Document:

EXHIBIT 10.1

 

Partners for Growth

 

2006 Term Loan and Security
Agreement

 

	
  Borrower:

  	
   

  	
  Bioject Medical Technologies Inc.

  
	
  Address:

  	
   

  	
  20245 S.W. 95th Ave., Tualatin, OR   97062

  
	
   

  	
   

  	
   

  
	
  Borrower:

  	
   

  	
  Bioject, Inc.

  
	
  Address:

  	
   

  	
  20245 S.W. 95th Ave., Tualatin, OR   97062

  
	
   

  	
   

  	
   

  
	
  Date:

  	
   

  	
  March 29, 2006

  

 

 

THIS 2006 TERM LOAN AND SECURITY
AGREEMENT (“Agreement”) is entered into on the above date between
PARTNERS FOR GROWTH, L.P. (“PFG”), whose address is 180 Pacific Avenue, San
Francisco, CA 94111 and the borrowers named above (jointly and severally, the “Borrower”),
whose chief executive office is located at the above address, respectively. The
Schedule to this Agreement (the “Schedule”) being signed by the parties
concurrently, is an integral part of this Agreement. (Definitions of
certain terms used in this Agreement are set forth in Section 7 below.)

 

1.        LOANS.

 

1.1  Loans. 
 PFG will
make a loan to Borrower (the “Loan”) in the amount shown on the Schedule,
provided no Default or Event of Default has occurred and is continuing.

 

1.2   Interest.   All Loans
and all other monetary Obligations shall bear interest at the rate shown on the
Schedule, except where expressly set forth to the contrary in this Agreement. Interest
shall be payable monthly, on the last day of the month.

 

1.3  Fees.   Borrower has
paid to PFG the fees shown on the Schedule, which are in addition to all
interest and other sums payable to PFG and are not refundable.

 

1.4  [INTENTIONALLY LEFT BLANK]

 

1.5  Late Fee.   If any
payment of accrued interest for any month is not made within three Business
Days after the date a bill therefor is deemed delivered by PFG to Borrower, or
if any payment of principal or any other payment is not made within three
Business Days after the date due, Borrower shall pay PFG a late payment fee
equal to 5% of the amount of such late payment. The provisions of this
paragraph shall not be construed as PFG’s consent to Borrower’s failure to pay
any amounts when due, and PFG’s acceptance of any such late payments shall not
restrict PFG’s exercise of any remedies arising out of any such failure.

 

2.        SECURITY INTEREST. 

 

2.1  Grant of Security Interest.   To secure
the payment and performance of all of the Obligations when due, Borrower hereby
grants to PFG a security interest in all of the following (collectively, the “Collateral”):  all right, title and interest of Borrower in
and to all of the following, whether now owned or hereafter arising or acquired
and wherever located: all Accounts; all Inventory; all Equipment; all Deposit
Accounts; all General Intangibles (including without limitation all
Intellectual Property); all Investment Property; all Other Property; the Real
Property; and any and all claims, rights and interests in any of the above, and
all guaranties and security for any of the above, and all substitutions and
replacements for, additions, accessions, attachments, accessories, and
improvements to, and proceeds  (including
proceeds of any insurance policies, proceeds of proceeds and claims against
third parties) of, any and all of the above, and all Borrower’s books relating
to any and all of the above.

 

2.2  Specified Contracts Excluded.   Notwithstanding
anything herein to the contrary, the security interest granted under this Section 2
shall not attach to any of the following (“Specified Contracts”):  any lease, license, contract, property rights
or

 

 

agreement to which Borrower is a party or
any of its rights or interests thereunder if and for so long as the grant of
such security interest shall constitute or result in any of the following  (other than to the extent that any such term
would be ineffective under the Code or any other applicable law or principles
of equity):  (i) the abandonment,
invalidation or unenforceability of any right, title or interest of Borrower therein,
or (ii) in a breach or termination pursuant to the terms of, or a default
under, any such lease, license, contract property rights or agreement; provided
however that such security interest shall attach immediately at such time as
the condition causing such abandonment, invalidation or unenforceability shall
be remedied and to the extent severable, shall attach immediately to any
portion of such lease, license, contract, property rights or agreement that
does not result in any of the consequences specified in (i) or (ii) above.
Except as disclosed on Exhibit A hereto, Borrower represents and warrants
to PFG that there are no Specified Contracts which are material to Borrower’s
business or grant Borrower rights in Intellectual Property which is licensed by
the Borrower to its customers or incorporated in products licensed or sold by
the Borrower to its customers. Borrower shall not, hereafter, without PFG’s
prior written consent, enter into any Specified Contract which is material to
Borrower’s business or grants Borrower rights in Intellectual Property which is
licensed by the Borrower to its customers or incorporated in products licensed
or sold by the Borrower to its customers.

 

3.        REPRESENTATIONS,
WARRANTIES AND COVENANTS OF BORROWER.

 

In
order to induce PFG to enter into this Agreement and to make Loans, Borrower
represents and warrants to PFG as follows, and Borrower covenants that the
following representations will continue to be true, and that Borrower will at
all times comply with all of the following covenants, throughout the term of
this Agreement and until all Obligations have been paid and performed in full:

 

3.1  Corporate Existence and
Authority.   Borrower is
and will continue to be, duly organized and validly existing under the laws of
the jurisdiction of its incorporation. Borrower is and will continue to be
qualified and licensed to do business in all jurisdictions in which any failure
to do so would result in a Material Adverse Change. The execution, delivery and
performance by Borrower of this Agreement, and all other documents contemplated
hereby (i) have been duly and validly authorized, (ii) are
enforceable against Borrower in accordance with their terms (except as
enforcement may be limited by equitable principles and by bankruptcy, insolvency,
reorganization, moratorium or similar laws relating to creditors’ rights
generally), and (iii) do not violate Borrower’s articles or certificate of
incorporation, or Borrower’s by-laws, or any law or any  material agreement or instrument which is
binding upon Borrower or its property, and (iv) do not constitute grounds
for acceleration of any material indebtedness or obligation under any agreement
or instrument which is binding upon Borrower or its property.

 

3.2  Name; Trade Names and Styles.
  As of the
date hereof, the name of Borrower set forth in the heading to this Agreement is
its correct name, as set forth in its Articles or Certificate of Incorporation.
Listed in the Representations are all prior names of Borrower and all of
Borrower’s present and prior trade names as of the date hereof. Borrower shall
give PFG 30 days’ prior written notice before changing its name or doing
business under any other name. Borrower has complied, and will in the future
comply, in all material respects, with all laws relating to the conduct of
business under a fictitious business name, if applicable to Borrower.

 

3.3  Place of Business; Location
of Collateral.   As of the
date hereof, the address set forth in the heading to this Agreement is Borrower’s
chief executive office. In addition, as of the date hereof, Borrower has places
of business and Collateral is located only at the locations set forth in the
Representations. Borrower will give PFG at least 30 days prior written notice
before opening any additional place of business, changing its chief executive
office, or moving any of the Collateral to a location other than Borrower’s
Address or one of the locations set forth in the Representations, except that
Borrower may maintain sales offices in the ordinary course of business at
which not more than a total of $10,000 fair market value of Equipment is
located.

 

3.4  Title to Collateral;
Perfection; Permitted Liens.

 

(a)   Borrower is now, and will at all times in
the future be, the sole owner of all the Collateral, except for items of
Equipment which are leased to Borrower. The Collateral now is and will remain
free and clear of any and all liens, charges, security interests, encumbrances
and adverse claims, except for Permitted Liens. PFG now has, and will continue
to have, a first-priority perfected and enforceable security interest in all of
the Collateral, subject only to the Permitted Liens, and Borrower will at all
times defend PFG and the Collateral against all claims of others.

 

(b)   Borrower has set forth in the
Representations all of Borrower’s Deposit Accounts, and Borrower will give PFG
five Business Days advance written notice before establishing any new Deposit
Accounts and will cause the institution where any such new Deposit Account is
maintained to execute and deliver to PFG a control agreement in form sufficient
to perfect PFG’s security interest in the Deposit Account and otherwise
satisfactory to PFG in its good faith business judgment.

 

2

 

(c)   In the event that Borrower shall at any
time after the date hereof have any commercial tort claims against others,
which it is asserting, and in which the potential recovery exceeds $100,000,
Borrower shall promptly notify PFG thereof in writing and provide PFG with such
information regarding the same as PFG shall request (unless providing such
information would waive the Borrower’s attorney-client privilege). Such
notification to PFG shall constitute a grant of a security interest in the
commercial tort claim and all proceeds thereof to PFG, and Borrower shall
execute and deliver all such documents and take all such actions as PFG shall
request in connection therewith.

 

(d)   Whenever any Collateral is located upon
premises in which any third party has an interest, including real property
leased by Borrower, Borrower shall, whenever requested by PFG, use commercially
reasonable efforts to cause such third party to execute and deliver to PFG, in form acceptable
to PFG, such waivers and subordinations as PFG shall specify in its good faith
business judgment. Borrower will keep in full force and effect, and will comply
with all material terms of, any lease of real property where any of the
Collateral now or in the future may be located.

 

3.5  Maintenance of Collateral.   Borrower
will maintain the Collateral in good working condition (ordinary wear and tear
excepted), and Borrower will not use the Collateral for any unlawful purpose. Borrower
will immediately advise PFG in writing of any material loss or damage to the
Collateral.

 

3.6  Books and Records.   Borrower has
maintained and will maintain at Borrower’s Address complete and accurate books
and records, comprising an accounting system in accordance with GAAP.

 

3.7  Financial Condition,
Statements and Reports.   All
financial statements now or in the future delivered to PFG have been, and will
be, prepared in conformity with GAAP (subject, in the case of unaudited interim
statements, to year-end adjustments and the absence of footnotes) and now and
in the future will fairly present the results of operations and financial
condition of Borrower in all material respects, in accordance with GAAP
(subject, in the case of unaudited interim statements, to year-end adjustments
and the absence of footnotes), at the times and for the periods therein stated.
Between the last date covered by any such statement provided to PFG and the
date hereof, there has been no Material Adverse Change.

 

3.8  Tax Returns and Payments;
Pension Contributions.   Borrower has
timely filed, and will timely file, all required tax returns and reports, and
Borrower has timely paid, and will timely pay, all foreign, federal, state and
local taxes, assessments, deposits and contributions now or in the future owed
by Borrower. Borrower may, however, defer payment of any of the foregoing which
are contested by Borrower in good faith, provided that Borrower (i) contests
the same by appropriate proceedings promptly and diligently instituted and
conducted, (ii) notifies PFG in writing of the commencement of, and any
material development in any such proceedings, and (iii) posts bonds or
takes any other steps required to stay the enforcement of any such lien upon
any of the Collateral against which such foreign, federal, state or local
authority could then proceed. Borrower is unaware of any claims or adjustments
proposed for any of Borrower’s prior tax years which could result in additional
taxes becoming due and payable by Borrower. Borrower has paid, and shall
continue to pay all amounts necessary to fund all present and future pension,
profit sharing and deferred compensation plans in accordance with their terms,
and Borrower has not and will not withdraw from participation in, permit
partial or complete termination of, or permit the occurrence of any other event
with respect to, any such plan which could reasonably be expected to result in
any liability of Borrower, including any liability to the Pension Benefit
Guaranty Corporation or its successors or any other governmental agency.

 

3.9  Compliance with Law.   Borrower
has, to the best of its knowledge, complied, and will comply, in all material
respects, with all provisions of all foreign, federal, state and local laws and
regulations applicable to Borrower, including, but not limited to, those
relating to Borrower’s ownership of real or personal property, the conduct and
licensing of Borrower’s business, and all environmental matters.

 

3.10  Litigation.   There is no
claim, suit, litigation, proceeding or investigation pending or (to best of
Borrower’s knowledge) threatened against or affecting Borrower in any court or
before any governmental agency (or any basis therefor known to Borrower) which
could reasonably be expected to result, either separately or in the aggregate,
in any Material Adverse Change. Borrower will promptly inform PFG in
writing of any claim, proceeding, litigation or investigation in the future
threatened or instituted against Borrower involving $250,000 or more in the
aggregate for all such claims, proceedings, litigation or investigation.

 

3.11  Use of Proceeds.   All proceeds
of all Loans shall be used solely for lawful business purposes.

 

3.12  No Default.   At the date
hereof, no Default or Event of Default has occurred, and no Default or Event of
Default will have occurred after giving effect to any Loans being made
concurrently herewith.

 

3

 

4.        ADDITIONAL DUTIES OF
BORROWER.

 

4.1  Financial and Other
Covenants.   Borrower
shall at all times comply with the financial and other covenants set forth in
the Schedule.

 

4.2. Remittance of Proceeds.   All proceeds
arising from the disposition of any Collateral shall be delivered, in kind, by
Borrower to PFG in the original form in which received by Borrower not
later than the following Business Day after receipt by Borrower, to be applied
to the Obligations in such order as PFG shall determine; provided that, if no
Default or Event of Default has occurred and is continuing, Borrower shall not
be obligated to remit to PFG (i) the proceeds of Accounts arising in the
ordinary course of business, (ii) the proceeds of the sale of Inventory in
the ordinary course of business, (iii) the proceeds of the sale of
Permitted Investments which are promptly reinvested in other Permitted
Investments, the proceeds of the sale of Equipment to the extent such proceeds
are reinvested in Equipment of comparable utility within six (6) months of
such sale, or the proceeds of the sale of worn out or obsolete Equipment
disposed of by Borrower in good faith in an arm’s length transaction for an
aggregate purchase price of $50,000 or less (for all such transactions in any
fiscal year). Borrower agrees that it will not commingle proceeds of Collateral
with any of Borrower’s other funds or property, but will hold such proceeds
separate and apart from such other funds and property and in an express
trust for PFG, except as set forth above. Nothing in this Section limits
the restrictions on disposition of Collateral set forth elsewhere in this
Agreement.

 

4.3  Insurance.   Borrower
shall, at all times insure all of the tangible personal property Collateral and
carry such other business insurance, with insurers reasonably acceptable to
PFG, in such form and amounts as PFG may reasonably require and as
are customary and in accordance with standard practices for Borrower’s industry
and locations, and Borrower shall provide evidence of such insurance to PFG. All
such insurance policies shall name PFG as an additional loss payee, and shall
contain a lenders loss payee endorsement in form reasonably acceptable to
PFG. Upon receipt of the proceeds of any such insurance, PFG shall apply such
proceeds in reduction of the Obligations as PFG shall determine in its good
faith business judgment, except that, provided no Default or Event of Default
has occurred and is continuing, at the direction of Borrower, PFG shall release
to Borrower insurance proceeds of any such Collateral with respect to which the
insurance proceeds were paid. PFG may require reasonable assurance that
the insurance proceeds so released will be so used. If Borrower fails to
provide or pay for any insurance, PFG may, but is not obligated to, obtain the
same at Borrower’s expense. Borrower shall promptly deliver to PFG copies of
all material reports made to insurance companies.

