Document:

Exhibit 10.19

 

EXECUTION COPY

 

EXCHANGE AGREEMENT

 

THIS EXCHANGE
AGREEMENT (this “Agreement”) is made and entered into as of the 3rd day
of August, 2004, by and among LOUD TECHNOLOGIES INC. (f/k/a MACKIE DESIGNS
INC.), a Washington corporation (the “Company”), SUN MACKIE, LLC, a
Delaware limited liability company (“Sun”), RANDOLPH STREET PARTNERS V,
an Illinois general partnership (“RSP”), and H.I.G. SUN PARTNERS, INC.,
a Cayman Islands corporation (“HIG”, and together with Sun and RSP, the
“Purchasers”).

 

WHEREAS, on March 31, 2003, the Company issued Subordinated Promissory
Notes (the “Notes”) to Sun, RSP, and HIG, with original principal
amounts of $3,931,429, $40,000, and $28,571, respectively.

 

WHEREAS, the Company desires to issue, and the Purchasers desire to
exchange the entire principal amount, together with all accrued interest
thereon, of their respective Notes for, shares of the Company’s Common Stock,
no par value, upon the terms and subject to the conditions contained in this
Agreement;

 

NOW, THEREFORE, in consideration of the mutual promises, covenants and
conditions hereinafter set forth, the receipt and legal sufficiency of which
are hereby acknowledged, the parties hereto hereby agree as follows:

 

ARTICLE I

 

ISSUANCE OF SHARES; SURRENDER OF NOTES

 

SECTION 1.1.        Sale and Issuance of Shares;
Surrender of Notes

 

(a)           At
the Closing (as defined in Section 1.2(a) below), and upon the terms and
subject to the conditions set forth in this Agreement, the Company shall issue
and sell to the Purchasers, and the Purchasers shall purchase and accept from
the Company, 2,480,155 shares of Common Stock, no par value, of the Company
(such shares, the “Shares”), for the aggregate purchase price of
$4,836,301.37 (“Purchase Price”), representing a price per share of
$1.95, payable as set forth in paragraph (b) below.  Sun shall purchase 2,437,638 of the Shares, RSP shall purchase
24,802 of the Shares, and HIG shall purchase 17,715 of the Shares.

 

(b)           The Purchase Price shall be payable in full by the
surrender by the Purchasers to the Company of the Notes, upon which the Company
will be forever released from all obligations and liabilities thereunder.

 

SECTION 1.2.        Closing.

 

(a)           The closing of the purchase and sale of the Shares (the “Closing”)
shall take place at 10:00 a.m., local time, on the date hereof at the offices
of Kirkland & Ellis LLP, 200 E. Randolph Drive, Chicago, Illinois, or at
such other place and/or other time as the parties hereto shall agree in
writing.

 

1

 

(b)           At the Closing, (i) the Purchasers
shall surrender to the Company the Notes, and (ii) the Company shall deliver to
the Purchasers, against payment of the Purchase Price therefor, certificates
representing the Shares.  The Shares
shall be in definitive form, registered in the name of the Purchasers or their
nominees or designees, and in such denominations as the Purchasers shall
request not later than one business day prior to the date of the Closing.

 

(c)           The obligation of each Purchaser to
purchase its respective portion of the Shares shall be contingent upon (i)
receipt by the Company and such Purchaser of consents, in form and substance
satisfactory to the Company and such Purchaser, to the transactions
contemplated by this Agreement from Congress Financial Corporation and U.S.
Bank, National Association, the Company’s senior lenders, and (ii) receipt by
the board of directors of the Company of a fairness opinion, in form and
substance satisfactory to the Company and such Purchaser, from Houlihan, Lokey,
Howard & Zukin with respect to the transactions contemplated by this
Agreement.

 

ARTICLE II

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

 

The Company hereby
represents and warrants to each Purchaser as follows:

 

SECTION 2.1.        Authorization; Enforceability.

 

(a)           The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Washington and has the requisite power and authority to own its properties and
assets and to carry on its business as it is now being conducted. The Company
is duly qualified to do business as a foreign corporation in each jurisdiction
in which the character of the properties owned or leased by it or the nature of
its business makes such qualification necessary, except where the failure to so
qualify could not reasonably be expected to have a material adverse effect on
the Company.

 

(b)           The execution, delivery and
performance by the Company of this Agreement and the consummation of the
transactions contemplated hereby do not and will not violate any provision of
the governing documents of the Company, or of any material agreement or
instrument to which the Company is a party or by which it is bound, or to which
any of its properties or assets is subject, or of any applicable law.  The Company has duly executed and delivered
this Agreement.  This Agreement
constitutes the legal, valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms, except as enforceability may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the enforcement of creditors’ rights generally and by
general principles of equity (regardless of whether enforcement is sought in a
proceeding in equity or at law).

 

SECTION 2.2.        Governmental and Other Third Party
Consents.  Except as required by
applicable filing requirements of the Securities Exchange Act of 1934, as
amended, the applicable filing requirements of state securities laws, the
Company’s agreements with its senior

 

2

 

lenders, Congress Financial Corporation and U.S. Bank, National
Association, and those consents for which the failure to obtain would not have
a material adverse effect on the Company, the Company is not required to obtain
any consent from, or to make any declaration or filing with, any governmental
authority or any other person in connection with the execution, delivery and
performance of this Agreement, including, without limitation, the issuance, sale
and delivery of the Shares as contemplated hereunder.

 

SECTION 2.3.        Validity and Issuance of Shares.  The Shares have been duly authorized and
when issued, delivered and paid for pursuant to the terms of this Agreement,
will be duly and validly issued, fully paid and non-assessable.

 

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF THE PURCHASER

 

Each Purchaser, on behalf of
itself and no other person, hereby represents and warrants to the Company as
follows:

 

SECTION 3.1.        Authorization; Enforceability; No
Violations.

 

(a)           The Purchaser is duly organized,
validly existing and in good standing under the laws of its jurisdiction of
organization and has the requisite power and authority to own its properties
and assets and to carry on its business as it is now being conducted. The
Purchaser is duly qualified to do business in each jurisdiction in which the
character of the properties owned or leased by it or the nature of its business
makes such qualification necessary, except where the failure to so qualify could
not reasonably be expected to have a material adverse effect on the Purchaser.

 

(b)           The execution, delivery and
performance by the Purchaser of this Agreement and the consummation of the
transactions contemplated hereby do not and will not violate any provision of
the governing documents of the Purchaser, or of any material agreement or
instrument to which the Purchaser is a party or by which it is bound, or to
which any of its properties or assets is subject, or of any applicable law.  The Purchaser has duly executed and
delivered this Agreement.  This
Agreement constitutes the legal, valid and binding obligation of the Purchaser,
enforceable against the Purchaser in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors’ rights generally and by general principles of equity (regardless of
whether enforcement is sought in a proceeding in equity or at law).

 

SECTION 3.2.        Governmental and Other Third Party
Consents.  Except as required by
applicable filing requirements of the Securities Exchange Act of 1934, as
amended, the applicable filing requirements of state securities laws, the
Purchaser’s agreements with the Company’s senior lenders, Congress Financial
Corporation and U.S. Bank, National Association, and those consents for which
the failure to obtain would not have a material adverse effect on the
Purchaser, the Purchaser is not required to obtain any consent from, or to make
any declaration or filing with, any governmental authority or any other person
in connection with the execution,

 

3

 

delivery and performance of this Agreement, including, without
limitation, the purchase of the Shares as contemplated hereunder.

 

SECTION 3.3.        Private Placement.

 

(a)           The Purchaser understands that the
offering and sale of the Shares by the Company to the Purchaser are intended to
be exempt from registration under the Securities Act of 1933, as amended (the “Securities
Act”).

 

(b)           The Shares to be acquired by the
Purchaser pursuant to this Agreement are being acquired for its own account and
without a view to making a distribution thereof in violation of the Securities
Act.

 

(c)           The Purchaser has sufficient
knowledge and experience in financial and business matters so as to be capable
of evaluating the merits and risks of its investment in the Shares and the
Purchaser is capable of bearing the economic risks of such investment,
including a complete loss of its investment in the Shares.

 

(d)           The Purchaser is an “accredited
investor” as such term is defined in Regulation D under the Securities Act.

 

SECTION 3.4.        Legends.  The Purchaser understands that each
certificate evidencing the Shares may bear any legend required by applicable
state securities laws, and the following legend, at the discretion of the
Company:

 

“THESE SECURITIES HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933.  THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED
IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE
SECURITIES UNDER SUCH ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY
THAT SUCH REGISTRATION IS NOT REQUIRED.”

 

ARTICLE IV

MISCELLANEOUS

 

SECTION 4.1.        Notices.  All notices, demands, requests, consents,
approvals or other communications (collectively, “Notices”) required or
permitted to be given hereunder or which are given with respect to this
Agreement shall be in writing and shall be personally served, delivered by
reputable overnight courier service with charges prepaid, or transmitted by
hand delivery or facsimile, addressed as set forth below, or to such other
address as such party shall have specified most recently by written notice.  Notice shall be deemed given on the date of
service or transmission if personally served or transmitted by facsimile.  Notice otherwise sent as provided herein
shall be deemed given on the next business day following delivery of such
notice to a reputable overnight courier service.

 

4

 

	
  To the Company:

  
	
   

  
	
  LOUD Technologies Inc.

  
	
  16220 Wood-Red Road, N.E.

  
	
  Woodinville, Washington
  98072

  
	
  Attention:  Board of Directors

  
	
  Facsimile:  (425) 483-1801

  
	
   

  
	
  with a copy to:

  
	
   

  
	
  Perkins Coie LLP

  
	
  1201 Third Avenue, Suite
  4800

  
	
  Seattle, Washington 98101

  
	
  Attention:  Evelyn Cruz Sroufe

  
	
  Facsimile:

  	
  (206) 583-8500

  
	
   

  
	
  To the Purchasers:

  
	
   

  
	
  Sun Mackie, LLC

  
	
  c/o Sun Capital Partners,
  Inc.

  
	
  5200 Town Center Circle

  
	
  Suite 470

  
	
  Boca Raton, Florida 33486

  
	
  Attention:  Marc J. Leder, Rodger R. Krouse, and C.
  Deryl Couch

  
	
  Facsimile:  (561) 394-0540

  
	
   

  
	
  Randolph Street Partners V

  
	
  c/o Kirkland & Ellis
  LLP

  
	
  200 E. Randolph Dr.

  
	
  Chicago, Illinois 60601

  
	
  Attention:  Douglas C. Gessner

  
	
  Facsimile:  (312) 861-2200

  
	
   

  
	
  H.I.G. Sun Partners, Inc.

  
	
  c/o H.I.G. Capital

  
	
  1001 Brickell Bay Drive

  
	
  27th Floor

  
	
  Miami, Florida 33131

  
	
  Attention:  Rick Mendez

  
	
  Facsimile:  (305) 379-2013

  
	
   

  

 

5

 

	
  in each case with a copy
  to:

  
	
   

  
	
  Kirkland & Ellis LLP

  
	
  200 E. Randolph Dr.

  
	
  Chicago, Illinois 60601

  
	
  Attention:  Douglas C. Gessner

  
	
  Facsimile:  (312) 861-2200

  

 

SECTION 4.2.        Governing Law. This Agreement
shall be governed by, interpreted under, and construed in accordance with the
internal laws of the State of New York applicable to agreements made and to be
performed within the State of New York, without giving effect to any
choice-of-law provisions thereof that would compel the application of the
substantive laws of any other jurisdiction. 
Each party hereby irrevocably submits to the non-exclusive jurisdiction
of the United States District Court sitting in the Southern District of New
York, and of the Supreme Court of the State of New York sitting in New York
County and any appellate court from any thereof, for the adjudication of any
dispute hereunder or in connection herewith or with any transaction
contemplated hereby or discussed herein, and hereby irrevocably waives, and
agrees not to assert in any suit, action or proceeding, any claim that it is
not personally subject to the jurisdiction of any such court, that such suit,
action or proceeding is brought in an inconvenient forum or that the venue of
such suit, action or proceeding is improper.

 

SECTION 4.3.        Entire Agreement.  This Agreement constitutes the entire
agreement of the parties with respect to the subject matter hereof and
supersedes all prior and contemporaneous agreements, representations,
understandings, negotiations and discussions between the parties, whether oral
or written.

 

SECTION 4.4.        Modifications and Amendments.  No amendment, modification or termination of
this Agreement shall be binding upon the parties hereto unless executed in
writing by the parties hereto.

 

SECTION 4.5.        Waivers and Extensions.  Any party to this Agreement may waive any
right, breach or default which such party has the right to waive, provided
that such waiver will not be effective against the waiving party unless it is
in writing, is signed by such party, and specifically refers to this
Agreement.  Waivers may be made in
advance or after the right waived has arisen or the breach or default waived
has occurred.  Any waiver may be
conditional.  No waiver of any breach of
any agreement or provision herein contained shall be deemed a waiver of any
preceding or succeeding breach thereof nor of any other agreement or provision
herein contained.  No waiver or
extension of time for performance of any obligations or acts shall be deemed a
waiver or extension of the time for performance of any other obligations or
acts.

 

SECTION 4.6.        Titles and Headings.  Titles and headings of sections of this
Agreement are for convenience only and shall not affect the construction of any
provision of this Agreement.

 

SECTION 4.7.        Assignment.  This Agreement is not transferable or assignable
by the Company or by any Purchaser.

 

6

 

SECTION 4.8.        Counterparts.  This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original, and all of which taken
together shall constitute one and the same instrument.

 

SECTION 4.9.        Further Assurances.  Each party hereto, upon the request of any
other party hereto, shall do all such further acts and execute, acknowledge and
deliver all such further instruments and documents as may be necessary or
desirable to carry out the transactions contemplated by this Agreement,
including, in the case of the Company, such acts, instruments and documents as
may be necessary or desirable to convey and transfer to the Purchasers the
Shares to be purchased by them hereunder.

 

[SIGNATURE
PAGE FOLLOWS]

 

7

 

IN WITNESS WHEREOF, the parties have caused this Exchange Agreement to
be executed and delivered by their duly authorized representatives as of the
date first written above.

