Silicon Valley Bank

Loan and Security Agreement

Borrower:   Exabyte Corporation
Address:      1685 38th Street
                    Boulder, Colorado 80301
Date:           June 18, 2002

THIS LOAN AND SECURITY AGREEMENT

is entered into on the above date between SILICON VALLEY BANK ("Silicon"), whose
address is 3003 Tasman Drive, Santa Clara, California 95054 and the borrower(s)
named above (jointly --and severally, the "Borrower"), whose chief executive
office is located at the above address ("Borrower's Address"). The Schedule to
this Agreement (the "Schedule") shall for all purposes be deemed to be a part of
this Agreement, and the same is an integral part of this Agreement. (Definitions
of certain terms used in this Agreement are set forth in Section 8 below.)

1.        LOANS.

1.1 Loans.

Silicon will make loans to Borrower (the "Loans"), in amounts determined by
Silicon in its good faith business judgment, up to the amounts (the "Credit
Limit") shown on the Schedule, provided no Default or Event of Default has
occurred and is continuing, and subject to deduction of Reserves for accrued
interest and such other Reserves as Silicon deems proper from time to time in
its good faith business judgment*.

* in accordance with the provisions set forth in the definition of the term
"Reserves" below in Section 8

1.2 Interest.

All Loans and all other monetary Obligations shall bear interest at the rate
shown on the Schedule, except where expressly set forth to the contrary in this
Agreement. Interest shall be payable monthly, on the last day of the month.
Interest may, in Silicon's discretion, be charged to Borrower's loan account,
and the same shall thereafter bear interest at the same rate as the other Loans.
Silicon may, in its discretion, charge interest to Borrower's Deposit Accounts
maintained with Silicon. Regardless of the amount of Obligations that may be
outstanding from time to time, Borrower shall pay Silicon minimum monthly
interest during the term of this Agreement in the amount set forth on the
Schedule (the "Minimum Monthly Interest").

1.3 Overadvances.

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

1.4 Fees.

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

1.5 Loan Requests.

To obtain a Loan, Borrower shall make a request to Silicon by facsimile or
telephone. Loan requests received after 12:00 Noon will not be considered by
Silicon until the next Business Day. Silicon may rely on any telephone request
for a Loan given by a person whom Silicon believes is an authorized
representative of Borrower, and Borrower will indemnify Silicon for any loss
Silicon suffers as a result of that reliance.

1.6 Letters of Credit.

At the request of Borrower, Silicon may, in its good faith business judgment,
issue or arrange for the issuance of letters of credit for the account of
Borrower, in each case in form and substance satisfactory to Silicon in its sole
discretion (collectively, "Letters of Credit"). The aggregate face amount of all
Letters of Credit from time to time outstanding shall not exceed the amount
shown on the Schedule (the "Letter of Credit Sublimit"), and shall be reserved
against Loans which would otherwise be available hereunder, and in the event at
any time there are insufficient Loans available to Borrower for such reserve,
Borrower shall deposit and maintain with Silicon cash collateral in an amount at
all times equal to such deficiency, which shall be held as Collateral for all
purposes of this Agreement. Borrower shall pay all bank charges (including
charges of Silicon) for the issuance of Letters of Credit, together with such
additional fee as Silicon's letter of credit department shall charge in
connection with the issuance of the Letters of Credit. Any payment by Silicon
under or in connection with a Letter of Credit shall constitute a Loan hereunder
on the date such payment is made. Each Letter of Credit shall have an expiry
date no later than thirty days prior to the Maturity Date. Borrower hereby
agrees to indemnify and hold Silicon harmless from any loss, cost, expense, or
liability, including payments made by Silicon, expenses, and reasonable
attorneys' fees incurred by Silicon arising out of or in connection with any
Letters of Credit. Borrower agrees to be bound by the regulations and
interpretations of the issuer of any Letters of Credit guarantied by Silicon and
opened for Borrower's account or by Silicon's interpretations of any Letter of
Credit issued by Silicon for Borrower's account, and Borrower understands and
agrees that Silicon shall not be liable for any error, negligence, or mistake,
whether of omission or commission, in following Borrower's instructions or those
contained in the Letters of Credit or any modifications, amendments, or
supplements thereto. Borrower understands that Letters of Credit may require
Silicon to indemnify the issuing bank for certain costs or liabilities arising
out of claims by Borrower against such issuing bank. Borrower hereby agrees to
indemnify and hold Silicon harmless with respect to any loss, cost, expense, or
liability incurred by Silicon under any Letter of Credit as a result of
Silicon's indemnification of any such issuing bank. The provisions of this Loan
Agreement, as it pertains to Letters of Credit, and any other Loan Documents
relating to Letters of Credit are cumulative.

