Sanwa Bank California
[GRAPHIC OMITTED]

                           TERM LOAN CREDIT AGREEMENT
                                                           ($7,000,000.00)

         THIS TERM LOAN CREDIT  AGREEMENT (the  "Agreement") is made and entered
into this 27th day of January,  1997 by and between SANWA BANK  CALIFORNIA  (the
"Bank") and Elexsys International, Inc. (the "Borrower") in connection with that
certain Accounts Receivable Credit Agreement ("Accounts  Receivable  Agreement")
by and between Bank and Borrower dated of even date herewith.  Capitalized terms
used herein without  definition  shall have the same meanings herein as given to
them in the Accounts Receivable Agreement.
                                    SECTION I
                                AGREEMENT TO LEND

         1.01  Commitment to Lend.  Subject to the terms and  conditions of this
Agreement and so long as no Event of Default  occurs,  the Bank agrees to extend
to the Borrower the credit accommodations that follow.

         1.02 Term Loan. The Bank agrees to lend on a nonrevolving  basis to the
Borrower,  upon the Borrower's  request therefor made prior to January 31, 1998,
the  lesser  of  80%  of the  appraised  quick  sale  liquidation  value  of the
Borrower's  fixed assets or  7,000,000.00  (the "Term  Loan").  The appraisal is
subject to approval by the Bank.

                    A.  Purpose.  Proceeds  under the Term Loan shall be used to
          support the Borrower's plan for growth via acquisitions.

                  B. Term Loan Account.  The Bank shall  maintain on its books a
         record of account in which the Bank shall make entries for all payments
         made and such other  debits  and  credits  as shall be  appropriate  in
         connection with the Term Loan (the "Term Loan Account"). The Bank shall
         provide the Borrower with a monthly  statement of the  Borrower's  Term
         Loan  Account,  which  statement  shall be considered to be correct and
         conclusively  binding on the Borrower unless the Borrower  notifies the
         Bank to the contrary within 30 days after the Borrower's receipt of any
         such statement which it deems to be incorrect.

                    C.  Interest.  Interest  shall  accrue  on  the  outstanding
          principal  balance of the Term Loan (the "Term Balance") at one of the
          following rates, as quoted by the Bank and as elected by the Borrower:

                           1. Variable  Rate Balance:  A variable rate per annum
                  equivalent  to an index for a variable  interest rate which is
                  quoted,  published or announced  from time to time by the Bank
                  as its  reference  rate and as to which  loans  may be made by
                  Bank at, below or above such reference rate ("Reference Rate")
                  plus 1.00% per annum. (the "Variable Rate"). Interest shall be
                  adjusted concurrently with any change in the Reference Rate. A
                  Term  Balance  based  upon the  Variable  Rate is  hereinafter
                  referred to as a "Variable Rate Balance".

                           2. Cost of Funds Balance: At the Borrower's election,
                  at a fixed  rate for  such  period  of time  that the Bank may
                  quote and offer,  provided  that any such period of time shall
                  be for at  least 30 days  and  shall  not  extend  beyond  the
                  maturity  date (the "Cost of Funds  Interest  Period") for the
                  Term  Balance.  Such  interest  rate  shall  be  a  percentage
                  approximately  equivalent  to three percent (3.00 %) per annum
                  in excess of the rate  which the Bank  determines  in its sole
                  and  absolute  discretion  to be equal to the  Bank's  cost of
                  acquiring  funds  (adjusted  for  any  and  all   assessments,
                  surcharges   and  reserve   requirements   pertaining  to  the
                  borrowing  or purchase by the Bank of such funds) in an amount
                  equal to the  amount of the Term  Balance  and for a period of
                  time approximately  equal to the relevant Interest Period (the
                  "Cost of Funds Rate" or the "Fixed Rate"). Term Balances based
                  upon the Cost of Funds or Fixed Rate are hereinafter  referred
                  to as "Cost of Funds Balances" or "Fixed Rate Balances".

         Interest  shall be  computed  on the  basis of 360 days per  year,  but
charged on the actual number of days elapsed.  The Borrower  hereby promises and
agrees to pay the Bank  interest  monthly,  commencing  on January  31, 1997 and
continuing on the last day of each month thereafter to and including January 31,
2001.  If  interest  is not  paid as and when it is due it shall be added to and
become  and be  treated  as part of  principal,  and the  amount of such  unpaid
interest  shall  bear  interest,  until  paid in full,  at the  then  applicable
interest rate.

                    (a)  Notice  of  Election  to  Adjust  Interest  Rate.  Upon
          telephonic  notice  which  shall be  received by the Bank at or before
          11:00 a.m.  (California  time) on a business  day,  the  Borrower  may
          elect:

                           (1) That interest on a Variable Rate Balance shall be
                  adjusted to accrue at the Fixed Rate; provided,  however, that
                  such  notice  shall be  received by the Bank no later than two
                  business days prior to the day (which shall be a business day)
                  on which the Borrower  requests  that  interest be adjusted to
                  accrue at the Fixed Rate.

                           (2)  That  interest  on a Fixed  Rate  Balance  shall
                  continue  to accrue at a newly  quoted  Fixed Rate or shall be
                  adjusted to commence to accrue at the Variable Rate; provided,
                  however  that such  notice  shall be  received  by the Bank no
                  later  than  two  business  days  prior to the last day of the
                  Interest Period pertaining to such Fixed Rate Balance.  If the
                  Bank shall not have received  notice as  prescribed  herein of
                  the  Borrower's  election  that  interest  on any  Fixed  Rate
                  Balance  shall  continue  to  accrue at the  Fixed  Rate,  the
                  Borrower shall be deemed to have elected that interest thereon
                  shall be  adjusted  to  accrue at the  Variable  Rate upon the
                  expiration  of the  Interest  Period  pertaining  to such Term
                  Balance.

                  (b)  Prohibition  Against  Prepayment of Fixed Rate  Balances.
         Notwithstanding   anything  to  the  contrary  in  the  Agreement,   no
         prepayment  shall be made on any  Fixed  Rate  Balance  except on a day
         which is the last day of the Interest Period pertaining thereto. If the
         whole or any part of any Fixed  Rate  Balance  is  prepaid by reason of
         acceleration or otherwise, the Borrower shall, upon the Bank's request,
         promptly  pay to and  indemnify  the  Bank for all  costs  and any loss
         (including  interest)  actually  incurred  by the  Bank  and  any  loss
         (including loss of profit  resulting from the  re-employment  of funds)
         sustained by the Bank as a  consequence  of such  prepayment.  Borrower
         shall not be obligated to pay to or reimburse Bank for any reimbursable
         amounts  which  arose  or  were   incurred   during  or  are  otherwise
         attributable to any period of time more than 180 days prior to the date
         on which Bank delivered its written  statement for  indemnification  or
         reimbursement of such reimbursable amounts.

