LOAN AGREEMENT

                        $10,000,000 WORKING CAPITAL LINE
                                   PROVIDED BY
                               SILICON VALLEY BANK
                                       TO
                       ADVANCED TECHNOLOGY MATERIALS, INC.

                                DECEMBER 27, 1996

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     This LOAN AGREEMENT is entered into as of DECEMBER 27, 1996, by and between
SILICON  VALLEY BANK, a  California-chartered  bank with its principal  place of
business at 3003 Tasman Drive,  Santa Clara, CA 95054 and with a loan production
office  located  at  Wellesley  Office  Park,  40  William  Street,  Suite  350,
Wellesley, MA 02181, doing business under the name Silicon Valley East ("Bank"),
and  ADVANCED  TECHNOLOGY  MATERIALS,  INC.,  a  Delaware  corporation  with its
principal  place of business at 7 COMMERCE  DRIVE,  DANBURY,  CONNECTICUT  06810
("Borrower").

                                    RECITALS

     Borrower  wishes to obtain  credit  from time to time from  Bank,  and Bank
desires to extend  credit to Borrower.  This  Agreement  sets forth the terms on
which Bank will advance credit to Borrower,  and Borrower will repay the amounts
owing to Bank.

                                    AGREEMENT

     The parties agree as follows:

                         1. DEFINITIONS AND CONSTRUCTION

     1.1 Definitions.  As used in this Agreement, the following terms shall have
the following definitions: "Accounts" means all presently existing and hereafter
arising accounts,  contract rights,  and all other forms of obligations owing to
Borrower  arising  out of  the  sale  or  lease  of  goods  (including,  without
limitation,  the licensing of software and other technology) or the rendering of
services  by  Borrower,  whether or not earned by  performance,  and any and all
credit  insurance,  guaranties,  and  other  security  therefor,  as well as all
merchandise  returned to or reclaimed by Borrower and Borrower's  Books relating
to any of the foregoing.

     "Advance"  or  "Advances"  means  a loan  Advance  or  Advances  under  the
Committed Revolving Line.

     "Affiliate"  means,  with  respect to any  Person,  any Person that owns or
controls  directly or  indirectly  such Person,  any Person that  controls or is
controlled  by or is under common  control  with such  Person,  and each of such
Person's senior executive officers, directors, and partners.

     "Bank  Expenses"  means  all  reasonable   costs  or  expenses   (including
reasonable  attorneys'  fees  and  expenses)  incurred  in  connection  with the
preparation, negotiation,  administration, and enforcement of the Loan Documents
and  Bank's  reasonable  attorneys'  fees and  expenses  incurred  in  amending,
enforcing or defending the Loan Documents, whether or not suit is brought.

     "Borrower's  Assets"  means the  property  described  on Exhibit A attached
hereto.

     "Borrower's  Books" means all of  Borrower's  books and records  including:
ledgers; records concerning Borrower's Assets, liabilities,  business operations
or  financial  condition;  and all  computer  programs,  or tape files,  and the
equipment, containing such information.

     "Borrowing Base" has the meaning set forth in Section 2.1 hereof.

     "Business Day" means any day that is not a Saturday,  Sunday,  or other day
on which banks in the State of California are authorized or required to close.

     "Closing Date" means the date of this Agreement.

     "Code" means the Massachusetts Uniform Commercial Code.

     "Committed   Revolving  Line"  means  TEN  MILLION  AND  NO/100THS  Dollars
($10,000,000).

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     "Contingent  Obligation"  means,  as applied to any  Person,  any direct or
indirect liability,  contingent or otherwise, of that Person with respect to (i)
any  indebtedness,  lease,  dividend,  letter of credit or other  obligation  of
another,  including,   without  limitation,  any  such  obligation  directly  or
indirectly guaranteed,  endorsed, co-made or discounted or sold with recourse by
that  Person,  or in respect  of which  that  Person is  otherwise  directly  or
indirectly  liable;  (ii) any  obligations  with  respect to undrawn  letters of
credit issued for the account of that Person; and (iii) all obligations  arising
under any interest rate, currency or commodity swap agreement, interest rate cap
agreement,  interest rate collar  agreement,  or other  agreement or arrangement
designated to protect a Person against  fluctuation in interest rates,  currency
exchange rates or commodity prices; provided, however, that the term "Contingent
Obligation"  shall not include  endorsements  for  collection  or deposit in the
ordinary course of business.  The amount of any Contingent  Obligation  shall be
deemed to be an amount equal to the stated or  determined  amount of the primary
obligation  in respect of which such  Contingent  Obligation  is made or, if not
stated or determinable,  the maximum reasonably anticipated liability in respect
thereof as determined by such Person in good faith; provided, however, that such
amount shall not in any event exceed the maximum amount of the obligations under
the guarantee or other support arrangement.

     "Current Assets" means, as of any applicable date, all amounts that should,
in  accordance  with GAAP,  be  included as current  assets on the  consolidated
balance sheet of Borrower and its Subsidiaries as at such date.

     "Current  Liabilities"  means, as of any applicable  date, all amounts that
should,  in  accordance  with GAAP,  be included as current  liabilities  on the
consolidated  balance sheet of Borrower and its  Subsidiaries,  as at such date,
plus, to the extent not already included therein,  all outstanding Advances made
under this Agreement,  including all Indebtedness that is payable upon demand or
within one year from the date of determination  thereof unless such Indebtedness
is renewable or extendable at the option of Borrower or any Subsidiary to a date
more than one year from the date of  determination,  but excluding  Subordinated
Debt.

     "Daily  Balance" means the amount of the  Obligations  owed at the end of a
given day.

     "Eligible  Accounts" means those Accounts that arise in the ordinary course
of Borrower's  business that comply with all of Borrower's  representations  and
warranties  to Bank set  forth in  Section  5.4;  provided,  that  standards  of
eligibility  may be  fixed  and  revised  from  time to  time by Bank in  Bank's
reasonable judgment and upon notification thereof to Borrower in accordance with
the provisions  hereof.  Unless otherwise agreed to by Bank,  Eligible  Accounts
shall not include the following:

     (a) Accounts  that the account  debtor has failed to pay within ninety (90)
days of invoice date;

     (b) Accounts  with respect to an account  debtor,  fifty  percent  (50%) of
whose  Accounts the account  debtor has failed to pay within ninety (90) days of
invoice date;

     (c)  Accounts  with  respect  to which the  account  debtor is an  officer,
employee, or agent of Borrower;

     (d)  Accounts  with  respect  to which  goods are  placed  on  consignment,
guaranteed sale, sale or return, sale on approval, bill and hold, or other terms
by reason of which the payment by the account debtor may be conditional;

     (e)  Accounts  with  respect to which the  account  debtor is an  Affiliate
(other than by virtue of being directly or indirectly  under common ownership or
control with Borrower) of Borrower;

     (f)  Accounts  with  respect to which the account  debtor does not have its
principal  place of business in the United States,  except for Eligible  Foreign
Accounts,  and Accounts arising from products shipped to or services provided to
branches or offices located in the United States of any account debtor that does
not have its principal place of business in the United States;

     (g) Accounts with respect to which Borrower is liable to the account debtor
for goods sold or services rendered by the account debtor to Borrower,  but only
to the extent of any amounts owing to the account debtor against amounts owed to
Borrower;

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     (h) Accounts with respect to an account debtor,  including Subsidiaries and
Affiliates, whose total obligations to Borrower exceed twenty-five percent (25%)
of all  Accounts,  to the extent  such  obligations  exceed  the  aforementioned
percentage, except as approved in writing by Bank;

     (i) Accounts with respect to which the account debtor disputes liability or
makes any claim with  respect  thereto as to which  Bank  believes,  in its sole
discretion, that there may be a basis for dispute (but only to the extent of the
amount  subject  to such  dispute or  claim),  or is  subject to any  Insolvency
Proceeding, or becomes insolvent, or goes out of business; and

     (j) Accounts  the  collection  of which Bank  reasonably  determines  to be
doubtful.

     "Eligible  Foreign  Accounts"  means  Accounts  with  respect  to which the
account  debtor  does not have its  principal  place of  business  in the United
States and that are: (1) covered by credit insurance in form and amount,  and by
an insurer  satisfactory to Bank less the amount of any deductible(s)  which may
be or become owing thereon; or (2) supported by one or more letters of credit in
favor of Bank as  beneficiary,  in an  amount  and of a tenor,  and  issued by a
financial  institution,  acceptable  to Bank;  or (3) that  Bank  approves  on a
case-by-case basis.

     "Eligible  Inventory"  means  Borrower's  raw materials  Inventory  that is
reflected  on  Borrower's  financial  statements,  and  that  complies  with the
representations and warranties set forth in Section 5.5.

     "Equipment"  means all  present  and future  machinery,  equipment,  tenant
improvements,  furniture,  fixtures,  vehicles,  tools, parts and attachments in
which Borrower has any interest.

     "ERISA" means the  Employment  Retirement  Income  Security Act of 1974, as
amended, and the regulations thereunder.

     "GAAP" means  generally  accepted  accounting  principles as in effect from
time to time.

     "Indebtedness"  means  (a)  all  indebtedness  for  borrowed  money  or the
deferred purchase price of property or services,  including  without  limitation
reimbursement  and other obligations with respect to surety bonds and letters of
credit,  (b) all obligations  evidenced by notes,  bonds,  debentures or similar
instruments,   (c)  all  capital  lease   obligations  and  (d)  all  Contingent
Obligations.

     "Insolvency  Proceeding"  means any proceeding  commenced by or against any
person or entity under any  provision of the United States  Bankruptcy  Code, as
amended, or under any other bankruptcy or insolvency law, including  assignments
for the  benefit  of  creditors,  formal or  informal  moratoria,  compositions,
extension generally with its creditors,  or proceedings seeking  reorganization,
arrangement, or other relief.

     "Inventory"  means all present and future  inventory in which  Borrower has
any interest, including merchandise, raw materials, parts, supplies, packing and
shipping  materials,  work in process and finished products intended for sale or
lease  or to be  furnished  under a  contract  of  service,  of  every  kind and
description  now  or at  any  time  hereafter  owned  by or in  the  custody  or
possession,  actual or constructive, of Borrower, including such inventory as is
temporarily  out of its custody or  possession  or in transit and  including any
returns  upon any  accounts or other  proceeds,  including  insurance  proceeds,
resulting from the sale or disposition of any of the foregoing and any documents
of title  representing any of the above, and Borrower's Books relating to any of
the foregoing.

     "Investment" means any beneficial ownership  (including stock,  partnership
interest or other  securities)  of any Person,  or any loan,  advance or capital
contribution to any Person.

     "IRC"  means  the  Internal  Revenue  Code of  1986,  as  amended,  and the
regulations thereunder.

     "Lien" means any mortgage,  lien, deed of trust, charge,  pledge,  security
interest or other encumbrance.

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     "Loan Documents"  means,  collectively,  this Agreement,  any note or notes
executed by Borrower,  and any other agreement entered into between Borrower and
Bank in connection with this Agreement,  all as amended or extended from time to
time.

     "Material  Adverse  Effect"  means a  material  adverse  effect  on (i) the
business  operations  or condition  (financial or otherwise) of Borrower and its
Subsidiaries  taken as a whole or (ii) the  ability  of  Borrower  to repay  the
Obligations or otherwise perform its obligations under the Loan Documents.

     "Negotiable  Collateral" means all of Borrower's present and future letters
of credit of which it is a beneficiary, notes, drafts, instruments,  securities,
documents of title,  and chattel paper,  and Borrower's Books relating to any of
the foregoing.

     "Obligations" means all debt, principal,  interest, Bank Expenses and other
amounts  owed to Bank by  Borrower  pursuant  to  this  Agreement  or any  other
agreement, whether absolute or contingent, due or to become due, now existing or
hereafter arising, including any interest that accrues after the commencement of
an Insolvency Proceeding and including any debt, liability,  or obligation owing
from Borrower to others that Bank may have obtained by assignment or otherwise.

     "Payment Date" means the 26th calendar day of each month.

     "Periodic  Payments" means all installments or similar  recurring  payments
that Borrower may now or hereafter  become  obligated to pay to Bank pursuant to
the terms and  provisions  of any  instrument,  or agreement now or hereafter in
existence between Borrower and Bank.

