOGIES, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/Thomas Scannell

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
  Chief Financial Officer

  
	
   

  	
   

  	
   

  
	
   

  	
  COMERICA BANK

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/Signatory

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
  Senior Vice President

  
						

 

5

 

EXHIBIT C

 

BORROWING BASE
CERTIFICATE

 

	
  Borrower: RELIANT TECHNOLOGIES, INC.

  	
   

  	
  Lender: Comerica Bank

  
	
   

  	
   

  
	
  Commitment Amount: $4,000,000

  	
   

  

 

	
  ACCOUNTS
  RECEIVABLE

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.

  	
  Accounts
  Receivable Book Value as of    

  	
   

  	
   

  	
   

  	
  $

  	
             

  	
   

  
	
  2.

  	
  Additions
  (please explain on reverse)

  	
   

  	
   

  	
   

  	
  $

  	
             

  	
   

  
	
  3.

  	
  TOTAL
  ACCOUNTS RECEIVABLE

  	
   

  	
   

  	
   

  	
  $

  	
             

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ACCOUNTS
  RECEIVABLE DEDUCTIONS (without duplication)

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4.

  	
  Amounts over
  90 days due

  	
   

  	
  $

  	
             

  	
   

  	
   

  	
   

  
	
  5.

  	
  Balance of
  25% over 90 day accounts

  	
   

  	
  $

  	
             

  	
   

  	
   

  	
   

  
	
  6.

  	
  Concentration
  Limits

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  7.

  	
  Foreign
  Accounts

  	
   

  	
  $

  	
             

  	
   

  	
   

  	
   

  
	
  8.

  	
  Governmental
  Accounts

  	
   

  	
  $

  	
             

  	
   

  	
   

  	
   

  
	
  9.

  	
  Contra
  Accounts

  	
   

  	
  $

  	
             

  	
   

  	
   

  	
   

  
	
  10.

  	
  Demo
  Accounts

  	
   

  	
  $

  	
             

  	
   

  	
   

  	
   

  
	
  11.

  	
  Intercompany/Employee
  Accounts

  	
   

  	
  $

  	
             

  	
   

  	
   

  	
   

  
	
  12.

  	
  Other
  (please explain on reverse)

  	
   

  	
  $

  	
             

  	
   

  	
   

  	
   

  
	
  13.

  	
  TOTAL
  ACCOUNTS RECEIVABLE DEDUCTIONS

  	
   

  	
   

  	
   

  	
  $

  	
             

  	
   

  
	
  14.

  	
  Eligible
  Accounts (#3 minus #13)

  	
   

  	
   

  	
   

  	
  $

  	
             

  	
   

  
	
  15.

  	
  LOAN VALUE
  OF ACCOUNTS (80% of #14)

  	
   

  	
   

  	
   

  	
  $

  	
             

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  INVENTORY

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  16.

  	
  LOAN VALUE
  OF INVENTORY (40%; $1,500,000 max.)

  	
   

  	
   

  	
   

  	
  $

  	
             

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  BALANCES

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  17.

  	
  Maximum Loan
  Amount

  	
   

  	
   

  	
   

  	
  $

  	
  4,000,000

  	
   

  
	
  18.

  	
  Total Funds
  Available [Lesser of #17 or #15 plus #16]

  	
   

  	
   

  	
   

  	
  $

  	
             

  	
   

  
	
  19.

  	
  Present
  balance owing on Line of Credit

  	
   

  	
   

  	
   

  	
  $

  	
             

  	
   

  
	
  20.

  	
  RESERVE
  POSITION (#18 minus #19)

  	
   

  	
   

  	
   

  	
  $

  	
             

  	
   

  

 

The undersigned represents and warrants that the
foregoing is true, complete and correct, and that the information reflected in
this Borrowing Base Certificate complies with the representations and
warranties set forth in the Loan and Security Agreement between the undersigned
and Comerica Bank.

 

	
  RELIANT TECHNOLOGIES, INC.

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  
	
   

  	
  Authorized
  Signer

  
				

 

6

 

EXHIBIT D

 

COMPLIANCE CERTIFICATE

 

TO:                                                                            COMERICA
BANK

 

FROM:                                                         RELIANT
TECHNOLOGIES, INC.

 

The
undersigned authorized Officer of RELIANT TECHNOLOGIES, INC. (“Borrower”),
hereby certifies that in accordance with the terms and conditions of the Loan
and Security Agreement between Borrower and Bank (as such agreement may be
amended, modified or supplemented from time to time, the “Agreement”), (i)
Borrower is in complete compliance for the period ending                                      
with all required covenants except as noted below and (ii) all representations
and warranties of Borrower stated in the Agreement are true and correct in all
material respects as of the date hereof. Attached herewith are the required
documents supporting the above certification. The Officer further certifies
that these are prepared in accordance with Generally Accepted Accounting
Principles (GAAP) and are consistently applied from one period to the next
except as explained in an accompanying letter or footnotes.

 

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

 

	
  REPORTING COVENANTS

  	
   

  	
  REQUIRED

  	
   

  	
  COMPLIES

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Monthly financial statements

  	
   

  	
  Monthly, within 30 days

  	
   

  	
  YES

  	
   

  	
  NO

  
	
  Annual (CPA Audited - FY 2004)

  	
   

  	
  November 30, 2005

  	
   

  	
  YES

  	
   

  	
  NO

  
	
  Annual (CPA Audited - FY 2005 and thereafter)

  	
   

  	
  FYE within 120 days

  	
   

  	
  YES

  	
   

  	
  NO

  
	
  10K and 10Q

  	
   

  	
  (as applicable)

  	
   

  	
  YES

  	
   

  	
  NO

  
	
  A/R & A/P Agings, Borrowing Base Cert.

  	
   

  	
  Monthly, within 30 days

  	
   

  	
  YES

  	
   

  	
  NO

  
	
  A/R and Inventory Audit

  	
   

  	
  Initial and Semi-Annual

  	
   

  	
  YES

  	
   

  	
  NO

  
	
  Total amount of Borrower’s cash and investments

  	
   

  	
  Amount $

  	
   

  	
  YES

  	
   

  	
  NO

  
	
  Total amount of Borrower’s cash and investments
  maintained with Bank

  	
   

  	
  Amount $

  	
   

  	
  YES

  	
   

  	
  NO

  

 

	
  FINANCIAL COVENANTS

  	
   

  	
  REQUIRED

  	
   

  	
  ACTUAL

  	
   

  	
  COMPLIES

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  COMPLIANCE WITH EITHER COVENANT STRUCTURE A OR B

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  YES

  	
   

  	
  NO

  
	
  Structure A:

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (i)Minimum Bank Debt Liquidity Coverage (measured on
  a monthly basis); and

  	
   

  	
  1.25:1.00

  	
   

  	
                  :1.00

  	
   

  	
  YES

  	
   

  	
  NO

  
	
  (ii) Profitability (measured on a quarterly basis):

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  FQE 12/31/06

  	
   

  	
  $1

  	
   

  	
  $

  	
   

  	
  YES

  	
   

  	
  NO

  
	
  FQE thereafter

  	
   

  	
  $ To be reasonably determined by Bank

  	
   

  	
  $

  	
   

  	
  YES

  	
   

  	
  NO

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  OR

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Structure B:

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (i) Bank Debt/Cash Coverage 

      (commencing November 30, 2006 and 

      at all times thereafter)

  	
   

  	
  1.15:1.00

  	
   

  	
                  :1.00

  	
   

  	
  YES

  	
   

  	
  NO

  

 

Comments Regarding Exceptions: 
See Attached.

 

 

The Officer further acknowledges that at any time
Borrower is not in compliance with all the terms set forth in the Agreement,
including, without limitation, the financial covenants, no credit extensions
will be made.

