Document:

Exhibit
10.1

Partners for Growth

Loan and
Security Agreement

Borrower:                             Bioject
Medical Technologies, Inc.

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

Borrower:                             Bioject,
Inc.

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

Date:                                      December 11, 2006

THIS LOAN AND SECURITY AGREEMENT
is entered into on the above date between PARTNERS FOR GROWTH, L.P. (“PFG”),
whose address is 180 Pacific Avenue, San Francisco, CA 94111 and the borrowers
named above (jointly and severally, the “Borrower”), whose chief executive
office is located at the above address, respectively. The Schedule to this
Agreement (the “Schedule”) being signed by the parties concurrently, is an
integral part of this Agreement. 
(Definitions of certain terms used in this Agreement are set forth in
Section 8 below.)

1.     LOANS.

1.1  Loans.  PFG will make loans to Borrower (the “Loans”)
expressly for general working capital purposes up to a maximum aggregate credit
limit of $2,500,000 (the “Credit Limit”) within two credit facilities, subject
to the Borrowing Base, as specified in the Schedule, provided no Default or
Event of Default has occurred and is continuing, and subject to deduction of
Reserves for accrued interest and such other Reserves as PFG deems proper from
time to time in its good faith business judgment.

1.2  Interest.  All Loans and all other monetary Obligations
shall bear interest at the rate shown on the Schedule, except where expressly
set forth to the contrary in this Agreement. 
Interest shall be payable monthly, on the first day of each month for
interest accrued during the prior month. 
Interest may, in PFG’s discretion, be charged to Borrower’s loan
account, and the same shall thereafter bear interest at the same rate as the
other Loans.

1.3  Overadvances.  If, at any time or for any reason, the total
of all outstanding Loans and all other monetary Obligations exceeds the Credit
Limit (an “Overadvance”), Borrower shall immediately pay the amount of the
excess to PFG, without notice or demand. 
Without limiting Borrower’s obligation to repay to PFG the amount of any
Overadvance, Borrower agrees to pay PFG interest on the outstanding amount of
any Overadvance, on demand, at the Default Rate.

1.4  Fees.  Borrower shall pay PFG the fees shown on the
Schedule, which are in addition to all interest and other sums payable to PFG
and are not refundable.

1.5 Loan Requests.
To obtain a Loan, Borrower shall make a request to PFG by facsimile or
telephone. Loan requests may also be made by Borrower by email, but the same
shall not be deemed made until PFG acknowledges receipt of the same by email or
otherwise in writing. Loan requests received after 12:00 Noon Pacific time will
not be considered by PFG until the next Business Day. PFG may rely on any
telephone request for a Loan given by a person whom PFG believes in good faith
is an authorized representative of Borrower, and Borrower will indemnify PFG
for any loss PFG suffers as a result of that reliance.

1.6  Late Fee. If any
payment of accrued interest for any month is not made within three (3) Business
Days after the date a bill therefore is sent by PFG to Borrower, or if any
payment of principal or any other payment is not made within three

 

Business
Days after the date due, Borrower shall pay PFG a late payment fee equal to 5%
of the amount of such late payment.  The
provisions of this paragraph shall not be construed as PFG’s consent to
Borrower’s failure to pay any amounts when due, and PFG’s acceptance of any
such late payments shall not restrict PFG’s exercise of any remedies arising
out of any such failure.

2.  SECURITY INTEREST.

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

2.2  Specified Contracts Excluded.  Notwithstanding
anything herein to the contrary, the security interest granted under this
Section 2 shall not attach to any of the following (“Specified Contracts”):  any lease, license, contract, property rights
or agreement to which Borrower is a party or any of its rights or interests
thereunder if and for so long as the grant of such security interest shall
constitute or result in any of the following 
(other than to the extent that any such term would be ineffective under
the Code or any other applicable law or principles of equity):  (i) the abandonment, invalidation or
unenforceability of any right, title or interest of Borrower therein, or (ii)
in a breach or termination pursuant to the terms of, or a default under, any
such lease, license, contract property rights or agreement; provided however
that such security interest shall attach immediately at such time as the
condition causing such abandonment, invalidation or unenforceability shall be
remedied and to the extent severable, shall attach immediately to any portion
of such lease, license, contract, property rights or agreement that does not
result in any of the consequences specified in (i) or (ii) above. Except as
disclosed on Exhibit A hereto, Borrower represents and warrants to PFG that
there are no Specified Contracts which are material to Borrower’s business or
grant Borrower rights in Intellectual Property which is licensed by the
Borrower to its customers or incorporated in products licensed or sold by the
Borrower to its customers.  Borrower
shall not, hereafter, without PFG’s prior written consent, enter into any
Specified Contract which is material to Borrower’s business or grants Borrower
rights in Intellectual Property which is licensed by the Borrower to its
customers or incorporated in products licensed or sold by the Borrower to its
customers.

3.  REPRESENTATIONS, WARRANTIES AND COVENANTS OF
BORROWER.

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

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

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

 

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

3.4  Title to Collateral; Perfection; Permitted
Liens.

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

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

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

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

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

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

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

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

 

of
Borrower, including any liability to the Pension Benefit Guaranty Corporation
or its successors or any other governmental agency.

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

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

3.11  Use of Proceeds.  All proceeds of all Loans shall be used solely
for lawful business purposes.  Borrower
is not purchasing or carrying any “margin stock” (as defined in Regulation U of
the Board of Governors of the Federal Reserve System) and no part of the
proceeds of any Loan will be used to purchase or carry any “margin stock” or to
extend credit to others for the purpose of purchasing or carrying any “margin
stock.”

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

4.  ACCOUNTS.

4.1  Representations Relating to Accounts.  Borrower represents and warrants to PFG as
follows:  Each Account with respect to
which Loans are requested by Borrower shall, on the date each Loan is requested
and made, (i) represent an undisputed bona fide existing unconditional
obligation of the Account Debtor created by the sale, delivery, and acceptance
of goods or the rendition of services, or the licensing of Intellectual
Property, in the ordinary course of Borrower’s business, and (ii) meet the
Minimum Eligibility Requirements set forth in 
Section 8 below.

4.2  Representations Relating to Documents and
Legal Compliance.  Borrower
represents and warrants to PFG as follows: 
All statements made and all unpaid balances appearing in all invoices,
instruments and other documents evidencing the Accounts are and shall be true
and correct in all material respects and all such invoices, instruments and
other documents and all of Borrower’s books and records are and shall be
genuine and in all respects what they purport to be.  All sales and other transactions underlying
or giving rise to each Account shall comply in all material respects with all
applicable laws and governmental rules and regulations.  To the best of Borrower’s knowledge, all
signatures and endorsements on all documents, instruments, and agreements
relating to all Accounts are and shall be genuine, and all such documents,
instruments and agreements are and shall be legally enforceable in accordance
with their terms.

4.3 Documents Relating to
Accounts. If requested by PFG, Borrower shall furnish PFG
with copies (or, at PFG’s request, originals) of all contracts, orders,
invoices, and other similar documents, and all shipping instructions, delivery
receipts, bills of lading, and other evidence of delivery, for any goods the
sale or disposition of which gave rise to such Accounts, and Borrower warrants
the genuineness of all of the foregoing. 
Borrower shall also furnish to PFG an aged accounts receivable trial
balance as provided in the Schedule.  In
addition, Borrower shall deliver to PFG, on its request, the originals of all
instruments, chattel paper, security agreements, guarantees and other documents
and property evidencing or securing any Accounts, in the same form as received,
with all necessary endorsements, and copies of all credit memos.

4.4  Collection of Accounts.  Borrower shall have the right to collect all
Accounts, unless and until a Default or an Event of Default has occurred and is
continuing. PFG may, in its good faith business judgment, require that all
proceeds of Collateral be deposited by Borrower into a lockbox account, or such
other “blocked account” as PFG may specify, pursuant to a blocked account
agreement in such form as PFG may specify in its good faith business judgment.

4.5.  Remittance of Proceeds. All
proceeds arising from the disposition of any Collateral shall be delivered, in
kind, by Borrower to PFG in the original form in which received by Borrower not
later than the following Business Day after receipt by Borrower, to be applied
to the Obligations in such order as PFG shall determine; provided that, if no
Default or Event of Default has occurred and is continuing, Borrower shall not
be obligated to remit to PFG (i) the proceeds of Accounts arising in the
ordinary course of business, or (ii) the proceeds of the sale of Inventory in
the ordinary course of business, (iii) the proceeds of the sale of Permitted
Investments which are promptly reinvested in other Permitted Investments, the
proceeds of the sale of Equipment to the extent such proceeds are reinvested in
Equipment of comparable utility within six (6) months of such sale, or the
proceeds of the sale of worn out or obsolete Equipment disposed of by Borrower
in good faith in an arm’s

 

length transaction
for an aggregate purchase price of $50,000 or less (for all such transactions
in any fiscal year).  Borrower agrees
that it will not commingle proceeds of Collateral with any of Borrower’s other
funds or property, but will hold such proceeds separate and apart from such
other funds and property and in an express trust for PFG, except as set forth
above.  Nothing in this Section limits
the restrictions on disposition of Collateral set forth elsewhere in this
Agreement.

4.6  Disputes.  Borrower shall notify PFG promptly of all
disputes or claims relating to Accounts. 
Borrower shall not forgive (completely or partially), compromise or
settle any Account for less than payment in full, or agree to do any of the
foregoing, except that Borrower may do so, provided that: (i) Borrower does so
in good faith, in a commercially reasonable manner, in the ordinary course of
business, and in arm’s length transactions, which are reported to PFG on the
regular reports provided to PFG; (ii) no Default or Event of Default has
occurred and is continuing; and (iii) taking into account all such discounts,
settlements and forgiveness, the total outstanding Loans will not exceed the
Credit Limit.