                  (c) Conversion  from Fixed Rate to Variable Rate. In the event
         that the Bank shall at any time  determine that the accrual of interest
         on the basis of the Fixed Rate (i) is  infeasible  because  the Bank is
         unable to determine  the Fixed Rate due to the  unavailability  of U.S.
         dollar  deposits,  contracts  or  certificates  of deposit in an amount
         approximately  equal to the amount of the relevant Term Balance and for
         a period of time  approximately  equal to the relevant Interest Period;
         or (ii) is or has become unlawful or infeasible by reason of the Bank's
         compliance with any new law, rule,  regulation,  guideline or order, or
         any new interpretation of any present law, rule, regulation,  guideline
         or order, then the Bank shall give telephonic notice thereof (confirmed
         in writing) to the Borrower, in which event any Fixed Rate Term Balance
         shall be deemed to be a Variable  Rate Term Balance and interest  shall
         thereupon immediately accrue at the Variable Rate. Interest on any Term
         Balance  shall be  computed  on the  basis of 360  days per  year,  but
         charged on the actual number of days elapsed.

                  D Principal.  The Borrower  hereby  promises and agrees to pay
         principal in 36 equal  installments  commencing  on January 31, 1998 if
         the Variable  Rate is selected,  and to pay  principal  over a 36 month
         amortization period if the Fixed Rate is selected, and the payment will
         continue on the last day of each month  thereafter  up to and including
         January 31, 2000. On January 31, 2001, the Borrower hereby promises and
         agrees to pay to the Bank the entire unpaid principal balance, together
         with accrued and unpaid interest.

         Each  payment  received by the Bank  shall,  at the Bank's  option,  be
applied to pay interest then due and unpaid and the  remainder  thereof (if any)
shall be applied to pay principal.

         1.03  Disbursement of Proceeds from Loan. Any loan made hereunder shall
be  conclusively  presumed to have been made to and for the  Borrower's  benefit
when the proceeds of such loan are disbursed in accordance  with the  Borrower's
instructions or deposited into a checking account of the Borrower  maintained at
the Bank.



<PAGE>


                                    SECTION 2
                                   COLLATERAL

         2.01 The  Collateral:  To secure  payment  and  performance  of all the
Borrower's  Obligations under this Agreement and all other  liabilities,  loans,
guarantees,  covenants  and duties owed by the Borrower to the Bank,  whether or
not evidenced by this or by any other agreement,  absolute or contingent, due or
to become due, now existing or hereafter  and  howsoever  created,  the Borrower
hereby  grants  the  Bank a  security  interest  in and to all of the  following
property:

                  (a) All goods now owned or hereafter  acquired by the Borrower
         or in which the Borrower now has or may hereafter acquire any interest,
         including,  but not limited to, all  machinery,  equipment,  furniture,
         furnishings, fixtures, tools, supplies and motor vehicles of every kind
         and   description,   and  all  additions,   accessions,   improvements,
         replacements and substitutions thereto and thereof.

                  (b) All  inventory  now  owned or  hereafter  acquired  by the
         Borrower,  including,  but not limited to, all raw  materials,  work in
         process, finished goods, merchandise,  parts and supplies of every kind
         and description,  including inventory temporarily out of the Borrower's
         custody or possession, together with all returns on accounts.

                  (c) All accounts,  contract rights and general intangibles now
         owned or hereafter created or acquired by the Borrower,  including, but
         not limited to, all receivables,  goodwill,  trademarks,  trade styles,
         trade names, patents, patent applications, software, customer lists and
         business records.

                    (d) All documents,  instruments  and chattel paper now owned
          or hereafter acquired by the Borrower.

                  (e) All monies, deposit accounts,  certificates of deposit and
         securities  of the  Borrower  now or  hereafter  in the  Bank's  or its
         agents' possession.

         The Bank's  security  interest in the Collateral  shall be a continuing
lien and shall  include the proceeds and products of the  Collateral  including,
but not limited to, the proceeds of any insurance thereon.

                                    SECTION 3
                              CONDITIONS OF LENDING

         3.01 Conditions Precedent to the Initial Advance: The obligation of the
Bank to make the  initial  Advance  and the first  extension  of credit to or on
account of the Borrower  hereunder is subject to the  conditions  precedent that
the Bank shall have  received  before the date of such initial  Advance and such
first  extension  of  credit  all  of  the  following,  in  form  and  substance
satisfactory to the Bank:

                  (a) Evidence that the execution,  delivery and  performance by
         the  Borrower  of  this  Agreement  and  any  document,  instrument  or
         agreement required hereunder have been duly authorized.

                    (b)  Evidence  that the  merger  between  the  Borrower  and
          Symtron has been completed.

                  (c) The Bank shall have  conducted an audit of the  Borrower's
         books, records and operations and the Bank shall be satisfied as to the
         condition thereof.

                  (d) Loan fees of 0.25% per annum of the unused  portion of the
         credit  line,  payable  quarterly  in arrears in addition to any out of
         pocket cost or expenses incurred by the bank.

                  (e) Such other  evidence as the Bank may request to  establish
         the  consummation  of  the  transaction   contemplated   hereunder  and
         compliance with the conditions of this Agreement.

         3.02 Conditions  Precedent to All Advances:  The obligation of the Bank
to make each Advance and each other  extension of credit to or on account of the
Borrower (including the initial Advance and the first extension of credit) shall
be subject to the further conditions precedent that, on the date of each Advance
or each extension of credit and after the making of such Advance or extension of
credit:

                    (a) The Bank shall have  received the documents set forth in
          Section 5.06(e).

                  (b) The Bank shall have received such supplemental  approvals,
         opinions or documents as the Bank may reasonably request.

                  (c)   Except   as   disclosed   to   Bank  in   writing,   the
         representations  contained  in  Section  7 and in any  other  document,
         instrument or certificate delivered to the Bank hereunder are correct.

                  (d) No event has occurred and is continuing which constitutes,
         or,  with  the  lapse  of time or  giving  of  notice  or  both,  would
         constitute an Event of Default.

                  (e) The  security  interest  in the  Collateral  has been duly
         authorized,  created and perfected  with first  priority and is in full
         force and effect,  assuming Bank has timely filed and taken all actions
         necessary or desirable to perfect and protect such security interest.

         The  Borrower's  acceptance  of  the  proceeds  of any  Advance  or the
Borrower's  execution of any document or  instrument  evidencing or creating any
Obligation hereunder shall be deemed to constitute the Borrower's representation
and warranty that all of the above statements are true and correct.

                                    SECTION 4
                         REPRESENTATIONS AND WARRANTIES

The  Borrower hereby makes the following  representations  and warranties to the
     Bank as of the date of this Agreement

         4.01 Status:  The Borrower is a corporation  duly organized and validly
existing under the laws of the State of Delaware and is properly licensed and is
qualified  to do business  and in good  standing  in, and,  where  necessary  to
maintain the Borrower's rights and privileges,  has complied with the fictitious
name statute of every  jurisdiction  in which the Borrower is doing business and
where failure to so qualify would have a material adverse effect.

