Document:

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                                                                   Exhibit 10.20

HORIZON
Technology Finance

                                  July 18, 2006

Pearl Chan
Corporate Controller
Isilon Systems, Inc.
3101 Western Avenue
Seattle, WA 98121

Dear Ms. Chan:

      This letter is written in connection with that certain Loan Agreement
between Horizon Technology Funding Company LLC ("Lender") and Isilon Systems,
Inc. ("Borrower"), dated March 22, 2006 and the loan documents related thereto,
whereby Lender has made a loan in the original principal amount of Six Million
Dollars ($6,000,000) to Borrower (the "Loan"). Borrower has requested that the
subclause (e) of the definition of "Permitted Indebtedness" in Section 1.1 of
the Loan Agreement be amended to increase the principal amount of the permitted
senior revolving credit facility. In consideration for Borrower's payment to
Lender of a fee and legal expenses in an aggregate amount of Thirty Thousand
Dollars ($30,000), the receipt of which is hereby confirmed by Lender, Lender
agrees that subclause (e) of the definition of "Permitted Indebtedness" in
Section 1.1 of the Loan Agreement is hereby deleted and replaced with the
following:

                  "(e) Indebtedness from Silicon Valley Bank consisting of (i) a
            revolving credit facility in an aggregate principal amount
            outstanding at any one time does not exceed Eleven Million Dollars
            ($11,000,000) in which (1) loans are limited to not more than One
            Hundred Percent (100%) of Borrower's outstanding accounts
            receivable, inventory and cash, and (2)may include cash management
            services (including credit card lines of credit), letter of credit
            arrangements or foreign currency hedging arrangements and (ii)
            equipment term loans where advances are limited to the purchase
            price of equipment purchased by Borrower plus soft costs related
            thereto and the maximum aggregate original principal amount of such
            term loans does not exceed Two Million Three Hundred Twenty Thousand
            Dollars ($2,320,000);"

      By signing below and returning a copy of this letter to Lender, Borrower
acknowledges that the Loan Agreement is hereby modified in accordance with the
provisions set forth above. Borrower further understands and agrees that in
modifying the Loan Agreement, Lender is relying upon Borrowers representations,
warranties, and agreements, as set forth in the Loan Agreement. Except as
expressly modified pursuant to this letter, the terms of the Loan Agreement
remain unchanged and in full force and effect. Lender's agreement to modify the
Loan Agreement in accordance with the provisions set forth in this letter in no
way shall obligate Lender to make any future waivers or modifications to the
Loan Agreement. Nothing in this letter shall constitute a satisfaction of the
Borrower's indebtedness to Lender. It is the intention of Lender and Borrower to
retain as liable parties all makers and endorsers of the Loan Agreement, unless
the party is expressly released in

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Pearl Chan
Corporate Controller
Isilon Systems, Inc.
July 18, 2006
Page 2 of 2

writing. No maker or endorser will be released by virtue of this letter. The
terms of this paragraph apply not only to this letter, but also to all
subsequent loan modification agreements.

      The provisions of this letter shall not be deemed effective until such
time as Borrower shall have returned a countersigned copy to Lender.

                                           Very truly yours,

                                           HORIZON TECHNOLOGY FUNDING
                                           COMPANY LLC
                                           By: Horizon Technology Finance, LLC,
                                               its sole member

                                           By: /s/ Robert D. Pomeroy, Jr.
                                               ---------------------------------
                                               Robert D. Pomeroy, Jr.
                                               Managing Member

      By executing below, the undersigned acknowledges and confirms the
effectiveness of this letter to amend the provisions of the Loan Agreement.

Isilon Systems, Inc.

By: /s/ Pearl Chan
    --------------------------
    Pearl Chan
    Corporate Controller

Dated: 7/18/06

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                                                                 Exhibit 10.21

                               SILICON VALLEY BANK

                           LOAN AND SECURITY AGREEMENT

BORROWER: ISILON SYSTEMS, INC., A DELAWARE CORPORATION
ADDRESS:  220 W. MERCER STREET, SUITE 501
          SEATTLE, WASHINGTON 98119

DATE:     JUNE 24, 2004

THIS LOAN AND SECURITY AGREEMENT is entered into on the above date between
SILICON VALLEY BANK ("Silicon"), whose * address is 3003 Tasman Drive, Santa
Clara, California 95054 ** and the borrowers) named above (the "Borrower"),
whose chief executive office is located at the above address ("Borrower's
Address"). The Schedule to this Agreement (the "Schedule") shall for all
purposes be deemed to be a part of this Agreement, and the same is an integral
part of this Agreement. (Definitions of certain terms used in this Agreement are
set forth in Section 8 below.)

      *MAIN

      ** (AND WITH AN OFFICE AT 4700 CARILLON POINT, KIRKLAND, WASHINGTON
         98033),

1. LOANS.

      1.1 LOANS. Subject to the terms and conditions of this Agreement, Silicon
will make loans to Borrower (the "Loans") up to the amounts (the "Credit Limit")
shown in Section 1 of the Schedule, provided no Default or Event of Default has
occurred and is continuing, and subject to deduction of Reserves for accrued
interest and such other Reserves as Silicon deems proper from time to time in
its good faith business judgment.

      1.2 INTEREST. All Loans and all other monetary Obligations shall bear
interest at the rate shown on the Schedule, except where expressly set forth in
the contrary in this Agreement. Interest shall be payable monthly, on the last
day of the month. * may, in Silicon's discretion, be charged to borrower's loan
account, and the same shall thereafter bear interest at the same rate as the
other ** Loans. Silicon may, in its discretion, charge interest to Borrower's
Deposit Accounts maintained with Silicon.

      * UNTIL THE REVOLVING MATURITY DATE, INTEREST

      ** REVOLVING

      1.3 OVERADVANCES. If at any time or for any reason the total of all
outstanding Loans and all other monetary Obligations exceeds the Credit Limit
(an "Overadvance"), Borrower shall immediately pay the amount of the excess to
Silicon, without notice or demand. Without limiting Borrower's obligation to
repay to Silicon the amount of any Overadvance, Borrower agrees to pay Silicon
interest on the outstanding amount of any Overadvance, on demand, at the Default
Rate.

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      1.4 FEES. Borrower shall pay Silicon the fees shown on the Schedule, which
are in addition to all interest and other sums payable to Silicon and are not
refundable.

      1.5 LOAN REQUESTS. To obtain a Loan or other extension of credit, Borrower
shall make a request to Silicon by facsimile or telephone. Requests for Loans
and other extensions of credit received after 12:00 Noon * will not be
considered by Silicon until the next Business Day. Silicon may rely on any
telephone request, for a Loan or other extension of credit, given by a person
whom Silicon believes is an authorized representative of Borrower, and Borrower
will indemnify Silicon for any loss Silicon suffers as a result of that
reliance.

      * (PACIFIC TIME)

      1.6 LETTERS OF CREDIT. At the request of Borrower +, Silicon may, in its
good faith business judgment, issue or arrange for the issuance of letters of
credit for the account of Borrower, in each case in form and substance
satisfactory to Silicon in its sole discretion (collectively, "Letters of
Credit"). The Borrower agrees that the aggregate face amount of all outstanding
Letters of Credit shall never exceed the lesser of the amount defined in Section
1 of the Schedule as the "Letter of Credit Sublimit" or the amount of * Loans
and other extensions of credit ** which are from time to time available
hereunder, and that the amount of outstanding Letters of Credit shall be
reserved against * Loans and other extensions of credit ** which would otherwise
be available hereunder. If at any time or for any reason the aggregate face
amount of all outstanding Letters of Credit shall exceed the foregoing limit,
Borrower shall immediately pay an amount equal to said excess to Silicon,
without notice or demand. Borrower shall pay all bank charges (including charges
of Silicon) for the issuance of Letters of Credit, together with such additional
fees as Silicon's letter of credit department shall charge in connection with
the issuance of the Letters of Credit. Any payment by Silicon under or in
connection with a Letter of Credit shall constitute a Loan hereunder on the date
such payment is made. Each Letter of Credit shall have an expiry date no later
than thirty days prior to the ++. Borrower hereby agrees to indemnify, save, and
hold Silicon harmless from any loss, cost, expense, or liability, including
payments made by Silicon, expenses, and reasonable attorneys' fees incurred by
Silicon arising out of or in connection with any Letters of Credit ***. Borrower
agrees to be bound by the regulations and interpretations of the issuer of any
Letters of Credit guarantied by Silicon and opened for Borrower's account or by
Silicon's interpretations of any Letter of Credit issued by Silicon for
Borrower's account, and Borrower understands and agrees that Silicon shall not
be liable for any error, negligence, or mistake, whether of omission or
commission, in following Borrower's instructions or those contained in the
Letters of Credit or any modifications, amendments, or supplements thereto.
Borrower understands that Letters of Credit may require Silicon to indemnify the
issuing bank for certain costs or liabilities arising out of claims by Borrower
against such issuing bank. Borrower hereby agrees to indemnify and hold Silicon
harmless with respect to any loss, cost, expense, or liability incurred by
Silicon under any Letter of Credit as a result of Silicon's indemnification of
any such issuing bank. The provisions of this Agreement, as it pertains to
Letters of Credit, and any other Loan Documents relating to Letters of Credit
are cumulative.

