Document:

exv10w11

 

Exhibit
10.11

TENANCY AGREEMENT FOR OFFICE SPACE

and other business accommodation within the meaning of article 7:230a Civil Code

Specimen form adopted by the Council for Immoveable Property (ROZ1) in July 2003.

References to this specimen form and the use thereof are permitted
only if the completed, added or divergent text is clearly
identifiable as such. Any additions to or departures therefrom should preferably be included under the heading entitled “special provisions”.

The ROZ
hereby excludes any liability for the prejudicial consequences of the use of the text of the specimen form.

THE UNDERSIGNED

ARTIKONA HOLDING B.V.,

Herein represented for the purposes of the law by Mr. M.M.H. Pollaert,

Having their registered office at Withulsveld 30, 6226 NV Maastricht,

hereinafter called the “landlord”,

	 	 	 	 	 
	entered in the Register of Companies for:

	 	Zuid-Limburg	 
	under number:

	 	14048821	 
	turnover tax number:

	 	NL8032.71.001.B02	 
	 
	 	 	 	 
	AND
	 	 	 	 

Oculus Innovative Sciences Netherlands B.V., whose sole shareholder is Oculus Innovative Sciences
Inc., herein represented for the purposes of the law by Mr. B.J. Philippens, born in Heerlen on 26
May 1972, presently resident at Beljikensweg 42, 6438 KB Oirsbeek, and by Mr. K.S.W. Kelderman,
born in Ede on 08 August 1967, presently resident at Main Street 3901, Fair Oaks CA 95628, United
States of America.

hereinafter called the “tenant”,

	 	 	 	 	 
	entered in the Register of Companies for:

	 	Zuid-Limburg	 
	Under number:

	 	14078738	 

HAVE AGREED AS FOLLOWS:

The premises intended use

1.1 The landlord hereby leases to the tenant, who takes on lease from the landlord a business
complex covering approx. 450 m2 office space situated on the ground floor and a first
floor, two corporate halls having dimensions of approx. 843 m2 and 327 m2
respectively, a transshipment area having dimensions of approx. 164 m2, and a parking
and outdoor area (no rights may be derived from any over or under dimensions) with which the
parties are sufficiently familiar, hereinafter called the “premises”2, situated at Nusterweg 123,
6136 ST Sittard, known in the Land Register as gemeente Sittard, sectie K, nummers 2765 en 2778

(= municipality of Sittard, section K, numbers 2765 and 2778). As a follow-up hereto the parties
shall initial a record of delivery, which shall indicate which installations and other facilities
form part of the premises and which do not and which shall also contain a description of the state
of the premises, supplemented, where necessary, by photographs initialed by the parties.

1.2 The premises are intended to be used by or on behalf of the tenant exclusively for the purpose
of the production of and trade in (bio-medical) products in the field of disinfection and
sterilisation.

1.3 The tenant shall not, without the prior written consent of the landlord, be permitted to put
the premises to any use other than that described in t.2.

1.4 Floors may not be subjected to loads greater than 4,000 kg/m2.

Conditions

 

			
	1	 	Raad voor Onroerende Zaaken.
	 
	2	 	Literally the premises leased.

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2.1 This agreement shall include the “GENERAL PROVISIONS FOR TENANCY AGREEMENT FOR OFFICE
SPACE” and other business accommodation within the meaning of article 7:230A Civil Code, as filed
with the Registry of the Court of The Hague on 11th July 2003 and entered there under
number 72/2033, hereinafter called the “general provisions”. The parties are familiar with the
contents of these general provisions. The tenant and the landlord have each received a copy of the
general provisions.

2.2 The general provisions to which reference is made in 2.1, shall be applicable, save to the
extent that this agreement contains any express departure therefrom or the application thereof in
respect of the premises is not possible.

Duration, prolongation and termination

3.1 This agreement is concluded for a term of 5 years commencing on 01 February 2004 and shall run
up to and including 31 January 2009 (see also special provisions article 8.1).

3.2 After the expiration of the period mentioned in 3.1 this agreement shall be continued for a
subsequent period of 5 years, hence up to and including 31 January 2014. Thereafter this agreement
shall be continued for subsequent periods of 5 years.

3.3 The ending of this agreement shall take place by means of notice of termination to take effect
at the end of a tenancy period subject to a period of notice of at least one year.

3.4 Notice of termination must be served by bailiff’s summons or by registered letter.

Rent, turnover tax, adjustment of rent, payment obligation, payment period

4.1 The initial rent for the premises shall amount on an annual basis to €75,000. In words:
seventy five thousand euros.

4.2 The parties hereby agree that the landlord will charge turnover tax on the rent. In the event
that no tenancy subject to turnover tax is agreed, the tenant shall, in addition to the rent, be
liable to the landlord for a separate payment by way of compensation for the detriment suffered, or
at some future date to be suffered, by the landlord or his successor(s) at law as a result of the
fact that the turnover tax on the landlord’s investments and operating costs are not (or may no
longer be) deductible.

4.3 In the event that the parties have agreed on a tenancy subject to turnover tax, the tenant and
the landlord shall make use of the opportunity afforded them on the basis of Communication 45
Decree of 24 March 1999, no. VB 99/571 to waive the submission of a joint option application for a
tenancy subject to turnover tax. By the signing of the tenancy agreement the tenant hereby also
declares in favour of the landlord’s successor(s) at law that he permanently uses or shall caused
to be used the premises for purposes for which there exists a full or virtually full right to the
deduction of turnover tax on the basis of article 15 1968 Turnover Tax Law.

4.4 The tenant’s financial year runs from 01 January to 31 December inclusive.

4.5 The rent shall be adjusted annually on 01 February, and for the first time with effect from 01
February 2005, in accordance with the provisions of 9.1 to 9.4 inclusive general provisions.

4.6 The remuneration payable by the tenant for additional supplies and services provided by or on
behalf of the landlord shall be determined in accordance with 16 general provisions. This
remuneration shall be subject to a system of advance payments with subsequent set-offs as indicated
therein. N/A.

4.7.1 The tenant’s payment obligation shall consist of:

	-	 	the rent;
	 
	-	 	the turnover tax payable on the rent;

4.7.2 The tenant will no longer be liable for turnover tax on the rent if the premises may no
longer be leased subject to turnover tax, even though the parties had agreed thereon. In the event
that this is the case, the payments mentioned in 19.3.a general provisions shall replace the
turnover tax and the payment mentioned in 19.3.a(1) shall be determined in advance at 5% of the
current rent.

4.8 In respect of each payment period of one (1) calendar month, and upon the commencement of the
tenancy agreement:

	 	 	 	 	 	 	 
	-
	 	the rent shall amount to:	 	€	6,250.—	 
	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 
	 	 	 	 	 
	total
	 	 	 	€	6,250.—	 
	In words: six thousand two hundred and fifty euros.	 	 	 	 

4.9 Having regard to the commencing date of the tenancy, the tenant’s first payment shall refer to
the period February 2004 and the sum owed for this first period shall be €6,250.— (see also
special provisions article 8.2). This sum shall be exclusive of turnover tax. The tenant shall
pay this sum on or before 01 February 2004.

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4.10 The periodic payments to be made by the tenant to the landlord under this tenancy agreement,
as described in 4.8, shall be payable in advance as a single sum in euros and must have been made
in full on or before the first day of the period to which the payments refer.

4.11 Save where otherwise mentioned, all amounts in this tenancy agreement and the general
provisions forming part thereof shall be exclusive of turnover tax.

Supplies and services

5. The additional supplies and services to be provided by or on behalf of the landlord are hereby
agreed by the parties to be as follows:

N/A.

Banker’s guarantee

6. The amount of the banker’s guarantee mentioned in 12.1 general provisions is hereby fixed by the
parties at €20,000.—, in words twenty thousand euros.

Administrator

7.1 Until such time as the landlord advises otherwise, the landlord shall act as administrator.

7.2 Save where otherwise agreed in writing, the tenant must consult with the administrator with
regard to the contents and all further matters concerning this tenancy agreement.

Special provisions

8.1 The parties hereby agree that the tenant and landlord may, on one single occasion, viz 31
January 2007, bring this tenancy agreement to an end without the incurring of any costs and without
giving any reason in the manner described in article 3.3 and 3.4 of this present agreement.

8.2 In the first year (01 February 2004 to 31 January 2005 inclusive) the parties shall agree on a
reduction in the rent of €10,000.-, in words: ten thousand euros, which shall be accounted for on a
monthly basis. As a departure from the provisions of articles 4.8 and 4.9, the (monthly) rent
during the first year shall, therefore, come to €5,416.67 euros, excluding VAT, payable for the
first time on 01 February 2004. For the second year (01 February 2005 to 31 January 2006
inclusive) the parties shall agree on a reduction in the rent of €5,000.—, in words: five thousand
euros, which shall be accounted for in the same way as described above. With effect from 01
February 2006 the tenant must pay to the landlord the then applicable (index-linked) rent without
deduction.

8.3 The tenant is aware of the fact that in the rearmost corporate hall (of a dimension of approx.
327 m2 and sufficiently known to the parties) an installation has been erected which
belongs to the landlord. The landlord will have removed such installation from the hall by the
latest 31 March 2004. Until the aforementioned date (31-03-2004) the landlord shall retain right
of unimpeded access to the aforementioned hall for the purpose of demolishing/ removing the said
installation. The landlord will retain in this matter the full responsibility and risk for this
rearmost hall. The parties hereby further agree in this matter that the tenant will furthermore in
no way be held liable for any damage resulting from the possible claims. The parties shall in this
matter exercise reasonableness and fairness.

8.4 If, by operation of law, the tenant fails to obtain an environmental permit to conduct on the
premises those activities described in article 1.2, he may by the latest 01 April 2004 rescind this
present tenancy agreement entirely free of charge and without the intervention of the courts.

8.5 The landlord hereby grants the tenant permission, for the account and risk of the latter, to
affix advertising signs to the outside of the premises, provided always that this does not lead to
damage to the premises! In this respect the tenant must abide by any possible regulations derived
from the law or imposed by the authorities.

8.6 In respect of the alarm and video system the parties hereby expressly agree that, after the
initial delivery, all costs of replacement, adjustments, maintenance, renewal etc. shall be for the
account and risk of the tenant.

8.7 The parties hereby agree that the keys will be handed over as soon as the following conditions
have been observed:

	-	 	contracts have been duly signed by the parties;
	 
	-	 	the banker’s guarantee has been received by the landlord;
	 
	-	 	the first rent has been received by the landlord.

8.8 With regard to the obtaining of the required environmental permit, the parties hereby agree
that the landlord (insofar as this has reference to the landlord) will afford the tenant his
co-operation to this end in the widest sense of the word. Any possible costs resulting herefrom
shall be for the tenant’s account!

8.9 As a departure from the general provisions, the parties hereby agree that subletting by the
tenant to a business affiliated to the tenant shall be permitted, provided always that the tenant
in this present case shall remain

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fully liable in this matter as a principal tenant in respect of
all matters stipulated in the present agreement. The tenant shall inform the landlord in writing
of the foregoing.

8.10 As a departure from the stipulations of the attached general provisions, the parties hereby
agree as follows:

Article 6.2:

This shall be read as follows: “The tenant and landlord shall act in accordance with the
provisions etc.” and at the end of the article shall be added the words: “insofar as these are
covered by the tenant’s responsibility”.

Article 6.4:

The word “joint” is deleted.

Article 6.8.1 to 6.8.3 inclusive:

As a follow-up to the provisions of the aforementioned articles, the parties hereby agree that any
possible costs resulting from pollution etc. in relation to the premises, may only be imputed to
the tenant if they have been caused by the tenant and/or the conduct of his business.

Article 21:

The first sentence is replaced by: In the event that various (natural or juridical) persons have
committed themselves as tenant/landlord, they shall in all cases be severally and each one of them
liable for the whole vis-à-vis the landlord/tenant for all engagements flowing from the tenancy
agreement.

Article 22.2 + 22.3

The words “serious” and “gross” are deleted.

Thus drawn up and signed in triplicate.

	 	 	 
	Place                              Date	 	Place                              Date
	ARTIKONA HOLDING B.V.

	 	Oculus Innovative Sciences Netherlands B.V.
	 
	 	 
	Mr.
M. Pollaert

( signature )

	 	Mr. B.J. Philippens

( signature )
	 
	 	 
	 

	 	Mr. K.S.W. Kelderman

( signature )

Annexes:

	-	 	general provisions ROZ offices
	 
	-	 	record of delivery
	 
	-	 	declaration in favour of tenancy subject to tax
	 
	-	 	baker’s guarantee

Separate signature(s) of tenant(s) for receipt of his/their own copy of the “GENERAL PROVISIONS FOR
TENANCY AGREEMENT FOR OFFICE SPACE” and other business accommodations within the meaning of article
:230a Civil Code as mentioned in 2.1.

	 	 	 
	 

	 	Oculus Innovative Sciences Netherlands B.V.
	 
	 	 
	 

	 	Mr. B.J. Philippens
	 

	 	( signature )
	 
	 	 
	 

	 	Mr. K.S.W. Kelderman

( signature )
	 
	 	 
	Landlord’s initials

	 	Tenant’s initials

4exv10w12

 

Exhibit 10.12

LOAN AND SECURITY AGREEMENT

(Equipment)

Dated as of March 25, 2004

between

OCULUS INNOVATIVE SCIENCES, INC.

a California Corporation

as “Borrower”,

and

VENTURE
LENDING & LEASING III, INC.,

a Maryland corporation

as “Lender”

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LOAN AND SECURITY AGREEMENT

(Equipment)

     The Borrower and Lender identified on the cover page of this document have entered or
anticipate entering into one or more transactions pursuant to which Lender agrees to make available
to Borrower a loan facility governed by the terms and conditions set forth in this document and one
or more Supplements executed by Borrower and Lender which incorporate this document by reference.
Each Supplement constitutes a supplement to and forms part of this document, and will be read and
construed as one with this document, so that this document and the Supplement constitute a single
agreement between the parties (collectively referred to as this “Agreement”).

     Accordingly, the parties agree as follows:

ARTICLE 1 — INTERPRETATION

     1.1 Definitions. The terms defined in Article 10 and in the Supplement will have the meanings
therein specified for purposes of this Agreement.

     1.2 Inconsistency. In the event of any inconsistency between the provisions of any Supplement
and this document, the provisions of the Supplement will be controlling for the purpose of all
relevant transactions.

ARTICLE 2 — THE COMMITMENT AND LOANS

     2.1 The Commitment. Subject to the terms and conditions of this Agreement, Lender agrees to
make term loans to Borrower from time to time from the Closing Date and to, but not including, the
Termination Date in an aggregate principal amount not exceeding the Commitment, for the purpose of
financing the acquisition or carrying of certain Equipment. The Commitment is not a revolving
credit commitment, and Borrower does not have the right to repay and reborrow hereunder. Each Loan
requested by Borrower to be made on a single Business Day shall be for a minimum principal amount
set forth in the Supplement, except to the extent the remaining Commitment is a lesser amount.

     2.2 Notes Evidencing Loans, Repayment. Each Loan shall be evidenced by a separate Note payable
to the order of Lender, in the total principal amount of the Loan. Principal and interest of each
Loan shall be payable at the times and in the manner set forth in the Note and payment shall be
effected by automatic debit of the appropriate funds from Borrower’s Primary Operating Account as
specified in the Supplement hereto.

     2.3 Procedures for Borrowing.

     (a) Borrower shall give Lender, at least five (5) Business Days’ prior to a proposed Borrowing
Date, written notice of any request for borrowing hereunder (a “Borrowing Request”). Each Borrowing
Request shall be in substantially the form of Exhibit “B” to the Supplement, shall be
executed by a responsible executive or financial officer of Borrower, and shall state how much is
requested, and shall be accompanied by such other information and documentation as Lender may
reasonably request.

     (b) No later than 1:00 p.m. Pacific Standard Time on the Borrowing Date, if Borrower has
satisfied the conditions precedent in Article 4, Lender shall make the Loan available to Borrower
in immediately available funds.

     2.4 Interest. Except as otherwise set forth in the Supplement, Basic Interest on the
outstanding principal balance of each Loan shall accrue daily at the Designated Rate from the
Borrowing Date until the Maturity Date. If the outstanding principal balance of such Loan is not
paid on the Maturity Date, interest shall accrue at the Default Rate until paid in full, as further
set forth herein.

     2.5 Terminal Payment. Borrower shall pay the Terminal Payment with respect to each Loan on the
Maturity Date of such Loan.

     2.6 Interest Rate Calculation. Basic Interest, along with charges and fees under this
Agreement and any Loan Document, shall be calculated for actual days elapsed on the basis of a
360-day year, which results in higher interest, charge or fee payments than if a 365-day year were
used. In no event shall Borrower be obligated to pay Lender interest, charges or fees at a rate in
excess of the highest rate permitted by applicable law from time to time in effect.

     2.7 Default Interest. Any unpaid payments of principal or interest or the Terminal Payment
with respect to any Loan shall bear interest from their respective maturities. whether scheduled or
accelerated, at the Designated Rate for such Loan plus five percent (5.00%) per annum,
until paid in full, whether before or after judgment (the “Default Rate”). Borrower shall pay such
interest on demand.

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     2.8 Late Charges. If Borrower is late in making any payment of principal or interest or
Terminal Payment under this Agreement by more than five (5) days, Borrower agrees to pay a late
charge of five percent (5%) of the installment due, but not less than fifty dollars ($50.00) for
any one such delinquent payment. This late charge may be charged by Lender for the purpose of
defraying the expenses incidental to the handling of such delinquent amounts. Borrower acknowledges
that such late charge represents a reasonable sum considering all of the circumstances existing on
the date of this Agreement and represents a fair and reasonable estimate of the costs that will be
sustained by Lender due to the failure of Borrower to make timely payments. Borrower further agrees
that proof of actual damages would be costly and inconvenient. Such late charge shall be paid
without prejudice to the right of Lender to collect any other amounts provided to be paid or to
declare a default under this Agreement or any of the other Loan Documents or from exercising any
other rights and remedies of Lender.