 

4.4  Reports.   Borrower, at
its expense, shall provide PFG with the written reports set forth in the
Schedule, and such other written reports with respect to Borrower (including
budgets, projections, operating plans and other financial documentation), as
PFG shall from time to time reasonably request in its good faith business
judgment.

 

4.5  Access to Collateral, Books
and Records.   At
reasonable times, and on one Business Day’s notice, PFG, or its agents, shall
have the right to inspect the Collateral, and the right to audit and copy
Borrower’s books and records. The foregoing inspections and audits shall be at
Borrower’s expense for one such inspection and one such audit each year and the
charge therefor shall be $750 per person per day (or such higher amount as
shall represent PFG’s then current standard charge for the same), plus
reasonable out-of-pocket expenses. The PFG costs of any such inspections and
audits in excess of one each year shall be at PFG’s expense; provided, however,
that upon the occurrence and during the continuance of an Event of Default,
Borrower shall be liable for the costs of all such inspections. In no event
shall Borrower be required to disclose to PFG any document or information (i) where
disclosure is prohibited by applicable law or any agreement binding on
Borrower, or (ii) is subject to attorney-client or similar privilege or
constitutes attorney work product. If Borrower is withholding any information
under the preceding sentence, it shall so advise PFG in writing, giving PFG a
general description of the nature of the information withheld and the basis
upon which it is withheld.

 

4.6  Negative Covenants.   Except as may be
permitted in the Schedule, Borrower shall not, without PFG’s prior written
consent (which shall be a matter of its good faith business judgment), do any
of the following:

 

(i) merge or consolidate with
another corporation or entity;

 

(ii) acquire any assets, except in
the ordinary course of business, or make any Investments other than Permitted
Investments;

 

(iii) enter into any other
transaction outside the ordinary course of business;

 

(iv) sell or transfer any Collateral
(including without limitation and sale or transfer of Collateral which is then
leased back by Borrower), except for (A) the sale of Inventory in the
ordinary course of Borrower’s business, and except for the sale of obsolete or
unneeded Equipment and the sale and replacement of Equipment, in each case, in
the ordinary course of business, (B) the sale of, and reinvestment of such
sale proceeds in, Permitted Investments, (C) the granting of Permitted
Liens, and (D) the licensing of Intellectual Property in the ordinary
course of business;

 

4

 

(v) store any Inventory or other
Collateral with any warehouseman or other third party, unless Borrower has used
commercially reasonable efforts to comply with the provisions of Section 3.4(d) above
and has notified PFG of such action or proposed action;

 

(vi) sell any Inventory on a
sale-or-return, guaranteed sale, consignment, or other contingent basis;

 

(vii) make any loans of any money or
other assets, other than Permitted Investments;

 

(viii) incur any Indebtedness, other
than Permitted Indebtedness;

 

(ix) guarantee or otherwise become
liable with respect to the obligations of another party or entity other than
the endorsements of checks and other similar instruments in the ordinary course
of Borrower’s business;

 

(x) pay or declare any dividends on
Borrower’s stock (except for dividends payable solely in stock of Borrower);

 

(xi) redeem, retire, purchase or
otherwise acquire, directly or indirectly, any of Borrower’s stock;

 

(xii) engage, directly or indirectly, in
any business other than the businesses currently engaged in by Borrower or
reasonably related thereto; or

 

(xiii) dissolve or elect to dissolve.

 

Transactions permitted by the foregoing
provisions of this Section are only permitted if no Default or Event of
Default would occur as a result of such transaction.

 

4.7  Litigation Cooperation.   Should any
third-party suit or proceeding be instituted by or against PFG with respect to
any Collateral or relating to Borrower, Borrower shall, without expense to PFG,
make available Borrower and its officers, employees and agents and Borrower’s
books and records, to the extent that PFG may deem them reasonably
necessary in order to prosecute or defend any such suit or proceeding.

 

4.8  Changes.   Borrower
agrees to notify PFG in writing of any changes in the information set forth in
the Representations.

 

4.9  Further Assurances.   Borrower
agrees, at its expense, on request by PFG, to execute all documents and take
all actions, as PFG, may, in its good faith business judgment, deem necessary
or useful in order to perfect and maintain PFG’s perfected first-priority
security interest in the Collateral (subject to Permitted Liens), and in order
to fully consummate the transactions contemplated by this Agreement.

 

5.        TERM.

 

5.1  Maturity Date.   This
Agreement shall continue in effect until the maturity date set forth on the Schedule (the
“Maturity Date”), subject to Sections 5.2 and 5.3 below.

 

5.2  Early Termination.   This
Agreement may be terminated prior to the Maturity Date as follows:  (i) by Borrower, effective three
Business Days after written notice of termination is given to PFG; or (ii) by
PFG at any time after the occurrence and during the continuance of an Event of
Default. There is no termination fee or prepayment penalty.

 

5.3  Payment of Obligations.   On the
Maturity Date or on any earlier effective date of termination, Borrower shall
pay and perform in full all Obligations, whether evidenced by installment
notes or otherwise, and whether or not all or any part of such Obligations
are otherwise then due and payable. Notwithstanding any termination of this
Agreement, all of PFG’s security interests in all of the Collateral and all of
the terms and provisions of this Agreement shall continue in full force and
effect until all Obligations have been paid and performed in full; provided
that PFG may, in its sole discretion, refuse to make any further Loans after
termination. No termination shall in any way affect or impair any right or
remedy of PFG, nor shall any such termination relieve Borrower of any
Obligation to PFG, until all of the Obligations have been paid and performed in
full. Upon payment and performance in full of all the Obligations and
termination of this Agreement, PFG shall promptly terminate its financing
statements with respect to the Borrower and deliver to Borrower such other
documents as may be required to fully terminate PFG’s security interests.

 

6.        EVENTS OF DEFAULT AND
REMEDIES.

 

6.1  Events of Default.   The
occurrence of any of the following events shall constitute an “Event of Default”
under this Agreement, and Borrower shall give PFG immediate written notice
thereof:

 

(a) Any warranty, representation,
statement, report or certificate made or delivered to PFG by Borrower or any of
Borrower’s officers, employees or agents, now or in the future, shall be untrue
or misleading in a material respect when made or deemed to be made; or

 

5

 

(b) Borrower shall fail to pay any
Loan or any interest thereon or any other monetary Obligation within three (3) Business
Days after the date due or fail to pay any other monetary Obligation within
five (5) Business Days after the date due; or

 

(c) Borrower shall fail to comply
with the financial covenants set forth in the Schedule (if any), or shall
breach any of the provisions of Section 4.6 hereof, or shall fail to perform any
other non-monetary Obligation which by its nature cannot be cured, or shall
fail to permit PFG to conduct an inspection or audit as provided in Section 4.5
hereof or shall fail to timely provide PFG with reports due under Section 6
of the Schedule within five Business Days after the date due; or

 

(d) Borrower shall fail to perform any
other non-monetary Obligation which is capable of cure, which failure is not
cured within ten (10) Business Days after the date due; provided, such
cure period may be extended for such additional period as PFG may determine
in its good faith discretion (i) if Borrower is diligently pursuing a cure
that is likely to result in a cure and (ii) that repayment of Obligations
or PFG’s security is not affected by the granting of additional time to cure;
or

 

(e) any levy, assessment,
attachment, seizure, lien or encumbrance (other than a Permitted Lien) is made
on all or any part of the Collateral which is not cured within ten (10) Business
Days after the earlier to occur of (i) the occurrence of the same, or (ii) Borrower’s
knowledge of the same; or

 

(f) any default or event of default
occurs under any obligation secured by a Permitted Lien, which is not cured
within any applicable cure period or waived in writing by the holder of the
Permitted Lien; or

 

(g) Borrower breaches any material
contract or obligation, which has resulted or reasonably may be expected
to result in a Material Adverse Change; or

 

(h) Dissolution, termination of
existence, insolvency or business failure of Borrower; or appointment of a
receiver, trustee or custodian, for all or any part of the property of,
assignment for the benefit of creditors by, or the commencement of any
proceeding by Borrower under any reorganization, bankruptcy, insolvency,
arrangement, readjustment of debt, dissolution or liquidation law or statute of
any jurisdiction, now or in the future in effect, or Borrower shall generally
not pay its debts as they become due, or Borrower shall conceal, remove or
transfer any part of its property, with intent to hinder, delay or defraud
its creditors, or make or suffer any transfer of any of its property which may be
fraudulent under any bankruptcy, fraudulent conveyance or similar law; or

 

(i) the commencement of any proceeding
against Borrower or any guarantor of any of the Obligations under any
reorganization, bankruptcy, insolvency, arrangement, readjustment of debt,
dissolution or liquidation law or statute of any jurisdiction, now or in the
future in effect, which is not cured by the dismissal thereof within 45 days
after the date commenced; or

 

(j) revocation or termination of, or
limitation or denial of liability upon, any guaranty of the Obligations or any
attempt to do any of the foregoing, or commencement of proceedings by any
guarantor of any of the Obligations under any bankruptcy or insolvency law; or

 

(k) revocation or termination of, or
limitation or denial of liability upon, any pledge of any certificate of
deposit, securities or other property or asset of any kind pledged by any third
party to secure any or all of the Obligations, or any attempt to do any of the
foregoing, or commencement of proceedings by or against any such third party
under any bankruptcy or insolvency law; or

 

(l) Borrower makes any payment on account
of any indebtedness or obligation which has been subordinated to the
Obligations (other than as permitted in the applicable subordination
agreement), or if any Person who has subordinated such indebtedness or
obligations terminates or in any way limits his subordination agreement; or

 

(m) there shall occur, without the prior
written consent of PFG, a Change in Control,; or

 

(n) a Material Adverse Change shall
occur.

 

PFG may cease making any Loans
hereunder during any of the cure periods provided above, and thereafter if an
Event of Default has occurred and is continuing.

 

6.2  Remedies.   Upon the
occurrence and during the continuance of any Event of Default, PFG, at its
option, and without notice or demand of any kind except as specified below (all
of which are hereby expressly waived by Borrower), may do any one or more
of the following: (a) Cease making Loans or otherwise extending credit to
Borrower under this Agreement or any other Loan Document; (b) Upon notice
to Borrower (which may be on the same day) accelerate and declare all or
any part of the Obligations to be immediately due, payable, and
performable, notwithstanding any deferred or installment payments allowed by
any instrument evidencing or relating to any Obligation; (c) Take possession
of any or all of the

 

6

 

Collateral wherever it may be found,
and for that purpose Borrower hereby authorizes PFG without judicial process to
enter onto any of Borrower’s premises without interference to search for, take
possession of, keep, store, or remove any of the Collateral, and remain on the
premises or cause a custodian to remain on the premises in exclusive control
thereof, without charge for so long as PFG deems it necessary, in its good
faith business judgment, in order to complete the enforcement of its rights
under this Agreement or any other agreement; provided, however, that should PFG
seek to take possession of any of the Collateral by court process, Borrower
hereby irrevocably waives: (i) any bond and any surety or security
relating thereto required by any statute, court rule or otherwise as an
incident to such possession; (ii) any demand for possession prior to the
commencement of any suit or action to recover possession thereof; and (iii) any
requirement that PFG retain possession of, and not dispose of, any such
Collateral until after trial or final judgment; (d) Require Borrower to
assemble any or all of the Collateral and make it available to PFG at places
designated by PFG which are reasonably convenient to PFG and Borrower, and to
remove the Collateral to such locations as PFG may deem advisable; (e) Complete
the processing, manufacturing or repair of any Collateral prior to a
disposition thereof and, for such purpose and for the purpose of removal, PFG
shall have the right to use Borrower’s premises, vehicles, hoists, lifts,
cranes, and other Equipment and all other property without charge; (f) Sell,
lease or otherwise dispose of any of the Collateral, in its condition at the
time PFG obtains possession of it or after further manufacturing, processing or
repair, at one or more public and/or private sales, in lots or in bulk, for
cash, exchange or other property, or on credit, and to adjourn any such sale
from time to time without notice other than oral announcement at the time
scheduled for sale. PFG shall have the right to conduct such disposition on
Borrower’s premises without charge, for such time or times as PFG deems
reasonable, or on PFG’s premises, or elsewhere and the Collateral need not be
located at the place of disposition. PFG may directly or through any
affiliated company purchase or lease any Collateral at any such public
disposition, and if permissible under applicable law, at any private
disposition. Any sale or other disposition of Collateral shall not relieve
Borrower of any liability Borrower may have if any Collateral is defective
as to title or physical condition or otherwise at the time of sale; (g) Demand
payment of, and collect any Accounts and General Intangibles comprising
Collateral and, in connection therewith, Borrower irrevocably authorizes PFG to
endorse or sign Borrower’s name on all collections, receipts, instruments and
other documents, to take possession of and open mail addressed to Borrower and
remove therefrom payments made with respect to any item of the Collateral or
proceeds thereof, and, in PFG’s good faith business judgment, to grant
extensions of time to pay, compromise claims and settle Accounts and the like
for less than face value; (h) Exercise any and all rights under any
present or future control agreements relating to Deposit Accounts or Investment
Property; and (i) Demand and receive possession of any of Borrower’s
federal and state income tax returns and the books and records utilized in the preparation
thereof or referring thereto. All reasonable attorneys’ fees, expenses, costs,
liabilities and obligations incurred by PFG with respect to the foregoing shall
be added to and become part of the Obligations, shall be due on demand,
and shall bear interest at a rate equal to the highest interest rate applicable
to any of the Obligations. Without limiting any of PFG’s rights and remedies,
from and after the occurrence and during the continuance of any Event of
Default, the interest rate applicable to the Obligations shall be increased by
an additional four percent per annum (the “Default Rate”).

 

6.3  Standards for Determining
Commercial Reasonableness.   Borrower and
PFG agree that a sale or other disposition (collectively, “sale”) of any
Collateral which complies with the following standards will conclusively be
deemed to be commercially reasonable:  (i) Notice
of the sale is given to Borrower at least ten days prior to the sale, and, in
the case of a public sale, notice of the sale is published at least five days
before the sale in a newspaper of general circulation in the county where the
sale is to be conducted; (ii) Notice of the sale describes the collateral
in general, non-specific terms; (iii) The sale is conducted at a place
designated by PFG, with or without the Collateral being present; (iv) The
sale commences at any time between 8:00 a.m. and 6:00 p.m.;  (v) Payment of the purchase price in
cash or by cashier’s check or wire transfer is required; (vi) With respect
to any sale of any of the Collateral, PFG may (but is not obligated to)
direct any prospective purchaser to ascertain directly from Borrower any and
all information concerning the same. PFG shall be free to employ other methods
of noticing and selling the Collateral, in its discretion, if they are
commercially reasonable.