      + AND PRIOR TO THE REVOLVING MATURITY DATE

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      * REVOLVING

      ** (OTHER THAN EQUIPMENT LOANS)

      *** (EXCEPT IF AND TO THE EXTENT THE SAME IS THE PROXIMATE RESULT OF
SILICON'S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT)

      ++ REVOLVING MATURITY DATE; PROVIDED THAT A LETTER OF CREDIT MAY HAVE AN
EXPIRY DATE LATER THAN THIRTY DAYS PRIOR TO THE REVOLVING MATURITY DATE IF AND
ONLY IF BORROWER'S REIMBURSEMENT OBLIGATION WITH RESPECT TO SUCH LETTER OF
CREDIT IS SECURED BY CASH ON TERMS ACCEPTABLE TO SILICON AND IN THE MANNER SET
FORTH IN SECTION 6.3 HEREOF.

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

3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF BORROWER.

      In order to induce Silicon to enter into this Agreement and to make Loans
and other extensions of credit, Borrower represents and warrants to Silicon as
follows, and Borrower covenants that the following representations will continue
to be true, and that Borrower will at all times comply with all of the following
covenants, throughout the term of this Agreement and until all Obligations *
have been paid and performed in full:

      * , OTHER THAN CONTINGENT INDEMNIFICATION OBLIGATIONS UNDER SECTION 9.8
HEREOF OR ANY COMPARABLE PROVISION OF ANY LOAN DOCUMENT (COLLECTIVELY,
"CONTINGENT INDEMNIFICATION OBLIGATIONS") NOT YET DUE,

      3.1 CORPORATE EXISTENCE AND AUTHORITY. Borrower is and will continue to
be, duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation. Borrower is and will continue to be qualified
and licensed to do business in all jurisdictions in which any failure to do so
could reasonably be expected to result in a Material Adverse Change. The
execution, delivery and performance by Borrower of this Agreement, and all other
documents contemplated hereby (i) have been duly and validly authorized, (it)
are enforceable against Borrower in accordance with their terms (except as
enforcement may be limited by equitable principles and by bankruptcy,
insolvency, reorganization, moratorium or similar laws relating to

                                       -3-
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creditors' rights generally), and (iii) do not violate Borrower's articles or
certificate of incorporation, or Borrower's by-laws, or any law or any material
agreement or instrument which is binding upon Borrower or its property, and (iv)
do not constitute grounds for acceleration of any material indebtedness or
obligation under any agreement or instrument which is binding upon Borrower or
its property.

      3.2 NAME; TRADE NAMES AND STYLES. The name of Borrower set forth in the
heading to this Agreement is its correct name. Listed in the Representations are
all prior names of Borrower and all of Borrower's present and prior trade names.
Borrower shall give Silicon 30 days' prior written notice before changing its
name or doing business under any other name. Borrower has complied, and will in
the future comply, in all material respects, with all laws relating to the
conduct of business under a fictitious business name, except where the failure
to so comply could not reasonably be expected to result in a Material Adverse
Change.

      3.3 PLACE OF BUSINESS; LOCATION OF COLLATERAL. The address set forth in
the heading to this Agreement is Borrower's chief executive office. In addition,
Borrower has places of business and Collateral is located only at the locations
set forth in the Representations. Borrower will give Silicon at least 30 days
prior written notice before opening any additional place of business, changing
its chief executive office, or moving any of the Collateral to a location other
than Borrower's Address or one of the locations set forth in the
Representations, except that Borrower may maintain sales offices in the ordinary
course of business at which not more than a total of $10,000 fair market value
of Equipment is located.

      3.4 TITLE TO COLLATERAL; PERFECTION; PERMITTED LIENS.

      (a) Borrower is now, and will at all times in the future be, the sole
owner of all the Collateral, except for items of Equipment which are leased to
Borrower. The Collateral now is and will remain free and clear of any and all
liens, charges, security interests, encumbrances and adverse claims, except for
Permitted Liens. Silicon now has, and will continue to have, a first-priority
perfected and enforceable security interest in all of the Collateral, subject in
lien priority only to those Permitted Liens that are expressly entitled to such
priority over the security interests of Silicon by operation of law or by
written subordination agreement duly executed and delivered by Silicon in favor
of the holders of such Permitted Liens, and Borrower will at all times defend
Silicon and the Collateral against all claims of others.

      (b) Borrower has set forth in the Representations all of Borrower's
Deposit Accounts, and Borrower will give Silicon five Business Days advance
written notice before establishing any new Deposit Accounts and, in accordance
with Section 8(1) of the Schedule, will cause the institution where any such new
Deposit Account is maintained to execute and deliver to Silicon a control
agreement in form sufficient to perfect Silicon's security interest in the
Deposit Account and otherwise satisfactory to Silicon in its good faith business
judgment. Nothing herein limits any requirements which may be set forth in the
Schedule as to where Deposit Accounts will be maintained.

                                       -4-
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      (c) In the event that Borrower shall at any time after the date hereof
have any commercial tort claims against others, which it is asserting or intends
to assert, and in which the potential recovery exceeds *, Borrower shall
promptly notify Silicon thereof in writing and provide Silicon with such
information regarding the same as Silicon shall request (unless providing such
information would waive the Borrower's attorney-client privilege). Such
notification to Silicon shall constitute a grant of a security interest in the
commercial tort claim and all proceeds thereof to Silicon, and Borrower shall
execute and deliver all such documents and take all such actions as Silicon
shall request in connection therewith.

      * $175,000 IN THE AGGREGATE AS TO ALL SUCH CLAIMS

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

      * COMMERCIALLY REASONABLE

      3.5 MAINTENANCE OF COLLATERAL. Borrower will maintain the Collateral in
good working condition (ordinary wear and tear excepted), and Borrower will not
use the Collateral for any unlawful purpose. Borrower will immediately advise
Silicon in writing of any material loss or damage to the Collateral.

      3.6 BOOKS AND RECORDS. Borrower has maintained and will maintain at
Borrower's Address complete and accurate books and records, comprising an
accounting system in accordance with GAAP.

      3.7 FINANCIAL CONDITION, STATEMENTS AND REPORTS. All financial statements
now or in the future delivered to Silicon have been, and will be, prepared in
conformity with GAAP * and now and in the future will fairly present the results
of operations and financial condition of Borrower, in accordance with GAAP *, at
the times and for the periods therein stated. Between the last date covered by
any such statement provided to Silicon and the date hereof, there has been no
Material Adverse Change.

      * (EXCEPT THAT INTERIM FINANCIAL STATEMENTS MAY BE SUBJECT TO NORMAL
YEAR-END AUDIT ADJUSTMENTS AND NEED NOT CONTAIN FOOTNOTE DISCLOSURES REQUIRED BY
GAAP)

                                       -5-
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      3.8 TAX RETURNS AND PAYMENTS; PENSION CONTRIBUTIONS. Borrower has timely
filed, and will timely file, all required tax returns and reports, and Borrower
has timely paid, and will timely pay, all foreign, federal, state and local
taxes, assessments, deposits and contributions now or in the future owed by
Borrower. Borrower may, however, defer payment of any contested taxes, provided
that Borrower (i) in good faith contests Borrower's obligation to pay the taxes
by appropriate proceedings promptly and diligently instituted and conducted,
(ii) notifies Silicon in writing of the commencement of, and any material
development in, the proceedings, and (iii) posts bonds or takes any other steps
required to keep the contested taxes from becoming a lien upon any of the
Collateral. Borrower is unaware of any claims or adjustments proposed for any of
Borrower's prior tax years which could result in additional taxes * becoming due
and payable by Borrower. Borrower has paid, and shall continue to pay all
amounts necessary to fund all present and future pension, profit sharing and
deferred compensation plans in accordance with their terms, and Borrower has not
and will not withdraw from participation in, permit partial or complete
termination of, or permit the occurrence of any other event with respect to, any
such plan which could reasonably be expected to result in any liability of
Borrower, including any liability to the Pension Benefit Guaranty Corporation or
its successors or any other governmental agency.

      *, NOT TO EXCEED $50,000 IN THE AGGREGATE,

      3.9 COMPLIANCE WITH LAW. Borrower has, to the best of its knowledge,
complied, and will comply, in all material respects, with all provisions of all
foreign, federal, state and local laws and regulations applicable to Borrower,
including, but not limited to, those relating to Borrower's ownership of real or
personal property, the conduct and licensing of Borrower's business, and all
environmental matters.

      3.10 LITIGATION. There is no claim, suit, litigation, proceeding or
investigation pending or (to best of Borrower's knowledge) threatened against or
affecting Borrower in any court or before any governmental agency (or any basis
therefor known to Borrower) which could reasonably be expected to result, either
separately or in the aggregate, in any Material Adverse Change. Borrower will
promptly inform Silicon in writing of any claim, proceeding, litigation or
investigation in the future threatened or instituted against Borrower *.

      * INVOLVING ANY SINGLE CLAIM OF $100,000 OR MORE, OR INVOLVING $250,000 OR
MORE IN THE AGGREGATE

      3.11 USE OF PROCEEDS. All proceeds of all Loans and other extensions of
credit shall be used solely for lawful business purposes. Borrower is not
purchasing or carrying any "margin stock" (as defined in Regulation U of the
Board of Governors of the Federal Reserve System) and no part of the proceeds of
any Loan or other extension of credit will be used to purchase or carry any
"margin stock" or to extend credit to others for the purpose of purchasing or
carrying any "margin stock."

                                       -6-
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4. ACCOUNTS.

