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<A NAME=A001></A>
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=3><SUP>Silicon Valley Bank</SUP> </FONT></H1>

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<A NAME=A002></A>
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Loan and Security
Agreement<br>
(Exim Program) </FONT></H1>

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<A NAME=A003><font size="2"></font></A>
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Borrower: Tegal
Corporation<br>
                    Address: 2201 South McDowell Blvd. <br>
                    Petaluma, CA 94954 </FONT></H1>

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<A NAME=A005><font size="2"></font></A>
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Date: June 26, 2002 </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>THIS LOAN AND SECURITY
AGREEMENT</B> is entered into on the above date between SILICON VALLEY BANK
(“Silicon”), whose address is 3003 Tasman Drive, Santa Clara, California 95054
and the borrower(s) named above (jointly and severally, the “Borrower”), whose
chief executive office is located at the above address (“Borrower’s
Address”). The Schedule to this Agreement (the “Schedule”) shall for all
purposes be deemed to be a part of this Agreement, and the same is an integral part of
this Agreement. (Definitions of certain terms used in this Agreement are set forth in
Section 8 below.) </FONT></P>


<P><i><b><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1. LOANS. </FONT></b>
</i></P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>        <B><I>1.1
Loans. </I></B><I></I>Silicon will make loans to Borrower (the “Loans”), in
amounts determined by Silicon in its good faith business judgment, up to the amounts (the
“Credit Limit”) shown on the Schedule, provided no Default or Event of Default
has occurred and is continuing, and subject to deduction of Reserves for accrued interest
and such other Reserves as Silicon deems proper from time to time in its good faith
business judgment. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>        <B><I>1.2
Interest.</I></B><I></I> All Loans and all other monetary Obligations shall bear interest
at the rate shown on the Schedule, except where expressly set forth to the contrary in
this Agreement. Interest shall be payable monthly, on the last day of the month. Interest
may, in Silicon’s discretion, be charged to Borrower’s loan account, and the
same shall thereafter bear interest at the same rate as the other Loans. Silicon may, in
its discretion, charge interest to Borrower’s Deposit Accounts maintained with
Silicon. Regardless of the amount of Obligations that may be outstanding from time to
time, Borrower shall pay Silicon minimum monthly interest during the term of this
Agreement in the amount set forth on the Schedule (the “Minimum Monthly
Interest”). </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>        <B><I>1.3
Overadvances. </I></B><I></I>If at any time or for any reason the total of all outstanding
Loans and all other monetary Obligations exceeds the Credit Limit (an
“Overadvance”), Borrower shall immediately pay the amount of the excess to
Silicon, without notice or demand. Without limiting Borrower’s obligation to repay to
Silicon the amount of any Overadvance, Borrower agrees to pay Silicon interest on the
outstanding amount of any Overadvance, on demand, at the Default Rate. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>        <B><I>1.4
Fees.</I></B><I></I> Borrower shall pay Silicon the fees shown on the Schedule, which are
in addition to all interest and other sums payable to Silicon and are not refundable. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>        <B><I>1.5
Loan Requests.</I></B><I></I> To obtain a Loan, Borrower shall make a request to Silicon
by facsimile or telephone. Loan requests received after 12:00 Noon will not be considered
by Silicon until the next Business Day. Silicon may rely on any telephone request for a
Loan given by a person whom Silicon believes is an authorized representative of Borrower,
and Borrower will indemnify Silicon for any loss Silicon suffers as a result of that
reliance. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>        <B><I>1.6
Letters of Credit.</I></B><I></I> At the request of Borrower, Silicon may, in its good
faith business judgment, issue or arrange for the issuance of letters of credit for the
account of Borrower, in each case in form and substance satisfactory to Silicon in its
sole discretion (collectively, “Letters of Credit”). The aggregate face amount
of all Letters of Credit from time to time </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>outstanding shall not exceed the amount shown
on the Schedule (the “Letter of Credit Sublimit”), and shall be reserved against
Loans which would otherwise be available hereunder, and in the event at any time there are
insufficient Loans available to Borrower for such reserve, Borrower shall deposit and
maintain with Silicon cash collateral in an amount at all times equal to such deficiency,
which shall be held as Collateral for all purposes of this Agreement. Borrower shall pay
all bank charges (including charges of Silicon) for the issuance of Letters of Credit,
together with such additional fee as Silicon’s letter of credit department shall
charge in connection with the issuance of the Letters of Credit. Any payment by Silicon
under or in connection with a Letter of Credit shall constitute a Loan hereunder on the
date such payment is made. Each Letter of Credit shall have an expiry date no later than
thirty days prior to the Maturity Date. Borrower hereby agrees to indemnify and hold
Silicon harmless from any loss, cost, expense, or liability, including payments made by
Silicon, expenses, and reasonable attorneys’ fees incurred by Silicon arising out of
or in connection with any Letters of Credit. Borrower agrees to be bound by the
regulations and interpretations of the issuer of any Letters of Credit guarantied by
Silicon and opened for Borrower’s account or by Silicon’s interpretations of any
Letter of Credit issued by Silicon for Borrower’s account, and Borrower understands
and agrees that Silicon shall not be liable for any error, negligence, or mistake, whether
of omission or commission, in following Borrower’s instructions or those contained in
the Letters of Credit or any modifications, amendments, or supplements thereto. Borrower
understands that Letters of Credit may require Silicon to indemnify the issuing bank for
certain costs or liabilities arising out of claims by Borrower against such issuing bank.
Borrower hereby agrees to indemnify and hold Silicon harmless with respect to any loss,
cost, expense, or liability incurred by Silicon under any Letter of Credit as a result of
Silicon’s indemnification of any such issuing bank. The provisions of this Loan
Agreement, as it pertains to Letters of Credit, and any other Loan Documents relating to
Letters of Credit are cumulative. </FONT></P>

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     <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><I>2.    
          SECURITY INTEREST. </I></B><I></I>To secure the payment and performance of all
          of the Obligations when due, Borrower hereby grants to Silicon a security
          interest in all of the following (collectively, the “Collateral”): all
          right, title and interest of Borrower in and to all of the following, whether
          now owned or hereafter arising or acquired and wherever located: all Accounts;
          all Inventory; all Equipment; all Deposit Accounts; all General Intangibles
          (including without limitation all Intellectual Property); all Investment
          Property; all Other Property; and any and all claims, rights and interests in
          any of the above, and all guaranties and security for any of the above, and all
          substitutions and replacements for, additions, accessions, attachments,
          accessories, and improvements to, and proceeds (including proceeds of any
          insurance policies, proceeds of proceeds and claims against third parties) of,
          any and all of the above, and all Borrower’s books relating to any and all
          of the above. </FONT></P>

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<A NAME=A008></A>
<P ALIGN=LEFT><i><b><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3. REPRESENTATIONS,
WARRANTIES AND COVENANTS OF BORROWER. </FONT></b></i></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>        In
order to induce Silicon to enter into this Agreement and to make Loans, Borrower
represents and warrants to Silicon as follows, and Borrower covenants that the following
representations will continue to be true, and that Borrower will at all times comply with
all of the following covenants, throughout the term of this Agreement and until all
Obligations have been paid and performed in full: </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>        <B><I>3.1
Corporate Existence and Authority.</I></B><I></I> Borrower is and will continue to be,
duly organized, validly existing and in good standing under the laws of the jurisdiction
of its incorporation. Borrower is and will continue to be qualified and licensed to do
business in all jurisdictions in which any failure to do so would result in a Material
Adverse Change. The execution, delivery and performance by Borrower of this Agreement, and
all other documents contemplated hereby (i) have been duly and validly authorized, (ii)
are enforceable against Borrower in accordance with their terms (except as enforcement may
be limited by equitable principles and by bankruptcy, insolvency, reorganization,
moratorium or similar laws relating to creditors’ rights generally), and (iii) do not
violate Borrower’s articles or certificate of incorporation, or Borrower’s
by-laws, or any law or any material agreement or instrument which is binding upon Borrower
or its property, and (iv) do not constitute grounds for acceleration of any material
indebtedness or obligation under any agreement or instrument which is binding upon
Borrower or its property. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>        <B><I>3.2
Name; Trade Names and Styles.</I></B><I></I> The name of Borrower set forth in the heading
to this Agreement is its correct name. Listed in the Representations are all prior names
of Borrower and all of Borrower’s present and prior trade names. Borrower shall give
Silicon 30 days’ prior written notice before changing its name or doing business
under any other name. Borrower has complied, and will in the future comply, in all
material respects, with all laws relating to the conduct of business under a fictitious
business name, except where the failure to so comply would not reasonably be expected to
result in a Material Adverse Change. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>        <B><I>3.3
Place of Business; Location of Collateral. </I></B><I></I>The address set forth in the
heading to this Agreement is Borrower’s chief executive office. In addition, Borrower
has places of business and Collateral is located only at the locations set forth in the
Representations. Borrower will give Silicon at least 30 days prior written notice before
opening any additional place of business, changing its chief executive office, or moving
any of the Collateral to a location other than Borrower’s Address or one of the
locations set forth in the Representations, except that Borrower may maintain sales
offices in the ordinary course of business at which not more than a total of $10,000 fair
market value of Equipment is located. </FONT></P>

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<A NAME=A009></A>
<P ALIGN=LEFT><b><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>      3.4
Title to Collateral; Perfection; Permitted Liens.</I> </FONT></b></P>

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     <P><b><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>            </I></FONT></b><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(a) Borrower is now, and will at all times in the future be, the sole owner of all
          the Collateral, except for items of Equipment which are leased to Borrower. The
          Collateral now is and will remain free and clear of any and all liens, charges,
          security interests, encumbrances and adverse claims, except for Permitted Liens.
          Silicon now has, and will continue to have, a first-priority perfected and
          enforceable security interest in all of the Collateral, subject only to the
          Permitted Liens, and Borrower will at all times defend Silicon and the
          Collateral against all claims of others. </FONT></P>

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     <P><b><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>            </I></FONT></b><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(b)
     Borrower has set forth in the Representations all of Borrower’s Deposit
     Accounts, and Borrower will give Silicon five Business Days advance written
     notice before establishing any new Deposit Accounts and will cause the
     institution where any such new Deposit Account is maintained to execute and
     deliver to Silicon a control agreement in form sufficient to perfect
     Silicon’s security interest in the Deposit Account and otherwise
     satisfactory to Silicon in its good faith business judgment. Nothing herein
     limits any requirements which may be set forth in the Schedule as to where
     Deposit Accounts will be maintained. </FONT></P>

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     <P><b><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>            </I></FONT></b><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(c)
          In the event that Borrower shall at any time after the date hereof have any
          commercial tort claims against others, which it is asserting or intends to
          assert, and in which the potential recovery exceeds $100,000, Borrower shall
          promptly notify Silicon thereof in writing and provide Silicon with such
          information regarding the same as Silicon shall request (unless providing such
          information would waive the Borrower’s attorney-client privilege). Such
          notification to Silicon shall constitute a grant of a security interest in the
          commercial tort claim and all proceeds thereof to Silicon, and Borrower shall
          execute and deliver all such documents and take all such actions as Silicon
          shall request in connection therewith. </FONT></P>

