EX-10.2 5 exhibit102svbloanagmt.htm EXHIBIT

Exhibit 10.2

 

 

 

 

 

 

LOAN AND SECURITY AGREEMENT

between

THERMA-WAVE, INC.,

as Borrower

and

SILICON VALLEY BANK,

as Lender

 

 

 

 

 

 

TABLE OF CONTENTS

Page

1. ACCOUNTING AND OTHER TERMS. *

2. LOAN AND TERMS OF PAYMENT *

2.1 Credit Extensions. *

2.2 Overadvances. *

2.3 Interest Rate, Payments. *

2.4 Fees. *

3. CONDITIONS OF LOANS *

3.1 Conditions Precedent to Initial Credit Extension. *

3.2 Conditions Precedent to all Credit Extensions. *

4. CREATION OF SECURITY INTEREST *

4.1 Grant of Security Interest. *

5. REPRESENTATIONS AND WARRANTIES *

5.1 Due Organization and Authorization. *

5.2 Collateral. *

5.3 Litigation. *

5.4 No Material Adverse Change in Financial Statements. *

5.5 Solvency. *

5.6 Regulatory Compliance. *

5.7 Subsidiaries. *

5.8 Full Disclosure. *

6. AFFIRMATIVE COVENANTS *

6.1 Government Compliance. *

6.2 Financial Statements, Reports, Certificates. *

6.3 Inventory; Returns. *

6.4 Taxes. *

6.5 Insurance. *

6.6 Primary and Investment Accounts. *

6.7 Financial Covenants. *

6.8 Registration of Intellectual Property Rights. *

6.9 Control Agreements. *

6.10 Further Assurances. *

6.11 Exim Insurance. *

6.12 Borrower Agreement. *

6.13 Terms of Sale. *

7. NEGATIVE COVENANTS *

7.1 Dispositions. *

7.2 Changes in Business, Ownership, Management or Business Locations. *

7.3 Mergers or Acquisitions. *

7.4 Indebtedness. *

7.5 Encumbrance. *

7.6 Distributions; Investments. *

7.7 Transactions with Affiliates. *

7.8 Subordinated Debt. *

7.9 Compliance. *

7.10 Borrower Agreement and Exim Guarantee. *

8. EVENTS OF DEFAULT *

8.1 Payment Default. *

8.2 Covenant Default. *

8.3 Material Adverse Change. *

8.4 Attachment. *

8.5 Insolvency. *

8.6 Other Agreements. *

8.7 Judgments. *

8.8 Misrepresentations. *

8.9 Guaranty. *

8.10 Borrower Agreement Default . *

8.11 Exim Guarantee . *

9. BANK'S RIGHTS AND REMEDIES *

9.1 Rights and Remedies. *

9.2 Power of Attorney. *

9.3 Accounts Collection. *

9.4 Bank Expenses. *

9.5 Bank's Liability for Collateral. *

9.6 Remedies Cumulative. *

9.7 Demand Waiver. *

9.8 Exim Direction. *

9.9 Exim Notification. *

10. NOTICES *

11. CHOICE OF LAW , VENUE AND JURY TRIAL WAIVER *

12. GENERAL PROVISIONS *

12.1 Successors and Assigns. *

12.2 Indemnification. *

12.3 Time of Essence. *

12.4 Severability of Provision. *

12.5 Amendments in Writing, Integration. *

12.6 Counterparts. *

12.7 Survival. *

12.8 Confidentiality. *

12.9 Attorneys' Fees, Costs and Expenses. *

13. DEFINITIONS *

13.1 Definitions. *

This LOAN AND SECURITY AGREEMENT

dated June 13, 2003, between SILICON VALLEY BANK ("Bank"), whose address is 3003
Tasman Drive, Santa Clara, California 95054 and THERMA-WAVE, INC., a Delaware
corporation ("Borrower"), whose address is 1250 Reliance Way, Fremont,
California 94539 provides the terms on which Bank will lend to Borrower and
Borrower will repay Bank. The parties agree as follows:

ACCOUNTING AND OTHER TERMS.

Accounting terms not defined in this Agreement will be construed following GAAP.
Calculations and determinations must be made following GAAP. The term "financial
statements" includes the notes and schedules. The terms "including" and
"includes" always mean "including (or includes) without limitation," in this or
any Loan Document.

LOAN AND TERMS OF PAYMENT

Credit Extensions

.

Borrower will pay Bank the unpaid principal amount of all Credit Extensions and
interest on the unpaid principal amount of the Credit Extensions.

Revolving Advances.

Bank will make Advances under the Committed Revolving Line as follows:

(1) Advances under the Domestic Committed Line not to exceed (X) the lesser of
(A) the Domestic Committed Line minus the sum of (x) the aggregate amounts
deemed outstanding under the Cash Management Services sublimit described in
Section 2.1.4, plus, (y) the amount of all outstanding Letters of Credit
(including such drawn but unreimbursed Letters of Credit) booked under the
Domestic Committed Line, plus (z) the FX Reserve (arising from FX Forward
Contracts booked under the Domestic Committed Line), or (B) the Domestic
Borrowing Base minus the sum of (x) the aggregate amounts deemed outstanding
under the Cash Management Services sublimit described in Section 2.1.4, plus,
(y) the amount of all outstanding domestic Letters of Credit (including such
drawn but unreimbursed Letters of Credit) booked under the Domestic Committed
Line and (z) the FX Reserve (arising from FX Forward Contracts booked under the
Domestic Committed Line); and

(2) Advances under the Exim Committed Line not to exceed (X) the lesser of (A)
the Exim Committed Line minus the sum of (x) the FX Reserve (arising from FX
Forward Contracts booked under the Exim Committed Line), plus, (y) the amount of
all outstanding export related Letters of Credit (including such drawn but
unreimbursed Letters of Credit) booked under the Exim Committed Line, plus,
(z) the Domestic Standby Letter of Credit Reserve or (B) the Exim Borrowing Base
minus the sum of (x) the FX Reserve (arising from FX Forward Contracts under the
Exim Committed Line), plus, (y) the amount of all outstanding export related
Letters of Credit (including such drawn but unreimbursed Letters of Credit)
booked under the Exim Committed Line, plus, (z) the Domestic Standby Letter of
Credit Reserve. The sum of subparagraphs (x) and (y) are sometimes referred to
herein as the "Exim Soft Advances".

Amounts borrowed under this Section may be repaid and reborrowed during the term
of this Agreement.

To obtain an Advance, Borrower must notify Bank by facsimile or telephone by
12:00 noon Pacific time on the Business Day the Advance is to be made. Borrower
must promptly confirm the notification by delivering to Bank the Payment/Advance
Form attached as Exhibit B and submit copies of Export Orders in connection with
any Exim Advance. Bank will credit Advances to Borrower's deposit account. Bank
may make Advances under this Agreement based on instructions from a Responsible
Officer or his or her designee or without instructions if the Advances are
necessary to meet Obligations which have become due. Bank may rely on any
telephone notice given by a person whom Bank believes is a Responsible Officer
or designee. Borrower will indemnify Bank for any loss Bank suffers due to such
reliance, unless such loss is the result of Bank's gross negligence or willful
misconduct.

The Committed Revolving Line terminates on the Revolving Maturity Date, when all
Advances are immediately payable.

Letters of Credit Sublimit.

Bank will issue or have issued letters of credit (the "Letters of Credit") as
follows:

(1) Letters of Credit booked under the Domestic Committed Line for Borrower's
account not exceeding the lesser of: (i) $5,000,000 and (ii) Availability under
the Domestic Committed Line;

(2) export related Letters of Credit booked under the Exim Committed Line for
Borrower's account not exceed the lesser of (i) $10,000,000 and (ii)
Availability under the Exim Committed Line; and

(3) Excess Standby Letters of Credit.

Each Letter of Credit will have an expiry date of no later than ninety (90) days
after the Revolving Maturity Date, but Borrower's reimbursement obligation will
be secured by cash on terms acceptable to Bank (provided that Bank agrees that
cash equal to 105% of the outstanding letter of credit shall be deemed
acceptable) at any time after the Revolving Maturity Date if the term of this
Agreement is not extended by Bank. Borrower agrees to execute any further
documentation in connection with the Letters of Credit as Bank may reasonably
request.

Foreign Exchange Sublimit.

Subject to the limits set forth below in this Section 2.1.3, Borrower may enter
into foreign exchange forward contracts with the Bank under which Borrower
commits to purchase from or sell to Bank a set amount of foreign currency more
than one business day after the contract date (the "FX Forward Contract") (the
amount equal to 10% of the aggregate outstanding FX Forward Contracts is
hereinafter referred to as the "FX Reserve"). The FX Reserve may not exceed the
lesser of: (i) $15,000,000 and (ii) Availability under the Domestic Committed
Line and the Exim Committed Line. The total FX Forward Contracts at any one time
may not exceed the amount calculated as 10 multiplied by the FX Reserve. Bank
may terminate the FX Forward Contracts if an Event of Default occurs and is
continuing.

Cash Management Services Sublimit
.

Borrower may utilize Bank's Cash Management Services up to an amount equal to
the lesser of: (i) $5,000,000 and (ii) Availability under the Domestic Committed
Line ("Cash Management Services Sublimit"). Such services may include merchant
services, direct deposit of payroll, business credit card, and check cashing
services identified in various cash management services agreements related to
such services (the "Cash Management Services"). The aggregate amount of the
credit limits under all such agreements with respect to the Cash Management
Services shall be deemed to be the amount of the Cash Management Services for
the purposes of calculating the Cash Management Services Sublimit. Bank will
advise Borrower of any amounts that would affect the Cash Management Services
Sublimit.

Overadvances.

If Borrower's Obligations under Section 2.1 at any time exceed: (i) the
Committed Line (ii) the lesser of (a) the Domestic Committed Line, and (b) the
Domestic Borrowing Base, or (iii) the lesser of (a) the Exim Committed Line, and
(b) the Exim Borrowing Base; Borrower must immediately pay Bank the excess.

Interest Rate, Payments.

Interest Rate. (i) Advances under the Domestic Committed Line accrue interest on
the outstanding principal balance at a per annum rate of 150 basis points
(1.50 percentage points) above the Prime Rate; and (ii) Advances under the Exim
Committed Line accrue interest on the outstanding principal balance at a per
annum rate of 175 basis points (1.75 percentage points) above the Prime Rate.
While an Event of Default exists, Obligations accrue interest at 4 percent above
the rate effective immediately before the Event of Default. The interest rate
increases or decreases when the Prime Rate changes. Interest is computed on a
360 day year for the actual number of days elapsed.

Payments. Interest due on the Domestic Committed Line is payable on the first
day of each month. Interest due on the Exim Committed Line is payable on the
11th of each month. Bank may debit Borrower's deposit Account Number
____________________________ for principal and interest payments owing or any
amounts Borrower owes Bank, when due. Bank will promptly notify Borrower when it
debits Borrower's accounts. These debits are not a set- off. Payments received
after 12:00 noon Pacific time are considered received at the opening of business
on the next Business Day. When a payment is due on a day that is not a Business
Day, the payment is due the next Business Day and additional fees or interest
accrue.

Fees.

Borrower will pay:

Closing Fee. A closing fee in the amount of $200,000 to be fully earned and
payable on the Closing Date.

Bank Expenses. All Bank Expenses (including reasonable attorneys' fees and
reasonable expenses) incurred through and after the date of this Agreement, are
payable when due.

Exim Bank Expenses. On the Closing Date, Exim Bank Expenses incurred through the
date hereof.

2.5 Use of Exim Advance Proceeds.

Borrower will use the proceeds of the Exim Advances only for the purposes
specified in the Borrower Agreement. Borrower will not use the proceeds of the
Exim Advances for any purpose prohibited by the Borrower Agreement.

CONDITIONS OF LOANS

Conditions Precedent to Initial Credit Extension.

Bank's obligation to make the initial Credit Extension is subject to the
conditions precedent that it receive the following:

a fully executed copy of this Agreement;

a fully executed copy of the Borrower Agreement;

an intellectual property security agreement which confirms the grant to Bank of
a security interest in the Intellectual Property;

subordination agreements from all officers, directors, and Affiliates of
Borrower wherein the obligations for borrowed money owing by Borrower to such
parties are subordinated in favor of Borrower's obligations owing to Bank;

borrowing resolutions;

receipt by Bank of the Closing Fee;

receipt by Bank of Borrower's insurance certificates together with a lender's
loss payable endorsement reflecting Bank as a lender's loss payee;

receipt by Bank of the results of UCC searches or other evidence satisfactory to
Bank (in each case dated as of a date reasonably satisfactory to Bank)
indicating the absence of liens on the assets of Borrower, except for Permitted
Liens;

Bank shall have filed all such UCC financing statements as Bank deems
appropriate and shall have received UCC searches to reflect Bank's first
priority security interest subject only to Permitted Liens; provided however,
this Section 3.1(i) shall not be a condition precedent to issuance of letters of
credit to replace those existing letters of credit, described on Exhibit 3.1(i),
outstanding on the Closing Date; provided further however, that an Event of
Default shall occur if all actions contemplated by this Section 3.1(i) are not
completed prior to September 1, 2003;

Receipt by Bank of evidence of termination or authorization to terminate the
following UCC-1 financing statements: (i) No. 23271198, filed with the Secretary
of State of Delaware and reflecting Comerica Bank-California as secured party
and (ii) No. 0115660410, filed with the Secretary of State of California and
reflecting Comerica Bank-California as secured party;

Bank's completion of an audit of Borrower's Collateral, with results
satisfactory to Bank, at Borrower's expense; provided however, this Section
3.1(j) shall not be a condition precedent to issuance of letters of credit to
replace those existing letters of credit, described on Exhibit 3.1(i),
outstanding on the Closing Date; provided further however, that an Event of
Default shall occur if all actions contemplated by this Section 3.1(j) are not
completed prior to September 1, 2003; and

Receipt by Bank of all other agreements, documents and fees that Bank may
reasonably require in its good faith credit judgment in connection with the
transactions contemplated hereunder.

Conditions Precedent to all Credit Extensions.

Bank's obligations to make each Credit Extension, including the initial Credit
Extension, is subject to the following:

timely receipt of any Payment/Advance Form;

the representations and warranties in Section 5 must be materially true on the
date of the Payment/Advance Form and on the effective date of each Credit
Extension (except to the extent that they relate to an earlier date, in which
case such representations and warranties shall continue to have been materially
true as of such date) and no Event of Default may have occurred and be
continuing, or result from the Credit Extension. Each Credit Extension is
Borrower's representation and warranty on that date that the representations and
warranties of Section 5 remain materially true (except to the extent that they
relate to an earlier date, in which case such representations and warranties
shall continue to have been materially true as of such date);

receipt of the reports and certificates set forth in Section 6.2 required prior
to each and every Credit Extension, including copies of Export Orders in
connection with any Exim Advance; and

the Exim Guarantee will be in full force and effect.

CREATION OF SECURITY INTEREST

Grant of Security Interest.

Borrower grants Bank a continuing security interest in all presently existing
and later acquired Collateral to secure all Obligations and performance of each
of Borrower's duties under the Loan Documents. Except for Permitted Liens, and
except with respect to property located outside the United States, the security
interest granted will be a first priority security interest in the Collateral.
If this Agreement is terminated, Bank's lien and security interest in the
Collateral will continue until Borrower fully satisfies its Obligations arising
hereunder (other than contingent indemnification obligations with respect to
unasserted claims), at which time Bank will release its Liens in the Collateral
and all rights therein will revert to Borrower. Bank agrees to execute and
deliver to Borrower from time to time such Collateral releases as Borrower may
request and as are necessary to give other lenders of lessors that finance the
purchase of Equipment and related software after the date hereof a first
priority Lien in such Equipment and related software so long as the Liens and
Indebtedness incurred with respect thereto are permitted under this Agreement.

Notwithstanding the foregoing, the security interest granted herein does not
extend to and the term "Collateral" does not include: (A) Equipment and related
software subject to the Permitted Liens of lenders or lessors providing
financing for the acquisition of such property; (B) any license or contract
rights or any other property to the extent (i) the granting of a security
interest in it would be contrary to applicable law, or (ii) that such rights are
nonassignable by their terms (but only to the extent the prohibition is
enforceable under applicable law, including, without limitation, Section 9406(d)
of the Code) without the consent of the licensor or other party (but only to the
extent such consent has not been obtained); and (C) more than 65% of the
presently existing and hereafter arising issued and outstanding shares of
capital stock owned by Borrower of any foreign subsidiary which shares entitle
the holder thereof to vote for directors or any other matter.

REPRESENTATIONS AND WARRANTIES

Except as set forth on the attached Schedule, Borrower represents and warrants
as follows:

Due Organization and Authorization.

Borrower and each Subsidiary is duly existing and in good standing in its
respective jurisdiction of formation and qualified and licensed to do business
in, and in good standing in, any jurisdiction in which the conduct of its
business or its ownership of property requires that it be qualified, except
where the failure to do so could not reasonably be expected to cause a Material
Adverse Change.

The execution, delivery and performance of the Loan Documents have been duly
authorized, and do not conflict with Borrower's formation documents, nor
constitute an event of default under any material agreement by which Borrower is
bound. Borrower is not in default under any agreement to which it is a party or
by which it is bound in which the default could reasonably be expected to cause
a Material Adverse Change.

Collateral.

Borrower has good title to the Collateral, free of Liens except Permitted Liens.

The Accounts designated as eligible accounts (Eligible Accounts, Eligible
Retainage Accounts, Exim Eligible Foreign Accounts and Exim Eligible Foreign
Retainage Accounts) in any borrowing base certificate, or other report submitted
to Bank, are bona fide, existing obligations and the service or property has
been performed or delivered to the account debtor or its agent (subject only to
installation and warranty obligations arising in the ordinary course of
Borrower's business), for immediate shipment to and unconditional acceptance by
the account debtor (except in the case of Retainage Accounts where customary
acceptance terms in the ordinary course of business shall apply). Borrower has
no notice of any actual or imminent Insolvency Proceeding of any account debtor
whose accounts are an eligible account in any borrowing base certificate.

All Inventory designated as eligible inventory (Exim Eligible Foreign Inventory)
in any borrowing base certificate, or other report submitted to Borrower, is in
all material respects of good and marketable quality, free from material
defects, except for Inventory for which adequate reserves have been made in
accordance with GAAP, which reserves have been, and at all times will be,
disclosed to Bank in Borrower's borrowing base certificates.

Borrower is the sole owner of the Intellectual Property, except for: (i)
non-exclusive licenses granted to others in the ordinary course of business, and
(ii) joint ownership rights and licensing and cross-licensing agreements with
respect to Intellectual Property entered into from time to time in connection
with strategic relationships and development agreements, approved by Borrower's
senior management, provided that such joint ownership rights, licenses and
cross-licenses do not materially adversely impact Borrower's ability to conduct
its business or the value of the Collateral. To the best of Borrower's knowledge
and except as reported to Bank in writing, each of the Patents in which Borrower
has an interest is valid and enforceable and no part of the Intellectual
Property in which Borrower has an interest has been judged invalid or
unenforceable, in whole or in part, and no claim has been made that any part of
the Intellectual Property in which Borrower has an interest violates the rights
of any third party, except to the extent such invalidity, unenforceability or
claim could not reasonably be expected to cause a Material Adverse Change.

Litigation.

Except as shown in the Schedule and except as reported to Bank in writing, there
are no actions or proceedings pending or, to the knowledge of Borrower's
Responsible Officers, threatened by or against Borrower or any Subsidiary in
which a likely adverse decision could reasonably be expected to cause a Material
Adverse Change.

No Material Adverse Change in Financial Statements.

