Document:

EXHIBIT 4.1

 

THIRD AMENDMENT TO RIGHTS AGREEMENT

 

THIS THIRD AMENDMENT, dated as of March 8, 2006 (this “Third Amendment”),
is made between Bioject Medical Technologies Inc., an Oregon corporation (the “Company”),
and American Stock Transfer & Trust Company (the “Rights Agent”), to amend
the Rights Agreement, dated as of July 1, 2002, between the Company and
the Rights Agent, as amended by the First Amendment to Rights Agreement dated
as of October 8, 2002 and the Second Amendment to Rights Agreement dated as
of November 15, 2004 (the “Rights Agreement”).

 

WHEREAS, the Company and the Rights Agent have entered into the Rights
Agreement;

 

WHEREAS, the Board of Directors of the Company adopted resolutions on
March 3, 2006 to amend the Rights Agreement as stated below and in accordance
with Section 26 thereof; and

 

WHEREAS, the Company has directed the Rights Agent to adopt this Third
Amendment.

 

NOW, THEREFORE, in consideration of the mutual agreements set forth
herein, the parties agree as follows:

 

1.             Section
1(a) of the Rights Agreement is hereby amended in its entirety to read as
follows:

 

“(a)  “Acquiring Person” shall mean any Person (as
such term is defined in this Agreement) who or which, together with all
Affiliates and Associates (as such terms are defined in this Agreement) of such
Person, shall be the Beneficial Owner (as such term is defined in this
Agreement) of 15% or more of the shares of Common Stock then outstanding; provided,
however, that an Acquiring Person shall not include the Company,
any Subsidiary (as such term is defined in this Agreement) of the Company, any
employee benefit plan of the Company or of any Subsidiary of the Company, any
entity holding shares of Common Stock for or pursuant to the terms of any such
plan, or LOF Partners, LLC or its Affiliates and Associates (including Life
Sciences Opportunities Fund, L.P., Life Sciences Opportunities Fund II, L.P.
and Life Sciences Opportunities Fund II (Institutional), L.P.) (collectively, “LOF”).
Notwithstanding the foregoing, no Person shall be deemed to be an “Acquiring
Person” either (i) as the result of an acquisition of shares of Common Stock by
the Company which, by reducing the number of shares of Common Stock
outstanding, increases the proportionate number of shares Beneficially Owned by
such Person to 15% or more of the shares of Common Stock then outstanding; provided,
however, that if a Person shall become the Beneficial Owner of 15% or
more of the shares of Common Stock then outstanding by reason of share
acquisitions by the Company and if such Person shall, after such share
acquisitions by the Company, become the Beneficial Owner of any additional
shares of Common Stock representing one percent (1%) or more of Common Stock
(other than pursuant to a dividend or distribution paid or made by the Company
on the outstanding Common Stock or pursuant to a split or subdivision of the
outstanding Common Stock), then such Person (unless such Person shall
be the Company, any Subsidiary of the Company, any employee benefit
plan of the Company or of any Subsidiary of the Company, any entity holding
shares of Common Stock for or pursuant to the terms of any such plan, or LOF)

 

 

shall be deemed an “Acquiring
Person,” or (ii) if the Board of Directors of the Company determines in good
faith that a Person who would otherwise be an “Acquiring Person,” as defined by
the foregoing provisions of this paragraph (a), has become such inadvertently,
and such person divests as promptly as practicable a sufficient number of
shares of Common Stock so that such Person would no longer be an “Acquiring
Person,” as defined by the foregoing provisions of this paragraph (a).”

 

2.             Section
3(a) of the Rights Agreement is hereby amended to add to the first sentence of
such Section 3(a) the language marked in bold italics below:

 

“Until the earlier of (i) the Close of Business on the
tenth day after the Stock Acquisition Date (or, if the tenth day after the
Stock Acquisition Date is prior to the Record Date, the Close of Business on
the Record Date) or (ii) the Close of Business on the tenth day after the date
that a tender or exchange offer by any Person (other than the Company, any
Subsidiary of the Company, LOF,
any employee benefit plan of the Company or of any Subsidiary of
the Company, or any entity holding shares of Common Stock for or pursuant to
the terms of any such plan) is first published or sent or given within the
meaning of Rule 14d-2(a) of the General Rules and Regulations under the
Exchange Act...”

 

3.             The
Rights Agreement shall remain in full force and effect without amendment except
this Third Amendment and any other amendment made in accordance with Section 26
of the Rights Agreement. All references in the Rights Agreement to “this
Agreement” or the “Agreement” or “hereof” and all references in this Third
Amendment to the Agreement shall hereafter be deemed to be references to the
Rights Agreement as amended by this Third Amendment and any other amendment
made in accordance with Section 26 of the Rights Agreement. All terms used but
not defined in this Third Amendment shall have the meanings ascribed to them in
the Rights Agreement.

 

IN WITNESS WHEREOF, the parties hereto have caused
this Third Amendment to be duly executed as of the day and year first above
written.

 

	
   

  	
  BIOJECT
  MEDICAL TECHNOLOGIES INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/
  JOHN GANDOLFO

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  John
  Gandolfo

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  Chief Financial Officer
  and Vice President, Finance

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  AMERICAN
  STOCK TRANSFER & TRUST COMPANY

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/
  WILBERT MYLES

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Wilbert
  Myles

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  Vice
  President

  

 

2EXHIBIT 10.1

 

NOTE AND WARRANT PURCHASE AGREEMENT

 

by and among

 

BIOJECT MEDICAL TECHNOLOGIES INC.

 

and

 

THE PURCHASERS LISTED ON SCHEDULE 1 HERETO

 

 

March 8, 2006

 

 

TABLE OF CONTENTS

 

	
  ARTICLE 1 DEFINITIONS

  	
  1

  
	
  Section 1.1

  	
  Affiliate

  	
  1

  
	
  Section 1.2

  	
  Agreement

  	
  2

  
	
  Section 1.3

  	
  Base Rate

  	
  2

  
	
  Section 1.4

  	
  Borrowed
  Money

  	
  2

  
	
  Section 1.5

  	
  Bridge
  Loan

  	
  2

  
	
  Section 1.6

  	
  Bridge
  Loan Closing; Bridge Loan Closing Date

  	
  2

  
	
  Section 1.7

  	
  Bridge
  Note

  	
  2

  
	
  Section 1.8

  	
  Business
  Day

  	
  2

  
	
  Section 1.9

  	
  Common
  Stock

  	
  2

  
	
  Section 1.10

  	
  Default
  Rate

  	
  2

  
	
  Section 1.11

  	
  Event of
  Default

  	
  3

  
	
  Section 1.12

  	
  Existing
  Subsidiary

  	
  3

  
	
  Section 1.13

  	
  GAAP

  	
  3

  
	
  Section 1.14

  	
  Governmental
  Authority

  	
  3

  
	
  Section 1.15

  	
  Guarantor

  	
  3

  
	
  Section 1.16

  	
  Guaranty

  	
  3

  
	
  Section 1.17

  	
  Lien

  	
  3

  
	
  Section 1.18

  	
  Loan
  Documents

  	
  3

  
	
  Section 1.19

  	
  Maturity
  Date

  	
  3

  
	
  Section 1.20

  	
  Obligations

  	
  3

  
	
  Section 1.21

  	
  Permitted
  Liens

  	
  3

  
	
  Section 1.22

  	
  Person

  	
  4

  
	
  Section 1.23

  	
  PFG
  Obligations

  	
  4

  
	
  Section 1.24

  	
  PFG
  Subsequent Obligations

  	
  4

  
	
  Section 1.25

  	
  Purchaser
  and Purchasers

  	
  4

  
	
  Section 1.26

  	
  Purchaser
  Majority Interest

  	
  4

  
	
  Section 1.27

  	
  Security
  Agreement

  	
  4

  
	
  Section 1.28

  	
  Warrants

  	
  4

  
	
   

  	
   

  	
   

  
	
  ARTICLE 2 BRIDGE LOANS

  	
  4

  
	
  Section 2.1

  	
  Issuance
  and Terms of the Bridge Notes.

  	
  4

  
	
  Section 2.2

  	
  Maturity
  Date

  	
  5

  

 

 

	
  Section 2.3

  	
  Bridge
  Note Conversion Mechanics

  	
  5

  	 

	
  Section 2.4

  	
  Conversion
  Upon Closing of Other Securities Offerings

  	
  5

  
	
  Section 2.5

  	
  Maturity
  Date Conversion

  	
  5

  
	
  Section 2.6

  	
  Issuance
  of Warrants

  	
  6

  
	
  Section 2.7

  	
  Overall
  Cap on Common Shares Issuable to Purchasers.