4.7  Returns.  Provided no Event of Default has occurred and
is continuing, if any Account Debtor returns any Inventory to Borrower,
Borrower shall promptly determine the reason for such return and promptly issue
a credit memorandum to the Account Debtor in the appropriate amount.  In the event any attempted return occurs
after the occurrence and during the continuance of any Event of Default,
Borrower shall hold the returned Inventory in trust for PFG,
and immediately notify PFG of the return of the Inventory.

4.8  Verification.  PFG may, from time to time, verify directly
with the respective Account Debtors the validity, amount and other matters
relating to the Accounts, by means of mail, telephone or otherwise, either in
the name of Borrower or PFG or such other name as PFG may choose.

4.9  No Liability.  PFG shall not be responsible or liable for
any shortage or discrepancy in, damage to, or loss or destruction of, any
goods, the sale or other disposition of which gives rise to an Account, or for
any error, act, omission, or delay of any kind occurring in the settlement,
failure to settle, collection or failure to collect any Account, or for
settling any Account in good faith for less than the full amount thereof, nor
shall PFG be deemed to be responsible for any of Borrower’s obligations under
any contract or agreement giving rise to an Account.  Nothing herein shall, however, relieve PFG
from liability for its own gross negligence or willful misconduct.

5.  ADDITIONAL DUTIES OF BORROWER.

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

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

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

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

 

information
under the preceding sentence, it shall so advise PFG in writing, giving PFG a
general description of the nature of the information withheld and the basis
upon which it is withheld.

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

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

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

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

(iv) sell or transfer any Collateral (including
without limitation and sale or transfer of Collateral which is then leased back
by Borrower), except for (A) the sale of Inventory in the ordinary course of
Borrower’s business, and except for the sale of obsolete or unneeded Equipment
and the sale and replacement of Equipment, in each case, in the ordinary course
of business, (B) the sale of, and reinvestment of such sale proceeds in,
Permitted Investments, (C) the granting of Permitted Liens, and (D) the
licensing of Intellectual Property in the ordinary course of business, provided
that Borrower shall give PFG advance written notice of any exclusive licensing
of Intellectual Property and provided further that the proceeds of such
licensing shall become Collateral subject to the security interest of PFG;

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

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

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

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

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

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

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

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

(xiii) dissolve or elect to dissolve.

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

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

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

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

6.   TERM.

6.1  Maturity Date.  This Agreement shall continue in effect until
the maturity date set forth on the Schedule (the “Maturity Date”), subject to
Sections 6.2 and 6.3 below.

6.2  Early Termination.  This Agreement may be terminated prior to the
Maturity Date as follows:  (i) by
Borrower with respect to Facility A only, effective three Business Days after
written notice of termination is given to PFG; or (ii) by PFG at 

 

any
time after the occurrence and during the continuance of an Event of
Default.  There is no termination fee or
prepayment penalty provided, however, that Facility B may not be prepaid.

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

7.  EVENTS OF DEFAULT AND REMEDIES.

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

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

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

(c) the total Loans and other Obligations outstanding
at any time shall exceed the Credit Limit; or

(d) Borrower shall fail to comply with any of the
financial covenants set forth in the Schedule, or shall breach any of the
provisions of Section 5.5 hereof, or shall fail to perform any other
non-monetary Obligation which by its nature cannot be cured, or shall fail to
permit PFG to conduct an inspection or audit as provided in Section 5.4 hereof
or shall fail to provide PFG with a borrowing base report under Section 6 of
the Schedule within five Business Days after the date due; or

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

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

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

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

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

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

 

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

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

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

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

(p) a Material Adverse Change shall occur.

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

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

 

continuance
of any Event of Default, the interest rate applicable to the Obligations shall
be increased by an additional four percent per annum (the “Default Rate”).

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

7.4  Power of Attorney.  Upon the occurrence and during the
continuance of any Event of Default, without limiting PFG’s other rights and
remedies, Borrower grants to PFG an irrevocable power of attorney coupled with
an interest, authorizing and permitting PFG (acting through any of its
employees, attorneys or agents) at any time, at its option, but without obligation,
with or without notice to Borrower, and at Borrower’s expense, to do any or all
of the following, in Borrower’s name or otherwise, but PFG agrees that if it
exercises any right hereunder, it will do so in good faith and in a
commercially reasonable manner:  (a)
Execute on behalf of Borrower any documents that PFG may, in its good faith
business judgment, deem advisable in order to perfect and maintain PFG’s
security interest in the Collateral, or in order to exercise a right of
Borrower or PFG, or in order to fully consummate all the transactions
contemplated under this Agreement, and all other Loan Documents; (b) Execute on
behalf of Borrower, any invoices relating to any Account, any draft against any
Account Debtor and any notice to any Account Debtor, any proof of claim in
bankruptcy, any Notice of Lien, claim of mechanic’s, materialman’s or other
lien, or assignment or satisfaction of mechanic’s, materialman’s or other lien;
(c) Take control in any manner of any cash or non-cash items of payment or proceeds
of Collateral; endorse the name of Borrower upon any instruments, or documents,
evidence of payment or Collateral that may come into PFG’s possession; (d)
Endorse all checks and other forms of remittances received by PFG; (e) Pay,
contest or settle any lien, charge, encumbrance, security interest and adverse
claim in or to any of the Collateral, or any judgment based thereon, or
otherwise take any action to terminate or discharge the same; (f) Grant
extensions of time to pay, compromise claims and settle Accounts and General
Intangibles for less than face value and execute all releases and other
documents in connection therewith; (g) Pay any sums required on account of
Borrower’s taxes or to secure the release of any liens therefor, or both; (h)
Settle and adjust, and give releases of, any insurance claim that relates to
any of the Collateral and obtain payment therefor; (i) Instruct any third party
having custody or control of any books or records belonging to, or relating to,
Borrower to give PFG the same rights of access and other rights with respect
thereto as PFG has under this Agreement; and (j) Take any action or pay any sum
required of Borrower pursuant to this Agreement and any other Loan
Documents.  Any and all reasonable sums
paid and any and all reasonable costs, expenses, liabilities, obligations and
attorneys’ fees incurred by PFG with respect to the foregoing shall be added to
and become part of the Obligations, shall be payable on demand, and shall bear
interest at a rate equal to the highest interest rate applicable to any of the
Obligations.  In no event shall PFG’s
rights under the foregoing power of attorney or any of PFG’s other rights under
this Agreement be deemed to indicate that PFG is in control of the business,
management or properties of Borrower.

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

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

 

8.      DEFINITIONS.  As used in this
Agreement, the following terms have the following meanings:

 

“Account Debtor” means the obligor on an
Account.

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

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

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

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

“Change
in Control” means: (1) a dissolution, liquidation, or sale of all or
substantially all of the assets of Borrower; (2) a merger or consolidation in
which Borrower is not the surviving corporation; (3) a reverse merger in which
Borrower is the surviving corporation but the shares of the Borrower’s common
stock outstanding immediately preceding the merger are converted by virtue
of  the merger into other property,
whether in the form of securities, cash or otherwise; (4) an expression of
intent to acquire control notified to Borrower under Section 13(d)(1)(C) of the
U.S. Securities Exchange Act of 1934, as amended, which acquisition is
subsequently effected; or (5) a change in control of Borrower effected by a
successful tender offer for more than 50% of the outstanding voting securities
of Borrower.

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

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

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

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

“Default Rate” has the meaning set forth in
Section 7.2 above.

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

 “Eligible
Accounts” means Accounts and General Intangibles arising in the ordinary course
of Borrower’s business from the sale of goods or the rendition of services, or
the non-exclusive licensing of Intellectual Property, which PFG, in its good
faith business judgment, shall deem eligible for borrowing.  Without limiting the fact that the
determination of which Accounts are eligible for borrowing is a matter of PFG’s
good faith business judgment, the following (the “Minimum Eligibility
Requirements”) are the minimum requirements for a Account to be an Eligible
Account:

(i) the Account must not be outstanding for more than
90 days from its invoice date (the “Eligibility Period”),

(ii) the Account must not represent progress billings,
credit balances, accounting entries made to nullify a prior entry (contras), or
be due under a fulfillment or requirements contract with the Account Debtor,

(iii) the Account must not be subject to any
contingencies (including Accounts arising from sales on consignment, guaranteed
sale or other terms pursuant to which payment by the Account Debtor may be
conditional),

(iv) the Account must not be owing from an Account
Debtor with whom Borrower has any material dispute (whether or not relating to
the particular Account),

(v) the Account must not be owing from an Affiliate of
Borrower,

(vi) the Account must not be owing from an Account
Debtor which is subject to any insolvency or bankruptcy proceeding, or whose
financial condition is not acceptable to PFG in its good faith business
judgment, or which, fails or goes out of a material portion of its business,

(vii) the Account must not be owing from the United
States or any department, agency or instrumentality thereof (unless there has
been compliance, to PFG’s satisfaction, with the United States Assignment of
Claims Act),

 

(viii) the Account must not be owing from an Account
Debtor located outside the United States or Canada (unless an Excepted
Concentration Account, pre-approved by PFG in its discretion in writing, or
backed by a letter of credit satisfactory to PFG, or FCIA insured satisfactory
to PFG),

(xi)
the Account must not be owing from an Account debtor whose accounts receivable
aged over 90 days from invoice date exceed 50% of all accounts receivable from
such account debtor, and in such case, no account receivable of such account
debtor would be eligible for financing hereunder; and

(x) the Account must not be owing from an Account
Debtor to whom Borrower is or may be liable for goods purchased from such
Account Debtor or otherwise (but, in such case, the Account will be deemed not
eligible only to the extent of any amounts owed by Borrower to such Account
Debtor).

