Document:

THIS EMPLOYMENT AGREEMENT is entered into by and between Evan J.
Griffith, Jr. ("Griffith") and Chugach Electric Association, Inc. an Alaska
electrical cooperative association headquartered in Anchorage, Alaska ("Chugach"
or "Employer"), to be effective on and as of May 1, 2002.

         WITNESSETH:

         WHEREAS, Chugach is engaged in the business of production, transmission
and distribution of electricity in Alaska;

         WHEREAS, Griffith has skills and experience in electric utility
management generally and with the business and technology associated with the
production, transmission and distribution of electricity; and

         WHEREAS, Chugach desires to obtain Griffith's services as the General
Manager of its Business, and Griffith desires to be employed in that position by
Chugach;

         NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein set forth, the parties hereto agree as follows:

         1. Employment.            Chugach hereby employs Griffith as its
General Manager, and Griffith hereby accepts such employment upon the terms and
conditions hereinafter set forth.

         2. Duties.

                  a. Griffith shall serve as Chugach's General Manager and shall
perform his services as such within the framework of Chugach's Bylaws, policies,
procedures and goals as Chugach's Board of Directors shall from time to time
determine, including but not limited to the following:

               (i)      Board Policy 106, Delegations of Authority from the
                        Board of Directors to the General Manager, Appendix
                        A hereto;

               (ii)     Board Policy 107, Board of Directors- General Manager
                        Relationship, Appendix B hereto;

               (iii)    Board Policy 118, Delegation of Certain of the
                        Secretary's and Treasurer's Duties to the General
                        Manager, Appendix C hereto; and

               (iv)     General Manager Position Description, Appendix D hereto.

<PAGE>

In such capacity, Griffith (i) shall exercise general supervisory responsibility
and management authority over Chugach and all of its controlled affiliates and
(ii) shall perform such other duties commensurate with his position as may be
assigned to him from time to time by the Chugach Board of Directors.

                  b. Griffith shall devote substantially all his business time,
attention and energies to the performance of his duties and functions under this
Employment Agreement and shall not during the term of his employment hereunder
be engaged in any other substantial business activity for gain, profit or other
pecuniary advantage. Griffith shall faithfully, loyally and diligently perform
his assigned duties and functions and shall not engage in any activities
whatsoever that conflict with his obligations to Chugach during the term of his
employment hereunder. Notwithstanding the foregoing, nothing in the foregoing
shall be construed so as to limit or prohibit personal investments by Griffith;
provided that such investments shall not amount to a controlling interest in any
entity (other than trusts, limited partnerships or other entities adopted by
Griffith for estate planning purposes). Griffith also agrees that he will not
participate in any political activity that will or may reflect adversely upon
Chugach without obtaining the prior consent of Chugach's Board of Directors.

                  c. Chugach shall furnish Griffith with an office and other
facilities at Chugach's headquarters location and services that are suitable to
his position and adequate for the performance of his duties and functions
hereunder.

         3. Term. The term of this Employment Agreement shall commence on the
date hereof (the "Commencement Date") and, unless terminated earlier pursuant to
paragraph 10 hereof, shall continue through March 31, 2004 (the "Initial Term").
If neither party gives written notice to the other party of non-renewal of this
Employment Agreement not less than sixty (60) days prior to March 31, 2004, this
Employment Agreement shall continue in full force and effect for subsequent
one-year terms (the "Extended Term(s)")(the Initial Term, together with the
Extended Terms, if any, being referred to herein as the "Employment Term"),
provided, however, that either party may give written notice of non-renewal to
the other party not less than sixty (60) days prior to the anniversary date of
any Extended Term, in which case this Employment Agreement shall terminate on
that anniversary date without further action by the parties. This Employment
Agreement also is subject to termination pursuant to paragraph 10 hereof during
any Extended Term.

         4. Compensation.  Chugach shall pay to Griffith,  in
consideration of and as compensation for the services agreed to be rendered by
Griffith hereunder, the following:

                  a. Base Salary.  During the Employment  Term,  Chugach shall
pay to Griffith an annual salary of One Hundred Eighty-five Thousand Dollars

<PAGE>

($185,000) (the "Base Salary"). The Base Salary, subject to the modifications
contained in the Performance Appraisal/Bonus Program section contained below,
shall be adjusted annually each January based upon the Anchorage CPI-U (July
statistic) published by the Bureau of Labor Statistics. The Base Salary shall be
payable in accordance with Chugach's normal payroll schedule, less withholdings
required by law or authorized by Griffith.

                  b. Performance Appraisal/Bonus Program. Chugach and Griffith
agree that Griffith's total compensation under this Employment Agreement shall
be tied directly to his performance. Accordingly, the parties agree that
Griffith and Chugach's Board of Directors, by mutual agreement, shall by January
31 of each year develop reasonable objectives ("stated objectives") by which to
measure Griffith's performance for the upcoming year. Each year in January, the
parties shall then review the agreed upon stated objectives for the past year
and determine whether Griffith has met or failed to meet the stated objectives.

                           (i) Bonus for Meeting or Exceeding  Stated
Objectives.  In the event that Griffith meets or exceeds the stated objectives,
he shall be entitled to a bonus of up to twenty percent (20%) of his Base
Salary. The exact percentage of the bonus ("bonus amount") shall be at the
discretion of the Board of Directors in consideration of the level of goal
achievement including both quantitative and qualitative measures of merit.
Payment of any bonus under this program shall be considered compensation for
purposes of retirement plan credits.

                           (ii) Salary  Reduction  for  Failing  to Meet
Stated  Objectives.  In the  event  that the  Board of Directors determines
that Griffith has substantially failed to meet the stated objectives, the Board
of Directors is entitled to reduce Griffith's Base Salary for the upcoming year
by an amount not to exceed ten percent (10%) of the previous year's Base Salary.
The precise amount of the salary reduction shall be at the discretion of the
Board of Directors in consideration of the extent of Griffith's failure to meet
the stated objectives and taking into account any mitigating factors outside of
Griffith's control which substantially affected his ability to meet the stated
objectives.

                           (iii) Reversion to Base Salary After  Reduction
for Failure to Meet Stated  Objectives.  In the event Griffith's base salary is
reduced for failure to meet the stated objectives, his salary shall revert to
the previous year's Base Salary in January of the next year (e.g., 2002 - Base
Salary of $185,000. Failure to meet 2002 goals results in a reduction of 2003
Base Salary to $170,000. In January 2004, the Base Salary shall revert to
$185,000 prior to any adjustments based upon CPI or failure to meet stated goals
for previous year).

                           (iv) Future  Deferred  Compensation  Plans.  In the
event that the Board of  Directors  adopts and makes available a new deferred
compensation plan during the Employment Term under which eligible employees may
deferportions of their income (and thereby defer tax liability associated with
that income), Griffith shall be entitled to participate in such plan(s) to the
extent that he is eligible to do so. If the plan permits, Griffith may defer
some or all of the bonus amounts, leave or other compensation payable to him
pursuant to this Employment Agreement.

<PAGE>

         c. Use of Company  Vehicles.  During the  Employment  Term,
Griffith  shall be permitted to use Chugach  vehicles on company business on a
de minimus basis. Griffith shall not be entitled to a company vehicle for
personal use.

         5. Benefits. During the Employment Term, Griffith shall be entitled to
participate in all group health, pension, 401(k), 457 and other benefit plans
maintained by Chugach and provided to its salaried administrative personnel, on
the same terms as apply to participation therein by such personnel generally
(except as otherwise provided herein). Further, during the Employment Term,
Griffith shall be entitled to participate in all fringe benefit programs and
shall receive all perquisites if and to the extent that Chugach's Board of
Directors establishes and makes such benefits and perquisites available to its
salaried administrative personnel generally, including, but not limited to,
Employer-paid long-term disability insurance and life insurance coverage.

         6. Expenses. During the Employment Term, Chugach shall reimburse
Griffith for all reasonable travel, entertainment and other business expenses
incurred or paid by Griffith in performing his duties and functions hereunder,
subject to Griffith's accounting for and reporting such expenses pursuant to
applicable Chugach policies.

         7. Holidays, Sick Leave and Annual Leave. Griffith shall be entitled to
such holidays, sick leave and annual leave as are provided to its salaried
administrative personnel generally, which paid time off work shall continue to
accrue at the same rate(s) as Griffith accrued holidays, sick leave and annual
leave as an Executive Manager. For example, Griffith shall continue to accrue
annual leave at the rate of 9.23 hours per pay period (e.g., at the rate of 30
days per year). Griffith shall carry over to this Employment Agreement all
annual leave previously accrued as of the Commencement Date of this Employment
Agreement, provided, however, that all such carried over annual leave shall be
valued at Griffith's rate of compensation as Executive Manager immediately prior
to the Commencement Date. Additionally, Griffith shall either use or cash out
annual leave that accrues to his account after the Commencement Date so that he
does not add more than six (6) weeks of annual leave to his pre-Commencement
Date annual leave balance. Chugach agrees to reconsider this six-week cap on
additions to Griffith's annual leave balance if Griffith is unable to take leave
for business-related reasons. Griffith shall be entitled to such vacations,
taken at such time or times, as Griffith shall determine in his reasonable
discretion, consistent with the performance of Griffith's obligations hereunder
and the direction of Chugach's Board of Directors.

<PAGE>

         8. Non-Competition. During the Employment Term and for a period of one
(1) year thereafter, Griffith shall not enter into or participate in any
business competitive to the business carried on by Chugach in Southcentral
Alaska or at such additional locations, if any, outside Southcentral Alaska at
which Chugach conducts business. (This paragraph 8 does not apply to a
Termination Other Than For Cause pursuant to paragraph 10(b) hereof.) As used
herein, the term "business competitive to the business carried on by Chugach"
means any business that involves the production, transmission or distribution of
electricity, and the words "Southcentral Alaska" mean a business conducted in
whole or in part within the boundaries of the Municipality of Anchorage, the
Kenai Peninsula Borough, or the Matanuska-Susitna Borough. The provisions of
this paragraph 8 shall survive the expiration and/or termination of this
Employment Agreement. If a court of competent jurisdiction should declare any or
all of this provision unenforceable because of any unreasonable restriction of
duration and/or geographical area, then such court shall have the express
authority to reform this provision to provide for reasonable restrictions and/or
to grant Chugach such other relief, at law or in equity, as are reasonably
necessary to protect its interests.

         9. Confidential Information. During the Employment Term and for so long
thereafter as the information remains confidential, Griffith will not use for
his own advantage or disclose to any unauthorized person any confidential
information relating to the business operations or properties of Chugach and any
affiliate of Chugach. Upon the expiration or termination of the Employment Term,
upon Chugach's request, Griffith will surrender and deliver to Chugach all
documents and information of every kind relating to or connected with Chugach
and its affiliates. As used herein "confidential information" means all
information, whether written or oral, tangible or intangible, of a private,
secret, proprietary or confidential nature, of or concerning Chugach and its
business and operations, including without limitation, any trade-secrets or
know-how, computer software programs in both source code and object code,
information regarding any product or service, development, technology,
technique, process or methodology, any sales, promotional or marketing plans,
programs, techniques, practices or strategies, any expansion or acquisition
plans, any operational and management guidelines, any cost, pricing or other
financial data or projections, and any other information which is to be treated
as confidential because of any duty of confidentiality owed by Chugach to any
third party or any other information that Chugach shall, in the ordinary course
of its business, possess or use and not release externally without restriction
on use or disclosure. The foregoing confidential information provision shall not
apply to information which: (i) is or becomes publicly known through no wrongful
act of Griffith, (ii) is rightfully received from any third party without
restriction and without breach by Griffith of this Employment Agreement; or
(iii) is independently developed by Griffith after the term of his employment
hereunder or is independently developed by a competitor of Chugach at any time.
The provisions of this paragraph 9 shall survive the expiration and/or
termination of this Employment Agreement.

<PAGE>

         10. Termination.

                  a. Termination for Cause. Chugach may terminate Griffith's
employment for "cause" immediately upon written notice to Griffith, provided,
however, that Griffith has been given ten (10) days written notice of cause for
termination and has failed to, or is unable to, cure such cause within that
time. Such notice shall specify in reasonable detail the nature of the cause.
For purposes of this Employment Agreement, "cause" means a business-related
reason that is not arbitrary, capricious or illegal and which is based on facts
(i) supported by substantial evidence and (ii) reasonably believed by the Board
of Directors to be true. Examples of "cause" for termination of employment are
provided in Chugach Operating Policy 013 dated September 19, 2001, and are
incorporated herein by reference to the extent they are consistent with this
Employment Agreement. In the event of the involuntary termination of his
employment for cause, Griffith shall not be entitled to receive any compensation
hereunder other than his Base Salary and employee benefits and leave as accrued
through the effective date of such termination. Griffith's obligations under
Paragraphs 8 and 9 shall continue under the terms and conditions of this
Employment Agreement.

                  b. Termination Other Than for Cause. Chugach shall have the
right to terminate Griffith's employment for any reason, upon thirty (30) days
prior written notice to Griffith, whereupon Griffith's employment pursuant to
this Employment Agreement shall terminate as of the effective date of
termination. In the event of the involuntary termination of his employment other
than for cause, Griffith shall be entitled to receive: (i) his Base Salary,
bonus amount, leave and employee benefits as accrued through the effective date
of such termination; (ii) an amount equal to Griffith's Base Salary and benefits
for a period equal to five (5) months following the effective date of
termination; and (iii) a pro-rata portion of the bonus amount for that period.
Griffith will be entitled to receive the aforementioned amounts in this
Paragraph 10(b), if and only if Griffith signs a valid general release of all
claims against Chugach in a form provided by Chugach. All payments shall be made
at normal Chugach payroll periods, less withholdings required by law, unless
otherwise mutually agreed to in writing by Griffith and Chugach. Griffith's
obligations under Paragraph 9 shall continue under the terms and conditions of
this Employment Agreement.

                  c. Voluntary Termination. Griffith may voluntarily terminate
his employment under this Agreement at any time upon sixty (60) days' prior
written notice to Chugach's Board of Directors, whereupon Chugach's employment
of Griffith shall terminate at the end of the sixty (60) day notice period. In
the event of Griffith's voluntary termination of employment, he shall not be
entitled to receive any compensation hereunder other than his Annual Salary and
employee benefits as accrued through the effective date of such termination.
Griffith's obligations under Paragraphs 8 and 9 shall continue under the terms
and conditions of this Employment Agreement.

<PAGE>

                  d. Death or Disability. Griffith's employment pursuant to this
Agreement shall terminate automatically on the date of Griffith's death or
disability. Upon Griffith's death or disability, no compensation shall be
payable to Griffith under this Agreement except for Griffith's Base Salary,
bonus amount and employee benefits as accrued through the date of his death or
disability, whichever is applicable, including any employee benefits payable in
the event of Griffith's death or disability, whichever is applicable. For
purposes of this Employment Agreement, Griffith shall be deemed to be disabled
(as medically determined by an independent physician), if for a period of at
least three (3) consecutive months he is unable to perform the essential
functions of his position with Chugach, with or without reasonable
accommodation. For purposes of this Agreement, if Griffith's employment
terminates by reason of his disability, his employment termination date shall be
deemed to be the last day of the three (3) month period described in this
paragraph.

                  e. Excess Parachute Payment. In the event that Chugach treats
any portion of Griffith's payments or benefits hereunder as an "excess parachute
payment" within the meaning of Section 280G of the Internal Revenue Code
("Code") or any comparable provision of state or local tax law, or it is
otherwise asserted (including on an audit of either Chugach or Griffith) that
any portion of such payments or benefits is such an "excess parachute payment,"
Chugach shall prior to the date on which any amount of excise tax (or penalty or
interest) must be paid in respect thereof, promptly make an additional lump sum
payment in cash to Griffith in an amount sufficient, after giving effect to all
federal, state and other taxes and charges (including interest and penalties, if
any) with respect to such payment to make Griffith whole for all taxes
(including withholding and social security taxes) imposed under Section 4999 of
the Code, or any comparable provision of state or local tax law, with respect to
the "excess parachute payment" and all associated interest and penalty amounts.
Griffith shall cooperate in all reasonable respects with Chugach to attempt to
minimize any such tax liability.

                  f. Miscellaneous. In the event of any termination or attempted
termination hereof: (i) if multiple events, occurrences or circumstances are
asserted as bases for such termination or attempted termination, the event,
occurrence or circumstance that is earliest in time, and any termination or
attempted termination found to be proper hereunder based thereon, shall take
precedence over the others; (ii) no termination of this Employment Agreement
shall relieve or release either party from liability hereunder based on any
breach of the terms hereof by such party occurring prior to the Termination
Date; and (iii) the terms of this Employment Agreement relevant to performance
or satisfaction of any obligation hereunder expressly remaining to be performed
or satisfied in whole or in part at the Termination Date shall continue in force
until such full performance or satisfaction has been accomplished and otherwise
neither party hereto shall have any other or further remaining obligations to
other party hereunder.