 

Very truly yours,

 

 

	
   

  	
  BANK USE ONLY

  
	
   

  	
   

  	
  Rec’d By:

  	
   

  	
   

  
	
  Authorized Signer

  	
  Date:

  	
   

  	
   

  
	
   

  	
  Reviewed By:

  	
   

  	
   

  
	
  Name:

  	
   

  	
  Date:

  	
   

  	
   

  
	
  Title:

  	
   

  	
  Financial Compliance Status:                                       YES
  / NO

  

 

 

Corporation Resolutions and
Incumbency Certification

Authority to Procure Loans

 

I certify that I am the duly elected and qualified
Secretary of RELIANT TECHNOLOGIES, INC., and that the following is a true and
correct copy of resolutions duly adopted by the Board of Directors of the
Corporation in accordance with its bylaws and applicable statutes.

 

Copy of Resolutions:

 

Be it Resolved, That:

 

1.                                       Any
one (1) of the following                                         CEO,
CFO                                          (insert
titles only) of the Corporation are/is authorized, for, on behalf of, and in
the name of the Corporation to:

 

(a)                                  Negotiate
and procure loans, letters of credit and other credit or financial
accommodations from Comerica Bank (“Bank”), a Michigan banking corporation,
including, without limitation, that certain Loan and Security Agreement dated
as of August 26, 2004, as amended by that certain First Amendment to Loan and
Security Agreement dated August 17, 2005, that certain Waiver and Second
Amendment to Loan and Security Agreement, dated November 3, 2005, that certain waiver
letter dated as of August 10, 2006, that certain bilateral agreement dated as
of August 21, 2006, and that certain Waiver and Third Amendment to Loan and
Security Agreement dated as of October 30, 2006, and as may subsequently be
amended from time to time.

 

(b)                                 Discount
with the Bank, commercial or other business paper belonging to the Corporation
made or drawn by or upon third parties, without limit as to amount;

 

(c)                                  Purchase,
sell, exchange, assign, endorse for transfer and/or deliver certificates and/or
instruments representing stocks, bonds, evidences of Indebtedness or other
securities owned by the Corporation, whether or not registered in the name of
the Corporation;

 

(d)                                 Give
security for any liabilities of the Corporation to the Bank by grant, security
interest, assignment, lien, deed of trust or mortgage upon any real or personal
property, tangible or intangible of the Corporation;

 

(e)                                  Issue
a warrant or warrants to purchase the Corporation’s capital stock; and

 

(f)                                    Execute
and deliver in form and content as may be required by the Bank any and all
notes, evidences of Indebtedness, applications for letters of credit,
guaranties, subordination agreements, loan and security agreements, financing
statements, assignments, liens, deeds of trust, mortgages, trust receipts and
other agreements, instruments or documents to carry out the purposes of these
Resolutions, any or all of which may relate to all or to substantially all of
the Corporation’s property and assets.

 

2.                                       Said
Bank be and it is authorized and directed to pay the proceeds of any such loans
or discounts as directed by the persons so authorized to sign, whether so
payable to the order of any of said persons in their individual capacities or
not, and whether such proceeds are deposited to the individual credit of any of
said persons or not;

 

3.                                       Any
and all agreements, instruments and documents previously executed and acts and
things previously done to carry out the purposes of these Resolutions are
ratified, confirmed and approved as the act or acts of the Corporation.

 

4.                                       These
Resolutions shall continue in force, and the Bank may consider the holders of
said offices and their signatures to be and continue to be as set forth in a
certified copy of these Resolutions delivered to the

 

 

Bank, until notice
to the contrary in writing is duly served on the Bank (such notice to have no
effect on any action previously taken by the Bank in reliance on these
Resolutions).

 

5.                                       Any
person, corporation or other legal entity dealing with the Bank may rely upon a
certificate signed by an officer of the Bank to effect that these Resolutions
and any agreement, instrument or document executed pursuant to them are still
in full force and effect and binding upon the Corporation.

 

6.                                       The
Bank may consider the holders of the offices of the Corporation and their
signatures, respectively, to be and continue to be as set forth in the
Certificate of the Secretary of the Corporation until notice to the contrary in
writing is duly served on the Bank.

 

I further certify that the above Resolutions are in
full force and effect as of the date of this Certificate; that these
Resolutions and any borrowings or financial accommodations under these
Resolutions have been properly noted in the corporate books and records, and
have not been rescinded, annulled, revoked or modified; that neither the
foregoing Resolutions nor any actions to be taken pursuant to them are or will
be in contravention of any provision of the articles of incorporation or bylaws
of the Corporation or of any agreement, indenture or other instrument to which
the Corporation is a party or by which it is bound; and that neither the
certificate of incorporation nor bylaws of the Corporation nor any agreement,
indenture or other instrument to which the Corporation is a party or by which
it is bound require the vote or consent of shareholders of the Corporation to
authorize any act, matter or thing described in the foregoing Resolutions.

 

I further certify that the following named persons
have been duly elected to the offices set opposite their respective names, that
they continue to hold these offices at the present time, and that the
signatures which appear below are the genuine, original signatures of each
respectively:

 

(PLEASE SUPPLY GENUINE SIGNATURES
OF AUTHORIZED SIGNERS BELOW)

 

	
  NAME (Type or Print)

  	
   

  	
  TITLE

  	
   

  	
  SIGNATURE

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Eric
  Stang

  	
   

  	
   

  	
   

  	
  CEO

  	
   

  	
   

  	
   

  	
  /s/Eric
  Stang

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Tom
  Scannell

  	
   

  	
   

  	
   

  	
  CFO

  	
   

  	
   

  	
   

  	
  /s/Thomas
  Scannell

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

In Witness Whereof, I have affixed my name as
Secretary and have caused the corporate seal (where available) of said
Corporation to be affixed on October 30, 2006.

 

	
   

  	
  /s/Thomas
  J. Scannell

  
	
   

  	
  Secretary

  

 

 

	
  The Above Statements are Correct.

  	
   

  
	
   

  	
  SIGNATURE OF OFFICER OR DIRECTOR OR, IF NONE, A
  SHAREHOLDER OTHER THAN SECRETARY WHEN SECRETARY IS AUTHORIZED TO SIGN ALONE.

  

 

 

Failure
to complete the above when the Secretary is authorized to sign alone shall
constitute a certification by the Secretary that the Secretary is the sole
Shareholder, Director and Officer of the Corporation.

 

 

 

FOURTH AMENDMENT TO LOAN
AND SECURITY AGREEMENT

 

This
Fourth Amendment to Loan and Security Agreement (this “Amendment”) is entered
into as of March 21, 2007, by and between Comerica Bank (“Bank”) and Reliant
Technologies, Inc. (“Borrower”).

 

RECITALS

 

Borrower
and Bank are parties to that certain Loan and Security Agreement dated as of
August 26, 2004, as amended from time to time, including as amended by that
certain First Amendment to Loan and Security Agreement dated August 17, 2005,
that certain Waiver and Second Amendment to Loan and Security Agreement dated
as of November 3, 2005, that certain waiver letter dated as August 10, 2006,
that certain bilateral agreement dated as of August 21, 2006, and that certain
Waiver and Third Amendment to Loan and Security Agreement dated as of October
30, 2006 (collectively, the “Agreement”). The parties desire to amend the
Agreement in accordance with the terms of this Amendment.

 

NOW,
THEREFORE, the parties agree as follows:

 

1.                                       Any and all initially-capitalized terms
used in this Amendment without definition shall have their respective meanings
specified in the Agreement.

 

2.                                       The following defined terms in Section
1.1 of the Agreement hereby are amended and restated as follows:

 

“‘Liquidity’ means the
sum of (1) Cash, plus (2) net Eligible Accounts as determined by Bank
with reference to the most recent Borrowing Base Certificate delivered by
Borrower.”

 

“‘Net Income’ means
positive net income after tax excluding non-cash stock based compensation
expenses, to be calculated based on a trailing three months basis.”