Accounts
owing from one Account Debtor will not be deemed Eligible Accounts to the
extent they exceed 25% of the total Accounts outstanding; provided that the
foregoing shall not include Excepted Concentration Accounts.  In addition, if more than 50% of the Accounts
owing from an Account Debtor are outstanding for a period longer than their
Eligibility Period (without regard to unapplied credits) or are otherwise not
eligible Accounts, then all Accounts owing from that Account Debtor will be
deemed ineligible for borrowing.  PFG
may, from time to time, in its good faith business judgment, revise the Minimum
Eligibility Requirements, upon written notice to Borrower.

“Eligible Inventory” means Inventory which PFG,
in its good faith business judgment, deems eligible for borrowing, including
Raw Materials with an aggregate value at any time of not more than
$500,000.  Without limiting the fact that
the determination of which Inventory is eligible for borrowing is a matter of
PFG’s good faith business judgment, the following are the minimum requirements
for Inventory to be  Eligible Inventory:

(i) the Inventory must consist of finished goods,
in good, new and salable condition, not be perishable, not be obsolete or
unmerchantable, and not be comprised of raw materials, work in process,
packaging materials or supplies;

(ii) the Inventory must meet all applicable
governmental standards and have been manufactured in compliance with the Fair
Labor Standards Act;

(iii) the Inventory must conform in all respects
to the warranties and representations set forth in this Agreement;

(iv) the Inventory must be at all times subject
to PFG’s duly perfected, first priority security interest; and

(v) the Inventory must be situated at Borrower’s
Address or at one of the locations set forth in the Representations.

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

“Event of Default” means any of the events set
forth in Section 7.1 of this Agreement.

“Excepted Concentration Accounts” means
Accounts Receivable from Merial, Amgen, Inc. (AMGN: NASDAQ) and Serono, Inc.
(SRA: NYSE).

“GAAP” means generally accepted accounting
principles consistently applied.

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

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

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

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

 

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

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

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

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

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

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

“Minimum Eligibility Requirements” is defined
in the definition of “Eligible Accounts” above.

“Obligations” means all present and future
Loans, advances, debts, liabilities, obligations, guaranties, covenants, duties
and indebtedness at any time owing by Borrower to PFG, whether evidenced by
this Agreement or any note or other instrument or document, or otherwise,
whether arising from an extension of credit, opening of a letter of credit,
banker’s acceptance, loan, guaranty, indemnification or otherwise, whether
direct or indirect (including, without limitation, those acquired by assignment
and any participation by PFG in Borrower’s debts owing to others), absolute or
contingent, due or to become due, including, without limitation, all interest,
charges, expenses, fees, attorney’s fees, expert witness fees, audit fees,
collateral monitoring fees, closing fees, facility fees, termination fees,
minimum interest charges and any other sums chargeable to Borrower under this
Agreement or under any other Loan Documents, provided however, that for
purposes of determining if there is an Event of Default under Section 7.1(c),
the term “Obligations” shall not be construed to include Obligations other than
those under this Agreement.

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

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

“Permitted Indebtedness” means

(i) the Loans and other Obligations; and

 

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

(iii) Subordinated Debt;

(iv) other Indebtedness secured by Permitted Liens;

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

“Permitted Investments” are:

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

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

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

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

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

“Permitted Liens” means the following:

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

(ii) leases of specific items of Equipment;

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

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

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

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

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

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

 

uncured
default in any obligation secured by the subordinate security interest shall
also constitute an Event of Default under this Agreement;

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

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

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

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

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

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

“Raw Materials” means component materials
purchased for Borrower’s Biojector 2000 product under a purchase order from
Trimeris, Inc. (Nasdaq: TRMS).

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

“Reserves” means, as of any date of determination,
such amounts as PFG may from time to time establish and revise in its good
faith business judgment, reducing the amount of Loans, and other financial
accommodations which would otherwise be available to Borrower under the lending
formula(s) provided in the Schedule:  (a)
to reflect events, conditions, contingencies or risks which, as determined by
PFG in its good faith business judgment, do or may adversely affect (i) the
Collateral or any other property which is security for the Obligations or its value
(including without limitation any increase in delinquencies of Accounts), (ii)
the assets, business or prospects of Borrower or any Guarantor, or (iii) the
security interests and other rights of PFG in the Collateral (including the
enforceability, perfection and priority thereof); or (b) to reflect PFG’s good
faith belief that any collateral report or financial information furnished by
or on behalf of Borrower or any Guarantor to PFG is or may have been
incomplete, inaccurate or misleading in any material respect; or (c) in respect
of any state of facts which PFG determines in good faith constitutes an Event
of Default or may, with notice or passage of time or both, constitute an Event
of Default.

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

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

9.     GENERAL PROVISIONS.

9.1  Confidentiality.  PFG agrees to use the same degree of care
that it exercises with respect to its own proprietary information, to maintain
the confidentiality of any and all proprietary, trade secret or confidential
information provided to or received by PFG from the Borrower, which indicates
that it is confidential, including business plans and forecasts, non-public
financial information, confidential or secret processes, formulae, devices and
contractual information, customer lists, and employee relation matters,
provided that PFG may disclose such information (i) to its officers, directors,
employees, attorneys, accountants, affiliates, participants, prospective
participants, assignees and prospective assignees, and such other Persons to
whom PFG shall at any time be required to make such disclosure in accordance
with applicable law or legal 

 

process,
and (ii) in its good faith business judgment in connection with the enforcement
of its rights or remedies after an Event of Default, or in connection with any
dispute with Borrower or any other Person relating to Borrower.  The confidentiality agreement in this Section
supersedes any prior confidentiality agreement of PFG relating to Borrower.

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

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

9.4  Charges to Accounts.  PFG may, in its
discretion, require that Borrower pay monetary Obligations in cash to PFG, or charge
them to Borrower’s Loan account, in which event they will bear interest at the
same rate applicable to the Loans.

9.5  Monthly Accountings.  PFG shall provide Borrower monthly with an
account of advances, charges, expenses and payments made pursuant to this
Agreement.  Such account shall be deemed
correct, accurate and binding on Borrower and an account stated (except for
reverses and reapplications of payments made and corrections of errors
discovered by PFG), unless Borrower notifies PFG in writing to the contrary
within 60 days after such account is rendered, describing the nature of any alleged
errors or omissions.

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

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

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

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

9.10  No Liability for Ordinary Negligence.  Neither PFG, nor any of its directors,
officers, employees, agents, attorneys or any other Person affiliated with or
representing PFG shall be liable for any claims, demands, losses or damages, of
any kind whatsoever, made, claimed, incurred or suffered by Borrower or any
other party through the ordinary negligence of 

 

PFG,
or any of its directors, officers, employees, agents, attorneys or any other
Person affiliated with or representing PFG, but nothing herein shall relieve
PFG from liability for its own gross negligence or willful misconduct.

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

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

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

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

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

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

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

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

 

waives
any and all rights Borrower may have to object to the jurisdiction of any such
court, or to transfer or change the venue of any such action or proceeding.

9.19  Mutual Waiver of Jury Trial.  BORROWER AND PFG EACH HEREBY WAIVE THE RIGHT
TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, ARISING OUT OF, OR IN
ANY WAY RELATING TO, THIS AGREEMENT OR ANY OTHER PRESENT OR FUTURE INSTRUMENT
OR AGREEMENT BETWEEN PFG AND BORROWER, OR ANY CONDUCT, ACTS OR OMISSIONS OF PFG
OR BORROWER OR ANY OF THEIR DIRECTORS, OFFICERS, EMPLOYEES, AGENTS, ATTORNEYS
OR ANY OTHER PERSONS AFFILIATED WITH PFG OR BORROWER, IN ALL OF THE FOREGOING
CASES, WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE.  WITHOUT INTENDING IN ANY WAY TO LIMIT THE
PARTIES’ AGREEMENT TO WAIVE THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY, if
the above waiver of the right to a trial by jury is not enforceable, the
parties hereto agree that any and all disputes or controversies of any nature
between them arising at any time shall be decided by a reference to a private
judge, mutually selected by the parties (or, if they cannot agree, by the
Presiding Judge of the San Francisco County, California Superior Court)
appointed in accordance with California Code of Civil Procedure Section 638 (or
pursuant to comparable provisions of federal law if the dispute falls within
the exclusive jurisdiction of the federal courts), sitting without a jury, in
San Francisco County, California; and the parties hereby submit to the
jurisdiction of such court.  The
reference proceedings shall be conducted pursuant to and in accordance with the
provisions of California Code of Civil Procedure §§ 638 through 645.1,
inclusive.  The private judge shall have
the power, among others, to grant provisional relief, including without
limitation, entering temporary restraining orders, issuing preliminary and
permanent injunctions and appointing receivers. 
All such proceedings shall be closed to the public and confidential and
all records relating thereto shall be permanently sealed.  If during the course of any dispute, a party
desires to seek provisional relief, but a judge has not been appointed at that
point pursuant to the judicial reference procedures, then such party may apply
to the San Francisco County, California Superior Court for such relief.  The proceeding before the private judge shall
be conducted in the same manner as it would be before a court under the rules
of evidence applicable to judicial proceedings. 
The parties shall be entitled to discovery which shall be conducted in
the same manner as it would be before a court under the rules of discovery
applicable to judicial proceedings.  The
private judge shall oversee discovery and may enforce all discovery rules and
order applicable to judicial proceedings in the same manner as a trial court
judge.  The parties agree that the
selected or appointed private judge shall have the power to decide all issues
in the action or proceeding, whether of fact or of law, and shall report a
statement of decision thereon pursuant to the California Code of Civil
Procedure § 644(a).  Nothing in this
paragraph shall limit the right of any party at any time to exercise self-help
remedies, foreclose against collateral, or obtain provisional remedies.  The private judge shall also determine all
issues relating to the applicability, interpretation, and enforceability of
this paragraph.