<PAGE>

                  g. No Set-off; No Duty of Mitigation. There shall be no right
of setoff or counterclaim, in respect of any actual or alleged claim, debt or
obligation, against any payments or benefits required to be made or provided to
Griffith hereunder (including, without limitation, pursuant to subparagraphs
10(a) and 10(b)). In the event of any termination of Griffith's employment under
this paragraph 10, Griffith shall be under no obligation to seek other
employment and shall be entitled to all payments or benefits required to be made
or provided to Griffith hereunder, without any duty of mitigation of damages and
regardless of any other employment obtained by Griffith.

         11. Injunctive Relief. It is agreed that the services of Griffith are
unique and that any breach or threatened breach by Griffith of any provision of
this Employment Agreement cannot be remedied solely by damages. Accordingly, in
the event of a breach by Griffith of his obligations under this Employment
Agreement, Chugach shall be entitled to seek and obtain interim restraints and
permanent injunctive relief, restraining Griffith and any business, firm,
partnership, individual, corporation or entity participating in such breach or
attempted breach. Nothing herein, however, shall be construed as prohibiting
Chugach from pursuing any other remedies available at law or in equity for such
breach or threatened breach, including the recovery of damages and the
termination of the services of Griffith.

         12. Arbitration. Any dispute or controversy arising out of or relating
to this Employment Agreement or any claimed breach hereof shall be resolved, at
the request of either party, by a private arbitration proceeding. The
arbitration proceeding shall be conducted pursuant to the Alaska Uniform
Arbitration Act, AS 09.43.010 -- 09.43.180 (the "Act") and the Model Employment
Arbitration Rules (the "Arbitration Rules") of the American Arbitration
Association ("AAA"), each of which is incorporated herein by this reference to
the extent that the Act and the Arbitration Rules are consistent with this
Employment Agreement. The arbitrator shall be an impartial arbitrator qualified
to serve in accordance with the Arbitration Rules. The arbitrator shall be
selected by mutual agreement of the parties. If the parties are unable to agree
to a mutually acceptable arbitrator within twenty-one (21) days of the request
for arbitration, Chugach shall request that the AAA submit a list of seven (7)
arbitrators. After a coin toss to determine who makes the first strike, the
parties shall strike names from the AAA list alternately until the name of one
arbitrator remains. That arbitrator shall be deemed mutually acceptable to both
parties unless the arbitrator is unavailable, in which case the last arbitrator
whose name was struck shall be deemed acceptable to the parties, and so on. The
arbitration hearing shall be held in Anchorage, Alaska, or in such other place
as may be mutually agreed upon by the parties, at a time and location determined
by the arbitrator. Within thirty (30) days of the close of the arbitration
hearing, the arbitrator shall hand down a written decision and award. The
decision shall explain the basis for the arbitrator's award. The arbitrator
shall have authority to interpret and enforce this Employment Agreement, but
shall not have authority to alter, amend or supercede any provision of this
Employment Agreement. The decision and award shall be final and binding on the
parties, subject only to such appeal rights as are available under the Act.
Either party may seek entry of judgment upon such decision and award in any
court having jurisdiction over the parties. The expenses of the arbitration
proceeding shall be borne by Chugach. Each party shall pay for and bear the cost
of its own experts, witnesses and legal counsel in such arbitration proceeding.

<PAGE>

         13. Indemnification.

                  a. Chugach shall indemnify Griffith (as a "protected person")
to the fullest extent permitted by AS 10.25.145 (the terms of which are
incorporated herein by this reference) against all costs, expenses, liabilities
and losses (including, without limitation, attorneys' fees, judgments, penalties
and amounts paid in settlement) reasonably incurred by Griffith in connection
with any action, suit or proceeding, whether civil, criminal, administrative or
investigative in which Griffith is made, or is threatened to be made, a party to
or a witness in such action, suit or proceeding by reason of the fact that he is
or was an officer or agent of Chugach or of any of Chugach's controlled
affiliates or is or was serving as an officer, trustee, agent or fiduciary of
any other entity at the request of Chugach (a "Proceeding").

                  b. Chugach shall advance to Griffith all reasonable costs and
expenses incurred by him in connection with a Proceeding within twenty (20) days
after receipt by Chugach of a written request for such advance, accompanied by
an itemized list of the actual or anticipated costs and expenses and Griffith's
written undertaking to repay to Chugach on demand the amount of such advance if
it shall ultimately be determined that Griffith is not entitled to be
indemnified against such costs and expenses. Griffith shall periodically account
to Chugach for all such costs and expenses incurred by Griffith in connection
with his defense of the Proceeding.

                  c. The indemnification provided to Griffith hereunder is in
addition to, and not in lieu of, any additional indemnification to which he may
be entitled pursuant to Chugach's Certificate of Incorporation or Bylaws, any
insurance maintained by Chugach from time to time providing coverage to Griffith
and other officers and directors of Chugach, or any separate written agreement
with Griffith. The provisions of this paragraph 13 shall survive any termination
of this Employment Agreement.

         14. Amendment and Modification. This Employment Agreement contains the
entire agreement between the parties with respect to the subject matter hereof,
and supersedes any and all prior agreements, arrangements or understandings
between the parties hereto with respect to the subject matter hereof, whether
written or oral. Subject to applicable law and upon the consent of Chugach's
Board of Directors, this Employment Agreement may be amended, modified and

<PAGE>

supplemented by written agreement of Chugach and Griffith with respect to any of
the terms contained herein.

         15. Waiver of Compliance. Any failure of either party to comply with
any obligation, covenant, agreement or condition on its part contained herein
may be expressly waived in writing by the other party, but such waiver or
failure to insist upon strict compliance shall not operate as a waiver of, or
estoppel with respect to, any subsequent or other failure. Whenever this
Employment Agreement requires or permits consent by or on behalf of any party,
such consent shall be given in writing.

         16. Notices. All notices, requests, demands and other communications
required or permitted hereunder shall be in writing and shall be deemed to have
been duly given if delivered by hand, sent by registered or certified U.S. Mail,
postage prepaid, commercial overnight courier service or transmitted by
facsimile and shall be deemed served or delivered to the addressee at the
address for such notice specified below when hand delivered, upon confirmation
of sending when sent by fax, on the day after being sent when sent by overnight
delivery or five (5) days after having been mailed, certified or registered,
with postage prepaid:

           If to Chugach:                                If to Griffith:
           --------------                                --------------

      Chugach Electric Association,                        Evan J. Griffith, Jr.
      Inc.                                                 HC 85, Box 9242
      P.O. Box 196300                                      Eagle River, AK 99577
      Anchorage, AK 99519-6300
      Facsimile: (907) 762-4688                            Facsimile:
      Attention: Chairman of Board of
      Directors

or, in the case of either such party, to such substitute address as such party
may designate from time to time for purposes of notices to be given to such
party hereunder, which substitute address shall be designated as such in a
written notice given to the other party addressed as aforesaid.

         17. Assignment.  This Employment  Agreement shall inure to the
benefit of Griffith and Chugach and be binding upon the successors and general
assigns of Employer.  This Employment  Agreement shall not be assignable,
except to the extent set forth in paragraph 20.

         18. Enforceability.  In the event it is determined that this
Employment  Agreement is unenforceable in any respect, it is the mutual intent
of the parties that it be construed to apply and be enforceable  to the maximum
extent  permitted by applicable law.

<PAGE>

         19. Applicable Law. This  Employment  Agreement shall be construed
and enforced in accordance with the laws applicable to contracts executed,
delivered and fully to be performed in the State of Alaska.

         20. Beneficiaries: Executive's Representative. Griffith shall be
entitled to select (and to change, from time to time, except to the extent
prohibited under any applicable law) a beneficiary or beneficiaries to receive
any payments, distributions or benefits to be made or distributed hereunder upon
or following Griffith's death. Any such designation shall be made by written
notice to Chugach. In the event of Griffith's death or of a judicial
determination of Griffith's incompetence, references in this Employment
Agreement to Griffith shall be deemed, as appropriate, to refer to his
designated beneficiary, to his estate or to his executor or personal
representative ("Griffith's Representative") solely for the purpose of providing
a clear mechanism for the exercise of Griffith's rights hereunder in the case of
Griffith's death or disability.

         IN WITNESS WHEREOF, the parties have executed this Employment Agreement
to be effective on and as of the day and year first above written.

                                   CHUGACH ELECTRIC ASSOCIATION, INC.

                                   By: /s/ Bruce E. Davison
                                   Name: Bruce E. Davison
                                   Title: President, Board of Directors

                                   /s/ Evan J. Griffith06302002 Form 10-Q Exhibit 10.28

Exhibit 10.28

LOAN AND SECURITY AGREEMENT

(ACCOUNTS AND INVENTORY)

 

 

	
Obligor #:
	
Note #: 94587
	
Agreement Date: March 13, 2002

	
Credit Limit: $4,000,000.00
	
Interest Rate: Base Rate Plus 0.500%
	
Officer No./Initials:48202, Florina A. Sy

 

 

THIS AGREEMENT is entered into on March 13, 2002, between
Comerica Bank-California ("Bank") as secured party, whose headquarters
office is 333 West Santa Clara Street, San Jose, CA, and the
undersigned ("Borrower"), whose sole place of business (if it has only one),
chief executive office (if it has more than one place of business) or residence
(if an individual) is located at the address set forth below its name on the
signature page to this Agreement. The parties agree as follows:

	DEFINITIONS. 

	"Accounts shall mean and includes all presently
existing and hereafter arising accounts, including without limitation all
accounts receivable, contract rights and other forms of right to payment for
monetary obligations or receivables for property sold or to be sold, leased,
licensed, assigned or otherwise disposed of, or for services rendered or to be
rendered (including without limitation all health-care-insurance receivables)
owing to Borrower, and any supporting obligations, credit insurance, guaranties
or security therefor, irrespective of whether earned by performance.

	"Agreement shall mean and includes this Loan and
Security Agreement (Accounts and Inventory), any concurrent or subsequent rider
to this loan and Security Agreement (Accounts and Inventory) and any extensions,
supplements, amendments or modifications to this Loan and Security Agreement
(Accounts and Inventory) and or to any such rider.

	"Bank Expenses" shall mean and includes: all costs or
expenses required to be paid by Borrower under this Agreement which are paid or
advanced by Bank; taxes and insurance premiums of every nature and kind of
Borrower paid by Bank; filing, recording, publication and search fees, appraiser
fees, auditor fees and costs, and title insurance premiums paid or incurred by
Bank in connection with Bank's transactions with Borrower; costs and expenses
incurred by Bank in collecting the Accounts (with or without suit) to correct
any default or enforce any provision of this Agreement, or in gaining possession
of, maintaining, handling, preserving, storing, shipping, selling, disposing of,
preparing for sale and/or advertising to sell the Collateral, whether or not a
sale is consummated; costs and expenses of suit incurred by Bank in enforcing or
defending this Agreement or any portion hereof, including, but not limited to,
expenses incurred by Bank in attempting to obtain relief from any stay,
restraining order, injunction or similar process which prohibits Bank from
exercising any of its rights or
remedies; and reasonable attorneys' fees and expenses
incurred by Bank in advising, structuring, drafting, reviewing, amending,
terminating, enforcing, defending or concerning this Agreement, or any portion
hereof or any agreement related hereto, whether or not suit is brought. Bank
Expenses shall include Bank's in-house legal charges at reasonable rates.

	"Base Rate" shall mean that variable rate of interest
so announced by Bank at its headquarters office in San Jose, California as its
"Base Rate" from time to time and which serves as the basis upon which effective
rates of interest are calculated for those loans making reference thereto.

	"Borrower's Books" shall mean and includes all of
Borrower's books and records including but not limited to minute books; ledgers;
records indicating, summarizing or evidencing Borrower's assets (including,
without limitation, the Accounts) liabilities, business operations or financial
condition, and all information relating thereto, computer programs; computer
disc or tape files; computer printouts; computer runs; and other computer
prepared information and equipment of any kind.

	"Borrowing Base" shall mean the sum of: (1) Eighty
percent (80.00%) of the net amount of Eligible Accounts after deducting
therefrom all payments, adjustments and credits applicable thereto; and (2) the
amount, if any, of the advances against inventory agreed to be made pursuant to
any Inventory Rider, or other rider, amendment or modification to this
Agreement, that may now or hereafter be entered into by Bank and Borrower.

	"Cash Flow" shall mean, for any applicable period of
determination, the Net Income (after deduction for income taxes and other taxes
of such Person, or its subsidiaries, determined by reference to income or
profits of such Person, or its subsidiaries) for such period, plus, to the
extent deducted in computation of such Net Income, the amount of depreciation
and amortization expense and the amount of deferred tax liability during such
period, all as determined in accordance with GAAP.

	"Cash Flow Coverage Ratio" shall mean the ratio, as of
any applicable period of determination, the numerator of which is Net Income
plus depreciation plus amortization plus (or minus) the increase (or decrease)
in the deferred taxability minus dividends and, to the extent that and so long
as Borrower is an entity that is not directly subject to Federal Income taxation
with respect to which any earnings are attributable ratably to each Person with
an ownership interest in Borrower, minus any distributions to each such Person
in an amount necessary to pay each such Person's income tax resulting from such
ownership interest, at the greater of actual draws or net income times the
highest prevailing personal tax rate, and the denominator of which is the
current portion of long term debt plus the current portion of capital lease
payments for the same period of determination.

	"Collateral" shall mean and includes all personal
property of Borrower, including without limitation each and all of the
following: the Accounts; the Inventory; the General Intangibles; the Negotiable
Collateral; Borrower's Books; all Borrower's deposit accounts; all Borrower's
investment property (including without limitation securities and securities
entitlements); all goods, instruments, documents, policies and certificates of
insurance, deposits, money or other personal property of Borrower in which Bank
receives a security interest and which now or later come into the possession,
custody or control of Bank; all Borrower's equipment and fixtures; all
additions, accessions, attachments, parts, replacements, substitutions,
renewals, interest, dividends, distributions or rights of any kind for or with
respect to any of the foregoing (including without limitation any stock splits,
stock rights, voting rights and preferential rights); any supporting obligations
for any of the foregoing (including without limitation any stock splits, stock
rights, voting rights and preferential rights); any supporting obligations for
any of the foregoing; and the products and proceeds of any of the foregoing,
including, but not limited to, proceeds of insurance covering the Collateral,
and any and all Accounts, General Intangibles, Negotiable Collateral, inventory,
equipment, money, deposit accounts, investment property, equipment, fixtures or
other tangible and intangible property of Borrower resulting from the sale or
other disposition of the Collateral and the proceeds thereof and any supporting
obligations or security therefor and any right to payment thereunder, and
including, without limitation, cash or other property which were proceeds and
are recovered by a bankruptcy trustee or otherwise as a preferential transfer by
Borrower. Notwithstanding anything to the contrary contained herein, Collateral
shall not include any waste of other materials which have been or may be
designated as toxic or hazardous by Bank.

	"Credit" shall mean all indebtedness, except that
indebtedness arising pursuant to any other separate contract, instrument, note
or other separate agreement which, by its terms, provides for a specified
interest rate and term.

	"Credit Limit" shall mean Four Million and
no/100 Dollars ($4,000,000.00).

	"Current Assets" shall mean, in respect of a Person
and as of any applicable date of determination; all (a) unrestricted cash,
marketable securities, or certificates of deposit; (b) non-affiliated accounts
receivable; (c) United States government securities; (d) claims against the
United States government; and (e) inventories (held for sale in the ordinary
course of business) of such Person.

	"Current Liabilities" shall mean, in respect of a
Person and as of any applicable date of determination, (a) all liabilities of
such Person that should be classified as current in accordance with GAAP,
including without limitation, any portion of the principal of the indebtedness
under this Agreement classified as current, plus (b) to the extent not otherwise
included, all liabilities of Borrower to any of its affiliates (including
officers, directors, shareholders, subsidiaries and commonly held companies)
whether or not classified as current in accordance with GAAP.

	"Daily Balance" shall mean the amount determined by
taking the amount of the Credit owed at the beginning of a given day, adding any
new Credit advanced or incurred on such date, and subtracting any payments or
collections which are deemed to be paid and are applied by Bank in reduction of
the Credit on that date under the provisions of this Agreement.

