Document:

<PAGE>   1
                                                                   EXHIBIT 10.10

                                   THIRD PARTY
                               SECURITY AGREEMENT

        This Third Party Security Agreement (this "Agreement") is made and
entered into as of January 5, 2001 by and between the undersigned ("Grantor"),
and IMPERIAL BANK (the "Bank").

                                    RECITALS

        Bank has made loans to MHL DEVELOPMENT COMPANY ("Borrower"), which is
the parent company of Grantor, pursuant to a Loan and Security Agreement of even
date herewith, as amended from time to time (the "Loan Agreement"). Grantor
expects to derive economic benefit from Bank's doing so and dealing with
Borrower in accordance with the Loan Agreement, and has entered into an
Unconditional Guaranty of even date herewith with respect to the Loan Agreement
(the "Guaranty"). Grantor wishes to secure performance and payment of all
obligations under the Guaranty with substantially all of its assets. All terms
used without definition in this Agreement shall have the meaning assigned to
them in the Loan Agreement.

        NOW, THEREFORE, Grantor and the Bank agree as follows:

        1. Grant of Security Interest. To secure all of Grantor's obligations
under the Guaranty, as amended from time to time, Grantor grants to the Bank a
security interest in the property described in Exhibit A (the "Collateral").

        2. Grantor's Representations and Warranties. Grantor represents,
warrants, and covenants as follows:

               (a) Authorization. Grantor has authority and has obtained all
approvals and consents necessary to enter into this Agreement, and Grantor's
execution, delivery and performance of this Agreement will not violate or
conflict with the terms of Grantor's Articles of Incorporation or Bylaws or any
statute, regulation, ordinance, rule of law, agreement, contract, mortgage,
indenture, bond, bill, note, or other instrument or writing binding upon Grantor
or to which Grantor is subject.

               (b) Title. The Collateral is owned by Grantor and is free of all
liens, encumbrances and other security interests.

               (c) Further Representations. Grantor further represents,
warrants, and covenants that (i) Grantor is not in default under any agreement
under which Grantor owes any money, or any agreement, the violation or
termination of which could have a material adverse effect on Grantor; (ii) the
information provided to Bank on or prior to the date of this Agreement is true
and correct in all material respects; (iii) all financial statements and other

                                       1
<PAGE>   2

information provided to Bank fairly present Grantor's financial condition, and
there has not been a material adverse change in the financial condition of
Grantor since the date of the most recent of the financial statements submitted
to Bank; (iv) Grantor is in compliance with all laws and orders applicable to
it; (v) Grantor is not party to any litigation and is not the subject of any
government investigation, and Grantor has no knowledge of any pending litigation
or investigation or the existence of circumstances that reasonably could be
expected to give rise to such litigation or investigation; (vi) Grantor's
principal place of business is located at the address specified in Section 11;
and (vii) no representation or other statement made by Grantor to Bank contains
any untrue statement of a material fact or omits to state a material fact
necessary to make any statements made to Bank not misleading.

        3.     Covenants.

               (a) Encumbrances. Grantor shall not grant a security interest in
any of the Collateral other than to Bank or execute any financing statements
covering any of the Collateral in favor of any person other than Bank.

               (b) Use of Collateral. The Collateral will not be used for any
unlawful purpose or in any way that will void any insurance required to be
carried in connection therewith. Grantor will keep the Collateral free and clear
of liens and adverse claims and, as appropriate and applicable, will keep it in
good condition and repair, and will clean, shelter, and otherwise care for the
Collateral in all such ways as are considered good practice by owners of like
property.

               (c) Insurance of Collateral. Grantor will maintain insurance on
the Collateral that includes a lender's loss payable endorsement in favor of
Bank as an additional loss payee. Grantor will maintain insurance in a form
acceptable to Bank relating to the Collateral and Grantor's business in amounts
and of a type that are customary to businesses similar to Grantor's.