2.        SECURITY INTEREST.

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

*provided that the Collateral shall not include the stock of Borrower in
Creekpath Systems, Inc.

3.        REPRESENTATIONS, WARRANTIES AND COVENANTS OF BORROWER.

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

3.1 Corporate Existence and Authority.

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

*by all necessary corporate action

3.2 Name; Trade Names and Styles.

The name of Borrower set forth in the heading to this Agreement is its correct
name. Listed in the Representations are all prior names of Borrower and all of
Borrower's present and prior trade names. Borrower shall give Silicon 30 days'
prior written notice before changing its name or doing business under any other
name. Borrower has complied, and will in the future comply, in all material
respects, with all laws relating to the conduct of business under a fictitious
business name, except where the failure to so comply would not reasonably be
expected to result in a Material Adverse Change.

3.3 Place of Business; Location of Collateral.

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

*$20,000

**and Borrower may maintain tooling in the ordinary course of business with
suppliers in foreign countries

3.4 Title to Collateral; Perfection; Permitted Liens.

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

(b) Borrower has set forth in the Representations * all of Borrower's Deposit
Accounts, and Borrower will give Silicon five Business Days advance written
notice before establishing any new Deposit Accounts and will cause the
institution where any such new Deposit Account is maintained to execute and
deliver to Silicon a control agreement in form sufficient to perfect Silicon's
security interest in the Deposit Account and otherwise satisfactory to Silicon
in its good faith business judgment. Nothing herein limits any requirements
which may be set forth in the Schedule as to where Deposit Accounts will be
maintained.

*a list of

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

(d) None of the Collateral now is or will be affixed to any real property in
such a manner, or with such intent, as to become a fixture. Borrower is not and
will not become a lessee under any real property lease pursuant to which the
lessor may obtain any rights in any of the Collateral and no such lease now
prohibits, restrains, impairs or will prohibit, restrain or impair Borrower's
right to remove any Collateral from the leased premises. Whenever any Collateral
is located upon premises in which any third party has an interest, Borrower
shall, whenever requested by Silicon, use its best efforts to cause such third
party to execute and deliver to Silicon, in form acceptable to Silicon, such
waivers and subordinations as Silicon shall specify in its good faith business
judgment. Borrower will keep in full force and effect, and will comply with all
material terms of, any lease of real property where any of the Collateral now or
in the future may be located.

3.5 Maintenance of Collateral.

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

3.6 Books and Records.

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

3.7 Financial Condition, Statements and Reports.

All financial statements now or in the future delivered to Silicon have been,
and will be, prepared in conformity with GAAP and now and in the future will
fairly present the results of operations and financial condition of Borrower, in
accordance with GAAP, at the times and for the periods therein stated. Between
the last date covered by any such statement provided to Silicon and the date
hereof, there has been no Material Adverse Change.

3.8 Tax Returns and Payments; Pension Contributions.

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

3.9 Compliance with Law.

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

3.10 Litigation.

There is no claim, suit, litigation, proceeding or investigation pending or (to
best of Borrower's knowledge) threatened against or affecting Borrower in any
court or before any governmental agency (or any basis therefor known to
Borrower) which could reasonably be expected to result, either separately or in
the aggregate, in any Material Adverse Change. Borrower will promptly inform
Silicon in writing of any claim, proceeding, litigation or investigation in the
future threatened or instituted against Borrower involving any single claim of
$50,000 or more, or involving * $100,000 or more in the aggregate.

*$250,000

3.11 Use of Proceeds.

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

4.        Accounts.

4.1 Representations Relating to Accounts.

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

4.2 Representations Relating to Documents and Legal Compliance.

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

4.3 Schedules and Documents relating to Accounts.

Borrower shall deliver to Silicon transaction reports and schedules of
collections, as provided in the Schedule, on Silicon's standard forms; provided,
however, that Borrower's failure to execute and deliver the same shall not
affect or limit Silicon's security interest and other rights in all of
Borrower's Accounts, nor shall Silicon's failure to advance or lend against a
specific Account affect or limit Silicon's security interest and other rights
therein. If requested by Silicon*, Borrower shall furnish Silicon with copies
(or, at Silicon's request, originals) of all contracts, orders, invoices, and
other similar documents, and all shipping instructions, delivery receipts, bills
of lading, and other evidence of delivery, for any goods the sale or disposition
of which gave rise to such Accounts, and Borrower warrants the genuineness of
all of the foregoing. Borrower shall also furnish to Silicon an aged accounts
receivable trial balance as provided in the Schedule. In addition, Borrower
shall deliver to Silicon, on its request, the originals of all instruments,
chattel paper, security agreements, guarantees and other documents and property
evidencing or securing any Accounts, in the same form as received, with all
necessary indorsements, and copies of all credit memos.