 

	
   

  	
  LOUD TECHNOLOGIES INC.,

  
	
   

  	
  a Washington corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Tim O’Neil

  	
   

  
	
   

  	
  Name:  Tim O’Neil

  
	
   

  	
  Title:  Chief Financial Officer

  
	
   

  	
   

  	
   

  
	
   

  	
  SUN MACKIE, LLC,

  
	
   

  	
  a Delaware limited
  liability company

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Lynn Skillen

  	
   

  
	
   

  	
  Name:  Lynn Skillen

  
	
   

  	
  Title: Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
  RANDOLPH STREET PARTNERS
  V,

  
	
   

  	
  an Illinois general
  partnership

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Douglas C. Gessner

  	
   

  
	
   

  	
  Name:  Douglas C. Gessner

  
	
   

  	
  Title:  Managing Partner

  
	
   

  	
   

  	
   

  
	
   

  	
  H.I.G. SUN PARTNERS, INC.

  
	
   

  	
  a Cayman Islands corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Anthony Tamer

  	
   

  
	
   

  	
  Name:  Anthony Tamer

  
	
   

  	
  Title:  Managing DirectorExhibit
10.1

 

 

LOAN AND SECURITY AGREEMENT

 

BY AND AMONG

 

SILICON VALLEY BANK

as Bank

 

AND

 

3D SYSTEMS CORPORATION

and

3D SYSTEMS INC.

as Borrowers

 

 

 

TABLE OF CONTENTS

 

	
  1.

  	
  ACCOUNTING AND OTHER TERMS.

  	
  1

  
	
   

  	
   

  	
   

  
	
  2.

  	
  LOAN
  AND TERMS OF PAYMENT

  	
  1

  
	
   

  	
  2.1

  	
  Promise to Pay.

  	
  1

  
	
   

  	
  2.2

  	
  Overadvances.

  	
  2

  
	
   

  	
  2.3

  	
  Interest Rate, Payments.

  	
  2

  
	
   

  	
  2.4

  	
  Fees.

  	
  3

  
	
   

  	
   

  	
   

  
	
  3.

  	
  CONDITIONS
  OF LOANS

  	
  3

  
	
   

  	
  3.1

  	
  Conditions
  Precedent to Initial Credit Extension.

  	
  3

  
	
   

  	
  3.2

  	
  Conditions
  Precedent to all Credit Extensions.

  	
  5

  
	
   

  	
  3.3

  	
  Condition
  Subsequent.

  	
  5

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  4.

  	
  CREATION OF SECURITY
  INTEREST

  	
  6

  
	
   

  	
  4.1

  	
  Grant of Security Interest.

  	
  6

  
	
   

  	
  4.2

  	
  Authorization
  of File.

  	
  6

  
	
   

  	
   

  	
   

  
	
  5.

  	
  REPRESENTATIONS AND
  WARRANTIES

  	
  6

  
	
   

  	
  5.1

  	
  Due Organization
  and Authorization.

  	
  6

  
	
   

  	
  5.2

  	
  Collateral.

  	
  6

  
	
   

  	
  5.3

  	
  Intellectual
  Property.

  	
  7

  
	
   

  	
  5.4

  	
  Litigation.

  	
  7

  
	
   

  	
  5.5

  	
  No
  Material Adverse Change in Financial Statements.

  	
  7

  
	
   

  	
  5.6

  	
  Solvency.

  	
  7

  
	
   

  	
  5.7

  	
  Regulatory
  Compliance.

  	
  7

  
	
   

  	
  5.8

  	
  Subsidiaries.

  	
  8

  
	
   

  	
  5.9

  	
  Full
  Disclosure.

  	
  8

  
	
   

  	
   

  	
   

  
	
  6.

  	
  AFFIRMATIVE
  COVENANTS

  	
  9

  
	
   

  	
  6.1

  	
  Government
  Compliance.

  	
  9

  
	
   

  	
  6.2

  	
  Financial
  Statements, Reports, Certificates.

  	
  9

  
	
   

  	
  6.3

  	
  Inventory; Returns.

  	
  10

  
	
   

  	
  6.4

  	
  Taxes.

  	
  10

  
	
   

  	
  6.5

  	
  Insurance.

  	
  10

  
	
   

  	
  6.6

  	
  Location of
  Inventory and Equipment.

  	
  11

  
	
   

  	
  6.7

  	
  Primary
  Accounts.

  	
  11

  
	
   

  	
  6.8

  	
  Financial
  Covenants.

  	
  11

  
	
   

  	
  6.9

  	
  Registration
  of Intellectual Property Rights.

  	
  12

  
	
   

  	
  6.10

  	
  Control
  Agreements.

  	
  12

  
	
   

  	
  6.11

  	
  Further
  Assurances.

  	
  12

  

 

i

 

	
  7.

  	
  NEGATIVE
  COVENANTS

  	
  12

  
	
   

  	
  7.1

  	
  Dispositions.

  	
  12

  
	
   

  	
  7.2

  	
  Changes
  in Business, Ownership, Management or Locations of Collateral.

  	
  13

  
	
   

  	
  7.3

  	
  Mergers
  or Acquisitions.

  	
  13

  
	
   

  	
  7.4

  	
  Indebtedness.

  	
  13

  
	
   

  	
  7.5

  	
  Encumbrance.

  	
  14

  
	
   

  	
  7.6

  	
  Distributions; Investments.

  	
  14

  
	
   

  	
  7.7

  	
  Intentionally
  Omitted.

  	
  14

  
	
   

  	
  7.8

  	
  Subordinated
  Debt.

  	
  14

  
	
   

  	
  7.9

  	
  Compliance.

  	
  15

  
	
   

  	
   

  	
   

  
	
  8.

  	
  EVENTS OF DEFAULT

  	
  15

  
	
   

  	
  8.1

  	
  Payment Default.

  	
  15

  
	
   

  	
  8.2

  	
  Covenant
  Default.

  	
  15

  
	
   

  	
  8.3

  	
  Material
  Adverse Change.

  	
  15

  
	
   

  	
  8.4

  	
  Attachment.

  	
  16

  
	
   

  	
  8.5

  	
  Insolvency.

  	
  16

  
	
   

  	
  8.6

  	
  Other
  Agreements.

  	
  16

  
	
   

  	
  8.7

  	
  Judgments.

  	
  16

  
	
   

  	
  8.8

  	
  Misrepresentations.

  	
  16

  
	
   

  	
  8.9

  	
  Change in Control.

  	
  16

  
	
   

  	
  8.10

  	
  Guaranty.

  	
  17

  
	
   

  	
   

  	
   

  
	
  9.

  	
  BANK’S RIGHTS AND REMEDIES

  	
  17

  
	
   

  	
  9.1

  	
  Rights
  and Remedies.

  	
  17

  
	
   

  	
  9.2

  	
  Power of
  Attorney.

  	
  18

  
	
   

  	
  9.3

  	
  Intentionally Omitted.

  	
  18

  
	
   

  	
  9.4

  	
  Bank Expenses.

  	
  18

  
	
   

  	
  9.5

  	
  Bank’s Liability for
  Collateral.

  	
  18

  
	
   

  	
  9.6

  	
  Remedies
  Cumulative.

  	
  19

  
	
   

  	
  9.7

  	
  Demand Waiver.

  	
  19

  
	
   

  	
   

  	
   

  
	
  10.

  	
  NOTICES

  	
  19

  
	
   

  	
   

  	
   

  
	
  11.

  	
  CHOICE OF LAW, VENUE AND JURY TRIAL
  WAIVER

  	
  19

  
	
   

  	
   

  	
   

  
	
  12.

  	
  GENERAL
  PROVISIONS

  	
  19

  
	
   

  	
  12.1

  	
  Successors
  and Assigns.

  	
  19

  
	
   

  	
  12.2

  	
  Indemnification.

  	
  20

  
	
   

  	
  12.3

  	
  Time of Essence.

  	
  20

  
	
   

  	
  12.4

  	
  Severability of Provision.

  	
  20

  
	
   

  	
  12.5

  	
  Amendments
  in Writing, Integration.

  	
  21

  
	
   

  	
  12.6

  	
  Counterparts.

  	
  21

  
	
   

  	
  12.7

  	
  Survival.

  	
  21

  
	
   

  	
  12.8

  	
  Confidentiality.

  	
  21

  
	
   

  	
  12.9

  	
  Attorneys’ Fees, Costs and Expenses.

  	
  21

  

 

ii

 

	
  13.

  	
  DEFINITIONS

  	
  22

  
	
   

  	
  13.1

  	
  Definitions.

  	
  22

  
				

 

iii

 

This LOAN AND SECURITY AGREEMENT dated as
of June 30, 2004 among SILICON VALLEY BANK (“Bank”), whose address is 3003
Tasman Drive, Santa Clara, California 95054, 3D SYSTEMS CORPORATION, a Delaware
corporation (the “Company”), and its Subsidiary, 3D SYSTEMS, Inc., a California
corporation (“3D California”) (the Company and 3D California are sometimes
referred to herein individually as a “Borrower” and collectively, jointly and
severally, as the “Borrowers”), whose address is 26081 Avenue Hall, Valencia,
CA  91355 provides the terms on which
Bank will lend to Borrowers and Borrowers will repay Bank.  The parties agree as follows:

 

1.                                       ACCOUNTING AND OTHER TERMS.

 

Accounting terms not
defined in this Agreement will be construed following GAAP. Calculations and
determinations must be made following GAAP in effect on the Effective
Date.  The term “financial statements”
includes the notes and schedules.  The
terms “including” and “includes” always mean “including (or includes) without
limitation,” in this or any Loan Document.

 

2.                                       LOAN AND TERMS OF PAYMENT

 

2.1                                 Promise to Pay.

 

Each Borrower, jointly
and severally, agrees to pay Bank the unpaid principal amount of all Advances
and drawn but unreimbursed Letters of Credit issued for the account of a
Borrower and interest on the unpaid principal amount of each thereof pursuant
to the terms of this Agreement.

 

2.1.1                        Revolving
Advances.

 

(a)           Bank will make Advances
not exceeding the Committed Revolving Line, minus an amount equal to the sum
of: (i) the amount of all outstanding Letters of Credit (including drawn
but unreimbursed Letters of Credit) (such amount, the “Letter of Credit
Amount”) plus (ii) the outstanding FX Reserve.  Amounts borrowed under this Section may be repaid and
reborrowed during the term of this Agreement.

 

(b)                                 The
Company shall request Advances pursuant to the terms of Exhibit A-1.

 

(c)           The Committed Revolving
Line terminates on the Revolving Maturity Date, when all Advances are
immediately payable.

 

2.1.2                        Letters
of Credit Sublimit.

 

Bank will issue or have
issued letters of credit (each a “Letter of Credit”) for the Borrowers’ account
not exceeding (i) the Committed Revolving Line minus (ii) an amount
equal to: (y) the outstanding principal balance of the Advances, plus (z) the
FX Reserve; however, the Letter of Credit Amount shall at no time exceed
$7,500,000 minus an amount equal to the outstanding FX Reserve.  Each Letter of Credit will have an expiry
date of no later than 180 days after the Revolving Maturity Date.  In any event, if the Bank does not elect to
extend the terms of

 

1

 

this Agreement, then all
Letters of Credit that are outstanding following the Revolving Maturity Date
will be secured by unencumbered cash in an amount equal to the face amount of
such Letter of Credit on terms acceptable to Bank.  Each Borrower agrees to execute any further documentation in
connection with the Letters of Credit as Bank may reasonably request.

 

2.1.3                        Foreign
Exchange Sublimit.

 

If there is availability
under the Committed Revolving Line, then the Company, on behalf of the
Borrowers, may enter into foreign exchange forward contracts with the Bank
under which Borrowers commit to purchase from or sell to Bank a set amount of
foreign currency more than one business day after the contract date (the “FX
Forward Contract”).  On the effective
date of each FX Forward Contract (and without giving effect to any future
changes in the market value of such FX Forward Contract), Bank will subtract
10% of the value of such FX Forward Contract (the “FX Reserve”) from the
foreign exchange sublimit, which sublimit shall be an amount equal to (i)
$7,500,000 minus (ii) an amount equal to the face amount of then outstanding
Letters of Credit (including drawn but unreimbursed Letters of Credit).  On the termination date of each FX Forward
Contract, the FX Reserve corresponding to such FX Forward Contact shall be
released by Bank.  Bank may terminate
all outstanding FX Forward Contracts if an Event of Default is declared and
Bank has commenced to exercise its remedies under Section 9.1(a), but only
if the Company does not provide cash collateral in an aggregate amount of the
FX Reserve or other assurance of performance of the obligations under all
outstanding FX Forward Contracts satisfactory to Bank within 10 days after the
declaration of such Event of Default.

 

2.2                                 Overadvances.

 

If the Revolving
Obligations outstanding under Section 2.1.1, 2.1.2, and 2.1.3 exceed the
Committed Revolving Line or exceed the applicable sublimits, the Borrowers must
immediately pay Bank the excess or, in the case that the Letter of Credit or FX
Forward Contract sublimits are exceeded, the Borrowers will cash collateralize
such excess.

 

2.3                                 Interest Rate, Payments.

 

(a)           Interest Rate.  Advances accrue interest on the outstanding
principal balance at the Interest Rate as defined in Exhibit A-1.  So long as an Event of Default has occurred
and is continuing the Obligations shall accrue interest at 5 percent above the
rate in effect immediately before the occurrence of such Event of Default.  Interest is computed on a 360 day year for
the actual number of days elapsed.

 

(b)           Payments.  Interest due on the outstanding Advances, as
well as Bank Expenses payable pursuant to Section 9.4, are payable on the
first day of each month.  In the event
that Bank makes any payments pursuant to Section 9.4, Bank shall provide
to Borrower, promptly after any such payment is made, supporting documentation
relating to such payment .  Bank may
debit any of Borrowers’ deposit accounts including Account Number 3300395760
(the “Debiting Account”) for principal and interest payments owing by Borrowers
to Bank so long as such debit occurs on the date when such payment is due
before 12:00 noon Pacific time.  Bank
will

 

2

 

promptly notify the
Company when it debits an account of a Borrower.  These debits are not a set-off. 
Payments received after 12:00 noon Pacific time are considered received
at the opening of business on the next Business Day provided, however,
that if the funds in the Debiting Account equal or exceed the amount then due
and owing to Bank hereunder, then Bank will debit any payments due before 12
noon on the date any such payment is due. 
When a payment is due on a day that is not a Business Day, the payment
is due the next Business Day and additional fees or interest accrue.