	"Debt" shall mean, as of any applicable date of
determination, all items of indebtedness, obligation or liability of a Person,
whether matured or unmatured, liquidated or unliquidated, direct or indirect,
absolute or contingent, joint or several, that should be classified as
liabilities in accordance with GAAP. In the case of Borrower, the terms "Debt"
shall include, without limitation, the indebtedness.

	"Debt-to-Worth Ratio" shall mean, in respect of a
Person and as of any applicable date of determination, the ratio of (a) the
total Debt of such Person at such time, to (b) the Tangible Effective Net Worth
of such Person at such time.

	"Eligible Accounts" shall mean and includes those
Accounts of Borrower which are due and payable within sixty (60) days, or
less, from the date of invoice, have been validly assigned to Bank and strictly
comply with all of Borrower's warranties and representations to Bank; but
Eligible Accounts shall not include the following: (a) Accounts with respect to
which the account debtor is an officer, employee, partner, joint venturer or
agent of Borrower; (b) Accounts with respect to which goods are placed on
consignment, guaranteed sale or other terms by reason of which the payment by
the account debtor may be conditional; (c) Accounts with respect to which the
account debtor is not a resident of the United States; (d) Accounts with respect
to which the account debtor is the United States or any department, agency or
instrumentality of the United States; (e) Accounts with respect to which the
account debtor is any State of the United States or any city, county, town,
municipality or division thereof; (f) Accounts with respect to which the account
debtor is a subsidiary of, related to, affiliated or has common shareholders,
officers or directors with Borrower; (g) Accounts with respect to which Borrower
is or may become liable to the account debtor for goods sold or services
rendered by the account debtor to Borrower; (h) Accounts not paid by an account
debtor within ninety (90) days from the date of the invoice; (i) Accounts
with respect to which account debtors dispute liability or make any claim, or
have any defense, crossclaim, counterclaim, or offset; (j) Accounts with respect
to which any insolvency Proceeding is foiled by or against the account debtor,
or if an account debtor becomes insolvent, fails or goes out of business; (k)
Accounts owed by any single account debtor which exceed twenty percent (20%) of
all of the eligible Accounts; and (l) Accounts with a particular account debtor
on which over twenty-five percent (25%) of the aggregate amount owing is greater
than ninety (90) days from the date of the invoice.

	"Event of Default" shall mean one or more of those events
described in Section 7 contained herein below.

	"GAAP" shall mean, as of any applicable period,
generally accepted accounting principles in effect during such period.

	"General Intangibles" shall mean and includes all of
Borrower's present and future general intangibles and other personal property
(including without limitation all payment intangibles, electronic chattel paper,
contract rights, rights arising under common law, statutes, or regulations,
choses or things in action), goodwill, patents, trade names, trademarks,
servicemarks, copyrights, blueprints, drawings, plans, diagrams, schematics,
purchase orders, customer lists, monies due or recoverable from pension funds,
route lists, rights to payment (including without limitation, rights to payment
evidenced by chattel paper, documents or instruments) and other rights under any
royalty or licensing agreements, infringement claims, software (including
without limitation any computer program that is embedded in goods that consist
solely of the medium in which the program is embedded), information contained on
computer discs or tapes, literature, reports, catalogs, insurance premium
rebates, tax refunds, and tax refund claims, other than goods, Accounts,
Inventory, Negotiable Collateral, and Borrower's Books.

	"Indebtedness" shall mean and includes any and all loans,
advances, Letter of Credit Obligations, overdrafts, debts, liabilities
(including, without limitation, any and all amounts charged to Borrower's loan
account pursuant to any agreement authorizing Bank to charge Borrower's loan
account), obligations, lease payments, guaranties, covenants and duties owing by
Borrower to Bank of any kind and description whether advanced pursuant to or
evidenced by this Agreement; by any note or other instrument; or by any other
agreement between Bank and Borrower and whether or not for the payment of money,
whether direct or indirect, absolute or contingent, due or to become due now
existing or hereafter arising, including, without limitation, any interest,
fees, expenses, costs and other amounts owed to Bank that but for the provisions
of the United States Bankruptcy Code would have accrued after the commencement
of any Insolvency Proceeding, and including, without limitation, any debt,
liability or obligations owing from Borrower to others which Bank may have
obtained by assignment, participation, purchase or otherwise, and further
including, without limitation, all interest not paid when due and all Bank
Expenses which Borrower is required to pay or reimburse by this Agreement, by
law, or otherwise.

	"Insolvency Proceeding" shall mean and includes any
proceeding or case commenced by or against Borrower, or any guarantor of
Borrower's indebtedness, or any of Borrower's account debtors, under any
provisions of the United States Bankruptcy Code, as amended, or any other
bankruptcy or insolvency law, including, but not limited to assignments for the
benefit of creditors, formal or informal moratoriums, composition or extensions
with some of all creditors, any proceeding seeking a reorganization, arrangement
or any other relief under the United States Bankruptcy Code, as amended, or any
other bankruptcy or insolvency law.

	"Inventory" shall mean and includes all present and
future inventory in which Borrower has any interest, including, but not limited
to goods held by Borrower for sale or lease or to be furnished under a contract
of service and all of Borrower's present and future raw materials, work in
process, finished goods (including without limitation any computer program
embedded in any of the foregoing goods and any supporting information provided
in connection therewith that (i) is associated with the goods in such a manner
that the program customarily is considered part of the goods or that (ii) by
becoming the owner of the goods, a person acquires a right to use the program in
connection with the goods), together with any advertising materials and packing
and shipping materials, wherever located and any documents of title representing
any of the above, and any equipment, fixtures or other property used in the
storing, moving, preserving, identifying, accounting for and shipping or
preparing for shipping of inventory, and any and all other items hereafter
acquired by Borrower by way of substitution, replacement, return, repossession
or otherwise, and all additions and accessions thereto, and the resulting
product or mass, and any documents of title respecting any of the
above.

	"Letter of Credit Obligations" shall mean, as of any
applicable date of determination, the sum of the undrawn amount of any letter(s)
of credit issued by Bank upon the application of and/or for the account of
Borrower, plus any unpaid reimbursement obligations owing by Borrower to Bank in
respect of any such letter(s) of credit.

	"Net Income" shall mean the net income (or loss) of a
person for any period of determination, determined in accordance with GAAO but
excluding in any event:

	Any gains or losses on the sale or other disposition, not
in the ordinary course of business, of investments or fixed or capital assets,
and any taxes on the excluded gains and any tax deductions or credits on account
on any excluded losses; and

	In the case of Borrower, net earnings of any Person in
such Borrower has an ownership interest, unless such net earning shall have
actually been received by Borrower in the form of cash
distributions.

	"Negotiable Collateral" shall mean and include all of
Borrower's present and future letters of credit, advises of credit, letter-of-
credit rights, certificates of deposit, notes, drafts, money, documents
(including without limitation all negotiable documents), instruments (including
without limitation all promissory notes), tangible chattel paper or any other
similar property.

	"Judicial Officer or Assignee" shall mean and include any
trustee, receiver, controller, custodian, assignee for the benefit of creditors
or any other person or entity having powers or duties like or similar to the
powers and duties of trustee, receiver, controller, custodian or assignee for
the benefit of creditors.

	"Person" or "person" shall mean and includes any
individual, corporation, partnership, joint venture, firm, association, trust,
unincorporated association, trust, joint stock company, government,
municipality, political subdivision or agency or other entity.

	"Quick Assets" shall mean, as of any applicable date of
determination, unrestricted cash, certificates of deposit or marketable
securities and net accounts receivable arising from the sale of goods and
services, and United States government securities and/or claims against the
United States government of Borrower and its subsidiaries.

	"Subordinated Debt" shall mean indebtedness of the
Borrower to third parties which has been subordinated to the indebtedness
pursuant to a subordination agreement in form and content satisfactory to
Bank.

	"Subordination Agreement" shall mean a subordination
agreement in form satisfactory to Bank making all present and future
indebtedness of Borrower to _________NA_____________ subordinate to the
indebtedness.

	"Tangible Effective Net Worth" shall mean, with respect
to any person and as of any applicable date of determination, Tangible Net Worth
plus Subordinated Debt.

	"Tangible Net Worth" shall mean, with respect to any
Person and as of any applicable date of determination, the excess
of:

	the net book value of all assets of such Person
(excluding affiliate receivables, patents, patent rights, trademarks, trade
names, franchises, copyrights, licenses, goodwill, and all other intangible
assets of such Person) after all appropriate deductions in accordance with GAAP
(including, without limitation, reserves for doubtful receivables, obsolescence,
depreciation and amortization), over

	all Debt of such Person at such time.

	"Working Capital" shall mean, as of any applicable date
of determination, Current Assets less Current Liabilities.

Any and all terms used in the foregoing definitions and
elsewhere in this Agreement shall be construed and defined in accordance with
the meaning and definition of such terms under and pursuant to the California
Uniform Commercial code (hereinafter referred to as the "Uniform Commercial
Code") as amended, revised or replaced from time to time. Notwithstanding the
foregoing, the parties intend that the terms used herein, which are defined in
the Uniform Commercial Code, have, at all times, the broadest and most inclusive
meanings possible. Accordingly, if the Uniform Commercial Code shall in the
future be amended or held by a court to define any term used herein more broadly
or inclusively, then the Uniform Commercial Code in effect on the date of this
Agreement,
then such term, as used herein, shall be given such broadened
meaning. If the Uniform Commercial Code shall in the future be amended or held
by a court to define any term used herein more narrowly, or less inclusively,
than the Uniform Commercial Code in effect on the date of this agreement, such
amendment or holding shall be disregarded in defining terms used in this
Agreement.

	LOANS AND TERMS OF PAYMENT

For value received, Borrower promises to pay to the
order of Bank such amount, as provided for below, together with interest, as
provided for below.

	Upon the request of Borrower, made at any time and from
time to time during the term hereof, and so long as no Event of Default has
occurred, Bank shall lend to Borrower an amount equal to the Borrowing Base;
provided, however, that the Daily Balance shall not exceed the lesser of
either the Credit Limit or the Borrowing Base, minus all Letter of Credit
Obligations; and provided further, that Bank, in its sole discretion, may
permit advances of up to _________NA__________ Dollars ($
____NA____) regardless of the Borrowing Base. If at any time for any
reason, the amount of indebtedness owed by Borrower to Bank pursuant to this
Section 2.1 and Section 2.3 of this Agreement is greater than the aggregate
amount available to be drawn under this section 2.1, Borrower shall immediately
pay to Bank, in cash, the amount of such excess.

	Except as herein below provided, the Credit shall bear
interest, on the Daily Balance owing, at a fluctuating rate of interest equal to
the Base Rate plus 50/100 (0.500%) percentage points per annum.
All interest chargeable under this Agreement that is based upon a per annum
calculation shall be computed on the basis of a three hundred sixty (360) day
year for actual days elapsed. The Base Rate as of the date of this Agreement is
four and 75/100 (4.750%) per annum. In the event that the Base Rate
announced is, from time to time hereafter, changed, adjustment in the Base Rate
shall be made and based on the Base Rate in effect on the date of such change.
The Base Rate, as adjusted, shall apply to the Credit until the Base Rate is
adjusted again. The minimum interest payable by Borrower under this Agreement
shall in no event be less than _____NA______ per month.

All interest payable by Borrower under the Credit shall be
due and payable on the first day of each calendar month during the term of this
Agreement. A late payment charge equal to five percent (5%) of each late payment
may be charged on any payment not received by Bank within ten (10) calendar days
after the payment due date, but acceptance of payment of this charge shall not
waive any Event of Default under this Agreement. Upon the occurrence of an Event
of Default hereunder, and without constituting a waiver of any such Event of
Default, then during the continuation thereof, at Bank's option, the Credit
shall bear interest, on the Daily Balance owing, at a rate equal to three
percent (3%) per year in excess of the rate applicable immediately prior to the
occurrence of the Event of Default, and such rate of interest shall fluctuate
thereafter from time to 

time at the same time and in the same amount as any
fluctuation in the rate of interest applicable immediately prior to any such
occurrence.

	Subject to the terms and conditions of this Agreement,
Bank agrees to issue or cause to be issued letters of credit for the account of
Borrower during the terms of this agreement in the aggregate outstanding face
amount not to exceed (i) the lesser of the Credit Limit or the Borrowing Base,
minus (ii) the then outstanding Daily Balance, provided that the
Letter of Credit Obligations shall not in any case exceed One Million Two
Hundred Fifty Thousand and no/`00 Dollars ($1,250,000.00). All letters of
credit shall be, in form and substance, acceptable to Bank in its sole
discretion and shall be subject to the terms and conditions of Bank's form of
standard Letter of Credit Application and Agreement.

The obligation of Borrower to immediately reimburse Bank for
drawings made under letters of credit shall be absolute, unconditional and
irrevocable in accordance with the terms of this Agreement and the Letter of
Credit Application and Agreement with respect to each such letter of credit.
Borrower shall indemnify, defend, protect and hold Bank harmless from any loss,
cost, expense, or liability, including, without limitation, reasonable
attorney's fees incurred by Bank, whether in-house or outside counsel is used,
arising out of or in connection with any letters of credit.

	TERMS.

	This Agreement shall remain in full force and effect
until:

_X_Terminated by notice, by either party.
Notice of such termination shall be effectuated by mailing of a registered or
certified letter not less than thirty (30) days prior to the effective date of
such termination, addressed to the other party at the address set forth herein
and the termination shall be effective as of the date so fixed in such
notice.

______________________, unless earlier terminated by
notice by Borrower. Notice of such termination by Borrower shall be effectuated
by mailing of a registered or certified letter not less than thirty (30) days
prior to the effective date of such termination, addressed to Bank at the
address set forth herein and the termination shall be effective as of the date
so fixed in such notice.

Notwithstanding the foregoing, should Borrower be in default
of one or more of the provisions of this Agreement, Bank may terminate this
Agreement at any time without notice. Notwithstanding the foregoing, should
either Bank of Borrower become insolvent or unable to meet its debts as they
mature, or fail, suspend, or go out of business, the other party shall have the
right to terminate this Agreement at any time without notice. On the date of
termination all indebtedness shall become immediately due and payable without
notice or demand; no notice of 

termination by Borrower shall be effective until Borrower
shall have paid all 

indebtedness to Bank in full. Notwithstanding termination,
until all indebtedness has been fully satisfied, Bank shall retain its security
interest in all existing Collateral and Collateral arising thereafter, and
Borrower shall continue to perform all of its obligations.

	After termination and when Bank has received payment in
full of Borrower's indebtedness to Bank, Bank shall reassign to Borrower all
Collateral held by Bank, and shall execute a termination of all security
agreements and security interests given by Borrower to Bank.

	CREATION OF SECURITY INTEREST

	Borrower hereby grants to Bank a continuing
security interest in all presently existing and hereafter arising Collateral in
order to secure prompt repayment of any and all indebtedness owed by Borrower to
Bank and in order to secure prompt performance by Borrower of each and all of
its covenants and obligations under this Agreement and otherwise created. Bank's
security interest in the Collateral shall attach to all Collateral without
further act on the part of Bank or Borrower. In the event that any Collateral,
including proceeds, is evidenced by or consists of Negotiable Collateral,
Borrower, immediately upon the request of Bank, shall (a) endorse or assign such
Negotiable Collateral to Bank, (b) deliver actual physical possession of such
Negotiable Collateral to Bank, and (c) mark conspicuously all of its records
pertaining to such Negotiable Collateral with a legend, in form and substance
satisfactory to Bank (and in the case of Negotiable Collateral consisting of
tangible chattel paper, immediately mark all such tangible chattel paper with a
conspicuous legend in form and substance satisfactory to Bank), indicating that
the Negotiable Collateral is subject to the security interest granted to Bank
hereunder.