         4.02 Authority: The execution, delivery and performance by the Borrower
of this Agreement and any instrument,  document or agreement  required hereunder
have been duly  authorized and do not and will not: (i) violate any provision of
any  law,  rule,  regulation,   order,  writ,  judgment,   injunction,   decree,
determination  or award presently in effect having  application to the Borrower;
(ii) result in a breach of or constitute a default under any material  indenture
or loan or credit agreement or other material agreement,  lease or instrument to
which the Borrower is a party or by which it or its  properties  may be bound or
affected;  (iii) require any consent or approval of its  stockholders or violate
any provision of its certificate of incorporation or by-laws, if the Borrower is
a corporation;  or (iv) violate any provision of its partnership  agreement,  if
the Borrower is a partnership.

         4.03 Legal Effect:  This  Agreement  constitutes,  and any  instrument,
document  or  agreement  required   hereunder  when  delivered   hereunder  will
constitute,  legal,  valid and binding  obligations of the Borrower  enforceable
against the Borrower in accordance with their respective terms.

         4.04 Fictitious  Trade Styles:  All fictitious trade styles used by the
Borrower in connection with its business operations and each state in which each
such fictitious  trade style is used are listed below. The Borrower shall notify
the Bank within 30 days of effecting any change in the matters  described  below
or prior  to  using  any  other  fictitious  trade  style  at any  future  date,
indicating the trade style and state(s) of its use.


             Trade Style                              State of Use


         4.05 Financial Statements:  All financial  statements,  information and
other  data  which may have  been or which may  hereafter  be  submitted  by the
Borrower  to the Bank are true,  accurate  and  correct and have been or will be
prepared  in  accordance   with   generally   accepted   accounting   principles
consistently  applied and  accurately  represent the financial  condition or, as
applicable,  the other  information  disclosed  therein.  Since the most  recent
submission  of such  financial  information  or data to the Bank,  the  Borrower
represents  and  warrants  that no  material  adverse  change in the  Borrower's
financial  condition  or  operations  has  occurred  which  has not  been  fully
disclosed to the Bank in writing.

         4.06 Litigation:  Except as have been disclosed to the Bank in writing,
there are no actions,  suits or proceedings  pending or, to the knowledge of the
Borrower,  threatened  against  or  affecting  the  Borrower  or the  Borrower's
properties  in excess of  $500,000  before  any court or  administrative  agency
which, if determined  adversely to the Borrower,  would have a material  adverse
effect on the Borrower's financial condition or operations or on the Collateral.

         4.07 Title to Assets: The Borrower has good and marketable title to all
of its assets  (including,  but not limited to, the Collateral) and the same are
not subject to any security  interest,  encumbrance,  lien or claim of any third
person except for Permitted Liens.

         4.08 ERISA: If the Borrower has a pension, profit sharing or retirement
plan  subject  to ERISA,  such plan has been and will  continue  to be funded in
accordance  with its terms and  otherwise  complies with and continues to comply
with the requirements of ERISA.

         4.09 Taxes: The Borrower has filed all tax returns required to be filed
and paid all taxes shown thereon to be due,  including  interest and  penalties,
other than such taxes which are currently payable without penalty or interest or
those which are being duly contested in good faith.

         4.10  Environmental  Compliance:   The  Borrower  has  implemented  and
complied in all material respects with all applicable  federal,  state and local
laws,  ordinances,  statutes and regulations  with respect to hazardous or toxic
wastes,  substances or related  materials,  industrial  hygiene or environmental
conditions.  There are no suits, proceedings,  claims or disputes pending or, to
the knowledge of the Borrower,  threatened  against or affecting the Borrower or
its property claiming violations of any federal,  state or local law, ordinance,
statute or  regulation  relating to hazardous  or toxic  wastes,  substances  or
related materials.

                                    SECTION 5
                                    COVENANTS

         The  Borrower  covenants  and  agrees  that,  during  the  term of this
Agreement,  and so long thereafter as the Borrower is indebted to the Bank under
this Agreement,  the Borrower will,  unless the Bank shall otherwise  consent in
writing:

         5.01  Preservation  of  Existence;  Compliance  with  Applicable  Laws:
Maintain and preserve its existence and all rights and  privileges  now enjoyed;
not  liquidate or dissolve,  merge or  consolidate  with or into, or acquire any
other  business   organization;   notwithstanding  the  foregoing  Borrower  may
liquidate or dissolve,  or enter into any  consolidation,  merger,  partnership,
joint venture or other combination,  acquire any other business organization, or
acquire  all  or   substantially   all  of  the  assets  of  any  other   person
(collectively, an "Acquisition"),  so long as Borrower is in compliance with the
covenants  contained in Section 8.14  immediately  after such  acquisition;  and
conduct its business and  operations in  accordance  with all  applicable  laws,
rules and regulations.

         5.02 Maintenance of Insurance:  Maintain  insurance in such amounts and
covering  such  risks as is  usually  carried  by  companies  engaged in similar
businesses and owning similar  properties in the same general areas in which the
Borrower  operates and maintain  such other  insurance  and  coverages as may be
required by the Bank.  All such  insurance  shall be in form and amount and with
companies   satisfactory  to  the  Bank.  With  respect  to  insurance  covering
properties  in which  the Bank  maintains  a  security  interest  or lien,  such
insurance  shall  name  the  Bank  as  loss  payee  pursuant  to a loss  payable
endorsement satisfactory to the Bank and shall not be altered or canceled except
upon 10 days' prior written  notice to the Bank.  Upon the Bank's  request,  the
Borrower  shall furnish the Bank with the original  policy or binder of all such
insurance.

         5.03  Maintenance  of  Collateral  and  Other  Properties:  Except  for
Permitted Liens,  keep and maintain the Collateral free and clear of all levies,
liens,  encumbrances and security interests (including,  but not limited to, any
lien of attachment, judgment or execution) and defend the Collateral against any
such  levy,  lien,  encumbrance  or  security  interest;  comply  with all laws,
statutes and regulations pertaining to the Collateral and its use and operation;
execute,  file and record such  statements,  notices and  agreements,  take such
actions  and obtain  such  certificates  and other  documents  as  necessary  to
perfect,  evidence and continue the Bank's  security  interest in the Collateral
and  the  priority  thereof;  maintain  accurate  and  complete  records  of the
Collateral which show all sales,  claims and allowances;  and properly care for,
house,  store and maintain the  Collateral  in good  condition,  free of misuse,
abuse and  deterioration,  other than normal wear and tear.  The Borrower  shall
also  maintain  and  preserve  all its  properties  in good  working  order  and
condition in accordance with the general practice of other businesses of similar
character and size, ordinary wear and tear excepted.

         5.04  Payment of  Obligations  and Taxes:  Make  timely  payment of all
assessments and taxes and all of its liabilities and obligations including,  but
not limited to,  trade  payables,  unless the same are being  contested  in good
faith by  appropriate  proceedings  with  the  appropriate  court or  regulatory
agency.  For  purposes  hereof,  the  Borrower's  issuance of a check,  draft or
similar  instrument  without delivery to the intended payee shall not constitute
payment.