 

2.4                                 Fees.

 

Each Borrower will
jointly and severally pay:

 

(a)           Bank Expenses. All Bank
Expenses (including reasonable attorneys’ fees and reasonable expenses)
incurred through and after the date of this Agreement, are payable when due.
The amount of Bank Expenses actually invoiced and paid on the Effective Date
shall be netted against the unapplied expense deposit previously delivered by
the Company to Bank.

 

(b)                                 Closing Fee.
A closing fee in the amount of $37,500 fully earned and payable on the
Effective Date.

 

(c)           Unused Line Fee.  Beginning on July 1, 2004 and on the
first day of each calendar quarter thereafter during the term of this
Agreement, an unused line fee, payable in arrears, in an amount equal to 0.375%
per annum multiplied by the difference of: (i) $15,000,000 minus
(ii) the average Daily Balance of Revolving Obligations that were outstanding
during the immediately preceding calendar quarter, provided, however,
that the first payment of such fee shall be prorated from the Effective Date
through June 30, 2004; and provided, further, that if this
Agreement terminates on a date other than the first day of a quarter, this fee
shall be due on the date of termination and it shall be prorated to reflect the
partial quarter.

 

(d)           Letter of Credit Fee.  A non-refundable letter of credit fee equal
to 1.00% per annum (or the pro rata portion thereof for the number of days in
any period of less than a year that the applicable Letter of Credit is
scheduled to be outstanding in accordance with its terms) of the face amount of
each Letter of Credit which is a standby letter of credit plus standard
documentation and issuance fees charged by Bank, payable on the issuance date
of such Letter of Credit and thereafter annually in advance and fully earned
upon payment of such fee.

 

3.                                       CONDITIONS OF LOANS

 

3.1                                 Conditions Precedent to Initial
Credit Extension.

 

The obligation of Bank to
make the initial Credit Extension provided for hereunder, is subject to the
fulfillment, to the satisfaction of Bank (the making of such initial extension
of credit by Bank being conclusively deemed to be its satisfaction or waiver of
the following), of each of the following conditions precedent:

 

(a)           Bank shall have
received a filing authorization, duly executed by each Borrower and each
Guarantor, together with appropriate financing statements duly filed in such
office or

 

3

 

offices as may be
necessary or, in the opinion of Bank, desirable to perfect the Bank’s Liens in
and to the Collateral, and Bank shall have received searches reflecting the
filing of all such financing statements;

 

(b)           Bank shall have
received each of the following documents, in form and substance satisfactory to
Bank, duly executed, and each such document shall be in full force and effect:

 

(i)                                     the
Control Agreements,

 

(ii)                                  the
Intercompany Subordination Agreement,

 

(iii)          the Stock Pledge
Agreements, together with all certificates representing the shares of Stock
pledged thereunder, as well as Stock powers with respect thereto endorsed in
blank,

 

(iv)                              the
Joint and Several Borrower Rider,

 

(v)                                 the
Negative Pledge Agreement,

 

(vi)                              the
Guaranties, and

 

(vii)                           the
Security Agreements.

 

(c)           Bank shall have
received borrowing resolutions from the Secretary of each Borrower and
Guarantor (i) attesting to the resolutions of each such Person’s Board of
Directors (or other governing body) authorizing its execution, delivery, and
performance of this Agreement and the other Loan Documents to which such Person
is a party, (ii) authorizing specific officers of such Person to execute the
same, and (iii) attesting to the incumbency and signatures of such specific
officers of such Person;

 

(d)           Bank shall have
received copies of the Governing Documents, as amended, modified, or
supplemented to the Effective Date, of each Borrower and Guarantor certified by
the applicable Secretary of each such Person;

 

(e)           Bank shall have
received a certificate of status with respect to each Borrower and Guarantor,
dated within 10 days of the Effective Date, such certificate to be issued by
the appropriate officer of the jurisdiction of organization of such Person,
which certificate shall indicate that such Person is in good standing in such
jurisdiction;

 

(f)            Bank shall have
received certificates of status with respect to the Company and 3D California,
each dated within 30 days of the Effective Date, such certificates to be issued
by (i) in the case of the Company, the Colorado and California Secretaries of
State and (ii) the case of 3D California, the Colorado Secretary of State, and
which certificates shall indicate that each such Person is in good standing in
such jurisdictions;

 

4

 

(g)           Bank shall have
received a certificate of insurance, together with the endorsements thereto, as
are required by Section 6.5, the form and substance of which shall
be satisfactory to Bank;

 

(h)           Bank shall have
received an opinion of Gibson, Dunn & Crutcher LLP, special counsel to the
Borrowers, in form and substance satisfactory to Bank;

 

(i)            Bank shall have
received satisfactory evidence (including a certificate of the chief financial
officer of the Company) that all tax returns required to be filed by the
Company and its Subsidiaries have been timely filed, and all taxes shown upon
such returns as due have been paid and all other taxes upon each of the Company
and its Subsidiaries or their properties, assets, income, and franchises
(including Real Property taxes, sales taxes, and payroll taxes) have been paid
prior to delinquency, except (i) those taxes being contested in good faith,
through appropriate proceedings and for which the relevant Borrower has
established adequate reserves under GAAP or (ii) to the extent the failure to
file any such tax returns or pay any such tax could not reasonably be expected
to result in a Material Adverse Change;

 

(j)            the Company shall have
paid all Bank Expenses incurred in connection with the transactions
contemplated by this Agreement, to the extent invoices therefor have been
presented to the Company; and

 

(k)           all other documents and
legal matters in connection with the transactions contemplated by this
Agreement shall have been delivered, executed, or recorded and shall be in form
and substance satisfactory to Bank.

 

3.2           Conditions Precedent to all Credit
Extensions.

 

Bank’s obligations to
make each Credit Extension, including the initial Credit Extension, is subject
to the following:

 

(a)                                  timely
receipt of any Payment/Advance Form; and

 

(b)           the representations and
warranties in Section 5 must be materially true on the date of the Payment/Advance
Form and on the effective date of each Credit Extension and no Event of Default
may have occurred and be continuing, or result from the Credit Extension. Each
Credit Extension is Borrower’s representation and warranty on that date that
the representations and warranties of Section 5 remain materially true.

 

3.3                                 Condition Subsequent.

 

The obligation of Bank to
continue to make Advances (or otherwise extend credit hereunder) is subject to
fulfillment, on or before the date applicable thereto of the condition
subsequent set forth below (the failure by Borrowers to so perform or caused to
be performed constituting an Event of Default):

 

(a)           Bank shall have
received a Collateral Access Agreement with respect to the premises located at
26081 Avenue Hall, Valencia, CA 
91355 within 90 days of the date hereof.

 

5

 

4.                                       CREATION OF SECURITY INTEREST

 

4.1                                 Grant of Security Interest.

 

Each of the Company and
3D California grants Bank a continuing security interest in all presently
existing and later acquired Collateral to secure all Obligations and the
performance of each of Borrowers’ duties under the Loan Documents.  Except for Permitted Liens, any security
interest will be a first priority security interest in the Collateral.  Unless otherwise agreed by the Borrower on
whose name the applicable account is maintained and Bank, Bank may place a
“hold” on any deposit account pledged as Collateral solely after the occurrence
and during the continuance of an Event of Default. If this Agreement is
terminated, Bank’s lien and security interest in the Collateral will continue
until Borrower fully satisfies its Obligations (other than contingent
indemnification obligations, which obligations shall survive the release of Bank’s
lien and security interest in the Collateral).

 

4.2                                 Authorization of File.

 

Each
Borrower authorizes Bank to file financing statements without notice to such
Borrower, with all appropriate jurisdictions, as Bank deems appropriate, in
order to perfect or protect Bank’s interest in the Collateral.

 

5.                                       REPRESENTATIONS AND WARRANTIES

 

As of the Effective Date
and on the date of each Advance, each Borrower represents and warrants as
follows:

 

5.1                                 Due Organization and Authorization.

 

The Company and each Subsidiary
is duly existing and in good standing in its state of formation and qualified
and licensed to do business in, and in good standing in, any state in which the
conduct of its business or its ownership of property requires that it be
qualified, except where the failure to do so could not reasonably be expected
to cause a Material Adverse Change. Within the last five years, neither
Borrower has changed its state of formation or its organizational structure or type or any organizational number (if any)
assigned by its jurisdiction of formation.

 

The execution, delivery
and performance of the Loan Documents have been duly authorized, and do not
conflict with the formation documents of either Borrower, nor constitute an
event of default under any material agreement by which Borrower is bound.  Neither Borrower is in default under any
agreement to which or by which it is bound in which the default could
reasonably be expected to cause a Material Adverse Change.

 

5.2                                 Collateral.

 

Each of the Borrowers has
good title to the Collateral, free of Liens except Permitted Liens or such
Borrower has Rights to each asset that is Collateral.  Neither of the Borrowers has any other deposit account, other
than the deposit accounts described in the Schedule.  The

 

6

 

Accounts reflected on the
Company’s consolidated balance sheet (subject to the reserves against such
Accounts described therein) are bona fide, existing obligations.  The
Collateral is not in the possession of any third party bailee (such as at a
warehouse), other than as described in the Schedule.  In the event that a Borrower, after the date hereof, intends to
store or otherwise deliver the Collateral to such a bailee, then such Borrower
will contemporaneously therewith notify Bank and, if such bailee holds more
than $500,000 in Collateral, such bailee must acknowledge in writing that the
bailee is holding such Collateral for the benefit of Bank.  All Inventory shown on the Company’s
consolidated financial statements (net of reserves for obsolete and slow moving
items shown thereon) is of a quality and quantity usable in the ordinary course
of business of the Company and its Subsidiaries.

 

5.3                                 Intellectual Property.

 

Each Borrower owns all
the patents, trademarks, permits, service marks, trade names, copyrights,
licenses, franchises and formulas, or rights with respect to the foregoing, or
each has obtained licenses or assignments of all other rights of whatever
nature necessary for the present conduct of its businesses, without any known
conflict with the rights of others which, or the failure to obtain which, as
the case may be, would reasonably be expected to result in a Material Adverse
Change.

 

5.4                                 Litigation.

 

Except as shown in the
Schedule, there are no actions or proceedings pending or, to the knowledge of
the Company’s Responsible Officers, threatened by or against the Company or any
Subsidiary in which a likely adverse decision could reasonably be expected to
cause a Material Adverse Change.

 

5.5                                 No Material Adverse Change in
Financial Statements.

 

All consolidated
financial statements for the Company, delivered to Bank fairly present in all
material respects the Company’s consolidated financial condition and its
consolidated results of operations. 
There has not been any Material Adverse Change in the Company’s
consolidated financial condition since the date of the most recent financial
statements submitted to Bank.

 

5.6                                 Solvency.

 

The fair salable value of
the assets of the Company and its Subsidiaries, on a consolidated basis,
(including goodwill minus disposition costs) exceeds the fair value of their
liabilities, on a consolidated basis; the Company and its Subsidiaries, on a
consolidated basis, are not left with unreasonably small capital after the transactions
contemplated by this Agreement; and each Borrower is able to pay its debts
(including trade debts) as they mature.

 

5.7                                 Regulatory Compliance.

 

(a)           Neither Borrower is an
“investment company” or a company “controlled” by an “investment company” under
the Investment Company Act.  Neither
Borrower is engaged as one

 

7

 

of its important
activities in extending credit for margin stock (under Regulations T and U
of the Federal Reserve Board of Governors).

 

(b)           Each Borrower has
complied in all material respects with the Federal Fair Labor Standards Act,
except where the failure to so comply could not reasonably be expected to
result in a Material Adverse Change.

 

(c)           Each Borrower has not
violated any laws, ordinances or rules governing such Borrower, the violation
of which could reasonably be expected to cause a Material Adverse Change.

 

(d)           Except as set forth in
Schedule 5.7 attached hereto, none of the Company’s or any Subsidiary’s
properties or assets has been used by the Company or any Subsidiary or, to the
best of the Company’s knowledge, by previous Persons, in disposing, producing,
storing, treating, or transporting any hazardous substance other than legally
or in any other manner which could not reasonably be expected to result in a
Material Adverse Change.

 

(e)           The Company and each
Subsidiary have timely filed all tax returns required to be filed by the
Company and its Subsidiaries, all taxes shown upon such returns as due have
been paid and all other material taxes upon each of the Company and its
Subsidiaries or their properties, assets, income, and franchises (including
Real Property taxes, sales taxes, and payroll taxes) have been paid prior to
delinquency, except (i) those taxes being contested in good faith, through
appropriate proceedings and for which the relevant Borrower has established
adequate reserves under GAAP or (ii) to the extent the failure to file any such
tax returns or pay any such tax could not reasonably be expected to result in a
Material Adverse Change.

 

(f)            The Company and each
Subsidiary have obtained all consents, approvals and authorizations of, made
all declarations or filings with, and given all notices to, all government
authorities that are necessary to continue its business as currently conducted,
except where the failure to do so could not reasonably be expected to result in
a Material Adverse Change.

 

5.8                                 Subsidiaries.

 

Neither Borrower owns any
Stock, partnership interest or other equity securities except for Permitted
Investments.

 

5.9                                 Full Disclosure.

 

No written
representation, warranty or other statement of either Borrower in any
certificate or written statement given to Bank (taken together with all such
written certificates and written statements to Bank) contains any untrue
statement of a material fact or omits to state a material fact necessary to
make the statements contained in the certificates or statements not misleading,
it being recognized by Bank that the projections and forecasts provided by the
Company have been provided by the Company in good faith and based upon
reasonable assumptions that are not to be viewed as facts and that actual
results during the period or periods covered by such projections and forecasts
may differ from the projected and forecasted results.

 

8

 

6.                                       AFFIRMATIVE COVENANTS

 

Each Borrower will do all
of the following for so long as Bank has an obligation to lend, or there are
outstanding Obligations:

 

6.1                                 Government Compliance.

 

Each Borrower will
maintain its and all Subsidiaries’ legal existence and good standing in its
jurisdiction of formation and maintain qualification in each jurisdiction in
which the failure to so qualify would reasonably be expected to result in a
Material Adverse Change, except for the Subsidiaries listed in
Schedule 6.1 and such other Subsidiaries as are no longer useful to the
conduct of the Company’s consolidated business.  Each Borrower will comply, and have each Subsidiary comply, with
all laws, ordinances and regulations to which it is subject, noncompliance with
which could have a material adverse effect on Borrower’s business or operations
or would reasonably be expected to cause a Material Adverse Change.

