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BUSINESS FINANCING AGREEMENT
dated as of March 28, 2003
between
BRIDGE BANK, NATIONAL ASSOCIATION
and
Teknowledge Corporation, a Delaware corporation (Borrower).

Borrower and Lender agree as follows:

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|1. | Definitions and Construction.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
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|   | 1.1                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   | Definitions. In this Agreement:
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                 |                                                                                                                                                                                     
|   | Account Balance means at any time the  aggregate  of the  Receivable  Amounts of all  Eligible
Receivables at such time.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                 |                                                                                                                                                                                     
|   | Account  Debtor  has the meaning in the  California  Uniform  Commercial  Code and  includes any
person liable on any Receivable,  including without  limitation,  any guarantor of any Receivable and any issuer of
a letter of credit or banker's acceptance assuring payment thereof.                                                                                                                                                                                                                                                                                                                                                                                           
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                 |                                                                                                                                                                                     
|   | Adjustments   means  all  discounts,   allowances,   disputes,   offsets,  defenses,  rights  of
recoupment,  rights of return,  warranty claims, or short payments,  asserted by or on behalf of any Account Debtor
with respect to any Receivable.                                                                                                                                                                                                                                                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                 |                                                                                                                                                                                     
|   | Advance means an advance made by Lender to Borrower pursuant to Section 2.2.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                 |                                                                                                                                                                                     
|   | Advance  Rate  means 80% or such  greater or lesser  percentage  as Lender may from time to time
establish in its sole discretion upon notice to Borrower.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                 |                                                                                                                                                                                     
|   | Agreement means this Business Financing Agreement.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                 |                                                                                                                                                                                     
|   | Borrowing  Base  means at any time the sum of (a) the  product of the  Account  Balance  and the
Advance Rate, and (b) prebilled maintenance revenue in an amount not exceeding 10% of the Account Balance.                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                 |                                                                                                                                                                                     
|   | Collateral  means all of  Borrower's  rights  and  interest  in any and all  personal  property,
whether now existing or hereafter  acquired or created and wherever located,  and all products and proceeds thereof
and accessions thereto, including the following (collectively,  the  Collateral):  accounts,  including
health care insurance receivables,  chattel paper, inventory, equipment,  instruments,  including promissory notes,
investment property,  documents,  deposit accounts,  letter of credit rights, any commercial tort claim of Borrower
which is now or hereafter identified by Borrower or Lender, general intangibles, and supporting obligations.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                 |                                                                                                                                                                                     
|   | Collections  means  all  payments  from or on  behalf  of an  Account  Debtor  with  respect  to
Receivables.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                 |                                                                                                                                                                                     
|   | Compliance  Certificate  means a certificate in the form attached to this Agreement by the chief
financial  officer of Borrower  that,  among other things,  the  representations  and  warranties set forth in this
Agreement are true and correct as of the date such certificate is delivered.                                                                                                                                                                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                 |                                                                                                                                                                                     
|   | Credit Limit means $3,000,000.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                 |                                                                                                                                                                                     
|   | Default  means any Event of Default or any event that with  notice,  lapse of time or  otherwise
would constitute an Event of Default.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                 |                                                                                                                                                                                     
|   | EBITDA  means the sum of net income before  taxes,  plus interest  expense,  plus  depreciation,
depletion, amortization and other noncash charges.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                 |                                                                                                                                                                                     
|   | Eligible  Receivable  means a  Receivable  (net of any  prepaid or  prebilled  maintenance
revenue) that satisfies all of the following:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                 |                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | (a)                             | The  Receivable  has been created by Borrower in the ordinary  course of  Borrower's  business and without
any obligation on the part of Borrower to render any further performance.