	Bank's security interest in the Accounts shall attach to
all Accounts without further act on the part of Bank or Borrower. Upon request
from Bank, Borrower shall provide Bank with schedules describing all Accounts
created or acquired by Borrower (including without limitation agings listing the
names and addresses of and amounts owing by date by account debtors), and shall
execute and deliver written assignments of all Accounts to Bank all in a form
acceptable to Bank; provided, however, Borrower's failure to execute and
deliver such schedules and/or assignments shall not affect or limit Bank's
security interest and other rights in and to the Accounts. Together with each
schedule, delivery receipts for all merchandise sold, and Borrower warrants the
genuineness thereof. Upon the occurrence of an Event of Default, Bank or Bank's
designee may notify customers or account debtors of Bank's security int4rest in
the Collateral and direct such customers of account debtors to make payments
directly to Bank, but unless and until Bank does so or gives Borrower other
written instructions, Borrower shall collect all Accounts for Bank, receive in
trust all payments thereon as Bank's trustee, and, if so requested to do so from
Bank, Borrower shall immediately deliver said payments to Bank in their original
form as received from the account debtor and all letters of credit, advices of
credit, instruments, documents, chattel paper or any similar property evidencing
or constituting Collateral. Notwithstanding anything to the contrary contained
herein, if sales of inventory are made for cash, Borrower shall immediately
deliver to Bank, in identical form, all such cash, checks, or other forms of
payment which Borrower receives. The receipt of any check or other item of
payment by Bank shall not be considered a payment on account until such check or
other item of payment is honored when presented for payment, in which event,
said check or other item of payment shall be deemed to have been paid to Bank
two (2) calendar days after the date Bank actually receives such check or other
item of payment 

	Bank's security interest in inventory shall attach to
all inventory without further act on the part of Bank or Borrower. Borrower will
at Borrower's expense pledge, assemble and deliver such inventory to Bank or to
a third party as Bank's bailee; or hold the same in trust for Bank's account or
store the same in a warehouse in Bank's name; or deliver to Bank documents of
title representing said inventory; or evidence of Bank's security interest in
some other manner acceptable to Bank. Until a default by Borrower under this
Agreement or any other Agreement between Borrower and Bank, Borrower may,
subject to the provisions hereof and consistent herewith, sell the inventory,
but only in the ordinary course of Borrower's business. A sale of inventory in
Borrower's ordinary course of business does not include an exchange or a
transfer in partial or total satisfaction of a debt owing by Borrower.

	Concurrently with Borrower's execution of this Agreement,
and at any time or times hereafter at the request of Bank, Borrower shall (a)
execute and deliver to Bank security agreements, mortgages, assignments,
certificates of title, affidavits, reports, notices, schedules of accounts,
letters of authority and all other documents that Bank may reasonably request,
in form, satisfactory to Bank, to perfect and maintain perfected Bank's security
interest in the Collateral and in order to fully consummate all of the
transactions contemplated under this Agreement, (b) cooperate with Bank in
obtaining a control agreement in form and substance satisfactory to Bank with
respect to all deposit accounts, electronic chattel paper, investment property,
and letter-of-credit rights, and (c) in the event that any Collateral is in the
possession of a third party, Borrower shall join with Bank in notifying such
third party of Bank's security interest and obtaining an acknowledgment from
such third party that it is holding such Collateral for the benefit of Bank. By
authenticating or becoming bound by this Agreement, Borrower authorizes the
filing of initial financing statement(s), and any amendment(s) covering the
Collateral to perfect and maintain perfected Bank's security interest in the
collateral. Upon the occurrence of an Event of Default, Borrower hereby
irrevocably makes, constitutes and appoints Bank (and any of Bank's officers,
employees or agents designated by Bank) as Borrower's true and lawful attorney-in-fact with
power to sign the name of Borrower on any security agreement,
mortgage, assignment, certificate of title, affidavit, letter of authority,
notice of other similar documents which must be executed and/or filed in order
to perfect or continue perfected Bank's security interest in the collateral, and
to take such actions in its own name or in Borrower's name as Bank, in its sole
discretion, deems necessary or appropriate to establish exclusive possession or
control (as defined in the Uniform Commercial Code) over any Collateral of such
nature that perfection of Bank's security interest may be accomplished by
possession or control.

	Borrower shall make appropriate entries in Borrower's
Books disclosing Bank's security interest in the Accounts. Bank (through any of
its officers, employees or agents) shall have the right at any time or times
hereafter, provided that reasonable notice is provided, during Borrower's usual
business hours, or during the usual business hours of any third party having
control over the records of Borrower, to inspect and verify Borrower's Books in
order to verify the amount or condition of, or any other matter, relating to,
said Collateral and Borrower's financial condition.

	Effective only upon the occurrence of an Event of
Default, Borrower appoints Bank or any other person whom Bank may designate as
Borrower's attorney-in-fact, with power: to endorse Borrower's name on any
checks, notes, acceptances, money order, drafts or other forms of payment or
security that may come into Bank's possession; to sign Borrower's name on any
invoice or bill of lading relating to any Accounts, on drafts against account
debtors, on schedules and assignments of Accounts, on verifications of Accounts
and on notices to account debtors; to establish a lock box arrangement and/or to
notify the post office authorities to change the address for delivery of
Borrower's mail addressed to Borrower to an address designated by Bank, to
receive and open all mail addressed to Borrower, and to retain all mail relating
to the Collateral and forward all other mail to Borrower; to send, whether in
writing or by telephone, requests for verification of Accounts; and to do all
things necessary to carry out this Agreement. Borrower ratifies and approves all
acts of the attorney-in-fact. Neither Bank nor its attorney-in-fact will be
liable for any acts or omissions or for any error of judgement or mistakes of
fact or law. This power being coupled with an interest, is irrevocable so long
as any Accounts in which Bank has a security interest remain unpaid and until
the indebtedness has been fully satisfied.

	In order to protect or perfect any security interest
which Bank is granted hereunder, Bank may, in its sole discretion, discharge any
lien or encumbrance or bond the same, pay any insurance, maintain guards,
warehousemen, or any personnel to protect the collateral, pay any service
bureau, or obtain any records and all costs for the same shall be added to the
indebtedness and shall be payable on demand.

	Borrower agrees that Bank may provide information
relating to this Agreement or relating to Borrower to Bank's parent, affiliates,
subsidiaries and service providers.

	CONDITIONS PRECEDENT.

	As conditions precedent to the making of the loans and
the extension of the financial accommodations hereunder, Borrower shall execute,
or cause to be executed, and deliver to Bank, in form and substance satisfactory
to Bank and its counsel, the following:

	This agreement and other documents, instruments and
agreements required by Bank;

	If Borrower is a corporation, limited liability company,
limited partnership or other such entity, certified copies of all actions taken
by Borrower, any grantor of a security interest to Bank to secure the
indebtedness, and any guarantor of the indebtedness, authorizing the execution,
delivery and performance of this Agreement and any other documents, instruments
or agreements entered into in connection herewith, and authorizing specific
officers to execute and deliver any such documents, instruments and
agreements;

	If Borrower is a corporation, limited liability company,
limited partnership or other such entity, then a certificate of good standing
showing that Borrower is in good standing under the laws of the state of its
incorporation or formation and certificates indicating that Borrower is
qualified to transact business and is in good standing in any other state in
which it conducts business;

	If Borrower is a partnership, then a copy of borrower's
partnership agreement certified by each general partner of Borrower;

	UCC searches and financing statements, tax lien and
litigation searches, fictitious business statement filings, insurance
certificates, notices or other similar documents which Bank may require and in
such form as Bank may require, in order to reflect, perfect or protect Bank's
first priority security interest in the Collateral and in order to fully
consummate all of the transactions contemplated under this Agreement.

	Evidence that Borrower has obtained insurance and
acceptable endorsements;

	Such control agreements from each Person as Bank may
require;

	Duly executed certificates of title with respect to that
portion of the collateral that is subject to certificates of title;

	Such collateral access agreements from each lessor,
warehouseman, bailee, and other Person as Bank may require, duly executed by
each such Person; and

	Warranties and representations of officers.

	WARRANTIES, REPRESENTATIONS AND
COVENANTS.

	If so requested by Bank, Borrower shall, at such
intervals designated by Bank, during the term hereof execute and deliver a
Report of Accounts Receivable or similar report, in form customarily used by
Bank. The aggregate amount of the Borrowing Base at all times during the
effectiveness of this Agreement shall not be less than the advances made
hereunder. Bank shall have the right to recompute the Borrowing Base in
conformity with this Agreement.

	If any warranty is breached as to any Account, or any
Account is not paid in full by an account debtor within ninety (90) days
from the date of invoice, or an account debtor disputes liability or makes any
claim with respect thereto, or a petition in bankruptcy or other application for
relief under the Bankruptcy Code or any other insolvency law is filed by or
against an account debtor, or an account debtor makes an assignment for the
benefit of creditors, becomes insolvent, fails or goes out of business, then
Bank may deem ineligible any and all security interest in all Accounts, whether
eligible or ineligible, until all indebtedness has been fully paid and
satisfied. Returns and allowances, if any, as between Borrower and its
customers, will be on the same basis and in accordance with the usual customary
practices of Borrower, as they exist at this time. Any merchandise which is
returned by an account debtor or otherwise recovered shall be set aside, marked
with Bank's name, and Bank shall retain a security interest therein. Borrower
shall promptly notify Bank of all disputes and claims and settle or adjust them
on terms approved by Bank. After default by Borrower hereunder, no discount,
credit or allowance shall be granted to any account debtor by Borrower and no
return of merchandise shall be accepted by Borrower without Bank's consent. Bank
may, after default by Borrower, settle or adjust disputes and claims directly
with account debtors for amounts and upon terms which Bank considers advisable,
and in such cases Bank will credit Borrower's loan account with only the net
amounts received by Bank in payment of the Accounts, after deducting all Bank
Expenses in connection therewith.

	Borrower warrants, represents, covenants and agrees
that:

	Borrower has good and marketable title to the Collateral.
Bank has and shall continue to have a first priority perfected security interest
in and to the Collateral. The Collateral shall at all times remain free and
clear of all liens, encumbrances and security interests (except those in favor
of Bank);

	All Accounts are and will, at all times pertinent hereto,
be bona fide existing obligations created by the sale and delivery of
merchandise or the rendition of services to account debtors in the ordinary
course of business, free of liens, claims, encumbrances and security interests
(except as held by Bank and except as may be consented to, in writing, by Bank)
and are unconditionally owed to Borrower without defenses, disputes, offsets,
counterclaims, rights of return or cancellation, and Borrower shall have
received no notice of actual or imminent bankruptcy or insolvency of any account
debtor at the time an Account due from such account debtor is assigned to Bank;
and

	At the time each Account is assigned to Bank, all
property giving rise to such Account shall have been delivered to the account
debtor or to the agent for the account debtor for immediate shipment to, and
unconditional acceptance by, the account debtor. Borrower shall deliver to Bank,
as Bank may from time to time require, delivery receipts, customer's purchase
orders, shipping instructions, bill of lading and any other evidence of shipping
arrangements. Absent such a request by Bank, copies of all such documentation
shall be held by Borrower as custodian for Bank.

	At the time each eligible Account is assigned to Bank,
all such eligible Accounts will be due and payable on terms set forth in Section
1.17, or on such other terms approved in writing by Bank in advance of the
creation of such Accounts and which are expressly set forth on the face of all
invoices, copies of which shall be held by Borrower as custodian for Bank, and
no such Eligible Account will then be past due.

	Borrower shall keep the inventory only at the following
locations: 3240 Whipple road, Union City, CA, and the owner or mortgages
of the respective locations are Crossroads Technology Partners, Nearon
Crossroads, LLC.

	Borrower, immediately upon demand by Bank therefor, shall
now and from time to time hereafter, at such intervals as are reasonably
requested by Bank, deliver to Bank, designations of inventory specifying
Borrower's cost of inventory, the wholesale market value thereof and such other
matters and information relating to the inventory as Bank may request.

	Borrower's inventory, valued at the lower of Borrower's
cost or the wholesale market value thereof, at all times pertinent hereto shall
not be less than ____________N/A__________ Dollars ($____NA____)
of which no less than _____NA_____ Dollars ($____NA____) shall be
in raw materials and finished goods;

	All of the inventory is and shall remain free from all
purchase money or other security interests, liens or encumbrances, except as
held by Bank;

	Borrower does now keep and hereafter at all times shall
keep correct and accurate records itemizing and describing the kind, type,
quality and quantity of the inventory, its cost therefor and selling price
thereof, and the daily withdrawals therefrom and additions thereto, all of which
records shall be available upon demand to any of Bank's officers, agents and
employees for inspection and copying;

	All inventory, now and hereafter at all times, shall be
new inventory of good and merchantable quality free from material
defects;

	Inventory is not now and shall not at any time or times
hereafter be located or stored with a bailee, warehouseman or other third party
without Bank's prior written consent, and, in such event, Borrower will
concurrently therewith cause any such bailee, warehouseman or other third party
to issue and deliver to Bank, warehouse receipts in Bank's name evidencing the
storage of inventory and/or an acknowledgment by such bailee of Bank's prior
rights in the inventory. In each case in form and substance acceptable to Bank.
In any event, Borrower shall instruct any third party to hold all such inventory
for Bank's account subject to Bank's security interests and its instructions;
and

	Bank shall have the right upon demand now and/or at all
times hereafter, during Borrower's usual business hours, after reasonable
notice, to inspect and examine the inventory and to check and test the same as
to quality, quantity, value and condition and Borrower agrees to reimburse Bank
for Bank's reasonable costs and expenses in so doing.

	Borrower represents, warrants and covenants with Bank
that Borrower will not, without Bank's prior written consent:

	Grant a security interest in or permit a lien, claim or
encumbrance upon any of the Collateral to any person, association, firm,
corporation, entity of governmental agency or instrumentality;

	Permit any levy, attachment or restraint to be made
affecting any of Borrower's assets;

	Permit any Judicial Officer or Assignee to be appointed
or to take possession of any or all of Borrower's assets;

	Other than sales of inventory in the ordinary course of
Borrower's business, to sell, lease, or otherwise dispose of, move, or transfer,
whether by sale or otherwise, any of Borrower's assets;

	Change its name, the location of its sole place of
business, chief executive office or residence, business structure, corporate
identity or structure, form of organization or the state in which it has been
formed or organized; add any new fictitious names, liquidate, merge or
consolidate with or into any other business organization.

	Move or relocate any Collateral;

	Acquire any other business organization;

	Enter into any transaction not in the usual course of
Borrower's business;

	Make any change in Borrower's financial structure or in
any of its business objectives, purposes or operations which would materially
adversely affect the ability of Borrower to repay Borrower's
indebtedness;

	Incur any debts outside the ordinary course of Borrower's
business except renewals or extensions of existing debts and interest
thereon;

	Make loans, advances or extensions of credit to any
Person, except in the ordinary course of business;

	Guarantee or otherwise, directly or indirectly, in any
way be or become responsible for obligations of any other Person, whether by
agreement to purchase the indebtedness of any other Person, agreement for the
furnishing of funds to any other Person through the furnishing of goods,
supplies or services, by way of stock purchase, capital contribution, advance or
loan for the purpose of paying or discharging (or causing the payment or
discharge of) the indebtedness of any other Person, or otherwise, except for the
endorsement of negotiable instruments by Borrower in the ordinary course of
business for deposit or collection;

	Make any payment on account of any Subordinated Debt
except for regularly scheduled payments of interest and principal in accordance
with the provisions of any Subordination Agreement executed by Bank and the
subordinated debt holder, or amend any provision contained in any documentation
relating to any such Subordinated Debt without Bank's prior written
consent.

	(a) Sell, lease transfer or otherwise dispose of
properties and assets having an aggregate book value of more than
___________NA_______________ Dollars ($
________________NA_______) (whether in one transaction or in a series
of transactions) except as to the sale of inventory in the ordinary course of
business; (b) change its name, consolidate with or merge into any other
corporation, permit another corporation to merge into it, acquire all or
substantially all the properties or assets of any other Person, enter into any
reorganization or recapitalization or reclassify its capital stock, or (c) enter
into any sale-leaseback transaction;

	Purchase or hold beneficially any stock or other
securities of, or make any investment or acquire any securities or other
interest whatsoever in any other Person, except for the common stock of the
Subsidiaries owned by Borrower on the date of this Agreement and except for
certificates of deposit with maturities of one year or less of United States
commercial banks with capital, surplus and undivided profits in excess of One
Hundred Million Dollars ($100,000,000.00) and the securities or other direct
obligations of the United States Government maturing within one year from the
date of acquisition thereof; and

	Allow any fact, condition or event to occur or exist with
respect to any employee pension or profit sharing plans established or
maintained by it which might constitute grounds for termination of any such plan
or for the court appointment of a trustee to administer any such
plan

	Borrower is not a merchant whose sales for resale of
goods for personal, family or household purposes exceeded seventy-five percent
(75%) in dollar volume of its total sales of all goods during the twelve (12)
months preceding the filing by Bank of a financing statement describing the
Collateral. At no time hereafter shall Borrower's sales for resale goods for
personal, family or household purposes exceed seventy-five percent (75%) in
dollar volume of its total sales.

