Loan and Security Agreement

Borrower:         Paradigm Technology, Inc.
Address:          71 Vista Montana
                  San Jose, California  95134

Date:             October 25, 1996

This Loan and  Security  Agreement  is entered  into on the above  date  between
GREYROCK  BUSINESS CREDIT, a Division of  NationsCredit  Commercial  Corporation
("GBC"),  whose  address is 10880  Wilshire  Boulevard,  Suite 950, Los Angeles,
California  90024  and  the  borrower  named  above  ("Borrower"),  whose  chief
executive  office is located at the above address  ("Borrower's  Address").  The
Schedule to this  Agreement (the  "Schedule")  being signed  concurrently  is an
integral  part of this  Agreement.  (Definitions  of certain  terms used in this
Agreement are set forth in Section 8 below.)

1.       LOANS.

1.1 Loans.  GBC will make loans to Borrower (the "Loans") up to the amounts (the
"Credit  Limit") shown on the Schedule,  provided no Default or Event of Default
has  occurred and is  continuing.  If at any time or for any reason the total of
all  outstanding  Loans and all other  Obligations  exceeds  the  Credit  Limit,
Borrower shall  immediately pay the amount of the excess to GBC,  without notice
or demand.

1.2 Interest.  All Loans and all other monetary  Obligations shall bear interest
at the rate  shown on the  Schedule,  except  where  expressly  set forth to the
contrary in this  Agreement or in another  written  agreement  signed by GBC and
Borrower. Interest shall be payable monthly * , on the last day of the month. **
Interest may, in GBC's  discretion,  be charged to Borrower's loan account,  and
the same shall thereafter bear interest at the same rate as the other Loans.

* in arrears

** In lieu of direct payment from Borrower,

1.3 Fees. Borrower shall pay GBC the fee(s) shown on the Schedule,  which are in
addition to all interest and other sums payable to GBC and are not refundable.

2.       SECURITY INTEREST.

2.1  Security  Interest.  To secure the  payment and  performance  of all of the
Obligations when due,  Borrower hereby grants to GBC a security  interest in all
of  Borrower's  interest  in the  following,  whether  now  owned  or  hereafter
acquired, and wherever located (collectively,  the "Collateral"): All Inventory,
, Receivables,  and General Intangibles,  including,  without limitation, all of
Borrower's Deposit Accounts, all money, all collateral in which GBC is granted a
security  interest  pursuant  to any  other  present  or future  agreement,  all
property now or at any time in the future in GBC's possession,  and all proceeds
(including proceeds of any insurance  policies,  proceeds of proceeds and claims
against third parties), all products of the foregoing, and all books and records
related to any of the foregoing. *

* Notwithstanding  the foregoing,  the Collateral shall exclude all fixed assets
and/or  inventory  of  Borrower  produced  or  used at its  semiconductor  wafer
fabrication facility located in San Jose, California (the "Wafer
Fabrication Assets").

3.       REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE BORROWER.

In order to induce GBC to enter into this Agreement and to make Loans,  Borrower
represents  and  warrants to GBC as follows,  and  Borrower  covenants  that the
following representations will continue to be true * , and that Borrower will at
all times comply* with all of the following covenants:

* in all material respects

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

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3.2 Name; Trade Names and Styles.  The name of Borrower set forth in the heading
to this  Agreement  is its correct  name.  Listed on the  Schedule are all prior
names of Borrower and all of Borrower's present and prior trade names.  Borrower
shall give GBC 30 days' prior written  notice before  changing its name or doing
business under any other name.  Borrower has complied * , and will in the future
comply*,  with all laws  relating to the conduct of business  under a fictitious
business name.


* in all material respects


3.3 Place of  Business;  Location  of  Collateral.  The address set forth in the
heading to this Agreement is Borrower's  chief  executive  office.  In addition,
Borrower has places of business and  Collateral is located only at the locations
set forth on the Schedule. Borrower will give GBC at least 30 days prior written
notice  before  opening any  additional  place of  business,  changing its chief
executive  office,  or moving any of the  Collateral  to a  location  other than
Borrower's Address or one of the locations set forth 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 all the  Collateral.  The  Collateral now is
and  will  remain  free  and  clear  of any and  all  liens,  charges,  security
interests,  encumbrances and adverse claims, except for Permitted Liens. GBC now
has,  and will  continue to have, a  first-priority  perfected  and  enforceable
security interest in all of the Collateral, subject only to the Permitted Liens,
and Borrower will at all times defend GBC and the Collateral  against all claims
of others.  So long as any Loan is outstanding which is a term loan, none of the
Collateral  now is or will be affixed to any real property in such a manner,  or
with such intent, as to become a fixture.  Borrower is not and will not become a
lessee under any real property lease pursuant to which the lessor may obtain any
rights in any of the  Collateral  and no such  lease now  prohibits,  restrains,
impairs or will  prohibit,  restrain  or impair  Borrower's  right to remove any
Collateral  from the leased  premises.  Whenever any  Collateral is located upon
premises in which any third party has an interest (whether as owner,  mortgagee,
beneficiary under a deed of trust, lien or otherwise),  Borrower shall, whenever
requested  by GBC, use its best efforts to cause such third party to execute and
deliver to GBC, in form  acceptable to GBC, such waivers and  subordinations  as
GBC shall specify,  so as to ensure that GBC's rights in the Collateral are, and
will  continue to be,  superior to the rights of any such third party.  Borrower
will keep in full force and  effect,  and will comply with all the terms of, any
lease of real property  where any of the  Collateral now or in the future may be
located.