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| |                                                               | (b) | There are no  conditions  which must be satisfied  before  Borrower is entitled to receive  payment of the
Receivable, and the Receivable does not arise from COD sales, consignments or guaranteed sales.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
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| |                                                               | (c) | The Account Debtor upon the Receivable  does not claim any defense to payment of the  Receivable,  whether
well founded or otherwise.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |                                                               |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |                                                               | (d) | The  Receivable  is  not  the  obligation  of an  Account  Debtor  who  has  asserted  or may  assert  any
counterclaims or offsets against Borrower (including offsets for any contra  accounts  owed by Borrower
to the Account Debtor for goods purchased by Borrower or for services performed for Borrower).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
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| |                                                               | (e) | The  Receivable  represents  a genuine  obligation  of the  Account  Debtor  and to the  extent any credit
balances  exist in favor of the  Account  Debtor,  such  credit  balances  shall be  deducted  in  calculating  the
Receivable Amount.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |                                                               |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |                                                               | (f) | Borrower has sent an invoice to the Account Debtor in the amount of the Receivable.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
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| |                                                               | (g) | Borrower is not  prohibited by the laws of the state where the Account  Debtor is located from bringing an
action in the courts of that state to enforce the  Account  Debtor's  obligation  to pay the  Receivable.  Borrower
has  taken all  appropriate  actions  to ensure  access to the  courts  of the state  where the  Account  Debtor is
located,  including,  where necessary, the filing of a Notice of Business Activities Report or other similar filing
with the applicable state agency or the qualification by Borrower as a foreign  corporation  authorized to transact
business in such state.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
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| |                                                               | (h) | The  Receivable  is owned by Borrower free of any title defects or any liens or interests of others except
the security  interest in favor of Lender,  and Lender has a perfected,  first priority  security  interest in such
Receivable.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |                                                               |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |                                                               | (i) | The Account Debtor on the Receivable is not any of the following:  (i) an employee,  affiliate,  parent or
subsidiary  of  Borrower,  or an entity  which has  common  officers  or  directors  with  Borrower;  (ii) the U.S.
government or any agency or department of the U.S.  government  unless Borrower complies with the procedures in the
Federal  Assignment of Claims Act of 1940 (41 U.S.C.  §15) with respect to the Receivable,  and the underlying
contract  expressly  provides that neither the U.S.  government nor any agency or department thereof shall have the
right of setoff against Borrower (Eligible  Government  Receivables);  (iii) any person or entity
located in a foreign  country unless (A) the  Receivable is supported by an irrevocable  letter of credit issued by
a bank  acceptable  to Lender,  and (B) if  requested by Lender,  the original of such letter of credit  and/or any
usance  drafts  drawn  under such  letter of credit  and  accepted  by the  issuing  or  confirming  bank have been
delivered to Lender;  or (iv) an Account  Debtor as to which 35% percent or more of the aggregate  dollar amount of
all outstanding Receivables owing from such Account Debtor have not been paid within 90 days from invoice date.
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| |                                                               | (j) | The  Receivable  is not in default (a  Receivable  will be  considered  in default if any of the following
occur:  (i) the  Receivable is not paid within 90 days from its invoice  date;  (ii) the Account  Debtor  obligated
upon the Receivable  suspends business,  makes a general  assignment for the benefit of creditors,  or fails to pay
its debts  generally  as they come due; or (iii) any petition is filed by or against the Account  Debtor  obligated
upon the Receivable under any bankruptcy law or any other law or laws for the relief of debtors);                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
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| |                                                               | (k) | The Receivable does not arise from the sale of goods which remain in  Borrowers  possession or under
Borrowers control.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
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| |                                                               | (l) | The  Receivable  is not  evidenced  by a  promissory  note or chattel  paper,  nor is the  Account  Debtor
obligated to Borrower under any other obligation which is evidenced by a promissory note.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
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| |                                                               | (m) | Except  with  respect  to  Eligible  Government  Receivables,  the  Receivable  is  not  that  portion  of
Receivables  due from an Account  Debtor which is in excess of 25% of  Borrowers  aggregate  dollar amount of
all outstanding Receivables;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
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| |                                                               | (n) | The Receivable is otherwise acceptable to Lender.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |                                                               |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |  Event of Default has the meaning set forth in Section 9.1.
| |                                                               |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |  Facility Fee means $12,510.                               

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| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |               |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |   Finance  Charge  means for each Reconciliation  Period an interest amount equal to the Finance
Charge Percentage of the average daily Account Balance outstanding during such Reconciliation Period.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |               |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |   Finance  Charge  Percentage  means a rate per year  equal to the  greater  of (a) 4.25% or (b)
Lenders  Prime Rate plus 1.5%, which rate shall be reduced to Lenders  Prime Rate plus 1% commencing on
the first day  following  Lenders  receipt of financial  reports  from  Borrower  evidencing  Borrowers
completion of two consecutive quarters of EBITDA greater than $50,000.                                                                                                                                                                                                                                                                                                                          
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |               |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |  Funding  Request  means a writing signed by an authorized representative of Borrower requesting
an Advance which  accurately  identifies the Eligible  Receivables  and Receivable  Amounts,  and includes for each
such  Receivable the correct amount owed by the Account  Debtor,  the name and address of the Account  Debtor,  the
invoice number, the invoice date and the account code.                                                                                                                                                                                                                                                                                                                      
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |               |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |  Lender means Bridge Bank, National Association, and its successors and assigns.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |               |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |   Minimum  Utilization  Fee  means for any  Reconciliation  Period  the amount (if any) by which
$3,000 exceeds the Finance Charge for that Reconciliation Period.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |               |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |   Obligations  means  all  liabilities  and  obligations  of  Borrower  to Lender of any kind or
nature,  present or  future,  arising  under or in  connection  with this  Agreement  or under any other  document,
instrument or agreement,  whether or not evidenced by any note,  guarantee or other instrument,  whether arising on
account or by  overdraft,  whether  direct or  indirect  (including  those  acquired  by  assignment)  absolute  or
contingent,  primary or  secondary,  due or to become due, now owing or hereafter  arising,  and however  acquired;
including,  without limitation,  all Advances,  Finance Charges,  fees, interest,  expenses,  professional fees and
attorneys fees.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |               |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |   Overadvance  means that the total amount of the Advances then  outstanding  exceeds the Credit
Limit or the Borrowing Base.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |               |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |  Prime  Rate  means for any day, a variable rate of interest, per annum, most recently published
by the Wall Street  Journal,  as the prime  rate,  provided that if such day is not a business day, the
Prime  Rate  for such day  shall  be such  rate on such  transactions  on the  next  preceding  business  day as so
published in the Wall Street Journal on the next succeeding business day.                                                                                                                                                                                                                                                                                                             
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |               |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |   Receivable  Amount  means as to any  Receivable,  the  Receivable  Amount due from the Account
Debtor after deducting all discounts,  credits,  offsets,  payments or other  deductions of any nature  whatsoever,
whether or not claimed by the Account Debtor.                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |               |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |   Receivables  means  Borrowers  rights  to  payment  arising  in the  ordinary  course of
Borrowers  business,  including accounts,  chattel paper, instruments,  contract rights,  documents,  general
intangibles, letters of credit, drafts, and bankers acceptances.                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |               |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |  Reconciliation Date means the last calendar day of each Reconciliation Period.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |               |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |  Reconciliation Period means each calendar month.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |               |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |   Termination  Date  means the earlier of (a) one year from the date hereof,  or (b) the date on
which Lender elects to terminate this Agreement pursuant to the terms herein.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |               |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | Termination Fee means a payment equal to 0.5% of the Credit Limit.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |               |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | 1.2                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     | Construction:
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |               |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         | (a)           | In this  Agreement:  (i) references  to the plural  include the singular  and to the  singular  include the plural;
(ii) references   to  any   gender   include   any  other   gender;   (iii) the   terms   include   and
including  are not limiting; (iv) the term or  has the inclusive meaning represented by the
phrase  and/or,  (v)  unless  otherwise  specified,  section  and  subsection  references  are to  this
Agreement,  and (vi) any reference to any statute,  law, or regulation  shall  include all  amendments  thereto and
revisions thereof.
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| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         | (b)           | Neither this Agreement nor any  uncertainty  or ambiguity  herein shall be construed or resolved using any
presumption  against  either  Borrower or Lender,  whether  under any rule of  construction  or  otherwise.  On the
contrary,  this  Agreement  has been  reviewed by each party hereto and their  respective                                                                                                                                                                                                                                                      

