Exhibit 10.25**Silicon ValleyBank*Loan andSecurity Agreement

Borrower:	COM21,INC.		
Address:	750 TasmanDrive

		Milpitas, California  95035
Date:		November __,2001
**THIS LOANAND SECURITY AGREEMENT is entered into on the above date between SILICONVALLEY BANK,  COMMERCIAL FINANCE DIVISION ("Silicon"), whose addressis 3003 Tasman Drive, Santa Clara, California  95054 and the borrower(s) namedabove (jointly and severally, the "Borrower"), whose chief executiveoffice is located at the above address ("Borrower's Address").  TheSchedule to this Agreement (the "Schedule") shall for all purposes bedeemed to be a part of this Agreement, and the same is an integral part of thisAgreement.  (Definitions of certain terms used in this Agreement are set forthin Section 8 below.)
***1.	LOANS.

1.1  Loans.  Silicon will make loans * to Borrower(the "Loans"), in amounts determined by Silicon in its solediscretion, up to the amounts (the "Credit Limit") shown on theSchedule, provided no Default or Event of Default has occurred and iscontinuing, and subject to deduction of any Reserves for accrued interest andsuch other Reserves as Silicon deems proper from time to time.    
*** and other credit extensions
*1.2  Interest.  All Loans and all other monetaryObligations shall bear interest at the rate shown on the Schedule, except whereexpressly set forth to the contrary in this Agreement.  Interest shall bepayable monthly, on the last day of the month.  Interest may, in Silicon'sdiscretion, be charged to Borrower's loan account, and the same shall thereafterbear interest at the same rate as the other Loans.  Silicon may, in itsdiscretion, charge interest to Borrower's Deposit Accounts maintained withSilicon.  Regardless of the amount of Obligations that may be outstanding fromtime to time, Borrower shall pay Silicon minimum monthly interest during theterm of this Agreement in the amount set forth on the Schedule (the"Minimum Monthly Interest").
***1.3  Overadvances.  If at any time or for anyreason * the total of all outstanding Loans and all other Obligations exceedsthe Credit Limit (** an "Overadvance"), Borrower shall~~immediately~~ *** pay the amount of the excess to Silicon,without notice or demand.  Without limiting Borrower's obligation to repay toSilicon on demand the amount of any Overadvance, Borrower agrees to pay Siliconinterest on the outstanding amount of any Overadvance, on demand, at a rateequal to the interest rate which would otherwise be applicable to theOveradvance ~~, plus an additional 2% per annum~~.
*** either (A) the total of all outstanding Loans and allother Obligations (other than the Celestica Letter of Credit) exceeds the amountset forth in clause (a) of Section 1 of the Schedule, or (B)

** in either case, 

*** promptly (and in any event within 3 days)
*1.4  Fees.  Borrower shall pay Silicon the fee(s)shown on the Schedule, which are in addition to all interest and other sumspayable to Silicon and are not refundable.
***1.5  Letters of Credit.  At the request ofBorrower, Silicon may, in its sole discretion, issue or arrange for the issuanceof letters of credit for the account of Borrower, in each case in form andsubstance satisfactory to Silicon in its sole discretion (collectively,"Letters of Credit").  The aggregate face amount of all outstandingLetters of Credit * from time to time shall not exceed the amount shown on theSchedule (the "Letter of Credit Sublimit"), and shall be reservedagainst Loans which would otherwise be available hereunder.  **  Borrower shallpay all bank charges (including charges of Silicon) for the issuance of Lettersof Credit, together with such additional fee as Silicon's letter of creditdepartment shall charge in connection with the issuance of the Letters ofCredit.  Any payment by Silicon under or in connection with a Letter of Credit *shall constitute a Loan hereunder on the date such payment is made.  Each Letterof Credit shall have an expiry date no later than thirty days prior to theMaturity Date.  Borrower hereby agrees to indemnify, save, and hold Siliconharmless from any loss, cost, expense, or liability, including payments made bySilicon, expenses, and reasonable attorneys' fees incurred by Silicon arisingout of or in connection with any Letters of Credit.  Borrower agrees to be boundby the regulations and interpretations of the issuer of any Letters of Creditguarantied by Silicon and opened for Borrower's account or by Silicon'sinterpretations of any Letter of Credit issued by Silicon for Borrower'saccount, and Borrower understands and agrees that Silicon shall not be liablefor any error, negligence, or mistake, whether of omission or commission, infollowing Borrower's instructions or those contained in the Letters of Credit orany modifications, amendments, or supplements thereto.  Borrower understandsthat Letters of Credit may require Silicon to indemnify the issuing bank forcertain costs or liabilities arising out of claims by Borrower against suchissuing bank.  Borrower hereby agrees to indemnify and hold Silicon harmlesswith respect to any loss, cost, expense, or liability incurred by Silicon underany Letter of Credit as a result of Silicon's indemnification of any suchissuing bank.  The provisions of this Loan Agreement, as it pertains to Lettersof Credit, and any other present or future documents or agreements betweenBorrower and Silicon relating to Letters of Credit are cumulative.
*** (other than the Celestica Letter of Credit)

** The Celestica Letter of Credit is fully cash-secured bythe Celestica LC Cash Collateral, and therefore is not counted against theLetter of Credit Sublimit.
*2.  SECURITY INTEREST.

2.1  Security Interest.  To secure the payment andperformance of all of the Obligations when due, Borrower hereby grants toSilicon a security interest in all of Borrower's interest in the following,whether now owned or hereafter acquired, and wherever located:  All Inventory,Equipment, Receivables, and General Intangibles, including, without limitation,all of Borrower's Deposit Accounts, and all money, and all property now or atany time in the future in Silicon's possession (including claims and creditbalances), and all proceeds (including proceeds of any insurance policies,proceeds of proceeds and claims against third parties), all products and allbooks and records related to any of the foregoing (all of the foregoing,together with all other property in which Silicon may now or in the future begranted a lien or security interest, is referred to herein, collectively, as the"Collateral").  *
***  In addition, to secure the payment and performance ofall of the Obligations arising out of or in connection with the Celestica Letterof Credit, Borrower hereby grants to Silicon a security interest in all ofBorrower's interest in the Celestica LC Cash Collateral.
*3.  REPRESENTATIONS, WARRANTIES AND COVENANTS OF BORROWER.*
In order to induce Silicon to enter into thisAgreement and to make Loans, Borrower represents and warrants to Silicon asfollows, and Borrower covenants that the following representations *~~will continue to be true~~, and that Borrower will at all timescomply with all of the following covenants:
*** shall be true, correct, and complete in all materialrespects, as of the date hereof, and shall be true, correct, and complete in allmaterial respects at and as of the date of the making of each Loan (or otherextension of credit) made hereafter, as though made on and as of the date ofsuch Loan (or other extension of credit) (except to the extent that suchrepresentations and warranties expressly relate solely to an earlier date), andshall be true, correct, and complete in all material respects at and as of thedate of delivery of each executed Compliance Certificate required under Section6(6) of the Schedule, as though made on and as of the date of such delivery(except to the extent that such representations and warranties expressly relatesolely to an earlier date)
*3.1  Corporate Existence and Authority.  Borrower,if a corporation, is and will continue to be, duly organized, validly existingand in good standing under the laws of the jurisdiction of its incorporation.Borrower is and will continue to be qualified and licensed to do business in alljurisdictions in which any failure to do so would have a material adverse effecton Borrower.  The execution, delivery and performance by Borrower of thisAgreement, and all other documents contemplated hereby (i) have been duly andvalidly authorized, (ii) are enforceable against Borrower in accordance withtheir terms (except as enforcement may be limited by equitable principles and bybankruptcy, insolvency, reorganization, moratorium or similar laws relating tocreditors' rights generally), and (iii) do not violate Borrower's articles orcertificate of incorporation, or Borrower's by-laws, or any law or any  materialagreement or instrument which is binding upon Borrower or its property, and (iv)do not constitute grounds for acceleration of any material indebtedness orobligation under any material agreement or instrument which is binding uponBorrower or its property.
***3.2  Name; Trade Names and Styles.  The name ofBorrower set forth in the heading to this Agreement is its correct name.  Listedon the Schedule are all prior names of Borrower and all of Borrower's presentand prior trade names.  Borrower shall give Silicon 30 days' prior writtennotice before changing its name or doing business under any other name.Borrower has complied, and will in the future comply, with all laws relating tothe conduct of business under a fictitious business name.
***3.3  Place of Business; Location of Collateral. The address set forth in the heading to this Agreement is Borrower'schief executive office.  In addition, Borrower has places of business andCollateral is located only at the locations set forth on the Schedule.  Borrowerwill give Silicon at least 30 days prior written notice before opening anyadditional place of business, changing its chief executive office, or moving anyof the Collateral to a location other than Borrower's Address or one of thelocations set forth on the Schedule.
***3.4  Title to Collateral; Permitted Liens.Borrower is now, and will at all times in the future be, the sole owner of allthe Collateral, except for items of Equipment which are leased by Borrower.  TheCollateral now is and will remain free and clear of any and all liens, charges,security interests, encumbrances and adverse claims, except for Permitted Liens.Silicon now has, and will continue to have, a first-priority perfected andenforceable security interest in all of the Collateral, subject only to thePermitted Liens, and Borrower will at all times defend Silicon and theCollateral against all claims of others.  None of the Collateral now is or willbe affixed to any real property in such a manner, or with such intent, as tobecome a fixture.  Borrower is not and will not become a lessee under any realproperty lease pursuant to which the lessor may obtain any rights in any of theCollateral and no such lease now prohibits, restrains, impairs or will prohibit,restrain or impair Borrower's right to remove any Collateral from the leasedpremises.  Whenever any Collateral is located upon premises in which any thirdparty has an interest (whether as owner, mortgagee, beneficiary under a deed oftrust, lien or otherwise), Borrower shall, whenever requested by Silicon, useits ~~best~~ * efforts to cause such third party to execute anddeliver to Silicon, in form acceptable to Silicon, such waivers andsubordinations as Silicon shall specify, so as to ensure that Silicon's rightsin the Collateral are, and will continue to be, superior to the rights of anysuch third party.  Borrower will keep in full force and effect, and will complywith all the terms of, any lease of real property where any of the Collateralnow or in the future may be located.
*** commercially reasonable
*3.5  Maintenance of Collateral.  Borrower willmaintain the Collateral in good working condition, and Borrower will not use theCollateral for any unlawful purpose.  Borrower will immediately advise Siliconin writing of any material loss or damage to the Collateral.
***3.6  Books and Records.  Borrower hasmaintained and will maintain at Borrower's Address complete and accurate booksand records, comprising an accounting system in accordance with generallyaccepted accounting principles.
***3.7  Financial Condition, Statements andReports.  All financial statements now or in the future delivered toSilicon have been, and will be, prepared in conformity with generally acceptedaccounting principles and now and in the future will completely and accuratelyreflect the financial condition of Borrower, at the times and for the periodstherein stated.  Between the last date covered by any such statement provided toSilicon and the date hereof, there has been no material adverse change in thefinancial condition or business of Borrower.  Borrower is now and will continueto be solvent.     
***3.8  Tax Returns and Payments; PensionContributions.  Borrower has timely filed, and will timely file, all taxreturns and reports required by foreign, federal, state and local law, andBorrower has timely paid, and will timely pay, all foreign, federal, state andlocal taxes, assessments, deposits and contributions now or in the future owedby Borrower.  Borrower may, however, defer payment of any contested taxes,provided that Borrower (i) in good faith contests Borrower's obligation to paythe taxes by appropriate proceedings promptly and diligently instituted andconducted, (ii) notifies Silicon in writing of the commencement of, and anymaterial development in, the proceedings, and (iii) posts bonds or takes anyother steps required to keep the contested taxes from becoming a lien upon anyof the Collateral.  Borrower is unaware of any claims or adjustments proposedfor any of Borrower's prior tax years which could result in additional taxesbecoming due and payable by Borrower.  Borrower has paid, and shall continue topay all amounts necessary to fund all present and future pension, profit sharingand deferred compensation plans in accordance with their terms, and Borrower hasnot and will not withdraw from participation in, permit partial or completetermination of, or permit the occurrence of any other event with respect to, anysuch plan which could result in any liability of Borrower, including anyliability to the Pension Benefit Guaranty Corporation or its successors or anyother governmental agency.  Borrower shall, at all times, utilize the servicesof an outside payroll service providing for the automatic deposit of all payrolltaxes payable by Borrower.  
***3.9  Compliance with Law.  Borrower hascomplied, and will comply, in all material respects, with all provisions of all~~foreign,~~ federal, state and local laws and regulations relatingto Borrower, including, but not limited to, those relating to Borrower'sownership of real or personal property, the conduct and licensing of Borrower'sbusiness, and all environmental matters.
***3.10  Litigation.  Except as disclosed in theSchedule, there is no claim, suit, litigation, proceeding or investigationpending or (to best of Borrower's knowledge) threatened by or against oraffecting Borrower in any court or before any governmental agency (or any basistherefor known to Borrower) which may result, either separately or in theaggregate, in any material adverse change in the financial condition or businessof Borrower, or in any material impairment in the ability of Borrower to carryon its business in substantially the same manner as it is now being conducted.Borrower will promptly inform Silicon in writing of any claim, proceeding,litigation or investigation in the future threatened or instituted by or againstBorrower involving any single claim of ~~$50,000~~ * or more, orinvolving ~~$100,000~~ ** or more in the aggregate.
*** $250,000