  	
  6

  
	
   

  	
   

  	
   

  
	
  ARTICLE 3 REPRESENTATIONS
  AND WARRANTIES OF THE PURCHASERS

  	
  7

  	 

	
  Section 3.1

  	
  Representations
  and Warranties of the Purchasers

  	
  7

  	 

	
   

  	
   

  	
   

  
	
  ARTICLE 4 COLLATERAL

  	
  7

  	 

	
  Section 4.1

  	
  Generally

  	
  7

  	 

	
  Section 4.2

  	
  Lien
  Documents

  	
  7

  
	
  Section 4.3

  	
  Searches

  	
  7

  
	
  Section 4.4

  	
  Power of
  Attorney

  	
  8

  
	
   

  	
   

  	
   

  
	
  ARTICLE 5 REPRESENTATIONS
  AND WARRANTIES OF THE COMPANY

  	
  8

  	 

	
  Section 5.1

  	
  Incorporation
  of SPA Representations and Warranties

  	
  8

  	 

	
  Section 5.2

  	
  No Other
  Liens or Encumbrances

  	
  8

  
	
  Section 5.3

  	
  Solvency

  	
  8

  
	
   

  	
   

  	
   

  
	
  ARTICLE 6 LOAN CLOSING AND
  CONDITIONS OF LENDING

  	
  9

  	 

	
  Section 6.1

  	
  Conditions
  Precedent to Agreement

  	
  9

  	 

	
  Section 6.2

  	
  Bridge
  Loan Closing

  	
  12

  
	
  Section 6.3

  	
  Waiver of
  Rights

  	
  12

  
	
   

  	
   

  	
   

  
	
  ARTICLE 7 AFFIRMATIVE
  COVENANTS

  	
  12

  	 

	
  Section 7.1

  	
  Maintenance
  of Existence.

  	
  12

  	 

	
  Section 7.2

  	
  Cost
  Reduction Program

  	
  12

  
	
  Section 7.3

  	
  Further
  Assurances

  	
  13

  
	
   

  	
   

  	
   

  
	
  ARTICLE 8 NEGATIVE
  COVENANTS

  	
  13

  	 

	
  Section 8.1

  	
  Borrowing

  	
  13

  	 

	
  Section 8.2

  	
  No Liens
  and Encumbrances; No Disposition of the Collateral

  	
  13

  
	
  Section 8.3

  	
  Sale and
  Leaseback

  	
  13

  
	
  Section 8.4

  	
  Contingent
  Liabilities

  	
  13

  
	
  Section 8.5

  	
  Subsidiaries

  	
  14

  
	
  Section 8.6

  	
  Contracts
  and Agreements

  	
  14

  
	
  Section 8.7

  	
  Certain
  Fundamental Changes

  	
  14

  
	
   

  	
   

  	
   

  
	
  ARTICLE 9 EVENTS OF
  DEFAULT

  	
  14

  	 

	
  Section 9.1

  	
  Events of
  Default

  	
  14

  	 

	
  Section 9.2

  	
  Acceleration

  	
  16

  

 

 

	
  ARTICLE 10 MISCELLANEOUS

  	
  16

  	 

	
  Section 10.1

  	
  Expenses
  and Taxes.

  	
  16

  	 

	
  Section 10.2

  	
  Entire
  Agreement; Amendments

  	
  16

  
	
  Section 10.3

  	
  No
  Waiver; Cumulative Rights

  	
  17

  
	
  Section 10.4

  	
  Notices

  	
  17

  
	
  Section 10.5

  	
  Severability

  	
  18

  
	
  Section 10.6

  	
  Successors
  and Assigns

  	
  18

  
	
  Section 10.7

  	
  Counterparts

  	
  18

  
	
  Section 10.8

  	
  Interpretation

  	
  18

  
	
  Section 10.9

  	
  Survival
  of Terms

  	
  18

  
	
  Section 10.10

  	
  Release
  of Purchasers

  	
  19

  
	
  Section 10.11

  	
  Time

  	
  19

  
	
  Section 10.12

  	
  Commissions

  	
  19

  
	
  Section 10.13

  	
  Third
  Parties

  	
  20

  
	
  Section 10.14

  	
  Discharge
  of the Company’s Obligations

  	
  20

  
	
  Section 10.15

  	
  Indemnity

  	
  20

  
	
  Section 10.16

  	
  Purchaser
  Approvals

  	
  20

  
	
  Section 10.17

  	
  Further
  Assurances

  	
  20

  
	
  Section 10.18

  	
  Choice of
  Law

  	
  21

  
						

 

 

NOTE AND WARRANT PURCHASE AGREEMENT

 

THIS NOTE AND WARRANT PURCHASE SECURITY
AGREEMENT (this “Agreement”) is made as of March 8,
2006 by and between BIOJECT MEDICAL
TECHNOLOGIES INC., an Oregon corporation (the “Company”),
and the parties listed on Schedule 1
hereto (collectively, the “Purchasers”
and each, a “Purchaser”).

 

RECITALS

 

A.            The Purchasers desire to purchase and the
Company desires to sell, subject to shareholder approval and the terms and
conditions stated in that certain Securities Purchase Agreement, dated as the
date hereof (the “Securities Purchase Agreement”), $4,500,000 (plus the amount of
accrued interest on the Bridge Notes) of the Company’s Series E Convertible
Preferred Stock.

 

B.            To
provide the Company with additional resources to conduct its business and
pursue shareholder approval of the transactions contemplated by the Securities
Purchase Agreement, the Purchasers have agreed, subject to the terms and
conditions of this Agreement, to lend the Company the principal sum of One
Million Five Hundred Thousand Dollars ($1,500,000).

 

C.            The
Company desires to borrow funds from each Purchaser, and each Purchaser,
severally, is willing to make a loan to the Company in the amounts, with
respect to each Purchaser, set forth on Schedule
1 hereto, and on the terms and conditions set forth below.

 

D.            In
consideration of each Purchaser’s agreement to make the loans on the terms and
conditions set forth herein, the Company shall issue, and each Purchaser will
receive, a Warrant to purchase the number of shares of the Company’s common
stock, without par value (the “Common Stock”), set forth opposite such
Purchaser’s name on Schedule 1
hereto.

 

E.             The
Obligations (as defined herein) will be secured by the Collateral (as defined
in the Security Agreement).

 

NOW, THEREFORE, in
consideration of the promises and covenants contained in this Agreement, and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties covenant and agree as follows:

 

ARTICLE 1

 

DEFINITIONS

 

As used in this Agreement, unless otherwise
specified, all references to “Sections” shall be deemed to refer to Sections of
this Agreement, and the following terms shall have the meanings set forth
below:

 

Section 1.1            Affiliate.
“Affiliate” means, with respect to a specified Person, any Person directly
or indirectly controlling, controlled by, or under common control with the

 

 

specified Person, including,
without limitation their stockholders and any Affiliates thereof. A Person
shall be deemed to control a corporation or other entity if the Person
possesses, directly or indirectly, the power to direct or cause the direction
of the management and business of the corporation or other entity, whether
through the ownership of voting securities, by contract, or otherwise. The term
“Affiliate” shall include, without limitation, the Existing Subsidiaries.

 

Section 1.2            Agreement.
“Agreement” means this Note and Warrant Purchase Agreement, as it may be
amended or supplemented from time to time in accordance with the terms herein,
together with all attachments, exhibits, schedules, riders and addenda, all of
which are incorporated herein by this reference and made a part hereof.

 

Section 1.3            Base
Rate. “Base Rate” means 10.0% per annum.

 

Section
1.4            Borrowed Money.
“Borrowed Money” means, with respect to any Person, without duplication, (a)
all indebtedness for borrowed money, (b) all obligations of such Person
evidenced by bonds, debentures, notes or similar instruments, or upon which
interest payments are customarily made, (c) that portion of obligations with
respect to capital leases that is properly classified as a liability on a
balance sheet conformity with GAAP, (d) any obligations of such Person issued
or assumed as the deferred purchase price of property or services purchased by
such Person (other than trade debt incurred in the ordinary course of business
and due within six (6) months of the incurrence thereof or evidenced by a note
or other instrument), (e) all Borrowed Money of others secured by (or for which
the holder of such Borrowed Money has an existing right, contingent or
otherwise, to be secured by) any Lien on, or payable out of the proceeds of
production from, any property or asset owned, held or acquired by such Person
regardless of whether the indebtedness secured thereby shall have been assumed
by that Person or is nonrecourse to the credit of that Person, (f) all guaranty
obligations of such Person in respect of any Borrowed Money of any other person,(g)
the maximum amount of all standby letters of credit issued or bankers’
acceptances facilities created for the account of such Person and, without
duplication, all drafts drawn thereunder (to the extent unreimbursed), (h) the
principal balance outstanding under any synthetic lease, tax retention
operating lease, off-balance sheet loan or similar off-balance sheet financing
product plus any accrued interest thereon, and (i) the Borrowed Money of
any partnership or unincorporated joint venture in which such Person is a
general partner or joint venturer.