     "Permitted Indebtedness" means:

     (a)  Indebtedness of Borrower in favor of Bank arising under this Agreement
or any other Loan Document;

     (b)  Indebtedness  existing  on  the  Closing  Date  and  disclosed  in the
Schedule;

     (c) Subordinated Debt;

     (d)  Indebtedness  to trade  creditors  incurred in the ordinary  course of
business;

     (e)   Indebtedness   incurred  solely  for  the  purpose  of  financing  an
acquisition permitted by Section 7.3; and

     (f) Indebtedness secured by Permitted Liens.

     "Permitted Investment" means:

     (a) Investments existing on the Closing Date disclosed in the Schedule; and

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     (b) (i) marketable direct obligations issued or unconditionally  guaranteed
by the United  States of America  or any  agency or any State  thereof  maturing
within one (1) year from the date of acquisition thereof,  (ii) commercial paper
maturing  no more  than one (1)  year  from the  date of  creation  thereof  and
currently  having the highest rating  obtainable  from either  Standard & Poor's
Corporation  or Moody's  Investors  Service,  Inc.,  and (iii)  certificates  of
deposit  maturing no more than one (1) year from the date of investment  therein
issued by Bank.

     "Permitted Liens" means the following:

     (a) Any Liens existing on the Closing Date and disclosed in the Schedule or
arising under this Agreement or the other Loan Documents;

     (b) Liens for taxes,  fees,  assessments or other  governmental  charges or
levies,  either not  delinquent or being  contested in good faith by appropriate
proceedings,  provided  the same have no  priority  over any of Bank's  security
interests;

     (c) Liens (i) upon or in any equipment  acquired or held by Borrower or any
of  its  Subsidiaries  to  secure  the  purchase  price  of  such  equipment  or
indebtedness  incurred  solely for the purpose of financing the  acquisition  of
such  equipment,  or  (ii)  existing  on  such  equipment  at  the  time  of its
acquisition,  provided  that the Lien is  confined  solely  to the  property  so
acquired and improvements thereon, and the proceeds of such equipment;

     (d) Liens on Equipment leased by Borrower or any Subsidiary  pursuant to an
operating lease in the ordinary course of business  (including  proceeds thereof
and accessions  thereto)  incurred solely for the purpose of financing the lease
of such  Equipment  (including  Liens pursuant to leases  permitted  pursuant to
Section 7.1 and Liens arising from UCC  financing  statements  regarding  leases
permitted by this Agreement); and

     (e) Liens upon or in any stock or  property  acquired by Borrower or any of
its  Subsidiaries  to secure the purchase  price of such stock or property in an
acquisition permitted by Section 7.3.

     "Person" means any individual,  sole proprietorship,  partnership,  limited
liability   company,   joint  venture,   trust,   unincorporated   organization,
association,  corporation,  institution, public benefit corporation, firm, joint
stock company, estate, entity or governmental agency.

     "Prime Rate" means the variable rate of interest,  per annum, most recently
announced by Bank, as its "prime rate,"  whether or not such  announced  rate is
the lowest rate available from Bank.

     "Quick Assets"  means,  at any date as of which the amount thereof shall be
determined,  the consolidated cash,  cash-equivalents,  accounts  receivable and
investments,  with  maturities not to exceed 90 days, of Borrower  determined in
accordance with GAAP.

     "Responsible  Officer" means each of the Chief Executive Officer, the Chief
Financial Officer and the Controller of Borrower.

     "Revolving Maturity Date" means December 26, 1997.

     "Schedule" means the schedule of exceptions attached hereto.

     "Subordinated   Debt"  means  any  debt   incurred  by  Borrower   that  is
subordinated  to the debt owing by Borrower to Bank on terms  acceptable to Bank
(and identified as being such by Borrower and Bank).

     "Subsidiary"  means any corporation or partnership in which (i) any general
partnership  interest  or (ii)  more than 50% of the stock of which by the terms
thereof  ordinary  voting  power to elect the Board of  Directors,  managers  or
trustees of the entity shall, at the time as of which any determination is being
made, be owned by Borrower, either directly or through an Affiliate.

     "Tangible Net Worth" means at any date as of which the amount thereof shall
be determined,  the  consolidated  total assets of Borrower and its Subsidiaries
minus,  without  duplication,  (i) the sum of any  amounts  attributable  to (a)
goodwill,  (b) intangible  items such as unamortized  debt discount and expense,
patents,  trade and  service  marks  and  names,  copyrights  and  research  and
development  expenses except prepaid expenses,  and (c) all reserves not already
deducted from assets, and (ii) Total Liabilities.

     "Total  Liabilities" means at any date as of which the amount thereof shall
be  determined,  all  obligations  that  should,  in  accordance  with  GAAP  be
classified  as  liabilities  on the  consolidated  balance  sheet  of  Borrower,
including in any event all Indebtedness, but specifically excluding Subordinated
Debt.

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     1.2 Accounting Terms. All accounting terms not specifically  defined herein
shall be construed in accordance with GAAP and all  calculations  made hereunder
shall be made in accordance  with GAAP. When used herein,  the terms  "financial
statements" shall include the notes and schedules thereto.

                          2. LOAN AND TERMS OF PAYMENT

     2.1  Advances.  Borrower  promises  to pay to the order of Bank,  in lawful
money of the United States of America,  the aggregate unpaid principal amount of
all  Advances  made by Bank to  Borrower  hereunder  and  interest on the unpaid
principal  amount of such  Advances  at such rates and at such times as provided
for in this Agreement, all as in accordance with the terms of this Agreement.

     2.1.1 Revolving  Advances.  Subject to and upon the terms and conditions of
this  Agreement,  Bank  agrees to make  Revolving  Advances  to  Borrower  in an
aggregate amount not to exceed (i) the Committed Revolving Line or the Borrowing
Base, whichever is less minus (ii) the face amount of all outstanding Letters of
Credit (including drawn but unreimbursed  Letters of Credit) and minus (iii) the
Foreign Exchange Reserve. For purposes of this Agreement, "Borrowing Base" shall
mean an amount equal to (i) EIGHTY percent (80%) of Eligible  Accounts plus (ii)
the lesser of THIRTY percent (30%) of the value of Borrower's Eligible Inventory
(valued at the lower of cost or  wholesale  fair market  value) or NINE  HUNDRED
THOUSAND AND NO/100THS Dollars  ($900,000).  Subject to the terms and conditions
of this Agreement,  amounts borrowed  pursuant to this Section 2.1 may be repaid
and reborrowed at any time during the term of this Agreement.

     Whenever  Borrower desires a Revolving  Advance,  Borrower will notify Bank
(i) in the case of a Prime Rate loan, by facsimile  transmission or telephone no
later  than 3:00 p.m.  Pacific  time,  on the  Business  Day that the  Revolving
Advance is to be made,  in which case each such  notification  shall be promptly
confirmed  by a  Payment/Advance  Form in  substantially  the form of  Exhibit B
hereto,  or  (ii) in the  case of a LIBOR  Rate  loan  in  accordance  with  the
provisions of the LIBOR  Supplement  to  Agreement,  a copy of which is attached
hereto and incorporated  herein.  Bank is authorized to make Revolving  Advances
under  this  Agreement,  based upon  instructions  received  from a  Responsible
Officer, or without instructions if in Bank's discretion such Revolving Advances
are necessary to meet Obligations which have become due and remain unpaid.  Bank
shall be entitled to rely on any  telephonic  notice  given by a person who Bank
reasonably  believes to be a Responsible  Officer,  and Borrower shall indemnify
and hold Bank  harmless for any damages or loss  suffered by Bank as a result of
such reliance. Bank will credit the amount of Revolving Advances made under this
Section 2.1 to Borrower's deposit account.

     The Committed  Revolving  Line shall  terminate on the  Revolving  Maturity
Date,  at which time all  Revolving  Advances  under this  Section 2.1 and other
amounts  due under this  Agreement  (except  as  otherwise  expressly  specified
herein) shall be immediately due and payable.

     2.1.2 Letters of Credit.

     (a) Subject to the terms and conditions of this  Agreement,  Bank agrees to
issue or cause to be issued  Letters of Credit for the account of Borrower in an
aggregate  outstanding face amount not to exceed (i) the lesser of the Committed
Revolving  Line or the Borrowing  Base,  whichever is less,  minus (ii) the then
outstanding principal balance of the Advances.  Each Letter of Credit shall have
an expiry date no later than one hundred  eighty (180) days after the  Revolving
Maturity Date provided that Borrower's Letter of Credit reimbursement obligation
shall be  secured  by cash on terms  acceptable  to Bank at any time  after  the
Revolving  Maturity Date if the term of this  Agreement is not extended by Bank.
All Letters of Credit shall be, in form and substance, acceptable to Bank in its
sole  discretion and shall be subject to the terms and conditions of Bank's form
of standard Application and Letter of Credit Agreement.

     (b) The obligation of Borrower to  immediately  reimburse Bank for drawings
made under Letters of Credit shall be absolute,  unconditional  and irrevocable,
and shall be performed  strictly in accordance  with the terms of this Agreement
and such Letters of Credit, under all circumstances  whatsoever.  Borrower shall
indemnify,  defend, protect, and hold Bank harmless from any loss, cost, expense
or liability, including, without limitation, reasonable attorneys' fees, arising
out of or in  connection  with any  Letters  of Credit,  other than loss,  cost,
expense or liability  arising out of the gross negligence or willful  misconduct
of Bank.

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     (c) Borrower  may request  that Bank issue a Letter of Credit  payable in a
currency other than United States Dollars. If a demand for payment is made under
any such  Letter of  Credit,  Bank  shall  treat  such  demand as an  Advance to
Borrower of the  equivalent of the amount thereof (plus cable charges) in United
States  currency  at the then  prevailing  rate of  exchange  in San  Francisco,
California,  for sales of that other  currency for cable transfer to the country
of which it is the currency.

     (d) Upon the issuance of any letter of credit  payable in a currency  other
than United  States  Dollars,  Bank shall create a reserve  under the  Committed
Revolving Line for letters of credit against  fluctuations in currency  exchange
rates, in an amount equal to ten percent (10%) of the face amount of such letter
of credit.  The amount of such  reserve may be amended by Bank from time to time
to account for  fluctuations  in the exchange  rate. The  availability  of funds
under the  Committed  Revolving  Line  shall be  reduced  by the  amount of such
reserve for so long as such letter of credit remains outstanding.

     2.1.3 Foreign Exchange Contract; Foreign Exchange Settlements.

     (a) Subject to the terms of this Agreement, Borrower may enter into foreign
exchange contracts (the "Exchange  Contracts") not to exceed an aggregate amount
of (i)  the  lesser  of the  Committed  Revolving  Line or the  Borrowing  Base,
whichever  is less,  minus (ii) the then  outstanding  principal  balance of the
Advances  (the  "Contract  Limit"),  pursuant  to which  Bank  shall  sell to or
purchase from  Borrower  foreign  currency on a spot or future  basis.  Borrower
shall not request any  Exchange  Contracts  at any time it is out of  compliance
with any of the  provisions  of this  Agreement.  All  Exchange  Contracts  must
provide for delivery of  settlement on or before the Maturity  Date.  The amount
available under the Committed Revolving Line at any time shall be reduced by the
following  amounts  (the  "Foreign  Exchange  Reserve")  on any  given  day (the
"Determination  Date"):  (i) on all  outstanding  Exchange  Contracts  on  which
delivery is to be effected or  settlement  allowed more than two  business  days
after the Determination Date, 10% of the gross amount of the Exchange Contracts;
plus (ii) on all  outstanding  Exchange  Contracts  on which  delivery  is to be
effected or settlement  allowed within two business days after the Determination
Date, 100% of the gross amount of the Exchange Contracts.

     (b) Bank may, in its  discretion,  terminate the Exchange  Contracts at any
time (a) that an Event of  Default  occurs or (b) that  there is not  sufficient
availability  under the  Committed  Revolving  Line and  Borrower  does not have
available funds in its bank account to satisfy the Foreign Exchange Reserve.  If
Bank terminates the Exchange Contracts, and without limitation of any applicable
indemnities,  Borrower agrees to reimburse Bank for any and all fees,  costs and
expenses relating thereto or arising in connection therewith.