     2.9 Lender’s Records. Principal, Basic Interest, Terminal Payments and all other sums owed
under any Loan Document shall be evidenced by entries in records maintained by Lender for such
purpose. Each payment on and any other credits with respect to principal, Basic Interest, Terminal
Payments and all other sums outstanding under any Loan Document shall be evidenced by entries in
such records. Absent manifest error, Lender’s records shall be conclusive evidence thereof.

     2.10 Grant of Security Interests; Filing of Financing Statements.

     (a) To secure the timely payment and performance of all of Borrower’s Obligations to Lender,
Borrower hereby grants to Lender continuing security interests in all of the Collateral. In
connection with the foregoing, Borrower authorizes Lender to prepare and file any financing
statements describing the Collateral without otherwise obtaining the Borrower’s signature or
consent with respect to the filing of such financing statements.

     (b) Borrower is and shall remain absolutely and unconditionally liable for the performance of
its obligations under the Loan Documents, including, without limitation, any deficiency by reason
of the failure of the Collateral to satisfy all amounts due Lender under any of the Loan Documents.

     (c) All Collateral pledged by Borrower under this Agreement and any Supplement shall secure
the timely payment and performance of all Obligations under this Agreement, the Notes and the other
Loan Documents. Except as expressly provided in this Agreement, no Collateral pledged under this
Agreement or any Supplement shall be released until such time as all Obligations under this
Agreement and the other Loan Documents have been satisfied and paid in full.

ARTICLE 3 — REPRESENTATIONS AND WARRANTIES

     Borrower represents and warrants that, except as set forth in the Supplement or any schedule
of exceptions executed by the parties, as of the Closing Date and each Borrowing Date:

     3.1 Due Organization. Borrower is a corporation duly organized and validly existing in good
standing under the laws of the jurisdiction of its incorporation, and is duly qualified to conduct
business and is in good standing in each other jurisdiction in which its business is conducted or
its properties are located, except where the failure to be so qualified would not reasonably be
expected to have a Material Adverse Effect.

     3.2 Authorization, Validity and Enforceability. Subject to obtaining the approval of the
requisite vote of the shareholders of Borrower in favor of the increase of the authorized capital
of the borrower and consent to the grant of the Warrant, the execution, delivery and performance of
all Loan Documents executed by Borrower are within Borrower’s powers, have been duly authorized,
and are not in conflict with Borrower’s articles or certificate of incorporation or by-laws, or the
terms of any charter or other organizational document of Borrower, as amended from time to time;
and all such Loan Documents (other than the Warrant) constitute valid and binding obligations of
Borrower, enforceable in accordance with their terms (except as may be limited by bankruptcy,
insolvency and similar laws affecting the enforcement of creditors’ rights in general, and subject
to general principles of equity).

     3.3 Compliance with Applicable Laws. Borrower has complied with all licensing, permit and
fictitious name requirements necessary to lawfully conduct the business in which it is engaged, and
to any sales, leases or the furnishing of services by Borrower, including without limitation those
requiring consumer or other disclosures, the noncompliance with which would have a Material Adverse
Effect.

     3.4 No Conflict. The execution. delivery, and performance by Borrower of all Loan Documents
(other than the Warrant) are not in conflict with any

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law, rule, regulation, order or directive, or
any indenture, agreement, or undertaking to which Borrower is a party or by which Borrower may be
bound or affected.

     3.5 No Litigation, Claims or Proceedings. There is no litigation, tax claim, proceeding or
dispute pending, or, to the knowledge of Borrower, threatened against or affecting Borrower, its
property or the conduct of its business.

     3.6 Correctness of Financial Statements. Borrower’s financial statements which have been
delivered to Lender fairly and accurately reflect Borrower’s financial condition in accordance with
GAAP as of the latest date of such financial statements; and, since that date there has been no
Material Adverse Change.

     3.7 No Subsidiaries. Borrower is not a majority owner of or in a control relationship with any
other business entity, except as shown on the Supplement.

     3.8 Environmental Matters. Borrower has reviewed, or caused to be reviewed on its behalf, all
Environmental Laws applicable to its business operations and materials handled therein, and as a
result thereof has reasonably concluded that Borrower is in compliance with such Environmental
Laws, except to the extent a failure to be in such compliance could not reasonably be expected to
have a Material Adverse Effect.

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

     3.10 Full Disclosure. None of the representations or warranties made by Borrower in the Loan
Documents as of the date such representations and warranties are made or deemed made, and none of
the statements contained in any exhibit, report, statement or certificate furnished by or on behalf
of Borrower in connection with the Loan Documents (including disclosure materials delivered by or
on behalf of Borrower to Lender prior to the Closing Date or pursuant to Section 5.2 hereof),
contains any untrue statement of a material fact or omits any material fact required to be stated
therein or necessary to make the statements made therein, in light of the circumstances under which
they are made, not misleading as of the time when made or delivered.

     3.11 Specific Representations Regarding Collateral.

     (a) Title. Except for the security interests created by this Agreement and Permitted Liens,
(i) Borrower is and will be the unconditional legal and beneficial owner of the Collateral, and
(ii) the Collateral is genuine and subject to no Liens, rights or defenses of others.

     (b) Location of Collateral. Borrower’s chief executive office, Records, Equipment, and any
other offices or places of business are located at the address(es) shown on the Supplement.

     (c) Business Names. Other than its full corporate name, Borrower has not conducted business
using any trade names or fictitious business names except as shown on the Supplement.

     3.12 Copyrights, Patents, Trademarks and Licenses.

     (a) Borrower owns or is licensed or otherwise has the right to use all of the patents,
trademarks, service marks, trade names, copyrights, contractual franchises, authorizations and
other similar rights that are reasonably necessary for the operation of its business, without, to
the best of Borrower’s knowledge, conflict with the rights of any other Person.

     (b) To Borrower’s knowledge, no slogan or other advertising device, product, process, method,
substance, part or other material now employed, or now contemplated to be employed, by Borrower
infringes upon any rights held by any other Person.

     (c) No claim or litigation regarding any of the foregoing is pending or, to Borrower’s
knowledge, threatened, and no patent, invention, device, application, principle or any statute,
law, rule, regulation, standard or code is pending or proposed which, in either case, could
reasonably be expected to have a Material Adverse Effect.

     3.13 Survival. The representations and warranties of Borrower as set forth in this Agreement
survive the execution and delivery of this Agreement.

ARTICLE 4 — CONDITIONS PRECEDENT

     4.1 Conditions to First Loan. The obligation of Lender to make its first Loan hereunder is, in
addition to the conditions precedent specified in Section 4.2, subject to the fulfillment of the
following conditions and to the receipt by Lender of the documents described below, duly executed
and in form and substance satisfactory to Lender and its counsel:

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     (a) Resolutions. A certified copy of the resolutions of the Board of Directors of Borrower
authorizing the execution, delivery and performance by Borrower of the Loan Documents.

     (b) Incumbency and Signatures. A certificate of the secretary of Borrower certifying the names
of the officer or officers of Borrower authorized to sign the Loan Documents, together with a
sample of the true signature of each such officer.

     (c) Legal Opinion. The opinion of legal counsel for Borrower as to such matters as Lender may
reasonably request in substantially the form of Exhibit “F” attached to the Supplement.

     (d) Articles and By-Laws. Certified copies of the Articles or Certificate of Incorporation and
By-Laws of Borrower, as amended through the Closing Date.

     (e) This Agreement. A counterpart of this Agreement and an initial Supplement, with all
schedules completed and attached thereto, and disclosing such information as is acceptable to
Lender.

     (f) Financing Statements. Filing copies (or other evidence of filing satisfactory to Lender
and its counsel) of such UCC financing statements, account control agreements, collateral
assignments and termination statements, with respect to the Collateral as Lender shall request.

     (g) Lien Searches. UCC lien, judgment, bankruptcy and tax lien searches of Borrower from such
jurisdictions or offices as Lender may reasonably request, all as of a date reasonably satisfactory
to Lender and its counsel.

     (h) Good Standing Certificate. A Certificate of status or good standing of Borrower as of a
date acceptable to Lender from the jurisdiction of Borrower’s organization and any foreign
jurisdictions where Borrower is or should be qualified to do business.

     4.2 Conditions to All Loans. The obligation of Lender to make its initial Loan and each
subsequent Loan is subject to the following further conditions precedent that:

     (a) No Default. No Default or Event of Default has occurred and is continuing or will result
from the making of any such Loan, and the representations and warranties of Borrower contained in
Article 3 of this Agreement and Part 3 of the Supplement are true and correct as of the Borrowing
Date of such Loan.

     (b) No Material Adverse Effect. No event that has had or could reasonably be expected to have
a Material Adverse Effect has occurred.

     (c) Borrowing Request. Borrower shall have delivered to Lender a Borrowing Request for such
Loan.

     (d) Note. Borrower shall have delivered an executed Note evidencing such Loan, substantially
in the form of Exhibit “A” attached to the Supplement.

     (e) Supplemental Lien Filings. Borrower shall have executed and delivered such amendments or
supplements to this Agreement and such financing statements as Lender may reasonably request in
connection with the proposed Loan, in order to create or perfect or to maintain the perfection of
Lender’s Liens on the Collateral.

     (f) VCOC Limitation. Lender shall not be obligated to make any Loan under its Commitment if at
the time of or after giving effect to the proposed Loan Lender would no longer qualify as: (A) a
“venture capital operating company” under U.S. Department of Labor Regulations Section
2510.3-101(d), Title 29 of the Code of Federal Regulations, as amended; and (B) a “business
development company” under the provisions of federal Investment Company Act of 1940, as amended;
and (C) a “regulated investment company” under the provisions of the Internal Revenue Code of 1986,
as amended.

     (g) Financial Projections. Borrower shall have delivered to Lender Borrower’s business plan
and/or financial projections or forecasts as most recently approved by Borrower’s Board of
Directors.

ARTICLE 5 — AFFIRMATIVE COVENANTS

     During the term of this Agreement and until its performance of all Obligations, Borrower will:

5.1 Notice to Lender. Promptly give written notice to Lender of

     (a) Any litigation or administrative or regulatory proceeding affecting Borrower where the
amount claimed against Borrower is at the Threshold Amount or more, or where the granting of the
relief requested could have a Material Adverse Effect.

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     (b) Any substantial dispute which may exist between Borrower or any governmental or regulatory
authority.

     (c) The occurrence of any Default or any Event of Default.

     (d) Any change in the location of any of Borrower’s places of business or Collateral at least
thirty (30) days in advance of such change, or of the establishment of any new, or the
discontinuance of any existing, place of business.

     (e) Any dispute or default by Borrower or any other party under any joint venture, partnering,
distribution, cross-licensing, strategic alliance, collaborative research or manufacturing, license
or similar agreement which could reasonably be expected to have a Material Adverse Effect

     (f) Any other matter which has resulted or might reasonably result in a Material Adverse
Change.

     5.2 Financial Statements. Deliver to Lender or cause to be delivered to Lender, in form and
detail satisfactory to Lender the following financial and other information, which Borrower
warrants shall be accurate and complete in all material respects:

     (a) Monthly Financial Statements. As soon as available but no later than thirty (30) days
after the end of each month, Borrower’s balance sheet as of the end of such period, and Borrower’s
income statement for such period and for that portion of Borrower’s financial reporting year ending
with such period, prepared in accordance with GAAP and attested by a responsible financial officer
of Borrower as being complete and correct and fairly presenting Borrower’s financial condition and
the results of Borrower’s operations. After a Qualified Public Offering, the foregoing interim
financial statements shall be delivered no later than 45 days after each fiscal quarter and for the
quarter-annual fiscal period then ended.

     (b) Year-End Financial Statements. As soon as available but no later than one hundred twenty
(120) days after and as of the end of each financial reporting year, starting on the financial
reporting year ending December 31, 2005 or any prior year that Borrower’s Board of Director’s
directs audited statements to be produced, a complete copy of Borrower’s audit report, which shall
include balance sheet, income statement, statement of changes in equity and statement of cash flows
for such year, prepared in accordance with GAAP and certified by an independent certified public
accountant selected by Borrower and satisfactory to Lender (the “Accountant”). The Accountant’s
certification shall not be qualified or limited due to a restricted or limited examination by the
Accountant of any material portion of Borrower’s records or otherwise. For its financial reporting
year ended December 31, 2003 (and December 31, 2004, if applicable), Borrower shall furnish company
prepared annual financial statements to Lender as otherwise required above.

     (c) Compliance Certificates. Simultaneously with the delivery of each set of financial
statements referred to in paragraphs (a) and (b) above, a certificate of the chief financial
officer of Borrower substantially in the form of Exhibit “C” to the Supplement (i) setting
forth in reasonable detail any calculations required to establish whether Borrower is in compliance
with any financial covenants or tests set forth in the Supplement, and (ii) stating whether any
Default or Event of Default exists on the date of such certificate, and if so, setting forth the
details thereof and the action which Borrower is taking or proposes to take with respect thereto.

     (d) Government Required Reports; Press Releases. Promptly after sending, issuing, making
available, or filing, copies of all statements released to any news media for publication, all
reports, proxy statements, and financial statements that Borrower sends or makes available to its
stockholders, and, not later than five (5) days after actual filing or the date such filing was
first due, all registration statements and reports that Borrower files or is required to file with
the Securities and Exchange Commission, or any other governmental or regulatory authority.

     (e) Other Information. Such other statements, lists of property and accounts, budgets,
forecasts, reports, or other information as Lender may from time to time reasonably request.

     5.3 Managerial Assistance from Lender. Permit Lender to substantially participate in, and
substantially influence the conduct of management of Borrower through the exercise of “management
rights,” as that term is defined in 29 C.F.R. § 2510.3-101(d), including without limitation the
following rights:

     (a) Borrower agrees that (i) it will make its officers, directors, employees and affiliates
available at such times as Lender may reasonably request for Lender to consult with and advise as
to the conduct of Borrower’s business, its equipment and financing plans, and its financial
condition and prospects, (ii) Lender shall have the right to inspect Borrower’s books, records,
facilities and properties at reasonable times during normal business hours on reasonable advance

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notice, and (iii) Lender shall be entitled to recommend prospective candidates for election or
nomination for election to Borrower’s Board of Directors and Borrower shall give due consideration
to (but shall not be bound by) such recommendations, it being the intention of the parties that
Lender shall be entitled through such rights, inter alia, to furnish “significant managerial
assistance”, as defined in Section 2(a)(47) of the Investment Company Act of 1940, to Borrower.

     (b) Without limiting the generality of (a) above, if Lender reasonably believes that financial
or other developments affecting Borrower have impaired or are likely to impair Borrower’s ability
to perform its obligations under this Agreement, permit Lender reasonable access to Borrower’s
management and/or Board of Directors and opportunity to present Lender’s views with respect to such
developments.

     Lender shall cooperate with Borrower to ensure that the exercise of Lender’s rights shall not
disrupt the business of Borrower. The rights enumerated above shall not be construed as giving
Lender control over Borrower’s management or policies.

     5.4 Existence. Maintain and preserve Borrower’s existence, present form of business, and all
rights and privileges necessary or desirable in the normal course of its business; and keep all
Borrower’s property in good working order and condition, ordinary wear and tear excepted.

     5.5 Insurance. Obtain and keep in force insurance in such amounts and types as is usual in the
type of business conducted by Borrower, with insurance carriers having a policyholder rating of not
less than “A” and financial category rating of Class VII in “Best’s Insurance Guide,” unless
otherwise approved by Lender. Such insurance policies must be in form and substance satisfactory to
Lender, and shall list Lender as an additional insured or loss payee, as applicable, on
endorsement(s) in form reasonably acceptable to Lender. Borrower shall furnish to Lender such
endorsements, and upon Lender’s request, copies of any or all such policies.

     5.6 Accounting Records. Maintain adequate books, accounts and records, and prepare all
financial statements in accordance with GAAP, and in compliance with the regulations of any
governmental or regulatory authority having jurisdiction over Borrower or Borrower’s business.

     5.7 Compliance With Laws. Comply with all laws (including Environmental Laws), rules,
regulations applicable to, and all orders and directives of any governmental or regulatory
authority having jurisdiction over, Borrower or Borrower’s business, and with all material
agreements to which Borrower is a party, except where the failure to so comply would not have a
Material Adverse Effect.

     5.8 Taxes and Other Liabilities. Pay all Borrower’s Indebtedness when due; pay all taxes and
other governmental or regulatory assessments before delinquency or before any penalty attaches
thereto, except as may be contested in good faith by the appropriate procedures and for which
Borrower shall maintain appropriate reserves; and timely file all required tax returns.

     5.9 Special Collateral Covenants.

     (a) Maintenance of Collateral; Inspection. Do all things reasonably necessary to maintain,
preserve, protect and keep all Collateral in good working order and salable condition, ordinary
wear and tear excepted, deal with the Collateral in all ways as are considered good practice by
owners of like property, and use the Collateral lawfully and, to the extent applicable, only as
permitted by Borrower’s insurance policies. Maintain, or cause to be maintained, complete and
accurate Records relating to the Collateral. Upon reasonable prior notice at reasonable times
during normal business hours, Borrower hereby authorizes Lender’s officers, employees,
representatives and agents to inspect the Collateral and to discuss the Collateral and the Records
relating thereto with Borrower’s officers and employees.

     (b) Financing Statements and Other Actions. Execute and deliver to Lender all financing
statements, notices and other documents from time to time reasonably requested by Lender to
maintain a first perfected security interest in the Collateral in favor of Lender; perform such
other acts, and execute and deliver to Lender such additional conveyances, assignments, agreements
and instruments, as Lender may at any time request in connection with the administration and
enforcement of this Agreement or Lender’s rights, powers and remedies hereunder.