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


3.6 Books and Records.  Borrower has  maintained and will maintain at Borrower's
Address complete and accurate books and records, comprising an accounting system
in accordance with generally accepted accounting principles.


3.7 Financial Condition, Statements and Reports. All financial statements now or
in the future  delivered to GBC have been,  and will be,  prepared in conformity
with generally accepted  accounting  principles * and now and in the future will
completely and accurately  reflect the financial  condition of Borrower,  at the
times and for the periods therein  stated.  Between the last date covered by any
such statement  provided to GBC and the date hereof,  there has been no material
adverse change in the financial  condition or business of Borrower **.  Borrower
is now and will continue to be solvent.


* (except as may be otherwise set forth in the notes thereto)


** that has not been disclosed to GBC in writing


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


3.9 Compliance with Law. Borrower has complied, and will comply, in all material
respects, with all provisions of all applicable laws and regulations, including,
but not 


                                      -2-

<PAGE>

limited to, those relating to Borrower's ownership of real or personal property,
the conduct and licensing of Borrower's business, and all environmental matters.

3.10 Litigation.  Except as disclosed in the Schedule,  there is no claim, suit,
litigation,  proceeding  or  investigation  pending  or (to  best of  Borrower's
knowledge) threatened by or against or affecting Borrower in any court or before
any  governmental  agency (or any basis  therefor  known to Borrower)  which may
result, either separately or in the aggregate, in any material adverse change in
the financial  condition or business of Borrower,  or in any material impairment
in the ability of Borrower to carry on its  business in  substantially  the same
manner  as it is now being  conducted.  Borrower  will  promptly  inform  GBC in
writing of any claim,  proceeding,  litigation  or  investigation  in the future
threatened or instituted  by or against  Borrower  involving any single claim of
$50,000 or more, or involving $100,000 or more in the aggregate.

3.11 Use of Proceeds.  All proceeds of all Loans shall be used solely for lawful
business purposes.

4.       RECEIVABLES.

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

4.2  Representations  Relating  to  Documents  and  Legal  Compliance.  Borrower
represents and warrants to GBC as follows:  All  statements  made and all unpaid
balances appearing in all invoices,  instruments and other documents  evidencing
the  Receivables  are and  shall be true  and  correct  and all  such  invoices,
instruments and other documents and all of Borrower's  books and records are and
shall  be  genuine  and in all *  respects  what  they  purport  to be,  and all
signatories  and  endorsers  have the capacity to contract.  All sales and other
transactions  underlying or giving rise to each Receivable shall comply with all
applicable  laws and  governmental  rules and  regulations.  All  signatures and
endorsements  on all  documents,  instruments,  and  agreements  relating to all
Receivables are and shall be genuine,  and all such  documents,  instruments and
agreements are and shall be legally  enforceable in accordance  with their terms
**.

* material

** , except as such  terms may be limited by  bankruptcy,  insolvency,  or other
similar laws affecting creditors' rights generally

4.3 Schedules and Documents  relating to Receivables.  Borrower shall deliver to
GBC  transaction  reports and loan  requests,  schedules and  assignments of all
Receivables,  and  schedules  of  collections,  all  on  GBC's  standard  forms;
provided, however, that Borrower's failure to execute and deliver the same shall
not  affect  or  limit  GBC's  security  interest  and  other  rights  in all of
Borrower's  Receivables,  nor shall GBC's  failure to advance or lend  against a
specific  Receivable  affect or limit GBC's  security  interest and other rights
therein.  Together with each such schedule and assignment, or later if requested
by GBC, Borrower shall furnish GBC with copies (or, at GBC's request, originals)
of all  contracts,  orders,  invoices,  and  other  similar  documents,  and all
original shipping  instructions,  delivery receipts,  bills of lading, and other
evidence of delivery,  for any goods the sale or  disposition of which gave rise
to  such  Receivables,  and  Borrower  warrants  the  genuineness  of all of the
foregoing.  Borrower shall also furnish to GBC an aged accounts receivable trial
balance in such form and at such  intervals as GBC shall  request.  In addition,
Borrower shall deliver to GBC the originals of all  instruments,  chattel paper,
security  agreements,  guarantees and other documents and property evidencing or
securing any Receivables,  immediately upon receipt thereof and in the same form
as received, with all necessary endorsements.

4.4  Collection  of  Receivables.  Borrower  shall have the right to collect all
Receivables,  unless and until a Default or an Event of  Default  has  occurred.
Borrower  shall hold all payments on, and proceeds of,  Receivables in trust for
GBC, and Borrower  shall deliver all such  payments and proceeds to GBC,  within
one  business  day after  receipt  of the same,  in their  original  form,  duly
endorsed, to be applied to the Obligations in such order as GBC shall determine.

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

* material

4.6 Returns. Provided no Event of Default has occurred and is continuing, if any
Account Debtor * returns any Inventory to Borrower in the ordinary course of its
business,  Borrower  shall  promptly  determine  the reason for such  return and
promptly  issue a credit  memorandum  to the Account  Debtor in the  appropriate
amount  (sending a copy to GBC). In the event any attempted  return occurs after
the  

                                      -3-

<PAGE>

occurrence  of any  Event of  Default,  Borrower  shall  (i)  hold the  returned
Inventory in trust for GBC, (ii)  segregate all returned  Inventory  from all of
Borrower's other property,  (iii)  conspicuously label the returned Inventory as
GBC's property,  and (iv) immediately notify GBC of the return of any Inventory,
specifying  the  reason for such  return,  the  location  and  condition  of the
returned Inventory, and on GBC's request deliver such returned Inventory to GBC.