 

“‘Net Loss’ means
negative net income after tax excluding non-cash stock based compensation
expenses, to be calculated based on a trailing three months basis.”

 

3.                                       The following defined term is hereby
deleted from Section 1.1 of the Agreement:

 

“‘Profitability’ means
positive net income after tax excluding non cash stock based compensation
expenses, to be calculated based on a trailing three months basis.”

 

4.                                       Section 6.8 of the Agreement is hereby
amended and restated in its entirety to read as follows:

 

“6.8                           Alternative
Financial Covenant Structure. Borrower at all times shall fulfill each
of either Covenant Structure A or Covenant Structure B below:

 

(a)                                  Covenant Structure A:

 

(i)                                     Bank
Debt Liquidity Coverage. Borrower shall maintain at all times, measured as
of the last day of each calendar month, a ratio of Liquidity to all
Indebtedness to Bank of at least 1.25 to 1.00; and

 

(ii)                                  (Net
Loss)/Income. As measured as of the last day of each quarter ending period
below, Borrower shall not suffer a Net Loss (if applicable) in excess of the
Net Loss amount corresponding to the applicable quarter ending period below or
Borrower shall achieve Net Income (if applicable) of not less than the Net
Income amount corresponding to the applicable quarter ending period below: 

 

1

 

	
  Quarter Ending

  	
   

  	
  (Net Loss)/Net Income

  	
   

  
	
  March 31, 2007

  	
   

  	
  $

  	
  (5,800,000

  	
  )

  
	
   

  	
   

  	
   

  	
   

  
	
  June 30, 2007

  	
   

  	
  $

  	
  (2,000,000

  	
  )

  
	
   

  	
   

  	
   

  	
   

  
	
  September 30, 2007

  	
   

  	
  $

  	
  (2,500,000

  	
  )

  
	
   

  	
   

  	
   

  	
   

  
	
  December 31, 2007

  	
   

  	
  $

  	
  2,600,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Each quarter-ending period thereafter

  	
   

  	
  Amounts to be reasonably determined by Bank after
  January 15, 2008 based upon financial projections to be provided by Borrower
  to Bank prior to November 30, 2007.

  	
   

  

 

OR

 

(b)                                 Covenant Structure B:

 

(i)                                     Bank
Debt/Cash Coverage. Borrower shall maintain at all times, commencing
November 30, 2006, a ratio of Cash to all Indebtedness to Bank of at least 1.15
to 1.00. Borrower covenants to transfer sufficient cash from UBS Warburg to be
in compliance with this covenant as of November 30, 2006.

 

5.                                       Borrower’s and Bank’s addresses for
notices set forth in Section 10 of the Agreement are hereby amended in their entirety
to read as follows:

 

	
  “If to Borrower:

  	
  Reliant Technologies, Inc.

  
	
   

  	
  464 Ellis Street

  
	
   

  	
  Mountain View, CA 94043

  
	
   

  	
  Attn: Chief Financial Officer

  
	
   

  	
  FAX: (650) 605-2061

  
	
   

  	
   

  
	
  If to Bank:

  	
  Comerica Bank

  
	
   

  	
  75 E. Trimble Road, M/C 4770

  
	
   

  	
  San Jose, CA 95131

  
	
   

  	
  Attn: Manager

  
	
   

  	
  FAX: (408) 451-8586

  
	
   

  	
   

  
	
  With a copy to:

  	
  Comerica Bank

  
	
   

  	
  11943 El Camino Real,
  Suite 110B

  
	
   

  	
  San Diego, CA 92130

  
	
   

  	
  Attn: Killu Sanborn

  
	
   

  	
  FAX: (858) 509-2365”

  

 

6.                                       The reference to “clause (c)” in Section
12.2 is hereby changed to refer to and mean “Section 12.3”.

 

7.                                       Exhibit D (Compliance Certificate) to the Agreement is deleted
and replaced with Exhibit D attached hereto.

 

8.                                       No course of dealing on the part of Bank
or its officers, nor any failure or delay in the exercise of any right by Bank,
shall operate as a waiver thereof, and any single or partial exercise of any
such right shall not preclude any later exercise of any such right. Bank’s
failure 

 

2

 

at any time to require
strict performance by a Borrower of any provision shall not affect any right of
Bank thereafter to demand strict compliance and performance. Any suspension or
waiver of a right must be in writing signed by an officer of Bank.

 

9.                                       Unless otherwise defined, all initially
capitalized terms in this Amendment shall be as defined in the Agreement. The
Agreement, as amended hereby, shall be and remain in full force and effect in
accordance with its respective terms and hereby is ratified and confirmed in
all respects. Except as expressly set forth herein, the execution, delivery,
and performance of this Amendment shall not operate as a waiver of, or as an
amendment of, any right, power, or remedy of Bank under the Agreement, as in
effect prior to the date hereof.

 

10.                                 Borrower represents and warrants that the
Representations and Warranties contained in the Agreement arc true and correct
in ail material respects as of the date of this Amendment, and that no Event of
Default has occurred and is continuing.

 

11.                                 As a condition to the effectiveness of
this Amendment, Bank shall have received, in form and substance satisfactory to
Bank, the following:

 

(a)                                  this Amendment, duly executed by
Borrower;

 

(b)                                 a Corporation Resolutions and Incumbency
Certification authorizing the execution and delivery of this Amendment;

 

(c)                                  all reasonable Bank Expenses incurred
through the date of this Amendment, which may be debited from any of Borrower’s
accounts; and

 

(d)                                 such other documents, and completion of
such other matters, as Bank may reasonably deem necessary or appropriate.

 

12.                                 This Amendment may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one instrument.

 

In
Witness Whereof, the undersigned have executed this Amendment as of the first
date above written.

 

	
   

  	
  RELIANT TECHNOLOGIES, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Thomas J. Scannell

  
	
   

  	
   

  
	
   

  	
  Title:

  	
  VP Finance and CFO

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  COMERICA BANK

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Dennis Kim

  
	
   

  	
   

  
	
   

  	
  Title:

  	
  Corporate Banking Officer

  
					

 

3

 

EXHIBIT D

 

COMPLIANCE CERTIFICATE

 

TO:                                                                            COMERICA
BANK

 

FROM:                                                         RELIANT
TECHNOLOGIES, INC.

 

The
undersigned authorized Officer of RELIANT TECHNOLOGIES, INC. (“Borrower”),
hereby certifies that in accordance with the terms and conditions of the Loan
and Security Agreement between Borrower and Bank (as such agreement may be
amended, modified or supplemented from time to time, the “Agreement”), (i)
Borrower is in complete compliance for the period ending                               
with all required covenants except as noted below and (ii) all representations
and warranties of Borrower stated in the Agreement are true and correct in all
material respects as of the date hereof. Attached herewith are the required
documents supporting the above certification. The Officer further certifies
that these are prepared in accordance with Generally Accepted Accounting
Principles (GAAP) and are consistently applied from one period to the next
except as explained in an accompanying letter or footnotes.

 

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

 

	
  REPORTING COVENANTS

  	
   

  	
  REQUIRED

  	
   

  	
  COMPLIES

  
	
  Monthly financial statements and Compliance
  Certificate

  	
   

  	
  Monthly, within 30 days

  	
   

  	
  YES

  	
  NO

  
	
  Annual (CPA Audited – FY 2005 and thereafter)

  	
   

  	
  FYE within 120 days

  	
   

  	
  YES

  	
  NO

  
	
  10K and 10Q

  	
   

  	
  (as applicable)

  	
   

  	
  YES

  	
  NO

  
	
  A/R & A/P Agings, Borrowing Base Cert.

