Document:

exv10w1

 

SEPARATION AGREEMENT

     This Separation Agreement (“Agreement”) and the Release, which is
attached hereto and incorporated by reference as Exhibit A (the
“Release”), are made and entered into effective as of March 15, 2005, by
and between, PLATO Learning, Inc., a Delaware corporation (the
“Company”), and John Murray (“Employee”).

RECITALS

     A. The Company and Employee entered into an Employment Agreement, dated
January 1, 2001 (the “Employment Agreement”), and an Employment Security
Agreement, dated January 24, 2001 (the “Employment Security Agreement”).

     B. The Company and Employee have mutually agreed to terminate the
Employment Agreement and Employee’s employment with the Company in accordance
with the terms of this Agreement.

     C. The parties to this Agreement have mutually agreed to settle and
resolve all actual and potential claims, and threatened causes of action which
have been or could be brought against the Company or Employee.

     NOW, THEREFORE, in consideration of the foregoing Recitals and all of the
terms and conditions set forth herein, the parties agree as follows:

	1.  	Consideration. The Company shall, after receipt of this fully
executed Agreement and Release, and after expiration without rescission of
all applicable rescission periods, provide Employee the compensation and
other benefits set forth in this Section 1.

	 	(a)  	Salary Continuation. The Company shall pay the
Employee his current annualized base salary of $350,000 through
December 31, 2007, in accordance with the Company’s normal payroll
practice and subject to withholding for federal, state and local
income and employment-related taxes. The Company will make such
salary continuation payments beginning with its first regular
payroll following expiration without rescission of all applicable
rescission periods set forth in the Release, and the initial payment
shall cover the period from February 1, 2005, through the date of
such initial payment.
	 
	 	(b)  	Lump-Sum Payment. The Company shall pay the Employee
a lump sum of $1,000,000, subject to withholding for federal, state
and local income and employment-related taxes. The Company will
make such payment with its first regular payroll following
expiration without rescission of all applicable rescission periods
set forth in the Release.
	 
	 	(c)  	Stock Options. The parties acknowledge that Employee
holds options to purchase shares of common stock of the Company that
are outstanding and exercisable as set forth on Exhibit B. All
outstanding and exercisable options set forth on Exhibit B shall
remain exercisable through and expire at 5:00 p.m., Minneapolis
time, on April 29, 2005. Employee acknowledges that all unvested
options shall

 

 

	 	   	expire and be forfeited as of the date hereof. In consideration
for the lump-sum payment set forth in Section 1(b), the Company
shall have no obligation to grant Employee the option to purchase
260,000 shares of common stock contemplated by Section 6(a) of the
Employment Agreement.
	 
	 	(d)  	COBRA Continuation. Employee acknowledges that the
Company has provided Employee with information and election
materials regarding continuation coverage under the Company’s group
medical, dental and life insurance plans in accordance with
applicable federal and state law (“COBRA”) and that
Employee’s COBRA continuation period began on February 1, 2005. If
Employee elects COBRA continuation coverage, Employee will pay the
full cost of such COBRA continuation coverage each month, and the
Company will pay Employee an amount equal to the difference between
the amount Employee pays for such COBRA continuation coverage each
month and the amount paid by a full-time active employee each month
for the same level of coverage elected by Employee, subject to
withholding for federal, state and local income and
employment-related taxes. In order to receive payment pursuant to
this Section 1(d), Employee must comply with any reasonable policies
and procedures specified by Employer.

	2.  	Resignation as an Officer and Director. Employee hereby confirms
his resignation of all of his positions as an officer (including Chairman
of the Board, President and Chief Executive Officer) and director of the
Company and all direct and indirect subsidiaries of the Company effective
as of November 17, 2004. Employee will not visit any of the Company’s
offices unless invited by an officer of the Company, who will obtain, if
necessary, any prior approval from the Company’s Chief Executive Officer.
Employee will not contact any of the Company’s employees at any time to
solicit any information regarding the Company’s business, except that
Employee may contact the Company’s Vice President — Human Resources
regarding administrative matters related to benefits under this Agreement
and Kelly Jacobus to conduct stock option transactions.
	 
	3.  	Prior Agreements. The parties acknowledge and agree that the
Employment Agreement and Employee’s employment with the Company terminated
effective as of January 31, 2005, without any further rights, liabilities
or obligations of either party thereunder, except that Employee continues
to be bound by Section 7 of the Employment Agreement in accordance with
its terms. The Employment Security Agreement is hereby terminated without
any rights, liabilities or obligations of the Company or Employee
thereunder.
	 
	4.  	Release. In consideration of the compensation and other benefits
set forth in this Agreement, the Employee will voluntarily sign the
Release upon execution of this Agreement. Employee acknowledges that the
consideration under this Agreement is adequate to support this Agreement
and the Release. Except as set forth herein and except for any claims the
Company may have for breach of this Agreement, the Release, or Section 7
of the Employment Agreement, the Company releases the Employee from any
and all claims, liabilities, causes of action and rights, known or
unknown, now or arising in the future, that the Company may have or claim
to have against the Employee as of the date of this Agreement.

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	5.  	Stipulation of No Charges. Employee affirmatively represents that
he/she has not filed nor caused to be filed any charges, claims,
complaints, or actions against the Company before any federal, state, or
local administrative agency, court, or other forum. Employee further
waives any right to any form of recovery or compensation from any legal
action, excluding any action claiming this Agreement and Release violate
the ADEA and/or OWBPA, filed or threatened to be filed by him/her or on
his/her behalf based on his/her employment, terms of employment, or
termination from the Company. Employee understands that any consideration
paid to him/her pursuant to Section 1 may be deducted from any monetary
award he/she may receive as a result of a successful ADEA and/or OWBPA
challenge to this Agreement and Release.
	 
	6.  	Non-Disparagement. The parties to this Agreement agree that they
will not make any disparaging or defamatory comments regarding the other
parties in any respect or make any comments concerning any aspect of their
relationship or the conduct or events which precipitated Employee’s
separation or negotiation of this Agreement. Furthermore, Employee agrees
not to assist or encourage in any way any individual or group of
individuals to bring or pursue a lawsuit, charge, complaint, or grievance,
or make any other demands against the Company. Employee agrees that, in
any and all future proceedings of whatever nature, he/she will testify
truthfully and will testify against the Company only to the extent that
he/she is compelled to do so by a lawful subpoena or other judicial or
administrative action.
	 