     (c)  Borrower  shall not  permit  the total  gross  amount of all  Exchange
Contracts on which delivery is to be effected and settlement  allowed in any two
business day period to be more than $750,000 (the "Settlement  Limit") nor shall
Borrower  permit  the total  gross  amount of all  Exchange  Contracts  to which
Borrower is a party,  outstanding at any one time, to exceed the Contract Limit.
Notwithstanding the above,  however,  the amount which may be settled in any two
(2) business day period may be increased  above the Settlement  Limit up to, but
in no event to exceed,  the amount of the  Contract  Limit  under  either of the
following circumstances:

     (i) if there is sufficient  availability under the Committed Revolving Line
in the amount of the Foreign  Exchange  Reserve as of each  Determination  Date,
provided  that Bank in advance  shall  reserve  the full  amount of the  Foreign
Exchange Reserve against the Committed Revolving Line; or

     (ii) if there is insufficient  availability  under the Committed  Revolving
Line, as to  settlements  within any two (2) business day period,  provided that
Bank,  in its sole  discretion,  may:  (A) verify good funds  overseas  prior to
crediting  Borrower's  deposit account with Bank (in the case of Borrower's sale
of foreign currency); or (B) debit Borrower's deposit account with Bank prior to
delivering  foreign  currency  overseas (in the case of  Borrower's  purchase of
foreign currency).

     (d) In the case of  Borrower's  purchase of foreign  currency,  Borrower in
advance  shall  instruct  Bank upon  settlement  either to treat the  settlement
amount as an advance under the Committed  Revolving Line, or to debit Borrower's
account for the amount settled.

                                       9
<PAGE>

     (e) Borrower shall execute all standard from applications and agreements of
Bank in connection with the Exchange  Contracts and, without limiting any of the
terms of such  applications and agreements,  Borrower will pay all standard fees
and charges of Bank in connection with the Exchange Contracts.

     (f) Without  limiting any of the other terms of this  Agreement or any such
standard form  applications and agreement of Bank,  Borrower agrees to indemnify
Bank  and  hold it  harmless,  from  and  against  any and  all  claims,  debts,
liabilities,  demands,  obligations,  actions,  costs and  expenses  (including,
without  limitation,  attorneys'  fees of  counsel of Bank's  choice),  of every
nature and description  which it may sustain or incur,  based upon,  arising out
of, or in any way relating to any of the Exchange  Contracts or any transactions
relating thereto or contemplated thereby, other than claims, debts, liabilities,
demands,  obligations,  actions,  costs and  expenses  arising  out of the gross
negligence or willful misconduct of Bank.

     2.2  Overadvances.  If,  at any  time  or for any  reason,  the  amount  of
Obligations  owed by Borrower to Bank pursuant to Section 2.1 of this  Agreement
is  greater  than the  lesser of (i) the  Committed  Revolving  Line or (ii) the
Borrowing Base,  Borrower shall  immediately pay to Bank, in cash, the amount of
such excess.

     2.3 Interest Rates, Payments, and Calculations.

     (a)  Interest  Rate.  Except as set forth in Section  2.3(b),  any Advances
shall bear interest on the average Daily Balance at the Prime Rates or the LIBOR
Rates as set forth on the attached LIBOR Supplement to Agreement, as applicable.

     (b) Default Rate. All Obligations  shall bear interest,  from and after the
occurrence  of an Event of  Default,  at a rate  equal to three  (3)  percentage
points above the interest rate applicable under Section 2.3(a).

     (c) Payments.  Interest  hereunder  shall be due and payable on the Payment
Date of each month during the term hereof.  Borrower  hereby  authorizes Bank to
debit any accounts with Bank,  including,  without  limitation,  Account  Number
07-000537-70,  for payments of principal and interest due on the Obligations, on
the Payment Date thereof,  and any other amounts owing by Borrower to Bank. Bank
will notify Borrower of all debits which Bank makes against Borrower's accounts.
Any such debits against Borrower's accounts in no way shall be deemed a set-off.
Any  interest  not paid when due shall be  compounded  by becoming a part of the
Obligations, and such interest shall thereafter accrue interest at the rate then
applicable hereunder.

     (d)  Computation.  In the event the Prime Rate is changed from time to time
hereafter,  the  applicable  rate of interest  hereunder  shall be  increased or
decreased effective as of 12:01 a.m. on the day the Prime Rate is changed, by an
amount equal to such change in the Prime Rate. All interest chargeable under the
Loan Documents shall be computed on the basis of a three hundred sixty (360) day
year for the actual number of days elapsed.

     2.4  Crediting  Payments.

     Prior to the  occurrence  of an Event of Default,  Bank shall credit a wire
transfer  of funds,  check or other item of payment to such  deposit  account or
Obligation as Borrower  specifies.  After the occurrence of an Event of Default,
the  receipt  by Bank of any wire  transfer  of funds,  check,  or other item of
payment shall be immediately applied to conditionally  reduce  Obligations,  but
shall  not be  considered  a  payment  on  account  unless  such  payment  is of
immediately available federal funds or unless and until such check or other item
of payment is honored when  presented for payment.  Notwithstanding  anything to
the contrary  contained  herein,  any wire transfer or payment  received by Bank
after 12:00 noon Pacific  time shall be deemed to have been  received by Bank as
of the opening of business on the immediately  following  Business Day. Whenever
any payment to Bank under the Loan Documents  would  otherwise be due (except by
reason of acceleration) on a date that is not a Business Day, such payment shall
instead be due on the next Business Day, and additional fees or interest, as the
case may be, shall accrue and be payable for the period of such extension.

                                       10
<PAGE>

     2.5 Fees. Borrower shall pay to Bank the following:

     (a)  Facility  Fee. A Facility  Fee equal to TWENTY FIVE  THOUSAND  Dollars
($25,000),  which fee shall be due on or before  the  Closing  Date and shall be
fully earned and non-refundable;

     (b) Financial  Examination  and Appraisal Fees.  Bank's  customary fees and
out-of-pocket  expenses for Bank's audits of Borrower's  Accounts,  and for each
appraisal  of  Borrower's  Assets and  financial  analysis  and  examination  of
Borrower performed from time to time by Bank or its agents;  provided,  however,
that prior to the  occurrence of an Event of Default Bank shall not perform such
analyses and examinations more frequently than annually;

     (c) Bank Expenses.  Upon demand from Bank,  including,  without limitation,
upon the date  hereof,  all Bank  Expenses  incurred  through  the date  hereof,
including reasonable  attorneys' fees and expenses,  and, after the date hereof,
all Bank Expenses,  including  reasonable  attorneys' fees and expenses,  as and
when they become due.

     2.6  Additional  Costs.  In case any law,  regulation,  treaty or  official
directive  or the  interpretation  or  application  thereof  by any court or any
governmental authority charged with the administration thereof or the compliance
with  any  guideline  or  request  of any  central  bank or  other  governmental
authority (whether or not having the force of law):

     (a)  subjects  Bank to any tax with  respect to  payments of  principal  or
interest or any other amounts  payable  hereunder by Borrower or otherwise  with
respect to the transactions contemplated hereby (except for taxes on the overall
net  income of Bank  imposed by the  United  States of America or any  political
subdivision thereof);

     (b) imposes,  modifies or deems applicable any deposit insurance,  reserve,
special deposit or similar requirement against assets held by, or deposits in or
for the account of, or loans by, Bank; or

     (c) imposes upon Bank any other  condition with respect to its  performance
under this Agreement,  and the result of any of the foregoing is to increase the
cost to Bank,  reduce the income  receivable  by Bank or impose any expense upon
Bank with respect to any loans,  Bank shall notify  Borrower  thereof.  Borrower
agrees to pay to Bank the amount of such  increase in cost,  reduction in income
or additional expense as and when such cost, reduction or expense is incurred or
determined,  upon  presentation by Bank of a statement of the amount and setting
forth Bank's  calculation  thereof,  all in reasonable  detail,  which statement
shall be deemed true and correct absent manifest error.

     2.7 Term. Except as otherwise set forth herein, this Agreement shall become
effective on the Closing Date and,  subject to Section 12.7,  shall  continue in
full  force  and  effect  for a term  ending  on the  Revolving  Maturity  Date.
Notwithstanding  the  foregoing,  Bank  shall  have the right to  terminate  its
obligation to make Advances under this Agreement  immediately and without notice
upon the occurrence, and during the continuance, of an Event of Default.

                             3. CONDITIONS OF LOANS

     3.1 Conditions Precedent to Initial Advance. The obligation of Bank to make
the initial  Advance is subject to the condition  precedent that Bank shall have
received, in form and substance satisfactory to Bank, the following:

     (a) this  Agreement  and the  Working  Capital  Note each duly  executed by
Borrower;

     (b) a  certificate  of the Secretary of Borrower with respect to incumbency
and resolutions authorizing the execution and delivery of this Agreement;

     (c) financing  statements  (Forms  UCC-1)  evidencing  Borrower's  negative
pledge set forth in Section 7.5 of this Agreement;

                                       11
<PAGE>

     (d) a  Borrowing  Base  Certificate  signed  by a  Responsible  Officer  in
substantially  the form of  Exhibit C hereto,  together  with aged  listings  of
accounts receivable and accounts payable;

     (e) insurance certificate(s);

     (f) payment of the fees and Bank Expenses then due specified in Section 2.5
hereof; and

     (g) such other documents, and completion of such other matters, as Bank may
reasonably deem necessary or appropriate.

     3.2  Conditions  Precedent to all Advances.  The obligation of Bank to make
each Advance, including the initial Advance, is further subject to the following
conditions:

     (a) timely receipt by Bank of (i) the  Payment/Advance  Form as provided in
Section 2.1 in the case of a Prime Rate loan,  or the LIBOR Rate Loan  Borrowing
Certificate attached as Schedule A to the LIBOR Supplement to Agreement,  in the
case of a LIBOR Rate loan; and

     (b) the representations and warranties contained in Section 5 shall be true
and  correct  in  all  material   respects  on  and  as  of  the  date  of  such
Payment/Advance Form and on the effective date of each Advance as though made at
and as of each such date,  and no Event of Default  shall have  occurred  and be
continuing,  or would result from such Advance. The making of each Advance shall
be deemed to be a  representation  and  warranty by Borrower on the date of such
Advance as to the accuracy of the facts referred to in this Section 3.2(b).

                        4. CREATION OF SECURITY INTEREST

     INTENTIONALLY OMITTED

                        5. REPRESENTATIONS AND WARRANTIES

     Borrower represents and warrants as follows:

     5.1 Due Organization and  Qualification.  Borrower and each Subsidiary is a
corporation  duly existing and in good  standing  under the laws of its state of
incorporation  and  qualified  and  licensed to do  business  in, and is in good
standing in, any state in which the conduct of its business or its  ownership of
property  requires  that it be so  qualified,  except where the failure to be so
qualified would not have a Material Adverse Effect.

     5.2  Due  Authorization;   No  Conflict.   The  execution,   delivery,  and
performance of the Loan Documents are within Borrower's  powers,  have been duly
authorized,  and are  not in  conflict  with  nor  constitute  a  breach  of any
provision contained in Borrower's Charter or Bylaws, nor will they constitute an
event of default under any material agreement to which Borrower is a party or by
which Borrower is bound. Borrower is not in default under any agreement to which
it is a party or by which it is  bound,  which  default  could  have a  Material
Adverse Effect.

     5.3 No Prior  Encumbrances.  Borrower  has good and  indefeasible  title to
Borrower's Assets, free and clear of Liens, except for Permitted Liens.

     5.4 Bona  Fide  Eligible  Accounts.  The  Eligible  Accounts  are bona fide
existing  obligations.  The property  giving rise to such Eligible  Accounts has
been  delivered  to the  account  debtor or to the  account  debtor's  agent for
immediate  shipment  to and  unconditional  acceptance  by the  account  debtor.
Borrower has not received notice of actual or imminent Insolvency  Proceeding of
any account  debtor that is included in any  Borrowing  Base  Certificate  as an
Eligible Account.

     5.5 Merchantable  Inventory.  All Inventory is in all material  respects of
good and marketable quality, free from all material defects.