  	
   

  	
  Monthly, within 30 days

  	
   

  	
  YES

  	
  NO

  
	
  A/R and Inventory Audit

  	
   

  	
  Initial and Semi-Annual

  	
   

  	
  YES

  	
  NO

  
	
  Total amount of Borrower’s cash and investments

  	
   

  	
  Amount $         

  	
   

  	
  YES

  	
  NO

  
	
  Total amount of Borrower’s cash and investments
  maintained with Bank

  	
   

  	
  Amount $         

  	
   

  	
  YES

  	
  NO

  

 

1

 

	
  FINANCIAL COVENANTS

  	
   

  	
  REQUIRED

  	
   

  	
  ACTUAL

  	
   

  	
  COMPLIES

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  COMPLIANCE WITH APPLICABLE COVENANT STRUCTURE A
  OR B

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  YES

  	
  NO

  
	
  Covenant Structure A:

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (i) Minimum Bank Debt Liquidity Coverage, measured
  on a monthly basis; and

  	
   

  	
  1.25:1.00

  	
   

  	
               :1.00

  	
   

  	
  YES

  	
  NO

  
	
  (ii) (Net Loss)/Net Income (measured on a quarterly
  basis):

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  FQE
  03/31/07

  	
   

  	
  ($5,800,000)

  	
   

  	
  $

  	
   

  	
  YES

  	
  NO

  
	
  FQE
  06/30/07

  	
   

  	
  ($2,000,000)

  	
   

  	
  $

  	
   

  	
  YES

  	
  NO

  
	
  FQE
  09/30/07

  	
   

  	
  ($2,500,000)

  	
   

  	
  $

  	
   

  	
  YES

  	
  NO

  
	
  FQE
  12/31/07

  	
   

  	
  $2,600,000

  	
   

  	
  $

  	
   

  	
  YES

  	
  NO

  
	
  FQEs
  thereafter

  	
   

  	
  $To be reasonably determined by Bank

  	
   

  	
  $

  	
   

  	
  YES

  	
  NO

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  OR

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Covenant Structure B:

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Minimum Bank Debt/Cash Coverage, measured at all
  times, commencing 11/30/06

  	
   

  	
  1.15:1.00

  	
   

  	
               :1.00

  	
   

  	
  YES

  	
  NO

  

 

Comments Regarding Exceptions:  See Attached.

 

The Officer further acknowledges that at any time
Borrower is not in compliance with all the terms set forth in the Agreement,
including, without limitation, the financial covenants, no credit extensions
will be made.

 

Very truly yours,

 

 

	
   

  	
   

  	
  BANK USE ONLY

  
	
  Authorized Signer

  	
   

  	
  Rec’d By:

  	
   

  	
   

  
	
   

  	
   

  	
  Date:

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  	
  Reviewed By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Date:

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
  Financial Compliance
  Status:           YES
  / NO

  
							

 

2

 

Corporation Resolutions and
Incumbency Certification

Authority to Procure Loans

 

I certify that I am the duty elected and qualified
Secretary of RELIANT TECHNOLOGIES, INC., and that the following is a true and
correct copy of resolutions duly adopted by the Board of Directors of the
Corporation in accordance with its bylaws and applicable statutes.

 

Copy of Resolutions:

 

Be it Resolved, That:

 

13.                                 Any one (1) of the following CEO, CFO
(insert titles only) of the Corporation are/is authorized, for, on behalf of,
and in the name of the Corporation to:

 

(a)                                  Negotiate and procure loans, letters of
credit and other credit or financial accommodations from Comerica Bank
(“Bank”), a Michigan banking corporation, including, without limitation, that
certain Loan and Security Agreement dated as of August 26, 2004, as amended by
that certain First Amendment to Loan and Security Agreement dated August 17,
2005, that certain Waiver and Second Amendment to Loan and Security Agreement
dated November 3, 2005, that certain waiver letter dated as of August 10, 2006,
that certain bilateral agreement dated as of August 21, 2006, that certain
Waiver and Third Amendment to Loan and Security Agreement dated as of October
30, 2006, and that certain Fourth Amendment to Loan and Security Agreement
dated as of March 21, 2007, and as may subsequently be amended from time to
time.

 

(b)                                 Discount with the Bank, commercial or
other business paper belonging to the Corporation made or drawn by or upon
third parties, without limit as to amount;

 

(c)                                  Purchase, sell, exchange, assign, endorse
for transfer and/or deliver certificates and/or instruments representing
stocks, bonds, evidences of Indebtedness or other securities owned by the
Corporation, whether or not registered in the name of the Corporation;

 

(d)                                 Give security for any liabilities of the
Corporation to the Bank by grant, security interest, assignment, lien, deed of
trust or mortgage upon any real or personal property, tangible or intangible of
the Corporation;

 

(e)                                  Issue a warrant or warrants to purchase
the Corporation’s capital stock; and

 

(f)                                    Execute and deliver in form and content
as may be required by the Bank any and all notes, evidences of Indebtedness,
applications for letters of credit, guaranties, subordination agreements, loan
and security agreements, financing statements, assignments, liens, deeds of
trust, mortgages, trust receipts and other agreements, instruments or documents

 

 

to
carry out the purposes of these Resolutions, any or all of which may relate to
all or to substantially all of the Corporation’s property and assets.

 

14.                                 Said Bank be and it is authorized and
directed to pay the proceeds of any such loans or discounts as directed by the
persons so authorized to sign, whether so payable to the order of any of said
persons in their individual capacities or not, and whether such proceeds are
deposited to the individual credit of any of said persons or not;

 

15.                                 Any and all agreements, instruments and
documents previously executed and acts and things previously done to carry out
the purposes of these Resolutions are ratified, confirmed and approved as the
act or acts of the Corporation.

 

16.                                 These Resolutions shall continue in
force, and the Bank may consider the holders of said offices and their
signatures to be and continue to be as set forth in a certified copy of these
Resolutions delivered to the Bank, until notice to the contrary in writing is
duly served on the Bank (such notice to have no effect on any action previously
taken by the Bank in reliance on these Resolutions).

 

17.                                 Any person, corporation or other legal
entity dealing with the Bank may rely upon a certificate signed by an officer
of the Bank to effect that these Resolutions and any agreement, instrument or
document executed pursuant to them arc still in full force and effect and
binding upon the Corporation.

 

18.                                 The Bank may consider the holders of the
offices of the Corporation and their signatures, respectively, to be and
continue to be as set forth in the Certificate of the Secretary of the
Corporation until notice to the contrary in writing is duly served on the Bank.

 

I further certify that the above Resolutions arc in
full force and effect as of the date of this Certificate; that these
Resolutions and any borrowings or financial accommodations under these
Resolutions have been properly noted in the corporate books and records, and
have not been rescinded, annulled, revoked or modified; that neither the
foregoing Resolutions nor any actions to be taken pursuant to them arc or will
be in contravention of any provision of the articles of incorporation or bylaws
of the Corporation or of any agreement, indenture or other instrument to which
the Corporation is a party or by which it is bound; and that neither the
certificate of incorporation nor bylaws of the Corporation nor any agreement,
indenture or other instrument to which the Corporation is a party or by which
it is bound require the vote or consent of shareholders of the Corporation to
authorize any act, matter or thing described in the foregoing Resolutions.

 

 

I further certify that the following named persons
have been duly elected to the offices set opposite their respective names, that
they continue to hold these offices at the present time, and that the
signatures which appear below are the genuine, original signatures of each
respectively:

 

(PLEASE SUPPLY GENUINE SIGNATURES
OF AUTHORIZED SIGNERS BELOW)

 

	
  NAME (Type or Print)

  	
   

  	
  TITLE

  	
   

  	
  SIGNATURE

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Eric Stang

  	
   

  	
  CEO

  	
   

  	
  /s/ Eric Stang

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Thomas Scannell

  	
   

  	
  CFO

  	
   

  	
  /s/ Thomas Scannell

  

 

In Witness Whereof, I have affixed my name as
Secretary and have caused the corporate seal (where available) of said
Corporation to be affixed on March     , 2007.