	7.  	Non-Admissions. The parties expressly deny any and all liability
or wrongdoing and agree that nothing in this Agreement shall be deemed to
represent any concession or admission of such liability or wrongdoing or
any waiver of any defense.
	 
	8.  	Invalidity. In case any one or more of the provisions of this
Agreement shall be held invalid, illegal or unenforceable in any respect,
the validity, legality and enforceability of the remaining provisions
contained in this Agreement will not in any way be affected or impaired
thereby.
	 
	9.  	Return of Property/Intellectual Property. Employee has, or will,
return to the Company all originals and all copies of all property and
assets of the Company referred to in Section 7(a) of the Employment
Agreement created or obtained by the Employee as a result of or in the
course of or in connection with his or her employment with the Company
which are in the Employee’s possession or control, whether or not
constituting confidential information of the Company, including, but not
limited to, computer files, software programs, computer equipment,
correspondence, notes, memoranda, notebooks, drawings, prototypes,
customer lists, or other documents and assets delivered to or obtained by
the Employee concerning any idea, product, apparatus, invention or process
manufactured, used, developed, investigated or marketed by the Company
during the period of his or her employment. Employee acknowledges that
all such materials and assets are, and will always remain, the exclusive
property of the Company. Upon the Company’s request, Employee will
execute and deliver promptly to the Company any written instruments or
assignments, and perform any other acts necessary in the Company’s opinion
to preserve property rights in any invention belonging to the Company
against forfeiture, abandonment or loss and to obtain and maintain letters

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	   	patent and/or copyrights on the inventions and to vest the entire right
and title to inventions in the Company. Employee agrees to perform such
acts at no charge to the Company, but the Company shall reimburse the
Employee for reasonable out-of-pocket expenses incurred in connection
with performing such acts.
	 
	10.  	Voluntary and Knowing Action. Employee acknowledges that he/she
has had sufficient opportunity to review this Agreement and Release with
his/her attorney, that he/she has read and understands the terms of this
Agreement and attached Release, and that he/she has voluntarily and
knowingly entered into this Agreement to resolve any and all charges,
claims, demands or causes of action which he/she now has or may have with
respect to the Company.
	 
	11.  	Governing Law. This Agreement shall be construed and interpreted
in accordance with applicable federal laws and the laws of the State of
Minnesota without regard to conflict of law principles of any
jurisdiction.
	 
	12.  	Legal Counsel and Fees. The parties to this Agreement agree to
bear their own costs and attorneys’ fees, if any. Employee acknowledges
that the Company, by this Agreement, has advised him/her to consult with
an attorney of his/her choice prior to executing this Agreement and the
Release. Employee acknowledges that he/she has had the opportunity to be
represented by legal counsel during the negotiation and execution of this
Agreement and Release, and that he/she understands that he/she will be
fully bound by this Agreement and Release.
	 
	13.  	Successors and Assigns. This Agreement is binding on and inures
to the benefit of the Company’s successors and assigns, all of which are
included in the term the “Company” as it is used in this Agreement. This
Agreement is also binding on Employee’s spouse, heirs, agents, executors,
administrators and successors.
	 
	14.  	Choice of Law/Venue. This Agreement shall be construed and
interpreted in accordance with applicable federal laws and the laws of the
State of Minnesota. If either party brings a legal action pursuant to
this Agreement and Release including, but not limited to, an action to
enforce its terms, or to challenge its validity, such legal action shall
be properly filed in a court of competent jurisdiction located in Hennepin
County, Minnesota.
	 
	15.  	Entire Agreement. Except for Employee’s continuing obligations
under Section 7 of the Employment Agreement, this Agreement and the
Release constitute the entire agreement between the parties. No
modification, amendment or change of any kind to this Agreement shall be
effective unless it is in writing and signed by both parties.
	 
	16.  	Counterparts. This Agreement may be executed in one or more
counterparts, each which shall be an original and all of which shall
constitute one and the same instrument. Facsimile execution and delivery
of this Agreement shall be legal, valid and binding execution and delivery
for all purposes.

4

 

	   	IN WITNESS WHEREOF, the parties have executed this Agreement on the dates
set forth below.

	 	 	 	 	 
	 	PLATO LEARNING, INC.

 	 
	 	By:  	 	 
	Dated:     , 2005 	 	David W. Smith 	 
	 	 	Chairman of the Board 	 
	 

	 	 	 	 	 
	 	EMPLOYEE

 	 
	Dated:     ,  2005 	By:  	 	 
	 	 	John Murray 	 
	 	 	 	 

5

 

	 	 	 	 	 

EXHIBIT A

RELEASE

	1.  	Definitions. I intend all words used in this Release to have
their plain meanings in ordinary English. Technical legal words are not
needed to describe what I mean. Specific terms I use in this Release have
the following meanings:

	 	(a)  	“I,” “me,” and “my” include both me,
John Murray, and anyone who has or obtains any legal rights or
claims through me.
	 
	 	(b)  	“Company,” as used in this Release, shall at all times
mean PLATO Learning, Inc., and its respective parent and/or
subsidiary corporations, affiliates, successors, predecessors,
shareholders, present and/or former officers, directors, agents,
employees, and attorneys, whether in their individual or official
capacities, benefit plans and plan administrators, and insurers.
	 
	 	(c)  	“My Claims” mean any and all of the actual or
potential claims of any kind whatsoever I, may have had, or
currently may have against Company, regardless of whether I now know
about those claims, including, but not limited to claims that are in
any way related to my employment with or separation (termination of
employment) from the Company or, directly or indirectly, the
Company’s common stock or options to purchase shares of the
Company’s common stock. This includes, but is not limited to, claims
for invasion of privacy; breach of written or oral, express or
implied, contract; breach of fiduciary duty, fraud or
misrepresentation; violation of the Federal Fair Labor Standards Act
(“FLSA”), 29 U.S.C. § 203(s), the Age Discrimination in Employment
Act of 1967 (“ADEA”), 29 U.S.C. § 626, as amended, the Older Workers
Benefit Protection Act of 1990 (“OWBPA”), 29 U.S.C. 626(f), Title
VII of the Civil Rights Act of 1964 (“Title VII”), 42 U.S.C. §
2000e, et seq., the Americans with Disabilities Act
(“ADA”), 29 U.S.C. § 2101, et seq., the Family and
Medical Leave Act (“FMLA”), 29 U.S.C. § 2601, et seq.,
the Employee Retirement Income Security Act of 1978 (“ERISA”), as
amended, 29 U.S.C. §§ 1001, et seq., Equal Pay Act (“EPA”),
29 U.S.C. § 206(d), the Worker Adjustment and Retraining
Notification Act (“WARN”), 29 U.S.C. § 2101, et seq.,
the Minnesota Human Rights Act, Minn. Stat. § 363.01, et
seq., Minnesota Statutes § 181, et seq., any
civil rights laws based on protected class status; assault, battery,
defamation, intentional or negligent infliction of emotional
distress, breach of the covenant of good faith and fair dealing,
promissory estoppel, negligence, negligent hiring, retention or
supervision, retaliation, constructive discharge, violation of
whistleblower protection laws, unjust enrichment, violation of
public policy, unlawful employment practices, violation of the
federal or state securities laws, and all other federal, state,
local ordinance, decree, order, common law or statutory claims.