     (c) Liens. Not create, incur, assume or permit to exist any Lien or grant any other Person a
negative pledge on any Collateral, except Permitted Liens.

     (d) Documents of Title. Not sign or authorize the signing of any financing statement or other
document naming Borrower as debtor or obligor, or acquiesce or cooperate in the issuance of any
bill of lading, warehouse receipt or other document or instrument of title with respect to any
Collateral, except those

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negotiated to Lender, or those naming Lender as secured party.

     (e) Change in Location or Name. Without at least 30 days’ prior written notice to Lender: (a)
not relocate any Collateral or Records, its chief executive office, or establish a place of
business at a location other than as specified in the Supplement; and (b) not change its name,
mailing address, location of Collateral, jurisdiction of incorporation or its legal structure.

     (f) Decals, Markings. At the request of Lender, firmly affix a decal, stencil or other marking
to designated items of Equipment, indicating thereon the security interest of Lender.

     (g) Agreement With Real Property Owner/Landlord. Obtain and maintain such acknowledgments,
consents, waivers and agreements from the owner, lienholder, mortgagee and landlord with respect to
any real property on which Equipment is located as Lender may require, all in form and substance
satisfactory to Lender.

     5.10 Intellectual Property. Borrower shall use reasonable commercial efforts to (i) protect,
defend and maintain the validity and enforceability of its Trademarks, Patents, Copyrights, and any
licenses of any of the foregoing (ii) detect infringements of its Trademarks, Patents, Copyrights,
and any licenses of any of the foregoing, and (iii) not allow any material Trademarks, Patents or
Copyrights to be abandoned, forfeited or dedicated to the public unless approved by Borrower’s
Board of Directors.

     5.11 Authorization for Automated Clearinghouse Funds Transfer. (i) Authorize Lender to
initiate debit entries to Borrower’s Primary Operating Account, specified in the Supplement hereto,
through Automated Clearinghouse (“ACH”) transfers, in order to satisfy the Obligations; (ii)
provide Lender at least thirty (30) days notice of any change in Borrower’s Primary Operating
Account; and (iii) grant Lender any additional authorizations necessary to begin ACH debits from a
new account which becomes the Primary Operating Account.

ARTICLE 6 — NEGATIVE COVENANTS

     During the term of this Agreement and until the performance of all Obligations, Borrower will
not (without Lender’s prior written consent):

     6.1 Dividends. Except after a Qualified Public Offering, pay any dividends or purchase, redeem
or otherwise acquire or make any other distribution with respect to any of Borrower’s capital
stock, except (a) dividends or other distributions solely of capital stock of Borrower, (b) so long
as no Event of Default has occurred and is continuing, (i) repurchases of stock from employees upon
termination of employment under reverse vesting or similar repurchase plans, or (ii) dividends
required to be paid to Series A Preferred Stockholders pursuant to the Amended and Restated
Articles of Incorporation in force at the time of the execution of this Agreement and (c) as
expressly permitted in the Supplement.

     6.2 Changes/Mergers. Liquidate or dissolve; or enter into any consolidation, merger or other
combination in which the stockholders of the Borrower immediately prior to the first such
transaction own less than 50% of the voting stock of the Borrower immediately after giving effect
to such transaction or related series of such transactions, except that Borrower may consolidate or
merge so long as: (A) the entity that results from such merger or consolidation (the “Surviving
Entity”) shall have executed and delivered to Lender an agreement in form and substance reasonably
satisfactory to Lender, containing an assumption by the Surviving Entity of the due and punctual
payment and performance of all Obligations and performance and observance of each covenant and
condition of Borrower in the Loan Documents; (B) all such obligations of the Surviving Entity to
Lender shall be guaranteed by any entity that directly or indirectly owns or controls more than 50%
of the voting stock of the Surviving Entity; (C) immediately after giving effect to such merger or
consolidation, no Event of Default or, event which with the lapse of time or giving of notice or
both, would result in an Event of Default shall have occurred and be continuing; and (D) the credit
risk to Lender, in its sole discretion, of the Surviving Entity shall not be increased. In
determining whether the proposed merger or consolidation would result in an increased credit risk,
Lender may consider, among other things, changes in Borrower’s management team, employee base,
access to equity markets, venture capital support, financial position and/or disposition of
intellectual property rights which may reasonably be anticipated as a result of the transaction.

     6.3 Sales of Assets. Sell, transfer, lease, license or otherwise dispose of (a “Transfer”) any
of Borrower’s assets except (i) non-exclusive licenses of Intellectual Property in the ordinary
course of business consistent with industry practice; (ii) Transfers of worn-out, obsolete or
surplus property (each as determined by the Borrower in its reasonable judgment) not constituting
Equipment as to which a Loan was made hereunder; (iii) Transfers of Inventory not constituting
Equipment

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as to which a Loan was made hereunder; (iv) Transfers constituting Permitted Liens; (v)
Transfers of Borrower’s assets (other than Intellectual Property and Equipment as to which a Loan
was made hereunder) for fair consideration and in the ordinary course of its business, and (vi)
except as expressly permitted in the Supplement.

     6.4 Loans/Investments. Make or suffer to exist any loans, guaranties, advances, or
investments, except:

     (a) Accounts receivable in the ordinary course of Borrower’s business;

     (b) Investments in domestic certificates of deposit issued by, and other domestic investments
with, financial institutions organized under the laws of the United States or a state thereof,
having One Hundred Million Dollars ($100,000,000) in capital and a rating of at least “investment
grade” by Moody’s or Standard & Poors of any successor rating agency;

     (c) Investments in marketable obligations of the United States of America and in open market
commercial paper rated at least A2 or P2 by Moody’s and /or Standard & Poors.

     (d) Temporary advances to cover incidental expenses to be incurred in the ordinary course of
business;

     (e) Investments in joint ventures, strategic alliances, licensing and similar arrangements
customary in Borrower’s industry and which do not require Borrower to assume or otherwise become
liable for the obligations of any third party not directly related to or arising out of such
arrangement or, without the prior written consent of Lender, require Borrower to transfer ownership
of Collateral to such joint venture or other entity; and

     (f) Investments in wholly-owned subsidiaries of the Borrower; and

     (g) as expressly permitted in the Supplement.

     6.5 Transactions With Related Persons. Directly or indirectly enter into any transaction with
or for the benefit of a Related Person on terms more favorable to the Related Person than would
have been obtainable in an “arms’ length” dealing.

     6.6 Other Business. Engage in any material line of business other than the business Borrower
conducts as of the Closing Date.

     6.7 Financial Covenants. Fail to comply with any financial covenants or tests set forth in the
Supplement.

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

     6.9 Stock Ownership. Allow any Person or two or more Persons acting in concert to acquire
beneficial ownership (within the meaning of Rule 13d-3 of the Securities and Exchange Commission)
of twenty-five percent (25%) or more of the outstanding shares of voting stock of Borrower.

ARTICLE 7 — EVENTS OF DEFAULT

     7.1 Events of Default; Acceleration. Upon the occurrence and during the continuation of any
Default, the obligation of Lender to make any additional Loan shall be suspended. The occurrence of
any of the following (each, an “Event of Default”) shall terminate any obligation of Lender to make
any additional Loan; and shall, at the option of Lender (1) make all sums of Basic Interest and
principal, all Terminal Payments, and any Obligations and other amounts owing under any Loan
Documents immediately due and payable without notice of default, presentment or demand for payment,
protest or notice of nonpayment or dishonor or any other notices or demands, and (2) give Lender
the right to exercise any other right or remedy provided by contract or applicable law:

     (a) Borrower shall fail to pay any principal, interest or Terminal Payment under this
Agreement or any Note, or fail to pay any fees or other charges when due under any Loan Document,
and such failure continues for five (5) Business Days or more after the same first becomes due; or
an Event of Default as

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defined in any other Loan Document shall have occurred.

     (b) Any representation or warranty made, or financial statement, certificate or other document
provided, by Borrower under any Loan Document shall prove to have been false or misleading in any
material respect when made or deemed made herein.

     (c) Borrower shall fail to pay its debts generally as they become due or shall commence any
Insolvency Proceeding with respect to itself; an involuntary Insolvency Proceeding shall be filed
against Borrower, or a custodian, receiver, trustee, assignee for the benefit of creditors, or
other similar official, shall be appointed to take possession, custody or control of the properties
of Borrower, and such involuntary Insolvency Proceeding, petition or appointment is acquiesced to
by Borrower or is not dismissed within sixty (60) days; or the dissolution or termination of the
business of Borrower.

     (d) Borrower shall be in default beyond any applicable period of grace or cure under any other
agreement involving the borrowing of money, the purchase of property, the advance of credit or any
other monetary liability of any kind to Lender or to any Person which results in the acceleration
of payment of such obligation in an amount in excess of the Threshold Amount.

     (e) Any governmental or regulatory authority shall take any judicial or administrative action,
or any defined benefit pension plan maintained by Borrower shall have any unfunded liabilities, any
of which, in the reasonable judgment of Lender, might have a Material Adverse Effect.

     (f) Subject to Section 6.3 hereof, any sale, transfer or other disposition of all or a
substantial or material part of the assets of Borrower, including without limitation to any trust
or similar entity, shall occur, except any transfer to a wholly-owned subsidiary permitted under
the Supplement.

     (g) Any judgment(s) singly or in the aggregate in excess of the Threshold Amount shall be
entered against Borrower which remain unsatisfied, unvacated or unstayed pending appeal for ten
(10) or more days after entry thereof.

     (h) Borrower shall fail to perform or observe any covenant contained in Article 6 of this
Agreement.

     (i) Borrower shall fail to perform or observe any covenant contained in Section 5.9 of this
Agreement.

     (j) Borrower shall fail to perform or observe any covenant contained in this Agreement or any
other Loan Document (other than a covenant which is dealt with specifically elsewhere in this
Article 7) and, if capable of being cured, the breach of such covenant is not cured within 30 days
after the sooner to occur of Borrower’s receipt of notice of such breach from Lender or the date on
which such breach fast becomes known to any officer of Borrower; provided, however
that if such breach is not capable of being cured within such 30-day period and Borrower timely
notifies Lender of such fact and Borrower diligently pursues such cure, then the cure period shall
be extended to the date requested in Borrower’s notice but in no event more than 90 days from the
initial breach; provided, further, that such additional 60-day opportunity to cure shall not apply
in the case of any failure to perform or observe any covenant which has been the subject of a prior
failure within the preceding 180 days or which is a willful and knowing breach by Borrower.

     7.2 Remedies Upon Default. Upon the occurrence and during the continuance of an Event of
Default, Lender shall be entitled to, at its option, exercise any or all of the rights and remedies
available to a secured party under the UCC or any other applicable law, and exercise any or all of
its rights and remedies provided for in this Agreement and in any other Loan Document. The
obligations of Borrower under this Agreement shall continue to be effective or be reinstated, as
the case may be, if at any time any payment of any Obligations is rescinded or must otherwise be
returned by Lender upon, on account of, or in connection with, the insolvency, bankruptcy or
reorganization of Borrower or otherwise, all as though such payment had not been made.

     7.3 Sale of Collateral. Upon the occurrence and during the continuance of an Event of Default,
Lender may, subject to the provisions contained in the UCC and other applicable law, rules or
regulations, sell all or any part of the Collateral, at public or private sales, to itself, a
wholesaler, retailer or investor, for cash, upon credit or for future delivery, and at such price
or prices as Lender may deem commercially reasonable. To the extent permitted by law, Borrower
hereby specifically waives all rights of redemption and any rights of stay or appraisal which it
has or may have under any applicable law in effect from time to time. Any such public or private
sales shall be held at such times and at such place(s) as Lender may determine. In case of the sale
of all or any part of the Collateral on credit or for future delivery, the Collateral so sold may
be retained by Lender until the selling price is paid by the purchaser, but Lender shall not incur
any liability in case of the failure of such purchaser to pay for the

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Collateral and, in case of
any such failure, such Collateral may be resold. Lender may, instead of exercising its power of
sale, proceed to enforce its security interest in the Collateral by seeking a judgment or decree of
a court of competent jurisdiction.

     7.4 Borrower’s Obligations Upon Default. Upon the request of Lender after the occurrence and
during the continuance of an Event of Default, Borrower will:

     (a) Assemble and make available to Lender the Collateral at such place(s) as Lender shall
reasonably designate, segregating all Collateral so that each item is capable of identification;
and

     (b) Subject to the rights of any lessor, permit Lender, by Lender’s officers, employees,
agents and representatives, to enter any premises where any Collateral is located, to take
possession of the Collateral, to complete the processing, manufacture or repair of any Collateral,
and to remove the Collateral, or to conduct any public or private sale of the Collateral, all
without any liability of Lender for rent or other compensation for the use of Borrower’s premises.

ARTICLE 8 — SPECIAL COLLATERAL PROVISIONS

     8.1 Performance of Borrower’s Obligations. Without having any obligation to do so, upon
reasonable prior notice to Borrower, Lender may perform or pay any obligation which Borrower has
agreed to perform or pay under this Agreement, including, without limitation, the payment or
discharge of taxes or Liens levied or placed on or threatened against the Collateral. In so
performing or paying, Lender shall determine the action to be taken and the amount necessary to
discharge such obligations. Borrower shall reimburse Lender on demand for any amounts paid by
Lender pursuant to this Section, which amounts shall constitute Obligations secured by the
Collateral and shall bear interest from the date of demand at the Default Rate.

     8.2 Power of Attorney. For the purpose of protecting and preserving the Collateral and
Lender’s rights under this Agreement, Borrower hereby irrevocably appoints Lender, with full power
of substitution, as its attorney-in-fact with full power and authority, after the occurrence and
during the continuance of an Event of Default, to do any act which Borrower is obligated to do
hereunder; to exercise such rights with respect to the Collateral as Borrower might exercise; to
use such Equipment, Fixtures or other property as Borrower might use; to enter Borrower’s premises;
to give notice of Lender’s security interest in, and to collect the Collateral; and to execute and
file in Borrower’s name any financing statements, amendments and continuation statements necessary
or desirable to perfect or continue the perfection of Lender’s security interests in the
Collateral. Borrower hereby ratifies all that Lender shall lawfully do or cause to be done by
virtue of this appointment.

     8.3 Authorization for Lender to Take Certain Action. The power of attorney created in Section
8.2 is a power coupled with an interest and shall be irrevocable. The powers conferred on Lender
hereunder are solely to protect its interests in the Collateral and shall not impose any duty upon
lender to exercise such powers. Lender shall be accountable only for amounts that it actually
receives as a result of the exercise of such powers and in no event shall Lender or any of its
directors, officers, employees, agents or representatives be responsible to Borrower for any act or
failure to act, except for gross negligence or willful misconduct. After the occurrence and during
the continuance of an Event of Default, Lender may exercise this power of attorney without notice
to or assent of Borrower, in the name of Borrower, or in Lender’s own name, from time to time in
Lender’s sole discretion and at Borrower’s expense. To further carry out the terms of this
Agreement, after the occurrence and during the continuance of an Event of Default, Lender may:

     (a) Execute any statements or documents or take possession of, and endorse and collect and
receive delivery or payment of, any checks, drafts, notes, acceptances or other instruments and
documents constituting Collateral, or constituting the payment of amounts due and to become due or
any performance to be rendered with respect to the Collateral.

     (b) Sign and endorse any invoices, freight or express bills, bills of lading, storage or
warehouse receipts; drafts, certificates and statements under any commercial or standby letter of
credit relating to Collateral; or any other documents relating to the Collateral, including without
limitation the Records.

     (c) Use or operate Collateral or any other property of Borrower for the purpose of preserving
or liquidating Collateral.

     (d) File any claim or take any other action or proceeding in any court of law or equity or as
otherwise deemed appropriate by Lender for the purpose of collecting any and all monies due or

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securing any performance to be rendered with respect to the Collateral.

     (e) Commence, prosecute or defend any suits, actions or proceedings or as otherwise deemed
appropriate by Lender for the purpose of protecting or collecting the Collateral.

     (f) Prepare, adjust, execute, deliver and receive payment under insurance claims, and collect
and receive payment of and endorse any instrument in payment of loss or returned premiums or any
other insurance refund or return, and apply such amounts at Lender’s sole discretion, toward
repayment of the Obligations or replacement of the Collateral.

     8.4 Application of Proceeds. Any Proceeds and other monies or property received by Lender
pursuant to the terms of this Agreement or any Loan Document may be applied by Lender first to the
payment of expenses of collection, including without limitation reasonable attorneys’ fees, and
then to the payment of the Obligations in such order of application as Lender may elect.

     8.5 Deficiency. If the Proceeds of any disposition of the Collateral are insufficient to cover
all costs and expenses of such sale and the payment in full of all the Obligations, plus all other
sums required to be expended or distributed by Lender, then Borrower shall be liable for any such
deficiency.

     8.6 Lender Transfer. Upon the transfer of all or any part of the Obligations, Lender may
transfer all or part of the Collateral and shall be fully discharged thereafter from all liability
and responsibility with respect to such Collateral so transferred, and the transferee shall be
vested with all the rights and powers of Lender hereunder with respect to such Collateral so
transferred, but with respect to any Collateral not so transferred, Lender shall retain all rights
and powers hereby given.

     8.7 Lender’s Duties.

     (a) Lender shall use reasonable care in the custody and preservation of any Collateral in its
possession. Without limitation on other conduct which may be considered the exercise of reasonable
care, Lender shall be deemed to have exercised reasonable care in the custody and preservation of
such Collateral if such Collateral is accorded treatment substantially equal to that which Lender
accords its own property, it being understood that Lender shall not have any responsibility for
ascertaining or taking action with respect to declining value or other matters relative to any
Collateral, regardless of whether Lender has or is deemed to have knowledge of such matters; or
taking any necessary steps to preserve any rights against any Person with respect to any
Collateral. Under no circumstances shall Lender be responsible for any injury or loss to the
Collateral, or any part thereof, arising from any cause beyond the reasonable control of Lender.