 

6.2                                 Financial Statements, Reports,
Certificates.

 

(a)           The Company will
deliver to Bank:  (i) a company prepared
consolidated and consolidating balance sheet and income statement and
consolidated statement of cash flows covering the Company’s consolidated
operations during the period, certified by a Responsible Officer and in a form
acceptable to Bank as soon as available, but no later than the earlier of: (y)
45 days after the last day of each fiscal quarter (excluding the Company’s
fourth fiscal quarter), or (z) within 5 days after the filing of such financial
statements with the Securities and Exchange Commission (“SEC”); (ii) as soon as
available, but no later than 90 days after the last day of the Company’s fiscal
year, audited consolidated financial statements prepared under GAAP,
consistently applied, together with an unqualified opinion on the financial
statements from an independent certified public accounting firm reasonably
acceptable to Bank; (iii) as soon as available, but no later than 90 days after
the last day of the Company’s fiscal year, a company prepared consolidating
balance sheet and income statement covering the Company’s consolidated
operations during the fiscal year, certified by a Responsible Officer,
(iv) within 5 days after filing, copies of all reports on Form 10-K, 10-Q
and 8-K filed with the SEC; (v) a prompt report of any legal actions pending or
threatened in writing against the Company or any Subsidiary that could
reasonably be expected to result in damages or costs to the Company or any
Subsidiary of $1,000,000 or more; (vi) as soon as available but no later than
30 days after the end of each fiscal year the Company’s financial projections
for the upcoming year and, following approval thereof by the Company’s Board of
Directors written notice of such approval together with a description of any
material deviations from the projections delivered to the Bank; (vii) budgets,
sales projections, operating plans or other financial information Bank
reasonably requests; and (viii) prompt notice of any material change in the
composition of the Intellectual Property, including any subsequent ownership
right of the Company or a domestic Subsidiary in or to any material (in the
Company’s good faith business judgment) registered Copyright, Patent or
Trademark not shown in any intellectual property security agreement between
Borrower and Bank or knowledge of an event that materially adversely affects
the value of the Intellectual Property.

 

9

 

(b)           Within 45 days after
the last day of each fiscal quarter, the Company will deliver to Bank with the
quarterly financial statements a Compliance Certificate signed by a Responsible
Officer in the form of Exhibit C.

 

(c)           Bank has the right to
audit the Collateral at the Company’s expense, but the audits will be conducted
no more often than every six months unless an Event of Default has occurred and
is continuing.

 

6.3                                 Inventory; Returns.

 

All Inventory shown on
the Company’s consolidated financial statements (net of reserves for obsolete
and slow moving items shown thereon) will be of a quality and quantity usable
in the ordinary course of business of the Company and its Subsidiaries and
presented with a value thereon at the lesser of cost or the net realizable
value thereof, as determined in accordance with GAAP.  Returns and allowances between each Borrower and its account
debtors will follow such Borrower’s customary practices as they exist at
execution of this Agreement. Each Borrower must promptly notify Bank of all
returns, recoveries, disputes and claims, that involve more than $2,000,000 in
the aggregate for which provision have not already been made in the Company’s
consolidated financial statements.

 

6.4                                 Taxes.

 

The Company will make,
and cause each Subsidiary to make, timely payment of all federal, state, and
local taxes or assessments and will deliver to Bank, promptly on demand,
appropriate certificates attesting to the payment thereof, except to the extent
(i) such taxes are being contested in good faith, through appropriate
proceedings and adequate reserves have been established under GAAP or (ii) the
failure to pay any such tax could not reasonably be expected to result in a
Material Adverse Change.

 

6.5                                 Insurance.

 

Each Borrower will keep
its business adequately insured as determined by the Company in the exercise of
its prudent business judgment, provided that any such insurance policies shall
be of the type and provide coverage substantially similar to other insurance
policies maintained by companies in Borrowers’ industry. All property policies
will have a lender’s loss payable endorsement showing Bank as an additional
loss payee and all liability policies will show the Bank as an additional
insured and provide that the insurer must give Bank at least 20 days notice
before canceling its policy.  At Bank’s
request, each Borrower will deliver certified copies of policies and evidence
of all premium payments.  Proceeds
payable under any policy providing coverage for property losses will, at Bank’s
option following the occurrence and during the continuance of an Event of
Default, be payable to Bank on account of the Obligations.  At any time during which an Event of Default
does not then exist, all proceeds in respect of casualty insurance shall be
advanced to the Company or its Subsidiaries to be used solely for the prompt
repair or replacement of the damaged or destroyed property that gave rise to
casualty claim.

 

10

 

6.6                                 Location of Inventory and Equipment.

 

The Company and its
domestic Subsidiaries may relocate assets in the ordinary course of business,
which assets are located, as of the Effective Date, primarily at the locations
identified on Schedule 6.6. 
The Company and its domestic Subsidiaries agree that each thereof will
endeavor to provide Bank with prior written notice of any change in the
location of their assets or promptly following any such change, except if
related to any transfer of assets between locations identified on Schedule 6.6
or in-transit to account debtors.  The
Company will give Bank 10 Business Days prior written notice of any change in
the chief executive office of the Company or any domestic Subsidiary, which
chief executive office is, as of the Effective Date, identified on Schedule 6.6(b).

 

6.7                                 Primary Accounts.

 

The Borrowers will
maintain their primary depository, operating, and investment accounts with
Bank.  The foregoing notwithstanding,
Bank understands and agrees that (i) the Borrowers currently maintain their
primary depository, operating and investment accounts with U.S. Bank, (ii) the
Borrowers will continue to maintain such accounts while the Borrowers’ notify
their account debtors and transition the collection of Accounts from U.S. Bank
to Bank and (iii) the retention of such accounts is not a default under this
Agreement.

 

6.8                                 Financial Covenants.

 

The Company will
maintain, on a consolidated basis, as of the last day of each calendar quarter
(unless otherwise indicated):

 

(i)            Quick Ratio (Adjusted).  (a) as of June 30, 2004, as of
September 30, 2004, and as of December 31, 2004, a ratio of Quick
Assets to Adjusted Current Liabilities of at least 0.90 to 1.00 and (b) as of
March 31, 2005, and as of the last day of each calendar quarter
thereafter, a ratio of Quick Assets to Adjusted Current Liabilities of at least
1.00 to 1.00.

 

(ii)           Minimum Deposits.  At all times Revolving Obligations equal or
exceed $5,000,000, the Company shall maintain, on a consolidated basis,
unrestricted cash and cash equivalents in investments and deposit accounts
maintained in financial institutions within the United States equal to or
greater than an amount equal to the product of: (i) the Revolving Obligations
multiplied by (ii) 0.6667.

 

(iii)          Adjusted Total Liabilities/Tangible Net
Worth Ratio. If there are any Advances outstanding under
Section 2.1.1 as of the last day of such calendar quarter, (a) as of  June 30,
2004, as of September 30, 2004, and as of December 31, 2004, a ratio
of (y) Total Liabilities less Subordinated Debt to (z) Tangible Net Worth, of
not more than 2.10 to 1:00 and (b) as of March 31, 2005, and as of the
last day of each calendar quarter thereafter a ratio of (y) Total Liabilities
less Subordinated Debt to (z) Tangible Net Worth, of not more than 2.00 to
1.00.

 

11

 

(iv)          Tangible Net Worth.  If there are any Advances outstanding under
Section 2.1.1 as of the last day of such calendar quarter, a Tangible Net
Worth of at least the sum of: (i) $20,000,000 plus (ii) the TNW Additions.

 

(v)           Domestic Tangible Assets.  Domestic Tangible Assets of not less than 25%
of the Adjusted Tangible Assets.

 

6.9                                 Registration of Intellectual
Property Rights.

 

Neither Borrower shall
register any Copyrights with the United States Copyright Office unless it has
given at least fifteen (15) days’ prior notice to Bank of its intent to
register such Copyrights and has provided Bank with a copy of the application
it intends to file with the United States Copyright Office (excluding exhibits
thereto).  Each Borrower shall promptly
provide to Bank a copy of the Copyright application(s) filed with the United
States Copyright Office, together with evidence of the recording of the
security documents necessary for Bank to maintain the perfection and priority
of its security interest in such Copyrights.

 

6.10                           Control Agreements.

 

With respect to deposit
accounts or investment accounts maintained at financial institutions (other
than Bank) located within the United States, within 30 days of the opening of
any such deposit account or investment account, the Borrower that is the
account holder will execute and deliver to Bank, a Control Agreement in form
satisfactory to Bank in order for Bank to perfect its security interest in such
Borrower’s deposit accounts or investment accounts; provided, however,
that each Borrower may maintain deposit accounts or investment accounts that
are not the subject of a Control Agreement so long as the aggregate average
credit balances maintained in all such accounts does not exceed $500,000.

 

6.11                           Further Assurances.

 

Each Borrower will
execute any further instruments and take further action as Bank reasonably
requests to perfect or continue Bank’s security interest in the Collateral or
to effect the purposes of this Agreement, provided, however, that unless
requested by Bank neither Borrower shall be required to deliver certificates of
title to Bank in respect of any equipment so certificated.

 

7.                                       NEGATIVE COVENANTS

 

Each Borrower will not do
any of the following and will not allow any of its Subsidiaries to do any of
the following without Bank’s prior written consent, which will not be
unreasonably withheld:

 

7.1           Dispositions.

 

Convey, sell, lease,
transfer or otherwise dispose of (collectively “Transfer”), or permit any of
its Subsidiaries to Transfer, all or any part of its business or property,
other than Transfers (i) of Inventory in the ordinary course of business;
(ii) of non-exclusive licenses and similar

 

12

 

arrangements for the use
of the property of the Company or its Subsidiaries in the ordinary course of
business; (iii) of worn-out or obsolete Equipment or Equipment no longer
used or useful in the business of the Company and its Subsidiaries;
(iv) between the Company and any Subsidiary thereof or between Subsidiaries,
in each case in the ordinary course of business or otherwise such that a
violation of the financial covenant set forth in Section 6.8(v) could not
reasonably be expected to result; (v) not in the ordinary course of business in
an amount not to exceed, in the aggregate in any one fiscal year, the greater
of: (y) $5,000,000 or (z) 5% of the Company’s consolidated assets
(determined in accordance with GAAP) based on the Company’s financial
statements for the fiscal year ended immediately prior to the date of such
Transfer; and (vii) other Transfers of real property in an amount not to
exceed $5,000,000 in the aggregate during the term of this Agreement.

 

7.2                                 Changes in Business, Ownership, Management
or Locations of Collateral.

 

Engage in any business
other than the businesses currently engaged in by the Company or its
Subsidiaries or reasonably related, complementary or incidental thereto or are
reasonable extensions thereof.  Neither
Borrower will relocate its chief executive office to a location outside of the
United States or change its state of formation (including reincorporation) to a
jurisdiction outside of the United States. 
Neither Borrower will, without at least 10 Business Days prior written
notice thereof being provided to the Bank, relocate its chief executive office
to a location within the United States, change its state of formation
(including reincorporation to a jurisdiction within the United States), or
change its organizational number or name.

 

7.3                                 Mergers or Acquisitions.

 

Merge or consolidate, or
permit any of its Subsidiaries to merge or consolidate, with any other Person,
or acquire, or permit any of its Subsidiaries to acquire, all or substantially
all of the Stock or property of another Person, except (A) where (i) no Event
of Default has occurred and is continuing or would result from such action,
(ii) the aggregate value of such transactions does not exceed $5,000,000 in any
one calendar year, (iii) a Borrower or one of their Subsidiaries is the
surviving entity after any such transaction has been consummated and, in the
case of a transaction involving a Borrower or Guarantor, the surviving entity
has assumed the Obligations of the corresponding Borrower or Guarantor pursuant
to documentation reasonably acceptable to Bank, (iv) the security interests of
Bank, if any, have attached to the domestic assets of the surviving entity,
unless both parties to the subject transaction were foreign Subsidiaries, and
(v) such transaction would not result in a decrease of more than 25% of Tangible
Net Worth; (B) in connection with an acquisition or merger that constitutes a
Permitted Investment; and (C) any Subsidiary may merge into or consolidate with
a Borrower or another directly or indirectly wholly owned Subsidiary of the
Company.

 

7.4                                 Indebtedness.

 

Create, incur, assume, or
be liable for any Indebtedness, or permit any Subsidiary to do so, other than
Permitted Indebtedness.

 

13

 

7.5                                 Encumbrance.

 

Create, incur, or allow
any Lien on any of its property, or assign or convey any right to receive
income, including the sale of any Accounts, or permit any of its Subsidiaries
to do so, except for Permitted Liens, or permit any Collateral not to be
subject to the first priority security interest granted here, subject to
Permitted Liens.

 

7.6                                 Distributions; Investments.

 

Directly or indirectly
acquire or own any Person, or make any Investment in any Person, other than
Permitted Investments, or permit any of its Subsidiaries to do so.  Pay any dividends or make any distribution
or payment on or in respect of its Stock or redeem, retire or purchase any
Stock, except that provided no Event of Default has occurred, is continuing or
would exist after giving effect to any of the following, the Company may: (i) repurchase
Stock from former employees, consultants, or directors of the Company under the
terms of applicable repurchase agreements, restricted Stock plans,
(ii) make distributions or pay dividends solely in the Stock of the
Company or a Subsidiary, (iii) repurchase Stock or outstanding Stock
options so long as the funds for such repurchases are derived from the proceeds
of substantially concurrent Stock or convertible securities issuances,
(iv) redeem Stock pledged as collateral for loans to employees outstanding
as of the Effective Date, (v) pay dividends and distributions made by any
of Borrower’s Subsidiaries to the holders of its Stock, (vi) repurchase
Stock in connection with the exercise of Stock options or Stock appreciation
rights so long as the consideration for such repurchases is not cash,
(vii) repurchase Stock in order to allow the seller of such Stock to pay
withholding tax obligations arising out of the purchase of such Stock,  (viii) repurchase
factional shares resulting from Stock splits, dividends, or purchases of
businesses otherwise permitted herein, and (ix) pay cash dividends
required to be paid to holders of Series B Preferred Stock.  The foregoing notwithstanding, the Company
may redeem its Series B Preferred Stock at any time or from time to time after
May 6, 2006, so long as (i) no Event of Default then exists or would
result after giving effect to such redemption and (ii) after giving pro
forma effect to such redemption, the Company is in compliance with
Section 6.8

 

7.7                                 Intentionally Omitted.

 

7.8                                 Subordinated Debt.

 

Make or permit any
payment on any Subordinated Debt, except under the terms of the Subordinated
Debt, or amend any provision in any document relating to the Subordinated Debt
in any material respect that is adverse to Bank, without Bank’s prior written
consent, which consent shall not be unreasonably withheld; provided, however, that the
Company may redeem all or any portion of its $10,000,000 aggregate principal
amount of 7.0% convertible subordinated debentures at any time or from time to
time after December 31, 2004 so long as (i) no Event of Default then
exists or would result after giving effect to such redemption and
(ii) after giving pro forma effect to such redemption, the Company is in
compliance with Section 6.8.