	2.  	Agreement to Release My Claims. I agree to give up all My Claims,
waive any rights thereunder, and withdraw any and all of my charges and
lawsuits against Company, except as stated in Paragraph 5 of this Release.
In exchange for my agreement to release My Claims, I am receiving
satisfactory consideration (compensation) from Company.
The consideration I am receiving is a full and fair payment for the
release of all My Claims. The Company does not owe me anything in
addition to what I will be receiving.

 

 

	3.  	Older Workers Benefit Protection Act. I understand and have been
advised that the above release of My Claims is subject to the terms of the
Older Workers Benefit Protection Act (“OWBPA”). The OWBPA provides that
an individual cannot waive a right or claim under the Age Discrimination
in Employment Act (“ADEA”) unless the waiver is knowing and
voluntary. I have been advised of this law, and I agree that I am signing
this Release voluntarily, and with full knowledge of its consequences. I
understand that the Company is giving me at least twenty-one (21) days
from the date I received a copy of this Release to decide whether I want
to sign it. I acknowledge that I have been advised to use this time to
consult with an attorney about the effect of this Release. If I sign this
Release before the end of the twenty-one (21) day period, it will be my
personal, voluntary decision to do so, and will be done with full
knowledge of my legal rights. I agree that material and/or immaterial
changes to this Release will not restart the running of this consideration
period.
	 
	4.  	Exclusions from Release. My Claims do not include my rights, if
any, to claim the following: re-employment insurance benefits; claims for
my vested post-termination benefits under any 401(k) or similar retirement
benefit plan; my COBRA rights; my rights to enforce the terms of this
Release and the Separation Agreement of even date herewith; or my rights
to assert claims that are based on events occurring after this Release
becomes effective.

	 	(a)  	Nothing in this Release interferes with my right to file a
charge with the Equal Employment Opportunity Commission
(“EEOC”) or participate in any manner in an EEOC
investigation or proceeding under Title VII, the ADA, the ADEA, or
the EPA. I do, however, understand that I am waiving my right to
recover individual relief including, but not limited to, back pay,
front pay, reinstatement, attorneys’ fees, and/or punitive damages,
in any administrative or legal action whether brought by me, the
EEOC, or any other party.
	 
	 	(b)  	Nothing in this Release interferes with my right to challenge
the knowing and voluntary nature of this Release under the ADEA
and/or OWBPA.
	 
	 	(c)  	Nothing in this Release limits any rights that I would
otherwise have to be indemnified by the Employer, in my capacity as
an officer, director or employee of the Company, under the Company’s
Certificate of Incorporation, Bylaws, directors’ and officers’
insurance policy or Section 145 of the Delaware General Corporation
Law.
	 
	 	(d)  	I agree that Company reserves any and all defenses, which it
has or might have against any unreleased claims brought by me. This
includes, but is not limited to, Company’s right to seek available
costs and attorneys’ fees, and to have any monetary award granted to
me, if any, reduced by the amount of money that I received in
consideration for this Release.

	5.  	Right to Rescind and/or Revoke. I understand that insofar as this
Release relates to my rights under the ADEA, it shall not become effective
or enforceable until seven (7) days after I sign it. I have the right to
rescind this Release only insofar as it extends to potential claims under
the ADEA by written notice to Company within seven (7) calendar days
following my signing this Release, and within fifteen (15) calendar days
as to waiver of claims under the Minnesota Human Rights Act. Any such
rescission must be in writing and hand-delivered to Company or, if sent by
mail, must be addressed as follows:

	 	(a)  	post-marked within the seven (7) or fifteen (15) day period,
whichever is applicable;

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	 	(b)  	properly addressed to Jill Verlo, Vice President — Human
Resources, PLATO Learning, Inc., 10801 Nesbitt Avenue South,
Bloomington, Minnesota 55437; and
	 
	 	(c)  	sent by certified mail, return receipt requested.

  I understand that the payment I am receiving for settling and releasing
My Claims is contingent upon my agreement to be bound by the terms of
this Release. Accordingly, if I decide to rescind this Release, I
understand that I am not entitled to any of the payments or other
consideration offered in the attached Separation Agreement. I further
understand that if I attempt to rescind my release of any claim, I must
immediately return to the Company or its counsel all payments and other
consideration I have received under my Separation Agreement.

	6.  	I Understand the Terms of this Release. I have had the
opportunity to read this Release carefully and understand all its terms.
I have reviewed this Release with my own attorney. In agreeing to sign
this Release, I have not relied on any statements or explanations made by
Company or their attorneys. I understand and agree that this Release and
the attached Separation Agreement contain all the agreements between
Company and me. We have no other written or oral agreements.

     IN WITNESS WHEREOF, I have executed this Release on the date set forth
below.

	 	 	 	 	 
	 	

 

 	 
	Dated:     ,  2005 	  	 	 
	 	 	John Murray 	 
	 	 	 	 

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Exhibit B — Stock Option Summary

