Document:

Exhibit 10.1

LOAN AND SECURITY AGREEMENT

THIS LOAN AND SECURITY
AGREEMENT (this “Agreement”) is dated as of November 9, 2007 by and between
CELSION CORPORATION, a corporation organized under the laws of the State of
Delaware (the “Borrower”), and MANUFACTURERS AND TRADERS TRUST COMPANY, a New
York banking corporation (the “Lender”).

RECITALS

A.            The Borrower has applied to the Lender for a certain draw
down credit facility in the maximum principal amount of $6,500,000 to be used
by the Borrower for the uses specified in this Agreement.

B.            The Lender is willing to make such credit facility
available to the Borrower upon the terms and subject to the conditions set
forth in this Agreement.

AGREEMENTS

NOW,
THEREFORE, in
consideration of the Loan or Loans described below and the mutual covenants and
agreements contained herein, and intending to be legally bound hereby, the
Lender and the Borrower agree as follows:

ARTICLE I

DEFINITIONS

 

Section 1.1             Certain
Defined Terms.

As
used in this Agreement, the terms defined in the Preamble and Recitals hereto
shall have the respective meanings specified therein, and the following terms
shall have the following meanings:

“Account” individually
and “Accounts” collectively mean all presently existing or hereafter acquired
or created accounts, accounts receivable, health-care insurance receivables,
receivables arising out of the use of a credit or charge card or information
contained on or for use with the card, contract rights, notes, drafts,
instruments, acceptances, chattel paper, leases and writings evidencing a
monetary obligation or a security interest in, or a lease of, goods, all rights
to payment of a monetary obligation or other consideration under present or
future contracts (including, without limitation, all rights (whether or not
earned by  performance) to receive
payments under presently existing or hereafter acquired or created letters of
credit), or by virtue of  property that
has been sold, leased, licensed, assigned, or otherwise disposed of, services
rendered or to be rendered, loans and advances made or other considerations
given, by or set forth in or arising out of any present or future chattel
paper, note, draft, lease, acceptance, writing, bond, insurance policy
(including, without limitation, the right to receive refunds of unearned
insurance premiums), instrument, document or general intangible, and all
extensions 

 

and renewals of
any thereof, all rights under or arising out of present or future contracts,
agreements or general interest in goods which gave rise to any or all of the
foregoing, including all commercial tort claims, other claims or causes of
action now existing or hereafter arising in connection with or under any
agreement or document or by operation of law or otherwise, all collateral security
of any kind (including, without limitation, real property mortgages and deeds
of trust), Supporting Obligations, letter-of-credit rights and letters of
credit given by any Person with respect to any of the foregoing, all books and
records in whatever media (paper, electronic or otherwise) recorded or stored,
with respect to any or all of the foregoing and all equipment and general
intangibles necessary or beneficial to retain, access and/or process the
information contained in those books and records, and all proceeds (cash
proceeds and non-cash proceeds) of the foregoing.

“Account Debtor” means
any Person who is obligated on a Receivable and “Account Debtors” mean all
Persons who are obligated on the Receivables.

“Affiliate” means, with
respect to any designated Person, any other Person, (i) directly or indirectly
controlling, directly or indirectly controlled by, or under direct or indirect
common control with the Person designated, (ii) directly or indirectly owning
or holding five percent (5%) or more of any equity interest in such designated
Person, or (iii) five percent (5%) or more of whose stock or other equity
interest is directly or indirectly owned or held by such designated
Person.  For purposes of this definition,
the term “control” (including with correlative meanings, the terms “controlling”,
“controlled by” and “under common control with”) means the possession, directly
or indirectly, of the power to direct or cause the direction of the management
and policies of a Person, whether through ownership of voting securities or
other equity interests or by contract or otherwise.

“Bank Products” means any
service or facility extended to the Borrower by the Lender or any Affiliate
of  the Lender including:  (a) credit cards, (b) credit card processing
services, (c) debit cards, (d) purchase cards, (e) ACH Transactions, (f) cash
management, including controlled disbursement, accounts or services, or (g)
Hedge Agreements.

“Boston Scientific” means
Boston Scientific Corporation, a Delaware corporation and its successors and
assigns.

“Business Day” means any
day other than a Saturday, Sunday or other day on which commercial banks in the
State or the State of New York are authorized or required to close.

“Chattel Paper” means a
record or records (including, without limitation, electronic chattel paper)
which evidence both a monetary obligation and a security interest in specific
goods, a  security interest in specific
goods and software used in the goods, or a lease of specific goods; all
Supporting Obligations with respect thereto; any returned, rejected or
repossessed goods and software covered by any such record or records and all
proceeds (in any form including, without limitation, accounts, contract rights,
documents, chattel paper, instruments and general intangibles) of such
returned, rejected or repossessed goods; and all proceeds (cash proceeds and
noncash proceeds) of the foregoing.

“Collateral” has the
meaning described in Section 3.1 (Collateral).

 

 

2

 

“Collateral Account” has
the meaning described in Section 3.6 (Specific Purchase Agreement Documents
Collateral Provisions).

“Default” means an event
which, with the giving of notice or lapse of time, or both, could or would
constitute an Event of Default under the provisions of this Agreement.

“Enforcement Costs” means
all expenses, charges, costs and fees whatsoever (including, without
limitation, reasonable outside and allocated in-house counsel attorney’s fees
and expenses) of any nature whatsoever paid or incurred by or on behalf of the
Lender in connection with (a) any or all of the Obligations, this Agreement
and/or any of the other Financing Documents, (b) the creation, perfection,
collection, maintenance, preservation, defense, protection, realization upon,
disposition, sale or enforcement of all or any part of the Collateral, this
Agreement or any of the other Financing Documents, including, without
limitation, those costs and expenses more specifically enumerated in Section
3.3 (Costs) and/or Section 8.3(Costs, Expenses and Attorney’s Fees), and (c)
the monitoring, administration, processing and/or servicing of any or all of
the Obligations, the Financing Documents, and/or the Collateral.

“Equipment” means all
equipment, machinery, computers, chattels, tools, parts, machine tools,
furniture, furnishings, fixtures and goods (other than inventory) of every
nature (including, without limitation, embedded software), presently existing
or hereafter acquired or created and wherever located, whether or not the same
shall be deemed to be affixed to real property, and all of such types of
property leased by the Borrower and all of the Borrower’s rights and interests
with respect thereto under such leases (including, without limitation, options
to purchase), together with all accessions, additions, fittings, accessories,
special tools, and improvements thereto and substitutions therefor and all
parts and equipment which may be attached to or which are necessary or
beneficial for the operation, use and/or disposition of such personal property,
all licenses, warranties, franchises and General Intangibles related thereto or
necessary or beneficial for the operation, use and/or disposition of the same,
together with all Accounts, Chattel Paper, instruments and other consideration
received by the Borrower on account of the sale, lease or other disposition of
all or any part of the foregoing, and together with all rights under or arising
out of present or future documents and contracts relating to the foregoing and
all proceeds (cash proceeds and noncash proceeds) of the foregoing.

“ERISA” means the
Employee Retirement Income Security Act of 1974, as amended from time to time.

“Event of Default” has
the meaning described in ARTICLE VII (Events of Default).

“Financing Documents”
means this Agreement, any and all promissory notes and any and all other
documents, instruments, guarantees, certificates, agreements, loan agreements,
security agreements, guaranties, deeds of trust, mortgages, assignments or
other contract with or for the benefit of the Lender, or securing or evidencing
payment of any indebtedness of the Borrower, previously, simultaneously or
hereafter executed and/or delivered by the Borrower, any guarantor and/or any
other Person in connection with any Loan or any of the other Obligations, all
as the same may be amended, modified, restated, substituted, extended and
renewed at any time and from time to time.

 

 

3

 

“GAAP” means United
States generally accepted accounting principles, as in effect from time to
time, consistently applied.

“General Intangibles”
means all general intangibles of every nature, whether presently existing or
hereafter acquired or created, and without implying any limitation of the
foregoing, further means all books and records, commercial tort claims, other
claims (including without limitation all claims for income tax and other
refunds), payment intangibles, Supporting Obligations, choses in action, causes
of action in tort or equity, contract rights, judgments, customer lists,
software, patents, trademarks, licensing agreements, rights in intellectual
property, goodwill (including goodwill of the Borrower’s business symbolized by
and associated with any and all trademarks, trademark licenses, copyrights
and/or service marks), royalty payments, licenses, letter-of-credit rights,
letters of credit, contractual rights, the right to receive refunds of unearned
insurance premiums, rights as lessee under any lease of real or personal
property, literary rights,  copyrights,
service names, service marks, logos, trade secrets, amounts received as an
award in or settlement of a suit in damages, deposit accounts, interests in
joint ventures, general or limited partnerships, or limited liability companies
or partnerships, rights in applications for any of the foregoing, books and
records in whatever media (paper, electronic or otherwise) recorded or stored
with respect to any or all of the foregoing, all Supporting Obligations with
respect to any of the foregoing, and all equipment and general intangibles
necessary or beneficial to retain, access and/or process the information
contained in those books and records, and all proceeds (cash proceeds and
noncash proceeds) of the foregoing.

“Governmental Authority”
means any nation or government, any state or other political subdivision
thereof and any entity exercising executive, legislative, judicial, regulatory
or administrative functions of or pertaining to government and any department,
agency or instrumentality thereof.

“Hazardous Materials”
includes all materials defined as hazardous wastes or substances under any
environmental Laws,  petroleum, petroleum
products, oil and asbestos, and any substance the presence of which on any
property now or hereafter controlled, owned or acquired by the Borrower is
prohibited by any Law similar to those set forth in this definition; and any
other substance which by Laws requires special handling in its collection,
storage, treatment or disposal.

“Hedge Agreement” means
any and all transactions, agreements or documents now existing or hereafter
entered into, that provides for an interest rate, credit, commodity or equity
swap, cap, floor, collar, forward foreign exchange transaction, currency swap,
cross currency rate swap, currency option, or any combination of, or option
with respect to, these or similar transactions, for the purpose of hedging the
exposure to fluctuations in interest or exchange rates, loan, credit exchange,
security or currency valuations or commodity prices.

“Indebtedness for
Borrowed Money” of a Person means at any time the sum at such time of (a)
indebtedness of such Person for borrowed money or for the deferred purchase
price of property or services, (b) any obligations of such Person in respect of
letters of credit, banker’s or other acceptances or similar obligations issued
or created for the account of such Person, (c) Lease Obligations of such Person
with respect to capital leases, (d) all liabilities secured by any Lien on any
property owned by such Person, to the extent attached to such Person’s interest
in

 

 

4

 

such property,
even though such Person has not assumed or become personally liable for the
payment thereof, (e) obligations of third parties that are being guarantied or
indemnified against by such Person or that are secured by the property of such
Person; (f) any obligation of such Person under or with respect to an employee
stock ownership plan or other employee benefit plan; (g) any obligation of such
Person or a ERISA Affiliate to a Multi-employer Plan (as those terms are used
under ERISA); and (h) any obligations, liabilities or indebtedness, contingent
or otherwise, under or in connection with any Hedge Agreements; but excluding
trade and other accounts payable in the ordinary course of business in
accordance with customary trade terms and that are not overdue (as determined
in accordance with customary trade practices) or that are being disputed in
good faith by such Person and for which adequate reserves are being provided on
the books of such Person in accordance with GAAP.

“Inventory” means all
inventory of the Borrower and all right, title and interest of the Borrower in
and to all of its now owned and hereafter acquired goods and other personal
property (including, without limitation, embedded software) furnished under any
contract of service or intended for sale or lease, including, without
limitation, all raw materials, work-in-process, finished goods and materials
and supplies of any kind, nature or description which are used or consumed in
the Borrower’s business or are or might be used in connection with the
manufacture, packing, shipping, advertising, selling or finishing of such goods
and other personal property, and all licenses, warranties, franchises, General
Intangibles, personal property and all documents of title or documents relating
to the same, together with all Accounts, Chattel Paper, instruments and other
consideration received by the Borrower on account of the sale, lease or other
disposition of all or any part of the foregoing, and together with all rights
under or arising out of present or future documents and contracts relating to
the foregoing and all proceeds (cash proceeds and noncash proceeds) of the
foregoing.

“Investment Property”
means a security, whether  certificated
or uncertificated, security entitlement, securities  account, commodity contract, or commodity
account, and all proceeds (cash proceeds and noncash proceeds) of, and
Supporting Obligations with respect to, the foregoing.

“Item of Payment” means
each check, draft, cash, money, instrument, item, wire transfer, ACH transfer,
other electronic transfer and other remittance, in any form or method
whatsoever, in payment or on account of payment of the Receivables or otherwise
with respect to any Collateral, including, without limitation, cash proceeds of
any returned, rejected or repossessed goods, the sale or lease of which gave
rise to a Receivable, and other proceeds of Collateral; and “Items of Payment”
means the collective reference to all of the foregoing.

“Laws” means the
collective reference to each and all laws, ordinances, statutes, rules,
regulations, orders, injunctions, rule of common law, judicial interpretation,
writs, or decrees of any nation or government, any state or other political
subdivision thereof and any entity exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to government and any
department, agency or instrumentality thereof.

“Lien” means any
mortgage, deed of trust, grant, pledge, security interest, assignment,
encumbrance, judgment, lien, claim or charge of any kind, whether perfected or
unperfected, avoidable or unavoidable, including, without limitation, any
conditional sale or other title 

 

 

5

 

retention
agreement, any lease in the nature thereof, and the filing of or agreement to
give any financing statement under the Uniform Commercial Code of any
jurisdiction.

“Loan” or “Loans” means
collectively any and all loans and other financial accommodations (including,
without limitation, letters of credit) heretofore or hereafter made by the
Lender to the Borrower.

“Note” has the meaning
described in Section 2.2.2 (Note).

“Obligations” means all
present and future indebtedness, duties, obligations, and liabilities, whether
now existing or contemplated or hereafter arising, of the Borrower to the
Lender under, arising pursuant to, in connection with and/or on account of the
Loans or the provisions of this Agreement and/or any of the other Financing
Documents, including, without limitation, the principal of, and interest on,
late charges, fees, Enforcement Costs,
expenses (including, without limitation, reasonable attorneys fees), regardless
of whether such indebtedness, duties, obligations, and liabilities be direct,
indirect, primary, secondary, joint, several, joint and several, fixed or
contingent; and also means all other present and future indebtedness,
liabilities and obligations, including, without limitation, those with respect
to Bank Products, all whether now existing or contemplated or hereafter
arising, of the Borrower to the Lender of any nature whatsoever, regardless of
whether any such indebtedness, obligations and liabilities be direct, indirect,
primary, secondary, joint, several, joint and several, fixed or contingent; and
also means any and all renewals, extensions and rearrangements of any such
indebtedness, obligations and liabilities.

“Person” means and
includes an individual, a corporation, a partnership, a limited liability
company, a joint venture, a trust, an unincorporated association, a government
or political subdivision or agency thereof or any other organization or entity.

“Purchase Agreement”
means that certain Asset Purchase Agreement dated as of April 17, 2007 by and
between the Borrower and Boston Scientific.

“Purchase Agreement
Documents” means collectively the Purchase Agreement and any and all other
agreements, documents or instruments (together with any and all amendments,
modifications, and supplements thereto, restatements thereof, and substitutes
therefor) previously, now or hereafter executed and delivered by the Borrower,
Boston Scientific, or any other Person in connection with the Purchase Agreement
Transaction.

“Purchase Agreement
Transaction” means the asset agreement transaction contemplated by the
provisions of the Purchase Agreement.

“Rating Agencies” means,
collectively, (a) Standard & Poor’s, (b) Moody’s Investor Service and (c)
Fitch Ratings.

“Rating Levels At Closing”
means, collectively, (a) BB+ for Standard & Poor’s, (b) Ba2 by
Moody’s Investor Service and (c) BB+ by Fitch Ratings.

“Receivable” means one of
the Borrower’s now owned and hereafter owned, acquired or created Accounts,
Chattel Paper, General Intangibles and instruments; and “Receivables” means 

 

 

6

 

all of the
Borrower’s now or hereafter owned, acquired or created Accounts, Chattel Paper,
General Intangibles and instruments, and all cash and non-cash proceeds and
products thereof.

“Supporting Obligation”
means a letter-of-credit right, 
secondary obligation, or obligation of a secondary obligor, or secondary
obligation that supports the payment or performance of an account, chattel
paper, a document, a general intangible, an instrument, or investment property.

“Termination Date” means
the earliest of (a) June 21, 2008, (b) the date on which the Note matures (by
acceleration or otherwise), or (c) the date on which the Lender’s obligation to
make advances under the Loan is terminated following an Event of Default or
otherwise.

“Uniform
Commercial Code” means, unless otherwise provided in this Agreement, the
Uniform Commercial Code as adopted by and in effect from time to time in the State
of Maryland or in any other jurisdiction, as applicable.

All accounting terms not specifically defined or specified herein shall
have the meanings generally attributed to such terms under GAAP. All terms used
in this Agreement which are defined by the applicable Uniform Commercial Code
shall have the same meanings as assigned to them by the Uniform Commercial Code
unless and to the extent varied by this Agreement.  In this Agreement, the singular number shall
include the plural, the plural the singular and the use of the masculine,
feminine or neuter gender shall include all genders, as the context may
require. Reference to any one or more of the Financing Documents shall mean the
same as the foregoing may from time to time be amended, restated, substituted,
extended, renewed, supplemented or otherwise modified.

 

Section 1.2             Accounting
Terms and Other Definitional Provisions.

Unless otherwise defined
herein, as used in this Agreement and in any certificate, report or other
document made or delivered pursuant hereto, accounting terms not otherwise
defined herein, and accounting terms only partly defined herein, to the extent
not defined, shall have the respective meanings given to them under GAAP.  Unless otherwise defined herein, all terms
used herein which are defined by the Uniform Commercial Code shall have the
same meanings as assigned to them by the Uniform Commercial Code unless and to
the extent varied by this Agreement.  The
words “hereof”, “herein” and “hereunder” and words of similar import when used
in this Agreement shall refer to this Agreement as a whole and not to any
particular provision of this Agreement, and article, section, subsection,
schedule and exhibit references are references to articles, sections or
subsections of, or schedules or exhibits to, as the case may be, this Agreement
unless otherwise specified.  As used
herein, the singular number shall include the plural, the plural the singular
and the use of the masculine, feminine or neuter gender shall include all
genders, as the context may require. Reference to any one or more of the
Financing Documents shall mean the same as the foregoing may from time to time
be amended, restated, substituted, extended, renewed, supplemented or otherwise
modified.