               (d) Indemnification. Grantor shall indemnify Bank against all
losses, claims, demands and liabilities of any kind caused by the Collateral.

               (e) Perfection of Security Interest. Grantor shall execute and
deliver such documents as Bank reasonably deems necessary to create, perfect and
continue the security interest in the Collateral contemplated hereby.

               (f) Records. Grantor shall prepare and keep, in accordance with
generally accepted accounting principles consistently applied, complete and
accurate records regarding the Collateral and, if and when requested by Bank,
shall prepare and deliver a complete and accurate schedule of all the Collateral
in such detail as Bank may reasonably require.

                                       2
<PAGE>   3

               (g) Inspection of Grantor's Books. Grantor shall permit Bank or
its designee at reasonable times and from time to time to inspect Grantor's
books, records and properties and to audit and to make copies of extracts from
such books and records.

               (h) Fees and Costs. Grantor shall pay all expenses, including
reasonable attorneys' fees, incurred by Bank in the preservation, realization,
enforcement or exercise of any Bank's rights under this Agreement.

               (i) Corporate Existence. Grantor will maintain its corporate
existence and good standing and will maintain in force all licenses and
agreements, the loss of which could have a material adverse effect on Grantor's
business, except that this Section 3(i) shall not apply to transactions in which
the Grantor merges into or consolidates with the Borrower and, after giving
effect to which, the Borrower is the surviving entity. Grantor will pay all
taxes on or before the date such taxes are due, and will comply with all laws
and orders applicable to it.

               (j) Negative Covenants. Grantor will not (i) make any investments
in, or loans or advances to, any person other than in the ordinary course of
business as currently conducted, (ii) acquire any assets other than in the
ordinary course of business as currently conducted, (iii) make any distributions
or pay any dividends to any person except to Borrower on account of Grantor's
shares, (iv) borrow any money except in the ordinary course of business as
currently conducted, (v) move, dispose of or encumber any portion of its assets,
except for dispositions of inventory in the ordinary course of Grantor's
business, (vi) merge or consolidate with or into any person or entity, except as
otherwise permitted in this Agreement, or (vii) create, incur, assume or suffer
to exist any lien with respect to any of its property, or assign or otherwise
convey any right to receive income, including the sale of any of Grantor's
accounts.

        4. Events of Default. The occurrence of any Event of Default under the
Loan Agreement, or the failure by Grantor to perform any obligations under the
Guaranty, or the breach of any representation under this Agreement, or the
failure to perform any obligation under Section 3 of this Agreement, shall
constitute an "Event of Default" under this Agreement.

        5. Remedies on Default. Upon the occurrence of an Event of Default, Bank
shall have all rights, privileges, powers and remedies provided by law,
including, but not limited to, exercise of any or all of the following remedies.

               (a) Bank may declare amounts outstanding under the Loan Agreement
and the Guaranty to be immediately due and payable, and thereupon all such
amounts shall be and become immediately due and payable to the Bank.

               (b) Bank may dispose of the Collateral in accordance with
applicable law.

                                       3
<PAGE>   4

               (c) Bank may use, operate, consume and sell the Collateral in its
possession as appropriate for the purpose of performing Grantor's obligations
with respect thereto to the extent necessary to satisfy the obligations of
Grantor.

               (d) All payments received and amounts realized by Bank shall be
promptly applied and distributed by the Bank in the following order or priority:

                      (i) first, to the payment of all costs and expenses,
including reasonable legal expenses and attorneys fees, incurred or made
hereunder by Bank, including any such costs and expenses of foreclosure or suit,
if any, and of any sale or the exercise of any other remedy under this Section
5, and of all taxes, assessments or liens superior to the lien granted under
this Agreement; and

                      (ii) second, to the payment to Bank of the amount then
owing under the Loan Agreement.