 

Section 1.5            Bridge
Loan. “Bridge Loan” has the meaning set forth in Section 2.1(a).

 

Section
1.6            Bridge Loan
Closing; Bridge Loan Closing Date. “Bridge Loan Closing” and “Bridge
Loan Closing Date” have the meanings set forth in Section 6.2.

 

Section 1.7            Bridge
Note. “Bridge Note” has the meaning set forth in Section 2.1(a).

 

Section
1.8            Business Day. “Business
Day” means any day on which financial institutions are open for business in the
State of New York, excluding Saturdays and Sundays.

 

Section
1.9            Common Stock.
“Common Stock” has the meaning set forth in the RECITALS hereto.

 

Section 1.10         Default
Rate. “Default Rate”
means 12.0% per annum.

 

2

 

Section
1.11         Event of Default. “Event
of Default” and “Events of Default” have the meanings set forth in Section 9.1.

 

Section
1.12         Existing Subsidiary.
“Existing Subsidiary” means Bioject Inc., an Oregon corporation and a
wholly-owned subsidiary of the Company.

 

Section 1.13         GAAP.
“GAAP” means generally accepted accounting principles applied in a
consistent manner.

 

Section
1.14         Governmental Authority.
“Governmental Authority” means and includes any federal, state, District of
Columbia, county, municipal, or other government and any department,
commission, board, bureau, agency or instrumentality thereof, whether domestic
or foreign.

 

Section 1.15         Guarantor.
“Guarantor” means the Existing Subsidiary and any other Person who may from
time to time guaranty, pledge assets as security for, or otherwise become
obligated in respect of, the obligations of the Company under the Loan
Documents.

 

Section 1.16         Guaranty.
“Guaranty” means any guaranty of the obligations of the Company under the
Loan Documents from time to time outstanding, as the same may be amended,
modified, or supplemented from time to time.

 

Section 1.17         Lien.
“Lien” shall mean any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or otherwise), charge or other
security interest or any preference, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever (including, without
limitation, any conditional sale or other title retention agreement and any
capital lease having substantially the same practical effect as any of the
foregoing).

 

Section
1.18         Loan Documents. “Loan
Documents” means and includes this Agreement, the Bridge Notes, any Guaranty,
the Warrants, the Security Agreement, the Securities Purchase Agreement and each
and every other document now or hereafter delivered by the Company or any
Guarantor in connection with this Agreement, as any of them may be amended,
modified, increased, renewed or restated from time to time.

 

Section
1.19         Maturity Date.
“Maturity Date” has the meaning set forth in Section 2.2.

 

Section 1.20         Obligations.
“Obligations” has the meaning set forth in Section 4.1.

 

Section
1.21         Permitted Liens. “Permitted
Liens” means: (a) deposits or pledges to secure obligations under workmen’s
compensation, social security or similar laws, or under unemployment insurance;
(b) deposits or pledges to secure bids, tenders, contracts (other than
contracts for the payment of money), leases, statutory obligations, surety and
appeal bonds and other obligations of like nature arising in the ordinary
course of business; (c) mechanic’s, workmen’s, materialmen’s or other like
Liens arising in the ordinary course of business with respect to obligations
which are not due, or which are being contested in good faith by appropriate
proceedings which suspend the collection thereof and in respect of which
adequate reserves have been made (provided that such proceedings do not, in
Purchasers’ sole discretion,

 

3

 

involve any substantial risk of
the sale, loss or forfeiture of such property or assets or any interest
therein); (d) Liens and encumbrances in favor of Purchaser; and (e) Liens in
favor of Partners for Growth, L.P. (“PFG”), securing (i) PFG Obligations not in
excess of the amount specified in Section 8.1(d) hereof or (ii) PFG Subsequent
Obligations.

 

Section 1.22         Person.
“Person” means an individual, partnership, corporation, trust, joint
venture, joint stock company, limited liability company, association,
unincorporated organization, Governmental Authority, or any other entity.

 

Section
1.23         PFG Obligations.
“PFG Obligations” means outstanding indebtedness and all other amounts payable
to PFG under (i) the Term Loan and Security Agreement, dated December 15, 2004,
between PFG, the Company and the Existing Subsidiary, (ii) the Loan and
Security Agreement, dated December 15, 2004, between PFG, the Company and the
Existing Subsidiary, (iii) all other agreements, documents and instruments
executed or delivered in connection with, or otherwise related to, any of the
foregoing and (iv) any and all modifications, amendments, replacements or
extensions to any of the foregoing in clauses (i), (ii) and (iii) above dated
as of or before the date hereof.

 

Section
1.24         PFG Subsequent Obligations.
“PFG Subsequent Obligations” means outstanding indebtedness (the principal
amount of which shall not exceed $1,250,000) and any other amounts payable to
PFG pursuant to documents dated after the date hereof.

 

Section
1.25         Purchaser and
Purchasers. “Purchaser” and “Purchasers” have the meanings set forth in
the Preamble.

 

Section
1.26         Purchaser Majority
Interest. “Purchaser Majority Interest” means holders of a majority in
principal amount of the Bridge Notes.

 

Section 1.27         Security Agreement. “Security
Agreement” has the meaning set forth in Section 6.1(q)(vi).

 

Section 1.28         Warrants.
“Warrants” shall mean the Warrants to be issued to the Purchasers on the Bridge
Loan Closing Date, substantially in the form attached hereto as Exhibit B.

 

ARTICLE
2

BRIDGE LOANS

 

Section
2.1            Issuance and Terms
of the Bridge Notes.

 

(a)
Subject to the terms
and conditions herein contained, the aggregate principal amount of the loans to
be made by the Purchasers to the Company pursuant to this Section 2.1 (each, a “Bridge
Loan”) shall be One Million Five Hundred Thousand Dollars ($1,500,000). Each
Bridge Loan shall be evidenced by a promissory note substantially in the form
of Exhibit A attached hereto, which
promissory note shall be deemed incorporated into and made part of this
Agreement (each, a “Bridge Note”).

 

4

 

(b)
Subject to the terms
and conditions herein contained, the Company hereby agrees to issue and sell
the Bridge Notes to the Purchasers, and the Purchasers hereby severally agree
to purchase the Bridge Notes from the Company, in the principal amounts and for
the purchase price set forth opposite each Purchaser’s name set forth on Schedule 1 hereto.

 

(c)
The outstanding
principal amount of the Bridge Loans shall accrue interest at the Base Rate
from the date of issuance thereof through and including the date of repayment
in full of all principal and unpaid interest on the Bridge Notes, based on a
year of 360 days; provided, however, upon the occurrence and during
the continuance of an Event of Default, the Bridge Loans shall accrue interest
at the Default Rate.

 

Section
2.2            Maturity Date. Principal
and interest on each Bridge Note shall be payable by the Company to the
Purchasers immediately upon the earliest of (a) April 1, 2007; (b) subject to
Section 2.7, the time of closing of the Company’s offering and sale of at least
$4,500,000 of its Series E Preferred Stock (the “Securities”) pursuant to the
Securities Purchase Agreement; and (c) the occurrence of an Event of Default. All
payments shall be made without deduction for any set-off, recoupment,
counterclaim or defense that the Company now has or may have in the future.

 

Section
2.3            Bridge Note
Conversion Mechanics. The outstanding principal of, and accrued and
unpaid interest on, each Bridge Note shall be converted automatically on the
Closing Date (as defined in the Securities Purchase Agreement) into shares of
the Securities, at the time of the Securities Closing, in accordance with the
following sentence. On the date of the Securities Closing, each Purchaser shall
surrender its Bridge Note for conversion, and upon such surrender, such
Purchaser will receive such number of shares of the Securities equal to the
quotient obtained by dividing (A) the outstanding principal amount of, and
accrued and unpaid interest on, its Bridge Note by (B) the price per share
equal to $1.37 (as adjusted for stock splits, stock dividends and the like in
the same manner as the Exercise Price (as defined in the Warrants) is adjusted
pursuant to the Warrants).

 

Section
2.4            Conversion Upon
Closing of Other Securities Offerings. Subject to Section 2.7, if,
prior to Maturity Date, an offering and sale of equity securities of the
Company, other than the offering pursuant to the Securities Purchase Agreement,
approved by the Company’s Board of Directors, occurs which does not meet the
requirements of a Securities Offering (each, an “Other Securities Offering”),
the Purchasers shall have the right to convert, on the closing date of such offering
and sale, the outstanding principal amount of, and all accrued and unpaid
interest on, the Bridge Notes, in whole but not in part, into shares of the
Company’s securities offered sold in such Other Securities Offering or into
Common Stock (at the election of each Purchaser), at a price per share equal to
the lower of (i) the Exercise Price (as defined in the Warrants) or (ii) the
price per share of the equity securities so offered and sold to the investors
in such offering. If the Purchasers exercise such right, the Bridge Notes will
be deemed paid in full on the closing date of such offering and sale.