      4.1 REPRESENTATIONS RELATING TO ACCOUNTS. Borrower represents and warrants
to Silicon as follows: Each Account with respect to which Loans or other
extensions of credit are requested by Borrower shall, on the date each Loan or
other extension of credit is requested and made, (i) represent an undisputed
bona fide existing unconditional obligation of the Account Debtor created by the
sale, delivery, and acceptance of goods or the rendition of services, or the
non-exclusive licensing of Intellectual Property, in the ordinary course of
Borrower's business, and (ii) meet the Minimum Eligibility Requirements set
forth in Section 8 below.

      4.2 REPRESENTATIONS RELATING TO DOCUMENTS AND LEGAL COMPLIANCE. Borrower
represents and warrants to Silicon as follows: All statements made and all
unpaid balances appearing in all invoices, instruments and other documents
evidencing the Accounts are and shall be true and correct and all such invoices,
instruments and other documents and all of Borrower's books and records are and
shall be genuine and in all respects what they purport to be. All sales and
other transactions underlying or giving rise to each Account shall comply in all
material respects with all applicable laws and governmental rules and
regulations. To the best of Borrower's knowledge, all signatures and
endorsements on alt documents, instruments, and agreements relating to all
Accounts are and shall be genuine, and all such documents, instruments and
agreements are and shall be legally enforceable in accordance with their terms
*.

      * (EXCEPT AS ENFORCEMENT MAY BE LIMITED BY EQUITABLE PRINCIPLES AND BY
BANKRUPTCY, INSOLVENCY, REORGANIZATION, MORATORIUM, OR SIMILAR LAWS RELATING TO
CREDITORS' RIGHTS GENERALLY)

      4.3 SCHEDULES AND DOCUMENTS RELATING TO ACCOUNTS. Borrower shall deliver
to Silicon transaction reports and schedules of collections, as provided in the
Schedule, on Silicon's standard forms; provided, however, that Borrower's
failure to execute and deliver the same shall not affect or limit Silicon's
security interest and other rights in all of Borrower's Accounts, nor shall
Silicon's failure to advance or lend against a specific Account affect or limit
Silicon's security interest and other rights therein. If requested by Silicon,
Borrower shall furnish Silicon with copies (or, at Silicon's request, originals)
of all contracts, orders, invoices, and other similar documents, and all
shipping instructions, delivery receipts, bills of lading, and other evidence of
delivery, for any goods the sale or disposition of which gave rise to such
Accounts, and Borrower warrants the genuineness of all of the foregoing.
Borrower shall also furnish to Silicon an aged accounts receivable trial balance
as provided in the Schedule. In addition, Borrower shall deliver to Silicon, on
its request, the originals of all instruments, chattel paper, security
agreements, guarantees and other documents and property evidencing or securing
any Accounts, in the same form as received, with all necessary indorsements, and
copies of all credit memos.

      4.4 COLLECTION OF ACCOUNTS. Borrower shall have the right to collect all
Accounts, unless and until a Default or an Event of Default has occurred and is
continuing. Whether or not an Event of Default has occurred and is continuing,
Borrower shall hold all payments on, and proceeds of, Accounts in trust for
Silicon, and * Borrower shall immediately deliver all such payments and proceeds
to Silicon in their original form, duly endorsed, to be applied to the
Obligations in such

                                       -7-
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order as Silicon shall determine. Silicon may, in its good faith business
judgment, require that all proceeds of Collateral be deposited by Borrower into
a lockbox account, or such other "blocked account" as Silicon may specify,
pursuant to a blocked account agreement in such form as Silicon may specify in
its good faith business judgment.

      * , SUBJECT TO THE STREAMLINE PROVISIONS,

      4.5 REMITTANCE OF PROCEEDS. All proceeds arising from the disposition of
any Collateral shall be delivered, in kind, by Borrower to Silicon in the
original form in which received by Borrower not later than the following
Business Day after receipt by Borrower, to be applied to the Obligations in such
order as Silicon shall determine; provided that, if no Default or Event of
Default has occurred and is continuing, Borrower shall not be obligated to remit
to Silicon the proceeds of the sale of worn out or obsolete Equipment disposed
of by Borrower in good faith in an arm's length transaction for an aggregate
purchase price of $25,000 or less (for all such transactions in any fiscal
year). Borrower agrees that it will not commingle proceeds of Collateral with
any of Borrower's other funds or property, but will hold such proceeds separate
and apart from such other funds and property and in an express trust for
Silicon. Nothing in this Section limits the restrictions on disposition of
Collateral set forth elsewhere in this Agreement.

      4.6 DISPUTES. Borrower shall notify Silicon promptly of all disputes or
claims relating to Accounts. Borrower shall not forgive (completely or
partially), compromise or settle any Account for less than payment in full, or
agree to do any of the foregoing, except that Borrower may do so, provided that:
(i) Borrower does so in good faith, in a commercially reasonable manner, in the
ordinary course of business, and in arm's length transactions, which are
reported to Silicon on the regular reports provided to Silicon; (ii) no Default
or Event of Default has occurred and is continuing; and (iii) taking into
account all such discounts, settlements and forgiveness, the total outstanding
Loans and other extensions of credit will not exceed the Credit Limit.

      4.7 RETURNS. Provided no Event of Default has occurred and is continuing,
if any Account Debtor returns any Inventory to Borrower, Borrower shall promptly
determine the reason for such return and promptly issue a credit memorandum to
the Account Debtor in the appropriate amount. In the event any attempted return
occurs after the occurrence and during the continuance of any Event of Default,
Borrower shall hold the returned Inventory in trust for Silicon, and immediately
notify Silicon of the return of the Inventory.

      4.8 VERIFICATION. Silicon may, from time to time, verify directly with the
respective Account Debtors the validity, amount and other matters relating to
the Accounts, by means of mail, telephone or otherwise, either in the name of
Borrower or Silicon or such other name as Silicon may choose.

      4.9 NO LIABILITY. Silicon shall not be responsible or liable for any
shortage or discrepancy in, damage to, or loss or destruction of, any goods, the
sale or other disposition of which gives rise to an Account, or for any error,
act, omission, or delay of any kind occurring in the settlement, failure to
settle, collection or failure to collect any Account, or for settling any
Account

                                       -8-
<PAGE>

in good faith for less than the full amount thereof, nor shall Silicon be deemed
to be responsible for any of Borrower's obligations under any contract or
agreement giving rise to an Account. Nothing herein shall, however, relieve
Silicon from liability for its own gross negligence or willful misconduct.

5. ADDITIONAL DUTIES OF BORROWER.

      5.1 FINANCIAL AND OTHER COVENANTS. Borrower shall at all times comply with
the financial and other covenants set forth in the Schedule.

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

      5.3 REPORTS. Borrower, at its expense, shall provide Silicon with the
written reports set forth in the Schedule, and such other written reports with
respect to Borrower (including budgets, sales projections, operating plans and
other financial documentation), as Silicon shall from time to time specify in
its good faith business judgment.

      5.4 ACCESS TO COLLATERAL, BOOKS AND RECORDS. At reasonable times, and on
at least one Business Day's notice, Silicon, or its agents, shall have the right
to inspect the Collateral, and the right to audit and copy Borrower's books and
records *. ** The foregoing inspections and audits shall be at Borrower's
expense and the charge therefor shall be $750 per person per day (or such higher
amount as shall represent Silicon's then current standard charge for the same),
plus reasonable out-of-pocket expenses. In the event Borrower and Silicon
schedule an audit more than 10 days in advance, and Borrower seeks to
reschedules the audit with less than 10 days written notice to Silicon, then
(without limiting any of Silicon's rights or remedies), Borrower shall pay
Silicon a cancellation fee of $1,000 plus any out-of-pocket expenses incurred by
Silicon, to compensate Silicon for the anticipated costs and expenses of the
cancellation.

      * (SUCH INSPECTION AND AUDIT, COLLECTIVELY, A "FIELD EXAMINATION")

                                       -9-
<PAGE>

      ** IN HANDLING ANY CONFIDENTIAL INFORMATION, SILICON WILL EXERCISE THE
SAME DEGREE OF CARE THAT IT EXERCISES FOR ITS OWN PROPRIETARY INFORMATION, BUT
DISCLOSURE OF INFORMATION MAY BE MADE (i) TO SILICON'S SUBSIDIARIES OR
AFFILIATES IN CONNECTION WITH THEIR BUSINESS WITH BORROWER, (ii) TO PROSPECTIVE
TRANSFEREES OR PURCHASERS OF ANY INTEREST IN THE LOANS (PROVIDED, HOWEVER,
SILICON SHALL USE COMMERCIALLY REASONABLE EFFORTS IN OBTAINING SUCH PROSPECTIVE
TRANSFEREE'S OR PURCHASER'S AGREEMENT OF THE TERMS OF THIS PROVISION), (iii) AS
REQUIRED BY LAW, REGULATION, SUBPOENA, OR OTHER ORDER, (iv) AS REQUIRED IN
CONNECTION WITH SILICON'S EXAMINATION OR AUDIT AND (v) AS SILICON CONSIDERS
APPROPRIATE EXERCISING REMEDIES UNDER THIS AGREEMENT CONFIDENTIAL INFORMATION
DOES NOT INCLUDE INFORMATION THAT EITHER: (a) IS IN THE PUBLIC DOMAIN OR IN
SILICON'S POSSESSION WHEN DISCLOSED TO SILICON, OR BECOMES PART OF THE PUBLIC
DOMAIN AFTER DISCLOSURE TO SILICON; OR (b) IS DISCLOSED TO SILICON BY A THIRD
PARTY, IF SILICON DOES NOT KNOW THAT THE THIRD PARTY IS PROHIBITED FROM
DISCLOSING THE INFORMATION.