 

	
   

  	
  /s/ Thomas J. Scannell

  
	
   

  	
  Asst. Secretary

  

 

	
  The Above Statements are Correct.

  	
   

  
	
   

  	
  SIGNATURE OF OFFICER OR DIRECTOR OR, IF NONE, A
  SHAREHOLDER OTHER THAN SECRETARY WHEN SECRETARY IS AUTHORIZED TO SIGN ALONE.

  

 

Failure
to complete the above when the Secretary is authorized to sign alone shall
constitute a certification by the Secretary that the Secretary is the sole
Shareholder, Director and Officer of the Corporation.

 

 

EXHIBIT C

 

BORROWING BASE
CERTIFICATE

 

	
  Borrower: RELIANT TECHNOLOGIES, INC.

  	
   

  	
  Lender: Comerica Bunk

  

 

Commitment Amount: 
$4,000,000

 

	
  ACCOUNTS
  RECEIVABLE

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.

  	
  Accounts Receivable Book Value as of 

  	
   

  	
   

  	
   

  	
  $

  	
             

  	
   

  
	
  2.

  	
  Additions (please explain on reverse)

  	
   

  	
   

  	
   

  	
  $

  	
             

  	
   

  
	
  3.

  	
  TOTAL ACCOUNTS RECEIVABLE

  	
   

  	
   

  	
   

  	
  $

  	
             

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ACCOUNTS
  RECEIVABLE DEDUCTIONS (without duplication)

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4.

  	
  Amounts over 90 days due

  	
   

  	
  $

  	
             

  	
   

  	
   

  	
   

  
	
  5.

  	
  Balance of 25% over 90 day accounts

  	
   

  	
  $

  	
             

  	
   

  	
   

  	
   

  
	
  6.

  	
  Concentration Limits

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  7.

  	
  Foreign Accounts

  	
   

  	
  $

  	
             

  	
   

  	
   

  	
   

  
	
  8.

  	
  Governmental Accounts

  	
   

  	
  $

  	
             

  	
   

  	
   

  	
   

  
	
  9.

  	
  Contra Accounts

  	
   

  	
  $

  	
             

  	
   

  	
   

  	
   

  
	
  10.

  	
  Demo Accounts

  	
   

  	
  $

  	
             

  	
   

  	
   

  	
   

  
	
  11.

  	
  Intercompany/Employee Accounts

  	
   

  	
  $

  	
             

  	
   

  	
   

  	
   

  
	
  12.

  	
  Other (please explain on reverse)

  	
   

  	
  $

  	
             

  	
   

  	
   

  	
   

  
	
  13.

  	
  TOTAL ACCOUNTS RECEIVABLE DEDUCTIONS

  	
   

  	
   

  	
   

  	
  $

  	
             

  	
   

  
	
  14

  	
  Eligible Accounts (#3 minus #13)

  	
   

  	
   

  	
   

  	
  $

  	
             

  	
   

  
	
  15.

  	
  LOAN VALUE Of ACCOUNTS (80% of #14)

  	
   

  	
   

  	
   

  	
  $

  	
             

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  INVENTORY

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  16.

  	
  LOAN VALUE
  OF INVENTORY (40%: $1,500,000 max)

  	
   

  	
   

  	
   

  	
  $

  	
             

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  BALANCES

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  17.

  	
  Maximum Loan Amount

  	
   

  	
   

  	
   

  	
  $

  	
  4,000,000

  	
   

  
	
  18.

  	
  Total Funds Available [Lesser of #17 or #15 plus
  #16]

  	
   

  	
   

  	
   

  	
  $

  	
             

  	
   

  
	
  19.

  	
  Present balance owing on Line of Credit

  	
   

  	
   

  	
   

  	
  $

  	
             

  	
   

  
	
  20.

  	
  RESERVE POSITION (#18 minus #19)

  	
   

  	
   

  	
   

  	
  $

  	
             

  	
   

  

 

The undersigned represents and warrants that the
foregoing is true, complete and correct, and that the information reflected in
this Borrowing Base Certificate complies with the representations and
warranties set forth in the Loan and Security Agreement between the undersigned
and Comerica Bank.

 

RELIANT TECHNOLOGIES, INC

 

	
  By:

  	
   

  	
   

  
	
  Authorized
  Signer

  	
   

  

 

 

EXHIBIT D

 

COMPLIANCE CERTIFICATE

 

	
  TO:

  	
  COMERICA BANK

  
	
   

  	
   

  
	
  FROM:

  	
  RELIANT
  TECHNOLOGIES, INC.

  

 

The
undersigned authorized Officer of RELIANT TECHNOLOGIES, INC. (“Borrower”),
hereby certifies that in accordance with the terms and conditions of the Loan
and Security Agreement between Borrower and Bank (as such agreement may be
amended, modified or supplemented from time to time, the “Agreement”), (i)
Borrower is in complete compliance for the period ending
                                   
with all required covenants except as noted below and (ii) all representations
and warranties of Borrower stated in the Agreement are true and correct in all
material respects as of the date hereof. Attached herewith are the required
documents supporting the above certification. The Officer further certifies
that these are prepared in accordance with Generally Accepted Accounting
Principles (GAAP) and are consistently applied from one period to the next
except as explained in an accompanying letter or footnotes.

 

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

 

	
  REPORTING COVENANTS

  	
   

  	
  REQUIRED

  	
   

  	
  COMPLIES

  
	
  Monthly financial statements

  	
   

  	
  Monthly, within 30 days

  	
   

  	
  YES

  	
  NO

  
	
  Annual (CPA Audited – FY 2004)

  	
   

  	
  November 30, 2005

  	
   

  	
  YES

  	
  NO

  
	
  Annual (CPA Audited – FY 2005 and thereafter)

  	
   

  	
  FYE within 120 days

  	
   

  	
  YES

  	
  NO

  
	
  10K and 10Q

  	
   

  	
  (as applicable)

  	
   

  	
  YES

  	
  NO

  
	
  A/R & A/P Agings, Borrowing Base Cert.

  	
   

  	
  Monthly, within 30 days

  	
   

  	
  YES

  	
  NO

  
	
  A/R and Inventory Audit

  	
   

  	
  Initial and Semi-Annual

  	
   

  	
  YES

  	
  NO

  
	
  Total amount of Borrower’s cash and investments

  	
   

  	
  Amount $

  	
   

  	
  YES

  	
  NO

  
	
  Total amount of Borrower’s cash and investments
  maintained with Bank

  	
   

  	
  Amount $

  	
   

  	
  YES

  	
  NO

  

 

 

	
  FINANCIAL COVENANTS

  	
   

  	
  REQUIRED

  	
   

  	
  ACTUAL

  	
   

  	
  COMPLIES

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  COMPLIANCE WITH EITHER COVENANT STRUCTURE A OR B

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  YES

  	
  NO

  
	
  Structure A:

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (i) Minimum Bank Debt Liquidity Coverage (measured
  on a monthly basis); and

  	
   

  	
  1.25:1.00

  	
   

  	
            :1.00

  	
   

  	
  YES

  	
  NO

  
	
  (ii) Profitability (measured on a quarterly basis):

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  FQE
  12/31/06

  	
   

  	
  $1

  	
   

  	
  $

  	
   

  	
  YES

  	
  NO

  
	
  FQEs
  thereafter

  	
   

  	
  $ To be reasonably determined by Bank

  	
   

  	
  $

  	
   

  	
  YES

  	
  NO

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  OR

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Structure B:

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (i) Bank Debt/Cash Coverage (commencing November 30,
  2006 and at all times thereafter)

  	
   

  	
  1.15:1.00

  	
   

  	
            :1.00

  	
   

  	
  YES

  	
  NO

  

 

Comments Regarding Exceptions:  See Attached.