* (other  than a  distributor  engaged by  Borrower  in the  ordinary  course of
business)

4.7  Verification.  GBC  may,  from  time to  time,  verify  directly  with  the
respective  Account Debtors the validity,  amount and other matters  relating to
the Receivables, by means of mail, telephone or otherwise, either in the name of
Borrower  or GBC or such other name as GBC may choose,  and GBC or its  designee
may, at any time,  notify Account Debtors that it has a security interest in the
Receivables.

4.8 No Liability. GBC shall not under any circumstances be responsible or liable
for any shortage or discrepancy  in, damage to, or loss or  destruction  of, any
goods, the sale or other disposition of which gives rise to a Receivable, or for
any error,  act,  omission,  or delay of any kind  occurring in the  settlement,
failure to settle,  collection  or failure  to collect  any  Receivable,  or for
settling any Receivable in good faith for less than the full amount thereof, nor
shall GBC be deemed to be responsible  for any of Borrower's  obligations  under
any contract or agreement  giving rise to a  Receivable.  Nothing  herein shall,
however,  relieve GBC from  liability  for its own gross  negligence  or willful
misconduct.

5.       ADDITIONAL DUTIES OF THE BORROWER.

5.1 Insurance. Borrower shall, at all times, insure all of the tangible personal
property  Collateral  and carry such other  business  insurance,  with  insurers
reasonably  acceptable to GBC * , in such form and amounts as GBC may reasonably
require,  and Borrower shall provide  evidence of such insurance to GBC, so that
GBC is satisfied that such insurance is, at all times, in full force and effect.
All such  insurance  policies  shall name GBC as an additional  loss payee,  and
shall contain a lenders loss payee endorsement in form reasonably  acceptable to
GBC.  Upon receipt of the proceeds of any such  insurance,  GBC shall apply such
proceeds in  reduction  of the  Obligations  as GBC shall  determine in its sole
discretion,  GBC may require reasonable assurance that the insurance proceeds so
released will be so used. If Borrower fails to provide or pay for any insurance,
GBC  may,  but is not  obligated  to,  obtain  the same at  Borrower's  expense.
Borrower shall  promptly  deliver to GBC copies of all reports made to insurance
companies.

* (it being agreed that Borrower's current insurers are currently acceptable)

5.2  Reports.  Borrower,  at its  expense,  shall  provide  GBC with the written
reports set forth in the Schedule,  and such other written  reports with respect
to Borrower  (including  budgets,  sales projections,  operating plans and other
financial documentation), as GBC shall from time to time reasonably specify.

5.3 Access to Collateral,  Books and Records.  At reasonable  times,  and on one
business day's notice,  GBC, or its agents,  shall have the right to inspect the
Collateral,  and the right to audit and copy Borrower's  books and records.  GBC
shall take reasonable steps to keep confidential all information obtained in any
such  inspection  or audit,  but GBC shall have the right to  disclose  any such
information to its auditors, regulatory agencies, and attorneys, and pursuant to
any subpoena or other legal process. The foregoing  inspections and audits shall
be at Borrower's  expense and the charge  therefor  shall be $600 per person per
day (or such higher amount as shall represent GBC's then current standard charge
for the same), plus reasonable  out-of-pockets  expenses.  Borrower shall not be
charged more than $3,000 per audit (plus  reasonable  out-of-pockets  expenses),
nor shall  audits be done more  frequently  than four times per  calendar  year,
provided  that the  foregoing  limits shall not apply after the  occurrence of a
Default or Event of  Default,  nor shall they  restrict  GBC's  right to conduct
audits at its own  expense  (whether  or not a Default or Event of  Default  has
occurred).  Borrower will not enter into any agreement with any accounting firm,
service  bureau  or third  party to store  Borrower's  books or  records  at any
location other than  Borrower's  Address,  without first obtaining GBC's written
consent,  which may be conditioned upon such accounting firm,  service bureau or
other third party agreeing to give GBC the same rights with respect to access to
books and records and related rights as GBC has under this Agreement.

5.4  Remittance  of  Proceeds.  All  proceeds  arising  from  the  sale or other
disposition of any Collateral shall be delivered, in kind, by Borrower to GBC in
the original  form in which  received by Borrower  not later than the  following
business day after receipt by Borrower, to be applied to the Obligations in such
order  as  GBC  shall  determine;  Borrower  shall  not  commingle  proceeds  of
Collateral with any of Borrower's  other funds or property,  and shall hold such
proceeds separate and apart from such other funds and property and 

                                      -4-

<PAGE>

in an express trust for GBC.  Nothing in this Section limits the restrictions on
disposition of Collateral set forth elsewhere in this Agreement.

5.5 Negative  Covenants.  Except as may be permitted in the  Schedule,  Borrower
shall not,  without GBC's prior written  consent,  do any of the following:  (i)
merge or  consolidate  with  another  corporation  or entity;  (ii)  acquire any
assets,  except in the ordinary  course of business;  (iii) enter into any other
transaction  outside the  ordinary  course of business * ; (iv) sell or transfer
any  Collateral,  except  that,  provided  no Default  or Event of  Default  has
occurred  and is  continuing,  Borrower may (a) sell  finished  Inventory in the
ordinary  course of  Borrower's  business,  ; (v) store any  Inventory  or other
Collateral with any warehouseman or other third party**; (vi) sell any Inventory
on a sale-or-return, guaranteed sale, consignment, or other contingent basis***;
(vii) make any loans of any money or other assets **** ; (viii) incur any debts,
outside the ordinary  course of business,  which would have a material,  adverse
effect on Borrower or on the prospect of repayment of the Obligations*****; (ix)
guarantee or otherwise  become liable with respect to the obligations of another
party or  entity  ******  ; (x)  Intentionally  deleted;  (xi)  redeem,  retire,
purchase or otherwise acquire, directly or indirectly,  any of Borrower's stock;
(xii)  make any  change in  Borrower's  capital  structure  which  would  have a
material  adverse  effect on Borrower or on the  prospect  of  repayment  of the
Obligations;  or (xiii) dissolve or elect to dissolve;  or (xiv) agree to do any
of the foregoing.