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Grant	 	 	Grant	 	 	Options	 	 	Grant	 	 	Options	 	 	Options	 	 	Options	 	 	Options	 	 	Options	 	 	Options	 
	Name	 	Plan	 	 	Date	 	 	Type	 	 	Granted	 	 	Price	 	 	Vested	 	 	Exercised	 	 	Cancelled	 	 	Unvested	 	 	Outstanding	 	 	Exercisable	 
	Murray, John
	 	2000 SIP	 	 	09/13/2000	 	 	NSO	 	 	22,015	 	 	$	13.3125	 	 	 	22,015	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	22,015	 	 	 	22,015	 
	Murray, John
	 	2000 SIP	 	 	09/13/2000	 	 	ISO	 	 	7,985	 	 	$	13.3125	 	 	 	7,985	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	7,985	 	 	 	7,985	 
	Murray, John
	 	1993 SOP	 	 	11/20/2000	 	 	NSO	 	 	53,334	 	 	$	15.6443	 	 	 	53,334	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	53,334	 	 	 	53,334	 
	Murray, John
	 	1993 SOP	 	 	12/05/2000	 	 	NSO	 	 	30,000	 	 	$	14.1098	 	 	 	30,000	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	30,000	 	 	 	30,000	 
	Murray, John
	 	1997 SOP	 	 	09/18/2001	 	 	NSO	 	 	1,662	 	 	$	16.4250	 	 	 	1,662	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	1,662	 	 	 	1,662	 
	Murray, John
	 	2000 SIP	 	 	09/18/2001	 	 	NSO	 	 	9,712	 	 	$	16.4250	 	 	 	9,712	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	9,712	 	 	 	9,712	 
	Murray, John
	 	2000 SIP	 	 	12/04/2001	 	 	NSO	 	 	75,293	 	 	$	13.7400	 	 	 	75,293	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	75,293	 	 	 	75,293	 
	Murray, John
	 	2002 SP	 	 	03/14/2002	 	 	NSO	 	 	46,667	 	 	$	17.0000	 	 	 	46,667	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	46,667	 	 	 	46,667	 
	Murray, John
	 	2002 SP	 	 	09/10/2002	 	 	NSO	 	 	86,667	 	 	$	6.6600	 	 	 	86,667	 	 	 	57,778	 	 	 	0	 	 	 	0	 	 	 	28,889	 	 	 	28,889	 
	Muuray, John
	 	2002 SP	 	 	01/21/2003	 	 	NSO	 	 	35,000	 	 	$	5.7800	 	 	 	35,000	 	 	 	23,333	 	 	 	0	 	 	 	0	 	 	 	11,667	 	 	 	11,667	 
	Murray, John
	 	2002 SP	 	 	09/16/2003	 	 	NSO	 	 	86,667	 	 	$	7.9500	 	 	 	86,667	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	86,667	 	 	 	86,667	 
	Murray, John
	 	2002 SP	 	 	12/10/2003	 	 	NSO	 	 	86,000	 	 	$	10.2600	 	 	 	28,666	 	 	 	0	 	 	 	0	 	 	 	57,334	 	 	 	86,000	 	 	 	28,666	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	541,002	 	 	 	 	 	 	 	483,668	 	 	 	81,111	 	 	 	0	 	 	 	57,334	 	 	 	459,891	 	 	 	402,557<PAGE>
                                                                               .
                                                                               .
                                                                               .

[COMERICA - BANK LOGO]  MASTER REVOLVING NOTE
                        LIBOR Rate-Maturity Date-Optional Advances (Business and
                         Commercial Loans Only)
<TABLE>
<CAPTION>
AMOUNT            NOTE DATE        MATURITY DATE     TAX IDENTIFICATION NUMBER
<S>               <C>              <C>               <C>
$5,000,000.00     July 25, 2003    July 30, 2005     75-1549797
</TABLE>
ON THE MATURITY DATE, as stated above, for value received, the undersigned
promise(s) to pay to the order of Comerica Bank-Texas ("Bank") at any office of
the Bank in the State of Texas, FIVE MILLION AND NO/100 DOLLARS (U.S.) (or that
portion of it advanced by the Bank and not repaid as later provided) with
interest until maturity, whether by acceleration or otherwise, or until Default,
as later defined, at a per annum rate equal to the lesser of (a) the Maximum
Rate, as later defined, or (b) the Stated Rate, as later defined, and after that
at a rate equal to the rate of interest otherwise prevailing under this Note
plus three percent (3%) per annum (but in no event in excess of the Maximum
Rate.) If on any day the Stated Rate shall exceed the Maximum Rate for that day,
the rate of interest applicable to this Note shall be fixed at the Maximum Rate
on that day and on each day thereafter until the total amount of interest
accrued on the unpaid principal balance of this Note equals the total amount of
interest which would have accrued if there had been no Maximum Rate. Interest
rate changes will be effective for interest computation purposes as and when the
Maximum Rate or the Stated Rate, as later defined, as applicable, changes.
Subject to the limitations hereinbelow set forth, interest shall be calculated
on the basis of a 360-day year for the actual number of days the principal is
outstanding. Accrued interest on this Note shall be payable on the first LIBOR
Business Day, as later defined, of each calendar month, commencing with the
first LIBOR Business Day of the calendar month following the date of this Note
and with respect to interest accrued on any LIBOR Balance, as later defined, on
the last day of the applicable LIBOR Interest Period, as later defined, until
the Maturity Date (set forth above) when all amounts outstanding under this Note
shall be due and payable in full. If any payment of principal or interest under
this Note shall be payable on a day other than a day on which the Bank is open
for business, this payment shall be extended to the next succeeding business day
and interest shall be payable at the rate specified in this Note during this
extension. A late payment charge equal to a reasonable amount not to exceed five
percent (5%) of each late payment may be charged on any payment not received by
the Bank within ten (10) calendar days after the payment due date, but
acceptance of payment of this charge shall not waive any Default under this
Note.

Subject to the provisions hereof, the undersigned shall have the option (an
"Interest Option") exercisable from time to time to designate a portion of the
unpaid principal balance of this Note to bear interest at a rate determined with
respect to the Prime Rate (such portion being herein referred to as the "Prime
Rate Balance") and to designate one or more portions of the unpaid principal
balance of this Note to bear interest at a rate determined with respect to a
LIBOR Based Rate (each such portion being herein referred to as a "LIBOR
Balance").

The term "Maximum Rate" as used herein, shall mean at the particular time in
question the maximum nonusurious rate of interest which, under applicable law,
may then be charged on this Note. If such maximum rate of interest changes after
the date hereof, the Maximum Rate shall be automatically increased or decreased,
as the case may be, without notice to the undersigned from time to time as of
the effective date of each change in such maximum rate. For purposes of
determining the Maximum Rate under the law of the State of Texas, the applicable
interest rate ceiling shall be the "weekly ceiling" from time to time in effect
under Chapter 303 of the Texas Finance Code, as amended.

The term "Stated Rate," as used in this Note, shall mean (a) with respect to the
Prime Rate Balance outstanding from time to time, a fluctuating per annum rate
of interest equal to the Prime Rate plus the Applicable Margin and (b) with
respect to each LIBOR Balance, a per annum rate of interest equal to the LIBOR
Based Rate for the LIBOR Interest Period then in effect with respect to such
LIBOR Balance plus the Applicable Margin.