	Borrower represents, warrants, covenants and agrees
that:

	Borrower's true and correct legal name is that set forth
on the signature page to this Agreement. Except as disclosed in writing to Bank
on or before the date of this Agreement, Borrower has not done business under
any name other than that set forth on the signature page to this
Agreement;

	If Borrower is an individual, the location (as determined
pursuant to the Uniform Commercial Code) of Borrower's principal residence is
that set forth following Borrower's name on the signature page to this
Agreement;

	If Borrower is a registered organization that is
organized under the laws of any one of the states comprising the United States
(e.g. corporation, limited partnership, registered limited liability partnership
or limited liability company), and is located (as determined pursuant to the
Uniform Commercial Code) in the state under the laws of which it was organized,
Borrower's form of organization and the state in which it has been organized are
those set forth immediately following Borrower's name on the signature page to
this Agreement.

	If Borrower is a registered organization organized under
the laws of the United States, and Borrower is located in the state that United
States law designates as its location; or if United States law authorized
Borrower to designate the state for its location, the state designated by
Borrower, or if neither of the foregoing are applicable, at the District of
Columbia (in each case as determined in accordance with the Uniform Commercial
Code), Borrower's form of organization and the state or district in which it is
located are those set forth immediately following Borrower's name on the
signature page to this Agreement.

	If Borrower is a domestic organization that is not a
registered organization under the laws of the United States or any state thereof
(e.g. general partnership, joint venture, trust, estate or association), and
Borrower is located (as determined pursuant to the Uniform Commercial Code) at
its sole place of business or, if it has more than one place of business, at its
chief executive office. Borrower's form of organization and the address of that
location are those set forth on the signature page to this Agreement;
and

	If Borrower is a foreign individual or foreign
organization or a branch or agency of a bank that is not organized under the
laws of the United States or a state thereof, Borrower is located (as determined
pursuant to the Uniform Commercial Code) at the address set forth following
Borrower's name on the signature page to this Agreement.

	If Borrower is a corporation, Borrower represents,
warrants and covenants as follows:

	Borrower will not make any distribution or declare or pay
any dividend (in stock or in cash) to any shareholder or on any of its capital
stock, of any class, whether now or hereafter outstanding, or purchase, acquire,
repurchase, or redeem or retire any such capital stock; provided however,
so long as no Event of Default has or is continuing hereunder, to the extent
that and so long as Borrower is an entity that is not directly subject to
Federal Income taxation and with respect to which any earnings are attributable
ratably to each Person with an ownership interest in Borrower, Borrower may make
distributions to each Person in an amount necessary to pay each such Person's
income tax resulting from such ownership interest in Borrower, provided further
that promptly upon request of Bank, Borrower shall cause each such Person to
provide Bank with copies of its tax return to substantiate any such
distribution;

	Borrower is and shall at all times hereafter be a
corporation duly organized and existing in good standing under the laws of the
state of its incorporation and qualified and licensed to do business in
California or any other state in which it conducts its business;

	Borrower has the right and power and is duly authorized
to enter into this Agreement; and

	The execution by Borrower of this Agreement shall not
constitute a breach of any provision contained in Borrower's articles of
incorporation or by-laws.

	The execution of and performance by Borrower of all of
the terms and provisions contained in this Agreement shall not result in a
breach of or constitute an event of default under any agreement to which
Borrower is now or hereafter becomes a party.

	Borrower shall promptly notify Bank in writing of its
acquisition by purchase, lease or otherwise of any after acquired property of
the type included in the Collateral, with the exception of purchases of
inventory in the ordinary course of business.

	All assessments and taxes, whether real, personal or
otherwise, due or payable, by, or imposed, levied or assessed against, Borrower
or any of its property have been paid, and shall hereafter be paid in full,
before delinquency. Borrower shall make due and timely payment or deposit of all
federal, state and local taxes, assessments or contributions required of it by
law, and will execute and deliver to Bank, on demand, appropriate certificates
attesting to the payment or deposit thereof. Borrower will make timely payment
or deposit of all F.I.C.A payments and withholding taxes required of it by
applicable laws, and will upon request, furnish Bank with proof satisfactory to
it that Borrower has made such payments or deposit. If Borrower fails to pay any
such assessment, tax, contribution, or make such deposit, or furnish the
required proof, Bank may, in its sole and absolute discretion and without notice
to Borrower: (i) make payment of the same or any part thereof, or (ii) set up
such reserves in Borrower's loan account as Bank deems necessary to satisfy the
liability therefor, or both. Bank may conclusively rely on the usual statements
of the amount owing or other official statements issued by the appropriate
governmental agency. Each amount so paid or deposited by Bank shall constitute a
Bank Expense and an additional advance to Borrower.

	There are no actions or proceedings pending by or against
Borrower or any guarantor of Borrower before any court or administrative agency
and Borrower has no knowledge of any pending, threatened or imminent litigation,
governmental investigations or claims, complaints, actions or prosecutions
involving Borrower or any guarantor of Borrower, except as heretofore
specifically disclosed in writing to Bank. If any of the foregoing arise during
the terms of the Agreement, Borrower shall immediately notify Bank in
writing.

	Insurance.

	Borrower, at its expense, shall keep and maintain its
assets insured against loss or damage by fire, theft, explosion, sprinklers and
all other hazards and risks ordinarily insured against by other owners who use
such properties in similar businesses for the full insurable value thereof.
Borrower shall also keep and maintain business interruption insurance and public
liability and property damage insurance relating to Borrower's ownership and use
of the Collateral and its other assets. All such policies of insurance shall be
in such form with such companies, and in such amounts as may be satisfactory to
Bank. Borrower shall deliver to Bank certified copies of such policies of
insurance and evidence of the payments of all premiums therefor. All such
policies of insurance (except those of public liability and property damage)
shall contain an endorsement in a form satisfactory to Bank showing Bank as a
loss payee thereof, with a waiver of warranties satisfactory to Bank, and all
proceeds payable thereunder shall be payable to Bank and, upon receipt by Bank,
shall be applied on account of the indebtedness owing to Bank. To secure the
payment of the indebtedness, Borrower grants Bank a security interest in and to
all such policies of insurance (except those of public liability and property
damage) and the proceeds thereof, and Borrower shall direct all insurers under
such policies of insurance to pay all proceeds thereof directly to
Bank.

	Borrower hereby irrevocably appoints Bank (and any of
Bank's officers, employees or agents designated by Bank) as Borrower's attorney
for the purpose of making, selling and adjusting claims under such policies of
insurance, endorsing the name of Borrower on any check, draft, instrument or
other item of payment for the proceeds of such policies of insurance and for
making all determinations and decisions with respect to such policies of
insurance. Borrower will not cancel any of such policies without Bank's prior
written consent. Each such insurer shall agree by endorsement upon the policy or
policies of insurance issued by it to Borrower as required above, or by
independent instruments furnished to Bank, that it will give Bank at least ten
(10) days written notice before any such policy or policies of insurance shall
be altered or canceled, and that no act or default of Borrower, or any other
person, shall affect the right of Bank to recover under such policy or policies
of insurance required above or to pay any premium in whole or in part relating
thereto. Bank, without waiving or releasing any indebtedness or any Event of
Default, may, but shall have no obligation to do so, obtain and maintain such
policies of insurance and pay such premiums and take any other action with
respect to such policies which Bank deems advisable. All sums to disbursed by
Bank, as well as reasonable attorneys' fees incurred by Bank, whether in-house
or outside counsel is used, court costs, expenses and other charges relating
thereto, shall constitute Bank Expenses and are payable on demand.

	All financial statements and information relating to
Borrower which have been or may hereafter be delivered by Borrower to Bank are
true and correct and have been prepared in accordance with GAAP consistently
applied and there has been no material adverse change in the financial condition
of Borrower since the submission of such financial information to Bank.

	Financial Reporting.

	Borrower at all times hereafter shall maintain a standard
and modern system of accounting in accordance with GAAP consistently applied
with ledger and account cards and/or computer tapes and computer discs, computer
printouts and computer records pertaining to the Collateral which contain
information as may from time to time be requested by Bank, not modify or change
its method of accounting or enter into, modify or terminate any agreement
presently existing, or at any time hereafter entered into with any third party
accounting firm and/or service bureau for the preparation and/or storage of
Borrower's accounting records without the written consent of Bank first obtained
and without said accounting firm and/or service bureau agreeing to provide
information regarding the Accounts and inventory and Borrower's financial
condition to Bank; permit Bank and any of its employees, officers or agents,
upon demand, during Borrower's usual business hours, or the usual business hours
of third persons having control thereof, to have access to and examine all of
Borrower's Books relating to the Collateral, Borrower's indebtedness to Bank,
Borrower's financial condition and the results of Borrower's operations and in
connection therewith, permit Bank or any of its agents, employees or officers to
copy and make extracts therefrom.

	Borrower shall deliver to Bank within thirty (30) days
after the end of each quarter, a company prepared balance sheet
and profit and loss statement covering Borrower's operations and deliver to Bank
within one hundred twenty (120) days after the end of each of Borrower's fiscal
year an audited statement of the financial condition of Borrower for each
such fiscal year, including but not limited to, a balance sheet and profit and
loss statement and any other report requested by Bank relating to the Collateral
and the financial condition of Borrower, and a certificate signed by an
authorized employee of Borrower to the effect that all reports, statements,
computer disc or tape files, computer printouts, computer runs, or other
computer prepared information of any kind or nature relating to the foregoing or
documents delivered or caused to be delivered to Bank under this subparagraph
are complete, correct and thoroughly present the financial condition of Borrower
and that there exists on the date of delivery to Bank no condition or event
which constitutes a breach or Event of Default under this Agreement.

	In addition to the financial statements requested above,
Borrower agrees to provide Bank with the following schedules:

____xx____Accounts Receivable Agings on a
___monthly___ basis;

____xx____Accounts Payable Agings on a
___monthly___ basis;

__________Job Progress Reports on a _____________
basis;

____xx____Borrowing Base Certificate on a
____monthly__ basis;

__________Compliance Certification on a _____________
basis;

____xx____Inventory Reports on a
____monthly__ basis; and

10-K within 120 days of fiscal year end, with CPA unqualified
opinion; Quarterly 10-G within 60 days of each quarter; annual Borrower prepared
projections.

	Borrower shall maintain the following financial ratios
and covenants on a consolidated and non-consolidated basis, which shall be
maintained on a quarterly basis, except as noted below:

	Working Capital in an amount not less than
__________N/A___________

	Tangible Effective Net Worth in an amount not less than
___________ See Addendum "A" attached hereto and made a part
hereof____________

	A ratio of Current Assets to Current Liabilities of not
less than _________

____NA___________________________________________________
__

	A ratio of Quick Assets to Current Liabilities
of not less than __________

____NA___________________________________________________
__

	A Debt-to-Worth Ratio of less than
______________NA______________
f.Cash Flow Coverage Ratio of not less than
________NA______________

	Net Income after taxes of _____See Addendum "A"
attached hereto and made a part hereof______

	Borrower shall not without Bank's prior written consent
acquire or expend for or commit itself to acquire or expend for fixed assets by
lease, purchase or otherwise in an aggregate amount that exceeds
_______N/A_

__________Dollars ($________________) in any fiscal year;
and

	___________________________________________________________

___________________________________________________________

___________________________________________________________

___________________________________________________________

All financial covenants shall be computed in accordance with
GAAP consistently applied except as otherwise specifically set forth in this
Agreement. All monies due from affiliates (including officers, directors and
shareholders) shall be excluded from Borrower's assets for all purposes
hereunder.

	Borrower shall promptly supply Bank (and cause any
guarantor to supply Bank) with such other information (including tax returns)
concerning its financial affairs (or that of any guarantor) as Bank may request
from time to time hereafter, and shall promptly notify Bank of any material
adverse change in Borrower's financial condition and of any condition or event
which constitutes a breach of or an event which constitutes an Event of Default
under this Agreement.

	Borrower is now and shall be at all times hereafter
solvent and able to pay its debts (including trade debts) as they
mature.

	Borrower shall immediately and without demand reimburse
Bank for all sums expended by Bank in connection with any action brought by Bank
to correct any default or enforce any provision of this Agreement, including all
Bank expenses; Borrower authorizes and approves all advances and payments by
Bank for items described in this Agreement as Bank Expenses.

	Each warranty, representation and agreement contained in
this Agreement shall automatically be deemed repeated with each advance and
shall conclusively be presumed to have been relied on by Bank regardless of any
investigation made or information possessed by Bank. The warranties,
representations and agreements set forth herein shall be cumulative and in
addition to any and all other warranties, representations and agreements which
Borrower shall give, or cause to be given, to Bank, either now or
hereafter.

	Borrower shall keep all of its principal bank accounts
with Bank and shall notify Bank immediately in writing of the existence of any
other bank account, deposit account, or any other account into which money can
be deposited.

	Borrower shall furnish to Bank: (a) as soon as possible,
but in no event later than thirty (30) days after Borrower knows or has reason
to know that any reportable event with respect to any deferred compensation plan
has occurred, a statement of the chief financial officer of Borrower setting
forth the details concerning such reportable event and the action which Borrower
proposes to take with respect thereto, together with a copy of the notice of
such reportable event given to the Pension Benefit Guaranty Corporation, if a
copy of such notice is available to Borrower; (b) promptly after the filing
thereof with the United States Secretary of Labor or the Pension Benefit
Guaranty Corporation, copies of each annual report with respect to each deferred
compensation plan; (c) promptly after receipt thereof, a copy of any notice
Borrower may receive from the Pension Benefit Guaranty Corporation or the
Internal Revenue Service; and (d) when the same is made available to
participants in the deferred compensation plan, all notices and other forms of
information from time to time disseminated to the participants by the
administrator of the deferred compensation plan.

	Borrower is now and shall at all times hereafter remain
in compliance with all federal, state and municipal laws, regulations and
ordinances relating to the handling, treatment and disposal of toxic substances,
wastes and hazardous material and shall maintain all necessary authorizations
and permits.

	Borrower shall maintain insurance on the life of
__________N/A__________ in an amount not to be less than
______________________________________ Dollars ($_______________) under one or
more policies issued by insurance companies satisfactory to Bank, which policies
shall be assigned to Bank as security for the indebtedness and on which Bank
shall be named as sole beneficiary.

	Borrower shall limit direct and indirect compensation
paid to the following employees: ________________, ________________,
________________ to an aggregate of ____________N/A____________ Dollars
($_______N/A_______) per _____N/A_____.

	EVENTS OF DEFAULT.

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

	If Borrower fails or neglects to perform, keep or observe
any terms, provision, condition, covenant, agreement, warranty or representation
contained in this Agreement, or any other present or future document, instrument
or agreement Borrower and Bank;

	If any representation, statement, report or certificate
made or delivered by Borrower, or any of its officers, employees or agents to
Bank is not true and correct;

	If Borrower fails to pay when due and payable or declared
due and payable, all or any portion of Borrower's indebtedness (whether of
principal, interest, taxes, reimbursement of Bank Expenses, or
otherwise);

	If there is a material impairment of the prospect of
repayment of all or any portion of Borrower's indebtedness or a material
impairment of the value or priority of Bank's security interest in the
Collateral;

	If all or any of Borrower's assets are attached, seized,
subject to a writ or distress warrant, or are levied upon, or come into the
possession of any Judicial Officer or Assignee and the same are not released,
discharged or bonded against within ten (10) days thereafter;

	If any Insolvency Proceeding is filed or commenced by or
against Borrower without being dismissed within ten (10) days
thereafter;

	If any proceeding is filed or commenced by or against
Borrower for its dissolution or liquidation;

	If Borrower is enjoined, restrained or in any way
prevented by court order from continuing to conduct all or any material part of
its business affairs;

	If a notice of lien, levy or assessment is filed of
record with respect to any or all of Borrower's assets by the United States
Government, or any department, agency or instrumentality thereof, or by any
state, county, municipal or other government agency, or if any taxes or debts
owing at any time hereafter to any one or more of such entities becomes a lien,
whether inchoate or otherwise, upon any or all of Borrower's assets and the same
is not paid on the payment date thereof;

	If a judgment or other claim becomes a lien or
encumbrance upon any or all of Borrower's assets and the same is not satisfied,
dismissed or bonded against within ten (10) days thereafter;

	If Borrower's records are prepared and kept by an outside
computer service bureau at the time this Agreement is entered into or during the
term of this Agreement such an agreement with an outside service bureau is
entered into, and at any time thereafter, without first obtaining the written
consent of Bank, Borrower terminates, modifies, amends or changes its
contractual relationship with said computer service bureau or said computer
service bureau fails to provide Bank with any requested information or financial
data pertaining to Bank's Collateral, Borrower's financial condition or the
results of Borrower's operations;

	If Borrower permits a default in any material agreement
to which Borrower is a party with third parties so as to result in an
acceleration of the maturity of Borrower's indebtedness to others, whether under
any indenture, agreement or otherwise;

	If Borrower makes any payment on account of indebtedness
which has been subordinated to Borrower's indebtedness to Bank except as
otherwise permitted under the terms of this Agreement;

	If any misrepresentation exists now or thereafter in any
warranty or representation made to Bank by any officer or director of Borrower,
or if any such warranty or representation is withdrawn by any officer or
director;

	If any party subordinating its claims to that of Bank's
or any guarantor of Borrower's indebtedness dies, terminates its subordination
or guaranty, violates the terms of the subordination or guaranty, becomes
insolvent, or an insolvency Proceeding is commenced by or against any such
subordinating party or guarantor;

	If Borrower is an individual and Borrower dies;

	If there is a change of ownership or control of
_______N/A_______ percent (__N/A__%) or more of the issued and
outstanding stock of Borrower; or

	If any reportable event, which Bank determines
constitutes grounds for the termination of any deferred compensation plan by the
Pension Benefit Guaranty Corporation or for the appointment by the appropriate
United States District Court of a trustee to administer any such plan, shall
have occurred and be continuing thirty (30) days after written notice of such
determination shall have been given to Borrower by Bank, or any such Plan shall
be terminated within the meaning of Title IV of the Employment Retirement Income
Security Act ("ERISA"), or a trustee shall be appointed by the appropriate
United States District Court to administer any such plan, or the Pension Benefit
Guaranty Corporation shall institute proceedings to terminate any plan and in
case of any event described in this Section 7, the aggregate amount of
Borrower's liability to the Pension Benefit Guaranty Corporation under Sections
4062, 4063 or 4064 of ERISA shall exceed five percent (5%) of Borrower's
Tangible Effective Net Worth.