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

8.20  Provisions Relating to Oregon Law.  To the extent that all or any portion of this
Agreement is determined by a court of competent jurisdiction to be subject to
Oregon law, the following disclosures are made:

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

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

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

WARNING:  UNLESS YOU PROVIDE US WITH EVIDENCE OF THE
INSURANCE COVERAGE AS REQUIRED BY OUR CONTRACT OR LOAN AGREEMENT, WE MAY
PURCHASE INSURANCE AT YOUR EXPENSE TO 

 

PROTECT OUR
INTEREST.  THIS INSURANCE MAY, BUT NEED
NOT, ALSO PROTECT YOUR INTEREST.  IF THE
COLLATERAL BECOMES DAMAGED, THE COVERAGE WE PURCHASE MAY NOT PAY ANY CLAIM YOU
MAKE OR ANY CLAIM MADE AGAINST YOU.  YOU
MAY LATER CANCEL THIS COVERAGE BY PROVIDING EVIDENCE THAT YOU HAVE OBTAINED
PROPERTY COVERAGE ELSEWHERE.

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

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

	
  Borrower:

  	
   

  	
  PFG: 

  
	
   

  	
   

  	
   

  
	
  Bioject Medical Technologies Inc. 

  	
   

  	
  PARTNERS FOR GROWTH, L.P. 

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By

  	
   

  	
   

  	
   

  	
  By

  	
   

  	
   

  
	
   

  	
  Jim O’Shea, President

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
  By

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Secretary or Ass’t Secretary

  	
   

  	
   

  	
  Title: 

  	
  Manager, Partners for Growth, LLC 

  
	
   

  	
   

  	
   

  	
   

  	
  Its General Partner

  
	
   

  	
   

  	
   

  	
   

  
	
  Borrower:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Bioject Inc. 

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Jim O’Shea, President

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Secretary or Ass’t Secretary

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
									

 

 

Partners
For Growth

 

Schedule to

Loan and
Security Agreement

	
  Borrower:

  	
   

  	
  Bioject Medical Technologies, Inc.

  	
   

  	
   

  
	
  Address:

  	
   

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

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Borrower:

  	
   

  	
  Bioject, Inc.

  	
   

  	
   

  
	
  Address:

  	
   

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

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Date:

  	
   

  	
  December 11, 2006

  	
   

  	
   

  

 

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

1.     FACILITY A:

(Section 1.1):                                                                                                                         An
amount not to exceed at any time the lesser of (a) (i) $2,000,000, plus
(ii) any amounts that may be re-borrowed under FACILITY B, or (b) sum of the
following (the sum of (1) and (2) below being defined as the “Borrowing Base”):

(1)          up to 75% (an “Advance
Rate”) of the amount of Borrower’s Eligible Accounts (as defined in Section 8
above); plus

(2)          up to 30% (an “Advance
Rate”) of the value of Borrower’s Eligible Inventory (as defined in Section 8
above), calculated on the basis of the values set forth from time to time on
Borrower’s balance sheet, at all times in accordance with GAAP, consistently
applied, and in accordance with Borrower’s historical accounting policies; plus

(3)          any amounts that may be
re-borrowed under FACILITY B.

PFG may, from time
to time, modify the Advance Rates, in its good faith business judgment, upon
notice to the Borrower, based on changes in collection experience with respect
to Accounts, its evaluation of the Inventory or other issues or factors
relating to the Accounts, Inventory or other Collateral.

 

 

FACILITY B:

(Section 1.1):                                                                                                                                                An
amount not to exceed $500,000, all of which shall be borrowed on the date
hereof. Borrower shall repay Facility B in 18 equal monthly principal payments
of $27,777.78, plus accrued interest. Facility B may not be prepaid by
Borrower. Subject at all times to Section 1.1 of the Loan Agreement, principal
amounts indefeasibly repaid to PFG under Facility B may be re-borrowed by
Borrower under Facility A so long as there is availability under the Borrowing
Base.

 

2.     INTEREST.

Interest
Rate (Section 1.2):

Facility A:
A monthly rate equal to (i) the greater of 4.5% or the Prime Rate, plus (ii)
2%. Facility B: A monthly rate equal to (i) the greater of 4.5% or the
Prime Rate, plus (ii) 1.5%. Interest shall be based on the average daily
financed account balance during each month for each Facility, calculated on the
basis of the actual number of days in each month (the “Monthly Financed
Amount”). Accrued interest for each month shall be payable monthly, on the
last day of the month.

 

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

 

3.     FEES
(Section 1.4):

Loan Fee:                                                                                          None.

Collateral
Handling Fee:              Initially,
0.55% per month of the Monthly Financed Amount. 
If Borrower’s Common Stock closes between $2.00 and $4.00 per share for
30 consecutive trading days, the Collateral Handling Fee will reduce to 0.38%
per month. If Borrower’s Common Stock closes at or above $4.00 per share for 30
consecutive trading days, the Collateral Handling Fee will reduce to 0.22% per
month.

4.     MATURITY
DATE

(Section 6.1):                                                                                                                       18
months from the date hereof.

 

5.     BORROWING
PROCEDURE:

Borrower will deliver to
PFG a Borrowing Base Certificate together with any Request for Advance in such
forms as PFG may specify from 

 

time to time, not less
than five (5) days prior to the date on which the applicable Advance is to be
made.

6.     REPORTING.

(Section5.3):

Borrower shall
provide PFG with the following:

(a)                                  Monthly
Borrowing Base Certificate, in such form as PFG shall specify, within five (5)
Business Days after the end of each month, and borrowing base reports at such
other times as PFG shall from time to time request in its good faith business
judgment.

(b)                                 Monthly
accounts receivable agings, aged by invoice date, within five (5) Business Days
after the end of each month.

(c)                                  Monthly
accounts payable agings, aged by invoice date, and outstanding or held check
registers, if any, within five (5) Business Days after the end of each month.

(d)                                 Monthly
reconciliations of accounts receivable agings (aged by invoice date), and
general ledger, within five (5) Business Days after the end of each month.

(e)                                  Monthly
perpetual inventory reports for the Inventory valued on a first-in, first-out
basis at the lower of cost or market (in accordance with GAAP) or such other
inventory reports as are requested by PFG in its good faith business judgment,
all within ten (10) Business Days after the end of each month.

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

(g)                                 Monthly
Compliance Certificates, within ten (10) Business Days after the end of each
month, in such form as PFG shall reasonably specify, signed by the Chief
Financial Officer of Borrower, certifying that as of the end of such month
Borrower was in full compliance with all of the terms and conditions of this
Agreement, and setting forth calculations showing compliance with the financial
covenants set forth in this Agreement and such other information as PFG shall
reasonably request, including, without limitation, a statement that at the end
of such month there were no held checks.

(h)                                 Quarterly
financial statements, as soon as available, and in any event within forty-five
days after the end of each fiscal quarter of Borrower (other than the last  fiscal quarter in any year); 

 

provided, however, if
Borrower files a form 10-Q with the Securities and Exchange Commission and the
same is available within said period through EDGAR, such availability will
satisfy this requirement.

(i)                                     A
quarterly information update certificate, in the form of an update of the
Representations, unless such information is otherwise included as part of a
Borrowing Base or Monthly Compliance Certificate, within the earlier to occur
of ten (10) Business Days after the end of each fiscal quarter of Borrower or
promptly following the knowledge of any executive officer of Borrower that the
Representations are no longer true, complete and accurate.

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

7.     BORROWER
INFORMATION:

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

8.     ADDITIONAL
PROVISIONS

(a)                                  Deposit Accounts. 
Concurrently, Borrower shall cause the banks and other institutions
where its Deposit Accounts are maintained to enter into control agreements with
PFG, in form and substance satisfactory to PFG in its good faith business
judgment and sufficient to perfect PFG’ security interest in said Deposit
Accounts. Said control agreements shall permit PFG, in its discretion, to
withdraw from said Deposit Accounts accrued interest on the Obligations
monthly.

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

 

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

 

	
  Borrower:

  	
   

  	
  PFG: 

  
	
   

  	
   

  	
   

  
	
  Bioject Medical
  Technologies, Inc.

  	
   

  	
  PARTNERS FOR GROWTH, L.P. 

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By 

  	
   

  	
   

  	
  By 

  	
   

  	
   

  
	
  President or
  Vice President 

  	
   

  	
  Title

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By 

  	
   

  	
   

  	
   

  
	
  Secretary or
  Ass’t Secretary

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Borrower: 

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Bioject, Inc. 

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By

  	
   

  	
   

  	
   

  
	
  President or
  Vice President

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By 

  	
   

  	
   

  	
   

  
	
  Secretary or
  Ass’t Secretary

  	
   

  	
   

  
							

 

 

Exhibit A to Term
Loan and Security Agreement

Section
2.2—Specified Contracts which, to the extent provided in Section 2.2, are
excluded from the security interest granted to PFG and which are material to
Borrower’s business or grant Borrower rights in Intellectual Property which is
licensed by the Borrower to its customers or incorporated in products licensed
or sold by the Borrower to its customers:

[NONE]

Section 7—“Permitted
Indebtedness”—Other Existing Permitted Indebtedness:

[NONE]

Section 7—“Permitted Investments”— Bioject’s
Investment Policy:

Bioject
Medical Technology, Inc.