        6. Power of Attorney. Grantor hereby appoints Bank, its attorney-in-fact
to prepare, sign and file or record, for Grantor in Grantor's name, any
financing statements; applications for registration and like papers and to take
any other action deemed by Bank necessary or desirable in order to perfect the
security interest of the Bank hereunder, to dispose of any Collateral, and to
perform any obligations of Grantor hereunder, at Grantor's expense, but without
obligation to do so.

        7. 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 California Uniform Commercial Code (the "UCC"), 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 is was given.

        8. Amendment of Loan Documents. Grantor authorizes Bank, without notice
or demand and without affecting its liability hereunder, from time to time to
(a) renew, extend, or otherwise change the terms of any Loan Document, or any
part thereof; (b) take and hold security for the payment of any Loan Document,
and exchange, enforce, waive and release any such security; and (c) apply such
security and direct the order or manner of sale thereof as Bank in its sole
discretion may determine.

        9. Grantor Waivers. Grantor waives any right to require Bank to (a)
proceed against Borrower, any other guarantor or any other person; (b) proceed
against or exhaust any security held from Borrower; (c) marshal any assets of
Borrower; or (d) pursue any other

                                       4
<PAGE>   5

remedy in Bank's power whatsoever. Bank may, at its election, exercise or
decline or fail to exercise any right or remedy it may have against Borrower or
any security held by Bank, including without limitation the right to foreclose
upon any such security by judicial or nonjudicial sale, without affecting or
impairing in any way the liability of Grantor hereunder. Grantor waives any
defense arising by reason of any disability or other defense of Borrower or by
reason of the cessation from any cause whatsoever of the liability of Borrower.
Grantor waives any setoff, defense or counterclaim that Borrower may have
against Bank. Grantor waives any defense arising out of the absence, impairment
or loss of any right of reimbursement or subrogation or any other rights against
Borrower. Until all obligations under the Guaranty have been satisfied, Grantor
shall have no right of subrogation or reimbursement, contribution or other
rights against Borrower, and Grantor waives any right to enforce any remedy that
Bank now has or may hereafter have against Borrower. Grantor waives all rights
to participate in any security now or hereafter held by Bank. Grantor waives all
presentments, demands for performance, notices of nonperformance, protests,
notices of protest, notices of dishonor, and notices of acceptance of this
Agreement and of the existence, creation, or incurring of new or additional
indebtedness. Grantor assumes the responsibility for being and keeping itself
informed of the financial condition of Borrower and of all other circumstances
bearing upon the risk of nonpayment of any indebtedness or nonperformance of any
obligation of Borrower, warrants to Bank that it will keep so informed, and
agrees that absent a request for particular information by Grantor, Bank shall
have no duty to advise Grantor of information known to Bank regarding such
condition or any such circumstances. Grantor waives the benefits of California
Civil Code sections 2809, 2810, 2819, 2845, 2847, 2848, 2849, 2850, 2899 and
3433.

        10. Borrower Insolvency. If Borrower becomes insolvent or is adjudicated
bankrupt or files a petition for reorganization, arrangement, composition or
similar relief under any present or future provision of the United States
Bankruptcy Code, or if such a petition is filed against Borrower, and in any
such proceeding some or all of any indebtedness or obligations under the Loan
Documents are terminated or rejected or any obligation of Borrower is modified
or abrogated, or if Borrower's obligations are otherwise avoided for insolvency,
bankruptcy or any similar reason, Grantor agrees that Grantor's liability
hereunder shall not thereby be affected or modified and such liability shall
continue in full force and effect as if no such action or proceeding had
occurred. This Agreement shall continue to be effective or be reinstated, as the
case may be, if any payment must be returned by Bank upon the insolvency,
bankruptcy or reorganization of Borrower, Grantor, any other person, or
otherwise, as though such payment had not been made.