All consolidated financial statements for Borrower, and any Subsidiary,
delivered to Bank fairly present in all material respects Borrower's
consolidated financial condition and Borrower's consolidated results of
operations. There has not been any material deterioration in Borrower's
consolidated financial condition since the date of the most recent financial
statements submitted to Bank.

Solvency.

The fair salable value of Borrower's assets (including goodwill minus
disposition costs) exceeds the fair value of its liabilities; the Borrower is
not left with unreasonably small capital after the transactions in this
Agreement; and Borrower is able to pay its debts (including trade debts) as they
mature.

Regulatory Compliance.

Borrower is not an "investment company" or a company "controlled" by an
"investment company" under the Investment Company Act. Borrower is not engaged
as one of its important activities in extending credit for margin stock (under
Regulations T and U of the Federal Reserve Board of Governors). Borrower has
complied in all material respects with the Federal Fair Labor Standards Act.
Borrower has not violated any laws, ordinances or rules, the violation of which
could reasonably be expected to cause a Material Adverse Change. None of
Borrower's or any Subsidiary's properties or assets has been used by Borrower or
any Subsidiary or, to the best of Borrower's knowledge, by previous Persons, in
disposing, producing, storing, treating, or transporting any hazardous substance
other than legally. Borrower and each Subsidiary has timely filed all required
tax returns and paid, or made adequate provision to pay, all material taxes,
except those being contested in good faith with adequate reserves under GAAP.
Borrower and each Subsidiary has obtained all consents, approvals and
authorizations of, made all declarations or filings with, and given all notices
to, all government authorities that are necessary to continue its business as
currently conducted, except where the failure to do so could not reasonably be
expected to cause a Material Adverse Change.

Subsidiaries.

Borrower does not own any stock, partnership interest or other equity securities
except for Permitted Investments.

Full Disclosure.

No written representation, warranty or other statement of Borrower in any
certificate or written statement given to Bank (taken together with all such
written certificates and written statements to Bank) contains any untrue
statement of a material fact or omits to state a material fact necessary to make
the statements contained in the certificates or statements not misleading. It
being recognized by Bank that the projections and forecasts provided by Borrower
in good faith and based upon reasonable assumptions are not viewed as facts and
that actual results during the period or periods covered by such projections and
forecasts may differ from the projected and forecasted results.

AFFIRMATIVE COVENANTS

Borrower will do all of the following while Obligations arising hereunder or any
commitment by Bank to lend remain outstanding (other than contingent
indemnification obligations for unasserted claims):

Government Compliance.

Borrower will maintain its and all Subsidiaries' legal existence and good
standing in its jurisdiction of formation and maintain qualification in each
jurisdiction in which the failure to so qualify would reasonably be expected to
cause a material adverse effect on Borrower's business or operations. Borrower
will comply, and have each Subsidiary comply, with all laws, ordinances and
regulations to which it is subject, noncompliance with which could reasonably be
expected to cause a Material Adverse Change.

Financial Statements, Reports, Certificates.

Borrower will deliver to Bank: (i) as soon as available, but no later than 30
days after the last day of each month, a company prepared consolidated balance
sheet and income statement together with a statement of cash flows covering
Borrower's consolidated operations during the period, in a form and certified by
a Responsible Officer acceptable to Bank; (ii) as soon as available, but no
later than 120 days after the last day of Borrower's fiscal year, audited
consolidated financial statements prepared under GAAP, consistently applied,
together with an unqualified opinion (except for a going concern qualification
that does not constitute a Material Adverse Change) n the financial statements
from an independent certified public accounting firm reasonably acceptable to
Bank; (iii) within 5 days of filing, copies of all statements, reports and
notices made available to Borrower's security holders or to any holders of
Subordinated Debt and all reports on Form 10-K, 10-Q and 8-K filed with the
Securities and Exchange Commission; (iv) a prompt report of any legal actions
pending or threatened in writing against Borrower or any Subsidiary that could
reasonably be expected to result in damages or costs to Borrower or any
Subsidiary of $700,000 or more; (v) budgets, sales projections, operating plans
or other financial information Bank reasonably requests; and (vi) prompt notice
of any material change in the composition of the Intellectual Property,
including any subsequent ownership right of Borrower in or to any Copyright,
Patent or Trademark not shown in any intellectual property security agreement
between Borrower and Bank or knowledge of an event that materially adversely
affects the value of the Intellectual Property.

Prior to each and every Credit Extension and in any event within 30 days after
the last day of each month, Borrower will deliver to Bank Borrowing Base
Certificates signed by a Responsible Officer in the forms of Exhibit C and E,
with aged listings of accounts receivable and accounts payable, together with
Inventory reports reasonably requested by Bank. Each Credit Extension under the
Exim Committed Line shall be supported by Export Orders in connection with such
Credit Extension.

Within 30 days after the last day of each month, Borrower will deliver to Bank
with the monthly financial statements a Compliance Certificate signed by a
Responsible Officer in the form of Exhibit D.

Bank has the right to audit Borrower's Collateral at Borrower's expense, but the
audits will be conducted no more often than twice yearly, during normal business
hours, upon two (2) Business Days advance notice (telephonic or otherwise),
except that during the existence of an Event of Default no such frequency or
business hours limitations or notice requirements shall apply.

Borrower will deliver to Bank such other reports as reasonably requested by Bank
from time to time.

Borrower shall deliver all reports, certificates and other documents to Bank as
provided in the Borrower Agreement, including, without limitation, the Borrowing
Base Certificates on a monthly basis as described on Exhibit D hereof, copies of
Export Orders and any other information that Bank and Exim Bank may reasonably
request.

Inventory; Returns.

Borrower will keep all Inventory in good and marketable condition, free from
material defects except for Inventory for which adequate reserves have been made
in accordance with GAAP, which reserves have been, and at all times will be with
respect to Exim Eligible Inventory, disclosed to Bank in Borrower's Exim
Borrowing Base Certificate. Returns and allowances between Borrower and its
account debtors will follow Borrower's customary practices as they exist at
execution of this Agreement. Borrower must promptly notify Bank of all returns,
recoveries, disputes and claims, that involve more than $1,500,000.

Taxes.

Borrower will make, and cause each Subsidiary to make, timely payment of all
material federal, state, and local taxes or assessments (except for taxes and
assessments being contested in good faith with adequate reserves under GAAP,
provided that no Lien having any priority over Bank's security interests arising
from such contest) and will deliver to Bank, on demand, appropriate certificates
attesting to the payment.

Insurance.

Borrower will keep its business and the Collateral insured for risks and in
amounts, as Bank may reasonably request. Insurance policies will be in a form,
with companies, and in amounts that are satisfactory to Bank in Bank's
reasonable discretion. All property policies will have a lender's loss payable
endorsement showing Bank as an additional loss payee and all liability policies
will show the Bank as an additional insured and provide that the insurer must
give Bank at least 20 days notice before canceling its policy. At Bank's
request, Borrower will deliver certified copies of policies and evidence of all
premium payments. Proceeds payable under any policy (not subject to a senior
purchase money Permitted Lien) will, at Bank's option, be payable to Bank on
account of the Obligations; provided that, so long as no Event of Default or no
event which, with notice or passage of time or both would constitute an Event of
Default, shall have occurred and be continuing, insurance proceeds of less than
$1,500,000 shall be released by Bank to Borrower to be applied by Borrower to
the repair or replacement of the property with respect to which the insurance
proceeds were paid, and Bank may request reasonable assurance that such proceeds
will be so applied, and with Borrower hereby granting a security interest to
Bank in such property and agreeing to take such action necessary, if any, to
perfect such security interest.

Primary and Investment Accounts
.

Borrower will maintain its primary depository, operating and investment accounts
with Bank, except that with respect to its investment accounts, Borrower will
only be required to maintain 75% of its total consolidated depository, operating
and investment balances with Bank or one of its Affiliates.

Financial Covenants.

Borrower will maintain:

Quick Ratio (Adjusted)

. As of the last day of each month, a ratio of Quick Assets to Current
Liabilities minus current portions of Deferred Revenue of at least 1.50 to 1.00.

Profitability

. Borrower will have a net profit/loss (exclusive of non-cash charges related to
(1) expensing, re- pricing, and variable accounting for stock options, and
(2) the write-down of up to an additional $2,000,000 of intangible assets
through the period ending on the original Revolving Maturity Date) of not less
than the required amount set forth in the following table for the applicable
period set forth opposite thereto.

Applicable Amount

Applicable Period

<$18,775,000> Quarter-ended 03/31/03

<$8,500,000> Quarter-ended 06/30/03

<$4,500,000> Quarter-ended 09/30/03

<$2,000,000> Quarter-ended 12/31/03

<$1,000,000> Quarter-ended 03/31/04

$0 Each quarter-ended period thereafter.

Registration of Intellectual Property Rights.

In the absence of an Event of Default, Borrower shall provide Bank with
quarterly reports of its applications for registration with the United States
Patent and Trademark Office or the United States Copyright Office for its
Intellectual Property that is material to its business and shall provide Bank
with copies of any proposed applications. During the existence of an Event of
Default, Borrower will notify Bank 30 days prior to any registration of
Intellectual Property with the United States Patent and Trademark Office or the
United States Copyright Office, and shall provide Bank with a copy of the
proposed application. Borrower will (i) protect, defend and maintain the
validity and enforceability of the Intellectual Property that it owns where it
is a reasonable business practice to do so as determined by Borrower's Board of
Directors, and promptly advise Bank in writing of material infringements and
(ii) not allow any Intellectual Property that it owns and is material to the
continued operation of Borrower's business to be abandoned, forfeited or
dedicated to the public without Bank's written consent.

Control Agreements.

With respect to deposit accounts or investment accounts located in the United
States and maintained at financial institutions other than Bank, within 7 days
of the opening of any such deposit account or investment account, Borrower will
execute and deliver to Bank, control agreements in form reasonably satisfactory
to Bank in order for Bank to perfect its security interest in Borrower's deposit
accounts or investment accounts. Notwithstanding the foregoing sentence and
provided that Borrower is in compliance with Section 6.6, Borrower may maintain
up to $350,000 in the aggregate in such deposit accounts or investment accounts
without providing Bank with such control agreements.

Further Assurances.

Borrower will execute any further instruments and take further action as Bank
reasonably requests to perfect or continue Bank's security interest in the
Collateral or to effect the purposes of this Agreement.

Exim Insurance.

If required by Bank, Borrower will obtain, with respect to Accounts that are
otherwise ineligible under Exim borrowing criteria and where Borrower has
requested or obtained an Advance, and pay when due all premiums with respect to,
and maintain uninterrupted foreign credit insurance. In addition, Borrower will
execute in favor of Bank an assignment of proceeds of any insurance policy
obtained by Borrower and issued by Exim Bank insuring against comprehensive
commercial and political risk (the "EXIM Bank Policy"). The insurance proceeds
from the EXIM Bank Policy assigned or paid to Bank will be applied to the
balance outstanding under this Agreement. Borrower will immediately notify Bank
and Exim Bank in writing upon submission of any claim under the Exim Bank
Policy. Then Bank will not be obligated to make any further Credit Extensions to
Borrower based on Exim Eligible Foreign Accounts without prior approval from
Exim Bank.

Borrower Agreement.

Borrower will comply with all terms of the Borrower Agreement. If any provision
of the Borrower Agreement conflicts with any provision contained in this Exim
Agreement, the more strict provision, with respect to the Borrower, will
control; provided, however, any action or event that is permitted hereunder
shall be deemed to satisfy any requirement for consent of Bank under the
Borrower Agreement.

Terms of Sale.

Borrower will, if required by Exim Bank or Bank, cause all sales of products on
which the Exim Advances are based to satisfy at least one of the following: (i)
be supported by one or more irrevocable letters of credit in an amount and of
matter, naming a beneficiary and issued by a financial institution acceptable to
Bank and negotiated by Bank, (ii) be for any Account which satisfies all of the
requirements to constitute an Exim Eligible Foreign Account, or (iii) where the
Accounts from the Buyer exceed twenty-five percent (25%) of all Exim Eligible
Foreign Accounts, to be preapproved in writing, by Bank or Exim Bank.

NEGATIVE COVENANTS

Borrower will not do any of the following without Bank's prior written consent,
which will not be unreasonably withheld:

Dispositions.

Convey, sell, lease, transfer or otherwise dispose of (collectively "Transfer"),
or permit any of its Subsidiaries to Transfer, all or any part of its business
or property, other than Transfers: (i) of Inventory in the ordinary course of
business; (ii) of (a) non-exclusive licenses and similar arrangements for the
use of the property of Borrower or its Subsidiaries in the ordinary course of
business; and (b) of joint-ownership rights, licenses and cross-licenses entered
into from time to time in connection with strategic relationships and
development agreements, approved by Borrower's senior management, provided that
such joint ownership rights, licenses and cross-licenses do not materially
impact Borrower's ability to conduct its business or the value of the
Collateral; (iii) worn-out, obsolete or surplus Equipment; (iv) constituting
Permitted Liens or Permitted Investments; (v) of assets in connection with the
sale of Borrower's "Designated Product Line", including inventory and related
Intellectual Property; and (vi) other property that Borrower reasonably
determines is not necessary or useful for the ordinary operations of Borrower,
so long as the disposition of same will not have a material adverse effect on
the business or operations of Borrower.

Changes in Business, Ownership, Management or Business Locations.

Suffer a Change of Control, or engage in or permit any of its Subsidiaries to
engage in any business other than the businesses currently engaged in by
Borrower and its Subsidiaries or reasonably related thereto. Borrower will not,
without at least 30 days prior written notice, relocate its chief executive
office or add any new offices or business locations. Neither Borrower nor any of
its Subsidiaries shall be under any restriction with respect to the offer, sale
or issuance of equity securities in a public or private offering so long as no
Event of Default exists or will result from such public or private offering.

Mergers or Acquisitions.

Merge or consolidate, or permit any of its Subsidiaries to merge or consolidate,
with any other Person, or acquire, or permit any of its Subsidiaries to acquire,
all or substantially all of the capital stock or property of another Person,
except where (i) no Event of Default has occurred and is continuing or would
result from such action during the term of this Agreement and (ii) such
transaction would not result in a decrease of more than 25% of Tangible Net
Worth. A Subsidiary may merge or consolidate into another Subsidiary or into
Borrower.

Indebtedness.

Create, incur, assume, or be liable for any Indebtedness, or permit any
Subsidiary to do so, other than Permitted Indebtedness.

Encumbrance.

Create, incur, or allow any Lien on any of its property, or assign or convey any
right to receive income, including the sale of any Accounts, or permit any of
its Subsidiaries to do so, except for Permitted Liens, or permit any Collateral
not to be subject to the first priority security interest granted here, subject
to Permitted Liens.

Distributions; Investments.

Directly or indirectly acquire or own any Person, or make any Investment in any
Person, other than Permitted Investments, or permit any of its Subsidiaries to
do so. Pay any cash (or property of Borrower other than Borrower's capital
stock) as dividends or make any cash distribution or payment (or distribution or
payment of Borrower's property other than in the form of Borrower's capital
stock) or redeem, retire or purchase with cash (or any property of Borrower) any
capital stock; provided that (i) Borrower may convert any of its convertible
securities into other securities pursuant to the terms of such convertible
securities or otherwise in exchange thereof, (ii) Borrower may repurchase the
stock of former employees or consultants pursuant to stock repurchase agreements
so long (a) as an Event of Default does not exist at the time of such repurchase
and would not exist after giving effect to such repurchase, and (b) such
repurchases do not exceed $500,000 in the aggregate during any fiscal year of
Borrower; and (iii) Borrower may make any open-market purchase or exchange of
Borrower's publicly-traded equity securities, so long as (x) an Event of Default
does not exist at the time of such purchase or exchange and would not exist
after giving effect to such purchase or exchange, and (y) such purchase and
exchange do not exceed $1,500,000 in the aggregate during any fiscal year of
Borrower.

Transactions with Affiliates.

Directly or indirectly enter into or permit any material transaction with any
Affiliate except transactions that are in the ordinary course of Borrower's
business, on terms less favorable to Borrower than would be obtained in an arm's
length transaction with a non-affiliated Person.

Subordinated Debt.

Make or permit any payment on any Subordinated Debt, except under the terms of
the Subordinated Debt, or amend any provision in any document relating to the
Subordinated Debt without Bank's prior written consent.

Compliance.

Become an "investment company" or a company controlled by an "investment
company," under the Investment Company Act of 1940 or undertake as one of its
important activities extending credit to purchase or carry margin stock, or use
the proceeds of any Credit Extension for that purpose; fail to meet the minimum
funding requirements of ERISA, permit a Reportable Event or Prohibited
Transaction, as defined in ERISA, to occur; fail to comply with the Federal Fair
Labor Standards Act or violate any other law or regulation, if the violation
could reasonably be expected to have a material adverse effect on Borrower's
business or operations or would reasonably be expected to cause a Material
Adverse Change, or permit any of its Subsidiaries to do so.

Borrower Agreement and Exim Guarantee.

Violate or fail to comply with any provision of the Borrower Agreement or take
an action, or permit any action to be taken, that causes, or could be expected
to cause, the Exim Guarantee to not be in full force and effect. Notwithstanding
the introductory sentence to this Section 7, at no time will Bank give or be
required to give its consent to the actions set forth in this Section 7.10.

EVENTS OF DEFAULT

Any one of the following is an Event of Default:

Payment Default.

If Borrower fails to pay any of the Obligations within 3 Business Days after
their due date. During the additional period the failure to cure the default is
not an Event of Default (but no Credit Extension will be made during the cure
period).

Covenant Default.

If Borrower does not perform any obligation in Section 6 or violates any
covenant in Section 7 or does not perform or observe any other material term,
condition or covenant in this Agreement, any Loan Documents, or in any agreement
between Borrower and Bank and as to any default under a term, condition or
covenant that can be cured, has not cured the default within 10 days after it
occurs, or if the default cannot be cured within 10 days or cannot be cured
after Borrower's attempts within 10 day period, and the default may be cured
within a reasonable time, then Borrower has an additional period (of not more
than 30 days) to attempt to cure the default. During the additional time, the
failure to cure the default is not an Event of Default (but no Credit Extensions
will be made during the cure period).

Material Adverse Change.

If there (i) occurs a material adverse change in the business operations, or
condition (financial or otherwise) of the Borrower; or (ii) is a material
impairment of the prospect of repayment of any portion of the Obligations; or
(iii) is a material impairment of the value or priority of Bank's security
interests in the Collateral.

Attachment.

If any material portion of Borrower's assets is attached, seized, levied on, or
comes into possession of a trustee or receiver and the attachment, seizure or
levy is not removed in 10 days, or if Borrower is enjoined, restrained, or
prevented by court order from conducting a material part of its business or if a
judgment or other claim becomes a Lien on a material portion of Borrower's
assets, or if a notice of lien, levy, or assessment is filed against any of
Borrower's assets by any government agency and not paid within 10 days after
Borrower receives notice. These are not Events of Default if stayed or if a bond
is posted pending contest by Borrower (but no Credit Extensions will be made
during the cure period).

Insolvency.

If Borrower becomes insolvent or if Borrower begins an Insolvency Proceeding or
an Insolvency Proceeding is begun against Borrower and not dismissed or stayed
within 45 days (but no Credit Extensions will be made before any Insolvency
Proceeding is dismissed).

Other Agreements.