 

Section
2.5            Maturity Date
Conversion. Subject to
Section 2.7, if no offering and sale of equity securities of the Company
approved by the Company’s Board of Directors occurs on or prior to the Maturity
Date, then each Purchaser shall have the right to convert, on the Maturity
Date, the outstanding principal amount of, and all accrued and unpaid interest
on, the

 

5

 

Bridge Notes, in whole but not
in part, into shares of the Common Stock, at a price per share equal to the
lower of (i) the Exercise Price (as defined in the Warrants) or (ii) the
Current Weighted Market Price (as defined in the Warrants) on the Maturity Date.
If the Purchasers exercise such right, the Bridge Notes will be deemed to be
paid in full on the Maturity Date.

 

Section
2.6            Issuance of
Warrants. Subject to the terms and conditions hereof, the Company
agrees to issue the Warrants to the Purchasers in the form attached as Exhibit B on the Bridge Loan Closing Date as described on
Schedule 1.

 

Section
2.7            Overall Cap on
Common Shares Issuable to Purchasers.

 

(a)
Notwithstanding
anything in this Agreement, the Bridge Notes, the Warrants or the Loan
Agreements to the contrary, if the rules of Nasdaq require, the Purchaser shall
not have the right to acquire the Warrants, or to convert or exercise any
portion thereof or of the Bridge Notes into shares of Common Stock in
accordance with the terms hereof or thereof (such shares of Common Stock being
referred to herein as “Conversion Shares”), to the extent that either (i) the
aggregate number of Conversion Shares issued and issuable by the Company
pursuant to the Bridge Notes and the Warrants exceeds 19.9% of the number of
shares of Common Stock or the voting power of the Company outstanding on the
original date of issuance of the Bridge Notes and the Warrants (“Date of
Original Issuance”) or (ii) after giving effect to such acquisition, conversion
or exercise, the Purchaser (together with the Purchaser’s Affiliates) would
beneficially own in excess of 19.9% of the number of shares of the Common Stock
or the voting power of the Company outstanding immediately after the Loan
Closing (the securities issued and issuable up to and in compliance with the
19.9% thresholds described in clauses (i) and (ii) above being referred to
herein as the “Issuable Maximum”), unless the issuance of securities in excess
of the Issuable Maximum shall first be approved by the Company’s shareholders
in accordance with applicable law and the Bylaws and Articles of Incorporation
of the Company. If at the time of any potential issuance of the Warrants, or
any conversion or exercise thereof or of the Bridge Notes, the Conversion Shares
issued and issuable exceed the Issuable Maximum (and if the Company has not
previously obtained the required shareholder approval), the Company shall issue
to the Purchaser a number of Conversion Shares not exceeding the Issuable
Maximum, and the remainder of the Bridge Notes, Warrants and Conversion Shares
to be issued shall constitute “Excess Securities” pursuant to Section 2.7(b)
below.

 

(b)
In the event that the
Purchaser’s receipt of the Conversion Shares is restricted based on the
Issuable Maximum, the Company shall promptly call a shareholder’s meeting for
the purpose of obtaining shareholder approval of the issuance of the Excess
Securities to the Purchaser. No Conversion Shares issued upon exercise of any
Bridge Notes or Warrants acquired pursuant to this Agreement shall be entitled
to vote to approve the issuance of the Excess Securities.

 

(c)
Neither the Company
nor the Purchasers may waive the provisions of this Section 2.7.

 

6

 

ARTICLE
3

REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS

 

Section 3.1            Representations and Warranties of the Purchasers.
Each Purchaser hereby covenants and agrees that all representations and
warranties of the Purchasers set forth in Article 3 of the Securities Purchase
Agreement are true and correct as of the Bridge Loan Closing date, which
representations and warranties are incorporated herein by this reference with
the same force and effect as though each such representation and warranty was
set forth in full herein.

 

ARTICLE
4

COLLATERAL

 

Section 4.1            Generally.
As security for the payment of all liabilities of the Company to the
Purchasers, including, without limitation: (a) indebtedness evidenced under the
Bridge Note, repayment of the Bridge Loans and all other liabilities and
obligations of every kind or nature whatsoever of the Company to the
Purchasers, whether now existing or hereafter incurred, joint or several,
matured or unmatured, direct or indirect, primary or secondary, related or
unrelated, due or to become due, including but not limited to, any extensions,
modifications, substitutions, increases and renewals thereof, (b) the payment
of all amounts advanced by any Purchaser to preserve, protect, defend, and
enforce its rights under this Agreement and in the following property in
accordance with the terms of this Agreement, and (c) the payment of all
expenses incurred by any Purchaser in connection therewith (collectively, the “Obligations”),
the Company hereby assigns and grants to the Purchasers a continuing second
priority Lien (second only to the existing Lien of PFG and, if applicable, the
lien of PFG in connection with the PFG Subsequent Obligations) on, and security
interest in, upon, and to, the Collateral (as defined in the Security
Agreement).

 

Section
4.2            Lien Documents.
At the Bridge Loan Closing and thereafter as the Purchasers deem necessary
in their sole discretion, the Company shall execute and deliver to the
Purchasers, or have executed and delivered (all in form and substance
satisfactory to the Purchasers in their sole discretion) any agreements,
documents, instruments (including Guaranties), and writings deemed necessary by
any Purchaser or as the Purchasers may otherwise request from time to time in
their sole discretion to evidence, perfect, or protect any Purchaser’s Lien and
security interest in the Collateral required under this Agreement. The Company
hereby authorizes each Purchaser to file one or more financing statements and
amendments thereto describing the Collateral and describing any agricultural
liens or other statutory liens held by Purchaser, and providing any other
notices deemed necessary by each Purchaser.

 

Section 4.3            Searches.
Before the Bridge Loan Closing and thereafter (as and when determined by
any Purchaser in its sole discretion), such Purchaser will perform the searches
described in clauses (a), (b) and (c) below against the Company and the
Existing Subsidiary (the results of which are to be consistent with the Company’s
representations and warranties under this Agreement), all at the Company’s
expense:

 

7

 

(a)
Uniform Commercial
Code searches with the Secretary of State and local filing offices of each
jurisdiction where the Company or the Existing Subsidiary maintains its
executive offices, a place of business, or assets and the jurisdiction in which
the Company or the Existing Subsidiary is organized;

 

(b)
Judgment, federal tax
lien and corporate and partnership tax lien searches, in each jurisdiction
searched under clause (a) above; and

 

(c)
Searches of
applicable corporate, limited liability company, partnership and related
records to confirm the continued valid existence and organization of the
Company and the Existing Subsidiary and the exact legal name under which each
of the Company and the Existing Subsidiary is organized.

 

Section
4.4            Power of Attorney.
Each of the officers or managing members of each Purchaser is hereby
irrevocably made, constituted and appointed the true and lawful attorney for
the Company and the Existing Subsidiary (without requiring any of them to act
as such) with full power of substitution to do the following: (a) endorse the
name of the Company and the Existing Subsidiary upon any and all checks,
drafts, money orders, and other instruments for the payment of money that are
payable to the Company and constitute collections on the Company’s Accounts (as
defined in the Securities Purchase Agreement); (b) execute in the name of the
Company and the Existing Subsidiary any financing statements, schedules,
assignments, instruments, documents, and statements that the Company is
obligated to give any Purchaser under this Agreement; (c) following the
occurrence of an Event of Default, do such acts and deeds in the name of the
Company and the Existing Subsidiary that the Purchasers may deem necessary or
desirable to enforce any Account or other Collateral; and (d) do such other and
further acts and deeds in the name of the Company and/or Existing Subsidiary
that the Purchasers may deem necessary or desirable to perfect each Purchaser’s
security interest or Lien in any Collateral.

 

ARTICLE
5

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

 

The Company represents and warrants to each
Purchaser, that:

 

Section
5.1            Incorporation of
SPA Representations and Warranties.
All representations and warranties of the Company set forth in
Article 2 of the Securities Purchase Agreement are true and correct as of the
Bridge Loan Closing Date, which representations and warranties are incorporated
herein by this reference with the same force and effect as though each such
representation and warranty was set forth in full herein.

 

Section
5.2            No Other Liens or
Encumbrances. Except for Permitted Liens, no Collateral is subject to
any Lien or any encumbrance or security interest of any kind.