 

The Officer further acknowledges that at any time
Borrower is not in compliance with all the terms set forth in the Agreement,
including, without limitation, the financial covenants, no credit extensions
will be made.

 

Very truly yours,

 

 

	
   

  	
   

  	
  BANK USE ONLY

  
	
  Authorized Signer

  	
   

  	
  Rec’d By:

  	
   

  	
   

  
	
   

  	
   

  	
  Date:

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  	
  Reviewed By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Date:

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
  Financial Compliance
  Status:           YES
  / NO

  
							

 

 

FIFTH AMENDMENT TO LOAN AND SECURITY AGREEMENT

 

This
Fifth Amendment to Loan and Security Agreement (this “Amendment”) is entered
into as of August 9, 2007, by and between COMERICA BANK (“Bank”) and RELIANT
TECHNOLOGIES, INC. (“Borrower”).

 

RECITALS

 

Borrower
and Bank are parties to that certain Loan and Security Agreement dated as of
August 26, 2004, as amended from time to time including (but not limited to) by
that certain waiver letter dated December 6, 2004, that certain waiver letter
dated August 9, 2005, that certain First Amendment to Loan and Security
Agreement dated as of August 17, 2005, that certain Waiver and Second Amendment
to Loan and Security Agreement dated as of November 3, 2005, that certain
waiver letter dated as of August 10, 2006, that certain Waiver and Third
Amendment to Loan and Security Agreement dated as of October 30, 2006, that
certain waiver letter dated as of November 20, 2006, that certain waiver letter
dated as of March 19, 2007, that certain Fourth Amendment to Loan and Security
Agreement dated as of March 21, 2007, that certain waiver letter dated as of
May 23, 2007 and that certain waiver letter dated as of July 16, 2007 (the
“Agreement”). The parties desire to amend the Agreement in accordance with the
terms of this Amendment.

 

NOW,
THEREFORE, the parties agree as follows:

 

1.                                       The following defined terms in Section
1.1 of the Agreement hereby are added, amended or restated as follows:

 

“Borrowing
Base” means an amount equal to (i) eighty percent (80%) of Eligible Accounts,
(ii) forty percent (40%) of Primary Eligible Inventory (provided that Advances
based on Primary Eligible Inventory shall not exceed fifty percent (50%) of all
Advances outstanding at any time) and (iii) twenty percent (20%) of Secondary
Eligible Inventory (provided that Advances based on Secondary Eligible
Inventory shall not exceed Five Hundred Thousand Dollars ($500,000) at any
time), all as determined by Bank with reference to the most recent Borrowing
Base Certificate delivered by Borrower.

 

“Eligible
Inventory” means Primary Eligible Inventory and Secondary Eligible Inventory.

 

“Permitted
Accounts” means accounts held at financial institutions in Japan and the United
Kingdom with aggregate balances not to exceed One Hundred Thousand Dollars
($100,000).

 

“Primary
Eligible Inventory” means those Inventory items held at Borrower’s Mountain
View location which are (i) finished products or (ii) raw materials that could
become finished products within seventy two (72) hours and in all cases which
Bank has not reasonably determined are obsolete and which are approved by Bank
for inclusion in the Borrowing Base which approval shall not be unreasonably
withheld.

 

“Revolving
Line” means a credit extension of up to Eight Million Dollars ($8,000,000).

 

“Revolving
Maturity Date” means October 24, 2008.

 

“Secondary
Eligible Inventory” means those Inventory items not held at Borrower’s Mountain
View location which are finished products and in all cases (i) which Bank has
not reasonably determined are obsolete and which are approved by Bank for inclusion
in the Borrowing Base which approval shall not be unreasonably withheld and
(ii) as to which Bank is listed on Borrower’s insurance policy as loss payee
with respect to any such Inventory items that are lost, damaged or stolen.

 

“Tangible
Net Worth” means at any date as of which the amount thereof shall be
determined, the sum of the capital stock of Borrower and its Subsidiaries
(including preferred stock), plus the aggregate amount of Subordinated Debt
from Pinnacle Ventures plus all preferred stock warrant liabilities associated
with FSP 150-5 minus intangible assets, determined in accordance with GAAP.

 

2.                                       The second paragraph of Section 6.3 of
the Agreement is hereby amended and restated in its entirety to read as
follows:

 

 

“Borrower shall deliver to
Bank a Borrowing Base Certificate signed by a Responsible Officer in
substantially the form of Exhibit C hereto, together with aged listings by
invoice date of accounts receivable and accounts payable no later than (i)
thirty (30) days after the last day of each month if there are Four Million
Dollars ($4,000,000) or less of Advances outstanding or (ii) by Friday of each
of week if there are more than Four Million Dollars ($4,000,000) of Advances
outstanding.”

 

3.                                       Section 6.7 of the Agreement is hereby
amended and restated in its entirety to read as follows:

 

“6.7                           Accounts. Borrower shall maintain all its depository and operating accounts
with Bank, and all its investment accounts with Bank or Bank’s Affiliates
subject to account control agreements in form and substance acceptable to Bank;
provided however, Borrower will have thirty days (30) days from August 9, 2007
to transfer all investment accounts from Deutsche Bank Alex Brown to Bank or
Bank’s Affiliates.”

 

4.                                       Section 6.8 of the Agreement is hereby
amended and restated in its entirety to read as follows:

 

“6.8                           Financial Covenants. Borrower shall at all times maintain the
following financial ratios and covenants:

 

(a)                                  Minimum
Cash at Bank or Bank’s Affiliates. A balance of Cash at Bank or Bank’s Affiliates
subject to account control agreements in favor of Bank of not less than Two
Million Dollars ($2,000,000).

 

(b)                                 Tangible
Net Worth. A Tangible Net Worth of not less than (i) Six Million Dollars
($6,000,000) plus (ii) fifty percent (50%) of the net proceeds from the sale of
Borrower’s equity securities after August 9, 2007.”

 

5.                                       Exhibit C to the Agreement is hereby
replaced with Exhibit C attached hereto.

 

6.                                       Exhibit D to the Agreement is hereby
replaced with Exhibit D attached hereto.

 

7.                                       No course of dealing on the part of Bank
or its officers, nor any failure or delay in the exercise of any right by Bank,
shall operate as a waiver thereof, and any single or partial exercise of any
such right shall not preclude any later exercise of any such right. Bank’s
failure at any time to require strict performance by Borrower of any provision
shall not affect any right of Bank thereafter to demand strict compliance and
performance. Any suspension or waiver of a right must be in writing signed by
an officer of Bank.

 

8.                                       Unless otherwise defined, all initially
capitalized terms in this Amendment shall be as defined in the Agreement. The
Agreement, as amended hereby, shall be and remain in full force and effect in
accordance with its respective terms and hereby is ratified and confirmed in
all respects. Except as expressly set forth herein, the execution, delivery,
and performance of this Amendment shall not operate as a waiver of, or as an
amendment of, any right, power, or remedy of Bank under the Agreement, as in
effect prior to the date hereof.

 

9.                                       Borrower represents and warrants that the
Representations and Warranties contained in the Agreement are true and correct
in all material respects as of the date of this Amendment, and that no Event of
Default has occurred and is continuing.

 

10.                                 As a condition to the effectiveness of
this Amendment, Bank shall have received, in form and substance satisfactory to
Bank, the following:

 

(a)                                  this
Amendment, duly executed by Borrower;

 

(b)                                 a
Certificate of the Secretary of Borrower with respect to incumbency and
resolutions authorizing the execution and delivery of this Amendment;

 

(c)                                  an
amendment fee in the amount of Twenty Thousand Dollars ($20,000), which may be
debited from any of Borrower’s accounts;

 

 

(d)                                 an
Affirmation and Amendment of Subordination and Intercreditor Agreement executed
by each Pinnacle Ventures entity which holds Subordinated Debt;

 

(e)                                  Evidence
that Borrower has received a Five Million Dollars ($5,000,000) Commitment in
Subordinated Debt from Pinnacle Ventures;

 

(f)                                    all
reasonable Bank Expenses incurred through the date of this Amendment, which may
be debited from any of Borrower’s accounts; and

 

(g)                                 such
other documents, and completion of such other matters, as Bank may reasonably
deem necessary or appropriate.