     (b) Lender may at any time deliver the Collateral or any part thereof to Borrower and the
receipt of Borrower shall be a complete and full acquittance for the Collateral so delivered, and
Lender shall thereafter be discharged from any liability or responsibility therefor.

     (c) Neither Lender, nor any of its directors, officers, employees, agents, attorneys or any
other person affiliated with or representing Lender 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 Lender, or any of its directors, officers, employees,
agents, attorneys or any other person affiliated with or representing Lender.

     8.8 Termination of Security Interests. Upon the payment in full of the Obligations and
satisfaction of all Borrower’s obligations under this Agreement and the other Loan Documents, and
if Lender has no further obligations under its Commitment, the security interest granted hereby
shall terminate and all rights to the Collateral shall revert to Borrower. Upon any such
termination, the Lender shall, at Borrower’s expense, execute and deliver to Borrower such
documents as Borrower shall reasonably request to evidence such termination.

ARTICLE 9 — GENERAL PROVISIONS

     9.1 Notices. Any notice given by any party under any Loan Document shall be in writing and
personally delivered, sent by overnight courier, or United States mail, postage prepaid, or sent by
facsimile, or other authenticated message, charges prepaid, to the other party’s or parties’
addresses shown on the Supplement. Each party may change the address or facsimile number to which
notices, requests and other communications are to be sent by giving written notice of such change
to each other party. Notice given by hand delivery shall be deemed received on the date delivered;
if sent by overnight courier, on the next Business Day after delivery to the courier service; if by
first class mail, on the third Business Day after deposit in the U.S. Mail; and if by facsimile, on
the date of transmission.

12

 

     9.2 Binding Effect. The Loan Documents shall be binding upon and inure to the benefit of
Borrower and Lender and their respective successors and assigns; provided, however, that neither
Borrower nor Lender may assign or transfer Borrower’s rights or obligations under any Loan Document
without the other party’s prior written consent, provided that Lender may grant a security interest
in its rights under the Loan Documents. Lender shall at all times maintain the confidentiality of
all documents and information which Lender now or hereafter may have relating to the Loans,
Borrower, or its business. It is the intention of the parties that. as a “venture capital operating
company,” Venture Lending & Leasing III, LLC (“LLC”), the parent and sole owner of Venture Lending
& Leasing III, Inc., shall have the benefit of, and the power to independently exercise, those
management rights’ provided in Section 5.3. To that end, the references to Lender in Sections
4.2(f), 5.1, 5.2, 5.3 and 5.9(a) hereof shall include LLC, and LLC shall have the right to exercise
the advisory, inspection, information and other rights given to lender under those Sections
independently of Lender. No amendment or modification of this Agreement shall alter or diminish
LLC’s rights under the preceding sentence without the consent of LLC.

     9.3 No Waiver. Any waiver, consent or approval by Lender of any Event of Default or breach of
any provision, condition, or covenant of any Loan Document must be in writing and shall be
effective only to the extent set forth in writing. No waiver of any breach or default shall be
deemed a waiver of any later breach or default of the same or any other provision of any Loan
Document. No failure or delay on the part of Lender in exercising any power, right, or privilege
under any Loan Document shall operate as a waiver thereof, and no single or partial exercise of any
such power, right, or privilege shall preclude any further exercise thereof or the exercise of any
other power, right or privilege. Lender has the right at its sole option to continue to accept
interest and/or principal payments due under the Loan Documents after default, and such acceptance
shall not constitute a waiver of said default or an extension of the Maturity Date unless Lender
agrees otherwise in writing.

     9.4 Rights Cumulative. All rights and remedies existing under the Loan Documents are
cumulative to, and not exclusive of, any other rights or remedies available under contract or
applicable law.

     9.5 Unenforceable Provisions. Any provision of any Loan Document executed by Borrower which is
prohibited or unenforceable in any jurisdiction, shall be so only as to such jurisdiction and only
to the extent of such prohibition or unenforceability, but all the remaining provisions of any such
Loan Document shall remain valid and enforceable.

     9.6 Accounting Terms. Except as otherwise provided in this Agreement, accounting terms and
financial covenants and information shall be determined and prepared in accordance with GAAP.

     9.7 Indemnification; Exculpation. Borrower shall pay and protect, defend and indemnify Lender
and Lender’s employees, officers, directors, shareholders, affiliates, correspondents, agents and
representatives (other than Lender, collectively “Agents”) against, and hold Lender and each such
Agent harmless from, all claims, actions, proceedings, liabilities, damages, losses, expenses
(including, without limitation, attorneys’ fees and costs) and other amounts incurred by Lender and
each such Agent, arising from (i) the matters contemplated by this Agreement or any other Loan
Documents or (ii) any contention that Borrower has failed to comply with any law, rule, regulation,
order or directive applicable to Borrower’s business; provided, however, that this indemnification
shall not apply to any of the foregoing incurred solely as the result of Lender’s or any Agents
gross negligence or willful misconduct. This indemnification shall survive the payment and
satisfaction of all of Borrower’s Obligations to Lender.

     9.8 Reimbursement. Borrower shall reimburse Lender for all costs and expenses, including
without limitation reasonable attorneys’ fees and disbursements expended or incurred by Lender in
any arbitration, mediation, judicial reference, legal action or otherwise in connection with (a)
the preparation and negotiation of the Loan Documents (which Lender acknowledges shall be included
within the Documentation Fee), (b) the amendment and enforcement of the Loan Documents, including
without limitation during any workout, attempted workout, and/or in connection with the rendering
of legal advice as to Lender’s rights, remedies and obligations under the Loan Documents, (c)
collecting any sum which becomes due Lender under any Loan Document, (d) any proceeding for
declaratory relief, any counterclaim to any proceeding, or any appeal, or (e) the protection,
preservation or enforcement of any rights of Lender. For the purposes of this section, attomeys’
fees shall include, without limitation, fees incurred in connection with the following: (1)
contempt proceedings; (2) discovery; (3) any motion, proceeding or other activity of any kind in
connection with an Insolvency Proceeding; (4) garnishment, levy, and debtor and third party
examinations; and (5) postjudgment motions and proceedings of any kind, including without
limitation any activity taken to collect or enforce any judgment.

13

 

All of the foregoing costs and
expenses shall be payable upon demand by Lender, and if not paid within forty-five (45) days of
presentation of invoices shall bear interest at the highest applicable Default Rate.

     9.9 Execution in Counterparts. This Agreement may be executed in any number of counterparts
which, when taken together, shall constitute but one agreement.

     9.10 Entire Agreement. The Loan Documents are intended by the parties as the final expression
of their agreement and therefore contain the entire agreement between the parties and supersede all
prior understandings or agreements concerning the subject matter hereof. This Agreement may be
amended only in a writing signed by Borrower and Lender.

     9.11 Governing Law and Jurisdiction.

     (a) THIS AGREEMENT AND THE LOAN DOCUMENTS SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE INTERNAL LAWS OF THE STATE OF CALIFORNIA.

     (b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT
MAY BE BROUGHT IN THE COURTS OF THE STATE OF CALIFORNIA OR OF THE UNITED STATES FOR THE NORTHERN
DISTRICT OF CALIFORNIA, AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF BORROWER AND
LENDER CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF
THOSE COURTS. EACH OF BORROWER AND LENDER IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION
TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR
HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS
AGREEMENT OR ANY DOCUMENT RELATED HERETO. BORROWER AND LENDER EACH WAIVE PERSONAL SERVICE OF ANY
SUMMONS, COMPLAINT OR OTHER PROCESS, WHICH MAY BE MADE BY ANY OTHER MEANS PERMITTED BY CALIFORNIA
LAW.

     9.12 Waiver of Jury Trial. BORROWER AND LENDER EACH WAIVES ITS RESPECTIVE RIGHTS TO A TRIAL BY
JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE
OTHER LOAN DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION, PROCEEDING
OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY OR ANY
PARTICIPANT OR ASSIGNEE, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE.
BORROWER AND LENDER EACH AGREES THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT
TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE PARTIES FURTHER AGREE THAT THEIR
RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION,
COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEMS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR
ENFORCEABILITY OF THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS OR ANY PROVISION HEREOF OR THEREOF.
THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO
THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.

ARTICLE 10 — DEFINITIONS

     The definitions appearing in this Agreement or any Supplement shall be applicable to both the
singular and plural forms of the defined terms:

     “Account” means any “account,” as such term is defined in the UCC, now owned or hereafter acquired
by Borrower or in which Borrower now holds or hereafter acquires any interest and, in any event,
shall include, without limitation, all accounts receivable, book debts and other forms of
obligations (other than forms of obligations evidenced by Chattel Paper, Documents or Instruments)
now owned or hereafter received or acquired by or belonging or owing to Borrower (including,
without limitation, under any trade name, style or division thereof) whether arising out of goods
sold or services rendered by Borrower or from any other transaction, whether or not the same
involves the sale of goods or services by Borrower (including, without limitation, any such
obligation that may be characterized as an account or contract right under the UCC) and all of
Borrower’s rights in, to and under all purchase orders or receipts now owned or hereafter acquired
by it for goods or services, and all of Borrower’s rights to any goods represented by any of the
foregoing (including, without limitation, unpaid seller’s rights of rescission, replevin,
reclamation and stoppage in transit and rights to returned, reclaimed or

14

 

repossessed goods), and
all monies due or to become due to Borrower under all purchase orders and contracts for the sale of
goods or the performance of services or both by Borrower or in connection with any other
transaction (whether or not yet earned by performance on the part of Borrower), now in existence or
hereafter occurring, including, without limitation, the right to receive the proceeds of said
purchase orders and contracts, and all collateral security and guarantees of any kind given by any
Person with respect to any of the foregoing.

“Affiliate” means any Person which directly or indirectly controls, is controlled by, or is under
common control with Borrower. “Control,” “controlled by” and “under common control with” mean
direct or indirect possession of the power to direct or cause the direction of management or
policies (whether through ownership of voting securities, by contract or otherwise); provided, that
control shall be conclusively presumed when any Person or affiliated group directly or indirectly
owns five percent (5%) or more of the securities having ordinary voting power for the election of
directors of a corporation.

“Agreement” means this Loan and Security Agreement and each Supplement thereto, as each may be
amended or supplemented from time to time.

“Bankruptcy Code” means the Federal Bankruptcy Reform Act of 1978 (1I U.S.C. §101, et
seq.), as amended.

“Basic Interest” means the fixed rate of interest payable on the outstanding balance of each Loan
at the applicable Designated Rate.

“Borrowing Date” means the Business Day on which the proceeds of a Loan are disbursed by Lender.

“Borrowing Request” means a written request from Borrower in substantially the form of Exhibit
“B” to the Supplement, requesting the funding of one or more Loans on a particular Borrowing
Date.

“Business Day” means any day other than a Saturday, Sunday or other day on which commercial banks
in New York City or San Francisco are authorized or required by law to close.

“Chattel Paper” means any “chattel paper,” as such term is defined in the UCC, now owned or
hereafter acquired by Borrower or in which Borrower now holds or hereafter acquires any interest.

“Closing Date” means the date of this Agreement.

“Collateral” means all of Borrower’s right, title and interest in and to Equipment, whether now or
hereafter owned or acquired by Borrower and wherever located; and whether held by Borrower or in
the possession of any third party, and all Proceeds of each of the foregoing and all accessions to
substitutions and replacements for, and rents, profits and products of each of the foregoing.

“Commitment” means the obligation of Lender to make Loans to Borrower up to the aggregate principal
amount set forth in the Supplement.

“Copyrights” means all of the following now owned or hereafter acquired by Borrower or in which
Borrower now holds or hereafter acquires any interest: (i) all copyrights, whether registered or
unregistered, held pursuant to the laws of the United States, any State thereof or of any other
country; (ii) all registrations, applications and recordings in the United States Copyright Office
or in any similar office or agency of the United States, any State thereof or any other country;
(iii) all continuations, renewals or extensions thereof; and (iv) any registrations to be issued
under any pending applications.

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

“Default Rate” is defined in Section 2.7.

“Designated Rate” means the rate of interest per annum described in the Supplement as being
applicable to an outstanding Loan from time to time.

“Environmental Laws” means all federal, state or local laws, statutes, common law duties, rules,
regulations, ordinances and codes, together with all administrative orders, directed duties,
requests, licenses, authorizations and permits of, and agreements with, any governmental
authorities, in each case relating to environmental, health, or safety matters.

“Equipment” means each item of “equipment” and “goods,” as such terms are defined in the UCC,
described on Schedule I, attached to the Supplement and incorporated herein by this
reference (as such Schedule I may be amended or supplemented from time to time), now owned
or hereafter acquired by Borrower or in which Borrower now holds or hereafter acquires any
interest, and any and all additions, substitutions and replacements of any of the foregoing,
wherever located, together with all attachments,

15

 

components, parts, equipment and accessories
installed thereon or affixed thereto; and all proceeds of the foregoing arising from the sale,
lease, use of other disposition of all or any portion of such property, including all rights to
payments with respect to insurance or condemnation of the foregoing, and any cause of action
relating to any of the foregoing.

“Event of Default” means any event described in Section 7. I.

“GAAP” means generally accepted accounting principles and practices consistent with those
principles and practices promulgated or adopted by the Financial Accounting Standards Board and the
Board of the American Institute of Certified Public Accountants, their respective predecessors and
successors. Each accounting term used but not otherwise expressly defined herein shall have the
meaning given it by GAAP.

“Indebtedness” of any Person means at any date, without duplication and without regard to whether
matured or unmatured, absolute or contingent: (i) all obligations of such Person for borrowed
money; (ii) all obligations of such Person evidenced by bonds, debentures, notes, or other similar
instruments; (iii) all obligations of such Person to pay the deferred purchase price of property or
services, except trade accounts payable arising in the ordinary course of business; (iv) all
obligations of such Person as lessee under capital leases; (v) all obligations of such Person to
reimburse or prepay any bank or other Person in respect of amounts paid under a letter of credit,
banker’s acceptance, or similar instrument, whether drawn or undrawn; (vi) all obligations of such
Person to purchase securities which arise out of or in connection with the sale of the same or
substantially similar securities; (vii) all obligations of such Person to purchase, redeem,
exchange, convert or otherwise acquire for value any capital stock of such Person or any warrants,
rights or options to acquire such capital stock, now or hereafter outstanding, except to the extent
that such obligations remain performable solely at the option of such Person; (viii) all
obligations to repurchase assets previously sold (including any obligation to repurchase any
accounts or chattel paper under any factoring, receivables purchase, or similar arrangement): (ix)
obligations of such Person under interest rate swap, cap, collar or similar hedging arrangements,
excluding foreign exchange contracts used for hedging; and (x) all obligations of others of any
type described in clause (i) through clause (ix) above guaranteed by such Person.

“Insolvency Proceeding” means (a) any case, action or proceeding before any court or other
governmental authority relating to bankruptcy, reorganization, insolvency, liquidation,
receivership, dissolution, winding up or relief of debtors, or (b) any general assignment for the
benefit of creditors, composition, marshalling of assets for creditors, or other, similar
arrangement in respect of its creditors generally or any substantial portion of its creditors,
undertaken under U.S. Federal, state or foreign law, including the Bankruptcy Code.

“Instruments” means any “instrument,” as such term is defined in the UCC, now owned or hereafter
acquired by Borrower or in which Borrower now holds or hereafter acquires any interest.

“Lien” means any mortgage, deed of trust, pledge, hypothecation, assignment for security, security
interest, encumbrance, levy, lien or charge of any kind, whether voluntarily incurred or arising by
operation of law or otherwise, against any property, any conditional sale or other title retention
agreement, any lease in the nature of a security interest, and the filing of any financing
statement (other than a precautionary financing statement with respect to a lease that is not in
the nature of a security interest) under the UCC or comparable law of any jurisdiction.

“Loan” means an extension of credit by Lender under this Agreement.

“Loan Documents” means, individually and collectively, this Loan and Security Agreement, each
Supplement, each Note, and any other security or pledge agreement(s), any Warrants issued by
Borrower to Lender in connection with this Agreement, and all other contracts, instruments, addenda
and documents executed in connection with this Agreement or the extensions of credit which are the
subject of this Agreement.

“Material Adverse Effect” or “Material Adverse Change” means (a) a material adverse change in, or a
material adverse effect upon, the operations, business, properties, or condition (financial or
otherwise) of Borrower, (b) a material impairment of the ability of Borrower to perform under any
Loan Document; or (c) a material adverse effect upon the legality, validity, binding effect or
enforceability against Borrower of any Loan Document.

“Maturity Date” means, with regard to a Loan, the earlier of (i) its maturity by reason of
acceleration, or (ii) its stated maturity date; and is the date on which payment of all outstanding
principal, accrued interest,

16

 

and the Terminal Payment with respect to such Loan is due.

“Note” means a promissory note substantially in the form attached to the Supplement as Exhibit “A”,
executed by Borrower evidencing each Loan.

“Obligations” means all debts, obligations and liabilities of Borrower to Lender currently existing
or now or hereafter made, incurred or created under, pursuant to or in connection with this
Agreement or any other Loan Document, whether voluntary or involuntary and however arising or
evidenced, whether direct or acquired by Lender by assignment or succession, whether due or not
due, absolute or contingent, liquidated or unliquidated, determined or undetermined, and whether
Borrower may be liable individually or jointly, or whether recovery upon such debt may be or become
barred by any statute of limitations or otherwise unenforceable; and all renewals, extensions and
modifications thereof; and all attorneys’ fees and costs incurred by Lender in connection with the
collection and enforcement thereof as provided for in any Loan Document.