Investment Policy

 

A. Purpose

The purpose of this policy is to set forth guidelines
for managing the available cash of the Corporation.

B. Objectives

Investments must be selected to achieve the following
objectives in priority order:

1. Safety of principal

2. Liquidity for
operating needs

3. Diversification of
risk

4. Maximization of
pre-tax equivalent yield

 

C.  Investment
Guidelines

Approval Discretionary accounts must be approved by
the Board.

Final Maturity No single security will have an
effective maturity in excess of 30 months.

Liquidity The portfolio will maintain liquidity
sufficient to meet operating needs, with a minimum of 10% of the portfolio
available on 30 days notice.

U.S. Currency All investments will be held in U.S.
dollars.

5.                                       Eligible
Investments.  Investments in the
portfolio will be limited to:

a.                                       Obligations
issued by the U.S. Treasury

b.                                      Obligations
issued by U.S. Federal Agencies and Supra-National Agencies

c.                                       Repurchase
agreements

d.                                      Taxable
and tax-exempt municipal notes, bonds and commercial paper

e.                                       SEC
registered money market funds

f.                                         Auction
rate securities

g.                                      Corporate
Obligations, Yankee, Medium Term Notes and Deposit Notes

h.                                      Commercial
paper

i.                                        Variable
Rate Demand Notes

j.                                          Putable
bonds

k.                                       Asset
Backed Securities

6.                                       Credit
Quality All holdings will be of high credit quality.  Non-U.S. Government holdings will be subject
to the following limitations:

a.                                       Municipal
notes/Municipal Commercial paper must have a minimum short-term rating of Mig1
or SP1

b.                                      Taxable
Commercial paper must have a minimum short-term credit rating of A1 or P1

 

c.                                       Repurchase
agreements must have underlying collateral quality of AAA and be collateralized
at 102%.

d.                                      Municipal
Obligations must have a credit rating of at least AAA by one recognized credit
rating agency

e.                                       Taxable
Obligations must have a credit rating of at least AA by one recognized credit
rating agency

7.                                       Marketability
Holdings should be sufficient size and held in issues that are traded actively
to facilitate transactions at a minimal cost. 
No more than $1 million of portfolio invested by any issuer.

8.                                       Trading
All purchases and sales will be executed at the best net price to the
Corporation.  All securities purchased
will be held in the name of the Company.

9.                                       Diversification
Adequate diversification required to spread credit risk among various
issuers.  No issuer with the exception of
money market funds, repurchase agreements, Treasury, Agency and Supra-National
Agencies issues shall constitute more than 10% of the portfolio’s assets at
time of purchase.

10.                                 Prohibited
Securities the following investments will not be used without the expressed
written approval of the Company.

a.                                       Direct
mortgages or real estate investment trusts

b.                                      Commodities

c.                                       Short
sales and margin purchases

d.                                      Oil,
gas mineral or other types of leases

e.                                       Lettered,
legend, unregistered or other restricted stock

f.                                         Common
stock – with the exception of the Company’s own stock during a stock repurchase
plan

g.                                      Speculative
use of futures and options

h.                                      Derivative
securities

11.                                 Miscellaneous
Tax status, including alternative minimum tax (AMT) is to be determined by the
company’s tax department.Exhibit
10.2

WARRANT

THIS WARRANT (THE “WARRANT”)
IS ISSUED PURSUANT TO THE TERMS OF THE PROVISIONS OF A WARRANT PURCHASE
AGREEMENT (THE “AGREEMENT”) BETWEEN BIOJECT MEDICAL TECHNOLOGIES INC. (THE “COMPANY”)
AND THE INITIAL WARRANT HOLDER.  A COPY
OF SUCH AGREEMENT IS ON FILE AT THE OFFICE OF THE  CORPORATE SECRETARY OF THE COMPANY.  THIS SECURITY WAS SOLD IN A PRIVATE
PLACEMENT, WITHOUT REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE “SECURITIES ACT”), AND MAY BE 
OFFERED OR SOLD ONLY IF REGISTERED UNDER THE SECURITIES ACT OR IF AN
EXEMPTION FROM REGISTRATION IS AVAILABLE.

	
  Company:

  	
   

  	
  Bioject Medical Technologies, Inc., an Oregon
  corporation (BJCT: NASDAQ)

  
	
  Number of Shares:

  	
   

  	
  200,000

  	
   

  	
   

  
	
  Class of Shares:

  	
   

  	
  Common, no par value

  	
   

  	
   

  
	
  Exercise Price:

  	
   

  	
  $1.37

  	
   

  	
   

  
	
  Issue Date:

  	
   

  	
  December 11, 2006

  	
   

  	
   

  
	
  Expiration Date:

  	
   

  	
  December 10, 2011

  	
   

  	
   

  

 

The
term “Holder” shall initially refer to Partners for Growth, L.P., a Delaware
limited partnership, which is the initial holder of this Warrant and shall
further refer to any subsequent permitted holder of this Warrant from time to
time.

The
Holder is subject to certain restrictions as set forth in the Agreement.

The
Company does hereby certify and agree that, for the agreed sum of $1531.00 and
for other good and valuable consideration, the Holder, or its permitted
successors and assigns, hereby is entitled to purchase from Bioject Medical
Technologies, Inc. (the “Company”) Two Hundred Thousand (200,000) duly
authorized, validly issued, fully paid and non-assessable shares of its Common
Stock, no par value, upon the terms and subject to the provisions of this
Warrant. The shares of Common Stock issuable upon exercise of this Warrant are
referred to herein as the “Warrant Stock,” and the Warrant and the Warrant
Stock are sometimes together referred to as the “Securities.”

Section 1.              Term, Price and Exercise of Warrant.

1.1           Term of Warrant. This Warrant
shall be exercisable for a period of five (5) years after the date hereof
(hereinafter referred to as the “Expiration Date”).

 

1.2           Exercise Price.  The price per share at which the Warrant
Stock is issuable upon exercise of this Warrant shall be One Dollar and
Thirty-Seven Cents ($1.37), subject to adjustment from time to time as set
forth herein (the “Exercise Price”).

1.3           Exercise of Warrant.

(a)     This Warrant may be exercised or converted,
in whole or in part, upon surrender to the Company at its then principal
offices in the United States of this Warrant to be exercised, together with the
form of election to exercise attached hereto as Exhibit A duly completed and
executed, and upon payment to the Company of the Exercise Price for the number
of shares of Warrant Stock in respect of which this Warrant is then being
exercised.

(b)     Payment of the aggregate Exercise Price may
be made (i) in cash or by cashier’s or bank check or (ii) by converting this
Warrant through a Cashless Exercise (as defined herein).  Upon a “Cashless Exercise” the Holder shall
receive Warrant Stock on a net basis such that, without the payment of any
funds, the Holder shall surrender this Warrant in exchange for the number of
shares of Warrant Stock equal to “X” (as defined below), computed using the
following formula:

	
  

  	
  Y * (A-B)

  	
   

  
	
  X

  	
   

  	
  =

  	
   

  	
   

  
	
   

  	
  A

  	
   

  
						

 

Where

	
  X

  	
   

  	
  =

  	
   

  	
  the number of shares of Warrant Stock to be issued
  to Holder.

  
	
  Y

  	
   

  	
  =

  	
   

  	
  the number of shares of Warrant Stock to be
  exercised under this Warrant

  
	
  A

  	
   

  	
  =

  	
   

  	
  the Fair Market Value of one share of Common Stock.

  
	
  B

  	
   

  	
  =

  	
   

  	
  the Exercise Price (as adjusted to the date of such
  calculations).

  

 

(c)    For purposes of this Warrant, the “Fair
Market Value” of one share of Warrant Stock shall be (i) if the Company’s
common stock (the “Common Stock”) is or becomes listed on a national stock
exchange or the Nasdaq SmallCap Market, the product of (A) the highest closing
sale price reported on such exchange or market for the 90-day period prior to
the earlier of the day Holder delivers its Election of Exercise to the Company
or the date of determination of Fair Market Value and (B) the number of shares
of Common Stock into which a share of Warrant Stock is convertible at the time
of such exercise, or (ii) if the Common Stock is traded over-the-counter, the
product of (A) the highest closing bid price for the Common Stock over the
90-day period immediately prior to the earlier of the day Holder delivers its
Election of Exercise to the Company or the date of determination of Fair Market
Value and (B) the number of shares of Common Stock into which one share of
Warrant Stock is convertible at the time of such exercise.  If the Common Stock is not traded as
contemplated in clauses (i) or (ii), above, the Fair Market Value of the
Company’s Warrant Stock shall be the price per share which the Company could
obtain from a willing buyer for shares of Warrant Stock sold by the 

 

Company from its
authorized but unissued shares, as the Board of Directors of the Company shall
determine in its reasonable good faith judgment.  In the event that Holder elects to convert
the Warrant Stock through Cashless Exercise in connection with a transaction in
which the Warrant Stock is converted into or exchanged for another security,
Holder may effect a Cashless Exercise directly into such other security.  Notwithstanding the right of the Holder to
effect a Cashless Exercise, the Company may require Holder to exercise this
Warrant for cash if the Warrant Stock is registered under the Securities Act of
1933, may be traded by Holder without restriction under SEC rules and regulations
and applicable law and such freely-tradable Common Stock issuable upon exercise
of this Warrant is delivered within three (3) Business Days of Holder’s
exercise.