 

14

 

7.9                                 Compliance.

 

Become an “investment
company” or a company controlled by an “investment company,” under the
Investment Company Act of 1940 or undertake as one of its important activities
extending credit to purchase or carry margin Stock, or use the proceeds of any
Credit Extension for that 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 other law or regulation, if in any such case such
failure or violation would reasonably be expected to cause a Material Adverse
Change, or permit any of its Subsidiaries to do so.

 

8.                                       EVENTS OF DEFAULT

 

Any one of the following
is an Event of Default:

 

8.1                                 Payment Default.

 

If either Borrower fails
to pay any of the Obligations within 3 days after their due date.  During the additional period the failure to
cure the default is not an Event of Default (but no Credit Extension will be
made during the cure period);

 

8.2                                 Covenant Default.

 

(a)           If the Company fails to
perform any obligation under Section 6.8 or either Borrower violates any
of the covenants contained in Section 7 of this Agreement, or

 

(b)           If either Borrower
fails or neglects to perform, keep, or observe any other material term,
provision, condition, covenant, or agreement contained in this Agreement or in
any of the Loan Documents 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) Business Days after the earlier to occur of
(y) the Company’s knowledge of such default and (z) the Bank’s written notice
to the Company of such default; provided, however, that if the default cannot
by its nature be cured within the ten (10) day period or cannot after diligent
attempts by the applicable 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 Credit Extensions will 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 Company and its Subsidiaries, on a consolidated basis; 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 or priority of
Bank’s security interests in the Collateral (the foregoing being referred to as
a “Material Adverse Change”).

 

15

 

8.4                                 Attachment.

 

If any material portion
of the assets of the Borrowers is attached, seized, levied on, or comes into
possession of a trustee or receiver and the attachment, seizure or levy is not
removed in 10 days, or if either Borrower is enjoined, restrained, or prevented
by court order from conducting a material part of its business or if a judgment
or other claim becomes a Lien on a material portion of the assets of the
Borrowers, or if a notice of lien, levy, or assessment is filed against any of
the assets of the Borrowers by any government agency and not paid within 10
days after Borrower receives notice, in each case to the extent any such lien is
not a Permitted Lien.  These are not
Events of Default if stayed or if a bond is posted pending contest by Borrower
(but no Credit Extensions will be made during the cure period);

 

8.5                                 Insolvency.

 

If either Borrower begins
an Insolvency Proceeding or an Insolvency Proceeding is begun against a
Borrower and not dismissed or stayed within 60 days (but no Credit Extensions
will be made before any Insolvency Proceeding is dismissed) or either Borrower
fails generally to pay its debts as they become due;

 

8.6                                 Other Agreements.

 

If there is a default in
any agreement: (a) between a Borrower and a third party that gives the third
party the right to accelerate any Indebtedness exceeding $1,000,000 (which
right has not been waived), (b) other than the Loan Documents, between a
Borrower and the Bank that gives the Bank the right to accelerate any
Indebtedness exceeding $500,000 (which right has not been waived), or (c)
between the Borrower and any party (including the Bank) that would reasonably
be expected to result in a Material Adverse Change;

 

8.7                                 Judgments.

 

If a money judgment(s)
not covered by insurance (issued by a solvent insurance company) in the
aggregate of at least $1,000,000 is rendered against Borrowers or either of
them and is unsatisfied, unstayed, unbonded pending appeal, for 30 days (but no
Credit Extensions will be made before the judgment is stayed or satisfied);

 

8.8                                 Misrepresentations.

 

If either Borrower or any
Person acting for either Borrower makes any material misrepresentation or
material misstatement now or later in any warranty or representation in this
Agreement or in any writing delivered to Bank pursuant to this Agreement or to
induce Bank to enter this Agreement or any Loan Document; or

 

8.9                                 Change in Control.

 

If there occurs a Change in
Control.

 

16

 

8.10                           Guaranty.

 

Any guaranty of any
Obligations ceases for any reason to be in full force or any Guarantor does not
perform any obligation under any guaranty of the Obligations, or any material
misrepresentation or material misstatement exists now or later in any warranty
or representation in any guaranty of the Obligations or in any certificate
delivered to Bank in connection with the guaranty, or any circumstance
described in Sections 8.4, 8.5 or 8.7 occurs to any Guarantor and, in each
case, a Material Adverse Change has occurred.

 

9.                                       BANK’S RIGHTS AND REMEDIES

 

9.1                                 Rights and Remedies.

 

When an Event of Default
occurs and continues Bank may, without notice or demand, do any or all of the following:

 

(a)           Declare all Obligations
immediately due and payable (but if an Event of Default described in
Section 8.5 occurs all Obligations are immediately due and payable without
any action by Bank);

 

(b)           Stop advancing money or
extending credit under this Agreement or under any other Loan Document;

 

(c)           Settle or adjust
disputes and claims directly with account debtors for amounts, on terms and in
any order that Bank considers advisable; notify any Person owing either
Borrower money of Bank’s security interest in the funds and verify the amount
of the Account.  The Borrowers must
collect all payments in trust for Bank and, if requested by Bank, immediately
deliver the payments to Bank in the form received from the account debtor, with
proper endorsements for deposit;

 

(d)           Make any payments and
do any acts it considers necessary or reasonable to protect its security
interest in the Collateral.  The
Borrowers will assemble the Collateral if Bank requires and make it available
as Bank designates.  Bank may enter
premises where the Collateral is located, take and maintain possession of any
part of the Collateral, and pay, purchase, contest, or compromise any Lien
which appears to be prior or superior to its security interest and pay all
expenses incurred.  The Borrowers grant
Bank a license to enter and occupy any of their premises, without charge, to
exercise any of Bank’s rights or remedies;

 

(e)           Apply to the
Obligations any (i) balances and deposits of the Borrowers it holds, or
(ii) any amount held by Bank owing to or for the credit or the account of
either Borrower;

 

(f)            Ship, reclaim,
recover, store, finish, maintain, repair, prepare for sale, advertise for sale,
and sell the Collateral.  Bank is
granted a non-exclusive, royalty-free license or other right to use, without
charge, either Borrower’s labels, Patents, Copyrights, rights of use of any
name, trade secrets, trade names, Trademarks, service marks, and advertising
matter, or any similar property as it pertains to the Collateral, in completing
production of, advertising for sale, and selling any Collateral and, in
connection with Bank’s exercise of its rights under this Section,

 

17

 

each Borrower’s rights
under all licenses and all franchise agreements inure to Bank’s benefit; and

 

(g)                                 Dispose
of the Collateral according to the Code.

 

9.2                                 Power of Attorney.

 

Effective only when an
Event of Default occurs and continues, each Borrower irrevocably appoints Bank
as its lawful attorney to: 
(i) endorse such Borrower’s name on any checks or other forms of
payment or security; (ii) sign such Borrower’s name on any invoice or bill
of lading for any Account or drafts against account debtors, (iii) make,
settle, and adjust all claims under such Borrower’s insurance policies;
(iv) settle and adjust disputes and claims about the Accounts directly
with account debtors, for amounts and on terms Bank determines reasonable; and
(v) transfer the Collateral into the name of Bank or a third party as the
Code permits.  Bank may exercise the
power of attorney to sign each Borrower’s name on any documents necessary to
perfect or continue the perfection of any security interest regardless of
whether an Event of Default has occurred. 
Bank’s appointment as each Borrower’s attorney in fact, and all of
Bank’s rights and powers, coupled with an interest, are irrevocable until all
Obligations have been fully repaid and performed and Bank’s obligation to
provide Credit Extensions terminates.

 

9.3                                 Intentionally Omitted.

 

9.4                                 Bank Expenses.

 

If (i) a Borrower fails
to pay any amount or furnish any required proof of payment to third persons, in
each case to the extent required to be paid or furnished hereunder, (ii) an
Event of Default then exists, and (iii) the failure to make such payment
impairs either Bank’s access to the Collateral or the value of the Collateral,
Bank may make all or part of the payment or obtain insurance policies required
in Section 6.5 or pay any other amounts required to preserve the
Collateral, and take any action under insurance policies Bank deems
prudent.  Any amounts paid by Bank are
Bank Expenses, are due and payable in accordance with Section 2.3(b) and
will bear interest at the then applicable rate at all times starting on the
sixth Business Day immediately following the due date of such Bank Expenses and
will be secured by the Collateral.  No
payments by Bank are deemed an agreement to make similar payments in the future
or Bank’s waiver of any Event of Default.

 

9.5                                 Bank’s Liability for Collateral.

 

If Bank complies with
reasonable banking practices and Section 9-207 of the Code, it is not
liable for: (a) the safekeeping of the Collateral; (b) any loss or damage
to the Collateral; (c) any diminution in the value of the Collateral; or (d)
any act or default of any carrier, warehouseman, bailee, or other person.  The Borrowers bear all risk of loss, damage
or destruction of the Collateral.

 

18

 

9.6                                 Remedies Cumulative.

 

Bank’s rights and
remedies under this Agreement, the Loan Documents, and all other agreements are
cumulative.  Bank has all rights and
remedies provided under the Code, by law, or in equity. Bank’s exercise of one
right or remedy is not an election, and Bank’s waiver of any Event of Default
is not a continuing waiver. Bank’s delay is not a waiver, election, or
acquiescence. No waiver is effective unless signed by Bank and then is only
effective for the specific instance and purpose for which it was given.

 

9.7                                 Demand Waiver.

 

Except for such notices
and demands as are expressly provided for in the Loan Documents, the Borrowers
waive demand, 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 held by Bank on which the Borrowers are liable.

 

10.                                 NOTICES

 

All notices or demands by
any party about this Agreement or any other related agreement must be in
writing and be personally delivered or sent by an overnight delivery service,
by certified mail, postage prepaid, return receipt requested, or by
telefacsimile to the addresses set forth at the beginning of this
Agreement.  A party may change its
notice address by giving the other party written notice.

 

11.                                 CHOICE OF LAW, VENUE AND JURY TRIAL WAIVER

 

California law governs
the Loan Documents without regard to principles of conflicts of law.  Each Borrower and Bank each submit to the
exclusive jurisdiction of the State and Federal courts in Santa Clara County,
California.

 

EACH
BORROWER AND BANK EACH WAIVE THEIR RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE
OF ACTION ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY CONTEMPLATED
TRANSACTION, INCLUDING CONTRACT, TORT, BREACH OF DUTY AND ALL OTHER CLAIMS.
THIS WAIVER IS A MATERIAL INDUCEMENT FOR EACH OF SUCH PARTIES TO ENTER INTO
THIS AGREEMENT.  EACH PARTY HAS REVIEWED
THIS WAIVER WITH ITS COUNSEL.

 

12.                                 GENERAL PROVISIONS

 

12.1                           Successors and Assigns.

 

This Agreement binds and
is for the benefit of the successors and permitted assigns of each party.  Neither Borrower may assign this Agreement
or any rights under it without Bank’s prior written consent which may be
granted or withheld in Bank’s discretion. 
Bank has the right, without the consent of or notice to either Borrower,
to sell, transfer, negotiate, or grant

 

19

 

participation in all or
any part of, or any interest in, Bank’s obligations, rights and benefits under
this Agreement; provided, however, that with respect to the sale of a
participation interest (i) Bank shall remain the “Bank” for all purposes
of this Agreement and the other Loan Documents and the participant receiving
the participating interest in the Obligations and the other rights and
interests of Bank hereunder shall not constitute a “Bank” hereunder or under
the other Loan Documents and Bank’s obligations under this Agreement shall
remain unchanged, (ii)  Bank shall
remain solely responsible for the performance of such obligations, (iii) the
Borrowers and the Bank shall continue to deal solely and directly with each
other Bank in connection with Bank’s rights and obligations under this
Agreement and the other Loan Documents, (iv) Bank shall not transfer or grant
any participating interest under which the participant has the right to approve
any amendment to, or any consent or waiver with respect to, this Agreement or
any other Loan Document, except to the extent such amendment to, or consent or
waiver with respect to this Agreement or of any other Loan Document would (A)
extend the final maturity date of the Obligations hereunder in which such
participant is participating, (B) reduce the interest rate applicable to the
Obligations hereunder in which such participant is participating, (C) release
all or substantially all of the Collateral or guaranties (except to the extent
expressly provided herein or in any of the Loan Documents) supporting the
Obligations hereunder in which such participant is participating, (D) postpone
the payment of, or reduce the amount of, the interest or fees payable to such
participant through Bank, or (E) change the amount or due dates of scheduled
principal repayments or prepayments or premiums, and (v) all amounts payable by
the Borrowers hereunder shall be determined as if Bank had not sold such
participation.  The rights of any
participant only shall be derivative through Bank and no participant shall have
any rights under this Agreement or the other Loan Documents or any direct
rights as to either Borrower, any Guarantor, the Collateral, or otherwise in
respect of the Obligations.  No
participant shall have the right to participate directly in the making of
decisions by Bank.

 

12.2                           Indemnification.

 

The Borrowers will
jointly and severally indemnify, defend and hold harmless Bank and its
officers, employees, and agents against: 
(a) all obligations, demands, claims, and liabilities asserted by any
other party in connection with the transactions contemplated by the Loan
Documents and (b) all losses or Bank Expenses incurred, or paid by Bank from,
following, or consequential to transactions between Bank and the Borrowers or
any actions of Bank in connection with or relating to this Agreement or any
other Loan Document (including reasonable attorneys fees and expenses), except
for losses caused by Bank’s gross negligence or willful misconduct, subject to
the provisions of Section 12.9.