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|   |                                       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                | counsel.  In case of any
ambiguity or uncertainty,  this Agreement shall be construed and interpreted  according to the ordinary  meaning of
the words used to accomplish fairly the purposes and intentions of all parties hereto.
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|   |                                       | (c)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            | Titles and section  headings used in this Agreement are for convenience  only and shall not be used in interpreting
this Agreement.                                                                                                
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|2. | Advances.                            
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|   | 2.1                                   | Funding  Requests.  Borrower  may request  that Lender make an advance  (each,  an  Advance)  by
delivering  to Lender a Funding  Request.  Lender  shall be  entitled  to rely on all the  information  provided by
Borrower  to Lender on or with the  Funding  Request  and to rely on the  signature  on any  Funding  Request as an
authorized signature of Borrower.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   |                                       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |                                                                                                                                                                                                                                    
|   | 2.2                                   | Revolving  Credit Line.  Subject to the terms and conditions of this Agreement,  from the date on which this
Agreement  becomes  effective until the Termination  Date,  Lender will make Advances to Borrower not exceeding the
Credit Limit minus the Credit Card Sublimit or the  Borrowing  Base,  whichever is less;  provided that in no event
shall  Lender be  obligated  to make any  Advance  that  results  in an  Overadvance  or while any  Overadvance  is
outstanding.  Amounts  borrowed  under  this  Section  may be  repaid  and  reborrowed  during  the  term  of  this
Agreement.  It shall be a condition to each Advance that (a) all of the  representations  and  warranties set forth
in  Section 6  are true and  correct  on the date of such  Advance  as though  made at and as of each such date and
(b) no Default has occurred and is continuing, or would result from such Advance.                                                        
|   |                                       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |                                                                                                                                                                                                                                    
|   | 2.3                                   | Credit Card  Sublimit.  Borrower may use up to $10,000 (the Credit Card  Sublimit) of the Credit
Limit for credit  card  services  identified  in that  certain  Corporate  Visa  Credit  Card  Agreement,  dated of
substantially even date herewith,  between Bank and Borrower.  All amounts paid by Bank at Borrowers  request
for any credit card services thereunder will be treated as an Advance hereunder.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   |                                       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |                                                                                                                                                                                                                                    
|   | 2.4                                   | Rights  in Respect of  Receivables.  Lender shall have the  exclusive  right to receive all  Collections  on
the Receivable and no Adjustments  will be made without the Lender's  consent.  Lender shall have,  with respect to
any goods  related to the  Receivables,  all the rights  and  remedies  of an unpaid  seller  under the  California
Uniform  Commercial  Code and other  applicable  law,  including  the  rights  of  replevin,  claim  and  delivery,
reclamation and stoppage in transit.                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |                                                                                                                                                                                                                                    
|   | 2.5                                   | Due  Diligence.  Lender may at any time and from time to time  contact  Account  Debtors  and other  persons
obligated or  knowledgeable  in respect of  Receivables to confirm the Receivable  Amount of such  Receivables,  to
determine whether Receivables  constitute Eligible  Receivables,  and for any other purpose in connection with this
Agreement.  Lender may audit Borrowers  Receivables and any and all records pertaining to the Collateral,  at
Lenders sole discretion and at Borrowers expense.                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   |                                       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |                                                                                                                                                                                                                                    
|3. | Collections, Charges and Remittances.
|   |                                       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |                                                                                                                                                                                                                                    
|   | 3.1                                   | Collections.   Lender  shall  credit  Collections  with  respect  to  Receivables   received  by  Lender  to
Borrowers  Account Balance within three business days of the date received;  provided that for the purpose
of  calculating  fees under Section 3.3,  collections  will not be credited  until the third business day after the
date  received.  All  Collections  received by Lender  shall first be applied to repay the  Advances  and other
Obligations;  once all Obligations have been paid in full,  Lender agrees to remit to Borrower the remaining amount
of  Collections  it  receives.  Lender has no duty to do any act other than to turn over such  amounts as  required
above.  If an item of Collections  is not honored or Lender does not receive good funds for any reason,  the amount
of any  application  shall be reversed as if the  Collections  had not been  received  and  Finance  Charges  under
Section 3.2 shall accrue thereon.
|   |                                       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |                                                                                                                                                                                                                                    
|   | 3.2                                   | Finance  Charges.  On each  Reconciliation  Date  Borrower  shall pay to Lender the  Finance  Charge for the
Reconciliation  Period ending on such  Reconciliation  Date.  Lender may deduct the accrued  Finance Charges as set
forth in Section 3.5.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   |                                       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |                                                                                                                                                                                                                                    
|   | 3.3                                   | Fees.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   |                                       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |                                                                                                                                                                                                                                    
|   |                                       | (a)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            | Facility  Fee.  On the date of this Agreement and on each  anniversary  thereof prior to the  termination of
this Agreement, Borrower shall pay to Lender the Facility Fee.                                                        