(d)    Subject to Section 2 hereof, upon surrender
of this Warrant, and the duly completed and executed form of election to
exercise, and payment of the Exercise Price or conversion of this Warrant
through Cashless Exercise, the Company shall issue and deliver within three (3)
business days to the Holder or such other person as the Holder may designate in
writing a certificate or certificates for the number of shares of Warrant Stock
so purchased upon the exercise or conversion of this Warrant. Such certificate
or certificates shall be deemed to have been issued and any person so designated
to be named therein shall be deemed to have become a holder of record of such
Warrant Stock as of the date of the surrender of this Warrant, and the duly
completed and executed form of election to exercise, and payment of the
Exercise Price or conversion of this Warrant through Cashless Exercise;
provided, that if the date of surrender of this Warrant and payment of the
Exercise Price is not a business day, the certificates for the Warrant Stock
shall be issued as of the next business day (whether before or after the
Expiration Date), and, until such date, the Company shall be under no duty to
cause to be delivered any certificate for such Warrant Stock or for shares of
such other class of capital stock.  If
this Warrant is exercised or converted in part, a new warrant of the same tenor
and for the number of shares of Warrant Stock not exercised or converted shall
be executed by the Company.

1.4           Fractional Interests. The
Company shall not be required to issue fractions of shares of Warrant Stock
upon the exercise of this Warrant.  If
any fraction of a share of Common Stock would be issuable upon the exercise of
this Warrant (or any portion thereof), the Company shall purchase such fraction
for an amount in cash equal to the same fraction of the last  reported sale price of the Common Stock on
the NASDAQ National Market System or any other national securities exchange or
market on which the Common Stock is then listed or traded.

1.5           Automatic Conversion upon
Expiration.  In the event that, upon
the Expiration Date, the fair market value of one share of Common Stock (or
other security issuable upon the exercise hereof) as determined in accordance
with Section 1.3 above is greater than the Exercise Price in effect on such
date, then this Warrant shall automatically be deemed on and as of such date to
be converted pursuant to Section 1.2 above as to all Warrant Stock (or such
other securities) for which it shall not previously have been exercised or
converted, and the Company shall promptly deliver a certificate 

 

representing the Warrant Stock (or such other
securities) issued upon such conversion to the Holder.

Section 2.              Exchange and Transfer of Warrant.

(a)  This
Warrant may be transferred, in whole or in part, without restriction, subject
to (i) the Holder’s delivery of an opinion of counsel in customary form that
such transfer is in compliance with applicable securities laws and (ii) the
transferee holder of the new Warrant assumes in writing the obligations of the
Holder set forth in the Agreement.  A
transfer may be registered with the Company by submission to it of this
Warrant, together with the annexed Assignment Form attached hereto as Exhibit B
duly completed and executed. After the Company’s receipt of this Warrant and
the Assignment Form so completed and executed, the Company will issue and
deliver to the transferee a new warrant (representing the portion of this
Warrant so transferred) at the same Exercise Price per share and otherwise
having the same terms and provisions as this Warrant, which the Company will
register in the new holder’s name.  In
the event of a partial transfer of this Warrant, the Company shall concurrently
issue and deliver to the transferring holder a new warrant that entitles the
transferring holder to purchase the balance of this Warrant not so transferred
and that otherwise is upon the same terms and conditions as this Warrant.  Upon the due delivery of this Warrant for
transfer, the transferee holder shall be deemed for all purposes to have become
the holder of the new warrant issued for the portion of this Warrant so
transferred, effective immediately prior to the close of business on the date
of such delivery, irrespective of the date of actual delivery of the new
warrant representing the portion of this Warrant so transferred.

(b)  In
the event of the loss, theft or destruction of this Warrant, the Company shall
execute and deliver an identical new warrant to the Holder in substitution
therefor upon the Company’s receipt of (i) evidence reasonably satisfactory to
the Company of such event and (ii) if requested by the Company, an indemnity
agreement reasonably satisfactory in form and substance to the Company.  In the event of the mutilation of or other
damage to the Warrant, the Company shall execute and deliver an identical new warrant
to the Holder in substitution therefor upon the Company’s receipt of the
mutilated or damaged warrant.

(c)  The
Company shall pay all costs and expenses incurred in connection with the
exercise, exchange, transfer or replacement of this Warrant, including, without
limitation, the costs of preparation, execution and delivery of a new warrant
and of share certificates representing all Warrant Stock; provided, that the
Holder shall pay all stamp and other transfer taxes payable in connection with
the transfer or replacement of this Warrant.

Section 3.              Certain Covenants.

(a)  The
Company shall at all times reserve for issuance and keep available out of its
authorized and unissued Common Stock, solely for the purpose of providing for
the exercise of this Warrant, such number of shares of Common Stock as shall
from time to time be sufficient therefor.

 

(b)  The
Company will not, by amendment of its Articles of Incorporation or Bylaws or
through reorganization, consolidation, merger, amalgamation, sale of assets or
otherwise, avoid or seek to avoid the observance or performance of any of the
terms of this Warrant.  Without limiting
the foregoing, the Company (i) will not increase the par value of any shares
receivable upon the exercise of this Warrant above the amount payable therefor
upon such exercise and (ii) will take all such action as may be necessary or
appropriate in order that the Company may validly and legally issue fully paid
and nonassessable shares upon the exercise of this Warrant.

Section
4.              Adjustments to Exercise
Price and Number of Shares of Warrant Stock.

4.1  Adjustments.
In order to prevent dilution of the rights granted hereunder, the Exercise
Price shall be subject to adjustment from time to time in accordance with this
Section 4. Upon each adjustment of the Exercise Price pursuant to this Section
4, the Holder shall thereafter be entitled to acquire upon exercise, at the
Exercise Price resulting from such adjustment, the number of shares of Common
Stock of the Company obtainable by multiplying the Exercise Price in effect
immediately prior to such adjustment by the number of shares of Common Stock
acquirable immediately prior to such adjustment and dividing the product
thereof by the new Exercise Price resulting from such adjustment.

4.2  Subdivisions,
Combinations and Share Dividends. If the Company shall at any time
subdivide by split-up or otherwise, its outstanding Common Stock into a greater
number of shares, or issue additional Common Stock as a dividend, bonus issue
or otherwise with respect to any Common Stock, the Exercise Price in effect
immediately prior to such subdivision or share dividend or bonus issue shall be
proportionately reduced. Conversely, in case the outstanding Common Stock of
the Company shall be combined into a smaller number of shares, the Exercise
Price in effect immediately prior to such combination shall be proportionately
increased.

4.3.  Reorganization,
Reclassification, Consolidation, Merger or Sale of Assets. If any capital
reorganization or reclassification of the Common Stock, or consolidation,
amalgamation 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 Common Stock shall be entitled to receive shares,
securities, cash or other property with respect to or in exchange for Common
Stock, then, as a condition of such reorganization, reclassification,
consolidation, amalgamation, merger or sale, lawful and adequate provision
shall be made whereby the Holder shall have the right to acquire and receive
upon exercise of this Warrant (or at the option of the Holder, shall have the
right to receive a new and equivalent Warrant for) such shares, securities,
cash or other property issuable or payable (as part of the reorganization,
reclassification, consolidation, amalgamation, merger or sale) with respect to
or in exchange for such number of outstanding shares of Common Stock as would
have been received upon exercise of this Warrant at the Exercise Price then in
effect. The Company will not effect any such

 

consolidation,
amalgamation, merger or sale unless, prior to the consummation thereof, the
successor corporation (if other than the Company) resulting from such consolidation
or merger or the corporation purchasing such assets shall assume by written
instrument the obligation to deliver such shares, securities or assets that the
Holder may be entitled to purchase in accordance with the foregoing
provisions.  If a purchase, tender or
exchange offer is made to and accepted by the holders of more than 50% of the
outstanding Common Stock of the Company, the Company shall not effect any
consolidation, amalgamation, merger or sale with the person having made such
offer or with any Affiliate of such person, unless prior to the consummation of
such consolidation, merger or sale the Holder shall have been given a
reasonable opportunity to then elect to receive upon the exercise of this
Warrant either the shares, securities or assets then issuable with respect to
the Common Stock of the Company or the shares, securities or assets, or the
equivalent, issued to previous holders of the Common Stock in accordance with
such offer. For purposes hereof the term “Affiliate” with respect to any given
person shall mean any person controlling, controlled by or under common control
with the given person.

4.4.  Notices
of Record Date, Etc.  In the event
that:

(1)  declare or propose to declare any dividend
upon its capital stock, whether payable in cash, property, stock or other
securities and whether or not a regular cash dividend, or

(2)  offer for sale any additional shares of any
class or series of the Company’s capital stock or securities exchangeable for
or convertible into such capital stock, or

(3)  effect or approve any reclassification,
exchange, substitution or recapitalization of the capital stock of the Company,
including any subdivision or combination of its outstanding capital stock, or
consolidation or merger of the Company with, or sale of all or substantially
all of its assets to, another corporation, 
or to liquidate, dissolve or wind up (including an assignment for the
benefit of creditors), or

(4)  offer holders of registration rights the
opportunity to participate in any public offering of the Company’s securities, 

then,
in connection with such event, the Company shall give to Holder:

(i)  at least ten (10) days prior written notice of
the date on which the books of the Company shall close or a record shall be
taken for such a dividend or offer in respect of the matters referred to in (1)
or (2) above, or for determining rights to vote in respect of the matters
referred to in (3) above; and

(ii)  in the case of the matters referred to in (3)
above, at least ten (10) days prior written notice of the date when the same
shall take place. Such notice in accordance with the foregoing clause (i) shall
also specify, in the case of any such dividend, the date on which the holders
of capital stock shall be entitled thereto and the terms of such dividend, 

 

and such notice in
accordance with this clause (ii) shall also specify the date on which the
holders of capital stock shall be entitled to exchange their capital stock for
securities or other property deliverable upon such reorganization,
reclassification, exchange, substitution, consolidation, merger or sale, as the
case may be, and the terms of such exchange. Each such written notice shall be
given by first class mail, postage prepaid, addressed to the holder of this
Warrant at the address of Holder; and

(iii)  in the case of the matter referred to in (4)
above, the same notice as is given or required to be given to the holders of
such registration rights.