        11. 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

                                       5
<PAGE>   6

receipt requested, or by telefacsimile to Borrower or to Bank, as the case may
be, at its addresses set forth below:

               If to Grantor:               BIOELECTRIC CORPORATION
                                            16125 SW 72nd Ave.
                                            Portland, OR  97224
                                            Attn: Richard G. Sass
                                            Fax:  503-639-0330

               If to Bank:                  IMPERIAL BANK
                                            226 Airport Parkway
                                            San Jose, CA  95110-1024

               with a copy to:              IMPERIAL BANK
                                            1300 SW 5th Ave., Suite 1815
                                            Portland, OR  97201
                                            Attn: Mike Parrott
                                            Fax:  503-471-2957

        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.

        12.    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 Grantor and Bank hereby submits to the non-exclusive
jurisdiction of the state and Federal courts located in the County of Santa
Clara, State of California. GRANTOR 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 THIS AGREEMENT OR 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.

                                       6
<PAGE>   7

        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 Grantor without Bank's prior written consent, which consent
may be granted or withheld in Bank's sole discretion. Bank shall have the right
without the consent of or notice to Grantor 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. Grantor 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 Grantor's failure to comply with the terms of this
Agreement; and (b) all losses or Bank Expenses (as defined in the Loan
Agreement) in any way suffered, incurred, or paid by Bank as a result of or in
any way arising out of, following, or consequential to Grantor's failure to
comply with the terms of this Agreement (including without limitation reasonable
attorneys fees and expenses), except for losses caused by Bank's 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. This Agreement cannot 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, 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. The obligations of Grantor 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.

                                       7
<PAGE>   8

        14.    Judicial Reference.

               (a) Other than (i) nonjudicial foreclosure and all matters in
connection therewith regarding security interests in real or personal property;
or (ii) the appointment of a receiver, or the exercise of other provisional
remedies (any and all of which may be initiated pursuant to applicable law),
each controversy, dispute or claim between the parties arising out of or
relating to this Agreement, which controversy, dispute or claim is not settled
in writing within thirty (30) days after the "Claim Date" (defined as the date
on which a party subject to this Agreement gives written notice to all other
parties that a controversy, dispute or claim exists), will be settled 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
section ("CCP"), which shall constitute the exclusive remedy for the settlement
of any controversy, dispute or claim concerning this Agreement, including
whether such controversy, dispute or claim is subject to the reference
proceeding and except as set forth above, the parties waive their rights to
initiate any legal proceedings against each other in any court or jurisdiction
other than the Superior Court in the County where the Real Property, if any, is
located or Santa Clara County if none (the "Court"). The referee shall be a
retired Judge of the Court selected by mutual agreement of the parties, and if
they cannot so agree within forty- five (45) days after the Claim Date, the
referee shall be promptly selected by the Presiding Judge of the Court (or his
representative). The referee shall be appointed to sit as a temporary judge,
with all of 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 the Court (or any subsequently enacted
Rule). Each party shall have one peremptory challenge pursuant to CCP Section
170.6. The referee shall (a) be requested to set the matter for hearing within
sixty (60) days after the date of selection of the referee and (b) try any and
all issues of law or fact and report a statement of decision upon them, if
possible, within ninety (90) days of the Claim Date. Any decision rendered by
the referee will be final, binding and conclusive and judgment shall be entered
pursuant to CCP Section 644 in any court in the State of California having
jurisdiction. Any party may apply for a reference proceeding at any time after
thirty (30) days following notice to any other party of the nature of the
controversy, dispute or claim, by filing a petition for a hearing and/or trial.
All discovery permitted by this Agreement shall be completed no later than
fifteen (15) days before the first hearing date established by the referee. The
referee may extend such period in the event of a party's refusal to provide
requested discovery or unavailability of a witness due to absence or illness. No
party shall be entitled to "priority" in conducting discovery. Depositions may
be taken by either party upon seven (7) days written notice, and request for
production or inspection of documents which cannot be resolved by the parties
shall be submitted to the referee as provided herein. The Superior Court is
empowered to issue temporary and/or provisional remedies, as appropriate.