The term "Prime Rate," as used herein, shall mean that annual rate of interest
which is equal to the greater of the annual rate of interest designated by the
Bank as its Prime Rate which is changed by the Bank from time to time or a
variable per annum rate of interest determined from day to day which equals the
sum of 1% plus the average per annum rate of interest on overnight Federal
funds transactions with members of Federal Reserve System arranged by Federal
funds brokers ("Overnight Transactions") transacted on the immediately preceding
Business Day, as published by the Federal Reserve Bank of New York, or, if such
interest rate is not so published for any Business Day, the average of the per
annum interest rate quotations for Overnight Transactions received by the Bank
(or, at its option, the Reference Bank) for such Business Day from 3 Federal
funds brokers of recognized standing selected by the Bank (or, at its option,
the Reference Bank). The Bank's Prime Rate is a reference rate and does not
necessarily represent the lowest or best rate actually charged by the Bank to
any of its customers. The Bank may make commercial loans at rates of interest
at, above or below its Prime Rate.

The term "Reference Bank" means Comerica Bank, a Michigan banking corporation,
its successors and assigns.

The term "LIBOR-Based Rate", as used herein, shall mean, with respect to the
applicable LIBOR Interest Period and applicable LIBOR Balance (as defined
above), the quotient of the following (rounded upwards, if necessary, to the
nearest 1/16 of 1%): (a) the LIBOR Rate (as defined below); divided by (b) a
percentage (expressed as a decimal) equal to 1.00 minus the maximum rate during
such interest period at which Bank or the Reference Bank (or, if applicable, the
Reference Bank's designated eurodollar lending office) is required to maintain
reserves on "Eurocurrency Liabilities" as defined in and pursuant to Regulation
D of the Board of Governors of the Federal Reserve System or, if such regulation
or designation is modified, and as long as Bank or the Reference Bank (or, if
applicable, the Reference Bank's designated eurodollar lending office) is
required to maintain reserves against a category of liabilities which includes
eurodollar deposits or includes a category of assets which includes eurodollar
loans, the rate at which such reserves are required to be maintained on such
category.

The term "LIBOR Rate", as used herein, shall mean the per annum rate of interest
determined on the basis of the rate for deposits in United States Dollars for a
period equal to the relevant LIBOR Interest Period for such LIBOR Balance,
commencing on the first day of such LIBOR Interest Period, appearing on Page
BBAM of the Bloomberg Financial Markets Information Service as of 10:00 a.m.
(Dallas, Texas time) (or soon thereafter as practical), two (2) LIBOR Business
Days prior to the first day of such LIBOR Interest Period. In the event that
such rate does not appear on Page BBAM of the Bloomberg Financial Markets
Information Service (or otherwise on such Service), the LIBOR Rate shall be
determined by reference to such other publicly available service for displaying
eurodollar rates as may be agreed upon by Bank and the undersigned, or, in the
absence of such agreement, the LIBOR Rate shall, instead, be the per annum rate
equal to the average (rounded upward, if necessary, to the nearest one-sixteenth
of one percent (1/16%)) of the rate at which Bank is offered dollar deposits at
or about 10:00 a.m. (Dallas, Texas time) (or soon thereafter as practical), two
(2) LIBOR Business Days prior to the first day of such LIBOR Interest Period in
the interbank eurodollar market in an amount comparable to the principal amount
of the respective LIBOR Balance which is to bear interest at such LIBOR Rate and
for a period equal to the relevant LIBOR Interest Period.

The term "LIBOR Interest Period", as used herein, shall mean, with respect to
the applicable LIBOR Balance, a period commencing on the date (which must be a
LIBOR Business Day) upon which, pursuant to an Interest Notice, as later
defined, the principal amount of such LIBOR Balance begins to accrue interest at
the applicable LIBOR-based Rate plus, if applicable, the Applicable Margin (or,
in the case of a rollover to a successive LIBOR Interest Period, the last day of
the immediately preceding LIBOR Interest Period) and ending 30, 60, 90,180 or
360 days after the commencement date (as designated in the Interest Notice);
provided, that: (i) any LIBOR Interest Period which would otherwise end on a day
which is not a LIBOR Business Day shall be extended to the next succeeding LIBOR
Business Day (unless such LIBOR Business Day falls in another calendar month, in
which case, such LIBOR Interest Period shall end on the next preceding LIBOR
Business Day); and (ii) any LIBOR Interest Period which begins on a day for
which there is no numerically corresponding day in the calendar month at the end
of such LIBOR Interest Period shall end on the last LIBOR Business Day of such
last calendar month; and (iii) no LIBOR Interest Period shall extend beyond the
Maturity Date.

The term "LIBOR Business Day," as used herein, shall mean any day other than a
Saturday, Sunday or holiday on which Bank is open for all or substantially all
of its domestic and international commercial banking business (including
dealings in foreign exchange) in Dallas, Texas, and, if the applicable day
relates to the LIBOR-based Rate, any LIBOR Interest Period, or any notice with
respect to the LIBOR-based Rate

                                       1
<PAGE>

or any LIBOR Interest Period, also a day on which dealings in dollar deposits
are also carried on in the London interbank market and on which banks are open
for business in London.

The term "Applicable Margin," as used herein, shall mean 0% for the Prime Rate
Balance and two percent (2%) for each LIBOR Balance.

The term "Business Day" as used herein, shall mean any day other than a
Saturday, Sunday or holiday, on which the Bank and the Reference Bank (and, if
applicable, the Reference Bank's designated eurodollar lending office) are open
to carry on all or substantially all of their normal commercial lending
business.

The Interest Option shall be exercisable by the undersigned subject to the other
limitations in this Note on the undersigned's option to designate a portion of
the unpaid principal balance hereof as a LIBOR Balance and only in the manner
provided below:

      (i) Before 12:00 noon at least 3 Business Days prior to the date the
undersigned has requested the Bank to make an advance upon this Note, the
undersigned shall have given the Bank written notice (any such notice, an
"Interest Notice") each in form and content satisfactory to Bank specifying the
initial Interest Option(s) and the respective initial amounts of the Prime Rate
Balance and LIBOR Balance designated by the undersigned for such advance. If the
required Interest Notice shall not have been timely received by the Bank or
fails to designate all or any portion of the unpaid principal amount of the
advance as either a Prime Rate Balance or a LIBOR Balance in accordance with the
terms and provisions of this Note, the undersigned shall be deemed conclusively
to have designated such amounts to be a Prime Rate Balance and to have given the
Bank notice of such designation.