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

      * EXPRESSLY IN THIS AGREEMENT

      ** : (a) THE SALE OF FINISHED INVENTORY IN THE ORDINARY COARSE OF
BORROWER'S BUSINESS; (b) THE SALE OR TRANSFER OF OBSOLETE OR UNNEEDED EQUIPMENT
IN THE ORDINARY COURSE OF BORROWER'S BUSINESS; (c) THE GRANT OF NON-EXCLUSIVE
LICENSES OF INTELLECTUAL PROPERTY TO CUSTOMERS OF BORROWER IN THE ORDINARY
COURSE OF BUSINESS; AND (d) SOLELY WITH RESPECT TO BORROWER'S CUSTOMIZATION OF
SOFTWARE OR OTHER PRODUCTS FOR ACCOUNT DEBTORS IN THE ORDINARY COURSE OF
BORROWER'S BUSINESS, THE EXCLUSIVE LICENSING BY BORROWER OF SUCH SOFTWARE OR
OTHER PRODUCTS, AS SO CUSTOMIZED

      *** (EXCEPT: (a) LOANS CONSISTING OF (1) TRAVEL ADVANCES AND EMPLOYEE
RELOCATION LOANS AND OTHER SIMILAR EMPLOYEE LOANS AND ADVANCES IN THE ORDINARY
COURSE OF BUSINESS, PROVIDED THE AGGREGATE AMOUNT OF SUCH LOANS UNDER THIS
(A)(1) DO NOT EXCEED $250,000 AT ANY ONE TIME

                                      -10-
<PAGE>

OUTSTANDING, AND (2) LOANS TO EMPLOYEES, OFFICERS OR DIRECTORS RELATING TO THE
PURCHASE OF EQUITY SECURITIES OF BORROWER PURSUANT TO EMPLOYEE STOCK PURCHASE
PLANS OR AGREEMENTS APPROVED BY BORROWER'S BOARD OF DIRECTORS, PROVIDED THE
AGGREGATE AMOUNT OF SUCH LOANS UNDER THIS CLAUSE (A)(2) DO NOT EXCEED $250,000
AT ANY ONE TIME OUTSTANDING; AND (B) DEBT OBLIGATIONS RECEIVED IN CONNECTION
WITH THE BANKRUPTCY OR REORGANIZATION OF CUSTOMERS OR SUPPLIERS AND IN
SETTLEMENT OF DELINQUENT OBLIGATIONS OF, AND OTHER DISPUTES WITH, CUSTOMERS OR
SUPPLIERS ARISING IN THE ORDINARY COURSE OF BUSINESS; AND (C) DEBT OBLIGATIONS
CONSISTING OF NOTES RECEIVABLE OF, OR PREPAID ROYALTIES AND OTHER CREDIT
EXTENSIONS TO, CUSTOMERS WHO ARE NOT AFFILIATES, IN THE ORDINARY COURSE
BUSINESS, PROVIDED THE AGGREGATE AMOUNT OF SUCH DEBT OBLIGATIONS UNDER THIS
CLAUSE (C) DO NOT EXCEED $75,000 AT ANY ONE TIME OUTSTANDING)

      **** , EXCEPT FOR THE REPURCHASES OF STOCK FROM THE CANCELLATION OF
INDEBTEDNESS AND FROM FORMER EMPLOYEES, OFFICERS, DIRECTORS, AND CONTRACTORS, OF
BORROWER UNDER THE TERMS OF APPLICABLE REPURCHASE OR SIMILAR AGREEMENTS BETWEEN
BORROWER AND SUCH EMPLOYEES, OFFICERS, DIRECTORS, AND CONTRACTORS, ALL IN AN
AGGREGATE AMOUNT NOT TO EXCEED $350,000 WHILE THIS AGREEMENT IS IN EFFECT

      5.6 LITIGATION COOPERATION. Should any third-party suit or proceeding be
instituted by or against Silicon with respect to any Collateral or relating to
Borrower, Borrower shall, without expense to Silicon, make available Borrower
and its officers, employees and agents and Borrower's books and records, to the
extent that Silicon may deem them reasonably necessary in order to prosecute or
defend any such suit or proceeding.

      5.7 FURTHER ASSURANCES. Borrower agrees, at its expense, on request by
Silicon, to execute all documents and take all actions, as Silicon, may, in its
good faith business judgment, deem necessary or useful in order to perfect, and
maintain the first-lien-priority of, Silicon's security interests in the
Collateral (subject in lien priority only to those Permitted Liens that are
expressly entitled to such priority over the security interests of Silicon by
operation of law or by written subordination agreement duly executed and
delivered by Silicon in favor of the holders of such Permitted Liens), and in
order to fully consummate the transactions contemplated by this Agreement.

6. TERM.

      6.1 MATURITY DATE. This Agreement shall continue in effect until the *
maturity date set forth in Section 4 of the Schedule (the "Maturity Date"),
subject to Section 6.3 below.

      * LATEST

      6.2 EARLY TERMINATION. This Agreement may be terminated prior to the
Maturity Date as follows: (i) by Borrower, effective three Business Days after
written notice of termination is given to Silicon; or (ii) by Silicon at any
time after the occurrence and during the continuance of an Event of Default,
without notice, effective immediately. If this Agreement is terminated by
Borrower or by Silicon under this Section 6.2, Borrower shall pay to Silicon a
termination fee in an amount equal to

                                      -11-
<PAGE>

*, provided that no termination fee shall be charged if ** the credit facility
hereunder is replaced with a new facility from another division of Silicon
Valley Bank. The termination fee shall be due and payable on the effective date
of termination and thereafter shall bear interest at a rate equal to the highest
rate applicable to any of the Obligations.

      * ONE PERCENT (1.0%) OF THE MAXIMUM REVOLVER AMOUNT

      ** (y) ALL OBLIGATIONS (OTHER THAN CONTINGENT INDEMNIFICATION OBLIGATIONS
NOT YET DUE) ARE PAID IN FULL IN CASH AND THIS AGREEMENT IS TERMINATED UNDER
THIS SECTION 6.2 CONCURRENTLY WITH THE ACQUISITION OF BORROWER BY A THIRD PARTY
NOT AFFILIATED WITH BORROWER, OR (z)

      6.3 PAYMENT OF OBLIGATIONS. * Without limiting the generality of the
foregoing, if on the ** Maturity Date, or on any earlier effective date of
termination, there are any outstanding Letters of Credit issued by Silicon or
issued by another institution based upon an application, guarantee, indemnity or
similar agreement on the part of Silicon, then on such date Borrower shall
provide to Silicon cash collateral in an amount equal to *** of all such Letters
of Credit plus all interest, fees and cost due or to become due in connection
therewith (as estimated by Silicon in its good faith business judgment), to
secure all of the Obligations relating to said Letters of Credit, pursuant to
Silicon's then standard form cash pledge agreement. Notwithstanding any
termination of this Agreement, all of Silicon's security interests in all of the
Collateral and all of the terms and provisions of this Agreement shall continue
in full force and effect until all Obligations have been paid and performed in
full; provided that Silicon may, in its sole discretion, refuse to make any
further Loans and other extensions of credit after termination. No termination
shall in any way affect or impair any right or remedy of Silicon, nor shall any
such termination relieve Borrower of any Obligation to Silicon, until all of the
Obligations have been paid and performed in full. Upon payment and performance
in full of all the Obligations and termination of this Agreement, Silicon shall
promptly terminate its financing statements with respect to the Borrower and
deliver to Borrower such other documents as may be required to fully terminate
Silicon's security interests.

      * WITH RESPECT TO EACH LINE A EQUIPMENT LOAN, ON THE APPLICABLE LINE A
EQUIPMENT LOAN MATURITY DATE OR ON ANY EARLIER EFFECTIVE DATE OF TERMINATION,
BORROWER SHALL PAY AND PERFORM IN FULL SUCH LINE A EQUIPMENT LOAN AND ALL OTHER
OBLIGATIONS SPECIFICALLY RELATING THERETO, WHETHER EVIDENCED BY INSTALLMENT
NOTES OR OTHERWISE, AND WHETHER OR NOT ALL OR ANY PART OF SUCH OBLIGATIONS ARE
OTHERWISE THEN DUE AND PAYABLE. ON THE LINE B EQUIPMENT LOAN MATURITY DATE OR ON
ANY EARLIER EFFECTIVE DATE OF TERMINATION, BORROWER SHALL PAY AND PERFORM IN
FULL ALL OUTSTANDING LINE B EQUIPMENT LOANS AND ALL OTHER OBLIGATIONS
SPECIFICALLY RELATING THERETO, WHETHER EVIDENCED BY INSTALLMENT NOTES OR
OTHERWISE, AND WHETHER OR NOT ALL OR ANY PART OF SUCH OBLIGATIONS ARE OTHERWISE
THEN DUE AND PAYABLE. ON THE REVOLVER MATURITY DATE OR ON ANY EARLIER EFFECTIVE
DATE OF TERMINATION, BORROWER SHALL PAY AND PERFORM IN FULL ALL OBLIGATIONS
(EXCLUDING OUTSTANDING EQUIPMENT LOANS AND OTHER OBLIGATIONS SPECIFICALLY
RELATING THERETO), WHETHER EVIDENCED BY INSTALLMENT NOTES OR OTHERWISE, AND
WHETHER OR NOT ALL OR ANY PART OF SUCH OBLIGATIONS ARE OTHERWISE THEN DUE AND
PAYABLE.