 

11.                                 This Amendment may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one instrument.

 

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

 

	
   

  	
  RELIANT TECHNOLOGIES, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Andrew Galligan

  
	
   

  	
   

  
	
   

  	
  Title:

  	
  CFO

  
	
   

  	
   

  
	
   

  	
  COMERICA BANK

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Dennis Kim

  
	
   

  	
   

  
	
   

  	
  Title:

  	
  Corporate Banking Officer

  
				

 

 

[Signature
Page to Fifth Amendment to Loan & Security Agreement]

 

 

EXHIBIT C

 

BORROWING BASE CERTIFICATE

 

	
  Borrower: 
  RELIANT TECHNOLOGIES, INC.

   

  Commitment Amount: 
  $8,000,000

  	
  Lender:  Comerica Bank

  

 

	
  ACCOUNTS
  RECEIVABLE

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.

  	
  Accounts Receivable Book Value as of 

  	
   

  	
   

  	
   

  	
  $

  	
             

  	
   

  
	
  2.

  	
  Additions (please explain on reverse)

  	
   

  	
   

  	
   

  	
  $

  	
             

  	
   

  
	
  3.

  	
  TOTAL ACCOUNTS RECEIVABLE

  	
   

  	
   

  	
   

  	
  $

  	
             

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ACCOUNTS
  RECEIVABLE DEDUCTIONS (without duplication)

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4.

  	
  Amounts over 90 days due

  	
   

  	
  $

  	
             

  	
   

  	
   

  	
   

  
	
  5.

  	
  Balance of 25% over 90 day accounts

  	
   

  	
  $

  	
             

  	
   

  	
   

  	
   

  
	
  6.

  	
  Concentration Limits

  	
   

  	
  $

  	
          

  	
   

  	
   

  	
   

  
	
  7.

  	
  Foreign Accounts

  	
   

  	
  $

  	
             

  	
   

  	
   

  	
   

  
	
  8.

  	
  Governmental Accounts

  	
   

  	
  $

  	
             

  	
   

  	
   

  	
   

  
	
  9.

  	
  Contra Accounts

  	
   

  	
  $

  	
             

  	
   

  	
   

  	
   

  
	
  10.

  	
  Demo Accounts

  	
   

  	
  $

  	
             

  	
   

  	
   

  	
   

  
	
  11.

  	
  Intercompany/Employee Accounts

  	
   

  	
  $

  	
             

  	
   

  	
   

  	
   

  
	
  12.

  	
  Other (please explain on reverse)

  	
   

  	
  $

  	
             

  	
   

  	
   

  	
   

  
	
  13.

  	
  TOTAL ACCOUNTS RECEIVABLE DEDUCTIONS

  	
   

  	
   

  	
   

  	
  $

  	
             

  	
   

  
	
  14.

  	
  Eligible Accounts (#3 minus #13)

  	
   

  	
   

  	
   

  	
  $

  	
             

  	
   

  
	
  15.

  	
  LOAN VALUE OF ACCOUNTS (80% of #14)

  	
   

  	
   

  	
   

  	
  $

  	
             

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  INVENTORY

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  16.

  	
  LOAN VALUE
  OF INVENTORY (40% of Primary Eligible Inventory (50% of all Advances max) and
  20% of Secondary Eligible Inventory ($500,000 max)

  	
   

  	
   

  	
   

  	
  $

  	
             

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  BALANCES

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  17.

  	
  Maximum Loan Amount

  	
   

  	
   

  	
   

  	
  $

  	
  8,000,000

  	
   

  
	
  18.

  	
  Total Funds Available [Lesser of #17 or #15 plus
  #16]

  	
   

  	
   

  	
   

  	
  $

  	
             

  	
   

  
	
  19.

  	
  Present balance owing on Line of Credit

  	
   

  	
   

  	
   

  	
  $

  	
             

  	
   

  
	
  20.

  	
  RESERVE POSITION (#18 minus #19)

  	
   

  	
   

  	
   

  	
  $

  	
             

  	
   

  
										

 

The undersigned represents and warrants that the
foregoing is true, complete and correct, and that the information reflected in
this Borrowing Base Certificate complies with the representations and
warranties set forth in the Loan and Security Agreement between the undersigned
and Comerica Bank.

 

 

RELIANT TECHNOLOGIES, INC.

 

 

	
  By:

  	
   

  	
   

  
	
  Authorized
  Signer

  	
   

  

 

 

EXHIBIT D

 

COMPLIANCE CERTIFICATE

 

TO:                                                    COMERICA
BANK

 

FROM:                                 RELIANT TECHNOLOGIES,
INC.

 

The undersigned authorized Officer of RELIANT
TECHNOLOGIES, INC. (“Borrower”), hereby certifies that in accordance with the
terms and conditions of the Loan and Security Agreement between Borrower and
Bank (as such agreement may be amended, modified or supplemented from time to
time, the “Agreement”), (i) Borrower is in complete compliance for the period
ending                              
with all required covenants except as noted below and (ii) all representations
and warranties of Borrower stated in the Agreement are true and correct in all
material respects as of the date hereof. Attached herewith are the required
documents supporting the above certification. The Officer further certifies
that these are prepared in accordance with Generally Accepted Accounting
Principles (GAAP) and are consistently applied from one period to the next
except as explained in an accompanying letter or footnotes.

 

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

 

	
  REPORTING COVENANTS

  	
   

  	
  REQUIRED

  	
   

  	
  COMPLIES

  
	
  Monthly financial statements

  	
   

  	
  Monthly, within 30 days

  	
   

  	
  YES

  	
  NO

  
	
  Annual (CPA Audited – FY 2006)

  	
   

  	
  October 31, 2007

  	
   

  	
  YES

  	
  NO

  
	
  Annual (CPA Audited – FY 2007 and thereafter)

  	
   

  	
  FYE within 120 days

  	
   

  	
  YES

  	
  NO

  
	
  10K and 10Q

  	
   

  	
  (as applicable)

  	
   

  	
  YES

  	
  NO

  
	
  A/R & A/P Agings, Borrowing Base Cert.

  	
   

  	
  Monthly, within 30 days OR Weekly if outstanding
  Advances over $4,000,000

  	
   

  	
  YES

  	
  NO

  
	
  A/R and Inventory Audit

  	
   

  	
  Initial and Semi-Annual

  	
   

  	
  YES

  	
  NO

  
	
  Total amount of Borrower’s cash and investments

  	
   

  	
  Amount $

  	
   

  	
  YES

  	
  NO

  
	
  Total amount of Borrower’s cash and investments
  maintained with Bank or Bank’s Affiliates

  	
   

  	
  Amount: greater of (i) All cash and investments or (ii)
  $2,000,000

  	
   

  	
  YES

  	
  NO

  

 

	
  FINANCIAL COVENANTS

  	
   

  	
  REQUIRED

  	
   

  	
  ACTUAL

  	
   

  	
  COMPLIES

  
	
  Tangible Net Worth

  	
   

  	
  $6,000,000 plus 50% of new equity issuances

  	
   

  	
  $

  	
   

  	
  YES

  	
  NO

  

 

The Officer further acknowledges that at any time
Borrower is not in compliance with all the terms set forth in the Agreement,
including, without limitation, the financial covenants, no credit extensions
will be made.