If there is a default in any agreement between Borrower and a third party that
gives the third party the right to accelerate any Indebtedness exceeding
$500,000 or that could cause a Material Adverse Change provided, however, that
the Event of Default under this Section 8.6 caused by the occurrence of a
default under another agreement described in this Section 8.6 shall be
automatically cured for purposes of this Agreement upon the cure or waiver of
the default under such other agreement, if (i) Bank has not exercised its right
to accelerate the maturity of the Obligations under Section 9.1(a) hereof, and
(ii) any such cure by Borrower does not result in an Event of Default under any
other provision of this Agreement, and (iii) in connection with such cure, the
agreement with the third party is not modified in a manner which increases the
payments from the Borrower to the third party or otherwise makes it materially
less advantageous to Borrower.

Judgments.

If a money judgment(s) in the aggregate of at least $200,000 is rendered against
Borrower and is unsatisfied, unstayed or not covered by adequate insurance or
indemnity (as to which coverage has been confirmed to Bank's reasonable
satisfaction, provided that the terms of Section 8.4 remain in effect
notwithstanding any confirmation of such insurance or indemnity) for 10 days
(but no Credit Extensions will be made before the judgment is stayed or
satisfied).

Misrepresentations.

If Borrower or any Person acting for Borrower makes any material
misrepresentation or material misstatement now or later in any warranty or
representation in this Agreement or in any writing delivered to Bank or to
induce Bank to enter this Agreement or any Loan Document.

Guaranty.

Any guaranty of any Obligations ceases for any reason to be in full force or any
Guarantor does not perform any obligation under any guaranty of the Obligations,
or any material misrepresentation or material misstatement exists now or later
in any warranty or representation in any guaranty of the Obligations or in any
certificate delivered to Bank in connection with the guaranty, or any
circumstance described in Sections 8.4, 8.5 or 8.7 occurs to any Guarantor.

Borrower Agreement Default .

If Borrower violates any covenant in the Borrower Agreement or otherwise
defaults thereunder.

Exim Guarantee .

If the Exim Guarantee ceases for any reason to be in full force and effect, or
if the Exim Bank declares the Exim Guarantee void or revokes any obligations
under the Exim Guarantee.

BANK'S RIGHTS AND REMEDIES

Rights and Remedies.

When an Event of Default occurs and continues Bank may, without notice or
demand, do any or all of the following:

Declare all Obligations immediately due and payable (but if an Event of Default
described in Section 8.5 occurs all Obligations are immediately due and payable
without any action by Bank);

Stop advancing money or extending credit for Borrower's benefit under this
Agreement or under any other agreement between Borrower and Bank;

Settle or adjust disputes and claims directly with account debtors for amounts,
on terms and in any order that Bank considers advisable;

Make any payments and do any acts it considers necessary or reasonable to
protect its security interest in the Collateral. Borrower will assemble the
Collateral if Bank requires and make it available as Bank designates. Bank may
enter premises where the Collateral is located, take and maintain possession of
any part of the Collateral, and pay, purchase, contest, or compromise any Lien
which appears to be prior or superior to its security interest and pay all
expenses incurred. Borrower grants Bank a license to enter and occupy any of its
premises, without charge, to exercise any of Bank's rights or remedies;

(i) Bank may place a "hold" on any deposit account of Borrower maintained with
Bank, and (ii) apply to the Obligations any (1) balances and deposits of
Borrower it holds, or (2) any amount held by Bank owing to or for the credit or
the account of Borrower;

Ship, reclaim, recover, store, finish, maintain, repair, prepare for sale,
advertise for sale, and sell the Collateral. To the extent not prohibited under
applicable law or under an enforceable provision of a contract, Bank is granted
a non-exclusive, royalty-free license or other right to use while an Event of
Default exists, without charge, Borrower's labels, Patents, Copyrights, Mask
Works, rights of use of any name, trade secrets, trade names, Trademarks,
service marks, and advertising matter, or any similar property as it pertains to
the Collateral, in completing production of, advertising for sale, and selling
any Collateral and, in connection with Bank's exercise of its rights under this
Section, Borrower's rights under all licenses and all franchise agreements inure
to Bank's benefit; and

Dispose of the Collateral according to the Code.

Notwithstanding anything to the contrary herein or in the Loan Documents, Bank
will not deliver to any Person any notice of exclusive control, any entitlement
order, or other directions or instructions pursuant to any account control
agreement or similar agreement providing for control of any deposit, investment
or other accounts of Borrower, unless an Event of Default has occurred and is
continuing.

Power of Attorney.

Effective only when an Event of Default occurs and continues, Borrower
irrevocably appoints Bank as its lawful attorney to: (i) endorse Borrower's name
on any checks or other forms of payment or security; (ii) sign Borrower's name
on any invoice or bill of lading for any Account or drafts against account
debtors, (iii) make, settle, and adjust all claims under Borrower's insurance
policies; (iv) settle and adjust disputes and claims about the Accounts directly
with account debtors, for amounts and on terms Bank determines reasonable; and
(v) transfer the Collateral into the name of Bank or a third party as the Code
permits. Bank may exercise the power of attorney to sign Borrower's name on any
documents necessary to perfect or continue the perfection of any security
interest regardless of whether an Event of Default has occurred. Bank's
appointment as Borrower's attorney in fact, and all of Bank's rights and powers,
coupled with an interest, are irrevocable until all Obligations have been fully
repaid and performed and Bank's obligation to provide Credit Extensions
terminates.

Accounts Collection.

When an Event of Default occurs and continues, Bank may notify any Person owing
Borrower money of Bank's security interest in the funds and verify the amount of
the Account. Borrower must collect all payments in trust for Bank and, if
requested by Bank, immediately deliver the payments to Bank in the form received
from the account debtor, with proper endorsements for deposit.

Bank Expenses.

If Borrower fails to pay any amount or furnish any required proof of payment to
third persons, Bank may make all or part of the payment or obtain insurance
policies required in Section 6.5, and take any action under the policies Bank
deems prudent. Any amounts paid by Bank are Bank Expenses and immediately due
and payable, bearing interest at the then applicable rate and secured by the
Collateral. No payments by Bank are deemed an agreement to make similar payments
in the future or Bank's waiver of any Event of Default.

Bank's Liability for Collateral.

If Bank complies with reasonable banking practices and Section 9207 of the Code,
it is not liable for: (a) the safekeeping of the Collateral; (b) any loss or
damage to the Collateral; (c) any diminution in the value of the Collateral; or
(d) any act or default of any carrier, warehouseman, bailee, or other person.
Borrower bears all risk of loss, damage or destruction of the Collateral.

Remedies Cumulative.

Bank's rights and remedies under this Agreement, the Loan Documents, and all
other agreements are cumulative. Bank has all rights and remedies provided under
the Code, by law, or in equity. Bank's exercise of one right or remedy is not an
election, and Bank's waiver of any Event of Default is not a continuing waiver.
Bank's delay is not a waiver, election, or acquiescence. No waiver is effective
unless signed by Bank and then is only effective for the specific instance and
purpose for which it was given.

Demand Waiver.

Borrower waives demand, notice of default or dishonor, notice of payment and
nonpayment, notice of any default, nonpayment at maturity, release, compromise,
settlement, extension, or renewal of accounts, documents, instruments, chattel
paper, and guarantees held by Bank on which Borrower is liable.

Exim Direction.

Upon the occurrence and during the continuance of an Event of Default, Exim Bank
shall have right to (i) direct Bank to exercise the remedies specified in
Section 9.1 and (ii) request that Bank accelerate the maturity of any other
loans to Borrower.

Exim Notification.

Bank has the right to immediately notify Exim Bank in writing if it has
knowledge of any of the following events: (1) any failure to pay any amount due
under this Agreement; (2) the Borrowing Base is less than the sum of the
outstanding Credit Extensions; (3) any failure to pay when due any amount
payable to Bank under any loan owing by Borrower to Bank; (4) the filing of an
action for debtor's relief by, against or on behalf of Borrower; (5) any
threatened or pending material litigation against Borrower, or any dispute
involving Borrower.

If Bank sends a notice to Exim Bank, Bank has the right to send Exim Bank a
written report on the status of events covered by the notice every 30 days after
the date of the original notification, until Bank files a claim with Exim Bank
or the defaults have been cured (but no Advances may be required during the cure
period unless Exim Bank gives its written approval). If directed by Exim Bank,
Bank will have the right to exercise any rights it may have against the Borrower
to demand the immediate repayment of all amount outstandings under the Exim Loan
Documents.

NOTICES

All notices or demands by any party about this Agreement or any other related
agreement must be in writing and be personally delivered or sent by an overnight
delivery service, by certified mail, postage prepaid, return receipt requested,
or by telefacsimile to the addresses set forth at the beginning of this
Agreement. A party may change its notice address by giving the other party
written notice.

CHOICE OF LAW , VENUE AND JURY TRIAL WAIVER

California law governs the Loan Documents without regard to principles of
conflicts of law. Borrower and Bank each submit to the exclusive jurisdiction of
the State and Federal courts in Santa Clara County, California. Any references
in the Borrower Agreement to the laws of the State of New York, shall be deemed
a reference to the laws of the State of California.

BORROWER AND BANK EACH WAIVE THEIR RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE
OF ACTION ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY CONTEMPLATED
TRANSACTION, INCLUDING CONTRACT, TORT, BREACH OF DUTY AND ALL OTHER CLAIMS. THIS
WAIVER IS A MATERIAL INDUCEMENT FOR BOTH PARTIES TO ENTER INTO THIS AGREEMENT.
EACH PARTY HAS REVIEWED THIS WAIVER WITH ITS COUNSEL.

GENERAL PROVISIONS

Successors and Assigns

.

This Agreement binds and is for the benefit of the successors and permitted
assigns of each party. Borrower may not assign this Agreement or any rights
under it without Bank's prior written consent which may be granted or withheld
in Bank's discretion. Bank has the right, without the consent of or notice to
Borrower, to sell, transfer, negotiate, or grant participation in all or any
part of, or any interest in, Bank's obligations, rights and benefits under this
Agreement; provided that if Bank grants any participation in Bank's rights and
benefits under this Agreement, the Borrower shall only be required to deal with
Bank with respect to the administration of the transactions under this
Agreement, including, without limitation, by only being required to give any
notices hereunder to Bank or take directions hereunder from Bank.

Indemnification.

Borrower will indemnify, defend and hold harmless Bank and its officers,
employees, and agents against: (a) all obligations, demands, claims, and
liabilities asserted by any other party in connection with the transactions
contemplated by the Loan Documents; and (b) all losses or Bank Expenses
incurred, or paid by Bank from, following, or consequential to transactions
between Bank and Borrower (including reasonable attorneys fees and expenses),
except for losses caused by Bank's gross negligence or willful misconduct.

Time of Essence.

Time is of the essence for the performance of all obligations in this Agreement.

Severability of Provision.

Each provision of this Agreement is severable from every other provision in
determining the enforceability of any provision.

Amendments in Writing, Integration.

All amendments to this Agreement must be in writing and signed by Borrower and
Bank. This Agreement represents the entire agreement about this subject matter,
and supersedes prior negotiations or agreements. All prior agreements,
understandings, representations, warranties, and negotiations between the
parties about the subject matter of this Agreement merge into this Agreement and
the Loan Documents.

Counterparts.

This Agreement may be executed in any number of counterparts and by different
parties on separate counterparts, each of which, when executed and delivered,
are an original, and all taken together, constitute one Agreement.

Survival.

All covenants, representations and warranties made in this Agreement continue in
full force while any Obligations arising hereunder remain outstanding (other
than contingent indemnification obligations with respect to unasserted claims).
Borrower may terminate this Agreement at any time without penalty or premium
upon five (5) days' prior written notice to Bank with payment in full of all
outstanding monetary Obligations, so long as Borrower shall have fully secured
with cash any outstanding reimbursement obligations pursuant to Section 2.1.2.
The obligations of Borrower in Section 12.2 to indemnify Bank will survive until
all statutes of limitations for actions that may be brought against Bank have
run.

Confidentiality.

In handling any confidential information, Bank will exercise the same degree of
care that it exercises for its own proprietary information, but disclosure of
information may be made (i) to Bank's subsidiaries or affiliates in connection
with their business with Borrower, (ii) to prospective transferees or purchasers
of any interest in the loans that are not competitors of Borrower (provided,
however, Bank shall use commercially reasonable efforts in obtaining such
prospective transferees or purchasers agreement of the terms of this provision),
(iii) as required by law, regulation, subpoena, or other order, (iv) as required
in connection with Bank's examination or audit and (v) as Bank considers
appropriate in exercising remedies under this Agreement in its good faith
judgment. Confidential information does not include information that either: (a)
is in the public domain (other than as a result of Bank's disclosure) or in
Bank's possession when disclosed to Bank, or becomes part of the public domain
after disclosure to Bank; or (b) is disclosed to Bank by a third party, if Bank
does not know that the third party is prohibited from disclosing the
information.

Attorneys' Fees, Costs and Expenses.

In any action or proceeding between Borrower and Bank arising out of the Loan
Documents, the prevailing party will be entitled to recover its reasonable
attorneys' fees and other reasonable costs and expenses incurred, in addition to
any other relief to which it may be entitled.

DEFINITIONS

Definitions.

In this Agreement:

"Accounts" are all existing and later arising accounts, contract rights, and
other obligations owed Borrower in connection with its sale or lease of goods
(including licensing software and other technology) or provision of services,
all credit insurance, guaranties, other security and all merchandise returned or
reclaimed by Borrower and Borrower's Books relating to any of the foregoing.

"Advance" or "Advances" is a loan advance (or advances) under the Committed
Revolving Line.

"Affiliate" of a Person is a Person that owns or controls directly or indirectly
the Person, any Person that controls or is controlled by or is under common
control with the Person, and each of that Person's senior executive officers,
directors, partners and, for any Person that is a limited liability company,
that Person's managers and members.

"Availability"

means, as of any date of determination, the amount that Borrower is entitled to
borrow as Advances under the Committed Domestic Line or the Committed Exim Line,
as applicable, (after giving effect to all then outstanding Advances and all
sublimits and reserves applicable thereunder).

"Bank Expenses" are all audit fees and expenses and reasonable costs and
expenses (including reasonable attorneys' fees and expenses) for preparing,
negotiating, administering, defending and enforcing the Loan Documents
(including appeals or Insolvency Proceedings).

"Borrower Agreement"

is the Export-Import Bank of the United States Working Capital Guarantee Program
Borrower Agreement between Borrower and Bank.

"Borrower's Books" are all Borrower's books and records including ledgers,
records regarding Borrower's assets or liabilities, the Collateral, business
operations or financial condition and all computer programs or discs or any
equipment containing the information.

"Borrowing Base" is the sum of:

the sum of (x) 80% of Eligible Accounts and (y) the lesser of (A) 50% all
Eligible Retainage Accounts, and (B) $500,000, as determined by Bank from
Borrower's most recent Domestic Borrowing Base Certificate (the "Domestic
Borrowing Base"), plus

the sum of (x) 90% of Exim Eligible Foreign Accounts, (y) the lesser of (A) 25%
of all Exim Eligible Foreign Retainage Accounts, and (B) $500,000, and (z) the
least of (I) 75% of Exim Eligible Foreign Inventory (valued at the lower of cost
or market), (II) $4,000,000, and (III) 60% of the aggregate outstanding amount
of Exim Advances including the Exim Soft Advances, as determined by Bank from
Borrower's most recent Exim Borrowing Base Certificate (the "Exim Borrowing
Base").

provided

, however, that Bank may lower the percentages set forth in the Borrowing Base
in its good faith credit judgment after performing an audit of Borrower's
Collateral.

"Business Day" is any day that is not a Saturday, Sunday or a day on which the
Bank is closed.

"Cash Management Services"

are defined in Section 2.1.4.

"Change in Control"

shall mean a transaction in which any "person" or "group" (within the meaning of
Section 13(d) and 14(d)(2) of the Securities Exchange Act of 1934) becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Securities Exchange Act
of 1934), directly or indirectly, of a sufficient number of shares of all
classes of stock then outstanding of Borrower ordinarily entitled to vote in the
election of directors, empowering such "person" or "group" to elect a majority
of the Board of Directors of Borrower, who did not have such power before such
transaction.

"Closing Date" is the date of this Agreement.

"Code" is the California Uniform Commercial Code.

"Collateral" is the property described on Exhibit A.

"Committed Revolving Line" are Advances of up to $15,000,000 in the aggregate,
under the Exim Committed Line and the Domestic Committed Line.

"Contingent Obligation" is, for any Person, any direct or indirect liability,
contingent or not, of that Person for (i) any indebtedness, lease, dividend,
letter of credit or other obligation of another such as an obligation directly
or indirectly guaranteed, endorsed, co-made, discounted or sold with recourse by
that Person, or for which that Person is directly or indirectly liable; (ii) any
obligations for undrawn letters of credit for the account of that Person; and
(iii) all obligations from any interest rate, currency or commodity swap
agreement, interest rate cap or collar agreement, or other agreement or
arrangement designated to protect a Person against fluctuation in interest
rates, currency exchange rates or commodity prices; but "Contingent Obligation"
does not include endorsements in the ordinary course of business. The amount of
a Contingent Obligation is the stated or determined amount of the primary
obligation for which the Contingent Obligation is made or, if not determinable,
the maximum reasonably anticipated liability for it determined by the Person in
good faith; but the amount may not exceed the maximum of the obligations under
the guarantee or other support arrangement.

"Copyrights" are all copyright rights, applications or registrations and like
protections in each work or authorship or derivative work, whether published or
not (whether or not it is a trade secret) now or later existing, created,
acquired or held.

"Credit Extension" is each Advance, Letter of Credit, Exchange Contract, or any
other extension of credit by Bank for Borrower's benefit.

"Current Liabilities" are the aggregate amount of Borrower's Total Liabilities
that mature within one (1) year, which Current Liabilities include the
Obligations.

"Deferred Revenue" is all amounts received in advance of performance under a
contract and not yet recognized as revenue.

"Designated Product Line"

means Borrower's product line as set forth on Schedule 13.1(D).

"Domestic Advance"

is a loan advance (or advances) under the Domestic Committed Line.

"Domestic Borrowing Base" is defined in the definition of "Borrowing Base" set
forth in this Section 13.1.

"Domestic Borrowing Base Certificate"

is a Domestic Borrowing Base Certificate in the form of Exhibit C.

"Domestic Committed Line" is a Domestic Advance of up to $5,000,000, pursuant to
Section 2.1.1(a)(1).

"Domestic Standby Letter of Credit Reserve" is an amount equal to the issued and
outstanding (including drawn but unreimbursed Letters of Credit) Excess Standby
Letters of Credit.

"Eligible Accounts" are Accounts in the ordinary course of Borrower's business
that meet all Borrower's representations and warranties in Section 5; but Bank
in its good faith business judgment may change eligibility standards by giving
Borrower notice. Unless Bank agrees otherwise in writing, Eligible Accounts will
not include:

Accounts that the account debtor has not paid within 90 days of invoice date;

Accounts for an account debtor, 50% or more of whose Accounts have not been paid
within 90 days of invoice date;

Credit balances over 90 days from invoice date;

Accounts for an account debtor, including Affiliates, whose total obligations to
Borrower exceed 25% of all Accounts, for the amounts that exceed that
percentage, unless the Bank approves otherwise in writing, except that such
percentage shall be 40% with respect to the domestic Accounts of the Significant
Account Debtor;

Accounts for which the account debtor does not have its principal place of
business in the United States;

Accounts for which the account debtor is a federal entity or any department,
agency, or instrumentality except for Accounts of the United States if the payee
has assigned its payment rights to Bank and the assignment has been acknowledged
under the Assignment of Claims Act of 1940 (31 U.S.C.ss. 3727);

Accounts for which Borrower owes the account debtor, but only up to the amount
owed (sometimes called "contra" accounts, accounts payable, customer deposits or
credit accounts);

Accounts for demonstration or promotional equipment, or in which goods are
consigned, sales guaranteed, sale or return, sale on approval, bill and hold, or
other terms if account debtor's payment may be conditional;

Accounts for which the account debtor is Borrower's Affiliate, officer,
employee, or agent;

Accounts in which the account debtor disputes liability or makes any claim and
Bank reasonably believes there may be a basis for dispute (but only up to the
disputed or claimed amount), or if the Account Debtor is subject to an
Insolvency Proceeding, or becomes insolvent, or goes out of business; and

Accounts for which Bank reasonably determines collection to be doubtful.