      ** REVOLVING

                                      -12-
<PAGE>

      *** 100% OF THE FACE AMOUNT (WHICH MUST BE IN U.S. CURRENCY)

7. EVENTS OF DEFAULT AND REMEDIES.

      7.1 EVENTS OF DEFAULT. The occurrence of any of the following events shall
constitute an "Event of Default" under this Agreement, and Borrower shall give
Silicon immediate written notice thereof: (a) Any warranty, representation,
statement, report or certificate made or delivered to Silicon by Borrower or any
of Borrower's officers, employees or agents, now or in the future, shall be
untrue or misleading in a material respect when made or deemed to be made; or
(b) Borrower shall fail to pay when due any Loan or any interest thereon or any
other monetary Obligation; or (c) the total Loans and other Obligations
outstanding at any time shall exceed the Credit Limit; or (d) Borrower (i) shall
fail to comply with any of the financial covenants set forth in the Schedule, or
(ii) shall fail to perform any other non-monetary Obligation which by its nature
cannot be cured, or (iii) shall fail to permit Silicon to conduct an inspection
or audit as specified in Section 5.4 hereof; or (e) Borrower shall fail to
perform any other non-monetary Obligation, which failure is not cured within
five Business Days after the date due; or (f) any levy, assessment, attachment,
seizure, lien or encumbrance (other than a Permitted Lien) is made on all or any
part of the Collateral which is not cured within 10 days after the occurrence of
the same; or (g) any default or event of default occurs under any obligation
secured by a Permitted Lien, which is not cured within any applicable cure
period or waived in writing by the holder of the Permitted Lien; or (h) Borrower
breaches any material contract or obligation, which has resulted or could
reasonably be expected to result in a Material Adverse Change; or (i)
Dissolution, termination of existence, insolvency or business failure of
Borrower or any guarantor of the Obligations; or appointment of a receiver,
trustee or custodian, for all or any part of the property of, assignment for the
benefit of creditors by, or the commencement of any proceeding by Borrower or
any guarantor of the Obligations under any reorganization, bankruptcy,
insolvency, arrangement, readjustment of debt, dissolution or liquidation law or
statute of any jurisdiction, now or in the future in effect; or (j) the
commencement of any proceeding against Borrower or any guarantor of any of the
Obligations under any reorganization, bankruptcy, insolvency, arrangement,
readjustment of debt, dissolution or liquidation law or statute of any
jurisdiction, now or in the future in effect, which is not cured by the
dismissal thereof within 30 days after the date commenced; or (k) revocation or
termination of, or limitation or denial of liability upon, any guaranty of the
Obligations or any attempt to do any of the foregoing; or (l) revocation or
termination of, or limitation or denial of liability upon, any pledge of any
certificate of deposit, securities or other property or asset of any kind
pledged by any third party to secure any or all of the Obligations, or any
attempt to do any of the foregoing, or commencement of proceedings by or against
any such third party under any bankruptcy or insolvency law; or (m) Borrower
makes any payment on account of any indebtedness or obligation which has been
subordinated to the Obligations other than as permitted in the applicable
subordination agreement, or if any Person who has subordinated such indebtedness
or obligations terminates or in any way limits his subordination agreement; or
(n) *; or (o) Borrower shall generally not pay its debts as they become due, or
Borrower shall conceal, remove or transfer any part of its property, with intent
to hinder, delay or defraud its creditors, or make or suffer any transfer of any
of its property which may be fraudulent under any bankruptcy, fraudulent
conveyance or similar law, or (p) a Material Adverse Change shall occur; or (q)
an event of default has occurred and is continuing under any other Loan

                                      -13-
<PAGE>

Document (after giving effect (without duplication hereof) of all applicable
cure periods, if any). Silicon may cease making any Loans and other extensions
of credit hereunder during any of the above cure periods, and thereafter if an
Event of Default has occurred and is continuing.

      * WITHOUT THE PRIOR WRITTEN CONSENT OF SILICON, (1) A "PERSON" OR "GROUP"
(WITHIN THE MEANING OF SECTIONS 13(d) AND 14(d)(2) OF THE SECURITIES EXCHANGE
ACT OF 1934, AS AMENDED) BECOMES, AFTER THE DATE OF THIS AGREEMENT, THE
"BENEFICIAL OWNER" (AS DEFINED IN RULE 13D-3 UNDER THE SECURITIES EXCHANGE ACT
OF 1934, AS AMENDED), DIRECTLY OR INDIRECTLY, OF MORE THAN 40% OF THE TOTAL
VOTING POWER OF ALL CLASSES OF CAPITAL STOCK THEN OUTSTANDING OF BORROWER, OR
(2) A MAJORITY OF THE MEMBERS OF THE BOARD OF DIRECTORS OF BORROWER SHALL NOT
CONSTITUTE CONTINUING DIRECTORS

      7.2 REMEDIES. Upon the occurrence and during the continuance of any Event
of Default, Silicon, at its option, and without notice or demand of any kind
(all of which are hereby expressly waived by Borrower), may do any one or more
of the following: (a) Cease making Loans or otherwise extending credit to
Borrower under this Agreement or any other Loan Document; (b) Accelerate and
declare all or any part of the Obligations to be immediately due, payable, and
performable, notwithstanding any deferred or installment payments allowed by any
instrument evidencing or relating to any Obligation; (c) Take possession of any
or all of the Collateral wherever it may be found, and for that purpose Borrower
hereby authorizes Silicon without judicial process to enter onto any of
Borrower's premises without interference to search for, take possession of,
keep, store, or remove any of the Collateral, and remain on the premises or
cause a custodian to remain on the premises in exclusive control thereof,
without charge for so long as Silicon deems it necessary, in its good faith
business judgment, in order to complete the enforcement of its rights under this
Agreement or any other Loan Document; provided, however, that should Silicon
seek to take possession of any of the Collateral by court process, Borrower
hereby irrevocably waives: (i) any bond and any surety or security relating
thereto required by any statute, court rule or otherwise as an incident to such
possession; (ii) any demand for possession prior to the commencement of any suit
or action to recover possession thereof; and (iii) any requirement that Silicon
retain possession of, and not dispose of, any such Collateral until after trial
or final judgment; (d) Require Borrower to assemble any or all of the Collateral
and make it available to Silicon at places designated by Silicon which are
reasonably convenient to Silicon and Borrower, and to remove the Collateral to
such locations as Silicon may deem advisable; (e) Complete the processing,
manufacturing or repair of any Collateral prior to a disposition thereof and,
for such purpose and for the purpose of removal, Silicon shall have the right to
use Borrower's premises, vehicles, hoists, lifts, cranes, and other Equipment
and all other property without charge; (f) Sell, lease or otherwise dispose of
any of the Collateral, in its condition at the time Silicon obtains possession
of it or after further manufacturing, processing or repair, at one or more
public and/or private sales, in lots or in bulk, for cash, exchange or other
property, or on credit, and to adjourn any such sale from time to time without
notice other than oral announcement at the time scheduled for sale. Silicon
shall have the right to conduct such disposition on Borrower's premises without
charge, for such time or times as Silicon deems reasonable, or on Silicon's
premises, or elsewhere and the Collateral need not be located at the place of
disposition. Silicon may directly or through any affiliated company purchase or
lease any Collateral at any such public disposition, and if permissible under
applicable law, at any private

                                      -14-
<PAGE>

disposition. Any sale or other disposition of Collateral shall not relieve
Borrower of any liability Borrower may have if any Collateral is defective as to
title or physical condition or otherwise at the time of sale; (g) Demand payment
of, and collect any Accounts and General Intangibles comprising Collateral and,
in connection therewith, Borrower irrevocably authorizes Silicon to endorse or
sign Borrower's name on all collections, receipts, instruments and other
documents, to take possession of and open mail addressed to Borrower and remove
therefrom payments made with respect to any item of the Collateral or proceeds
thereof, and, in Silicon's good faith business judgment, to grant extensions of
time to pay, compromise claims and settle Accounts and the like for less than
face value; (h) Effect an administrative "hold" or offset against any sums in
any of Borrower's general, special or other Deposit Accounts with Silicon
against any or all of the Obligations; and (i) Demand and receive possession of
any of Borrower's federal and state income tax returns and the books and records
utilized in the preparation thereof or referring thereto. All reasonable
attorneys' fees, expenses, costs, liabilities and obligations incurred by
Silicon with respect to the foregoing shall be added to and become part of the
Obligations, shall be due on demand, and shall bear interest at a rate equal to
the highest interest rate applicable to any of the Obligations. Without limiting
any of Silicon's rights and remedies, from and after the occurrence and during
the continuance of any Event of Default, the interest rate applicable to the
Obligations shall be increased by an additional four percent per annum (the
"Default Rate").

      7.3 STANDARDS FOR DETERMINING COMMERCIAL REASONABLENESS. Borrower and
Silicon agree that a sale or other disposition (collectively, "sale") of any
Collateral which complies with the following standards will conclusively be
deemed to be commercially reasonable: (i) Notice of the sale is given to
Borrower at least ten days prior to the sale, and, in the case of a public sale,
notice of the sale is published at least ten days before the sale in a newspaper
of general circulation in the county where the sale is to be conducted; (ii)
Notice of the sale describes the collateral in general, non-specific terms;
(iii) The sale is conducted at a place designated by Silicon, with or without
the Collateral being present; (iv) The sale commences at any time between 8:00
a.m. and 6:00 p.m; (v) Payment of the purchase price in cash or by cashier's
check or wire transfer is required; (vi) With respect to any sale of any of the
Collateral, Silicon may (but is not obligated to) direct any prospective
purchaser to ascertain directly from Borrower any and alt information concerning
the same. Silicon shall be free to employ other methods of noticing and selling
the Collateral, in its discretion, if they are commercially reasonable.