*in its good faith business judgment, Borrower, from time to time

4.4 Collection of Accounts.

Borrower shall have the right to collect all Accounts, unless and until a
Default or an Event of Default has occurred and is continuing. Whether or not an
Event of Default has occurred and is continuing, Borrower shall hold all
payments on, and proceeds of, Accounts in trust for Silicon, and Borrower shall
immediately deliver all such payments and proceeds to Silicon in their original
form, duly endorsed, to be applied to the Obligations in such order as Silicon
shall determine. Silicon may, in its good faith business judgment, require that
all proceeds of Collateral be deposited by Borrower into a lockbox account, or
such other "blocked account" as Silicon may specify, pursuant to a blocked
account agreement in such form as Silicon may specify in its good faith business
judgment.

4.5. Remittance of Proceeds.

All proceeds arising from the disposition of any Collateral shall be delivered,
in kind, by Borrower to Silicon in the original form in which received by
Borrower not later than the following Business Day after receipt by Borrower, to
be applied to the Obligations in such order as Silicon shall determine; provided
that, if no Default or Event of Default has occurred and is continuing, Borrower
shall not be obligated to remit to Silicon the proceeds of the sale of worn out
or obsolete Equipment disposed of by Borrower in good faith in an arm's length
transaction for an aggregate purchase price of * $25,000 or less (for all such
transactions in any fiscal year). Borrower agrees that it will not commingle
proceeds of Collateral with any of Borrower's other funds or property, but will
hold such proceeds separate and apart from such other funds and property and in
an express trust for Silicon. Nothing in this Section limits the restrictions on
disposition of Collateral set forth elsewhere in this Agreement.

*$100,000

4.6 Disputes.

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

*on the regular reports to Silicon

4.7 Returns.

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

4.8 Verification.

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

4.9 No Liability.

Silicon shall not be responsible or liable for any shortage or discrepancy in,
damage to, or loss or destruction of, any goods, the sale or other disposition
of which gives rise to an Account, or for any error, act, omission, or delay of
any kind occurring in the settlement, failure to settle, collection or failure
to collect any Account, or for settling any Account in good faith for less than
the full amount thereof, nor shall Silicon be deemed to be responsible for any
of Borrower's obligations under any contract or agreement giving rise to an
Account*. Nothing herein shall, however, relieve Silicon from liability for its
own gross negligence or willful misconduct.

* provided, however, that nothing in this Section 4.9 shall be deemed to grant
to Silicon the rights to settle or collect any Accounts or to any rights to
control any goods, other than such rights as are given elsewhere in this
Agreement in connection with any Event of Default that is continuing.

5.        ADDITIONAL DUTIES OF BORROWER.

5.1 Financial and Other Covenants.

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

5.2 Insurance.

Borrower shall, at all times insure all of the tangible personal property
Collateral and carry such other business insurance, with insurers reasonably
acceptable to Silicon, in such form and amounts as Silicon may reasonably
require and that are customary and in accordance with standard practices for
Borrower's industry and locations, and Borrower shall provide evidence of such
insurance to Silicon. All such insurance policies shall name Silicon as an
additional loss payee, and shall contain a lenders loss payee endorsement in
form reasonably acceptable to Silicon. Upon receipt of the proceeds of any such
insurance, Silicon shall apply such proceeds in reduction of the Obligations as
Silicon shall determine in its good faith business judgment, except that,
provided no Default or Event of Default has occurred and is continuing, Silicon
shall release to Borrower insurance proceeds with respect to Equipment totaling
less than $100,000, which shall be utilized by Borrower for the replacement of
the Equipment with respect to which the insurance proceeds were paid. Silicon
may require reasonable assurance that the insurance proceeds so released will be
so used. If Borrower fails to provide or pay for any insurance, Silicon may, but
is not obligated to, obtain the same at Borrower's expense. Borrower shall
promptly deliver to Silicon copies of all material reports made to insurance
companies.

5.3 Reports.

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

5.4 Access to Collateral, Books and Records.

At reasonable times, and on * one Business Day's notice, Silicon, or its agents,
shall have the right to inspect the Collateral, and the right to audit and copy
Borrower's books and records. Silicon shall take reasonable steps to keep
confidential all information obtained in any such inspection or audit, but
Silicon shall have the right to disclose any such information to its auditors,
regulatory agencies, and attorneys, and pursuant to any subpoena or other legal
process. The foregoing inspections and audits shall be at Borrower's expense and
the charge therefor shall be $700 per person per day (or such higher amount as
shall represent Silicon's then current standard charge for the same), plus
reasonable out-of-pocket expenses. In the event Borrower and Silicon schedule an
audit more than 10 days in advance, and Borrower seeks to reschedules the audit
with less than 10 days written notice to Silicon, then (without limiting any of
Silicon's rights or remedies), Borrower shall pay Silicon a cancellation fee of
$1,000 plus any out-of-pocket expenses incurred by Silicon, to compensate
Silicon for the anticipated costs and expenses of the cancellation.