"Eligible Retainage Accounts" are Accounts that would otherwise constitute
Eligible Accounts but for the fact that such Accounts are Retainage Accounts.

"Equipment" is all present and future machinery, equipment, tenant improvements,
furniture, fixtures, vehicles, tools, parts and attachments in which Borrower
has any interest.

"ERISA" is the Employment Retirement Income Security Act of 1974, and its
regulations.

"Excess Standby Letters of Credit"

are standby Letters of Credit for which there is insufficient Availability under
the Domestic Committed Line (and therefore are reserved against the Exim
Committed Line) in an aggregate face amount (including drawn but unreimbursed
letters of credit) not to exceed the lesser of: (i) Availability under the Exim
Committed Line and (ii) $3,500,000.

"Exim Advance"

is a loan advance (or advances) under the Exim Committed Line.

"Exim Bank"

is the Export-Import Bank of the United States.

"Exim Bank Expenses"

are all audit fees and expenses; reasonable costs or expenses (including
reasonable attorneys' fees and expenses) for preparing, negotiating,
administering, defending and enforcing the Exim Loan Documents (including
appeals or Insolvency Proceedings) and the fees that the Bank pays to the Exim
Bank in consideration of the issuance of the Exim Guarantee.

"Exim Borrowing Base" is defined in the definition of "Borrowing Base" set forth
in this Section 13.1.

"Exim Borrowing Base Certificate"

is a Exim Borrowing Base Certificate in the form of Exhibit C.

"Exim Committed Line"

is an Exim Advance of up to $10,000,000, pursuant to Section 2.1.1(a)(2).

"Exim Eligible Foreign Accounts" are Accounts payable in United States Dollars
that arise in the ordinary course of Borrower's business from Borrower's sale of
Exim Eligible Foreign Inventory (i) that the account debtor does not have its
principal place of business in the United States and (ii) that have been
assigned and comply with all of Borrower's representations and warranties in;
but Bank, in its good faith business judgment, may change eligibility standards
by giving Borrower notice. Unless Bank agrees otherwise in writing, Exim
Eligible Foreign Accounts will not include:

(a) Accounts with terms of sales greater than 90 days.

(b) Accounts which are more than sixty (60) calendar days past the original due
date, unless it is insured through Exim Bank export credit insurance for
comprehensive commercial and political risk, or through Exim Bank approved
private insurers for a comparable coverage, in which case ninety (90) calendar
days shall apply;

(c) Credit balances over 60 days from due date of the relevant invoice;

(d) Accounts evidenced by a letter of credit until the date of shipment of the
items covered by the subject letter of credit;

(e) Accounts for which the account debtor is a military or defense entity;

(f) Accounts for which Borrower owes the account debtor, but only up to the
amount owed (sometimes called "contra" accounts, accounts payable, customer
deposits or credit accounts);

(g) Accounts for demonstration or promotional equipment, or in which goods are
consigned, sales guaranteed, sale or return, sale on approval, bill and hold, or
other terms if account debtor's payment may be conditional;

(h) Accounts for which the account debtor is Borrower's Affiliate, officer,
employee, or agent;

(i) Accounts in which the account debtor disputes liability or makes any claim
and Bank believes there may be a basis for dispute (but only up to the disputed
or claimed amount), or if the Account Debtor is subject to an Insolvency
Proceeding, or becomes insolvent, or goes out of business;

(j) Accounts generated by the sale of products purchased for military purposes;

(k) Accounts generated by the sales of Inventory which constitute defense
articles or defense services;

(l) Accounts excluded from the Borrowing Base under the Borrower Agreement;

(m) Accounts that arise from the sales of items not in the ordinary course of
Borrower's business;

(n) Accounts not owned by Borrower or that are subject to any right, claim or
interest of another person other than the lien in favor of Bank;

(o) Accounts with respect to which an invoice has not been sent;

(p) Accounts billed and payable outside the United Stated unless approved in
writing by Exim Bank, however, limited to no more than 50% of the Exim Borrowing
Base shall be of such accounts; and such Accounts are subject to the following:

 i.   Each subsidiary or affiliate is a party to the Loan Agreement;
 ii.  All proceeds are remitted to the United States on a monthly basis
      (excluding the retention of proceeds for the purpose of funding local
      expenses);
 iii. Accounts are derived from eligible exports originating from the United
      States;
 iv.  Bank obtains a valid first priority security interest (or equivalent) in
      the jurisdiction where the Accounts are located; and
 v.   Bank obtains a legal opinion from local counsel with regard to the
      enforceability of such security interest.

(q) Accounts from account debtors with balance of 50% over 60 days past the
invoice due date;

(r) Accounts with open account term with balance more than 25% concentration of
total Exim Eligible Foreign Accounts, unless pre-approved by Bank;

(s) Accounts billed in currencies other than U.S. Dollars, unless approved in
writing by Exim Bank;

(t) Accounts from foreign buyers in countries where Exim Bank is legally
prohibited from doing business or in which Exim Bank coverage is not available
(as designated in the Country Limitation Schedule);

(u) Accounts backed by letters of credit unacceptable to Bank in its reasonable
and good faith credit judgment;

(v) Accounts for which Bank or Exim Bank determines collection to be doubtful,
with Bank's determination of same to be reasonable;

(w) Accounts for which the items giving rise to such Account have not been
shipped and delivered to and accepted by the Buyer or the services giving rise
to such Account have not been performed by Borrower and accepted by the Buyer or
the Account does not represent a final sale;

(x) Accounts for which Borrower has made any agreement with the Buyer for any
deduction therefrom, except for discounts or allowances made in the ordinary
course of business for prompt payment, all of which discounts or allowances are
reflected in the calculation of the face value of each respective invoice
related thereto; and

(y) Accounts for which any of the items giving rise to such Account have been
returned, rejected or repossessed.

"Exim Eligible Foreign Inventory"

is Borrower's Inventory purchased or manufactured for resale (to buyers located
outside the United States), located in the United States, other than Inventory
that is excluded under the Borrower Agreement and this Agreement. Exim Eligible
Foreign Inventory will not include the following:

(a) Inventory not located in the United States;

(b) Any demonstration Inventory or Inventory sold on consignment;

(c) Inventory consisting of proprietary software not intended for sale;

(d) Inventory previously exported from the United States;

(e) Inventory which constitutes defense articles or defense services;

(f) Inventory destined for shipment to prohibited countries in which Exim Bank
is legally prohibited from doing business as designated in the most recent
Country Limitation Schedule;

(g) Inventory destined for shipment to a country in which Exim coverage is not
available as designated in the most recent Country Limitation Schedule;

(h) Inventory which is to be incorporated into items whose sale would result in
ineligible accounts receivable;

(i) Inventory with offsetting claims;

(j) Inventory that is damaged, defective, obsolete, returned, recalled or unfit
for further processing;

(k) Inventory that is not subject to a valid, perfected first priority Lien in
favor of Bank;

Inventory that is located at an address that has not been disclosed to Bank in
writing; and

Inventory that is in the possession of a processor or bailee, or located on
premises leased or subleased to Borrower, or on premises subject to a mortgage
in favor of a Person other than Bank, unless such processor or bailee or
mortgagee or the lessor or sublessor of such premises, as the case may be, has
executed and delivered all documentation which Bank shall require to evidence
the subordination or other limitation or extinguishment of such Person's rights
with respect to such Inventory and Bank's right to gain access thereto; and

Inventory incorporated into items which are destined for shipment to a country
in which Exim coverage is not available as designated in the most recent Country
Limitation Schedule unless sold under a letter of credit reasonably acceptable
to Exim Bank;

"Exim Eligible Foreign Retainage Accounts" are Accounts that would otherwise
constitute Exim Eligible Foreign Accounts but for the fact that such Accounts
are Retainage Accounts.

"Exim Guarantee" is that certain Master Guarantee Agreement or other agreement,
as amended from time to time, the terms of which are incorporated into this
Agreement.

"Exim Loan Documents"

means this Agreement, any note or notes executed by Borrower or any other
agreement entered into in connection with this Agreement, pursuant to which Exim
Bank guarantees Borrower's obligations under this Agreement.

"Exim Soft Advances"

is defined in Section 2.1.1(a)(2).

"Export Order"

is a written export order or contract for the purchase by the buyer from the
Borrower of any finished goods or services which are intended for export.

"FX Forward Contract" is defined in Section 2.1.3.

"FX Reserve " is defined in Section 2.1.3.

"GAAP" is generally accepted accounting principles.

"Guarantor" is any present or future guarantor of the Obligations, including
sample.

"Indebtedness" is (a) indebtedness for borrowed money or the deferred price of
property or services, such as reimbursement and other obligations for surety
bonds and letters of credit, (b) obligations evidenced by notes, bonds,
debentures or similar instruments, (c) capital lease obligations and
(d) Contingent Obligations.

"Insolvency Proceeding" are proceedings commenced by the filing of a petition
for relief by or against any Person under the United States Bankruptcy Code, or
any other bankruptcy or insolvency law, including assignments for the benefit of
creditors, compositions, extensions generally with its creditors, or proceedings
seeking reorganization, arrangement, or other relief.

"Intellectual Property" is:

Copyrights, Trademarks, Patents, and Mask Works including amendments, renewals,
extensions, and all licenses or other rights to use and all license fees and
royalties from the use;

Any trade secrets and any intellectual property rights in computer software and
computer software products now or later existing, created, acquired or held;

All design rights which may be available to Borrower now or later created,
acquired or held;

Any claims for damages (past, present or future) for infringement of any of the
rights above, with the right, but not the obligation, to sue and collect damages
for use or infringement of the intellectual property rights above;

All proceeds and products of the foregoing, including all insurance, indemnity
or warranty payments.

"Inventory" is present and future inventory in which Borrower has any interest,
including merchandise, raw materials, parts, supplies, packing and shipping
materials, work in process and finished products intended for sale or lease or
to be furnished under a contract of service, of every kind and description now
or later owned by or in the custody or possession, actual or constructive, of
Borrower, including inventory temporarily out of its custody or possession or in
transit and including returns on any accounts or other proceeds (including
insurance proceeds) from the sale or disposition of any of the foregoing and any
documents of title.

"Investment" is any beneficial ownership of (including stock, partnership
interest or other securities) any Person, or any loan, advance or capital
contribution to any Person.

"Letter of Credit" is defined in Section 2.1.2.

"Lien" is a mortgage, lien, deed of trust, charge, pledge, security interest or
other encumbrance.

"Loan Documents" are, collectively, this Agreement, any note, or notes or
guaranties executed by Borrower or Guarantor, and any other present or future
agreement between Borrower and/or for the benefit of Bank in connection with
this Agreement, all as amended, extended or restated.

"Mask Works" are all mask works or similar rights available for the protection
of semiconductor chips, now owned or later acquired.

"Material Adverse Change" is defined in Section 8.3.

"Obligations" are debts, principal, interest, Bank Expenses and other amounts
Borrower owes Bank now or later, including cash management services, letters of
credit and foreign exchange contracts, if any and including interest accruing
after Insolvency Proceedings begin and debts, liabilities, or obligations of
Borrower assigned to Bank.

"Patents" are patents, patent applications and like protections, including
improvements, divisions, continuations, renewals, reissues, extensions and
continuations-in-part of the same.

"Permitted Indebtedness" is:

Borrower's indebtedness to Bank under this Agreement or any other Loan Document;

Indebtedness existing on the Closing Date and shown on the Schedule;

Subordinated Debt;

Indebtedness to trade creditors incurred in the ordinary course of business;

Indebtedness secured by Permitted Liens;

The following Indebtedness incurred in the ordinary course of Borrower's
business: Indebtedness of Borrower to any Subsidiary and Contingent Obligations
of any Subsidiary with respect to obligations of Borrower (provided that the
primary obligations of Borrower are not prohibited hereby), Indebtedness of any
Subsidiary to Borrower or any domestic Subsidiary and Contingent Obligations of
any Subsidiary with respect to obligations of another Subsidiary (provided that
the primary obligations of the other Subsidiary are not prohibited hereby); and

Extensions, refinancings, modifications, amendments and restatements of any
items of Permitted Indebtedness described in (a) through (f) above, provided
that (i) the principal amount thereof is not increased, (ii) the terms thereof
are not modified to impose more burdensome terms upon Borrower or its
Subsidiaries, and (iii) any subordination agreements relating thereto which
existed prior to the taking of such actions must be effective in all respects
after the completion of such actions.

"Permitted Investments

" are:

Investments shown on the Schedule and existing on the Closing Date;

(i)  marketable direct obligations issued or unconditionally guaranteed by the
United States or its agency or any State maturing within 1 year from its
acquisition, (ii) 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., (iii) Bank's certificates of deposit issued
maturing no more than 1 year after issue, and (iv) Investments permitted by
Borrower's investment policy, a copy of which is attached hereto as Exhibit
13.1(P), together with Investments allowed from time to time by Borrower's Board
of Directors with prior written notice to Bank;

Acquisitions permitted under Section 7.3;

Investments consisting of the endorsement of negotiable instruments for deposit
or collection or similar transactions in the ordinary course of Borrower's
business;

Investments in the ordinary course of Borrower's business consisting of (i)
travel advances and employee relocation loans and other employee loans, and (ii)
loans to employees, officers or directors relating to the purchase of equity
securities of Borrower or its Subsidiaries pursuant to employee stock purchase
or employee stock option plans approved by Borrower's Board of Directors;

Investments (including debt obligations) received in connection with the
bankruptcy or reorganization of customers or suppliers and in settlement of
delinquent obligations of, and other disputes with, customers or suppliers
pursuant to Borrower's customary practices as they exist at execution of this
Agreement;

Investments consisting of notes receivable of, or prepaid royalties and other
credit extensions, to customers and suppliers who are not Affiliates pursuant to
Borrower's customary practices as they exist at execution of this Agreement;

Strategic Investments in customers, vendors, suppliers and other Persons in the
same industries as Borrower and its Subsidiaries, including the exercise of
warrants to purchase capital stock of such Persons in an aggregate amount not to
exceed $1,000,000 per year so long as no Event of Default exists or will result
from such actions;

Investments pursuant to or arising under currency agreements or interest rate
agreements entered into in the ordinary course of business and consistent with
policies issued by Borrower's Board of Directors;

Subject to the terms of Section 6.6, deposit and investment accounts of Borrower
in which Bank has a Lien prior to any other Lien (other than Liens securing fees
and expenses of the depository or investment intermediary);

Investments in Subsidiaries, consisting of loans, cash Investments, and other
capital contributions, to cover operating expenses and capital expenditures so
long as such investments do not exceed $3,000,000 in the aggregate during any
fiscal year of Borrower; and

Subject to the terms and conditions of Section 6.6, Deposits and investment
accounts of any Subsidiary maintained in the ordinary course of business

"Permitted Liens"

are:

Liens existing on the Closing Date and shown on the Schedule or arising under
this Agreement or other Loan Documents;

Liens for taxes, fees, assessments or other government charges or levies, either
not delinquent or being contested in good faith and for which Borrower maintains
adequate reserves on its Books, if they have no priority over any of Bank's
security interests;

Liens (i) on Equipment and related software acquired or held by Borrower or its
Subsidiaries incurred for financing the acquisition of the Equipment, related
software and related soft costs, or (ii) existing on Equipment when acquired, if
the Lien is confined to the property and improvements and the proceeds of the
Equipment and related software;

Liens in favor of other financial institutions arising in connection with
Borrower's deposit or investment accounts held at such institutions to secure
fees and charges in connection with said accounts if such deposit or investment
accounts are permitted by Section 6.6;

Statutory Liens securing claims or demands not yet delinquent of materialmen,
mechanics, carriers, warehousemen, landlords and other like Persons imposed
without action of such parties;

Liens to secure payment of workers' compensation, employment insurance, old-age
pensions, social security and other like obligations arising in the ordinary
course of Borrower's business for obligations not yet delinquent;

Liens on insurance proceeds in favor of insurance companies granted solely as
security for financed premiums;

Liens in favor of customs and revenue authorities arising as a matter of law to
secure payment of customs duties in connection with the importation of goods;

Liens arising from the filing of any financing statement relating to operating
leases otherwise permitted hereunder;

Liens that are not prior to the Bank's security interests which constitute
rights of offset of a customary nature;

Licenses or sublicenses granted in the ordinary course of Borrower's business
and any interest or title of a licensor or under any license or sublicense;

Leases or subleases granted in the ordinary course of Borrower's business,
including in connection with Borrower's leased premises or leased property;

Liens incurred in the extension, renewal or refinancing of the indebtedness
secured by Liens described in (a) through (c), but any extension, renewal or
replacement Lien must be limited to the property encumbered by the existing Lien
and the principal amount of the indebtedness may not increase.

"Person" is any individual, sole proprietorship, partnership, limited liability
company, joint venture, company association, trust, unincorporated organization,
association, corporation, institution, public benefit corporation, firm, joint
stock company, estate, entity or government agency.

"Prime Rate" is Bank's most recently announced "prime rate," even if it is not
Bank's lowest rate.

"Quick Assets" is, on any date, the sum of Borrower's consolidated, unrestricted
cash, cash equivalents, and net billed accounts receivable, and investments with
maturities of less than twelve months, determined according to GAAP.

"Responsible Officer" is each of the Chief Executive Officer, the President, the
Chief Financial Officer and the Controller of Borrower.

"Retainage Account"

is a portion of an Account that is conditional and remains subject to buyer's
acceptance.

"Revolving Maturity Date" is June 13, 2004.

"Schedule" is any attached schedule of exceptions.

"Significant Account Debtor"

means the account debtor identified on Schedule 13.1(S).

"Subordinated Debt" is debt incurred by Borrower subordinated to Borrower's
indebtedness owed to Bank and which is reflected in a written agreement in a
manner and form acceptable to Bank and approved by Bank in writing.

"Subsidiary" is for any Person, or any other business entity of which more than
50% of the voting stock or other equity interests is owned or controlled,
directly or indirectly, by the Person or one or more Affiliates of the Person.

"Tangible Net Worth" is, on any date, the consolidated total assets of Borrower
and its Subsidiaries minus, (i) any amounts attributable to (a) goodwill, (b)
intangible items such as unamortized debt discount and expense, Patents, trade
and service marks and names, Copyrights and research and development expenses
except prepaid expenses, and (c) reserves not already deducted from assets, and
(ii) Total Liabilities.

"Total Liabilities" is on any day, obligations that should, under GAAP, be
classified as liabilities on Borrower's consolidated balance sheet, including
all Indebtedness, and current portion Subordinated Debt allowed to be paid, but
excluding all other Subordinated Debt.

"Trademarks" are trademark and servicemark rights, registered or not,
applications to register and registrations and like protections, and the entire
goodwill of the business of Assignor connected with the trademarks.

BORROWER:

THERMA-WAVE, INC.