 

Very truly yours,

 

	
   

  	
   

  	
  BANK USE ONLY

  
	
   

  	
   

  	
  Rec’d By:

  	
   

  	
   

  
	
  Authorized Signer

  	
   

  	
  Date:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Reviewed By:

  	
   

  	
   

  
	
  Name:

  	
   

  	
  Date:

  	
   

  	
   

  
	
  Title:

  	
   

  	
  Financial Compliance
  Status:           YES
  / NO

  
						

 

 

Corporation Resolutions and
Incumbency Certification

Authority to Procure Loans

 

I certify that I am the duly elected and qualified
Secretary of RELIANT TECHNOLOGIES, INC.; that the following is a true and
correct copy of resolutions duly adopted by the Board of Directors of the
Corporation in accordance with its bylaws and applicable statutes.

 

Copy of Resolutions:

 

Be it Resolved, That:

 

1.                                       Any one (1) of the following
                                 
(insert titles only) of the Corporation are/is authorized, for, on behalf of,
and in the name of the Corporation to:

 

(a)                                  Negotiate
and procure loans, letters of credit and other credit or financial
accommodations from Comerica Bank (“Bank”), a Michigan banking corporation, including,
without limitation, that certain Loan and Security Agreement dated as of August
26, 2004, as amended from time to time including by that certain waiver letter
dated December 6, 2004, that certain waiver letter dated August 9, 2005, that
certain First Amendment to Loan and Security Agreement dated as of August 17,
2005, that certain Waiver and Second Amendment to Loan and Security Agreement
dated as of November 3, 2005, that certain waiver letter dated as of August 10,
2006, that certain Waiver and Third Amendment to Loan and Security Agreement
dated as of October 30, 2006, that certain waiver letter dated as of November
20, 2006, that certain waiver letter dated as of March 19, 2007, that certain
Fourth Amendment to Loan and Security Agreement dated as of March 21, 2007,
that certain waiver letter dated as of May 23, 2007 and that certain waiver
letter dated as of July 16, 2007 and that certain Fifth Amendment to Loan and
Security Agreement dated as of August 9, 2007.

 

(b)                                 Discount
with the Bank, commercial or other business paper belonging to the Corporation
made or drawn by or upon third parties, without limit as to amount;

 

(c)                                  Purchase,
sell, exchange, assign, endorse for transfer and/or deliver certificates and/or
instruments representing stocks, bonds, evidences of Indebtedness or other
securities owned by the Corporation, whether or not registered in the name of
the Corporation;

 

(d)                                 Give
security for any liabilities of the Corporation to the Bank by grant, security
interest, assignment, lien, deed of trust or mortgage upon any real or personal
property, tangible or intangible of the Corporation; and

 

(e)                                  Execute
and deliver in form and content as may be required by the Bank any and all
notes, evidences of Indebtedness, applications for letters of credit,
guaranties, subordination agreements, loan and security agreements, financing
statements, assignments, liens, deeds of trust, mortgages, trust receipts and
other agreements, instruments or documents to carry out the purposes of these
Resolutions, any or all of which may relate to all or to substantially all of
the Corporation’s property and assets.

 

2.                                       Said Bank be and it is authorized and
directed to pay the proceeds of any such loans or discounts as directed by the
persons so authorized to sign, whether so payable to the order of any of said
persons in their individual capacities or not, and whether such proceeds are
deposited to the individual credit of any of said persons or not;

 

3.                                       Any and all agreements, instruments and
documents previously executed and acts and things previously done to carry out
the purposes of these Resolutions are ratified, confirmed and approved as the
act or acts of the Corporation.

 

 

4.                                       These Resolutions shall continue in
force, and the Bank may consider the holders of said offices and their
signatures to be and continue to be as set forth in a certified copy of these
Resolutions delivered to the Bank, until notice to the contrary in writing is
duly served on the Bank (such notice to have no effect on any action previously
taken by the Bank in reliance on these Resolutions).

 

5.                                       Any person, corporation or other legal
entity dealing with the Bank may rely upon a certificate signed by an officer
of the Bank to effect that these Resolutions and any agreement, instrument or
document executed pursuant to them are still in full force and effect and
binding upon the Corporation.

 

6.                                       The Bank may consider the holders of the
offices of the Corporation and their signatures, respectively, to be and
continue to be as set forth in the Certificate of the Secretary of the
Corporation until notice to the contrary in writing is duly served on the Bank.

 

I further certify that the above Resolutions are in
full force and effect as of the date of this Certificate; that these
Resolutions and any borrowings or financial accommodations under these
Resolutions have been properly noted in the corporate books and records, and
have not been rescinded, annulled, revoked or modified; that neither the
foregoing Resolutions nor any actions to be taken pursuant to them are or will
be in contravention of any provision of the articles of incorporation or bylaws
of the Corporation or of any material agreement, indenture or other instrument
to which the Corporation is a party or by which it is bound; and that neither
the articles of incorporation nor bylaws of the Corporation nor any agreement,
indenture or other instrument to which the Corporation is a party or by which
it is bound require the vote or consent of shareholders of the Corporation to
authorize any act, matter or thing described in the foregoing Resolutions.

 

I further certify that the following named persons
have been duly elected to the offices set opposite their respective names, that
they continue to hold these offices at the present time, and that the
signatures which appear below are the genuine, original signatures of each
respectively:

 

(PLEASE SUPPLY GENUINE SIGNATURES
OF AUTHORIZED SIGNERS BELOW)

 

	
  NAME (Type or Print)

  	
   

  	
  TITLE

  	
   

  	
  SIGNATURE

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  

 

In Witness Whereof, I have affixed my name as
Secretary and have caused the corporate seal (where available) of said
Corporation to be affixed on August 9, 2007.

 

	
   

  	
   

  
	
   

  	
  Secretary

  

 

 

	
  The Above Statements are Correct.

  	
   

  
	
   

  	
  SIGNATURE OF OFFICER OR DIRECTOR OR, IF NONE. A 

  SHAREHOLDER OTHER THAN SECRETARY WHEN SECRETARY IS

  AUTHORIZED TO SIGN ALONE.

  

 

Failure to complete the above when the Secretary
is authorized to sign alone shall constitute a certification by the Secretary
that the Secretary is the sole Shareholder, Director and Officer of the
Corporation.

 

 

AGREEMENT TO PROVIDE INSURANCE

 

	
  TO:                            COMERICA
  BANK

  Attn:  Lead Insurance Reviewer

  75 E. Trimble Road

  San Jose, CA 95131

  	
  Date:  August
  9, 2007

   

   

  Borrower:             RELIANT TECHNOLOGIES, INC.

  

 

In
consideration of a loan in the amount of $8,704,660,85, secured by all tangible
personal property including inventory and equipment.

 

I/We
agree to obtain adequate insurance coverage to remain in force during the term
of the loan.

 

I/We
also agree to advise the below named agent to add Comerica Bank as lender’s
loss payable on the new or existing insurance policy, and to furnish Bank at
above address with a copy of said policy/endorsements and any subsequent
renewal policies.

 

I/We
understand that the policy must contain:

 

1.                                       Fire and extended coverage in an amount
sufficient to cover:

 

(a)                                  The
amount of the loan, OR

 

(b)                                 All
existing encumbrances, whichever is greater,

 

But
not in excess of the replacement value of the improvements on the real
property.

 

2.                                       Lender’s “Loss Payable” Endorsement Form
438 BFU in favor of Comerica Bank, or any other form acceptable to Bank.

 

INSURANCE INFORMATION

 

	
  Insurance Co./Agent

  	
  Telephone No.:

  

 

Agent’s Address:

 

	
  Signature
  of Obligor:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Signature
  of Obligor:

  	
   

  	
   

  

 

	
  FOR BANK USE ONLY

   

  INSURANCE VERIFICATION:  Date:

   

  Person Spoken to:

   

  Policy Number:

   

  Effective From:
                
  To:

   

  Verified by:

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