               (b) Except as expressly set forth in this Agreement, 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

                                       8
<PAGE>   9

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. The party
making such a request shall have the obligation to arrange for and pay for the
court reporter. The costs of the court reporter at the trial shall be borne
equally by the parties.

               (c) 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, to provide all
temporary and/or provisional remedies and to enter equitable orders that will be
binding upon the parties. The referee shall issue a single judgment at the close
of the reference proceeding which shall dispose of all of the claims of the
parties that are the subject of the reference. The parties hereto expressly
reserve the right to contest or appeal from the final judgment or any appealable
order or appealable judgment entered by the referee. The parties hereto
expressly 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 Section.

               (d) In the event that 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. The
arbitration will be conducted by a retired judge of the Court, in accordance
with the California Arbitration Act, Section 1280 through Section 1294.2 of the
CCP as amended from time to time. The limitations with respect to discovery as
set forth hereinabove shall apply to any such arbitration proceeding.

        IN WITNESS WHEREOF, the parties have executed this Agreement on the date
set forth above.

GRANTOR:                                     BANK:

BIOELECTRIC CORPORATION                      IMPERIAL BANK

By:/s/ RICHARD G. SASS                       By: /s/ MIKE PARROTT
   --------------------------------             --------------------------------

Name: Richard G. Sass                        Name: Mike Parrott

Title: Chief Executive Officer               Title: Venture Banking Officer

                                       9
<PAGE>   10

                                    EXHIBIT A

        The Collateral shall be all personal property of Grantor (herein
referred to as "Grantor" or "Debtor") whether presently existing or hereafter
created, written, produced or acquired, including, but not limited to:

               (i) all accounts receivable, accounts, chattel paper, contract
rights (including, without limitation, royalty agreements, license agreements
and distribution agreements), documents, instruments, money, deposit accounts
and general intangibles, including, without limitation, returns, repossessions,
books and records relating thereto, and equipment containing said books and
records, all financial assets, all investment property, including securities and
securities entitlements;

               (ii) all software, computer source codes and other computer
programs (collectively, the "Software Products"), and all common law and
statutory copyrights and copyright registrations, applications for registration,
now existing or hereafter arising, United States of America and foreign,
obtained or to be obtained on or in connection with the Software Products, or
any parts thereof or any underlying or component elements of the Software
Products together with the right to copyright and all rights to renew or extend
such copyrights and the right (but not the obligation) of Bank (herein referred
to as "Bank" or "Secured Party") to sue in its own name and/or the name of the
Debtor for past, present and future infringements of copyright;

               (iii) all goods, including, without limitation, equipment and
inventory (including, without limitation, all export inventory);

               (iv) all guarantees and other security therefor;

               (v) all trademarks, service marks, trade names and service names
and the goodwill associated therewith;

               (vi) (a) all 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, (b)
licenses pertaining to any patent whether Debtor is licensor or licensee, (c)
all 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, (d) the right (but not the obligation) to sue for past,
present and future infringements thereof, (e) all rights corresponding thereto
throughout the world in all jurisdictions in which such patents have been issued
or applied for, and (f) the reissues, divisions, continuances, renewals,
extensions and continuations-in-part with any of the foregoing (all of the
foregoing patents and applications and interests under patent license
agreements, together with the items described in clauses (a)

                                        1
<PAGE>   11

through (f) in this paragraph are sometimes herein individually and collectively
referred to as the "Patents"); and

               (vii) all products and proceeds, including, without limitation,
insurance proceeds, of any of the foregoing.

                                        2<PAGE>   1
                                                                   EXHIBIT 10.11

                             SUBORDINATION AGREEMENT

        This Subordination Agreement is made as of January 5, 2001 by and among
each of the undersigned creditors (individually, a "Creditor" and, collectively,
the "Creditors"), and Imperial Bank ("Bank").