* , other  than the sale of the  Wafer  Fabrication  Assets,  provided  that the
foregoing  shall not  prohibit  Borrower  from  making any  underwritten  public
offering of its capital stock and interests therein

** , other than  subcontractors  of whom  Borrower  has given GBC prior  written
notice, including the following  subcontractors:  71 Vista Montana; IQL; Liberty
Laboratories,  Inc.;  Viko Test Labs; IQN Implant  Services;  IC Implant Center,
Inc.; Best IC Laboratories,  Inc.; ISIS Surface Mounting; Amkor/Anam SC Compound
KH-22;  Hyundai SAN 136-1, AMI-RI; ASE Electronics (M) SDN. BHD.; ASE, Inc.; and
Siliconware Precision

*** , except to a  distributor  engaged by  Borrower in the  ordinary  course of
business

**** in any material  amount,  other than any seller  financing  provided to any
purchaser of the Wafer Fabrication Assets

***** (the foregoing shall not preclude any loan to Borrower secured solely by a
lien on Borrower's equipment)

****** , except as an  endorser  of checks or drafts in the  ordinary  course of
business

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

5.7 Further  Assurances.  Borrower agrees, at its expense, on request by GBC, to
execute all documents and take all actions, as GBC may deem reasonably necessary
or useful in order to perfect and maintain GBC's perfected  security interest in
the Collateral,  and in order to fully consummate the transactions  contemplated
by this Agreement.

5.8  Indemnity.  Borrower  hereby  agrees to indemnify GBC and hold GBC harmless
from and against any and all claims, debts, liabilities,  demands,  obligations,
actions, causes of action,  penalties,  costs and expenses (including attorneys'
fees),  of every  nature,  character and  description,  which GBC may sustain or
incur based upon or arising out of any of the Obligations, any actual or alleged
failure  to  collect  and pay over any  withholding  or other  tax  relating  to
Borrower  or its  employees,  any  relationship  or  agreement  between  GBC and
Borrower,  any  actual or  alleged  failure  of GBC to  comply  with any writ of
attachment or other legal  process  relating to Borrower or any of its property,
or any other  matter,  cause or thing  whatsoever  occurred,  done,  omitted  or
suffered to be done by GBC relating to Borrower or the  Obligations  (except any
such  amounts  sustained  or incurred as the result of the gross  negligence  or
willful misconduct of GBC or any of its directors,  officers, employees, agents,
attorneys,   or  any  other  person   affiliated  with  or  representing   GBC).
Notwithstanding  any provision in this Agreement to the contrary,  the indemnity
agreement  set forth in this  Section  shall  survive  any  termination  of this
Agreement and shall for all purposes continue in full force and effect.

6.       TERM.

6.1 Maturity Date.  This  Agreement  shall continue in effect until the maturity
date set forth on the Schedule (the "Maturity Date"); provided that the Maturity
Date shall automatically be extended, and this Agreement shall automatically and
continuously renew, for successive additional terms of one year each, unless one
party gives written  notice to the other,  not less than sixty days prior to the
next Maturity Date, that such party elects to terminate this Agreement effective
on the next Maturity Date.

6.2 Early  Termination.  This Agreement may be terminated  prior to the Maturity
Date as follows:  (i) by Borrower,  effective  three business days after written
notice  of  termination  is given to GBC;  or (ii) by GBC at any time  

                                      -5-

<PAGE>

after  the  occurrence  of  an  Event  of  Default,  without  notice,  effective
immediately.  If this  Agreement is  terminated by Borrower or by GBC under this
Section 6.2, Borrower shall pay to GBC a termination fee (the "Termination Fee")
in the  amount  shown on the  Schedule.  The  termination  fee  shall be due and
payable on the effective date of termination and thereafter  shall bear interest
at a rate equal to the highest rate applicable to any of the Obligations.