Notwithstanding anything contained in Section 7 to the
contrary, Bank shall refrain from exercising its rights and remedies and Event
of Default shall thereafter not be deemed to have occurred by reason of the
occurrence of any of the events set forth in Sections 7.e, 7.f or 7.j of this
Agreement if, within ten (10) days from the date thereof, the same is released,
discharged, dismissed, bonded against or satisfied; provided however, if
the event is the institution of Insolvency Proceedings against Borrower, Bank
shall not be obligated to make advances to Borrower during such cure
period.

	BANK'S RIGHTS AND REMEDIES

	Upon the occurrence of an Event of Default by
Borrower under this Agreement, Bank may, at its election, without notice of its
election and without demand, do any one or more of the following, all of which
are authorized by Borrower:

	Declare Borrower's indebtedness, whether evidenced by
this Agreement, installment notes, demand notes or otherwise, immediately due
and payable to Bank;

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

	Terminate this Agreement as to any future liability or
obligation of Bank, but without affecting Bank's rights and security interests
in the Collateral, and the indebtedness of Borrower to Bank;

	Without notice of or demand upon Borrower or any
guarantor, make such payments and do such acts as Bank considers necessary or
reasonable to protect its security interest in the Collateral. Borrower agrees
to assemble the Collateral if Bank so requires and to make the Collateral
available to Bank as Bank may designate. Borrower authorizes Bank to enter the
premises where the Collateral is located, take and maintain possession of the
Collateral and the premises (at no charge to Bank), or any part thereof, and to
pay, purchase, contest or compromise any encumbrance, charge or lien which in
the opinion of Bank appears to be prior or superior to its security interest and
to pay all expenses incurred in connection therewith;

	Without limiting Bank's rights under any security
interest, Bank is hereby granted a license or other right to use, without
charge, Borrower's labels, patents, copyrights, rights of use of any name, trade
secrets, trade names, trademarks and advertising matter, or any property or a
similar nature as it pertains to the collateral, in completing production of,
advertising for sale and selling any Collateral and Borrower's rights under all
licenses and all franchise agreements shall inure to Bank's benefit, and Bank
shall have the right and power to enter into sublicense agreements with respect
to all such rights with third parties on terms acceptable to Bank;

	Ship, reclaim, recover, store, finish, maintain, repair,
prepare for sale, advertise for sales and sell (in the manner provided for
herein) the inventory;

	Sell or dispose the Collateral at either a public or
private sale, or both, by way of one or more contracts or transactions, for cash
or on terms, in such manner and at such places (including Borrower's premises)
as is commercially reasonable in the opinion of Bank. It is not necessary that
the Collateral be present at any such sale. At any sale or other disposition of
the Collateral pursuant to this Section, Bank disclaims all warranties which
would otherwise be given under the Uniform Commercial Code, including without
limitation a disclaimer of any warranty relating to title, possession, quiet
enjoyment or the like, and Bank may communicate these disclaimers to purchaser
at such disposition. This disclaimer of warranties will not render the sale
commercially unreasonable;

	Bank shall give notice of the disposition of the
Collateral as follows:

	Bank shall give Borrower and each holder of a security
interest in the Collateral who has filed with Bank's written request for notice,
a notice in writing of the time and place of public sale, or, if the sale is a
private sale or some disposition other than a public sale is to made of the
Collateral, the time on or after which the private sale or other disposition is
to be made;

	The notice shall be personally delivered or mailed,
postage prepaid, to Borrower's address appearing in this Agreement, at least ten
(10) calendar days before the date fixed for the sale, or at least ten (10)
calendar days before the date on or after which the private sale or other
disposition is to be made, unless the Collateral is perishable or threatens to
decline speedily in value. Notice to persons other than Borrower claiming an
interest in the collateral shall be sent to such addresses as have been
furnished to Bank or as otherwise determined in accordance with Section 9611 of
the Uniform Commercial Code; and 

	If the sale is to be a public sale, Bank shall also give
notice of the time and place by publishing a notice one time at least ten (10)
calendar days before the date of the sale in a newspaper of general circulation
in the county in which the sale is to be held; and

	Bank may credit bid and purchase at any public
sale.

	Borrower shall pay all Bank Expenses incurred in
connection with Bank's enforcement and exercise of any of its rights and
remedies as herein provided, whether or not suit is commenced by Bank;

	Any deficiency which exists after disposition of the
Collateral as provided above will be paid immediately by Borrower. Any excess
will be returned, without interest and subject to the rights of third parties,
to Borrower by Bank, or, in Bank's discretion, to any party who Bank believes,
in good faith, is entitled to the excess;

	Without constituting a retention of Collateral in
satisfaction of an obligation within the meaning of 9620 of the Uniform
Commercial Code or an action under California Code of Civil Procedure 726, apply
any and all amounts maintained by Borrower as deposit accounts (as that term is
defined under 9102 of the Uniform Commercial Code) or other accounts that
Borrower maintains with Bank against the indebtedness;

	The proceeds of any sale or other disposition of
Collateral authorized by this Agreement shall be applied by Bank first upon all
expenses authorized by the Uniform Commercial Code and all reasonable attorney
fees and legal expenses incurred by Bank, whether in-house or outside counsel is
used, the balance of the proceeds of the sale or other disposition shall be
applied in the payment of the indebtedness, first to interest, then to
principal, then to remaining indebtedness and the surplus, if any, shall be paid
over to Borrower or to such other person(s) as may be entitled to it under
applicable law. Borrower shall remain liable for any deficiency, which it shall
pay to Bank immediately upon demand. Borrower agrees that Bank shall be under no
obligation to accept any noncash proceeds in connection with any sale or
disposition of Collateral unless failure to do so would be commercially
unreasonable. If Bank agrees in its sole discretion to accept noncash proceeds
(unless the failure to do so would be commercially unreasonable), Bank may
ascribe any commercially reasonable value to such proceeds. Without limiting the
foregoing, Bank may apply any discount factor in determining the present value
of proceeds to be received in the future or may elect to apply proceeds to be
received in the future only as and when such proceeds are actually received in
cash by Bank; and

	The following shall be the basis for any finder of fact's
determination of the value of any Collateral which is the subject matter of a
disposition giving rise to a calculation of any surplus or deficiency under
Section 9615(f) of the Uniform Commercial Code: (i) The Collateral which is the
subject matter of the disposition shall be valued in an "as is" condition as of
the date of the disposition, without any assumption or expectation that such
Collateral will be repaired or improved in any manner; (ii) the valuation shall
be based upon an assumption that the transferee of such Collateral desires a
resale of the Collateral for cash promptly (but no later than 30 days) following
the disposition; (iii) all reasonable closing costs customarily borne by the
seller in commercial sales transactions relating to property similar to such
Collateral shall be deducted including, with limitation, brokerage commissions,
tax prorations, attorney's fees, whether in-house or outside counsel is used,
and marketing costs; (iv) the value of the Collateral which is the subject
matter of the disposition shall be further discounted to account for any
estimated holding costs associated with maintaining such Collateral pending sale
(to the extent not accounted for in (iii) above, and other maintenance,
operational and ownership expenses; and (v) any expert opinion testimony given
or considered in connection with a determination of the value of such Collateral
must be given by persons having at least 5 years experience in appraising
property similar to the Collateral and who have conducted and prepared a
complete written appraisal of such Collateral taking into consideration the
factors set forth above. The "value" of any such Collateral shall be a factor in
determining the amount of proceeds which would have been realized in a
disposition to a transferee other than a secured party, a person related to a
secured party or a secondary obligor under Section 9615(f) of the Uniform
Commercial Code.

	In addition to any and all other rights and remedies
available to Bank under or pursuant to this Agreement or any other documents,
instrument or agreement contemplated hereby, Borrower acknowledges and agrees
that (i) at any time following the occurrence and during the continuance of any
Event of Default, and/or (ii) termination of Bank's commitment or obligation to
make loans or advances or otherwise extend credit to or in favor of Borrower
hereunder, in the event that and to the extent that there are any Letter of
Credit Obligations outstanding at such time, upon demand of Bank, Borrower shall
deliver to Bank, or cause to be delivered to Bank, cash collateral in an amount
not less than such Letter of Credit Obligations, together with any and all other
indebtedness of Borrower to Bank remaining unpaid, and Borrower pledges to Bank
and grants to Bank a continuing first priority security interest in such cash
collateral so delivered to Bank. Alternatively, Borrower shall cause to be
delivered to Bank an irrevocable standby letter of credit issued in favor of
Bank by a bank acceptable to Bank, in its sole discretion, in an amount not less
than such Letter of Credit Obligations, and upon terms acceptable to Bank, in
its sole discretion.

	Bank's rights and remedies under this Agreement and all
other agreements shall be cumulative. Bank shall have all other rights and
remedies not inconsistent herewith as provided by law or in equity. No exercise
by Bank of one right or remedy shall be deemed an election, and no waiver by
Bank of any default on Borrower's part shall be deemed a continuing waiver. No
delay by Bank shall constitute a waiver, election or acquiescence by
Bank.

	TAXES AND EXPENSES REGARDING BORROWER'S PROPERTY.

If Borrower fails to pay promptly when due to
another person or entity, monies which Borrower is required to pay by reason of
any provision in this Agreement, Bank may, but need not, pay the same and charge
Borrower's loan account therefor, and Borrower shall promptly reimburse Bank.
All such sums shall become additional Indebtedness owing to Bank, shall bear
interest at the rate hereinabove provided, and shall be secured by all
Collateral. Any payments made by Bank shall not constitute (i) an agreement by
it to make similar payments in the future, or (ii) a waiver by Bank of any
default under this Agreement. Bank need not inquire as to , or contest the
validity of, any such expense, tax, evidence that the same was validly due and
owing. Such payments shall constitute Bank Expenses and additional advances to
Borrower.

	WAIVERS.

	Borrower agrees that checks and other instruments
received by Bank in payment or on account of Borrower's indebtedness constitute
only conditional payment until such items are actually paid to Bank and Borrower
waives the right to direct the application of any and all payments at any time
or times hereafter received by Bank on account of Borrower's indebtedness and
Borrower agrees that Bank shall have the continuing exclusive right to apply and
reapply such payments in any manner as Bank may deem advisable, notwithstanding
any entry by Bank upon its books.

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

	Bank shall not in any way or manner be liable or
responsible for (a) the safekeeping of the inventory; (b) any loss or damage
thereto occurring or arising in any manner or fashion from any cause; (c) any
diminution in the value thereof; or (d) any act or default of any carrier,
warehouseman, bailee, forwarding agency or other person whomsoever. All risk of
loss, damage or destruction of inventory shall be borne by Borrower.

	Borrower waives the right and the right to assert a
confidential relationship, if any, it may have with any accountant, accounting
firm and/or service bureau or consultant in connection with any information
requested by Bank pursuant to or in accordance with this Agreement, and agrees
that a Bank may contact directly any such accountants, accounting firm and/or
service bureau or consultant in order to obtain such information.

	THE UNDERSIGNED AND THE BANK ACKNOWLEDGE THAT THE RIGHT
TO TRIAL BY JURY IS A CONSTITUTIONAL ONE, BUT THAT IT MAY BE WAIVED. EACH PARTY,
AFTER CONSULTING (OR HAVING HAD THE OPPORTUNITY TO CONSULT) WITH COUNSEL OF
THEIR CHOICE, KNOWINGLY AND VOLUNTARILY, AND FOR THEIR MUTUAL BENEFIT, WAIVES
ANY RIGHT TO TRIAL BY JURY IN THE EVENT OF LITIGATION REGARDING THE PERFORMANCE
OR ENFORCEMENT OF, OR IN ANY WAY RELATED TO, THIS AGREEMENT OR THE
INDEBTEDNESS.

	In the event that Bank elects to waive any rights or
remedies hereunder, or compliance with any of the terms hereof, or delays or
fails to pursue or enforce any term, such waiver, delay or failure to pursue or
enforce shall only be effective with respect to that single act and shall not be
construed to affect any subsequent transactions or Bank's right to later pursue
such rights and remedies.

	ONE CONTINUING LOAN TRANSACTION.
All
loans and advances heretofore, now or at any time or times hereafter made by
Bank to Borrower under this Agreement or any other agreement between Bank and
Borrower, shall constitute one loan secured by Bank's security interests in the
Collateral and by all other security interests, liens, encumbrances heretofore,
now or from time to time hereafter granted by Borrower to Bank.
Notwithstanding the above, (i) to the extent that any portion
of the indebtedness is a consumer loan, that portion shall not be secured by any
deed of trust or mortgage on or other security interest in Borrower's principal
dwelling which is not a purchase money security interest as to that portion,
unless expressly provided to the contrary in another place, or (ii) if Borrower
(or any of them) has (have) given or give(s) Bank a deed of trust or mortgage
covering real property, that deed of trust or mortgage shall not secure the loan
and any other indebtedness of Borrower (or any of them), unless expressly
provided to the contrary in another place.

	NOTICES. Unless otherwise provided in this
Agreement, all notices or demands by either party on the other relating to this
Agreement shall be in writing and sent by regular United States mail, postage
prepaid, properly addressed to Borrower or to Bank at the addresses stated in
this Agreement, or to such other addresses as Borrower or Bank may from time to
time specify to the other in writing. Requests for information made to Borrower
by Bank from time to time hereunder may be made orally or in writing, at Bank's
discretion.

	AUTHORIZATION TO DISBURSE. Bank is hereby
authorized to make loans and advances hereunder upon telephonic or other
instructions received from anyone purporting to be an officer, employee, or
representative of Borrower, or at the discretion of Bank if said loans and
advances are necessary to meet any indebtedness of Borrower to Bank. Bank shall
have no duty to make inquiry or verify the authority of any such party, and
Borrower shall hold Bank harmless from any damage, claims or liability by reason
of Bank's honor of, or failure to honor, any such instruction.

	PAYMENTS. Borrower hereby authorizes Bank
to deduct the full amount of any interest, fees, costs, or Bank expenses due
under this Agreement and not paid or collected when due in accordance with the
terms and conditions hereof from any account maintained by Borrower with Bank.
Should there be insufficient funds in any such account to pay all such sums when
due, the full amount of such deficiency shall be immediately due and payable by
Borrower; provided, however, that Bank shall not be obligated to advance
funds to cover any such payment.

	DESTRUCTION OF BORROWER'S DOCUMENTS. Any
documents, schedules, invoices or other papers delivered to Bank, may be
destroyed or otherwise disposed of by Bank six (6) months after they are
delivered to or received by Bank, unless Borrower requests, in writing, the
return of the said documents, schedules, invoices or other papers and makes
arrangements, at Borrower's expense, for their return.