                                    Recitals

        A. MHL DEVELOPMENT COMPANY, an Oregon corporation ("Borrower"), has
requested and/or obtained certain loans or other credit accommodations from Bank
which are or may be from time to time secured by assets and property of
Borrower.

        B. Each Creditor has extended loans or other credit accommodations to
Borrower, and/or may extend loans or other credit accommodations to Borrower
from time to time.

        C. In order to induce Bank to extend credit to Borrower and, at any time
or from time to time, at Bank's option, to make such further loans, extensions
of credit, or other accommodations to or for the account of Borrower, or to
purchase or extend credit upon any instrument or writing in respect of which
Borrower may be liable in any capacity, or to grant such renewals or extension
of any such loan, extension of credit, purchase, or other accommodation as Bank
may deem advisable, each Creditor is willing to subordinate: (i) all of
Borrower's indebtedness and obligations to such Creditor, whether presently
existing or arising in the future (the "Subordinated Debt") to all of Borrower's
indebtedness and obligations to Bank; and (ii) all of such Creditor's security
interests, if any, to all of Bank's security interests in the Borrower's
property.

        NOW, THEREFORE, THE PARTIES AGREE AS FOLLOWS:

        1. Each Creditor subordinates to Bank any security interest or lien that
such Creditor may have in any property of Borrower. Notwithstanding the
respective dates of attachment or perfection of the security interest of a
Creditor and the security interest of Bank, the security interest of Bank in the
Collateral, as defined in that certain Loan and Security Agreement between
Borrower and Bank, dated as of the date hereof, as amended from time to time
(the "Loan Agreement"), shall at all times be prior to the security interest of
such Creditor. Capitalized terms not otherwise defined herein shall have the
same meaning as in the Loan Agreement.

        2. All Subordinated Debt is subordinated in right of payment to all
obligations of Borrower to Bank now existing or hereafter arising, together with
all costs of collecting such obligations (including attorneys' fees), including,
without limitation, all interest accruing after the commencement by or against
Borrower of any bankruptcy, reorganization or similar proceeding, and all
obligations under the Loan Agreement (the "Senior Debt").

                                       1
<PAGE>   2

        3. Each Creditor will not demand or receive from Borrower (and Borrower
will not pay to such Creditor) all or any part of the Subordinated Debt, by way
of payment, prepayment, setoff, lawsuit or otherwise, nor will such Creditor
execute any remedy with respect to the Collateral, nor will such Creditor
commence, or cause to commence, prosecute or participate in any administrative,
legal or equitable action against Borrower, for so long as any portion of the
Senior Debt remains outstanding.

        4. Each Creditor shall promptly deliver to Bank in the form received
(except for endorsement or assignment by such Creditor where required by Bank)
for application to the Senior Debt any payment, distribution, security or
proceeds received by such Creditor with respect to the Subordinated Debt other
than in accordance with this Agreement.

        5. In the event of Borrower's insolvency, reorganization or any case or
proceeding under any bankruptcy or insolvency law or laws relating to the relief
of debtors, these provisions shall remain in full force and effect, and Bank's
claims against Borrower and the estate of Borrower shall be paid in full before
any payment is made to any Creditor.

        6. For so long as any of the Senior Debt remains unpaid, each Creditor
irrevocably appoints Bank as such Creditor's attorney-in-fact, and grants to
Bank a power of attorney with full power of substitution, in the name of such
Creditor or in the name of Bank, for the use and benefit of Bank, without notice
to such Creditor, to perform at Bank's option the following acts in any
bankruptcy, insolvency or similar proceeding involving Borrower:

               (i) To file the appropriate claim or claims in respect of the
Subordinated Debt on behalf of Creditor if Creditor does not do so prior to 30
days before the expiration of the time to file claims in such proceeding and if
Bank elects, in its sole discretion, to file such claim or claims; and

               (ii) To accept or reject any plan of reorganization or
arrangement on behalf of Creditor and to otherwise vote Creditor's claims in
respect of any Subordinated Debt in any manner that Bank deems appropriate for
the enforcement of its rights hereunder.