*three Business Days notice (except that if an Event of Default has occurred and
is continuing said period shall be one Business Day's notice)

5.5 Negative Covenants.

Except as may be permitted in the Schedule, Borrower shall not, without
Silicon's prior written consent (which shall be a matter of its good faith
business judgment), do any of the following: (i) merge or consolidate with
another corporation or entity; (ii) acquire any assets, except in the ordinary
course of business; (iii) enter into any other transaction outside the ordinary
course of business; (iv) sell or transfer any Collateral, except for the sale of
finished Inventory in the ordinary course of Borrower's business, and except for
the sale of obsolete or unneeded Equipment in the ordinary course of business;
(v) store any Inventory or other Collateral with any warehouseman or other third
party*; (vi) sell any Inventory on a sale-or-return, guaranteed sale,
consignment, or other contingent basis; (vii) make any loans of any money or
other assets; (viii) incur any debts, outside the ordinary course of business,
which would result in a Material Adverse Change; (ix) guarantee or otherwise
become liable with respect to the obligations of another party or entity; (x)
pay or declare any dividends on Borrower's stock, except for dividends payable
solely in stock of Borrower; (xi) redeem, retire, purchase or otherwise acquire,
directly or indirectly, any of Borrower's stock**; (xii) make any change in
Borrower's capital structure which would result in a Material Adverse Change; or
(xiii) engage, directly or indirectly, in any business other than the businesses
currently engaged in by Borrower or reasonably related thereto; or (xiv)
dissolve or elect to dissolve. Transactions permitted by the foregoing
provisions of this Section are only permitted if no Default or Event of Default
would occur as a result of such transaction.

*unless such warehouseman or other third party has executed a bailee agreement
in form acceptable to Silicon

**provided that Borrower may retire any stock which has been redeemed or
repurchased and fully paid for prior to the date of the most recent financial
statements provided to Silicon prior to the date hereof

5.6 Litigation Cooperation.

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

* and upon reasonable notice to Borrower

5.7 Further Assurances.

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

6.        TERM.

6.1 Maturity Date.

This Agreement shall continue in effect until the maturity date set forth on the
Schedule (the "Maturity Date"), subject to Section 6.3 below.

6.2 Early Termination.

This Agreement may be terminated prior to the Maturity Date as follows: (i) by
Borrower, effective three Business Days after written notice of termination is
given to Silicon; or (ii) by Silicon at any time after the occurrence and during
the continuance of an Event of Default, without notice, effective immediately.
If this Agreement is terminated by Borrower or by Silicon under this Section
6.2, Borrower shall pay to Silicon a termination fee in an amount equal to 3% of
the Maximum Credit Limit (as defined in the Schedule) if termination occurs on
or before the first anniversary of the date of this Agreement, 2% of the Maximum
Credit Limit if termination occurs after the first anniversary of the date of
this Agreement and on or before the second anniversary of the date of this
Agreement, and 1% of the Maximum Credit Limit if termination occurs after the
second anniversary of the date of this Agreement. The termination fee shall be
due and payable on the effective date of termination and thereafter shall bear
interest at a rate equal to the highest rate applicable to any of the
Obligations. Notwithstanding the foregoing, if Borrower does not attain positive
EBITDA for a fiscal quarter, and Silicon is not willing to release the Reserve
Until EBITDA Positive, referred to in Section 1 of the Schedule, then Borrower
may terminate this Agreement without a prepayment fee, subject to the following:
(i) Borrower may not terminate this Agreement under this sentence prior to
Borrower providing Silicon with Borrower's financial statements for the fiscal
quarter ending December 31, 2002, and giving Silicon ten Business Days to
determine whether or not to release the Reserve Until EBITDA Positive. (ii) If
Silicon determines not to release said Reserve, then Borrower may terminate this
Agreement without a prepayment fee, but only if Borrower does so and pays all
outstanding Obligations in full within 60 days after Silicon notifies Borrower
that it has determined not to release said Reserve.