                                       12
<PAGE>

     5.6 Name;  Location of Chief Executive  Office.  Except as disclosed in the
Schedule,  Borrower  has not done  business  under  any  name  other  than  that
specified on the signature page hereof.  The chief executive  office of Borrower
is located at the address indicated in Section 10 hereof.

     5.7 Litigation.  Except as set forth in the Schedule,  there are no actions
or proceedings pending by or against Borrower or any Subsidiary before any court
or  administrative  agency in which an  adverse  decision  could have a Material
Adverse Effect or a material adverse effect on Borrower's interest in Borrower's
Assets.  Borrower  does not have  knowledge  of any such  pending or  threatened
actions or proceedings.

     5.8 No Material  Adverse Change in Financial  Statements.  All consolidated
financial  statements  related to  Borrower  and any  Subsidiary  that have been
delivered by Borrower to Bank fairly present in all material respects Borrower's
consolidated   financial  condition  as  of  the  date  thereof  and  Borrower's
consolidated results of operations for the period then ended. There has not been
a material  adverse change in the consolidated  financial  condition of Borrower
since the date of the most  recent of such  financial  statements  submitted  to
Bank.

     5.9  Solvency.  Borrower  is solvent  and able to pay its debts  (including
trade debts) as they mature.

     5.10  Regulatory  Compliance.  Borrower  and  each  Subsidiary  has met the
minimum funding requirements of ERISA with respect to any employee benefit plans
subject to ERISA.  No event has occurred  resulting from  Borrower's  failure to
comply with ERISA that is reasonably  likely to result in  Borrower's  incurring
any  liability  that could have a Material  Adverse  Effect.  Borrower is not an
"investment company" or a company "controlled" by an "investment company" within
the  meaning of the  Investment  Company  Act of 1940.  Borrower  is not engaged
principally, or as one of the important activities, in the business of extending
credit for the  purpose of  purchasing  or  carrying  margin  stock  (within the
meaning  of  Regulations  G, T and U of the Board of  Governors  of the  Federal
Reserve  System).  Borrower has complied with all the  provisions of the Federal
Fair  Labor  Standards  Act.  Borrower  has not  violated  any  statutes,  laws,
ordinances or rules  applicable to it,  violation of which could have a Material
Adverse Effect.

     5.11  Environmental  Condition.  None  of  Borrower's  or any  Subsidiary's
properties or assets has ever been used by Borrower or any Subsidiary or, to the
best of Borrower's knowledge,  by previous owners or operators,  in the disposal
of, or to produce,  store, handle, treat,  release, or transport,  any hazardous
waste or hazardous  substance  other than in accordance  with applicable law; to
the best of Borrower's  knowledge,  none of Borrower's  properties or assets has
ever been designated or identified in any manner  pursuant to any  environmental
protection statute as a hazardous waste or hazardous substance disposal site, or
a candidate for closure pursuant to any  environmental  protection  statute;  no
lien  arising  under any  environmental  protection  statute has attached to any
revenues  or to  any  real  or  personal  property  owned  by  Borrower  or  any
Subsidiary;  and neither  Borrower  nor any  Subsidiary  has received a summons,
citation,  notice, or directive from the Environmental  Protection Agency or any
other  federal,  state or other  governmental  agency  concerning  any action or
omission by Borrower or any Subsidiary resulting in the releasing,  or otherwise
disposing of hazardous waste or hazardous substances into the environment.

     5.12 Taxes.  Borrower and each  Subsidiary  has filed or caused to be filed
all tax  returns  required  to be  filed,  and has  paid,  or has made  adequate
provision for the payment of, all taxes reflected therein.

     5.13 Subsidiaries. Borrower does not own any stock, partnership interest or
other equity securities of any Person, except for Permitted Investments.

     5.14  Government  Consents.  Borrower and each  Subsidiary has obtained all
consents,  approvals and  authorizations  of, made all  declarations  or filings
with, and given all notices to, all governmental  authorities that are necessary
for the continued operation of Borrower's business as currently conducted.

     5.15 Full Disclosure.  No representation,  warranty or other statement made
by Borrower in any certificate or written  statement  furnished to Bank contains
any  untrue  statement  of a  material  fact or omits to state a  material  fact
necessary  in order to make the  statements  contained in such  certificates  or
statements not misleading.

                                       13
<PAGE>

                            6. AFFIRMATIVE COVENANTS

     Borrower   covenants  and  agrees  that,  until  payment  in  full  of  all
outstanding Obligations, and for so long as Bank may have any commitment to make
an Advance hereunder, Borrower shall do all of the following:

     6.1  Good   Standing.   Borrower   shall  maintain  its  and  each  of  its
Subsidiaries'  corporate  existence  and good  standing in its  jurisdiction  of
incorporation  and  maintain  qualification  in each  jurisdiction  in which the
failure to so  qualify  could have a Material  Adverse  Effect.  Borrower  shall
maintain  in force,  and shall  cause each of its  Subsidiaries  to  maintain in
force, to the extent consistent with prudent management of Borrower's  business,
all licenses,  approvals and agreements, the loss of which could have a Material
Adverse Effect.

     6.2  Government  Compliance.  Borrower  shall  meet,  and shall  cause each
Subsidiary to meet, the minimum  funding  requirements  of ERISA with respect to
any employee  benefit plans subject to ERISA.  Borrower shall comply,  and shall
cause each  Subsidiary  to  comply,  with all  statutes,  laws,  ordinances  and
government  rules and  regulations  to which it is subject,  noncompliance  with
which  could have a Material  Adverse  Effect or a  material  adverse  effect on
Borrower's Assets.

     6.3 Financial Statements, Reports, Certificates.  Borrower shall deliver to
Bank:

     (a) as soon as  available,  but in any event  within  FORTY-FIVE  (45) days
after the end of each fiscal quarter,  a company prepared  consolidated  balance
sheet and income statement covering  Borrower's  consolidated  operations during
such period, certified by an officer of Borrower reasonably acceptable to Bank;

     (b) as soon as  available,  but in any event within  NINETY (90) days after
the end of Borrower's fiscal year, audited consolidated  financial statements of
Borrower prepared in accordance with GAAP,  consistently applied,  together with
an unqualified opinion on such financial statements of an independent  certified
public accounting firm reasonably acceptable to Bank;

     (c) within five (5) days of filing,  copies of all statements,  reports and
notices sent or made available  generally by Borrower to its security holders or
to any holders of  Subordinated  Debt and all reports on Form 10-K, 10-Q and 8-K
filed with the Securities and Exchange Commission;

     (d) promptly upon receipt of notice thereof,  a report of any legal actions
pending or threatened  against  Borrower or any Subsidiary  that could result in
damages or costs to Borrower or any Subsidiary of One Hundred  Thousand  Dollars
($100,000) or more; and

     (e) such budgets,  sales  projections,  operating  plans or other financial
information as Bank may reasonably request from time to time.

     Within  fifteen (15) days after the last day of each fiscal  quarter during
which Advances are outstanding  under this Agreement,  Borrower shall deliver to
Bank  a  Borrowing  Base  Certificate   signed  by  a  Responsible   Officer  in
substantially  the form of  Exhibit C hereto,  together  with aged  listings  of
accounts receivable and accounts payable.

     Within  FORTY-FIVE  (45) days  after the last day of each  fiscal  quarter,
Borrower  shall  deliver  to Bank  with the  quarterly  financial  statements  a
Compliance Certificate signed by a Responsible Officer in substantially the form
of Exhibit D hereto.

     6.4  Inventory;  Returns.  Borrower  shall keep all  Inventory  in good and
marketable condition, free from all material defects. Returns and allowances, if
any, as between  Borrower and its account debtors shall be on the same basis and
in accordance with the usual customary  practices of Borrower,  as they exist at
the  time of the  execution  and  delivery  of this  Agreement.  Borrower  shall
promptly  notify Bank of all  returns and  recoveries  and of all  disputes  and
claims,  where the return,  recovery,  dispute or claim involves more than Fifty
Thousand Dollars ($50,000).

                                       14
<PAGE>

     6.5 Taxes.  Borrower shall make,  and shall cause each  Subsidiary to make,
due and timely  payment or deposit of all  material  federal,  state,  and local
taxes, assessments, or contributions required of it by law, and will execute and
deliver to Bank, on demand, appropriate certificates attesting to the payment or
deposit thereof; and Borrower will make, and will cause each Subsidiary to make,
timely  payment or deposit of all material tax  payments and  withholding  taxes
required of it by  applicable  laws,  including,  but not limited to, those laws
concerning F.I.C.A.,  F.U.T.A., state disability,  and local, state, and federal
income taxes,  and will, upon request,  furnish Bank with proof  satisfactory to
Bank  indicating  that  Borrower  or a  Subsidiary  has made  such  payments  or
deposits;  provided that  Borrower or a Subsidiary  need not make any payment if
the amount or validity of such payment is contested in good faith by appropriate
proceedings  and is  reserved  against  (to the  extent  required  by  GAAP)  by
Borrower.

     6.6 Insurance.

     (a) Borrower, at its expense,  shall keep Borrower's Assets insured against
loss or damage by fire, theft, explosion,  sprinklers, and all other hazards and
risks,  and in such amounts,  as ordinarily  insured  against by other owners in
similar  businesses  conducted in the  locations  where  Borrower's  business is
conducted on the date hereof. Borrower shall also maintain insurance relating to
Borrower's  ownership and use of Borrower's Assets in amounts and of a type that
are customary to businesses similar to Borrower's.

     (b) All such  policies  of  insurance  shall  be in such  form,  with  such
companies,  and in such amounts as  reasonably  satisfactory  to Bank.  All such
policies of property insurance shall shall specify that the insurer must give at
least  twenty  (20) days  notice to Bank  before  canceling  its  policy for any
reason.  Borrower  shall  deliver to Bank  certified  copies of such policies of
insurance  and evidence of the payments of all premiums  therefor.  All proceeds
payable under any such policy  shall,  at the option of Bank, be payable to Bank
to be applied on account of the Obligations.

     6.7 Principal  Depository.  Borrower  shall maintain at least one operating
account and some portion of its excess funds with Bank.

     6.8  Quick  Ratio.  Borrower  shall  maintain,  as of the  last day of each
calendar quarter, a ratio of Quick Assets to Current Liabilities of at least 2.0
to 1.0.

     6.9 Debt-Net Worth Ratio.  Borrower shall  maintain,  as of the last day of
each calendar  quarter,  a ratio of Total  Liabilities less Subordinated Debt to
Tangible Net Worth plus Subordinated Debt of not more than 1.0 to 1.0.

     6.10 Tangible Net Worth.  Borrower  shall  maintain,  as of the last day of
each calendar quarter, a Tangible Net Worth of not less than TWENTY FIVE MILLION
Dollars ($25,000,000).

     6.11 Further  Assurances.  At any time and from time to time Borrower shall
execute and deliver such further instruments and take such further action as may
reasonably be requested by Bank to effect the purposes of this Agreement.

                              7. NEGATIVE COVENANTS

     Borrower  covenants and agrees that, so long as any credit  hereunder shall
be available and until payment in full of the outstanding  Obligations or for so
long as Bank may have any commitment to make any Advances,  Borrower will not do
any of the following:

     7.1 Dispositions.  Convey,  sell,  lease,  transfer or otherwise dispose of
(collectively, a "Transfer"), or permit any of its Subsidiaries to Transfer, all
or any part of its business or property,  other than: (i) Transfers of Inventory
in the ordinary course of business; (ii) Transfers of non-exclusive licenses and
similar   arrangements   for  the  use  of  the  property  of  Borrower  or  its
Subsidiaries;  (iii)  Transfers  of  worn-out  or  obsolete  Equipment,  or (iv)
Transfers of property no longer  necessary or useful to the business of Borrower
or any of its Subsidiaries.

                                       15
<PAGE>

     7.2  Change in  Business.  Engage  in any  business,  or permit  any of its
Subsidiaries  to engage in any  business,  other than the  businesses  currently
engaged in by Borrower and any business substantially similar or related thereto
(or incidental thereto),  or undergo a material change in Borrower's  ownership,
management  or  directors.  Borrower  will not,  without  thirty (30) days prior
written notification to Bank, relocate its chief executive office.