 

 

7

Section 1.3             Interpretive
Provisions.

(i)            The term “documents”
includes any and all instruments, documents, agreements, certificates,
indentures, notices, other writings, and other records (authenticated and not
authenticated), however evidenced.

(ii)           The term “writing” shall have its
ordinary meaning except that, to  limited
extent the Lender in an authenticated record expressly so agrees from time to
time in the exercise of its sole and absolute discretion, the term may also
include a record in a form other than a writing.

(iii)          The terms “sign,” “signed” and “signatures”
shall have their ordinary meanings except that, to limited extent the Lender in
an authenticated record expressly agrees otherwise from time to time in the
exercise of its sole and absolute discretion, the terms may also include other
methods used to authenticate.

 

ARTICLE II

THE CREDIT FACILITIES

 

Section 2.1             [Intentionally
Deleted].

Section 2.2             The
Loan.

                2.2.1        Loan Amount.

Subject to and upon the
provisions of this Agreement, the Lender establishes a draw-down credit
facility in favor of the Borrower (the “Loan”). The aggregate principal
advances under the Loan (collectively, “Loan Advances” and each a “Loan Advance”)
shall not exceed $6,500,000.  The Lender’s
obligation to make advances under the Loan shall terminate on the Termination
Date, and following a Default or an Event of Default under this Agreement, may
be limited, suspended or terminated at the Lender’s sole and absolute
discretion exercised from time to time.

                2.2.2        Note.

The Borrower’s obligation
to repay the Loan Advances shall be evidenced by a promissory note dated as of
the same date as this Agreement (as amended, modified, restated, substituted,
extended and renewed at any time and from time to time, the “Note”) in
substantially the form attached to this Agreement as EXHIBIT A and in
the aggregate principal amount of $6,500,000 having a maturity date, repayment
terms and interest rate as set forth in the Note. Notwithstanding anything
contained in this Agreement or in any of the Financing Documents to the
contrary, the Loan is not a revolving credit facility and sums borrowed
under the Loan and repaid may not be readvanced.

                2.2.3        Loan Procedures

Once all of the
conditions precedent to Loan Advances set forth in this Agreement and the other
Financing Documents are fully satisfied, including, without limitation, the
conditions set forth in ARTICLE V (Conditions of Lending), the Borrower may
borrow under the Loan on any Business Day, provided, however, that (a)
Lender shall not make Loan Advances of less than $100,000 per Loan Advance and
(b) the aggregate amount of Loan 

 

 

8

 

Advances shall not
exceed $1,500,000 in any calendar month. 
Loan Advances shall be deposited to the Borrower’s demand deposit
account with the Lender or shall be otherwise applied as directed by the
Borrower, which direction the Lender may require to be in writing. No later
than 10:00 a.m. (Baltimore time) on the Business Day of the requested
borrowing, the Borrower shall give the Lender oral or written notice and (if
requested by the Lender) the purpose of the requested borrowing.  Notwithstanding the foregoing, the Lender may
require written notices of requested borrowings in its sole and absolute
discretion.  To the extent oral loan
notices are permitted by Lender, any oral loan notice shall be confirmed in
writing by the Borrower within three (3) Business Days after the making of the
requested Loan Advance.

                2.2.4        Use of Loan Proceeds

The proceeds of the Loan
shall be used solely to pay the Borrower’s business expenses incurred in the
ordinary course of the Borrower’s business.

                2.2.5        Lender Advances.

The Borrower hereby
irrevocably authorizes the Lender at any time and from time to time, without
further request from or notice to the Borrower, to make advances under the Loan
which the Lender, in its sole and absolute discretion, deems necessary or
appropriate to protect the Lender’s interests under this Agreement, including,
without limitation, advances to cover principal of, and/or interest on, the
Loans, the Obligations, Enforcement Costs, and/or any costs, charges, fees
(including, without limitation, reasonable attorneys fees), and expenses;
provided, however, that, prior to an Event of Default, the Lender shall notify
the Borrower of any advances not expressly requested by Borrower (not including
advances or to cover interest on the Loan) within a reasonable time from the
making of such advance.

Section 2.3             General
Provisions.

2.3.1        Use of Loan Proceeds

The Borrower shall use
the proceeds of the Loan promptly and solely for the purposes expressly
permitted by this Agreement. Without implying any limitation on the foregoing,
the Borrower will not, directly or indirectly, use any part of such proceeds
for the purpose of purchasing or carrying any margin stock within the meaning
of Regulation U of the Board of Governors of the Federal Reserve System or to
extend credit to any Person for the purpose of purchasing or carrying any such
margin stock.

2.3.2        Calculation of Interest and Fees

All applicable fees and
interest shall be calculated on the basis of a year of 360 days for the actual
number of days elapsed.

2.3.3        Payment Absolute

All payments of the
Obligations, including, without limitation, principal, interest, prepayments,
and fees, shall be paid by the Borrower without setoff, recoupment or
counterclaim to the Lender at the Lender’s office specified in the Note
available funds not later than 12:00 noon, Baltimore, Maryland time on the due
date of such payment.  Alternatively, at
its sole discretion, the Lender may charge any deposit account of the Borrower
at the Lender or any affiliate thereof with all or any part of any amount due
hereunder to the extent that the Borrower

 

 

9

has not otherwise
tendered payment to the Lender.  All
payments shall be applied to the Obligations in such order as the Lender may
elect.

2.3.4        Lender
Responsibility

The Lender assumes no
responsibility or liability for any errors, mistakes, and/or discrepancies in
the oral, telephonic, written or other transmissions of any instructions,
orders, requests and confirmations between the Lender and the Borrower in
connection with the Loan or Loan Advances or any other transaction in
connection with the provisions of this Agreement.

2.3.5        Interest
in Deposit Accounts

The Borrower hereby
grants to the Lender a continuing lien, assignment and security interest for
all of the Obligations of the Borrower upon any and all monies, deposit
accounts, securities, and other property of the Borrower and the proceeds
thereof, now or hereafter held or received by or in transit to, the Lender from
or for the Borrower, and also upon any and all deposit accounts (general or
special) and credits of the Borrower, if any, with the Lender or any affiliate
of the Lender, at any time existing.

ARTICLE III 

SECURITY

Section 3.1             The
Collateral.

As security for the
payment and performance of the Obligations, the Borrower assigns, pledges and
grants to Lender, and covenants and agrees that Lender shall have a perfected
and continuing security interest in all of the personal property of the
Borrower, all whether now owned or existing or hereafter acquired or created
and wherever situated and including, without limitation, the following (the “Collateral”):

(a)           All Accounts; and

(b)           All Inventory; and

(c)           All Equipment; and

(d)           All General Intangibles;

(e)           All Investment Property; and

(f)            All notes, notes receivable, drafts,
deposit accounts, securities, acceptances, money, instruments and documents;
AND

WITH RESPECT TO EACH AND
ALL OF THE FOREGOING, all insurance policies and insurance proceeds related to
any and all of the foregoing and all cash proceeds and non-cash proceeds
thereof, and all books and records in whatever media (paper, electronic or
otherwise) recorded or stored, with respect to any or all of the foregoing and
all equipment, hardware and general intangibles necessary or beneficial
desirable to retain, access and/or process the 

 

 

10

 

information
contained in those books and records, and all proceeds (cash and non-cash) of
the foregoing.

The Borrower further
agrees that the Lender shall have in respect thereof all of the rights and
remedies of a secured party under the Uniform Commercial Code as well as those
provided in this Agreement. 
Notwithstanding the fact that the proceeds of the Collateral constitute
a part of the Collateral, the Borrower may not dispose of the Collateral, or
any part thereof.

As additional security
for the Obligations, the Borrower hereby agrees to establish all of the
Borrower’s deposit services, checking and operating accounts and other such
accounts with t the Lender.

Section 3.2             Other
Security.

In addition to the
Collateral, the Obligations shall also be secured by the following Financing
Documents:

(a)            a Patent Security Agreement dated as
of even date herewith from the Borrower in favor of the Lender covering all of
the patents and associated intellectual property of Borrower under terms and
provisions more specifically set forth therein; and

(b)           a Trademark Security Agreement dated
as of even date herewith from the Borrower in favor of the Lender covering all
of the patents and associated intellectual property of Borrower under terms and
provisions more specifically set forth therein.

Section 3.3             Costs.

The
Borrower agrees to pay, as part of the Enforcement Costs and to the fullest
extent permitted by applicable Laws, on demand all costs, fees and expenses
incurred by the Lender in connection with the taking, perfection, preservation,
protection and/or release of a Lien on the Collateral, including, without
limitation:

(a)           fees and expenses incurred in
preparing Financing Documents from time to time (including, without limitation,
reasonable attorneys’ fees incurred in connection with preparing the Financing
Documents);

(b)           all filing and/or recording taxes or
fees;

(c)           all title insurance premiums and
costs;

(d)           all costs of Lien and record
searches;

(e)           reasonable attorneys’ fees in
connection with all legal opinions required;

(f)            appraisal and/or survey costs; and

(g)           all related costs, fees and expenses.

 

 

11

 

Section 3.4             Rights
of Inspection, Field Examination, Etc.

(a)           The Borrower shall permit authorized
representatives of the Lender to visit and inspect the properties of the
Borrower, to review, audit, check and inspect the Collateral at any time with
or without notice, to review, audit, check and inspect the Borrower’s other
books of record at any time with or without notice and to make abstracts and
photocopies thereof, and to discuss the affairs, finances and accounts of the
Borrower, with the officers, directors, employees and other representatives of
the Borrower and its accountants, all at such times during normal business
hours and other reasonable times and as often as the Lender may reasonably
request; provided, however, that prior to an Event of Default or such
time that Lender in its good faith discretion believes an Event of Default to
exist, (a) the Lender shall use reasonable efforts to notify the Borrower of
such inspections and (b) the Borrower shall not be required to reimburse the
Lender for the costs and expenses incurred by the Lender in connection with any
inspections in excess of two (2) inspections during any twelve (12) month
period.

(b)           The Borrower hereby irrevocably
authorizes and directs all accountants and auditors employed by the Borrower at
any time prior to the repayment in full of the Obligations to exhibit and
deliver to the Lender copies of any and all of the financial statements, trial
balances, management letters, or other accounting records of any nature of the
Borrower in the accountant’s or auditor’s possession, and to disclose to the
Lender any information they may have concerning the financial status and
business operations of the Borrower. 
Further, the Borrower hereby authorizes all Governmental Authorities to
furnish to the Lender copies of reports or examinations relating to the
Borrower, whether made by the Borrower or otherwise.

(c)           Any and all costs and expenses
incurred by, or on behalf of, the Lender in connection with the conduct of any
of the foregoing shall be part of the Enforcement Costs and shall be payable to
the Lender upon demand.  The Borrower acknowledges
and agrees that such expenses may include, but shall not be limited to, any and
all out-of-pocket costs and expenses of the Lender’s employees and agents in,
and when, traveling to the Borrower’s facilities.

Section 3.5             Specific
Cash Collateral Account Provisions.

Without limiting the
general grant and assignment set forth in Section 3.1 (The Collateral), as
security for the payment and performance of the Obligations, the Borrower
specifically assigns, pledges and grants to Lender, and covenants and agrees
that Lender shall have a perfected and continuing first priority security
interest in the Cash Collateral Account, all cash and other assets deposited
therein from time to time and all proceeds thereof.

Section 3.6             Specific
Purchase Agreement Documents Collateral Provisions.

Without limiting the
general grant and assignment set forth in Section 3.1 (The Collateral), as
additional Collateral and security for the Obligations, the Borrower
specifically assigns, pledges and grants to Lender, and covenants and agrees
that Lender shall have, a perfected and continuing first priority security
interest in the Purchase Agreement, the other Purchase Agreement Documents and
all cash payments, receivables, Items of Payment, other amounts payable
associated therewith or relating thereto, including, without limitation the
Second Payment (as defined in the Purchase Agreement), and furthermore,
including, without 

 

 

12

 

limitation, all of
the benefits of any representations and warranties provided by Boston
Scientific and any and all rights of the Borrower to indemnification from the
Boston Scientific or any other Person contained therein.  The Borrower agrees that neither the assignment
to the Lender nor any other provision contained in this Agreement or any of the
other Financing Documents shall impose on the Lender any obligation or
liability of the Borrower or any other Person under the Purchase Agreement
and/or under any of the other Purchase Agreement Documents.  The Borrower hereby agrees to indemnify the
Lender and hold the Lender harmless from any and all claims, actions, suits,
losses, damages, costs, expenses, fees, obligations and liabilities that may be
incurred by or imposed upon the Lender by virtue of the assignment of and Lien
on the Borrower’s rights, title and interest in, to, and under the Purchase
Agreement and the Purchase Agreement Documents. 
The Borrower further acknowledges and agrees that following the
occurrence of an Event of Default, the Lender shall be entitled to enforce any
and all rights and remedies available to the Borrower under the Purchase
Agreement and/or under any or all of the Purchase Agreement Documents and/or
applicable Laws with respect to the Purchase Agreement Transaction.

The Borrower agrees to
instruct Boston Scientific to wire transfer all cash payments, Items of Payment
and other amounts payable to the Borrower under the Purchase Agreement and the
other Purchase Agreement Documents directly to a bank account designated by the
Lender and from which the Lender alone has power of access and withdrawal (the “Collateral
Account”). Without in any way limiting the foregoing, if Borrower shall receive
any cash payment, Item of Payment or other payment from Boston Scientific
pursuant to the Purchase Agreement and the other Purchase Agreement Documents
(a) the Borrower shall deposit the same in the Collateral Account on the same
Business Day as the date of receipt of the cash, Item of Payment or other
amount payable, (b) the same shall be deposited in precisely the form received,
except for the endorsements of the Borrower where necessary to permit the
collection of any such Items of Payment, which endorsement the Borrower hereby
agrees to make, and, in the event the Borrower fails to do so, the Borrower
hereby authorizes the Lender to make the endorsement in the name of the
Borrower and (c) prior to such a deposit, the Borrower will not commingle any
such cash payment, Items of Payment or other such payment with any of the
Borrower’s other funds or property, but will hold them separate and apart in
trust and for the account of the Lender. 
The Lender will apply the whole or any part of the collected funds
credited to the Collateral Account against the outstanding Obligations, the
order and method of such application to be in the sole discretion of the
Lender.  Notwithstanding the foregoing,
once the Obligations have been indefeasibly paid in full and performed, the
Lender will provide written notice to the Borrower and Boston Scientific (i)
that the Lender’s security interest in the Collateral Account has terminated;
(ii) that Boston Scientific and the Borrower are no longer obligated to deposit
amounts in the Collateral Account; and (iii) that the Notice and Acknowledgment
of Assignment is terminated and the parties’ obligations thereunder have been
satisfied.  At such time as (a) the
Obligations have been paid and performed in full, (b) the Lender shall have no
obligation or commitment to advance any funds to the Borrower or any other Person
under this Agreement or the other Financing Documents and (c) this Agreement is
terminated, then the Lender shall remit to Borrower all remaining cash
payments, Items of Payment and other amounts relating to or deriving from the
Purchase Agreement and the Other Purchase Agreement documents received by the
Lender that have not already been applied to the Obligations.

 

 

13

 

ARTICLE IV

REPRESENTATIONS AND
WARRANTIES

The Borrower represents
and warrants to the Lender, and shall be deemed to represent and warrant to the
Lender at the time each request for an advance under the Loans is submitted and
again at the time any advance is made under the Loans, as follows:

Section 4.1             Good Standing.

The Borrower is a corporation
duly organized, validly existing and in good standing under the Laws of the
State of Delaware and has the power and authority to own its property and to
carry on its business in each jurisdiction in which the Borrower does business.

Section 4.2             Authority and Compliance.

The Borrower has full
power and authority to execute and deliver the Financing Documents and to incur
and perform the obligations provided for therein and under the Purchase
Agreement Documents, all of which have been duly authorized by all proper and
necessary action of the appropriate governing body of the Borrower. No consent
or approval of any governmental authority or other third party is required as a
condition to the validity of any Financing Document or any of the Purchase Agreement
Documents. The Borrower is in compliance with all Laws to which it is subject.

Section 4.3             Binding Agreement.

This Agreement and the
other Financing Documents executed by the Borrower constitute valid and legally
binding obligations of the Borrower, enforceable against the Borrower in
accordance with their terms.

Section 4.4             No Conflicting Agreements.

There is no charter,
bylaw, stock provision, partnership agreement or other document pertaining to
the organization, power or authority of the Borrower, no provision of any
existing agreement, mortgage, indenture or contract binding on the Borrower or
affecting its property, and no Laws which would conflict with or in any way
prevent the execution, delivery or carrying out of the terms of this Agreement
and/or any of the other Financing Documents.

Section 4.5             No Defaults.

The Borrower is in
compliance with its covenants and agreements contained in this Agreement and in
the other Financing Documents. No Default or Event of Default has occurred and
is continuing.

Section 4.6             Financial Statements and Other
Information.

The financial statements
of the Borrower heretofore delivered to the Lender have been prepared in
accordance with GAAP applied on a consistent basis throughout the period
involved and fairly present the Borrower’s financial condition as of the date
or dates thereof, and there has been no material adverse change in the Borrower’s
financial condition or operations since                      June 30, 2007. To the
best of the Borrower’s knowledge, all factual information furnished by the
Borrower to the Lender in connection with this Agreement and the other
Financing Documents is and will be accurate and complete on the date as of
which such information is delivered to the 

 

 

14

 

Lender and is not
and will not be incomplete by the omission of any material fact necessary to
make such information not misleading.

Section 4.7             Information.

The information contained
in EXHIBIT B and EXHIBIT C, which are attached to and a part of
this Agreement, is complete and correct.