 

Section 5.3            Solvency.
Both before and after giving effect to the transactions contemplated by the
terms and provisions of this Agreement, the Company (a) owns property whose
fair saleable value is greater than the amount required to pay all of the
Company’s

 

8

 

Indebtedness (including
contingent debts), and (b) was and is able to pay all of its Indebtedness as
such Indebtedness matures. After giving effect to the transactions contemplated
by the terms and provisions of this Agreement, the Company has capital
sufficient to carry on its business and transactions and all business and
transactions in which it about to engage. For purposes of this Agreement, the
term “Indebtedness” means, without duplication (x) all items which in
accordance with GAAP would be included in determining total liabilities as
shown on the liability side of a balance sheet of the Company as of the date on
which Indebtedness is to be determined, (y) all obligations of any other person
or entity which the Company has guaranteed, and (z) the Obligations.

 

ARTICLE
6

LOAN CLOSING AND CONDITIONS OF LENDING

 

Section
6.1            Conditions
Precedent to Agreement. The obligations of each Purchaser to make a
Bridge Loan are subject to the following conditions precedent:

 

(a)
The Purchasers shall
have received one (1) original of this Agreement, any Guaranty and all other
Loan Documents required to be executed and delivered at or before the Bridge
Loan Closing, executed by the Company.

 

(b)
Each Purchaser shall
have received all searches required by Section 4.3.

 

(c)
The Company shall
have complied and shall then be in compliance with all the terms, covenants and
conditions of the Loan Documents.

 

(d)
There shall have
occurred and be continuing no Event of Default and no event that, with the
giving of notice or the lapse of time, or both, could constitute such an Event
of Default.

 

(e)
Each Purchaser shall
have executed a subordination agreement with PFG with respect to the PFG
Obligations, the PFG Subsequent Obligations and the Obligations in form and
substance satisfactory to the Purchasers, and each Purchaser shall have
received copies of a written consent of PFG to (i) the issuance of the Bridge
Notes, (ii) the grant by the Company of a continuing second priority security
interest in the Collateral as contemplated hereby and (iii) the performance by
the Company of all other transactions contemplated hereby.

 

(f)
Each Purchaser shall
have received copies of all board of directors resolutions and other action
taken by the Company to authorize the execution, delivery and performance of
the Loan Documents and the borrowing of the Bridge Loan under the Loan
Documents and the issuance of the Warrants, as well as the names and signatures
of the officers of the Company authorized to execute documents on its behalf in
connection with the transactions contemplated hereby, all as also certified as
of the date of this Agreement by the Company’s chief financial officer, or
equivalent, and such other papers as Purchaser may require.

 

(g)
Each Purchaser shall
have received (i) copies, certified as true, correct and complete by the
applicable state of organization of the Company, of the Articles and ByLaws,
each as amended to date, (ii) copies, certified as true, correct and
complete by an authorized

 

9

 

officer
of the Company, of all other documents necessary for performance of the
obligations of the Company under this Agreement and the other Loan Documents,
and (iii) certificates of valid existence for the Company, each Existing
Subsidiary issued by the respective states of organization and by each state in
which the Company is doing and currently intends to do business for which
qualification is required.

 

(h)
The Company shall
have delivered to each Purchaser reports and lists satisfactory to the
Purchaser in their sole reasonable discretion, with respect to the value and
nature of any property which is Collateral, including, without limitation, the
Accounts, the Inventory and the Equipment.

 

(i)
Each Purchaser shall
have received such financial statements, reports, certifications, and other
operational information required to be delivered under this Agreement, or with
respect to the Collateral, such additional information as may be reasonably
requested by a Purchaser.

 

(j)
The representations
and warranties on the part of the Company contained in Article V of this
Agreement shall be true and correct in all material respects (except to the
extent that such representations and warranties expressly relate solely to an
earlier date).

 

(k) No material adverse change in the condition (financial
or otherwise), properties, business, or operations of the Company shall have
occurred and be continuing with respect to the Company since the date of this
Agreement.

 

(l)
The Company shall
have obtained all necessary blue sky law permits and qualifications, or secured
exemptions therefrom, required by any state or foreign or other jurisdiction
for the issuance of the Notes, the Warrants and the Issuable Common Stock
(defined below).

 

(m)
The Company shall
have filed with Nasdaq a Notification Form: 
“Listing of Additional Shares” covering the shares of the Company’s
Common Stock issuable upon exercise of the Warrants (the “Issuable Common
Stock”).

 

(n)
The Company shall
have delivered to such Purchaser an opinion, dated as of the Bridge Loan
Closing Date, from Stoel Rives LLP, counsel to the Company, in substantially
the form attached hereto as Exhibit C.

 

(o)
No proceeding
challenging this Agreement or the Securities Purchase Agreement and the Related
Agreements or the transactions contemplated hereby or thereby, or seeking to
prohibit, alter, prevent or materially delay the Bridge Loan Closing, shall
have been instituted or be pending before any court, arbitrator, governmental
body, agency or official.

 

(p)
Subject to Section
2.7, the issuance of the Bridge Notes, the Warrants and the Issuable Common
Stock by the Company shall not be prohibited by any law or governmental order
or regulation and any governmental, regulatory or third party consents of
approvals, if any, necessary for the sale of the Bridge Notes, the Warrants and
the Issuable Common Stock shall have been obtained.

 

10

 

(q)
The following
documents, in a form satisfactory to Purchasers, shall have been duly executed,
acknowledged and delivered by all parties thereto, and shall be in full force
and effect:

 

(i)            The
Securities Purchase Agreement;

 

(ii)           This
Agreement;

 

(iii)          The
Bridge Notes;

 

(iv)          The
Warrants;

 

(v)           A
certificate from an officer of the Company with respect to incumbency and
resolutions authorizing the execution and delivery of this Agreement and the
Related Agreements;

 

(vi)          A Security Agreement of even date herewith,
the form of which is attached hereto as Exhibit D (the “Security
Agreement”); and

 

(vi)          A
UCC-1 National Standard Form financing statement covering all of the Collateral
described in this Agreement shall have been recorded or filed for record in each
public office wherein such recording or filing is deemed necessary or
appropriate by the Purchasers to perfect the lien thereof as against creditors
of or purchasers from the Company.  Without limiting the foregoing, all
taxes, fees and other charges in connection with the execution, delivery,
recording and filing of the foregoing instruments shall have been paid or
allowance therefor shall have been made;

 

(r)
The Company shall
have duly authorized and issued the Warrants and shall have executed and delivered
the Warrants to each Purchaser.

 

(s)
The Company and
American Stock Transfer and Trust Company shall have executed and delivered the
Third Amendment to Rights Agreement in the form approved by the Company and the
Purchasers.

 

(t)
The Company’s Board of
Directors (which shall have eight (8) members as of the Loan Closing, including
the Investor Representative (as defined below)), shall have appointed,
effective as of the Loan Closing, one Person designated by the purchasers (the “Investor
Representative”) as a member of the Company’s Board of Directors, initially
Jerald S. Cobbs, in accordance with and subject to the requirements of
applicable legal rules and regulations and rules of Nasdaq and the SEC. Subject
to being to being deemed eligible to serve on the compensation committee and
the nominating and corporate governance committee of the Board of Directors
pursuant to the terms of the committee charters and applicable listing
standards and securities law requirements, the Company’s Board of Directors
shall have appointed, effective as of the Closing, the Investor Representative
as a member of the compensation committee and as chair of the nominating and
corporate governance committee of the Company’s Board of Directors, and such
appointments shall be in full force and effect.

 

11

 

(u)
Promptly following
the date hereof and prior to the time that the Investor Representative is
appointed to the Company’s Board of Directors, the Company shall have executed an
indemnification agreement with such director in form reasonably acceptable to
the Purchasers.

 

Section
6.2            Bridge Loan Closing.
Subject to the conditions of this Article VI, the Bridge Loans shall be
made on the date as is mutually agreed by the parties (the “Bridge Loan Closing
Date”), at such time as may be mutually agreeable to the parties upon the
execution of this Agreement (the “Bridge Loan Closing”) and at such place as
may be requested by the Purchasers.

 

Section
6.3            Waiver of Rights.
By completing the Bridge Loan Closing under this Agreement, no Purchaser
waives a breach of any representation or warranty of the Company under this
Agreement or under any other Loan Document, and all of each Purchaser’s claims
and rights resulting from any breach or misrepresentation by the Company are
specifically reserved to the Purchasers.

 

ARTICLE
7

AFFIRMATIVE COVENANTS

 

Section
7.1            Maintenance of
Existence.

 

(a)
The Company shall at
all times preserve, renew and keep in full, force and effect its corporate existence
and rights and franchises with respect thereto and maintain in full force and
effect all permits, licenses, trademarks, tradenames, approvals,
authorizations, leases and contracts necessary to carry on the business as
presently or proposed to be conducted.