4

---

|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |                                                                                                                                                                                                                                                                                                                                                        
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |                                                                                                                                                                                                                                                                                                                                                        
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         | (b)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 | Termination  Fee.  In the event this Agreement is terminated  within 6 months of the date of this Agreement,
Borrower  shall pay the  Termination  Fee to Lender;  provided  that such  Termination  Fee shall be waived if this
Agreement is terminated in connection with  Borrowers  entry into a financing  agreement with an affiliate of
Lender.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |                                                                                                                                                                                                                                                                                                                                                        
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         | (c)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 | Minimum   Utilization  Fee.  On  each  Reconciliation  Date,  Borrower  shall  pay  to  Lender  the  Minimum
Utilization Fee for the Reconciliation Period ending on such Reconciliation Date.                                                                                                                                                         
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |                                                                                                                                                                                                                                                                                                                                                        
|   | 3.4                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     | Reporting.  Within 15 days after the end of each  Reconciliation  Period,  Lender  shall send to  Borrower a
report  covering  the  transactions  for that  Reconciliation  Period,  including  the  amount of all  Collections,
Adjustments  made by Lender,  Finance Charges,  and other fees and charges.  The accounting shall be deemed correct
and  conclusive  unless  Borrower  makes  written  objection  to Lender  within 30 days after the Lender  mails the
accounting to Borrower.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |                                                                                                                                                                                                                                                                                                                                                        
|   | 3.5                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     | Adjustments.  In the event of a breach of  Sections 6  or 7, or in the event any  Adjustment  or  dispute is
asserted by any Account  Debtor,  Borrower shall  promptly  advise Lender and shall,  subject to the  Lenders
approval,  resolve such disputes and advise Lender of any  adjustments.  Lender shall have the right,  at any time,
to take possession of any rejected,  returned,  or recovered personal property.  If such possession is not taken by
Lender,  Borrower is to resell it for  Lenders  account at  Borrowers  expense with the  proceeds  made
payable to Lender.  While Borrower  retains  possession of any returned goods,  Borrower shall segregate said goods
and mark them as property of Lender.                                                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |                                                                                                                                                                                                                                                                                                                                                        
|   | 3.6                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     | Lockbox  Account  Collection  Services.  Borrower,  Lender and lockbox  provider  acceptable to Lender shall
immediately  enter  into a  three  party  agreement  acceptable  to  Lender  (the  Lockbox  Agreement).
Borrower shall use the lockbox address as the remit to and payment address for all of  Borrowers  Collections
and it will be  considered  an immediate  Event of Default if this does not occur or is not  operational  within 60
days  of  the  date  of  this  Agreement.  All  Collections  received  to  the  lockbox  will  be  deposited  to  a
noninterest  bearing  bankcontrol  account  maintained with Lender and Borrower will not have access to
that  account.  Borrower  will (i)  immediately  notify,  transfer and deliver to Lender all  Collections  Borrower
receives and (ii) deliver to Lender a detailed cash  receipts  journal on Friday of each week until the lockbox is
operational.  Additionally,  Lender  may  request  that  Account  Debtors  pay (by  wire  transfer  or  otherwise)
Collections to Lender directly.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |                                                                                                                                                                                                                                                                                                                                                        
|4. | Overadvances.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |                                                                                                                                                                                                                                                                                                                                                        
|   | 4.1                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     | Overadvances.  Upon any occurrence of an  Overadvance,  Borrower shall  immediately pay down the Advances so
that, after giving effect to such payments, no Overadvance exists.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |                                                                                                                                                                                                                                                                                                                                                        
|   | 4.2                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     | Borrowers  Payment.  When any  Overadvance or other amount owing to Lender  becomes due,  Lender shall
inform  Borrower  of the  manner  of  payment  which  may be any one or  more of the  following  in  Lender's  sole
discretion:  (a) in cash  immediately  upon demand  therefor;  (b)  by deduction  from or offset against the amount
that  otherwise  would be forwarded to Borrower in respect of any further  Advances that may be made by Lender;  or
(c) by any combination of the foregoing as Lender may from time to time choose.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |                                                                                                                                                                                                                                                                                                                                                        
|5. | Power of Attorney.  Borrower  irrevocably  appoints Lender and its successors and assigns as Borrowers
true and lawful  attorney in fact, and  authorizes  Lender,  at  Borrowers  sole expense,  (a) whether or not
there has been an Event of Default,  to  (i) receive  and open all mail  addressed  to Borrower  for the purpose of
collecting  the  Receivables;  (ii) endorse  Borrowers  name on any  checks or other  forms of payment on the
Receivables;  (iii) execute on behalf of Borrower any and all instruments,  documents, financing statements and the
like to perfect  Lender's  interests in the Receivables and Collateral;  and (iv) do all acts and things  necessary
or expedient,  in furtherance of any such purposes,  and (b) upon the occurrence and during the  continuance of any
Event of Default,  without limiting  Lender's other rights and remedies,  to (i) sell,  assign,  transfer,  pledge,
compromise,  or discharge the whole or any part of the Collateral;  (ii) demand,  collect,  receive,  sue, and give
releases to any Account  Debtor for the monies due or which may become due upon or with respect to the  Receivables
and to  compromise,  prosecute,  or defend any  action,  claim,  case or  proceeding  relating  to the  Collateral,
including  the filing of a claim or the voting of such  claims in any  bankruptcy  case,  all in  Lender's  name or
Borrowers  name, as Lender may choose; and (iii) prepare,  file and sign  Borrowers name on any notice,
claim,  assignment,  demand,  draft, or notice of or  satisfaction  of lien or mechanics' lien or similar  document
with respect to the Collateral.