         5.05 Inspection  Rights:  At any reasonable time and from time to time,
permit the Bank or any representative  thereof to examine and make copies of the
records and visit the  properties  of the  Borrower and discuss the business and
operations of the Borrower with any employee or representative  thereof.  If the
Borrower shall  maintain any records  (including,  but not limited to,  computer
generated  records or computer  programs for the  generation of such records) in
the possession of a third party, the Borrower hereby agrees to notify such third
party to permit the Bank free access to such records at all reasonable times and
to provide  the Bank with  copies of any records  which it may  request,  at the
Borrower's expense limited to $20,000 or at Bank's expense,  the amount of which
shall be payable within five (5) days of written notice.  In addition,  the Bank
may,  at any  reasonable  time and from time to time,  conduct  inspections  and
audits of the  Collateral  and the  Borrower's  accounts  payable,  the cost and
expenses of which shall be paid by the Borrower to the Bank upon demand.

          5.06 Reporting and Certification Requirements:  Deliver or cause to be
delivered to the Bank in form and detail satisfactory to the Bank:

                  (a)  Not  later  than  90  days  after  the end of each of the
         Borrower's  fiscal years,  a copy of (i) the annual  audited  financial
         report of the  Borrower  for such year  prepared by a firm of certified
         public  accountants   reasonably  acceptable  to  Bank,  and  (ii)  the
         Borrower's Form 10-K filed with the Securities  Exchange Commission and
         (iii) the Borrower's  consolidating  balance sheet and income statement
         for such year; and, not later than 60 days after the end of each of the
         Borrower's  fiscal years,  a copy of the Borrower's  projected  balance
         sheet and income statement for the fiscal year then in effect.

                  (b)  Not  later  than  45  days  after  the end of each of the
         Borrower's  fiscal  quarters,  a copy of the Borrower's Form 10-Q filed
         with   the   Securities   Exchange   Commission   and  the   Borrower's
         consolidating  balance sheet and income  statement for such quarter for
         the first three quarters only.

                    (c) Not later than 45 days after the end of each month,  the
          Borrower's financial statement as of the end of such period.

                  (d)  Concurrently  with the delivery of the financial  reports
         required hereunder,  a compliance certificate in substantially the form
         attached hereto as Exhibit "A",  showing the  calculations  which would
         demonstrate  compliance with all of the financial  covenants  contained
         herein.

                  (e) Not later  than 30 days  after the end of each  month,  an
         aging of  accounts  receivable  indicating  separately  the  amount  of
         Eligible Accounts and the amount of total accounts receivable which are
         current, 1 to 30 days past the date of invoice,  31 to 60 days past the
         date of  invoice,  and the amount over 60 days past the date of invoice
         and an aging of accounts payable indicating the amount of such payables
         which are current, 1 to 30 days past the date of invoice, 31 to 60 days
         past the date of invoice,  and the amount over 60 days past the date of
         invoice.

                  (f) Daily or at such other time as required by the Bank: (i) a
         transaction report and schedule of accounts  receivable which indicates
         all sales made and all collections received for each such day; (ii) all
         remittances and collections of accounts in kind and without commingling
         to be applied to the payment of the Borrower's  Obligations on the next
         Business Day following receipt thereof; provided, however, that if such
         amounts are  received in a form other than cash or bank wire,  the Bank
         may  withhold  application  of such amounts for such time to the extent
         permitted by law as the Bank, in its sole discretion,  deems reasonable
         to allow for collection and provided  further that any  remittances and
         collections received by the Bank later than 2:30 p.m. (California time)
         on any day shall be deemed  received  on the next  succeeding  Business
         Day;  and (iii)  clear and  legible  copies  of all  invoices  or sales
         receipts evidencing the sale of goods or services by the Borrower.

                  (g) Promptly upon the Bank's request,  such other  information
         pertaining to the Borrower,  the Collateral or any guarantor  hereunder
         as the Bank may reasonably request.

         5.07  Payment of  Dividends:  Not declare or pay any  dividends  on any
class of stock now or hereafter  outstanding except (i) dividends payable solely
in the Borrower's capital stock; or (ii) dividends approved by Bank.

         5.08  Redemption or  Repurchase  of Stock:  Not redeem or repurchase in
excess  of 5% per  year any  class  of the  Borrower's  stock  now or  hereafter
outstanding without prior written Bank approval.

         5.09 Additional Indebtedness: Not, after the date hereof, create, incur
or assume,  directly or indirectly,  any additional  Indebtedness other than (i)
indebtedness  owed or to be owed to the  Bank  or  (ii)  indebtedness  to  trade
creditors  incurred in the ordinary  course of the Borrower's  business or (iii)
permitted indebtedness.

         5.10  Loans:  Not make any loans or  advances  or extend  credit to any
third person, including, but not limited to, directors, officers,  shareholders,
partners,  employees,  affiliated  entities and  subsidiaries  of the  Borrower,
except for (i) credit extended in the ordinary course of the Borrower's business
as presently conducted and (ii) permitted investments.

         5.11 Liens and Encumbrances:  Not create, assume or permit to exist any
security  interest,  encumbrance,   mortgage,  deed  of  trust,  or  other  lien
(including,  but not limited to, a lien of  attachment,  judgment or  execution)
affecting any of the Borrower's properties,  or execute or allow to be filed any
financing  statement or continuation  thereof  affecting any of such properties,
except for Permitted Liens or as otherwise provided in this Agreement.

         5.12  Transfer  Assets:  Except  for an  amount  not  exceeding  in the
aggregate  $100,000  in any  fiscal  year,  not,  after the date  hereof,  sell,
contract for sale, convey, transfer,  assign, lease or sublet, any of its assets
(including, but not limited to, the Collateral) except in the ordinary course of
business as presently  conducted by the Borrower  and,  then,  only for fair and
reasonable  consideration  and (i) sales of inventory in the ordinary  course of
business,  (ii) transfer of assets in the ordinary  course of business that have
become worn out or obsolete or that are promptly being replaced, (iii) transfers
of  non-exclusive  licenses and similar  arrangements for the use of property of
Borrower  made in the ordinary  course of  business,  and (iv)  transfers  which
constitute liquidation of permitted investments.

         5.13 Change in Nature of Business:  Not make any material change in its
financial structure or the nature of its business as existing or conducted as of
the date hereof.

         5.14  Financial Condition:  Maintain at all times:

                    (a) A  minimum  Effective  Tangible  Net  Worth  of at least
          $26,557,000 plus 50% of net profit after taxes quarterly (exclusive of
          losses).

                    (b) A ratio of Senior Debt to  Effective  Tangible Net Worth
          of not more than 1.5 to 1.

                    (c) A minimum  working  capital  defined as  current  assets
          minus current liabilities, of not less than $5,000,000.

                    (d) A  ratio  of  the  sum of  cash,  cash  equivalents  and
          accounts to current liabilities of not less than .80 to 1.0.

                    (e) A minimum net profit after tax at the end of each fiscal
          quarter of at least $1.00.