 

12.3                           Time of Essence.

 

Time is of the essence
for the performance of all obligations in this Agreement.

 

12.4                           Severability of Provision.

 

Each provision of this
Agreement is severable from every other provision in determining the
enforceability of any provision.

 

20

 

12.5                           Amendments in Writing, Integration.

 

All amendments to this
Agreement must be in writing and signed by the Borrowers and Bank.  This Agreement and the Loan Documents
represent the entire agreement about this subject matter, and supersede prior
negotiations or agreements.  All prior
agreements, understandings, representations, warranties, and negotiations
between the parties about the subject matter of this Agreement merge into this
Agreement and the Loan Documents.

 

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, are an original, and
all taken together, constitute one Agreement.

 

12.7         Survival.

 

All covenants,
representations and warranties made in this Agreement continue in full force
while any Obligations remain outstanding. 
The obligations of the Company in Section 12.2 to indemnify Bank
will survive until all statutes of limitations for actions that may be brought
against Bank have run; provided, however, if all Obligations have
been paid in full (other than contingent indemnification obligations) Bank will
release all liens upon and security interests in the Collateral.

 

12.8                           Confidentiality.

 

In handling any
confidential information, Bank will exercise the same degree of care that it
exercises for its own proprietary information, but disclosure of information
may be made (i) to Bank’s subsidiaries or affiliates in connection with
their business with Borrower, (ii) to prospective transferees or
purchasers of any interest in the loans (provided, however, Bank shall use
commercially reasonable efforts in obtaining such prospective transferee or
purchasers agreement of the terms of this provision), (iii) as required by
law, regulation, subpoena, or other order, (iv) as required in connection
with Bank’s examination or audit and (v) as Bank considers appropriate
exercising remedies under this Agreement. 
Confidential information does not include information that either: (a)
is in the public domain or in Bank’s possession when disclosed to Bank, or
becomes part of the public domain after disclosure to Bank; or (b) is disclosed
to Bank by a third party, if Bank does not know that the third party is
prohibited from disclosing the information.

 

12.9                           Attorneys’ Fees, Costs and Expenses.

 

In any action or
proceeding between Borrower and Bank arising out of the Loan Documents, the
prevailing party will be entitled to recover its reasonable attorneys’ fees and
other reasonable costs and expenses incurred, in addition to any other relief
to which it may be entitled.

 

21

 

13.                                 DEFINITIONS

 

13.1                           Definitions.

 

In this Agreement:

 

“Accounts” are all existing and
later arising accounts, contract rights, and other obligations owed to a
Borrower in connection with its sale or lease of goods (including licensing
software and other technology) or provision of services,  all credit insurance,
guaranties, other security and all merchandise returned or reclaimed by such
Borrower and such Borrower’s Books relating to any of the foregoing.

 

“Adjusted
Current
Liabilities” is the
sum of: (i) the aggregate amount of the Company’s Total Liabilities (on a
consolidated basis) which mature within one (1) year plus (ii) Revolving
Obligations not already included under (i), minus (iii) the principal
amount, if any, of loan obligations funded by industrial revenue bonds
previously classified as long-term debt which have been re-classified as
short-term debt according to GAAP as a result of any planned sale of a facility
securing the payment of obligations owing to the holders of such industrial
revenue bonds.

 

“Adjusted
Tangible Assets”
means, at any date on a consolidated basis, the total assets of the Company and
its Subsidiaries minus the aggregate amount of intangible assets of the Company
and its Subsidiaries.

 

“Advance” or “Advances”
is a loan advance (or advances) under the Committed Revolving Line.

 

“Affiliate” of a Person is a Person
that owns or controls directly or indirectly the Person, any Person that
controls or is controlled by or is under common control with the Person, and
each of that Person’s senior executive officers, directors, partners and, for
any Person that is a limited liability company, that Person’s managers and
members.

 

“Bank
Expenses” are all
reasonable audit fees and expenses and reasonable costs and expenses (including
reasonable attorneys’ fees and expenses) for preparing, negotiating,
administering, defending and enforcing the Loan Documents (including appeals or
Insolvency Proceedings).

 

“Borrower’s
Books” are all books
and records maintained by a Borrower including ledgers, records regarding a
Borrower’s assets or liabilities, the Collateral, business operations or
financial condition and all computer programs or discs or any equipment containing
the information.

 

“Business Day” is any day that is not a
Saturday, Sunday or a day on which the Bank is permitted to be closed.

 

“Change of Control”
is (i) any transaction in which any “person” or “group” (within the
meaning of Section 13(d) and 14(d)(2) of the Securities Exchange Act of
1934, as amended)

 

22

 

other than the current
owners of more than five percent (5%) of the shares of any class of Stock then
outstanding of the Company becomes the beneficial owner (as defined in
Rule 13d-3 under the Securities Exchange Act of 1934, as amended),
directly or indirectly, of greater than thirty five percent (35%) of the shares
of all classes of Stock then outstanding of the Company ordinarily entitled to
vote in the election of directors or (ii) if any Subsidiary ceases to be 100%
owned, directly or indirectly, by the Company, except as a result of a
transaction permitted by Section 7.1 or 7.3.

 

“Code” is the California Uniform
Commercial Code.

 

“Collateral” is the property described
on Exhibit A.

 

“Collateral
Access Agreement” means
a landlord waiver, bailee letter, or acknowledgement agreement of any lessor,
warehouseman, processor, consignee, or other Person in possession of, having a
Lien upon, or having rights or interests in Borrower’s Books, Equipment, or
Inventory, in each case, in form and substance satisfactory to Bank.

 

“Committed
Revolving Line” is
Bank’s commitment to lend up to $15,000,000.

 

“Company” means 3D
Systems Corporation, a Delaware corporation.

 

“Contingent
Obligation” is, for
any Person, any direct or indirect liability, contingent or not, of that Person
for (i) any indebtedness, lease, dividend, letter of credit or other
obligation of another such as an obligation directly or indirectly guaranteed,
endorsed, co-made, discounted or sold with recourse by that Person, or for
which that Person is directly or indirectly liable; (ii) any obligations
for undrawn letters of credit for the account of that Person; and
(iii) all obligations from any interest rate, currency or commodity swap
agreement, interest rate cap or collar agreement, or other agreement or
arrangement designated to protect a Person against fluctuation in interest
rates, currency exchange rates or commodity prices;  but “Contingent Obligation” does not include endorsements in the
ordinary course of business.  The amount
of a Contingent Obligation is the stated or determined amount of the primary
obligation for which the Contingent Obligation is made or, if not determinable,
the maximum reasonably anticipated liability for it determined by the Person in
good faith; but the amount may not exceed the maximum of the obligations under
the guarantee or other support arrangement.

 

“Control
Agreement” means a
control agreement, in form and substance satisfactory to Bank, executed and
delivered by the Borrower that holds the applicable account, Bank, and the
applicable securities intermediary (with respect to a securities account) or
bank (with respect to a deposit account).

 

“Copyrights” are all copyright rights,
applications or registrations and like protections in each work or authorship
or derivative work, whether published or not (whether or not it is a trade
secret) now or later existing, created, acquired or held.

 

“Credit
Extension” is each
Advance, outstanding Letter of Credit, FX Forward Contract, or any other
extension of credit by Bank for a Borrower’s benefit.

 

23

 

“Daily
Balance” is, with
respect to each day during the term of this Agreement, the amount of Revolving
Obligations outstanding at the end of such day.

 

“Domestic Tangible Assets” means,
at any date, the sum of (i) the combined assets located in the United States of
the Company, 3D California, and the Guarantors, minus (ii) assets of the
Company and its domestic Subsidiaries consisting of net investment in or
receivables from Subsidiaries outside the United States minus (iii) the
combined amount of intangible assets of the Company and its domestic
Subsidiaries.

 

“Effective
Date” is the date in
which the Bank executes this Agreement.

 

“Equipment” is all present and future
machinery, equipment, tenant improvements, furniture, fixtures, vehicles,
tools, parts and attachments in which a Borrower has any interest.

 

“ERISA” is the Employment
Retirement Income Security Act of 1974, and its regulations.

 

“FX Forward
Contract” is defined
in Section 2.1.3.

 

“FX Reserve”
is defined in Section 2.1.3.

 

“GAAP” is generally accepted
accounting principles in the United States.

 

“Guaranties” means
the guaranties executed and delivered by the Guarantors for the benefit of
Bank, in form and substance satisfactory to Bank.

 

“Guarantors” means
(i) 3D Holdings LLC, a Delaware limited liability company, (ii) 3D Systems Asia
Pacific, Ltd., a California corporation, and (iii) 3D Capital Corporation, a
California corporation.

 

“Indebtedness” is (a) indebtedness for
borrowed money or the deferred price of property or services, such as
reimbursement and other obligations for surety bonds and letters of credit, (b)
obligations evidenced by notes, bonds, debentures or similar instruments, (c)
capital lease obligations and (d) Contingent Obligations.

 

“Insolvency
Proceeding” are
proceedings by or against any Person under the United States Bankruptcy Code,
or any other applicable bankruptcy or insolvency law, including assignments for
the benefit of creditors, compositions, extensions generally with its
creditors, or proceedings seeking reorganization, arrangement, or other similar
relief.

 

“Intellectual
Property” is:

 

(a)           Copyrights, Trademarks,
Patents, including amendments, renewals, extensions, and all licenses or other
rights to use and all license fees and royalties from the use;

 

(b)           Any trade secrets and
any intellectual property rights in computer software and computer software
products now or later existing, created, acquired or held;

 

24

 

(c)           All design rights which
may be available to a Borrower now or later created, acquired or held;

 

(d)           Any claims for damages
(past, present or future) for infringement of any of the rights above, with the
right, but not the obligation, to sue and collect damages for use or
infringement of the intellectual property rights above;

 

All proceeds and products
of the foregoing, including all insurance, indemnity or warranty payments.

 

“Inventory” is present and future
inventory in which a 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 later owned by or in
the custody or possession, actual or constructive, of such Borrower, including
inventory temporarily out of its custody or possession or in transit and
including returns on any accounts or other proceeds (including insurance
proceeds) from the sale or disposition of any of the foregoing and any
documents of title.

 

“Investment” is any beneficial
ownership of (including Stock, partnership interests or other securities) any
Person, or any loan, advance or capital contribution to any Person.

 

“Letter of
Credit” is defined in
Section 2.1.2.

 

“Lien” is a mortgage, lien, deed
of trust, charge, pledge, security interest or other encumbrance.

 

“Loan
Documents” are,
collectively, this Agreement, any note, or notes or guaranties executed by a
Borrower or Guarantor, and any other present or future agreements between a
Borrower or Guarantor and/or for the benefit of Bank in connection with this
Agreement, all as amended, extended or restated.

 

“Material
Adverse Change” is
defined in Section 8.3.

 

“Obligations” are debts, principal,
interest, Bank Expenses and other amounts either Borrower owes Bank now or
later, letters of credit and foreign exchange contracts, if any and including
interest accruing after Insolvency Proceedings begin and debts, liabilities, or
obligations of either Borrower assigned to Bank under the Loan Documents.

 

“Patents” are patents, patent
applications and like protections, including improvements, divisions,
continuations, renewals, reissues, extensions and continuations-in-part of the
same.

 

“Permitted
Indebtedness” is:

 

(a)                                  Borrowers’
indebtedness to Bank under this Agreement or any other Loan Document;

 

25

 

(b)                                 Indebtedness
existing on the Effective Date and shown on the Schedule;

 

(c)                                  Subordinated
Debt;

 

(d)                                 Indebtedness
owing by a Borrower or any Subsidiary to any other Subsidiary or Borrower;

 

(e)           Indebtedness consisting
of the financing of insurance premiums in the ordinary course of business
consistent with past practices;

 

(f)                                    Indebtedness
relating to documentary letters of credit;

 

(g)           Indebtedness relating
to surety bonds and similar obligations incurred in the ordinary course of
business;

 

(h)           Indebtedness consisting
of interest rate, currency, or commodity swap agreements, interest rate cap or
collar agreements or arrangements designated to protect a Person against
fluctuations in interest rates, currency exchange rates or commodity prices;

 

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

 

(j)            Indebtedness
consisting of capitalized leases and purchase money Indebtedness secured by
Permitted Liens;

 

(k)           Indebtedness incurred
in connection with the administration of the cash management systems of
Subsidiaries that are not Borrowers or Guarantors, so long as the net
Indebtedness in respect thereof does not exceed $3,000,000 at any one time
outstanding; and

 

(l)            Extensions,
refinancings, modifications, amendments and restatements of any items of
Permitted Indebtedness set forth in (a) through (k) above, provided that the
principal amount thereof is not increased or the terms thereof are not modified
to impose more burdensome terms (when considered as a whole) upon the obligors
thereunder, except for payment of any reasonable premium or other reasonable
amount paid in connection with such refinancing or increase in principal equal
to any commitment existing but unutilized as of the date of such refinancing;

 

“Permitted Investments” are:

 

(a)                                  Investments
shown on the Schedule and existing on the Effective Date;

 

(b)           (i) marketable
direct obligations maturing within 1 year from their acquisition and issued or
unconditionally guaranteed by the United States, any of its agencies, any
State, the United Kingdom, Germany, Japan, Italy, or France,
(ii) commercial paper maturing no more than 2 years after its creation and
having the highest rating from either Standard & Poor’s Corporation or
Moody’s Investors Service, Inc., (iii) a bank’s certificates of deposit
issued maturing no more than 2 years after issue, (iv) deposit accounts
and investment accounts, so long as the assets maintained in such accounts are
liquid and, with respect to accounts in the United States and then

 

26

 

only to the extent
required hereby, Bank has obtained, with respect to each such account, a
control agreement reasonably satisfactory to Bank in order to perfect its
security interest therein;

 

(c)           Investments made in
accordance with the Company’s written investment policy approved by the
Company’s Board of Directors and delivered to Bank on or about the Effective
Date;

 

(d)                                 Investments
by a Borrower or Subsidiary in any other Subsidiary or Borrower;

 

(e)                                  [Intentionally
Omitted];

 

(f)                                    [Intentionally
Omitted];

 

(g)                                 [Intentionally
Omitted];

 

(h)           Investments consisting
of (i) (A) travel advances, (B) employee relocation loans and
(C) other employee loans and advances in the ordinary course of business,
and (ii) loans to employees, officers or directors relating to the purchase of
equity securities of the Company or its Subsidiaries pursuant to employee Stock
purchase plans or agreements approved by the Company’s Board of Directors;

 

(i)            Investments (including
debt obligations) received in connection with the bankruptcy or reorganization
of customers or suppliers and in settlement of delinquent obligations of, and
other disputes with, financially troubled customers or suppliers arising in the
ordinary course of business;

 

(j)            Investments (including
debt obligations) received in exchange for Permitted Investments after the
bankruptcy, reorganization, or restructuring of the issuer of the original
Permitted Investment;

 

(k)           Investments resulting
from a Borrower’s exercise of its remedies (including foreclosure) with regards
to collateralized Permitted Investments;

 

(l)            Investments consisting
of extensions of credit in the nature of accounts receivable, prepaid
royalties, or notes receivable arising from the sale or lease of goods;

 

(m)          Investments in the
ordinary course of business in Patents, research and development, software
development or other similar matters so long as such Investments are
capitalized in accordance with GAAP;

 

(n)           Investments consisting
of interest rate, currency, or commodity swap agreement, interest rate cap or
collar agreements or arrangements designated to protect a Person against
fluctuation in interest rates, currency exchange rates or commodity prices;

 

(o)           Investment in respect
of non-cash consideration received in connection with an asset disposition not
prohibited hereby; and

 

27

 

(p)           Investments in Persons
to the extent resulting from deposits made to secure payment of workers’
compensation, employment insurance, old age pensions, social security or other
like obligations incurred in the ordinary course of business.