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     <P><b><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>            </I></FONT></b><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(d) None of the Collateral now is or will be affixed to any real property in such a
          manner, or with such intent, as to become a fixture. Borrower is not and will
          not become a lessee under any real property lease pursuant to which the lessor
          may obtain any rights in any of the Collateral and no such lease now prohibits,
          restrains, impairs or will prohibit, restrain or impair Borrower’s right to
          remove any Collateral from the leased premises. Whenever any Collateral is
          located upon premises in which any third party has an interest, Borrower shall,
          whenever requested by Silicon, use its best efforts to cause such third party to
          execute and deliver to Silicon, in form acceptable to Silicon, such waivers and
          subordinations as Silicon shall specify in its good faith business judgment.
          Borrower will keep in full force and effect, and will comply with all material
          terms of, any lease of real property where any of the Collateral now or in the
          future may be located. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>        <B><I>3.5
Maintenance of Collateral. </I></B><I></I>Borrower will maintain the Collateral in good
working condition (ordinary wear and tear excepted), and Borrower will not use the
Collateral for any unlawful purpose. Borrower will immediately advise Silicon in writing
of any material loss or damage to the Collateral. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>        <B><I>3.6
Books and Records.</I></B><I></I> Borrower has maintained and will maintain at
Borrower’s Address complete and accurate books and records, comprising an accounting
system in accordance with GAAP. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>        <B><I>3.7
Financial Condition, Statements and Reports.</I></B><I></I> All financial statements now
or in the future delivered to Silicon have been, and will be, prepared in conformity with
GAAP and now and in the future will fairly present the results of operations and financial
condition of Borrower, in accordance with GAAP, at the times and for the periods therein
stated. Between the last date covered by any such statement provided to Silicon and the
date hereof, there has been no Material Adverse Change. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>        <B><I>3.8
Tax Returns and Payments; Pension Contributions.</I></B><I></I> Borrower has timely filed,
and will timely file, all required tax returns and reports, and Borrower has timely paid,
and will timely pay, all foreign, federal, state and local taxes, assessments, deposits
and contributions now or in the future owed by Borrower. Borrower may, however, defer
payment of any contested taxes, provided that Borrower (i) in good faith contests
Borrower’s obligation to pay the taxes by appropriate proceedings promptly and
diligently instituted and conducted, (ii) notifies Silicon in writing of the commencement
of, and any material development in, the proceedings, and (iii) posts bonds or takes any
other steps required to keep the contested taxes from becoming a lien upon any of the
Collateral. Borrower is unaware of any claims or adjustments proposed for any of
Borrower’s prior tax years which could result in additional taxes becoming due and
payable by Borrower. Borrower has paid, and shall continue to pay all amounts necessary to
fund all present and future pension, profit sharing and deferred compensation plans in
accordance with their terms, and Borrower has not and will not withdraw from participation
in, permit partial or complete termination of, or permit the occurrence of any other event
with respect to, any such plan which could reasonably be expected to result in any
liability of Borrower, including any liability to the Pension Benefit Guaranty Corporation
or its successors or any other governmental agency. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>        <B><I>3.9
Compliance with Law.</I></B><I></I> Borrower has, to the best of its knowledge, complied,
and will comply, in all material respects, with all provisions of all foreign, federal,
state and local laws and regulations applicable to Borrower, including, but not limited
to, those relating to Borrower’s ownership of real or personal property, the conduct
and licensing of Borrower’s business, and all environmental matters. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>        <B><I>3.10
Litigation.</I></B><I></I> There is no claim, suit, litigation, proceeding or
investigation pending or (to best of Borrower’s knowledge) threatened against or
affecting Borrower in any court or before any governmental agency (or any basis therefor
known to Borrower) which could reasonably be expected to result, either separately or in
the aggregate, in any Material Adverse Change. Borrower will promptly inform Silicon in
writing of any claim, proceeding, litigation or investigation in the future threatened or
instituted against Borrower involving any single claim of $50,000 or more, or involving
$100,000 or more in the aggregate. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>        <B><I>3.11
Use of Proceeds.</I></B><I></I> All proceeds of all Loans shall be used solely for lawful
business purposes. Borrower is not purchasing or carrying any “margin stock” (as
defined in Regulation U of the Board of Governors of the Federal Reserve System) and no
part of the proceeds of any Loan will be used to purchase or carry any “margin
stock” or to extend credit to others for the purpose of purchasing or carrying any
“margin stock.” </FONT></P>

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<A NAME=A010></A>
<P ALIGN=LEFT><i><b><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4.
ACCOUNTS. </FONT></b></i></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>        <B><I>4.1
Representations Relating to Accounts. </I></B><I></I>Borrower represents and warrants to
Silicon as follows: Each Account with respect to which Loans are requested by Borrower
shall, on the date each Loan is requested and made, (i) represent an undisputed bona fide
existing unconditional obligation of the Account Debtor created by the sale, delivery, and
acceptance of goods or the rendition of services, or the non-exclusive licensing of
Intellectual Property, in the ordinary course of Borrower’s business, and (ii) meet
the Minimum Eligibility Requirements set forth in Section 8 below. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>        <B><I>4.2
Representations Relating to Documents and Legal Compliance. </I></B><I></I>Borrower
represents and warrants to Silicon as follows: All statements made and all unpaid balances
appearing in all invoices, instruments and other documents evidencing the Accounts are and
shall be true and correct and all such invoices, instruments and other documents and all
of Borrower’s books and records are and shall be genuine and in all respects what
they purport to be. All sales and other transactions underlying or giving rise to each
Account shall comply in all material respects with all applicable laws and governmental
rules and regulations. To the best of Borrower’s knowledge, all signatures and
endorsements on all documents, instruments, and agreements relating to all Accounts are
and shall be genuine, and all such documents, instruments and agreements are and shall be
legally enforceable in accordance with their terms. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>        <B><I>4.3
Schedules and Documents relating to Accounts. </I></B><I></I>Borrower shall deliver to
Silicon transaction reports and schedules of collections, as provided in the Schedule, on
Silicon’s standard forms; provided, however, that Borrower’s failure to execute
and deliver the same shall not affect or limit Silicon’s security interest and other
rights in all of Borrower’s Accounts, nor shall Silicon’s failure to advance or
lend against a specific Account affect or limit Silicon’s security interest and other
rights therein. If requested by Silicon, Borrower shall furnish Silicon with copies (or,
at Silicon’s request, originals) of all contracts, orders, invoices, and other
similar documents, and all shipping instructions, delivery receipts, bills of lading, and
other evidence of delivery, for any goods the sale or disposition of which gave rise to
such Accounts, and Borrower warrants the genuineness of all of the foregoing. Borrower
shall also furnish to Silicon an aged accounts receivable trial balance as provided in the
Schedule. In addition, Borrower shall deliver to Silicon, on its request, the originals of
all instruments, chattel paper, security agreements, guarantees and other documents and
property evidencing or securing any Accounts, in the same form as received, with all
necessary endorsements, and copies of all credit memos. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>        <B><I>4.4
Collection of Accounts. </I></B><I></I>Borrower shall have the right to collect all
Accounts, unless and until a Default or an Event of Default has occurred and is
continuing. Whether or not an Event of Default has occurred and is continuing, Borrower
shall hold all payments on, and proceeds of, Accounts in trust for Silicon, and Borrower
shall immediately deliver all such payments and proceeds to Silicon in their original
form, duly endorsed, to be applied to the Obligations in such order as Silicon shall
determine. Silicon may, in its good faith business judgment, require that all proceeds of
Collateral be deposited by Borrower into a lockbox account, or such other “blocked
account” as Silicon may specify, pursuant to a blocked account agreement in such form
as Silicon may specify in its good faith business judgment. </FONT></P>

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     <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>        <B><I>4.5. Remittance of Proceeds. </I></B><I></I>
     All proceeds arising from the disposition of any Collateral shall be
     delivered, in kind, by Borrower to Silicon in the original form in which
     received by Borrower not later than the following Business Day after
     receipt by Borrower, to be applied to the Obligations in such order as
     Silicon shall determine; provided that, if no Default or Event of Default
     has occurred and is continuing, Borrower shall not be obligated to remit to
     Silicon the proceeds of the sale of worn out or obsolete Equipment disposed
     of by Borrower in good faith in an arm’s length transaction for an
     aggregate purchase price of $25,000 or less (for all such transactions in
     any fiscal year). Borrower agrees that it will not commingle proceeds of
     Collateral with any of Borrower’s other funds or property, but will hold
     such proceeds separate and apart from such other</FONT></P>

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     <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> funds and
     property and in an express trust for Silicon. Nothing in this Section
     limits the restrictions on disposition of Collateral set forth elsewhere in
     this Agreement. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>        <B><I>4.6
Disputes. </I></B><I></I>Borrower shall notify Silicon promptly of all disputes or claims
relating to Accounts. Borrower shall not forgive (completely or partially), compromise or
settle any Account for less than payment in full, or agree to do any of the foregoing,
except that Borrower may do so, provided that: (i) Borrower does so in good faith, in a
commercially reasonable manner, in the ordinary course of business, and in arm’s
length transactions, which are reported to Silicon on the regular reports provided to
Silicon; (ii) no Default or Event of Default has occurred and is continuing; and (iii)
taking into account all such discounts, settlements and forgiveness, the total outstanding
Loans will not exceed the Credit Limit. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>        <B><I>4.7
Returns.</I></B><I></I> Provided no Event of Default has occurred and is continuing, if
any Account Debtor returns any Inventory to Borrower, Borrower shall promptly determine
the reason for such return and promptly issue a credit memorandum to the Account Debtor in
the appropriate amount. In the event any attempted return occurs after the occurrence and
during the continuance of any Event of Default, Borrower shall hold the returned Inventory
in trust for Silicon, and immediately notify Silicon of the return of the Inventory. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>        <B><I>4.8
Verification.</I></B><I></I> Silicon may, from time to time, verify directly with the
respective Account Debtors the validity, amount and other matters relating to the
Accounts, by means of mail, telephone or otherwise, either in the name of Borrower or
Silicon or such other name as Silicon may choose. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>        <B><I>4.9
No Liability. </I></B><I></I>Silicon shall not be responsible or liable for any shortage
or discrepancy in, damage to, or loss or destruction of, any goods, the sale or other
disposition of which gives rise to an Account, or for any error, act, omission, or delay
of any kind occurring in the settlement, failure to settle, collection or failure to
collect any Account, or for settling any Account in good faith for less than the full
amount thereof, nor shall Silicon be deemed to be responsible for any of Borrower’s
obligations under any contract or agreement giving rise to an Account. Nothing herein
shall, however, relieve Silicon from liability for its own gross negligence or willful
misconduct. </FONT></P>

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<A NAME=A011></A>
<P ALIGN=LEFT><i><b><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5. ADDITIONAL DUTIES OF
BORROWER. </FONT></b></i></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>        <B><I>5.1
Financial and Other Covenants.</I></B><I></I> Borrower shall at all times comply with the
financial and other covenants set forth in the Schedule. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>        <B><I>5.2
Insurance.</I></B><I></I> Borrower shall, at all times insure all of the tangible personal
property Collateral and carry such other business insurance, with insurers reasonably
acceptable to Silicon, in such form and amounts as Silicon may reasonably require and that
are customary and in accordance with standard practices for Borrower’s industry and
locations, and Borrower shall provide evidence of such insurance to Silicon. All such
insurance policies shall name Silicon as an additional loss payee, and shall contain a
lenders loss payee endorsement in form reasonably acceptable to Silicon. Upon receipt of
the proceeds of any such insurance, Silicon shall apply such proceeds in reduction of the
Obligations as Silicon shall determine in its good faith business judgment, except that,
provided no Default or Event of Default has occurred and is continuing, Silicon shall
release to Borrower insurance proceeds with respect to Equipment totaling less than
$100,000, which shall be utilized by Borrower for the replacement of the Equipment with
respect to which the insurance proceeds were paid. Silicon may require reasonable
assurance that the insurance proceeds so released will be so used. If Borrower fails to
provide or pay for any insurance, Silicon may, but is not obligated to, obtain the same at
Borrower’s expense. Borrower shall promptly deliver to Silicon copies of all material
reports made to insurance companies. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>        <B><I>5.3
Reports.</I></B><I></I> Borrower, at its expense, shall provide Silicon with the written
reports set forth in the Schedule, and such other written reports with respect to Borrower
(including budgets, sales projections, operating plans and other financial documentation),
as Silicon shall from time to time specify in its good faith business judgment. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>        <B><I>5.4
Access to Collateral, Books and Records.</I></B><I></I> At reasonable times, and on one
Business Day’s notice, Silicon, or its agents, shall have the right to inspect the
Collateral, and the right to audit and copy Borrower’s books and records. Silicon
shall take reasonable steps to keep confidential all information obtained in any such
inspection or audit, but Silicon shall have the right to disclose any such information to
its auditors, regulatory agencies, and attorneys, and pursuant to any subpoena or other
legal process. The foregoing inspections and audits shall be at Borrower’s expense
and the charge therefor shall be $700 per person per day (or such higher amount as shall
represent Silicon’s then current standard charge for the same), plus reasonable
out-of-pocket expenses. In the event Borrower and Silicon schedule an audit more than 10
days in advance, and Borrower seeks to reschedule the audit with less than 10 days written
notice to Silicon, then (without limiting any of Silicon’s rights or remedies),
Borrower shall pay Silicon a cancellation fee of $1,000 plus any out-of-pocket expenses
incurred by Silicon, to compensate Silicon for the anticipated costs and expenses of the
cancellation. </FONT></P>