                  (f) Fixed Charge Coverage Ratio:  Maintain,  on a rolling four
         fiscal quarter basis,  ratio of Consolidated  Earnings Before Interest,
         Taxes,  Depreciation,  Amortization  and  Rentals  to  the  sum  of (i)
         interest (interest expense plus capitalized interest) in respect to all
         indebtedness  plus rentals  payable under leases of real or personal or
         mixed  property  and (ii) the current  portion of long term debt at the
         end of each quarter of not less than 2.00:1.00.

         5.15  Compensation of Employees:  Compensate its employees for services
rendered at an hourly rate at least equal to the minimum hourly rate  prescribed
by any applicable federal or state law or regulation.

         5.16 Capital  Expense:  Not make any fixed capital  expenditure  or any
commitment  therefor,  including,  but not limited to,  incurring  liability for
leases  which  would  be,  in  accordance  with  generally  accepted  accounting
principles,  reported  as  capital  leases,  or  purchase  any real or  personal
property in an aggregate  amount  exceeding  $10,000,000 in any one fiscal year,
exclusive of  acquisition  financing.  Provided  that  Borrower may make capital
expenditures  or  commitments  therefor in connection  with  acquisitions  in an
amount up to $3,000,000  without the Bank's  approval  (subject to the terms and
conditions  of the Term Loan Credit  Agreement of even date between the Bank and
the Borrower.

         5.17  Notice:  Give the Bank prompt  written  notice of any and all (i)
Events of Default; (ii) litigation, arbitration or administrative proceedings to
which  the  Borrower  is a party and in which  the  claim or  liability  exceeds
$500,000 or which  affects the  Collateral;  and (iii) other  matters which have
resulted in, or might result in a material  adverse  change in the Collateral or
the financial condition or business operations of the Borrower.

         5.18  Environmental Compliance.  The Borrower shall:

                  (a)  Implement  and comply in all material  respects  with all
         applicable  federal,  state and local laws,  ordinances,  statutes  and
         regulations  with respect to hazardous or toxic  wastes,  substances or
         related materials, industrial hygiene or to environmental conditions.

                  (b) Not own, use, generate, manufacture, store, handle, treat,
         release or dispose of any  hazardous  or toxic  wastes,  substances  or
         related  materials,  except in material  compliance with all applicable
         federal, state and local laws, ordinances, statutes and regulations.

                  (c) Give prompt  written  notice of any  discovery of or suit,
         proceeding,  claim,  dispute,  threat,  inquiry  or  filing  respecting
         hazardous or toxic wastes, substances or related materials.

                  (d) At all times  indemnify  and hold  harmless  Bank from and
         against  any and  all  liability  arising  out of the  Borrower's  use,
         generation,  manufacture,  storage, handling, treatment, or disposal by
         Borrower of hazardous or toxic wastes,  substances or related materials
         at the site.

                                    SECTION 6
                                EVENTS OF DEFAULT

         Any one or more of the following  described  events shall constitute an
event of default (an "Event of Default") under this Agreement:

          6.01  Non-Payment:  The  Borrower  shall  fail to pay any  Obligations
within 10 days of when due.

         6.02 Performance  Under This and Other  Agreements:  The Borrower shall
fail in any  material  respect  to  perform or  observe  any term,  covenant  or
agreement  contained  in  this  Agreement  or in  any  document,  instrument  or
agreement  evidencing or relating to any  indebtedness of the Borrower  (whether
such  indebtedness is owed to the Bank or third  persons),  and any such failure
(exclusive of the payment of money to the Bank under this Agreement or under any
other instrument,  document or agreement,  which failure shall constitute and be
an immediate  Event of Default if not paid when due or when  demanded to be due)
shall  continue for more than 30 days after written  notice from the Bank to the
Borrower of the existence and character of such Event of Default.

         6.03  Representations  and  Warranties;   Financial   Statements:   Any
representation or warranty made by the Borrower under or in connection with this
Agreement or any  financial  statement  given by the  Borrower or any  guarantor
shall prove to have been incorrect in any material respect when made or given or
when deemed to have been made or given.

         6.04  Insolvency:  The  Borrower  or any  guarantor  shall:  (i) become
insolvent or be unable to pay its debts as they mature;  (ii) make an assignment
for the  benefit  of  creditors  or to an  agent  authorized  to  liquidate  any
substantial amount of its properties and assets; (iii) file a voluntary petition
in bankruptcy or seeking reorganization or to effect a plan or other arrangement
with  creditors;  (iv) file an answer  admitting the material  allegations of an
involuntary  petition  relating to bankruptcy or  reorganization  or join in any
such  petition;  (v)  become or be  adjudicated  a  bankrupt;  (vi) apply for or
consent to the appointment of, or consent that an order be made,  appointing any
receiver,  custodian or trustee, for itself or any of its properties,  assets or
businesses;  or (vii)  any  receiver,  custodian  or  trustee  shall  have  been
appointed for all or substantial  part of its  properties,  assets or businesses
and shall not be discharged within 60 days after the date of such appointment.

         6.05  Execution:  Any writ of execution or  attachment  or any judgment
lien shall be issued  against  any  property  of the  Borrower  and shall not be
discharged  or bonded  against or released  within 60 days after the issuance or
attachment of such writ or lien.

         6.06 Suspension: The Borrower shall voluntarily suspend the transaction
of business or allow to be suspended, terminated, revoked or expired any permit,
license or approval of any governmental body necessary to conduct the Borrower's
business as now conducted.

         6.07  Change  in  Ownership:   There  shall  occur  a  sale,  transfer,
disposition or encumbrance  (whether voluntary or involuntary),  or an agreement
shall be entered  into to do so, with respect to more than 25% of the issued and
outstanding  capital stock of the  Borrower,  if a  corporation,  or there shall
occur a change in any general  partner or a change  affecting the control of the
Borrower, if a partnership.

                                    SECTION 7
                               REMEDIES ON DEFAULT

         Upon the occurrence and during the continuance of any Event of Default,
the Bank may, at its sole and absolute election,  without demand and with prompt
subsequent notice to Borrower:

         7.01  Acceleration:  Declare any or all of the Borrower's  indebtedness
owing  to  the  Bank,  whether  under  this  Agreement  or any  other  document,
instrument or agreement,  immediately due and payable,  whether or not otherwise
due and payable.

         7.02  Cease  Extending  Credit:  Cease  making  Advances  or  otherwise
extending  credit to or for the account of the Borrower  under this Agreement or
under any other  agreement  now existing or  hereafter  entered into between the
Borrower and the Bank.

         7.03 Termination:  Terminate this Agreement as to any future obligation
of the Bank without affecting the Borrower's obligations to the Bank, the Bank's
obligations  to the Borrower,  or the Bank's or  Borrower's  rights and remedies
under this Agreement or under any other document, instrument or agreement.

         7.04  Notification of Account Debtors:

                  (a) Notify any Account Debtor, any buyers or transferee of the
         Collateral  or  any  other  persons  of  the  Bank's  interest  in  the
         Collateral and the proceeds thereof.