	CHOICE OF LAW. The validity of this
Agreement, its construction, interpretation and enforcement, and the rights of
the parties hereunder and concerning the Collateral, shall be determined
according to the laws of the State of California. The parties agree that all
actions or proceedings arising in connection with this Agreement shall be tried
and litigated only in the state and federal courts in the Northern District of
California or the County of Santa Clara.

	GENERAL PROVISIONS

	This Agreement shall be binding and deemed
effective when executed by Borrower and accepted and executed by Bank at its
headquarters office.

	This Agreement shall bind and inure to the benefit of the
respective successors and assigns of each of the parties; provided,
however, that Borrower may not assign this Agreement or any rights hereunder
without Bank's prior written consent and any prohibited assignment shall be
absolutely void. No consent to an assignment by Bank shall release Borrower or
any guarantor from their obligations to Bank. Bank may assign this Agreement and
its rights and duties hereunder. Bank reserves the right to sell, assign,
transfer, negotiate or grant participations in all or any part of, or any
interest in Bank's rights and benefits hereunder. In connection therewith, Bank
may disclose all documents and information which Bank now or hereafter may have
relating to Borrower or Borrower's business.

	Paragraph headings and paragraph numbers have been set
forth herein for convenience only; unless the contrary is compelled by the
context, everything contained in each paragraph applies equally to this entire
Agreement. Unless the context of this Agreement clearly requires otherwise,
references to the plural include the singular, references to the singular
include the plural, and the term "including" is not limiting. The words
"hereof", "herein", "hereby", "hereunder", and similar terms in this Agreement
refer to this Agreement as a whole and not to any particular provision of this
Agreement.

	Neither this Agreement nor any uncertainty or ambiguity
herein shall be construed or resolved against Bank or Borrower, whether under
any rule of construction or otherwise; on the contrary, this Agreement has been
reviewed by all parties and shall be construed and interpreted according to the
ordinary meaning of the words used so as to fairly accomplish the purposes and
intentions of all parties hereto.

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

	This Agreement cannot be changed or terminated orally.
This Agreement contains the entire agreement of the parties hereto and
supersedes all prior agreements, understandings, representations, warranties and
negotiations, if any, related to the subject matter hereof, and none of the
parties shall be bound by anything not expressed in writing.

	The parties intend and agree that their respective
rights, duties, powers, liabilities, obligations, and discretions shall be
performed, carried out, discharged and exercised reasonably and in good
faith.

	In addition, if this Agreement is secured by a deed of
trust or mortgage covering real property, then the trustor or mortgagor shall
not mortgage or pledge the mortgaged premises as security for any other
indebtedness or obligations. This Agreement, together with all other
indebtedness secured by said deed of trust or mortgage, shall become due and
payable immediately, without notice, at the option of Bank, (a) if said trustor
or mortgagor shall mortgage or pledge the mortgaged premises for any other
indebtedness or obligations or shall convey, assign or transfer the mortgaged
premises by deed, installment sale contact or other instrument; (b) if the title
to the mortgaged premises shall become vested in any other person or party in
any manner whatsoever; or (c) if there is any disposition (through one or more
transactions) of legal or beneficial title to a controlling interest of said
trustor or mortgagor.

	Each undersigned Borrower hereby agrees that it is
jointly and severally, directly, and primarily liable to Bank for payment and
performance in full of all duties, obligations and liabilities under this
Agreement and each other document, instrument and agreement entered into by
Borrower with or in favor of Bank in connection herewith, and that such
liability is independent of the duties, obligations and liabilities of any other
borrower or any other guarantor of the indebtedness as applicable. Each
reference herein to Borrower shall mean each and every Borrower party hereto,
individually and collectively, jointly and severally.

IN WITNESS WHEREOF, the parties hereto have caused
this Loan and Security Agreement (Accounts and Inventory) to be executed as of
the date first hereinabove written.

See Addendum "A" attached hereto and made a part hereof.

INITIAL HERE _A.S.I___F.S.______

BORROWER:

a
______Corporation__________

Accepted and effective as of __March 13, 2002__
By: ___/s/ Alberto Santa Ines_____

At Bank's Headquarters Office 
Signature of

Title:
_________________________

Comerica Bank-California_______________

By:
__________________________

By: ___/s/ Florina Sy____________________ 
Signature of

Signature of

Title _____Corporate Banking
Officer______Title: _________________________

By:
__________________________

 Signature of

Address for NoticesTitle:
_________________________

3240 Whipple Road

Union City, CA 94587By:
__________________________

BORROWER:

a
____________________________

By:
__________________________

 Signature of

Title:
_________________________

Address for NoticesBy:
__________________________

 Signature of

Title:
_________________________

By:
__________________________

  Signature of

Title:
_________________________
By: __________________________

 Signature of

Title:
_________________________

ADDENDUM "A"

 

 

This Addendum "A" is attached to, and by this reference
forms a part of that certain Loan and Security Agreement (Accounts and
Inventory) dated as of March 13, 2002 by and between Abaxis, Inc., a California
corporation ("Borrower") and Comerica Bank-California, a California banking
corporation ("Bank"), (the "Agreement") and shall amend the Agreement as set
forth below:

	Section 1.6 is hereby deleted in its entirely, and
replaced with the following:

"1.6"Borrowing Base" shall mean the sum of: (1) eighty
percent (80%) of the net amount of Eligible Accounts after deducting therefrom
all payments, adjustments and credits applicable thereto; plus (2) the amount if
any, of the advances against inventory agreed to be made pursuant to any
Inventory Rider, or other rider (provided however, that the outstanding
advance limitation shown on the Inventory rider which forms a part of this
Agreement, shall be further limited to an amount which shall not exceed at any
time the outstanding advances under Eligible Accounts); and (3) less
at all times an aggregate amount of Five Hundred Thousand dollars ($500,000.00),
and any amendment or modification to this Agreement, that may now or hereafter
be entered into by Bank and Borrower."

	Section 1.17 is hereby amended, as
follows:

	by deleting section (k) thereof in its entirety, and
replacing it with the following:

."(k) Accounts owed by any single account debtor which
exceed twenty-five percent (25%) of all of the Eligible Accounts, and except
that with respect to account debtor Vedco, the Accounts owed by such account
debtor which exceed forty percent (40%) of all of the Eligible Accounts;"
and

	by deleting from section (1) the term "twenty-five
percent (25%)" and replacing it with forty percent (40%).

	Section 6.17 is hereby deleted in its entirety and
replaced with the following:

"6.17Borrower shall maintain the following financial
ratios and covenants on a consolidated and non-consolidated basis, which shall
be monitored on a quarterly basis, except as noted below:

	Working Capital: Intentionally Omitted.

	Tangible Effective Net Worth in an amount not less than
$15,000,000.00, provided that such amount shall increase incrementally by 100%
of any net equity capital raised after 12/31/01, plus a minimum of 50% of
Borrower's annual after tax Net Income;

	a ratio of current Assets to Current Liabilities:
Intentionally Omitted;

	A ratio of Quick Assets to Current Liabilities of not
less than 1.00:1.00, provided that such ratio shall increase to 1.25:1.00 at the
time Borrower raises a new equity (for purposes of calculating this ratio,
Current Liabilities shall include, without limitation, the Letter of Credit
Obligations);

	a Debt-to-Worth Ratio of less than 1.00:1.00;

	a Cash flow Coverage Ratio of net less than
1.20:100;

	Net Income after taxes as follows:

	During each of Borrower's annual fiscal operating
periods, a minimum of $25,000.00 in any three (3) quarterly operating periods,
provided that any loss incurred in the remaining operating quarter for such
annual period shall not exceed an amount of $250,000.00; and

	Borrower to be profitable on a fiscal year to date basis
beginning with the six (6) month period ending September 30; and

	An amount of $1,150,000.00 for the fiscal year ending
March 31, 2003.

	Borrower shall not without Bank's prior written consent
acquire or expend for or commit itself to acquire or expend for fixed assets by
lease, purchase or otherwise in an aggregate amount that exceeds One Million
Five Hundred Thousand and no/100 Dollars ($1,500,000.00)

Initials:Borrower:
_A.S.I._________Bank: __Florina Sy________

MASTER REVOLVING NOTE

Variable Rate-Maturity Date-Obligatory Advances (Business and
Commercial Loans Only)

 

	
Amount 

$1,250,000.00
	
Note Date 

March 13, 2002
	
Maturity Date

September 11, 2002
	
Tax Identification #

 

On the Maturity Date, as stated above, for value received,
the undersigned promises(s( to pay to the order of Comerica Bank-
California (("Bank"), at any office of the Bank in the State of California,
One Million Two Hundred Fifty Thousand and no/100 Dollars (U.S.) (or that
portion of it advanced by the Bank and not repaid as later provided) with
interest until maturity, whether by acceleration or otherwise, or an Event of
Default, as later defined, at a per annum rate equal to the Bank's base rate
from time to time in effect plus 0.500% % per annum and after that at a
rate equal to the rate of interest otherwise prevailing under this Note plus 3%
per annum (but in no event in excess of the maximum rate permitted by law). the
Bank's "base rate" is that annual rate of interest so designated by the Bank and
which is changed by the Bank from time to time. Interest rate changes will be
effective for interest computation purposes as and when the Bank's base rate
changes. Interest shall be calculated on the basis of a 360-day year for the
actual number of days the principal is outstanding. Accrued interest on this
Note shall be payable o the 11th day of each month
commencing April 11, 2002, until the Maturity Date when all amounts
outstanding under this Note shall be due and payable in full. If the frequency
of interest payments is hot otherwise specified, accrued interest on this Note
shall be payable monthly on the first day of each month. If any payment of
principal or interest under this Note shall be payable on a day other than a day
on which the Bank is open for business, this payment shall be extended to the
next succeeding business day and interest shall be payable at the rate specified
in this Note during this extension. A late payment charge equal to 5% of each
late payment may be charged on any payment not received by the Bank within 10
calendar days after the payment due date, but acceptance of payment of this
charge shall not waive any Default under this Note.

The principal amount payable under this Note shall be the sum
of all advances made by the Bank to or at the request of the undersigned, less
principal payments actually received in cash by the Bank. The books and records
of the Bank shall be the best evidence of the principal amount and the unpaid
interest amount owing at any time under this Note and shall be conclusive absent
manifest error. No interest shall accrue under this Note until the date of the
first advance made by the Bank; after that interest on all advances shall accrue
and be computed on the principal balance outstanding from time to time under
this Note until the same is paid in full

This Note and any other indebtedness and liabilities of any
kind of the undersigned (or any of them) to the Bank, and any and all
modifications, renewals or extensions of it, whether joint or several,
contingent or aboslute, now existing or later arising, and however evidenced
(collectively "indebtedness") are secured by and the Bank is granted a security
interest in all items deposited in any account of any of the undersigned with
the Bank and by all proceeds of these items (cash or otherwise), all account
balances of any of the undersigned from time to time with the Bank, by all
property of any of the undersigned from time to time in the possession of the
Bank and by any other collateral, rights and properties described in each and
every deed of trust, mortgage, security agreement, pledge, assignment and other
security or collateral agreement which has been, or will at any time(s) later
be, executed by any (or all) of the undersigned to or for the benefit of the
Bank (collectively "Collateral"). Notwithstanding the above, (i) to the extend
that any portion of the indebtedness is a consumer loan, that portion shall not
be secured by any deed of trust or mortgage on or other security interest in any
of the undersigned's principal dwelling or any of the undersigned's real
property which is not a purchase money security interest in any of the
undersigned's principal dwelling or in any of the undersigned's real property
which is not a purchase money security interest as to that portion , unless
expressly provided to the contrary in another place, or (ii) if the undersigned
(or any of them) has (have) given or give(s) Bank a deed of trust or mortgage
covering real property , that deed of trust or Mortgage shall not secure this
Note or any other indebtedness of the undersigned (or any of them), unless
expressly provided to the contrary in another place.

If the undersigned (or any of them) or any guaranty of all or
part of the indebtedness ("guarantor") (a) fail(s) to pay this Note or any of
the indebtedness when due, by maturity, acceleration or otherwise , or fail(s)
to pay any indebtedness owing on a demand basis upon demand; or (b) fail(s) to
comply with any of the terms or provisions of any agreement between the
undersigned ( or any of them) or any guarantor and the Bank; or (c) become(s)
insolvent or the subject of a voluntary or involuntary proceeding in bankruptcy
or a reorganization, arrangement or creditor composition proceeding, (if a
business entity) cease(s) doing business as a going concern, (if a natural
person) die(s) or become(s) incompetent,(if a partnership) dissolve(s) or any
general partner of it dies, becomes incompetent or becomes the subject of a
bankruptcy proceeding or (if a corporation or a limited liability company) is
the subject of a dissolution, merger or consolidation; or (d) if any warranty or
representation made by any of the undersigned or any guarantor in connection
with this note or any of the indebtedness shall be discovered to be untrue or
incomplete; or (e) if there is any termination, notice of termination, or breach
of any guaranty, pledge, collateral assignment or subordination agreement
relating to all or any part of the indebtedness; or (f) if there is any failure
by any of the undersigned or any guarantor to pay when due any of its
indebtedness (other than to the Bank) or in the observance or performance of any
term, covenant or condition in any document evidencing, securing or relating to
such indebtedness; or (g) if the Bank deems itself insecure, believing that the
prospect of payment of this Note or any of the Indebtedness is impaired or shall
fear deterioration, removal or waste of any of the Collateral; or (h) if there
is filed or issued a levy or writ of attachment or garnishment or other like
judicial process upon the undersigned (or any of them) or any guarantor ro any
of the Collateral, including without limit, any accounts of the undersigned (or
any of them) or any guarantor with the Bank, then the Bank, upon the occurrence
of any of these events (each a "Default"), may at its option and without notice
to the undersigned (or any of them), declare any or all of the indebtedness to
be immediately due and payable (notwithstanding any provisions contained in the
evidence thereof to the contrary), sell or liquidate all or any portion of the
Collateral, set off against the indebtedness any amounts owing by the Bank to
the undersigned (or any of them), charge interest at the default rate provided
in the document evidencing the relevant indebtedness and exercise any one or
more of the rights and remedies granted to the Bank by any agreement with the
undersigned (or any of them) or given to it under applicable law. In addition,
if this Note is secured by a deed of trust or mortgage covering real property,
then the trustor or mortgagor shall not mortgage or pledge the mortgaged
premises as security for any other indebtedness or obligations. This Note,
together with all other indebtedness secured by said trust or mortgage, shall
become due and payable immediately, without notice, at the option of the Bank,
(a) if said trustor or mortgagor shall mortgage or pledge the mortgaged premises
for any other indebtedness or obligations or shall convey, assign or transfer
the mortgaged premises by deed, installment sale contact or other instrument, or
(b) if the title to the mortgaged premises shall become vested in any other
person or party in any manner whatsoever, or (c) if there is any disposition
(through one or more transactions) of legal or beneficial title to a controlling
interest of said trustor or mortgagor. All payments under this Note shall be in
immediately available United States funds, without or counterclaim. 

If this note is signed by two or more parties (whether by all
as makers or by one or more as an accommodation party or otherwise), the
obligations and undertakings under this Note shall be that of all and any two or
more jointly and also of each severally. This Note shall bind the undersigned,
and the undersigned's respective heirs, personal representatives, successors and
assigns.

The undersigned waive(s) presentment, demand, protest, notice
of dishonor, notice of demand or intent to demand, notice of acceleration or
intent to accelerate, and all other notices and agree(s) that no extention or
indulgence to the undersigned (or any of them) or release, substitution or
nonenforcement of any security, or release or substitution of any of the
undersigned, any guarantor or any other party whether with or without notice,
shall affect the obligations of any of the undersigned. The undersigned waive(s)
all defenses or right to discharge available under Section 3-605 of the
California Uniform Commercial Code and waive(s) all other suretyship
defenses or right to discharge. The Undersigned agree(s) that the Bank has the
right to sell, assign, or grant participations, or any interest, in any or all
of the indebtedness, and that , in connection with this right, but without
limiting its ability to make other disclosures ot the full extent allowable, the
Bank may disclose all documents and information which the Bank now or later has
relating to the undersigned of the Indebtedness. The undersigned agree(s) that
the Bank may provide information relating to this Note or to the undersigned to
the Bank's parent, affiliates, subsidiaries and service providers.