 

(b)
The Company shall not
change its name unless each of the following conditions is satisfied: (i) each Purchaser shall have received not less
than thirty (30) days prior written notice from the Company of such proposed
change in its corporate name, which notice shall accurately set forth the new
name; and (ii) each Purchaser shall have
received a copy of the amendment to the Articles of Incorporation of the
Company providing for the name change certified by the Secretary of State of
the jurisdiction of incorporation or organization of the Company as soon as it
is available.

 

(c)
The Company shall not
change its chief executive office or its mailing address or organizational
identification number (or if it does not have one, shall not acquire one) unless
each Purchaser shall have received not less than thirty (30) days’ prior
written notice from the Company of such proposed change, which notice shall set
forth such information with respect thereto as the Purchasers may require and
the Purchaser shall have received such agreements as each Purchaser may
reasonably require in connection therewith. The Company shall not change its
type of organization, jurisdiction of organization or other legal structure.

 

Section
7.2            Cost Reduction
Program. The cost reduction program, which includes the sale of the
Company’s headquarters facility in Bedminster, New Jersey, and which was
specifically disclosed in writing to the Purchasers will be implemented by the
Company in accordance with terms so disclosed, including with respect to the
timing thereof.

 

12

 

Section
7.3            Further Assurances.
At the request of any Purchaser at any time and from time to time, the Company
shall, at its expense, duly execute and deliver, or cause to be duly executed
and delivered, such further agreements, documents and instruments, and do or
cause to be done such further acts as may be necessary or proper to evidence,
perfect, maintain and enforce the security interests and the priority thereof in
the Collateral and to otherwise effectuate the provisions or purposes of this
Agreement or any of the other Loan Documents.

 

ARTICLE
8

NEGATIVE COVENANTS

 

The Company covenants and agrees that until
payment in full of the Bridge Notes and performance of all other obligations of
the Company under the Loan Documents:

 

Section 8.1            Borrowing.
The Company shall not create, incur or
assume any liability for Borrowed Money except: (a) indebtedness to a
Purchaser; (b) borrowings incurred in the ordinary course of its business
and not exceeding $50,000 in the aggregate outstanding at any one time; (c)
indebtedness secured by Permitted Liens; (d) any refinancing of the Company’s
outstanding indebtedness to PFG which increases the principal amount of such
indebtedness by not more than the amount of accrued and unpaid interest
thereon, which indebtedness, in any event, shall not exceed $2.4 million in the
aggregate.

 

Section
8.2            No Liens and
Encumbrances; No Disposition of the Collateral. The Company shall
not:  (a) create, incur or assume any
mortgage, pledge, Lien or other encumbrance of any kind (including the charge
upon property purchased under a conditional sale or other title retention
agreement) upon, or any security interest in, any of its Collateral, whether
now owned or hereafter acquired, except for Permitted Liens; (b) make any sale
or leases of any of the Collateral (except in the ordinary course of its
business and except for a sale of the Company’s corporate headquarters located
in Bedminster, New Jersey and the sale of all fixtures and furniture located at
such premises); or (c) license any of the Collateral.

 

Section
8.3            Sale and Leaseback.
The Company will not,
directly or indirectly, enter into any arrangement whereby the Company sells or
transfers all or any part of its assets and thereupon and within one year
thereafter rents or leases the assets so sold or transferred without prior
written notice to and the prior written consent of the Purchasers, which
consent shall not be unreasonably withheld.

 

Section
8.4            Contingent
Liabilities. The Company will not assume, guarantee, endorse,
contingently agree to purchase or otherwise become liable upon the obligation
of any Person, except by the endorsement of negotiable instruments for deposit
or collection or similar transactions in the ordinary course of business.

 

13

 

Section
8.5            Subsidiaries. The
Company will not form any subsidiary, or make any investment in or any loan in
the nature of an investment to, any other Person (other than investments
already existing in the Existing Subsidiary).

 

Section
8.6            Contracts and
Agreements. The Company will not become or be a party to any contract
or agreement which would breach this Agreement, or breach any other material
instrument, agreement, or document to which the Company is a party or by which
it is or may be bound.

 

Section
8.7            Certain Fundamental
Changes. The Company will not, without providing the Purchasers with
thirty (30) days’ prior written notice, change the state of its formation or
change its legal name.

 

ARTICLE
9

EVENTS OF DEFAULT

 

Section
9.1            Events of Default.
Each of the following (individually, an “Event of Default” and
collectively, the “Events of Default”) shall constitute an event of default
under this Agreement:

 

(a)
A default in the
payment of any principal of, or interest upon, any Bridge Note when due and
payable, whether at maturity or otherwise, which default or breach, as
applicable, shall have continued unremedied for a period of five (5) days after
written notice of the default or breach from any Purchaser to the Company;

 

(b)
A default in the due
observance or performance by the Company of the other Obligations or any other
term, covenant or agreement contained in any of the Loan Documents, which
default shall have continued unremedied for a period of fifteen (15) days after
written notice of the default from any Purchaser to the Company;

 

(c)
Any representation or
warranty made by the Company in this Agreement or in any of the other Loan Documents,
any financial statement, or any statement or representation made in any other
certificate, report or opinion delivered in connection with this Agreement or
the other Loan Documents proves to have been incorrect or misleading in any
material respect when made;

 

(d)
Any obligation of the
Company (other than its Obligations under this Agreement) for the payment of
Borrowed Money in an aggregate amount in excess of $50,000 is not paid when due
or within any applicable grace period, or such obligation becomes or is
declared to be due and payable before the expressed maturity of the obligation,
or there shall have occurred an event that after expiration of any applicable
grace period remains uncured;

 

(e)
The Company makes an
assignment for the benefit of creditors, offers a composition or extension to
creditors, or makes or sends notice of an intended bulk sale of any business or
assets now or hereafter conducted by the Company;

 

14

 

(f)
The Company, the Existing
Subsidiary or any Guarantor (i) files a petition in bankruptcy, (ii) is
adjudicated insolvent or bankrupt, petitions or applies to any tribunal for any
receiver of or any trustee for itself or any substantial part of its property,
(iii) commences any proceeding relating to itself under any reorganization,
arrangement, readjustment or debt, dissolution or liquidation law or statute of
any jurisdiction, whether now or hereafter in effect, or any such proceeding is
commenced against the Company, the Existing Subsidiary or any Guarantor and
such proceeding remains undismissed for a period of sixty (60) days, (iv) by
any act indicates its consent to, approval of, or acquiescence in, any such
proceeding or the appointment of any receiver of or any trustee for the
Company, the Existing Subsidiary or Guarantor or any substantial part of its
property, or suffers any such receivership or trusteeship to continue
undischarged for a period of sixty (60) days, or (v) admits in writing its
inability to pay its debts as they become due;

 

(g)
One or more (i) final
judgments against the Company or the Existing Subsidiary or attachments against
its property in each case, obligating the Company or the Existing Subsidiary to
pay in excess of $100,000 in the aggregate, shall be rendered by a court,
arbitrator, arbitration panel, mediator or any individual(s) or entity with the
authority to issue binding judgments against the Company or the Existing
Subsidiary or (ii) final settlements by or on behalf of the Company or the Existing
Subsidiary of any pending litigation, arbitration or other claim or otherwise
disputed matter, which obligate the Company or the Existing Subsidiary to pay
in excess of $100,000 in the aggregate and which are not otherwise fully
covered by insurance with respect to the amount in excess of $100,000, shall
remain unpaid, unstayed on appeal, undischarged, unbonded and undismissed for a
period of thirty (30) days;

 

(h)
There shall occur any
uninsured damage to or loss, theft or destruction of any portion of the
tangible Collateral that exceeds $100,000 in the aggregate;

 

(i)
The Company or the
Existing Subsidiary ceases any material portion of its business operations as
currently conducted;

 

(j)
Any indication or
evidence is received by any Purchaser that the Company or the Existing
Subsidiary may have directly or indirectly been engaged in any type of activity
which, in a Purchaser’s discretion, may result in the forfeiture of any
property of the Company or the Existing Subsidiary to any Governmental Authority,
which default shall have continued unremedied for a period of sixty (60) days
after written notice from Purchaser;

 

(k)
The Company or any
Affiliate of the Company, shall challenge or contest, in any action, suit or
proceeding, the validity or enforceability of this Agreement, or any of the
other Loan Documents, the legality or the enforceability of any of the
Obligations or the perfection or priority of any Lien granted to any Purchaser;

 

(l)
The Company or the
Existing Subsidiary shall be criminally indicted or convicted under any law
that could lead to a forfeiture of any Collateral; or

 

(m)
There shall occur a
material adverse change in the financial condition or business prospects of the
Company, or if a Purchaser in good faith deems itself insecure as a result of
acts or events bearing upon the financial condition of the Company or the
repayment of

 

15

 

the
Bridge Notes, which default shall have continued unremedied for a period of
thirty (30) days after written notice from Purchaser; provided, however,
that termination or suspension of development or licensing agreements or
commercial supply agreements to which the Company or the Existing Subsidiary is
a party shall not be deemed a material adverse change or a reason for a
Purchaser to deem itself insecure.