     7.3 Mergers or  Acquisitions.  Merge or  consolidate,  or permit any of its
Subsidiaries  to  merge  or  consolidate,   with  or  into  any  other  business
organization,  or, without Bank's prior written consent,  acquire, or permit any
of its Subsidiaries to acquire, all or substantially all of the capital stock or
property of another Person or any operating  division of a Person in one or more
acquisitions  having a total  aggregate  purchase price of FIVE MILLION  DOLLARS
($5,000,000) or more.

     7.4 Indebtedness. Create, incur, assume or be or remain liable with respect
to any  Indebtedness,  or permit any  Subsidiary so to do, other than  Permitted
Indebtedness.

     7.5 Encumbrances.  Create,  incur,  assume or suffer to exist any Lien with
respect to any of its Accounts or Inventory,  or assign or otherwise  convey any
right to receive  income,  including the sale of any Accounts,  or permit any of
its Subsidiaries so to do, except for Permitted Liens.

     7.6  Distributions.  Pay any  dividends or make any other  distribution  or
payment on account of or in  redemption,  retirement  or purchase of any capital
stock other than cash  dividends not in excess of SEVEN  HUNDRED FIFTY  THOUSAND
Dollars ($750,000) in any fiscal year of Borrower.

     7.7  Investments.  Directly  or  indirectly  acquire  or own,  or make  any
Investment  in or to any  Person,  or permit any of its  Subsidiaries  so to do,
other than Permitted Investments.

     7.8  Transactions  with  Affiliates.  Directly or indirectly  enter into or
permit to exist any material  transaction  with any Affiliate of Borrower except
for transactions  that are in the ordinary course of Borrower's  business,  upon
fair and  reasonable  terms that are no less favorable to Borrower than would be
obtained in an arm's length transaction with a non-affiliated Person.

     7.9  Subordinated  Debt.  Make any  payment in respect of any  Subordinated
Debt,  or permit any of its  Subsidiaries  to make any such  payment,  except in
compliance  with the terms of such  Subordinated  Debt,  or amend any  provision
contained in any documentation  relating to the Subordinated Debt without Bank's
prior written consent.

     7.10  Compliance.   Become  an  "investment   company"   controlled  by  an
"investment  company," within the meaning of the Investment Company Act of 1940,
or  become  principally  engaged  in,  or  undertake  as one  of  its  important
activities,  the business of extending  credit for the purpose of  purchasing or
carrying margin stock, or use the proceeds of any Advance for such purpose. Fail
to meet the minimum funding  requirements of ERISA, permit a Reportable Event or
Prohibited  Transaction,  as defined in ERISA, to occur, fail to comply with the
Federal  Fair  Labor  Standards  Act or  violate  any law or  regulation,  which
violation could have a Material  Adverse Effect or a material  adverse effect on
Borrower's Assets, or permit any of its Subsidiaries to do any of the foregoing.

                         8. EVENTS OF DEFAULT

     Any one or more of the  following  events  shall  constitute  an  Event  of
Default by Borrower under this Agreement:

     8.1  Payment  Default.  If  Borrower  fails to pay,  when  due,  any of the
Obligations.

     8.2 Covenant Default.

     (a) If Borrower  fails to perform any  obligation  under Sections 6.3, 6.7,
6.8,  6.9, or 6.10 or violates  any of the  covenants  contained in Article 7 of
this Agreement, or

                                       16
<PAGE>

     (b) If Borrower  fails or neglects to perform,  keep,  or observe any other
material term,  provision,  condition,  covenant, or agreement contained in this
Agreement,  in any of the Loan  Documents,  or in any  other  present  or future
agreement between Borrower and Bank and as to any default under such other term,
provision,  condition,  covenant or agreement  that can be cured,  has failed to
cure such default within ten (10) days after Borrower receives notice thereof or
any officer of Borrower becomes aware thereof;  provided,  however,  that if the
default  cannot by its nature be cured  within the ten (10) day period or cannot
after  diligent  attempts by Borrower be cured  within such ten (10) day period,
and such default is likely to be cured within a reasonable  time,  then Borrower
shall have an additional  reasonable  period (which shall not in any case exceed
thirty (30) days) to attempt to cure such  default,  and within such  reasonable
time period the failure to have cured such default  shall not be deemed an Event
of Default  (provided  that no Advances  will be required to be made during such
cure period);

     8.3 Material Adverse Change.  If there (i) occurs a material adverse change
in the  business,  operations,  or condition  (financial  or  otherwise)  of the
Borrower,  or (ii) is a material  impairment of the prospect of repayment of any
portion  of the  Obligations  or (iii) is a  material  impairment  of the  value
Borrower's Assets;

     8.4 Attachment.  If any material portion of Borrower's  assets is attached,
seized,  subjected to a writ or distress  warrant,  or is levied upon,  or comes
into the  possession  of any  trustee,  receiver  or person  acting in a similar
capacity and such attachment,  seizure, writ or distress warrant or levy has not
been removed,  discharged  or rescinded  within ten (10) days, or if Borrower is
enjoined,  restrained, or in any way prevented by court order from continuing to
conduct all or any material  part of its business  affairs,  or if a judgment or
other  claim  becomes  a lien  or  encumbrance  upon  any  material  portion  of
Borrower's  assets,  or if a notice of lien,  levy,  or  assessment  is filed of
record with respect to any of Borrower's assets by the United States Government,
or any department,  agency, or instrumentality thereof, or by any state, county,
municipal, or governmental agency, and the same is not paid within ten (10) days
after  Borrower  receives  notice  thereof,  provided that none of the foregoing
shall  constitute an Event of Default where such action or event is stayed or an
adequate bond has been posted pending a good faith contest by Borrower (provided
that no Advances will be required to be made during such cure periods);

     8.5  Insolvency.  If  Borrower  becomes  insolvent,  or  if  an  Insolvency
Proceeding is commenced by Borrower, or if an Insolvency Proceeding is commenced
against  Borrower  and is not  dismissed  or  stayed  within  thirty  (30)  days
(provided  that  no  Advances  will  be  made  prior  to the  dismissal  of such
Insolvency Proceeding);

     8.6 Other  Agreements.  If there is a  default  in any  agreement  to which
Borrower is a party with a third party or parties resulting in the exercise of a
right  by such  third  party or  parties,  to  accelerate  the  maturity  of any
Indebtedness in an amount in excess of One Hundred Thousand  Dollars  ($100,000)
or that could have a Material Adverse Effect;

     8.7  Subordinated  Debt.  If  Borrower  makes any  payment  on  account  of
Subordinated  Debt,  except to the extent  such  payment  is  allowed  under any
subordination agreement entered into with Bank;

     8.8  Judgments.  If a judgment or judgments  for the payment of money in an
amount,  individually  or in the aggregate,  of at least Fifty Thousand  Dollars
($50,000) shall be rendered  against  Borrower and shall remain  unsatisfied and
unstayed  for a period of thirty (30) days  (provided  that no Advances  will be
made prior to the satisfaction or stay of such judgment); or

     8.9  Misrepresentations.  If any  material  misrepresentation  or  material
misstatement exists now or hereafter in any warranty or representation set forth
herein  or in any  certificate  delivered  to  Bank by any  Responsible  Officer
pursuant to this Agreement or to induce Bank to enter into this Agreement or any
other Loan Document.

                          9. BANK'S RIGHTS AND REMEDIES

     9.1 Rights and Remedies.  Upon the occurrence and during the continuance of
an Event of Default,  Bank may, at its election,  without notice of its election
and  without  demand,  do any one or more of the  following,  all of  which  are
authorized by Borrower:

                                       17
<PAGE>

     (a) Declare all Obligations, whether evidenced by this Agreement, by any of
the other Loan Documents,  or otherwise,  immediately due and payable  (provided
that upon the  occurrence  of an Event of Default  described  in Section 8.5 all
Obligations  shall  become  immediately  due and  payable  without any action by
Bank);

     (b) Cease  advancing  money or  extending  credit to or for the  benefit of
Borrower under this Agreement or under any other agreement  between Borrower and
Bank; and

     (c) Without notice to Borrower set off and apply to the Obligations any and
all (i) balances and deposits of Borrower held by Bank, or (ii)  indebtedness at
any time owing to or for the credit or the account of Borrower held by Bank.

     9.2 Power of Attorney.  Effective  only upon the  occurrence and during the
continuance of an Event of Default,  Borrower hereby  irrevocably  appoints Bank
(and any of Bank's  designated  officers,  or employees) as Borrower's  true and
lawful attorney to send requests for  verification of Accounts or notify account
debtors of Bank's security interest in the Accounts.  The appointment of Bank as
Borrower's attorney in fact, and each and every one of Bank's rights and powers,
being coupled with an interest, is irrevocable until all of the Obligations have
been  fully  repaid and  performed  and Bank's  obligation  to provide  advances
hereunder is terminated.

     9.3 Bank  Expenses.  If  Borrower  fails to pay any  amounts or furnish any
required  proof of payment due to third persons or entities,  as required  under
the terms of this Agreement,  then Bank may do any or all of the following:  (a)
make payment of the same or any part thereof; (b) set up such reserves under the
Committed  Revolving  Line as Bank  deems  necessary  to  protect  Bank from the
exposure created by such failure;  or (c) obtain and maintain insurance policies
of the type discussed in Section 6.6 of this Agreement, and take any action with
respect to such policies as Bank deems prudent. Any amounts so paid or deposited
by Bank shall  constitute  Bank Expenses,  shall be immediately due and payable,
and shall bear interest at the then applicable rate  hereinabove  provided.  Any
payments made by Bank shall not  constitute an agreement by Bank to make similar
payments  in the future or a waiver by Bank of any Event of  Default  under this
Agreement.

     9.4 Remedies  Cumulative.  Bank's rights and remedies under this Agreement,
the Loan Documents,  and all other  agreements  shall be cumulative.  Bank shall
have all other rights and remedies not inconsistent herewith as provided by law,
or in  equity.  No  exercise  by Bank of one right or remedy  shall be deemed an
election, and no waiver by Bank of any Event of Default on Borrower's part shall
be deemed a  continuing  waiver.  No delay by Bank  shall  constitute  a waiver,
election,  or  acquiescence  by it. No waiver by Bank shall be effective  unless
made in a written  document signed on behalf of Bank and then shall be effective
only in the  specific  instance  and for the  specific  purpose for which it was
given.

     9.5 Demand;  Protest.  Borrower waives demand,  protest, notice of protest,
notice of default or dishonor,  notice of payment and nonpayment,  notice of any
default, nonpayment at maturity, release, compromise,  settlement, extension, or
renewal of accounts,  documents,  instruments,  chattel paper, and guarantees at
any time held by Bank on which Borrower may in any way be liable.

                                   10. NOTICES

     Unless otherwise provided in this Agreement,  all notices or demands by any
party  relating  to  this  Agreement  or any  other  agreement  entered  into in
connection herewith shall be in writing and (except for financial statements and
other  informational  documents which may be sent by first-class  mail,  postage
prepaid)  shall  be  personally  delivered  or  sent by a  recognized  overnight
delivery service,  certified mail, postage prepaid, return receipt requested, or
by  telefacsimile  to Borrower or to Bank,  as the case may be, at its addresses
set forth below:

          If to Borrower       Advanced Technology Materials, Inc.
                                7 Commerce Drive
                                Danbury, CT 06810
                               ATTN: Daniel P. Sharkey, CFO
                                FAX: 203-792-8040

                                       18
<PAGE>

          If to Bank           Silicon Valley Bank
                                40 William Street
                               Wellesley, MA 02181
                               ATTN: Joan Parsons
                                FAX: 617-431-9906

     The  parties  hereto may  change  the  address at which they are to receive
notices  hereunder,  by notice in writing in the  foregoing  manner given to the
other.