6.3 Payment of Obligations.

On the Maturity Date or on any earlier effective date of termination, Borrower
shall pay and perform in full all Obligations, whether evidenced by installment
notes or otherwise, and whether or not all or any part of such Obligations are
otherwise then due and payable. Without limiting the generality of the
foregoing, if on the Maturity Date, or on any earlier effective date of
termination, there are any outstanding Letters of Credit issued by Silicon or
issued by another institution based upon an application, guarantee, indemnity or
similar agreement on the part of Silicon, then on such date Borrower shall
provide to Silicon cash collateral in an amount equal to 105% of the face amount
of all such Letters of Credit plus all interest, fees and cost due or to become
due in connection therewith (as estimated by Silicon in its good faith business
judgment), to secure all of the Obligations relating to said Letters of Credit,
pursuant to Silicon's then standard form cash pledge agreement. Notwithstanding
any termination of this Agreement, all of Silicon's security interests in all of
the Collateral and all of the terms and provisions of this Agreement shall
continue in full force and effect until all Obligations have been paid and
performed in full; provided that Silicon may, in its sole discretion, refuse to
make any further Loans after termination. No termination shall in any way affect
or impair any right or remedy of Silicon, nor shall any such termination relieve
Borrower of any Obligation to Silicon, until all of the Obligations have been
paid and performed in full. Upon payment and performance in full of all the
Obligations and termination of this Agreement, Silicon shall promptly terminate
its financing statements with respect to the Borrower and deliver to Borrower
such other documents as may be required to fully terminate Silicon's security
interests.

7.        EVENTS OF DEFAULT AND REMEDIES.

7.1 Events of Default.

The occurrence of any of the following events shall constitute an "Event of
Default" under this Agreement, and Borrower shall give Silicon immediate written
notice thereof: (a) Any warranty, representation, statement, report or
certificate made or delivered to Silicon by Borrower or any of Borrower's
officers, employees or agents, now or in the future, shall be untrue or
misleading in a material respect when made or deemed to be made; or (b) Borrower
shall fail to pay when due any Loan or any interest thereon or any other
monetary Obligation; or (c) the total Loans and other Obligations outstanding at
any time shall exceed the Credit Limit; or (d) Borrower shall fail to comply
with any of the financial covenants set forth in the Schedule, or shall fail to
perform any other non-monetary Obligation which by its nature cannot be cured,
or shall fail to permit Silicon to conduct an inspection or audit as specified
in Section 5.4 hereof; or (e) Borrower shall fail to perform any other
non-monetary Obligation, which failure is not cured within five Business Days
after the date due; or (f) any levy, assessment, attachment, seizure, lien or
encumbrance (other than a Permitted Lien) is made on all or any part of the
Collateral ** which is not cured within 10 days after the occurrence of the
same; or (g) any default or event of default occurs under any obligation secured
by a Permitted Lien, which is not cured within any applicable cure period or
waived in writing by the holder of the Permitted Lien; or (h) Borrower breaches
any material contract or obligation, which has resulted or may reasonably be
expected to result in a Material Adverse Change; or (i) Dissolution, termination
of existence, insolvency or business failure of Borrower; or appointment of a
receiver, trustee or custodian, for all or any part of the property of,
assignment for the benefit of creditors by, or the commencement of any
proceeding by Borrower under any reorganization, bankruptcy, insolvency,
arrangement, readjustment of debt, dissolution or liquidation law or statute of
any jurisdiction, now or in the future in effect; or (j) the commencement of any
proceeding against Borrower or any guarantor of any of the Obligations under any
reorganization, bankruptcy, insolvency, arrangement, readjustment of debt,
dissolution or liquidation law or statute of any jurisdiction, now or in the
future in effect, which is not cured by the dismissal thereof within * 30 days
after the date commenced; or (k) revocation or termination of, or limitation or
denial of liability upon, any guaranty of the Obligations or any attempt to do
any of the foregoing, or commencement of proceedings by any guarantor of any of
the Obligations under any bankruptcy or insolvency law; or (l) revocation or
termination of, or limitation or denial of liability upon, any pledge of any
certificate of deposit, securities or other property or asset of any kind
pledged by any third party to secure any or all of the Obligations, or any
attempt to do any of the foregoing, or commencement of proceedings by or against
any such third party under any bankruptcy or insolvency law; or (m) Borrower
makes any payment on account of any indebtedness or obligation which has been
subordinated to the Obligations other than as permitted in the applicable
subordination agreement, or if any Person who has subordinated such indebtedness
or obligations terminates or in any way limits his subordination agreement; or
(n) *** there shall be a change in the record or beneficial ownership of an
aggregate of more than 20% of the outstanding shares of stock of Borrower, in
one or more transactions, compared to the ownership of outstanding shares of
stock of Borrower in effect on the date hereof, without the prior written
consent of Silicon; or (o) Borrower shall generally not pay its debts as they
become due, or Borrower shall conceal, remove or transfer any part of its
property, with intent to hinder, delay or defraud its creditors, or make or
suffer any transfer of any of its property which may be fraudulent under any
bankruptcy, fraudulent conveyance or similar law; or (p) a Material Adverse
Change shall occur; or (q) Silicon, acting in good faith and in a commercially
reasonable manner, deems itself insecure because of the occurrence of an event
prior to the effective date hereof of which Silicon had no knowledge on the
effective date or because of the occurrence of an event on or subsequent to the
effective date. Silicon may cease making any Loans hereunder during any of the
above cure periods, and thereafter if an Event of Default has occurred and is
continuing.