        7. Each Creditor shall immediately affix a legend to the instruments
evidencing the Subordinated Debt stating that the instruments are subject to the
terms of this Agreement. No amendment of the documents evidencing or relating to
the Subordinated Debt shall directly or indirectly modify the provisions of this
Agreement in any manner which might terminate or impair the subordination of the
Subordinated Debt or the subordination of the security interest or lien that
such Creditor may have in any property of Borrower. By way of example, such
instruments shall not be amended to (i) increase the rate of interest with
respect to the Subordinated Debt, or (ii) accelerate the payment of the
principal or interest or any other portion of the Subordinated Debt.

                                       2
<PAGE>   3

        8. This Agreement shall remain effective for so long as Borrower owes
any amounts to Bank under the Loan Agreement or otherwise. If, at any time after
payment in full of the Senior Debt any payments of the Senior Debt must be
disgorged by Bank for any reason (including, without limitation, the bankruptcy
of Borrower), this Agreement and the relative rights and priorities set forth
herein shall be reinstated as to all such disgorged payments as though such
payments had not been made and each Creditor shall immediately pay over to Bank
all payments received with respect to the Subordinated Debt to the extent that
such payments would have been prohibited hereunder. At any time and from time to
time, without notice to such Creditor, Bank may take such actions with respect
to the Senior Debt as Bank, in its sole discretion, may deem appropriate,
including, without limitation, terminating advances to Borrower, increasing the
principal amount, extending the time of payment, increasing applicable interest
rates, renewing, compromising or otherwise amending the terms of any documents
affecting the Senior Debt and any collateral securing the Senior Debt, and
enforcing or failing to enforce any rights against Borrower or any other person.
No such action or inaction shall impair or otherwise affect Bank's right
hereunder. Each Creditor waives the benefits, if any, of Civil Code Sections
2809, 2810, 2819, 2845, 2847, 2848, 2849, 2850, 2899 and 3433.

        9. This Agreement shall bind any successors or assignees of a Creditor
and shall benefit any successors or assigns of Bank. This Agreement is solely
for the benefit of each Creditor and Bank and not for the benefit of Borrower or
any other party. Creditor further agrees that if Borrower is in the process of
refinancing a portion of the Senior Debt with a new lender, and if Bank makes a
request of such Creditor, Creditor shall agree to enter into a new subordination
agreement with the new lender on substantially the terms and conditions of this
Agreement.

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

        11. This Agreement shall be governed by and construed in accordance with
the laws of the State of California, without giving effect to conflicts of laws
principles. Creditor and Bank submit to the exclusive jurisdiction of the state
and federal courts located in Santa Clara County, California. EACH CREDITOR AND
BANK WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF
ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY OF THE TRANSACTIONS
CONTEMPLATED HEREIN.

        12. This Agreement represents the entire agreement with respect to the
subject matter hereof, and supersedes all prior negotiations, agreements and
commitments. No Creditor is relying on any representations by Bank or Borrower
in entering into this Agreement, and each Creditor has kept and will continue to
keep itself fully apprised of the financial and other condition of Borrower.
This Agreement may be amended only by written instrument signed by each Creditor
and Bank.

                                       3
<PAGE>   4

        13. In the event of any legal action to enforce the rights of a party
under this Agreement, the party prevailing in such action shall be entitled, in
addition to such other relief as may be granted, all reasonable costs and
expenses, including reasonable attorneys' fees, incurred in such action.