                 11. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER

     The  laws  of  the  Commonwealth  of  Massachusetts  shall  apply  to  this
Agreement.  BORROWER  ACCEPTS FOR ITSELF AND IN CONNECTION  WITH ITS PROPERTIES,
UNCONDITIONALLY, THE NON-EXCLUSIVE JURISDICTION OF ANY STATE OR FEDERAL COURT OF
COMPETENT JURISDICTION IN THE COMMONWEALTH OF MASSACHUSETTS IN ANY ACTION, SUIT,
OR  PROCEEDING  OF ANY KIND  AGAINST IT WHICH ARISES OUT OF OR BY REASON OF THIS
AGREEMENT; PROVIDED, HOWEVER, THAT IF FOR ANY REASON BANK CANNOT AVAIL ITSELF OF
THE COURTS OF THE COMMONWEALTH OF MASSACHUSETTS,  BORROWER ACCEPTS  JURISDICTION
OF THE COURTS AND VENUE IN SANTA CLARA  COUNTY,  CALIFORNIA.  BORROWER  AND BANK
EACH HEREBY WAIVE THEIR RESPECTIVE  RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE
OF ACTION  BASED UPON OR ARISING OUT OF ANY OF THE LOAN  DOCUMENTS OR ANY OF THE
TRANSACTIONS  CONTEMPLATED  THEREIN,  INCLUDING  CONTRACT  CLAIMS,  TORT CLAIMS,
BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS.  EACH PARTY
RECOGNIZES  AND  AGREES  THAT  THE  FOREGOING  WAIVER   CONSTITUTES  A  MATERIAL
INDUCEMENT  FOR IT TO ENTER  INTO THIS  AGREEMENT.  EACH  PARTY  REPRESENTS  AND
WARRANTS  THAT IT HAS  REVIEWED  THIS WAIVER WITH ITS LEGAL  COUNSEL AND THAT IT
KNOWINGLY AND VOLUNTARILY  WAIVES ITS JURY TRIAL RIGHTS  FOLLOWING  CONSULTATION
WITH LEGAL COUNSEL.

                             12. GENERAL PROVISIONS

     12.1  Successors and Assigns.  This  Agreement  shall bind and inure to the
benefit  of the  respective  successors  and  permitted  assigns  of each of the
parties; provided, however, that neither this Agreement nor any rights hereunder
may be assigned by Borrower without Bank's prior written consent,  which consent
may be granted or withheld in Bank's sole discretion.  Bank shall have the right
without the consent of or notice to Borrower to sell,  transfer,  negotiate,  or
grant  participation  in  all  or any  part  of,  or  any  interest  in,  Bank's
obligations,  rights and benefits hereunder, provided that Bank remains the lead
bank after any such action.

     12.2  Indemnification.  Borrower shall defend,  indemnify and hold harmless
Bank and its  officers,  employees,  and agents  against:  (a) all  obligations,
demands,  claims,  and  liabilities  claimed or  asserted  by any other party in
connection with the  transactions  contemplated  by this Agreement;  and (b) all
losses or Bank  Expenses  in any way  suffered,  incurred,  or paid by Bank as a
result  of or in  any  way  arising  out  of,  following,  or  consequential  to
transactions  between  Bank  and  Borrower  whether  under  this  Agreement,  or
otherwise (including without limitation reasonable attorneys fees and expenses),
except for losses caused by Bank's gross negligence or willful misconduct.

     12.3 Time of Essence.  Time is of the essence  for the  performance  of all
obligations set forth in this Agreement.

     12.4 Severability of Provisions.  Each provision of this Agreement shall be
severable  from every  other  provision  of this  Agreement  for the  purpose of
determining the legal enforceability of any specific provision.

     12.5 Amendments in Writing,  Integration.  This Agreement cannot be amended
or terminated  orally.  All prior agreements,  understandings,  representations,
warranties,  and  negotiations  between the parties  hereto with  respect to the
subject matter of this Agreement, if any, are merged into this Agreement and the
Loan Documents.

                                       19
<PAGE>

     12.6  Counterparts.  This  Agreement  may  be  executed  in any  number  of
counterparts and by different parties on separate  counterparts,  each of which,
when  executed  and  delivered,  shall be deemed to be an  original,  and all of
which, when taken together, shall constitute but one and the same Agreement.

     12.7 Survival.  All covenants,  representations and warranties made in this
Agreement  shall  continue  in full force and effect so long as any  Obligations
remain  outstanding.  The obligations of Borrower to indemnify Bank with respect
to the expenses,  damages,  losses,  costs and liabilities  described in Section
12.2 shall  survive until all  applicable  statute of  limitations  periods with
respect to actions that may be brought against Bank have run.

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

     12.9  Effectiveness.  This  Agreement  shall become  effective only when it
shall have been executed by Borrower and Bank  (provided,  however,  in no event
shall this  Agreement  become  effective  until  signed by an officer of Bank in
California).

     IN WITNESS  WHEREOF,  the parties  hereto have caused this  Agreement to be
executed as a sealed instrument as of the date first set forth above.

"Borrower"                                "Bank"

ADVANCED TECHNOLOGY MATERIALS, INC.       SILICON VALLEY BANK, doing business
                                          as SILICON VALLEY EAST


By:   /s/ Daniel P. Sharkey                 By: /s/ James C. Maynard
    --------------------------             --------------------------
       Daniel P. Sharkey, CFO                 James C. Maynard, VP


                                          SILICON VALLEY BANK

                                          By:   /s/ Christine Ware
                                          -------------------------
                                          Title: Vice President
                                          -------------------------
                                     (Signed in Santa Clara County, California)

                                       20
<PAGE>



                                    EXHIBIT A
                                BORROWER'S ASSETS


     Borrower's  Assets  shall  consist  of all  right,  title and  interest  of
Borrower in and to the following:

     (a) All goods and  equipment  now owned or hereafter  acquired,  including,
without limitation, all machinery,  fixtures, vehicles (including motor vehicles
and trailers),  and any interest in any of the foregoing,  and all  attachments,
accessories,   accessions,   replacements,    substitutions,    additions,   and
improvements to any of the foregoing, wherever located;

     (b) All  inventory,  now owned or hereafter  acquired,  including,  without
limitation,  all  merchandise,  raw  materials,  parts,  supplies,  packing  and
shipping  materials,  work in  process  and  finished  products  including  such
inventory  as is  temporarily  out of  Borrower's  custody or  possession  or in
transit and including any returns upon any accounts or other proceeds, including
insurance  proceeds,  resulting  from  the  sale  or  disposition  of any of the
foregoing  and  any  documents  of  title  representing  any of the  above,  and
Borrower's Books relating to any of the foregoing;

     (c) All  contract  rights and general  intangibles  now owned or  hereafter
acquired, including, without limitation,  goodwill,  trademarks,  service marks,
trade  styles,  trade  names,  patents,  patent  applications,  leases,  license
agreements,   franchise  agreements,   blueprints,  drawings,  purchase  orders,
customer lists, route lists, infringements,  claims, computer programs, computer
discs, computer tapes, literature,  reports, catalogs, design rights, income tax
refunds, payments of insurance and rights to payment of any kind;

     (d) All now existing  and  hereafter  arising  accounts,  contract  rights,
royalties,  license rights and all other forms of obligations  owing to Borrower
arising out of the sale or lease of goods,  the  licensing of  technology or the
rendering of services by Borrower, whether or not earned by performance, and any
and all credit insurance,  guaranties,  and other security therefor,  as well as
all  merchandise  returned to or  reclaimed  by Borrower  and  Borrower's  Books
relating to any of the foregoing;

     (e) All documents, cash, deposit accounts,  securities,  letters of credit,
certificates  of deposit,  instruments  and chattel paper now owned or hereafter
acquired and Borrower's Books relating to the foregoing;

     (f) All copyright rights,  copyright applications,  copyright registrations
and like  protections in each work of authorship  and  derivative  work thereof,
whether  published or unpublished,  now owned or hereafter  acquired;  all trade
secret  rights,  including  all  rights  to  unpatented  inventions,   know-how,
operating manuals,  license rights and agreements and confidential  information,
now owned or hereafter  acquired;  all mask work or similar rights available for
the protection of  semiconductor  chips,  now owned or hereafter  acquired;  all
claims for damages by way of any past, present and future infringement of any of
the foregoing; and

     (g) Any and all claims,  rights and  interests  in any of the above and all
substitutions for, additions and accessions to and proceeds thereof.

                                       21
<PAGE>




                                    EXHIBIT B
                  LOAN PAYMENT/ADVANCE TELEPHONE REQUEST FORM

The undersigned hereby certifies as follows:

     I, ___________________, am the duly elected and acting ____________________
of Advanced Technology Materials, Inc. ("Borrower").

     This certificate is delivered  pursuant to Section 2.1 of that certain Loan
Agreement  dated  December 27, 1996 by and between  Borrower and Silicon  Valley
Bank ("Bank") (the "Loan  Agreement").  The terms used in this Borrowing Request
which are defined in the Loan Agreement have the same meaning herein as ascribed
to them therein.

     Borrower is confirming  its telephone  request made on  __________________,
199___ for a Prime Rate Advance as follows:

     (a) The  date on  which  the  Advance  is to be made is  _________________,
199__.

     (b) The amount of the Advance is to be $____________.

     All representations and warranties of Borrower stated in the Loan Agreement
are true,  accurate and complete in all material  respects as of the date of the
telephone request for and Advance confirmed by this Borrowing Request; provided,
however,  that those  representations  and  warranties  expressly  referring  to
another date shall be true, accurate and complete in all material respects as of
such date.

     IN WITNESS WHEREOF,  this Borrowing  Request is executed by the undersigned
as of this ______ day of ______________, 199__.



     ADVANCED TECHNOLOGY MATERIALS, INC.


     By:

     Title:



                                       22
<PAGE>
<TABLE>
<CAPTION>

                                    EXHIBIT C
                           BORROWING BASE CERTIFICATE

Borrower:                                    Lender:
         Advanced Technology Materials, Inc.        Silicon Valley Bank
         7 Commerce Drive                           3003 Tasman Drive
         Danbury, CT 06810                          Santa Clara, CA 95054

Commitment Amount: $10,000,000

ACCOUNTS RECEIVABLE
<S>                                                      <C>        <C>
1. Accounts Receivable Book Value as of ________________            $__________
2. Additions (please explain on reverse)                            $__________
3. TOTAL ACCOUNTS RECEIVABLE                                        $__________
ACCOUNTS RECEIVABLE DEDUCTIONS
4. Amounts over 90 days due                              $_________
5. Credit Balances Applied to Over 90-Day Accounts       $_________
6. Balance of 50% over 90 day accounts                   $_________
7. Concentration Limits                                  $_________
8. Ineligible Foreign Accounts                           $_________
9. Contra Accounts                                       $_________
10.Promotion or Demo Accounts                            $_________
11.Intercompany/Employee Accounts                        $_________
12.Other (please explain on reverse)                     $_________
13.TOTAL ACCOUNTS RECEIVABLE DEDUCTIONS                              $_________
14.Eligible Accounts (#3 - #13)                                      $_________
15.LOAN VALUE OF ACCOUNTS (80% of #14)                               $_________

</TABLE>
ELIGIBLE INVENTORY
16.Raw Materials Inventory Value as of  ___________________  $_________ ELIGIBLE
INVENTORY  DEDUCTIONS  (without   duplication)  17.Work  in  Process  $_________
18.TOTAL  ELIGIBLE  INVENTORY  DEDUCTIONS   $_________   19.Eligible   Inventory
(#16-#18)  $_________  20.Maximum  Eligible Inventory Sublimit $ 900,000 21.LOAN
VALUE OF INVENTORY (lesser of 20 or [30% of #18]) $_________

<TABLE>
<CAPTION>
BALANCES
<S>                                                                 <C>
22.Maximum Loan Amount                                              $10,000,000
23.Total Funds Available (Lesser of #22 or [#15 plus #21])           $_________
24.Present balance owing on Line of Credit                           $_________
25.Outstanding under Eligible Inventory Sublimit                     $_________
26.RESERVE POSITIVE (#22 minus #24 plus #25)                         $_________
</TABLE>
     The  undersigned  represents  and  warrants  that  the  foregoing  is true,
complete and correct, and that the information  reflected in this Borrowing Base
Certificate  complies with the  representations  and warranties set forth in the
Loan  Agreement  dated  DECEMBER 27, 1996,  as may be amended from time to time,
between the undersigned and Silicon Valley Bank.