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

7.       EVENTS OF DEFAULT AND REMEDIES.

7.1 Events of Default.  The  occurrence  of any of the  following  events  shall
constitute an "Event of Default" under this  Agreement,  and Borrower shall give
GBC  immediate  written  notice  thereof:  (a)  Any  warranty,   representation,
statement,  report or certificate made or delivered to GBC by Borrower or any of
Borrower's officers,  employees or agents, now or in the future, shall be untrue
or misleading in a material respect;  or (b) Borrower shall fail to pay when due
any Loan or any  interest  thereon  or any  other  monetary  Obligation;  or (c)
Intentionally  Deleted;  or (d) Borrower shall fail to perform any  non-monetary
Obligation  which by its nature cannot be cured;  or (e) Borrower  shall fail to
perform any other non-monetary  Obligation,  which failure is not cured within 5
business days after the date  performance  is due; or (f) Any levy,  assessment,
attachment,  seizure,  lien or encumbrance (other than a Permitted Lien) is made
on all or any part of the Collateral which is not cured within 10 days after the
occurrence of the same; or (g) any default or event of default  occurs under any
obligation secured by a Permitted Lien, which is not cured within any applicable
cure  period or waived in writing by the holder of the  Permitted  Lien;  or (h)
Borrower  breaches  any  material  contract or  obligation  * , which has or may
reasonably be expected to have a material adverse effect on Borrower's  business
or financial condition; or (i) Dissolution, termination of existence, insolvency
or business failure of Borrower or any Guarantor;  or appointment of a receiver,
trustee or custodian, for all or any part of the property of, assignment for the
benefit of creditors by, or the  commencement  of any  proceeding by Borrower or
any Guarantor under any  reorganization,  bankruptcy,  insolvency,  arrangement,
readjustment  of  debt,  dissolution  or  liquidation  law  or  statute  of  any
jurisdiction,  now or in the future in effect;  or (j) the  commencement  of any
proceeding   against  Borrower  or  any  Guarantor  under  any   reorganization,
bankruptcy,  insolvency,  arrangement,  readjustment  of  debt,  dissolution  or
liquidation law or statute of any jurisdiction,  now or in the future in effect,
which is not  cured by the  dismissal  thereof  within  45 days  after  the date
commenced;  or (k) default under, revocation or termination of, or limitation or
denial of liability  upon, any guaranty of the  Obligations or any attempt to do
any of the  foregoing;  or (l) default under,  revocation or termination  of, or
limitation  or denial of  liability  upon,  any  pledge  of any  certificate  of
deposit,  securities  or other  property or asset  pledged by any third party to
secure any or all of the Obligations, or any attempt to do any of the foregoing,
or  commencement  of  proceedings  by or against  any such third party under any
bankruptcy  or insolvency  law; or (m) Borrower  makes any payment on account of
any  indebtedness or obligation  which has been  subordinated to the Obligations
other than as permitted in the  applicable  subordination  agreement,  or if any
Person who has  subordinated  such  indebtedness or obligations  defaults under,
terminates or in any way limits or terminates its  subordination  agreement;  or
(n)  there  shall  be a change  in the  record  or  beneficial  ownership  of an
aggregate of more than 20% of the  outstanding  shares of stock of Borrower,  in
one or more  transactions,  compared to the ownership of  outstanding  shares of
stock of  Borrower  in  effect on the date  hereof,  without  the prior  written
consent of GBC ** ; or (o) Borrower  shall  generally  not pay its debts as they
become due,  or  Borrower  shall  conceal,  remove or  transfer  any part of its
property,  with  intent to hinder,  delay or defraud its  creditors,  or make or
suffer any transfer of any of its  property  which may be  fraudulent  under any
bankruptcy,  fraudulent  conveyance  or  similar  law;  or (p) there  shall be a
material adverse change in Borrower's business or financial  condition.  GBC may
cease  making any Loans  hereunder  during any of the above  

                                      -6-

<PAGE>


cure periods, and thereafter if an Event of Default has occurred.


* (after giving effect to any applicable cure period)


** , except for a change which results from an  underwritten  public offering of
Borrower's capital stock or any interests therein


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


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


7.4 Power of  Attorney.  Upon the  occurrence  of any Event of Default,  without
limiting GBC's other rights and remedies,  Borrower grants to GBC an irrevocable
power of attorney  coupled  with an interest,  authorizing  and  permitting  GBC
(acting  through any of its employees,  attorneys or agents) at any time, at its
option,  but without  obligation,  with or without  notice to  Borrower,  and at
Borrower's  expense,  to do any or all of the following,  in Borrower's  name or
otherwise,  but GBC agrees to exercise the  



                                      -7-

<PAGE>

following powers in a commercially  reasonable  manner: (a) Execute on behalf of
Borrower any documents that GBC may, in its sole  discretion,  deem advisable in
order to perfect and maintain GBC's security  interest in the Collateral,  or in
order to exercise a right of  Borrower  or GBC, or in order to fully  consummate
all the transactions  contemplated  under this Agreement,  and all other present
and  future  agreements;   (b)  Execute  on  behalf  of  Borrower  any  document
exercising,  transferring or assigning any option to purchase, sell or otherwise
dispose of or to lease (as lessor or lessee) any real or personal property which
is part of GBC's  Collateral  or in which GBC has an  interest;  (c)  Execute on
behalf of Borrower,  any invoices relating to any Receivable,  any draft against
any Account Debtor and any notice to any Account  Debtor,  any proof of claim in
bankruptcy,  any Notice of Lien,  claim of  mechanic's,  materialman's  or other
lien, or assignment or satisfaction of mechanic's,  materialman's or other lien;
(d) Take  control  in any  manner of any cash or  non-cash  items of  payment or
proceeds of Collateral;  endorse the name of Borrower upon any  instruments,  or
documents,   evidence  of  payment  or  Collateral  that  may  come  into  GBC's
possession;  (e) Endorse all checks and other forms of  remittances  received by
GBC; (f) Pay, contest or settle any lien, charge, encumbrance, security interest
and adverse claim in or to any of the Collateral, or any judgment based thereon,
or  otherwise  take any action to terminate  or  discharge  the same;  (g) Grant
extensions of time to pay,  compromise claims and settle Receivables and General
Intangibles  for less  than  face  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 the release of any liens  therefor,  or both; (i)
Settle and adjust, and give releases of, any insurance claim that relates to any
of the  Collateral  and obtain  payment  therefor;  (j) Instruct any third party
having custody or control of any books or records  belonging to, or relating to,
Borrower  to give GBC the same rights of access and other  rights  with  respect
thereto as GBC has under this Agreement;  and (k) Take any action or pay any sum
required of Borrower  pursuant to this Agreement and any other present or future
agreements.  Any and all reasonable sums paid and any and all reasonable  costs,
expenses,  liabilities,  obligations and reasonable  attorneys' fees incurred by
GBC with  respect  to the  foregoing  shall be added to and  become  part of the
Obligations, shall be payable on demand, and shall bear interest at a rate equal
to the highest interest rate applicable to any of the  Obligations.  In no event
shall GBC's rights under the  foregoing  power of attorney or any of GBC's other
rights under this  Agreement be deemed to indicate that GBC is in control of the
business, management or properties of Borrower.