5

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|   |                                                                    |     |                                                                                                                                                                                                                                                                                                                                              
|-- | ------------------------------------------------------------------ | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                    |     |                                                                                                                                                                                                                                                                                                                                              
|6. | Representations and Warranties.  Borrower represents and warrants:
|   |                                                                    |     |                                                                                                                                                                                                                                                                                                                                              
|   |                                                                    | (a) | With respect to each Eligible Receivable:                                                                                                                                                                                                                                                                                                    
|   |                                                                    |     |                                                                                                                                                                                                                                                                                                                                              
|   |                                                                    |     | (i) It is the owner with legal right to sell, transfer and assign it;                                                                                                                                                                                                                                                                        
|   |                                                                    |     |                                                                                                                                                                                                                                                                                                                                              
|   |                                                                    |     | (ii) The correct Receivable Amount has been accurately reported to Lender and is not disputed;                                                                                                                                                                                                                                               
|   |                                                                    |     |                                                                                                                                                                                                                                                                                                                                              
|   |                                                                    |     | (iii) Lender has the right to endorse  and/ or require  Borrower to endorse all  payments  received on  Receivables
and all proceeds of Collateral; and                                                                                                                                                                                      
|   |                                                                    |     |                                                                                                                                                                                                                                                                                                                                              
|   |                                                                    |     | (iv) No  representation,  warranty or other statement of Borrower in any certificate or written  statement given to
Lender  contains any untrue  statement of a material fact or omits to state a material  fact  necessary to make the
statement contained in the certificates or statement not misleading.                                 
|   |                                                                    |     |                                                                                                                                                                                                                                                                                                                                              
|   |                                                                    | (b) | Borrower  is duly  existing  and in good  standing  in its state of  formation  and  qualified  and  licensed to do
business in, and in good  standing in, any state in which the conduct of its business or its  ownership of property
requires that it be qualified.                                                                       
|   |                                                                    |     |                                                                                                                                                                                                                                                                                                                                              
|   |                                                                    | (c) | The execution,  delivery and  performance of this  Agreement has been duly  authorized,  and does not conflict with
Borrowers  organizational  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 or by which it is bound.
|   |                                                                    |     |                                                                                                                                                                                                                                                                                                                                              
|   |                                                                    | (d) | Borrower has good title to the  Collateral  and all  inventory is in all material  respects of good and  marketable
quality, free from material defects.                                                                                                                                                                                     
|   |                                                                    |     |                                                                                                                                                                                                                                                                                                                                              
|   |                                                                    | (e) | Borrowers  name, form of organization,  chief executive  office,  and the place where the records  concerning
all  Receivables  and Collateral are kept is set forth at the beginning of this  Agreement,  Borrower is located at
its address for notices set forth in this Agreement.                                                      
|   |                                                                    |     |                                                                                                                                                                                                                                                                                                                                              
|   |                                                                    | (f) | If Borrower owns, holds or has any interest in, any copyrights (whether  registered,  or unregistered),  patents or
trademarks,  and licenses of any of the foregoing,  such interest has been specifically disclosed and identified to
Lender in writing.                                                                                   
|   |                                                                    |     |                                                                                                                                                                                                                                                                                                                                              
|7. | Miscellaneous Provisions.  Borrower will:                         
|   |                                                                    |     |                                                                                                                                                                                                                                                                                                                                              
|   |                                                                    | (a) | Maintain  its  corporate  existence  and good  standing in its  jurisdictions  of  incorporation  and  maintain its
qualification in each jurisdiction necessary to Borrowers business or operations.                                                                                                                                       
|   |                                                                    |     |                                                                                                                                                                                                                                                                                                                                              
|   |                                                                    | (b) | Give Lender at least 30 days prior written notice of changes to its name,  organization,  chief executive office or
location of records.                                                                                                                                                                                                     
|   |                                                                    |     |                                                                                                                                                                                                                                                                                                                                              
|   |                                                                    | (c) | Pay all its taxes  including  gross  payroll,  withholding  and sales taxes when due and will deliver  satisfactory
evidence of payment to Lender if requested.                                                                                                                                                                              
|   |                                                                    |     |                                                                                                                                                                                                                                                                                                                                              
|   |                                                                    | (d) | Provide to Lender a written  report  within 10 days,  if payment of any  Receivable  does not occur by its due date
and include the reasons for the delay.                                                                                                                                                                                   
|   |                                                                    |     |                                                                                                                                                                                                                                                                                                                                              
|   |                                                                    | (e) | Give Lender copies of all of  Borrowers  quarterly  balance sheets and income  statements,  Forms  10K,
10Q  and 8K (or  equivalents)  within 5 days of filing any of the  foregoing  with the  Securities  and
Exchange Commission, while any Advance is outstanding.                                                                   
|   |                                                                    |     |                                                                                                                                                                                                                                                                                                                                              
|   |                                                                    | (f) | Execute  any further  instruments  and take  further  action as Lender  requests  to perfect or  continue  Lenders
security interest in the Collateral or to effect the purposes of this Agreement.                                                                                                                                         
|   |                                                                    |     |                                                                                                                                                                                                                                                                                                                                              
|   |                                                                    | (g) | Immediately notify, transfer and deliver to Lender all Collections Borrower receives.                                                                                                                                                                                                                                                        
|   |                                                                    |     |                                                                                                                                                                                                                                                                                                                                              
|   |                                                                    | (h) | Not create, incur, assume, or be liable for any indebtedness.                                                                                                                                                                                                                                                                                
|   |                                                                    |     |                                                                                                                                                                                                                                                                                                                                              
|   |                                                                    | (i) | Immediately  notify Lender if Borrower  hereafter  obtains any interest in any copyrights,  patents,  trademarks or
licenses  that are  significant  in value or are  material  to the  conduct  of its  business  or the  value of any
Receivable.                                                                                          
|   |                                                                    |     |                                                                                                                                                                                                                                                                                                                                              
|   |                                                                    | (j) | Provide  to Lender  within 20 days  after the end of each month the  following  for such month and the period  then                                                                                                                                                                                                                          