“Patents” means all of the following property now owned or hereafter acquired by Borrower or in
which Borrower now holds or hereafter acquires any interest: (a) all letters patent of, or rights
corresponding thereto in, the United States or any other county, all registrations and recordings
thereof, and all applications for letters patent of, or rights corresponding thereto in, the United
States or any other country, including, without limitation, registrations, recordings and
applications in the United States Patent and Trademark Office or in any similar office or agency of
the United States, any State thereof or any other country; (b) all reissues, continuations,
continuations-in-part or extensions thereof; (c) all petty patents, divisionals, and patents of
addition; and (d) all patents to be issued under any such applications.

“Permitted Lien” means

     (a) Involuntary Liens which, in the aggregate, would not have a Material Adverse Effect and
which in any event would not exceed, in the aggregate, the Threshold Amount;

     (b) Liens for current taxes or other governmental or regulatory assessments which are not
delinquent, or which are contested in good faith by the appropriate procedures and for which
appropriate reserves are maintained;

     (c) security interests on any property held or acquired by Borrower in the ordinary course of
business securing Indebtedness incurred or assumed for the purpose of financing all or any part of
the cost of acquiring such property; provided, that such Lien attaches solely to the
property acquired with such Indebtedness and that the principal amount of such Indebtedness does
not exceed one hundred percent (100%) of the cost of such property; and further provided,
that such property is not equipment or other Collateral with respect to which a Loan has been made
hereunder.

     (d) Liens in favor of Lender;

     (e) bankers’ liens, rights of setoff and similar Liens incurred on deposits made in the
ordinary course of business;

     (f) material men’s, mechanics’, repairmen’s, employees’ or other like Liens arising in the
ordinary course of business and which are not delinquent for more than 45 days or are being
contested in good faith by appropriate proceedings;

     (g) any judgment, attachment or similar Lien, unless the judgment it secures has not been
discharged or execution thereof effectively stayed and bonded against pending appeal within 30 days
of the entry thereof;

     (h) nonexclusive licenses or sublicenses of patents, copyrights or trademarks in the order
course of Borrower’s business; and

     (i) Liens which have been approved by Lender in writing prior to the Closing Date.

“Proceeds” means “proceeds,” as such term is defined in the UCC and, in any event, shall include,
without limitation, (a) any and all Accounts, Chattel Paper, Instruments, cash or other forms of
money or currency or other proceeds payable to Borrower from time to time in respect of the
Collateral, (b) any and all proceeds of any insurance, indemnity, warranty or guaranty payable to
Borrower from time to time with respect to any of the Collateral, (c) any and all payments (in any
form whatsoever) made or due and payable to Borrower from time to time in connection with any
requisition, confiscation, condemnation, seizure or forfeiture of all or any part of the Collateral
by any governmental authority (or any Person acting under color of governmental authority), (d) any
claim of Borrower against third parties (i) for past, present or future infringement of any
copyright, patent or patent license or (ii) for past, present or future infringement or

17

 

dilution of
any trademark or trademark license or for injury to the goodwill associated with any trademark,
trademark registration or trademark licensed under any trademark license and (e) any and all other
amounts from time to time paid or payable under or in connection with any of the Collateral

“Person” means any individual, sole proprietorship, partnership, joint venture, trust,
unincorporated organization, association, corporation, limited liability company, institution,
public benefit corporation, other entity or government (whether federal, state, county, city,
municipal, local, foreign, or otherwise, including any instrumentality, division, agency, body or
department thereof).

“Qualified Public Offering” means the closing of a firmly underwritten public offering of
Borrower’s common stock with aggregate proceeds of not less than $20,000,000 (prior to underwriting
expenses and commissions).

“Records” means all Borrower’s computer programs, software, hardware, source codes and data
processing information, all written documents, books, invoices, ledger sheets, financial
information and statements, and all other writings concerning Equipment and other Collateral.

“Related Person” means any Affiliate of Borrower, or any officer, employee, director or equity
security holder of Borrower or any Affiliate.

“Supplement” means that certain supplement to the Loan and Security Agreement, as the same may be
amended or restated from time to time, and any other supplements entered into between Borrower and
Lender, as the same may be amended or restated from time to time.

“Terminal Payment” means, with respect to each Loan, an amount payable on the Maturity Date of such
Loan in an amount equal to that percentage of the original principal amount of such Loan specified
in the Supplement.

“Termination Date” has the meaning specified in the Supplement.

“Threshold Amount” has the meaning specified in the Supplement.

“Trademarks” means all of the following property now owned or hereafter acquired by Borrower or in
which Borrower now holds or hereafter acquires any interest: (a) all trademarks, tradenames,
corporate names, business names, trade styles, service marks, logos, other source or business
identifiers, prints and labels on which any of the foregoing have appeared or appear, designs and
general intangibles of like nature, now existing or hereafter adopted or acquired, all
registrations and recordings thereof, and any applications in connection therewith, including,
without limitation, registrations, recordings and applications in the United States Patent and
Trademark Office or in any similar office or agency of the United States, any State thereof or any
other country or any political subdivision thereof and (b) reissues, extensions or renewals
thereof.

“UCC” means the Uniform Commercial Code as the same may, from time to time, be in effect in the
State of California; provided, that in the event that, by reason of mandatory provisions of
law, any or all of the attachment, perfection or priority of, or remedies with respect to, Lender’s
Lien on any Collateral is governed by the uniform Commercial Code as enacted and in effect in a
jurisdiction other than the State of California, the term “UCC” shall mean the Uniform Commercial
Code as enacted and in effect in such other jurisdiction solely for purposes of the provisions
thereof relating to such attachment, perfection, priority or remedies and for purposes of
definitions related to such provisions. Unless otherwise defined herein, terms that are defined in
the UCC and used herein shall have the meanings given to them in the UCC.

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

BORROWER:

OCULUS INNOVATIVE SCIENCES, INC.

By:                    /s/                    

Name:                 Hojabr Alimi                    

Title:                                         

BORROWER:

VENTURE LENDING & LEASING III, INC.

By:                     /s/                    

Name: Salvador O. Gutierrez

Title: President

18

 

Disclosure Schedule to Loan and Security Agreement

     This Disclosure Schedule is provided to Venture Lending & Leasing III, Inc. (the
“Lender”) by Oculus Innovative Sciences, Inc. (the “Borrower”) in connection with that certain Loan
and Security Agreement dated as of March 25, 2004 and entered into by and between Lender and
Borrower (the “Agreement”). This Disclosure Schedule is incorporated into, and shall be deemed a
part of the Agreement. The Borrower hereby delivers this Disclosure Schedule to the Lender setting
forth certain exceptions to the Borrower’s representations and warranties given in the Agreement.
The item numbers in this Disclosure Schedule correspond to the Section numbers in the Agreement;
however, any information disclosed herein under any item number shall be deemed to be disclosed and
incorporated in other Section numbers of the Agreement, where such disclosure would be appropriate.
Capitalized terms not otherwise defined herein shall have the meanings assigned to them in the
Agreement.

	 	 	 
	3.4

	 	     (a) In the event that the Lender has not, as of the Closing Date,
received the release from Remington Partners, Inc. contemplated in
Section 3 of the Supplement (the “Remington Release”), the
transactions contemplated in the Agreement and the documents related
thereto may be in conflict with the terms of that certain Security
Agreement dated as of April 25, 2003 by and between the Borrower and
Remington Partners, Inc. (the “Remington Agreement”).
	 
	 	 
	 

	 	     (b) In the event that the Lender has not, as of the Closing Date,
received the consent from Remington Partners, Inc. contemplated in
Section 3 of the Supplement regarding payment by Borrower to Lender
of the principal amount of any Loan, any such payment, prior to the
full payment of the loan outstanding under the Remington Agreement,
would conflict with Borrower’s covenant under Section 9(h) of the
Remington Agreement.
	 
	 	 
	3.11

	 	In the event that the Lender has not, as of the Closing Date,
received the Remington Release, the Collateral may be subject to a
security interest in favor of Remington Partners, Inc.

[Signature Page Follows)

 

 

Executed as of the date first written above.

	 	 	 
	BORROWER

	 	LENDER
	 
	 	 
	Oculus Innovative Sciences, Inc.

	 	Venture Lending & Leasing III, Inc.

	 	 	 	 	 	 	 
	By

	 	/s/
	 	By:
	 	/s/
	 

	 	 
	 	 	 	 
	Name :

	 	Robert Miller
	 	Name:	 	 
	 

	 	 	 	 	 	 
	Title:

	 	Chief Financial Officer
	 	Title:	 	 
	 

	 	 	 	 	 	 

[SIGNATURE PAGE TO DISCLOSURE SCHEDULE TO LOAN AND SECURITY

AGREEMENT]

 

 

SUPPLEMENT

to the

Loan and Security Agreement

Dated as of March 25, 2004

between

Oculus Innovative Sciences, Inc. (“Borrower”)

and

Venture Lending & Leasing III, Inc. (“Lender”)

     This is a Supplement identified in the document entitled Loan and Security Agreement dated as
of March 25, 2004, between Borrower and Lender. All capitalized terms used in this Supplement and
not otherwise defined in this Supplement have the meanings ascribed to them in Section 10 of the
Loan and Security Agreement, which is incorporated in its entirety into this Supplement. In the
event of any inconsistency between the provisions of that document and this Supplement, this
Supplement is controlling. Execution of this Supplement by the Lender and Borrower shall constitute
execution of the Loan and Security Agreement.

     In addition to the provisions of the Loan and Security Agreement, the parties agree as
follows:

     Part 1. — Additional Definitions:

     “Commitment”: Subject to the terms and conditions set forth in the Loan and Security Agreement
and this Supplement, Lender commits to make Equipment Loans to Borrower up to the aggregate
original principal amount of One Million Dollars ($1,000,000.00) to finance the acquisition of
Eligible Equipment. As a sub-facility of the Commitment, Lender commits to make Soft Cost Loans to
Borrower in an aggregate original principal amount not to exceed Seven Hundred Fifty Thousand
Dollars ($750,000.00) of the Commitment (the “Soft Cost Loan Sublimit”), provided,
however, that in no event shall the aggregate original principal amount of all Equipment
Loans and Soft Cost Loans funded under the Commitment exceed One Million Dollars ($1,000,000).
Equipment Loans and Soft Cost Loans are sometimes referred to herein individually as a “Loan” or
collectively as “Loans”.

     “Designated Rate”: The Designated Rate shall be (i) for each Loan, a fixed rate of interest
per annum equal to the Prime Rate as published on the Business Day on which Lender prepares the
Note for such Loan following Borrower’s submission of the Borrowing Request for such Loan, plus
five and 797/1000 percent (5.797%); provided, however, that in no event shall the
Designated Rate for an Loan be less than nine and 797/1000 percent (9.797%).

     “Eligible Equipment” means manufacturing equipment, computer equipment, lab and shop
equipment, test equipment, office equipment and other standard hardware located in the United
Stated, approved by Lender in writing and that is not the subject of a license agreement(s) between
Borrower and any Person, and excluding any equipment constituting Soft Costs.

     “Equipment Loan” means any Loan requested by Borrower and funded by Lender to finance
Borrower’s acquisition or carrying of specific items of Eligible Equipment.

     “Permitted Lien” includes, in addition to those Permitted Liens defined in the Loan and
Security Agreement, the security interest in favor of Remington Partners, Inc.

     “Prime Rate” means the “prime rate” of interest, as published from time to time by The Wall
Street Journal in the “Money Rates” section of its Western Edition newspaper.

     “Soft Costs” means, with respect to amounts to be financed hereunder with proceeds of a Soft
Cost Loan, Borrower’s costs of acquiring or licensing non-standard equipment (not otherwise
approved by Lender as Eligible Equipment), perpetual software license fees, tenant improvements at
Borrower’s primary business premises, mask sets, sales tax, freight charges and other items
approved by Lender in writing. In addition, Soft Costs includes

 

 

equipment located outside of the
United States that would otherwise qualify as Eligible Equipment and including the installation of
flooring at the Borrower’s facility in the Netherlands.

     “Soft Cost Loan “means any Loan requested by Borrower and funded by Lender to finance Soft
Costs.

     “Spin-off Subsidiary” means L3 Pharmaceuticals, Inc. a Delaware corporation. which was formed
to conduct Borrower’s lines of business in the development of oncology technology and the provision
of consulting services.

     “Terminal Payment”: Each Loan shall have a Terminal Payment equal to five percent (5%) of the
original principal amount of such Loan.

     “Termination Date”: The Termination Date is the earliest of (a) the date Lender may terminate
making Loans or extending other credit pursuant to the rights of Lender under Article 7 of the Loan
and Security Agreement, or (b) December 31, 2004; provided, however, if there is a
remaining balance of unused Commitment of at least Fifty Thousand Dollars ($50,000.00) on December
31, 2004, such date shall be extended to March 31, 2005, provided that the aggregate sum of all
Borrowing Requests submitted after December 31, 2004 shall not exceed the lesser of (i) the
remaining balance of the Commitment, or (ii) Three Hundred Thousand Dollars ($300,000.00).

     “Threshold Amount”: Seventy-Five Thousand Dollars ($75,000.00).

     Part 2. — Additional Covenants and Conditions:

     I. Use of Proceeds; Limitations on Loans.

     (a) Equipment Loan Facility and Soft Cost Loan Sub-facility. Subject to the terms and
conditions of the Agreement, Lender agrees to make:

          (i) Equipment Loans to Borrower from time to time from the Closing Date and to and including
the Termination Date in an aggregate original principal amount up to but not exceeding the lesser
of (A) the then unfunded portion of the Commitment, and (B) an amount equal to 100% of the amount
paid or payable by Borrower to a manufacturer, vendor or dealer who is not an Affiliate of Borrower
for each item of Eligible Equipment being financed with the proceeds of such Loan as shown on an
invoice therefor (excluding any commissions and any portion of the amount invoiced which relates to
servicing of the Eligible Equipment, delivery, freight and installation charges or sales taxes
payable upon acquisition) (“Original Cost”). Notwithstanding the foregoing, no item of Eligible
Equipment shall be eligible to be financed with the proceeds of an Equipment Loan if such item was
acquired or first placed in service by Borrower earlier than 90 days prior to the Borrowing Date of
such Equipment Loan; provided, however, that so long as the Borrowing Date of the initial Equipment
Loan occurs prior to April 15, 2004, Borrower may finance Eligible Equipment acquired or first
placed in service after January 15, 2003, at the Original Cost of such Eligible Equipment.

          (ii) Soft Cost Loans to Borrower from time to time from the Closing Date and to and including
the Termination Date in an aggregate original principal amount up to but not exceeding the lowest
of (A) the then unfunded portion of the Commitment; (B) the then unfunded portion of the Soft Cost
Loan Sublimit; and (C) an amount equal to 100% of the Soft Costs proposed to be financed under the
related Borrowing Request. Notwithstanding the foregoing, no item of Soft Costs shall be eligible
to be financed with the proceeds of a Soft Cost Loan if such Soft Cost was first expended,
incurred, or acquired (in the case of equipment) by Borrower earlier than 90 days prior to the
Borrowing Date of such Soft Cost Loan.

     (b) Locations of Equipment. All Eligible Equipment financed hereunder shall be located at all
times at Borrower’s principal place of business in Petaluma, California, or with respect to Soft
Costs, such other place of business located within or outside the United States disclosed on the
Supplement or, if not so disclosed, approved by Lender in writing prior to the Funding Date of any
Soft Cost Loan. Borrower shall provide a monthly statement of all Equipment financed by Lender
which shall include the location(s) of all such Equipment.

 

 

          (c) Minimum Funding Amount. Except to the extent the remaining Commitment is a lesser amount,
each Loan or Loans requested by Borrower to be made on a single Business Day shall be for a minimum
aggregate principal amount of Fifty Thousand Dollars ($50,000.00). Borrower shall not submit a
Borrowing Request more frequently than once each month.

     2. Prepayment. Borrower may voluntarily prepay Loans as follows:

          (a) On or before January 31, 2005, Borrower may voluntarily prepay all, but not less than all,
Loans in whole but not in part at any time by tendering to Lender payment in respect of each such
Loan as provided in this paragraph (a). The prepayment of the outstanding principal balance of each
such Loan shall be accompanied by payment of: (i) all accrued and unpaid Basic Interest on such
Loan as of the date of prepayment; (ii) the undiscounted Terminal Payment on such Loan; and (iii)
an amount equal to the undiscounted, total amount of all installment payments of principal and
Basic Interest that would have accrued and been payable from the date of prepayment through the
stated Maturity Date of the Loan had it remained outstanding and been paid in accordance with the
terms of the related Note.

          (b) On or after February I, 2005, Borrower may voluntarily prepay all, but not less than all,
Loans in whole but not in part at any time by tendering to Lender payment in respect of each such
Loan as provided in this paragraph (b). The prepayment of the outstanding principal balance of each
such Loan shall be accompanied by payment of : (i) all accrued and unpaid Basic Interest on such
Loan as of the date of prepayment; (ii) the Terminal Payment on such Loan discounted at a rate per
annum equal to 0.89%, from the scheduled Maturity Date of such Loan to the date of such prepayment;
and (iii) an amount equal to the, total amount of all installment payments of principal and Basic
Interest that would have accrued and been payable from the date of prepayment through the stated
Maturity Date of the Loan had it remained outstanding and been paid in accordance with the terms of
the related Note, discounted at a rate per annum equal to 0.89%, from the scheduled Maturity Date
of such Loan to the date of such prepayment.