        14. JUDICIAL REFERENCE.

               (a) Other than (i) nonjudicial foreclosure and all matters in
connection therewith regarding security interests in real or personal property;
or (ii) the appointment of a receiver, or the exercise of other provisional
remedies (any and all of which may be initiated pursuant to applicable law),
each controversy, dispute or claim between the parties arising out of or
relating to this Agreement, which controversy, dispute or claim is not settled
in writing within thirty (30) days after the "Claim Date" (defined as the date
on which a party subject to this Agreement gives written notice to all other
parties that a controversy, dispute or claim exists), will be settled 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
section ("CCP"), which shall constitute the exclusive remedy for the settlement
of any controversy, dispute or claim concerning this Agreement, including
whether such controversy, dispute or claim is subject to the reference
proceeding and except as set forth above, the parties waive their rights to
initiate any legal proceedings against each other in any court or jurisdiction
other than the Superior Court in the County where the Real Property, if any, is
located or Santa Clara County if none (the "Court"). The referee shall be a
retired Judge of the Court selected by mutual agreement of the parties, and if
they cannot so agree within forty- five (45) days after the Claim Date, the
referee shall be promptly selected by the Presiding Judge of the Court (or his
representative). The referee shall be appointed to sit as a temporary judge,
with all of 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 the Court (or any subsequently enacted
Rule). Each party shall have one peremptory challenge pursuant to CCP Section
170.6. The referee shall (a) be requested to set the matter for hearing within
sixty (60) days after the date of selection of the referee and (b) try any and
all issues of law or fact and report a statement of decision upon them, if
possible, within ninety (90) days of the Claim Date. Any decision rendered by
the referee will be final, binding and conclusive and judgment shall be entered
pursuant to CCP Section 644 in any court in the State of California having
jurisdiction. Any party may apply for a reference proceeding at any time after
thirty (30) days following notice to any other party of the nature of the
controversy, dispute or claim, by filing a petition for a hearing and/or trial.
All discovery permitted by this Agreement shall be completed no later than
fifteen (15) days before the first hearing date established by the referee. The
referee may extend such period in the event of a party's refusal to provide
requested discovery or unavailability of a witness due to absence or illness. No
party shall be entitled to "priority" in conducting discovery. Depositions may
be taken by either party upon seven (7) days written notice, and request for
production or inspection of documents which cannot be resolved by the parties
shall be submitted to the referee as

                                       4
<PAGE>   5

provided herein. The Superior Court is empowered to issue temporary and/or
provisional remedies, as appropriate.

               (b) Except as expressly set forth in this Agreement, 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. 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. The party making such a request shall have the obligation to
arrange for and pay for the court reporter. The costs of the court reporter at
the trial shall be borne equally by the parties.

               (c) 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, to provide all
temporary and/or provisional remedies and to enter equitable orders that will be
binding upon the parties. The referee shall issue a single judgment at the close
of the reference proceeding which shall dispose of all of the claims of the
parties that are the subject of the reference. The parties hereto expressly
reserve the right to contest or appeal from the final judgment or any appealable
order or appealable judgment entered by the referee. The parties hereto
expressly 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 provisions.

               (d) In the event that 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. The
arbitration will be conducted by a retired judge of the Court, in accordance
with the California Arbitration Act, Section 1280 through Section 1294.2 of the
CCP as amended from time to time. The limitations with respect to discovery as
set forth hereinabove shall apply to any such arbitration proceeding.

                                       5
<PAGE>   6

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

                                        "Bank"

                                        IMPERIAL BANK

                                        By: /s/ MIKE PARROTT
                                            ------------------------------------

                                        Title: Venture Banking Officer

                                        "Creditors"

                                        /s/ RICHARD G. SASS
                                        ----------------------------------------
                                        RICHARD G. SASS

                                        SASS REVOCABLE TRUST

                                        By: /s/ RICHARD G. SASS
                                            ------------------------------------

                                        Title: Trustee

        The undersigned approves of the terms of this Agreement.

                                        "Borrower"

                                        MHL DEVELOPMENT COMPANY

                                        By: /s/ JANE K. CONNER
                                            ------------------------------------

                                        Title: Chief Financial Officer

                                       6

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00027-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00027-of-00352.parquet"}]]