4.5.
 Adjustment by Board of Directors.
If any event occurs as to which, in the opinion of the Board of Directors of
the Company, the provisions of this Section 4 are not strictly applicable or if
strictly applicable would not fairly protect the rights of the Holder in
accordance with the essential intent and principles of such provisions, then
the Board of Directors shall make an adjustment in the application of such
provisions, in accordance with such essential intent and principles, so as to
protect such rights, but in no event shall any adjustment have the effect of
increasing the Exercise Price as otherwise determined pursuant to any of the
provisions of this Section 4, except in the case of a combination of shares of
a type contemplated in Section 4.2 and then in no event to an amount larger
than the Exercise Price as adjusted pursuant to Section 4.2.

4.6.
 Officers’ Statement as to Adjustments.
Whenever the Exercise Price and/or number of shares of Warrant Stock subject to
the Warrant is required to be adjusted as provided in Section 4, the Company
shall forthwith file at each office designated for the exercise of this Warrant
a statement, signed by the Chief Executive Officer, Chief Financial Officer or
any Managing Director of the Company, showing in reasonable detail the facts
requiring such adjustment, the Exercise Price and number of issuable shares that
will be effective after such adjustment; provided, however, such statement
shall not be required to the extent the information requested in this Section
4.6 is available through the Company’s reports filed with the Securities and
Exchange Commission. If the information described in this Section 4.6 is
readily available through the Company’s reports filed with the Securities and
Exchange Commission, the Company shall not be required to provide a separate
notice of adjustment to the Holder; provided, however, if such information is
not readily available through the Company’s reports filed with the Securities
Exchange Commission and made public, the Company shall cause a notice setting
forth any such adjustments to be sent by mail, first class, postage prepaid, to
the record Holder of this Warrant at its address appearing herein.  If such notice relates to an adjustment
resulting from an event referred to in Section 4.3, such notice shall be
included as part of the notice required to be mailed or published under the
provisions of Section 4.3.

4.7  Issue of Securities other than Common
Stock.  In the event that at any
time, as a result of any adjustment made pursuant to Section 4, the Holder
thereafter shall become entitled to receive any shares of the Company, other
than Common Stock, thereafter the number of such other shares so receivable
upon exercise of this Warrant shall be subject to adjustment from time to time
in a manner and on terms as nearly 

 

equivalent as
practicable to the provisions with respect to the Common Stock contained in
Section 4.

Section 5.              Rights and Obligations of the Warrant Holder.

This Warrant shall not entitle the Holder to any
rights of a holder of Common Stock in the Company.  The Holder shall have the specific “piggyback”
registration rights set forth in Exhibit C attached hereto and made a part
hereof.  Capitalized terms not otherwise
defined in Exhibit C shall have the meanings set forth herein.

Section 6.              Restrictive Stock Legend.

This Warrant and the Warrant Stock have not been
registered under any securities laws. 
Accordingly, any share certificates issued pursuant to the exercise of
this Warrant shall (until receipt of an opinion of counsel in customary form
that such legend is no longer necessary) bear the following legend:

THIS WARRANT AND THE
WARRANT STOCK ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE “ACT”), AND HAVE BEEN ACQUIRED FOR INVESTMENT AND
NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OF DISTRIBUTION THEREOF. NO
SUCH SALE OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION
STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL IN CUSTOMARY FORM THAT SUCH
REGISTRATION IS NOT REQUIRED UNDER THE ACT.

Section 7.              Notices.

Any notice or other communication required or
permitted to be given here shall be in writing and shall be effective (a) upon
hand delivery or delivery by e-mail or facsimile at the address or number
designated below (if delivered on a business day during normal business hours
where such notice is to be received) or the first business day following such
delivery (if delivered other than on a business day during normal business
hours where such notice is to be received), or (b) on the third business day
following the date of mailing by express courier service, fully prepaid,
addressed to such address, or upon actual receipt of such mailing, whichever
shall first occur. The addresses for such communication shall be:

if to Holder, at

Partners for Growth, L.P.

180 Pacific Avenue

San Francisco, California
94111

Attention:  Lorraine Nield

 

Fax:  (415) 781-0510

lorraine@pfgrowth.com

with a copy to

Benjamin Greenspan, Esq.

620 Laguna Road

Mill Valley, CA 94941

Fax: (415) 358-4780

Email:
bg2@greenspan.org

or

if to the Company, at

Bioject Medical Technologies
Inc.

Attn:  Chris Farrell

20245 S.W. 95th Ave.

Tualatin, OR   97062

Phone: 503. 692.8001

Fax: 503.692.6698

Email: cfarrell@bioject.com

with a copy to:

Stoel Rives, LLP

Attn:  Todd A. Bauman

900 SW 5th Avenue

Suite 2600

Portland, OR 97204

(503) 294-9812 Direct

(503) 220-2480 Fax

tabauman@stoel.com

Each party hereto
may from time to time change its address for notices under this Section 7 by
giving at least 10 calendar days’ notice of such changes address to the other
party hereto.

Section 8.              Amendments and Waivers.

This Warrant and any term hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by the
party against which enforcement of such change, waiver, discharge or
termination is sought.

 

Section 9.              Applicable Law; Severability.

This Warrant shall be governed by and construed and
enforced in accordance with the laws of the State of Oregon.  If any one or more of the provisions
contained in this Warrant, or any application of any provision thereof, shall
be invalid, illegal, or unenforceable in any respect, the validity, legality
and enforceability of the remaining provisions contained herein and all other
applications of any provision thereof shall not in any way be affected or
impaired thereby.

Section 10.            Construction.

The
terms of the Warrant Purchase Agreement to which this Warrant is attached as
Exhibit 1 are incorporated by reference herein. Terms used but not defined
herein have the meaning set forth in the Warrant Purchase Agreement.

IN WITNESS WHEREOF, the
Company has caused this Warrant to be duly executed on the day and year first
above written.

 

 

COMPANY:

 

	
  Bioject Medical Technologies Inc.

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  
				

 

 

ACKNOWLEDGED AND AGREED:

HOLDER:

	
  Partners
  for Growth, L.P.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
                                      

  	
  , Manager of

  	
   

  	
   

  
	
   

  	
  Partners for Growth, LLC,

  	
   

  	
   

  
	
   

  	
  Its General Partner

  	
   

  	
   

  
						

 

Signature Page Bioject PFG
Warrant

 

Exhibit A

To:     Bioject Medical
Technologies Inc.

ELECTION TO EXERCISE

1.                                       The
undersigned hereby exercises its right to subscribe for and purchase                         
fully paid, validly issued and nonassessable Shares covered by the attached
Warrant and tenders payment herewith in the amount of $                         
in accordance with the terms thereof.

1.                                       The
undersigned hereby elects to convert the attached Warrant into fully paid,
validly issued and nonassessable Shares by Cashless Exercise in the manner
specified in Section 1.3 of the attached Warrant. This conversion is exercised
with respect to                         
of shares.

[Strike the
paragraph above that does not apply.]

, and requests that
certificates for such shares be issued in the name of, and delivered to:

 

 

	
  Date:

  	
   

  	
   

  	
  [Holder]

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
   

  
										

 

 

Exhibit B

ASSIGNMENT FORM

	
  To:

  	
   

  	
  Bioject Medical Technologies Inc.

  
	
   

  	
   

  	
   

  
	
   

  	
  The undersigned hereby assigns and transfers this
  Warrant to

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  (Insert assignee’s social security or tax
  identification number)

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  (Print or type assignee’s name, address and postal
  code)

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  and irrevocably appoints 

  	
   

  	
   to transfer
  this 

  
	
  Warrant on the books of the Company.

  
	
   

  	
   

  	
   

  
	
  Date:

  	
   

  	
   

  	
   Partners For
  Growth, L.P.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By 

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  	
  , Manager of

  
	
   

  	
   

  	
  Partners for Growth, LLC, Its General Partner

  
											

 

 

EXHIBIT C

PIGGYBACK
REGISTRATION RIGHTS

1.                       PIGGYBACK
REGISTRATION RIGHTS.

1.1                 Piggyback
Rights. If (but without any obligation to do so) the Company proposes to
register any of its equity securities under the United States Securities Act of
1933 (the “Act”) in connection with the public offering of such shares (other
than (i) a registration relating solely to the sale of securities to
participants in a Company equity option or stock incentive or share rights or
share purchase plan, (ii) a registration relating to a corporate reorganization
or other transaction under Rule 145 of the Act, or (iii) a registration relating
to the offer and sale of debt securities, (iv) a registration on any
registration form that does not permit secondary sales, or (v) a registration
on any form that does not include substantially the same information as would
be required to be included in a registration statement covering the sale of the
Warrant Stock), the Company shall, at such time, promptly give the Holder
written notice of such registration. Upon the written request of the Holder
given within ten (10) business days after mailing of such notice by the
Company, the Company shall, subject to the provisions of Section 1.4 of this
Exhibit C, use all commercially reasonable efforts to cause a registration
statement to become effective, which includes all of the Warrant Stock that the
Holder requests to be registered by such notice and for which the Holder (or
its individual members) is then the shareholder of record (or would be the
shareholder of record upon the exercise of its Warrant).