      7.4 POWER OF ATTORNEY. Upon the occurrence and during the continuance of
any Event of Default, without limiting Silicon's other rights and remedies,
Borrower grants to Silicon an irrevocable power of attorney coupled with an
interest, authorizing and permitting Silicon (acting through any of its
employees, attorneys or agents) at any time, at its option, but without
obligation, with or without notice to Borrower, and at Borrower's expense, to do
any or all of the following, in Borrower's name or otherwise, but Silicon agrees
that if it exercises any right hereunder, it will do so in good faith and in a
commercially reasonable manner (a) Execute on behalf of Borrower any documents
that Silicon may, in its good faith business judgment, deem advisable in order
to perfect and maintain Silicon's security interest in the Collateral, or in
order to exercise a right of Borrower or Silicon, or in order to folly
consummate all the transactions contemplated under this Agreement, and all other
Loan Documents; (b) Execute on behalf of Borrower, any invoices relating to any

                                      -15-
<PAGE>

Account, any draft against any Account Debtor and any notice to any Account
Debtor, any proof of claim in bankruptcy, any Notice of Lien, claim of
mechanic's, materialman's or other lien, or assignment or satisfaction of
mechanic's, materialman's or other lien; (c) Take control in any manner of any
cash or non-cash items of payment or proceeds of Collateral; endorse the name of
Borrower upon any instruments, or documents, evidence of payment or Collateral
that may come into Silicon's possession; (d) Endorse all checks and other forms
of remittances received by Silicon; (e) Pay, contest or settle any lien, charge,
encumbrance, security interest and adverse claim in or to any of the Collateral,
or any judgment based thereon, or otherwise take any action to terminate or
discharge the same; (f) Grant extensions of time to pay, compromise claims and
settle Accounts and General Intangibles for less than face value and execute all
releases and other documents in connection therewith; (g) Pay any sums required
on account of Borrower's taxes or to secure the release of any liens therefor,
or both; (h) Settle and adjust, and give releases of, any insurance claim that
relates to any of the Collateral and obtain payment therefor, (i) Instruct any
third party having custody or control of any books or records belonging to, or
relating to, Borrower to give Silicon the same rights of access and other rights
with respect thereto as Silicon has under this Agreement; and (j) Take any
action or pay any sum required of Borrower pursuant to this Agreement and any
other Loan Documents. Any and all reasonable sums paid and any and all
reasonable costs, expenses, liabilities, obligations and attorneys' fees
incurred by Silicon with respect to the foregoing shall be added to and become
part of the Obligations, shall be payable on demand, and shall bear interest at
a rate equal to the highest interest rate applicable to any of the Obligations.
In no event shall Silicon's rights under the foregoing power of attorney or any
of Silicon's other rights under this Agreement be deemed to indicate that
Silicon is in control of the business, management or properties of Borrower.

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

      7.6 REMEDIES CUMULATIVE. In addition to the rights and remedies set forth
in this Agreement, Silicon shall have all the other rights and remedies accorded
a secured party under the California Uniform Commercial Code and under all other
applicable laws, and under any other instrument or agreement now or in the
future entered into between Silicon and Borrower, and all of such rights and
remedies are cumulative and none is exclusive. Exercise or partial exercise by
Silicon of one or more of its rights or remedies shall not be deemed an
election, nor bar Silicon from subsequent exercise or partial exercise of any
other rights or remedies. The failure or delay of Silicon to exercise any rights
or remedies shall not operate as a waiver thereof, but all rights and

                                      -16-
<PAGE>

remedies shall continue in full force and effect until all of the Obligations
have been fully paid in cash and otherwise performed and this Agreement has been
terminated.

8. DEFINITIONS. As used in this Agreement, the following terms have the
following meanings:

      "Account Debtor" means the obligor on an Account.

      "Accounts" means all present and future "accounts" as defined in the
California Uniform Commercial Code in effect on the date hereof with such
additions to such term as may hereafter be made, and includes without limitation
all accounts receivable and other sums owing to Borrower.

      "Affiliate" means, with respect to any Person, a relative, partner,
shareholder, director, officer, or employee of such Person, or any parent or
subsidiary of such Person, or any Person controlling, controlled by or under
common control with such Person.

      "Bankruptcy Code" means the United States Bankruptcy Code (11 U.S.C.
Sections 101 et seq.). as amended, and any successor statute.

      "Business Day" means a day on which Silicon is open for business.

      "Code" means the Uniform Commercial Code as adopted and in effect in the
State of California from time to time.

      "Collateral" has the meaning set forth in Section 2 above.

      "continuing" and "during the continuance of" when used with reference to a
Default or Event of Default means that the Default or Event of Default has
occurred and has not been either waived in writing by Silicon or cured within
any applicable cure period.

      "CONTINUING DIRECTOR" MEANS (a) ANY MEMBER OF THE BOARD OF DIRECTORS WHO
WAS A DIRECTOR (OR COMPARABLE MANAGER) OF BORROWER ON THE DATE OF THIS
AGREEMENT, AND (b) ANY INDIVIDUAL WHO BECOMES A MEMBER OF THE BOARD OF DIRECTORS
AFTER THE DATE OF THIS AGREEMENT IF SUCH INDIVIDUAL WAS APPOINTED OR NOMINATED
FOR ELECTION TO THE BOARD OF DIRECTORS BY A MAJORITY OF THE CONTINUING
DIRECTORS, BUT EXCLUDING ANY SUCH INDIVIDUAL ORIGINALLY PROPOSED FOR ELECTION IN
OPPOSITION TO THE BOARD OF DIRECTORS IN OFFICE AT THE DATE OF THIS AGREEMENT IN
AN ACTUAL OR THREATENED ELECTION CONTEST RELATING TO THE ELECTION OF THE
DIRECTORS (OR COMPARABLE MANAGERS) OF BORROWER (AS SUCH TERMS ARE USED IN RULE
14A-11 UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED) AND WHOSE INITIAL
ASSUMPTION OF OFFICE RESULTED FROM SUCH CONTEST OR THE SETTLEMENT THEREOF.

      "Default" means any event which with notice or passage of time or both,
would constitute an Event of Default.

      "Default Rate" has the meaning set forth in Section 7.2 above.

                                      -17-
<PAGE>

      "Deposit Accounts" means all present and future "deposit accounts" as
defined in the California Uniform Commercial Code in effect on the date hereof
with such additions to such term as may hereafter be made, and includes without
limitation all general and special bank accounts, demand accounts, checking
accounts, savings accounts and certificates of deposit.

      "Eligible Accounts" means Accounts arising in the ordinary course of
Borrower's business from the sale of goods or the rendition of services, or the
non-exclusive licensing of Intellectual Property, which Silicon, in its good
faith business judgment, shall deem eligible for borrowing. Without limiting the
fact that the determination of which Accounts are eligible for borrowing is a
matter of Silicon's good faith business judgment, (he requirements in the
remainder of this definition (the "Minimum Eligibility Requirements") are the
minimum requirements for an Account to be an Eligible Account: (i) the Account
must not be outstanding for more than 90 days from its invoice date (the
"Eligibility Period"), (ii) the Account must not represent progress billings, or
be due under a fulfillment or requirements contract with the Account Debtor,
(iii) the Account must not be subject to any contingencies (including Accounts
arising from sales on consignment, guaranteed sale or other terms pursuant to
which payment by the Account Debtor may be conditional), (iv) the Account must
not be owing from an Account Debtor with whom Borrower has any dispute (whether
or not relating to the particular Account), (v) the Account must not be owing
from an Affiliate of Borrower, (vi) the Account must not be owing from an
Account Debtor which is subject to any insolvency or bankruptcy proceeding, or
whose financial condition is not acceptable to Silicon, or which, fails or goes
out of a material portion of its business, (vii) the Account must not be owing
from the United States or any department, agency or instrumentality thereof
(unless there has been compliance, to Silicon's satisfaction, with the United
States Assignment of Claims Act), (viii) the Account must not be owing from an
Account Debtor located outside the United States or those provinces or
territories of Canada that have adopted the Personal Property Security Act
(unless pre-approved by Silicon in its discretion in writing, or backed by a
letter of credit satisfactory to Silicon, or FCIA insured satisfactory to
Silicon), (ix) the Account must not be owing from an Account Debtor to whom
Borrower is or may be liable for goods or services purchased by Borrower, or
third-party intellectual property licensed by Borrower (as licensee), from such
Account Debtor or otherwise (but, in such case, the Account will be deemed not
eligible only to the extent of any amounts owed by Borrower to such Account
Debtor) *. Accounts owing from one Account Debtor will not be deemed Eligible
Accounts to the extent they exceed 25% ** of the total Accounts outstanding. In
addition, if more than 50% of the Accounts owing from an Account Debtor are
outstanding for a period longer than their Eligibility Period (without regard to
unapplied credits) or are otherwise not eligible Accounts, then all Accounts
owing from that Account Debtor will be deemed ineligible for borrowing. Silicon
may, from time to time, in its good faith business judgment, revise the Minimum
Eligibility Requirements, upon written notice to Borrower.