 

6.4  Power of Attorney.   Upon the
occurrence and during the continuance of any Event of Default, without limiting
PFG’s other rights and remedies, Borrower grants to PFG an irrevocable power of
attorney coupled with an interest, authorizing and permitting PFG (acting
through any of its employees, attorneys or agents) at any time, at its option,
but without obligation, with or without notice to Borrower, and at Borrower’s
expense, to do any or all of the following, in Borrower’s name or otherwise,
but PFG agrees that if it exercises any right hereunder, it will do so in good
faith and in a commercially reasonable manner: 
(a) Execute on behalf of Borrower any documents that PFG may, in
its good faith business judgment, deem advisable in order to perfect and
maintain PFG’s security interest in the Collateral, or in order to exercise a
right of Borrower or PFG, or in order to fully consummate all the transactions
contemplated under this Agreement, and all other Loan Documents; (b) Execute
on behalf of Borrower, any invoices relating to any Account, any draft against
any Account Debtor and any notice to any Account Debtor, any proof of claim in
bankruptcy, any Notice of Lien, claim of mechanic’s, materialman’s or other lien,
or assignment or satisfaction of mechanic’s, materialman’s or other lien; (c) Take
control in any manner of any

 

7

 

cash or non-cash items of payment or
proceeds of Collateral; endorse the name of Borrower upon any instruments, or
documents, evidence of payment or Collateral that may come into PFG’s
possession; (d) Endorse all checks and other forms of remittances received
by PFG; (e) Pay, contest or settle any lien, charge, encumbrance, security
interest and adverse claim in or to any of the Collateral, or any judgment
based thereon, or otherwise take any action to terminate or discharge the same;
(f) Grant extensions of time to pay, compromise claims and settle Accounts
and General Intangibles for less than face value and execute all releases and
other documents in connection therewith; (g) Pay any sums required on
account of Borrower’s taxes or to secure the release of any liens therefor, or
both; (h) Settle and adjust, and give releases of, any insurance claim
that relates to any of the Collateral and obtain payment therefor; (i) Instruct
any third party having custody or control of any books or records belonging to,
or relating to, Borrower to give PFG the same rights of access and other rights
with respect thereto as PFG has under this Agreement; and (j) Take any action
or pay any sum required of Borrower pursuant to this Agreement and any other
Loan Documents. Any and all reasonable sums paid and any and all reasonable
costs, expenses, liabilities, obligations and attorneys’ fees incurred by PFG
with respect to the foregoing shall be added to and become part of the
Obligations, shall be payable on demand, and shall bear interest at a rate
equal to the highest interest rate applicable to any of the Obligations. In no
event shall PFG’s rights under the foregoing power of attorney or any of PFG’s
other rights under this Agreement be deemed to indicate that PFG is in control
of the business, management or properties of Borrower.

 

6.5  Application of Proceeds.   All proceeds
realized as the result of any sale of the Collateral shall be applied by PFG
first to the reasonable costs, expenses, liabilities, obligations and attorneys’
fees incurred by PFG in the exercise of its rights under this Agreement, second
to the interest due upon any of the Obligations, and third to the principal of
the Obligations, in such order as PFG shall determine in its sole discretion. Any
surplus shall be paid to Borrower or other persons legally entitled thereto;
Borrower shall remain liable to PFG for any deficiency. If, PFG, in its good
faith business judgment, directly or indirectly enters into a deferred payment
or other credit transaction with any purchaser at any sale of Collateral, PFG
shall have the option, exercisable at any time, in its good faith business
judgment, of either reducing the Obligations by the principal amount of
purchase price or deferring the reduction of the Obligations until the actual
receipt by PFG of the cash therefor.

 

6.6  Remedies Cumulative.   In addition
to the rights and remedies set forth in this Agreement, PFG shall have all the
other rights and remedies accorded a secured party under the Code and under all
other applicable laws, and under any other instrument or agreement now or in
the future entered into between PFG and Borrower, and all of such rights and
remedies are cumulative and none is exclusive. Exercise or partial exercise by
PFG of one or more of its rights or remedies shall not be deemed an election,
nor bar PFG from subsequent exercise or partial exercise of any other rights or
remedies. The failure or delay of PFG to exercise any rights or remedies shall
not operate as a waiver thereof, but all rights and remedies shall continue in
full force and effect until all of the Obligations have been fully paid and
performed.

 

7.        Definitions.  AS USED IN THIS AGREEMENT,
THE FOLLOWING TERMS HAVE THE FOLLOWING MEANINGS:

 

“Account
Debtor” means the obligor on an Account.

 

“Accounts”
means all present and future “accounts” as defined in the California Uniform Commercial
Code in effect on the date hereof with such additions to such term as may hereafter
be made, and includes without limitation all accounts receivable and other sums
owing to Borrower.

 

 “Affiliate” means, with respect to any
Person, a relative, partner, shareholder, director, officer, or employee of
such Person, or any parent or subsidiary of such Person, or any Person
controlling, controlled by or under common control with such Person.

 

“Borrower
Address” shall mean the address(es) listed on the first page of this
Loan and Security Agreement for each Borrower.

 

“Bridge
Lender” has the meaning set forth in Section 8 of the Schedule.

 

“Bridge
Notes” has the meaning set forth in Section 8 of the Schedule.

 

“Business Day” means a day on which
PFG is open for business.

 

“Change in Control” means: (1) a
dissolution, liquidation, or sale of all or substantially all of the assets of
Borrower; (2) a merger or consolidation in which Borrower is not the
surviving corporation; (3) a reverse merger in which Borrower is the
surviving corporation but the shares of the Borrower’s common stock outstanding
immediately preceding the merger are converted by virtue of  the merger into other property, whether in
the form of securities, cash or otherwise; (4) an expression of
intent to acquire control notified to Borrower under Section 13(d)(1)(C) of
the U.S. Securities Exchange Act of 1934, as

 

8

 

amended, which acquisition is subsequently effected; or (5) a change
in control of Borrower effected by a successful tender offer for more than 50%
of the outstanding voting securities of Borrower.

 

“Code”
means the Uniform Commercial Code as adopted and in effect in the State of
California from time to time.

 

“Collateral”
has the meaning set forth in Section 2 above.

 

“continuing”
and “during the continuance of” when used with reference to a Default or
Event of Default means that the Default or Event of Default has occurred and
has not been either waived in writing by PFG or cured within any applicable
cure period.

 

“Default”
means any event which with notice or passage of time or both, would constitute
an Event of Default.

 

“Default
Rate” has the meaning set forth in Section 6.2 above.

 

“Deposit
Accounts” means all present and future “deposit accounts” as defined in the
California Uniform Commercial Code in effect on the date hereof with such
additions to such term as may hereafter be made, and includes without
limitation all general and special bank accounts, demand accounts, checking
accounts, savings accounts and certificates of deposit.

 

 “Equipment” means all present and
future “equipment” as defined in the California Uniform Commercial Code in
effect on the date hereof with such additions to such term as may hereafter
be made, and includes without limitation all machinery, fixtures, goods,
vehicles (including motor vehicles and trailers), and any interest in any of
the foregoing.

 

“Event
of Default” means any of the events set forth in Section 6.1 of this
Agreement.

 

“GAAP”
means generally accepted accounting principles consistently applied.

 

“General
Intangibles” means all present and future “general intangibles” as defined
in the California Uniform Commercial Code in effect on the date hereof
with such additions to such term as may hereafter be made, and includes
without limitation all Intellectual Property, payment intangibles, royalties,
contract rights, goodwill, franchise agreements, purchase orders, customer
lists, route lists, telephone numbers, domain names, claims, income tax
refunds, security and other deposits, options to purchase or sell real or
personal property, rights in all litigation presently or hereafter pending
(whether in contract, tort or otherwise), insurance policies (including without
limitation key man, property damage, and business interruption insurance),
payments of insurance and rights to payment of any kind.

 

“good
faith business judgment” means honesty in fact and good faith (as defined
in Section 1201 of the Code) in the exercise of PFG’s business judgment.

 

“including”
means including (but not limited to).

 

“Indebtedness”
means (a) indebtedness for borrowed money or the deferred purchase price
of property or services (other than trade payables arising in the ordinary
course of business), (b) obligations evidenced by bonds, notes, debentures
or other similar instruments, (c) reimbursement obligations in connection
with letters of credit, and (d) capital lease obligations.

 

 “Intellectual Property” means all
present and future: (a) copyrights, copyright rights, copyright
applications, copyright registrations and like protections in each work of
authorship and derivative work thereof, whether published or unpublished, (b) trade
secret rights, including all rights to unpatented inventions and know-how, and
confidential information; (c) mask work or similar rights available for
the protection of semiconductor chips; (d) patents, patent applications
and like protections including without limitation improvements, divisions,
continuations, renewals, reissues, extensions and continuations-in-part of
the same; (e) trademarks, servicemarks, trade styles, and trade names,
whether or not any of the foregoing are registered, and all applications to
register and registrations of the same and like protections, and the entire
goodwill of the business of Borrower connected with and symbolized by any such
trademarks; (f) computer software and computer software products; (g) designs
and design rights; (h) technology; (i) all claims for damages by way
of past, present and future infringement of any of the rights included above;
and (j) all licenses or other rights to use any property or rights of a type
described above.

 

“Inventory”
means all present and future “inventory” as defined in the California Uniform Commercial
Code in effect on the date hereof with such additions to such term as may hereafter
be made, and includes without limitation all merchandise, raw materials, parts,
supplies, packing and shipping materials, work in process and finished
products, including without limitation such inventory as is temporarily out of
Borrower’s custody or possession or in transit and including any returned goods
and any documents of title representing any of the above.

 

“Investment”
means any beneficial ownership interest in any Person (including any stock,
partnership interest or other equity or debt securities issued by any Person),
and any loan, advance or capital contribution to any Person.

 

9

 

“Investment
Property” means all present and future investment property, securities,
stocks, bonds, debentures, debt securities, partnership interests, limited
liability company interests, options, security entitlements, securities
accounts, commodity contracts, commodity accounts, and all financial assets
held in any securities account or otherwise, and all options and warrants to
purchase any of the foregoing, wherever located, and all other securities of
every kind, whether certificated or uncertificated.

 

“Loan
Documents” means, collectively, this Agreement, the Representations, and
all other present and future documents, instruments and agreements between PFG
and Borrower, including, but not limited to those relating to this Agreement,
and all amendments and modifications thereto and replacements therefor.

 

“Material
Adverse Change” means any of the following: (i) a material adverse
change in the business, operations, or financial or other condition of the
Borrower (in the case of two Borrowers, such entities taken as a whole), or (ii) a
material impairment of the prospect of repayment of any portion of the
Obligations; or (iii) a material impairment of the value or priority of
PFG’s security interests in the Collateral.

 

“Obligations”
means all present and future Loans, advances, debts, liabilities, obligations,
guaranties, covenants, duties and indebtedness at any time owing by Borrower to
PFG, whether evidenced by this Agreement or any note or other instrument or
document, or otherwise, whether arising from an extension of credit, opening of
a letter of credit, banker’s acceptance, loan, guaranty, indemnification or
otherwise, whether direct or indirect (including, without limitation, those
acquired by assignment and any participation by PFG in Borrower’s debts owing
to others), absolute or contingent, due or to become due, including, without
limitation, all interest, charges, expenses, fees, attorney’s fees, expert
witness fees, audit fees, collateral monitoring fees, closing fees, facility
fees, termination fees, minimum interest charges and any other sums chargeable
to Borrower under this Agreement or under any other Loan Documents.

 

“Other
Property” means the following as defined in the California Uniform Commercial
Code in effect on the date hereof with such additions to such term as may hereafter
be made, and all rights relating thereto: all present and future “commercial
tort claims” (including without limitation any commercial tort claims
identified in the Representations), “documents”, “instruments”, “promissory
notes”, “chattel paper”, “letters of credit”, “letter-of-credit rights”, “fixtures”,
“farm products” and “money”; and all other goods and personal property of every
kind, tangible and intangible, whether or not governed by the California Uniform Commercial
Code.

 

“Payment”
means all checks, wire transfers and other items of payment received by for
credit to Borrower’s outstanding Obligations.

 

“Permitted
Indebtedness” means

 

(i) the Loans and other Obligations
(including for the avoidance of doubt, the Existing PFG Loans, as described in
the Schedule); and

 

(ii) Indebtedness existing on the
date hereof and shown on Exhibit A hereto;

 

(iii) Subordinated Debt;

 

(iv) Indebtedness owing to the
Bridge Lenders under the Bridge Notes, so long as such Indebtedness is
subordinated to the Obligations;

 

(v) other Indebtedness secured by
Permitted Liens;

 

(vi) reimbursement obligations in
respect of letters of credit in an aggregate face amount outstanding not to
exceed $300,000 at any time outstanding, which have been reported to PFG in
writing.

 

“Permitted
Investments” are:

 

(i) Investments (if any) shown on
the Exhibit A and existing on the date hereof;

 

(ii) marketable direct obligations
issued or unconditionally guaranteed by the United States or its agency or any
State maturing within 1 year from its acquisition;

 

(iii) commercial paper maturing no
more than 1 year after its creation and having the highest rating from either
Standard & Poor’s Corporation or Moody’s Investors Service, Inc; and

 

(iv) bank certificates of deposit
issued maturing no more than 1 year after issue; and

 

10

 

(v) other investments (except for
common stock of Borrower) consistent with Borrower’s Investment Policy attached
hereto as Exhibit A.