1.2                 Right
to Terminate Registration. The Company shall have the right to terminate or
withdraw any registration initiated by it under this Section 1 prior to the
effectiveness of such registration whether or not the Holder has elected to
include securities in such registration.

1.3                 Expenses
of Registration. All expenses other than underwriting discounts and
commissions incurred in connection with registrations, filings or
qualifications pursuant to this Section, including without limitation all
registration, filing and qualification fees (including Blue Sky fees), printers’
and accounting fees, and fees and disbursements of counsel for the Company and
the reasonable fees and disbursements for one counsel for the Holder shall be
borne by the Company (which shall not exceed $2,000). Any fees or disbursements
of counsel for the Holder (other than the single counsel referenced above)
shall be borne by the Holder.

1.4                 Underwriting
Requirements. In connection with any offering involving an underwriting of
Common Stock of the Company, the Company shall not be required under this
Section to include any of the Warrant Stock in such underwriting unless the
Holder accepts the terms of the underwriting as agreed upon between the Company
and the underwriters selected by it (or by other persons entitled to select the
underwriters) and enters into an underwriting agreement in customary form with
an underwriter or underwriters selected by the Company. If the total amount of
securities, including Warrant 

 

Stock, requested
by shareholders or other securities holders to be included in such offering
exceeds the amount of securities sold other than by the Company that the
underwriters determine in their sole discretion is compatible with the success
of the offering, then the Company shall be required to include in the offering
only that number of such securities, including Warrant Stock, that the
underwriters determine in their sole discretion will not  jeopardize the success of the offering (the
securities so included to be apportioned pro rata among the selling
shareholders, including Holder, according to the total amount of securities
entitled to be included therein owned by each selling shareholder or in such
other proportions as may be mutually agreed to by such selling shareholders).

1.5                 Information
from the Holder. It shall be a condition precedent to the obligations of
the Company to take any action pursuant to this Section 1 with respect to the
Warrant Stock that the Holder shall furnish to the Company such information
regarding itself and its individual members, the Warrant Stock held by Holder
or its members, and the intended method of disposition of such securities as
shall be reasonably required to effect the registration of the Warrant Stock.

1.6                 No
Delay of Registration. The Holder shall not have any right to obtain or seek
an injunction restraining or otherwise delaying any such registration as the
result of any controversy that might arise with respect to the interpretation
or implementation of this Section 1.

2.                       INDEMNIFICATION

In
the event any shares of Warrant Stock are included in a registration statement
under Section 1 of this Exhibit C:

2.1                 The
Company Indemnity. To the extent permitted by law, the Company will
indemnify, defend and hold harmless the Holder, its partners or officers,
directors, shareholders, legal counsel and accountants for the Holder, any
underwriter (as defined in the Act) for the Holder and each person, if any, who
controls the Holder or underwriter, within the meaning of the Securities Act or
the Securities Exchange Act of 1934, as amended (the “Exchange Act”) (each an “Indemnified
Person”), against any losses, claims, damages or liabilities (joint or several)
to which they may become subject under the Securities Act, the Exchange Act or
any state securities laws, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
of the following statements, omissions or violations (collectively a “Violation”):
(i) any untrue statement or alleged untrue statement of a material fact
contained in such registration statement, including any preliminary prospectus
or final prospectus contained therein or any amendments or supplements thereto,
(ii) the omission or alleged omission to state therein a material fact required
to be stated therein, or necessary to make the statements therein not
misleading, or (iii) any violation or alleged violation by the Company of the
Securities Act, the Exchange Act, any state securities laws or any rule or
regulation promulgated under the Securities Act, the Exchange Act or any state
securities laws in connection with such registration; and the Company will
reimburse each  Indemnified Person for
any legal or other expenses reasonably incurred by them in 

 

connection with
investigating or defending any such loss, claim, damage, liability or action as
such expenses are incurred; provided however that the indemnity agreement
contained in this Section 2.1 shall not apply to amounts paid in settlement of
any such loss, claim, damage, liability or action if such settlement is
effected without the consent of the Company (which consent shall not be
unreasonably withheld), nor shall the Company be liable in any such case for
any such loss, claim, damage, liability or action to the extent that it arises
out of or is based upon a Violation that occurs in reliance upon and in
conformity with written information furnished expressly for use in connection
with such registration by any Indemnified Person; provided further, however,
that the  foregoing indemnity agreement
with respect to any preliminary prospectus shall not inure to the benefit of
any Indemnified Person from whom the person asserting any such losses, claims,
damages or liabilities purchased Warrant Stock in the offering, if a copy of
the prospectus (as then amended or supplemented if the Company shall have
furnished any amendments or supplements thereto) was not sent or given by or on
behalf of such Indemnified Person to such person, if required by law so to have
been delivered, at or prior to the written confirmation of the sale of the
shares to such person, and if the prospectus (as so amended or supplemented)
would have cured the defect giving rise to such loss, claim, damage or
liability.

2.2                 Holder
Indemnity. To the extent permitted by law, the Holder will defend and hold
harmless the Company, each of its directors, each of its officers, each of its
partners, each person, if any, who controls the Company within the meaning of
the Securities Act, legal counsel and accountants for the Company, any
underwriter, any other shareholder selling securities in such registration
statement and any controlling person of any such  underwriter or other shareholder, against any
losses, claims, damages or liabilities (joint or several) to which any of the
foregoing persons may become subject, under the Securities Act, the Exchange
Act or any state securities laws, insofar as such losses, claims, damages or
liabilities (or actions in respect thereto) arise out of or are based upon any
Violation (but excluding clause (iii) of the definition thereof), in each case
to the extent (and only to the extent) that such Violation occurs in reliance
upon and in conformity with written information furnished by the Holder
expressly for use in connection with such registration; and the Holder will reimburse
any person intended to be indemnified pursuant to this Section 2.2 for any
legal or other expenses reasonably incurred by such person in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided however that the indemnity agreement contained in this Section 2.2
shall not apply to amounts paid in settlement of any such loss, claim, damage,
liability or action if such settlement is effected without the consent of the
Holder (which consent shall not be unreasonably withheld).

2.3                 Prompt
Notice Required. Promptly after receipt by an indemnified party under this
Section 2 of actual knowledge of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 2, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, 
jointly with any other indemnifying party similarly noticed, to assume
the defense thereof with counsel 

 

mutually
satisfactory to the parties; provided however that an indemnified party
(together with all other indemnified parties that may be represented without
conflict by one counsel) shall have the right to retain one separate counsel,
with the fees and expenses to be paid by the indemnifying party, if
representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential differing
interests between such indemnified party and any other party represented by
such counsel in such proceeding.  The
failure to deliver written notice to the indemnifying party within a reasonable
time of the commencement of any such action, if prejudicial to its ability to
defend such action, shall relieve such indemnifying party of any liability to
the indemnified party under this Section 2 to the extent of such prejudice, but
the omission to so deliver written notice to the indemnifying party will not
relieve it of any liability that it may have to any indemnified party
otherwise than under this Section 2.3.

2.4                 Alternative
Relief. If the indemnification provided for in this Section 2 is held by a
court of competent jurisdiction to be unavailable to an indemnified party with
respect to any loss, liability, claim, damage or expense referred to herein,
then the indemnifying party, in lieu of indemnifying such indemnified party
hereunder, shall contribute to the amount paid or payable by such indemnified
party as a result of such loss, liability, claim, damage or expense in such
proportion as is appropriate to reflect the relative fault of and the relative
benefits received by the indemnifying party on the one hand and of the
indemnified party on the other in connection with the statements or omissions
that resulted in such loss, liability, claim, damage or expense, as well as any
other relevant equitable considerations, provided that no person guilty of
fraud shall be entitled to contribution. The relative fault of the indemnifying
party and of the indemnified party shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties’ relative
intent, knowledge, access to information, and opportunity to correct or prevent
such statement or omission.  The relative
benefits received by the indemnifying party and the indemnified party shall be
determined by reference to the net proceeds and underwriting discounts and
commissions from the offering received by each such party.

2.5                 Underwriting
Agreement. Notwithstanding the foregoing, to the extent that the provisions
on indemnification and contribution contained in the underwriting agreement
entered into in connection with the underwritten public offering are in
conflict with the foregoing provisions of this Section 2, the provisions in the
underwriting agreement shall control.

2.6                 Survival.
The obligations of the Company and the Holder under this Section 2 shall
survive the completion of any offering of the Warrant Stock in a registration
statement under Section 1 of this Exhibit C.

3.                       ASSIGNMENT

The
rights to cause the Company to register Warrant Stock pursuant to Section 1 of
this  Exhibit C may be assigned (but only
with all related obligations) by Holder to 
a 

 

transferee or
assignee of such securities provided; (a) the Company is, within a reasonable
time after such transfer, furnished with written notice of  the name and address of such transferee or
assignee and the securities with  respect
to which such registration rights are being assigned and (b) such  transferee or assignee agrees in writing to
be bound by and subject to the  terms and
conditions of the Agreement.

4.                       TERMINATION
OF REGISTRATION RIGHTS

The
Holder shall not be entitled to exercise any right provided for in Section 1 of
this Exhibit C after such time at which all Warrant Stock of the relevant
holder can be sold in any three (3) month period without registration in
compliance with Rule 144 of the Act.

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