<hr STYLE="page-break-after:always">

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>        <B><I>5.5
Negative Covenants.</I></B><I></I> Except as may be permitted in the Schedule, Borrower
shall not, without Silicon’s prior written consent (which shall be a matter of its
good faith business judgment), do any of the following: (i) merge or consolidate with
another corporation or entity; (ii) acquire any assets, except in the ordinary course of
business; (iii) enter into any other transaction outside the ordinary course of business;
(iv) sell or transfer any Collateral, except for the sale of finished Inventory in the
ordinary course of Borrower’s business, and except for the sale of obsolete or
unneeded Equipment in the ordinary course of business; (v) store any Inventory or other
Collateral with any warehouseman or other third party; (vi) sell any Inventory on a
sale-or-return, guaranteed sale, consignment, or other contingent basis; (vii) make any
loans of any money or other assets<B>*</B>; (viii) incur any debts, outside the ordinary
course of business, which would result in a Material Adverse Change; (ix) guarantee or
otherwise become liable with respect to the obligations of another party or entity; (x)
pay or declare any dividends on Borrower’s stock (except for dividends payable solely
in stock of Borrower); (xi) redeem, retire, purchase or otherwise acquire, directly or
indirectly, any of Borrower’s stock; (xii) make any change in Borrower’s capital
structure which would result in a Material Adverse Change; or (xiii) engage, directly or
indirectly, in any business other than the businesses currently engaged in by Borrower or
reasonably related thereto; or (xiv) dissolve or elect to dissolve. Transactions permitted
by the foregoing provisions of this Section are only permitted if no Default or Event of
Default would occur as a result of such transaction. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>*, except that, provided that no
Default or Event of Default has occurred and is continuing, Borrower make loans to
employees of Borrower in an aggregate amount not exceeding $150,000 outstanding at any
time</B> </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>        <B><I>5.6
Litigation Cooperation.</I></B><I></I> Should any third-party suit or proceeding be
instituted by or against Silicon with respect to any Collateral or relating to Borrower,
Borrower shall, without expense to Silicon, make available Borrower and its officers,
employees and agents and Borrower’s books and records, to the extent that Silicon may
deem them reasonably necessary in order to prosecute or defend any such suit or
proceeding. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>        <B><I>5.7
Further Assurances.</I></B><I></I> Borrower agrees, at its expense, on request by Silicon,
to execute all documents and take all actions, as Silicon, may, in its good faith business
judgment, deem necessary or useful in order to perfect and maintain Silicon’s
perfected first-priority security interest in the Collateral (subject to Permitted Liens),
and in order to fully consummate the transactions contemplated by this Agreement. </FONT></P>

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<A NAME=A012></A>
<P ALIGN=LEFT><i><b><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6. TERM. </FONT>
</b></i></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>        <B><I>6.1
Maturity Date.</I></B><I></I> This Agreement shall continue in effect until the maturity
date set forth on the Schedule (the “Maturity Date”), subject to Section 6.3
below. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>        <B><I>6.2
Early Termination.</I></B><I></I> This Agreement may be terminated prior to the Maturity
Date as follows: (i) by Borrower, effective three Business Days after written notice of
termination is given to Silicon; or (ii) by Silicon at any time after the occurrence and
during the continuance of an Event of Default, without notice, effective immediately. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>        <B><I>6.3
Payment of Obligations.</I></B><I></I> On the Maturity Date or on any earlier effective
date of termination, Borrower shall pay and perform in full all Obligations, whether
evidenced by installment notes or otherwise, and whether or not all or any part of such
Obligations are otherwise then due and payable. Without limiting the generality of the
foregoing, if on the Maturity Date, or on any earlier effective date of termination, there
are any outstanding Letters of Credit issued by Silicon or issued by another institution
based upon an application, guarantee, indemnity or similar agreement on the part of
Silicon, then on such date Borrower shall provide to Silicon cash collateral in an amount
equal to 105% of the face amount of all such Letters of Credit plus all interest, fees and
cost due or to become due in connection therewith (as estimated by Silicon in its good
faith business judgment), to secure all of the Obligations relating to said Letters of
Credit, pursuant to Silicon’s then standard form cash pledge agreement.
Notwithstanding any termination of this Agreement, all of Silicon’s security
interests in all of the Collateral and all of the terms and provisions of this Agreement
shall continue in full force and effect until all Obligations have been paid and performed
in full; provided that Silicon may, in its sole discretion, refuse to make any further
Loans after termination. No termination shall in any way affect or impair any right or
remedy of Silicon, nor shall any such termination relieve Borrower of any Obligation to
Silicon, until all of the Obligations have been paid and performed in full. Upon payment
and performance in full of all the Obligations and termination of this Agreement, Silicon
shall promptly terminate its financing statements with respect to the Borrower and deliver
to Borrower such other documents as may be required to fully terminate Silicon’s
security interests. </FONT></P>

<hr STYLE="page-break-after:always">

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<A NAME=A013></A>
<P ALIGN=LEFT><i><FONT FACE="Times New Roman, Times, Serif" SIZE=2>7. EVENTS OF DEFAULT AND
REMEDIES. </FONT></i></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>        <B><I>7.1
Events of Default.</I></B><I></I> The occurrence of any of the following events shall
constitute an “Event of Default” under this Agreement, and Borrower shall give
Silicon immediate written notice thereof: (a) Any warranty, representation, statement,
report or certificate made or delivered to Silicon by Borrower or any of Borrower’s
officers, employees or agents, now or in the future, shall be untrue or misleading in a
material respect when made or deemed to be made; or (b) Borrower shall fail to pay when
due any Loan or any interest thereon or any other monetary Obligation; or (c) the total
Loans and other Obligations outstanding at any time shall exceed the Credit Limit; or (d)
Borrower shall fail to comply with any of the financial covenants set forth in the
Schedule, or shall fail to perform any other non-monetary Obligation which by its nature
cannot be cured, or shall fail to permit Silicon to conduct an inspection or audit as
specified in Section 5.4 hereof; or (e) Borrower shall fail to perform any other
non-monetary Obligation, which failure is not cured within five Business Days after the
date due; or (f) any levy, assessment, attachment, seizure, lien or encumbrance (other
than a Permitted Lien) is made on all or any part of the Collateral which is not cured
within 10 days after the occurrence of the same; or (g) any default or event of default
occurs under any obligation secured by a Permitted Lien, which is not cured within any
applicable cure period or waived in writing by the holder of the Permitted Lien; or (h)
Borrower breaches any material contract or obligation, which has resulted or may
reasonably be expected to result in a Material Adverse Change; or (i) Dissolution,
termination of existence, insolvency or business failure of Borrower; or appointment of a
receiver, trustee or custodian, for all or any part of the property of, assignment for the
benefit of creditors by, or the commencement of any proceeding by Borrower under any
reorganization, bankruptcy, insolvency, arrangement, readjustment of debt, dissolution or
liquidation law or statute of any jurisdiction, now or in the future in effect; or (j) the
commencement of any proceeding against Borrower or any guarantor of any of the Obligations
under any reorganization, bankruptcy, insolvency, arrangement, readjustment of debt,
dissolution or liquidation law or statute of any jurisdiction, now or in the future in
effect, which is not cured by the dismissal thereof within 30 days after the date
commenced; or (k) revocation or termination of, or limitation or denial of liability upon,
any guaranty of the Obligations or any attempt to do any of the foregoing, or commencement
of proceedings by any guarantor of any of the Obligations under any bankruptcy or
insolvency law; or (l) revocation or termination of, or limitation or denial of liability
upon, any pledge of any certificate of deposit, securities or other property or asset of
any kind pledged by any third party to secure any or all of the Obligations, or any
attempt to do any of the foregoing, or commencement of proceedings by or against any such
third party under any bankruptcy or insolvency law; or (m) Borrower makes any payment on
account of any indebtedness or obligation which has been subordinated to the Obligations
other than as permitted in the applicable subordination agreement, or if any Person who
has subordinated such indebtedness or obligations terminates or in any way limits his
subordination agreement; or (n) there shall be a change in the record or beneficial
ownership of the outstanding shares of stock of Borrower, in one or more
transactions,<B>*</B> without the prior written consent of Silicon; or (o) Borrower shall
generally not pay its debts as they become due, or Borrower shall conceal, remove or
transfer any part of its property, with intent to hinder, delay or defraud its creditors,
or make or suffer any transfer of any of its property which may be fraudulent under any
bankruptcy, fraudulent conveyance or similar law; or (p) a Material Adverse Change shall
occur; or (q) Silicon, acting in good faith and in a commercially reasonable manner, deems
itself insecure because of the occurrence of an event prior to the effective date hereof
of which Silicon had no knowledge on the effective date or because of the occurrence of an
event on or subsequent to the effective date. Silicon may cease making any Loans hereunder
during any of the above cure periods, and thereafter if an Event of Default has occurred
and is continuing. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>        <B>*the
result of which is that any one Person owns at least 50% of the outstanding stock of
Borrower,</B> </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>        <B><I>7.2
Remedies.</I></B><I></I> Upon the occurrence and during the continuance of any Event of
Default, and at any time thereafter, Silicon, at its option, and without notice or demand
of any kind (all of which are hereby expressly waived by Borrower), may do any one or more
of the following: (a) Cease making Loans or otherwise extending credit to Borrower under
this Agreement or any other Loan Document; (b) Accelerate and declare all or any part of
the Obligations to be immediately due, payable, and performable, notwithstanding any
deferred or installment payments allowed by any instrument evidencing or relating to any
Obligation; (c) Take possession of any or all of the Collateral wherever it may be found,
and for that purpose Borrower hereby authorizes Silicon without judicial process to enter
onto any of Borrower’s premises without interference to search for, take possession
of, keep, store, or remove any of the Collateral, and remain on the premises or cause a
custodian to remain on the premises in exclusive control thereof, without charge for so
long as Silicon deems it necessary, in its good faith business judgment, in order to
complete the enforcement of its rights under this Agreement or any other agreement;
provided, however, that should Silicon seek to take possession of any of the Collateral by
court process, Borrower hereby irrevocably waives: (i) any bond and any surety or security
relating thereto required by any statute, court rule or otherwise as an incident to such
possession; (ii) any demand for possession prior to the commencement of any suit or action
to recover possession thereof; and (iii) any requirement that Silicon retain possession
of, and not dispose of, any such Collateral until after trial or final judgment; (d)
Require Borrower to assemble any or all of the Collateral and make it available to Silicon
at places designated by </FONT></P>