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

* reasonable

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

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

"Account Debtor" means the obligor on a Receivable.

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

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

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

"Collateral" has the meaning set forth in Section 2.1 above.

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

"Deposit Account" has the meaning set forth in Section 9105 of the Code.

"Eligible  Receivables"  means  Receivables  arising in the  ordinary  course of
Borrower's business from the sale of 

                                      -8-

<PAGE>

goods or  rendition  of services,  which GBC, in its sole  judgment,  shall deem
eligible for  borrowing,  based on such  considerations  as GBC may from time to
time deem appropriate. Without limiting the fact that the determination of which
Receivables  are eligible for  borrowing  is a matter of GBC's  discretion,  the
following (the "Minimum Eligibility  Requirements") are the minimum requirements
for a Receivable to be an Eligible  Receivable:  (i) the Receivable  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  a  fulfillment  or
requirements  contract with the Account Debtor, (iii) the Receivable must not be
subject  to any  contingencies  (including  Receivables  arising  from  sales on
consignment,  guaranteed  sale or other terms  pursuant to which  payment by the
Account Debtor may be  conditional),  (iv) the Receivable must not be owing from
an  Account  Debtor  with whom the  Borrower  has any  dispute  (whether  or not
relating to the particular  Receivable),  (v) the  Receivable  must not be owing
from an  Affiliate of Borrower,  (vi) the  Receivable  must not be owing from an
Account Debtor which is subject to any insolvency or bankruptcy  proceeding,  or
whose financial  condition is not acceptable to GBC, or which, fails or goes out
of a material  portion of its business,  (vii) the Receivable  must not be owing
from the United  States or any  department,  agency or  instrumentality  thereof
(unless there has been compliance, to GBC's satisfaction, with the United States
Assignment  of Claims  Act),  (viii)  the  Receivable  must not be owing from an
Account Debtor located outside the United States or Canada (unless  pre-approved
by  GBC  in  its  discretion  in  writing,  or  backed  by a  letter  of  credit
satisfactory  to GBC, or FCIA insured  satisfactory to GBC), (ix) the Receivable
must not be owing from an Account  Debtor to whom  Borrower  is or may be liable
for goods purchased from such Account Debtor or otherwise.  In addition, if more
than 25% of the Receivables  owing from an Account Debtor are  outstanding  more
than 90 days from their  invoice date (without  regard to unapplied  credits) or
are otherwise not Eligible  Receivables,  then all  Receivables  owing from that
Account Debtor will be deemed  ineligible  for borrowing.  GBC may, from time to
time, in its discretion,  revise the Minimum  Eligibility  Requirements,  upon *
written notice to the Borrower.

* prior

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

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

"Guarantor" means any Person who has guaranteed any of the Obligations.

"Inventory"  means all of  Borrower's  now owned and hereafter  acquired  goods,
merchandise  or other  personal  property *, wherever  located,  to be furnished
under any  contract  of  service  or held for sale or lease  (including  all raw
materials,  work in  process,  finished  goods  and goods in  transit),  and all
materials and supplies of every kind,  nature and description which are or might
be used or  consumed  in  Borrower's  business  or used in  connection  with the
manufacture, packing, shipping, advertising, selling or finishing of such goods,
merchandise or other personal property, and all warehouse receipts, documents of
title and other documents representing any of the foregoing.

* other than Wafer Fabrication Assets

"LIBOR Rate" means (i) the one-month London Interbank  Offered Rate for deposits
in U.S. dollars,  as shown each day in The Wall Street Journal (Eastern Edition)
under the caption "Money Rates - London  Interbank  Offered Rates  (LIBOR)";  or
(ii) if the Wall  Street  Journal  does  not  publish  such  rate,  the  offered
one-month rate for deposits in U.S.  dollars which appears on the Reuters Screen
LIBO Page as of 10:00 a.m., New York time,  each day,  provided that if at least
two rates  appear on the Reuters  Screen LIBO Page on any day,  the "LIBOR Rate"
for such day shall be the  arithmetic  mean of such rates;  or (iii) if the Wall
Street  Journal does not publish such rate on a particular  day and no such rate
appears on the Reuters Screen LIBO Page on 

                                      -9-

<PAGE>

such day,  the rate per annum at which  deposits in U.S.  dollars are offered to
the principal  London  office of The Chase  Manhattan  Bank,  N.A. in the London
interbank  market at  approximately  11:00 A.M.,  London time, on such day in an
amount approximately equal to the outstanding principal amount of the Loans, for
a period of one month,  in each of the  foregoing  cases as  determined  in good
faith by GBC, which determination shall be conclusive absent manifest error.