 

Section
9.2            Acceleration. Upon
the occurrence of any of the foregoing Events of Default, the Obligations under
the Bridge Notes shall become and be immediately due and payable upon
declaration to that effect delivered by a Purchaser to the Company.

 

ARTICLE
10

MISCELLANEOUS

 

Section
10.1         Expenses and Taxes.

 

(a)
The Company agrees to
pay, whether or not any transaction contemplated by the Loan Documents closes,
but on the Bridge Loan Closing Date, if a Bridge Loan Closing occurs, and on
the Closing Date if the Closing (as defined in the Securities Purchase
Agreement) occurs, a reasonable documentation preparation fee, together with
actual legal, audit and appraisal fees and all other out-of-pocket charges and
expenses reasonably incurred by the Purchasers in connection with the
negotiation, preparation, legal review and execution of each of the Loan
Documents and the transactions and agreements contemplated thereby (provided
that the aggregate of such fees, charges and expenses of Purchasers to be paid
by the Company with respect to the Bridge Loan Closing and the Closing (as
defined in the Securities Purchase Agreement), taken together, shall not exceed
$65,000), including but not limited to, UCC and judgment lien searches and UCC
and other lien filings and fees for post-Loan Closing UCC and judgment lien
searches. In addition, the Company shall pay all such fees associated with any
amendments, modifications and terminations to the Loan Documents following Loan
Closing.

 

(b)
The Company also
agrees to pay all out-of-pocket charges and expenses incurred by each Purchaser
(including the fees and expenses of Purchasers’ counsel) in connection with the
enforcement, protection or preservation of any right or claim of each
Purchaser, the termination of this Agreement, the termination of any Liens of
the Purchasers on the Collateral, or the collection of any amounts due under
the Loan Documents.

 

(c)
The Company shall pay
all taxes (other than taxes based upon or measured by a Purchaser’s income or
revenues or any personal property tax), if any, in connection with the issuance
of the Bridge Notes and the recording of the security documents therefor. The
obligations of the Company under this clause (c) shall survive the payment of
the Company’s indebtedness under this Agreement and the termination of this
Agreement.

 

Section
10.2         Entire Agreement;
Amendments. This Agreement and the other Loan Documents constitute the
full and entire understanding and agreement among the parties with regard to
their subject matter and supersede all prior written or oral agreements,
understandings, representations and warranties made with respect thereto. No
amendment, supplement or

 

16

 

modification of this Agreement
nor any waiver of any provision thereof shall be made except in writing
executed by the Company and a Purchaser Majority Interest.

 

Section
10.3         No Waiver; Cumulative
Rights. No waiver by any party to this Agreement of any one or more
defaults by the other party in the performance of any of the provisions of this
Agreement shall operate or be construed as a waiver of any future default or
defaults, whether of a like or different nature. No failure or delay on the
part of any party in exercising any right, power or remedy under this
Agreement, nor acceptance of partial performance or partial payment, shall
operate as a waiver of such right, power or remedy nor shall any single or
partial exercise of any such right, power or remedy preclude any other or
further exercise of such right, power or remedy or the exercise of any other
right, power or remedy. The remedies provided for in this Agreement are
cumulative and are not exclusive of any remedies that may be available to any
party to this Agreement at law, in equity or otherwise.

 

Section 10.4         Notices.
Any notice or other communication required or permitted under this
Agreement shall be in writing and personally delivered, mailed by registered or
certified mail (return receipt requested and postage prepaid), e-mailed, sent
by telecopier (with a confirming copy sent by regular mail), or sent by prepaid
overnight courier service, and addressed to the relevant party at its address
set forth below, or at such other address as such party may, by written notice,
designate as its address for purposes of notice under this Agreement:

 

(a)
If to the Purchasers,
at:

 

c/o LOF Partners, LLC

126 East 68th Street

New York, New York  10022

Attention:  James C. Gale

Telephone:  (212) 419-3906

Telecopier:  (212) 419-3956

E-mail:  james.gale@smhgroup.com

 

with a copy to:

 

Heller Ehrman LLP

7 Times Square

Times Square Tower

New York, New York  10036

Attention:  Salvatore J. Vitiello, Esq.

Telephone:  (212) 847-8732

Fax:  (212) 703-8923

E-mail:  Sal.Vitiello@hellerehrman.com

 

17

 

(b)
If to the Company,
at:

 

Bioject Medical Technologies Inc.

20245 S.W. 95th  Avenue

Tualatin, OR  97062

Attention:      Christine Farrell

Telephone     (503) 691-4132

Telecopier     (503) 692-6783

E-mail:            cfarrell@bioject.com

 

If mailed, notice
shall be deemed to be given five (5) days after being sent, and if sent by
personal delivery, telecopier or prepaid courier, notice shall be deemed to be
given when delivered.

 

Section 10.5         Severability.
If any term, covenant or condition of this Agreement, or the application of
such term, covenant or condition to any party or circumstance shall be found by
a court of competent jurisdiction to be, to any extent, invalid or
unenforceable, the remainder of this Agreement and the application of such
term, covenant, or condition to parties or circumstances other than those as to
which it is held invalid or unenforceable, shall not be affected thereby, and
each term, covenant or condition shall be valid and enforced to the fullest
extent permitted by law.

 

Section
10.6         Successors and Assigns.
This Agreement, the Bridge Notes, the Warrants, and the other Loan
Documents shall be binding upon and inure to the benefit of the Company and
each Purchaser and their respective successors and assigns and shall bind all
Persons who become bound as a debtor to this Agreement. Notwithstanding the
foregoing, the Company may not assign any of its rights or delegate any of its
obligations under this Agreement without the prior written consent of the
Purchasers, which may be withheld in their sole discretion. Subject to the
terms hereof, each Purchaser may sell, assign, transfer, or participate any or
all of its rights or obligations under this Agreement without notice to or consent
of the Company.

 

Section 10.7         Counterparts.
This Agreement may be executed in any number of counterparts, each of which
shall be deemed an original, but all of which together shall constitute but one
instrument.

 

Section
10.8         Interpretation. No
provision of this Agreement or any other Loan Document shall be interpreted or
construed against any party because that party or its legal representative
drafted that provision. The titles of the paragraphs of this Agreement are for
convenience of reference only and are not to be considered in construing this
Agreement. Any pronoun used in this Agreement shall be deemed to include
singular and plural and masculine, feminine and neuter gender as the case may
be. The words “herein,” “hereof,” and “hereunder” shall be deemed to refer to
this entire Agreement, except as the context otherwise requires.

 

Section
10.9         Survival of Terms.
All covenants, agreements, representations and warranties made in this
Agreement, any other Loan Document, and in any certificates and other

 

18

 

instruments delivered in
connection with this Agreement shall be considered to have been relied upon by
each Purchaser and shall survive the making by each Purchaser of the Bridge
Loans contemplated by this Agreement and the execution and delivery to each
Purchaser of the Bridge Notes, and shall continue in full force and effect
until all liabilities and obligations of the Company to the Purchasers are
satisfied in full.

 

Section
10.10       Release of Purchasers.
For and in consideration of the Bridge Loans, the Company, voluntarily,
knowingly, unconditionally, and irrevocably, with specific and express intent,
for and on behalf of itself and its agents, attorneys, heirs, successors, and
assigns (collectively the “Releasing Parties”) does hereby fully and completely
release, acquit and forever discharge each Purchaser, and its successors,
assigns, heirs, affiliates, subsidiaries, parent companies, principals,
directors, officers, employees, shareholders and agents (hereinafter called the
“Purchaser Parties”), and any other person, firm, business, corporation,
insurer, or association which may be responsible or liable for the acts or
omissions of the Purchaser Parties, or who may be liable for the injury or
damage resulting therefrom (collectively the “Released Parties”), of and from
any and all actions, causes of action, suits, debts, disputes, damages, claims,
obligations, liabilities, costs, expenses and demands of any kind whatsoever
and not resulting from the gross negligence or willful misconduct of any of the
Released Parties, at law or in equity, whether matured or unmatured, liquidated
or unliquidated, vested or contingent, choate or inchoate, known or unknown,
that the Releasing Parties (or any of them) have or may have, against the
Released Parties or any of them (whether directly or indirectly) relating to
this Agreement or the transactions contemplated hereby. The Company
acknowledges that the foregoing release is a material inducement to each Purchaser’s
decision to extend to the Company the financial accommodations hereunder and
has been relied upon by each Purchaser in agreeing to make the Bridge Loans. The
foregoing release is not intended to apply to misappropriation of the Company’s
funds or failure to apply the Company’s funds to sums due under this Agreement.