<hr STYLE="page-break-after:always">

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Silicon which are reasonably convenient to Silicon and Borrower,
and to remove the Collateral to such locations as Silicon may deem advisable; (e) Complete
the processing, manufacturing or repair of any Collateral prior to a disposition thereof
and, for such purpose and for the purpose of removal, Silicon shall have the right to use
Borrower’s premises, vehicles, hoists, lifts, cranes, and other Equipment and all
other property without charge; (f) Sell, lease or otherwise dispose of any of the
Collateral, in its condition at the time Silicon obtains possession of it or after further
manufacturing, processing or repair, at one or more public and/or private sales, in lots
or in bulk, for cash, exchange or other property, or on credit, and to adjourn any such
sale from time to time without notice other than oral announcement at the time scheduled
for sale. Silicon shall have the right to conduct such disposition on Borrower’s
premises without charge, for such time or times as Silicon deems reasonable, or on
Silicon’s premises, or elsewhere and the Collateral need not be located at the place
of disposition. Silicon may directly or through any affiliated company purchase or lease
any Collateral at any such public disposition, and if permissible under applicable law, at
any private disposition. Any sale or other disposition of Collateral shall not relieve
Borrower of any liability Borrower may have if any Collateral is defective as to title or
physical condition or otherwise at the time of sale; (g) Demand payment of, and collect
any Accounts and General Intangibles comprising Collateral and, in connection therewith,
Borrower irrevocably authorizes Silicon to endorse or sign Borrower’s name on all
collections, receipts, instruments and other documents, to take possession of and open
mail addressed to Borrower and remove therefrom payments made with respect to any item of
the Collateral or proceeds thereof, and, in Silicon’s good faith business judgment,
to grant extensions of time to pay, compromise claims and settle Accounts and the like for
less than face value; (h) Offset against any sums in any of Borrower’s general,
special or other Deposit Accounts with Silicon against any or all of the Obligations; and
(i) Demand and receive possession of any of Borrower’s federal and state income tax
returns and the books and records utilized in the preparation thereof or referring
thereto. All reasonable attorneys’ fees, expenses, costs, liabilities and obligations
incurred by Silicon with respect to the foregoing shall be added to and become part of the
Obligations, shall be due on demand, and shall bear interest at a rate equal to the
highest interest rate applicable to any of the Obligations. Without limiting any of
Silicon’s rights and remedies, from and after the occurrence and during the
continuance of any Event of Default, the interest rate applicable to the Obligations shall
be increased by an additional four percent per annum (the “Default Rate”). </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>        <B><I>7.3
Standards for Determining Commercial Reasonableness.</I></B><I></I> Borrower and Silicon
agree that a sale or other disposition (collectively, “sale”) of any Collateral
which complies with the following standards will conclusively be deemed to be commercially
reasonable: (i) Notice of the sale is given to Borrower at least ten days prior to the
sale, and, in the case of a public sale, notice of the sale is published at least five
days before the sale in a newspaper of general circulation in the county where the sale is
to be conducted; (ii) Notice of the sale describes the collateral in general, non-specific
terms; (iii) The sale is conducted at a place designated by Silicon, with or without the
Collateral being present; (iv) The sale commences at any time between 8:00 a.m. and 6:00
p.m; (v) Payment of the purchase price in cash or by cashier’s check or wire transfer
is required; (vi) With respect to any sale of any of the Collateral, Silicon may (but is
not obligated to) direct any prospective purchaser to ascertain directly from Borrower any
and all information concerning the same. Silicon shall be free to employ other methods of
noticing and selling the Collateral, in its discretion, if they are commercially
reasonable. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>        <B><I>7.4
Power of Attorney.</I></B><I></I> Upon the occurrence and during the continuance of any
Event of Default, without limiting Silicon’s other rights and remedies, Borrower
grants to Silicon an irrevocable power of attorney coupled with an interest, authorizing
and permitting Silicon (acting through any of its employees, attorneys or agents) at any
time, at its option, but without obligation, with or without notice to Borrower, and at
Borrower’s expense, to do any or all of the following, in Borrower’s name or
otherwise, but Silicon agrees that if it exercises any right hereunder, it will do so in
good faith and in a commercially reasonable manner: (a) Execute on behalf of Borrower any
documents that Silicon may, in its good faith business judgment, deem advisable in order
to perfect and maintain Silicon’s security interest in the Collateral, or in order to
exercise a right of Borrower or Silicon, or in order to fully consummate all the
transactions contemplated under this Agreement, and all other Loan Documents; (b) Execute
on behalf of Borrower, any invoices relating to any Account, any draft against any Account
Debtor and any notice to any Account Debtor, any proof of claim in bankruptcy, any Notice
of Lien, claim of mechanic’s, materialman’s or other lien, or assignment or
satisfaction of mechanic’s, materialman’s or other lien; (c) Take control in any
manner of any cash or non-cash items of payment or proceeds of Collateral; endorse the
name of Borrower upon any instruments, or documents, evidence of payment or Collateral
that may come into Silicon’s possession; (d) Endorse all checks and other forms of
remittances received by Silicon; (e) Pay, contest or settle any lien, charge, encumbrance,
security interest and adverse claim in or to any of the Collateral, or any judgment based
thereon, or otherwise take any action to terminate or discharge the same; (f) Grant
extensions of time to pay, compromise claims and settle Accounts and General Intangibles
for less than face value and execute all releases and other documents in connection
therewith; (g) Pay any sums required on account of Borrower’s taxes or to secure the
release of any liens therefor, or both; (h) Settle and adjust, and give releases of, any
insurance claim that relates to any of the Collateral and obtain payment therefor; (i)
Instruct any third party having custody or control of any books or records
belonging to, or relating to, Borrower to give Silicon the same rights of access
and other rights with respect thereto as Silicon has under this Agreement; and
(j) Take any </FONT></P>

<hr STYLE="page-break-after:always">

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>action or pay any sum
required of Borrower pursuant to this Agreement and any other Loan Documents.
Any and all reasonable sums paid and any and all reasonable costs, expenses,
liabilities, obligations and attorneys’ fees incurred by Silicon with respect to
the foregoing shall be added to and become part of the Obligations, shall be
payable on demand, and shall bear interest at a rate equal to the highest
interest rate applicable to any of the Obligations. In no event shall Silicon’s
rights under the foregoing power of attorney or any of Silicon’s other rights
under this Agreement be deemed to indicate that Silicon is in control of the
business, management or properties of Borrower. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>        <B><I>7.5
Application of Proceeds.</I></B><I></I> All proceeds realized as the result of any sale of
the Collateral shall be applied by Silicon first to the reasonable costs, expenses,
liabilities, obligations and attorneys’ fees incurred by Silicon in the exercise of
its rights under this Agreement, second to the interest due upon any of the Obligations,
and third to the principal of the Obligations, in such order as Silicon shall determine in
its sole discretion. Any surplus shall be paid to Borrower or other persons legally
entitled thereto; Borrower shall remain liable to Silicon for any deficiency. If, Silicon,
in its good faith business judgment, directly or indirectly enters into a deferred payment
or other credit transaction with any purchaser at any sale of Collateral, Silicon shall
have the option, exercisable at any time, in its good faith business judgment, of either
reducing the Obligations by the principal amount of purchase price or deferring the
reduction of the Obligations until the actual receipt by Silicon of the cash therefor. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>        <B><I>7.6
Remedies Cumulative.</I></B><I></I> In addition to the rights and remedies set forth in
this Agreement, Silicon shall have all the other rights and remedies accorded a secured
party under the California Uniform Commercial Code and under all other applicable laws,
and under any other instrument or agreement now or in the future entered into between
Silicon and Borrower, and all of such rights and remedies are cumulative and none is
exclusive. Exercise or partial exercise by Silicon of one or more of its rights or
remedies shall not be deemed an election, nor bar Silicon from subsequent exercise or
partial exercise of any other rights or remedies. The failure or delay of Silicon to
exercise any rights or remedies shall not operate as a waiver thereof, but all rights and
remedies shall continue in full force and effect until all of the Obligations have been
fully paid and performed. </FONT></P>

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     <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><I>8.</I></B><I></I>    
          <B><I>DEFINITIONS. </I></B><I></I>As used in this Agreement, the following terms
          have the following meanings: </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>        “<U>Account
Debtor</U>” means the obligor on an Account. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>        “<U>Accounts</U>”
means all present and future “accounts” as defined in the California Uniform
Commercial Code in effect on the date hereof with such additions to such term as may
hereafter be made, and includes without limitation all accounts receivable and other sums
owing to Borrower. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>        “<U>Affiliate</U>”
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. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>        “<U>Business
Day</U>” means a day on which Silicon is open for business. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>        “<U>Code</U>”
means the Uniform Commercial Code as adopted and in effect in the State of California from
time to time. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>        “<U>Collateral</U>”
has the meaning set forth in Section 2 above. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>        “<U>continuing</U>” and
“<U>during the continuance of</U>” when used with reference to a Default or
Event of Default means that the Default or Event of Default has occurred and has not been
either waived in writing by Silicon or cured within any applicable cure period. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>        “<U>Default</U>”
means any event which with notice or passage of time or both, would constitute an Event of
Default. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>        “<U>Default
Rate</U>” has the meaning set forth in Section 7.2 above. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>        “<U>Deposit Accounts</U>”
means all present and future “deposit accounts” as defined in the California
Uniform Commercial Code in effect on the date hereof with such additions to such term as
may hereafter be made, and includes without limitation all general and special bank
accounts, demand accounts, checking accounts, savings accounts and certificates of
deposit. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>        “<U>Eligible
Inventory</U>” means Inventory which Silicon, in its sole judgment, deems eligible
for borrowing, based on such considerations as Silicon may from time to time deem
appropriate<B>*</B>. Without limiting the fact that the determination of which Inventory
is eligible for borrowing is a matter of Silicon’s discretion, Inventory which does
not meet the following requirements will not be deemed to be Eligible Inventory: Inventory
which (i) consists of raw materials<B>**</B> or finished goods, in good, new and
salable condition which is not perishable, not obsolete or unmerchantable, and is not
comprised of packaging materials or supplies; (ii) meets all
applicable governmental standards; (iii) has been manufactured in compliance with the Fair
Labor Standards Act; (iv) conforms in all respects to the warranties and
representations set forth in this Agreement; (v) is at all times subject to
Silicon’s duly perfected, first priority security interest; and (vi) is situated
at a one of the locations set forth on the Schedule. </FONT></P>

<hr STYLE="page-break-after:always">

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>        <B>*and
which constitutes “Eligible Export-Related Inventory” (as defined in the Exim
Borrower Agreement referred to in the Schedule)</B> </FONT></P>

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<A NAME=A014></A>
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>      **<b>,
work in process </b> </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>        “<U>Eligible
Accounts</U>” means Accounts and General Intangibles arising in the ordinary course
of Borrower’s business from the sale of goods or the rendition of services, or the
non-exclusive licensing of Intellectual Property, which Silicon, in its good faith
business judgment, shall deem eligible for borrowing<B>*</B>. Without limiting the fact
that the determination of which Accounts are eligible for borrowing is a matter of
Silicon’s good faith business judgment, the following (the “<U>Minimum
Eligibility Requirements</U>”) are the minimum requirements for a Account to be an
Eligible Account: (i) the Account must not be outstanding for more than 90 days from its
invoice date (the “<U>Eligibility Period</U>”), (ii) the Account must not
represent progress billings, or be due under a fulfillment or requirements contract with
the Account Debtor, (iii) the Account must not be subject to any contingencies (including
Accounts arising from sales on consignment, guaranteed sale or other terms pursuant to
which payment by the Account Debtor may be conditional), (iv) the Account must not be
owing from an Account Debtor with whom Borrower has any dispute (whether or not relating
to the particular Account), (v) the Account must not be owing from an Affiliate of
Borrower, (vi) the Account must not be owing from an Account Debtor which is subject to
any insolvency or bankruptcy proceeding, or whose financial condition is not acceptable to
Silicon, or which, fails or goes out of a material portion of its business, (vii) the
Account must not be owing from the United States or any department, agency or
instrumentality thereof (unless there has been compliance, to Silicon’s satisfaction,
with the United States Assignment of Claims Act), (viii) (ix) the Account must not be
owing from an Account Debtor to whom Borrower is or may be liable for goods purchased from
such Account Debtor or otherwise (but, in such case, the Account will be deemed not
eligible only to the extent of any amounts owed by Borrower to such Account Debtor).
Accounts owing from one Account Debtor will not be deemed Eligible Accounts to the extent
they exceed 25% of the total Accounts outstanding. In addition, if more than 50% of the
Accounts owing from an Account Debtor are outstanding for a period longer than their
Eligibility Period (without regard to unapplied credits) or are otherwise not eligible
Accounts, then all Accounts owing from that Account Debtor will be deemed ineligible for
borrowing. Silicon may, from time to time, in its good faith business judgment, revise the
Minimum Eligibility Requirements, upon written notice to Borrower. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>        <B>*and
which constitute “Eligible Export-Related Accounts Receivable” (as defined in
the Exim Borrower Agreement referred to in the Schedule).</B> </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>        “<U>Equipment</U>”
means all present and future “equipment” as defined in the California Uniform
Commercial Code in effect on the date hereof with such additions to such term as may
hereafter be made, and includes without limitation all machinery, fixtures, goods,
vehicles (including motor vehicles and trailers), and any interest in any of the
foregoing. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>        “<U>Event
of Default</U>” means any of the events set forth in Section 7.1 of this
Agreement. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>        “<U>GAAP</U>”
means generally accepted accounting principles consistently applied. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>        “<U>General
Intangibles</U>” means all present and future “general intangibles” as
defined in the California Uniform Commercial Code in effect on the date hereof with such
additions to such term as may hereafter be made, and includes without limitation all
Intellectual Property, payment intangibles, royalties, contract rights, goodwill,
franchise agreements, purchase orders, customer lists, route lists, telephone numbers,
domain names, claims, income tax refunds, security and other deposits, options to purchase
or sell real or personal property, rights in all litigation presently or hereafter pending
(whether in contract, tort or otherwise), insurance policies (including without limitation
key man, property damage, and business interruption insurance), payments of insurance and
rights to payment of any kind. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>        “<U>good
faith business judgment</U>” means honesty in fact and good faith (as defined in
Section 1201 of the Code) in the exercise of Silicon’s business judgment. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>        “<U>including</U>”
means including (but not limited to). </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Large Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>        “<U>Intellectual
Property</U>” means all present and future (a) copyrights, copyright rights,
copyright applications, copyright registrations and like protections in each work of
authorship and derivative work thereof, whether published or unpublished, (b) trade secret
rights, including all rights to unpatented inventions and know-how, and confidential
information; (c) mask work or similar rights available for the protection of semiconductor
chips; (d) patents, patent applications and like protections including without limitation
improvements, divisions, continuations, renewals, reissues, extensions and
continuations-in-part of the same; (e) trademarks, servicemarks, trade styles, and trade
names, whether or not any of the foregoing are registered, and all applications to
register and registrations of the same and like protections, and the entire goodwill of
the business of Borrower connected with and symbolized by any such trademarks; (f)
computer software and computer software products; (g) designs and design rights; (h)
technology; (i) all claims for damages by way of past, present and future infringement of
any of the rights included above; (j) all licenses or other rights to use any property or
rights of a type described above. </FONT></P>