 

By:

Title:

 

BANK:

SILICON VALLEY BANK

 

By:

Title:

EXHIBIT A

The Collateral consists of all of Borrower's right, title and interest in and to
the following whether now owned or hereafter arising and whether the Borrower
has rights now or hereafter has rights therein and wherever located:

All goods and equipment now owned or hereafter acquired, including, without
limitation, all machinery, fixtures, vehicles (including motor vehicles and
trailers), and any interest in any of the foregoing, and all attachments,
accessories, accessions, replacements, substitutions, additions, and
improvements to any of the foregoing, wherever located;

All inventory, now owned or hereafter acquired, including, without limitation,
all merchandise, raw materials, parts, supplies, packing and shipping materials,
work in process and finished products including such inventory as is held for
sale or lease, or to be furnished under a contract of service or is temporarily
out of Borrower's custody or possession or in transit and including any returns
or repossession upon any accounts or other proceeds, including insurance
proceeds, resulting from the sale or disposition of any of the foregoing and any
documents of title representing any of the above;

All contract rights and general intangibles now owned or hereafter acquired,
including, without limitation, goodwill, trademarks, servicemarks, trade styles,
trade names, patents, patent applications, leases, license agreements, franchise
agreements, blueprints, drawings, purchase orders, customer lists, route lists,
infringements, claims, computer programs, computer discs, computer tapes,
literature, reports, catalogs, design rights, income tax refunds, payments of
insurance, payment intangibles, and rights to payment of any kind;

All now existing and hereafter arising accounts (including health-care insurance
receivables), contract rights, royalties, license rights and all other forms of
obligations owing to Borrower arising out of the sale or lease of goods, the
licensing of technology or the rendering of services by Borrower, whether or not
earned by performance, and any and all credit insurance, guaranties, and other
security therefor, as well as all merchandise returned to or reclaimed by
Borrower;

All documents (including negotiable documents), cash, deposit accounts,
securities, securities entitlements, securities accounts, investment property,
financial assets, letters of credit, letter of credit rights, money,
certificates of deposit, instruments (including promissory notes) and chattel
paper (including tangible and electronic chattel paper) now owned or hereafter
acquired and Borrower's Books relating to the foregoing;

All copyright rights, copyright applications, copyright registrations and like
protections in each work of authorship and derivative work thereof, whether
published or unpublished, now owned or hereafter acquired; all trade secret
rights, including all rights to unpatented inventions, know-how, operating
manuals, license rights and agreements and confidential information, now owned
or hereafter acquired; all claims for damages by way of any past, present and
future infringement of any of the foregoing; and

All Borrower's Books relating to the foregoing, and the computers and equipment
containing said books and records, and any and all claims, rights and interests
in any of the above and all substitutions for, additions and accessions to and
proceeds thereof.

EXHIBIT B

LOAN PAYMENT/ADVANCE TELEPHONE REQUEST FORM

DEADLINE FOR SAME DAY PROCESSING IS 12:00 NOON, P.S.T.

TO: CENTRAL CLIENT SERVICE DIVISION DATE:

FAX#: (408) 496-2426 TIME:

FROM: Therma-Wave, Inc.

CLIENT NAME (BORROWER)

REQUESTED BY:

AUTHORIZED SIGNER'S NAME

AUTHORIZED SIGNATURE:

PHONE NUMBER:

FROM ACCOUNT #               ;             TO ACCOUNT #

REQUESTED TRANSACTION TYPE

REQUESTED DOLLAR AMOUNT

PRINCIPAL INCREASE (ADVANCE) $

PRINCIPAL PAYMENT (ONLY) $

INTEREST PAYMENT (ONLY) $

PRINCIPAL AND INTEREST (PAYMENT) $

OTHER INSTRUCTIONS:

All Borrower's representations and warranties in the Loan and Security Agreement
are true, correct and complete in all material respects on the date of the
telephone request for and Advance confirmed by this Borrowing Certificate; but
those representations and warranties expressly referring to another date shall
be true, correct and complete in all material respects as of that date.

1

BANK USE ONLY

TELEPHONE REQUEST

:

The following person is authorized to request the loan payment transfer/loan
advance on the advance designated account and is known to me.

Authorized Requester Phone #

Received By (Bank) Phone #

 

Authorized Signature (Bank)

2

EXHIBIT C

DOMESTIC BORROWING BASE CERTIFICATE

Borrower:

Therma-Wave, Inc.

1250 Reliance Way

Fremont, CA 94539

 

Bank:

Silicon Valley Bank

3003 Tasman Drive

Santa Clara, CA 95054

Commitment Amount: $5,000,000

ACCOUNTS RECEIVABLE

1. Accounts Receivable Book Value as of _____________ $

2. Additions (please explain on reverse) $

3. TOTAL ACCOUNTS RECEIVABLE $

ACCOUNTS RECEIVABLE DEDUCTIONS (without duplication)

4. Amounts over 90 days past invoice date $

5. Balance of 50% over 90 day accounts $

6. Credit balances over 90 days from invoice date $

7. Concentration Limits* $

8. Governmental Accounts $

9. Contra Accounts $

10. Promotion or Demo Accounts $

11. Intercompany/Employee Accounts $

12. Disputed Accounts $_____________

13. Doubtful Accounts $_____________

14. Other (please explain on reverse) $

15. TOTAL ACCOUNTS RECEIVABLE DEDUCTIONS $

16. Eligible Accounts (#3 minus #15) $

17. Eligible Retainage Accounts $_____________

18. LOAN VALUE OF ACCOUNTS (80% of #16 plus the lesser of (i) 50% of

(#17and (ii) $500,000) $

* 40% for Significant Account Debtor

BALANCES

19. Maximum Loan Amount $5,000,000

20. Total Funds Available [Lesser of #19 or #18] $

21. Present balance owing on Line of Credit $

22. a. Total outstanding under standby LCs $_____________

b. Line 60 from EXIM BBC $_____________

c. Lessor of $0 or 22a. minus 22b. $_____________

23. Outstanding under Sublimits (commercial LC, CM and FX) $

RESERVE POSITION (#20 minus #21, #22c and #23) $

The undersigned represents and warrants that this is true, complete and correct,
and that the information in this Borrowing Base Certificate complies with the
representations and warranties in the Loan and Security Agreement between the
undersigned and Silicon Valley Bank.

COMMENTS:

THERMA-WAVE, INC.

 

By:

Authorized Signer

BANK USE ONLY

Rec'd By

Authorized Signer

Date:

Verified:

EXHIBIT D

COMPLIANCE CERTIFICATE

TO: SILICON VALLEY BANK

3003 Tasman Drive

Santa Clara, CA 95054

FROM: THERMA-WAVE, INC.

1250 Reliance Way

Fremont, CA 94539

The undersigned authorized officer of Therma-Wave, Inc. ("Borrower") certifies
that under the terms and conditions of the Loan and Security Agreement between
Borrower and Bank (the "Agreement"), (i) Borrower is in complete compliance for
the period ending _______________ with all required covenants except as noted
below and (ii) all representations and warranties in the Agreement are true and
correct in all material respects on this date. Attached are the required
documents supporting the certification together with supporting calculations.
The Officer certifies that these are prepared in accordance with Generally
Accepted Accounting Principles (GAAP) consistently applied from one period to
the next except as explained in an accompanying letter or footnotes. The Officer
acknowledges that no borrowings may be requested at any time or date of
determination that Borrower is not in compliance with any of the terms of the
Agreement, and that compliance is determined not just at the date this
certificate is delivered.

Please indicate compliance status by circling Yes/No under "Complies" column

.

Reporting Covenant

Required

Complies

       

Monthly financial statements + CC

Monthly within 30 days

Yes

No

Annual (Audited)

FYE within 120 days

Yes

No

10-Q, 10-K and 8-K

Within 5 days after filing with SEC

Yes

No

A/R & A/P Agings and Inventory reports

Prior to every Advance*, and Monthly within 30 days

Yes

No

A/R Audit

Initial and Semi-Annual

Yes

No

Borrowing Base Certificates

Prior to every Advance*, and Monthly within 30 days

Yes

No

* An Advance under the Exim Committed Line shall be supported by copies of
Export Orders, invoices, etc.

Financial Covenant

Required

Actual

Complies

         

Maintain on a Monthly Basis:

       

Minimum Quick Ratio (Adjusted)

1:50:1.00

$_______

Yes

No

Profitability:

   

Quarterly

(see below)

$_______ (Actual)

Yes

No

   

Applicable Amt. Req'd.

Applicable Period

<$18,775,000> Quarter-ended 03/31/03

<$8,500,000> Quarter-ended 06/30/03

<$4,500,000> Quarter-ended 09/30/03

<$2,000,000> Quarter-ended 12/31/03

<$1,000,000> Quarter-ended 03/31/04

$0 Each quarter-ended period thereafter.

   

With respect to the Profitability financial covenant above, Borrower hereby
discloses the write-down of intangibles assets in the amounts set forth in the
columns opposite hereto.

Current Compliance Period Write-downs

$__________

Cumulative Write-downs since 01/01/03

$_________

Have there been updates to Borrower's intellectual property, if appropriate?

Yes

No

 

 

Comments Regarding Exceptions:

See Attached.

Sincerely,

THERMA-WAVE, INC.

 

Signature

Title

Date

 

BANK USE ONLY

Received by:

authorized signer

Date:

Verified:

authorized signer

Date:

Compliance Status: Yes No

 

 

EXHIBIT E

EXIM BORROWING BASE CERTIFICATE

COLLATERAL SCHEDULE

(FOREIGN A/R LINE OF CREDIT)

Borrower: Therma-Wave, Inc. Bank: Silicon Valley Bank

FOREIGN ACCOUNTS RECEIVABLE FROM EXPORT ACTIVITIES

1. Foreign Accounts Receivable Book Value as of ____________ $______________

2. Additions (please explain on reverse) $______________

3. TOTAL FOREIGN ACCOUNTS RECEIVABLE $______________

ACCOUNTS RECEIVABLE DEDUCTIONS

4. Accounts with sale terms over 90 days $____________

5. Accounts more than 60 calendar days past original due date unless insured
through Exim Bank $____________

6. Credit Balances over 60 days from due date of the relevant invoice
$____________

7. Accounts in the form of L/Cs, if subject items have not yet been shipped by
Borrower $____________

8. Military and Defense Entity Accounts $____________

9. Contra Accounts $____________

10. Promotion, Demo or Consignment Accounts $____________

11. Intercompany/Employee and affiliate Accts $____________

12. Disputed Accounts $____________

13. Accounts arising from the sale of defense articles or items $____________

14. Accounts excluded under the Borrower Agrt $____________

15. Accounts from sales not in the ordinary course of business $____________

16. Accounts not owned by Borrower $____________

17. Accounts without invoices $____________

18. Accounts billed and payable outside U.S. $____________

19. Accounts with 50% over 60 days past invoice $____________

20. Accounts over 25% concentration $____________

21. Accounts billed in non U.S. currency $____________

22. Accounts in countries prohibited by EXIM $____________

23. Accts supported by LCs not accepted by EXIM $____________

24. Accounts determined doubtful $____________

25. Accounts if the subject items have not been shipped $____________

26. Accounts subject to deduction $____________

27. Accounts if the subject items have been rejected $_____________

28. Other $____________

29. TOTAL ACCOUNTS RECEIVABLE DEDUCTIONS $_______________

30. Eligible Accounts (No. 3 - No. 29) $_______________

31. Exim Eligible Foreign Retainage Accounts $____________

32. Loan Value of Accounts (90% of No. 30 plus the lesser of (i) 25% of No.31,
and (ii) $500,000) $_______________

INVENTORY

33. Inventory Book Value as of ____________________ $_______________

34. Additions (please explain on reverse) $_______________

35. TOTAL INVENTORY $_______________

INVENTORY DEDUCTIONS

36. Inventory for which reserves have been made in accordance with GAAP
$________________

37. Inventory not located in the U.S. $________________

38. Any Demo Inventory or Inventory sold on consignment $_______________

39. Inventory consisting of proprietary software. $_______________

40. Inventory previously exported from the United States $_______________

41. Inventory which constitutes military defense articles or military defense
services. $_______________

42. Inventory destined for shipment to prohibited countries $_______________

43. Inventory destined for shipment to a county in which Exim coverage is not
available $_______________

Inventory which is to be incorporated into

items whose sale would result in ineligible

accounts receivable $________________

45. Inventory with offsetting claims $________________

46. Inventory that is damaged $________________

47. Inventory not subject to Bank's lien $________________

48. Inventory located in undisclosed location $________________

49. Inventory in which Bank does not have access $________________

50. Inventory incorporated in items destined to location in which EXIM coverage
is not available $________________

51. Other (please explain on reverse) $________________

52. TOTAL INVENTORY DEDUCTIONS $_________________

53. Eligible Inventory (No. 35 - No.52) $_________________

54. LOAN VALUE OF INVENTORY (75% of No. 53) $_________________

55. TOTAL AVAILABLE BASE * $_________________

*Not to exceed the lesser of $4,000,000 or 60% of the total Exim Advances plus
Exim Soft Advances.

BALANCES

56. Maximum Loan Amount $10,000,000

57. Total Available

[Lesser of No. 56 or (No.32 + No. 55)] $______________

58. Present balance owing on Line of Credit $______________

59. Outstanding under Sublimits $______________

60. Domestic Standby Letter of Credit** $______________

61. RESERVE POSITION -

[No.57 - (No.58 + No. 59 + No. 60)].

If there are no outstandings under the

Exim Committed Line, then the greater

of [No.57 - (No.58 + No. 59 + No. 60)]

and $0. $______________

** Domestic Standby Letter of Credit Reserve:

If there are outstandings under the Exim Committed Line: the lesser $3,500,000
and No.57 - (No.58 + No. 59).

If there are no outstandings under the Exim Committed Line: the lesser
$3,500,000 and No. 32 + (lesser of $4,000,000 and 1.5 times No. 32 and No. 54).

The undersigned represents and warrants that as of the date hereof the foregoing
is true, complete and correct, that the information reflected in this Collateral
Schedule complies with the representations and warranties set forth in the Loan
and Security Agreement, between Borrower and Bank, and the Borrower Agreement,
executed by Borrower and acknowledged by Lender, each dated June 13, 2003, as
may be amended from time to time, as if all representations and warranties were
made as of the date hereof, and that Borrower is, and shall remain, in full
compliance with its agreements, covenants, and obligations under such
agreements. Such representations and warranties include, without limitation, the
following: Borrower is using disbursements only for the purpose of enabling
Borrower to finance the cost of manufacturing, purchasing or selling items
intended for export. Borrower is not using disbursements for the purpose of: (a)
servicing any of Borrower's unrelated pre-existing or future indebtedness; (b)
acquiring fixed assets or capital goods for the use of Borrower's business; (c)
acquiring, equipping, or renting commercial space outside the United States; or
(d) paying salaries of non-U.S. citizens or non-U.S. permanent residents who are
located in the offices of the United States. Additionally, disbursements are not
being used to finance the manufacture, purchase or sale of all of the following:
(a) Items to be sold to a buyer located in a country in which the Export Import
Bank of the United States is legally prohibited from doing business; (b) that
part of the cost of the items which is not U.S. Content unless such part is not
greater than fifty percent (50%) of the cost of the items and is incorporated
into the items in the United States; (c) defense articles or defense services or
items directly or indirectly destined for use by military organizations designed
primarily for military use (regardless of the nature or actual use of the
items); or (d) any items to be used in the construction, alteration, operation
or maintenance of nuclear power, enrichment, reprocessing, research or heavy
water production facilities.

Sincerely,

BORROWER

THERMA-WAVE, INC.

By:

Name:

Title:

Date:

BANK USE ONLY

Received By:

Date:

Verified By:

 

 

The following are the exceptions to the representations, warranties and
covenants in Sections 5, 6 and 7 made by Therma-Wave, Inc. (the "Company") in
the Loan and Security Agreement, dated as of June 13, 2003, by and between the
Company and Silicon Valley Bank (the "Agreement"). Capitalized terms used in
this schedule, unless otherwise specified, shall have the same meaning given
them in the Agreement. The section references used herein are to the particular
subsections in Sections 5, 6 and 7, respectively, of the Agreement. However,
because a particular disclosure may apply to multiple sections of the Agreement,
all information disclosed herein shall be deemed disclosed under and
incorporated into any section herein where such disclosure would be applicable.
This schedule is qualified in its entirety by reference to the Agreement and is
not intended to constitute any representation or warranty of the Company except
as and to the extent expressly provided in the Agreement.

 

 

 

SCHEDULE 3.1(i)

EXISTING LETTERS OF CREDIT

 

Beneficiary

Property Involved

Last Date of Issue

Issuing Bank

Original Value

Expiration Date

           

Danilo & Lola Piccinini
999 Chip Court
Incline Village, NV 89450

3171 Jay Street
Santa Clara

7/16/2002

Comerica

$ 150,000.00

4/30/2006

           

SDC 950
10600 N. De Anza Blvd
Suite 200
Cupertino, CA 95014

1250 Reliance Way
Fremont, CA

5/8/2003

Comerica

$ 3,500,000.00

5/15/2004

           

A.I. Credit Corp.
160 Water Street
New York, NY 10038

D&O Insurance

3/4/2003

SVB

$ 1,169,630.55

Monthly decrease

3/4/2004

           

Minos Management Company Inc.
c/o Lend Lease Management
3424 Peachtree Rd. N.E. Suite 800
Atlanta, GA 30326
Att: D. Denney Jr.

48500 Kato Rd
Fremont, CA

5/31/2000

Comerica

$ 102,194.27

5/31/2008

 

 

SCHEDULE 5.2

COLLATERAL

Exceptions to Sole Ownership Of Intellectual Property.

The Company licenses, on an exclusive and non- exclusive basis, technology and
other Intellectual Property developed under development and joint development
agreements with other Persons, including an arrangement with Tokyo Electron with
respect to certain software commonly known as "OVERLAY" used in measurement and
testing processes.

Claims of Infringement on Rights of Third Parties

.

On April 22, 2002, the Company filed a patent infringement suit against Boxer
Cross Inc. in the United States District Court, Northern District of California.
The suit alleges that Boxer Cross' BX-10 product infringes certain patents held
by Therma-Wave related to ion implant monitoring. Two of the asserted patents
were previously found to be valid and infringed in a suit filed against
Jenoptik, AG, in 1994. The earlier court rulings led to Jenoptik's withdrawal
from the U.S. market. On June 7, 2002, Boxer Cross filed its amended answer and
counterclaims to Therma-Wave's complaint and asserted various affirmative
defenses to Therma-Wave's claims of patent infringement. The pleading also
contained various counterclaims including allegations that Therma- Wave's
Therma-Probe product infringed upon certain patents owned by Boxer Cross and
also raised claims of misappropriation of trade secrets, tortious interference
with contract, unfair competition and unfair business practices. The Company
replied to Boxer Cross's counterclaims, denying the material allegations and
asserting declaratory judgment counterclaims. On December 9, 2002, the Court
held a Markman claim construction hearing on our patents-in- suit. The Court has
not yet issued its ruling. No discovery deadline or trial date has been set. On
April 29, 2003, Applied Materials announced that it had acquired all of the
outstanding stock of Boxer Cross.

On December 28, 2001, Sensys Instruments Corporation, or Sensys, who became a
wholly-owned subsidiary of the Company in January 2002, was named in a patent
infringement suit filed by KLA-Tencor. KLA-Tencor alleged that it patented an
aspect of the integrated metrology technology that Sensys uses in its integrated
product family. KLA-Tencor is seeking damages and an injunction to stop the sale
of the equipment it alleges uses this aspect. The Company believe none of the
current Sensys products infringes any of the claims of KLA- Tencor's patent.