** $1,000,000
*3.11  Use of Proceeds.  All proceeds of all Loansshall be used solely for lawful business purposes.  Borrower is not purchasingor carrying any "margin stock" (as defined in Regulation U of the Board ofGovernors of the Federal Reserve System) and no part of the proceeds of any Loanwill be used to purchase or carry any "margin stock" or to extend credit toothers for the purpose of purchasing or carrying any "margin stock." 
***4.  Receivables.

4.1  Representations Relating to Receivables. Borrower represents and warrants to Silicon as follows:  Each Receivablewith respect to which Loans are requested by Borrower shall, on the date eachLoan is requested and made, (i) represent an undisputed bona fide existingunconditional obligation of the Account Debtor created by the sale, delivery,and acceptance of goods or the rendition of services in the ordinary course ofBorrower's business, and (ii) meet the Minimum Eligibility Requirements setforth in  Section 8 below.
***4.2  Representations Relating to Documents and LegalCompliance.  Borrower represents and warrants to Silicon as follows:All statements made and all unpaid balances appearing in all invoices,instruments and other documents evidencing the Receivables are and shall be trueand correct and all such invoices, instruments and other documents and all ofBorrower's books and records are and shall be genuine and in all respects whatthey purport to be, and all signatories and endorsers have the capacity tocontract.  All sales and other transactions underlying or giving rise to eachReceivable shall fully comply with all applicable laws and governmental rulesand regulations.  All signatures and endorsements on all documents, instruments,and agreements relating to all Receivables are and shall be genuine, and allsuch documents, instruments and agreements are and shall be legally enforceablein accordance with their terms.
***4.3  Schedules and Documents relating to Receivables.Borrower shall deliver to Silicon transaction reports and loanrequests, schedules and assignments of all Receivables, and schedules ofcollections, all on Silicon's standard forms; provided, however, that Borrower'sfailure to execute and deliver the same shall not affect or limit Silicon'ssecurity interest and other rights in all of Borrower's Receivables, nor shallSilicon's failure to advance or lend against a specific Receivable affect orlimit Silicon's security interest and other rights therein.  Loan requestsreceived after 12:00 Noon will not be considered by Silicon until the nextBusiness Day.  *  Together with each such schedule and assignment, or later ifrequested by Silicon, Borrower shall furnish Silicon with copies (or, atSilicon's request, originals) of all contracts, orders, invoices, and othersimilar documents, and all original shipping instructions, delivery receipts,bills of lading, and other evidence of delivery, for any goods the sale ordisposition of which gave rise to such Receivables, and Borrower warrants thegenuineness of all of the foregoing.  Borrower shall also furnish to Silicon anaged accounts receivable trial balance in such form and at such intervals asSilicon shall  request.  In addition, Borrower shall deliver to Silicon theoriginals of all instruments, chattel paper, security agreements, guarantees andother documents and property evidencing or securing any Receivables, immediatelyupon receipt thereof and in the same form as received, with all necessaryindorsements, all of which shall be with recourse.  Borrower shall also provideSilicon with copies of all credit memos within two days after the dateissued.
*** The following provisions of this Section 4.3 are subjectto any applicable less stringent reporting or delivery requirements set forth inthe Streamline Facility Agreement:
*4.4  Collection of Receivables.  Borrower shallhave the right to collect all Receivables, unless and until a Default or anEvent of Default has occurred *.  Borrower shall hold all payments on, andproceeds of, Receivables in trust for Silicon, and ** Borrower shall immediatelydeliver all such payments and proceeds to Silicon in their original form, dulyendorsed in blank, to be applied to the Obligations in such order as Siliconshall determine.  Silicon may, in its discretion, require that all proceeds ofCollateral be deposited by Borrower into a lockbox account, or such other"blocked account" as Silicon may specify, pursuant to a blocked accountagreement in such form as Silicon may specify.  Silicon or its designee may, atany time, notify Account Debtors that the Receivables have been assigned toSilicon. 
*** and is continuing

** , subject to the Streamline Facility Agreement,
*4.5.  Remittance of Proceeds. All proceedsarising from the disposition of any Collateral shall be delivered, in kind, byBorrower to Silicon in the original form in which received by Borrower not laterthan the following Business Day after receipt by Borrower, to be applied to theObligations in such order as Silicon shall determine; provided that, if noDefault or Event of Default has occurred *, Borrower shall not be obligated toremit to Silicon the proceeds of the sale of worn out or obsolete equipmentdisposed of by Borrower in good faith in an arm's length transaction for anaggregate purchase price of $25,000 or less (for all such transactions in anyfiscal year).  Borrower agrees that it will not commingle proceeds of Collateralwith any of Borrower's other funds or property, but will hold such proceedsseparate and apart from such other funds and property and in an express trustfor Silicon.  Nothing in this Section limits the restrictions on disposition ofCollateral set forth elsewhere in this Agreement.
*** and is continuing
*4.6  Disputes.  Borrower shall notify Siliconpromptly of all disputes or claims relating to Receivables.  Borrower shall notforgive (completely or partially), compromise or settle any Receivable for lessthan payment in full, or agree to do any of the foregoing, except that Borrowermay do so, provided that: (i) Borrower does so in good faith, in a commerciallyreasonable manner, in the ordinary course of business, and in arm's lengthtransactions, which are reported to Silicon on the regular reports provided toSilicon; (ii) no Default or Event of Default has occurred and is continuing; and(iii) taking into account all such discounts settlements and forgiveness, thetotal outstanding Loans will not exceed the Credit Limit.  Silicon may, at anytime after the occurrence * of an Event of Default, settle or adjust disputes orclaims directly with Account Debtors for amounts and upon terms which Siliconconsiders advisable in its reasonable credit judgment and, in all cases, Siliconshall credit Borrower's Loan account with only the net amounts received bySilicon in payment of any Receivables.
*** and during the continuation
*4.7  Returns.  Provided no Event of Default hasoccurred and is continuing, if any Account Debtor returns any Inventory toBorrower in the ordinary course of its business, Borrower shall promptlydetermine the reason for such return and promptly issue a credit memorandum tothe Account Debtor in the appropriate amount (sending a copy to Silicon).  Inthe event any attempted return occurs after the occurrence * of any Event ofDefault, Borrower shall (i) hold the returned Inventory in trust forSilicon, (ii) segregate all returned Inventory from all of Borrower's otherproperty, (iii) conspicuously label the returned Inventory as Silicon'sproperty, and (iv) immediately notify Silicon of the return of anyInventory, specifying the reason for such return, the location and condition ofthe returned Inventory, and on Silicon's request deliver such returned Inventoryto Silicon.  
*** and during the continuation
*4.8  Verification.  Silicon may, from time totime, verify directly with the respective Account Debtors the validity, amountand other matters relating to the Receivables, by means of mail, telephone orotherwise, either in the name of Borrower or Silicon or such other name asSilicon may choose. 
***4.9  No Liability. Silicon shall not under anycircumstances be responsible or liable for any shortage or discrepancy in,damage to, or loss or destruction of, any goods, the sale or other dispositionof which gives rise to a Receivable, or for any error, act, omission, or delayof any kind occurring in the settlement, failure to settle, collection orfailure to collect any Receivable, or for settling any Receivable in good faithfor less than the full amount thereof, nor shall Silicon be deemed to beresponsible for any of Borrower's obligations under any contract or agreementgiving rise to a Receivable.  Nothing herein shall, however, relieve Siliconfrom liability for its own gross negligence or willful misconduct.
***5.  ADDITIONAL DUTIES OF BORROWER.