<hr STYLE="page-break-after:always">

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>        “<U>Inventory</U>”
means all present and future “inventory” as defined in the California Uniform
Commercial Code in effect on the date hereof with such additions to such term as may
hereafter be made, and includes without limitation all merchandise, raw materials, parts,
supplies, packing and shipping materials, work in process and finished products, including
without limitation such inventory as is temporarily out of Borrower’s custody or
possession or in transit and including any returned goods and any documents of title
representing any of the above. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>        “<U>Investment
Property</U>” means all present and future investment property, securities, stocks,
bonds, debentures, debt securities, partnership interests, limited liability company
interests, options, security entitlements, securities accounts, commodity contracts,
commodity accounts, and all financial assets held in any securities account or otherwise,
and all options and warrants to purchase any of the foregoing, wherever located, and all
other securities of every kind, whether certificated or uncertificated. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>        “<U>Loan
Documents</U>” means, collectively, this Agreement, the Representations, and all
other present and future documents, instruments and agreements between Silicon and
Borrower, including, but not limited to those relating to this Agreement, and all
amendments and modifications thereto and replacements therefor. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>        “<U>Material
Adverse Change</U>” means any of the following: (i) a material adverse change in the
business, operations, or financial or other condition of the Borrower, or (ii) a material
impairment of the prospect of repayment of any portion of the Obligations; or (iii) a
material impairment of the value or priority of Silicon’s security interests in the
Collateral. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>        “<U>Obligations</U>”
means all present and future Loans, advances, debts, liabilities, obligations, guaranties,
covenants, duties and indebtedness at any time owing by Borrower to Silicon, whether
evidenced by this Agreement or any note or other instrument or document, or otherwise,
whether arising from an extension of credit, opening of a letter of credit, banker’s
acceptance, loan, guaranty, indemnification or otherwise, whether direct or indirect
(including, without limitation, those acquired by assignment and any participation by
Silicon in Borrower’s debts owing to others), absolute or contingent, due or to
become due, including, without limitation, all interest, charges, expenses, fees,
attorney’s fees, expert witness fees, audit fees, letter of credit fees, collateral
monitoring fees, closing fees, facility fees, termination fees, minimum interest charges
and any other sums chargeable to Borrower under this Agreement or under any other Loan
Documents. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>        “<U>Other
Property</U>” means the following as defined in the California Uniform Commercial
Code in effect on the date hereof with such additions to such term as may hereafter be
made, and all rights relating thereto: all present and future “commercial tort
claims” (including without limitation any commercial tort claims identified in the
Representations), “documents”, “instruments”, “promissory
notes”, “chattel paper”, “letters of credit”,
“letter-of-credit rights”, “fixtures”, “farm products” and
“money”; and all other goods and personal property of every kind, tangible and
intangible, whether or not governed by the California Uniform Commercial Code. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>        “<U>Permitted
Liens</U>” means the following: (i) purchase money security interests in specific
items of Equipment; (ii) leases of specific items of Equipment; (iii) liens for taxes not
yet payable; (iv) additional security interests and liens consented to in writing by
Silicon, which consent may be withheld in its good faith business judgment; (v) security
interests being terminated substantially concurrently with this Agreement; (vi) liens
of materialmen, mechanics, warehousemen, carriers, or other similar liens arising in the
ordinary course of business and securing obligations which are not delinquent;
(vii) liens incurred in connection with the extension, renewal or refinancing of the
indebtedness secured by liens of the type described above in clauses (i) or (ii) above,
provided that any extension, renewal or replacement lien is limited to the property
encumbered by the existing lien and the principal amount of the indebtedness being
extended, renewed or refinanced does not increase; (viii) Liens in favor of customs and
revenue authorities which secure payment of customs duties in connection with the
importation of goods. Silicon will have the right to require, as a condition to its
consent under subparagraph (iv) above, that the holder of the additional security interest
or lien sign an intercreditor agreement on Silicon’s then standard form, acknowledge
that the security interest is subordinate to the security interest in favor of Silicon,
and agree not to take any action to enforce its subordinate security interest so long as
any Obligations remain outstanding, and that Borrower agree that any uncured default in
any obligation secured by the subordinate security interest shall also constitute an Event
of Default under this Agreement. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>        “<U>Person</U>”
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. </FONT></P>

<hr STYLE="page-break-after:always">

<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>       “<U>Representations</U>”
means the written Representations and Warranties provided by Borrower to Silicon referred
to in the Schedule. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>        “<U>Reserves</U>”
means, as of any date of determination, such amounts as Silicon may from time to time
establish and revise in its good faith business judgment, reducing the amount of Loans,
Letters of Credit and other financial accommodations which would otherwise be available to
Borrower under the lending formula(s) provided in the Schedule: (a) to reflect events,
conditions, contingencies or risks which, as determined by Silicon in its good faith
business judgment, do or may adversely affect (i) the Collateral or any other property
which is security for the Obligations or its value (including without limitation any
increase in delinquencies of Accounts), (ii) the assets, business or prospects of Borrower
or any Guarantor, or (iii) the security interests and other rights of Silicon in the
Collateral (including the enforceability, perfection and priority thereof); or (b) to
reflect Silicon’s good faith belief that any collateral report or financial
information furnished by or on behalf of Borrower or any Guarantor to Silicon is or may
have been incomplete, inaccurate or misleading in any material respect; or (c) in respect
of any state of facts which Silicon determines in good faith constitutes an Event of
Default or may, with notice or passage of time or both, constitute an Event of Default. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>        <U>Other
Terms</U>. All accounting terms used in this Agreement, unless otherwise indicated, shall
have the meanings given to such terms in accordance with GAAP, consistently applied. All
other terms contained in this Agreement, unless otherwise indicated, shall have the
meanings provided by the Code, to the extent such terms are defined therein. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->
<A NAME=A015></A>
<P ALIGN=LEFT><i><b><FONT FACE="Times New Roman, Times, Serif" SIZE=2>9. GENERAL PROVISIONS. </FONT>
</b></i></P>

<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>        <B><I>9.1
Interest Computation. </I></B><I></I>In computing interest on the Obligations, all checks,
wire transfers and other items of payment received by Silicon (including proceeds of
Accounts and payment of the Obligations in full) shall be deemed applied by Silicon on
account of the Obligations three Business Days after receipt by Silicon of immediately
available funds, and, for purposes of the foregoing, any such funds received after 12:00
Noon on any day shall be deemed received on the next Business Day. Silicon shall not,
however, be required to credit Borrower’s account for the amount of any item of
payment which is unsatisfactory to Silicon in its good faith business judgment, and
Silicon may charge Borrower’s loan account for the amount of any item of payment
which is returned to Silicon unpaid. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>        <B><I>9.2
Application of Payments. </I></B><I></I>All payments with respect to the Obligations may
be applied, and in Silicon’s good faith business judgment reversed and re-applied, to
the Obligations, in such order and manner as Silicon shall determine in its good faith
business judgment. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>        <B><I>9.3
Charges to Accounts. </I></B><I></I>Silicon may, in its discretion, require that Borrower
pay monetary Obligations in cash to Silicon, or charge them to Borrower’s Loan
account, in which event they will bear interest at the same rate applicable to the Loans.
Silicon may also, in its discretion, charge any monetary Obligations to Borrower’s
Deposit Accounts maintained with Silicon. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>        <B><I>9.4
Monthly Accountings.</I></B><I></I> Silicon shall provide Borrower monthly with an account
of advances, charges, expenses and payments made pursuant to this Agreement. Such account
shall be deemed correct, accurate and binding on Borrower and an account stated (except
for reverses and reapplications of payments made and corrections of errors discovered by
Silicon), unless Borrower notifies Silicon in writing to the contrary within 60 days after
such account is rendered, describing the nature of any alleged errors or omissions. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>        <B><I>9.5
Notices.</I></B><I></I> All notices to be given under this Agreement shall be in writing
and shall be given either personally or by reputable private delivery service or by
regular first-class mail, or certified mail return receipt requested, addressed to Silicon
or Borrower at the addresses shown in the heading to this Agreement, or at any other
address designated in writing by one party to the other party. Notices to Silicon shall be
directed to the Commercial Finance Division, to the attention of the Division Manager or
the Division Credit Manager. All notices shall be deemed to have been given upon delivery
in the case of notices personally delivered, or at the expiration of one Business Day
following delivery to the private delivery service, or two Business Days following the
deposit thereof in the United States mail, with postage prepaid. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>        <B><I>9.6
Severability.</I></B><I></I> 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. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>        <B><I>9.7
Integration.</I></B><I></I> This Agreement and such other written agreements, documents
and instruments as may be executed in connection herewith are the final, entire and
complete agreement between Borrower and Silicon and supersede all prior and
contemporaneous negotiations and oral representations and agreements, all of which are
merged and integrated in this Agreement. <U>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.</U> </FONT></P>