SCHEDULE 5.3

LITIGATION

 

For information purposes only:

On April 22, 2002, the Company filed a patent infringement suit against Boxer
Cross Inc. in the United States District Court, Northern District of California.
The suit alleges that Boxer Cross' BX-10 product infringes certain patents held
by Therma-Wave related to ion implant monitoring. Two of the asserted patents
were previously found to be valid and infringed in a suit filed against
Jenoptik, AG, in 1994. The earlier court rulings led to Jenoptik's withdrawal
from the U.S. market. On June 7, 2002, Boxer Cross filed its amended answer and
counterclaims to Therma-Wave's complaint and asserted various affirmative
defenses to Therma-Wave's claims of patent infringement. The pleading also
contained various counterclaims including allegations that Therma- Wave's
Therma-Probe product infringed upon certain patents owned by Boxer Cross and
also raised claims of misappropriation of trade secrets, tortious interference
with contract, unfair competition and unfair business practices. The Company
replied to Boxer Cross's counterclaims, denying the material allegations and
asserting declaratory judgment counterclaims. On December 9, 2002, the Court
held a Markman claim construction hearing on our patents-in- suit. The Court has
not yet issued its ruling. No discovery deadline or trial date has been set. On
April 29, 2003, Applied Materials announced that it had acquired all of the
outstanding stock of Boxer Cross.

On December 28, 2001, Sensys Instruments Corporation, or Sensys, who became a
wholly-owned subsidiary of the Company in January 2002, was named in a patent
infringement suit filed by KLA-Tencor. KLA-Tencor alleged that it patented an
aspect of the integrated metrology technology that Sensys uses in its integrated
product family. KLA-Tencor is seeking damages and an injunction to stop the sale
of the equipment it alleges uses this aspect. The Company believe none of the
current Sensys products infringes any of the claims of KLA- Tencor's patent.

The Company has an ongoing dispute with Korean taxing and revenue authorities
regarding VAT liability arising from an audit of VAT payments. The total amount
in dispute is approximately US$650,000.

 

SCHEDULE 5.7

SUBSIDIARIES BRANCHES AND INVESTMENTS

 

Issuer Name

Shares/ Equity Interests Owned by Company

   

Sensys Instruments Corporation

1250 Reliance Way

Fremont, CA 94539

Incorporated in California, January 18, 2002

Statement by Domestic Stock Corporation filed March 8, 2002, file #02-655932

100%

   

Therma-Wave International Sales Corp. (DISC)

1250 Reliance Way

Fremont, CA 94539

Fed ID # 94 2856453

Established: November 10, 1982

Business: Currently Inactive.

100%

   

Thermawave, LTD

The Coach House

Cross Road

Leamington Spa

Warwickshire CV32 5PB

United Kingdom

100%

   

Therma-Wave, K.K.

Yokohama Creation Square 5-1

Sakaecho Kanagawa-ku

Yokohama 221-0052

Japan

Established: November 8, 1990

Business: Service of Therma-Wave, Inc. products.

100%

   

Therma-Wave Korea Branch

Representative Jong Ho Yoon

5th & 6th Floors, Dungdo Building

974-9 Inkye-dong, Paldal-ku

Suwon City, Kyunggi-do

Korea

N/A

   

Therma-Wave Taiwan- Branch

7F No 118, SEC. 1, Tung Ta Road

Hsin-Chu City

Taiwan, ROC 300

N/A

   

Therma-Wave Israel - Branch

5 Badner St.

Ramat-Gan 52542 Israel

N/A

   

Therma-Wave (Shanghai) Co., Ltd.

Unit 1, 16th Floor, Hua Du Mansion

No. 838 Shang Yang Road

Pu Dong, Shanghai

ROC

"Trading" company in WaiGaoQiao Free Trade Zone ("GQ FTZ").

100%

   

Praesagus, Inc.

217,808 shares of Series A Preferred Stock

   

 

 

SCHEDULE 7.4

EXISTING INDEBTEDNESS

As of May 31, 2003:

The Company owes Therma-Wave, K.K. (Japan) US$1,716,315

As of June 5, 2003:

Thermawave, LTD (UK) owes to the Company US$724,890

Thema-Wave (Shanghai) Co., Ltd. owes to the Company US$149,500

SCHEDULE 7.5

EXISTING LIENS

 

Liens evidenced by the following financing statements:

Jurisdiction

Secured Party

Filing Date

File Number

Delaware

DeLage Landen Financial Services, Inc.

02/12/02

20598353

California

DeLage Landen Financial Services, Inc.

05/26/00

0015760055

California

DeLage Landen Financial Services, Inc.

05/31/00

0016060402

California

CIT Technology Financial Services Inc.

07/26/00

0021460327

California

CIT Technology Financing Services Inc.

07/26/00

0021460333

California

DeLage Landen Finacial Services, Inc.

08/14/00

0023460479

California

Newcourt Communications Finance Corporation

08/21/00

0023560807

California

DeLage Landen Financial Services, Inc.

09/26/00

0027960257

California

CIT Technology Financing Services Inc.

09/26/00

0027961467

California

DeLage Landen Financial Services, Inc.

10/16/00

0029860982

California

DeLage Landen Financial Services, Inc.

12/01/00

0034660386

California

CIT Technology Financing Services

12/04/00

0034760765

California

Micron Leasing

12/06/00

0035060620

California

The CIT Group/Equipment Financing Inc.

12/06/00

0035060630

California

Micron Leasing

01/16/01

0102260704

California

DeLage Landen Financial Services, Inc.

02/02/01

0103960788

California

Micron Leasing

02/15/01

0105360681

California

DeLage Landen Financial Services, Inc.

02/23/01

0105861085

California

CIT Technology Financing Services, Inc.

03/22/01

0108760124

California

CIT Technology Financing Services Inc.

05/03/01

0112860713

California*

CIT Technology Financing Services Inc.

07/13/01

0119760182

California*

DeLage Landen Financial Services, Inc.

07/25/01

0121160185

 

 

 

SCHEDULE 7.6

EXISTING INVESTMENTS

 

Investments identified on Schedule 5.6.

Two loans to Allan Rosencwaig, a former officer of the Company, in the
approximate aggregate outstanding principal amount of $1,025,172.

Two loans to David Willenborg, a former officer of the Company, in the
approximate aggregate outstanding principal amount of $55,470..

 

SCHEDULE 13.1

DESIGNATED PRODUCT LINE

 

All "Meta-Probe" product line assets.

SCHEDULE 13.1

SIGNIFICANT ACCOUNT DEBTOR

 

INTELLECTUAL PROPERTY SECURITY AGREEMENT

This Intellectual Property Security Agreement is entered into as of June 13,
2003 by and between SILICON VALLEY BANK ("Bank") and THERMA-WAVE, INC., a
Delaware corporation ("Grantor").

RECITALS

A. Bank has agreed to make certain advances of money and to extend certain
financial accommodation to Grantor (the "Loans") in the amounts and manner set
forth in that certain Loan and Security Agreement by and between Bank and
Grantor dated June 13, 2003 (as the same may be amended, modified or
supplemented from time to time, the "Loan Agreement"; capitalized terms used
herein are used as defined in the Loan Agreement). Bank is willing to make the
Loans to Grantor, but only upon the condition, among others, that Grantor shall
grant to Bank a security interest in certain Copyrights, Trademarks, Patents,
and Mask Works to secure the obligations of Grantor under the Loan Agreement.

B. Pursuant to the terms of the Loan Agreement, Grantor has granted to Bank a
security interest in all of Grantor's right, title and interest, whether
presently existing or hereafter acquired, in, to and under all of the
Collateral.

NOW, THEREFORE, for good and valuable consideration, receipt of which is hereby
acknowledged, and intending to be legally bound, as collateral security for the
prompt and complete payment when due of its obligations under the Loan
Agreement, Grantor hereby represents, warrants, covenants and agrees as follows:

AGREEMENT

To secure its obligations under the Loan Agreement, Grantor grants and pledges
to Bank a security interest in all of Grantor's right, title and interest in, to
and under its Intellectual Property Collateral (including without limitation
those Copyrights, Patents, Trademarks and Mask Works listed on Schedules A, B,
C, and D hereto), and including without limitation all proceeds thereof (such
as, by way of example but not by way of limitation, license royalties and
proceeds of infringement suits), the right to sue for past, present and future
infringements, all rights corresponding thereto throughout the world and all
re-issues, divisions continuations, renewals, extensions and
continuations-in-part thereof.

This security interest is granted in conjunction with the security interest
granted to Bank under the Loan Agreement. The rights and remedies of Bank with
respect to the security interest granted hereby are in addition to those set
forth in the Loan Agreement and the other Loan Documents, and those which are
now or hereafter available to Bank as a matter of law or equity. Each right,
power and remedy of Bank provided for herein or in the Loan Agreement or any of
the Loan Documents, or now or hereafter existing at law or in equity shall be
cumulative and concurrent and shall be in addition to every right, power or
remedy provided for herein and the exercise by Bank of any one or more of the
rights, powers or remedies provided for in this Intellectual Property Security
Agreement, the Loan Agreement or any of the other Loan Documents, or now or
hereafter existing at law or in equity, shall not preclude the simultaneous or
later exercise by any person, including Bank, of any or all other rights, powers
or remedies.

IN WITNESS WHEREOF, the parties have cause this Intellectual Property Security
Agreement to be duly executed by its officers thereunto duly authorized as of
the first date written above.

GRANTOR:

Address of Grantor: THERMA-WAVE, INC.

1250 Reliance Way

Fremont, California 94539

Attn:

 

By:

Title:

BANK:

Address of Bank: SILICON VALLEY BANK

3003 Tasman Drive

Santa Clara, CA 95054-1191

Attn:

 

By:

Title:

EXHIBIT A

Copyrights

Description

Registration/

Application

Number

Registration/

Application

Date

                                                                               
   

EXHIBIT B

Patents

Description

Registration/

Application

Number

Registration/

Application

Date

Apparatus for analyzing multi-layer thin film stacks on semiconductors

6567213

May 20, 2003

Wafer metrology apparatus and method

6563586

May 13, 2003

Combination thermal wave and optical spectroscopy measurement system

6535285

Mar. 18, 2003

Method and apparatus for multidomain data analysis

6532076

Mar. 11, 2003

Method for determining ion concentration and energy of shallow junction implants

6532070

Mar. 11, 2003

Apparatus for evaluating metalized layers on semiconductors

6522413

Feb. 18, 2003

Thin film optical measurement system and method with calibrating ellipsometer

6515746

Feb. 4, 2003

Small spot ellipsometer

6515744

Feb. 4, 2003

Apparatus for analyzing samples using combined thermal wave and X-ray
reflectance measurements

6512815

Jan. 28, 2003

Spatial averaging technique for ellipsometry and reflectometry

6509199

Jan. 21, 2003

System and method for X-ray reflectometry measurement of low density films

6507634

Jan. 14, 2003

Evaluation of etching processes in semiconductors

6472238

Oct. 29, 2002

Analysis of interface layer characteristics

6465265

Oct. 15, 2002

Calibration and alignment of X-ray reflectometric systems

6453006

Sep. 17, 2002

Apparatus for evaluating metalized layers on semiconductors

6452685

Sep. 17, 2002

Broadband spectroscopic rotating compensator ellipsometer

6449043

Sep. 10, 2002

Critical dimension analysis with simultaneous multiple angle of incidence
measurements

6429943

Aug. 6, 2002

Apparatus for analyzing multi-layer thin film stacks on semiconductors

6417921

July 9, 2002

Thin film optical measurement system and method with calibrating ellipsometer

6411385

June 25, 2002

Apparatus for analyzing samples using combined thermal wave and X-ray
reflectance measurements

6408048

June 18, 2002

Apparatus for evaluating metalized layers on semiconductors

6320666

Nov. 20, 2001

Broadband spectroscopic rotating compensator ellipsometer

6320657

Nov. 20, 2001

Thin film optical measurement system and method with calibrating ellipsometer

6304326

Oct. 16, 2001

Apparatus for analyzing multi-layer thin film stacks on semiconductors

6297880

Oct. 2, 2001

Apparatus for analyzing multi-layer thin film stacks on semiconductors

6278519

Aug. 21, 2002

Method and apparatus for preparing semiconductor wafers for measurement

6261853

July 17, 2001

Apparatus for evaluating metalized layers on semiconductors

6191846

Feb. 20, 2001

Ellipsometer and polarimeter with zero-order plate compensator

6181421

Jan. 30, 2001

Broadband spectroscopic rotating compensator ellipsometer

6134012

Oct. 17, 2000

Apparatus for evaluating metalized layers on semiconductors

5978074

Nov. 2, 1999

Broadband spectroscopic rotating compensator ellipsometer

5973787

Oct. 26, 1999

Method and apparatus for optical data analysis; Method for evaluating parameters
of a semiconductor wafer

5953446

Sep. 14, 1999

Thin film optical measurement system and method with calibrating ellipsometer

5900939

May 4, 1999

Thin film optical measurement system and method with calibrating ellipsometer

5798837

Aug. 25, 1998

Integrated spectroscopic ellipsometer

5596411

Jan. 21, 1997

Sample characteristic analysis utilizing multi wavelength and multi angle
polarization and magnitude change detection

5596406

Jan. 21, 1997

Multiple angle spectroscopic analyzer utilizing interferometric and
ellipsometric devices

5412473

May 2, 1995

Apparatus for evaluating thermal and electrical characteristics in a sample

5228776

July 20, 1993

Method and apparatus for evaluating the thickness of thin films

5181080

Jan. 19, 1993

Optical measurement device with enhanced sensitivity

5159412

Oct. 27, 1992

Apparatus for measuring grain sizes in metalized layers

5149978

Sep. 22, 1992

Method and apparatus for evaluating ion implant dosage levels in semiconductors

5074669

Dec. 24, 1991

Method and apapratus for evaluating surface and subsurface features in a
semiconductor

5042952

Aug, 27, 1991

High resolution ellipsometric apparatus

5042951

Aug. 27, 1991

Method and apparatus for measuring thickness of thin films

4999014

Mar. 12, 1991

Method and apparatus for evaluating surface and subsurface features in a
semiconductor

4952063

Aug. 28, 1990

Method and apparatus for evaluating surface and subsurface features in a
semiconductor

4854710

Aug. 8, 1989

Apparatus for locating and testing areas of interest on a workpiece

4795260

Jan. 3, 1989

Method and apparatus for optically detecting surface states in materials

4750822

June 14, 1988

Evaluating both thickness and compositional variables in a thin film sample

4679946

July 14, 1987

Method and apparatus for evaluating surface conditions of a sample

4636088

Jan. 13, 1987

Method and apparatus for detecting thermal waves

4634290

Jan. 6, 1987

Evaluation of surface and subsurface characteristics of a sample

4632561

Dec. 30, 1986

Thin film thickness measurement with thermal waves

4522510

June 11, 1985

Method for detection of thermal waves with a laser probe

4521118

June 4, 1985

Thin film thickness measurements and depth profiling utilizing a thermal wave
detection system

4513384

April 23, 1985

Method for evaluating the quality of the bond between two members utilizing
thermoacoustic microscopy

4484820

Nov. 27, 1984

EXHIBIT C

Trademarks

Description

Registration/

Application

Number

Registration/

Application

Date

CD-PROBE

76-315, 694

Sep. 21, 2001

RT/CD

76-313, 612

Sep. 12, 2001

COILS

76-274, 897

June 21, 2001

WBWS

2,547,288

Mar. 12, 2002

META-PROBE X

2,522,390

Dec. 25, 2001

INTEGRA

2,669,787

Dec. 31, 2002

ENVIRONMENTAL FILM DESORBER

2,605,497

Aug. 6, 2002

EFD

2,632,559

Oct. 8, 2002

DESORBER

2,420,246

Jan. 9, 2001

ABSOLUTE ELLIPSOMETER

2,364,232

July 4, 2000

FAB PRODUCTIVITY ENHANCEMENT

2,518,811

Dec. 11, 2001

FPE

2,403,438

Nov. 14, 2000

MICROAE

75-601,345

Dec. 8, 1998

UAE

75-601,342

Dec. 8, 1998

AE

2,290,866

Nov. 9, 1999

BPR

2,271,440

Aug. 24, 1999

BPE

2,268,211

Aug. 10, 1999

BEAM PROFILE ELLIPSOMETRY

2,518,933

Dec. 18, 2001

BEAM PROFILE REFLECTOMETRY

2,521,459

Dec. 25, 2001

THERMA-WAVE

2,165,847

June 16, 1998

META-PROBE

2,517,657

Dec. 11, 2001

THERMA-PROBE

1,715,145

Sep. 15, 1992

OPTI-PROBE

1,661,280

Oct. 15, 1991

DESIGN

1,636,760

Mar. 5, 1991

EXHIBIT D

Mask Works

Description

Registration/

Application

Number

Registration/

Application

Date

                                                                               
   

 

 

 

 

 

 

ANNEX B

Export-Import Bank of the United States

Working Capital Guarantee Program

Borrower Agreement

THIS BORROWER AGREEMENT (this "Agreement") is made and entered into by the
entity identified as Borrower on the signature page hereof ("Borrower") in favor
of the Export-Import Bank of the United States ("Ex-Im Bank") and the
institution identified as Lender on the signature page hereof ("Lender").

RECITALS

Borrower has requested that Lender establish a Loan Facility in favor of
Borrower for the purposes of providing Borrower with pre- export working capital
to finance the manufacture, production or purchase and subsequent export sale of
Items.

It is a condition to the establishment of such Loan Facility that Ex-Im Bank
guarantee the payment of ninety percent (90%) of certain credit accommodations
subject to the terms and conditions of a Master Guarantee Agreement, the Loan
Authorization Agreement, and to the extent applicable, the Delegated Authority
Letter Agreement.

Borrower is executing this Agreement for the benefit of Lender and Ex-Im Bank in
consideration for and as a condition to Lender's establishing the Loan Facility
and Ex-Im Bank's agreement to guarantee such Loan Facility pursuant to the
Master Guarantee Agreement.

NOW, THEREFORE, Borrower hereby agrees as follows:

DEFINITIONS

Definition of Terms

. As used in this Agreement, including the Recitals to this Agreement and the
Loan Authorization Agreement, the following terms shall have the following
meanings:

"Accounts Receivable" shall mean all of Borrower's now owned or hereafter
acquired (a) "accounts" (as such term is defined in the UCC), other receivables,
book debts and other forms of obligations, whether arising out of goods sold or
services rendered or from any other transaction; (b) rights in, to and under all
purchase orders or receipts for goods or services; (c) rights to any goods
represented or purported to be represented by any of the foregoing (including
unpaid sellers' rights of rescission, replevin, reclamation and stoppage in
transit and rights to returned, reclaimed or repossessed goods); (d) moneys due
or to become due to such Borrower under all purchase orders and contracts for
the sale of goods or the performance of services or both by Borrower (whether or
not yet earned by performance on the part of Borrower), including the proceeds
of the foregoing; (e) any notes, drafts, letters of credit, insurance proceeds
or other instruments, documents and writings evidencing or supporting the
foregoing; and (f) all collateral security and guarantees of any kind given by
any other Person with respect to any of the foregoing.

"Advance Rate" shall mean the rate specified in Section 5(C) of the Loan
Authorization Agreement for each category of Collateral.

"Business Day" shall mean any day on which the Federal Reserve Bank of New York
is open for business.

"Buyer" shall mean a Person that has entered into one or more Export Orders with
Borrower.

"Collateral" shall mean all property and interest in property in or upon which
Lender has been granted a Lien as security for the payment of all the Loan
Facility Obligations including the Collateral identified in Section 6 of the
Loan Authorization Agreement and all products and proceeds (cash and non-cash)
thereof.

"Commercial Letters of Credit" shall mean those letters of credit subject to the
UCP payable in Dollars and issued or caused to be issued by Lender on behalf of
Borrower under a Loan Facility for the benefit of a supplier(s) of Borrower in
connection with Borrower's purchase of goods or services from the supplier in
support of the export of the Items.