      * (x) THE ACCOUNT MUST NOT BE OWING BY AN ACCOUNT DEBTOR AS TO WHOM
BORROWER HAS RECOGNIZED OR CAN RECOGNIZE DEFERRED REVENUE, UNLESS AND IN WHICH
CASE THE PORTION OF SUCH ACCOUNT THAT IS EQUAL TO SUCH DEFERRED REVENUE AMOUNT
SHALL BE INELIGIBLE UNDER THIS CLAUSE (x), AND (xi) THE ACCOUNT MUST HAVE BEEN
BILLED TO THE ACCOUNT DEBTOR.

      ** (OR, IN THE CASE OF THE ACCOUNT DEBTOR KNOWN AS OFOTO, 40%)

                                      -18-
<PAGE>

      "Eligible Inventory" means Inventory which Silicon, in its good faith
business judgment, deems eligible for borrowing. Without limiting the fact that
the determination of which Inventory is eligible for borrowing is a matter of
Silicon's good faith business judgment, the requirements in the remainder of
this definition are the minimum requirements for Inventory to be Eligible
Inventory: the Inventory must (i) consist of finished goods *, in good, new and
salable condition, not be perishable, not be obsolete or unmerchantable, and not
be comprised of work in process, packaging materials or supplies; (ii) meet all
applicable governmental standards; (iii) have been manufactured in compliance
with the Fair Labor Standards Act; (iv) conform in all respects to the
warranties and representations set forth in this Agreement; (v) be at all times
subject to Silicon's duly perfected, first priority security interest; and (vi)
be situated at Borrower's Address or at one of **.

      * OR RAW MATERIALS

      ** BORROWER'S LOCATIONS SET FORTH IN THE REPRESENTATIONS (OR (y) AT A
THIRD-PARTY LOCATION SET FORTH IN THE REPRESENTATIONS IF AND TO THE EXTENT THE
INVENTORY LOCATED AT SUCH THIRD-PARTY LOCATION IS SUBJECT TO A BAILEE AGREEMENT,
IN FORM AND SUBSTANCE SATISFACTORY TO SILICON IN ITS GOOD FAITH BUSINESS
JUDGMENT, BY THE APPLICABLE THIRD PARTY IN FAVOR OF SILICON, OR (z) AT SUCH
OTHER LOCATION(s), IF ANY, THAT SILICON APPROVES IN ITS GOOD FAITH BUSINESS
JUDGMENT)

      "Equipment" means all present and future "equipment" as defined in the
California Uniform Commercial Code in effect on the date hereof with such
additions to such term as may hereafter be made, and includes without limitation
all machinery, fixtures, goods, vehicles (including motor vehicles and
trailers), and any interest in any of the foregoing.

      "Event of Default" means any of the events set forth in Section 7.1 of
this Agreement

      "GAAP" means generally accepted accounting principles consistently
applied.

      "General Intangibles" means all present and future "general intangibles"
as defined in the California Uniform Commercial Code in effect on the date
hereof with such additions to such term as may hereafter be made, and includes
without limitation all Intellectual Property, payment intangibles, royalties,
contract rights, goodwill, franchise agreements, purchase orders, customer
lists, route lists, telephone numbers, domain names, claims, income tax refunds,
security and other deposits, options to purchase or sell real or personal
property, rights in all litigation presently or hereafter pending (whether in
contract, tort or otherwise), insurance policies (including without limitation
key man, property damage, and business interruption insurance), payments of
insurance and rights to payment of any kind.

      "good faith business judgment" means honesty in fact and good faith (as
defined in Section 1201 of the Code) in the exercise of Silicon's business
judgment.

      "including" means including (but not limited to).

                                      -19-
<PAGE>

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

      "Inventory" means all present and future "inventory" as defined in the
California Uniform Commercial Code in effect on the date hereof with such
additions to such term as may hereafter be made, and includes without limitation
all merchandise, raw materials, parts, supplies, packing and shipping materials,
work in process and finished products, including without limitation such
inventory as is temporarily out of Borrower's custody or possession or in
transit and including any returned goods and any documents of title representing
any of the above.

      "Investment Property" means all present and future investment property,
securities, stocks, bonds, debentures, debt securities, partnership interests,
limited liability company interests, options, security entitlements, securities
accounts, commodity contracts, commodity accounts, and all financial assets held
in any securities account or otherwise, and all options and warrants to purchase
any of the foregoing, wherever located, and all other securities of every kind,
whether certificated or uncertificated.

      "Loan Documents" means, collectively, this Agreement, the Representations,
and all other present and future documents, instruments and agreements between
Silicon and Borrower (or any guarantor of the Obligations), including, but not
limited to those relating to this Agreement, and all amendments and
modifications thereto and replacements therefor.

      "Material Adverse Change" means any of the following: (i) a material
adverse change in the business, operations, or financial or other condition of
the Borrower, or (ii) a material impairment of the prospect of repayment of any
portion of the Obligations; or (iii) a material impairment of the value or
priority of Silicon's security interests in the Collateral.

      "Obligations" means all present and future Loans, advances, debts,
liabilities, obligations, guaranties, covenants, duties and indebtedness at any
time owing by Borrower to Silicon, whether evidenced by this Agreement or any
note or other instrument or document, or otherwise, whether arising from an
extension of credit, opening of a letter of credit, banker's acceptance, loan,
guaranty, indemnification or otherwise, whether direct or indirect (including,
without limitation, those acquired by assignment and any participation by
Silicon in Borrower's debts owing to others),

                                      -20-
<PAGE>

absolute or contingent, due or to become due, including, without limitation, all
interest, charges, expenses, fees, attorneys fees, expert witness fees, audit
fees, letter of credit fees, collateral monitoring fees, closing fees, facility
fees, termination fees, minimum interest charges and any other sums chargeable
to Borrower under this Agreement or under any other Loan Documents (including
any interest and other amounts that, but for the provisions of the Bankruptcy
Code, would have accrued).

      "Other Property" means the following as defined in the California Uniform
Commercial Code in effect on the date hereof with such additions to such term as
may hereafter be made, and all rights relating thereto: all present and future
"commercial tort claims" (including without limitation any commercial tort
claims identified in the Representations), "documents", "instruments",
"promissory notes", "chattel paper", "letters of credit", "letter-of-credit
rights", "fixtures", "farm products" and "money"; and all other goods and
personal property of every kind, tangible and intangible, whether or not
governed by the California Uniform Commercial Code.

      "Payment" means all checks, wire transfers and other items of payment
received by Silicon (including proceeds of Accounts and payment of the
Obligations in full) for credit to Borrower's outstanding * Loans or, if the
balance of the * Loans have been reduced to zero, for credit to its Deposit
Accounts.

      * REVOLVING

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

      * (A) INCHOATE LIENS FOR TAXES NOT YET PAYABLE; AND (B) LIENS FOR TAXES
(OTHER THAN PAYROLL TAXES OR TAXES THAT ARE THE SUBJECT OF A UNITED STATES
FEDERAL TAX LIEN) BEING DILIGENTLY CONTESTED BY BORROWER IN GOOD FAITH, PROVIDED
THAT (1) A RESERVE WITH RESPECT TO SUCH OBLIGATION IS

                                      -21-
<PAGE>

ESTABLISHED ON THE BOOKS OF BORROWER IN ACCORDANCE WITH GAAP (OR, IF HIGHER, IN
AN AMOUNT THAT SILICON IN ITS GOOD FAITH BUSINESS JUDGMENT BELIEVES TO BE
APPROPRIATE UNDER THE CIRCUMSTANCES), AND (2) SILICON IS SATISFIED THAT, WHILE
ANY SUCH PROTEST IS PENDING, THERE WILL BE NO IMPAIRMENT OF THE ENFORCEABILITY,
VALIDITY, OR PRIORITY OF ANY OF THE SECURITY INTERESTS OF SILICON IN AND TO THE
COLLATERAL

      ** ; (ix) WITH RESPECT TO ANY REAL PROPERTY OF BORROWER, EASEMENTS, RIGHTS
OF WAY, ZONING AND SIMILAR COVENANTS AND RESTRICTIONS, AND SIMILAR ENCUMBRANCES
THAT CUSTOMARILY EXIST ON REAL PROPERTIES OF PERSONS ENGAGED IN SIMILAR
ACTIVITIES AND SIMILARLY SITUATED AND THAT IN ANY EVENT DO NOT MATERIALLY
INTERFERE WITH OR IMPAIR THE USE OR OPERATION OF THE COLLATERAL BY BORROWER OR
THE VALUE OF SILICON'S SECURITY INTEREST THEREIN, OR MATERIALLY INTERFERE WITH
THE ORDINARY CONDUCT OF THE BUSINESS OF BORROWER; AND (i) LIENS WHICH CONSTITUTE
BANKER'S LIENS, RIGHTS OF SET-OFF OR SIMILAR RIGHTS AS TO DEPOSIT ACCOUNTS OR
OTHER FUNDS MAINTAINED WITH A BANK OR OTHER FINANCIAL INSTITUTION (BUT ONLY TO
THE EXTENT SUCH BANKER'S LIENS, RIGHTS OF SET-OFF OR OTHER RIGHTS ARE IN RESPECT
OF CUSTOMARY SERVICE CHARGES RELATIVE TO SUCH DEPOSIT ACCOUNTS AND OTHER FUNDS,
AND NOT IN RESPECT OF ANY LOANS OR OTHER EXTENSIONS OF CREDIT BY SUCH BANK OR
OTHER FINANCIAL INSTITUTION TO BORROWER)

      "Person" means any individual, sole proprietorship, partnership, joint
venture, trust, unincorporated organization, association, corporation,
government, or any agency or political division thereof, or any other entity.