<hr STYLE="page-break-after:always">

<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>        <B><I>9.8
Waivers; Indemnity.</I></B><I></I> The failure of Silicon at any time or times to require
Borrower to strictly comply with any of the provisions of this Agreement or any other Loan
Document shall not waive or diminish any right of Silicon later to demand and receive
strict compliance therewith. Any waiver of any default shall not waive or affect any other
default, whether prior or subsequent, and whether or not similar. None of the provisions
of this Agreement or any other Loan Document shall be deemed to have been waived by any
act or knowledge of Silicon or its agents or employees, but only by a specific written
waiver signed by an authorized officer of Silicon and delivered to Borrower. Borrower
waives the benefit of all statutes of limitations relating to any of the Obligations or
this Agreement or any other Loan Document, and Borrower waives demand, protest, notice of
protest and notice of default or dishonor, notice of payment and nonpayment, release,
compromise, settlement, extension or renewal of any commercial paper, instrument, account,
General Intangible, document or guaranty at any time held by Silicon on which Borrower is
or may in any way be liable, and notice of any action taken by Silicon, unless expressly
required by this Agreement. Borrower hereby agrees to indemnify Silicon and its
affiliates, subsidiaries, parent, directors, officers, employees, agents, and attorneys,
and to hold them harmless from and against any and all claims, debts, liabilities,
demands, obligations, actions, causes of action, penalties, costs and expenses (including
reasonable attorneys’ fees), of every kind, which they may sustain or incur based
upon or arising out of any of the Obligations, or any relationship or agreement between
Silicon and Borrower, or any other matter, relating to Borrower or the Obligations;
provided that this indemnity shall not extend to damages proximately caused by the
indemnitee’s own gross negligence or willful misconduct. Notwithstanding any
provision in this Agreement to the contrary, the indemnity agreement set forth in this
Section shall survive any termination of this Agreement and shall for all purposes
continue in full force and effect. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>        <B><I>9.9
No Liability for Ordinary Negligence.</I></B><I></I> Neither Silicon, nor any of its
directors, officers, employees, agents, attorneys or any other Person affiliated with or
representing Silicon shall be liable for any claims, demands, losses or damages, of any
kind whatsoever, made, claimed, incurred or suffered by Borrower or any other party
through the ordinary negligence of Silicon, or any of its directors, officers, employees,
agents, attorneys or any other Person affiliated with or representing Silicon, but nothing
herein shall relieve Silicon from liability for its own gross negligence or willful
misconduct. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>        <B><I>9.10
Amendment.</I></B><I></I> The terms and provisions of this Agreement may not be waived or
amended, except in a writing executed by Borrower and a duly authorized officer of
Silicon. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>        <B><I>9.11
Time of Essence.</I></B><I></I> Time is of the essence in the performance by Borrower of
each and every obligation under this Agreement. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>        <B><I>9.12
Attorneys Fees and Costs.</I></B><I></I> Borrower shall reimburse Silicon for all
reasonable attorneys’ fees and all filing, recording, search, title insurance,
appraisal, audit, and other reasonable costs incurred by Silicon, pursuant to, or in
connection with, or relating to this Agreement (whether or not a lawsuit is filed),
including, but not limited to, any reasonable attorneys’ fees and costs Silicon
incurs in order to do the following: prepare and negotiate this Agreement and all present
and future documents relating to this Agreement; obtain legal advice in connection with
this Agreement or Borrower; enforce, or seek to enforce, any of its rights; prosecute
actions against, or defend actions by, Account Debtors; commence, intervene in, or defend
any action or proceeding; initiate any complaint to be relieved of the automatic stay in
bankruptcy; file or prosecute any probate claim, bankruptcy claim, third-party claim, or
other claim; examine, audit, copy, and inspect any of the Collateral or any of
Borrower’s books and records; protect, obtain possession of, lease, dispose of, or
otherwise enforce Silicon’s security interest in, the Collateral; and otherwise
represent Silicon in any litigation relating to Borrower. In satisfying Borrower’s
obligation hereunder to reimburse Silicon for attorneys fees, Borrower may, for
convenience, issue checks directly to Silicon’s attorneys, Levy, Small & Lallas,
but Borrower acknowledges and agrees that Levy, Small & Lallas is representing only
Silicon and not Borrower in connection with this Agreement. If either Silicon or Borrower
files any lawsuit against the other predicated on a breach of this Agreement, the
prevailing party in such action shall be entitled to recover its reasonable costs and
attorneys’ fees, including (but not limited to) reasonable attorneys’ fees and
costs incurred in the enforcement of, execution upon or defense of any order, decree,
award or judgment. All attorneys’ fees and costs to which Silicon may be entitled
pursuant to this Paragraph shall immediately become part of Borrower’s Obligations,
shall be due on demand, and shall bear interest at a rate equal to the highest interest
rate applicable to any of the Obligations. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>        <B><I>9.13
Benefit of Agreement.</I></B><I></I> The provisions of this Agreement shall be binding
upon and inure to the benefit of the respective successors, assigns, heirs, beneficiaries
and representatives of Borrower and Silicon; provided, however, that Borrower may not
assign or transfer any of its rights under this Agreement without the prior written
consent of Silicon, and any prohibited assignment shall be void. No consent by Silicon to
any assignment shall release Borrower from its liability for the Obligations. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>        <B><I>9.14
Joint and Several Liability.</I></B><I></I> 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. </FONT></P>

<hr STYLE="page-break-after:always">

<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>        <B><I>9.15
Limitation of Actions.</I></B><I> </I>Any claim or cause of action by Borrower against
Silicon, its directors, officers, employees, agents, accountants or attorneys, based upon,
arising from, or relating to this Loan Agreement, or any other Loan Document, or any other
transaction contemplated hereby or thereby or relating hereto or thereto, or any other
matter, cause or thing whatsoever, occurred, done, omitted or suffered to be done by
Silicon, its directors, officers, employees, agents, accountants or attorneys, shall be
barred unless asserted by Borrower by the commencement of an action or proceeding in a
court of competent jurisdiction by the filing of a complaint within one year after the
first act, occurrence or omission upon which such claim or cause of action, or any part
thereof, is based, and the service of a summons and complaint on an officer of Silicon, or
on any other person authorized to accept service on behalf of Silicon, within thirty (30)
days thereafter. Borrower agrees that such one-year period is a reasonable and sufficient
time for Borrower to investigate and act upon any such claim or cause of action. The
one-year period provided herein shall not be waived, tolled, or extended except by the
written consent of Silicon in its sole discretion. This provision shall survive any
termination of this Loan Agreement or any other Loan Document. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>        <B><I>9.16
Paragraph Headings; Construction.</I></B><I></I> Paragraph headings are only used in this
Agreement for convenience. Borrower and Silicon acknowledge that the headings may not
describe completely the subject matter of the applicable paragraph, and the headings shall
not be used in any manner to construe, limit, define or interpret any term or provision of
this Agreement. This Agreement has been fully reviewed and negotiated between the parties
and no uncertainty or ambiguity in any term or provision of this Agreement shall be
construed strictly against Silicon or Borrower under any rule of construction or
otherwise. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>        <B><I>9.17
Governing Law; Jurisdiction; Venue.</I></B><I></I> This Agreement and all acts and
transactions hereunder and all rights and obligations of Silicon and Borrower shall be
governed by the laws of the State of California. As a material part of the consideration
to Silicon to enter into this Agreement, Borrower (i) agrees that all actions and
proceedings relating directly or indirectly to this Agreement shall, at Silicon’s
option, be litigated in courts located within California, and that the exclusive venue
therefor shall be Santa Clara County; (ii) consents to the jurisdiction and venue of any
such court and consents to service of process in any such action or proceeding by personal
delivery or any other method permitted by law; and (iii) waives any and all rights
Borrower may have to object to the jurisdiction of any such court, or to transfer or
change the venue of any such action or proceeding. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>        <B><I>9.18
Mutual Waiver of Jury Trial.</I> BORROWER AND SILICON EACH HEREBY WAIVE THE RIGHT TO TRIAL
BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, ARISING OUT OF, OR IN ANY WAY RELATING TO,
THIS AGREEMENT OR ANY OTHER PRESENT OR FUTURE INSTRUMENT OR AGREEMENT BETWEEN SILICON AND
BORROWER, OR ANY CONDUCT, ACTS OR OMISSIONS OF SILICON OR BORROWER OR ANY OF THEIR
DIRECTORS, OFFICERS, EMPLOYEES, AGENTS, ATTORNEYS OR ANY OTHER PERSONS AFFILIATED WITH
SILICON OR BORROWER, IN ALL OF THE FOREGOING CASES, WHETHER SOUNDING IN CONTRACT OR TORT
OR OTHERWISE.</B> </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->
<A NAME=A016>
<table border="0" cellpadding="0" cellspacing="0" style="border-collapse: collapse" bordercolor="#111111" width="600" id="AutoNumber1">
  <tr>
    <td width="254"><b><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
    Borrower:</FONT></b></td>
    <td width="346"><b><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
    Silicon: </FONT></b></td>
  </tr>
  <tr>
    <td width="254"><b><FONT FACE="Times New Roman, Times, Serif" SIZE=2><br>
    TEGAL CORPORATION </FONT></b></td>
    <td width="346"><b><FONT FACE="Times New Roman, Times, Serif" SIZE=2><br>
    SILICON VALLEY BANK </FONT></b></td>
  </tr>
  <tr>
    <td width="254"> </td>
    <td width="346"> </td>
  </tr>
  <tr>
    <td width="254"><b><font size="2">
    BY /s/ Michael L. Parodi                       </font></b></td>
    <td width="346"><b><font size="2">
    BY /s/ Patrick J. O'Donnell                    </font></b></td>
  </tr>
  <tr>
    <td width="254"><b><font size="2">      President or Vice President</font></b></td>
    <td width="346"><b><font size="2">
    Title Vice President                                  </font></b></td>
  </tr>
  <tr>
    <td width="254"> </td>
    <td width="346"> </td>
  </tr>
  <tr>
    <td width="254"><b><font size="2">
    BY Kathy Petrini                                     </font></b></td>
    <td width="346"> </td>
  </tr>
  <tr>
    <td width="254"><b><font size="2">      Secretary or
    Ass't Secretary </font>
    </b></td>
    <td width="346"> </td>
  </tr>
  <tr>
    <td width="254"> </td>
    <td width="346"> </td>
  </tr>
</table>

</A>

<PRE><!-- MARKER PAGE="sheet: 11; page: 11" -->
<hr STYLE="page-break-after:always">

<font face="Times New Roman"><b>Silicon Valley Bank</b></font><div align="center"><font face="Times New Roman"><b>
Schedule to

Loan and Security Agreement
(Exim Program)</b></font></div><div align="left"><font face="Times New Roman"><b>

Borrower: Tegal Corporation
Address:    2201 South McDowell Blvd.
                     Petaluma, CA  94954

Date:             June 26, 2002</b>

This  Schedule  forms an integral  part of the Loan and  Security  Agreement  between  Silicon  Valley Bank and the above-borrower of even date.
</font>
<hr><!-- MARKER FORMAT-SHEET="Para Flush Level 4" FSL="Default" -->
</div><TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b>1. Credit Limit</b><br>     (Section 1.1):</FONT></TD>
<TD WIDTH=80%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
An
amount  not to exceed the  lesser of a total of  $5,000,000  at any one
                                        time outstanding  (the "Maximum Credit Limit"),
 or the sum of (a) and (b)                                         below: </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>                                                 (a) </FONT></TD>
<TD WIDTH=75%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>90%
(an "Advance Rate") of the amount of Borrower's  Eligible
                                                     Accounts (as defined in Section 8
above); provided,  however,                                                      if the
Eligible  Account is  denominated in Euros or Japanese
                                                     Yen and an FX Forward  Contract  (as
 defined  below) has not                                                      been
entered into with respect thereto,  then such percentage
                                                     shall be 70%,  plus </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>                                                 (b) </FONT></TD>
<TD WIDTH=75%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>an
amount not to exceed the lesser of: </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(1) </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>75%
(an "Advance  Rate") of the value of  Borrower's  Eligible  Inventory (as defined in
Section 8 above),
                                                              calculated  at the lower of
cost or market value and
                                                              determined on a first-in,
first-out basis, or </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(2) </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>75%
(an  "Advance  Rate") of the cost of goods sold with respect to "System  Purchase
 Orders" (as defined                                                               below)
as such  outstanding  System  Purchase Orders
                                                              are presented to Silicon; or </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(3) </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>60%
of the aggregate amount of all Loans available under subclauses (a) and (b) of the Credit
Limit; or </FONT></TD>
</TR>
</TABLE>
<BR>
<hr STYLE="page-break-after:always">