5.1  Financial and Other Covenants.  Borrower shallat all times comply with the financial and other covenants set forth in theSchedule.
***5.2  Insurance.  Borrower shall, at all timesinsure all of the tangible personal property Collateral and carry such otherbusiness insurance, with insurers reasonably acceptable to Silicon, in such formand amounts as Silicon may reasonably require, and Borrower shall provideevidence of such insurance to Silicon, so that Silicon is satisfied that suchinsurance is, at all times, in full force and effect.  All such insurancepolicies shall name Silicon as an additional insured and loss payee, and shallcontain a lenders loss payee endorsement in form reasonably acceptable toSilicon.  Upon receipt of the proceeds of any such insurance, Silicon shallapply such proceeds in reduction of the Obligations as Silicon shall determinein its sole discretion, except that, provided no Default or Event of Default hasoccurred and is continuing, Silicon shall release to Borrower insurance proceedswith respect to Equipment totaling less than $100,000, which shall be utilizedby Borrower for the replacement of the Equipment with respect to which theinsurance proceeds were paid.  Silicon may require reasonable assurance that theinsurance proceeds so released will be so used.  If Borrower fails to provide orpay for any insurance, Silicon may, but is not obligated to, obtain the same atBorrower's expense.  Borrower shall promptly deliver to Silicon copies of allreports made to insurance companies.
***5.3  Reports.  Borrower, at its expense, shallprovide Silicon with the written reports set forth in the Schedule, and suchother written reports with respect to Borrower (including budgets, salesprojections, operating plans and other financial documentation), as Siliconshall from time to time reasonably specify.
***5.4  Access to Collateral, Books and Records.At reasonable times, and on * one Business Day's notice, Silicon, or its agents,shall have the right to inspect the Collateral, and the right to audit and copyBorrower's books and records.  Silicon shall take reasonable steps to keepconfidential all information obtained in any such inspection or audit, butSilicon shall have the right to disclose any such information to its auditors,regulatory agencies, and attorneys, and pursuant to any subpoena or other legalprocess.  The foregoing inspections and audits shall be at Borrower's expenseand the charge therefor shall be $700 per person per day (or such higher amountas shall represent Silicon's then current standard charge for the same), plusreasonable out of pocket expenses.  Borrower will not enter into any agreementwith any accounting firm, service bureau or third party to store Borrower'sbooks or records at any location other than Borrower's Address, without firstobtaining Silicon's written consent, which may be conditioned upon suchaccounting firm, service bureau or other third party agreeing to give Siliconthe same rights with respect to access to books and records and related rightsas Silicon has under  this Loan Agreement.  ** Borrower waives the benefit ofany accountant-client privilege or other evidentiary privilege precluding orlimiting the disclosure, divulgence or delivery of any of its books and records(except that Borrower does not waive any attorney-client privilege).  
*** at least

** Solely as between Borrower and Silicon, and after theoccurrence and during the continuation of an Event of Default,
*5.5  Negative Covenants.  Except as may bepermitted in the Schedule, Borrower shall not, without Silicon's prior writtenconsent, do any of the following:  (i) merge or consolidate with anothercorporation or entity *; (ii) acquire any assets, except in the ordinary courseof business; (iii) enter into any other transaction outside the ordinary courseof business; (iv) sell or transfer any Collateral, except for the sale offinished Inventory in the ordinary course of Borrower's business, and except forthe sale of obsolete or unneeded Equipment in the ordinary course of business;(v) store any Inventory or other Collateral with any warehouseman or other thirdparty; (vi) sell any Inventory on a sale-or-return, guaranteed sale,consignment, or other contingent basis; (vii) make any loans of any money orother assets **; (viii) incur any debts, outside the ordinary course ofbusiness, which would have a material, adverse effect on Borrower or on theprospect of repayment of the Obligations; (ix) guarantee or otherwise becomeliable with respect to the obligations of another party or entity; (x) pay ordeclare any dividends on Borrower's stock (except for dividends payable solelyin stock of Borrower); (xi) redeem, retire, purchase or otherwise acquire,directly or indirectly, any of Borrower's stock ***; (xii) make any change inBorrower's capital structure which would have a material adverse effect onBorrower or on the prospect of repayment of the Obligations; or (xiii) ****~~pay total compensation, including salaries, fees, bonuses, commissions,and all other payments, whether directly or indirectly, in money or otherwise,to Borrower's executives, officers and directors (or any relative thereof) in anamount in excess of the amount set forth on the Schedule~~; or (xiv)dissolve or elect to dissolve.  Transactions permitted by the foregoingprovisions of this Section are only permitted if no Default or Event of Defaultwould occur as a result of such transaction.  
*** ; provided, however, that, so long as no Event ofDefault has occurred and is continuing or would otherwise result therefrom, adomestic subsidiary of Borrower may merge with or consolidate into Borrower uponSilicon's receipt of all applicable lien searches relative to such subsidiary,the results of which shall be satisfactory to Silicon in its good faith businessjudgment

** , except for loans consisting of travel advances, employeerelocation loans, and other employee loans/advances in the ordinary course ofbusiness; provided, however, that the aggregate amount of such loans shall notexceed $500,000 at any one time outstanding

*** , except for repurchases of stock (in accordance withapplicable law) from former employees or directors of Borrower as required underthe terms and conditions of Borrower's employee stock ownership plan; provided,however, that the aggregate amount of such repurchases shall not exceed $100,000while this Agreement is in effect and any Obligation remains outstanding

**** [intentionally omitted]
*5.6  Litigation Cooperation.  Should any third-party suit or proceeding be instituted by or against Silicon with respect to anyCollateral or in any manner relating to Borrower, Borrower shall, withoutexpense to Silicon, make available Borrower and its officers, employees andagents and Borrower's books and records, to the extent that Silicon may deemthem reasonably necessary in order to prosecute or defend any such suit orproceeding.
***5.7  Further Assurances.  Borrower agrees, atits expense, on request by Silicon, to execute all documents and take allactions, as Silicon, may deem reasonably necessary or useful in order to perfectand maintain Silicon's perfected security interest in the Collateral, and inorder to fully consummate the transactions contemplated by this Agreement.
***6.   TERM.

6.1  Maturity Date.  This Agreement shall continue ineffect until the maturity date set forth on the Schedule (the "MaturityDate"), subject to Section 6.3 below.
***6.2  Early Termination.  This Agreement may beterminated prior to the Maturity Date as follows:  (i) by Borrower, effectivethree Business Days after written notice of termination is given to Silicon; or(ii) by Silicon at any time after the occurrence * of an Event of Default,without notice, effective immediately.  If this Agreement is terminated byBorrower ** or by Silicon under this Section 6.2, Borrower shall pay to Silicona termination fee in an amount equal to *** ~~two percent (2.0%) of theMaximum Credit Limit,~~ provided that **** no termination fee shall becharged if the credit facility hereunder is replaced with a new facility fromanother division of Silicon Valley Bank.  The termination fee shall be due andpayable on the effective date of termination and thereafter shall bear interestat a rate equal to the highest rate applicable to any of the Obligations.
*** and during the continuation

** under this Section 6.2 prior to the 60th day preceding theMaturity Date

*** one percent (1.0%) of the Maximum Revolving Amount; 

**** (y) no termination fee shall be payable if thisAgreement is terminated by Borrower under this Section 6.2 and all Obligationsare paid in full in cash at any time during the 60 days immediately precedingthe Maturity Date; and (z)
*6.3  Payment of Obligations.  On the Maturity Dateor on any earlier effective date of termination, Borrower shall pay and performin full all Obligations, whether evidenced by installment notes or otherwise,and whether or not all or any part of such Obligations are otherwise then dueand payable.  Without limiting the generality of the foregoing, if on theMaturity Date,  or on any earlier effective date of termination, there are anyoutstanding Letters of Credit issued by Silicon or issued by another institutionbased upon an application, guarantee, indemnity or similar agreement on the partof Silicon, then on such date Borrower shall provide to Silicon cash collateralin an amount equal to the face amount of all such Letters of Credit plus allinterest, fees and cost due or to become due in connection therewith, to secureall of the Obligations relating to said Letters of Credit, pursuant to Silicon'sthen standard form cash pledge agreement.  Notwithstanding any termination ofthis Agreement, all of Silicon's security interests in all of the Collateral andall of the terms and provisions of this Agreement shall continue in full forceand effect until all Obligations have been paid and performed in full; providedthat, without limiting the fact that Loans are subject to the discretion ofSilicon, Silicon may, in its sole discretion, refuse to make any further Loansafter termination.  No termination shall in any way affect or impair any rightor remedy of Silicon, nor shall any such termination relieve Borrower of anyObligation to Silicon, until all of the Obligations have been paid and performedin full.  Upon payment and performance in full of all the Obligations andtermination of this Agreement, Silicon shall promptly deliver to Borrowertermination statements, requests for reconveyances and such other documents asmay be required to fully terminate Silicon's security interests.
***7.  EVENTS OF DEFAULT AND REMEDIES.

7.1  Events of Default.  The  occurrence of any ofthe following events shall constitute an "Event of Default" under thisAgreement, and Borrower shall give Silicon immediate written notice thereof: (a)Any warranty, representation, statement, report or certificate made or deliveredto Silicon by Borrower or any of Borrower's officers, employees or agents, nowor in the future, shall be untrue or misleading in a material respect; or (b)Borrower shall fail to pay when due any Loan or any interest thereon or anyother monetary Obligation *; or (c) the total Loans and other Obligationsoutstanding at any time shall exceed the Credit Limit **; or (d) Borrower shallfail to comply with any of the financial covenants set forth in the Schedule orshall fail to perform any other non-monetary Obligation which by its naturecannot be cured; or (e) Borrower shall fail to perform any other non-monetaryObligation, which failure is not cured within 5 Business Days after the datedue; or (f) any levy, assessment, attachment, seizure, lien or encumbrance(other than a Permitted Lien) is made on all or any part of the Collateral whichis not cured within 10 **+**~~days~~ after the occurrence ofthe same; or (g) any default or event of default occurs under any obligationsecured by a Permitted Lien, which is not cured within any applicable cureperiod or waived in writing by the holder of the Permitted Lien; or (h) Borrowerbreaches any material contract or obligation, which has or may reasonably beexpected to have a material adverse effect on Borrower's business or financialcondition; or (i) Dissolution, termination of existence, insolvency or businessfailure of Borrower; or appointment of a receiver, trustee or custodian, for allor any part of the property of, assignment for the benefit of creditors by, orthe commencement of any proceeding by Borrower under any reorganization,bankruptcy, insolvency, arrangement, readjustment of debt, dissolution orliquidation law or statute of any jurisdiction, now or in the future in effect;or (j) the commencement of any proceeding against Borrower or any guarantor ofany of the Obligations under any reorganization, bankruptcy, insolvency,arrangement, readjustment of debt, dissolution or liquidation law or statute ofany jurisdiction, now or in the future in effect, which is not cured by thedismissal thereof within ~~30~~ *** days after the date commenced;or (k) revocation or termination of, or limitation or denial of liability upon,any guaranty of the Obligations or any attempt to do any of the foregoing, orcommencement of proceedings by any guarantor of any of the Obligations under anybankruptcy or insolvency law; or (l) revocation or termination of, or limitationor denial of liability upon, any pledge of any certificate of deposit,securities or other property or asset of any kind pledged by any third party tosecure any or all of the Obligations, or any attempt to do any of the foregoing,or commencement of proceedings by or against any such third party under anybankruptcy or insolvency law; or (m) Borrower makes any payment on account ofany indebtedness or obligation which has been subordinated to the Obligationsother than as permitted in the applicable subordination agreement, or if anyPerson who has subordinated such indebtedness or obligations terminates or inany way limits his subordination agreement; or (n) ~~there shall be achange in the record or beneficial ownership of an aggregate of more than 20% ofthe outstanding shares of stock of Borrower, in one or more transactions,compared to the ownership of outstanding shares of stock of Borrower in effecton the date hereof,~~ without the prior written consent of Silicon ****;or (o) Borrower shall generally not pay its debts as they become due, orBorrower shall conceal, remove or transfer any part of its property, with intentto hinder, delay or defraud its creditors, or make or suffer any transfer of anyof its property which may be fraudulent under any bankruptcy, fraudulentconveyance or similar law; or (p) there shall be a material adverse change inBorrower's business or financial condition; or (q) ~~Silicon, acting ingood faith and in a commercially reasonable manner, deems itself insecurebecause of the occurrence of an event prior to the effective date hereof ofwhich Silicon had no knowledge on the effective date or because of theoccurrence of an event on or subsequent to the effective date~~ *****.Silicon may cease making any Loans hereunder during any of the above cureperiods, and thereafter if an Event of Default has occurred ******.  
*** (and solely with respect to Overadvances, subject to thetime period permitted in Section 1.3 within which to pay Silicon the amount ofthe excess described therein constituting such Overadvance)