                  (b) Sign the  Borrower's  name (which  authority  the Borrower
         hereby  irrevocably  and  unconditionally  grants  to the  Bank) on any
         invoice or bill of lading  relating to accounts or other drafts against
         the Account Debtors.

                  (c)  Require  the  Borrower  to  indicate  on the  face of all
         invoices (or such other  documentation  as may be specified by the Bank
         relating to the sale,  delivery or shipment of goods giving rise to the
         account)  that the account  has been  assigned to the Bank and that all
         payments  are to be made  directly  to the Bank at such  address as the
         Bank may designate.

         7.05  Protection of Security  Interest:  Make such payments and do such
acts as the Bank, in its sole  judgment,  considers  necessary and reasonable to
protect its security  interest or lien in the  Collateral.  The Borrower  hereby
irrevocably  authorizes  the Bank to pay,  purchase,  contest or compromise  any
encumbrance,  lien or claim which the Bank,  in its sole  judgment,  deems to be
prior or superior to its security interest.  Further, the Borrower hereby agrees
to  pay  to  the  Bank,  upon  demand  therefor,  all  reasonable  expenses  and
expenditures  (including reasonable attorneys' fees) incurred in connection with
the foregoing.  Notwithstanding the foregoing,  Bank will be responsible for its
own gross negligence or willful misconduct.

         7.06  Foreclosure:  Enforce  any  security  interest  or lien  given or
provided for under this  Agreement or under any  security  agreement,  mortgage,
deed of trust or other document, in such manner and such order, as to all or any
part of the properties  subject to such security  interest or lien, as the Bank,
in its sole  judgment,  deems to be  necessary or  appropriate  and the Borrower
hereby  waives any and all  rights,  obligations  or defenses  now or  hereafter
established by law relating to the foregoing. In the enforcement of its security
interest or lien,  the Bank is authorized  to enter upon the premises  where any
Collateral is located and take possession of the Collateral or any part thereof,
together with the Borrower's records pertaining thereto, or the Bank may require
the Borrower to assemble the Collateral and records  pertaining thereto and make
such Collateral and records  available to the Bank at a place  designated by the
Bank.  The Bank may sell the Collateral or any portions  thereof,  together with
all additions,  accessions and accessories thereto, giving only such notices and
following  only such  procedures  as are  required by law, at either a public or
private sale, or both, with or without having the Collateral present at the time
of the sale,  which sale shall be on such terms and  conditions and conducted in
such  manner as the Bank  determines  in its sole  judgment  to be  commercially
reasonable.  Any deficiency which exists after the disposition or liquidation of
the Collateral  shall be a continuing  liability of the Borrower to the Bank and
shall be paid by the  Borrower  to the Bank  within  five (5)  business  days of
written notice.

         7.07 Foreign Exchange Contracts: The Bank may, at its sole and absolute
discretion  and in addition to any other  remedies  available to it hereunder or
otherwise, require the Borrower to pay to the Bank within five (5) business days
of written notice, for application against the future settlement price under any
outstanding Foreign Exchange Contracts,  the outstanding face amount of any such
Foreign Exchange Contracts which have not matured or settled and Borrower hereby
grants to Bank a security  interest  in and to such  funds.  Any  portion of the
amount  so paid  to the  Bank  which  is not  subsequently  applied  to  satisfy
repayment  on  any  such  matured  Foreign  Exchange   Contracts  or  any  other
obligations of the Borrower to the Bank shall be repaid to the Borrower  without
interest.

         7.08  Letters  of  Credit:  The Bank  may,  at its  sole  and  absolute
discretion  and in addition to any other  remedies  available to it hereunder or
otherwise, require the Borrower to pay to the Bank within five (5) business days
of written  notice,  for  application  against  drawings  under any  outstanding
Letters of  Credit,  the  outstanding  principal  amount of any such  Letters of
Credit  which have not  expired.  Any  portion of the amount so paid to the Bank
which is not applied to satisfy  draws  under any such  Letters of Credit or any
other  obligations  of the  Borrower to the Bank shall be repaid to the Borrower
without interest.

         7.09  Non-Exclusivity  of Remedies:  Exercise one or more of the Bank's
rights set forth herein or seek such other rights or pursue such other  remedies
as may be provided by law, in equity or in any other  agreement  now existing or
hereafter entered into between the Borrower and the Bank, or otherwise.

         7.10  Application  of  Proceeds:  All  amounts  received by the Bank as
proceeds from the disposition or liquidation of the Collateral  shall be applied
to the Borrower's  indebtedness to the Bank as follows:  first, to the costs and
expenses of collection,  enforcement,  protection and preservation of the Bank's
lien in the Collateral,  including court costs and reasonable  attorneys'  fees,
whether or not suit is commenced by the Bank;  next, to those costs and expenses
incurred  by  the  Bank  in  protecting,   preserving,   enforcing,  collecting,
liquidating,  selling or disposing of the  Collateral;  next,  to the payment of
accrued and unpaid interest on all of the  Obligations;  next, to the payment of
the outstanding  principal balance of the Obligations;  and last, to the payment
of  any  other  indebtedness  owed  by the  Borrower  to the  Bank.  Any  excess
Collateral or excess  proceeds  existing after the disposition or liquidation of
the Collateral will be returned or paid by the Bank to the Borrower.

                                    SECTION 8
                                  MISCELLANEOUS

         8.01 Amounts  Payable on Demand:  If the Borrower  shall fail to pay on
demand any amount so payable under this  Agreement,  the Bank may, at its option
and without any obligation to do so and without  waiving any default  occasioned
by the Borrower having so failed to pay such amount, create an Advance under the
Line of Credit in an amount equal to the amount so payable,  which Advance shall
thereafter bear interest as provided under the Line of Credit.

         8.02 Default Interest Rate: The Borrower shall pay the Bank interest on
any indebtedness or amount payable under this Agreement, from the date that such
indebtedness  or amount became due or was demanded to be due until paid in full,
at a rate  which is 3% in  excess  of the rate  otherwise  provided  under  this
Agreement.

         8.03 Disposal of Invoices: All documents,  schedules, invoices or other
papers  received by the Bank from the Borrower may be destroyed or disposed of 6
months after  receipt by the Bank,  unless the Borrower  requests in writing the
return thereof, which shall be done at the Borrower's expense.

         8.04 Rights of the Bank With or Without  Default:  Upon written  notice
from  the  Bank  the  Borrower  agrees  that the Bank may at any time and at its
option, whether or not the Borrower is in default:

                  (a)  Require the  Borrower  to direct all  Account  Debtors to
         forward  all  remittances,  payments  and  proceeds  of the  Collateral
         directly  to the Bank at such  address  as the Bank may  designate.  In
         connection therewith,  the Borrower hereby irrevocably  constitutes and
         appoints  the Bank as its  attorney-in-fact  to endorse the  Borrower's
         name on any notes,  acceptances,  checks, drafts, money orders or other
         evidence of payment that may come into the Bank's possession.