 

“Permitted
Liens” means the following:

 

(i) purchase money security
interests in specific items of Equipment;

 

(ii) leases of specific items of
Equipment;

 

(iii) liens for taxes not yet
payable, or being contested in the manner contemplated in Section 3.8
above;

 

(iv)  subject to the written consent of
PFG on a case by case basis that such event(s) shall not give rise to an Event
of Default, which consent may be given or withheld in PFG’s business
judgment or subject to such conditions as PFG may determine in good faith,
liens for fees, assessments, or other charges of a governmental authority,
provided that the payment of such fees, assessments, or other charges of a
governmental authority referenced in this clause (iv) that are due and
payable are being contested in good faith and by appropriate proceedings
diligently pursued and as to which adequate financial reserves have been
established in accordance with GAAP on Borrower’s books and records and a stay
of enforcement of any such lien is in effect;

 

(v) liens on deposits made by Borrower
in the ordinary course of business in connection with, or to secure payment of,
obligations under worker’s compensation, unemployment insurance, social
security, and other similar laws, or to secure the performance of bids,
tenders, or contracts (other than for the repayment of Indebtedness) or to
secure indemnity, performance, or other similar bonds for the performance of
bids, tenders, or contracts (other than for the repayment of Indebtedness) or
to secure statutory obligations (other than Liens arising under ERISA or
Environmental Liens) or surety or appeal bonds, or to secure indemnity,
performance, or other similar bonds;

 

(vi) liens constituting encumbrances in
the nature of reservations, exceptions, encroachments, easements, rights of
way, covenants running with the land, and other similar title exceptions or
encumbrances affecting any Real Property, provided that any such liens do not
in the aggregate materially interfere with the use of such Real Property in the
ordinary conduct of Borrower’s business;

 

(vii) liens arising from judgments and
attachments in connection with court proceedings, provided that (a) the
attachment or enforcement of such liens would not otherwise result in an Event
of Default hereunder, (b) such liens are being contested in good faith by
appropriate proceedings diligently pursued, (c) adequate financial
reserves have been established on Borrower’s books and records in accordance
with GAAP, (d) no Collateral with an aggregate value in excess of $250,000
is subject to a material risk of loss or forfeiture, and (e) a stay of
execution pending appeal or proceeding for review is in effect;

 

(viii) any additional security
interests and liens consented to in writing by PFG, which consent may be
withheld in its good faith business judgment. PFG will have the right to
require, as a condition to its consent under this subparagraph (iv), that the
holder of the additional security interest or lien sign an intercreditor
agreement on PFG’s then standard form, acknowledge that the security interest
is subordinate to the security interest in favor of PFG, and agree not to take
any action to enforce its subordinate security interest so long as any
Obligations remain outstanding, and that Borrower agree that any uncured
default in any obligation secured by the subordinate security interest shall
also constitute an Event of Default under this Agreement;

 

(ix) security interests being
terminated substantially concurrently with this Agreement;

 

(x) liens of materialmen, mechanics, warehousemen,
carriers, or other similar liens arising in the ordinary course of business and
securing obligations which are not delinquent; provided, that Borrower may,
however, defer payment of any of the foregoing which are contested by Borrower
in good faith, provided that Borrower (a) contests the same by appropriate
proceedings promptly and diligently instituted and conducted, (b) notifies
PFG in writing of the commencement of, and any material development in, any
such proceedings which involved $250,000 either individually or in the
aggregate, and (c) posts bonds or takes any other steps required to stay
the enforcement of any such lien upon any of the Collateral against which such
person could then proceed;

 

(xi) liens incurred in connection
with the extension, renewal or refinancing of the indebtedness secured by liens
of the type described above in clauses (i) or (ii) above or clause
(xiv) below, provided that any extension, renewal or replacement lien is
limited to the property encumbered by the existing lien and the principal
amount of the indebtedness being extended, renewed or refinanced does not
increase;

 

11

 

(xii) liens in favor of customs and
revenue authorities which secure payment of customs duties in connection with
the importation of goods;

 

(xiii) statutory, common law or
contractual liens of depository institutions or institutions holding securities
account (including rights of set-off) securing only customary charges and fees
in connection with such accounts; and

 

(xiv) liens in favor of the Bridge
Lenders securing obligations under the Bridge Notes, so long as such liens are
subordinated to the liens of PFG.

 

“Person”
means any individual, sole proprietorship, partnership, joint venture, trust,
unincorporated organization, association, corporation, government, or any
agency or political division thereof, or any other entity.

 

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

 

“Representations”
means the written Representations and Warranties provided by Borrower to PFG
referred to in the Schedule.

 

“Subordinated Debt” means debt
incurred by Borrower subordinated to Borrower’s debt to PFG (pursuant to a
subordination agreement entered into between PFG, Borrower and the subordinated
creditor), on terms acceptable to PFG in its absolute discretion (which for the
avoidance of doubt includes the Bridge Notes).

 

Other
Terms. All accounting terms used in this Agreement, unless
otherwise indicated, shall have the meanings given to such terms in accordance
with GAAP, consistently applied. All other terms contained in this Agreement,
unless otherwise indicated, shall have the meanings provided by the Code, to
the extent such terms are defined therein.

 

8.        GENERAL PROVISIONS.

 

8.1  Confidentiality.   PFG agrees to use the same degree of care
that it exercises with respect to its own proprietary information, to maintain
the confidentiality of any and all proprietary, trade secret or confidential
information provided to or received by PFG from the Borrower, which indicates
that it is confidential, including business plans and forecasts, non-public
financial information, confidential or secret processes, formulae, devices and
contractual information, customer lists, and employee relation matters,
provided that PFG may disclose such information (i) to its officers,
directors, employees, attorneys, accountants, affiliates, participants,
prospective participants, assignees and prospective assignees, and such other
Persons to whom PFG shall at any time be required to make such disclosure in
accordance with applicable law or legal process, and (ii) in its good
faith business judgment in connection with the enforcement of its rights or
remedies after an Event of Default, or in connection with any dispute with
Borrower or any other Person relating to Borrower. The confidentiality agreement
in this Section supersedes any prior confidentiality agreement of PFG
relating to Borrower.

 

8.2  Interest Computation.   In computing
interest on the Obligations, all Payments received after 12:00 Noon, Pacific
Time, on any day shall be deemed received on the next Business Day.

 

8.3 Payments.   All Payments
may be applied, and in PFG’s good faith business judgment reversed and
re-applied, to the Obligations, in such order and manner as PFG shall determine
in its good faith business judgment.

 

8.4  Monthly Accountings.   PFG shall
provide Borrower monthly with an account of advances, charges, expenses and
payments made pursuant to this Agreement. Such account shall be deemed correct,
accurate and binding on Borrower and an account stated (except for reverses and
reapplications of payments made and corrections of errors discovered by PFG),
unless Borrower notifies PFG in writing to the contrary within 90 days after
such account is rendered, describing the nature of any alleged errors or
omissions.

 

8.5  Notices.   All notices
to be given under this Agreement shall be in writing and shall be given either
personally, or by reputable private delivery service, or by regular first-class mail,
or certified mail return receipt requested, or by fax to the most recent fax
number a party has for the other party (and if by fax or electronic mail, sent
concurrently by one of the other methods provided herein), addressed to PFG or
Borrower at the addresses shown in the heading to this Agreement, or at any
other address designated in writing by one party to the other party. All
notices shall be deemed to have been given upon delivery in the case of notices
personally delivered, or at the expiration of one Business Day following
delivery to the private delivery service, or two Business Days following the
deposit thereof in the United States mail, with postage prepaid, or on the
first business day of receipt during business hours in the case of notices sent
by fax or electronic mail, as provided herein.

 

8.6  Severability. 
 Should any
provision of this Agreement be held by any court of competent jurisdiction to
be void or unenforceable, such defect shall not affect the remainder of this
Agreement, which shall continue in full force and effect.

 

12

 

8.7  Integration. 
 This
Agreement and such other written agreements, documents and instruments as may be
executed in connection herewith are the final, entire and complete agreement
between Borrower and PFG and supersede all prior and contemporaneous
negotiations and oral representations and agreements, all of which are merged
and integrated in this Agreement. There are no oral understandings,
representations or agreements between the parties which are not set forth in
this Agreement or in other written agreements signed by the parties in
connection herewith.

 

8.8  Waivers; Indemnity.   The failure
of PFG at any time or times to require Borrower to strictly comply with any of
the provisions of this Agreement or any other Loan Document shall not waive or
diminish any right of PFG later to demand and receive strict compliance
therewith. Any waiver of any default shall not waive or affect any other
default, whether prior or subsequent, and whether or not similar. None of the
provisions of this Agreement or any other Loan Document shall be deemed to have
been waived by any act or knowledge of PFG or its agents or employees, but only
by a specific written waiver signed by an authorized officer of PFG and
delivered to Borrower. Borrower waives the benefit of all statutes of
limitations relating to any of the Obligations or this Agreement or any other
Loan Document, and Borrower waives demand, protest, notice of protest and
notice of default or dishonor, notice of payment and nonpayment, release,
compromise, settlement, extension or renewal of any commercial paper,
instrument, account, General Intangible, document or guaranty at any time held
by PFG on which Borrower is or may in any way be liable, and notice of any
action taken by PFG, unless expressly required by this Agreement. Borrower
hereby agrees to indemnify PFG and its affiliates, subsidiaries, parent,
directors, officers, employees, agents, and attorneys, and to hold them
harmless from and against any and all claims, debts, liabilities, demands,
obligations, actions, causes of action, penalties, and related costs and
expenses (including reasonable attorneys’ fees), of every kind, which they may sustain
or incur based upon or arising out of any of the Obligations, or any
relationship or agreement between PFG and Borrower, or any other matter,
relating to Borrower or the Obligations; provided that this indemnity
shall  not extend to damages proximately
caused by the indemnitee’s own gross negligence or willful misconduct. Notwithstanding
any provision in this Agreement to the contrary, the indemnity agreement set
forth in this Section shall survive any termination of this Agreement and
shall for all purposes continue in full force and effect.

 

8.9  No Liability for Ordinary
Negligence.   Neither PFG,
nor any of its directors, officers, employees, agents, attorneys or any other
Person affiliated with or representing PFG shall be liable for any claims,
demands, losses or damages, of any kind whatsoever, made, claimed, incurred or
suffered by Borrower or any other party through the ordinary negligence of PFG,
or any of its directors, officers, employees, agents, attorneys or any other
Person affiliated with or representing PFG, but nothing herein shall relieve
PFG from liability for its own gross negligence or willful misconduct.

 

8.10  Amendment.   The terms
and provisions of this Agreement may not be waived or amended, except in a
writing executed by Borrower and a duly authorized officer of PFG.

 

8.11  Time of Essence.   Time is of
the essence in the performance by Borrower of each and every obligation under
this Agreement.

 

8.12  Attorneys’ Fees and Costs.   Borrower
shall reimburse PFG for all reasonable attorneys’ fees and all filing,
recording, search, title insurance, appraisal, audit, and other reasonable
costs incurred by PFG: (a) in connection with the preparation, negotiation
and closing of this Agreement (not to exceed $30,000), and (b) any future
amendments, consents, waivers or supplements to this Agreement, and (c) upon
the occurrence and during the continuance of a Default or an Event of Default,
to (i) obtain legal advice in connection with this Agreement or Borrower; (ii) enforce,
or seek to enforce, any of its rights hereunder; (iii) prosecute actions
against, or defend actions by, Account Debtors; (iv) commence, intervene
in, or defend any action or proceeding; (v) initiate any complaint to be
relieved of the automatic stay in bankruptcy; file or prosecute any probate
claim, bankruptcy claim, third-party claim, or other claim; (vi) examine,
audit, copy, and inspect any of the Collateral or any of Borrower’s books and
records; (vii) protect, obtain possession of, lease, dispose of, or
otherwise enforce PFG’s security interest in, the Collateral; and (viii) otherwise
represent PFG in any litigation relating to Borrower. If either PFG or Borrower
files any lawsuit against the other predicated on a breach of this Agreement,
the prevailing party in such action shall be entitled to recover its reasonable
costs and attorneys’ fees, including (but not limited to) reasonable attorneys’
fees and costs incurred in the enforcement of, execution upon or defense of any
order, decree, award or judgment. All attorneys’ fees and costs to which PFG may be
entitled pursuant to this Paragraph shall immediately become part of
Borrower’s Obligations, shall be due on demand, and shall bear interest at a
rate equal to the highest interest rate applicable to any of the Obligations.

 

8.13  Benefit of Agreement.   The
provisions of this Agreement shall be binding upon and inure to the benefit of
the respective successors, assigns, heirs, beneficiaries and representatives of
Borrower and PFG; provided, however, that Borrower may not assign or
transfer any of its rights under this Agreement without the prior written
consent of PFG, and any prohibited assignment shall be void. No consent by PFG
to any assignment shall release Borrower from its liability for the
Obligations.

 

13

 

8.14  Joint and Several Liability.
  If Borrower
consists of more than one Person, their liability shall be joint and several,
and the compromise of any claim with, or the release of, any Borrower shall not
constitute a compromise with, or a release of, any other Borrower.

 

8.15  Limitation of Actions.   Any claim or
cause of action by Borrower against PFG, its directors, officers, employees,
agents, accountants or attorneys, based upon, arising from, or relating to this
Loan Agreement, or any other Loan Document, or any other transaction contemplated
hereby or thereby or relating hereto or thereto, or any other matter, cause or
thing whatsoever, occurred, done, omitted or suffered to be done by PFG, its
directors, officers, employees, agents, accountants or attorneys, shall be
barred unless asserted by Borrower by the commencement of an action or
proceeding in a court of competent jurisdiction by the filing of a complaint
within one year after the first act, occurrence or omission upon which such
claim or cause of action, or any part thereof, is based, and the service
of a summons and complaint on an officer of PFG, or on any other person
authorized to accept service on behalf of PFG, within thirty (30) days
thereafter. Borrower agrees that such one-year period is a reasonable and
sufficient time for Borrower to investigate and act upon any such claim or
cause of action. The one-year period provided herein shall not be waived,
tolled, or extended except by the written consent of PFG in its sole discretion.
This provision shall survive any termination of this Loan Agreement or any
other Loan Document.

 

8.16  Paragraph Headings;  Construction. 
 Paragraph
headings are only used in this Agreement for convenience. Borrower and PFG
acknowledge that the headings may not describe completely the subject matter
of the applicable paragraph, and the headings shall not be used in any manner
to construe, limit, define or interpret any term or provision of this
Agreement. This Agreement has been fully reviewed and negotiated between the
parties and no uncertainty or ambiguity in any term or provision of this
Agreement shall be construed strictly against PFG or Borrower under any rule of
construction or otherwise.

 

8.17  Governing Law;
Jurisdiction;  Venue.   This
Agreement and all acts and transactions hereunder and all rights and
obligations of PFG and Borrower shall be governed by the laws of the State of
New York. As a material part of the consideration to PFG to enter into
this Agreement, Borrower (i) agrees that all actions and proceedings
relating directly or indirectly to this Agreement shall, at PFG’s option, be
litigated in courts located within California, and that the exclusive venue
therefor shall be San Francisco County; (ii) consents to the jurisdiction
and venue of any such court and consents to service of process in any such
action or proceeding by personal delivery or any other method permitted by law;
and (iii) waives any and all rights Borrower may have to object to
the jurisdiction of any such court, or to transfer or change the venue of any
such action or proceeding.

 

8.18  Mutual Waiver of Jury Trial.   BORROWER AND PFG EACH HEREBY
WAIVE THE RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON,
ARISING OUT OF, OR IN ANY WAY RELATING TO, THIS AGREEMENT OR ANY OTHER PRESENT
OR FUTURE INSTRUMENT OR AGREEMENT BETWEEN PFG AND BORROWER, OR ANY CONDUCT,
ACTS OR OMISSIONS OF PFG OR BORROWER OR ANY OF THEIR DIRECTORS, OFFICERS,
EMPLOYEES, AGENTS, ATTORNEYS OR ANY OTHER PERSONS AFFILIATED WITH PFG OR
BORROWER, IN ALL OF THE FOREGOING CASES, WHETHER SOUNDING IN CONTRACT OR TORT
OR OTHERWISE.

 

8.19 Representations and
warranties of PFG.   PFG
has all requisite power and has taken all requisite action to execute and
deliver each of this Agreement and to carry out and perform all of its
obligations hereunder. This Agreement has been duly authorized, executed and
delivered on behalf of Purchaser and constitutes the valid and binding
agreement of PFG, enforceable in accordance with its terms, except (i) as
limited by applicable bankruptcy, insolvency, 
reorganization or similar laws relating to or affecting the enforcement
of creditors’ rights generally and (ii) as limited by equitable principles
generally. The consummation of the transactions contemplated herein and the
fulfillment of the terms herein will not result in a breach of any of the terms
or provisions of PFG’s partnership agreement or other relevant organizational
documents.