Section 4.8             Ownership of Assets.

The Borrower has good
title to its assets, and its assets are free and clear of Liens except those
granted to the Lender and any described on EXHIBIT D attached to and a
part of this Agreement.

Section 4.9             Subsidiaries.

The Borrower has no
subsidiaries.

Section 4.10           Litigation.

There is no proceeding
involving the Borrower pending or, to the knowledge of the Borrower, threatened
before any court or governmental authority, agency, instrumentality or
arbitration authority, except any described on EXHIBIT E attached to and
a part of this Agreement.

Section 4.11           Perfection.

The Lender has as
security for the Obligations a valid, perfected, first and only security interest
in all of the Collateral.

Section 4.12           Taxes and Other Obligations.

All taxes and
assessments, indebtedness for borrowed money, leases, and other obligations due
and payable by the Borrower have been paid or are being contested in good faith
by appropriate proceedings in accordance with the Borrower’s covenants in this
Agreement and the Borrower has filed all tax returns which it is required to
file.

Section 4.13           Purchase Agreement Documents.

The Lender has received
true and correct photocopies of the Purchase Agreement and each of the other
Purchase Agreement Documents.  Neither
the Purchase Agreement nor any of the other Purchase Agreement Documents have
been modified, changed, supplemented, canceled, amended or otherwise altered or
affected, except as otherwise disclosed to the Lender in writing on or before
the date of this Agreement.  The Purchase
Agreement Transaction has been effected, closed and consummated pursuant to,
and in accordance with, the terms and conditions of the Purchase Agreement and
with all applicable Laws.

Section 4.14           Environmental Matters.

The conduct of the
Borrower’s business operations does not and will not violate any Laws for
environmental protection, regulations of the Environmental Protection Agency or
any other applicable Laws relating to the environment or Hazardous Materials.

 

 

15

 

ARTICLE V 

CONDITIONS
OF LENDING

In addition to the
conditions stated elsewhere in this Agreement, the Lender shall not be
obligated to consider or to make any advance under this Agreement unless on the
date of the advance is requested and on the date the advance is to be made:

Section 5.1             Representations
and Warranties.

The representations and
warranties contained in ARTICLE IV (Representations and Warranties) are true
and correct as though made on and as of such date.

Section 5.2             Compliance.

The Borrower is in
compliance with all of the covenants and agreements contained in this Agreement
and in the other Financing Documents.

Section 5.3             Default.

No
Default or Event of Default has occurred and is continuing.

Section 5.4             No
Adverse Changes.

There shall have been no
material adverse change, as determined by the Lender, in the financial
condition or business of Borrower.

Section 5.5             $500,000
Cash Requirement.

The Lender shall have
determined in its sole good faith discretion that the Borrower owns $500,000 or
less in cash, marketable securities and other investment property readily
convertible to cash, not including the Cash Collateral Account, and the
Borrower shall have delivered such satisfactory documentation required by the
Lender in its discretion to determine such requirement.

Section 5.6             $1,000,000
Cash Collateral Account.

Not later than the date
of this Agreement, Borrower (a) shall have deposited not less than $1,000,000
in cash in a bank account designated by the Lender and from which the Lender
alone has power of access and withdrawal (the “Cash Collateral Account”), from
which the Lender shall make withdrawals and debits for interest payments on the
Loan for other Obligations in Lender’s discretion and (b) shall have executed
and delivered such account agreements and other documentation that Lender shall
require in its discretion relating to the Cash Collateral Account.

Section 5.7             Notice
and Acknowledgment of Assignment

As of the date of this
Agreement, the Borrower shall execute and deliver, and cause Boston Scientific
to execute and deliver, a Notice and Acknowledgment of Assignment (the “Notice
and Acknowledgment of Assignment”) in form and substance satisfactory to the
Lender.

 

 

 

16

 

Section 5.8             Purchase
Agreement Transaction.

The Lender shall have
received photocopies of all Purchase Agreement Documents, together with a
certificate signed by a responsible officer of the Borrower certifying that the
Purchase Agreement and the other Purchase Agreement Documents furnished to the
Lender are true, correct, in full force and effect and the provisions thereof
have not been in any way modified, amended or waived, and certifying to such
other matters that Lender deems advisable.

Section 5.9             Documentation.

The Lender shall have
received such Financing Documents, opinions, record searches, financial
statements, assignments, waivers, certificates and other documents as the
Lender may require, all in form and substance satisfactory to the Lender and
its counsel, in the exercise of their sole and absolute discretion.

Section 5.10           Commitment
Fee.

The Lender shall have
received the full amount of its commitment fee of $32,500, which fee is fully
earned and non-refundable.

Each request for an
advance shall be deemed a representation by the Borrower that the conditions of
this Article have been met.

ARTICLE VI 

COVENANTS

Until full payment and
performance of all Obligations, the Borrower covenants and agrees that (without
limiting any requirement of any other Financing Document):

Section 6.1             Affirmative
Covenants.

6.1.1        Financial
Statements and Other Information.

The Borrower will file
with the United States Securities and Exchange Commission (the “SEC”) or
furnish to the Lender, as applicable, the following, which shall be in form and
content satisfactory to the Lender:

(a)           The Borrower shall make timely filing
with the SEC of annual financial statements audited by the Borrower’s certified
public accountants (who shall be chosen by the Borrower and reasonably acceptable
to the Lender) in accordance with GAAP consistently applied for, such filing to
occur within ninety (90) days after the close of each of, the Borrower’s fiscal
years.  Upon notice to the Borrower, the
Lender may require delivery of such financial statements directly to Lender
within the time periods prescribed above, in addition to filing with the SEC.

(b)           The Borrower shall make timely filing
with the SEC of quarterly financial statements (including a balance sheet,
profit and loss statement and a statement of changes in financial condition) of
the Borrower for each quarter of each fiscal year of the Borrower, such filing
to occur within forty-five (45) days after the close of each such period, as 

 

 

17

 

prepared by the Borrower’s chief financial officer in
accordance with GAAP consistently applied to the Borrower.  Upon notice to the Borrower, the Lender may
require delivery of such financial statements directly to Lender within the
time periods prescribed above, in addition to filing with the SEC.

(c)           The Borrower shall furnish to the
Lender a compliance certificate of the President or chief financial officer of
the Borrower concurrently with, and dated as of the date required for delivery
of each of, the financial statements containing (i) a certification that the
financial statements of even date are true and correct and there exists no
Default or Event of Default, and (ii) computations and conclusions, in such
detail as the Lender may require, with respect to compliance with this
Agreement, and the other Financing Documents, including computations of all
quantitative covenants, if any.

(d)           The Borrower shall furnish to the
Lender, within ten (10) days following the required filing date, a copy of the
Borrower’s federal income tax return with all schedules and attachments.

(e)           The Borrower shall furnish to the
Lender, within ten (10) days upon the filing or making thereof, at least one
(l) copy of all financial statements, reports, notices and proxy statements
sent by the Borrower to its stockholders, and of all regular and other reports
filed by the Borrower with any securities exchange or with the SEC.

(f)            The Borrower shall furnish to the
Lender, promptly such additional information, reports and statements respecting
the business operations and financial condition of the Borrower, from time to
time, as the Lender may reasonably require.

6.1.2        Accounting;
Books and Records.

The Borrower will
maintain a system of accounting satisfactory to the Lender and in accordance
with GAAP applied on a consistent basis at all times, permit the Lender’s
officers or authorized representatives to visit and inspect without notice the
Borrower’s books of account and other records, businesses and properties at
such times and as often as the Lender may desire, and pay the reasonable fees
and disbursements of any accountants or other agents of the Lender selected by
the Lender for the foregoing purposes. 
The Borrower shall maintain a fiscal year ending December 31st.  Unless written notice of another location is
given to the Lender, the Borrower’s books and records will be located at the
Borrower’s chief executive office described on EXHIBIT B.

6.1.3        Existence
and Compliance.

The Borrower will
maintain its existence, good standing and qualification to do business wherever
required, and will comply with all Laws, including, without limitation,
environmental Laws applicable to it or to any of its property, business
operations and transactions.

6.1.4        ERISA

The Borrower will, and
will cause each of its subsidiaries and Affiliates to, comply with the funding
requirements of ERISA with respect to employee pension benefit plans 

 

 

18

 

for its respective
employees.  The Borrower will not permit
with respect to any employee benefit plan or plans covered by Title IV of ERISA
(a) any prohibited transaction or transactions under ERISA or the Internal
Revenue Code, that results, or may result, in any material liability of the
Borrower and/or any subsidiary and/or Affiliate, or (b) any reportable event
if, upon termination of the plan or plans with respect to which one or more
such reportable events shall have occurred, there is or would be any material
liability of the Borrower and/or any subsidiary and/or Affiliate to the
PBGC.  Upon the Lender’s request, the
Borrower will deliver to the Lender a copy of the most recent actuarial report,
financial statements and annual report completed with respect to any “defined
benefit plan”, as defined in ERISA.

6.1.5        Maintenance.

The Borrower will
maintain all of its tangible property in good condition and repair and make all
necessary replacements thereof, and preserve and maintain all licenses,
trademarks, privileges, permits, franchises, certificates and the like
necessary or desirable for the operation of its business.

6.1.6        Insurance.

(a)           Insurance. Generally. The Borrower
will maintain insurance with responsible insurance companies on such of its
properties, in such amounts and against such risks as is customarily maintained
by similar businesses operating in the same vicinity, specifically to include
fire and extended coverage insurance covering all assets, business interruption
insurance, workers compensation insurance and liability insurance, all to be with
such companies and in such amounts as are satisfactory to the Lender from time
to time. Satisfactory evidence of such insurance will be supplied to the Lender
prior to the initial funding under this Agreement and no later than thirty (30)
days prior to each policy renewal.

(b)           Insurance on Collateral.  The Borrower will (a) maintain hazard
insurance with fire and extended coverage and naming the Lender as an
additional insured with loss payable to the Lender as its interest may appear
on the Equipment and Inventory in an amount at least equal to the lesser amount
of the outstanding principal amount of the Obligations or the fair market value
of the Equipment and Inventory (but in any event sufficient to avoid any
co-insurance obligations) and with a specific endorsement to each such
insurance policy pursuant to which the insurer agrees to give the Lender at
least thirty (30) days written notice before any alteration or termination of
such insurance policy and that no act or default of the Borrower shall affect
the right of the Lender to recover under such policy in the event of loss or
damage; (b) file with the Lender, upon its request, a detailed list of the
insurance then in effect and stating the names of the insurance companies, the
amounts and rates of the insurance, dates of the expiration thereof and the
properties and risks covered thereby; and (c) within thirty (30) days after
notice in writing from the Lender, obtain such additional insurance as the
Lender may reasonably request.

6.1.7        Taxes
and Other Obligations.

The Borrower will pay
when due all of its taxes, other governmental assessments, indebtedness for
borrowed money, leases, and other obligations, including, but not limited to,
taxes, costs or other expenses arising out of this transaction, as the same
become due and payable, except, with respect to taxes and governmental
assessments, to the extent the same are 

 

 

19

 

being contested in
good faith by appropriate proceedings in a diligent manner, no Lien has been
imposed with respect thereto, and the Lender is satisfied that the Borrower at
all times has the financial ability to pay the disputed taxes and governmental
assessments, with all interest and penalties, without materially and adversely
affecting the Borrower’s financial condition.

6.1.8        Hazardous
Materials.

The Borrower will not use
or permit any other party to use any Hazardous Materials at any of the Borrower’s
places of business or at any other property owned, controlled or operated by
the Borrower except such materials as are incidental to the Borrower’s normal
course of business, maintenance and repairs and which are handled in compliance
with all applicable Laws.  The Borrower
agrees to permit the Lender, its agents, contractors and employees to enter and
inspect any of the Borrower’s places of business or any other property of the
Borrower at any reasonable times upon three (3) days prior notice for the
purposes of conducting an environmental investigation and audit (including
taking physical samples) to insure that the Borrower is complying with this
covenant and the Borrower shall reimburse the Lender on demand for the costs of
any such environmental investigation and audit. The Borrower shall provide the
Lender, its agents, contractors, employees and representatives with access to
and copies of any and all data and documents relating to or dealing with any
Hazardous Materials used, generated, manufactured, stored or disposed of by the
Borrower’s business operations within five (5) days of the Lender’s request
therefor.

6.1.9        Notices.

(a)           Environmental.  The Borrower will immediately notify the
Lender in writing of (a) any and all enforcement, cleanup, remedial, removal,
or other governmental or regulatory actions instituted, completed or threatened
pursuant to any applicable Laws relating to any Hazardous Materials; (b) all
claims made or threatened by any third party against the Borrower relating to
damages, contribution, cost recovery, compensation, loss or injury resulting
from any Hazardous Materials; and (c) any remedial action taken by the Borrower
with respect to the Borrower’s business operations.

(b)           Adverse Matters.  The Borrower will immediately notify the
Lender in writing of (a) any condition, event or act which comes to its
attention that would or might materially and adversely affect the Borrower’s
financial condition or operations, the Collateral, or the Lender’s rights under
the Financing Documents; (b) any litigation instituted or threatened against
the Borrower and of the entry of any judgment or Lien against any of the assets
or properties of the Borrower where the claims against the Borrower or any of
its subsidiaries exceed One Hundred Thousand Dollars ($100,000) and are not
covered by insurance; (c) any Default or Event of Default, any judicial,
administrative or arbitral proceeding pending against the Borrower; (d) any
judicial or administrative proceeding known by the Borrower to be threatened
against it which, if adversely decided, could materially adversely affect its
financial condition or operations (present or prospective); (e) the receipt by
the Borrower or any of its subsidiaries of any notice, claim or demand from any
Governmental Authority which alleges that the Borrower or any subsidiary is in
violation of any of the terms of, or has failed to comply with any applicable
Laws regulating its operation and business, including, but not limited to, the
Occupational Safety and Health Act and the Environmental 

 

 

20

 

Protection Act; and (f) loss through fire, theft,
liability or property damage in excess of an aggregate of One Hundred Thousand
Dollars ($100,000).

(c)           Commercial Tort Claims. The Borrower
shall promptly notify the Lender in writing in the event the Borrower shall
have, receive or otherwise obtain a commercial tort claim, as plaintiff or
otherwise in its favor against any third party and, upon the request of the
Lender, shall promptly amend the Perfection Certificate and, without implying
any limitation on the provisions of Section 6.1.12 (Further Assurances; Defense
of Title), confirm that the Lender is authorized to file additional, and to
amend, financing statements and do such other acts or things deemed necessary
or desirable by the Lender to grant the Lender a first priority, perfected
security interest in any such commercial tort claim, including, without
limitation executing an assignment of such commercial tort claim.

(d)           Disclosure
of Significant Transactions.  The
Borrower shall deliver to the Lender a written notice describing in detail each
transaction by it involving the purchase, sale, lease, or other acquisition or
loss or casualty to or disposition of an interest in fixed or capital assets
which exceeds One Hundred Thousand Dollars ($100,000.00), said notices to be
delivered to the Lender within thirty (30) days of the occurrence of each such
transaction.

(e)           Change in Information.  The Borrower will provide the Lender not less
than thirty (30) days’ written notice prior to any change to the information
set forth on EXHIBIT B.

6.1.10      Safekeeping.

The Borrower will store
the Collateral in appropriate containers, in safe and secure locations, and in
accordance with applicable Laws. The Borrower will take all steps necessary to
preserve and maintain the Collateral and its value. The Borrower will not
subject the Collateral to Liens or rights of setoff or recoupment, discount or
adjustment, or otherwise permit anything to be done to the Collateral which may
materially impair its the value or security.

6.1.11      Inspection.

The Borrower shall, and
shall cause each of its subsidiaries to, permit authorized representatives of
the Lender to visit and inspect the properties of the Borrower and its
subsidiaries, to review, audit, check and inspect the Collateral at any time
with or without notice, to review, audit, check and inspect the Borrower’s
other books of record at any time with or without notice and to make abstracts
and photocopies thereof, and to discuss the affairs, finances and accounts of
the Borrower and/or any subsidiaries, with the officers, directors, employees
and other representatives of the Borrower and/or any subsidiaries and their
respective accountants, all at such times during normal business hours and
other reasonable times and as often as the Lender may reasonably request.  Any and all costs and expenses incurred by,
or on behalf of, the Lender in connection with the conduct of any of the
foregoing, including, without limitation, travel, lodging, meals, and other
expenses together with the Lender’s customary allocated charge of per day for
each examiner employed by the Lender for inspections of the Collateral and the
Borrower’s operations, shall be part of the Enforcement Costs and shall be
payable to the Lender upon demand.  The
Borrower acknowledges and agrees that such expenses may include, but shall 

 

 

21

 

not be limited to,
any and all out-of-pocket costs and expenses of the Lender’s employees and
agents in, and when, traveling to the Borrower’s facilities.

6.1.12      Further
Assurances; Defense of Title.

At its expense, the
Borrower will defend the title to the Collateral (or any part thereof), and
will promptly execute, acknowledge and deliver any financing statement, other
notice, continuation statement, security agreement, notice, assignment or other
document as may be necessary or beneficial, in the opinion of the Lender, to
perfect, preserve, provide notice of, publicize, maintain, continue, protect
and/or extend the assignment, lien or security interest granted to the Lender
under this Agreement and/or any of the other Financing Documents and the
priority thereof.  The Borrower will
immediately upon obtaining possession or control over any Collateral which may
be perfected by  possession or control
deliver the same to the Lender, with such endorsements, stock powers or other
documents or instruments as the Lender may from time to time require. The
Borrower will from time to time do whatever the Lender may require by way of
obtaining, executing, delivering, and/or filing financing statements, landlords’
or mortgagees’ waivers, notices of assignment and other notices and amendments
and renewals thereof and the Borrower will take any and all steps and observe
such formalities as the Lender may require, in order to create and maintain a
valid Lien upon, pledge of, or paramount security interest in, the Collateral.
Without implying any limitation on the foregoing, with respect to the
Collateral that may be perfected by control, 
the Borrower shall take such steps as the Lender may require in order
that Lender may have such control. To the extent that the proceeds of any of
the Accounts are expected to become subject to the control of, or in the
possession of, a party other than the Borrower or the Lender, the Borrower
shall cause all such parties to execute and deliver on the date of this
Agreement and from time to time hereafter security documents, financing
statements or other documents as requested by the Lender and as may be
necessary to evidence and/or perfect the security interest of the Lender in
those proceeds.  The Borrower agrees that
a copy of a fully executed security agreement and/or financing statement shall
be sufficient to satisfy for all purposes the requirements of a financing statement
as set forth in Article 9 of the applicable Uniform Commercial Code. The
Borrower hereby irrevocably appoints the Lender as the Borrower’s attorney-in-fact,
with power of substitution, in the name of the Lender or in the name of the
Borrower or otherwise, for the use and benefit of the Lender, but at the cost
and expense of the Borrower and without notice to the Borrower, to execute and
deliver any and all of the instruments and other documents and take any action
which the Lender may require pursuant the foregoing provisions of this Section.
Further, to the extent permitted by applicable Laws, the Lender may file,
without the Borrower’s signature, one or more financing statements or other
notices disclosing the Lender’s liens and other security interests. All
financing statements and notices may describe the Lender’s collateral as all
assets or all personal property of Borrower. The Borrower hereby ratifies and
confirms the validity of any and all financing statements filed by the Lender
prior to the date of this Agreement.