6

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|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |                                                                                                                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |                                                                                                                                 | ending: accounts payable aging report, deferred revenue report, and Compliance Certificate.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |                                                                                                                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              | (k)                                                                                                                             | Provide to  Lender,  no later than 5 days  following  the 1st and 15th day of each  month,  the  following  for the
period then ending:  accounts  receivable  aging report,  together with a borrowing  base  certificate  in form and
substance  acceptable to Lender setting forth the Eligible  Receivables and Receivable  Amounts thereof;  provided,
that  upon  Borrowers  completion  of two  consecutive  quarters  of  positive  EBITDA  (excluding  one  time
noncash  items) and a Receivables  audit  reasonably  acceptable to Lender,  Borrower shall provide within 15
days after the end of each month,  an accounts  receivable  aging report and borrowing  base  certificate  for such
month.                                                                                                                                                                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |                                                                                                                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              | (l)                                                                                                                             | Lender  shall have a right from time to time  hereafter to audit  Borrowers  Receivables  at  Borrowers
expense.  Such audits shall be conducted every six months or as otherwise requested by Lender.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |                                                                                                                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              | (m)                                                                                                                             | Maintain its primary depository and operating accounts with Lender.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |                                                                                                                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              | (n)                                                                                                                             | Commencing  with the quarter ending June 30, 2003,  maintain a positive  EBITDA  (excluding one time  noncash
items);  provided,  that Borrower may have a negative EBITDA (excluding one time noncash  items) of up
to $(400,000) in one calendar quarter during such time.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |                                                                                                                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              | (o)                                                                                                                             | At all times  insure all of the  tangible  Collateral  and carry  such  other  business  insurance,  with  insurers
reasonably  acceptable to Lender, in such form and amounts as Lender 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 Lender.  All such insurance  policies shall name Lender as an additional  loss payee,
and shall contain a lenders loss payee  endorsement in form  reasonably  acceptable to Lender.  Upon receipt of the
proceeds of any such  insurance,  Lender shall apply such proceeds in reduction of the  Obligations as Lender shall
determine in its good faith  business  judgment,  provided  that no Default or Event of Default has occurred and is
continuing.  If Borrower  fails to provide or pay for any  insurance,  Lender may, but is not  obligated to, obtain
the same at  Borrowers  expense.  Borrower  shall promptly  deliver to Lender copies of all material  reports
made to insurance companies.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |                                                                                                                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|8. | Security  Interest.  To secure the  prompt  payment  and  performance  to Lender of all of the  Obligations,
Borrower hereby grants to Lender a continuing  security  interest in the Collateral.  Borrower is not authorized to
sell, assign,  transfer or otherwise convey any Collateral  without Lender's prior written consent,  except for the
sale of  finished  inventory  in the  Borrowers  usual  course  of  business.  Borrower  agrees  to sign  any
instruments  and  documents  requested by Lender to evidence,  perfect,  or protect the  interests of Lender in the
Collateral.  Borrower  agrees to deliver to Lender the  originals of all  instruments,  chattel paper and documents
evidencing  or  related  to  Receivables  and other  Collateral.  Borrower  shall  not grant or permit  any lien or
security  interest in the  Collateral or any interest  therein.  Notwithstanding  anything to the contrary  herein,
upon  Borrowers  request and so long as Borrower is not in default  under this  Agreement at the time of such
request,  Lender  agrees  to  consider  permitting  Borrower  to grant a  security  interest  in  certain  items of
Collateral to another secured party and to subordinate  Lender's  security  interest in such items of Collateral to
the security  interest  granted by Borrower to such other secured party;  provided,  that such other party executes
an intercreditor agreement with Lender in form and substance reasonably acceptable to Lender.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |                                                                                                                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|9. | Default and Remedies.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |                                                                                                                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | 9.1                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          | Events  of  Default.  The  occurrence  of any one or more of the  following  shall  constitute  an  Event of
Default hereunder.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |                                                                                                                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              | (a)                                                                                                                             | Failure to Pay.  Borrower fails to make a payment under this Agreement.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |                                                                                                                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              | (b)                                                                                                                             | Lien Priority.  Lender fails to have an enforceable first lien (except for any prior liens to which Lender
has consented in writing) on or security interest in the Collateral.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |                                                                                                                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              | (c)                                                                                                                             | False Information.  Borrower (or any guarantor) has given Lender false or misleading information or
representations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |                                                                                                                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              | (d)                                                                                                                             | Death.  If Borrower is a partnership, any general partner dies or becomes legally incompetent; or any
guarantor dies or becomes legally incompetent.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |                                                                                                                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              | (e)                                                                                                                             | Bankruptcy.  Borrower (or any guarantor) files a bankruptcy petition, a bankruptcy petition is                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