     3. Partial Releases of Blanket Liens, Remington Partners Waiver of Payment Restrictions. As an
additional condition precedent under Section 4.2 of the Loan and Security Agreement, on or prior to
each Borrowing Date, Lender shall be in receipt of an executed release from Remington Partners,
Inc. and any lenders who may acquire a security interest in assets of the Borrower subsequent to
the execution of the Loan Agreement, if any, of any and all Liens on the Collateral that is the
subject of the Borrowing Request. As an additional condition precedent under Section 4.1 of the
Loan and Security Agreement, on or prior to the initial Borrowing Date, Borrower shall provide to
Lender the written approval by Remington Partners, Inc, to all principal, interest and/or other
payments to be made to Letider by Borrower under any Note executed by Borrower pursuant to the Loan
and Security Agreement

     4. Issuance of Warrants to Lender. As additional consideration for the making of the
Commitment, Lender has earned and is entitled to receive a warrant instrument issued by Borrower
(the “Warrant”) initially exercisable for 66,667 of fully paid and nonassessable shares of the
Borrower’s Series A Preferred Stock. The Warrant shall be exercisable at an initial exercise price
of $1.50 per share. The above stated exercise price per share and number of shares issuable upon
exercise of the Warrant shall also be subject to adjustment as provided in the Warrant.

     The Warrant shall be in substantially the form attached hereto as Exhibit “D” and
shall be exercisable at any time and from time to time through December 31, 2014, and shall include
piggyback and S-3 registration rights and anti-dilution protection provisions reasonably
satisfactory to Lender and its counsel and equivalent to those rights and protections granted to
the holders of Borrower’s Series A Preferred Stock. Borrower acknowledges that Lender has assigned
its rights to receive the Warrant to its parent, Venture Lending & Leasing III, LLC: in connection
therewith, Borrower shall issue the Warrant directly to Venture Lending & Leasing III, LLC. Upon
request of Borrower, Lender shall furnish to Borrower a copy of the agreement in which Lender
assigned the right to receive the Warrant to Venture Lending & Leasing III, LLC.

     Notwithstanding the foregoing or anything contrary elsewhere in the Loan Agreement, no later
than April 30, 2004, all action on the part of Borrower necessary for the valid execution, delivery
and performance by Borrower of the Warrant shall have been duly and effectively taken and evidence
satisfactory to Lender. In addition, borrower

 

 

shall provide an opinion of legal counsel for the
Borrower regarding the due authorization by the Borrower of the issuance of the Warrant to Lender.

     Borrower agrees that the failure to deliver the Warrant on or before April 30, 2004 shall
constitute an Event of Default and entitle Lender to, at its election, make all sums of Basic
Interest and principal, with respect to any Equipment or Soft Cost Loans outstanding at that time,
immediately due and payable without notice of default, presentment or demand for payment, protest
or notice of nonpayment or dishonor or any other notices or demands, to terminate making Loans or
extending other credit pursuant to the rights of Lender under Article 7 of the Loan and Security
Agreement, and to take such other action allowable under applicable law, including but not limited
to requesting a court to grant specific performance of the issuance and delivery of the Warrant.

     5. Equity Purchase. As additional consideration for the making of the Commitment, Borrower
grants Lender the right to purchase up to an aggregate amount of Two Hundred Thousand ($200,000) of
Borrower’s stock issued in Borrower’s next bona fide round of equity financing resulting in net
aggregate proceeds to the Borrower of at least $1,000,000.00 at the same price per share paid by
the lead investor of that round of financing. Borrower shall give Lender reasonable advance notice
of such securities offering, and if Lender desires to participate in such offering, it shall give
Borrower written notice of its election to purchase within fifteen (15) calendar days after receipt
of Borrower’s notice. Lender shall have no obligation to purchase Borrower’s securities except
pursuant to definitive purchase documents executed in connection with the offering, containing such
representations as Borrower and its counsel shall reasonably deem necessary to comply with
applicable law.

     6. Documentation Fee Payment. As an additional condition precedent under Section 4.1 of the
Loan and Security Agreement, on or prior to the initial Borrowing Date, Borrower shall pay Lender
an amount not to exceed Six Thousand Dollars ($6,000.00), which amount shall constitute payment for
the total amount of Lender’s legal expenses incurred in connection with the preparation and
negotiation of the Loan Documents pursuant to Section 9.8(a) of the Loan and Security Agreement
(the “Documentation Fee”); provided, however, that Documentation Fee does not include Lender’s
out-of-pocket costs of perfecting its security interest, which Borrower shall pay to Lender on
demand.

     7. Completion of Due Diligence; Payment and Disposition of Commitment Fee. As an additional
condition precedent under Section 4.1 of the Loan and Security Agreement, Lender shall have
completed to its satisfaction its due diligence review of Borrower’s business and financial
condition and prospects, and Lender’s credit committee shall have approved the Commitment. If this
condition is not satisfied, Lender shall refund to Borrower the Five Thousand Dollar ($5,000.00)
commitment fee previously paid to Lender on account of the Commitment. Lender agrees that with
respect to each Loan advanced, on the Borrowing Date applicable to such Loan, Lender shall credit
against the payments due from Borrower on such date in respect of such Loan an amount equal to the
product of Five Thousand Dollars ($5,000.00) and a fraction the numerator of which is the principal
amount of such Loan and the denominator of which is One Million Dollars ($1,000,000.00), until the
aggregate amount of such credits equals but does not exceed Five Thousand Dollars ($5,000.00).

     8. Spin-Off of Subsidiary. Notwithstanding anything to the contrary elsewhere in the Loan
Agreement, Lender acknowledges that Borrower has formed the Spin-off Subsidiary. Borrower may
without Lender’s prior consent (i) Transfer assets, that are related to each line of business to
the Spin-off Subsidiary; and (ii) re-distribute the capital stock of either of the Spin-off
Subsidiary issued to the Borrower, to the Borrower’s shareholders, provided, however, that Borrower
shall not transfer any assets comprising Collateral or any assets, including Intellectual Property,
that are directly related to the operation or development of Borrower’s disinfectant technology.

     9. Debits to Account for ACH Transfers. For purposes of Section 2.2 and 5.10 of the Loan and
Security Agreement, Borrower’s Primary Operating Account is:

Cupertino National Bank

3 Palo Alto Square, Suite I50

Palo Alto, CA 94306

Account No.: 003115895

Routing No.: 121141152

 

 

     Loans will be advanced to the account specified above and payments will be automatically
debited from the same account.

Part 3. — Additional Representations:

     Borrower represents and warrants that as of the Closing Date and each Borrowing Date:

	 	a)	 	Its chief executive office is located at: 1129 North McDowell Blvd., Petaluma, CA 94954
	 
	 	b)	 	Its Equipment is located at: 1129 North McDowell Blvd., Petaluma, CA 94954,
except as otherwise disclosed in the Borrowing Request for a Loan.
	 
	 	c)	 	Its Records are located at: 1129 North McDowell Blvd., Petaluma, CA 94954.
	 
	 	d)	 	In addition to its chief executive office, Borrower maintains offices or
operates its business at the following locations:

Aquamed Technologies

1129 N. McDowell Blvd.

Petaluma, CA 94954 USA

MicroMed Laboratories, Inc.

1129 N. McDowell Blvd.

Petaluma, CA 94954

USA

L3 Pharmaceuticals, Inc.

1129 N. McDowell Blvd.

Petaluma, CA 94954

USA

Oculus Technologies of Mexico S.A. de C.V.

Salvador Pineda No. 214 Col. Dr. Miguel

Silva, C.P. 58120

Morelia, Michoacan

Mexico

Oculus Innovative Sciences Netherlands B.V.

Nusterweg 123

6136 KT Sittard

P.O. Box 5056

6130 PB Sittard

The Netherlands

	 	e)	 	Other than its full corporate name, Borrower has conducted business using the
following trade names or fictitious business names: Micromed Laboratories
	 
	 	(f)	 	Borrower’s Federal Tax I.D. number is: 64-0423298
	 
	 	(g)	 	Borrower’s California state corporation I.D. number is: C2160639
	 
	 	(h)	 	Borrower is a majority owner of or in a control relationship with the following
business entities:

 

 

Aquamed Technologies

1129 N. McDowell Blvd.

Petaluma, CA 94954

USA

MicroMed Laboratories, Inc.

1129 N. McDowell Blvd.

Petaluma, CA 94954

USA

(corporation formed but shares not yet issued)

L3 Pharmaceuticals, Inc.

1129 N. McDowell Blvd.

Petaluma, CA 94954

USA

(corporation formed but shares not yet issued)

Oculus Technologies of Mexico S.A. de C.V.

Salvador Pineda No. 214 Col. Dr. Miguel

Silva, C.P. 58120

Morelia, Michoacan

Mexico

Oculus Innovative Sciences Netherlands B.V.

Nusterweg 123

6136 KT Sittard

P.O. Box 5056

6130 PB Sittard

The Netherlands

Part 4. — Additional Loan Documents:

	 	 	 	 	 
	 

	 	Form of Note
	 	Exhibit “A”
	 

	 	Form of Borrowing Request
	 	Exhibit “B”
	 

	 	Form of Compliance Certificate
	 	Exhibit “C”
	 

	 	Form of Warrant
	 	Exhibit “D”
	 

	 	Form of Landlord Waiver
	 	Exhibit “E”
	 

	 	Form of Legal Opinion
	 	Exhibit “F”

[Signature Page Follows)

 

 

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

	 	 	 	 	 	 	 
	 	 	BORROWER:	 	 
	 
	 	 	 	 	 	 
	 	 	OCULUS INNOVATIVE SCIENCES, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Hojabr Alimi	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	Hojabr Alimi 	 	 
	 

	 	 	 	 	 	 
	 

	 	Title:	 	CEO 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	Address for Notices:

	 	Attn:	 	 	 	 
	 

	 	 	 	 	 	 
	 	 	1129 North McDowell Blvd., Petaluma, CA 94954

Fax #: (707) 283-0551	 	 
	 
	 	 	 	 	 	 
	 	 	LENDER:	 	 
	 
	 	 	 	 	 	 
	 	 	VENTURE LENDING & LEASING III, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Title:	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	Address for Notices:	 	Attn: Chief Financial Officer

2010 North First Street, Suite 310

San Jose, California 95131

Fax #: (408) 436-8625	 	 

 

 

EXHIBIT “A”

FORM OF PROMISSORY NOTE

[Note No. X-XXX]

			
	 	 	 
	     $                                        
	 	                                         , 200___

San Jose, California

     The undersigned (“Borrower”) promises to pay to the order of VENTURE LENDING & LEASING III,
INC., a Maryland corporation (“Lender”), at its office at 2010 North First Street, Suite 310, San
Jose, California 95131, or at such other place as Lender may designate in writing, in lawful money
of the United States of America, the principal sum of   
               
              
              
               
Dollars ($             
              
             ),
with Basic Interest thereon (except as otherwise provided herein) from the date hereof until
maturity, whether scheduled or accelerated, at a fixed rate per annum equal to [the Prime Rate on
the Business Day Lender prepares the Note plus 5.797%, but in no event less than 9.797%; (the
“Designated Rate”) [, and a Terminal Payment in the sum of 15.00% of face amount] Dollars
($                                         ) payable on the Maturity Date.]

     This Note is one of the Notes referred to in, and is entitled to all the benefits of, a Loan
and Security Agreement dated as of March 25, 2004, between Borrower and Lender (the “Loan
Agreement”). Each capitalized term not otherwise defined herein shall have the meaning set forth in
the Loan Agreement. The Loan Agreement contains provisions for the acceleration of the maturity of
this Note upon the happening of certain stated events.

     Principal of and interest on this Note shall be payable as follows:

     On the Borrowing Date, Borrower shall pay (i) interest at the Designated Rate on the
outstanding principal balance of this Note for the period from the Borrowing Date through [the last
day of the same month]; and (ii) a first (1st) amortization installment of principal and
Basic Interest at the Designated Rate in the amount of                                          in advance for the month of [first
full month after Borrowing Date] and (iii) a thirty-third (33rd) amortization installment of
principal and Basic Interest at the Designated Rate in the amount of $                                        , in advance for the
month of [date of last regular amortization payment] .

     Commencing on the first day of the second full month after the Borrowing Date, and continuing
on the first day of each consecutive month thereafter, principal and Basic Interest at the
Designated Rate shall be payable, in advance, in thirty (30) equal consecutive installments of
                                         Dollars ($                    ) each, with a thirty-first (31st) installment equal to the entire
unpaid principal balance and accrued Basic Interest at the Designated Rate on                                         , 200_. The
Terminal Payment and unpaid expenses, fees, interest and principal amount shall be due and payable
on [one month later]                                         , 200_.]

     This Note may be voluntarily prepaid only as permitted under Section 2 of Part 2 of the
Supplement to the Loan Agreement.

     Any unpaid payments of principal or interest on this Note shall bear interest from their
respective maturities, whether scheduled or accelerated, at a rate per annum equal to the Default
Rate. Borrower shall pay such interest on demand.

     Interest, charges and fees shall be calculated for actual days elapsed on the basis of a
360-day year, which results in higher interest, charge or fee payments than if a 365-day year were
used. In no event shall Borrower be obligated to pay interest, charges or fees at a rate in excess
of the highest rate permitted by applicable law from time to time in effect.

     If Borrower is late in making any payment under this Note by more than five (5) days, Borrower
agrees to pay a “late charge” of five percent (5%) of the installment due, but not less than fifty
dollars ($50.00) for any one such delinquent payment. This late charge may be charged by Lender for
the purpose of defraying the expenses incidental to the handling of such delinquent amounts.
Borrower acknowledges that such late charge represents a reasonable

 

 

sum considering all of the circumstances existing on the date of this Note and represents a
fair and reasonable estimate of the costs that will be sustained by Lender due to the failure of
Borrower to make timely payments. Borrower further agrees that proof of actual damages would be
costly and inconvenient. Such late charge shall be paid without prejudice to the right of Lender to
collect any other amounts provided to be paid or to declare a default under this Note or any of the
other Loan Documents or from exercising any other rights and remedies of Lender.

     This Note shall be governed by, and construed in accordance with, the laws of the State of
California.

	 	 	 	 	 	 	 
	 	 	OCULUS INNOVATIVE SCIENCES, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Its:	 	 	 	 
	 

	 	 	 	 	 	 

 

 

EXHIBIT “B”

FORM OF BORROWING REQUEST

[Date]

Venture Lending & Leasing III, Inc.

2010 North First Street, Suite 310

San Jose, CA 95131

Re: Oculus Innovative Sciences, Inc. Gentlemen

     Reference is made to the Loan and Security Agreement dated as of March 25, 2004 (as amended
from time to time, the “Loan Agreement”, the capitalized terms used herein as defined therein),
between Venture Lending & Leasing III, Inc. and Oculus Innovative Sciences, Inc. (the “Company”).

     The undersigned is the ____________of the Company, and hereby requests on behalf of the
Company a Loan under the Loan Agreement, and in that connection certifies as follows:

     I. The type(s) of the proposed Loan is/are [an Equipment Loan] a [Soft Cost Loan]. The amount
of the proposed Loan is _________and _________/100 Dollars ($____________). The Borrowing Date of
the proposed Loan is _________,200_________.

     2. The Eligible Equipment and/or Soft Costs to be financed with the proceeds of the Equipment
Loan are described, and are or will be located at the address(es) shown, on the attached
Schedule I or amendment or supplement to Schedule I, which is hereby incorporated
by reference in and made a part of the Loan Agreement. The requested amount of the Equipment Loan
and/or Soft Cost Loan does not exceed the aggregate of one hundred percent (100%) of the amount
paid or payable by Borrower to a non-affiliated manufacturer, vendor or dealer for such items of
Eligible Equipment and/or Soft Costs as shown on an invoice therefor (excluding any commissions and
any portion of the payment which relates to the servicing of the equipment or item and sales taxes
payable by Borrower upon acquisition, and delivery charges). No item of Eligible Equipment or Soft
Costs has been owned or was incurred by Borrower earlier than 90 days before the proposed Borrowing
Date, or with respect to the Eligible Equipment, before January 15, 2003, for the initial Equipment
Loan, if funded prior to April, 15, 2004.

     3. [If this Borrowing Request will utilize the remainder of the Commitments] After giving
effect to the Loan(s) requested hereby, no more than Seven Hundred Fifty Thousand Dollars
($750,000.00) of the Commitment has been used to finance Soft Costs.

     4. As of this date, no Default or Event of Default has occurred and is continuing, or will
result from the making of the proposed Loan, the representations and warranties of the Company
contained in Article 3 of the Loan Agreement are true and correct, and the conditions precedent
described in Article 4 of the Loan Agreement have been met.

     5. No event that has had, or could reasonably be expected to have, a Material Adverse Change
has occurred.

     6, The Company’s most recent [financial projections or business plan] dated _________, as
approved by the Company’s Board of Directors on _________, are enclosed herewith.

 

 

     The Company shall notify you promptly before the funding of the Loan if any of the matters to
which I have certified above shall not be true and correct on the Borrowing Date

	 	 	 	 	 	 	 
	 	 	Very truly yours,	 	 
	 
	 	 	 	 	 	 
	 	 	OCULUS INNOVATIVE SCIENCES, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Title:	 	 	 	 
	 

	 	 	 	 	 	 

 

 

Schedule I to the Loan and Security Agreement

Description of Equipment/Soft Costs

Quantity   
         Article     
       Make        
    Year Mfg.          
  Model/Serial #           
Location           
ü If Soft Cost

     See
attached continuation to Schedule I

together with all improvements,
replacements, accessions and additions thereto, wherever located,
and all Proceeds thereof arising from the sale, lease, rental or other use or disposition of any
such property, including all rights to payment with respect to insurance or condemnation, returned
premiums, or any cause of action relating to any of the foregoing.

	 	 	 	 	 
	OCULUS INNOVATIVE SCIENCES, INC.	 	 
	 
	 	 	 	 
	By:
	 	 	 	 
	 

	 	 	 	 
	Name:
	 	 	 	 
	 

	 	 	 	 
	Title:
	 	 	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	VENTURE LENDING & LEASING III, INC.	 	 
	 