6.1.13      Equipment

The Borrower will (a)
maintain all Equipment as personalty, (b) not affix any Equipment to any real
estate in such manner as to become a fixture or part of such real estate, and
(c) shall hold no Equipment on a sale on approval basis. The Borrower hereby
declares its intent that, notwithstanding the means of attachment, no goods of
the Borrower hereafter 

 

 

22

 

attached to any
realty shall be deemed a fixture, which declaration shall be irrevocable,
without the Lender’s consent.

6.1.14      Collection
of Receivables.

Until such time that the
Lender shall notify the Borrower of the revocation of such privilege and except
as otherwise provided by this Agreement, the Borrower shall at its own expense
have the privilege for the account of, and in trust for, the Lender of
collecting its Receivables and all Items of Payment and shall otherwise
completely service all of the Receivables including (a) the billing, posting
and maintaining of complete records applicable thereto, (b) the taking of such
action with respect to the Receivables as the Lender may request or in the
absence of such request, as the Borrower may deem advisable; and (c) the
granting, in the ordinary course of business, to any Account Debtor, any
rebate, refund or adjustment to which the Account Debtor may be lawfully
entitled, and may accept, in connection therewith, the return of goods, the
sale or lease of which shall have given rise to a Receivable and may take such
other actions relating to the settling of any Account Debtor’s claim as may be
commercially reasonable.  The Lender may,
at its option, at any time or from time to time after and during the
continuance of an Event of Default hereunder, revoke the collection privilege
given in this Agreement to the Borrower by either giving notice of its
assignment of, and lien on the Collateral to the Account Debtors or giving
notice of such revocation to the Borrower. 
The Lender shall not have any duty to, and the Borrower hereby releases
the Lender from all claims of loss or damage caused by the delay or failure to
collect or enforce any of the Receivables or to preserve any rights against any
other party with an interest in the Collateral. The Lender shall be entitled at
any time and from time to time to confirm and verify Receivables.

6.1.15      Assignments
of Receivables.

The Borrower will
promptly, upon request, execute and deliver to the Lender written assignments,
in form and content acceptable to the Lender, of specific Receivables or groups
of Receivables; provided, however, the Lien and/or security interest granted to
the Lender under this Agreement shall not be limited in any way to or by the
inclusion or exclusion of Receivables within such assignments.  Receivables so assigned shall secure payment
of the Obligations and are not sold to the Lender whether or not any assignment
thereof, which is separate from this Agreement, is in form absolute.  The Borrower agrees that neither any
assignment to the Lender nor any other provision contained in this Agreement or
any of the other Financing Documents shall impose on the Lender any obligation
or liability of the Borrower with respect to that which is assigned and the
Borrower hereby agrees to indemnify the Lender and hold the Lender harmless
from any and all claims, actions, suits, losses, damages, costs, expenses,
fees, obligations and liabilities which may be incurred by or imposed upon the
Lender by virtue of the assignment of and Lien on the Borrower’s rights, title
and interest in, to, and under the Collateral.

6.1.16      Government
Accounts.

The Borrower will
immediately notify the Lender if any of the Receivables arise out of contracts
with the United States or with any other Governmental Authority, and execute
any instruments and take any steps required by the Lender in order that all
moneys due and to become due under such contracts shall be assigned to the
Lender and notice thereof given to the 

 

 

23

 

Governmental Authority
under the Federal Assignment of Claims Act or any other applicable Laws.

6.1.17      Notice
of Returned Goods, etc.

The Borrower will
promptly notify the Lender of the return, rejection or repossession of any
goods sold or delivered in respect of any Receivables, and of any claims made
in regard thereto to the extent that the aggregate purchase price of any such
goods in any given calendar month exceeds in the aggregate Ten Thousand Dollars
($10,000.00) in any given calendar month.

6.1.18      Inventory.

With respect to the
Inventory, the Borrower will: (a) as soon as possible upon demand by the Lender
from time to time, prepare and deliver to the Lender designations of Inventory
specifying the Borrower’s cost of Inventory, the retail price thereof, and such
other matters and information relating to the Inventory as the Lender may
reasonably request; (b) keep correct and accurate records itemizing and
describing the kind, type, quality and quantity of Inventory, the Borrower’s
cost therefor and the selling price thereof, all of which records shall be
available to the officers, employees or agents of the Lender upon demand for
inspection and copying thereof; (c) not store any of its Inventory with a
bailee, warehouseman or similar Person without the Lender’s prior written
consent, which consent may be conditioned on, among other things, delivery by
the bailee, warehouseman or similar Person to the Lender of warehouse receipts,
in form acceptable to the Lender, in the name of the Lender evidencing the
storage of Inventory and the Lender’s interests therein; and (d) permit the
Lender and its agents or representatives to inspect and examine the Inventory
and to check and test the same as to quality, quantity, value and condition at
any time or times hereafter during the Borrower’s usual business hours or at
other reasonable times.  The Borrower
shall be permitted to sell its Inventory in the ordinary course of its business
until the occurrence of an Event of Default.

Section 6.2             Negative
Covenants.

Until full payment and
performance of all Obligations, the Borrower covenants and agrees that (without
limiting any requirement of any other Financing Documents):

6.2.1        Indebtedness.

The Borrower will not
create, incur, assume or become liable directly or indirectly in any manner for
any Indebtedness for Borrowed Money other than to the Lender, except for normal
trade debts incurred in the ordinary course of the Borrower’s business, and
except for existing indebtedness described on EXHIBIT C.  The Borrower will not prepay any such
Indebtedness for Borrowed Money, other than to the Lender.

6.2.2        Liens.

The Borrower will not (a)
grant, suffer or permit any Liens, contractual or otherwise, against it or its
assets, except Liens in favor of the Lender that are first priority Liens and
except any disclosed on EXHIBIT D, (b) agree for the benefit of any
Person (other than the Lender) not to grant a Lien on any of its assets, or (c)
fail to pay promptly when due all lawful claims, whether for labor, materials
or otherwise.

 

 

 

24

6.2.3        Dividends
and Distributions.

The Borrower will not
make any distribution (other than dividends payable in capital stock of the
Borrower) on any shares of any class of its capital stock or, if the Borrower
is a partnership, make any distribution to any partner, or apply or set aside
any of its property or assets to the purchase, redemption, acquisition or other
retirement of any shares of any class of its capital stock of or any
partnership interest in the Borrower.

 

6.2.4        Transactions
with Affiliates.

Other than the Purchase
Agreement Transaction in accordance with the terms and provisions of the
Purchase Agreement Documents, the Borrower will not enter into or participate
in any transaction with, any bonuses, fees, compensation, commissions,
salaries, drawing accounts, other payments or consideration (cash and
non-cash), whether direct or indirect, to any Person (or any officer, director,
shareholder, partner or relative of such Person) who directly or indirectly
owns an interest in or controls the Borrower, or who directly or indirectly is
in whole or in part owned or controlled by the Borrower or such Person (or any
officer, director, shareholder, partner or relative of such Person), except for
the payment of reasonable salary and related employment benefits in the
ordinary course of business to officers, stockholders, directors and partners
in their capacity as officers or employees of the Borrower paid at time when
there is no Event of Default under this Agreement.

6.2.5        Extensions
of Credit.

The Borrower will not
make any loan, advance or extension of credit to any individual, partnership,
corporation or other entity, other than trade credit on reasonable terms
extended to customers of the Borrower in the ordinary course of business.

6.2.6        Transfer
of Assets or Control.

The Borrower will not (a)
sell, lease, sell and rent or lease back within one year, assign, release,
abandon or otherwise dispose of or transfer (including, without limitation,
transfers or assignments by merger, consolidation or operation of law) any
assets, except inventory sold in the ordinary course of its business prior to
an Event of Default under this Agreement, (b) enter into, or otherwise be the
subject of, any merger or consolidation, or transfer of all or substantially
all of the assets of any Person, (c) permit or suffer to occur any change in
the Borrower’s key management, (d) form or acquire any subsidiary, or (f) alter
or amend its capital structure, authorize any additional class of equity, issue
any stock or equity of any class.

6.2.7        Investments.

The Borrower will not
make, assume, acquire or continue to hold any investment in any real property
(unless used in connection with its business and treated as a fixed or capital
asset of the Borrower) or in any Person, whether by stock purchase, capital
contribution, acquisition of indebtedness of such Person or otherwise
(including, without limitation, investments in any joint venture or partnership
or in any Investment Property).

 

 

25

6.2.8        Character
of Business.

The Borrower will not
change the general character of business as conducted at the date hereof, or
engage in any type of business not reasonably related to its business as
presently conducted.

ARTICLE VII

DEFAULT

Section 7.1             Events
of  Default.

The Borrower shall be in
default under this Agreement and under each of the other Financing Documents
upon the occurrence of any one or more of the following (each an “Event of
Default”; any one or more collectively, “Events of Default”) set forth in
Section 7.1.1 and Section 7.1.2 below:

7.1.1        General
Events of Default.

(a)           There occurs any failure to pay any
amounts when due and owing under the Loans or the other Obligations.

(b)           Any representation or warranty made
in this Agreement or in connection with this Agreement (including, without
limitation, any opinion of counsel for the Borrower or other obligor to the
Lender), any of the other Financing Documents, or the Obligations, shall prove
to have been false or misleading when made (or, if applicable, when reaffirmed)
in any material respect.

(c)           The Borrower or any other obligor
under the Financing Documents fails to timely and properly observe, keep or
perform, any term, covenant, agreement or condition in this Agreement, in any
of the other Financing Documents, which failure is not cured within any express
cure period, or challenges (or states its intention to challenge) the validity
of any material provision of the Financing Documents; provided, however, that:

(a) only with respect to a
failure under subsections (a), (b) and (c) of Section 6.1.1 (Financial
Statements and Other Information), no Event of Default shall arise until such
failure continues uncured for a period of five (5) days from notice by Lender
(provided that no more than one (1) cure period in any twelve month period
shall be permitted), or

(b) only with respect to
a failure under Sections 6.1.2 (Accounting; Books and Records) 6.1.3 (Existence
and Compliance), 6.1.7 (Taxes and othe Obligations) which does not relate to Taxes
due or claimed to be due in excess of $50,000 in the aggregate, no Event of
Default shall arise unless the Borrower after discovering such failure, fails
to diligently and continuously pursue the cure of such failure or unless such
failure continues uncured thirty (30) days after discovery.

(d)           The Borrower transfers to or allows
any of the Collateral to be located at a location other than a location
expressly described in this Agreement.

 

 

26

 

(e)           The Borrower or any other obligor
under the Financing Documents suspends or terminates its business operations or
liquidates, dissolves or terminates its existence or, if an individual, dies.

(f)            The Borrower or any other obligor
under the Financing Documents is in default under any indebtedness for borrowed
money (other than the Loans).

(g)           The Borrower or any other obligor
under the Financing Documents admits in writing its inability generally to pay
its debts as they mature or shall make any assignment for the benefit of any of
its creditors.

(h)           The Borrower or any other obligor
under the Financing Documents is the subject of federal or state bankruptcy,
insolvency, receivership or trustee proceedings.

(i)            Any of the Financing Documents shall
for any reason (except to the extent permitted by its express terms) cease to
be effective.

(j)            The Lender at any time shall cease
to have a valid and perfected first priority Lien on, or security interest in,
any of the property (real or personal) purported to be covered any of the
Financing Documents.

(k)           Any execution or attachment shall be
levied against the Collateral, or any part thereof, and such execution or
attachment shall not be set aside, discharged or stayed within thirty (30) days
after the same shall have been levied.

(l)            The Borrower suffers, in the good
faith judgment of the Lender, a material adverse change in the Borrower’s
financial condition.

(m)          The value of the Collateral, or the
ability of the Lender, in the good faith judgment of the Lender, to realize
thereon is materially impaired.

7.1.2        Boston
Scientific Specific Events of Default.

(a)           Boston Scientific is downgraded by
any two or more of the Rating Agencies two or more rating levels below the
applicable Rating Levels At Closing.

(b)           A default or event of default shall
occur under the Purchase Agreement or any of the other Purchase Agreement
Documents, or any of the Purchase Agreement Documents shall for any reason
(except to the extent permitted by its express terms) cease to be effective.

(c)           Boston Scientific fails to pay any
amounts when due and owing under the Purchase Agreement or any other Purchase
Agreement Documents.

(d)           Boston Scientific suspends or
terminates its business operations or liquidates, dissolves or terminates its
existence.

(e)           Boston Scientific admits in writing
its inability generally to pay its debts as they mature or shall make any
assignment for the benefit of any of its creditors.

 

 

27

 

(f)            Boston Scientific is the subject of
federal or state bankruptcy, insolvency, receivership or trustee proceedings.

(g)           Boston Scientific suffers, in the
good faith and commercially reasonable judgment of the Lender, a material
adverse change in the Boston Scientific’s financial condition.

Notwithstanding
the foregoing, it shall not be an Event of Default upon the occurrence of any
of the events set forth in this Section 7.1.2, provided, that, the
Borrower deposits the full amount of the outstanding principal amount of the
Obligations in cash into the Collateral Account within five (5) days from the
occurrence of the event set forth in this Section 7.1.2 and the Lender is
satisfied in its discretion that the Borrower can service the Obligations,
including, without limitation, paying all interest and fees, provided,
however, that, the Lender shall have absolutely no obligation to advance
under funds under the Loan or otherwise upon the occurrence of any of the
events set forth in this Section 7.1.2.

Section 7.2             Rights
And Remedies.

Upon the occurrence of
any Event of Default, the Lender may at any time thereafter exercise any one or
more of the following rights, powers or remedies:

7.2.1        Acceleration.

The Lender may declare
the Obligations to be immediately due and payable, notwithstanding anything
contained in this Agreement or in any of the other Financing Documents to the
contrary, without presentment, demand, protest, notice of protest or of
dishonor, or other notice of any kind, all of which the Borrower hereby waives.
THE OCCURRENCE OR NON-OCCURRENCE OF A DEFAULT OR AN EVENT OF DEFAULT UNDER THIS
AGREEMENT OR UNDER ANY OF THE OTHER FINANCING DOCUMENTS SHALL IN NO WAY AFFECT
OR CONDITION THE LENDER’S RIGHT TO IMMEDIATE PAYMENT AT ANY TIME OF ANY OF THE
OBLIGATIONS WHICH ARE PAYABLE ON DEMAND REGARDLESS OF WHETHER OR NOT A DEFAULT
OR AN EVENT OF DEFAULT HAS OCCURRED.

7.2.2        Further
Advances.

The Lender may from time
to time without notice to the Borrower suspend, terminate or limit any further
loans or other extensions of credit under this Agreement and under any of the
other Financing Documents. Further, upon the occurrence of an Event of Default
or Default with respect to any event specified in clause (g) or clause (h) of ,
or (e) or (f) of Section 7.1.2 (Boston Scientific Specific Events of Default),
any commitment of the Lender to make advances under the Loans and any agreement
in any of the Financing Documents to provide additional credit shall
immediately and automatically terminate and, subject to the provisions of 7.1.2
(Boston Scientific Specific Events of Default) solely with regards to clause
(e) or (f) of such Section, the unpaid principal amount of Note (with accrued
interest thereon) and all other Obligations then outstanding, shall immediately
become due and payable without further action of any kind and without
presentment, demand, protest or notice of any kind, all of which are hereby
expressly waived by the Borrower.

 

 

 

28

 

7.2.3        Uniform
Commercial Code.

The Lender shall have all
of the rights and remedies of a secured party under the applicable Uniform
Commercial Code and other applicable Laws. Upon demand by the Lender, the
Borrower shall assemble the Collateral and make it available to the Lender, at
a place designated by the Lender.  The
Lender or its agents may without notice from time to time enter upon the
Borrower’s premises to take possession of the Collateral, to remove it, to
render it unusable, to process it or otherwise prepare it for sale, or to sell
or otherwise dispose of it.

Any written notice of the
sale, disposition or other intended action by the Lender with respect to the
Collateral which is sent by regular mail, postage prepaid, to the Borrower at
the address  the Borrower which may from
time to time be shown on the Lender’s records, at least ten (10) days prior to
such sale, disposition or other action, shall constitute commercially
reasonable notice to the Borrower. The Lender may alternatively or additionally
give such notice in any other commercially reasonable manner. Nothing in this
Agreement shall require the Lender to give any notice not required by
applicable Laws.

If any consent, approval,
or authorization of any state, municipal or other governmental department,
agency or authority or of any person, or any person, corporation, partnership
or other entity having any interest therein, should be necessary to effectuate
any sale or other disposition of the Collateral, the Borrower agrees to execute
all such applications and other instruments, and to take all other action, as
may be required in connection with securing any such consent, approval or
authorization.