 

8.20  Provisions Relating to Oregon Law.   To the extent
that all or any portion of this Agreement is determined by a court of competent
jurisdiction to be subject to Oregon law, notwithstanding the parties’
determination that it shall be governed by New York law, the following
disclosures are made:

 

In compliance with Oregon law, the Borrower
and any Guarantor(s) should read carefully and acknowledge your receipt and
understanding of the following statement:

 

UNDER OREGON LAW, MOST AGREEMENTS, PROMISES
AND COMMITMENTS MADE BY US AFTER NOVEMBER 3, 1989, CONCERNING LOANS AND
OTHER CREDIT EXTENSIONS WHICH ARE NOT FOR PERSONAL, FAMILY OR HOUSEHOLD
PURPOSES OR SECURED SOLELY BY THE BORROWER’S RESIDENCE MUST BE IN WRITING,
EXPRESS CONSIDERATION AND BE SIGNED BY AN AUTHORIZED REPRESENTATIVE OF LENDER
TO BE ENFORCEABLE.

 

14

 

Under Oregon law, we are also required to
notify you of certain matters related to our right to place insurance on the
property that is collateral for our loan in certain circumstances. In
compliance with this law, please read carefully and acknowledge your receipt and
understanding of the following warning:

 

WARNING:  UNLESS YOU PROVIDE US WITH EVIDENCE OF THE
INSURANCE COVERAGE AS REQUIRED BY OUR CONTRACT OR LOAN AGREEMENT, WE MAY PURCHASE
INSURANCE AT YOUR EXPENSE TO PROTECT OUR INTEREST. THIS INSURANCE MAY, BUT NEED
NOT, ALSO PROTECT YOUR INTEREST. IF THE COLLATERAL BECOMES DAMAGED, THE
COVERAGE WE PURCHASE MAY NOT PAY ANY CLAIM YOU MAKE OR ANY CLAIM MADE
AGAINST YOU. YOU MAY LATER CANCEL THIS COVERAGE BY PROVIDING EVIDENCE THAT
YOU HAVE OBTAINED PROPERTY COVERAGE ELSEWHERE.

 

YOU ARE RESPONSIBLE FOR THE COST OF ANY
INSURANCE PURCHASED BY US. THE COST OF THIS INSURANCE MAY BE ADDED TO YOUR
CONTRACT OR LOAN BALANCE. IF THIS COST IS ADDED TO YOUR CONTRACT OR LOAN
BALANCE, THE INTEREST RATE PAYABLE UNDER THE UNDERLYING LOAN WILL APPLY TO THIS
ADDED AMOUNT. THE EFFECTIVE DATE OF THE COVERAGE MAY BE THE DATE YOUR
PRIOR COVERAGE LAPSED OR THE DATE YOU FAILED TO PROVIDE PROOF OF COVERAGE.

 

THE COVERAGE WE PURCHASE MAY BE
CONSIDERABLY MORE EXPENSIVE THAN INSURANCE YOU CAN OBTAIN ON YOUR OWN AND MAY NOT
SATISFY ANY NEED FOR PROPERTY DAMAGE COVERAGE OR ANY MANDATORY LIABILITY
INSURANCE REQUIREMENTS IMPOSED BY APPLICABLE LAW. (Each reference to “you” and “your”
shall refer to Borrower and each reference to “us” and “we” shall refer to
Lender.)

 

 

	
  Borrower:

  	
  PFG:

  
	
   

  	
   

  
	
  Bioject Medical Technologies Inc.

  	
  PARTNERS FOR GROWTH, L.P.

  
	
   

  	
   

  
	
   

  	
   

  
	
  By

  	
  /s/ Jim O’Shea

  	
   

  	
  By

  	
  /s/Andrew W. Kahn

  	
   

  
	
   

  	
  Jim O’Shea, President

  	
   

  
	
   

  	
  Name:

  	
  Andrew W. Kahn

  	
   

  
	
  By

  	
  /s/ Christine Farrell

  	
   

  	
   

  
	
   

  	
  Secretary or Ass’t Secretary

  	
  Title:

  	
  Manager, Partners for Growth,
  LLC

  
	
   

  	
   

  	
  Its General Partner

  
	
   

  	
   

  
	
  Borrower:

  	
   

  
	
   

  	
   

  
	
  Bioject Inc.

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By

  	
  /s/ Jim O’Shea

  	
   

  	
   

  
	
   

  	
  Jim O’Shea, President

  	
   

  
	
   

  	
   

  
	
  By

  	
  /s/ Christine Farrell

  	
   

  	
   

  
	
   

  	
  Secretary or Ass’t Secretary

  	
   

  
											

 

15

 

Partners For Growth

 

Schedule to

 

2006 Term
Loan and Security Agreement

 

	
  Borrower:

  	
   

  	
  Bioject Medical Technologies Inc.

  
	
  Address:

  	
   

  	
  20245 S.W. 95th Ave., Tualatin, OR  97062

  
	
   

  	
   

  	
   

  
	
  Borrower:

  	
   

  	
  Bioject, Inc.

  
	
  Address:

  	
   

  	
  20245 S.W. 95th Ave., Tualatin, OR  97062

  
	
   

  	
   

  	
   

  
	
  Date:

  	
   

  	
  March 29, 2006

  

 

This Schedule forms an integral part of the 2006 Term Loan
and Security Agreement between PARTNERS FOR GROWTH, L.P. and the above-borrower
of even date.

 

1.  LOAN (Section 1.1):

 

	
   

  	
  The Loan shall consist of a term loan in the amount of $1,250,000,
  which shall be funded in its entirety on the date hereof

  The Principal Amount of
  the Loan and all other monetary Obligations shall be repaid on the Maturity
  Date.

  
	
   

  	
   

  
	
  PFG Conversion:

  	
  At any time prior to the Maturity Date, PFG may at its option
  convert the principal amount of and all accrued and unpaid interest under
  this Loan (or any part thereof) into Bioject Medical Technologies
  Inc.’s  (“BMTI”) common stock (the
  “Conversion Stock”) at a conversion price equal to the lower of (a) $1.37
  per share (subject to adjustment, as set forth below) or (b) the price
  per share at which the promissory notes issued pursuant to that certain Note
  and Warrant Purchase Agreement between BMTI and the purchasers thereunder
  dated March 8, 2006 convert into BMTI’s Series E Preferred Stock
  (or, failing BMTI stockholder approval, such other securities into which such
  notes become convertible) (the “Conversion Price”). The Conversion Price and
  the Conversion Stock are subject to adjustment for stock splits,
  combinations, reclassifications and similar transactions. PFG
  may exercise its right to convert the Loan or part thereof by
  telecopying or otherwise delivering an executed and completed notice
  specifying the portion of the Loan to be converted into Conversion Stock (a
  “Conversion Notice”). Any fractional shares will be paid in cash. Each date
  on which a Conversion Notice is telecopied or delivered to BMTI in accordance
  with the provisions hereof shall be deemed a 
  Conversion Date. Pursuant to the terms of the Conversion Notice, the
  BMTI will issue stock certificates for the Conversion Stock within five
  (5) business days of the delivery of the Conversion Notice. The
  conversion of the Loan into Conversion Stock is subject only to the approval
  of such transaction by BMTI’s stockholders, which approval BMTI agrees to use
  its best efforts to obtain at the BMTI 2006 Annual Meeting. In the event that
  the requisite percentage of BMTI stockholders do not approve the issue of
  Conversion Stock (and the Warrants (as defined in the “Prepayment” clause
  below)) at the earlier of the BMTI 2006 Annual Meeting or July 31, 2006,
  the Loan shall be due upon demand by PFG.

  

 

1

 

	
  BMTI-Initiated

  	
   

  
	
  Conversion:

  	
  At any time prior to the Maturity Date, BMTI may initiate a
  conversion of the Loan into Conversion Stock by delivering a notice (the
  “BMTI Conversion Notice”) to PFG, so long as all of the following conditions
  have been demonstrably met:

  
	
   

  	
   

  
	
   

  	
  (i) the Conversion Stock must be freely tradable either pursuant
  to a registration statement covering such common stock or Rule 144
  (without volume limitation);

  
	
   

  	
   

  
	
   

  	
  (ii) the Conversion Stock must have traded above 300% of the
  Conversion Price for twenty (20) consecutive trading days prior to delivery
  of the BMTI Conversion Notice;

  
	
   

  	
   

  
	
   

  	
  (iii) the number of shares of Conversion Stock issuable pursuant
  to the Borrower Conversion Notice may not exceed 50% of the average
  daily trading volume for BMTI’s common stock over the ten
  (10) consecutive trading days period immediately prior to the delivery
  of the BMTI Conversion Notice; and

  
	
   

  	
   

  
	
   

  	
  (iv) if BMTI initiates a conversion of the Loan in part, at
  least 5 Business Days must lapse between such conversion and any other
  Borrower-initiated conversion under this Section, which subsequent conversion
  is conditioned on preconditions (i) through (iii) being satisfied.

  
	
   

  	
   

  
	
   

  	
  Each BMTI Conversion Notice shall include, inter alia, a statement or
  calculation of compliance with the preconditions to BMTI conversion as set
  forth in clauses (i) through (iv) above.

  
	
   

  	
   

  
	
  Registration:

  	
  Conversion Stock issuable pursuant to a BMTI and/or PFG-initiated
  conversion, common stock issuable as payment of interest and common stock
  issuable under the Warrants (as defined in the “Prepayment” clause, below)
  shall be registered on the same registration statement on Form S-3 as
  the shares of common stock issuable upon conversion of BMTI’s Series E
  Preferred Stock (or failing the issue of Series E Preferred Stock or
  another preferred equity financing, on a registration statement on
  Form S-3 to be filed within 60 days of shareholder approval of
  conversion of the Loan and the issuance of the Warrants).

  
	
   

  	
   

  
	
  Prepayment:

  	
  Borrower may prepay the Loan plus all accrued but unpaid
  interest in whole or in part at any time, without penalty, subject to
  compliance with the following provisions. At the time any prepayment is made,
  and subject to the shareholder approval referred to above, BMTI shall issue
  PFG a warrant to purchase that number of shares of BMTI’s common stock as
  would be issued at such time if BMTI or PFG had converted that portion of the
  Loan that is equal to the prepayment (each a “Warrant” and all such Warrants
  collectively, “Warrants”). The exercise price of the Warrant(s) shall be equal
  to the Conversion Price. The expiration date of each Warrant issued under
  this clause shall be the Maturity Date (ignoring any early termination of the
  Loan due to prepayment or otherwise). The form of Warrant shall be in
  substantially the form of the warrant issued to PFG in connection with
  the Existing PFG Loans (as defined in Section 8 of this Schedule).

  
	
   

  	
   

  
	
  2. INTEREST.

  	
   

  
	
  Interest Rate (Section 1.2):

  
	
   

  
	
   

  	
  A rate equal to the Prime Rate per annum, measured monthly and
  applied to the average daily aggregate amount outstanding under this
  Agreement each month. Interest shall be calculated on the basis of a 360-day
  year and a year of twelve months of 30 days each for the actual number of
  days elapsed. Accrued interest for each month shall be payable monthly, on
  the first day of each month for interest accrued during the prior month. PFG
  shall have the right to adjust the rate applicable to amounts outstanding
  hereunder as and when the Prime Rate changes, but may elect in its sole
  discretion to reflect any such changes on a monthly basis.

  
	
   

  	
   

  
	
   

  	
  “Prime Rate” means the rate quoted from time to time by
  Silicon Valley Bank as its prime lending rate.

  

 

2

 

	
   

  	
  After shareholder approval of the conversion of the Loan and for so
  long as the holders of the Series E Preferred Stock of Bioject Medical
  Technologies Inc. (“BMTI”) have the right to receive dividends payable in
  shares of Series E Preferred Stock of BMTI, PFG shall have the right to
  receive from time to time, at its option, as payment of interest for any
  month, common stock of BMTI rather than cash. The number of shares of common
  stock issuable shall be calculated as interest accrued during the month
  divided by the Conversion Price. BMTI common stock issuable in lieu of cash
  interest shall be issued not later than 5 business days after the end of each
  month. For example, if $1,000 in interest is due to PFG for the month of
  February, then 729 shares of BMTI common stock would be issued to PFG not
  later than the fifth business day of March. Any fractional shares will be
  paid in cash.

  
	
   

  	
   

  
	
  3. FEES (Section 1.3):

  	
   

  
	
   

  	
   

  
	
  Diligence Fee:

  	
  $25,000 fee
  payable to PFG, non-refundable.

  
	
   

  	
   

  
	
  4. MATURITY DATE

  	
   

  
	
  (Section 5.1):

  	
  March    ,
  2011

  
	
   

  	
   

  
	
  5. FINANCIAL COVENANTS

  	
   

  
	
  (Section 4.1):

  	
  NONE

  
	
   

  	
   

  
	
  6. REPORTING.

  	
   

  
	
  (Section 4.4):

  	
   

  
	
   

  	
   

  
	
   

  	
  Borrower
  shall provide PFG with the following, as and when requested by PFG:

  
	
   

  	
   

  
	
   

  	
  (a)

  	
  Monthly unaudited, management-prepared financial statements prepared
  in accordance with GAAP, within ten (10) Business Days after the end of
  each month.

  
	
   

  	
   

  	
   

  
	
   

  	
  (b)

  	
  Monthly Compliance Certificates, within ten (10) Business Days
  after the end of each month, in such form as PFG shall reasonably
  specify, signed by the Chief Financial Officer of Borrower (or, if there is
  no Chief Financial Officer, the Secretary of Borrower or such other person
  who has been vested by the Board of Directors with the duties and
  responsibilities of the Chief Financial Officer), certifying that as of the
  end of such month Borrower was in full compliance with all of the terms and
  conditions of this Agreement, and setting forth such other information as PFG
  shall reasonably request, including, without limitation, a statement that at
  the end of such month there were no held checks.

  
	
   

  	
   

  	
   

  
	
   

  	
  (c)

  	
  Quarterly financial statements, as soon as available, and in any
  event within forty-five days after the end of each fiscal quarter of Borrower
  (other than the last fiscal quarter in any year); provided, however, if
  Borrower files a form 10-Q with the Securities and Exchange Commission
  and the same is available within said period through EDGAR, such availability
  will satisfy this requirement.

  
	
   

  	
   

  	
   

  
	
   

  	
  (d)

  	
  A quarterly information update certificate, in the form of an
  update of the Representations, within the earlier to occur of ten
  (10) Business Days after

  

 

3

 

	
   

  	
   

  	
  the end of each fiscal quarter of Borrower or promptly following the
  knowledge of any executive officer of Borrower that the Representations are
  no longer true, complete and accurate.

  
	
   

  	
   

  	
   

  
	
   

  	
  (e)

  	
  Annual financial statements, as soon as available, and in any event
  within 120 days following the end of Borrower’s fiscal year, certified by,
  and with an unqualified opinion of, independent certified public accountants
  reasonably acceptable to PFG; provided, however, if Borrower files a
  form 10-K with the Securities and Exchange Commission and the same is
  available within said period through EDGAR, such availability will satisfy
  this requirement.