	 	 	 	 
	By:
	 	 	 	 
	 

	 	 	 	 
	Name:
	 	 	 	 
	 

	 	 	 	 
	Title:
	 	 	 	 
	 

	 	 	 	 

 

 

EXHIBIT “C”

COMPLIANCE CERTIFICATE

Venture Lending & Leasing III, Inc.

2010 North First Street, Suite 310

San Jose, CA 95131

Re: Oculus Innovative Sciences, Inc.

Gentlemen.

     Reference is made to the Loan and Security Agreement dated as of March 25, 2004 (as the same
have been and may be amended from time to time, the “Loan Agreement”, the capitalized terms used
herein as defined therein), between Venture Lending & Leasing III, Inc. and Oculus Innovative
Sciences, Inc. (the “Company”).

     The undersigned authorized representative of the Company hereby certifies that in accordance
with the terms and conditions of the Loan Agreement, the Company is in complete compliance for the
financial reporting period ending _______ with all required financial reporting under the Loan
Agreement, except as noted below. Attached herewith are the required documents supporting the
foregoing certification. The undersigned further certifies that the accompanying financial
statements have been prepared in accordance with Generally Accepted Accounting Principles, and are
consistent from one period to the next, except as explained below.

Indicate compliance status by circling Yes/No under “Complies”

	 	 	 	 	 
	REPORTING REQUIREMENT	 	REQUIRED	 	COMPLIES
	Interim Financial Statements

	 	Monthly within 30 days
	 	YES/NO
	Annual Financial Statements

	 	FYE within 120 days
	 	YES/NO
	 
	 	 	 	 
	Business Plan or Projections
dated                                          With each Borrowing Request	 	YES/NO
	Any Change in budget since prior Borrowing Request	 	YES/NO

EXPLANATIONS

	 	 	 	 	 
	 
	 
	 	 	 	 
	 
	 
	 	 	 	 
	 
	 
	 	 	 	 
	 

	 	 	 	 	 	 	 
	 	 	Very truly yours,	 	 
	 
	 	 	 	 	 	 
	 	 	OCULUS INNOVATIVE SCIENCES, INC.	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Title:*	 	 	 	 
	 

	 	 	 	 	 	 

 

			
	*	 	Must be executed by Borrower’s Chief
Financial Officer or other executive officer.

 

 

EXHIBIT “D”

FORM OF WARRANT

 

 

EXHIBIT D

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A
VIEW TO, OR IN CONNECTION WITH, THE SALE AND DISTRIBUTION THEREOF, AND HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) OR ANY STATE SECURITIES LAWS.
SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN OPINION OF
COUNSEL IN A FORM REASONABLY ACCEPTABLE TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED DUE
TO AN EXEMPTION THEREFROM UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS.

WARRANT TO PURCHASE

66,667 SHARES OF SERIES A PREFERRED STOCK OF

OCULUS INNOVATIVE SCIENCES, INC.

(Void after December 31, 2014)

     This certifies that VENTURE LENDING & LEASING III, LLC, a Delaware limited liability company,
or assigns (the “Holder”), for value received, is entitled to purchase from OCULUS INNOVATIVE
SCIENCES, INC., a California corporation (the “Company”), 66,667 fully paid and nonassessable
shares of the Company’s Series A Preferred Stock (“Preferred Stock”) for cash at a price of $1.50
per share (the “Stock Purchase Price”) at any time or from time to time up to and including 5:00
p.m. (Pacific time) on December 31, 2014 (the “Expiration Date”), upon surrender to the Company at
its principal office at 1 129 North McDowell Blvd., Petaluma, California 94954. (or at such other
location as the Company may advise Holder in writing) of this Warrant properly endorsed with the
Form of Subscription attached hereto duly filled in and signed and upon payment in cash or by check
of the aggregate Stock Purchase Price for the number of shares for which this Warrant is being
exercised determined in accordance with the provisions hereof The Stock Purchase Price and the
number of shares purchasable hereunder are subject to adjustment as provided in Section 4 of this
Warrant.

     This Warrant is subject to the following terms and conditions:

     1
.. Exercise, Issuance of Certificates; Payment for Shares.

          (a) Unless an election is made pursuant to clause (b) of this Section 1, this Warrant shall be
exercisable at the option of the Holder, at any time or from time to time, on or before the
Expiration Date for all or any portion of the shares of Preferred Stock (but not for a fraction of
a share) which may be purchased hereunder for the Stock Purchase Price multiplied by the number of
shares to be purchased. In the event, however, that pursuant to the Company’s Articles of
Incorporation, as amended, an event causing automatic conversion of the Company’s Preferred Stock
shall have occurred prior to the exercise of this Warrant, in whole or in part, then this Warrant
shall be exercisable for the number of shares of Common Stock of the Company into which the
Preferred Stock not purchased upon any prior exercise of this Warrant would have been so converted
(and, where the context requires, reference to “Preferred Stock” shall be deemed to be or include
such Common Stock, as may be appropriate). The Company agrees that the shares of Preferred Stock
purchased under this Warrant shall be and are deemed to be issued to the Holder hereof as the
record owner of such shares as of the close of business on the date on which the form of
subscription shall have been delivered and payment made for such shares. Subject to the provisions
of Section 2, certificates for the shares of Preferred Stock so purchased, together with any other
securities or property to which the Holder hereof is entitled upon such exercise, shall be
delivered to the Holder hereof by the Company at the Company’s expense within a reasonable time
after the rights represented by this Warrant have been so exercised. Except as provided in clause
(b) of this Section 1, in case of a purchase of less than all the shares which may be purchased
under this Warrant, the Company shall cancel this Warrant and execute and deliver a new Warrant or
Warrants of like tenor for the balance of the shares purchasable under this Warrant surrendered
upon such purchase to the Holder hereof within a reasonable time. Each stock certificate so
delivered shall be in such denominations of

 

 

Preferred Stock as may be requested by the Holder hereof and shall be registered in the name
of such Holder or such other name as shall be designated by such Holder, subject to the limitations
contained in Section 2.

          (b) The Holder. in lieu of exercising this Warrant by the cash payment of the Stock Purchase
Price pursuant to clause (a) of this Section l, may elect, at any time on or before the Expiration
Date, to surrender this Warrant and receive that number of shares of Preferred Stock equal to the
quotient of (i) the difference between (A) the Per Share Price (as hereinafter defined) of the
Preferred Stock, less (B) the Stock Purchase Price then in effect, multiplied by the number of
shares of Preferred Stock the Holder would otherwise have been entitled to purchase hereunder
pursuant to clause (a) of this Section 1 [or such lesser number of shares as the Holder may
designate in the case of a partial exercise of this Warrant); over (ii) the Per Share Price.
Election to exercise under this section (b) may be made by delivering a signed form of subscription
to the Company via facsimile, to be followed by delivery of this Warrant.

          (c) For purposes of clause (b) of this Section 1, “Per Share Price” means the product of: (i)
the greater of (A) the closing price of the securities issuable upon conversion of the Preferred
Stock, as quoted by NASDAQ or listed on any exchange, whichever is applicable, as published in the
Western Edition of The Wall Street Journal for the trading day immediately prior to the date of the
Holder’s election hereunder or, (B) if applicable at the time of or in connection with the exercise
under clause (b) of this Section 1, the gross sales price of one share of the Company’s Common
Stock pursuant to a registered public offering or that amount which stockholders of the Company
will receive for each share of Common Stock pursuant to a merger, reorganization or sale of assets;
and (ii) that number of shares of Common Stock into which each share of Preferred Stock is
convertible. If the securities issuable upon conversion of the Preferred Stock are not quoted by
NASDAQ or listed on an exchange and none of the above clauses apply, the Per Share Price of the
Preferred Stock (or the equivalent number of shares of Common Stock into which such Preferred Stock
is convertible) shall be the price per share which the Board of Directors of the Company shall
determine in good faith.

     2. Limitation on Transfer.

          (a) This Warrant and the Preferred Stock shall not be transferable without the prior written
consent of the Company (which shall not be unreasonably withheld or delayed) and then only after
compliance with the conditions specified in this Section 2, which conditions are intended to insure
compliance with the provisions of the Securities Act. Each holder of this Warrant or the Preferred
Stock issuable hereunder will cause any proposed transferee of the Warrant or Preferred Stock to
agree to take and hold such securities subject to the provisions and upon the conditions specified
in this Section 2.

          (b) Each certificate representing (i) this Warrant, (ii) the Preferred Stock, (iii) shares of
the Company’s Common Stock issued upon conversion of the Preferred Stock and (iv) any other
securities issued in respect to the Preferred Stock or Common Stock issued upon conversion of the
Preferred Stock upon any stock split, stock dividend, recapitalization, merger, consolidation or
similar event, shall (unless otherwise permitted by the provisions of this Section 2 or unless such
securities have been registered under the Securities Act or sold under Rule 144) be stamped or
otherwise imprinted with a legend substantially in the following form (in addition to any legend
required under applicable state securities laws):

     THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH
A VIEW TO, OR IN CONNECTION WITH, THE SALE AND DISTRIBUTION THEREOF, AND HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OR ANY STATE SECURITIES LAWS. SUCH SECURITIES MAY NOT BE SOLD OR
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN OPINION OF COUNSEL IN A FORM REASONABLY
ACCEPTABLE TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED DUE TO AN EXEMPTION THEREFROM
UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS.

          (c) The Holder of this Warrant and each person to whom this Warrant is subsequently
transferred (if permitted hereunder) represents and warrants to the Company (by acceptance of such
transfer) that it will not transfer this Warrant (or securities issuable upon exercise hereof
unless a registration statement under the Securities Act was in effect with respect to such
securities at the time of issuance thereof) except pursuant to (i) an effective registration
statement under the Securities Act, (ii) Rule 144 under the Securities Act (or any other rule under
the

 

 

Securities Act relating to the disposition of securities), or (iii) an opinion of counsel,
reasonably satisfactory to counsel for the Company, that an exemption from such registration is
available.

     3. Shares to be Fully Paid; Reservation of Shares. The Company covenants and agrees
that all shares of Preferred Stock which may be issued upon the exercise of the rights represented
by this Warrant will, upon issuance, be duly authorized, validly issued, fully paid and
nonassessable and free from all preemptive rights of any stockholder and free of all taxes, liens
and charges with respect to the issue thereof. The Company further covenants and agrees that during
the period within which the rights represented by this Warrant may be exercised, the Company will
at all times have authorized and reserved, for the purpose of issue upon exercise of the
subscription rights evidenced by this Warrant, a sufficient number of shares of authorized but
unissued Preferred Stock, or other securities and property, when and as required to provide for the
exercise of the rights represented by this Warrant. The Company will take all such action as may be
necessary to assure that such shares of Preferred Stock may be issued as provided herein without
violation of any applicable law or regulation, or of any requirements of any domestic securities
exchange upon which the Preferred Stock may be listed. The Company will not take any action which
would result in any adjustment of the Stock Purchase Price (as defined in Section 4 hereof) (i) if
the total number of shares of Preferred Stock issuable after such action upon exercise of all
outstanding warrants, together with all shares of Preferred Stock then outstanding and all shares
of Preferred Stock then issuable upon exercise of all options and upon the conversion of all
convertible securities then outstanding, would exceed the total number of shares of Preferred Stock
then authorized by the Company’s Articles of Incorporation, (ii) if the total number of shares of
Common Stock issuable after such action upon the conversion of all such shares of Preferred Stock
together with all shares of Common Stock then outstanding and then issuable upon exercise of all
options and upon the conversion of all convertible securities then outstanding would exceed the
total number of shares of Common Stock then authorized by the Company’s Articles of Incorporation
or (iii) if the par value per share of the Preferred Stock would exceed the Stock Purchase Price.

     4. Adjustment of Stock Purchase Price and Number of Shares. The Stock Purchase Price
and the number of shares purchasable upon the exercise of this Warrant shall be subject to
adjustment from time to time upon the occurrence of certain events described in this Section 4.
Upon each adjustment of the Stock Purchase Price, the Holder of this Warrant shall thereafter be
entitled to purchase, at the Stock Purchase Price resulting from such adjustment, the number of
shares obtained by multiplying the Stock Purchase Price in effect immediately prior to such
adjustment by the number of shares purchasable pursuant hereto immediately prior to such
adjustment, and dividing the product thereof by the Stock Purchase Price resulting from such
adjustment.

          4.1 Subdivision or Combination of Stock. In case the Company shall at any time
subdivide its outstanding shares of Preferred Stock into a greater number of shares, the Stock
Purchase Price in effect immediately prior to such subdivision shall be proportionately reduced,
and conversely, in case the outstanding shares of Preferred Stock of the Company shall be combined
into a smaller number of shares, the Stock Purchase Price in effect immediately prior to such
combination shall be proportionately increased.

          4.2 Dividends in Preferred Stock, Other Stock. Property, Reclassification. If at any
time or from time to time the holders of Preferred Stock (or any shares of stock or other
securities at the time receivable upon the exercise of this Warrant) shall have received or become
entitled to receive, without payment therefor,

               (a) Preferred Stock, or any shares of stock or other securities whether or not such securities
are at any time directly or indirectly convertible into or exchangeable for Preferred Stock, or any
rights or options to subscribe for, purchase or otherwise acquire any of the foregoing by way of
dividend or other distribution, or

               (b) any cash paid or payable otherwise than as a cash dividend, or

               (c) Preferred Stock or other or additional stock or other securities or property (including
cash) by way of spin off, split-up, reclassification, combination of shares or similar corporate
rearrangement, (other than shares of Preferred Stock issued as a stock split, adjustments in
respect of which shall be covered by the terms of Section 4.1 above),

Then and in each such case, the Holder hereof shall, upon the exercise of this Warrant, be entitled
to receive, in addition to the number of shares of Preferred Stock receivable thereupon, and
without payment of any additional

 

 

consideration therefore, the amount of stock and other securities and property (including cash in
the cases referred to in clauses (b) and (c) above) which such Holder would hold on the date of
such exercise had he been the holder of record of such Preferred Stock as of the date on which
holders of Preferred Stock received or became entitled to receive such shares and/or all other
additional stock and other securities and property.

     4.3 Reorganization, Reclassification, Consolidation, Merger or Sale. If any capital
reorganization of the capital stock of the Company, or any consolidation or merger of the Company
with another corporation, or the sale of all or substantially all of its assets to another
corporation shall be effected in such a way that holders of Preferred Stock shall be entitled to
receive stock, securities or assets with respect to or in exchange for Preferred Stock, then, as a
condition of such reorganization, reclassification, consolidation, merger or sale, lawful and
adequate provisions shall be made whereby the holder hereof shall thereafter have the right to
purchase and receive (in lieu of the shares of the Preferred Stock of the Company immediately
theretofore purchasable and receivable upon the exercise of the rights represented hereby) such
shares of stock, securities or assets as may be issued or payable with respect to or in exchange
for a number of outstanding shares of such Preferred Stock equal to the number of shares of such
stock immediately theretofore purchasable and receivable upon the exercise of the rights
represented hereby. In any such case, appropriate provision shall be made with respect to the
rights and interests of the holder of this Warrant to the end that the provisions hereof
(including, without limitation, provisions for adjustments of the Stock Purchase Price and of the
number of shares purchasable and receivable upon the exercise of this Warrant) shall thereafter be
applicable, as nearly as may be possible, in relation to any shares of stock, securities or assets
thereafter deliverable upon the exercise hereof. The Company will not effect any such
consolidation, merger or sale unless, prior to the consummation thereof, the successor corporation
(if other than the Company) resulting from such consolidation or the corporation purchasing such
assets shall assume by written instrument, executed and mailed or delivered to the registered
Holder hereof at the last address of such Holder appearing on the books of the Company, the
obligation to deliver to such Holder such shares of stock, securities or assets as, in accordance
with the foregoing provisions, such Holder may be entitled to purchase.

     4.4 Sale or Issuance Below Purchase Price. The other antidilution rights applicable to
the shares of series Preferred Stock purchasable hereunder are set forth in the Company’s Articles
of Incorporation, as amended through the date hereof (the “Charter”). The Company shall promptly
provide the Holder hereof with any restatement, amendment, modification or waiver of the Charter
promptly after the same has been made.

     4.5 Notice of Adjustment. Upon any adjustment of the Stock Purchase Price, and/or any
increase or decrease in the number of shares purchasable upon the exercise of this Warrant the
Company shall give written notice thereof, by first class mail, postage prepaid, addressed to the
registered holder of this Warrant at the address of such holder as shown on the books of the
Company. The notice, which may be substantially in the form of Exhibit “A” attached hereto, shall
be signed by the Company’s chief financial officer and shall state the Stock Purchase Price
resulting from such adjustment and the increase or decrease, if any, in the number of shares
purchasable at such price upon the exercise of this Warrant, setting forth in reasonable detail the
method of calculation and the facts upon which such calculation is based.

     4.6 Other Notices. If at any time:

          (a) the Company shall declare any cash dividend upon its Preferred Stock;

          (b) the Company shall declare any dividend upon its Preferred Stock payable in stock or make
any special dividend or other distribution to the holders of its Preferred Stock;

          (c) the Company shall offer for subscription pro rata to the holders of its Preferred Stock
any additional shares of stock in connection with a Down Round or additional shares of stock of any
class or other rights;

          (d) there shall be any capital reorganization or reclassification of the capital stock of the
Company, or consolidation or merger of the Company with, or sale of all or substantially all of its
assets to, another entity;

 

 

          (e) there shall be a voluntary or involuntary dissolution, liquidation or winding-up of the
Company; or

          (f) the Company shall take or propose to take any other action, notice of which is actually
provided to holders of the Preferred Stock;

then, in any one or more of said cases, the Company shall give, by first class mail, postage
prepaid, addressed to the Holder of this Warrant at the address of such Holder as shown on the
books of the Company, (i) at least 20 day’s prior written notice of the date on which the books of
the Company shall close or a record shall be taken for such dividend, distribution or subscription
rights or for determining rights to vote in respect of any such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding-up, or other action and (ii) in
the case of any such reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding-up, or other action, at least 20 day’s written notice of the date when the
same shall take place. Any notice given in accordance with the foregoing clause (i) shall also
specify, in the case of any such dividend, distribution or subscription rights, the date on which
the holders of Preferred Stock shall be entitled thereto. Any notice given in accordance with the
foregoing clause (ii) shall also specify the date on which the holders of Preferred Stock shall be
entitled to exchange their Preferred Stock for securities or other property deliverable upon such
reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or
winding-up, or other action as the case may be.