The Borrower recognizes
that the Lender may be unable to effect a public sale of all or a part of the
Collateral consisting of securities by reason of certain prohibitions contained
in the Securities Act of 1933, as amended, and other applicable federal and
state Laws.  The Lender may, therefore,
in its discretion, take such steps as it may deem appropriate to comply with
such Laws and may, for example, at any sale of the Collateral consisting of
securities restrict the prospective bidders or purchasers as to their number,
nature of business and investment intention, including, without limitation, a
requirement that the Persons making such purchases represent and agree to the
satisfaction of the Lender that they are purchasing such securities for their
account, for investment, and not with a view to the distribution or resale of
any thereof. The Borrower covenants and agrees to do or cause to be done promptly
all such acts and things as the Lender may request from time to time and as may
be necessary to offer and/or sell the securities or any part thereof in a
manner which is valid and binding and in conformance with all applicable Laws.   Upon any such sale or disposition, the
Lender shall have the right to deliver, assign and transfer to the purchaser
thereof the Collateral consisting of securities so sold.

7.2.4        Specific
Rights With Regard to Collateral.

In addition to all other
rights and remedies provided hereunder or as shall exist at law or in equity
from time to time, the Lender may (but shall be under no obligation to),
without notice to the Borrower, and the Borrower hereby irrevocably appoints
the Lender as its attorney-in-fact, with power of substitution, in
the name of the Lender or in the name of the Borrower or otherwise, for the use
and benefit of the Lender, but at the cost and expense of the Borrower and
without notice to the Borrower:

 

 

29

 

(a)           request any account debtor obligated
on any of the Accounts to make payments thereon directly to the Lender, with
the Lender taking control of the cash and non-cash proceeds thereof;

(b)           compromise, extend or renew any of
the Collateral or deal with the same as it may deem advisable;

(c)           make exchanges, substitutions or
surrenders of all or any part of the Collateral;

(d)           copy, transcribe, or remove from any
place of business of the Borrower all books, records, ledger sheets,
correspondence, invoices and documents, relating to or evidencing any of the
Collateral or without cost or expense to the Lender, make such use of the
Borrower’s place(s) of business as may be reasonably necessary to administer,
control and collect the Collateral;

(e)           repair, alter or supply goods if
necessary to fulfill in whole or in part the purchase order of any account
debtor;

(f)            demand, collect, receipt for and
give renewals, extensions, discharges and releases of any of the Collateral;

(g)           institute and prosecute legal and
equitable proceedings to enforce collection of, or realize upon, any of the
Collateral;

(h)           settle, renew, extend, compromise,
compound, exchange or adjust claims in respect of any of the Collateral or any
legal proceedings brought in respect thereof;

(i)            endorse or sign the name of the
Borrower upon any items of payment, certificates of title, instruments,
securities, stock powers, documents, documents of title, financing statements,
assignments, notices, or other writing relating to or part of the Collateral and
on any Proof of Claim in bankruptcy against an account debtor;

(j)            notify the Post Office authorities
to change the address for the delivery of mail to the Borrower to such address
or Post Office Box as the Lender may designate and receive and open all mail
addressed to the Borrower; and

(k)           take any other action necessary or
beneficial to realize upon or dispose of the Collateral or to carry out the
terms of this Agreement.

 

 

30

 

7.2.5        Protection
of Collateral.

The Borrower agrees that
the Lender may at any time take such steps as the Lender deems reasonably
necessary to protect the Lender’s interest in, and to preserve the Collateral,
including, without limitation, the hiring of such security guards, the placing
of other security protection measures, and otherwise restricting access to
owned or leased locations where Collateral is located, all as the Lender deems
appropriate from time to time, may employ and maintain at any of the Borrower’s
premises a custodian who shall have full authority to do all acts necessary to
protect the Lender’s interests in the Collateral and may lease warehouse
facilities to which the Lender may move all or any part of the Collateral to
the extent commercially reasonable.  The
Borrower agrees to cooperate fully with the Lender’s efforts to preserve the
Collateral and will take such actions to preserve the Collateral as the Lender
may reasonably direct.  All of the Lender’s
expenses of preserving the Collateral, including any reasonable expenses
relating to the compensation and bonding of a custodian, shall be part of the
Enforcement Costs.

7.2.6        Application
of Proceeds.

Any proceeds of sale or
other disposition of the Collateral will be applied by the Lender to the
payment of any and all Enforcement Costs,
taxes, and fees owed to the Lender, and any balance of such proceeds will be
applied by the Lender to the payment of the balance of the Obligations in such
order and manner of application as the Lender may from time to time in its sole
and absolute discretion determine. If the sale or other disposition of the
Collateral fails to fully satisfy the Obligations, the Borrower shall remain
liable to the Lender for any deficiency.

7.2.7        Performance
by Lender.

If the Borrower shall
fail to pay the Obligations or otherwise fail to perform, observe or comply
with any of the conditions, covenants, terms, stipulations or agreements
contained in this Agreement or any of the other Financing Documents, the Lender
without notice to or demand upon the Borrower and without waiving or releasing
any of the Obligations or any Event of Default, may (but shall be under no
obligation to) at any time thereafter make such payment or perform such act for
the account and at the expense of the Borrower, and may enter upon the premises
of the Borrower for that purpose and take all such action thereon as the Lender
may consider necessary or appropriate for such purpose  and the Borrower hereby irrevocably appoints
the Lender as its attorney-in-fact to do so, with power of
substitution, in the name of the Lender or in the name of the Borrower or
otherwise, for the use and benefit of the Lender, but at the cost and expense
of the Borrower and without notice to the Borrower.  All sums so paid or advanced by the Lender
together with interest thereon from the date of payment, advance or incurring
until paid in full at a per annum rate of interest equal at all times to the
default rate of interest permitted under any promissory note at any time
evidencing any of the Obligations and designated by the Lender, and all costs
and expenses, shall be paid by the Borrower to the Lender on demand, and shall
constitute and become a part of the Obligations.

7.2.8        Collateral
Account

The Borrower will
deposit, or cause to be deposited, all cash, checks, drafts and other Items of
Payment, and other proceeds of the Collateral to the Collateral Account. Each
deposit shall be made not later than the next Business Day after the date of
receipt of the Items of 

 

 

31

 

Payment.  The Borrower shall direct any and all Account
Debtors who make payment by federal wire transfer or other electronic means to
make such payment directly to the Collateral Account.  The Items of Payment shall be deposited in precisely
the form received, except for the endorsements of the Borrower where necessary
to permit the collection of any such Items of Payment, which endorsement the
Borrower hereby agrees to make. In the event the Borrower fails to do so, the
Borrower hereby authorizes the Lender to make the endorsement in the name of
the Borrower.  Prior to such a deposit,
the Borrower will not commingle any Items of Payment with any of the Borrower’s
other funds or property, but will hold them separate and apart in trust and for
the account of the Lender.

In the event Items of
Payment are returned to the Lender for any reason whatsoever, the Lender may,
in the exercise of its discretion from time to time, forward such Items of
Payment a second time. Any returned Items of Payment shall be charged back to
the Collateral Account and any credit given the Borrower with respect thereto
shall be reversed.

The Lender will apply the
whole or any part of the collected funds credited to the Collateral Account
against the Obligations, the order and method of such application to be in the
sole discretion of the Lender.

7.2.9        Lockbox

If so directed by the
Lender, the Borrower shall direct the mailing of all Items of Payment from its
account debtors to a post-office box designated by the Lender or to such other
additional or replacement post-office boxes pursuant to the requirements of the
Lender from time to time and to which the Lender shall have unrestricted and
exclusive access (collectively, the “Lockbox”). 
The Lender shall deposit in the Collateral Account items of payment
received in the Lockbox.

7.2.10      Other
Remedies.

The Lender may from time
to time proceed to protect or enforce its rights by an action or actions at law
or in equity or by any other appropriate proceeding, whether for the specific
performance of any of the covenants contained in this Agreement or in any of
the other Financing Documents, or for an injunction against the violation of
any of the terms of this Agreement or any of the other Financing Documents, or
in aid of the exercise or execution of any right, remedy or power granted in
this Agreement, the Financing Documents, and/or applicable Laws. The Lender is
authorized to offset and apply to all or any part of the Obligations all
moneys, credits and other property of any nature whatsoever of the Borrower now
or at any time hereafter in the possession of, in transit to or from, under the
control or custody of, or on deposit with, the Lender.

ARTICLE VIII

MISCELLANEOUS

The Borrower and the
Lender further covenant and agree as follows, without limiting any requirement
of any other Financing Document:

 

 

32

 

Section 8.1             Notices.

All notices, requests or
demands which any party is required or may desire to give to any other party
under any provision of this Agreement must be in writing, hand delivered, sent
by nationally recognized overnight courier or mailed, addressed to the Borrower
and to the Lender at the following address:

	
  The Lender:

  	
   

  	
  Manufacturers and
  Traders Trust Company

  
	
   

  	
   

  	
  305 West Chesapeake
  Avenue, Suite 500

  
	
   

  	
   

  	
  Towson Maryland 21204

  
	
   

  	
   

  	
  Attn:

  	
  Alexander Bartlett,

  
	
   

  	
   

  	
   

  	
  Vice President

  

 

 

	
  the Borrower:

  	
   

  	
  Celsion Corporation

  
	
   

  	
   

  	
  10220 Old Columbia Road

  
	
   

  	
   

  	
  Columbia, Maryland 21046

  
	
   

  	
   

  	
  Attn:

  	
  President and Chief Executive Officer

  

 

or to such other address as any party may designate by written notice
to the other party. Each such notice, request and demand shall be deemed given
or made as follows:

(a)           If sent by hand delivery, upon
delivery;

(b)           If sent by nationally recognized
overnight courier service, on the business day next following the day on which
the notice is delivered to such courier; or

(c)           If sent by mail, upon the earlier of
the date of receipt or five (5) days after deposit in the U.S. Mail, first
class postage prepaid.

Section 8.2             Cumulative
Rights and No Waiver.

Each and every right
granted to the Lender under any Financing Document, or allowed it by law or
equity shall be cumulative of each other and may be exercised in addition to
any and all other rights of the Lender, and no delay in exercising any right
shall operate as a waiver thereof, nor shall any single or partial exercise by
the Lender of any right preclude any other or future exercise thereof or the
exercise of any other right.  The
Borrower expressly waives any presentment, demand, protest or other notice of
any kind, including but not limited to notice of intent to accelerate and
notice of acceleration. No notice to or demand on the Borrower in any case
shall, of itself, entitle the Borrower to any other or future notice or demand
in similar or other circumstances, except as expressly required in this
Agreement. Without limiting the generality of the foregoing, the Lender may
proceed against the Borrower with or without proceeding against any guarantor,
surety, indemnitor or any other Person who may be liable for all or any part of
the Obligations.

Section 8.3             Costs,
Expenses and Attorney’s Fees.

The Borrower shall pay to
the Lender ON DEMAND the full amount of all 
expenses, charges, costs, taxes, and fees including, without limitation,
reasonable outside counsel fees and all allocated costs of the Lender’s
in-house counsel if permitted by applicable Laws, whether 

 

 

33

 

incurred prior to
the institution of any suit or other proceeding or otherwise, incurred by or on
behalf of the Lender in connection with (a) negotiation and preparation of this
Agreement and each of the Financing Documents, and (b) the Lender’s continued
administration thereof, and (c) the perfection, collection, maintenance,
preservation, inspection, insuring, defense, protection, realization upon,
disposition, sale or enforcement of all or any part of the Collateral or the
enforcement or collection of the Obligations and shall also pay to the Lender
immediately ON DEMAND interest thereon from the date incurred or advanced until
paid in full at a per annum rate of interest equal at all times to the default
rate of interest permitted under any promissory note at any time evidencing any
of the Obligations and designated by the Lender. The Lender may, at its option
exercised from time to time, make an advance under the Loan or debit any
deposit account of the Borrower with the Lender to cover in whole or in part
any amounts owed under this Agreement.

Section 8.4             Applicable
Law.

This Agreement and the
rights and obligations of the parties hereunder shall be governed by and
interpreted in accordance with the Laws of the State of Maryland and applicable
United States federal law. The Borrower irrevocably submits to the jurisdiction
of any state or federal court sitting in the State over any suit, action or
proceeding arising out of or relating to this Agreement or any of the other
Financing Documents.  The Borrower
irrevocably waives, to the fullest extent permitted by law, any objection that
it may now or hereafter have to the laying of the venue of any such suit,
action or proceeding brought in any such court and any claim that any such
suit, action or proceeding brought in any such court has been brought in an
inconvenient forum.  Final judgment in
any such suit, action or proceeding brought in any such court shall be
conclusive and binding upon the Borrower and may be enforced in any court in
which the Borrower is subject to jurisdiction, by a suit upon such judgment,
provided that service of process is effected upon the Borrower in one of the
manners specified in this Section or as otherwise permitted by applicable
Laws.  The Borrower hereby consents to
process being served in any suit, action or proceeding of the nature referred
to in this Section by (a) the mailing of a copy thereof by registered or
certified mail, postage prepaid, return receipt requested, to the Borrower at
the Borrower’s address designated in or pursuant to Section 8.1 (Notices), and
(b) serving a copy thereof upon the agent, if any, designated and appointed by
the Borrower as the Borrower’s agent for service of process.  The Borrower irrevocably agrees that such
service (y) shall be deemed in every respect effective service of process upon
the Borrower in any such suit, action or proceeding, and (z) shall, to the
fullest extent permitted by law, be taken and held to be valid personal service
upon the Borrower.  Nothing in this
Section shall affect the right of the Lender to serve process in any manner
otherwise permitted by law or limit the right of the Lender otherwise to bring
proceedings against the Borrower in the courts of any jurisdiction or
jurisdictions.

Section 8.5             Amendment;
Other Provisions.

No modification, consent,
amendment or waiver of any provision of this Agreement, nor consent to any
departure by the Borrower therefrom, shall be effective unless the same shall
be in writing and signed by an officer of the Lender, and then shall be
effective only in the specified instance and for the purpose for which given.
This Agreement is binding upon and shall inure to the benefit of the Borrower
and the Lender, and their respective heirs, personal representatives,
successors and assigns; however, no assignment or other transfer of the
Borrower’s rights or 

 

 

34

 

obligations
hereunder shall be made or be effective without the Lender’s prior written
consent, nor shall it relieve the Borrower of any obligations hereunder. There
is no third party beneficiary of this Agreement. The headings in this Agreement
are included herein for convenience only, shall not constitute a part of this
Agreement for any other purpose, and shall not be deemed to affect the meaning
or construction of any of the provisions hereof.

Section 8.6             Documents.

All documents,
certificates and other items required under this Agreement to be executed
and/or delivered to the Lender shall be in form and content satisfactory to the
Lender and its counsel.

Section 8.7             Partial
Invalidity.

The unenforceability or
invalidity of any provision of this Agreement shall not affect the
enforceability or validity of any other provision herein and the invalidity or
unenforceability of any provision of any Financing Document to any Person or
circumstance shall not affect the enforceability or validity of such provision
as it may apply to other Persons or circumstances.

Section 8.8             Indemnification.

The Borrower shall
indemnify, defend and hold the Lender and its successors and assigns harmless
from and against any and all claims, demands, suits, losses, damages,
assessments, fines, penalties, costs or other expenses (including reasonable
attorneys’ fees and court costs) arising from or in any way related to any of
the transactions contemplated hereby, including but not limited to actual or
threatened damage to the environment, agency costs of investigation, personal
injury or death, or property damage, due to a release or alleged release of
Hazardous Materials, arising from the Borrower’s business operations, any other
property owned by the Borrower or in the surface or ground water arising from
the Borrower’s business operations, or gaseous emissions arising from the
Borrower’s business operations or any other condition existing or arising from
the Borrower’s business operations resulting from the use or existence of
Hazardous Materials, whether such claim proves to be true or false.  The Borrower further agrees that its
indemnity obligations shall include, but are not limited to, liability for
damages resulting from the personal injury or death of an employee of the
Borrower, regardless of whether the Borrower has paid the employee under the
workmen’s compensation laws of any state or other similar federal or state
legislation for the protection of employees. 
The term “property damage” as used in this section includes, but is not
limited to, damage to any real or personal property of the Borrower, the
Lender, and of any third parties. The Borrower’s obligations under this section
shall survive the repayment of the Loans and any deed in lieu of foreclosure or
foreclosure of any deed of trust, security agreement, mortgage or other
Financing Documents securing all or any part of the Obligations.

Section 8.9             Survivability.

All covenants, agreements,
representations and warranties made herein or in the other Financing Documents
shall survive the making of the Loans and shall continue in full force and
effect so long as any Loan or other Obligations are outstanding.

 

 

 

35

 

Section 8.10           Entire
Agreement.

This Agreement is
intended by the Lender and the Borrower to be a complete, exclusive and final
expression of the agreements contained herein. 
Neither the Lender nor the Borrower shall hereafter have any rights
under any prior agreements pertaining to the matters addressed by this
Agreement but shall look solely to this Agreement for definition and
determination of all of their respective rights, liabilities and
responsibilities under this Agreement.

Section 8.11           Headings.

The headings in this
Agreement are included herein for convenience only, shall not constitute a part
of this Agreement for any other purpose, and shall not be deemed to affect the
meaning or construction of any of the provisions hereof.

Section 8.12           NO
ORAL AGREEMENT.

THIS WRITTEN AGREEMENT
AND THE OTHER FINANCING DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE
PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,  CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS
OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

Section 8.13           WAIVER
OF TRIAL BY JURY.

THE BORROWER AND THE LENDER
HEREBY JOINTLY AND SEVERALLY WAIVE TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO
WHICH THE BORROWER AND THE LENDER MAY BE PARTIES, ARISING OUT OF OR IN ANY WAY
PERTAINING TO (A) THIS AGREEMENT, (B) ANY OF THE FINANCING DOCUMENTS, OR (C)
THE COLLATERAL.  THIS WAIVER CONSTITUTES
A WAIVER OF TRIAL BY JURY OF ALL CLAIMS AGAINST ALL PARTIES TO SUCH ACTIONS OR
PROCEEDINGS, INCLUDING CLAIMS AGAINST PARTIES WHO ARE NOT PARTIES TO THIS
AGREEMENT.