"Country Limitation Schedule" shall mean the schedule published from time to
time by Ex-Im Bank and provided to Borrower by Lender which sets forth on a
country by country basis whether and under what conditions Ex-Im Bank will
provide coverage for the financing of export transactions to countries listed
therein.

"Credit Accommodation Amount" shall mean, the sum of (a) the aggregate
outstanding amount of Disbursements and (b) the aggregate outstanding face
amount of Letter of Credit Obligations.

"Credit Accommodations" shall mean, collectively, Disbursements and Letter of
Credit Obligations.

"Debarment Regulations" shall mean, collectively, (a) the Governmentwide
Debarment and Suspension (Nonprocurement) regulations (Common Rule), 53 Fed.
Reg. 19204 (May 26, 1988), (b) Subpart 9.4 (Debarment, Suspension, and
Ineligibility) of the Federal Acquisition Regulations, 48 C.F.R. 9.400-9.409 and
(c) the revised Governmentwide Debarment and Suspension (Nonprocurement)
regulations (Common Rule), 60 Fed. Reg. 33037 (June 26, 1995).

"Delegated Authority Letter Agreement" shall mean the Delegated Authority Letter
Agreement, if any, between Ex-Im Bank and Lender.

"Disbursement" shall mean, collectively, (a) an advance of a working capital
loan from Lender to Borrower under the Loan Facility, and (b) an advance to fund
a drawing under a Letter of Credit issued or caused to be issued by Lender for
the account of Borrower under the Loan Facility.

"Dollars" or "$" shall mean the lawful currency of the United States.

"Effective Date" shall mean the date on which (a) the Loan Documents are
executed by Lender and Borrower or the date, if later, on which agreements are
executed by Lender and Borrower adding the Loan Facility to an existing working
capital loan arrangement between Lender and Borrower and (b) all of the
conditions to the making of the initial Credit Accommodations under the Loan
Documents or any amendments thereto have been satisfied.

"Eligible Export-Related Accounts Receivable" shall mean an Export-Related
Account Receivable which is acceptable to Lender and which is deemed to be
eligible pursuant to the Loan Documents, but in no event shall Eligible
Export-Related Accounts Receivable include any Account Receivable:

(a) that does not arise from the sale of Items in the ordinary course of
Borrower's business;

(b) that is not subject to a valid, perfected first priority Lien in favor of
Lender;

(c) as to which any covenant, representation or warranty contained in the Loan
Documents with respect to such Account Receivable has been breached;

(d) that is not owned by Borrower or is subject to any right, claim or interest
of another Person other than the Lien in favor of Lender;

(e) with respect to which an invoice has not been sent;

(f) that arises from the sale of defense articles or defense services;

(g) that is due and payable from a Buyer located in a country with which Ex-Im
Bank is prohibited from doing business as designated in the Country Limitation
Schedule;

(h) that does not comply with the requirements of the Country Limitation
Schedule;

(i) that is due and payable more than one hundred eighty (180) days from the
date of the invoice;

(j) that is not paid within sixty (60) calendar days from its original due date,
unless it is insured through Ex-Im Bank export credit insurance for
comprehensive commercial and political risk, or through Ex-Im Bank approved
private insurers for comparable coverage, in which case it is not paid within
ninety (90) calendar days from its due date;

(k) that arises from a sale of goods to or performance of services for an
employee of Borrower, a stockholder of Borrower, a subsidiary of Borrower, a
Person with a controlling interest in Borrower or a Person which shares common
controlling ownership with Borrower;

(l) that is backed by a letter of credit unless the Items covered by the subject
letter of credit have been shipped;

(m) that Lender or Ex-Im Bank, in its reasonable judgment, deems uncollectible
for any reason;

(n) that is due and payable in a currency other than Dollars, except as may be
approved in writing by Ex-Im Bank;

(o) that is due and payable from a military Buyer, except as may be approved in
writing by Ex-Im Bank;

(p) that does not comply with the terms of sale set forth in Section 7 of the
Loan Authorization Agreement;

(q) that is due and payable from a Buyer who (i) applies for, suffers, or
consents to the appointment of, or the taking of possession by, a receiver,
custodian, trustee or liquidator of itself or of all or a substantial part of
its property or calls a meeting of its creditors, (ii) admits in writing its
inability, or is generally unable, to pay its debts as they become due or ceases
operations of its present business, (iii) makes a general assignment for the
benefit of creditors, (iv) commences a voluntary case under any state or federal
bankruptcy laws (as now or hereafter in effect), (v) is adjudicated as bankrupt
or insolvent, (vi) files a petition seeking to take advantage of any other law
providing for the relief of debtors, (vii) acquiesces to, or fails to have
dismissed, any petition which is filed against it in any involuntary case under
such bankruptcy laws, or (viii) takes any action for the purpose of effecting
any of the foregoing;

(r) that arises from a bill-and-hold, guaranteed sale, sale-and-return, sale on
approval, consignment or any other repurchase or return basis or is evidenced by
chattel paper;

(s) for which the Items giving rise to such Account Receivable have not been
shipped and delivered to and accepted by the Buyer or the services giving rise
to such Account Receivable have not been performed by Borrower and accepted by
the Buyer or the Account Receivable otherwise does not represent a final sale;

(t) that is subject to any offset, deduction, defense, dispute, or counterclaim
or the Buyer is also a creditor or supplier of Borrower or the Account
Receivable is contingent in any respect or for any reason;

(u) for which Borrower has made any agreement with the Buyer for any deduction
therefrom, except for discounts or allowances made in the ordinary course of
business for prompt payment, all of which discounts or allowances are reflected
in the calculation of the face value of each respective invoice related thereto;
or

(v) for which any of the Items giving rise to such Account Receivable have been
returned, rejected or repossessed.

"Eligible Export-Related Inventory" shall mean Export-Related Inventory which is
acceptable to Lender and which is deemed to be eligible pursuant to the Loan
Documents, but in no event shall Eligible Export-Related Inventory include any
Inventory:

(a) that is not subject to a valid, perfected first priority Lien in favor of
Lender;

(b) that is located at an address that has not been disclosed to Lender in
writing;

(c) that is placed by Borrower on consignment or held by Borrower on consignment
from another Person;

(d) that is in the possession of a processor or bailee, or located on premises
leased or subleased to Borrower, or on premises subject to a mortgage in favor
of a Person other than Lender, unless such processor or bailee or mortgagee or
the lessor or sublessor of such premises, as the case may be, has executed and
delivered all documentation which Lender shall require to evidence the
subordination or other limitation or extinguishment of such Person's rights with
respect to such Inventory and Lender's right to gain access thereto;

(e) that is produced in violation of the Fair Labor Standards Act or subject to
the "hot goods" provisions contained in 29 U.S.C.ss 215 or any successor statute
or section;

(f) as to which any covenant, representation or warranty with respect to such
Inventory contained in the Loan Documents has been breached;

(g) that is not located in the United States;

(h) that is demonstration Inventory;

(i) that consists of proprietary software (i.e. software designed solely for
Borrower's internal use and not intended for resale);

(j) that is damaged, obsolete, returned, defective, recalled or unfit for
further processing;

(k) that has been previously exported from the United States;

(l) that constitutes defense articles or defense services;

(m) that is to be incorporated into Items destined for shipment to a country as
to which Ex-Im Bank is prohibited from doing business as designated in the
Country Limitation Schedule;

(n) that is to be incorporated into Items destined for shipment to a Buyer
located in a country in which Ex-Im Bank coverage is not available for
commercial reasons as designated in the Country Limitation Schedule, unless and
only to the extent that such Items are to be sold to such country on terms of a
letter of credit confirmed by a bank acceptable to Ex-Im Bank; or

(o) that is to be incorporated into Items whose sale would result in an Account
Receivable which would not be an Eligible Export-Related Account Receivable.

"Eligible Person" shall mean a sole proprietorship, partnership, limited
liability partnership, corporation or limited liability company which (a) is
domiciled, organized, or formed, as the case may be, in the United States; (b)
is in good standing in the state of its formation or otherwise authorized to
conduct business in the United States; (c) is not currently suspended or
debarred from doing business with the United States government or any
instrumentality, division, agency or department thereof; (d) exports or plans to
export Items; (e) operates and has operated as a going concern for at least one
(1) year; (f) has a positive tangible net worth determined in accordance with
GAAP; and (g) has revenue generating operations relating to its core business
activities for at least one year.

"ERISA" shall mean the Employee Retirement Income Security Act of 1974 and the
rules and regulations promulgated thereunder.

"Export Order" shall mean a written export order or contract for the purchase by
the Buyer from Borrower of any of the Items.

"Export-Related Accounts Receivable" shall mean those Accounts Receivable
arising from the sale of Items which are due and payable to Borrower in the
United States.

"Export-Related Accounts Receivable Value" shall mean, at the date of
determination thereof, the aggregate face amount of Eligible Export- Related
Accounts Receivable less taxes, discounts, credits, allowances and Retainages,
except to the extent otherwise permitted by Ex-Im Bank in writing.

"Export-Related Borrowing Base" shall mean, at the date of determination
thereof, the sum of (a) the Export-Related Inventory Value multiplied by the
Advance Rate applicable to Export-Related Inventory set forth in Section 5(C)(1)
of the Loan Authorization Agreement, (b) the Export-Related Accounts Receivable
Value multiplied by the Advance Rate applicable to Export- Related Accounts
Receivable set forth in Section 5(C)(2) of the Loan Authorization Agreement, (c)
if permitted by Ex-Im Bank in writing, the Retainage Value multiplied by the
Retainage Advance Rate set forth in Section 5(C)(3) of the Loan Authorization
Agreement and (d) the Other Assets Value multiplied by the Advance Rate
applicable to Other Assets set forth in Section 5(C)(4) of the Loan
Authorization Agreement.

"Export-Related Borrowing Base Certificate" shall mean a certificate in the form
provided or approved by Lender, executed by Borrower and delivered to Lender
pursuant to the Loan Documents detailing the Export-Related Borrowing Base
supporting the Credit Accommodations which reflects, to the extent included in
the Export-Related Borrowing Base, Export-Related Accounts Receivable, Eligible
Export-Related Accounts Receivable, Export-Related Inventory and Eligible
Export-Related Inventory balances that have been reconciled with Borrower's
general ledger, Accounts Receivable aging report and Inventory schedule.

"Export-Related General Intangibles" shall mean those General Intangibles
necessary or desirable to or for the disposition of Export-Related Inventory.

"Export-Related Inventory" shall mean the Inventory of Borrower located in the
United States that has been purchased, manufactured or otherwise acquired by
Borrower for resale pursuant to Export Orders.

"Export-Related Inventory Value" shall mean, at the date of determination
thereof, the lower of cost or market value of Eligible Export- Related Inventory
of Borrower as determined in accordance with GAAP.

"Final Disbursement Date" shall mean, unless subject to an extension of such
date agreed to by Ex-Im Bank, the last date on which Lender may make a
Disbursement set forth in Section 10 of the Loan Authorization Agreement or, if
such date is not a Business Day, the next succeeding Business Day; provided,
however, to the extent that Lender has not received cash collateral or an
indemnity with respect to Letter of Credit Obligations outstanding on the Final
Disbursement Date, the Final Disbursement Date with respect to an advance to
fund a drawing under a Letter of Credit shall be no later than thirty (30)
Business Days after the expiry date of the Letter of Credit related thereto.

"GAAP" shall mean the generally accepted accounting principles issued by the
American Institute of Certified Public Accountants as in effect from time to
time.

"General Intangibles" shall mean all intellectual property and other "general
intangibles" (as such term is defined in the UCC) necessary or desirable to or
for the disposition of Inventory.

"Guarantor" shall mean each Person, if any, identified in Section 3 of the Loan
Authorization Agreement who shall guarantee (jointly and severally if more than
one) the payment and performance of all or a portion of the Loan Facility
Obligations.

"Guaranty Agreement" shall mean a valid and enforceable agreement of guaranty
executed by each Guarantor in favor of Lender.

"Inventory" shall mean all "inventory" (as such term is defined in the UCC), now
or hereafter owned or acquired by Borrower, wherever located, including all
inventory, merchandise, goods and other personal property which are held by or
on behalf of Borrower for sale or lease or are furnished or are to be furnished
under a contract of service or which constitute raw materials, work in process
or materials used or consumed or to be used or consumed in Borrower's business
or in the processing, production, packaging, promotion, delivery or shipping of
the same, including other supplies.

"ISP" shall mean the International Standby Practices-ISP98, International
Chamber of Commerce Publication No. 590 and any amendments and revisions
thereof.

"Issuing Bank" shall mean the bank that issues a Letter of Credit, which bank is
Lender itself or a bank that Lender has caused to issue a Letter of Credit by
way of guarantee.

"Items" shall mean the finished goods or services which are intended for export
from the United States, as specified in Section 4(A) of the Loan Authorization
Agreement.

"Letter of Credit" shall mean a Commercial Letter of Credit or a Standby Letter
of Credit.

"Letter of Credit Obligations" shall mean all outstanding obligations incurred
by Lender, whether direct or indirect, contingent or otherwise, due or not due,
in connection with the issuance or guarantee by Lender or the Issuing Bank of
Letters of Credit.

"Lien" shall mean any mortgage, security deed or deed of trust, pledge,
hypothecation, assignment, deposit arrangement, lien, charge, claim, security
interest, security title, easement or encumbrance, or preference, priority or
other security agreement or preferential arrangement of any kind or nature
whatsoever (including any lease or title retention agreement, any financing
lease having substantially the same economic effect as any of the foregoing, and
the filing of, or agreement to give, any financing statement perfecting a
security interest under the UCC or comparable law of any jurisdiction) by which
property is encumbered or otherwise charged.

"Loan Agreement" shall mean a valid and enforceable agreement between Lender and
Borrower setting forth the terms and conditions of the Loan Facility.

"Loan Authorization Agreement" shall mean the Loan Authorization Agreement
entered into between Lender and Ex-Im Bank or the Loan Authorization Notice
setting forth certain terms and conditions of the Loan Facility, a copy of which
is attached hereto as Annex A.

"Loan Authorization Notice" shall mean the Loan Authorization Notice executed by
Lender and delivered to Ex-Im Bank in accordance with the Delegated Authority
Letter Agreement setting forth the terms and conditions of each Loan Facility.

"Loan Documents" shall mean the Loan Authorization Agreement, the Loan
Agreement, this Agreement, each promissory note (if applicable), each Guaranty
Agreement, and all other instruments, agreements and documents now or hereafter
executed by Borrower or any Guarantor evidencing, securing, guaranteeing or
otherwise relating to the Loan Facility or any Credit Accommodations made
thereunder.

"Loan Facility" shall mean the Revolving Loan Facility, the Transaction Specific
Loan Facility or the Transaction Specific Revolving Loan Facility established by
Lender in favor of Borrower under the Loan Documents.

"Loan Facility Obligations" shall mean all loans, advances, debts, expenses,
fees, liabilities, and obligations for the performance of covenants, tasks or
duties or for payment of monetary amounts (whether or not such performance is
then required or contingent, or amounts are liquidated or determinable) owing by
Borrower to Lender, of any kind or nature, present or future, arising in
connection with the Loan Facility.

"Loan Facility Term" shall mean the number of months from the Effective Date to
the Final Disbursement Date as originally set forth in the Loan Authorization
Agreement.

"Master Guarantee Agreement" shall mean the Master Guarantee Agreement between
Ex-Im Bank and Lender, as amended, modified, supplemented and restated from time
to time.

"Material Adverse Effect" shall mean a material adverse effect on (a) the
business, assets, operations, prospects or financial or other condition of
Borrower or any Guarantor, (b) Borrower's ability to pay or perform the Loan
Facility Obligations in accordance with the terms thereof, (c) the Collateral or
Lender's Liens on the Collateral or the priority of such Lien or (d) Lender's
rights and remedies under the Loan Documents.

"Maximum Amount" shall mean the maximum principal balance of Credit
Accommodations that may be outstanding at any time under the Loan Facility
specified in Section 5(A) of the Loan Authorization Agreement.

"Other Assets" shall mean the Collateral, if any, described in Section 5(C)(4)
of the Loan Authorization Agreement.

"Other Assets Value" shall mean, at the date of determination thereof, the value
of the Other Assets as determined in accordance with GAAP.

"Permitted Liens" shall mean (a) Liens for taxes, assessments or other
governmental charges or levies not delinquent, or, being contested in good faith
and by appropriate proceedings and with respect to which proper reserves have
been taken by Borrower; provided, that, the Lien shall have no effect on the
priority of the Liens in favor of Lender or the value of the assets in which
Lender has such a Lien and a stay of enforcement of any such Lien shall be in
effect; (b) deposits or pledges securing obligations under worker's
compensation, unemployment insurance, social security or public liability laws
or similar legislation; (c) deposits or pledges securing 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 Borrower's business; (d) judgment Liens that
have been stayed or bonded; (e) mechanics', workers', materialmen's or other
like Liens arising in the ordinary course of Borrower's business with respect to
obligations which are not due; (f) Liens placed upon fixed assets hereafter
acquired to secure a portion of the purchase price thereof, provided, that, any
such Lien shall not encumber any other property of Borrower; (g) security
interests being terminated concurrently with the execution of the Loan
Documents; (h) Liens in favor of Lender securing the Loan Facility Obligations;
and (i) Liens disclosed in Section 6(D) of the Loan Authorization Agreement.

"Person" shall mean any individual, sole proprietorship, partnership, limited
liability partnership, joint venture, trust, unincorporated organization,
association, corporation, limited liability company, institution, public benefit
corporation, entity or government (whether national, federal, provincial, state,
county, city, municipal or otherwise, including any instrumentality, division,
agency, body or department thereof), and shall include such Person's successors
and assigns.

"Principals" shall mean any officer, director, owner, partner, key employee, or
other Person with primary management or supervisory responsibilities with
respect to Borrower or any other Person (whether or not an employee) who has
critical influence on or substantive control over the transactions covered by
this Agreement.

"Retainage" shall mean that portion of the purchase price of an Export Order
that a Buyer is not obligated to pay until the end of a specified period of time
following the satisfactory performance under such Export Order.

"Retainage Accounts Receivable" shall mean those portions of Eligible
Export-Related Accounts Receivable arising out of a Retainage.

"Retainage Advance Rate" shall mean the percentage rate specified in Section
5(C)(3) of the Loan Authorization Agreement as the Advance Rate for the
Retainage Accounts Receivable of Borrower.

"Retainage Value" shall mean, at the date of determination thereof, the
aggregate face amount of Retainage Accounts Receivable, less taxes, discounts,
credits and allowances, except to the extent otherwise permitted by Ex-Im Bank
in writing.

"Revolving Loan Facility" shall mean the credit facility or portion thereof
established by Lender in favor of Borrower for the purpose of providing
pre-export working capital in the form of loans and/or Letters of Credit to
finance the manufacture, production or purchase and subsequent export sale of
Items pursuant to Loan Documents under which Credit Accommodations may be made
and repaid on a continuous basis based solely on the Export-Related Borrowing
Base during the term of such credit facility.

"Special Conditions" shall mean those conditions, if any, set forth in Section
13 of the Loan Authorization Agreement.

"Specific Export Orders" shall mean those Export Orders specified in Section
5(D) of the Loan Authorization Agreement.

"Standby Letter of Credit" shall mean those letters of credit subject to the ISP
or UCP issued or caused to be issued by Lender for Borrower's account that can
be drawn upon by a Buyer only if Borrower fails to perform all of its
obligations with respect to an Export Order.