7

---

|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                                                                                                                                                                                                                                                                                               
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | filed
against Borrower (or any guarantor) or Borrower (or any guarantor) makes a general assignment for the benefit of
creditors.                                                                                                                                                                                             
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                                                                                                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 | (f)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   | Receivers.  A receiver or similar official is appointed for a substantial portion of  Borrowers (or
any guarantor's) business, or the business is terminated.                                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                                                                                                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 | (g)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   | Judgments.  Any judgments or arbitration awards are entered against Borrower (or any guarantor), or
Borrower (or any guarantor) enters into any settlement agreements with respect to any litigation or arbitration,
in an amount exceeding $250,000, irrespective of any available insurance coverage.                       
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                                                                                                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 | (h)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   | Material Adverse Change.  A material adverse change occurs, or is reasonably likely to occur, in
Borrowers (or any guarantor's) business condition (financial or otherwise), operations, properties or
prospects, or ability to repay the credit; or Lender determines that it is insecure for any other reason.             
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                                                                                                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 | (i)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   | Crossdefault.  Any default occurs under any agreement in connection with any credit Borrower (or any
guarantor) or any of  Borrowers related entities or affiliates has obtained from anyone else or which
Borrower (or any guarantor) or any of  Borrowers related entities or affiliates has guaranteed.                 
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                                                                                                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 | (j)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   | Default under Related Documents.  Any default occurs under any guaranty, subordination agreement, security
agreement, deed of trust, mortgage, or other document required by or delivered in connection with this Agreement
or any such document is no longer in effect.                                                      
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                                                                                                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 | (k)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   | Other Agreements.  Borrower (or any guarantor) or any of  Borrowers related entities or affiliates
fails to meet the conditions of, or fails to perform any obligation under any other agreement Borrower (or any
guarantor) or any of  Borrowers related entities or affiliates has with Lender or any affiliate of Lender.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                                                                                                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 | (l)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   | Other Breach Under Agreement.  Borrower fails to meet the conditions of, or fails to
perform any obligation under, any term of this Agreement not specifically referred to above.                                                                                                                                             
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                                                                                                                                                                                                                                                                                               
|    | 9.2                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             | Remedies.  Upon the  occurrence  of an Event of  Default,  (1) without  implying  any  obligation  to do so,
Lender may cease  making  Advances or  extending  any other  financial  accommodations  to  Borrower;  (2) all or a
portion of the  Obligations  shall be, at the option of and upon demand by Lender,  or with  respect to an Event of
Default  described in  Section 9.1(e),  automatically  and without  notice or demand,  due and payable in full; (3)
Lender may notify  Account  Debtors that the underlying  Receivables  have been assigned to Lender and that payment
thereof  is to be made to the order of Lender  and sent  directly  to  Lender,  and  (4) Lender  shall have and may
exercise all the rights and remedies  under this  Agreement  and under  applicable  law,  including  the rights and
remedies  of a secured  party under the  California  Uniform  Commercial  Code,  all the power of  attorney  rights
described in Section 5 with respect to all  Collateral,  and the right to collect,  dispose of, sell,  lease,  use,
and realize upon all Receivables and all Collateral in any commercial reasonable manner.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                                                                                                                                                                                                                                                                                               
|10. | Accrual  of  Interest.  If any amount owed by Borrower  hereunder is not paid when due,  including,  without
limitation, amounts due under Section 3.3,  Overadvances,  amounts due under Section 11, and any other Obligations,
such amounts shall bear  interest at a per annum rate equal to the per annum rate of the Finance  Charges until the
earlier of  (i) payment  in good funds or  (ii) entry  of a final  judgment  thereof,  at which time the  principal
amount of any  money  judgment  remaining  unsatisfied  shall  accrue  interest  at the  highest  rate  allowed  by
applicable  law. All interest and Finance Charges  hereunder  calculated at an annual rate shall be based on a year
of 360 days, which results in a higher effective rate of interest than if a year of 365 or 366 days were used.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                                                                                                                                                                                                                                                                                               
|11. | Fees,  Costs and  Expenses;  Indemnification.  The Borrower  will pay to Lender upon demand all fees,  costs
and expenses  (including  fees of attorneys and  professionals  and their costs and expenses) that Lender incurs or
may from time to time impose in connection with any of the following:  (a) preparing,  negotiating,  administering,
and enforcing this Agreement or any other  agreement  executed in connection  herewith,  including any  amendments,
waivers or consents in connection with any of the foregoing,  (b) any litigation or dispute (whether  instituted by
Lender,  Borrower or any other person) in any way relating to the  Receivables,  the Collateral,  this Agreement or
any other agreement  executed in connection  herewith or therewith,                                           