*45

**having a value of more than $25,000

***Meritage Investment Partners LLC shall cease to own at least 20% of the
outstanding voting stock of Borrower

7.2 Remedies.

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

7.3 Standards for Determining Commercial Reasonableness.

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

7.4 Power of Attorney.

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

7.5 Application of Proceeds.

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

7.6 Remedies Cumulative.

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

8.        Definitions.

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

"Account Debtor" means the obligor on an Account.

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

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

"Business Day" means a day on which Silicon is open for business.

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

"Collateral" has the meaning set forth in Section 2 above.

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

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

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

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

"Eligible Inventory" means Inventory which Silicon, in its good faith business
judgment, deems eligible for borrowing. Without limiting the fact that the
determination of which Inventory is eligible for borrowing is a matter of
Silicon's good faith business judgment, the following are the minimum
requirements for Inventory to be Eligible Inventory: the Inventory must
(i) consist of finished goods, in good, new and salable condition, not be
perishable, not be obsolete or unmerchantable, and not be comprised of raw
materials, work in process, packaging materials or supplies; (ii) meet all
applicable governmental standards; (iii) have been manufactured in compliance
with the Fair Labor Standards Act; (iv) conform in all respects to the
warranties and representations set forth in this Agreement; (v) be at all times
subject to Silicon's duly perfected, first priority security interest; and (vi)
be situated at Borrower's Address or at one of the locations set forth in the
Representations.

"Eligible Accounts" means Accounts and General Intangibles arising in the
ordinary course of Borrower's business from the sale of goods or the rendition
of services, or the non-exclusive licensing of Intellectual Property, which
Silicon, in its good faith business judgment, shall deem eligible for borrowing.
Without limiting the fact that the determination of which Accounts are eligible
for borrowing is a matter of Silicon's good faith business judgment, the
following (the "Minimum Eligibility Requirements") are the minimum requirements
for a Account to be an Eligible Account: (i) the Account must not be outstanding
for more than 90 days from its invoice date (the "Eligibility Period"), (ii) the
Account must not represent progress billings, or be due under a fulfillment or
requirements contract with the Account Debtor, (iii) the Account must not be
subject to any contingencies (including Accounts arising from sales on
consignment, guaranteed sale or other terms pursuant to which payment by the
Account Debtor may be conditional), (iv) * the Account must not be owing from an
Account Debtor with whom Borrower has any dispute (whether or not relating to
the particular Account), (v) the Account must not be owing from an Affiliate of
Borrower, (vi) the Account must not be owing from an Account Debtor which is
subject to any insolvency or bankruptcy proceeding, or whose financial condition
is not acceptable to Silicon, or which, fails or goes out of a material portion
of its business, (vii) the Account must not be owing from the United States or
any department, agency or instrumentality thereof (unless there has been
compliance, to Silicon's satisfaction, with the United States Assignment of
Claims Act), (viii) the Account must not be owing from an Account Debtor located
outside the United States or Canada (unless it is pre-approved by Silicon in its
discretion in writing, or backed by a letter of credit satisfactory to Silicon,
or FCIA insured satisfactory to Silicon, or the subject of credit insurance
under a credit insurance policy which is in form and substance acceptable to
Silicon in its good faith business judgment, under which Silicon is the
exclusive loss payee, and which is issued by an insurance company which is, and
continues to be, acceptable to Silicon in its good faith business judgment and
which has a claims and payment history acceptable to Silicon in its good faith
business judgment (the "Foreign Credit Insurance Policy")), (ix) the Account
must not be owing from an Account Debtor to whom Borrower is or may be liable
for goods purchased from such Account Debtor or otherwise (but, in such case,
the Account will be deemed not eligible only to the extent of any amounts owed
by Borrower to such Account Debtor). Accounts owing from one Account Debtor will
not be deemed Eligible Accounts to the extent they exceed 25% of the total
Accounts outstanding **. In addition, if more than 50% of the Accounts owing
from an Account Debtor are outstanding for a period longer than their
Eligibility Period (without regard to unapplied credits) or are otherwise not
eligible Accounts, then all Accounts owing from that Account Debtor will be
deemed ineligible for borrowing. Silicon may, from time to time, in its good
faith business judgment, revise the Minimum Eligibility Requirements, upon
written notice to Borrower. As to any Foreign Credit Insurance Policy, the
following provisions shall apply: (a) Borrower agrees to comply with all
requirements of the Foreign Credit Insurance Policy, to provide Silicon with
copies of all claims thereunder and all reports made to the insurance company,
to make timely claims thereunder in the event of any loss covered by such
insurance, and to keep said insurance in full force and effect so long as any
Accounts subject thereto are outstanding. (b) To the extent Accounts owing from
an Account Debtor exceed any limits set forth in the Foreign Credit Insurance
Policy, they shall not be deemed to be Eligible Accounts, and to the extent
total Accounts insured under the Foreign Credit Insurance Policy exceed the
policy limit of the Foreign Credit Insurance Policy, they shall not be deemed
Eligible Accounts. (c) Borrower shall assure that the terms of sale, products
sold, and all other aspects of sales to Account Debtors named in the Foreign
Credit Insurance Policy shall comply in all respects with the terms and
requirements of the Foreign Credit Insurance Policy. (d) Silicon may, in its
good faith business judgment, establish Reserves with respect to Accounts
insured under the Foreign Credit Insurance Policy to take into account
deductibles, co-insurance, other provisions of the Foreign Credit Insurance
Policy, and other factors and risks relating to the Accounts.