 

“Permitted Liens”
are:

 

(a)           Liens existing on the
Effective Date and shown on the Schedule or arising under this Agreement
or other Loan Documents;

 

(b)           Liens for taxes, fees,
assessments or other government charges or levies, either not delinquent or
being contested in good faith and for which the Company maintains adequate
reserves on its consolidated Books, so long as they have no priority over any
of Bank’s security interests;

 

(c)           Liens (including with
respect to capital leases) (i) on property (including accessions,
additions, parts, replacements, fixtures, improvements and attachments thereto,
and the proceeds thereof) acquired by the Company or its Subsidiaries incurred
for financing property including accessions, additions, parts, replacements,
fixtures, improvements and attachments thereto, and the proceeds thereof), or
(ii) existing on property (including accessions, additions, parts,
replacements, fixtures, improvements and attachments thereto, and the proceeds
thereof) when acquired, if the Lien under either (i) or (ii) above is confined
to such property (including accessions, additions, parts, replacements,
fixtures, improvements and attachments thereto, and the proceeds thereof);

 

(d)           Licenses or sublicenses
granted in the ordinary course of the Company’s business and any interest or
title of a licensor under any license or sublicense;

 

(e)           Leases or subleases
granted in the ordinary course of the Company’s business, including in
connection with the leased premises or leased property of the Company or any of
its Subsidiaries;

 

(f)            Liens on insurance
proceeds, return of premiums, and dividends which may become due in connection
with the Company’s insurance policies, in each case securing the payment of
financed insurance premiums for such policies;

 

(g)           Liens consisting of
pledges of cash, cash equivalents or government securities to secure swap or
foreign exchange contracts or letters of credit;

 

(h)           Liens incurred in the
extension, renewal or refinancing of the indebtedness secured by Liens
described in (a) through (g), but any extension, renewal or replacement
Lien must be limited to the property encumbered by the existing Lien and the
principal amount of the indebtedness may not increase;

 

(i)            deposits to secure the
performance of bids, trade contracts (other than for borrowed money), contracts
for the purchase of property, leases, statutory obligations, surety and appeal
bonds, performance bonds and other obligations of a like nature, in each case,
incurred in the ordinary course of business and not representing an obligation
for borrowed money;

 

28

 

(j)            Liens arising from
judgments, decrees or attachments in circumstances not constituting an Event of
Default under Section 8.4 or 8.7;

 

(k)           carriers’,
warehousemen’s, mechanics’, materialmen’s, repairmen’s or other like Liens arising
in the ordinary course of business which are not overdue for a period of more
than 30 days or which are being contested in good faith and by appropriate
proceedings if adequate reserves with respect thereto are maintained on the
books of the applicable Person;

 

(l)            Liens or deposits to
secure payment of workers’ compensation, employment insurance, old age
pensions, social security or other like obligations incurred in the ordinary
course of business;

 

(m)          easements,
rights-of-way, restrictions and other similar encumbrances affecting real
property which, in the aggregate, are not substantial in amount, and which do
not in any case materially detract from the value of the property subject
thereto or materially interfere with the ordinary conduct of the business of
the applicable Person;

 

(n)           customary Liens in
favor of a trustee to secure fees and other amounts owing to such trustee under
an indenture or other similar agreement; and

 

(o)           Liens in favor of
customs and revenue authorities arising as a matter of law to secure payment of
customs duties in connection with the importation of goods.

 

“Person” is any individual, sole
proprietorship, partnership, limited liability company, joint venture, company
association, trust, unincorporated organization, association, corporation,
institution, public benefit corporation, firm, joint stock company, estate,
entity or government agency.

 

“Quick Assets” is, on any date, on a
consolidated basis, the Company’s consolidated, unrestricted cash, cash
equivalents and Accounts reflected on the Company’s consolidated financial
statements (net of reserves therefor), as determined according to GAAP.

 

“Responsible
Officer” is each of the Chief
Executive Officer, the President, the Chief Financial Officer, Vice President
of Finance, and the Controller of the Company.

 

“Revolving
Maturity Date” is
July 1, 2006.

 

“Revolving
Obligations” as of the date of determination the sum of:
(i) the aggregate principal amount of all outstanding Advances; plus
(ii) the face amount of all outstanding Letters of Credit (including drawn
but unreimbursed Letters of Credit), plus (iii) the outstanding FX
Reserve.

 

“Rights” as applied to the
Collateral, means a Borrower’s rights and interests in, and powers with respect
to, that Collateral, whatever the nature of those rights, interests and powers
and, in any event, including such Borrower’s power to transfer rights in such
Collateral to Bank.

 

“Schedule” is any attached
schedule of exceptions.

 

29

 

“SEC” is defined in
Section 6.2.

 

“Security
Agreements” means the
Security Agreements executed by each of the Guarantors, securing the
obligations of such Guarantor under the applicable Guaranty.

 

“Stock” means all shares, options, warrants,
interests, participations, or other equivalents (regardless of how designated)
of or in a Person, whether voting or nonvoting, including common stock,
preferred stock, or any other “equity security” (as such term is defined in
Rule 3a11-1 of the General Rules and Regulations promulgated by the SEC under
the Securities Exchange Act of 1934, as in effect from time to time).

 

“Stock
Pledge Agreements” means:
(i) a stock pledge agreement, in form and substance satisfactory to Bank,
executed and delivered by 3D Holdings LLC to Bank with respect to the pledge of
the Stock of 3D California owned by 3D Holdings LLC and (ii) a stock pledge
agreement, in form and substance satisfactory to Bank, executed and delivered
by 3D California to Bank with respect to the pledge of 65% of the Stock of 3D
California’s foreign Subsidiaries.

 

“Subordinated
Debt” is: (i) those
certain 7% convertible subordinated debentures, issued on or about
December 19, 2001 in the aggregate principal amount of $10,000,000, (ii)
those certain 6% convertible subordinated debentures, issued in
November and December 2003 in the aggregate principal amount of
$22,704,000, and (iii) other debt incurred by the Company or any of its
Subsidiaries and that which is expressly subordinated to all indebtedness owed
to Bank under the Loan Documents in a written agreement in a manner and form
acceptable to Bank and approved by Bank in writing.

 

“Subsidiary” is for any Person, or any
other business entity of which more than 50% of the voting Stock or other
equity interests is owned or controlled, directly or indirectly, by the Person
or one or more Affiliates of the Person.

 

“Tangible Net
Worth” is, on any
date, the difference, on a consolidated basis, of: (A) the sum of (i) the
Company’s consolidated net worth, plus (ii) issued and outstanding
preferred Stock, plus (iii) Subordinated Debt, minus, (B) the sum
of any amounts attributable to (a) goodwill, plus (b) intangible items such as
unamortized debt discount and expense, Patents, trade and service marks and
names, Copyrights, acquired technology, licenses, research and development
expenses except prepaid expenses, and any other assets classified as intangible
assets in accordance with GAAP.

 

“TNW
Additions” means, on
a consolidated basis, the cumulative sum (for all quarters ending after the
Effective Date but prior to the date of determination) of: (i) 50% of after-tax
income available to common shareholders with no deduction for losses, plus
(ii) 75% of equity (or equity equivalent) infusions, plus (iii) without
duplication of the increase set forth in the (i) and (ii) above, 75% of
after-tax net income available to common shareholders that is attributable to a
reversal in the allowance for net deferred taxes.

 

“Total
Liabilities” is on any day,
obligations that should, under GAAP, be classified as liabilities on the
Company’s consolidated balance sheet, including all Indebtedness, and current

 

30

 

portion Subordinated Debt
due in accordance with its terms within 12 months, but excluding all other
Subordinated Debt.

 

“Trademarks” are trademark and
servicemark rights, registered or not, applications to register and
registrations and like protections, and the entire goodwill of the business of
Assignor connected with the trademarks.

 

“3D California” is
defined in the Preamble.

 

[Remainder of this
page intentionally left blank]

 

31

 

BORROWER:

 

3D SYSTEMS CORPORATION,

a Delaware corporation

 

 

	
  By:

  	
   

  	
  /s/
  Fred R. Jones

  	
   

  
	
   

  	
   

  
	
  Title:

  	
   

  	
  Vice
  President

  	
   

  
					

 

 

3D SYSTEMS, INC,

a California corporation

 

 

	
  By:

  	
   

  	
  /s/
  Fred R. Jones

  	
   

  
	
   

  	
   

  
	
  Title:

  	
   

  	
  Vice
  President

  	
   

  
					

 

S-1

[Signature Page to
Loan Agreement]

 

BANK:

 

SILICON VALLEY BANK

 

 

	
  By:

  	
  /s/
  Mark Turk

  	
   

  
	
   

  	
   

  
	
  Title:

  	
   

  	
  Senior
  Vice President

  	
   

  
	
   

  	
   

  
	
  Effective
  Date:

  	
  6/30/04

  	
   

  
						

 

S-2

[Signature Page to
Loan Agreement]

 

EXHIBIT A

 

The Collateral consists
of all of each Borrower’s right, title and interest in and to the following whether
owned now or hereafter arising and whether the Borrower has rights now or
hereafter has rights therein and wherever located:

 

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;

 

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 held for sale or lease, or to
be furnished under a contract of service or is temporarily out of Borrower’s
custody or possession or in transit and including any returns or repossession
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;

 

All contract rights and
general intangibles now owned or hereafter acquired, including, without
limitation, purchase orders, customer lists, route lists, claims, computer
discs, computer tapes, literature, reports, catalogs, income tax refunds,
payments of insurance, payment intangibles, and rights to payment of any kind,
but excluding therefrom all Intellectual Property (as hereinafter defined);

 

All now existing and
hereafter arising accounts (including health-care insurance receivables),
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, insurance (including refunds)
claims and proceeds, guaranties, and other security therefor, as well as all
merchandise returned to or reclaimed by Borrower;

 

All documents (including
negotiable documents), cash, deposit accounts, securities (provided, however,
that with respect to foreign subsidiaries, no more than 65% of the outstanding
Stock of such subsidiary is Collateral for purposes of this Agreement),
securities entitlements, securities accounts, investment property, financial
assets, letters of credit, letter of credit rights, money, certificates of
deposit, instruments (including promissory notes) and chattel paper (including
tangible and electronic chattel paper) now owned or hereafter acquired and
Borrower’s Books relating to the foregoing; and

 

All Borrower’s Books
relating to the foregoing, and the computers and equipment containing said
books and records, and any and all claims, rights and interests in any of the
above and all substitutions for, additions and accessions to and proceeds
thereof.

 

Notwithstanding the
foregoing, the Collateral shall not be deemed to include:

 

A-1

 

(a)           any copyrights,
copyright applications, copyright registration and like protection in each work
of authorship and derivative work thereof, whether published or unpublished,
now owned or hereafter acquired; any patents, patent applications and like
protections including without limitation improvements, divisions,
continuations, renewals, reissues, extensions and continuations-in-part of the
same, trademarks, servicemarks and applications therefor, whether registered or
not, and the goodwill of the business of Borrower connected with and symbolized
by such trademarks, any trade secret rights, including any rights to unpatented
inventions, know-how, operating manuals, license rights and agreements and
confidential information, now owned or hereafter acquired; or any claims for
damage by way of any past, present and future infringement of any of the
foregoing (collectively, the “Intellectual Property”), except that the
Collateral shall include the proceeds of all the Intellectual Property that are
accounts, (i.e. accounts receivable) of Borrower, or general intangibles
consisting of rights to payment, if a judicial authority (including a U.S.
Bankruptcy Court) holds that a security interest in the underlying Intellectual
Property is necessary to have a security interest in such accounts and general
intangibles of Borrower that are proceeds of the Intellectual Property, then
the Collateral shall automatically, and effective as of the Effective Date,
include the Intellectual Property to the extent necessary to permit perfection
of Bank’s security interest in such accounts and general intangibles of
Borrower that are proceeds of the Intellectual Property.

 

(b)           any license or contract
rights to the extent (i) the granting of a security interest in it would be
contrary to applicable law, or (ii) that such rights are nonassignable by their
terms (but only to the extent such prohibition is enforceable under applicable
law, including, without limitation, Section 9406, 9407, 9408, and 9409 of
the Code) without the consent of the licensor or other party (but only to the
extent such consent has not been obtained).

 

(c)           any equipment or other
property in which a Borrower has Rights or the power to transfer Rights and in
which a lien or security interest was granted to secure the Company’s
obligations under or in respect of the transactions entered into in connection
with the $4.9 million original aggregate principal amount loan made by Mesa
County, Colorado to 3D Systems Corporation with the proceeds of the $4.9
million variable rate demand industrial development revenue bonds, series 1996
(3D Systems Corporation Project), including, without limitation, all property
in which a lien or security interest was granted to Mesa County, Colorado, the
trustee under the indenture governing the industrial development revenue bonds
and the letter of credit bank that issued (or issues) a letter of credit to
support the repayment of such bonds.