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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>                                                     (4) </FONT></TD>
<TD><b><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></b></TD>
<TD WIDTH=70%><b><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$3,000,000. </FONT></b></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD WIDTH=80%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Notwithstanding
 the foregoing,  the total  outstanding  Obligations under
                                        this Loan  Agreement and under the Non-Exim Agreement (as defined  below)                                         shall not at any
time exceed $10,000,000 (the "Overall Credit Limit"). </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD WIDTH=80%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
For
the  purposes  hereof,  the  term  "System  Purchase  Orders"  means a
                                        purchase  order of the Borrower  from a customer
of Borrower for an entire                                         etching machine
 manufactured by Borrower,  a copy of which purchase order
                                        shall have been  provided to Silicon (and the
 original of which  purchase                                         order  will be
 provided  to Silicon  upon  Silicon's  request).  A System
                                        Purchase  Order shall not include any  purchase
 orders for spare parts or                                         any purchase orders
for anything less than an entire etching machine. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD WIDTH=80%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Silicon
 may,  from time to time,  modify the Advance  Rates,  in its good
                                        faith business judgment, upon notice to the
Borrower,  based on changes in                                         collection
 experience  with respect to Accounts,  its  evaluation  of the
                                        Inventory or other issues or factors  relating to
the Accounts,  Inventory                                         or other Collateral. </FONT></TD>
</TR>
</TABLE>
<BR>



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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b>Letter of Credit Sublimit</b><BR>(Section 1.6):</FONT></TD>
<TD WIDTH=80%><b><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<br>$5,000,000. </FONT></b></TD>
</TR>
</TABLE>
<font face="Times New Roman, Times, Serif"><BR></font><TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=20%><u><font size="2" face="Times New Roman, Times, Serif">Foreign Exchange <BR>Contract Sublimit: </font></u></TD>
<TD WIDTH=80%><b><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<br>$5,000,000. </FONT></b></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD WIDTH=80%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Borrower
may enter into foreign  exchange  forward  contracts with Silicon,
                                        on its standard  forms,  under which  Borrower
 commits to purchase from or                                         sell to  Silicon a
set amount of foreign  currency  more than one  business
                                        day after the contract  date (the "FX Forward
 Contracts");  provided  that                                         (1) at the time the
FX  Forward  Contract  is  entered  into  Borrower  has
                                        Loans  available to it under this  Agreement in
an amount at least equal to                                         10% of the  amount of
the FX  Forward  Contract;  (2) the total FX  Forward
                                        Contracts  at any one time  outstanding  may not
exceed 10 times the amount                                         of the Foreign
Exchange  Contract Sublimit set forth above.  Silicon shall
                                        have  the  right  to  withhold,  from  the  Loans
 otherwise  available  to                                         Borrower  under this
 Agreement,  a reserve  (which shall be in addition to
                                        all  other  reserves)  in an amount  equal to 10%
of the  total FX  Forward                                         Contracts  from  time
to time  outstanding,  and in the  event  at any time
                                        there are  insufficient  Loans  available  to
 Borrower  for such  reserve,                                         Borrower  shall
 deposit and maintain  with Silicon cash  collateral  in an
                                        amount  at all  times  equal  to such
 deficiency,  which  shall be held as                                         Collateral
 for  all  purposes  of  this  Agreement.  Silicon  may,  in its
                                        discretion,  terminate  the FX Forward  Contracts
at any time that an Event                                         of Default  occurs and
is  continuing.  Borrower shall execute all standard
                                        form  applications  and  agreements  of Silicon
in  connection  with the FX                                         Forward  Contracts,
  and  without  limiting  any  of  the  terms  of  such
                                        applications  and  agreements,  Borrower  shall
pay all  standard  fees and                                         charges of Silicon in
connection with the FX Forward Contracts. </FONT></TD>
</TR>
</TABLE>
<BR>

<hr STYLE="page-break-after:always">


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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b> 2.  Interest.<br>        Interest Rate</b> (Section 1.2):</FONT></TD>
<TD WIDTH=80%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
A
rate equal to the "Prime  Rate" in effect  from time to time,  plus 1.0%
                                        per annum.  Interest  shall be  calculated  on
the basis of a 360-day year                                         for the  actual
 number  of days  elapsed.  "Prime  Rate"  means  the rate
                                        announced  from time to time by Silicon as its
"prime  rate;" it is a base                                         rate upon which
 other rates  charged by Silicon are based,  and it is not
                                        necessarily  the  best  rate  available  at
 Silicon.  The  interest  rate                                         applicable to the
Obligations  shall change on each date there is a change
                                        in the Prime Rate. </FONT></TD>
</TR>
</TABLE>
<BR><TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=20%><b><font size="2">Minimum Monthly<br>Interest</font></b><font size="2"> (Section 1.2):</font></TD>
<TD WIDTH=80%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Not
Applicable. </FONT></TD>
</TR>
</TABLE>
<BR>
<b><font face="Times New Roman">3.  Fees (Section 1.4):
</font></b><TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=20%><font size="2" face="Times New Roman">Loan Fee: </font></TD>
<TD WIDTH=80%><FONT FACE="Times New Roman" SIZE=2>The
Loan Fee is payable as provided for in the Non-Exim Agreement. </FONT></TD>
</TR>
</TABLE>
<font face="Times New Roman"><BR></font><TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=20%><p align="left"><font size="2" face="Times New Roman">Early Acceptance<br>Reduction:</font></TD>
<TD WIDTH=80%><FONT FACE="Times New Roman" SIZE=2>If
this  Agreement and the Loan  Documents  related to this Agreement have
                                        been  executed  by each of the  parties  by June
25,  2002,  Silicon  will                                         reduce  the  amount  of
the  Loan Fee  payable  concurrently  herewith  as
                                        provided for in the Non-Exim Agreement. </FONT></TD>
</TR>
</TABLE>
<BR><TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD WIDTH=80%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
If
this  Agreement and the Loan  Documents  related to this Agreement have
                                        been executed by each of the parties by July 2,
2002,  Silicon will reduce                                         the amount of the Loan
Fee payable  concurrently  herewith as provided for
                                        in the Non-Exim Agreement. </FONT></TD>
</TR>
</TABLE>
<BR>
<hr STYLE="page-break-after:always">




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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=20%><FONT FACE="Times New Roman" SIZE=2>Collateral Monitoring<br>Fee:</FONT></TD>
<TD WIDTH=80%><FONT FACE="Times New Roman" SIZE=2>$1,000,
 per month in the  aggregate  as between  this  Agreement  and the
                                        Non-Exim Agreement,  payable in arrears (prorated
for any partial month at                                         the beginning and at
termination of this Agreement). </FONT></TD>
</TR>
</TABLE>
<font face="Times New Roman"><BR></font><TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=20%><font size="2" face="Times New Roman">Unused Line Fee:</font></TD>
<TD WIDTH=80%><FONT FACE="Times New Roman" SIZE=2>In
the event,  in any calendar month (or portion  thereof at the beginning
                                        and end of the term hereof),  the average daily
 principal  balance of the                                         aggregate Loans
outstanding  during the month under this Agreement and the
                                        Non-Exim Agreement is less than the amount of
the Maximum  Credit  Limit,                                         Borrower  shall pay
Silicon an unused line fee in an amount equal to 0.25%
                                        per annum on the  difference  between  the
 amount of the  Maximum  Credit                                         Limit and such
average daily  principal  balance of the Loans  outstanding
                                        during  the  month,  which  unused  line fee
 shall be  computed  and paid                                         monthly, in
arrears, on the first day of the following month. </FONT></TD>
</TR>
</TABLE>
<BR><TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=20%><font size="2" face="Times New Roman"><b>4.  Maturity Date</b><br>     (Section 6.1): </font></TD>
<TD WIDTH=80%><FONT FACE="Times New Roman" SIZE=2>Two
years from the date of this Agreement. </FONT></TD>
</TR>
</TABLE>
<font face="Times New Roman"><BR></font><TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=20%><font size="2" face="Times New Roman"><b>5.  Financial Covenants</b><br>     (Section 5.1): </font></TD>
<TD WIDTH=80%><FONT FACE="Times New Roman" SIZE=2>Borrower
 shall comply with each of the  financial  covenants set forth in
                                        the Non-Exim Agreement (as defined below). </FONT></TD>
</TR>
</TABLE>
<font face="Times New Roman"><BR></font><TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=20%><font size="2" face="Times New Roman"><b>6.  Reporting.</b><br>     (Section 5.3):</font></TD>
<TD WIDTH=80%><FONT FACE="Times New Roman" SIZE=2>Borrower
shall provide Silicon with the following: </FONT></TD>
</TR>
</TABLE>
<BR>

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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1. </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>With
each  request  for a Loan and on a  minimum  weekly  basis,  transaction  reports  and
 schedules  of                                             collections, on Silicon's
standard form. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2. </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Monthly
 accounts  receivable agings,  aged by invoice  date,  within  fifteen days after the
end of each                                             month. </FONT></TD>
</TR>
</TABLE>
<BR>
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3. </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Monthly
 accounts payable agings,  aged by invoice date, and outstanding or held check registers,
 if any,                                             within fifteen days after the end of
each month. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4. </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Monthly
 reconciliations of accounts receivable agings (aged by invoice date),  transaction
 reports,  and                                             general ledger, within fifteen
days after the end of each month. </FONT></TD>
</TR>
</TABLE>
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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5. </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Monthly
perpetual  inventory reports for the Inventory valued on a first-in,  first-out basis at
the lower                                             of cost or market (in  accordance
 with GAAP) or such other  inventory                                             reports
 as are  requested  by  Silicon  in its  good  faith  business
                                            judgment, all within fifteen days after the
end of each month. </FONT></TD>
</TR>
</TABLE>
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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6. </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Monthly unaudited financial  statements,  as soon as available,  and in any event within thirty
days after                                             the end of each month. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>7. </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Monthly
Compliance  Certificates,  within thirty days after the end of each month, in such form
as Silicon                                             shall  reasonably  specify,
 signed by the Chief Financial  Officer of
                                            Borrower,  certifying that as of the end of
such month Borrower was in                                             full  compliance
 with  all  of  the  terms  and  conditions  of  this
                                            Agreement,  and setting forth calculations
showing compliance with the                                             financial
 covenants  set  forth  in this  Agreement  and  such  other
                                            information as Silicon shall reasonably
 request,  including,  without                                             limitation,  a
 statement  that at the end of such month there were no
                                            held checks. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>8. </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Quarterly unaudited financial  statements,  as soon as available,  and in any event within
forty-five days                                             after the end of each fiscal
quarter of Borrower. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>9. </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Annual
 operating  budgets  (including  income  statements,  balance sheets and cash flow
 statements,  by                                             month) for the  upcoming
 fiscal year of Borrower  within  thirty days
                                            prior to the end of each fiscal year of
Borrower. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10. </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Annual
financial statements,  as soon as available,  and in any event within 120 days following
the end of                                             Borrower's fiscal year,  certified
by, and with an unqualified opinion                                             of,
independent certified public accountants acceptable to Silicon. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>11. </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Together
with each transaction  report, as provided for above,  Borrower shall provide Silicon
with a copy                                             of each purchase  order or sales
contract with respect to each invoice                                             in
excess of $100,000. </FONT></TD>
</TR>
</TABLE>
<BR>

<font face="Times New Roman"><b>7.  Borrower Information:</b></font><TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD WIDTH=80%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Borrower
 represents  and warrants that the  information  set forth in the
                                        Representations  and  Warranties  of the Borrower
 dated June 25, 2002,                                         previously  submitted
 to  Silicon  (the  "Representations")  is true  and
                                        correct as of the date hereof. </FONT></TD>
</TR>
</TABLE>
<BR>
<hr STYLE="page-break-after:always">