*the Account Debtor with respect to such Account must not have asserted a
dispute with respect to such Account

**unless Silicon, in its sole discretion, agrees in writing to a higher number
for particular Account Debtors

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

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

"GAAP" means generally accepted accounting principles consistently applied.

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

"good faith business judgment" means honesty in fact and good faith (as defined
in Section 1201 of the Code) in the exercise of Silicon's business judgment.

"including" means including (but not limited to).

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

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

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

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

"Material Adverse Change" means any of the following: (i) a material adverse
change in the business, operations, or financial or other condition of the
Borrower, or (ii) a material impairment of the prospect of repayment of any
portion of the Obligations; or (iii) a material impairment of the value or
priority of Silicon's security interests in the Collateral.

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

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

"Permitted Liens" means the following: (i) purchase money security interests in
specific items of Equipment; (ii) leases of specific items of Equipment; (iii)
liens for taxes not yet payable; (iv) additional security interests and liens
consented to in writing by Silicon, which consent may be withheld in its good
faith business judgment; (v) security interests being terminated substantially
concurrently with this Agreement; (vi) liens of materialmen, mechanics,
warehousemen, carriers, or other similar liens arising in the ordinary course of
business and securing obligations which are not delinquent; (vii) liens incurred
in connection with the extension, renewal or refinancing of the indebtedness
secured by liens of the type described above in clauses (i) or (ii) above,
provided that any extension, renewal or replacement lien is limited to the
property encumbered by the existing lien and the principal amount of the
indebtedness being extended, renewed or refinanced does not increase; (viii)
Liens in favor of customs and revenue authorities which secure payment of
customs duties in connection with the importation of goods. Silicon will have
the right to require, as a condition to its consent under subparagraph (iv)
above, that the holder of the additional security interest or lien sign an
intercreditor agreement on Silicon's then standard form, acknowledge that the
security interest is subordinate to the security interest in favor of Silicon,
and agree not to take any action to enforce its subordinate security interest so
long as any Obligations remain outstanding, and that Borrower agree that any
uncured default in any obligation secured by the subordinate security interest
shall also constitute an Event of Default under this Agreement.

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

"Representations" means the written Representations and Warranties provided by
Borrower to Silicon referred to in the Schedule.

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

*are reasonably likely to

*is reasonably likely to

Other Terms

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

9.         GENERAL PROVISIONS.

9.1 Interest Computation.

In computing interest on the Obligations, all checks, wire transfers and other
items of payment received by Silicon (including proceeds of Accounts and payment
of the Obligations in full) shall be deemed applied by Silicon on account of the
Obligations two Business Days after receipt by Silicon of immediately available
funds, and, for purposes of the foregoing, any such funds received after 12:00
Noon on any day shall be deemed received on the next Business Day. * Silicon
shall not, however, be required to credit Borrower's account for the amount of
any item of payment which is unsatisfactory to Silicon in its good faith
business judgment, and Silicon may charge Borrower's loan account for the amount
of any item of payment which is returned to Silicon unpaid.

* For purposes of computing availability of Loans, checks, wire transfers and
other items of payment received by Silicon (including proceeds of Accounts)
shall be deemed applied by Silicon on account of the Obligations on the date
received by Silicon in immediately available funds, provided that funds received
after 12:00 Noon on any day shall be deemed received on the next Business Day.

9.2 Application of Payments.

All payments with respect to the Obligations may be applied, and in Silicon's
good faith business judgment reversed and re-applied, to the Obligations, in
such order and manner as Silicon shall determine in its good faith business
judgment.