The undersigned agree(s) to reimburse the holder or owner of
this Note for any and all costs and expenses (including without limit, court
costs, legal expenses and reasonable attorney fees, whether inside or outside
counsel is used, whether or not suit is instituted and, if suit is instituted,
whether at the trail court level, appellate level, in a bankruptcy, probate or
administrative proceeding or otherwise) incurred in collecting or attempting to
collect this Note or incurred in any other matter or proceeding relating to this
Note.

The undersigned acknowledge(s) and agree(s) that there are no
contrary agreements, oral or written, establishing a term of this Note and
agree(s) that the terms and conditions of this Note may not be amended, waived
or modified except in a writing signed by an officer of the Bank expressly
stating that the writing constitutes an amendment, waiver or modification of the
terms of this Note. As used in this Note, the word "undersigned" means,
individually and collectively, each maker, accommodation party, endorser and
other party signing this Note in a similar capacity. If any provision of this
Note is unenforceable in whole or part for any reason, the remaining provisions
shall continue to be effective. THIS NOTE IS MADE IN THE STATE OF
California AND SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
INTERNAL LAWS OF THE STATE OF California, WITHOUT REGARD TO CONFLICT OF
LAWS PRINCIPLES.

The maximum interest rate shall not exceed the highest
applicable usury ceiling.

THE UNDERSINGED AND THE BANK ACKNOWLEDGE THAT THE RIGHT TO
TRIAL BY JURY IS A CONSTITUTIONAL ONE, BUT THAT IT MAY BE WAIVED. EACH PARTY,
AFTER CONSULTING (OR HAVING HAD THE OPPORTUNITY TO CONSULT) WITH COUNSEL OF
THEIR CHOICE, KNOWINGLY AND VOLUNTARILY, AND FOR THEIR MUTUAL BENEFIT, WAIVES
ANY RIGHT TO TRIAL BY JURY IN THE EVENT OF LITIGATION REGARDING THE PERFORMANCE
OR ENFORCEMENT OF, OR IN ANY WAY RALTED TO, THIS NOTE OR THE INDEBTEDNESS.

This Note is subject to the terms and conditions of that
certain Loan And Security Agreement of even date.

Abaxis, Inc.

By: /s/ Alberto Santa Ines Its: Interim
CFO/Director of Finance

SIGNATURE OF TITLE

COMERICA

ENVIRONMENTAL RIDER

Comerica Bank-California

NAME OF OFFICE
                       333 West Santa Clara Street, San Jose, CA  95113

                               ADDRESS

This ENVIRONMENTAL RIDER (this "Rider") dated this
13th day of March, 2002 is hereby made a part of and
incorporated into that certain Loan and Security Agreement (The
"Agreement") dated March 13, 2002 between Comerica Bank-
California a California corporation ("Lender") and Abaxis, Inc.
("Borrower").

1.Borrower hereby represents, warrants and covenants that
none of the collateral or real property occupied and/or owned by Borrower has
ever been used by Borrower or any other previous owner and /or operator in
connection with the disposal of or to refine, generate, manufacture, produce,
store, handle, treat, transfer, release, process or transport any hazardous
waste, as defined in 42 U.S.C. 9601 (14) ("Hazardous Substance"), and
Borrower will not at any time use the collateral or such real property for the
disposal of , refining of , generating, manufacturing, producing, storing,
handling, treating, transferring, releasing, processing, or transporting any
such Hazardous Waste and/or Hazardous Substances.

2. None of the collateral or real property used and/or
occupied by Borrower has been designated, listed or identified in any manner by
the United States Environmental Protection Agency (the "EPA") or under
and pursuant to the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, set forth at 42 U.S.C. 9601 et seq.
("RCRA") or any other environmental protection statute as a Hazardous
Waste or Hazardous Substance disposal or removal site, superfund or cleanup site
or candidate for removal of closure pursuant to RCRA, CERCLA or any other
environmental protection statute.

3.Borrower has not received a summons, citation, notice,
directive, letter or other communication, written or oral, from the EPA or any
other federal or state governmental agency or instrumentality, authorized
pursuant to an environmental protections statute, concerning any intentional or
unintentional action or omission by Borrower resulting in the releasing,
spilling, leaking, pumping, pouring, emitting, emptying, dumping or otherwise
disposing of Hazardous Waste or Hazardous Substance into the environment
resulting in damage thereto or to the fish, shellfish, wildlife, biota or other
natural resources.

4. Borrower shall not cause or permit to exist, as a result
of an intentional or unintentional action or omission on its part, or on the
part of any third party, on property owned and /or occupied by Borrower, any
disposal, releasing, spilling, leaking, pumping, omitting, pouring, emptying or
dumping of a Hazardous Waste or Hazardous Substance into the environment where
damage may result to the environment, fish, shellfish, wildlife, biota or other
natural resources unless such disposal, release, spill, leak, pumping, emission,
pouring, emptying or dumping is pursuant to and in compliance with the
conditions of a permit issued by the appropriate federal or state governmental
authority.

5. Borrower shall furnish to Lender:

    (a)Promptly and in any event within thirty (30) days
after receipt thereof, a copy of any notice, summons, citation, directive,
letter or other communications from the EPA or any other governmental agency or
instrumentality concerning any intentional or unintentional action or omission
on Borrower's part in connections with the handling, transporting, transferring,
disposal or in the releasing, spilling, leaking, pumping, pouring, emitting,
emptying or dumping of Hazardous Waste or Hazardous Substances into the
environment resulting in damage to the environment, fish, shellfish, wildlife,
biota and any other natural resource;

   (b) Promptly and in any event within thirty (30) days
after the receipt thereof, a copy of any notice of or other communication
concerning the filing of a lien upon, against or in connection with Borrower,
the collateral or Borrower's real property by the EPA or any other governmental
agency or instrumentality authorized to file such a lien pursuant to an
environmental protection statute in connection with a fund to pay for damages
and/or cleanup and/or removal costs arising from the intentional or
unintentional action or omission of Borrower resulting from the disposal or in
the releasing, spilling, leaking, pumping, pouring, emitting, emptying or
dumping of Hazardous Waste or Hazardous Substances into the environment;

    (c) Promptly and in any event within thirty (30) days
after the receipt thereof, a copy of any notice, directive, letter of other
communication from the EPA or any other governmental agency or instrumentality
acting under the authority of an environmental protection statute indicating
that all or any portion of the Borrower's property or assets have been listed
and/or borrowers deemed by such agency to be the owner and operator of the
facility that has failed to furnish to the EPA or other authorized governmental
agency or instrumentality, all the information required by the RCRA, CERCLA or
other applicable environmental protection statutes;

     (d) Promptly and in no event more than thirty (30)
days after the filing thereof with the EPA or other governmental agency or
instrumentality authorized as such pursuant to an environmental protection
statute, copies of any and all information reports filed with such agency or
instrumentality in connection with Borrower's compliance with RCRA, CERCLA or
other applicable environmental protection statutes.

6. Any one or more of the following events which occur with
respect to Borrower shall constitute an event of default:

	The breach by Borrower of any covenant or condition,
representation or warranty contained in this Rider;

	The failure by Borrower to comply with each, every and
all of the requirements of RCRA, CERCLA or any other applicable environmental
protection statues on the real property and /or on owned by borrower;

	The receipt by Borrower of a notice from the EPA or any
other governmental agency or instrumentality acting under the authority of any
environmental protection statute, indicating that a lien has been filed against
any of the collateral, or any of Borrower's other property by the EPA or any
other governmental agency or instrumentality in connection with a fund as a
result of damage arising from an intentional or unintentional action or omission
by Borrower resulting from the disposal, releasing, spilling, leaking, pumping,
pouring, emitting, emptying or dumping of Hazardous Substances or Hazardous
Waste into the environment; and

	Any other event or condition exists which might, in the
opinion of Lender, under applicable environmental protection statutes, have a
material adverse effect on the financial or operational condition of Borrower or
the value of all or any material part of the collateral or other property or
Borrower.

In witness whereof, the Borrower has agreed as of the date
first set forth above.

         Abaxis, Inc.             .

(BORROWER/PLEDGOR)

By: /s/Alberto Santa Ines

Its: Interim CFO/Director of Finance

COMERICA

    EQUIPMENT
RIDER 

Borrower(s): Abaxis, Inc.

Borrower has entered into a certain Loan and Security
Agreement (Accounts and Inventory) (hereinafter referred to as
"Agreement"), dated March 13, 2002 with Bank (Secured Party).
This EQUIPMENT RIDER (hereinafter referred to as this "Rider") dated
March 13, 2002 is hereby made a part of and incorporated into that
Agreement.

	Borrower grants to Bank a security interest in the
following wherever located (hereinafter referred to as
"Equipment"):

	all of Borrower's present machinery, equipment, fixtures,
vehicles, office equipment, furniture, furnishings, tools, dies, jigs and
attachments, wherever located, (including but not limited to, the items listed
and described on the Schedule of Equipment attached hereto and marked Exhibit
"A and by this reference made a part hereof as though full set forth
herein);

	all of Borrower's additional equipment, wherever located,
of like or unlike nature, to be acquired hereafter, and all replacements,
substitutes, accessions, additions and improvements to any of the foregoing;
and

	all of Borrower's general intangibles, including without
limitation, computer programs, computer disks, computer tapes, literature,
reports, catalogs, drawings, blueprints and other proprietary
items.

2. Bank's security interest in the Equipment as set forth
above shall secure each, any and all of Borrower's Indebtedness to Bank, as the
term "Indebtedness" is defined in the Agreement.

3. Bank may in its sole discretion, from time to time
thereafter, make loans to Borrower.  Loans made by Bank to Borrower pursuant to
this Rider shall be included as part of the Indebtedness of Borrower to Bank and
at Bank's option, may be evidenced by promissory note(s), in form satisfactory
to Bank.  Such loans shall bear interest at the rate and be payable in the
manner specified in said promissory note(s) in the event Bank exercises the
aforementioned option, and in the event Bank does not, such loans shall bear
interest at the rate and be payable in the manner specified in the
Agreement.

4. Borrower represents and warrants to Bank that:

	it has good and indefeasible title to the
Equipment;

	the Equipment is and will be free and clear of all liens,
security interests, encumbrances and claims, except as held by Bank,

	the Equipment shall be kept only at the following
locations: 3240 Whipple Road, Union City, CA

	the owners or mortgagees of the respective locations
are: Crossroads Technology Partners, Nearon Crossroads, LLC.

	Bank shall have the right upon demand now and/or at
all times hereafter, during Borrower's usual business hours to inspect and
examine the Equipment and Borrower agrees to reimburse Bank for its reasonable
costs and expenses in so doing.

5. Borrower shall keep and maintain the Equipment in good
operating condition and repair, make all necessary replacements thereto so that
the value and operating efficiency thereof shall at all time be maintained and
preserved.  Borrower shall not permit any items of Equipment to become a fixture
to real estate or accession to other property, and the Equipment is now and
shall at all times remain an be personal property.

6.  Borrower, at its expense, shall keep and maintain; the
Equipment insured against loss or damage by fire, theft, explosion, sprinklers
and all other hazards and risks ordinarily insured against by other owners who
use such properties and interest in properties in similar businesses for the
full insurable value thereof; and business interruption insurance and public
liability and property damage insurance relating to Borrower's ownership and use
of its assets.  All such policies of insurance shall be in such form, with such
companies and in such amounts as may be satisfactory to Bank. Borrower shall
deliver to bank certified copies of such policies of insurance and evidence of
the payment of all premiums thereof.  All such policies of insurance (except
those of public liability and property damage) shall contain an endorsement in a
form satisfactory to Bank showing loss payable to Bank and all proceeds payable
thereunder shall be payable to Bank and upon receipt by Bank shall be applied on
the account of Borrower's Indebtedness. To secure the payment of Borrower's
Indebtedness, Borrower grants Bank a security interest in and to all such
policies of insurance (except those of public liability and property damage) and
the proceeds thereof and directs all insurers under such policies of insurance
to pay all proceeds thereof directly to Bank. Borrower hereby irrevocably
appoints Bank (and any of Bank's officers, employees or agents designed by Bank)
as Borrower's attorney-in-fact for the purpose of making, settling and adjusting
claims under such policies of insurance and for making determinations and
decisions with respect to such policies of insurance.  Each such insurer shall
agree by endorsement upon the policy or policies of insurance issued by it to
Borrower as required above, or by independent instruments furnished to Bank that
it will give Bank at least ten (10) days written notice before any such policy
or policies of insurance shall be altered or canceled, and that no act or
default of Borrower, or any other person, shall affect the right of Bank to
recover under such policy or policies of insurance required above or to pay any
premium in whole or in part relating thereto.  Bank, without waiving or
releasing any obligations or defaults by Borrower hereunder, may at any time or
times hereafter, but shall have no obligation to do so, obtain and maintain such
policies of insurance and pay such premiums and take any other action with
respect to such policies which Bank deems advisable.  All sums so disbursed by
Bank, including reasonable attorneys' fees, court costs, expenses and other
charges relating thereto, shall be a part of Borrower's Indebtedness and payable
on demand.

7. Until default by Borrower under the agreement or this
Rider, Borrower may subject to the provisions of the Agreement and this Rider
and consistent therewith, remain in possession thereof and use the Equipment
referred to herein in the ordinary course of business at the locations herein
above designated.

8. All of the terms, conditions, warranties, covenants,
agreements and representations of the Agreement are incorporated herein and
reaffirmed.

9. Upon a default by Borrower under the Agreement or this
Rider, Borrower upon request of Bank to do so, agrees to assemble and make the
Equipment or any part thereof available to Bank at a place designated by
Bank.

10. Borrower shall upon demand by Bank immediately deliver to
bank and properly endorse, any and all evidences of ownership, certificates of
title or applications for title to any of the aforesaid items of Equipment.

11. Bank shall not in any way or manner be liable or
responsible for (a) the safekeeping of the Equipment; (b) any loss or damage
thereto occurring or arising in any manner or fashion from any cause; (c) any
diminution in the value thereof or (d) any fact of default by any person
whomsoever.  All risk of loss, damage or destruction of the Equipment shall be
borne by Borrower.

Borrower(s): Abaxis, Inc.

By: /s/ Alberto Santa Ines

 

 

COMERICA

INVENTORY RIDER 

(REVOLVING ADVANCE)

Borrower(s): Abaxis, Inc.

Borrower has entered into a certain Loan and Security
Agreement (Accounts and Inventory) ( hereinafter referred to as
"Agreement") dated March 13, 2002 with Bank (Secured Party).
This INVENTORY RIDER (hereinafter referred to as this Rider) dated March 13,
2002 is hereby made a part of and incorporated into that Agreement.

1. At the present of Borrower, made at any time and from
time to time during the term of the Agreement, and so long as no Event of
Default under the Agreement has occurred and Borrower is in full, faithful and
timely compliance with each and all of the covenants, conditions, warranties and
representations, contained in the Agreement, this Rider and/or any other
agreement between Bank and Borrower, Bank agrees to lend Borrower Forty
Percent (40.000%) of the lower of cost or market value of Borrower's raw
materials and finished good Inventory, and as may be adjusted by Bank, in Bank's
discretion, for age and seasonality or other factors affecting the value of the
Inventory, up to a maximum advance outstanding at any one time of One Million
and no/100 Dollars ($ 1,000,000.00) upon Borrower's concurrent
execution and delivery to Bank of a Designation of Inventory, or Certification
of Borrowing Base, in form customarily used by Bank.  All advances made and to
be made pursuant to this Rider are solely and exclusively to enable Borrower to
acquire rights in and purchase new Inventory, and Borrower represents and
warrants that all advances by Bank pursuant to this Rider will be used solely
and exclusively for such purpose; and since such advances will be used for the
foregoing purposes, Bank's security interest in Borrower's Inventory is and
shall be at all times a purchase money security interest as that term is
described in Section 9107 of the California Uniform Commercial Code.

2. Advances made by Bank to Borrower pursuant to this
Rider shall be included as part of the Indebtedness of Borrower to Bank as the
term "Indebtedness" is defined in the Agreement; and at Bank's option,
advances pursuant to this Rider may be evidenced by promissory note(s), in form
and on terms satisfactory to Bank. All such advances shall bear interest at the
rate and be payable in the manner specified in said promissory note(s) in the
event Bank exercises the aforementioned option, and in the event Bank does not,
such advances shall bear interest at the rate and be payable in the manner
specified in the Agreement.

3. All of the terms, covenants, warranties, conditions,
agreements and representations of the Agreement are incorporated herein as
though set forth in their entirety and are hereby reaffirmed by Borrower and
Bank as though fully set forth herein.

BORROWER(S): Abaxis, Inc.

By: /s/ Alberto Santa Ines

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