<font face="Times New Roman"><b>8. ADDITIONAL PROVISIONS</b></font><TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>                                        <b>(1) </b></FONT></TD>
<TD WIDTH=75%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b>Banking
 Relationship.</b> Borrower  shall at all times  maintain  its
                                               primary banking  relationship  with
Silicon.  Without  limiting the                                                generality
 of  the  foregoing,   Borrower  shall,  at  all  times,
                                               maintain  not less than 80% of its total
 cash and  investments  on                                                deposit with
 Silicon.  As to any Deposit  Accounts and  investment
                                               accounts maintained with another
institution,  Borrower shall cause                                                such
institution,  within 30 days after the date of this Agreement,
                                               to enter into a control  agreement in form
acceptable to Silicon in                                                its good faith
 business  judgment  in order to  perfect  Silicon's
                                               first-priority  security  interest  in
said  Deposit  Accounts  and                                                investment
accounts. </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD WIDTH=5%><b><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(2) </FONT></b></TD>
<TD WIDTH=75%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b>Subordination
 of  Inside  Debt.</b> All  present  and  future  indebtedness  of  Borrower  to its
 officers,                                                directors and shareholders
 ("Inside Debt") shall, at all times, be
                                               subordinated  to  the  Obligations
  pursuant  to  a  subordination                                                agreement
on  Silicon's  standard  form.  Borrower  represents  and
                                               warrants  that  there  is no  Inside  Debt
 presently  outstanding,                                                except for the
 following: - $0 -.  Prior to  incurring  any
                                               Inside Debt in the future,  Borrower shall
cause the person to whom                                                such  Inside
 Debt will be owed to execute and deliver to Silicon a
                                               subordination agreement on Silicon's
standard form. </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD WIDTH=5%><b><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(3) </FONT></b></TD>
<TD WIDTH=75%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b>Warrants.</b> Concurrently  herewith,  Borrower shall provide  Silicon with the warrants  provided for
in the                                                Non-Exim Agreement. </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
</TR>
</TABLE>
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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD WIDTH=5%><b><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(4) </FONT></b></TD>
<TD WIDTH=75%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b>Copyright
 Filings.</b> Concurrently,  Borrower  is  executing  and  delivering  to Silicon  an
 Intellectual                                                Property   Security
  Agreement   (the    "Intellectual    Property
                                               Agreement").  Within 60 days after the
date hereof,  Borrower shall                                                (i) cause all
of its  computer  software,  the  licensing  of which
                                               results in  Accounts,  or which is
material  to its  business to be
                                               registered with the United States
Copyright  Office,  (ii) complete                                                the
Exhibits to the  Intellectual  Property  Agreement  with all of
                                               the  information  called for with respect
to such  software,  (iii)                                                cause the
 Intellectual  Property  Agreement  to be recorded in the
                                               United States Copyright  Office,  and (iv)
provide evidence of such                                                recordation to
Silicon. </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b>(5)</b> </FONT></TD>
<TD WIDTH=75%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b>Foreign
Bank Accounts. </b>Without  limitation  upon any other terms of this  Agreement,  Borrower
 covenants                                                and  agrees  that  the
 proceeds  of  any  Export-Related  Accounts
                                               Receivable  that are remitted by the
Account  Debtor to any account                                                in the
 name of  Borrower  or any of its  subsidiaries  (including,
                                               without  limitation, Tegal GmbH),
 whether  maintained at Deutsche                                                Bank or
any other foreign financial  institution (each such account
                                               a "Foreign Bank  Account"),  are to be
remitted by Borrower (or, if                                                applicable,
 caused to be remitted  by  Borrower),  immediately  to
                                               Borrower's  cash  collateral   account
 maintained  at  Silicon  in                                                accordance
  with   Section   4.4  above.   Additionally,   without
                                               limitation upon any other terms of this
 Agreement,  within 30 days                                                of the date of
this  Agreement  with  respect to any  Foreign  Bank
                                               Account  which  exists  as  of  the  date
 hereof,   and  prior  to                                                establishing
 any new Foreign Bank Account,  Borrower  shall either
                                               (i) provide  Silicon with liens  against
the Foreign Bank  Accounts                                                which, under
the laws applicable to the Foreign Bank Accounts,  are
                                               equivalent  in  priority  and   protection
  to  a   first-priority                                                perfected
 security interest  ("Priority  Lien"), and with dominion
                                               over such Foreign Bank Accounts,
 including without limitation,  by                                                causing
Deutsche Bank and any other financial  institution at which
                                               a Foreign Bank Account is maintained to
execute such  documents and                                                take such
 other  actions as Silicon  deems  necessary  in order to
                                               grant Silicon such lien  against,  and
dominion  over,  all Foreign                                                Bank
Accounts;  or at Borrower's  option, or at Silicon's option if
                                               Silicon  determines  in its good  faith
 business  judgment  that a                                                Priority  Lien
and  dominion  cannot be  obtained  within the above
                                               referenced time periods,  (ii) establish a
new bank account (or use                                                an existing bank
account) in the United States at Silicon,  or such
                                               other  financial  institution  as is
 acceptable  to Silicon,  (the                                                "U.S.
Account"),  cause Silicon to have a first-priority  perfected
                                               security  interest  in the  U.S.  Account,
 cause  Silicon  to have                                                dominion over the
U.S.  Account,  and direct all Account Debtors of
                                               Export-Related  Accounts  Receivable to
remit payments to such U.S.                                                Account. </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD WIDTH=5%><b><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(6) </FONT></b></TD>
<TD WIDTH=75%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b>Landlord
 Waivers.</b> Borrower shall,  within thirty days of the date hereof,  cause any third party
who has                                                an  interest  in any  premises
 where  Collateral  is  located,  to
                                               execute  and  deliver to Silicon,  in form
 acceptable  to Silicon,                                                such waivers and
 subordinations  as Silicon shall specify in order
                                               to confirm  Silicon's  priority security
interest in the Collateral                                                and to assure
Silicon of access to the Collateral. </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
</TR>
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<hr STYLE="page-break-after:always">

<BR>

<font face="Times New Roman"><b>9. EXIM PROVISIONS:</b></font>

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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD WIDTH=5%><b><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(1) </FONT></b></TD>
<TD WIDTH=75%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b>Exim Guaranty.</b> Prior to the first  disbursement of any Loans  hereunder,  Borrower shall
cause the Export                                                Import  Bank of the
United  States (the "Exim Bank") to  guarantee
                                               the  Loans  made  under  this  Agreement,
  pursuant  to  a  Master                                                Guarantee
 Agreement,  Loan  Authorization  Agreement  and  (to the
                                               extent   applicable)    Delegated
   Authority   Letter   Agreement
                                               (collectively,  the "Exim Guaranty"),  and
Borrower shall cause the Exim Guaranty to
be in full force and effect  throughout  the term
                                               of  this  Agreement  and  so  long  as
 any  Loans   hereunder  are                                                outstanding.
 If, for any reason,  the Exim Guaranty shall cease to
                                               be in full force and effect,  or if the Exim Bank declares the Exim Guaranty  void
or  revokes  any  obligations thereunder or denies
                                               liability thereunder,  any such event
shall constitute an Event of                                                Default
 under  this  Agreement.  Nothing  in  any  confidentiality
                                               agreement  in  this  Agreement  or in  any
 other  agreement  shall                                                restrict
  Silicon's   right  to  make   disclosures   and  provide
                                               information to the Exim Bank in connection
with the Exim Guaranty. </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
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<BR>

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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD WIDTH=5%><b><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(2) </FONT></b></TD>
<TD WIDTH=75%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b>Exim Borrower Agreement;  Costs.</b> Borrower shall,  concurrently  execute and deliver a
Borrower Agreement,                                                in the form  specified
 by the Exim Bank,  in favor of Silicon  and
                                               the Exim Bank (the "Exim Borrower
 Agreement").  This Agreement is                                                subject
 to all of the terms and  conditions  of the Exim Borrower
                                               Agreement,  all of which  are  hereby
 incorporated  herein by this                                                reference.
  Borrower  expressly  agrees  to  perform  all  of  the
                                               obligations  and comply with all of the
 affirmative  and  negative                                                covenants and
all other terms and  conditions set forth in the Exim Borrower  Agreement  as though  the same
were  expressly  set forth                                                herein.  In the
 event of any  conflict  between  the  terms of the Exim Borrower  Agreement  and the other
 terms of this  Agreement,                                                whichever terms
are more  restrictive  shall apply.  Borrower shall
                                               reimburse  Silicon  for all fees and all
out of  pocket  costs  and                                                expenses
 incurred by Silicon with respect to the Exim Guaranty and
                                               the Exim Borrower  Agreement,  including
 without  limitation  all                                                facility  fees
and usage fees,  and Silicon is  authorized to debit
                                               Borrower's  account with Silicon for such
fees,  costs and expenses                                                when paid by
Silicon. </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD WIDTH=5%><b><FONT FACE="Times New Roman, Times, Serif" SIZE=2>                                        (3) </FONT></b></TD>
<TD WIDTH=75%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b>Non-Exim Agreement;    Cross-Collateralization;    Cross-Default.</b> Silicon  and the  Borrower  are  parties
to that  certain  Loan and                                                Security
  Agreement   of  even  date   herewith   (the   "Non-Exim Agreement").  Both this Agreement and the
Non-Exim Agreement shall                                                continue  in
full force and  effect,  and all  rights and  remedies
                                               under this  Agreement and the Non-Exim Agreement  are  cumulative.                                                The  term
 "Obligations"  as  used  in  this  Agreement  and in the
                                               Non-Exim Agreement shall include without
limitation the obligation                                                to pay when due
all Loans  made  pursuant  to this  Agreement  (the
                                               "Exim Loans") and all interest  thereon
and the  obligation to pay                                                when due all
Loans made  pursuant to the  Non-Exim Agreement  (the
                                               "Non-Exim Loans") and all interest
 thereon.  Without limiting the                                                generality
of the foregoing,  all  "Collateral"  as defined in this
                                               Agreement  and as defined in the  Non-Exim Agreement  shall secure                                                all Exim Loans
and all  Non-Exim Loans and all  interest  thereon,
                                               and  all  other  Obligations.  Any  Event
 of  Default  under  this                                                Agreement  shall
 also  constitute  an Event of  Default  under the
                                               Non-Exim Agreement,  and any Event of
Default  under the  Non-Exim Agreement
 shall also  constitute  an Event of  Default  under this
                                               Agreement.  In the event  Silicon  assigns
 its  rights  under this                                                Agreement  and/or
under any Note  evidencing Exim Loans and/or its
                                               rights  under  the  Non-Exim Agreement
  and/or  under  any  Note                                                evidencing
 Non-Exim Loans, to any third party,  including  without
                                               limitation  the Exim Bank,  whether
 before or after the occurrence                                                of any
Event of Default,  Silicon shall have the right (but not any
                                               obligation),  in its sole  discretion,  to
allocate  and  apportion                                                Collateral  to
the  Agreement  and/or Note  assigned and to specify
                                               the  priorities  of  the  respective
 security  interests  in  such                                                Collateral
 between itself and the assignee,  all without notice to
                                               or consent of the Borrower. </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
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<BR>



</pre>
<table border="0" cellpadding="0" cellspacing="0" style="border-collapse: collapse" bordercolor="#111111" width="600" id="AutoNumber2">
  <tr>
    <td width="252"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
    Borrower:</FONT></td>
    <td width="348"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
    Silicon: </FONT></td>
  </tr>
  <tr>
    <td width="252"><FONT FACE="Times New Roman, Times, Serif" SIZE=2><br>
    TEGAL CORPORATION </FONT></td>
    <td width="348"><FONT FACE="Times New Roman, Times, Serif" SIZE=2><br>
    SILICON VALLEY BANK </FONT></td>
  </tr>
  <tr>
    <td width="252"> </td>
    <td width="348"> </td>
  </tr>
  <tr>
    <td width="252"><font size="2">
    BY <u>/s/ Michael L. Parodi                           
    </u></font></td>
    <td width="348"><font size="2">
    BY <u>/s/ Patrick J. O'Donnell             
    </u></font></td>
  </tr>
  <tr>
    <td width="252"><font size="2">      President or Vice President</font></td>
    <td width="348"><font size="2">
    Title <u>Vice President                      
    _ 
    </u></font></td>
  </tr>
  <tr>
    <td width="252"> </td>
    <td width="348"> </td>
  </tr>
  <tr>
    <td width="252"><font size="2">
    BY <u>/s/ Kathy Petrini                                   
    </u></font></td>
    <td width="348"> </td>
  </tr>
  <tr>
    <td width="252"><font size="2">      Secretary or Ass't Secretary </font>
    </td>
    <td width="348"> </td>
  </tr>
  <tr>
    <td width="252"> </td>
    <td width="348"> </td>
  </tr>
</table>