9.3 Charges to Accounts.

Silicon may, in its discretion, require that Borrower pay monetary Obligations
in cash to Silicon, or charge them to Borrower's Loan account, in which event
they will bear interest at the same rate applicable to the Loans. Silicon may
also, in its discretion, charge any monetary Obligations to Borrower's Deposit
Accounts maintained with Silicon.

9.4 Monthly Accountings.

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

9.5 Notices.

All notices to be given under this Agreement shall be in writing and shall be
given either personally or by reputable private * delivery service or by regular
first-class mail, or certified mail return receipt requested, addressed to
Silicon or Borrower at the addresses shown in the heading to this Agreement, or
at any other address designated in writing by one party to the other party.
Notices to Silicon shall be directed to the Commercial Finance Division, to the
attention of the Division Manager or the Division Credit Manager. All notices
shall be deemed to have been given upon delivery in the case of notices
personally delivered, or at the expiration of one Business Day following
delivery to the private delivery service, or ** two Business Days following the
deposit thereof in the United States mail, with postage prepaid.

*overnight **four

9.6 Severability.

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

9.7 Integration.

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

9.8 Waivers; Indemnity.

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

9.9 No Liability for Ordinary Negligence.

Neither Silicon, nor any of its directors, officers, employees, agents,
attorneys or any other Person affiliated with or representing Silicon shall be
liable for any claims, demands, losses or damages, of any kind whatsoever, made,
claimed, incurred or suffered by Borrower or any other party through the
ordinary negligence of Silicon, or any of its directors, officers, employees,
agents, attorneys or any other Person affiliated with or representing Silicon,
but nothing herein shall relieve Silicon from liability for its own gross
negligence or willful misconduct.

9.10 Amendment.

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

9.11 Time of Essence.

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

9.12 Attorneys Fees and Costs.

Borrower shall reimburse Silicon for all reasonable attorneys' fees and all
filing, recording, search, title insurance, appraisal, audit, and other
reasonable costs incurred by Silicon, pursuant to, or in connection with, or
relating to this Agreement (whether or not a lawsuit is filed), including, but
not limited to, any reasonable attorneys' fees and costs Silicon incurs in order
to do the following: prepare and negotiate this Agreement and all present and
future documents relating to this Agreement; obtain legal advice in connection
with this Agreement or Borrower; enforce, or seek to enforce, any of its rights;
prosecute actions against, or defend actions by, Account Debtors; commence,
intervene in, or defend any action or proceeding; initiate any complaint to be
relieved of the automatic stay in bankruptcy; file or prosecute any probate
claim, bankruptcy claim, third-party claim, or other claim; examine, audit,
copy, and inspect any of the Collateral or any of Borrower's books and records;
protect, obtain possession of, lease, dispose of, or otherwise enforce Silicon's
security interest in, the Collateral; and otherwise represent Silicon in any
litigation relating to Borrower. In satisfying Borrower's obligation hereunder
to reimburse Silicon for attorneys fees, Borrower may, for convenience, issue
checks directly to Silicon's attorneys, Levy, Small & Lallas, but Borrower
acknowledges and agrees that Levy, Small & Lallas is representing only Silicon
and not Borrower in connection with this Agreement. If either Silicon or
Borrower files any lawsuit against the other predicated on a breach of this
Agreement, the prevailing party in such action shall be entitled to recover its
reasonable costs and attorneys' fees, including (but not limited to) reasonable
attorneys' fees and costs incurred in the enforcement of, execution upon or
defense of any order, decree, award or judgment. All attorneys' fees and costs
to which Silicon may be entitled pursuant to this Paragraph shall immediately
become part of Borrower's Obligations, shall be due on demand, and shall bear
interest at a rate equal to the highest interest rate applicable to any of the
Obligations.

9.13 Benefit of Agreement.

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

9.14 Joint and Several Liability.

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

9.15 Limitation of Actions.

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

*two years ** two-year

9.16 Paragraph Headings; Construction.

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

9.17 Governing Law; Jurisdiction; Venue.

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

9.18 Mutual Waiver of Jury Trial.

Borrower and Silicon each hereby waive the right to trial by jury in any action
or proceeding based upon, arising out of, or in any way relating to, this
Agreement or any other present or future instrument or agreement between Silicon
and Borrower, or any conduct, acts or omissions of Silicon or Borrower or any of
their directors, officers, employees, agents, attorneys or any other persons
affiliated with Silicon or Borrower, in all of the foregoing cases, whether
sounding in contract or tort or otherwise.

Borrower:

 

Silicon:

EXABYTE CORPORATION

 

SILICON VALLEY BANK

 

 

 

By /s/ Craig G. Lamborn

 

By /s/ S. Renee Hudnell

President or Vice President

 

Title: Vice President

 

 

 

By /s/ Stephen F. Smith

 

 

Secretary or Ass't Secretary

 

 

 

 

Form: -3 (3/7/02)
Version -5