      (ii) At least three (3) LIBOR Business Days prior to the termination of
any LIBOR Interest Period for a LIBOR Balance, the undersigned shall give the
Bank an Interest Notice specifying the Interest Option which is to be applicable
to such LIBOR Balance upon the expiration of such LIBOR Interest Period. If the
required Interest Notice shall not have been timely received by the Bank, the
undersigned shall be deemed conclusively to have designated such amount as a
Prime Rate Balance immediately upon the expiration of such LIBOR Interest Period
and to have given the Bank notice of such designation.

      (iii) The undersigned shall have the right, exercisable on any Business
Day subject to the terms of this Note, to convert an eligible portion of the
Prime Rate Balance to a LIBOR Balance by giving the Bank an Interest Notice of
such designation at least three (3) LIBOR Business Days prior to the effective
date of such exercise. Additionally, upon termination of any LIBOR Interest
Period, the undersigned shall have the right, on any Business Day, to convert
all or a portion of such principal amount from the LIBOR Balance to a Prime Rate
Balance by giving Bank an Interest Notice of such selection at least three (3)
LIBOR Business Days prior to effective date of such exercise.

      (iv) There may be no more than four (4) LIBOR Balances in effect at any
time.

      (v) Each LIBOR Balance must be, as of the first day of the applicable
LIBOR Interest Period, at least $100,000.00.

      (vi) No Default, or condition or event which, with the giving of notice or
the lapse of time, or both, would constitute a Default, shall have occurred and
be continuing or exist.

      (vii) Each exercise of an Interest Option to designate a LIBOR Balance to
bear interest at a Stated Rate which is based on the LIBOR Based Rate shall not
be revocable.

Changes in the Stated Rate applicable to a Prime Rate Balance or a LIBOR Balance
shall become effective without prior notice to the undersigned automatically as
of the opening of business on the date of each change in the Prime Rate or the
LIBOR Based Rate, as the case may be.

If the Bank or Reference Bank (or, if applicable, the Reference Bank's
designated eurodollar lending office) determines that deposits in U.S. dollars
(in the applicable amounts) are not being offered to prime banks in the
interbank eurodollar market selected by the Bank or Reference Bank (or, if
applicable, the Reference Bank's designated eurodollar lending office) for the
applicable LIBOR Interest Period, or that the rate at which such dollar deposits
are being offered will not adequately and fairly reflect the cost to the Bank or
Reference Bank (or, if applicable, the Reference Bank's designated eurodollar
lending office) of making or maintaining a LIBOR Balance for the applicable
LIBOR Interest Period, the Bank shall forthwith give notice thereof to the
undersigned, whereupon, until the Bank notifies the undersigned that such
circumstances no longer exist, the right of the undersigned to select an
Interest Option based upon a LIBOR Based Rate shall be suspended, and the
undersigned may only select Interest Options based on the Prime Rate.

If the adoption of any applicable law, rule or regulation, or any change
therein, or any change in the interpretation or administration thereof by any
governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by the Bank or Reference
Bank (or, if applicable, its designated eurodollar lending office) with any
request or directive (whether or not having the force of law) of any such
authority, central bank or comparable agency shall make it unlawful or
impractical for the Bank or Reference Bank (or, if applicable, its designated
eurodollar lending office) to make or maintain a LIBOR Balance, the Bank shall
so notify the undersigned and any then-existing LIBOR Balance shall
automatically convert to a Prime Rate Balance either (i) on the last day of the
then-current LIBOR Interest Period applicable to such LIBOR Balance, if the Bank
and Reference Bank (and, if applicable, its designated eurodollar lending
office) may lawfully continue to maintain and fund such LIBOR Balance to such
day, or (ii) immediately, if the Bank or Reference Bank (or, if applicable, its
designated eurodollar lending office) may not lawfully continue to maintain such
LIBOR Balance to such day. Further, until the Bank notices the undersigned that
such conditions or circumstances no longer exist, the right of the undersigned
to select an Interest Option based on a LIBOR Based Rate shall be suspended, and
the undersigned may only select Interest Options based on the Prime Rate.

If either (i) the adoption of any applicable law, rule or regulation, or any
change therein, or any change in the interpretation or administration thereof by
any governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by the Bank or Reference
Bank (or, if applicable, its designated eurodollar lending office) with any
request or directive (whether or not having the force of law) of any such
authority, central bank or comparable agency shall subject the Bank or Reference
Bank (or, if applicable, its designated eurodollar lending office) to any tax
(including without limitation any United States interest equalization or similar
tax, however named), duty or other charge with respect to any LIBOR Balance,
this Note or the Bank's or the Reference Bank's (or, if applicable, its
designated eurodollar lending office's) obligation to compute interest on the
principal balance of this Note at a rate based upon a LIBOR Based Rate, or shall
change the basis of taxation of payments to the Bank or the Reference Bank (or,
if applicable, its designated eurodollar lending office) of the principal of or
interest on any LIBOR Balance or any other amounts due under this Note in
respect of any LIBOR Balance or the Bank's or Reference Bank's (or, if
applicable, its designated eurodollar lending office's) obligation to compute
the interest on the balance of this Note at a rate based upon a LIBOR Based
Rate, or (ii) any governmental authority, central bank or other comparable
authority shall at any time impose, modify or deem applicable any reserve
(including, without limitation, any imposed by the Board of Governors of the
Federal Reserve System), special deposit or similar requirement against assets
of, deposits with or for the account of, or credit extended by, the Bank or
Reference Bank (or, if applicable, its designated eurodollar lending office), or
shall impose on the Bank or Reference Bank (or, if applicable, its designated
eurodollar lending office) or any relevant interbank eurodollar market or
exchange any other condition affecting any LIBOR Balance, this Note or the
Bank's or Reference Bank's (or, if applicable, its designated eurodollar lending
office's) obligation to compute the interest on the balance of this Note at a
rate based upon a LIBOR Based Rate; and the result of any of the foregoing is to
increase the cost to the Bank or Reference Bank (or, if applicable, the
Reference Bank's designated eurodollar lending office) of maintaining any LIBOR
Balance, or to reduce the amount of any sum received or receivable by the Bank
or Reference Bank (or, if applicable, the Reference Bank's designated eurodollar
lending office) under or with respect to this Note by an amount deemed by the
Bank to be material, then upon demand by the Bank, the undersigned shall pay to
the Bank such additional amount or amounts as will compensate the Bank and the
Reference Bank (and, if applicable, its designated eurodollar lending office)
for such increased cost or reduction. The Bank will promptly notify the
undersigned of any event of which it has knowledge, occurring after the date
hereof, which will entitle the Bank or Reference Bank (or, if applicable, the
Reference Bank's designated

                                        2
<PAGE>

eurodollar lending office) to compensation pursuant to this paragraph. A
certificate of the Bank claiming compensation under this paragraph and setting
forth the additional amount or amounts to be paid hereunder shall be conclusive
in the absence of manifest error.