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

* reasonable

"Permitted Liens" means the following: (i) liens for taxes not yet payable; (ii)
additional  security  interests and liens which are  subordinate to the security
interest in favor of GBC and are  consented to in writing by GBC (which  consent
shall not be unreasonably  withheld);  (iii) security interests being terminated
substantially  concurrently  with this  Agreement;  (iv)  liens of  materialmen,
mechanics,  warehousemen,  carriers,  or  other  similar  liens  arising  in the
ordinary course of business and securing  obligations  which are not delinquent;
(v) Liens in favor of customs and revenue  authorities  which secure  payment of
customs duties in connection  with the  importation of goods.  GBC will have the
right to require,  as a condition to its consent under  subparagraph (iv) above,
that  the  holder  of  the  additional   security   interest  or  lien  sign  an
intercreditor  agreement  on GBC's  then  standard  form,  acknowledge  that the
security  interest is subordinate to the security  interest in favor of GBC, and
agree not to take any action to enforce  its  subordinate  security  interest so
long as any  Obligations  remain  outstanding,  and that Borrower agree that any
uncured default in any obligation  secured by the subordinate  security interest
shall also constitute an Event of Default under this Agreement.

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

"Receivables"  means all of Borrower's now owned and hereafter acquired accounts
(whether  or not earned by  performance),  letters of credit,  contract  rights,
chattel  paper,  instruments,  securities,  documents  and all  other  forms  of
obligations  at any time owing to Borrower,  all  guaranties  and other security
therefor, all merchandise returned to or repossessed by Borrower, and all rights
of  stoppage in transit  and all other  rights or remedies of an unpaid  vendor,
lienor or secured party.

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

9.       GENERAL PROVISIONS.

9.1 Interest Computation. In computing interest on the Obligations,  all checks,
wire transfers and other items of payment received by GBC (including proceeds of
Receivables  and payment of the  Obligations in full) shall be deemed applied by
GBC on account of the  Obligations  three  Business Days after receipt by GBC of
immediately  available  funds.  GBC shall not,  however,  be  required to credit
Borrower's account for the amount of any item of payment which is unsatisfactory
to GBC in its  discretion,  and GBC may charge  Borrower's  Loan account for the
amount of any item of payment which is returned to GBC unpaid.

9.2 Application of Payments. All payments with respect to the Obligations may be
applied,  and  in  GBC's  sole  discretion  reversed  and  re-applied,   to  the
Obligations,  in such  order  and  manner  as GBC  shall  determine  in its sole
discretion.

9.3 Charges to Account.  GBC may, in its  discretion,  require that Borrower pay
monetary  Obligations in cash to GBC, or charge them to Borrower's Loan account,
in which event they will bear interest at the same rate applicable to the Loans.

9.4 Monthly  Accountings.  GBC shall provide Borrower monthly with an account of
advances,  charges,  expenses and payments made pursuant to this Agreement. Such
account shall be deemed correct, accurate and binding on Borrower and an account
stated (except for reverses and  reapplications of payments made and corrections
of errors  

                                      -10-

<PAGE>


discovered  by GBC),  unless  Borrower  notifies  GBC in writing to the contrary
within sixty days after each account is rendered,  describing  the nature of any
alleged errors or admissions.


9.5 Notices.  All notices to be given under this  Agreement  shall be in writing
and shall be given either personally or by reputable private delivery service or
by regular  first-class  mail,  or  certified  mail  return  receipt  requested,
addressed  to GBC or  Borrower  at the  addresses  shown in the  heading to this
Agreement,  or at any other  address  designated  in writing by one party to the
other party. All notices shall be deemed to have been given upon delivery in the
case of notices personally  delivered,  or at the expiration of one business day
following  delivery  to the  private  delivery  service,  or two  business  days
following the deposit thereof in the United States mail, with postage prepaid.


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


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


9.8  Waivers.  The  failure of GBC at any time or times to require  Borrower  to
strictly  comply  with any of the  provisions  of this  Agreement  or any  other
present or future agreement between Borrower and GBC shall not waive or diminish
any right of GBC later to demand and receive strict  compliance  therewith.  Any
waiver of any default shall not waive or affect any other default, whether prior
or  subsequent,  and  whether or not  similar.  None of the  provisions  of this
Agreement or any other  agreement now or in the future  executed by Borrower and
delivered  to GBC shall be deemed to have been waived by any act or knowledge of
GBC or its agents or employees,  but only by a specific written waiver signed by
an authorized officer of GBC and delivered to Borrower.  Borrower waives demand,
protest, notice of protest and notice of default or dishonor,  notice of payment
and nonpayment,  release,  compromise,  settlement,  extension or renewal of any
commercial paper, instrument,  account, General Intangible, document or guaranty
at any time held by GBC on which  Borrower  is or may in any way be liable,  and
notice of any action taken by GBC, unless expressly required by this Agreement.


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


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


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


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


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


9.14


                                      -11-

<PAGE>

9.15 Paragraph Headings; Construction.  Paragraph headings are only used in this
Agreement for  convenience.  Borrower and GBC acknowledge  that the headings may
not describe completely the subject matter of the applicable paragraph,  and the
headings shall not be used in any manner to construe, limit, define or interpret
any term or provision of this Agreement. The term "including",  whenever used in
this Agreement,  shall mean "including (but not limited to)". This Agreement has
been fully  reviewed and  negotiated  between the parties and no  uncertainty or
ambiguity in any term or provision of this Agreement shall be construed strictly
against GBC or Borrower under any rule of construction or otherwise.