------------------------------------------------------------------------------
BANK                                   USE                               ONLY
------------------------------------------------------------------------------
Rec'd By: ___________
------------------------------------------------------------------------------
              Auth. Signer

Date: _______________

Verified: _______________
           Auth. Signer

Date: ________________


ADVANCED TECHNOLOGY MATERIALS, INC.


By: ____________________________
          Authorized Signer
COMMENTS:

                                       23
<PAGE>

                                    EXHIBIT D
                             COMPLIANCE CERTIFICATE

Borrower:                                   Lender:
        Advanced Technology Materials, Inc.        Silicon Valley Bank
        7 Commerce Drive                           3003 Tasman Drive
        Danbury, CT 06810                          Santa Clara, CA 95054

     The undersigned  authorized officer of Advanced Technology Materials,  Inc.
hereby  certifies  that in accordance  with the terms and conditions of the Loan
Agreement dated DECEMBER 27, 1996 between  Borrower and Bank (the  "Agreement"),
(i) Borrower is in complete  compliance for the period ending ___________ of all
required conditions and terms except as noted below and (ii) all representations
and  warranties  of Borrower  stated in the  Agreement  are true,  accurate  and
complete in all material  respects as of the date hereof.  Attached herewith are
the required documents supporting the above  certification.  The Officer further
certifies  that  these  are  prepared  in  accordance  with  Generally  Accepted
Accounting  Principals  (GAAP)  and are  consistent  from one period to the next
except as explained in an accompanying letter or footnotes.

     Please  indicate  compliance  status by circling  Yes/No under  '"Complies"
column

Reporting Covenant                  Required                          Complies

Quarterly financial statements      Quarterly within 45 days         Yes     No
Annual (CPA Audited)                FYE within 90 days               Yes     No
A/R & A/P Agings                    Quarterly within 15 days
                                   (prior to first Advance
                                    and only while Advances
                                         are outstanding)             Yes    No

Financial Covenants           Required          Actual                Complies

Maintain on a Quarterly Basis:
 Minimum Quick Ratio          2.0:1.0            __________:1.0        Yes   No
 Minimum TNW              $25,000,000        $_____________            Yes   No
 Maximum Debt/TNW             1.0:1.0            __________:1.0        Yes   No

Comments Regarding Exceptions:

     On behalf of Borrower,  the Officer further  acknowledges  that at any such
time as  Borrower  is out of  compliance  with any of the terms set forth in the
Agreement,  including,  without  limitation,  any  of the  financial  covenants,
Borrower cannot receive any advances.


     Sincerely,
------------------------------------------------------------------------------
BANK                                   USE                                ONLY
------------------------------------------------------------------------------
Received                     by:               ___________________________
------------------------------------------------------------------------------
Date: _________________________________

Verified: ______________________________
Date: _________________________________

Compliance Status:                  Yes      No

-----------------------------------
Signature

-----------------------------------
TITLE

----------------------------------
DATE



                                       24
<PAGE>

                          LIBOR SUPPLEMENT TO AGREEMENT

     This LIBOR  Supplement to Agreement (the  "Supplement")  is a supplement to
the Loan Agreement dated as of December 27, 1996 (the "Loan Agreement")  between
Silicon   Valley  Bank  ("Bank")  and  Advanced   Technology   Materials,   Inc.
("Borrower), and forms a part of and is incorporated into the Loan Agreement.

                                 1. DEFINITIONS

     "Business  Day" means a day of the year (a) that is not a Saturday,  Sunday
or other day on which banks in the State of California or the City of London are
authorized or required to close and (b) on which  dealings are carried on in the
interbank market in which Bank customarily participates.

     "Interest Period" means for each LIBOR Rate Loan, a period of approximately
one, two or three months as the Borrower may elect,  provided  that the last day
of an Interest  Period for a LIBOR Rate Loan shall be  determined  in accordance
with the practices of the LIBOR interbank market as from time to time in effect,
provided,  further,  in all cases such  period  shall  expire not later than the
applicable Maturity Date.

     "Interest  Rate"  shall mean as to: (a) Prime Rate  Loans,  an annual  rate
equal to the Prime  Rate;  and (b) LIBOR Rate  Loans,  an annual rate of 2.5% in
excess of the LIBOR Rate (based on the LIBOR Rate  applicable  for the  Interest
Period selected by the Borrower).

     "LIBOR Base Rate" means, for any Interest Period for a LIBOR Rate Loan, the
rate of  interest  per  annum  determined  by Bank to be the per  annum  rate of
interest at which  deposits in United States  Dollars are offered to Bank in the
London  interbank  market in which Bank  customarily  participates at 11:00 A.M.
(local time in such interbank market) two (2) Business Days before the first day
of such Interest Period for a period approximately equal to such Interest Period
and in an amount approximately equal to the amount of such Loan.

     "LIBOR Rate" shall mean,  for any Interest  Period for a LIBOR Rate Loan, a
rate per annum (rounded upwards, if necessary,  to the nearest 1/16 of 1%) equal
to (i) the LIBOR Base Rate for such Interest  Period divided by (ii) 1 minus the
Reserve Requirement for such Interest Period.

     "LIBOR  Rate  Loans"  means any Loans  made or a portion  thereof  on which
interest is payable based on the LIBOR Rate in accordance with the terms hereof.

     "Prime Rate" means the variable  rate of interest per annum,  most recently
announced by Bank as its "prime rate," whether or not such announced rate is the
lowest rate available from Bank. The Interest rate  applicable to the Prime Rate
Loans shall change on each date there is a change in the Prime Rate.

     "Prime  Rate  Loans"  means any Loans  made or a portion  thereof  on which
interest is payable based on the Prime Rate in accordance with the terms hereof.

     "Regulation D" means  Regulation D of the Board of Governors of the Federal
Reserve System as the same may be amended or supplemented from time to time.

     "Regulatory Change" means, with respect to Bank, any change on or after the
date of this Loan Agreement in United States  federal,  state or foreign laws or
regulations,  including Regulation D, or the adoption or making on or after such
date of any  interpretations,  directives  or  requests  applying  to a class of
lenders  including Bank of or under any United States  federal or state,  or any
foreign,  laws or  regulations  (whether  or not having the force of law) by any
court or governmental or monetary  authority charged with the  interpretation or
administration thereof.

                                       25
<PAGE>

     "Reserve  Requirement"  means, for any Interest Period. the average maximum
rate at which  reserves  (including  any  marginal,  supplemental  or  emergency
reserves)  are  required to be  maintained  during such  Interest  Period  under
Regulation  D  against  "Eurocurrency  liabilities"  (as  such  term  is used in
Regulation D) by member banks of the Federal  Reserve System.  Without  limiting
the effect of the  foregoing,  the Reserve  Requirement  shall reflect any other
reserves  required to be maintained by Bank by reason of any  Regulatory  Change
against (i) any category of liabilities  which includes deposits by reference to
which the LIBOR Rate is to be determined as provided in the definition of "LIBOR
Base Rate" or (ii) any  category of  extensions  of credit or other assets which
include Loans.

             2. REQUESTS FOR LOANS: CONFIRMATION OF INITIAL LOANS.

     (a) Each LIBOR Rate Loan shall be made upon the irrevocable written request
of Borrower received by Bank not later than 11:00 a.m. (Santa Clara,  California
time) on the Business Day three (3) Business Days prior to the date such Loan is
to be made.  Each such  notice  shall  specify the date such Loan is to be made,
which day shall be a Business Day, the amount of such Loan, the Interest  Period
for such Loan, and comply with such other  requirements  as Bank  determines are
reasonable or desirable in connection therewith.

     (b) Each  written  request  for a LIBOR Rate Loan shall be in the form of a
LIBOR Rate Loan Borrowing Certificate as set forth on Schedule A, which shall be
duly executed by the Borrower.

     (c) Each Prime Rate Loan shall be made upon the irrevocable written request
of Borrower received by Bank not later than 11:00 a.m. (Santa Clara,  California
time) on the Business Day one (1) Business day prior to the date such Loan is to
be made. Each such notice shall specify the date such Loan is to be made,  which
day shall be a Business  Day and the amount of such Loan,  and comply  with such
other  requirements as Bank determines are reasonable or desirable in connection
therewith.

                      3. CONVERSION/CONTINUATION OF LOANS.

     (a)  Borrower  may from time to time submit in writing a request that Prime
Rate Loans be  converted  to LIBOR Rate  Loans or that any  existing  LIBOR Rate
Loans continue for an additional Interest Period. Such request shall specify the
amount of the Prime Rate Loans which will  constitute  LIBOR Rate Loans (subject
to the limits set forth below) and the Interest  Period to be applicable to such
LIBOR Rate Loans.  Each written request for a conversion to a LIBOR Rate Loan or
a  continuation  of a LIBOR  Rate Loan shall be  substantially  in the form of a
LIBOR Rate Conversion/Continuation Certificate as set forth on Schedule B, which
shall be duly  executed  by the  Borrower.  Subject to the terms and  conditions
contained herein, three (3) Business Days after Bank's receipt of such a request
from  Borrower,  such Prime Rate Loans shall be converted to LIBOR Rate Loans or
such LIBOR Rate Loans shall continue, as the case may be provided that:

     (i) no Event of  Default,  or event which with notice or passage of time or
both would constitute an Event of Default, exists;

     (ii) no party  hereto  shall  have sent any notice of  termination  of this
Supplement or of the Loan Agreement.

     (iii) Borrower  shall have complied with such customary  procedures as Bank
has established from time to time for Borrower's requests for LIBOR Rate Loans;

     (iv) the  amount of a LIBOR  Rate Loan shall be  $500,000  or such  greater
amount which is an integral multiple of $50,000; and

     (v) Bank shall have  determined  that the Interest  Period or LIBOR Rate is
available to Bank which can be readily  determined as of the date of the request
for such LIBOR Rate Loan.

     Any request by Borrower to convert  Prime Rate Loans to LIBOR Rate Loans or
continue any  existing  LIBOR Rate Loans shall be  irrevocable.  Notwithstanding
anything  to the  contrary  contained  herein,  Bank  shall not be  required  to
purchase United States Dollar deposits in the London  interbank  market or other
applicable  LIBOR Rate market to fund any LIBOR Rate Loans,  but the  provisions
hereof shall be deemed to apply as if Bank had  purchased  such deposits to fund
the LIBOR Rate Loans.

                                       26
<PAGE>

     (b) Any LIBOR Rate Loans  shall  automatically  convert to Prime Rate Loans
upon the last day of the applicable  Interest  Period,  unless Bank has received
and approved a complete and proper  request to continue  such LIBOR Rate Loan at
least  three (3)  Business  Days prior to such last day in  accordance  with the
terms hereof.  Any LIBOR Rate Loans shall,  at Bank's  option,  convert to Prime
Rate Loans in the event that (i) an Event of  Default,  or event  which with the
notice or passage of time or both would  constitute  an Event of Default,  shall
exist, (ii) this Supplement or the Loan Agreement shall terminate,  or (iii) the
aggregate  principal  amount of the Prime Rate Loans which have  previously been
converted to LIBOR Rate Loans,  or the  aggregate  principal  amount of existing
LIBOR Rate Loans continued,  as the case may be, at the beginning of an interest
Period shall at any time during such Interest  Period  exceeds the lesser of (x)
the Committed  Revolving Line or (y) the Borrowing Base.  Borrower agrees to pay
to Bank, upon demand by Bank (or Bank may, at its option, charge Borrower's loan
account) any amounts required to compensate Bank for any loss (including loss of
anticipated  profits),  cost or expense Incurred by such person,  as a result of
the  conversion  of LIBOR Rate Loans to Prime Rate Loans  pursuant to any of the
foregoing.

     (c) On all Loans,  Interest shall be payable by Borrower to Bank monthly in
arrears not later than the  twenty-second  (22nd) day of each calendar  month at
the applicable Interest Rate.