      "Representations" means the written Representations and Warranties
provided by Borrower to Silicon referred to in the Schedule.

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

      "STREAMLINE PROVISIONS" MEANS THE SET OF PROVISIONS SET FORTH IN SECTION 9
OF THE SCHEDULE.

                                      -22-
<PAGE>

      Other Terms. All accounting terms used in this Agreement, unless otherwise
indicated, shall have the meanings given to such terms in accordance with GAAP,
consistently applied. All other terms contained in this Agreement, unless
otherwise indicated, shall have the meanings provided by the Code, to the extent
such terms are defined therein.

9. GENERAL PROVISIONS.

      9.1 INTEREST COMPUTATION; FLOAT CHARGE. In computing interest on the
Obligations, all Payments received after 12:00 Noon on any day shall be deemed
received on the next Business Day. In addition, Silicon shall be entitled to
charge Borrower a "float" charge in an amount equal to * Business Days interest,
at the interest rate applicable to the ** Loans, on all Payments received by
Silicon. Said float charge is not included in interest for purposes of computing
Minimum Monthly Interest (if any) under this Agreement. The float charge for
each month shall be payable on the last day of the month.

      *TWO

      ** REVOLVING

      9.2 APPLICATION OF PAYMENTS. All payments with respect to the Obligations
may be applied, and in Silicon's good faith business judgment reversed and
re-applied, to the Obligations, in such order and manner as Silicon shall
determine in its good faith business judgment.

      9.3 CHARGES TO ACCOUNTS. Silicon may, in its discretion, require that
Borrower pay monetary Obligations in cash to Silicon, or charge them to
Borrower's Loan account *, in which event they will bear interest at the same
rate applicable to the ** Loans. Silicon may also, in its discretion, charge any
monetary Obligations to any one or more of Borrower's Deposit Accounts
maintained with Silicon.

      * AS A REVOLVING LOAN

      ** REVOLVING

      9.4 MONTHLY ACCOUNTINGS. Silicon shall provide Borrower monthly with an
account of advances, charges, expenses and payments made pursuant to this
Agreement. Such account shall be deemed correct, accurate and binding on
Borrower and an account stated (except for reverses and reapplications of
payments made and corrections of errors discovered by Silicon), unless Borrower
notifies Silicon in writing to the contrary within 60 days after such account is
rendered, describing the nature of any alleged errors or omissions.

      9.5 NOTICES. All notices to be given under this Agreement shall be in
writing and shall be given either personally or by reputable private delivery
service or by regular first-class mail, or certified mail return receipt
requested, and addressed as follows: (a) if to Borrower, at the address for
Borrower shown in the heading to this Agreement; (b) if to Silicon, at Silicon
Valley Bank, 4700 Carillon Point, Kirkland, Washington 98033, Attn: Manager; or
(c) at any other address designated

                                      -23-
<PAGE>

in writing by one party to the other party in accordance with this Section 9.5.
All notices shall be deemed to have been given upon delivery in the case of
notices personally delivered, or at the expiration of one Business Day following
delivery to the private delivery service, or two Business Days following the
deposit thereof in the United States mail, with postage prepaid.

      9.6 SEVERABILITY. Should any provision of this Agreement be held by any
court of competent jurisdiction to be void or unenforceable, such defect shall
not affect the remainder of this Agreement, which shall continue in full force
and effect.

      9.7 INTEGRATION. This Agreement and such other written agreements,
documents and instruments as may be executed in connection herewith are the
final, entire and complete agreement between Borrower and Silicon and supersede
all prior and contemporaneous negotiations and oral representations and
agreements, all of which are merged and integrated in this Agreement. There are
no oral understandings, representations or agreements between the parties which
are not set forth in this Agreement or in other written agreements signed by the
parties in connection therewith.

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

      9.9 NO LIABILITY FOR ORDINARY NEGLIGENCE. Neither Silicon, nor any of its
directors, officers, employees, agents, attorneys or any other Person affiliated
with or representing Silicon shall be liable for any claims, demands, losses or
damages, of any kind whatsoever, made, claimed,

                                      -24-
<PAGE>

incurred or suffered by Borrower or any other party through the ordinary
negligence of Silicon, or any of its directors, officers, employees, agents,
attorneys or any other Person affiliated with or representing Silicon, but
nothing herein shall relieve Silicon from liability for its own gross negligence
or willful misconduct.

      9.10 AMENDMENT. The terms and provisions of this Agreement may not be
waived or amended, except in a writing executed by Borrower and a duly
authorized officer of Silicon. 9.11 TIME OF ESSENCE. Time is of the essence in
the performance by Borrower of each and every obligation under this Agreement.

      9.11 TIME OF ESSENCE. Time is of the essence in the performance by
Borrower of each and every obligation under this Agreement.

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

      9.13 BENEFIT OF AGREEMENT. The provisions of this Agreement shall be
binding upon and inure to the benefit of the respective successors, assigns,
heirs, beneficiaries and representatives of Borrower and Silicon; provided,
however, that Borrower may not assign or transfer any of its rights under this
Agreement without the prior written consent of Silicon, and any prohibited
assignment shall be void. No consent by Silicon to any assignment shall release
Borrower from its liability for the Obligations.

                                      -25-
<PAGE>

      9.14 JOINT AND SEVERAL LIABILITY. If Borrower consists of more than one
Person, their liability shall be joint and several, and the compromise of any
claim with, or the release of, any Borrower shall not constitute a compromise
with, or a release of, any other Borrower.

      9.15 LIMITATION OF ACTIONS. Any claim or cause of action by Borrower
against Silicon, its directors, officers, employees, agents, accountants or
attorneys, based upon, arising from, or relating to this Loan Agreement, or any
other Loan Document, or any other transaction contemplated hereby or thereby or
relating hereto or thereto, or any other matter, cause or thing whatsoever,
occurred, done, omitted or suffered to be done by Silicon, its directors,
officers, employees, agents, accountants or attorneys, shall be barred unless
asserted by Borrower by the commencement of an action or proceeding in a court
of competent jurisdiction by the filing of a complaint within * after the first
act, occurrence or omission upon which such claim or cause of action, or any
part thereof, is based, and the service of a summons and complaint on an officer
of Silicon, or on any other person authorized to accept service on behalf of
Silicon, within thirty (30) days thereafter. Borrower agrees that such ** period
is a reasonable and sufficient time for Borrower to investigate and act upon any
such claim or cause of action. The ** period provided herein shall not be
waived, tolled, or extended except by the written consent of Silicon in its sole
discretion. This provision shall survive any termination of this Loan Agreement
or any other Loan Document.

      * TWO YEARS

      ** TWO-YEAR

      9.16 SECTION HEADINGS; CONSTRUCTION. Section headings are only used in
this Agreement for convenience. Borrower and Silicon acknowledge that the
headings may not describe completely the subject matter of the applicable
section, and the headings shall not be used in any manner to construe, limit,
define or interpret any term or provision of this Agreement. This Agreement has
been fully reviewed and negotiated between the parties and no uncertainty or
ambiguity in any term or provision of this Agreement shall be construed strictly
against Silicon or Borrower under any rule of construction or otherwise.

      9.17 GOVERNING LAW; JURISDICTION; VENUE. This Agreement and (except to the
extent expressly provided to the contrary) the other Loan Documents and all acts
and transactions hereunder and (except to the extent expressly provided to the
contrary) thereunder and all rights and obligations of Silicon and Borrower
shall be governed by the laws of the State of California. As a material part of
the consideration to Silicon to enter into this Agreement and the other Loan
Documents, Borrower (i) agrees that all actions and proceedings relating
directly or indirectly to this Agreement and the other Loan Documents shall, at
Silicon's option, be litigated in courts located within California, and that the
exclusive venue therefor shall be Santa Clara County; (ii) consents to the
jurisdiction and venue of any such court and consents to service of process in
any such action or proceeding by personal delivery or any other method permitted
by law; and (iii) waives any and all rights Borrower may have to object to the
jurisdiction of any such court, or to transfer or change the venue of any such
action or proceeding.

                                      -26-
<PAGE>

      9.18 MUTUAL WAIVER OF JURY TRIAL. BORROWER AND SILICON EACH HEREBY WAIVE
THE RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, ARISING OUT
OF, OR IN ANY WAY RELATING TO, THIS AGREEMENT OR ANY OTHER PRESENT OR FUTURE
INSTRUMENT OR AGREEMENT BETWEEN SILICON AND BORROWER, OR ANY CONDUCT, ACTS OR
OMISSIONS OF SILICON OR BORROWER OR ANY OF THEIR DIRECTORS, OFFICERS, EMPLOYEES,
AGENTS, ATTORNEYS OR ANY OTHER PERSONS AFFILIATED WITH SILICON OR BORROWER, IN
ALL OF THE FOREGOING CASES, WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE.

      [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK; SIGNATURE PAGE FOLLOWS]

                                      -27-
<PAGE>

      IN WITNESS WHEREOF, the parties hereto have caused this Schedule to be
executed and delivered as of the date first above written.

BORROWER:                               SILICON:

ISILON SYSTEMS, INC.                    SILICON VALLEY BANK

By /s/ Stuart W. Fuhlendorf             By /s/ Patrick McCarthy
   -----------------------------------     -------------------------------------
   CFO                                  Title  Sr. Vice President

By
   -----------------------------------
   Secretary or Ass't Secretary

                                [SIGNATURE PAGE]

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