  
	
   

  	
   

  
	
  7. BORROWER INFORMATION:

  
	
   

  	
   

  
	
   

  	
  Borrower represents and warrants that the information set forth in
  the Representations and Warranties of the Borrower dated March 29, 2006,
  previously submitted to PFG (the “Representations”) is true and correct as of
  the date hereof.

  
	
   

  	
   

  
	
  8. ADDITIONAL PROVISIONS

  	
   

  
	
   

  	
   

  
	
   

  	
  (a)

  	
  Bridge Lenders.  
  As used herein, “Bridge Lenders” means the holders of those
  convertible subordinated promissory notes in the aggregate principal amount
  of $1.5 million issued pursuant to the Note and Warrant Purchase Agreement,
  dated March 8, 2006, between BMTI and such Bridge Lenders (the “Bridge
  Notes”).

  
	
   

  	
   

  	
   

  
	
   

  	
  (b)

  	
  Existing PFG Loans.   On the date hereof, PFG and Borrower are party to a Term Loan and
  Security Agreement dated as of December 15, 2004, and a Loan and
  Security Agreement dated as of December 15, 2004 (for a revolving line
  of credit) and associated cross-corporate guarantees and security agreements
  (the “Existing PFG Loans”). PFG and Borrower agree that the Loan made by PFG
  under this Agreement is and shall be deemed to be included within the
  definition of “Obligations” under the Existing PFG Loans, that PFG’s security
  interest in the Collateral shall continue in the Obligations arising under
  this Agreement and that the security interests and liens of PFG arising under
  this Agreement shall be deemed to have attached and been perfected when made
  in connection with the Existing PFG Loans, regardless of any repayment of the
  Existing PFG Loans made after the date hereof.

  
	
   

  	
   

  	
   

  
	
   

  	
  (c)

  	
  Deposit Accounts.   Concurrently and to the extent not already done, Borrower shall cause
  the banks and other institutions where its Deposit Accounts are maintained to
  enter into control agreements with PFG, in form and substance
  satisfactory to PFG in its good faith business judgment and sufficient to perfect
  PFG’s security interest in said Deposit Accounts,. Said control agreements
  shall permit PFG, in its discretion, to withdraw from said Deposit Accounts
  accrued interest on the Obligations monthly.

  
	
   

  	
   

  	
   

  
	
   

  	
  (d)

  	
  Lockbox.  
  If requested
  to do so by PFG, Borrower shall direct each Account Debtor (and each
  depository institution where proceeds of accounts receivable are on deposit)
  to make payments with respect to all receivables to a lockbox account
  established for PFG at such banking

  

 

4

 

	
   

  	
   

  	
  institution as PFG may notify (the “Lockbox”) or to wire
  transfer payments to a cash collateral account that PFG controls, as and when
  directed by PFG from time to time, at its option and at the sole and
  exclusive discretion of the PFG. It will be considered an immediate Event of
  Default if the Lockbox is not set-up and operational within 30 days from the
  date of PFG ‘s request.

  
	
   

  	
   

  	
   

  
	
   

  	
  (e)

  	
  Conditional Release of Collateral from Security
  Interest.  At any time prior to the Maturity Date,
  Borrower may request that PFG release its security interest and lien on
  all or part of Borrower’s Intellectual Property, and PFG shall release
  such security interest and lien, provided, however, that Borrower’s
  right to make such request and PFG’s obligation to honor such request shall
  be expressly conditioned on the following:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (i)  at the time of such request, no Event of Default has
  occurred and is continuing and Borrower is otherwise in full compliance with
  its obligations to PFG hereunder and under each other agreement between
  Borrower and PFG; and

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (ii) Borrower has entered or proposes to enter into an agreement
  to license or sell the Intellectual Property requested to be released from
  PFG’s security interest and lien; and

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (iii)  upon each occasion of the Intellectual Property released
  from PFG’s security interest and lien being sold or licensed, Borrower shall
  pay 50% (or such lesser percentage as PFG may determine in its sole
  discretion) of any such sales or licensing proceeds to PFG, which proceeds
  PFG will maintain as a deposit against payment of Obligations (“Deposit”) and
  PFG’s security interest and lien shall continue in said proceeds. If the Loan
  is converted, the Deposit and all interest earned thereon will be promptly returned
  to Borrower. If the Loan is not converted or is converted in part, PFG
  may apply the Deposit and all interest earned thereon to the payment of
  outstanding Obligations in such manner as PFG may determine in its
  discretion. For the avoidance of doubt, (A) the parties agree that
  Borrower’s non-exclusive licensing of Intellectual Property in the ordinary
  course of business does not require the release of PFG’s lien on such
  Intellectual Property and, accordingly, the proceeds of such non-exclusive licensing
  are not subject to this clause (e)(iii), and (B) the licensing of
  Intellectual Property to a customer for its exclusive use with a particular
  drug (or other injectable substance) that is one of such customer’s products
  shall be deemed a non-exclusive license of Borrower’s Intellectual Property
  for purposes hereof.

  
	
   

  	
   

  	
   

  
	
   

  	
  (f)

  	
  Additional Representations and
  Warranties of PFG.  PFG
  represents and warrants to Borrower, with respect to itself and its purchase
  hereunder, as follows:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (i)  Investment
  Purpose.  PFG is purchasing certain equity
  rights evidenced by this Agreement (together with the Conversion Stock and
  common stock issued under the Warrants or as payment of interest, the “Equity
  Rights”) for its own account for investment and not with a present view
  toward the public sale or distribution thereof and has no intention of
  selling or distributing any of the Equity Rights or any arrangement or
  understanding with any other persons regarding the sale or distribution of
  such Equity Rights except as contemplated by this Agreement or the Loan
  Documents and in compliance with the Securities Act of 1933, as amended (the
  “Securities Act”). PFG will not, directly or indirectly, offer, sell, pledge,
  transfer or otherwise dispose of (or solicit any offers to buy, purchase or
  otherwise acquire or take a pledge of) any of the Equity Rights except in

  

 

5

 

	
   

  	
   

  	
  accordance with the provisions of this Agreement or the Loan
  Documents and in compliance with applicable securities laws.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (ii)  Purchaser
  Status. At the time
  PFG was offered the Equity Rights, it was, and at the date hereof it is, and
  on each date on which it accepts a payment of interest in the form of
  common stock or exercises any Warrant or option to convert the Loan into
  Conversion Stock, it will be an “accredited investor” as defined in
  Rule 501(a) under the Securities Act.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (iii)  Reliance on
  Exemptions. PFG
  understands that the Equity Rights are being offered and sold to it in
  reliance upon specific exemptions from, or non-application of, the
  registration requirements of United States federal and state securities laws
  and that Borrower is relying upon the truth and accuracy of, and PFG’s
  compliance with, the representations, warranties, agreements, acknowledgments
  and understandings of PFG set forth herein in order to determine the
  availability of such exemptions and the eligibility of PFG to acquire the
  Equity Rights.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (iv)  Information. PFG acknowledges that is has been
  afforded (A) the opportunity to ask such questions as it has deemed
  necessary of, and to receive answers from, representatives of Borrower
  concerning the terms and conditions of the offering of the Equity Rights and
  the merits and risks of investing in the Equity Rights; (B) access to
  information about Borrower and its financial condition, results of
  operations, businesses, properties, management and prospects sufficient to
  enable it to evaluate its investment in the Equity Rights, including, without
  limitation, Borrower’s reports required to be filed with the Securities and
  Exchange Commission (“SEC”), and PFG has had the opportunity to review such
  documents; and (C) the opportunity to obtain such additional information
  that Borrower possesses or can acquire without unreasonable effort or expense
  that is necessary to make an informed investment decision with respect to the
  investment.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (v)  Acknowledgement of Risk. PFG acknowledges and
  understands that its investment in the Equity Rights involves a significant
  degree of risk, including, without limitation, the risks set forth in
  Borrower’s reports required to be filed with the SEC. PFG is able to bear the
  economic risk of holding the Equity Rights for an indefinite period, and has
  knowledge and experience in financial and business matters such that it is
  capable of evaluating the risks of the investment in the Equity Rights. PFG
  has, in connection with its decision to purchase the Equity Rights and with
  respect to all matters relating to this Agreement and the Loan Documents and
  the transactions contemplated hereby and thereby, relied solely upon the
  advice of its own counsel and has not relied upon or consulted any counsel to
  Borrower. PFG is not purchasing the Equity Rights as a result of any
  form of general solicitation or general advertising within the meaning
  of Rule 502(c) under the Securities Act.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (vi) Transfer or
  Resale. PFG
  understands that (A) the Conversion Stock and common stock issuable in
  connection with this Agreement have not been, and are not being, registered
  under the Securities Act (other than as contemplated in Section 1 of
  this Schedule) or any applicable state securities laws and, consequently, PFG
  may have to bear the risk of owning such securities for an indefinite
  period of time because such securities may not be transferred unless
  (I) the resale of such securities is covered by an effective
  registration statement under the Securities Act or exempt from the
  registration requirements thereof or (II) PFG has delivered to Borrower
  an opinion of counsel to PFG (in form, substance and scope customary for
  opinions of counsel in comparable transactions) to the effect that such
  securities to be sold or transferred may be sold or transferred pursuant
  to an exemption from such registration; and (B) except as set forth in
  Section 1 of this Schedule, neither Borrower nor any other person is
  under any

  

 

6

 

	
   

  	
   

  	
  obligation to register the resale of any such securities under the
  Securities Act or any state or foreign securities laws or to comply with the
  terms and conditions of any exemption thereunder.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (vii) Legends. PFG
  understands that any certificate representing, or other evidence of, the
  Conversion Stock and common stock issuable under the Warrants or as payment
  of interest may bear a restrictive legend in substantially the following
  form (and, until such time as there is a registration statement in
  effect covering such Conversion Stock and common stock, a stop-transfer order
  may be placed against transfer of such securities):

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED WITH THE
  SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE
  OF THE UNITED STATES IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER
  THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) AND
  ACCORDINGLY, MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED,
  TRANSFERRED OR ASSIGNED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
  STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OR PURSUANT TO AN
  AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
  REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
  APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL
  TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY
  ACCEPTABLE TO THE COMPANY.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (viii)  Residency. PFG is a resident of the jurisdiction set
  forth next to its name in the heading to this Agreement.

  

 

 

	
  Borrower:

  	
  PFG:

  
	
   

  	
   

  
	
  Bioject
  Medical Technologies Inc.

  	
  PARTNERS FOR GROWTH, L.P.

  
	
   

  	
   

  
	
   

  	
   

  
	
  By

  	
  /s/
  Jim O’Shea

  	
   

  	
   

  
	
   

  	
  Jim
  O’Shea, President

  	
  By

  	
  /s/ Andrew W. Kahn

  	
   

  
	
   

  	
   

  
	
  By

  	
  /s/
  Christine Farrell

  	
   

  	
  Name:

  	
  Andrew W. Kahn

  	
   

  
	
   

  	
  Secretary
  or Ass’t Secretary

  	
   

  
	
   

  	
  Title: Manager, Partners for Growth,
  LLC

  
	
   

  	
  Its
  General Partner

  
												

 

7Exhibit 4.01

 

[FACE OF NOTE]

 

Unless this certificate is presented by an authorized
representative of The Depository Trust Company (55 Water Street, New York, New
York) to the issuer or its agent for registration of transfer, exchange or
payment, and any certificate issued is registered in the name of Cede & Co.
or such other name as requested by an authorized representative of The
Depository Trust Company and any payment is made to Cede & Co., ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL since the registered owner hereof, Cede & Co., has an interest
herein.

 

	
  REGISTERED

  	
   

  	
   

  	
   

  	
  CUSIP: 225434 AJ 8

  

  

  PRINCIPAL AMOUNT: $855,000

  

 

NO. 1

 

CREDIT SUISSE (USA), INC.

Reverse Convertible Securities Linked to the Performance of Sherwin-Williams
Co.

due March 30, 2007

 

CREDIT SUISSE (USA), INC., a Delaware corporation (the
“Company”, which term includes any successor corporation under the Indenture
hereinafter referred to), for value received, hereby promises to pay to Cede &
Co., or registered assigns, at the office or agency of the Company in New York,
New York, the Redemption Amount (as defined on the reverse hereof) on the
Maturity Date (as defined on the reverse hereof), in the coin or currency of
the United States and to pay a coupon of 11.00% per annum on the
principal amount from March 31, 2006. The coupon payment will be payable
quarterly in arrears on June 30, 2006, September 29, 2006, December 29, 2006,
and March 30, 2007.

 

Reference is hereby made to the further provisions of
this Note set forth on the reverse hereof, which further provisions shall for
all purposes have the same effect as if set forth at this place.

 

This Note shall not be valid or become obligatory for
any purpose until the certificate of authentication hereon shall have been
manually signed by the Trustee under the Indenture referred to on the reverse
hereof.

 

F-1

 

IN
WITNESS WHEREOF, the Company has caused this Note to be duly executed under its
corporate seal.

 

 

 

	
   

  	
   

  	
  CREDIT SUISSE (USA), INC.

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  [SEAL]

  	
   

  	
  By:

  	
  /s/ Peter Feeney

  	
   

  
	
   

  	
   

  	
   

  	
  Name: Peter Feeney

  	
   

  
	
   

  	
   

  	
   

  	
  Title: Authorized Signatory

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  CREDIT SUISSE (USA), INC.

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Simon Yates

  	
   

  
	
   

  	
   

  	
   

  	
  Name: Simon Yates

  	
   

  
	
   

  	
   

  	
   

  	
  Title: Authorized Signatory

  	
   

  
	
   

  	
   

  	
   

  	
   

  
						

 

CERTIFICATE OF AUTHENTICATION

 

This is one of the Securities of the series designated
therein referred to in the within-mentioned Indenture.

 

	
  Dated:  March
  31, 2006

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  JPMORGAN CHASE, N.A.,

  as Trustee

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Ignazio Tamburello

  	
   

  
	
   

  	
   

  	
   

  	
  Authorized Signatory

  	
   

  

 

 

F-2

 

[REVERSE OF NOTE]

 

CREDIT SUISSE
(USA), INC.

Reverse Convertible Securities Linked to the Performance of Sherwin-Williams
Co.

due March 30, 2007

 

This Note is one of a
duly authorized issue of debentures, notes, bonds or other evidences of
indebtedness of the Company (the “Securities”) of the series hereinafter
specified, all issued or to be issued under and pursuant to a senior indenture,
dated as of June 1, 2001 (the “Indenture”), between the Company and JPMorgan
Chase Bank, as trustee (the “Trustee”), to which Indenture and all indentures
supplemental thereto reference is hereby made for a description of the rights,
limitations of rights, obligations, duties and immunities thereunder of the
Trustee, the Company, and the Holders of the Securities. The Securities may be
issued in one or more series, which different series may be issued in various
aggregate principal amounts, may mature at different times, may bear interest
(if any) at different rates, may be subject to different redemption provisions
(if any), may be subject to different sinking, purchase or analogous funds (if
any) and may otherwise vary as provided in the Indenture. This Note is one of a
series designated as the Reverse Convertible Securities Linked to the
Performance of Sherwin-Williams Co., due March 30, 2007 (the “Note”).