 

A-2

 

EXHIBIT A-1

LIBOR SUPPLEMENT 

TO

LOAN AND SECURITY AGREEMENT

 

This LIBOR Supplement to
Loan and Security Agreement (the “Supplement”) is a supplement to Loan and
Security Agreement (the “Loan Agreement”) dated as of the Effective Date
between SILICON VALLEY BANK (“Bank”), on the one hand, and 3D SYSTEMS
CORPORATION, a Delaware corporation and certain of its Subsidiaries set forth
in the signature pages hereto (collectively, joint and severally, “Borrower”),
on the other hand, 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
Revolving Maturity Date.

 

“Interest Rate” shall
mean as to:  (a) Prime Rate Loans, a
rate per annum equal to the Prime Rate; and (b) LIBOR Rate Loans, a rate per
annum equal to the LIBOR Rate (based on the LIBOR Rate applicable for the
Interest Period selected by the Borrower) plus the LIBOR Rate Margin.

 

“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 as 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
Advances made or a portion thereof on which interest is payable based on the
LIBOR Rate in accordance with the terms hereof.

 

“LIBOR Rate Margin” means
275 basis points (2.75%).

 

A-1-1

 

“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 Advances made or a portion thereof on which interest is payable based on
the Prime Rate in accordance with the terms hereof.

 

“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.

 

“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. 
Each LIBOR Rate Loan shall be made upon the irrevocable written request
of Borrower by facsimile or telephone 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 LIBOR Rate Loan is to be made, which day shall be a Business Day;
the amount of such LIBOR Rate Loan, the Interest Period for such LIBOR Rate
Loan, and comply with such other requirements as Bank determines are reasonable
or desirable in connection therewith.

 

Borrower must promptly
confirm each request for a LIBOR Rate Loan in writing in the form of a LIBOR
Rate Loan Borrowing Certificate as set forth on Exhibit A-2, which shall
be duly executed by the Borrower.

 

Each Prime Rate Loan
shall be made upon the irrevocable request of Borrower by facsimile or
telephone received by Bank not later than 12:00 noon (Santa Clara, California
time) one (1) Business Day prior to the date such Loan is to be made. Borrower
must promptly confirm the notification by delivering to Bank the
Payment/Advance Form attached as Exhibit B.  Each such notice shall specify the date such
Prime Rate Loan is to be made, which day shall be a Business Day and the amount
of such Prime Rate Loan, and comply with such other requirements as Bank
determines are reasonable or desirable in connection therewith.  The amount of each Prime Rate Loan shall be
$1,000,000 or such greater amount which is an integral multiple of $1,000,000.

 

A-1-2

 

Bank may make either
LIBOR Rate Loans or Prime Rate Loans under the Loan Agreement based on
instructions from a Responsible Officer or his or her designee or without
instructions as a Prime Rate Loan if such Prime Rate Loan is necessary to meet
Obligations which have become due.  Bank
may rely on any telephone notice given by a person whom Bank believes is a
Responsible Officer or designee. Borrower will indemnify Bank for any loss Bank
suffers due to such reliance.

 

All LIBOR Rate Loans and
Prime Rate Loans shall be credited to Borrower’s deposit account.

 

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 Exhibit A-2,
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)                              no
more than ten LIBOR Rate Loans shall be outstanding at any one time;

 

(v)           the amount of a LIBOR
Rate Loan shall be $1,000,000 or such greater amount which is an integral
multiple of $1,000,000; and

 

(vi)          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.

 

A-1-3

 

(a)           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, in which case such LIBOR Rate Loan shall convert
at Bank’s option, to a Prime Rate Loan upon the expiration of such LIBOR Rate
Loan, (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 Committed
Line.  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 (excluding,
however, 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

 

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 interest at the LIBOR Rate applicable to the amount
so received 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

 

A-1-4

 

(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.

 

(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) or 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 the
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

 

A-1-5

 

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) of
this Exhibit A-1).

 

A-1-6

 

EXHIBIT A-2

 

LIBOR RATE LOAN
BORROWING CERTIFICATE

 

The undersigned hereby
certifies as follows:

 

I,                                        ,
am the duly elected and acting
                                  
of 3D SYSTEMS CORPORATION, a Delaware corporation (“Requesting Borrower”).

 

This certificate is
delivered pursuant to Section 2 of that certain LIBOR Supplement to Loan
and Security Agreement together with the Loan and Security Agreement by and
between 3D SYSTEMS CORPORATION, a Delaware corporation and certain of its
Subsidiaries set forth in the signature pages hereto (collectively, joint and
severally, “Borrower”), on the one hand, and Silicon Valley Bank (“Bank”), on
the other hand (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.

 

Requesting Borrower
hereby requests on
                          ,
20      a LIBOR Rate Loan as follows:

 

(a)                                  The
date on which the LIBOR Rate Loan is to be made is
                        ,
20    .

 

(b)           The amount of the LIBOR
Rate 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 LIBOR
Rate 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
LIBOR Rate Loan Borrowing Certificate is executed by the undersigned as of this
         day of
                          ,
20              .

 

	
   

  	
  3D SYSTEMS CORPORATION,

  
	
   

  	
  a Delaware corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
					

 

For Internal Bank Use Only

 

	
  LIBOR Pricing Date

  	
   

  	
  LIBOR Rate

  	
   

  	
  LIBOR Rate
  Variance

  	
   

  	
  Maturity
  Date

  
	
   

  	
   

  	
   

  	
   

  	
  %

  	
   

  	
   

  

 

A-2-1

 

EXHIBIT A-3

 

LIBOR RATE
CONVERSION/CONTINUATION CERTIFICATE

 

The undersigned hereby
certifies as follows:

 

I,
                                                ,
am the duly elected and acting
                              
of 3D SYSTEMS CORPORATION, a Delaware corporation (“Requesting Borrower”).

 

This certificate is
delivered pursuant to Section 2 of that certain LIBOR Supplement to Loan
and Security Agreement together with the Loan and Security Agreement by and
between 3D SYSTEMS CORPORATION, a Delaware corporation and certain of its
Subsidiaries set forth in the signature pages hereto (collectively, joint and
severally, “Borrower”), on the one hand, and Silicon Valley Bank (“Bank”), on
the other hand (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.

 

Requesting Borrower
hereby requests on
                          ,
20     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 LIBOR Rate Loan is to be made is
                        
20    .

 

(c)           The amount of the LIBOR
Rate Loan is to be
                                    
($
                            ),
for an Interest Period (if applicable) of                       
month(s).

 

A-3-1

 

IN WITNESS WHEREOF, this
LIBOR Rate Conversion/Continuation Certificate is executed by the undersigned
as of this          day of
                  ,
20          .

 

	
   

  	
  3D SYSTEMS CORPORATION,

  
	
   

  	
  a Delaware corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  

 

For Internal Bank Use Only

 

	
  LIBOR Pricing Date

  	
   

  	
  LIBOR Rate

  	
   

  	
  LIBOR Rate
  Variance

  	
   

  	
  Maturity
  Date

  
	
   

  	
   

  	
   

  	
   

  	
  %

  	
   

  	
   

  

 

A-3-2

 

EXHIBIT B

 

LOAN
PAYMENT/ADVANCE TELEPHONE REQUEST FORM

 

DEADLINE FOR SAME
DAY PROCESSING IS 12:00 NOON., P.S.T.

 

	
  TO: CENTRAL CLIENT
  SERVICE DIVISION

  	
   

  	
  DATE: 
                               

  
	
   

  	
   

  	
   

  
	
  FAX#:  (408) 496-2426

  	
   

  	
  TIME: 
                                

  

 

 

FROM: 3D SYSTEMS
CORPORATION

 

CLIENT NAME
(BORROWER)

LOAN NUMBER: 

 

                                                                                                                                                                                                                     

 

REQUESTED BY:
                                                                                                                                                                                     

AUTHORIZED
SIGNER’S NAME

 

AUTHORIZED
SIGNATURE: 
                                                                                                                                                                

 

PHONE NUMBER: 
                                                                                                                                                                                  

 

FROM ACCOUNT #
                              TO ACCOUNT
#                                                                                                                      

 

	
  REQUESTED TRANSACTION TYPE

  	
   

  	
  REQUESTED
  DOLLAR AMOUNT

  
	
   

  	
   

  	
   

  
	
  PRINCIPAL INCREASE
  (ADVANCE)

  	
   

  	
  $                                                                                                       

  
	
  PRINCIPAL PAYMENT
  (ONLY)

  	
   

  	
  $                                                                                                       

  
	
  INTEREST PAYMENT (ONLY)

  	
   

  	
  $                                                                                                       

  
	
  PRINCIPAL AND INTEREST
  (PAYMENT)

  	
   

  	
  $                                                                                                       

  

 

OTHER
INSTRUCTIONS:                                                                                                                                                                     

 

                                                                                                                                                                                                                     

 

All Borrower’s
representations and warranties in the Loan and Security Agreement are true,
correct and complete in all material respects on the date of the telephone
request for an Advance confirmed by this Borrowing Certificate; but those
representations and warranties expressly referring to another date shall be
true, correct and complete in all material respects as of that date.

 

BANK USE ONLY

 

TELEPHONE REQUEST:

 

The following person is
authorized to request the loan payment transfer/loan advance on the advance
designated account and is known to me.

 

B-1

 

	
  Authorized
  Requester

  	
   

  	
  Phone #

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Received By
  (Bank)

  	
   

  	
  Phone #

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Authorized
  Signature (Bank)

  
					

 

B-2

 

EXHIBIT C

COMPLIANCE CERTIFICATE

 

	
  TO:

  	
   

  	
  SILICON VALLEY BANK

  
	
   

  	
   

  	
   

  
	
  FROM:

  	
   

  	
  3D
  Systems Corporation

  
	
   

  	
   

  	
  26081 Avenue Hall

  
	
   

  	
   

  	
  Valencia CA 91355

  

 

The undersigned
authorized officer of 3D Systems Corporation (“Borrower”) certifies that under
the terms and conditions of the Loan and Security Agreement between Borrower
and Bank (the “Agreement”), (i) Borrower is in complete compliance for the
period ending
                              
with all required covenants except as noted below and (ii) all representations
and warranties in the Agreement are true and correct in all material respects
as of the date of this certificate.  In
addition, the undersigned authorized officer of Borrower certifies that
Borrower and each Subsidiary (i) has timely filed all required tax returns and
paid, or made adequate provision to pay, all material taxes, except those being
contested in good faith with adequate reserves under GAAP and (ii) does not
have any legal actions pending or threatened against Borrower or any Subsidiary
which Borrower has not previously notified in writing to Bank. Attached are the
required documents supporting the certification.  The Officer certifies that these are prepared in accordance with
Generally Accepted Accounting Principles (GAAP) consistently applied from one
period to the next except as explained in an accompanying letter or
footnotes.  The Officer acknowledges
that no borrowings may be requested at any time or date of determination that
Borrower is not in compliance with any of the terms of the Agreement, and that
compliance is determined not just at the date this certificate is delivered.

 

Please indicate compliance status by circling Yes/No under
“Complies” column.

 

	
  Reporting Covenant

  	
   

  	
  Required

  	
   

  	
  Complies

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Quarterly financial
  statements + CC

  	
   

  	
  Quarterly within 45
  days

  	
   

  	
  Yes

  	
   

  	
  No

  
	
  Annual (Audited)

  	
   

  	
  FYE within 90 days

  	
   

  	
  Yes

  	
   

  	
  No

  
	
  Annual Projections

  	
   

  	
  Within 30 days after
  FYE

  	
   

  	
  Yes

  	
   

  	
  No

  

 

	
  Financial Covenant

  	
   

  	
  Required

  	
   

  	
  Actual

  	
   

  	
  Complies

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Maintain on a Quarterly
  Basis:

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Minimum Quick Ratio
  (Adjusted):

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  On or before 9/30/2004

  	
   

  	
   

  	
  .90:1.00

  	
   

  	
             :1.00

  	
   

  	
  Yes

  	
   

  	
  No

  
	
  On and at all times
  after 12/31/2004

  	
   

  	
   

  	
  1.00:1.00

  	
   

  	
             :1.00

  	
   

  	
  Yes

  	
   

  	
  No

  
	
  Minimum Tangible Net
  Worth

  	
   

  	
   

  	
  $22,000,000(1)

  	
   

  	
  $           

  	
   

  	
  Yes

  	
   

  	
  No

  
	
  Adjusted Total
  Liabilities to Tangible

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Net
  Worth:

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  On or before 9/30/2004

  	
   

  	
   

  	
  2.10:1.00

  	
   

  	
             :1.00

  	
   

  	
  Yes

  	
   

  	
  No

  
	
  On and at all times
  after 12/31/2004

  	
   

  	
   

  	
  2.00:1.00

  	
   

  	
             :1.00

  	
   

  	
  Yes

  	
   

  	
  No

  
	
  Minimum Deposits

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (if Revolving
  Obligations > $5,000,000)

  	
   

  	
   

  	
  66.67%
  of

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Revolving
  Obligations

  	
   

  	
             

  	
   

  	
  Yes

  	
   

  	
  No

  

 

Borrower only has deposit
accounts located at the following institutions:
                                      .

 

(1)  This number will increase by an amount equal
to the TNW Additions.

 

C-1

 

	
  Has Borrower filed any
  new Copyright applications?

  	
  Yes / No

  

 

	
  Registered Copyrights:

  	
   

  	
   

  	
  BANK USE ONLY

  
	
   

  	
   

  
	
   

  	
  Received by:

  	
   

  	
   

  
	
   

  	
  AUTHORIZED
  SIGNER

  
	
   

  	
   

  
	
   

  	
  Date:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Verified:

  	
   

  	
   

  
	
   

  	
  AUTHORIZED
  SIGNER

  
	
   

  	
   

  
	
   

  	
  Date:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Compliance Status:

  	
  Yes     No

  	
   

  
										

 

 

Comments Regarding Exceptions:  See Attached.

 

 

Sincerely,

 

3D Systems Corporation

 

 

	
   

  	
   

  
	
  SIGNATURE

  
	
   

  
	
   

  	
   

  
	
  TITLE

  
	
   

  
	
   

  	
   

  
	
  DATE

  

 

C-2

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