** and Borrower shall fail to pay Silicon the amount of suchexcess within the time period required by Section 1.3

+ Business Days

*** 45

**** : (1) a "person" or "group" (within the meaning ofSections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended)becomes, after the date of this Agreement, the "beneficial owner" (as defined inRule 13d-3 under the Securities Exchange Act of 1934, as amended), directly orindirectly, of more than 20% of the total voting power of all classes of capitalstock then outstanding of Borrower entitled to vote in the election ofdirectors, or (2) a majority of the members of the Board of Directors ofBorrower shall not constitute Continuing Directors

***** [intentionally omitted]

****** and is continuing
*7.2  Remedies.  Upon the occurrence * of any Eventof Default, ~~and at any time thereafter,~~ Silicon, at its option,and without notice or demand of any kind (all of which are hereby expresslywaived by Borrower), may do any one or more of the following: (a) Cease makingLoans or otherwise extending credit to Borrower under this Agreement or anyother document or agreement; (b) Accelerate and declare all or any part of theObligations to be immediately due, payable, and performable, notwithstanding anydeferred or installment payments allowed by any instrument evidencing orrelating to any Obligation; (c) Take possession of any or all of the Collateralwherever it may be found, and for that purpose Borrower hereby authorizesSilicon without judicial process to enter onto any of Borrower's premiseswithout interference to search for, take possession of, keep, store, or removeany of the Collateral, and remain on the premises or cause a custodian to remainon the premises in exclusive control thereof, without charge for so long asSilicon deems it reasonably necessary in order to complete the enforcement ofits rights under this Agreement or any other agreement; provided, however, thatshould Silicon seek to take possession of any of the Collateral by Courtprocess, Borrower hereby irrevocably waives: (i) any bond and any surety orsecurity relating thereto required by any statute, court rule or otherwise as anincident to such possession; (ii) any demand for possession prior to thecommencement of any suit or action to recover possession thereof; and (iii) anyrequirement that Silicon retain possession of, and not dispose of, any suchCollateral until after trial or final judgment; (d) Require Borrower to assembleany or all of the Collateral and make it available to Silicon at placesdesignated by Silicon which are reasonably convenient to Silicon and Borrower,and to remove the Collateral to such locations as Silicon may deem advisable;(e) Complete the processing, manufacturing or repair of any Collateral prior toa disposition thereof and, for such purpose and for the purpose of removal,Silicon shall have the right to use Borrower's premises, vehicles, hoists,lifts, cranes, equipment and all other property without charge; (f) Sell, leaseor otherwise dispose of any of the Collateral, in its condition at the timeSilicon obtains possession of it or after further manufacturing, processing orrepair, at one or more public and/or private sales, in lots or in bulk, forcash, exchange or other property, or on credit, and to adjourn any such salefrom time to time without notice other than oral announcement at the timescheduled for sale.  Silicon shall have the right to conduct such disposition onBorrower's premises without charge, for such time or times as Silicon deemsreasonable, or on Silicon's premises, or elsewhere and the Collateral need notbe located at the place of disposition.  Silicon may directly or through anyaffiliated company purchase or lease any Collateral at any such publicdisposition, and if permissible under applicable law, at any privatedisposition.  Any sale or other disposition of Collateral shall not relieveBorrower of any liability Borrower may have if any Collateral is defective as totitle or physical condition or otherwise at the time of sale; (g) Demand paymentof, and collect any Receivables and General Intangibles comprising Collateraland, in connection therewith, Borrower irrevocably authorizes Silicon to endorseor sign Borrower's name on all collections, receipts, instruments and otherdocuments, to take possession of and open mail addressed to Borrower and removetherefrom payments made with respect to any item of the Collateral or proceedsthereof, and, in Silicon's sole discretion, to grant extensions of time to pay,compromise claims and settle Receivables and the like for less than face value;(h) Offset against any sums in any of Borrower's general, special or otherDeposit Accounts with Silicon; and (i) Demand and receive possession of any ofBorrower's federal and state income tax returns and the books and recordsutilized in the preparation thereof or referring thereto.  All reasonableattorneys' fees, expenses, costs, liabilities and obligations incurred bySilicon with respect to the foregoing shall be added to and become part of theObligations, shall be due on demand, and shall bear interest at a rate equal tothe highest interest rate applicable to any of the Obligations.  Withoutlimiting any of Silicon's rights and remedies, from and after the occurrence *of any Event of Default, the interest rate applicable to the Obligations shallbe increased by an additional ~~four~~ *** percent per annum.
*** and during the continuation

** three
*7.3  Standards for Determining CommercialReasonableness.  Borrower and Silicon agree that a sale or otherdisposition (collectively, "sale") of any Collateral which complieswith the following standards will conclusively be deemed to be commerciallyreasonable:  (i) Notice of the sale is given to Borrower at least~~seven~~ * days prior to the sale, and, in the case of a publicsale, notice of the sale is published at least ~~seven~~ * daysbefore the sale in a newspaper of general circulation in the county where thesale is to be conducted; (ii) Notice of the sale describes the collateral ingeneral, non-specific terms; (iii) The sale is conducted at a place designatedby Silicon, with or without the Collateral being present; (iv) The salecommences at any time between 8:00 a.m. and 6:00 p.m;  (v) Payment of thepurchase price in cash or by cashier's check or wire transfer is required; (vi)With respect to any sale of any of the Collateral, Silicon may (but is notobligated to) direct any prospective purchaser to ascertain directly fromBorrower any and all information concerning the same.  Silicon shall be free toemploy other methods of noticing and selling the Collateral, in its discretion,if they are commercially reasonable.
*** ten
*7.4  Power of Attorney.  Upon the occurrence * ofany Event of Default, without limiting Silicon's other rights and remedies,Borrower grants to Silicon an irrevocable power of attorney coupled with aninterest, authorizing and permitting Silicon (acting through any of itsemployees, attorneys or agents) at any time, at its option, but withoutobligation, with or without notice to Borrower, and at Borrower's expense, to doany or all of the following, in Borrower's name or otherwise, but Silicon agreesto exercise the following powers in a commercially reasonable manner:  (a)Execute on behalf of Borrower any documents that Silicon may, in its solediscretion, deem advisable in order to perfect and maintain Silicon's securityinterest in the Collateral, or in order to exercise a right of Borrower orSilicon, or in order to fully consummate all the transactions contemplated underthis Agreement, and all other present and future agreements; (b) Execute onbehalf of Borrower any document exercising, transferring or assigning any optionto purchase, sell or otherwise dispose of or to lease (as lessor or lessee) anyreal or personal property which is part of Silicon's Collateral ~~or inwhich Silicon has an interest~~; (c) Execute on behalf of Borrower, anyinvoices relating to any Receivable, any draft against any Account Debtor andany notice to any Account Debtor, any proof of claim in bankruptcy, any Noticeof Lien, claim of mechanic's, materialman's or other lien, or assignment orsatisfaction of mechanic's, materialman's or other lien; (d) Take control in anymanner ** of any cash or non-cash items of payment or proceeds of Collateral;endorse the name of Borrower upon any instruments, or documents, evidence ofpayment or Collateral that may come into Silicon's possession; (e) Endorse allchecks and other forms of remittances received by Silicon; (f) Pay, contest orsettle any lien, charge, encumbrance, security interest and adverse claim in orto any of the Collateral, or any judgment based thereon, or otherwise take anyaction to terminate or discharge the same; (g) Grant extensions of time to pay,compromise claims and settle Receivables and General Intangibles for less thanface value and execute all releases and other documents in connection therewith;(h) Pay any sums required on account of Borrower's taxes or to secure therelease of any liens therefor, or both; (i) Settle and adjust, and give releasesof, any insurance claim that relates to any of the Collateral and obtain paymenttherefor; (j) Instruct any third party having custody or control of any books orrecords belonging to, or relating to, Borrower to give Silicon the same rightsof access and other rights with respect thereto as Silicon has under thisAgreement; and (k) Take any action or pay any sum required of Borrower pursuantto this Agreement and any other present or future agreements.  Any and allreasonable sums paid and any and all reasonable costs, expenses, liabilities,obligations and attorneys' fees incurred by Silicon with respect to theforegoing shall be added to and become part of the Obligations, shall be payableon demand, and shall bear interest at a rate equal to the highest interest rateapplicable to any of the Obligations.  In no event shall Silicon's rights underthe foregoing power of attorney or any of Silicon's other rights under thisAgreement be deemed to indicate that Silicon is in control of the business,management or properties of Borrower.
*** and during the continuation

** permitted by applicable law
*7.5  Application of Proceeds.  All proceedsrealized as the result of any sale of the Collateral shall be applied by Siliconfirst to the reasonable costs, expenses, liabilities, obligations and attorneys'fees incurred by Silicon in the exercise of its rights under this Agreement,second to the interest due upon any of the Obligations, and third to theprincipal of the Obligations, in such order as Silicon shall determine in itssole discretion.  Any surplus shall be paid to Borrower or other persons legallyentitled thereto; Borrower shall remain liable to Silicon for any deficiency.If, Silicon, in its sole discretion, directly or indirectly enters into adeferred payment or other credit transaction with any purchaser at any sale ofCollateral, Silicon shall have the option, exercisable at any time, in its solediscretion, of either reducing the Obligations by the principal amount ofpurchase price or deferring the reduction of the Obligations until the actualreceipt by Silicon of the cash therefor.
***7.6  Remedies Cumulative.  In addition to therights and remedies set forth in this Agreement, Silicon shall have all theother rights and remedies accorded a secured party under the California UniformCommercial Code and under all other applicable laws, and under any otherinstrument or agreement now or in the future entered into between Silicon andBorrower, and all of such rights and remedies are cumulative and none isexclusive.  Exercise or partial exercise by Silicon of one or more of its rightsor remedies shall not be deemed an election, nor bar Silicon from subsequentexercise or partial exercise of any other rights or remedies.  The failure ordelay of Silicon to exercise any rights or remedies shall not operate as awaiver thereof, but all rights and remedies shall continue in full force andeffect until all of the Obligations have been fully paid and performed.
***8.	Definitions.  As used in this Agreement, the followingterms have the following meanings:

"Account Debtor" means the obligor on aReceivable.