8

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|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  | 
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | 
|    | (c) enforcing  any rights against  Borrower or
any  guarantor,  or any  Account  Debtor,  (d) protecting  or  enforcing  its  interest in the  Receivables  or the
Collateral,  (e) collecting the Receivables and the Obligations,  or (f) the representation of Lender in connection
with any bankruptcy case or insolvency proceeding involving Borrower, any Receivable,  the Collateral,  any Account
Debtor,  or any guarantor.  Borrower shall  indemnify and hold Lender harmless from and against any and all claims,
actions,  damages,  costs, expenses, and liabilities of any nature whatsoever arising in connection with any of the
foregoing.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  | 
|12. | Integration, Severability, Waiver, and Choice of Law.  This Agreement and any related security or other
agreements required by this Agreement, collectively: (a) represent the sum of the understandings and agreements
between Lender and Borrower concerning this credit; (b) replace any prior oral or written agreements between
Lender and Borrower concerning this credit; and (c) are intended by Lender and Borrower as the final, complete
and exclusive statement of the terms agreed to by them.  In the event of any conflict between this Agreement and
any other agreements required by this Agreement, this Agreement will prevail.  If any provision of this Agreement
is deemed invalid by reason of law, this Agreement will be construed as not containing such provision and the
remainder of the Agreement shall remain in full force and effect.  Lender retains all of its rights, even if it
makes an Advance after a default.  If Lender waives a default, it may enforce a later default.  Any consent or
waiver under, or amendment of, this Agreement must be in writing, and no such consent, waiver , or amendment
shall imply any obligation by Lender to make any subsequent consent, waiver, or amendment.   THIS AGREEMENT SHALL
BE GOVERNED BY AND INTERPRETED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF CALIFORNIA.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  | 
|13. | Notices.  All  notices  shall be given to Lender and  Borrower  at the  addresses  or faxes set forth on the
signature  page of this Agreement and shall be deemed to have been  delivered and received:  (a) if  mailed,  three
(3) calendar  days after  deposited in the United  States mail,  first class,  postage  prepaid,  (b) one (1)
calendar  day after  deposit  with an overnight  mail or  messenger  service;  or (c) on the same date of confirmed
transmission if sent by hand delivery, telecopy, telefax or telex.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  | 
|14. | Jury  Trial.  EACH PARTY TO THIS AGREEMENT  HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM,
DEMAND,  ACTION OR CAUSE OF ACTION  ARISING IN CONNECTION  WITH THE  OBLIGATIONS  OR IN ANY WAY  CONNECTED  WITH OR
RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH RESPECT TO ANY  OBLIGATION,  OR THE
TRANSACTIONS  RELATED  THERETO,  IN EACH CASE  WHETHER NOW EXISTING OR HEREAFTER  ARISING,  AND WHETHER  FOUNDED IN
CONTRACT OR TORT OR OTHERWISE;  AND EACH PARTY HEREBY AGREES AND CONSENTS  THAT ANY SUCH CLAIM,  DEMAND,  ACTION OR
CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL  WITHOUT A JURY,  AND THAT ANY PARTY TO THIS  AGREEMENT MAY FILE AN
ORIGINAL  COUNTERPART  OR A COPY OF THIS  SECTION  WITH  ANY  COURT  AS  WRITTEN  EVIDENCE  OF THE  CONSENT  OF THE
SIGNATORIES  HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.  EACH PARTY  REPRESENTS AND WARRANTS THAT IT HAS
REVIEWED  THIS WAIVER,  HAS  DETERMINED  FOR ITSELF THE  NECESSITY TO REVIEW THE SAME WITH ITS LEGAL  COUNSEL,  AND
KNOWINGLY AND VOLUNTARILY WAIVES ALL RIGHTS TO A JURY TRIAL.                                                                                                                                                                                                                         
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|15. | Term and  Termination.  This  Agreement  shall become  effective  upon the execution and delivery  hereof by
Borrower  and Lender and shall  continue  in full  force and  effect  for one year from the date  hereof.  Upon the
Termination Date, the unpaid balance of the Obligations shall be due and payable without demand or notice.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
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|16. | Other  Agreements.  Any  security  agreements,  liens  and/or  security  interests  securing  payment of any
obligations  of  Borrower  owing to  Lender  or its  affiliates  also  secure  the  Obligations,  and are valid and
subsisting  and are not  adversely  affected  by  execution  of this  Agreement.  An Event of  Default  under  this
Agreement constitutes a default under other outstanding agreements between Borrower and Lender or its affiliates.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            

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IN WITNESS WHEREOF, Borrower and Lender have executed this Agreement on the day and year above written.

|BORROWER:                                                          | LENDER:                                                                          
|------------------------------------------------------------------ | ---------------------------------------------------------------------------------
|                                                                   |                                                                                  
|TEKNOWLEDGE CORPORATION, a Delaware corporation

By 
Name: 
Title: | BRIDGE BANK, NATIONAL ASSOCIATION

By 
Name: 
Title:                             
|                                                                   |                                                                                  
|Address for Notices: 
1810 Embarcadero Road
Palo Alto, CA 94303    | Address for Notices: 
5201 Great America Parkway, Suite 320
Santa Clara, CA 95054

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