 

Section 10.11       Time. Whenever
the Company is required to make any payment or perform any act on a Saturday,
Sunday, or a legal holiday under the laws of the State of New York (or other jurisdiction
where the Company is required to make the payment or perform the act), the
payment may be made or the act performed on the next Business Day. Time is of
the essence in the Company’s performance under this Agreement and all other
Loan Documents.

 

Section 10.12       Commissions.
The transactions contemplated by this Agreement were brought about by the
Purchasers and the Company acting as principals and, except as set forth on
Schedule 3.12 of the Securities Purchase Agreement, without any brokers, agents,
or finders being the effective procuring cause. The Company represents that it
has not committed any Purchaser to the payment of any brokerage fee,
commission, or charge in connection with this transaction. If any such claim is
made on a Purchaser by any broker, finder, or agent or other person, the
Company will indemnify, defend, and hold Purchaser harmless from and against
the claim and will defend any action to recover on that claim, at the Company’s
cost and expense, including each Purchaser’s counsel’s fees. The Company
further agrees that until any such claim or demand is adjudicated in a
Purchaser’s favor, the amount demanded will be deemed a liability of the
Company under this Agreement, secured by the Collateral.

 

19

 

Section 10.13       Third
Parties. No rights are intended to be created under this Agreement or
under any other Loan Document for the benefit of any third party donee,
creditor, or incidental beneficiary of the Company. Nothing contained in this
Agreement shall be construed as a delegation to any Purchaser of the Company’s
duty of performance, including, without limitation, the Company’s duties under
any account or contract in which any Purchaser has a security interest.

 

Section
10.14       Discharge of the Company’s
Obligations. Each Purchaser, in its sole discretion, shall have the
right at any time, and from time to time, without prior notice to the Company
if the Company fails to do so, to: (a) obtain insurance covering any of the
Collateral as required under this Agreement; (b) pay for the performance of any
of the Company’s obligations under this Agreement; (c) discharge taxes, Liens,
security interests, or other encumbrances at any time levied or placed on any
of the Collateral in violation of this Agreement unless the Company is in good
faith with due diligence by appropriate proceedings contesting those items; and
(d) pay for the maintenance and preservation of any of the Collateral. Expenses
and advances shall be added to the Bridge Loans, until reimbursed to the
Purchasers and shall be secured by the Collateral. Any such payments and
advances by a Purchaser shall not be construed as a waiver by a Purchaser of an
Event of Default.

 

Section 10.15       Indemnity.
The Company hereby indemnifies and agrees to defend (with counsel
acceptable to the Purchasers) and hold harmless Purchaser, its partners,
officers, agents and employees (collectively, “Indemnitee”) from and against
any liability, loss, cost, expense (including reasonable attorneys’ fees and
expenses for both in-house and outside counsel), claim, damage, suit, action or
proceeding ever suffered or incurred by a Purchaser or in which a Purchaser may
ever be or become involved (whether as a party, witness or otherwise) (a)
arising from the Company’s failure to observe, perform or discharge any of its
covenants, obligations, agreements or duties under this Agreement,
(b) arising from the breach of any of the representations or warranties
contained in Article V of this Agreement, (c) by reason of this Agreement,
the other Loan Documents or the transactions contemplated hereby or thereby, or
(d) relating to claims of any Person (other than PFG to the extent such claims
arise out of the PFG Subsequent Obligations or documents and agreements existing
and in effect at the time of the Bridge Loan Closing) with respect to the
Collateral. Notwithstanding any contrary provision in this Agreement, the
obligation of the Company under this Section 10.15 shall survive the payment in
full of the Obligations and the termination of this Agreement.

 

Section
10.16       Purchaser Approvals.
Unless expressly provided herein to the contrary, any approval, consent,
waiver or satisfaction of the Purchasers with respect to any matter that is the
subject of this Agreement may be granted or withheld by a Purchase Majority
Interest in their sole and absolute discretion.

 

Section
10.17       Further Assurances. The
Company hereby agrees that at any time and from time to time, at the expense of
the Company, the Company will promptly execute and deliver all further
instruments and documents, and take all further action, that may be necessary
or that the Purchasers may reasonably request, in order to perfect and protect
any security interest granted or purported to be granted hereby, or to enable
Purchaser or any of its agents to exercise and enforce its rights and remedies
under this Agreement with respect to any portion of such Collateral.

 

20

 

Section 10.18       Choice of
Law. EXCEPT TO THE EXTENT THAT THE UCC PROVIDES FOR THE APPLICATION OF
THE LAW OF THE COMPANY’S STATE OF ORGANIZATION, THIS AGREEMENT, THE WARRANTS,
THE BRIDGE NOTES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO ANY OTHERWISE APPLICABLE
PRINCIPLES OF CONFLICTS OF LAWS.

 

[Signature
Page Follows]

 

21

 

IN WITNESS WHEREOF, intending to be legally bound, and
intending that this Agreement constitutes an instrument executed under seal,
the parties have caused this Agreement to be executed under seal as of the date
first written above.

 

 

	
   

  	
  THE COMPANY:

  
	
   

  	
   

  	
   

  
	
   

  	
  BIOJECT MEDICAL TECHNOLOGIES

  INC.

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/
  JOHN GANDOLFO

  	
   

  
	
   

  	
  Name:

  	
  John
  Gandolfo

  
	
   

  	
  Title:

  	
  Chief
  Financial Officer and Vice

  
	
   

  	
   

  	
  President, Finance

  
						

 

 

	
   

  	
  PURCHASER:

  
	
   

  	
   

  	
   

  
	
   

  	
  LIFE
  SCIENCES OPPORTUNITIES FUND

  II, L.P.,

  
	
   

  	
  a
  Delaware limited partnership

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  LOF Partners, LLC,

  
	
   

  	
   

  	
  its general manager

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
    /s/ JAMES
  C. GALE

  
	
   

  	
   

  	
   

  	
  Name:

  	
  James C. Gale

  
	
   

  	
   

  	
   

  	
  Title:

  	
  Managing Partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  PURCHASER:

  
	
   

  	
   

  	
   

  
	
   

  	
  LIFE
  SCIENCES OPPORTUNITIES FUND

  II (Institutional), L.P.,

  
	
   

  	
  a
  Delaware limited partnership

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  LOF Partners, LLC,

  
	
   

  	
   

  	
  its general partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
    /s/ JAMES
  C. GALE

  
	
   

  	
   

  	
   

  	
  Name:

  	
  James C. Gale

  
	
   

  	
   

  	
   

  	
  Title:

  	
  Managing Partner

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  PURCHASER:

  
	
   

  	
   

  
	
   

  	
  SANDERS
  OPPORTUNITY FUND, L.P.,

  
	
   

  	
  a
  Delaware limited partnership

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  SOF Management, LLC,

  
	
   

  	
   

  	
  its general partner

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
    /s/ BRAD D.
  SANDERS

  
	
   

  	
   

  	
   

  	
  Name:

  	
  Brad D. Sanders

  
	
   

  	
   

  	
   

  	
  Title:

  	
  Director of Fund
  Administration

  

 

 

	
   

  	
  PURCHASER:

  
	
   

  	
   

  
	
   

  	
  SANDERS
  OPPORTUNITY FUND

  (Institutional), L.P.,

  
	
   

  	
  a
  Delaware limited partnership

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  SOF Management, LLC,

  
	
   

  	
   

  	
  its general partner

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
    /s/ BRAD D.
  SANDERS

  
	
   

  	
   

  	
   

  	
  Name:

  	
  Brad D. Sanders

  
	
   

  	
   

  	
   

  	
  Title:

  	
  Director of Fund Administration

  

 

 

LIST OF
EXHIBITS

 

Exhibit A - Form of Bridge Notes

 

Exhibit B - Form of Warrants

 

Exhibit C - Form of Opinion of Counsel

 

Exhibit D - Form of Security Agreement

 

 

Schedule 1

 

	
   

  	
   

  	
  Principal

  Amount of 

  Bridge Loan

  	
   

  	
  Number

  of

  Warrants

  	
   

  
	
  Life Sciences Opportunities Fund II, L.P.

  	
   

  	
  $

  	
  127,546

  	
   

  	
  55,416

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Life Sciences Opportunities Fund
  (Institutional) II, L.P.

  	
   

  	
  $

  	
  712,454

  	
   

  	
  309,547

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Sanders Opportunities Fund, L.P.

  	
   

  	
  $

  	
  158,400

  	
   

  	
  70,073

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Sanders Opportunities Fund (Institutional),
  L.P.

  	
   

  	
  $

  	
  501,600

  	
   

  	
  221,898

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total:

  	
   

  	
  $

  	
  1,500,000

  	
   

  	
  656,934

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00098-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00098-of-00352.parquet"}]]