          4.7 Certain Events. If any change in the outstanding Preferred Stock of the Company or
any other event occurs as to which the other provisions of this Section 4 are not strictly
applicable and the Board of Directors in good faith believes that an adjustment is necessary to
effect the essential intent and principles with the adjustment provisions of this Warrant or if the
provisions of this Section 4 are strictly applicable to an event but the application of such
provisions would not fairly effect the adjustments to this Warrant in accordance with the essential
intent and principles of such provisions, then the Board of Directors of the Company shall make in
good faith an adjustment in the number and class of shares issuable under this Warrant, the Stock
Purchase Price and/or the application of such provisions, in accordance with such essential intent
and principles, so as to protect such purchase rights as aforesaid. The adjustment shall be such as
will give the Holder of this Warrant upon exercise for the same aggregate Stock Purchase Price the
total number, class and kind of shares as the Holder would have owned had this Warrant been
exercised prior to the event and had the Holder continued to hold such shares until after the event
requiring adjustment.

     5. Issue Tax. The issuance of certificates for shares of Preferred Stock upon the
exercise of this Warrant shall be made without charge to the Holder of this Warrant for any issue
tax in respect thereof; provided, however, that the Company shall not be required to pay any tax
which may be payable in respect of any transfer involved in the issuance and delivery of any
certificate in a name other than that of the then Holder of this Warrant being exercised.

     6. Closing of Books. The Company will at no time close its transfer books against the
transfer of this Warrant or of any shares of Preferred Stock issued or issuable upon the exercise
of this Warrant in any manner which interferes with the timely exercise of this Warrant, unless
required by applicable law or regulation, or to avoid the violation of any applicable law or
regulation..

     7. No Voting or Dividend Rights; Limitation of Liability. Nothing contained in this
Warrant shall be construed as conferring upon the Holder hereof the right to vote or to consent as
a stockholder in respect of meetings of stockholders for the election of directors of the Company
or any other matters or any rights whatsoever as a stockholder of the Company. No dividends or
interest shall be payable or accrued in respect of this Warrant or the interest represented hereby
or the shares purchasable hereunder until, and only to the extent that this Warrant shall have been
exercised. No provisions hereof, in the absence of affirmative action by the Holder to purchase
shares of Preferred Stock, and no mere enumeration herein of the rights or privileges of the Holder
hereof, shall give rise to any liability of such Holder for the Stock Purchase Price or as a
stockholder of the Company, whether such liability is asserted by the Company or by its creditors.

     8. Intentionally Omitted.

 

 

     9. Registration Rights. The Holder hereof shall be entitled, with respect to the
shares of Preferred Stock issued upon exercise hereof or the shares of Common Stock or other
securities issued upon conversion of such Preferred Stock as the case may be, to all of the
registration rights set forth in the Series A Preferred Shares Investors Rights Agreement executed
by the holders of Series A Preferred Stock in connection with the offering of Series A Preferred
Shares (the “Rights Agreement”), to the same extent and on the same terms and conditions as
possessed by the investors thereunder with the following exceptions and clarifications: (i) the
Holder will have no demand registration rights; (ii) the Holder will be subject to the same
provisions regarding indemnification as contained in the Rights Agreement; (iii) the registration
rights are freely assignable by the Holder of this Warrant in connection with a permitted transfer
of this Warrant or the shares issuable upon exercise hereof, and (iv) the Holder will be subject to
the same lock-up obligations as contained in the Rights Agreement. The Company shall take such
action as may be reasonably necessary to assure that the granting of such registration rights to
the Holder does not violate the provisions of the Rights Agreement or any of the Company’s charter
documents or rights of prior grantees of registration rights.

     10. Rights and Obligations Survive Exercise of Warrant. The rights and obligations of
the Company, of the Holder of this Warrant and of the holder of shares of Preferred Stock issued
upon exercise of this Warrant, contained in Sections 6 and 9 shall survive the exercise of this
Warrant.

     11. Modification and Waiver. This Warrant and any provision hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by the party against which
enforcement of the same is sought.

     12. Notices. Any notice, request or other document required or permitted to be given
or delivered to the Holder hereof or the Company shall be deemed to have been given (i) upon
receipt if delivered personally or by courier (ii) upon confirmation of receipt if by telecopy or
(iii) three business days after deposit in the US mail, with postage prepaid and certified or
registered, to each such Holder at its address as shown on the books of the Company or to the
Company at the address indicated therefor in the first paragraph of this Warrant.

     13. Binding Effect on Successors. This Warrant shall be binding upon any corporation
succeeding the Company by merger, consolidation or acquisition of all or substantially all of the
Company’s assets. All of the obligations of the Company relating to the Preferred Stock issuable
upon the exercise of this Warrant shall survive the exercise and termination of this Warrant. All
of the covenants and agreements of the Company shall inure to the benefit of the successors and
assign of the holder hereof. The Company will, at the time of the exercise of this Warrant, in
whole or in part, upon request of the Holder hereof and at the Holder’s expense, acknowledge in
writing its continuing obligation to the Holder hereof in respect of any rights (including, without
limitation, any right to registration of the shares of Common Stock) to which the Holder hereof
shall continue to be entitled after such exercise in accordance with this Warrant; provided, that
the failure of the Holder hereof to make any such request shall not affect the continuing
obligation of the Company to the Holder hereof in respect of such rights.

     14. Descriptive Headings and Governing Law. The descriptive headings of the several
sections and paragraphs of this Warrant are inserted for convenience only and do not constitute a
part of this Warrant. This Warrant shall be construed and enforced in accordance with, and the
rights of the parties shall be governed by. the laws of the State of California.

     15. Lost Warrants or Stock Certificates. The Company represents and warrants to the
Holder hereof that upon receipt of evidence reasonably satisfactory to the Company of the loss,
theft, destruction, or mutilation of any Warrant or stock certificate and, in the case of any such
loss, theft or destruction, upon receipt of an indemnity reasonably satisfactory to the Company, or
in the case of any such mutilation upon surrender and cancellation of such Warrant or stock
certificate, the Company at its expense will make and deliver a new Warrant or stock certificate,
of like tenor, in lieu of the lost, stolen, destroyed or mutilated Warrant or stock certificate.

     16. Fractional Shares. No fractional shares shall be issued upon exercise of this
Warrant. The Company shall, in lieu of issuing any fractional share, pay the holder entitled to
such fraction a sum in cash equal to such fraction multiplied by the then effective Stock Purchase
Price.

     17. Representations of Holder. With respect to this Warrant, Holder represents and
warrants to the Company as follows:

 

 

          17.1 Experience. It is an “accredited investor” as that term is defined in Rule 501
(a) promulgated under the Securities Act of 1933, as amended; is experienced in evaluating and
investing in companies engaged in businesses similar to that of the Company; it understands that
investment in this Warrant involves substantial risks; it has made detailed inquiries concerning
the Company, its business and services, its officers and its personnel; the officers of the Company
have made available to Holder any and all written information it has requested; the officers of the
Company have answered to Holder’s satisfaction all inquiries made by it; in making this investment
it has relied upon information made available to it by the Company; and it has such knowledge and
experience in financial and business matters that it is capable of evaluating the merits and risks
of investment in the Company and it is able to bear the economic risk of that investment.

          17.2 Investment. It is acquiring this Warrant for investment for its own account and
not with a view to, or for resale in connection with, any distribution thereof. It understands that
this Warrant, the shares of Preferred Stock issuable upon exercise thereof and the shares of Common
Stock issuable upon conversion of the Preferred Stock, have not been registered under the
Securities Act, nor qualified under applicable state securities laws.

          17.3 Rule 144. It acknowledges that this Warrant, the Preferred Stock and the Common
Stock must be held indefinitely unless they are subsequently registered under the Securities Act or
an exemption from such registration is available. It has been advised or is aware of the provisions
of Rule 144 promulgated under the Securities Act.

          17.4 Access to Data. It has had an opportunity to discuss the Company’s business, management
and financial affairs with the Company’s management and has had the opportunity to inspect the
Company’s facilities.

     18. Additional Representations and Covenants of the Company. The Company hereby
represents, warrants and agrees as follows:

          18.1 Corporate Power. The Company has all requisite corporate power and corporate
authority to issue this Warrant and to carry out and perform its obligations hereunder.

          18.2 Authorization. All corporate action on the part of the Company, its directors and
stockholders necessary for the authorization, execution, delivery and performance by the Company of
this has been taken. This Warrant is a valid and binding obligation of the Company, enforceable in
accordance with its terms.

          18.3 Offering. Subject in part to the truth and accuracy of Holder’s representations
set forth in Section 17 hereof, the offer, issuance and sale of this Warrant is, and the issuance
of Preferred Stock upon exercise of this Warrant and the issuance of Common Stock upon conversion
of the Preferred Stock will be exempt from the registration requirements of the Securities Act, and
are exempt from the qualification requirements of any applicable state securities laws; and neither
the Company nor anyone acting on its behalf will take any action hereafter that would cause the
loss of such exemptions.

          18.4 Stock Issuance. Upon exercise of this Warrant, the Company will use its best
efforts to cause stock certificates representing the shares of Preferred Stock purchased pursuant
to the exercise to be issued in the names of Holder, its nominees or assignees, as appropriate at
the time of such exercise. Upon conversion of the shares of Preferred Stock into shares of Common
Stock, the Company will issue the Common Stock in the names of Holder, its nominees or assignees,
as appropriate.

          18.5 Certificates and By-Laws. The Company has provided Holder with true and complete
copies of the Company’s Certificate of Incorporation, By-Laws, and each Certificate of Designation
or other charter document setting, forth any rights, preferences and privileges of Company’s
capital stock, each as amended and in effect on the date of issuance of this Wan-ant.

          18.6 Conversion of Preferred Stock. As of the date hereof, each share of the Preferred
Stock is convertible into one share of the Common Stock.

 

 

          18.7 Financial and Other Reports. From time to time up to the earlier of the
Expiration Date or the complete exercise of this Warrant, the Company shall furnish to Holder (i)
within 90 days after the close of each fiscal year of the Company an audited balance sheet and
statement of changes in financial position at and as of the end of such fiscal year, together with
an audited statement of income for such fiscal year; (ii) within 45 days after the close of each
fiscal quarter of the Company, an unaudited balance sheet and statement of cash flows at and as of
the end of such quarter, together with an unaudited statement of income for such quarter; and (iii)
promptly after sending, making available, or filing, copies of all reports, proxy statements, and
financial statements that the Company sends or makes available to its stockholders and all
registration statements and reports that the Company files with the SEC or any other governmental
or regulatory authority.

IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed by its officers,
thereunto duly authorized this ___day of February, 2004.

	 	 	 	 	 
	OCULUS INNOVATIVE SCIENCES, INC.	 	 
	 
	 	 	 	 
	By:
	 	/s/ Robert Miller 	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	Title:
	 	CFO 	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	VENTURE LENDING & LEASING III, INC.	 	 
	 
	 	 	 	 
	By: VLLI CAPITAL, LLC	 	 
	a Delaware limited liability company,	 	 
	its Managing Member	 	 
	 
	 	 	 	 
	By:

	 	Westech Investment Advisors, Inc.
its Managing Member	 	 
	 
	 	 	 	 
	By:
	 	/s/ 	 	 
	 

	 	 	 	 
	Name:
	 	Salvador Investment Advisors, Inc. its 	 	 
	 

	 	 	 	 
	 
	 	Managing Member 	 	 
	 

	 	 	 	 
	Title:
	 	President 	 	 
	 

	 	 	 	 

 

 

FORM OF SUBSCRIPTION

(To be signed only upon exercise of Warrant)

	 	 	 
	To:

	 	OCULUS INNOVATIVE SCIENCES. INC.
	 
	 	 
	o

	 	The undersigned, the holder of the within Warrant,
hereby irrevocably
elects to exercise the purchase right represented by such Warrant for,
and to purchase thereunder, (1) See Below      
              
             
         (     
              
 ) shares
(the “Shares”) of Stock of        
             
              
       and herewith makes payment of
              
             
              
               
     Dollars ($        
            )
therefor, and requests that the
certificates for such shares be issued in the name of, and delivered
to,              
             
              ,
whose address is            
             
              
             
         .
	 
	 	 
	o

	 	The undersigned hereby elects to convert                      percent (                    %) of the
value of the Warrant pursuant to the provisions of Section 1(b) of the
Warrant.

The undersigned acknowledges that it has reviewed the representations and warranties contained in
Section 17 of this Warrant and by its signature below hereby makes such representations and
warranties to the Company.

	 	 	 	 	 	 	 
	 

	 	Dated	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	Holder	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	Its:	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	(Address)
	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 

	(1)	 	Insert here the number of shares called for on the face of the Warrant (or, in the case of a
partial exercise, the portion thereof as to which the Warrant is being exercised), in either
case without making any adjustment for additional Preferred Stock or any other stock or other
securities or property or cash which, pursuant to the adjustment provisions of the Warrant,
may be issuable upon exercise.

 

 

ASSIGNMENT

     FOR VALUE RECEIVED, the undersigned, the holder of the within Warrant, hereby sells, assigns and
transfers all of the rights of the undersigned under the within Warrant, with respect to the number
of shares of Preferred Stock covered thereby set forth herein below, unto:

	 	 	 	 	 	 	 
	Name of Assignee	 	Address	 	No. of Shares	 	 

	 	 	 	 	 	 	 
	 

	 	Dated	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Holder:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Its:	 	 	 	 
	 

	 	 	 	 	 	 

 

 

EXHIBIT “A”

[On letterhead of the Company]

     Reference is hereby made to that certain Warrant dated February ___, 2004 issued by OCULUS
INNOVATIVE SCIENCES, INC, a California corporation (the “Company”), to VENTURE LENDING & LEASING
III, INC., a Maryland corporation (the “Holder”).

     [IF APPLICABLE] Notice is hereby given pursuant to Section 4.5 of the Warrant that the
following adjustment(s) have been made to the Warrant: [describe adjustments, setting forth
details regarding method of calculation and facts upon which calculation is based].

     This
certifies that the Holder is entitled to purchase from the Company
___  (___)
fully paid and nonassessable shares of the Company’s ___Stock at a price of ___
Dollars ($___) per share (the “Stock Purchase Price”). The Stock Purchase Price and the
number of shares purchasable under the Warrant remain subject to adjustment as provided in Section
4 of the Warrant.

     Executed
this ___ day of ___, 200_.

	 	 	 	 	 	 	 
	 	 	OCULUS INNOVATIVE SCIENCES, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	Name:	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	Title:	 	 	 	 
	 

	 	 	 	 	 	 

 

 

EXHIBIT “E”

FORM OF LANDLORD WAIVER

 

 

Recording Requested By: Venture Lending & Leasing III, Inc.

and When Recorded Return to:

Venture Lending & Leasing III, Inc.

2010 North First Street, Suite 310

San Jose, CA 95131

LANDLORD/MORTGAGEE WAIVER

     In order to induce VENTURE LENDING & LEASING III, INC. (“Lender”) to provide financing for
certain equipment (the “Equipment”) to OCULUS INNOVATIVE SCIENCES, INC., a California corporation
(“Tenant”), pursuant to that certain Loan and Security Agreement dated March___, 2004, between
Lender and Tenant, and any supplements, extensions, renewals and replacements thereof (the “Loan
Agreement”), some or all of which Equipment may be located upon that certain real property located
at 1 129 North McDowell Blvd., Petaluma, CA 94954., more particularly described on Exhibit
“A” attached hereto (the “Real Property”), the undersigned declares and agrees as follows:

     1. The undersigned has an interest in the Real Property as (as indicated):

	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Landlord	 	 
	 

	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Mortgagee or Beneficiary under a Deed of Trust; or	 	 
	 

	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	Other (describe):	 	 	 	 
	 

	 

	 	 	 	 
	 	 

	 	 
	 	 	 	 	 	 	 	 	 

     2. The undersigned agrees that the Equipment shall at all times be deemed personal
property, even though it maybe placed on or affixed to the Real Property. Lender shall have the
right, at all reasonable times, to enter upon the Real Property to take possession and dispose
of the Equipment pursuant to the terms of the Loan Agreement or otherwise, free of any claim to,
interest in, or lien on the Equipment in favor of the undersigned; provided that if Lender, in
removing the Equipment damages any improvements of the undersigned on the Real Property, Lender
will, at its own expense, cause the same to be repaired.

     3. Any right or interest in the Equipment that the undersigned now has or may hereafter
acquire because of the location or installation of the Equipment on the Real Property or otherwise
is hereby made subject, subordinate and inferior to the rights of Lender to the Equipment under
the terms of the Loan Agreement; provided, that the undersigned shall continue to retain all
rights to bring an action in unlawful detainer and trespass against Tenant for nonpayment of its
(lease / mortgage] or any other breaches of agreements with the undersigned, subject to Lender’s
rights with respect to the Equipment.

     4. Each reference herein to Lender and the undersigned shall be deemed to include their
respective successors and assigns, all of whom shall be bound by and entitled to the benefits of
the provisions hereof.

 

 

EXHIBIT “F”

FORM OF LEGAL OPINION

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