If any applicable law, treaty, rule, or regulation (whether domestic or foreign)
now or hereafter in effect and whether presently applicable to the Bank or
Reference Bank (or, if applicable, its designated eurodollar lending office) or
any change therein or any interpretation or administration thereof by any
governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof or compliance by the Bank or Reference
Bank (or, if applicable, its designated eurodollar lending office) therewith or
with any guidance, request or directive of any such governmental authority,
central bank or comparable agency (whether or not having the force of law),
including any risk-based capital guidelines, affects or would affect the amount
of capital required or expected to be maintained by the Bank or Reference Bank
(or any corporation controlling the Bank or Reference Bank), and the Bank
determines that the amount of such capital is increased by or based upon the
existence of any obligations of Bank hereunder or the maintaining of any LIBOR
Balance hereunder, and such increase has the effect of reducing the rate of
return on Bank's or the Reference Bank's (or its controlling corporation's)
capital as a consequence of such obligations or the maintaining of LIBOR
Balances hereunder to a level below that which the Bank or Reference Bank (or
such controlling corporation) could have achieved but for such circumstances
(taking into consideration its policies with respect to capital adequacy), then
the undersigned shall pay to Bank, within fifteen (15) days of receipt by the
undersigned of written notice from the Bank demanding such compensation, such
additional amounts as are sufficient to compensate the Bank or Reference Bank
(or its controlling corporation) for any increase in the amount of capital and
reduced rate of return which the Bank determines to be allocable to the
existence of any obligations of the Bank hereunder or maintenance of any LIBOR
Balances hereunder. A certificate of Bank as to the amount of such compensation,
prepared in good faith and in reasonable detail by the Bank, which is submitted
by the Bank to the undersigned shall be conclusive and binding for all purposes
absent manifest error.

The undersigned may not repay any LIBOR Balance or convert all or any portion of
a LIBOR Balance to a Prime Rate Balance prior to the expiration of the
applicable LIBOR Interest Period, unless (i) such repayment or conversion is
specifically required by the terms of this Note, (ii) the Bank demands that such
repayment or conversion be made, or (iii) the Bank, in its sole discretion,
consents to such repayment or conversion. If for any reason, whether or not
consent shall have been given or demand shall have been made by the Bank, any
LIBOR Balance is repaid or converted prior to the expiration of the
corresponding LIBOR Interest Period, or any Interest Option which designates a
LIBOR Balance is revoked for any reason whatsoever prior to the commencement of
the applicable LIBOR Interest Period or the undersigned fails for any reason to
borrow the full amount of any LIBOR Balance for which the undersigned has
exercised an Interest Option, or if for any other reason whatsoever, the basis
for determining the Stated Rate shall be changed from a LIBOR Based Rate to the
Prime Rate prior to the expiration of the applicable LIBOR Interest Period, or
the undersigned shall fail to make any payment of principal or interest upon
this Note at any time that the Stated Rate if based on a LIBOR Based Rate, then
the undersigned shall pay to the Bank on demand any amounts required to
compensate the Bank and Reference Bank (and, if applicable, its designated
eurodollar lending office) for any losses, costs or expenses which any of them
may incur as a result thereof, including, without limitation, any loss, cost or
expense incurred in obtaining, liquidating, employing or redeploying deposits
from third parties. Amounts payable by the undersigned to the Bank pursuant to
this paragraph may include, without limitation, amounts equal to the excess, if
any of (a) the amounts of interest which would have accrued on any amounts so
prepaid, refunded, converted or not so borrowed, from the respective dates of
prepayment, refund, conversion or failure to borrow through the last day of the
relevant LIBOR Interest Periods at the applicable rates of interest for the
applicable LIBOR Balances, as provided under this Note, over (b) the amounts of
interest determined by the Bank or Reference Bank (or, if applicable, its
designated eurodollar lending office) which would have accrued to the Bank or
Reference Bank (or if applicable, its designated eurodollar lending office) on
such respective amounts by placing such amounts on deposit for comparable
periods with leading banks in the interbank eurodollar market selected by the
Bank or Reference Bank (or, if applicable, the Reference Bank's designated
eurodollar lending office). The calculation of any such amounts under this
paragraph shall be made as if the Bank or Reference Bank (or, if applicable, the
Reference Bank's designated eurodollar lending office) actually funded or
committed to fund the relevant LIBOR Balances hereunder through the purchase of
underlying deposits in amounts equal to the respective amounts of the applicable
LIBOR Balances and having terms comparable to the applicable LIBOR Interest
Periods; provided, however, that the Bank may fund LIBOR Balances hereunder in
any manner they may elect in their sole discretion, and the foregoing
assumptions shall be utilized only for the purposes of calculating amounts
payable under this paragraph. Upon written request by the undersigned, the Bank
shall deliver to the undersigned a certificate setting for the basis for
determining such losses, costs and expenses which certificate shall be
conclusive in the absence of manifest error.

For any LIBOR Balance, if the Bank or the Reference Bank shall designate a
eurodollar lending office which maintains books separate from those of the Bank
or the Reference Bank, the Bank and the Reference Bank shall have the option of
maintaining and carrying such LIBOR Balance on the Books of such eurodollar
lending office.

The principal amount payable under this Note shall be the sum of all advances
made by the Bank to or at the request of the undersigned, less principal
payments actually received by the Bank. The books and records of the Bank shall
be the best evidence of the principal amount and the unpaid interest amount
owing at any time under this Note and shall be conclusive absent manifest error.
No interest shall accrue under this Note until the date of the first advance
made by the Bank; after that interest on all advances shall accrue and be
computed on the principal balance outstanding from time to time under this Note
until the same is paid in full. AT NO TIME SHALL THE BANK BE UNDER ANY
OBLIGATION TO MAKE ANY ADVANCES TO THE UNDERSIGNED PURSUANT TO THIS NOTE
(NOTWITHSTANDING ANYTHING EXPRESSED OR IMPLIED IN THIS NOTE OR ELSEWHERE TO THE
CONTRARY, INCLUDING WITHOUT LIMIT IF THE BANK SUPPLIES THE UNDERSIGNED WITH A
BORROWING FORMULA) AND THE BANK, AT ANY TIME AND FROM TIME TO TIME, WITHOUT
NOTICE, AND IN ITS SOLE DISCRETION, MAY REFUSE TO MAKE ADVANCES TO THE
UNDERSIGNED WITHOUT INCURRING ANY LIABILITY DUE TO THIS REFUSAL AND WITHOUT
AFFECTING THE UNDERSIGNED'S LIABILITY UNDER THIS NOTE FOR ANY AND ALL AMOUNTS
ADVANCED.