                  (b) Require the Borrower to deliver to the Bank, at such times
         designated by the Bank, records and schedules which show the status and
         condition of the Collateral,  where it is located and such contracts or
         other matters which affect the Collateral.

                  (c)  Send verification requests to any Account Debtor.

                  (d)  Make inquiries of the Borrower's trade vendors.

         8.05  Indemnification:  The Borrower  agrees to hold the Bank  harmless
from and  indemnify  and  defend  the Bank from any  liability,  claim,  loss or
expense (including, but not limited to, reasonable attorneys' fees) arising from
any transaction  between the Borrower and any Account Debtor including,  but not
limited to, any loss, claim or liability arising from:

                  (a) Any violation of any federal or state consumer  protection
         law (including,  but not limited to, the federal  Truth-In-Lending Act)
         and regulations promulgated thereunder.

                    (b)  Improper  collection  practices  or  procedures  of the
          Borrower.

                    (c) Any unlawful  acts taken by the  Borrower in  connection
          with the collection of any account(s).

                    d) Any suit by any  person  against  the Bank  resulting  or
          arising from such person's dealings with the Borrower.

         8.06  Dispute  Resolution.  It is  understood  and agreed that upon the
request of any party to this agreement any dispute, claim, or controversy of any
kind,  whether  in  contract  or in tort,  statutory  or  common  law,  legal or
equitable  now existing or  hereinafter  arising  between the parties in any way
arising out of, pertaining to or in connection with: (1) this Agreement,  or any
related agreements,  documents, or instruments,  (2) all past and present loans,
credits,  accounts, deposit accounts (whether demand deposits or time deposits),
safe deposit boxes, safekeeping agreements, guarantees, letters of credit, goods
or services, or other transactions, contracts or agreements of any kind, (3) any
incidents,  omissions,  acts, practices, or occurrences causing injury to either
party whereby the other party or its agents, employees or representatives may be
liable,  in  whole  or in  part,  or (4)  any  aspect  of the  past  or  present
relationships  of the  parties,  shall be  resolved  through a two-step  dispute
resolution process  administered by Judicial  Arbitration & Mediation  Services,
Inc. ("Jo Ao Mo S") as follows:

                  (a) Step I -  Mediation:  At the  request  of any party to the
         dispute,  claim or  controversy  of the matter shall be referred to the
         nearest  office  of Jo Ao Mo S for  mediation,  that is,  an  informal,
         non-binding  conference or  conferences  between the parties in which a
         retired  judge or  justice  for the Jo Ao Mo S panel will seek to guide
         the parties to a resolution of the case.

                  (b) Step II - Unsecured  Contracts -  Arbitration:  Should any
         dispute,  claim or controversy  remain  unresolved at the conclusion of
         the Step I Mediation  Phase then all such  remaining  matters  shall be
         resolved by final and binding  arbitration  before a different judicial
         panelist,  unless the parties shall agree to have the mediator panelist
         act as  arbitrator.  The  hearing  shall  be  conducted  at a  location
         determined  by  the   arbitrator  in  San  Jose  County  and  shall  be
         administered  by and in  accordance  with  the then  existing  Rules of
         Practice and Procedure of Judicial  Arbitration  & Mediation  Services,
         Inc.,  and judgment upon any award  rendered by the  arbitrator  may be
         entered by any State or Federal Court having jurisdiction  thereof. The
         arbitrator  shall  determine  which is the  prevailing  party and shall
         include in the award that party's reasonable  attorneys fees and costs.
         This  subparagraph  (b)  shall  apply  only  if,  at  the  time  of the
         submission  of the  matter to Jo Ao Mo S, the  dispute(s)  or  issue(s)
         do(es) not arise out of a  transaction(s)  which is/are secured by real
         property  collateral  or, if so secured,  all  parties  consent to such
         submission.

                  As soon as practicable after selection of the arbitrator,  the
         arbitrator  or his/her  designated  representative  shall  determine  a
         reasonable  estimate of anticipated  fees and costs of the  Arbitrator,
         and  render a  statement  to each  party  setting  forth  that  party's
         pro-rata  share of said fees and costs.  Thereafter  each party  shall,
         within 10 days of receipt of said statement,  deposit said sum with the
         Arbitrator. Failure of any party to make such a deposit shall result in
         a forfeiture by the  non-depositing  party of the right to prosecute or
         defend the claim which is the subject of the arbitration, but shall not
         otherwise serve to abate, stay or suspend the arbitration proceedings.

                  (c)  Step II -  Contracts  Secured  By Real  Estate - Trial by
         Court Reference [ss.638 (1)] Code of Civil Procedure):  If the dispute,
         claim or  controversy  is not one required or agreed to be submitted to
         arbitration as provided by  subparagraph  (b) and has not been resolved
         by Step I mediation,  them any remaining dispute,  claim or controversy
         shall be submitted for  determination  by a trial on Order of Reference
         conducted  by a retired  judge or justice  from the panel of Jo Ao Mo S
         appointed  pursuant  to the  provisions  of  California  Code of  Civil
         Procedure  ss.638(1) or any  amendment,  addition or successor  section
         thereto to hear the case and report a statement  of  decision  thereon.
         The parties intend this general reference  agreement to be specifically
         enforceable in accordance with said section. If this parties are unable
         to agree upon a member of the Jo Ao Mo S panel to act as  referee  then
         one shall be appointed by the Presiding Judge of the county wherein the
         hearing  is to be  held.  The  parties  shall  pay in  advance,  to the
         referee, the estimated  reasonable fees and costs of the reference,  as
         may be specified in advance by the referee. The parties shall initially
         share equally,  by paying their  proportionate  amount of the estimated
         fees and costs of the  reference.  Failure  of any party to make such a
         fee deposit shall result in a forfeiture by the non-depositing party of
         the right to prosecute  or defend the cause(s) of action which  is(are)
         the subject of the reference,  but shall not otherwise  serve to abate,
         stay or suspend the reference proceeding.

                  (d)  Provisional  Remedies,  Self  Help  and  Foreclosure:  No
        provision of, or the exercise of any right(s)  under  subparagraph  (b),
        nor any other  provision of this  Dispute  Resolution  Provision,  shall
        limit the right of any party to exercise  self help remedies such as set
        off, to foreclose against any real or personal property  collateral,  or
        obtain  provisional or ancillary  remedies such as injunctive  relief or
        the appointment of a receiver from any court having jurisdiction before,
        during or after  the  pendency  of any  arbitration.  At Bank's  option,
        foreclosure under a deed of trust or mortgage may be accomplished either
        by exercise of power of sale under the deed of trust or mortgage,  or by
        judicial  foreclosure.  The institution and maintenance of an action for
        provisional  remedies  pursuit of provisional  or ancillary  remedies or
        exercise  of self help  remedies  shall not  constitute  a waiver of the
        right of any party,  including the plaintiff,  to submit the controversy
        or claim to arbitration.