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

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

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

"Collateral" has the meaning set forth inSection 2.1 above.
**"Continuing Director" means (a) anymember of the Board of Directors who was a director (or comparable manager) ofBorrower on the date of this Agreement, and (b) any individual who becomes amember of the Board of Directors after the date of this Agreement if suchindividual was appointed or nominated for election to the Board of Directors bya majority of the Continuing Directors, but excluding any such individualoriginally proposed for election in opposition to the Board of Directors inoffice at the date of this Agreement in an actual or threatened election contestrelating to the election of the directors (or comparable managers) of Borrower(as such terms are used in Rule 14a-11 under the Securities Exchange Act of1934, as amended) and whose initial assumption of office resulted from suchcontest or the settlement thereof.**
"Default" means any event which withnotice or passage of time or both, would constitute an Event of Default.

"Deposit Account" has the meaning set forth in Section9102(a) of the Code.

"Eligible Inventory"  [NOT APPLICABLE].

"Eligible Receivables" means Receivablesarising in the ordinary course of Borrower's business from the sale of goods orrendition of services, which Silicon, in its sole judgment, shall deem eligiblefor borrowing, based on such considerations as Silicon may from time to timedeem appropriate.  Without limiting the fact that the determination of whichReceivables are eligible for borrowing is a matter of Silicon's discretion, thefollowing (the "Minimum Eligibility Requirements") are theminimum requirements for a Receivable to be  an Eligible Receivable:  (i) theReceivable must not be outstanding for more than 90 days from its invoice date,(ii) the Receivable must not represent progress billings, or be due under afulfillment or requirements contract with the Account Debtor, (iii) theReceivable must not be subject to any contingencies (including Receivablesarising from sales on consignment, guaranteed sale or other terms pursuant towhich payment by the Account Debtor may be conditional), (iv) the Receivablemust not be owing from an Account Debtor with whom Borrower has any dispute(whether or not relating to the particular Receivable), (v) the Receivable mustnot be owing from an Affiliate of Borrower, (vi) the Receivable must not beowing from an Account Debtor which is subject to any insolvency or bankruptcyproceeding, or whose financial condition is not acceptable to Silicon, or which,fails or goes out of a material portion of its business, (vii) the Receivablemust not be owing from the United States or any department, agency orinstrumentality thereof (unless there has been compliance, to Silicon'ssatisfaction, with the United States Assignment of Claims Act), (viii) theReceivable must not be owing from an Account Debtor located outside the UnitedStates or Canada (unless pre-approved by Silicon in its discretion in writing,or backed by a letter of credit satisfactory to Silicon, or FCIA insuredsatisfactory to Silicon *), and (ix) the Receivable must not be owing from anAccount Debtor to whom Borrower is or may be liable for goods purchased fromsuch Account Debtor or otherwise **. Receivables owing from one Account Debtorwill not be deemed Eligible Receivables to the extent they exceed 25% of thetotal Receivables outstanding.  In addition, if more than 50% of the Receivablesowing from an Account Debtor are outstanding more than 90****days from theirinvoice date (without regard to unapplied credits) or are otherwise not eligibleReceivables, then all Receivables owing from that Account Debtor will be deemedineligible for borrowing.  Silicon may, from time to time, in its discretion,revise the Minimum Eligibility Requirements, upon written notice toBorrower.
*** ; without limiting the generality of the foregoing, asto each of the foreign Account Debtors identified in the definition of PermittedForeign Eligible Receivables, Receivables owing by such Account Debtor up to therespective maximum amount relating to such Account Debtor as identified in thedefinition of Permitted Foreign Eligible Receivables shall be deemed pre-approved by Silicon for purposes of this clause (viii) so long as suchReceivables are backed by a letter of credit satisfactory to Silicon for suchmaximum amount or FCIA insured satisfactory to Silicon for such maximumamount

** ; and (x) (so long as any UCC-1 filings covering anyproperty of Borrower are of record in favor of NTFC Capital Corporation) theReceivable must not constitute proceeds of any property sold, leased, licensedor sublicensed, or otherwise supplied by NTFC Capital Corporation toBorrower**
"Equipment" means all of Borrower's present andhereafter acquired machinery, molds, machine tools, motors, furniture,equipment, furnishings, fixtures, trade fixtures, motor vehicles, tools, parts,dyes, jigs, goods and other tangible personal property (other than Inventory) ofevery kind and description used in Borrower's operations or owned by Borrowerand any interest in any of the foregoing, and all attachments, accessories,accessions, replacements, substitutions, additions or improvements to any of theforegoing, wherever located.

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

"General Intangibles" means all general intangibles ofBorrower, whether now owned or hereafter created or acquired by Borrower,including, without limitation, all choses in action, causes of action, corporateor other business records, Deposit Accounts, inventions, designs, drawings,blueprints, patents, patent applications, trademarks and the goodwill of thebusiness symbolized thereby, names, trade names, trade secrets, goodwill,copyrights, registrations, licenses, franchises, customer lists, security  andother deposits, rights in all litigation presently or hereafter pending for anycause or claim (whether in contract, tort or otherwise), and all judgments nowor hereafter arising therefrom, all claims of Borrower against Silicon, rightsto purchase or sell real or personal property, rights as a licensor or licenseeof any kind, royalties, telephone numbers, proprietary information, purchaseorders, and all insurance policies and claims (including without limitation lifeinsurance, key man insurance, credit insurance, liability insurance, propertyinsurance and other insurance), tax refunds and claims, computer programs,discs, tapes and tape files, claims under guaranties, security interests orother security held by or granted to Borrower, all rights to indemnification andall other intangible property of every kind and nature (other thanReceivables).

"Inventory" means all of Borrower's now owned andhereafter acquired goods, merchandise or other personal property, whereverlocated, to be furnished under any contract of service or held for sale or lease(including without limitation all raw materials, work in process, finished goodsand goods in transit), and all materials and supplies of every kind, nature anddescription which are or might be used or consumed in Borrower's business orused in connection with the manufacture, packing, shipping, advertising, sellingor finishing of such goods, merchandise or other personal property, and allwarehouse receipts, documents of title and other documents representing any ofthe foregoing.

"Obligations" means all present and future Loans,advances, debts, liabilities, obligations, guaranties, covenants, duties andindebtedness at any time owing by Borrower to Silicon, whether evidenced by thisAgreement or any note or other instrument or document, whether arising from anextension of credit, opening of a letter of credit, banker's acceptance, loan,guaranty, indemnification or otherwise, whether direct or indirect (including,without limitation, those acquired by assignment and any participation bySilicon in Borrower's debts owing to others), absolute or contingent, due or tobecome due, including, without limitation, all interest, charges, expenses,fees, attorney's fees, expert witness fees, audit fees, letter of credit fees,collateral monitoring fees, closing fees, facility fees, termination fees,minimum interest charges and any other sums chargeable to Borrower under thisAgreement or under any other present or future instrument or agreement betweenBorrower and Silicon.
**"Permitted Foreign Eligible Receivables"means, collectively: (a) Receivables owing by the foreign Account Debtor knownas Cablecom AG, in an aggregate amount not to exceed $100,000 at any one timeoutstanding; (b) Receivables owing by the foreign Account Debtor known as FranceTelecom Cable Interactive, in an aggregate amount not to exceed $2,000,000 atany one time outstanding; (c) Receivables owing by the foreign Account Debtorknown as Fringes Systemns, in an aggregate amount not to exceed $250,000 at anyone time outstanding; (d) Receivables owing by the foreign Account Debtor knownas Fujikura, in an aggregate amount not to exceed $2,000,000 at any one timeoutstanding; (e) Receivables owing by the foreign Account Debtor known asFujikawa Electric Co., in an aggregate amount not to exceed $1,800,000 at anyone time outstanding; (f) Receivables owing by the foreign Account Debtor knownas Hitachi Cable America, in an aggregate amount not to exceed $1,000,000 at anyone time outstanding; (g) Receivables owing by the foreign Account Debtor knownas OSI Plus Corp., in an aggregate amount not to exceed $250,000 at any one timeoutstanding; (h) Receivables owing by the foreign Account Debtor known asPhilips Iberica, in an aggregate amount not to exceed $1,500,000 at any one timeoutstanding; (i) Receivables owing by the foreign Account Debtor known asSiemens Nederland, in an aggregate amount not to exceed $2,000,000 at any onetime outstanding; (j) Receivables owing by the foreign Account Debtor known asSpie Trindel, in an aggregate amount not to exceed $100,000 at any one timeoutstanding; (k) Receivables owing by the foreign Account Debtor known as TeliaSofia, in an aggregate amount not to exceed $100,000 at any one timeoutstanding; (l) Receivables owing by the foreign Account Debtor known asTelindus BV, in an aggregate amount not to exceed $5,000,000 at any one timeoutstanding; and (m) Receivables owing by the foreign Account Debtor known asThalamus Networks, in an aggregate amount not to exceed $100,000 at any one timeoutstanding.**
"Permitted Liens" means the following:  (i)purchase money security interests in specific items of Equipment; (ii) leases ofspecific items of Equipment; (iii) liens for taxes not yet payable; (iv)additional security interests and liens consented to in writing by Silicon,which consent shall not be unreasonably withheld; (v) security interests beingterminated substantially concurrently with this Agreement; (vi) liens ofmaterialmen, mechanics, warehousemen, carriers, or other similar liens arisingin the ordinary course of business and securing obligations which are notdelinquent; (vii) liens incurred in connection with the extension, renewalor refinancing of the indebtedness secured by liens of the type described abovein clauses (i) or (ii) above, provided that any extension, renewal orreplacement lien is limited to the property encumbered by the existing lien andthe principal amount of the indebtedness being extended, renewed or refinanceddoes not increase; (viii) Liens in favor of customs and revenue authoritieswhich secure payment of customs duties in connection with the importation ofgoods.  Silicon will have the right to require, as a condition to its consentunder subparagraph (iv) above, that the holder of the additional securityinterest or lien sign an intercreditor agreement * ~~on Silicon's thenstandard form~~, acknowledge that the security interest is subordinate tothe security interest in favor of Silicon, and agree not to take any action toenforce its subordinate security interest so long as any Obligations remainoutstanding, and that Borrower agree that any uncured default in any obligationsecured by the subordinate security interest shall also constitute an Event ofDefault under this Agreement.  
*** , in form and substance satisfactory to Silicon in itsgood faith business judgment,**
"Person" means any individual, soleproprietorship, partnership, joint venture, trust, unincorporated organization,association, corporation, government, or any agency or political divisionthereof, or any other entity.