This waiver is knowingly,
willingly and voluntarily made by the Borrower and the Lender, and the Borrower
and the Lender hereby represent that no representations of fact or opinion have
been made by any individual to induce this waiver of trial by jury or to in any
way modify or nullify its effect.  The
Borrower and the Lender further represent that they have been represented in
the signing of this Agreement and in the making of this waiver by independent
legal counsel, selected of their own free will, and that they have had the
opportunity to discuss this waiver with counsel.

Section 8.14           Indemnification.

The Borrower agrees to
indemnify and hold harmless, the Lender, the Lender’s parent and Affiliates and
the Lender’s parent’s and Affiliates’ officers, directors, shareholders,
employees and agents (each an collectively, the “Indemnified Parties”), from
and against any and all claims, liabilities, losses, damages, costs and
expenses (whether or not such Indemnified Party is a party to any litigation),
including without limitation, reasonable attorney’s fees and costs and costs of
investigation, document production, attendance at depositions or other
discovery, incurred by any Indemnified Party with respect to, arising out of or
as a consequence 

 

 

36

 

of (a) this
Agreement or any of the other Financing Documents, including without
limitation, any failure of the Borrower to pay when due (at maturity, by acceleration
or otherwise) any principal, interest, fee or any other amount due under this
Agreement or the other Financing Documents, or any other Event of Default; (b)
the use by the Borrower of any proceeds advanced hereunder; (c) the
transactions contemplated hereunder; or (d) any claim, demand, action or cause
of action being asserted against (i) the Borrower or any of its Affiliates by
any other Person, or (ii) any Indemnified Party by the Borrower in connection
with the transactions contemplated hereunder. 
Notwithstanding anything herein or elsewhere to the contrary, the
Borrower shall not be obligated to indemnify or hold harmless any Indemnified
Party from any liability, loss or damage resulting from the gross negligence,
willful misconduct or unlawful actions of such Indemnified Party.  Any amount payable to the Lender under this
Section will bear interest at the highest default rate of interest applicable
from time to time with respect to any of the Loans from the due date until
paid.

[Signatures Follow
on Next Page]

 

37

 

 

SIGNATURE PAGE TO
LOAN AND SECURITY AGREEMENT

IN WITNESS
WHEREOF, the parties hereto have signed and sealed this Agreement on the day
and year first above written.

	
  WITNESS
  OR ATTEST:

  	
  BORROWER:

  
	
   

  	
   

  	
   

  
	
   

  	
  CELSION
  CORPORATION

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
  (Seal)

  
	
   

  	
   

  	
  Michael
  H. Tardugno,

  
	
   

  	
   

  	
  President
  and Chief Executive Officer

  
	
   

  	
   

  	
   

  
					

 

 

 

 

	
  WITNESS:

  	
  LENDER:

  
	
   

  	
   

  	
   

  
	
   

  	
  MANUFACTURERS
  AND TRADERS TRUST COMPANY

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
  (Seal)

  
	
   

  	
   

  	
  Alexander
  Bartlett,

  
	
   

  	
   

  	
  Vice
  President

  
	
   

  	
   

  	
   

  
						

 

 

 

 

38

 

EXHIBIT
A TO LOAN AND SECURITY AGREEMENT

Form of Note

 

(Attached)

 

 

 

39

EXHIBIT B TO LOAN AND
SECURITY AGREEMENT

The Borrower further
represents and warrants to the Lender as follows:

(a)           The exact legal name and the state of
organization of the Borrowers are as stated in the initial paragraph to this
Agreement.

(b)           The organizational identification
number of the Borrower is 52-1256615.

(a)           The Borrower’s Federal tax
identification number is 3230100.

(c)           The Borrower’s chief executive office
is:

10220 L Old Columbia
Road, Columbia, MD 21046

(d)           The Borrower in fact manages the main
part of its business operations from that address; and it is at that address
that persons dealing with the Borrower would normally look for credit
information.

(e)           The mailing address of the
Borrower to be inserted on financing statements covering the Collateral is:

10220 L Old
Columbia Road, Columbia, MD 21046

(f)            In the twelve years preceding the
date hereof, the Borrower has not changed its name, state of organization,
identity or structure, has not conducted business under any name other than its
current name, and has not conducted its business in any jurisdiction other than
the jurisdiction in which its chief executive office is currently located,
except as follows:

None

 

(g)           The Borrower has no subsidiaries.

(h)           The following describes any and each
place of business of the Borrower which is not otherwise identified above:

8510 Corridor
Road, Savage, MD 20763

 

(i)            The following describes any and each
location of any books and records of the Borrower, which location is not
otherwise identified above:

None

 

 

40

 

(j)            The following describes any and each
location, where any of the Collateral is located, which location is not
otherwise identified above:

None

 

41

EXHIBIT C TO LOAN AND
SECURITY AGREEMENT

 

The following is all indebtedness described in 6.2.1 (Indebtedness)
except that in favor of the Lender:

 

NONE

 

 

 

42

EXHIBIT D TO LOAN AND
SECURITY AGREEMENT

 

The following are all Liens on the property of the Borrower other than
Liens in favor of the Lender:

NONE

 

 

 

 

43

EXHIBIT E TO LOAN AND SECURITY
AGREEMENT

The following are the
only proceedings involving the Borrower pending or, to the knowledge of the
Borrower, threatened before any court or governmental authority, agency,
instrumentality or arbitration authority:

NONE

 

 

 

44EXHIBIT 10.1

 

APOGEE TECHNOLOGY, INC.

 

2007 EMPLOYEE, DIRECTOR AND
CONSULTANT STOCK PLAN

 

1.  DEFINITIONS.

 

Unless
otherwise specified or unless the context otherwise requires, the following
terms, as used in this Apogee Technology, Inc. 2007 Employee, Director and
Consultant Stock Plan, have the following meanings:

 

Administrator   means the Board of Directors, unless it
has delegated power to act on its behalf to the Committee, in which case the
Administrator means the Committee.

 

Affiliate   means a corporation which, for purposes
of Section 424 of the Code, is a parent or subsidiary of the Company,
direct or indirect.

 

Agreement   means an agreement between the Company
and a Participant delivered pursuant to the Plan, in such form as the
Administrator shall approve.

 

Board of Directors   means the Board of Directors of the
Company.

 

Change of Control   means the occurrence of any of the
following events:

 

(i)   
Ownership.   Any “Person” (as such term is used in Sections
13(d) and 14(d) of the Securities Exchange Act of 1934, as amended)
becomes the “Beneficial Owner” (as defined in Rule 13d-3 under said Act),
directly or indirectly, of securities of the Company representing 50% or more
of the total voting power represented by the Company’s then outstanding voting
securities (excluding for this purpose any such voting securities held by the
Company or its Affiliates or by any employee benefit plan of the Company)
pursuant to a transaction or a series of related transactions which the Board
of Directors does not approve; or

 

(ii)  
Merger/Sale of Assets.   (A) A merger or consolidation of the
Company whether or not approved by the Board of Directors, other than a merger
or consolidation which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity or the parent of such corporation) at least 50% of the total
voting power represented by the voting securities of the Company or such
surviving entity or parent of such corporation, as the case may be,
outstanding immediately after such merger or consolidation; or (B) the
stockholders of the Company approve an agreement for the sale or disposition by
the Company of all or substantially all of the Company’s assets; or

 

(iii)  Change in
Board Composition.   A change in the composition of the Board of
Directors, as a result of which fewer than a majority of the directors are
Incumbent Directors. “Incumbent Directors” shall mean directors who either
(A) are directors of the Company as of [insert date], or
(B) are elected, or nominated for election, to the Board of Directors
with the affirmative votes of at least a majority of the Incumbent Directors at
the time of such election or nomination (but shall not include an individual
whose election or nomination is in connection with an actual or threatened
proxy contest relating to the election of directors to the Company).

 

A-1

 

Code   means the United States Internal Revenue Code of 1986, as
amended.

 

Committee   means the committee of the Board of
Directors to which the Board of Directors has delegated power to act under or
pursuant to the provisions of the Plan.

 

Common Stock   means shares of the Company’s common
stock, $.01 par value per share.

 

Company   means Apogee Technology, Inc., a
Delaware corporation.

 

Disability   or Disabled
means permanent and total disability as defined in
Section 22(e)(3) of the Code.

 

Employee   means any employee of the Company or of
an Affiliate (including, without limitation, an employee who is also serving as
an officer or director of the Company or of an Affiliate), designated by the
Administrator to be eligible to be granted one or more Stock Rights under the
Plan.

 

Fair Market Value   of a Share of Common Stock means:

 

(1)   If the
Common Stock is listed on a national securities exchange or traded in the
over-the-counter market and sales prices are regularly reported for the Common
Stock, the closing or last price of the Common Stock on the composite tape or
other comparable reporting system for the trading day on the applicable date
and if such applicable date is not a trading day, the last market trading day
prior to such date;

 

(2)   If the
Common Stock is not traded on a national securities exchange but is traded on
the over-the-counter market, if sales prices are not regularly reported for the
Common Stock for the trading day referred to in clause (1), and if bid and
asked prices for the Common Stock are regularly reported, the mean between the
bid and the asked price for the Common Stock at the close of trading in the
over-the-counter market for the trading day on which Common Stock was traded on
the applicable date and if such applicable date is not a trading day, the last
market trading day prior to such date; and

 

(3)   If the
Common Stock is neither listed on a national securities exchange nor traded in
the over-the-counter market, such value as the Administrator, in good faith,
shall determine.

 

ISO   means an option meant to qualify as an incentive stock
option under Section 422 of the Code.

 

Non-Qualified Option   means an option which is not intended to
qualify as an ISO.

 

Option   means an ISO or Non-Qualified Option granted under the
Plan.

 

Participant   means an Employee, director or consultant
of the Company or an Affiliate to whom one or more Stock Rights are granted
under the Plan. As used herein, “Participant” shall include “Participant’s
Survivors” where the context requires.

 

Plan   means this Apogee Technology, Inc. 2007 Employee, Director and Consultant Stock
Plan.

 

Shares   means shares of the Common Stock as to which Stock Rights
have been or may be granted under the Plan or any shares of capital stock into
which the Shares are changed or for which they are exchanged within the
provisions of Paragraph 3 of the Plan. The Shares issued under the Plan
may be authorized and unissued shares or shares held by the Company in its
treasury, or both.

 

A-2

 

Stock-Based Award   means a grant by the Company under the
Plan of an equity award or an equity based award which is not an Option or a
Stock Grant.

 

Stock Grant   means a grant by the Company of Shares
under the Plan.

 

Stock Right   means a right to Shares or the value of
Shares of the Company granted pursuant to the Plan—an ISO, a Non-Qualified
Option, a Stock Grant or a Stock-Based Award.

 

Survivor   means a deceased Participant’s legal
representatives and/or any person or persons who acquired the Participant’s
rights to a Stock Right by will or by the laws of descent and distribution.

 

2.  PURPOSES OF THE PLAN.

 

The
Plan is intended to encourage ownership of Shares by Employees and directors of
and certain consultants to the Company and its Affiliates in order to attract
and retain such people, to induce them to work for the benefit of the Company
or of an Affiliate and to provide additional incentive for them to promote the
success of the Company or of an Affiliate. The Plan provides for the granting
of ISOs, Non-Qualified Options, Stock Grants and Stock-Based Awards.

 

3.  SHARES SUBJECT TO THE
PLAN.

 

(a)  
The number of Shares which may be issued from time to time pursuant to this
Plan shall be 750,000, or the equivalent of such number of Shares after the
Administrator, in its sole discretion, has interpreted the effect of any stock
split, stock dividend, combination, recapitalization or similar transaction in
accordance with Paragraph 24 of the Plan.

 

(b)  
Notwithstanding Subparagraph (a) above, on the first day of each fiscal
year of the Company during the period beginning on and including the first day
of fiscal year 2008, and ending on the second day of fiscal year 2017, the
number of Shares that may be issued from time to time pursuant to the Plan,
shall be increased by an amount equal to the lesser of (i) 750,000 or the
equivalent of such number of Shares after the Administrator, in its sole
discretion, has interpreted the effect of any stock split, stock dividend, combination,
recapitalization or similar transaction in accordance with Paragraph 24 of the
Plan; and (ii) an amount determined by the Board. However this “evergreen”
feature shall, in no event, increase the number of shares eligible for issuance
under the Plan to an amount greater than 7% of the number of shares of Common
Stock outstanding on a fully diluted basis on the close of business on the on
the day prior to the increase (calculated by adding to the number of shares of
Common Stock outstanding, all outstanding securities convertible into Common
Stock on such date on an as converted basis).

 

(c)  
If an Option ceases to be “outstanding”, in whole or in part (other than by
exercise), or if the Company shall reacquire (at not more than its original
issuance price) any Shares issued pursuant to a Stock Grant or Stock-Based
Award, or if any Stock Right expires or is forfeited, cancelled, or otherwise
terminated or results in any Shares not being issued, the unissued Shares which
were subject to such Stock Right shall again be available for issuance from
time to time pursuant to this Plan. Notwithstanding the foregoing, if a Stock
Right is exercised, in whole or in part, by tender of Shares or if the Company’s
tax withholding obligation is satisfied by withholding Shares, the number of
Shares deemed to have been issued under the Plan for purposes of the limitation
set forth in Paragraph 3(a) above shall be the number of Shares that were
subject to the Stock Right or portion thereof, and not the net number of Shares
actually issued.

 

A-3

 

4.  ADMINISTRATION OF THE
PLAN.

 

The
Administrator of the Plan will be the Board of Directors, except to the extent
the Board of Directors delegates its authority to the Committee, in which case
the Committee shall be the Administrator. Subject to the provisions of the
Plan, the Administrator is authorized to:

 

a.  Interpret the provisions of the Plan and
all Stock Rights and to make all rules and determinations which it deems
necessary or advisable for the administration of the Plan;

 

b.  Determine which Employees, directors and
consultants shall be granted Stock Rights;

 

c.  Determine the number of Shares for which
a Stock Right or Stock Rights shall be granted;

 

d.  Specify the terms and conditions upon
which a Stock Right or Stock Rights may be granted;

 

e.  Make changes to any outstanding Stock
Right, including, without limitation, to reduce or increase the exercise price
or purchase price, accelerate the vesting schedule or extend the expiration
date, provided that no such change shall impair the rights of a Participant
under any grant previously made without such Participant’s consent;

 

f.  Buy out for a payment in cash or Shares,
a Stock Right previously granted and/or cancel any such Stock Right and grant
in substitution therefor other Stock Rights, covering the same or a different
number of Shares and having an exercise price or purchase price per share which
may be lower or higher than the exercise price or purchase price of the cancelled
Stock Right, based on such terms and conditions as the Administrator shall
establish and the Participant shall accept; and

 

g.  Adopt any sub-plans applicable to
residents of any specified jurisdiction as it deems necessary or appropriate in
order to comply with or take advantage of any tax or other laws applicable to
the Company or to Plan Participants or to otherwise facilitate the
administration of the Plan, which sub-plans may include additional restrictions
or conditions applicable to Stock Rights or Shares issuable pursuant to a Stock
Right;

 

provided, however, that
all such interpretations, rules, determinations, terms and conditions shall be
made and prescribed in the context of preserving the tax status under
Section 422 of the Code of those Options which are designated as ISOs.
Subject to the foregoing, the interpretation and construction by the
Administrator of any provisions of the Plan or of any Stock Right granted under
it shall be final, unless otherwise determined by the Board of Directors, if
the Administrator is the Committee. In addition, if the Administrator is the
Committee, the Board of Directors may take any action under the Plan that would
otherwise be the responsibility of the Committee.

 

To the
extent permitted under applicable law, the Board of Directors or the Committee
may allocate all or any portion of its responsibilities and powers to any one
or more of its members and may delegate all or any portion of its
responsibilities and powers to any other person selected by it. The Board of
Directors or the Committee may revoke any such allocation or delegation at any
time.

 

5.  ELIGIBILITY FOR
PARTICIPATION.

 

The
Administrator will, in its sole discretion, name the Participants in the Plan,
provided, however, that each Participant must be an Employee, director or
consultant of the Company or of an Affiliate at the

 

A-4

 

time a Stock Right is
granted. Notwithstanding the foregoing, the Administrator may authorize the
grant of a Stock Right to a person not then an Employee, director or consultant
of the Company or of an Affiliate; provided, however, that the actual grant of
such Stock Right shall be conditioned upon such person becoming eligible to
become a Participant at or prior to the time of the execution of the Agreement
evidencing such Stock Right. ISOs may be granted only to Employees.
Non-Qualified Options, Stock Grants and Stock-Based Awards may be granted to
any Employee, director or consultant of the Company or an Affiliate. The granting
of any Stock Right to any individual shall neither entitle that individual to,
nor disqualify him or her from, participation in any other grant of Stock
Rights.

 

6.  TERMS AND CONDITIONS OF
OPTIONS.

 

Each
Option shall be set forth in writing in an Option Agreement, duly executed by
the Company and, to the extent required by law or requested by the Company, by
the Participant. The Administrator may provide that Options be granted subject
to such terms and conditions, consistent with the terms and conditions
specifically required under this Plan, as the Administrator may deem
appropriate including, without limitation, subsequent approval by the
shareholders of the Company of this Plan or any amendments thereto. The Option
Agreements shall be subject to at least the following terms and conditions:

 

a.  Non-Qualified Options:   Each Option intended to be a
Non-Qualified Option shall be subject to the terms and conditions which the
Administrator determines to be appropriate and in the best interest of the
Company, subject to the following minimum standards for any such Non-Qualified
Option:

 

i.  Option Price:   Each Option Agreement shall
state the option price (per share) of the Shares covered by each Option, which
option price shall be determined by the Administrator but shall not be less
than the Fair Market Value per share of Common Stock.

 

ii.  Number of Shares:   Each Option Agreement shall
state the number of Shares to which it pertains.

 

iii.  Option Periods:   Each Option Agreement shall
state the date or dates on which it first is exercisable and the date after
which it may no longer be exercised, and may provide that the Option rights
accrue or become exercisable in installments over a period of months or years,
or upon the occurrence of certain conditions or the attainment of stated goals
or events.