     4. ADDITIONAL REQUIREMENTS/PROVISIONS REGARDING LIBOR RATE LOANS: ETC.

     (a) If for any reason  (including  voluntary  or  mandatory  prepayment  or
acceleration), Bank receives all or part of the principal amount of a LIBOR Rate
Loan prior to the last day of the Interest Period for such Loan,  Borrower shall
immediately  notify  Borrower's  account officer at Bank and, on demand by Bank,
pay Bank the amount (if any) by which (i) the  additional  interest  which would
have been payable on the amount so received had it not been  received  until the
last day of such Interest Period exceeds (ii) the interest which would have been
recoverable  by Bank by  placing  the  amount  so  received  on  deposit  in the
certificate of deposit  markets or the offshore  currency  interbank  markets or
United States  Treasury  investment  products,  as the case may be, for a period
starting on the date on which it was so  received  and ending on the last day of
such Interest  Period at the Interest rate  determined by Bank in its reasonable
discretion.  Bank's  determination as to such amount shall be conclusive  absent
manifest error.

     (b) Borrower shall pay to Bank, upon demand by Bank, from time to time such
amounts as Bank may  determine to be necessary  to  compensate  it for any costs
incurred  by Bank  that  Bank  determines  are  attributable  to its  making  or
maintaining  of any amount  receivable by Bank hereunder in respect of any Loans
relating  thereto (such increases in costs and reductions in amounts  receivable
being  herein  called  "Additional  Costs"),  in each  case  resulting  from any
Regulatory Change which:

     (i) changes the basis of taxation of any amounts payable to Bank under this
Supplement  in respect of any Loans  (other  than  changes  which  affect  taxes
measured by or imposed on the overall net income of Bank by the  jurisdiction in
which such Bank has its principal office); or

     (ii)  imposes  or  modifies  any  reserve,   special   deposit  or  similar
requirements  relating to any  extensions  of credit or other  assets of, or any
deposits with or other  liabilities of Bank (including any Loans or any deposits
referred to in the definition of "LIBOR Base Rate"); or

     (iii) imposes any other condition affecting this Supplement (or any of such
extensions of credit or liabilities).

     Bank will notify Borrower of any event occurring after the date of the Loan
Agreement  which will entitle Bank to  compensation  pursuant to this section as
promptly as  practicable  after it obtains  knowledge  thereof and determines to
request such  compensation.  Bank will furnish Borrower with a statement setting
forth the basis and amount of each request by Bank for  compensation  under this
Section 4. Determinations and allocations by Bank for purposes of this Section 4
of  the  effect  of any  Regulatory  Change  on its  costs  of  maintaining  its
obligations  to make  Loans or of  making  or  maintaining  Loans or on  amounts
receivable by it in respect of Loans, and of the additional  amounts required to
compensate Bank in respect of any Additional  Costs,  shall be conclusive absent
manifest error,

                                       27
<PAGE>

     (c) Borrower  shall pay to Bank,  upon the request of Bank,  such amount or
amounts as shall be sufficient  (in the sole good faith opinion of such Bank) to
compensate it for any loss,  costs or expense  incurred by it as a result of any
failure by Borrower to borrow a Loan on the date for such borrowing specified in
the relevant notice of borrowing hereunder.

     (d) If Bank shall  determine  that the  adoption or  implementation  of any
applicable law, rule,  regulation or treaty regarding capital  adequacy,  or any
change therein, or any change in the interpretation or administration thereof by
any governmental  authority,  central bank or comparable agency charged with the
interpretation  or  administration  thereof,  or  compliance  by  Bank  (or  its
applicable  lending  office) with  respect to any  directive  regarding  capital
adequacy (whether or not having the force of law) of any such authority, central
bank or comparable  agency, has or would have the effect of reducing the rate of
return on capital of Bank or any person or entity  controlling Bank (a "Parent")
as a consequence of its  obligations  hereunder to a level below that which Bank
(or its Parent) could have achieved but for such adoption,  change or compliance
(taking into  consideration its policies with respect to capital adequacy) by an
amount  deemed by Bank to be  material,  then from time to time,  within 15 days
after  demand by Bank,  Borrower  shall pay to Bank  such  additional  amount or
amounts as will compensate Bank for such reduction. A statement of Bank claiming
compensation  under this  Section and  setting  forth the  additional  amount or
amounts to be paid to it hereunder shall be conclusive absent manifest error.

     (e) If at any time Bank,  in its sole and absolute  discretion,  determines
that  (i)  the  amount  of  the  LIBOR  Rate  Loans  for  periods  equal  to the
corresponding  interest  Periods  are not  available  to  Bank  in the  offshore
currency interbank  markets,  or (ii) the LIBOR Rate does not accurately reflect
the cost to Bank of lending the LIBOR Rate Loan,  then Bank shall  promptly give
notice thereof to Borrower, and upon the giving of such notice Bank's obligation
to make the LIBOR Rate Loans shall terminate,  unless Bank and Borrower agree in
writing to a different interest rate applicable to LIBOR Rate Loans. If it shall
become  unlawful  for Bank to  continue  to fund or  maintain  any Loans,  or to
perform its obligations  hereunder,  upon demand by Bank,  Borrower shall prepay
the Loans in full with accrued interest thereon and all other amounts payable by
Borrower  hereunder  (including,  without  limitation,  any  amount  payable  in
connection with such prepayment pursuant to Section 4(a)).

                                  5. CONFLICTS.

     If there is any  conflict  between  the terms and  condition  of this LIBOR
Supplement to Loan Agreement and the terms and condition of the Loan  Agreement,
the terms  and  condition  of this  LIBOR  Supplement  to Loan  Agreement  shall
control.


                                       28
<PAGE>


                         SCHEDULE A TO LIBOR SUPPLEMENT
                      LIBOR RATE LOAN BORROWING CERTIFICATE

         The undersigned hereby certifies as fellows:

     I,   _________________________,    am   the   duly   elected   and   acting
________________ of Advanced Technology Materials, Inc. ("Borrower").

     This  certificate Is delivered  pursuant to Section 2 of that certain LIBOR
Supplement to Agreement together with the Loan Agreement dated December 27, 1996
by and between Borrower and Silicon Valley Bank ("Bank") (the "Loan Agreement").
The terms  used in this  Borrowing  Certificate  which are  defined  in the Loan
Agreement have the same meaning herein as ascribed to them therein.

     Borrower  hereby  requests  on  ___________,19___  a LIBOR  Rate  Loan (the
"Loan") as follows:

     (a) The date on which the Loan is to be made is _____________ 19__.

     (b) The  amount of the Loan is to be  ____________________  ($___________),
for an Interest Period of ____________ month(s).

     All representations and warranties of Borrower stated in the Loan Agreement
are true,  correct and complete in all material  respects as of the date of this
request for a loan; provided, however, that those representations and warranties
expressly  referring to another date shall be true,  correct and complete in all
material respects as of such date.

     IN WITNESS  WHEREOF,  this  Borrowing  Base  Certificate is executed by the
undersigned as of this ________ day of ___________ 19__.

     ADVANCED TECHNOLOGY MATERIALS, INC.


     By:

     Title:


     Internal Bank Use Only

------------------  ----------  -------------------  -------------
LIBOR Pricing Date  LIBOR Rate  LIBOR Rate Variance  Maturity Date
------------------  ----------  -------------------  -------------


                                       29
<PAGE>

                         SCHEDULE B TO LIBOR SUPPLEMENT
                 LIBOR RATE CONVERSION/CONTINUATION CERTIFICATE

         The undersigned hereby certifies as follows:

     I,   _________________________,    am   the   duly   elected   and   acting
________________ of Advanced Technology Materials, Inc. ("Borrower").

     This  certificate is delivered  pursuant to Section 2 of that certain LIBOR
Supplement to Agreement together with the Loan Agreement dated December 27, 1996
by and between Borrower and Silicon Valley Bank ("Bank") (the "Loan Agreement").
The terms used in this LIBOR Rate Conversion/Continuation  Certificate which are
defined in the Loan  Agreement  have the same meaning herein as ascribed to them
therein,

     Borrower  hereby  requests on  _____________  19____ a LIBOR Rate Loan (the
"Loan") as follows:

     (a) ____ (I) A rate  conversion of an existing Prime Rate Loan from a Prime
Rate Loan to a LIBOR Rate Loan; or

     ____ (ii) A  continuation  of an  existing  LIBOR Rate Loan as a LIBOR Rate
Loan;

     [Check (i) or (ii) above]

     (b) The date on which the Loan is to be made is _____________ 19___.

     (c) The amount of the Loan is to be  __________________  ($____________  ),
for an Interest Period of _____________ month(s).

     All representations and warranties of Borrower stated in the Loan Agreement
are true,  correct and complete in all material  respects as of the date of this
request for a loan; provided, however, that those representations and warranties
expressly  referring to another dale shall be true,  correct and complete in all
material respects as of such date.

     IN WITNESS WHEREOF, this LIBOR Rate Conversion/Continuation  Certificate is
executed by the undersigned as of this __________ day of _____________ 19__.

     ADVANCED TECHNOLOGY MATERIALS, INC.


     By:

     Title:

     For Internal Bank Use Only

------------------  ----------  -------------------  -------------
LIBOR Pricing Date  LIBOR Rate  LIBOR Rate Variance  Maturity Date
------------------  ----------  -------------------  -------------


                                       30
<PAGE>


                            Revolving Promissory Note

$10,000,000                                             Danbury, Connecticut
                                                           December 27, 1996

     FOR VALUE RECEIVED, the undersigned, ADVANCED TECHNOLOGY MATERIALS, INC., a
Delaware  corporation (the "Borrower"),  promises to pay to the order of Silicon
Valley Bank, a  California-chartered  bank ("Bank"), at such place as the holder
hereof may  designate,  in lawful  money of the United  States of  America,  the
aggregate unpaid principal amount of all advances  ("Advances")  made by Bank to
Borrower in accordance with the terms of the Loan Agreement between Borrower and
Bank of even date herewith, as amended from time to time (the "Loan Agreement"),
up  to  a  maximum  principal  amount  of  TEN  MILLION  AND  NO/100THS  Dollars
($10,000,000),  until  paid in full.  Borrower  shall also pay  interest  on the
aggregate  unpaid  principal  amount  of  such  Advances  at  the  rates  and in
accordance with the terms of the Loan Agreement. The entire principal amount and
all accrued interest shall be due and payable on DECEMBER 26, 1997.

     Borrower  irrevocably waives the right to direct the application of any and
all  payments  at any time  hereafter  received  by Bank  from or on  behalf  of
Borrower,  and Borrower  irrevocably  agrees that Bank shall have the continuing
exclusive  right to apply  any and all such  payments  against  the then due and
owing  obligations of Borrower as Bank may deem  advisable.  In the absence of a
specific  determination  by Bank with respect  thereto,  all  payments  shall be
applied in the following order: (a) then due and payable fees and expenses;  (b)
then due and payable interest payments and mandatory  prepayments;  and (c) then
due and payable principal payments and optional prepayments.

     Bank is hereby  authorized  by  Borrower  to  endorse  on Bank's  books and
records each Advance made by Bank under this Note and the amount of each payment
or  prepayment  of  principal of each such  Advance  received by Bank;  it being
understood,  however, that failure to make any such endorsement (or any error in
notation)  shall not affect the obligations of Borrower with respect to Advances
made  hereunder,  and  payments of  principal  by Borrower  shall be credited to
Borrower  notwithstanding  the  failure  to make a  notation  (or any  errors in
notation) thereof on such books and records.

     Borrower  promises to pay Bank all costs and expenses of collection of this
Note and to pay all  reasonable  attorneys'  fees  incurred in such  collection,
whether  or not there is a suit or  action,  or in any suit or action to collect
this  Note  or in any  appeal  thereof.  Borrower  waives  presentment,  demand,
protest,  notice of protest, notice of dishonor,  notice of nonpayment,  and any
and all other notices and demands in connection  with the delivery,  acceptance,
performance,  default or  enforcement  of this Note,  as well as any  applicable
statutes  of  limitations.  No delay by Bank in  exercising  any  power or right
hereunder  shall  operate  as a waiver  of any  power or  right.  Time is of the
essence as to all obligations hereunder.

     This Note is issued pursuant to the Loan Agreement,  which shall govern the
rights and obligations of Borrower with respect to all obligations hereunder.

     This Note  shall be  deemed to be made  under,  and shall be  construed  in
accordance with and governed by, the laws of the Commonwealth of  Massachusetts,
excluding conflicts of laws principles.

     Executed as an instrument under seal.

     ADVANCED TECHNOLOGY MATERIALS, INC.


     By: Daniel P. Sharkey, CFO