"Receivables" means all of Borrower's now owned andhereafter acquired accounts (whether or not earned by performance), letters ofcredit, contract rights, chattel paper, instruments, securities, securitiesaccounts, investment property, documents and all other forms of obligations atany time owing to Borrower, all guaranties and other security therefor, allmerchandise returned to or repossessed by Borrower, and all rights of stoppagein transit and all other rights or remedies of an unpaid vendor, lienor orsecured party.

"Reserves" means, as of any date of determination,such amounts as Silicon may from time to time establish and revise in good faithreducing the amount of Loans, Letters of Credit and other financialaccommodations which would otherwise be available to Borrower under the lendingformula(s) provided in the Schedule:  (a) to reflect events, conditions,contingencies or risks which, as determined by Silicon in good faith, do or mayaffect (i) the Collateral or any other property which is security for theObligations or its value (including without limitation any increase indelinquencies of Receivables), (ii) the assets, business or prospects ofBorrower or any Guarantor, or (iii) the security interests and other rights ofSilicon in the Collateral (including the enforceability, perfection and prioritythereof); or (b) to reflect Silicon's good faith belief that any collateralreport or financial information furnished by or on behalf of Borrower or anyGuarantor to Silicon is or may have been incomplete, inaccurate or misleading inany material respect; or (c) in respect of any state of facts which Silicondetermines in good faith constitutes an Event of Default or may, with notice orpassage of time or both, constitute an Event of Default.
**"Streamline Facility Agreement" meansthat certain Streamline Facility Agreement, dated as of even date herewith,entered into by and between Silicon and Bank concurrently herewith.**
Other Terms.  All accounting terms used in thisAgreement, unless otherwise indicated, shall have the meanings given to suchterms in accordance with generally accepted accounting principles, consistentlyapplied.  All other terms contained in this Agreement, unless otherwiseindicated, shall have the meanings provided by the Code, to the extent suchterms are defined therein. 
***9.	GENERAL PROVISIONS.

9.1  Interest Computation.  In computing interest onthe Obligations, all checks, wire transfers and other items of payment receivedby Silicon (including proceeds of Receivables and payment of the Obligations infull) shall be deemed applied by Silicon on account of the Obligations threeBusiness Days after receipt by Silicon of immediately available funds, and, forpurposes of the foregoing, any such funds received after 12:00 Noon on any dayshall be deemed received on the next Business Day.  Silicon shall not, however,be required to credit Borrower's account for the amount of any item of paymentwhich is unsatisfactory to Silicon in its sole discretion, and Silicon maycharge Borrower's loan account for the amount of any item of payment which isreturned to Silicon unpaid.  
***9.2  Application of Payments.  All paymentswith respect to the Obligations may be applied, and in Silicon's sole discretionreversed and re-applied, to the Obligations, in such order and manner as Siliconshall determine in its sole discretion.
***9.3  Charges to Accounts.  Silicon may, in itsdiscretion, require that Borrower pay monetary Obligations in cash to Silicon,or charge them to Borrower's Loan account, in which event they will bearinterest at the same rate applicable to the Loans.  Silicon may also, in itsdiscretion, charge any monetary Obligations to Borrower's Deposit Accountsmaintained with Silicon.
***9.4  Monthly Accountings.  Silicon shallprovide Borrower monthly with an account of advances, charges, expenses andpayments made pursuant to this Agreement.  Such account shall be deemed correct,accurate and binding on Borrower and an account stated (except for reverses andreapplications of payments made and corrections of errors discovered bySilicon), unless Borrower notifies Silicon in writing to the contrary withinthirty days after each account is rendered, describing the nature of any allegederrors or admissions.
***9.5  Notices.  All notices to be given underthis Agreement shall be in writing and shall be given either personally or byreputable private delivery service or by regular first-class mail, or certifiedmail return receipt requested, addressed to Silicon or Borrower at the addressesshown in the heading to this Agreement, or at any other address designated inwriting by one party to the other party.  Notices to Silicon shall be directedto the Commercial Finance Division, to the attention of the Division Manager orthe Division Credit Manager.  All notices shall be deemed to have been givenupon delivery in the case of notices personally delivered, or at the expirationof one Business Day following delivery to the private delivery service, or twoBusiness Days following the deposit thereof in the United States mail, withpostage prepaid.  
***9.6  Severability.  Should any provision ofthis Agreement be held by any court of competent jurisdiction to be void orunenforceable, such defect shall not affect the remainder of this Agreement,which shall continue in full force and effect.
***9.7  Integration.  This Agreement and suchother written agreements, documents and instruments as may be executed inconnection herewith * are the final, entire and complete agreement betweenBorrower and Silicon and supersede all prior and contemporaneous negotiationsand oral representations and agreements, all of which are merged and integratedin this Agreement.  There are no oral understandings, representations oragreements between the parties which are not set forth in this Agreement or inother written agreements signed by the parties in connection herewith.*** (including the Streamline Facility Agreement)
*9.8  Waivers.  The failure of Silicon at any timeor times to require Borrower to strictly comply with any of the provisions ofthis Agreement or any other present or future agreement between Borrower andSilicon shall not waive or diminish any right of Silicon later to demand andreceive strict compliance therewith.  Any waiver of any default shall not waiveor affect any other default, whether prior or subsequent, and whether or notsimilar.  None of the provisions of this Agreement or any other agreement now orin the future executed by Borrower and delivered to Silicon shall be deemed tohave been waived by any act or knowledge of Silicon or its agents or employees,but only by a specific written waiver signed by an authorized officer of Siliconand delivered to Borrower.  Borrower waives demand, protest, notice of protestand notice of default or dishonor, notice of payment and nonpayment, release,compromise, settlement, extension or renewal of any commercial paper,instrument, account, General Intangible, document or guaranty at any time heldby Silicon on which Borrower is or may in any way be liable, and notice of anyaction taken by Silicon, unless expressly required by this Agreement.  
***9.9  No Liability for Ordinary Negligence.Neither Silicon, nor any of its directors, officers, employees, agents,attorneys or any other Person affiliated with or representing Silicon shall beliable for any claims, demands, losses or damages, of any kind whatsoever, made,claimed, incurred or suffered by Borrower or any other party through theordinary negligence of Silicon, or any of its directors, officers, employees,agents, attorneys or any other Person affiliated with or representing Silicon,but nothing herein shall relieve Silicon from liability for its own grossnegligence or willful misconduct.
***9.10  Amendment.  The terms and provisions ofthis Agreement may not be waived or amended, except in a writing executed byBorrower and a duly authorized officer of Silicon.
***9.11  Time of Essence.  Time is of the essencein the performance by Borrower of each and every obligation under thisAgreement.
***9.12  Attorneys Fees and Costs.  Borrower shallreimburse Silicon for all reasonable attorneys' fees and all filing, recording,search, title insurance, appraisal, audit, and other reasonable costs incurredby Silicon, pursuant to, or in connection with, or relating to this Agreement(whether or not a lawsuit is filed), including, but not limited to, anyreasonable attorneys' fees and costs Silicon incurs in order to do thefollowing: prepare and negotiate this Agreement and the documents relating tothis Agreement; obtain legal advice in connection with this Agreement orBorrower; enforce, or seek to enforce, any of its rights; prosecute actionsagainst, or defend actions by, Account Debtors; commence, intervene in, ordefend any action or proceeding; initiate any complaint to be relieved of theautomatic stay in bankruptcy; file or prosecute any probate claim, bankruptcyclaim, third-party claim, or other claim; examine, audit, copy, and inspect anyof the Collateral or any of Borrower's books and records; protect, obtainpossession of, lease, dispose of, or otherwise enforce Silicon's securityinterest in, the Collateral; and otherwise represent Silicon in any litigationrelating to Borrower.  In satisfying Borrower's obligation hereunder toreimburse Silicon for attorneys fees, Borrower may, for convenience, issuechecks directly to Silicon's attorneys, Levy, Small & Lallas, but Borroweracknowledges and agrees that Levy, Small & Lallas is representing onlySilicon and not Borrower in connection with this Agreement.  If eitherSilicon or Borrower files any lawsuit against the other predicated on a breachof this Agreement, the prevailing party in such action shall be entitled torecover its reasonable costs and attorneys' fees, including (but not limited to)reasonable attorneys' fees and costs incurred in the enforcement of, executionupon or defense of any order, decree, award or judgment.  All attorneys' feesand costs to which Silicon may be entitled pursuant to this Paragraph shallimmediately become part of Borrower's Obligations, shall be due on demand, andshall bear interest at a rate equal to the highest interest rate applicable toany of the Obligations.
***9.13  Benefit of Agreement.  The provisions ofthis Agreement shall be binding upon and inure to the benefit of the respectivesuccessors, assigns, heirs, beneficiaries and representatives of Borrower andSilicon; provided, however, that Borrower may not assign or transfer any of itsrights under this Agreement without the prior written consent of Silicon, andany prohibited assignment shall be void.  No consent by Silicon to anyassignment shall release Borrower from its liability for the Obligations.
***9.14  Joint and Several Liability.  If Borrowerconsists of more than one Person, their liability shall be joint and several,and the compromise of any claim with, or the release of, any Borrower shall notconstitute a compromise with, or a release of, any other Borrower.
***9.15  Limitation of Actions.Any claim orcause of action by Borrower against Silicon, its directors, officers, employees,agents, accountants or attorneys, based upon, arising from, or relating to thisLoan Agreement, or any other present or future document or agreement, or anyother transaction contemplated hereby or thereby or relating hereto or thereto,or any other matter, cause or thing whatsoever, occurred, done, omitted orsuffered to be done by Silicon, its directors, officers, employees, agents,accountants or attorneys, shall be barred unless asserted by Borrower by thecommencement of an action or proceeding in a court of competent jurisdiction bythe filing of a complaint within * ~~one year~~ after the firstact, occurrence or omission upon which such claim or cause of action, or anypart thereof, is based, and the service of a summons and complaint on an officerof Silicon, or on any other person authorized to accept service on behalf ofSilicon, within thirty (30) days thereafter.  Borrower agrees that such **~~one-year~~ period is a reasonable and sufficient time forBorrower to investigate and act upon any such claim or cause of action.  The **~~one-year~~ period provided herein shall not be waived, tolled, orextended except by the written consent of Silicon in its sole discretion.  Thisprovision shall survive any termination of this Loan Agreement or any otherpresent or future agreement.
*** two years

** two-year
*9.16  Paragraph Headings; Construction.  Paragraphheadings are only used in this Agreement for convenience.  Borrower and Siliconacknowledge that the headings may not describe completely the subject matter ofthe applicable paragraph, and the headings shall not be used in any manner toconstrue, limit, define or interpret any term or provision of this Agreement.The term "including", whenever used in this Agreement, shall mean"including (but not limited to)".  This Agreement has been fullyreviewed and negotiated between the parties and no uncertainty or ambiguity inany term or provision of this Agreement shall be construed strictly againstSilicon or Borrower under any rule of construction or otherwise.
***9.17  Governing Law; Jurisdiction; Venue.  ThisAgreement and all acts and transactions hereunder and all rights and obligationsof Silicon and Borrower shall be governed by the laws of the State ofCalifornia.  As a material part of the consideration to Silicon to enter intothis Agreement, Borrower (i) agrees that all actions and proceedings relatingdirectly or indirectly to this Agreement shall, at Silicon's option, belitigated in courts located within California, and that the exclusive venuetherefor shall be Santa Clara County; (ii) consents to the jurisdiction andvenue of any such court and consents to service of process in any such action orproceeding by personal delivery or any other method permitted by law; and (iii)waives any and all rights Borrower may have to object to the jurisdiction of anysuch court, or to transfer or change the venue of any such action orproceeding.
***9.18  Mutual Waiver of Jury Trial.  Borrower andSilicon each hereby waive the right to trial by jury in any action or proceedingbased upon, arising out of, or in any way relating to, this Agreement or anyother present or future instrument or agreement between Silicon and Borrower, orany conduct, acts or omissions of Silicon or Borrower or any of their directors,officers, employees, agents, attorneys or any other persons affiliated withSilicon or Borrower, in all of the foregoing cases, whether sounding in contractor tort or otherwise.