 

A coupon will be payable on this Note of
11.00% per annum on the principal amount from March 31, 2006. The coupon
payment will be payable quarterly in arrears on June 30, 2006, September 29,
2006, December 29, 2006, and March 30, 2007. 

 

This Note is payable in the manner, with the effect
and subject to the conditions provided in the Indenture.

 

If a payment date is not a business day as defined in
the Indenture at a place of payment, payment may be made at that place on the
next succeeding day that is a business day, and no interest shall accrue for
the intervening period.

 

The Indenture provides that, without prior notice to
any Holders, the Company and the Trustee may amend the Indenture and the
Securities of any series with the written consent of the Holders of a majority
in principal amount of the outstanding Securities of all series affected by
such amendment (all such series voting as one class), and the Holders of a
majority in principal amount of the outstanding Securities of all series
affected thereby (all such series voting as one class) may waive future
compliance by the Company with any provision of the Indenture or the Securities
of such series by written notice to the Trustee; provided that, without the
consent of each Holder of the Securities of each series affected thereby, an
amendment or waiver, including a waiver of past defaults, may not: (i) extend
the stated maturity of the Principal of, or any sinking fund obligation or any
installment of interest on, such Holder’s Security, or reduce the principal
amount thereof or the rate of interest thereon (including any amount in respect
of original issue discount), or any premium payable with respect thereto, or
adversely affect the rights of such Holder under any mandatory redemption or
repurchase provision or any right of redemption or repurchase at the option of
such Holder, or reduce the amount of the Principal of an Original Issue
Discount Security that would be due and payable upon an acceleration of the
maturity thereof or the amount thereof provable in bankruptcy, or

 

R-1

 

change any place of payment where, or the currency in which, any
Security of such series or any premium or the interest thereon is payable, or
impair the right to institute suit for the enforcement of any such payment on
or after the due date therefor; (ii) reduce the percentage in principal amount
of outstanding Securities of the relevant series the consent of whose Holders
is required for any such supplemental indenture, for any waiver of compliance
with certain provisions of the Indenture or certain Defaults and their
consequences provided for in the Indenture; (iii) waive a Default in the
payment of Principal of or interest on any Security of such Holder; or (iv)
modify any of the provisions of the Indenture governing supplemental indentures
with the consent of Securityholders except to increase any such percentage or
to provide that certain other provisions of the Indenture cannot be modified or
waived without the consent of the Holder of each outstanding Security affected
thereby.

 

The Indenture provides that, subject to certain
conditions, the Holders of at least a majority in principal amount (or, if any
Securities are Original Issue Discount Securities, such portion of the
Principal as is then accelerable) of the outstanding Securities of all series
affected (voting as a single class), by notice to the Trustee, may waive an
existing Default or Event of Default with respect to the Securities of such
series and its consequences, except a Default in the payment of Principal of or
interest on any Security or in respect of a covenant or provision of the
Indenture which cannot be modified or amended without the consent of the Holder
of each outstanding Security affected. Upon any such waiver, such Default shall
cease to exist, and any Event of Default with respect to the Securities of such
series arising therefrom shall be deemed to have been cured, for every purpose
of the Indenture; but no such waiver shall extend to any subsequent or other
Default or Event of Default or impair any right consequent thereto.

 

The Indenture provides that a series of Securities may
include one or more tranches (each a “tranche”) of Securities, including
Securities issued in a Periodic Offering. The Securities of different tranches
may have one or more different terms, including authentication dates and public
offering prices, but all the Securities within each such tranche shall have
identical terms, including authentication date and public offering price.
Notwithstanding any other provision of the Indenture, subject to certain
exceptions, with respect to sections of the Indenture concerning the execution,
authentication and terms of the Securities, redemption of the Securities,
Events of Default of the Securities, defeasance of the Securities and amendment
of the Indenture, if any series of Securities includes more than one tranche,
all provisions of such sections applicable to any series of Securities shall be
deemed equally applicable to each tranche of any series of Securities in the
same manner as though originally designated a series unless otherwise provided
with respect to such series or tranche pursuant to a board resolution or a
supplemental indenture establishing such series or tranche.

 

No reference herein to the Indenture and no provision
of this Note or of the Indenture shall alter or impair the obligation of the
Company, which is absolute and unconditional, to pay the Redemption Amount of
this Note in the manner, at the place, at the time and in the coin or currency
herein prescribed.

 

The Securities are issuable initially only in
registered form without coupons in denominations of $5,000 and any integral
multiples of $1,000 in excess of that amount at the office or agency of the
Company in the Borough of Manhattan, The City of New York, and in the manner
and subject to the limitations provided in the Indenture.

 

R-2

 

The Securities will not be redeemable at the option of
the Company prior to maturity.

 

The Company will not be required to pay any Additional
Amounts on the Securities.

 

Maturity Date

 

The Maturity Date of the Securities is March 30, 2007 (the “Maturity Date”);
however, if a market disruption event exists on the Valuation Date, as
determined by the Calculation Agent, the Maturity Date will be the later of
March 30, 2007, and the third business day following the date on which the
closing price for the reference shares is calculated.

 

Redemption Amount

 

The Company will redeem the Securities at maturity for
a redemption amount in cash that will be based on the performance of the
reference shares during the term of the Securities (the “redemption amount”):

 

(1)          If the closing price of
the reference shares on the New York Stock Exchange (the “relevant exchange”)
is not less than the knock-in level, which is 70% of the Initial Share Price,
on any day from but not including March 28, 2006, which is the initial setting
date, to and including March 26, 2007 (the “Valuation Date”), the redemption
amount will equal a cash payment equal to 100% of the principal amount of the
Securities.

 

(2)          If (i) the closing price
of the reference shares on the relevant exchange is less than the knock-in
level on any day from but not including March 28, 2006, which is the initial
setting date, to and including the Valuation Date and (ii) the closing price of
the reference shares on the relevant exchange on the Valuation Date, which we
refer to as the final share price, is greater than or equal to the Initial
Share Price, the redemption amount will equal a cash payment equal to 100% of
the principal amount of the Securities.

 

(3)          Otherwise, the
redemption amount will be the physical delivery amount. The physical delivery
amount will be the number of reference shares per $1,000 principal amount of
Securities equal to $1,000 divided by the Initial Share Price. The market value
of the physical delivery amount will be less than the principal amount of the
Securities and may be zero. 

 

The “Initial Share Price” is $49.13.

 

A “business day” means a day, other than a Saturday,
Sunday or a day on which banking institutions in New York, New York are
generally authorized or obligated by law, regulation or executive order to
close and that is also a Trading Day.

 

A “trading day” means any day, as determined by the
Calculation Agent, on which trading is generally conducted for reference shares
(or, but for the occurrence of a market disruption event, would have been
generally conducted) on the relevant exchange and for options

 

R-3

 

and
other derivative instruments on the reference shares on the Chicago Mercantile
Exchange and the Chicago Board Options Exchange, which we refer to collectively
as the related exchanges, other than a day on which the relevant exchange or
the related exchanges are scheduled to close prior to their regular weekday closing
time.

 

Market Disruption Events

 

If no final share price is available on the Valuation
Date because of a market disruption event, as determined by the Calculation
Agent in its sole discretion, the Calculation Agent may postpone the
calculation of the final share price until the earlier of the date such market
disruption event has ceased or three trading days after the Valuation Date, as
the case may be. On such third trading day, in the event there still exists a
market disruption event, the Calculation Agent will determine the final share
price using its good faith estimate of the value for the reference shares as of
the closing time on the relevant exchange on such date. If a market disruption
event exists on the Valuation Date, the Maturity Date of the Securities will be
the later of the original Maturity Date and the third business day following
the day on which the final share price is calculated. No interest will accrue
or other payment be payable because of any postponement of the Maturity Date.

 

A “market disruption event” means the occurrence or
existence of any suspension of or limitation imposed on trading (by reason of
movements in price exceeding limits permitted by any relevant exchange or
market or otherwise) of, or the unavailability, through a recognized system of
public dissemination of transaction information, of accurate price, volume or
related information in respect of (a) the reference shares or (b) any options
or futures contracts, or any options on such futures contracts, relating to the
reference shares if, in each case, in the determination of the Calculation
Agent, in its sole discretion, any such suspension, limitation or
unavailability is material.

 

For purposes of determining whether a market
disruption event has occurred:  (1) a
limitation on the hours or number of days of trading will not constitute a
market disruption event if it results from an announced change in the regular
business hours of the relevant exchange; (2) a decision permanently to
discontinue trading in the relevant options or futures contract will not
constitute a market disruption event; (3) limitations pursuant to New York
Stock Exchange Rule 80A—Index Arbitrage Trading Restrictions (or any applicable
rule or regulation enacted or promulgated by the New York Stock Exchange, any
other self-regulatory organization or the SEC of similar scope as determined by
the Calculation Agent) on trading during significant market fluctuations will
constitute a market disruption event; (4) a suspension of trading in an options
contract on the reference shares by the primary securities market trading in
such options, if available, by reason of (x) a price change exceeding limits
set by such securities exchange or market, (y) an imbalance of orders relating
to such contracts or (z) a disparity in bid and ask quotes relating to such
contracts will constitute a suspension or material limitation of trading in
options contracts related to the reference shares notwithstanding that such
suspension or material limitation is less than two hours; (5) a suspension,
absence or material limitation of trading on the primary securities market on
which options contracts related to the reference shares are traded will not
include any time when such securities market is itself closed for trading under
ordinary circumstances; and (6) a “suspension or material limitation” on an
exchange or in a market will include a suspension or material limitation of
trading by one class

 

R-4

 

of investors provided that such suspension continues for more than two
hours of trading or during the last one-half hour period preceding the close of
trading on the relevant exchange or market (but will not include limitations
imposed on certain types of trading under New York Stock Exchange Rule 80A or
any applicable rule or regulation enacted or promulgated by the New York Stock
Exchange, NASDAQ, any other self-regulatory organization or the SEC of a
similar scope or as a replacement for Rule 80A, as determined by the Calculation
Agent) and will not include any time when such exchange or market is closed for
trading as part of such exchange’s or market’s regularly scheduled business
hours.

 

Based on the information currently available to us, on
October 27, 1997, the New York Stock Exchange suspended all trading during the
one-half hour period preceding the close of trading pursuant to New York Stock
Exchange Rule 80B and, on each of September 11, 12, 13 and 14, 2001, the New
York Stock Exchange suspended all trading for the entire day due to certain
terrorist activity. If any such suspension of trading occurred during the term
of the Securities, it would constitute a market disruption event. The existence
or non-existence of these circumstances, however, is not necessarily indicative
of the likelihood of these circumstances arising or not arising in the future.

 

Antidilution Adjustments 

 

General

 

The Calculation Agent will
adjust the Initial Share Price and the physical delivery amount if certain
corporate actions and other events described below (each of which, an
“adjustment event”), occur, and the Calculation Agent determines that such
adjustment event has a diluting or concentrative effect on the theoretical
value of the reference shares. Set forth below are examples of how adjustment
events may lead to adjustments to the Initial Share Price and the physical
delivery amount.

 

Upon the occurrence of an
adjustment event that the Calculation Agent determines has a diluting or
concentrative effect on the theoretical value of the reference shares, for
purposes only of determining whether (i) the price of the reference shares is
less than or equal to the knock-in level and (ii) the final share price is less
than or equal to the Initial Share Price, the Calculation Agent will typically
adjust the Initial Share Price according to the following formula:

 

 

The physical delivery amount
will be adjusted by the Calculation Agent as set forth in the specific examples
below.

 

The adjustments described
below do not cover all events that could affect the value of the Securities.

 

R-5

 

Adjustments

 

If an adjustment event occurs and the Calculation Agent
determines that the event has a diluting or concentrative effect on the
theoretical value of the reference shares, the Calculation Agent will calculate
a corresponding adjustment to the Initial Share Price and the physical delivery
amount as the Calculation Agent determines appropriate to account for that
diluting or concentrative effect. The Calculation Agent will also determine the
effective date of that adjustment, and the replacement of the reference shares,
if applicable, in the event of consolidation or merger. Upon making any such
adjustment, the Calculation Agent will give notice as soon as practicable to
the Trustee, stating the adjustment of the Initial Share Price and physical
delivery amount.

 

If more than one adjustment event occurs, the Calculation
Agent will make an adjustment for each such adjustment event in the order in
which they occur, and on a cumulative basis. Accordingly, having adjusted the
Initial Share Price and the physical delivery amount for the first such
adjustment event, the Calculation Agent will adjust the Initial Share Price and
the physical delivery amount for the second adjustment event, applying the
required adjustment to the Initial Share Price and the physical delivery amount
as already adjusted for the first adjustment event, and so on for each
subsequent adjustment event.

 

The Calculation Agent will not have to adjust the Initial
Share Price and the physical delivery amount for any adjustment event unless the adjustment would result in a
change to the Initial Share Price or the physical delivery amount of at least
0.1% in the Initial Share Price or the physical delivery amount that would
apply without the adjustment. The Initial Share Price and the physical delivery
amount resulting from any adjustment would be rounded up or down, as
appropriate, to, in the case of the Initial Share Price, the nearest cent, and,
in the case of the physical delivery amount, the nearest thousandth, with
one-half cent and five ten-thousandths, respectively, being rounded upwards.

 

If an adjustment event requiring antidilution adjustment
occurs, the Calculation Agent will make any adjustments with a view to
offsetting, to the extent practical, any change in the Holders’ economic
position relative to the Securities that results solely from that event. The
Calculation Agent may, in its sole discretion, modify any antidilution
adjustments as necessary to ensure an equitable result.

 

The Calculation Agent has sole discretion in making all
determinations with respect to antidilution adjustments, including any
determination as to whether an adjustment event requiring an antidilution
adjustment has occurred, as to the nature of the adjustment required and how it
will be made. In the absence of manifest error, those determinations will be
conclusive for all purposes and will be binding on the Holders and the Company,
without any liability on the part of the Calculation Agent. Upon written
request, the Calculation Agent will provide information about any adjustments
it makes.