 

iv.  Option Conditions:   Exercise of any Option may
be conditioned upon the Participant’s execution of a Share purchase agreement
in form satisfactory to the Administrator providing for certain protections for
the Company and its other shareholders, including requirements that:

 

A.  The Participant’s or the Participant’s
Survivors’ right to sell or transfer the Shares may be restricted; and

 

B.  The Participant or the Participant’s
Survivors may be required to execute letters of investment intent and must also
acknowledge that the Shares will bear legends noting any applicable
restrictions.

 

A-5

 

b.  ISOs:   Each Option intended to be
an ISO shall be issued only to an Employee and be subject to the following
terms and conditions, with such additional restrictions or changes as the
Administrator determines are appropriate but not in conflict with
Section 422 of the Code and relevant regulations and rulings of the Internal
Revenue Service:

 

i.  Minimum standards:   The ISO shall meet the
minimum standards required of Non-Qualified Options, as described in Paragraph
6(a) above, except clause (i) thereunder.

 

ii.  Option Price:   Immediately before the ISO
is granted, if the Participant owns, directly or by reason of the applicable
attribution rules in Section 424(d) of the Code:

 

A.  10% or
less of the total combined voting power of all classes of stock of
the Company or an Affiliate, the Option price per share of the Shares covered
by each ISO shall not be less than 100% of the Fair Market Value per share of
the Shares on the date of the grant of the Option; or

 

B.  More than 10% of the total combined
voting power of all classes of stock of the Company or an Affiliate, the Option
price per share of the Shares covered by each ISO shall not be less than 110%
of the Fair Market Value on the date of grant.

 

iii.  Term of Option:   For Participants who own:

 

A.  10% or
less of the total combined voting power of all classes of stock of the
Company or an Affiliate, each ISO shall terminate not more than ten years from
the date of the grant or at such earlier time as the Option Agreement may
provide; or

 

B.  More than 10% of the total combined
voting power of all classes of stock of the Company or an Affiliate, each ISO
shall terminate not more than five years from the date of the grant or at such
earlier time as the Option Agreement may provide.

 

iv.  Limitation on Yearly
Exercise:  
The Option Agreements shall restrict the amount of ISOs which may become
exercisable in any calendar year (under this or any other ISO plan of the
Company or an Affiliate) so that the aggregate Fair Market Value (determined at
the time each ISO is granted) of the stock with respect to which ISOs are
exercisable for the first time by the Participant in any calendar year does not
exceed $100,000.

 

7.  TERMS AND CONDITIONS OF
STOCK GRANTS.

 

Each
offer of a Stock Grant to a Participant shall state the date prior to which the
Stock Grant must be accepted by the Participant, and the principal terms of
each Stock Grant shall be set forth in an Agreement, duly executed by the
Company and, to the extent required by law or requested by the Company, by the
Participant. The Agreement shall be in a form approved by the Administrator and
shall contain terms and conditions which the Administrator determines to be
appropriate and in the best interest of the Company, subject to the following
minimum standards:

 

(a)  Each Agreement shall state the purchase
price (per share), if any, of the Shares covered by each Stock Grant, which
purchase price shall be determined by the Administrator but shall not be less
than the minimum consideration required by the Delaware General Corporation Law
on the date of the grant of the Stock Grant;

 

(b)  Each Agreement shall state the number of
Shares to which the Stock Grant pertains; and

 

A-6

 

(c)  Each Agreement shall include the terms of
any right of the Company to restrict or reacquire the Shares subject to the
Stock Grant, including the time and events upon which such rights shall accrue
and the purchase price therefor, if any.

 

8.  TERMS AND CONDITIONS OF
OTHER STOCK-BASED AWARDS.

 

The
Administrator shall have the right to grant other Stock-Based Awards based upon
the Common Stock having such terms and conditions as the Administrator may
determine, including, without limitation, the grant of Shares based upon
certain conditions, the grant of securities convertible into Shares and the
grant of stock appreciation rights, phantom stock awards or stock units. The
principal terms of each Stock-Based Award shall be set forth in an Agreement,
duly executed by the Company and, to the extent required by law or requested by
the Company, by the Participant. The Agreement shall be in a form approved by
the Administrator and shall contain terms and conditions which the
Administrator determines to be appropriate and in the best interest of the
Company.

 

9.  EXERCISE OF OPTIONS AND
ISSUE OF SHARES.

 

An
Option (or any part or installment thereof) shall be exercised by giving
written notice to the Company or its designee, together with provision for
payment of the full purchase price in accordance with this Paragraph for the
Shares as to which the Option is being exercised, and upon compliance with any
other condition(s) set forth in the Option Agreement. Such notice shall be
signed by the person exercising the Option, shall state the number of Shares
with respect to which the Option is being exercised and shall contain any representation
required by the Plan or the Option Agreement. Payment of the purchase price for
the Shares as to which such Option is being exercised shall be made (a) in
United States dollars in cash or by check, or (b) at the discretion of the
Administrator, through delivery of shares of Common Stock having a Fair Market
Value equal as of the date of the exercise to the cash exercise price of the
Option and held for at least six months, or (c) at the discretion of the
Administrator, by having the Company retain from the shares otherwise issuable
upon exercise of the Option, a number of shares having a Fair Market Value
equal as of the date of exercise to the exercise price of the Option, or
(d) at the discretion of the Administrator, in accordance with a cashless
exercise program established with a securities brokerage firm, and approved by
the Administrator, or (e) at the discretion of the Administrator, by any
combination of (a), (b), (c) and (d) above or (f) at the
discretion of the Administrator, payment of such other lawful consideration as
the Administrator may determine. Notwithstanding the foregoing, the
Administrator shall accept only such payment on exercise of an ISO as is
permitted by Section 422 of the Code.

 

The
Company shall then reasonably promptly deliver the Shares as to which such
Option was exercised to the Participant (or to the Participant’s Survivors, as
the case may be). In determining what constitutes “reasonably promptly,” it is
expressly understood that the issuance and delivery of the Shares may be
delayed by the Company in order to comply with any law or regulation
(including, without limitation, state securities or “blue sky” laws) which
requires the Company to take any action with respect to the Shares prior to
their issuance. The Shares shall, upon delivery, be fully paid, non-assessable
Shares.

 

The
Administrator shall have the right to accelerate the date of exercise of any
installment of any Option; provided that the Administrator shall not accelerate
the exercise date of any installment of any Option granted to an Employee as an
ISO (and not previously converted into a Non-Qualified Option pursuant to
Paragraph 27) without the prior approval of the Employee if such acceleration
would violate the annual vesting limitation contained in
Section 422(d) of the Code, as described in Paragraph 6(b)(iv).

 

A-7

 

The
Administrator may, in its discretion, amend any term or condition of an
outstanding Option provided (i) such term or condition as amended is
permitted by the Plan, (ii) any such amendment shall be made only with the
consent of the Participant to whom the Option was granted, or in the event of
the death of the Participant, the Participant’s Survivors, if the amendment is
adverse to the Participant, and (iii) any such amendment of any Option
shall be made only after the Administrator determines whether such amendment
would constitute a “modification” of any Option which is an ISO (as that term
is defined in Section 424(h) of the Code) or would cause any adverse
tax consequences for the holder of such Option including, but not limited to,
pursuant to Section 409A of the Code.

 

10.  ACCEPTANCE OF STOCK
GRANTS AND STOCK-BASED AWARDS AND ISSUE OF SHARES.

 

A
Stock Grant or Stock-Based Award (or any part or installment thereof) shall be
accepted by executing the applicable Agreement and delivering it to the Company
or its designee, together with provision for payment of the full purchase
price, if any, in accordance with this Paragraph for the Shares as to which
such Stock Grant or Stock-Based Award is being accepted, and upon compliance
with any other conditions set forth in the applicable Agreement. Payment of the
purchase price for the Shares as to which such Stock Grant or Stock-Based Award
is being accepted shall be made (a) in United States dollars in cash or by
check, or (b) at the discretion of the Administrator, through delivery of
shares of Common Stock held for at least six months and having a Fair Market
Value equal as of the date of acceptance of the Stock Grant or Stock
Based-Award to the purchase price of the Stock Grant or Stock-Based Award, or
(c) at the discretion of the Administrator, by any combination of
(a) and (b) above; or (d) at the discretion of the Administrator,
payment of such other lawful consideration as the Administrator may determine.

 

The
Company shall then, if required by the applicable Agreement, reasonably
promptly deliver the Shares as to which such Stock Grant or Stock-Based Award
was accepted to the Participant (or to the Participant’s Survivors, as the case
may be), subject to any escrow provision set forth in the applicable Agreement.
In determining what constitutes “reasonably promptly,” it is expressly
understood that the issuance and delivery of the Shares may be delayed by the
Company in order to comply with any law or regulation (including, without
limitation, state securities or “blue sky” laws) which requires the Company to
take any action with respect to the Shares prior to their issuance.

 

The
Administrator may, in its discretion, amend any term or condition of an
outstanding Stock Grant, Stock-Based Award or applicable Agreement provided
(i) such term or condition as amended is permitted by the Plan,
(ii) any such amendment shall be made only with the consent of the
Participant to whom the Stock Grant or Stock-Based Award was made, if the
amendment is adverse to the Participant and (iii) any such amendment shall
be made only after the Administrator determines whether such amendment would
cause any adverse tax consequences to the Participant, including, but not
limited to, pursuant to Section 409A of the Code.

 

11.  RIGHTS AS A
SHAREHOLDER.

 

No
Participant to whom a Stock Right has been granted shall have rights as a
shareholder with respect to any Shares covered by such Stock Right, except
after due exercise of the Option or acceptance of the Stock Grant or as set
forth in any Agreement, and tender of the full purchase price, if any, for the
Shares being purchased pursuant to such exercise or acceptance and registration
of the Shares in the Company’s share register in the name of the Participant.

 

A-8

 

12.  ASSIGNABILITY AND
TRANSFERABILITY OF STOCK RIGHTS.

 

By its
terms, a Stock Right granted to a Participant shall not be transferable by the
Participant other than (i) by will or by the laws of descent and
distribution, or (ii) as approved by the Administrator in its discretion
and set forth in the applicable Agreement.(1) Notwithstanding the foregoing, an
ISO transferred except in compliance with clause (i) above shall no longer
qualify as an ISO. The designation of a beneficiary of a Stock Right by a
Participant, with the prior approval of the Administrator and in such form as
the Administrator shall prescribe, shall not be deemed a transfer prohibited by
this Paragraph. Except as provided above, a Stock Right shall only be
exercisable or may only be accepted, during the Participant’s lifetime, by such
Participant (or by his or her legal representative) and shall not be assigned,
pledged or hypothecated in any way (whether by operation of law or otherwise)
and shall not be subject to execution, attachment or similar process. Any
attempted transfer, assignment, pledge, hypothecation or other disposition of
any Stock Right or of any rights granted thereunder contrary to the provisions
of this Plan, or the levy of any attachment or similar process upon a Stock
Right, shall be null and void.

 

13.  EFFECT ON OPTIONS OF
TERMINATION OF SERVICE OTHER THAN “FOR CAUSE” OR DEATH OR DISABILITY.

 

Except
as otherwise provided in a Participant’s Option Agreement, in the event of a
termination of service (whether as an employee, director or consultant) with
the Company or an Affiliate before the Participant has exercised an Option, the
following rules apply:

 

a.  A Participant who ceases to be an
employee, director or consultant of the Company or of an Affiliate (for any
reason other than termination “for cause”, Disability, or death for which
events there are special rules in Paragraphs 14, 15, and 16,
respectively), may exercise any Option granted to him or her to the extent that
the Option is exercisable on the date of such termination of service, but only
within such term as the Administrator has designated in a Participant’s Option
Agreement.

 

b.  Except as provided in Subparagraph
(c) below, or Paragraph 15 or 16, in no event may an Option intended to be
an ISO, be exercised later than three months after the Participant’s
termination of employment.

 

c.  The provisions of this Paragraph, and not
the provisions of Paragraph 15 or 16, shall apply to a Participant who
subsequently becomes Disabled or dies after the termination of employment,
director status or consultancy; provided, however, in the case of a Participant’s
Disability or death within three months after the termination of employment,
director status or consultancy, the Participant or the Participant’s Survivors
may exercise the Option within one year after the date of the Participant’s
termination of service, but in no event after the date of expiration of the
term of the Option.

 

(1)  The form of non-qualified option
agreement contains a provision allowing for options to be transferred but
remain eligible for exercise pursuant to Form S-8.  Optionees should be
encouraged to discuss the gifting of options with their tax advisors as under
current law only the transfer of a vested option is deemed to be a completed
gift and the income tax liability associated with the exercise of the option
continues to be the responsibility of the original optionee.

 

A-9

 

d.  Notwithstanding anything herein to the
contrary, if subsequent to a Participant’s termination of employment,
termination of director status or termination of consultancy, but prior to the
exercise of an Option, the Board of Directors determines that, either prior or
subsequent to the Participant’s termination, the Participant engaged in conduct
which would constitute “cause”, then such Participant shall forthwith cease to
have any right to exercise any Option.

 

e.  A Participant to whom an Option has been
granted under the Plan who is absent from the Company or an Affiliate because
of temporary disability (any disability other than a Disability as defined in
Paragraph 1 hereof), or who is on leave of absence for any purpose, shall not,
during the period of any such absence, be deemed, by virtue of such absence
alone, to have terminated such Participant’s employment, director status or
consultancy with the Company or with an Affiliate, except as the Administrator
may otherwise expressly provide; provided however that for ISOs any leave of
absence granted by the Administrator of greater than ninety days unless
pursuant to a contract or statute that guarantees the right to reemployment
shall cause such ISO to become a Non-Qualified Option.

 

f.  Except as required by law or as set forth
in a Participant’s Option Agreement, Options granted under the Plan shall not
be affected by any change of a Participant’s status within or among the Company
and any Affiliates, so long as the Participant continues to be an employee,
director or consultant of the Company or any Affiliate.

 

14.  EFFECT ON OPTIONS OF
TERMINATION OF SERVICE “FOR CAUSE”.

 

Except
as otherwise provided in a Participant’s Option Agreement, the following
rules apply if the Participant’s service (whether as an employee, director
or consultant) with the Company or an Affiliate is terminated “for cause” prior
to the time that all his or her outstanding Options have been exercised:

 

a.  All outstanding and unexercised Options
as of the time the Participant is notified his or her service is terminated “for
cause” will immediately be forfeited.

 

b.  For purposes of this Plan, “cause” shall
include (and is not limited to) dishonesty with respect to the Company or any
Affiliate, insubordination, substantial malfeasance or non-feasance of duty,
unauthorized disclosure of confidential information, breach by the Participant
of any provision of any employment, consulting, advisory, nondisclosure, non-competition
or similar agreement between the Participant and the Company, and conduct
substantially prejudicial to the business of the Company or any Affiliate. The
determination of the Administrator as to the existence of “cause” will be
conclusive on the Participant and the Company.

 

c.  “Cause” is not limited to events which
have occurred prior to a Participant’s termination of service, nor is it
necessary that the Administrator’s finding of “cause” occur prior to
termination. If the Administrator determines, subsequent to a Participant’s
termination of service but prior to the exercise of an Option, that either
prior or subsequent to the Participant’s termination the Participant engaged in
conduct which would constitute “cause”, then the right to exercise any Option
is forfeited.

 

d.  Any provision in an agreement between the
Participant and the Company or an Affiliate, which contains a conflicting
definition of “cause” for termination and which is in effect at the time of
such termination, shall supersede the definition in this Plan with respect to
that Participant.

 

A-10

 

15.  EFFECT ON OPTIONS OF
TERMINATION OF SERVICE FOR DISABILITY.

 

Except
as otherwise provided in a Participant’s Option Agreement:

 

a.  A Participant who ceases to be an
employee, director or consultant of the Company or of an Affiliate by reason of
Disability may exercise any Option granted to such Participant:

 

(i)    To
the extent that the Option has become exercisable but has not been exercised on
the date of Disability; and

 

(ii)   In the
event rights to exercise the Option accrue periodically, to the extent of a pro
rata portion through the date of Disability of any additional vesting rights
that would have accrued on the next vesting date had the Participant not become
Disabled. The proration shall be based upon the number of days accrued in the
current vesting period prior to the date of Disability.

 

b.  A Disabled Participant may exercise such
rights only within the period ending one year after the date of the Participant’s
Disability, notwithstanding that the Participant might have been able to
exercise the Option as to some or all of the Shares on a later date if the
Participant had not become Disabled and had continued to be an employee,
director or consultant or, if earlier, within the originally prescribed term of
the Option.

 

c.  The Administrator shall make the
determination both of whether Disability has occurred and the date of its
occurrence (unless a procedure for such determination is set forth in another
agreement between the Company and such Participant, in which case such
procedure shall be used for such determination). If requested, the Participant
shall be examined by a physician selected or approved by the Administrator, the
cost of which examination shall be paid for by the Company.

 

16.  EFFECT ON OPTIONS OF
DEATH WHILE AN EMPLOYEE, DIRECTOR OR CONSULTANT.

 

Except
as otherwise provided in a Participant’s Option Agreement:

 

a.  In the event of the death of a
Participant while the Participant is an employee, director or consultant of the
Company or of an Affiliate, such Option may be exercised by the Participant’s
Survivors:

 

(i)    To
the extent that the Option has become exercisable but has not been exercised on
the date of death; and

 

(ii)   In the
event rights to exercise the Option accrue periodically, to the extent of a pro
rata portion through the date of death of any additional vesting rights that
would have accrued on the next vesting date had the Participant not died. The
proration shall be based upon the number of days accrued in the current vesting
period prior to the Participant’s date of death.

 

b.  If the Participant’s Survivors wish to
exercise the Option, they must take all necessary steps to exercise the Option
within one year after the date of death of such Participant, notwithstanding
that the decedent might have been able to exercise the Option as to some or all
of the Shares on a later date if he or she had not died and had continued to be
an employee, director or consultant or, if earlier, within the originally
prescribed term of the Option.

 

A-11

 

17.  EFFECT OF TERMINATION
OF SERVICE ON UNACCEPTED STOCK GRANTS.

 

In the
event of a termination of service (whether as an employee, director or
consultant) with the Company or an Affiliate for any reason before the
Participant has accepted a Stock Grant, such offer shall terminate.