"Transaction Specific Loan Facility" shall mean a credit facility or a portion
thereof established by Lender in favor of Borrower for the purpose of providing
pre-export working capital in the form of loans and/or Letters of Credit to
finance the manufacture, production or purchase and subsequent export sale of
Items pursuant to Loan Documents under which Credit Accommodations are made
based solely on the Export-Related Borrowing Base relating to Specific Export
Orders and once such Credit Accommodations are repaid they may not be
reborrowed.

"Transaction Specific Revolving Loan Facility" shall mean a Revolving Credit
Facility established to provide financing of Specific Export Orders.

"UCC" shall mean the Uniform Commercial Code as the same may be in effect from
time to time in the jurisdiction in which Borrower or Collateral is located.

"UCP" shall mean the Uniform Customs and Practice for Documentary Credits (1993
Revision), International Chamber of Commerce Publication No. 500 and any
amendments and revisions thereof.

"U.S." or "United States" shall mean the United States of America and its
territorial possessions.

"U.S. Content" shall mean with respect to any Item all the labor, materials and
services which are of U.S. origin or manufacture, and which are incorporated
into an Item in the United States.

"Warranty" shall mean Borrower's guarantee to Buyer that the Items will function
as intended during the warranty period set forth in the applicable Export Order.

"Warranty Letter of Credit" shall mean a Standby Letter of Credit which is
issued or caused to be issued by Lender to support the obligations of Borrower
with respect to a Warranty or a Standby Letter of Credit which by its terms
becomes a Warranty Letter of Credit.

Rules of Construction

. For purposes of this Agreement, the following additional rules of construction
shall apply, unless specifically indicated to the contrary: (a) wherever from
the context it appears appropriate, each term stated in either the singular or
plural shall include the singular and the plural, and pronouns stated in the
masculine, feminine or neuter gender shall include the masculine, the feminine
and the neuter; (b) the term "or" is not exclusive; (c) the term "including" (or
any form thereof) shall not be limiting or exclusive; (d) all references to
statutes and related regulations shall include any amendments of same and any
successor statutes and regulations; (e) the words "this Agreement", "herein",
"hereof", "hereunder" or other words of similar import refer to this Agreement
as a whole including the schedules, exhibits, and annexes hereto as the same may
be amended, modified or supplemented; (f) all references in this Agreement to
sections, schedules, exhibits, and annexes shall refer to the corresponding
sections, schedules, exhibits, and annexes of or to this Agreement; and (g) all
references to any instruments or agreements, including references to any of the
Loan Documents, or the Delegated Authority Letter Agreement shall include any
and all modifications, amendments and supplements thereto and any and all
extensions or renewals thereof to the extent permitted under this Agreement.

Incorporation of Recitals

. The Recitals to this Agreement are incorporated into and shall constitute a
part of this Agreement.

OBLIGATIONS OF BORROWER

Until payment in full of all Loan Facility Obligations and termination of the
Loan Documents, Borrower agrees as follows:

Use of Credit Accommodations

. Borrower shall use Credit Accommodations only for the purpose of enabling
Borrower to finance the cost of manufacturing, producing, purchasing or selling
the Items. Borrower may not use any of the Credit Accommodations for the purpose
of: (i) servicing or repaying any of Borrower's pre-existing or future
indebtedness unrelated to the Loan Facility (unless approved by Ex-Im Bank in
writing); (ii) acquiring fixed assets or capital goods for use in Borrower's
business; (iii) acquiring, equipping or renting commercial space outside of the
United States; (iv) paying the salaries of non U.S. citizens or non-U.S.
permanent residents who are located in offices outside of the United States; or
(v) in connection with a Retainage or Warranty (unless approved by Ex-Im Bank in
writing).

In addition, no Credit Accommodation may be used to finance the manufacture,
purchase or sale of any of the following:

Items to be sold or resold to a Buyer located in a country as to which Ex-Im
Bank is prohibited from doing business as designated in the Country Limitation
Schedule;

that part of the cost of the Items which is not U.S. Content unless such part is
not greater than fifty percent (50%) of the cost of the Items and is
incorporated into the Items in the United States;

defense articles or defense services; or

without Ex-Im Bank's prior written consent, any Items to be used in the
construction, alteration, operation or maintenance of nuclear power, enrichment,
reprocessing, research or heavy water production facilities.

Loan Documents and Loan Authorization Agreement

. Each Loan Document and this Agreement have been duly executed and delivered on
behalf of Borrower, and each such Loan Document and this Agreement are and will
continue to be a legal and valid obligation of Borrower, enforceable against it
in accordance with its terms.

Borrower shall comply with all of the terms and conditions of the Loan
Documents, this Agreement and the Loan Authorization Agreement.

Export-Related Borrowing Base Certificates and Export Orders

. In order to receive Credit Accommodations under the Loan Facility, Borrower
shall have delivered to Lender an Export-Related Borrowing Base Certificate as
frequently as required by Lender but at least within the past thirty (30)
calendar days and a copy of the Export Order(s) (or, for Revolving Loan
Facilities, if permitted by Lender, a written summary of the Export Orders)
against which Borrower is requesting Credit Accommodations. If Lender permits
summaries of Export Orders, Borrower shall also deliver promptly to Lender
copies of any Export Orders requested by Lender. In addition, so long as there
are any Credit Accommodations outstanding under the Loan Facility, Borrower
shall deliver to Lender at least once each month no later than the twentieth
(20th) day of such month or more frequently as required by the Loan Documents,
an Export-Related Borrowing Base Certificate.

Exclusions from the Export-Related Borrowing Base

. In determining the Export-Related Borrowing Base, Borrower shall exclude
therefrom Inventory which is not Eligible Export-Related Inventory and Accounts
Receivable which are not Eligible Export-Related Accounts Receivable. Borrower
shall promptly, but in any event within five (5) Business Days, notify Lender
(a) if any then existing Export-Related Inventory no longer constitutes Eligible
Export-Related Inventory or (b) of any event or circumstance which to Borrower's
knowledge would cause Lender to consider any then existing Export-Related
Accounts Receivable as no longer constituting an Eligible Export-Related
Accounts Receivable.

Financial Statements

. Borrower shall deliver to Lender the financial statements required to be
delivered by Borrower in accordance with Section 11 of the Loan Authorization
Agreement.

Schedules, Reports and Other Statements

. Borrower shall submit to Lender in writing each month (a) an Inventory
schedule for the preceding month and (b) an Accounts Receivable aging report for
the preceding month detailing the terms of the amounts due from each Buyer.
Borrower shall also furnish to Lender promptly upon request such information,
reports, contracts, invoices and other data concerning the Collateral as Lender
may from time to time specify.

Additional Security or Payment

. Borrower shall at all times ensure that the Export-Related Borrowing Base
equals or exceeds the Credit Accommodation Amount. If informed by Lender or if
Borrower otherwise has actual knowledge that the Export-Related Borrowing Base
is at any time less than the Credit Accommodation Amount, Borrower shall, within
five (5) Business Days, either (i) furnish additional Collateral to Lender, in
form and amount satisfactory to Lender and Ex-Im Bank or (ii) pay to Lender an
amount equal to the difference between the Credit Accommodation Amount and the
Export-Related Borrowing Base.

For purposes of this Agreement, in determining the Export-Related Borrowing Base
there shall be deducted from the Export-Related Borrowing Base (i) an amount
equal to twenty-five percent (25%) of the outstanding face amount of Commercial
Letters of Credit and Standby Letters of Credit and (ii) one hundred percent
(100%) of the face amount of Warranty Letters of Credit less the amount of cash
collateral held by Lender to secure Warranty Letters of Credit.

Unless otherwise approved in writing by Ex-Im Bank, for Revolving Loan
Facilities (other than Transaction Specific Revolving Loan Facilities), Borrower
shall at all times ensure that the outstanding principal balance of the Credit
Accommodations that is supported by Export-Related Inventory does not exceed
sixty percent (60%) of the sum of the total outstanding principal balance of the
Disbursements and the undrawn face amount of all outstanding Commercial Letters
of Credit. If informed by Lender or if Borrower otherwise has actual knowledge
that the outstanding principal balance of the Credit Accommodations that is
supported by Inventory exceeds sixty percent (60%) of the sum of the total
outstanding principal balance of the Disbursements and the undrawn face amount
of all outstanding Commercial Letters of Credit, Borrower shall, within five (5)
Business Days, either (i) furnish additional non-Inventory Collateral to Lender,
in form and amount satisfactory to Lender and Ex-Im Bank, or (ii) pay down the
applicable portion of the Credit Accommodations so that the above described
ratio is not exceeded.

Continued Security Interest

. Borrower shall not change (a) its name or identity in any manner, (b) the
location of its principal place of business, (c) the location of any of the
Collateral or (d) the location of any of the books or records related to the
Collateral, in each instance without giving thirty (30) days prior written
notice thereof to Lender and taking all actions deemed necessary or appropriate
by Lender to continuously protect and perfect Lender's Liens upon the
Collateral.

Inspection of Collateral

. Borrower shall permit the representatives of Lender and Ex-Im Bank to make at
any time during normal business hours inspections of the Collateral and of
Borrower's facilities, activities, and books and records, and shall cause its
officers and employees to give full cooperation and assistance in connection
therewith.

General Intangibles

. Borrower represents and warrants that it owns, or is licensed to use, all
General Intangibles necessary to conduct its business as currently conducted
except where the failure of Borrower to own or license such General Intangibles
could not reasonably be expected to have a Material Adverse Effect.

Notice of Certain Events

. Borrower shall promptly, but in any event within five (5) Business Days,
notify Lender in writing of the occurrence of any of the following:

Borrower or any Guarantor (i) applies for, consents to or suffers the
appointment of, or the taking of possession by, a receiver, custodian, trustee,
liquidator or similar fiduciary of itself or of all or a substantial part of its
property or calls a meeting of its creditors, (ii) admits in writing its
inability, or is generally unable, to pay its debts as they become due or ceases
operations of its present business, (iii) makes a general assignment for the
benefit of creditors, (iv) commences a voluntary case under any state or federal
bankruptcy laws (as now or hereafter in effect), (v) is adjudicated as bankrupt
or insolvent, (vi) files a petition seeking to take advantage of any other law
providing for the relief of debtors, (vii) acquiesces to, or fails to have
dismissed within thirty (30) days, any petition filed against it in any
involuntary case under such bankruptcy laws, or (vii) takes any action for the
purpose of effecting any of the foregoing;

any Lien in any of the Collateral, granted or intended by the Loan Documents to
be granted to Lender, ceases to be a valid, enforceable, perfected, first
priority Lien (or a lesser priority if expressly permitted pursuant to Section 6
of the Loan Authorization Agreement) subject only to Permitted Liens;

the issuance of any levy, assessment, attachment, seizure or Lien, other than a
Permitted Lien, against any of the Collateral which is not stayed or lifted
within thirty (30) calendar days;

any proceeding is commenced by or against Borrower or any Guarantor for the
liquidation of its assets or dissolution;

any litigation is filed against Borrower or any Guarantor which has had or could
reasonably be expected to have a Material Adverse Effect and such litigation is
not withdrawn or dismissed within thirty (30) calendar days of the filing
thereof;

any default or event of default under the Loan Documents;

any failure to comply with any terms of the Loan Authorization Agreement;

any material provision of any Loan Document or this Agreement for any reason
ceases to be valid, binding and enforceable in accordance with its terms;

any event which has had or could reasonably be expected to have a Material
Adverse Effect; or

the Credit Accommodation Amount exceeds the applicable Export-Related Borrowing
Base.

Insurance

. Borrower will at all times carry property, liability and other insurance, with
insurers acceptable to Lender, in such form and amounts, and with such
deductibles and other provisions, as Lender shall require, and Borrower will
provide evidence of such insurance to Lender, so that Lender is satisfied that
such insurance is, at all times, in full force and effect. Each property
insurance policy shall name Lender as loss payee and shall contain a lender's
loss payable endorsement in form acceptable to Lender and each liability
insurance policy shall name Lender as an additional insured. All policies of
insurance shall provide that they may not be cancelled or changed without at
least ten (10) days' prior written notice to Lender and shall otherwise be in
form and substance satisfactory to Lender. Borrower will promptly deliver to
Lender copies of all reports made to insurance companies.

Taxes

. Borrower has timely filed all tax returns and reports required by applicable
law, has timely paid all applicable taxes, assessments, deposits and
contributions owing by Borrower and will timely pay all such items in the future
as they became due and payable. Borrower may, however, defer payment of any
contested taxes; provided, that Borrower (a) in good faith contests Borrower's
obligation to pay such taxes by appropriate proceedings promptly and diligently
instituted and conducted; (b) notifies Lender in writing of the commencement of,
and any material development in, the proceedings; (c) posts bonds or takes any
other steps required to keep the contested taxes from becoming a Lien upon any
of the Collateral; and (d) maintains adequate reserves therefor in conformity
with GAAP.

Compliance with Laws

. Borrower represents and warrants that it has complied in all material respects
with all provisions of all applicable laws and regulations, including those
relating to Borrower's ownership of real or personal property, the conduct and
licensing of Borrower's business, the payment and withholding of taxes, ERISA
and other employee matters, safety and environmental matters.

Negative Covenants

. Without the prior written consent of Ex-Im Bank and Lender, Borrower shall not
(a) merge, consolidate or otherwise combine with any other Person; (b) acquire
all or substantially all of the assets or capital stock of any other Person; (c)
sell, lease, transfer, convey, assign or otherwise dispose of any of its assets,
except for the sale of Inventory in the ordinary course of business and the
disposition of obsolete equipment in the ordinary course of business; (d) create
any Lien on the Collateral except for Permitted Liens; (e) make any material
changes in its organizational structure or identity; or (f) enter into any
agreement to do any of the foregoing.

Reborrowings and Repayment Terms

. If the Loan Facility is a Revolving Loan Facility, provided that Borrower is
not in default under any of the Loan Documents, Borrower may borrow, repay and
reborrow amounts under the Loan Facility until the close of business on the
Final Disbursement Date. Unless the Revolving Loan Facility is renewed or
extended by Lender with the consent of Ex-Im Bank, Borrower shall pay in full
the outstanding Loan Facility Obligations and all accrued and unpaid interest
thereon no later than the first Business Day after the Final Disbursement Date.

If the Loan Facility is a Transaction Specific Loan Facility, Borrower shall,
within two (2) Business Days of the receipt thereof, pay to Lender (for
application against the outstanding Loan Facility Obligations and accrued and
unpaid interest thereon) all checks, drafts, cash and other remittances it may
receive in payment or on account of the Export-Related Accounts Receivable or
any other Collateral, in precisely the form received (except for the endorsement
of Borrower where necessary). Pending such deposit, Borrower shall hold such
amounts in trust for Lender separate and apart and shall not commingle any such
items of payment with any of its other funds or property.

Cross Default

. Borrower shall be deemed in default under the Loan Facility if Borrower fails
to pay when due any amount payable to Lender under any loan or other credit
accommodations to Borrower whether or not guaranteed by Ex-Im Bank.

Munitions List

. If any of the Items are articles, services, or related technical data that are
listed on the United States Munitions List (part 121 of title 22 of the Code of
Federal Regulations), Borrower shall send a written notice promptly, but in any
event within five (5) Business Days, of Borrower learning thereof to Lender
describing the Items(s) and the corresponding invoice amount.

Suspension and Debarment, etc

. On the date of this Agreement neither Borrower nor its Principals are (a)
debarred, suspended, proposed for debarment with a final determination still
pending, declared ineligible or voluntarily excluded (as such terms are defined
under any of the Debarment Regulations referred to below) from participating in
procurement or nonprocurement transactions with any United States federal
government department or agency pursuant to any of the Debarment Regulations or
(b) indicted, convicted or had a civil judgment rendered against Borrower or any
of its Principals for any of the offenses listed in any of the Debarment
Regulations. Unless authorized by Ex-Im Bank, Borrower will not knowingly enter
into any transactions in connection with the Items with any person who is
debarred, suspended, declared ineligible or voluntarily excluded from
participation in procurement or nonprocurement transactions with any United
States federal government department or agency pursuant to any of the Debarment
Regulations. Borrower will provide immediate written notice to Lender if at any
time it learns that the certification set forth in this Section 2.19 was
erroneous when made or has become erroneous by reason of changed circumstances.

RIGHTS AND REMEDIES

Indemnification

. Upon Ex-Im Bank's payment of a Claim to Lender in connection with the Loan
Facility pursuant to the Master Guarantee Agreement, Ex-Im Bank may assume all
rights and remedies of Lender under the Loan Documents and may enforce any such
rights or remedies against Borrower, the Collateral and any Guarantors. Borrower
shall hold Ex-Im Bank and Lender harmless from and indemnify them against any
and all liabilities, damages, claims, costs and losses incurred or suffered by
either of them resulting from (a) any materially incorrect certification or
statement knowingly made by Borrower or its agent to Ex-Im Bank or Lender in
connection with the Loan Facility, this Agreement, the Loan Authorization
Agreement or any other Loan Documents or (b) any material breach by Borrower of
the terms and conditions of this Agreement, the Loan Authorization Agreement or
any of the other Loan Documents. Borrower also acknowledges that any statement,
certification or representation made by Borrower in connection with the Loan
Facility is subject to the penalties provided in Article 18 U.S.C. Section 1001.

Liens

. Borrower agrees that any and all Liens granted by it to Lender are also hereby
granted to Ex-Im Bank to secure Borrower's obligation, however arising, to
reimburse Ex-Im Bank for any payments made by Ex-Im Bank pursuant to the Master
Guarantee Agreement. Lender is authorized to apply the proceeds of, and
recoveries from, any property subject to such Liens to the satisfaction of Loan
Facility Obligations in accordance with the terms of any agreement between
Lender and Ex-Im Bank.

MISCELLANEOUS

Governing Law

. This Agreement and the Loan Authorization Agreement and the obligations
arising under this Agreement and the Loan Authorization Agreement shall be
governed by, and construed in accordance with, the law of the state governing
the Loan Documents.

Notification

. All notices required by this Agreement shall be given in the manner and to the
parties provided for in the Loan Agreement.

Partial Invalidity

. If at any time any of the provisions of this Agreement becomes illegal,
invalid or unenforceable in any respect under the law of any jurisdiction,
neither the legality, the validity nor the enforceability of the remaining
provisions hereof shall in any way be affected or impaired.

Waiver of Jury Trial

. BORROWER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY AND ALL
RIGHTS IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY ACTION, SUIT, PROCEEDING
OR OTHER LITIGATION BROUGHT TO RESOLVE ANY DISPUTE ARISING UNDER, ARISING OUT OF
OR IN CONNECTION WITH THIS AGREEMENT, THE LOAN AUTHORIZATION AGREEMENT, ANY LOAN
DOCUMENT, OR ANY OTHER AGREEMENT, DOCUMENT OR INSTRUMENT EXECUTED OR DELIVERED
IN CONNECTION HEREWITH OR THEREWITH OR ANY COURSE OF CONDUCT, COURSE OF DEALING,
STATEMENTS (WHETHER VERBAL OR WRITTEN), OR ACTIONS OR OMMISSIONS OF LENDER,
EX-IM BANK, OR ANY OTHER PERSON, RELATING TO THIS AGREEMENT, THE LOAN
AUTHORIZATION AGREEMENT OR ANY OTHER LOAN DOCUMENT.

IN WITNESS WHEREOF, Borrower has caused this Agreement to be duly executed as of
the ______ day of June, 2003.

THERMA-WAVE, INC.

By:______________________________
(Signature)

Name:____________________________
(Print or Type)

Title:_____________________________
(Print or Type)

ACKNOWLEDGED:

SILICON VALLEY BANK

By:______________________________
(Signature)

Name:____________________________
(Print or Type)

Title:_____________________________
(Print or Type)

ANNEXES:

Annex A - Loan Authorization Agreement or Loan Authorization Notice