 

R-6

 

Events requiring an antidilution
adjustment

 

The following is a list of adjustment events that may
require an antidilution adjustment:

 

(a)                                  a subdivision, consolidation
or reclassification of the reference shares or a free distribution or dividend
of any reference shares to existing holders of reference shares by way of
bonus, capitalization or similar issue;

 

(b)                                 a dividend or other
distribution to existing holders of reference shares of (i) the reference
shares, (ii) other share capital or securities granting the right to payment of
dividends equally or proportionately with such payments to holders of the
reference shares or (iii) any other type of securities, rights or warrants in
any case for payment (in cash or otherwise) at less than the prevailing market
price as determined by the Calculation Agent;

 

(c)                                  the declaration by the
issuer of the reference shares of an extraordinary or special dividend or other
distribution whether in cash or reference shares or other assets;

 

(d)                                 a repurchase of its common
stock by the issuer of the reference shares whether out of profits or capital
and whether the consideration for such repurchase is cash, securities or
otherwise;

 

(e)                                  a consolidation of the
issuer of the reference shares with another company or merger of the issuer of
the reference shares with another company; and

 

(f)                                    any other similar event that
may have a diluting or concentrative effect on the theoretical value of the
reference shares.

 

Certain adjustment events are discussed in
greater detail below.

 

Stock splits

 

A stock split is an increase
in the number of a corporation’s outstanding shares of stock without any change
in its stockholders’ equity. As a result of a stock split, each outstanding
share will be worth less.

 

If the reference shares are subject to a stock split, the
Calculation Agent will adjust the physical delivery amount to equal the sum of
the prior physical delivery amount—i.e., the physical delivery amount before
that adjustment—and the product of (i) the number of additional shares issued
in the stock split with respect to each of the reference shares times (ii) the
prior physical delivery amount.

 

Reverse stock splits

 

A reverse stock split is a decrease in the number of a
corporation’s outstanding shares of stock without any change in its
stockholders’ equity. As a result of a reverse stock split, each outstanding
share will be worth more.

 

If the reference shares are subject to a reverse stock
split, the Calculation Agent will adjust the physical delivery amount to equal
the product of the prior physical delivery amount and the quotient of (i) the
number of reference shares outstanding immediately after the reverse

 

R-7

 

stock split becomes
effective divided by (ii) the number of reference shares outstanding
immediately before the reverse stock split becomes effective. 

 

Stock dividends

 

In a stock dividend, a corporation issues additional shares
of its stock to all holders of its outstanding stock in proportion to the
shares they own. As a result of a stock dividend, each outstanding share will
be worth less.

 

If the reference shares are subject to a stock dividend
payable in the reference shares, then the Calculation Agent will adjust the
physical delivery amount to equal the sum of the prior physical delivery amount
and the product of (i) the number of additional shares issued in the stock
dividend with respect to each of the reference shares times (ii) the prior
physical delivery amount.

 

Other dividends and distributions

 

If the issuer of the reference shares declares a dividend
to be distributed to holders of record of the reference shares as of a date
falling in the period that begins on the day immediately following the
Valuation Date and ends on the day immediately prior to the Maturity Date, any
such dividend will not be paid to Holders.

 

The physical delivery amount will not be adjusted to
reflect any dividends or distributions paid with respect to the reference
shares, other than (i) stock dividends described above; (ii) issuances of
transferable rights and warrants as described in “—Transferable rights and
warrants” below; and (iii) extraordinary dividends as described below.

 

A dividend or other distribution with respect to the
reference shares will be deemed to be an “extraordinary dividend” if its per
share value exceeds that of the immediately preceding non-extraordinary
dividend, if any, for the reference shares by an amount equal to at least
10.00% of the market price of the reference shares on the business day before
the extraordinary dividend date. The ex dividend date for any dividend or other
distribution is the first day on which the reference shares trade without the
right to receive that dividend or distribution. If an extraordinary dividend
occurs, the Calculation Agent will adjust the physical delivery amount to equal
the product of (1) the prior physical delivery amount times (2) a fraction, the
numerator of which is the market price of the reference shares on the business
day before the ex dividend date and the denominator of which is the amount by
which that market price exceeds the extraordinary dividend adjustment amount.
The “extraordinary dividend adjustment amount” with respect to an extraordinary
dividend for the reference shares equals: 
(i) for an extraordinary dividend that is paid in lieu of a regular
quarterly dividend, the amount of the extraordinary dividend per share of the
reference shares minus the amount per share of the immediately preceding
dividend, if any, that was not an extraordinary dividend for the reference
shares, or (ii) for an extraordinary dividend that is not paid in lieu of a
regular quarterly dividend, the amount per share of the extraordinary dividend.

 

To the extent an extraordinary dividend is not paid in
cash, the value of the non-cash component will be determined by the Calculation
Agent. A distribution on the reference shares that is a dividend payable in the
reference shares, an issuance of rights or warrants or a spin-off

 

R-8

 

event and that is also an
extraordinary dividend will result in an adjustment to the physical delivery
amount only as described in “Stock dividends” above, “Transferable rights and
warrants” below or “Reorganization events” below, as the case may be, and not
as described here.

 

Transferable rights and warrants

 

If the issuer of the reference shares issues transferable
rights or warrants to all holders of the reference shares to subscribe for or
purchase the reference shares at an exercise price per share that is less than
the market price of the reference shares on the business day before the
extraordinary dividend date for the issuance, then the physical delivery amount
will be adjusted by multiplying the prior physical delivery amount by the
following fraction:  (i) the numerator
will be the sum of the number of reference shares outstanding at the close of
business on the day before that ex dividend date and the total number of
additional reference shares offered for subscription or purchase under those
transferable rights or warrants, and (ii) the denominator will be the sum of the
number of reference shares outstanding at the close of business on the day
before that ex dividend date and the product of (1) the total number of
additional reference shares offered for subscription or purchase under the
transferable rights or warrants times (2) the exercise price of those
transferable rights or warrants divided by the market price on the business day
before that extraordinary dividend date.

 

Reorganization events

 

Each of the following may be a reorganization event:  (i) the reference shares are reclassified or
changed; (ii) the issuer of the reference shares has been subject to a merger,
consolidation or other combination and either is not the surviving entity or is
the surviving entity but all outstanding reference shares are exchanged for or
converted into other property; (iii) a statutory share exchange involving
outstanding reference shares and the securities of another entity occurs, other
than as part of an event described above; (iv) the issuer of the reference
shares effects a spin-off (i.e., issues to all holders of reference shares
common stock equity securities of another issuer) other than as part of an
event described above; (v) the issuer of the reference shares sells or
otherwise transfers its property and assets as an entirety or substantially as
an entirety to another entity (each of the events in clauses (i) through (v)
above, a “merger event”); (vi) a takeover offer, tender offer, exchange offer,
solicitation, proposal or other event by any entity or person that results in
such entity or person purchasing, or otherwise obtaining or having the right to
obtain, by conversion or other means, not less than a majority of the
outstanding voting reference shares as determined by the Calculation Agent,
based upon the making of filings with governmental or self-regulatory agencies
or such other information as the Calculation Agent deems relevant, which we
refer to as a tender offer; (vii) the exchange on which the reference shares
trade announces that pursuant to the rules of such exchange, the reference
shares cease (or will cease) to be listed, traded or publicly quoted on it for
any reason (other than a merger event or tender offer) and are not immediately
re-listed, re-traded or re-quoted on another major U.S. exchange or quotation
system (a “delisting event”); and (viii) the issuer of the reference shares is
liquidated, dissolved or wound up or is subject to a proceeding under any
applicable bankruptcy, insolvency or other similar law (each, an “insolvency
event”).

 

R-9

 

Adjustments for reorganization events

 

If a merger event occurs and a holder of the reference
shares that makes no election, vote or decision in connection with such merger
event would receive as full or partial consideration ordinary or common shares
of any person (other than the issuer of the reference shares) that are publicly
quoted, traded or listed on any major U.S. exchange or quotation system (the
“new shares”), then the
Calculation Agent will adjust the physical delivery amount so as to consist of
the amount and type of property distributed in the reorganization event in
respect of the prior physical delivery amount. In this instance, if more than
one type of property is distributed, the physical delivery amount will be
adjusted so as to consist of each type of property distributed, in a
proportionate amount, so that the value of each type of property comprising the
new physical delivery amount as a percentage of the total value of the new
physical delivery amount equals the value of that type of property as a
percentage of the total value of all of the property distributed in the
reorganization event.

 

If a tender offer occurs, and the holder of the reference
shares can elect to receive new shares as full or partial consideration in
respect of such tender offer, then the Calculation Agent will adjust the
physical delivery amount in accordance with the preceding paragraph.

 

If a merger event occurs, and the consideration in respect
of such event does not consist in full or in part of new shares (or in the case
of a tender offer, a holder of the reference shares would not be able to elect
to receive in full or in part any new shares as consideration in respect of
such tender offer), then the Calculation Agent will accelerate the Maturity
Date to the day which is four business days after the approval date (as defined
below). The amount payable at maturity will be determined as described below
under “Events of default and acceleration.” 
The approval date is the closing date of a merger event or, in the case
of a tender offer, the date on which the person or entity making the tender
offer acquires or acquires the right to obtain the relevant percentage of
reference shares. 

 

If a delisting event or an insolvency event occurs, the
Calculation Agent will accelerate the Maturity Date to the day which is four
business days after the announcement date (as defined below). On the Maturity
Date, the Company will pay to each Holder the physical delivery amount and for
the purposes of such calculation, the final share price will be deemed to be
the closing price of the reference shares on the business day immediately prior
to the announcement date. The announcement date means, in the case of a
delisting event, the day of the first public announcement by the relevant
exchange that the reference shares will cease to trade or be publicly quoted on
such exchange, or, in the case of an insolvency event, the day of the first
public announcement of the institution of a proceeding or presentation of a
petition or passing of a resolution (or other analogous procedure in any
jurisdiction) that leads to an insolvency event with respect to the issuer of
the reference shares.

 

If a merger event or tender offer occurs, coupon payment
amounts will accrue on the Securities through the approval date and be paid on
the accelerated Maturity Date. Such coupon payments will be calculated using a
360-day year comprised of twelve 30-day months. If a delisting event or an
insolvency event occurs, the Company will pay all remaining scheduled unpaid
coupon payments due to a Holder through the scheduled Maturity Date on the
accelerated Maturity Date.

 

R-10

 

For the purposes of making an adjustment required by a reorganization
event, the Calculation Agent will determine the value of each type of property
distributed in the distribution, in its sole discretion. For any property
distributed consisting of new shares, the Calculation Agent will use the
closing price of the new shares on the approval date. The Calculation Agent may
value other types of property in any manner it determines, in its sole
discretion, to be appropriate. If a holder of the common stock of the issuer of
the reference shares elects to receive different types or combinations of types
of property in the reorganization event, such property will consist of the
types and amounts of each type distributed to a holder that makes no election,
as determined by the Calculation Agent.

 

If a reorganization event occurs and the Calculation Agent
adjusts the physical delivery amount to consist of the property distributed in
the reorganization event as described above, the Calculation Agent will make
further antidilution adjustments for later events that affect such property, or
any component of such property, comprising the new physical delivery amount.
The Calculation Agent will do so to the same extent that it would make
adjustments if the common stock of the issuer of the reference shares was
outstanding and was affected by the same kinds of events. If a subsequent
reorganization event affects only a particular component of the physical
delivery amount, the required adjustment will be made with respect to that
component, as if it alone were the physical delivery amount. For example, if
the issuer of the reference shares merges into another company and each share
of its common stock is converted into the right to receive two new shares of
the surviving company and a specified amount of cash, the physical delivery
amount will be adjusted to consist of two new shares and the specified amount
of cash per reference share. The Calculation Agent will adjust the common share
component of the new physical delivery amount to reflect any later stock split
or other event, including any later reorganization event, that affects the new
shares, to the extent described in this section entitled “Antidilution
adjustments” as if the new shares were the common stock of the issuer of the
reference shares. In that event, the cash component will not be adjusted but
will continue to be a component of the physical delivery amount. Consequently,
Holders who receive reference shares at maturity will be entitled to receive,
for each $1,000 of the outstanding principal amount of the Securities being
exchanged, all components of the physical delivery amount in effect on the
exchange date, with each component having been adjusted on a sequential and
cumulative basis for all relevant events requiring adjustment on or before the
exchange date. 

 

If a reorganization event
occurs, the property distributed in the event will be substituted for the
common stock of the issuer of the reference shares as described above.
Consequently, references to the common stock of the issuer of the reference
shares mean any property that is distributed in a reorganization event and
comprises the adjusted physical delivery amount. Similarly, references to the
issuer of the reference shares mean any successor entity in a reorganization
event.

 

Events of Default and Acceleration

 

In case an Event of Default (as defined in the
Indenture) with respect to the Securities shall have occurred and be
continuing, the amount declared due and payable upon any acceleration of the
Securities (in accordance with the acceleration provisions set forth in the

 

R-11

 

prospectus) will be determined by the Calculation Agent and will equal,
for each security, the arithmetic average, as determined by the Calculation
Agent, of the fair market value of the Securities as determined by at least
three but not more than five broker-dealers (which may include Credit Suisse
Securities (USA) LLC or any of the Company’s other subsidiaries or affiliates)
as will make such fair market value determinations available to the Calculation
Agent.

 

The Company, the Trustee and any agent of the Company
or the Trustee may deem and treat the registered Holder hereof as the absolute
owner of this Note (whether or not this Note shall be overdue and
notwithstanding any notation of ownership or other writing hereon) for the
purpose of receiving payment of, or on account of, the redemption amount
hereof, and for all other purposes, and neither the Company nor the Trustee nor
any agent of the Company or the Trustee shall be affected by any notice to the
contrary.

 

No recourse under or upon any obligation, covenant or
agreement contained in the Indenture or any indenture supplemental thereto or
in any Note, or because of any indebtedness evidenced thereby, shall be had
against any incorporator as such, or against any past, present or future
stockholder, officer, director or employee, as such, of the Company or of any
successor, either directly or through the Company or any successor, under any
rule of law, statute or constitutional provision or by the enforcement of any
assessment or by any legal or equitable proceeding or otherwise, all such
liability being expressly waived and released by the acceptance hereof and as
part of the consideration for the issue hereof.

 

The Calculation Agent for the Securities (the
“Calculation Agent”) is Credit Suisse International. The calculations and
determinations of the Calculation Agent will be final and binding upon all
parties (except in the case of manifest error). The Calculation Agent will have
no responsibility for good faith errors or omissions in its calculations and
determinations, whether caused by negligence or otherwise.

 

Terms used herein that are defined in the Indenture
and not otherwise defined herein shall have the respective meanings assigned
thereto in the Indenture.

 

The laws of the State of New York (without regard to
conflicts of laws principles thereof) shall govern this Note.

 

R-12

 

FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) unto

 

 

	
  [PLEASE INSERT SOCIAL
  SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE]

  
	
   

  
	
  [PLEASE PRINT OR TYPE
  NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE]

  
	
   

  
	
  the within Note and all
  rights thereunder, hereby irrevocably constituting and appointing

  
	
   

  
	
  Attorney to transfer
  such Note on the books of the Issuer, with full power of substitution in the
  premises.

  

 

	
   

  	
   

  	
   

  	
  Signature:

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Dated:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  NOTICE:The signature to
  this assignment must correspond with the name as written upon the face of the
  within Note in every particular without alteration or enlargement or any
  change whatsoever.

  
						

 

R-13

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00101-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00101-of-00352.parquet"}]]