         8.07 Waiver of Jury Trial.  THE  BORROWER AND THE BANK EACH WAIVE THEIR
RESPECTIVE  RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON
OR ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS, OR THE
TRANSACTIONS  CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION, PROCEEDING OR OTHER
LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES  AGAINST ANY OTHER PARTY OR
PARTIES, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. THE
BORROWER AND THE BANK EACH AGREE THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE
TRIED BY A COURT TRIAL  WITHOUT A JURY.  WITHOUT  LIMITING  THE  FOREGOING,  THE
PARTIES FURTHER AGREE THAT THEIR  RESPECTIVE  RIGHT TO A TRIAL BY JURY IS WAIVED
BY OPERATION OF THIS SECTION AS TO ANY ACTION,  COUNTERCLAIM OR OTHER PROCEEDING
WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF
THIS AGREEMENT OR THE OTHER LOAN  DOCUMENTS OR ANY PROVISION  HEREOF OR THEREOF.
THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,  RENEWALS,  SUPPLEMENTS OR
MODIFICATIONS TO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.

         8.08 Reliance: Each warranty, representation,  covenant, obligation and
agreement  contained in this Agreement  shall be  conclusively  presumed to have
been relied upon by the Bank regardless of any investigation made or information
possessed  by the Bank and  shall be  cumulative  and in  addition  to any other
warranties, representations,  covenants and agreements which the Borrower now or
hereafter shall give, or cause to be given, to the Bank.

         8.09  Attorneys'  Fees:  Borrower  shall  pay to the Bank all costs and
expenses,  including but not limited to reasonable  attorneys fees,  incurred by
Bank in connection with the administration,  enforcement,  or any refinancing or
restructuring in the nature of a "work-out",  of this Agreement or any document,
instrument  or agreement  executed  with respect to,  evidencing or securing the
indebtedness hereunder.

         8.10 Notices: All notices, payments, requests,  information and demands
which either party hereto may desire,  or may be required to give or make to the
other  party  hereto,  shall be given or made to such party by hand  delivery or
through deposit in the United States mail, postage prepaid,  or by Western Union
telegram,  addressed  as set  forth  below or to such  other  address  as may be
specified from time to time in writing by either party to the other.

To the Borrower:                   To the Bank:

Elexsys International, Inc.        SANWA BANK CALIFORNIA
4405 Fortran Court                 San Jose CBC
San Jose, CA  95134                220 Almaden Blvd.
                                   San Jose, CA  95113
Attn:    Milan Mandaric            
         President and CEO         Attn:    Jillian E, Mathur
                                   Vice President

With a copy to:                    With a copy to:

COOLEY GODWARD LLP                 SANWA BANK CALIFORNIA
Five Palo Alto Square              Asset Based Financing Department
3000 El Camino Real                444 Market Street, 22nd Floor
Palo Alto, CA  94306-2155          San Francisco, CA  94111

Attn:    Christine Ewing

         8.11  Waiver:  Neither the failure nor delay by the Bank in  exercising
any right  hereunder or under any document,  instrument  or agreement  mentioned
herein  shall  operate  as a waiver  thereof,  nor shall any  single or  partial
exercise  of any right  hereunder  or under any other  document,  instrument  or
agreement  mentioned  herein preclude other or further  exercise  thereof or the
exercise  of any  other  right;  nor shall  any  waiver of any right or  default
hereunder,  or under any  other  document,  instrument  or  agreement  mentioned
herein, constitute a waiver of any other right or default or constitute a waiver
of any other default of the same or any other term or provision.

         8.12 Conflicting Provisions:  To the extent the provisions contained in
this  Agreement are  inconsistent  with those  contained in any other  document,
instrument  or agreement  executed  pursuant  hereto,  the terms and  provisions
contained herein shall control.  Otherwise,  such provisions shall be considered
cumulative.

         8.13 Binding Effect;  Assignment:  This Agreement shall be binding upon
and inure to the  benefit  of the  Borrower  and the Bank and  their  respective
successors  and assigns,  except that the  Borrower  shall not have the right to
assign its rights  hereunder or any interest  herein  without the prior  written
consent of the Bank. The Bank may sell, assign or grant  participation in all or
any portion of its rights and benefits  hereunder.  The Borrower agrees that, in
connection with any such sale, grant or assignment,  the Bank may deliver to the
prospective  buyer,  participant  or  assignee  financial  statements  and other
relevant information relating to the Borrower and any guarantor.

         8.14  Jurisdiction:  This Agreement,  any notes issued  hereunder,  the
rights of the  parties  hereunder  to and  concerning  the  Collateral,  and any
documents,  instruments  or agreements  mentioned or referred to herein shall be
governed by and construed  according to the laws of the State of California,  to
the jurisdiction of whose courts the parties hereby submit.

          8.15  Headings:  The  headings  herein  set forth are  solely  for the
purpose of identification and have no legal significance.

         8.16 Entire  Agreement:  This Agreement and all documents,  instruments
and agreements mentioned herein constitute the entire and complete understanding
of the parties  with respect to the  transactions  contemplated  hereunder.  All
previous conversations, memoranda and writings between the parties pertaining to
the transactions  contemplated  hereunder not incorporated or referenced in this
Agreement  or in such  documents,  instruments  and  agreements  are  superseded
hereby.

         11.17   Confidentiality   Agreement.   In  handling  any   confidential
information  Bank,  and all  employees  and  agents of Bank,  including  but not
limited  to  accountants,  shall  exercise  the same  degree  of care  that Bank
exercises with respect to its own  proprietary  information of the same types to
maintain the  confidentiality of any non-public  information thereby received or
received  pursuant to this Agreement  except that disclosure of such information
may be made (i) to the  subsidiaries  or affiliates  of Bank in connection  with
their  present  or  prospective  business  relations  with  Borrower;   (ii)  to
prospective  transferees  or purchasers  of any interest in the loans,  provided
that they have entered into a comparable  confidentiality  agreement in favor of
Borrower  and have  delivered  a copy to  Borrower;  (iii) as  required  by law,
regulations,  rule or order, subpoena,  judicial order or similar order; (iv) as
may  be  required  in  connection  with  the   examination,   audit  or  similar
investigation  of Bank  and (v) as Bank may  determine  in  connection  with the
enforcement of any remedies hereunder.  Confidential information hereunder shall
not  include  information  that  either:  (a) is in the public  domain or in the
knowledge or possession  of Bank when  disclosed to Bank, or becomes part of the
public  domain  after  disclosure  to Bank  through no fault of Bank;  or (b) is
disclosed to Bank by a third party, provided Bank does not have actual knowledge
that such third party is prohibited from disclosing such information.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as of the date first hereinabove written.

Borrower                                Bank:

                                        SANWA BANK CALIFORNIA
ELEXSYS INTERNATIONAL, INC.

BY:/s/Milan Mandaric                    BY:/s/Jillian E. Mathur
   -----------------                       ---------------------
Name:    Milan Mandaric                 Name:    Jillian E. Mathur
Title:   President and CEO              Title:   Vice President