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

9.17 Mutual  Waiver of Jury Trial.  BORROWER AND GBC EACH HEREBY WAIVE THE RIGHT
TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING  BASED UPON,  ARISING OUT OF, OR IN
ANY WAY RELATING TO, THIS AGREEMENT OR ANY OTHER PRESENT OR FUTURE INSTRUMENT OR
AGREEMENT BETWEEN GBC AND BORROWER,  OR ANY CONDUCT, ACTS OR OMISSIONS OF GBC OR
BORROWER OR ANY OF THEIR DIRECTORS,  OFFICERS,  EMPLOYEES,  AGENTS, ATTORNEYS OR
ANY OTHER  PERSONS  AFFILIATED  WITH GBC OR  BORROWER,  IN ALL OF THE  FOREGOING
CASES, WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE.

Borrower:

         PARADIGM TECHNOLOGY, INC.



         By
            ---------------------------------------------
                    President or Vice President

         By
            ---------------------------------------------
                   Secretary of Ass't Secretary


GBC:

         GREYROCK BUSINESS CREDIT, a
         Division of NationsCredit Commercial
         Corporation



         By
            ---------------------------------------------

         Title
               ------------------------------------------

                                      -12-

<PAGE>

                                   Schedule to

                           Loan and Security Agreement


Borrower:         Paradigm Technology, Inc.
Address:          71 Vista Montana
                  San Jose, California 95134

Date:             October 25, 1996

This Schedule is an integral part of the Loan and Security  Agreement (the "Loan
Agreement")  between  Greyrock  Business  Credit,  a Division  of  NationsCredit
Commercial Corporation ("GBC") and the above-borrower ("Borrower") of even date.

================================================================================
1.  CREDIT LIMIT
    (Section 1.1):       An amount not to exceed the lesser of:

                         (i)  $6,000,000 at any one time outstanding; or

                         (ii) the sum of:

                              (a) 80%  of  the  amount  of  Borrower's  Eligible
                                  Receivables  * owing from  original  equipment
                                  manufacturers; plus

                              (b)  70% of  the  amount  of  Borrower's  Eligible
                                  Receivables * owing from distributors.

                              * (as defined in Section 8 of the Loan Agreement)
================================================================================
2.  INTEREST.

       Interest Rate (Section 1.2):

                         The interest  rate in effect  throughout  each calendar
                         month  during the term of this  Agreement  shall be the
                         highest "LIBOR Rate" in effect during such month,  plus
                         5.25% per annum,  provided  that the  interest  rate in
                         effect in each  month  shall not be less than 9.00% per
                         annum,  and provided that the interest charged for each
                         month shall be a minimum of $12,500,  regardless of the
                         amount of the Obligations  outstanding.  Interest shall
                         be  calculated  on the basis of a 360-day  year for the
                         actual  number of days  elapsed.  "LIBOR  Rate" has the
                         meaning set forth in Section 8 of the Loan Agreement.
================================================================================
3.  FEES (Section 1.3/Section 6.2):

     Loan Fee:           $45,000, payable concurrently herewith.

     Termination Fee:    $12,500 per month for each month (or portion thereof).

     NSF Check Charge:   $15.00 per item.

     Wire Transfers:     $15.00 per transfer.

================================================================================


                                       -1-

<PAGE>

4.  MATURITY DATE
    (Section 6.1)  October 31, 1997, subject to automatic renewal as provided in
Section 6.1 of the Loan Agreement,  and early termination as provided in Section
6.2 of the Loan Agreement.

================================================================================
5.  REPORTING.
    (Section 5.2):

                         Borrower shall provide GBC with the following:

                         1.   Annual financial statements, as soon as available,
                              and in any event within 90 days  following the end
                              of   Borrower's   fiscal   year,    certified   by
                              independent     certified    public    accountants
                              acceptable to GBC.

                         2.   Monthly unaudited financial statements, as soon as
                              available,  and in any event  within 45 days after
                              the end of each month.

                         3.   Monthly Receivable  agings,  aged by invoice date,
                              within 10 days after the end of each month.

                         4.   Monthly accounts  payable agings,  aged by invoice
                              date,  and  outstanding  or held  check  registers
                              within 10 days after the end of each month.
================================================================================


6.  BORROWER INFORMATION:

    Prior Names of
    Borrower
    (Section 3.2):            None

    Prior Trade
    Names of Borrower
    (Section 3.2):            GL Micro Devices

    Existing Trade
    Names of Borrower
    (Section 3.2):            None

    Other Locations and
    Addresses (Section 3.3):  11805 N.E. 99th Street, Vancouver, Washington
                              98682
                              6 Ventura, Suite 100, Irvine, California  92718
                              555 Republic Drive, Suite 200, Plano, Texas 75074
                              1600 Boston-Providence Highway, Walpole,
                              Massachusetts 02081
                              6525 The Corners Parkway, Suite 400, Norcross,
                              Georgia 30092

    Material Adverse
    Litigation (Section 3.10): 
                              1.  Joseph Bulwa, Michael  Mohamadifar,  et al. v.
                                  Paradigm  Technology,  Inc., et al.,  Superior
                                  Court, Santa Clara County, Case No. CV759991;

                              2.  Olson Technical Sales  Corporation v. Paradigm
                                  Technology,  Inc., Superior Court, Santa Clara
                                  County, Case No. CV748898.


                                       -2-

<PAGE>


Borrower:                     GBC:

   Paradigm Technology, Inc.  Greyrock Business Credit, a Division
                              of NationsCredit Commercial Corporation

By
   -------------------------------------------
            President or Vice President         By
                                                   -----------------------------
                                                Title
                                                      --------------------------
By
   -------------------------------------------
           Secretary or Ass't Secretary


                                       -3-