[Signature page immediately follows]
**IN WITNESS WHEREOF,the parties hereto have caused this Agreement to be executed and deliveredas of the date first above written.
**Borrower:

COM21, INC.

 

By 					
	President or Vice President

By 					
		Secretary or Ass't Secretary

Silicon:

SILICON VALLEY BANK

 

By 					
Title 					
 

Form 3/24/99

Version -0
** 

Silicon ValleyBank*Scheduleto 

Loan and Security Agreement

Borrower:	COM21, INC.		
Address:	750 Tasman Drive

		Milpitas, California  95035
Date:		November __, 2001

This Schedule forms anintegral part of the Loan and Security Agreement between Silicon Valley Bank andthe above-borrower of even date.  

 
** 

1.  Credit Limit

	(Section1.1):	An amount not to exceed the lesser of $20,000,000 (the "MaximumCredit Limit") and the sum of (a) plus (b) below: 
		(a)	Revolving Loans: Revolving Loans (the"Revolving Loans") in an amount not to exceed the lesser of:  (i)**$10,000,000** at any one time outstanding (the "Maximum RevolvingAmount"); or (ii) **75%** of the amount of Borrower's EligibleReceivables (as defined in Section 8 above); plus

		(b)Celestica Letter of Credit: one or more special purpose Letters of Creditissued for the account of Borrower to Celestica Inc. as beneficiary, in anaggregate face amount not to exceed $10,000,000 (individually and collectively,the "Celestica Letter of Credit").  Borrower's Obligations arising outof or in connection with the Celestica Letter of Credit shall be fully cash-secured pursuant to Silicon's standard form cash pledge agreement (such cashsecurity, the "Celestica LC Cash Collateral"; it being understood andagreed that the Celestica LC Cash Collateral constitutes additional Collateral).Borrower hereby covenants and agrees that the amount of cash collateral pledgedto Silicon as the Celestica LC Cash Collateral shall at all times be at least$10,000,000 plus all interest, fees and costs due or to become due in connectionwith the Celestica Letter of Credit.
	**Letter of Credit Sublimit**
	(Section1.5):	**$2,000,000 in theaggregate as to all Letters of Credit other than the Celestica Letter ofCredit** 

2.  Interest.

	Interest Rate(Section 1.2):	
	A rate perannum equal to the "Prime Rate" in effect from time to time, plus theApplicable Margin (as defined below).  Interest shall be calculated on the basisof a 360-day year for the actual number of days elapsed.  "Prime Rate" means therate announced from time to time by Silicon as its "prime rate;" it isa base rate upon which other rates charged by Silicon are based, and it is notnecessarily the best rate available at Silicon.  The interest rate applicable tothe Obligations shall change on each date there is a change in the Prime Rate orin the Applicable Margin.  As used herein, the term "ApplicableMargin" means, as of any date of determination, 2.0%; provided, however,that solely if (i) Borrower, after the date of this Agreement, achievesprofitability (in accordance with generally accepted accounting principlesconsistently applied) of not less than $1 for each of 2 consecutive fiscalquarters, (ii) Silicon timely receives the unaudited quarterly financialstatements required under this Agreement in respect of each of such 2consecutive fiscal quarters, which financial statements accurately reflectBorrower's achievement of such requisite profitability, and (iii) no Event ofDefault has occurred and is continuing, then the Applicable Margin shall equal1.5%, effective from and after the date of such receipt of such financialstatements.**	Minimum Monthly 
	Interest (Section 1.2):     $2,500 per month.
** 

3.  Fees (Section1.4):****
	LoanFee:	$100,000 (i.e., 1.0% of the Maximum Revolving Amount), payableconcurrently herewith.
	CollateralMonitoring
	Fee:	Subjectto the Streamline Facility Agreement, $1,500 per month, payable in arrears(prorated for any partial month at the beginning and at termination of thisAgreement).
	Letter of Credit Fees:	With respect to Letters ofCredit, Silicon's standard Letter of Credit fees, which fees shall be payablemonthly, on the last day of the month.  Such fees may, in Silicon's discretion,be charged to Borrower's loan account, and the same shall thereafter bearinterest at the same rate as Revolving Loans.
** 

4.  Maturity Date 

	(Section6.1): 	One year from the date of this Agreement.** 

5.  Financial Covenants

	(Section5.1):	Borrower shall comply with each of the following covenant(s).Compliance shall be determined as of the end of each month, except as otherwisespecifically provided below: **	Minimum Tangible 
	Net Worth:	Borrower shall maintain a Tangible NetWorth of not less than the sum of (a) $24,000,000 plus (b) the TNW CapitalIncrease (if any).

The term "TNW CapitalIncrease" means, as of any date of determination, the greater of (a) $-0-and (b) 60% of all consideration (if any) received after the date of thisAgreement for equity securities of the Borrower. In no event shall the amount ofthe TNW Capital Increase be decreased.

	**Definitions.	For purposes of the foregoing financial covenants,the following term shall have the following meaning:
		"Liabilities" shall have the meaningascribed thereto by generally accepted accounting principles.

		"Tangible Net Worth" shall mean the excessof total assets over total liabilities, determined in accordance with generallyaccepted accounting principles, with the following adjustments:  

		(A) there shall beexcluded from assets:  (i) notes, accounts receivable and other obligationsowing to Borrower from its officers or other Affiliates, and (ii) all assetswhich would be classified as intangible assets under generally acceptedaccounting principles, including without limitation goodwill, licenses, patents,trademarks, trade names, copyrights, capitalized software and organizationalcosts, licenses and franchises
		(B) there shall be excluded from liabilities:  allindebtedness which is subordinated to the Obligations under a subordinationagreement in form specified by Silicon or by language in the instrumentevidencing the indebtedness which is acceptable to Silicon in itsdiscretion.
** 

6.  Reporting.

      (Section 5.3):

Borrower shall provide Silicon with the following:

1.	Monthly Receivable agings, aged by invoice date, withinfifteen days after the end of each month.

2.	Monthly accounts payable agings, aged by invoice date,and outstanding or held check registers, if any, within fifteen days after theend of each month. 

3.	Monthly reconciliations of Receivable agings (aged byinvoice date), transaction reports, and general ledger, within fifteen daysafter the end of each month. 

4.	Monthly perpetual inventory reports for the Inventoryvalued on a first-in, first-out basis at the lower of cost or market (inaccordance with generally accepted accounting principles) or such otherinventory reports as are reasonably requested by Silicon, all within fifteendays after the end of each month. 

5.	Monthly unaudited financial statements, as soon asavailable, and in any event within thirty days after the end of each month. 

6.	Monthly Compliance Certificates, within thirty daysafter the end of each month, in such form as Silicon shall reasonably specify,signed by the Chief Financial Officer of Borrower, certifying that as of the endof such month Borrower was in full compliance with all of the terms andconditions of this Agreement, and setting forth calculations showing compliancewith the financial covenants set forth in this Agreement and such otherinformation as Silicon shall reasonably request, including, without limitation,a statement that at the end of such month there were no held checks.

7.	Quarterly unaudited financial statements, as soon asavailable, and in any event within forty-five days after the end of each fiscalquarter of Borrower.

8.	Annual operating budgets (including income statements,balance sheets and cash flow statements, by month) for the upcoming fiscal yearof Borrower within thirty days prior to the end of each fiscal year of Borrower.

9.	Annual financial statements, as soon as available, andin any event within 120 days following the end of Borrower's fiscal year,certified by independent certified public accountants acceptable to Silicon.
**7.Compensation	

	(Section5.5):	[Intentionally Omitted] ** 

8.  BorrowerInformation:

	Prior Names of 
	Borrower 

	(Section3.2):		See Representations and Warranties Certificate of Borrower datedNovember 6, 2001, incorporated herein by this reference.**	Prior Trade
	Names of Borrower  

	(Section3.2):		See Representations and Warranties Certificate of Borrower datedNovember 6, 2001, incorporated herein by this reference. **	ExistingTrade 
	Names of Borrower  

	(Section3.2):		See Representations and Warranties Certificate of Borrower datedNovember 6, 2001, incorporated herein by this reference. **	OtherLocations**and**
	**Addresses (Section 3.3):		See Representations and WarrantiesCertificate of Borrower dated November 6, 2001, incorporated herein by thisreference. **	MaterialAdverse 
	**Litigation (Section 3.10):	On October 3, 2001, Linear TechnologyCorporation filed a lawsuit against against Com21 for breach of contract in theSuperior Court of California, County of Santa Clara (Case No. CV 801968).Linear, a supplier of Com21, claims damages of approximately $520,000.** 

 