 

For
purposes of this Paragraph 17 and Paragraph 18 below, a Participant to whom a
Stock Grant has been offered and accepted under the Plan who is absent from
work with the Company or with an Affiliate because of temporary disability (any
disability other than a Disability as defined in Paragraph 1 hereof), or who is
on leave of absence for any purpose, shall not, during the period of any such
absence, be deemed, by virtue of such absence alone, to have terminated such
Participant’s employment, director status or consultancy with the Company or
with an Affiliate, except as the Administrator may otherwise expressly provide.

 

In
addition, for purposes of this Paragraph 17 and Paragraph 18 below, any change
of employment or other service within or among the Company and any Affiliates
shall not be treated as a termination of employment, director status or
consultancy so long as the Participant continues to be an employee, director or
consultant of the Company or any Affiliate.

 

18.  EFFECT ON STOCK GRANTS
OF TERMINATION OF SERVICE OTHER THAN “FOR CAUSE” OR DEATH OR DISABILITY.

 

Except
as otherwise provided in a Participant’s Stock Grant Agreement, in the event of
a termination of service (whether as an employee, director or consultant),
other than termination “for cause,” Disability, or death for which events there
are special rules in Paragraphs 19, 20, and 21, respectively, before all
forfeiture provisions or Company rights of repurchase shall have lapsed, then
the Company shall have the right to cancel or repurchase that number of Shares
subject to a Stock Grant as to which the Company’s forfeiture or repurchase
rights have not lapsed.

 

19.  EFFECT ON STOCK GRANTS
OF TERMINATION OF SERVICE “FOR CAUSE”.

 

Except
as otherwise provided in a Participant’s Stock Grant Agreement, the following
rules apply if the Participant’s service (whether as an employee, director
or consultant) with the Company or an Affiliate is terminated “for cause”:

 

a.  All Shares subject to any Stock Grant
that remain subject to forfeiture provisions or as to which the Company shall
have a repurchase right shall be immediately forfeited to the Company as of the
time the Participant is notified his or her service is terminated for Cause.

 

b.  For purposes of this Plan, “cause” shall
include (and is not limited to) dishonesty with respect to the employer,
insubordination, substantial malfeasance or non-feasance of duty, unauthorized
disclosure of confidential information, breach by the Participant of any
provision of any employment, consulting, advisory, nondisclosure,
non-competition or similar agreement between the Participant and the Company,
and conduct substantially prejudicial to the business of the Company or any
Affiliate. The determination of the Administrator as to the existence of “cause”
will be conclusive on the Participant and the Company.

 

c.  “Cause” is not limited to events which
have occurred prior to a Participant’s termination of service, nor is it
necessary that the Administrator’s finding of “cause” occur prior to
termination. If the Administrator determines, subsequent to a Participant’s
termination of service, that either

 

A-12

 

prior or subsequent to the Participant’s termination
the Participant engaged in conduct which would constitute “cause,” then the
Company’s right to repurchase all of such Participant’s Shares shall apply.

 

d.  Any provision in an agreement between the
Participant and the Company or an Affiliate, which contains a conflicting
definition of “cause” for termination and which is in effect at the time of
such termination, shall supersede the definition in this Plan with respect to
that Participant.

 

20.  EFFECT ON STOCK GRANTS
OF TERMINATION OF SERVICE FOR DISABILITY.

 

Except
as otherwise provided in a Participant’s Stock Grant Agreement, the following
rules apply if a Participant ceases to be an employee, director or
consultant of the Company or of an Affiliate by reason of Disability:  to
the extent the forfeiture provisions or the Company’s rights of repurchase have
not lapsed on the date of Disability, they shall be exercisable; provided,
however, that in the event such forfeiture provisions or rights of repurchase
lapse periodically, such provisions or rights shall lapse to the extent of a
pro rata portion of the Shares subject to such Stock Grant through the date of
Disability as would have lapsed had the Participant not become Disabled. The
proration shall be based upon the number of days accrued prior to the date of
Disability.

 

The
Administrator shall make the determination both of whether Disability has
occurred and the date of its occurrence (unless a procedure for such
determination is set forth in another agreement between the Company and such
Participant, in which case such procedure shall be used for such
determination). If requested, the Participant shall be examined by a physician
selected or approved by the Administrator, the cost of which examination shall
be paid for by the Company.

 

21.  EFFECT ON STOCK GRANTS
OF DEATH WHILE AN EMPLOYEE, DIRECTOR OR CONSULTANT.

 

Except
as otherwise provided in a Participant’s Stock Grant Agreement, the following
rules apply in the event of the death of a Participant while the
Participant is an employee, director or consultant of the Company or of an
Affiliate:  to the extent the forfeiture provisions or the Company’s
rights of repurchase have not lapsed on the date of death, they shall be
exercisable; provided, however, that in the event such forfeiture provisions or
rights of repurchase lapse periodically, such provisions or rights shall lapse
to the extent of a pro rata portion of the Shares subject to such Stock Grant
through the date of death as would have lapsed had the Participant not died.
The proration shall be based upon the number of days accrued prior to the
Participant’s death.

 

22.  PURCHASE FOR
INVESTMENT.

 

Unless
the offering and sale of the Shares to be issued upon the particular exercise
or acceptance of a Stock Right shall have been effectively registered under the
Securities Act of 1933, as now in force or hereafter amended (the “1933 Act”),
the Company shall be under no obligation to issue the Shares covered by such
exercise unless and until the following conditions have been fulfilled:

 

a.  The person(s) who
exercise(s) or accept(s) such Stock Right shall warrant to the
Company, prior to the receipt of such Shares, that such person(s) are acquiring
such Shares for their own respective accounts, for investment, and not with a
view to, or for sale in connection with, the distribution of any such Shares,
in which event the person(s) acquiring such Shares shall be bound

 

A-13

 

by the provisions of the following legend which shall
be endorsed upon the certificate(s) evidencing their Shares issued
pursuant to such exercise or such grant:

 

“The shares represented by this certificate have been
taken for investment and they may not be sold or otherwise transferred by any
person, including a pledgee, unless (1) either (a) a Registration
Statement with respect to such shares shall be effective under the Securities
Act of 1933, as amended, or (b) the Company shall have received an opinion
of counsel satisfactory to it that an exemption from registration under such
Act is then available, and (2) there shall have been compliance with all
applicable state securities laws.”

 

b.  At the discretion of the Administrator,
the Company shall have received an opinion of its counsel that the Shares may
be issued upon such particular exercise or acceptance in compliance with the
1933 Act without registration thereunder.

 

23.  DISSOLUTION OR
LIQUIDATION OF THE COMPANY.

 

Upon
the dissolution or liquidation of the Company, all Options granted under this
Plan which as of such date shall not have been exercised and all Stock Grants
and Stock-Based Awards which have not been accepted will terminate and become
null and void; provided, however, that if the rights of a Participant or a
Participant’s Survivors have not otherwise terminated and expired, the
Participant or the Participant’s Survivors will have the right immediately
prior to such dissolution or liquidation to exercise or accept any Stock Right
to the extent that the Stock Right is exercisable or subject to acceptance as
of the date immediately prior to such dissolution or liquidation. Upon the
dissolution or liquidation of the Company, any outstanding Stock-Based Awards
shall immediately terminate unless otherwise determined by the Administrator or
specifically provided in the applicable Agreement.

 

24.  ADJUSTMENTS.

 

Upon
the occurrence of any of the following events, a Participant’s rights with
respect to any Stock Right granted to him or her hereunder shall be adjusted as
hereinafter provided, unless otherwise specifically provided in a Participant’s
Agreement:

 

a.   Stock Dividends and Stock Splits.  
If (i) the shares of Common Stock shall be subdivided or combined into a
greater or smaller number of shares or if the Company shall issue any shares of
Common Stock as a stock dividend on its outstanding Common Stock, or
(ii) additional shares or new or different shares or other securities of
the Company or other non-cash assets are distributed with respect to such
shares of Common Stock, the number of shares of Common Stock deliverable upon
the exercise of an Option or acceptance of a Stock Grant shall be appropriately
increased or decreased proportionately, and appropriate adjustments shall be
made including, in the purchase price per share, to reflect such events. The
number of Shares subject to the limitations in Paragraph 3  shall also be proportionately adjusted
upon the occurrence of such events.

 

b.   Corporate Transactions.  
If the Company is to be consolidated with or acquired by another entity in a
merger, sale of all or substantially all of the Company’s assets other than a
transaction to merely change the state of incorporation (a “Corporate
Transaction”), the Administrator or the board of directors of any entity
assuming the obligations of the Company hereunder (the “Successor Board”),
shall, as to outstanding Options, either (i) make appropriate provision
for the continuation of such Options by substituting on an equitable basis for
the Shares then subject to such Options either the consideration payable with
respect to the outstanding shares of Common Stock in

 

A-14

 

connection with the Corporate Transaction or securities
of any successor or acquiring entity; or (ii) upon written notice to the
Participants, provide that such Options must be exercised (either (A) to
the extent then exercisable or, (B) at the discretion of the
Administrator, any such Options being made fully exercisable for purposes of
this Subparagraph), within a specified number of days of the date of such
notice, at the end of which period such Options shall terminate; or
(iii) terminate such Options in exchange for a cash payment equal to the
excess of the Fair Market Value of the Shares subject to such Options (either
(A) to the extent then exercisable or, (B) at the discretion of the
Administrator, any such Options being made fully exercisable for purposes of
this Subparagraph) over the exercise price thereof.

 

Notwithstanding the
foregoing, in the event the Corporate Transaction also constitutes a Change of
Control, all Options outstanding on the date of the Corporate Transaction will
become fully exercisable, and will be available for exercise for a number of
days after the date of such notice and as specified by the Administrator, at
the end of which period the Options shall terminate.

 

With respect to
outstanding Stock Grants, the Administrator or the Successor Board, shall
either (i) make appropriate provisions for the continuation of such Stock
Grants on the same terms and conditions by substituting on an equitable basis
for the Shares then subject to such Stock Grants either the consideration
payable with respect to the outstanding Shares of Common Stock in connection
with the Corporate Transaction or securities of any successor or acquiring
entity; or (ii) terminate such Stock Grants in exchange for a cash payment
equal to the excess of the Fair Market Value of the Shares subject to such Stock
Grants over the purchase price thereof, if any. In addition, in the event of a
Corporate Transaction, the Administrator may waive any or all Company
forfeiture or repurchase rights with respect to outstanding Stock Grants.

 

c.   Recapitalization or Reorganization.  
In the event of a recapitalization or reorganization of the Company other than
a Corporate Transaction pursuant to which securities of the Company or of
another corporation are issued with respect to the outstanding shares of Common
Stock, a Participant upon exercising an Option or accepting a Stock Grant after
the recapitalization or reorganization shall be entitled to receive for the
purchase price paid upon such exercise or acceptance of the number of
replacement securities which would have been received if such Option had been
exercised or Stock Grant accepted prior to such recapitalization or
reorganization.

 

d.   Adjustments to Stock-Based Awards.  
Upon the happening of any of the events described in Subparagraphs a, b or c
above, any outstanding Stock-Based Award shall be appropriately adjusted to
reflect the events described in such Subparagraphs. The Administrator or the
Successor Board shall determine the specific adjustments to be made under this
Paragraph 24, including, but not limited to the effect if any, of a Change of
Control and, subject to Paragraph 4, its determination shall be conclusive.

 

e.   Modification of ISOs.  
Notwithstanding the foregoing, any adjustments made pursuant to Subparagraph a,
b or c above with respect to ISOs shall be made only after the Administrator
determines whether such adjustments would constitute a “modification” of such
ISOs (as that term is defined in Section 424(h) of the Code) or would
cause any adverse tax consequences for the holders of such ISOs. If the
Administrator determines that such adjustments made with respect to ISOs would
constitute a modification of such ISOs, it may refrain from making such
adjustments, unless the holder of an ISO specifically agrees in writing that
such adjustment be made and such writing indicates that the holder has full
knowledge of the consequences of such “modification” on his or her income tax

 

A-15

 

treatment with respect to the ISO. This paragraph
shall not apply to the acceleration of the vesting of any ISO that would cause
any portion of the ISO to violate the annual vesting limitation contained in
Section 422(d) of the Code, as described in Paragraph 6b(iv).

 

25.  ISSUANCES OF
SECURITIES.

 

Except
as expressly provided herein, no issuance by the Company of shares of stock of
any class, or securities convertible into shares of stock of any class, shall
affect, and no adjustment by reason thereof shall be made with respect to, the
number or price of shares subject to Stock Rights. Except as expressly provided
herein, no adjustments shall be made for dividends paid in cash or in property
(including without limitation, securities) of the Company prior to any issuance
of Shares pursuant to a Stock Right.

 

26.  FRACTIONAL SHARES.

 

No
fractional shares shall be issued under the Plan and the person exercising a
Stock Right shall receive from the Company cash in lieu of such fractional
shares equal to the Fair Market Value thereof.

 

27.  CONVERSION  OF
ISOs INTO NON-QUALIFIED OPTIONS; TERMINATION OF ISOs.

 

The
Administrator, at the written request of any Participant, may in its discretion
take such actions as may be necessary to convert such Participant’s ISOs (or
any portions thereof) that have not been exercised on the date of conversion
into Non-Qualified Options at any time prior to the expiration of such ISOs,
regardless of whether the Participant is an employee of the Company or an
Affiliate at the time of such conversion. At the time of such conversion, the
Administrator (with the consent of the Participant) may impose such conditions
on the exercise of the resulting Non-Qualified Options as the Administrator in
its discretion may determine, provided that such conditions shall not be
inconsistent with this Plan. Nothing in the Plan shall be deemed to give any
Participant the right to have such Participant’s ISOs converted into
Non-Qualified Options, and no such conversion shall occur until and unless the
Administrator takes appropriate action. The Administrator, with the consent of
the Participant, may also terminate any portion of any ISO that has not been
exercised at the time of such conversion.

 

28.  WITHHOLDING.

 

In the
event that any federal, state, or local income taxes, employment taxes, Federal
Insurance Contributions Act (“F.I.C.A.”) withholdings or other amounts are
required by applicable law or governmental regulation to be withheld from the
Participant’s salary, wages or other remuneration in connection with the
exercise or acceptance of a Stock Right or in connection with a Disqualifying
Disposition (as defined in Paragraph 29) or upon the lapsing of any forfeiture
provision or right of repurchase or for any other reason required by law, the
Company may withhold from the Participant’s compensation, if any, or may
require that the Participant advance in cash to the Company, or to any
Affiliate of the Company which employs or employed the Participant, the
statutory minimum amount of such withholdings unless a different withholding
arrangement, including the use of shares of the Company’s Common Stock or a
promissory note, is authorized by the Administrator (and permitted by law). For
purposes hereof, the fair market value of the shares withheld for purposes of
payroll withholding shall be determined in the manner provided in Paragraph 1
above, as of the most recent practicable date prior to the date of exercise. If
the fair market value of the shares withheld is less than the amount of payroll
withholdings required, the Participant may be required to advance the
difference in cash to the Company or the Affiliate employer. The Administrator
in its discretion may condition the exercise of an

 

A-16

 

Option for less than the
then Fair Market Value on the Participant’s payment of such additional
withholding.

 

29.  NOTICE TO COMPANY OF
DISQUALIFYING DISPOSITION.

 

Each
Employee who receives an ISO must agree to notify the Company in writing
immediately after the Employee makes a Disqualifying Disposition of any shares
acquired pursuant to the exercise of an ISO. A Disqualifying Disposition is
defined in Section 424(c) of the Code and includes any disposition
(including any sale or gift) of such shares before the later of (a) two
years after the date the Employee was granted the ISO, or (b) one year
after the date the Employee acquired Shares by exercising the ISO, except as
otherwise provided in Section 424(c) of the Code. If the Employee has
died before such stock is sold, these holding period requirements do not apply
and no Disqualifying Disposition can occur thereafter.

 

30.  TERMINATION OF THE
PLAN.

 

The
Plan will terminate on June 9, 2017, the date which is ten years from the earlier of the date of its adoption by the
Board of Directors and the date of its approval by the shareholders of the
Company. The Plan may be terminated at an earlier date by vote of the
shareholders or the Board of Directors of the Company; provided, however, that
any such earlier termination shall not affect any Agreements executed prior to
the effective date of such termination.

 

31.  AMENDMENT OF THE PLAN
AND AGREEMENTS.

 

The
Plan may be amended by the shareholders of the Company. The Plan may also be
amended by the Administrator, including, without limitation, to the extent
necessary to qualify any or all outstanding Stock Rights granted under the Plan
or Stock Rights to be granted under the Plan for favorable federal income tax
treatment (including deferral of taxation upon exercise) as may be afforded
incentive stock options under Section 422 of the Code, and to the extent
necessary to qualify the shares issuable upon exercise or acceptance of any
outstanding Stock Rights granted, or Stock Rights to be granted, under the Plan
for listing on any national securities exchange or quotation in any national
automated quotation system of securities dealers. Any amendment approved by the
Administrator which the Administrator determines is of a scope that requires
shareholder approval shall be subject to obtaining such shareholder approval.
Any modification or amendment of the Plan shall not, without the consent of a
Participant, adversely affect his or her rights under a Stock Right previously
granted to him or her. With the consent of the Participant affected, the
Administrator may amend outstanding Agreements in a manner which may be adverse
to the Participant but which is not inconsistent with the Plan. In the
discretion of the Administrator, outstanding Agreements may be amended by the
Administrator in a manner which is not adverse to the Participant.

 

32.  EMPLOYMENT OR OTHER
RELATIONSHIP.

 

Nothing
in this Plan or any Agreement shall be deemed to prevent the Company or an
Affiliate from terminating the employment, consultancy or director status of a
Participant, nor to prevent a Participant from terminating his or her own
employment, consultancy or director status or to give any Participant a right
to be retained in employment or other service by the Company or any Affiliate
for any period of time.

 

33.  GOVERNING LAW.

 

This
Plan shall be construed and enforced in accordance with the law of the State of
Delaware.

 

A-17

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00132-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00132-of-00352.parquet"}]]