9.  Other Covenants

	(Section5.1):	Borrower shall at all times comply with all of the following additionalcovenants:**(1)  	Banking and Investment Account Relationship.Borrower shall at all times maintain its primary banking and investmentaccount relationships with Silicon.  With respect to any deposit accounts orsecurities accounts maintained by Borrower at any financial institution otherthan Silicon, Borrower agrees, upon Silicon's request therefor, to cause suchother financial institution to execute and deliver to Silicon, in form andsubstance satisfactory to Silicon, a Deposit Account Control Agreement or aSecurities Account Control Agreement (as the case may be) with respect to allsuch accounts maintained by Borrower at such other financial institution.
**(2)	**Subordination of Inside Debt**.  All present and future indebtedness ofBorrower to its officers, directors and shareholders ("Inside Debt")shall, at all times, be subordinated to the Obligations pursuant to asubordination agreement on Silicon's standard form.  Borrower represents andwarrants that there is no Inside Debt presently outstanding, except for thefollowing: NONE.  Prior to incurring any Inside Debt in the future, Borrowershall cause the person to whom such Inside Debt will be owed to execute anddeliver to Silicon a subordination agreement on Silicon's standard form.
**(3)	Patents, Trademarksand Copyrights. Concurrently with the execution of this Agreement, Borrowershall execute and deliver to Silicon, on Silicon's standard form(s), anysecurity agreement(s) and other documentation which Silicon deems necessary forfiling in the United States Patent and Trademark Office, the United StatesCopyright Office, and any other governmental office, with respect to Borrower'scopyrights, patents, trademarks and related collateral. Borrower promptly willidentify to Silicon in writing and register with the United States CopyrightOffice (i) any maskworks and computer software that generates Receivables fromthe sale or licensing thereof or that is otherwise material to the business ofBorrower (each, a "Material Copyright") it has, develops or acquires,including those in Exhibit A to the Intellectual Property Security Agreement,within 30 days of the date of execution and delivery of this Agreement, and (ii)any additional Material Copyright developed or acquired (including significantrevisions, additions or improvements to any Material Copyright or revisions,additions or improvements which significantly improve the functionality of anyMaterial Copyright) after the date of execution and delivery of this Agreement,concurrently with the required delivery of the quarterly unaudited financialstatements of Borrower under Section 6(7) of the Schedule, and Borrower willexecute such additional security agreement(s) and other documentation whichSilicon deems necessary for filing with respect to such additional registeredcopyright(s).  Borrower will promptly notify Silicon upon Borrower's filing ofany application or registration of any patent or trademark rights with theUnited States Patent and Trademark Office and Borrower will execute and deliverany and all instruments and documents as Bank may require to evidence or perfectBank's security interest in such application or registration. Borrower will:(i) protect, defend and maintain the validity and enforceability of thecopyrights, patents, and trademarks; (ii) promptly advise Bank in writing ofmaterial infringements of the copyrights, patents, or trademarks of whichBorrower is or becomes aware; and (iii) not allow any material item ofcopyrights, patents, or trademarks to be abandoned, forfeited or dedicated tothe public without Bank's written consent.
**(4)	LandlordAgreement. With respect to any leased premises of Borrower, Borrower shall,promptly upon Silicon's request therefor, deliver to Silicon a landlordagreement (in form and substance satisfactory to Silicon) duly executed by thelessor of such leased premises.
**(5)	BaileeAgreement. With respect to any goods of Borrower in the possession of anywarehouseman or other bailee, Borrower shall, promptly upon Silicon's requesttherefor, deliver to Silicon a bailee agreement (in form and substancesatisfactory to Silicon) duly executed by such warehouseman or other bailee.
**(6)	StockPledge.  Borrower shall concurrently execute and deliver a Pledge Agreementto Silicon, on Silicon's standard form, granting Silicon a security interest in100% of the outstanding stock of each Subsidiary of Borrower to secure all ofthe Obligations. Borrower shall cause said Pledge Agreement to continue in fullforce and effect at all times during the term of this Agreement with respect to100% of the outstanding stock of each Subsidiary now outstanding or hereafterissued and 100% of all options and warrants to acquire stock of each Subsidiaryhereafter issued.  Borrower represents and warrants that there are nooutstanding options or warrants to acquire stock of any Subsidiary.  Borrowershall deliver to Silicon possession of the original stock certificatesrespecting all of the issued and outstanding shares of stock of each suchSubsidiary, together with stock powers with respect thereto endorsed in blank.As used in this Agreement, the term "Subsidiary" means, with respect to anyPerson, a corporation, partnership, limited liability company, or other entityin which that Person directly or indirectly owns or controls the shares ofcapital stock or other equity interests having ordinary voting power to elect amajority of the board of directors (or appoint other comparable managers) ofsuch corporation, partnership, limited liability company, or other entity.
** 

10.  CONDITIONS PRECEDENT

In addition to the otherconditions precedent set forth in this Agreement, the making of the initial Loanis subject to the following additional conditions:

(A) Silicon shall havereceived lien searches listing all effective financing statements which nameBorrower (or any predecessor corporation or any tradename thereof or any sellerof assets acquired by Borrower outside of the ordinary course of business) asdebtor that are filed in the applicable filing offices with respect to Borrower,none of which financing statements shall cover any of the Collateral ofBorrower, except (i) Permitted Liens, (ii) financing statements as to whichSilicon has received duly executed authorization by the applicable secured partyto file executed termination statements or partial release statements in formand substance satisfactory to Silicon, or (iii) as otherwise agreed in writingby Silicon. Without limiting the generality of the foregoing, Silicon shall havereceived (x) a written authorization by NTFC Capital Corporation to fileappropriate termination statements in respect of NTFC Capital Corporation 'sUCC-1 filings covering any property of Borrower, or (y) evidence satisfactory toSilicon that NTFC Capital Corporation does not have any financing statementscovering any property of Borrower other than the specific Equipment of Borrowerthat is leased by NTFC Capital Corporation (as lessor) to Borrower (as lessee)and the specific software that is licensed or sublicensed by NTFC CapitalCorporation (as licensor or sublicensor) to Borrower (as licensee orsublicensee), and the proceeds thereof, or (z) a written authorization by NTFCCapital Corporation to file appropriate partial releases or amendments inrespect of NTFC Capital Corporation 's UCC-1 filings to conform the collateraldescriptions therein to the property described in the foregoing clause (y).Borrower represents and warrants that Borrower does not claim any interest inthe property described in that certain UCC-1 Financing Statement, listingBIT-COM, INC. as debtor and Tri Counties Bank as secured party, filed with theCalifornia Secretary of State on May 22, 1997 as File No. 9714860559.

(B) Silicon shall have received a letter, in form andsubstance satisfactory to Bank, duly executed and delivered by Comerica Bank toSilicon (the "Payoff Letter") respecting the amount necessary to repay in fullall of the obligations of Borrower owing to Comerica Bank and authorizing thefiling of executed UCC termination statements and evidencing the termination byComerica Bank of its Liens in and to the properties and assets of Borrower.

(C) Without limiting the generality of Section 9(1) of thisSchedule, Borrower shall deliver to Silicon either (y) evidence that Borrowerhas closed its deposit accounts currently maintained with Comerica Bank(collectively, the "Comerica Deposit Account") and transferred all amounts ondeposit therein to deposit accounts maintained at Silicon, or (z) a DepositAccount Control Agreement, in form and substance satisfactory to Silicon, withrespect to the Comerica Deposit Account.

(D) Each of (i) VOS [located at 930 Wrigley Way, Milpitas,California _______], (ii) Flite Pak [located at 15700-Z Export Plaza, Houston,Texas 77032], (iii) All Van Transportation [located at 1096 Pecten Court,Milpitas, California 95035], and (iv) Windart Express LLC [located at 8621Bellanca Avenue, Suite 103, Los Angeles, California 90045], shall execute anddeliver to Silicon, on Silicon's standard form (with such changes thereto asshall be acceptable to Silicon in its discretion), a bailee agreement containingsuch terms and conditions as Silicon may require.

[Signature page immediately follows]
**INWITNESS WHEREOF, the parties hereto have caused this Schedule to Loan andSecurity Agreement to be executed and delivered as of the date first abovewritten.

Borrower:

COM21, INC.

 

By_______________________________

	President or Vice President

By_______________________________

		Secretary or Ass't Secretary
Silicon:

SILICON VALLEY BANK

 

By_______________________________

Title_____________________________**Silicon ValleyBank*Certified Resolution andIncumbency Certificate

Borrower:	COM21,INC.,

 a corporation organized under the laws of the State of Delaware

Date:			November __, 2001

I, theundersigned, Secretary or Assistant Secretary of the above-named borrower, acorporation organized under the laws of the state set forth above, do herebycertify that the following is a full, true and correct copy of resolutions dulyand regularly adopted by the Board of Directors of said corporation as requiredby law, and by the by-laws of said corporation, and that said resolutions arestill in full force and effect and have not been in any way modified, repealed,rescinded, amended or revoked.

resolved, that this corporation borrow from Silicon ValleyBank ("Silicon"), from time to time, such sum or sums of money as, in thejudgment of the officer or officers hereinafter authorized hereby, thiscorporation may require.

resolved further, that any officer of this corporation be, and he or she ishereby authorized, directed and empowered, in the name of this corporation, toexecute and deliver to Silicon, and Silicon is requested to accept, the loanagreements, security agreements, notes, financing statements, and otherdocuments and instruments providing for such loans and evidencing and/orsecuring such loans, with interest thereon, and said authorized officers areauthorized from time to time to execute renewals, extensions and/or amendmentsof said loan agreements, security agreements, and other documents andinstruments.

resolved further, that said authorized officers be and theyare hereby authorized, directed and empowered, as security for any and allindebtedness of this corporation to Silicon, whether arising pursuant to thisresolution or otherwise, to grant, transfer, pledge, mortgage, assign, orotherwise hypothecate to Silicon, or deed in trust for its benefit, any propertyof any and every kind, belonging to this corporation, including, but not limitedto, any and all real property, accounts, inventory, equipment, generalintangibles, instruments, documents, chattel paper, notes, money, depositaccounts, furniture, fixtures, goods, and other property of every kind, and toexecute and deliver to Silicon any and all grants, transfers, trust receipts,loan or credit agreements, pledge agreements, mortgages, deeds of trust,financing statements, security agreements and other hypothecation agreements,which said instruments and the note or notes and other instruments referred toin the preceding paragraph may contain such provisions, covenants, recitals andagreements as Silicon may require and said authorized officers may approve, andthe execution thereof by said authorized officers shall be conclusive evidenceof such approval.

resolved further, that Silicon may conclusively rely upon a certified copy ofthese resolutions and a certificate of the Secretary or Ass't Secretary of thiscorporation as to the officers of this corporation and their offices andsignatures, and continue to conclusively rely on such certified copy of theseresolutions and said certificate for all past, present and future transactionsuntil written notice of any change hereto or thereto is given to Silicon by thiscorporation by certified mail, return receipt requested.

Theundersigned further hereby certifies that the following persons are the dulyelected and acting officers of the corporation named above as borrower and thatthe following are their actual signatures:

NAMES
OFFICE(S)
ACTUALSIGNATURES
__________________________
__________________________**x_________________________
__________________________
__________________________**x_________________________
__________________________
__________________________**x_________________________
__________________________
__________________________**x_________________________
in witness whereof, I have hereunto set my hand as suchSecretary or Assistant Secretary on the date set forth above.

___________________________________________

							Secretary or Assistant Secretary**********************************************************************************************************************************************************************************************************************************************************************