This Note and any other indebtedness and liabilities of any kind of the
undersigned (or any of them) to the Bank, and any and all modifications,
renewals or extensions of it, whether joint or several, contingent or absolute,
now existing or later arising, and however evidenced and whether incurred
voluntarily or involuntarily, known or unknown, or originally payable to the
Bank or to a third party and subsequently acquired by Bank including, without
limitation, any late charges; loan fees or charges; overdraft indebtedness;
costs incurred by Bank in establishing, determining, continuing or defending the
validity or priority of any security interest, pledge or other lien or in
pursuing any of its rights or remedies under any loan document (or otherwise) or
in connection with any proceeding involving the Bank as a result of any
financial accommodation to the undersigned (or any of them); and reasonable
costs and expenses of attorneys and paralegals, whether inside or outside
counsel is used, and whether any suit or other action is instituted, and to
court costs if suit or action is instituted, and whether any such fees, costs or
expenses are incurred at the trial court level or on appeal, in bankruptcy, in
administrative proceedings, in probate proceedings or otherwise (collectively
"Indebtedness"), are secured by and the Bank is granted a security interest in
and lien upon all items deposited in any account of any of the undersigned with
the Bank and by all proceeds of these items (cash or otherwise), all account
balances of any of the undersigned from time to time with the Bank, by all
property of any of the undersigned from time to time in the possession of the
Bank and by any other collateral, rights and properties described in each and
every deed of trust, mortgage, security agreement, pledge, assignment and other
security or collateral agreement which has been, or will at any time(s) later
be, executed by any (or all) of the undersigned to or for the benefit of the
Bank (collectively "Collateral"). Notwithstanding the above, (i) to the extent
that any portion of the Indebtedness is a consumer loan, that portion shall not
be secured by any deed of trust, mortgage on or other security interest in any
of the undersigned's principal dwelling or in any of the undersigned's real
property which is not a purchase money security interest as to that portion,
unless expressly provided to the contrary in another place, or (ii) if the
undersigned (or any of them) has(have) given or give(s) Bank a deed of trust or
mortgage covering California real property, that deed of trust or mortgage shall
not secure this Note or any other indebtedness of the undersigned (or any of
them), unless expressly provided to the contrary in another place, or (iii) if
the undersigned (or any of them) has (have) given or give(s) the Bank a deed of
trust or mortgage covering real property which, under Texas law, constitutes the
homestead of such person, that deed of trust or mortgage shall not secure this
Note or any other indebtedness of the undersigned (or any of them) unless
expressly provided to the contrary in another place.

If an Event of Default as defined in that certain Credit Agreement dated as of
evendate herewith between the undersigned and the Bank occurs or if the
undersigned (or any of them) or any guarantor under a guaranty of all or part of
the Indebtedness ("guarantor") (a) fail(s) to pay any of the Indebtedness when
due, by maturity, acceleration or otherwise, or fail(s) to pay any Indebtedness
owing on a demand basis

                                       3
<PAGE>

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

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

The undersigned waive(s) presentment, demand, protest, notice of dishonor,
notice of demand or intent to demand, notice of acceleration or intent to
accelerate, and all other notices and agree(s) that no extension or indulgence
to the undersigned (or any of them) or release, substitution or nonenforcement
of any security, or release or substitution of any of the undersigned, any
guarantor or any other party, whether with or without notice, shall affect the
obligations of any of the undersigned. The undersigned waive(s) all defenses or
right to discharge available under Section 3.605 of the Texas Uniform Commercial
Code and waive(s) all other suretyship defenses or right to discharge. The
undersigned agree(s) that the Bank has the right to sell, assign, or grant
participations or any interest in, any or all of the Indebtedness, and that, in
connection with this right, but without limiting its ability to make other
disclosures to the full extent allowable, the Bank may disclose all documents
and information which the Bank now or later has relating to the undersigned or
the Indebtedness. The undersigned agree(s) that the Bank may provide information
relating to this Note or the Indebtedness or relating to the undersigned to the
Bank's parent, affiliates, subsidiaries and service providers.

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

The undersigned acknowledge(s) and agree(s) that there are no contrary
agreements, oral or written, establishing a term of this Note and agree(s) that
the terms and conditions of this Note may not be amended, waived or modified
except in a writing signed by an officer of the Bank expressly stating that the
writing constitutes an amendment, waiver or modification of the terms of this
Note. As used in this Note, the word "undersigned" means, individually and
collectively, each maker, accommodation party, indorser and other party signing
this Note in a similar capacity. If any provision of this Note is unenforceable
in whole or part for any reason, the remaining provisions shall continue to be
effective. Chapter 346 of the Texas Finance Code (and as the same may be
incorporated by reference in other Texas statutes) shall not apply to the
Indebtedness evidenced by this Note. THIS NOTE IS MADE IN THE STATE OF TEXAS AND
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE
STATE OF TEXAS, WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLE.

This Note and all other documents, instruments and agreements evidencing,
governing, securing, guaranteeing or otherwise relating to or executed pursuant
to or in connection with this Note or the Indebtedness evidenced hereby (whether
executed and delivered prior to, concurrently with or subsequent to this Note),
as such documents may have been or may hereafter be amended from time to time
(the "Loan Documents") are intended to be performed in accordance with, and only
to the extent permitted by, all applicable usury laws. If any provision hereof
or of any of the other Loan Documents or the application thereof to any person
or circumstance shall, for any reason and to any extent, be invalid or
unenforceable, neither the application of such provision to any other person or
circumstance nor the remainder of the instrument in which such provision is
contained shall be affected thereby and shall be enforced to the greatest extent
permitted by law. It is expressly stipulated and agreed to be the intent of the
holder hereof to at all times comply with the usury and other applicable laws
now or hereafter governing the interest payable on the indebtedness evidenced by
this Note. If the applicable law is ever revised, repealed or judicially
interpreted so as to render usurious any amount called for under this Note or
under any of the other Loan Documents, or contracted for, charged, taken,
reserved or received with respect to the indebtedness evidenced by this Note, or
if Bank's exercise of the option to accelerate the maturity of this Note, or if
any prepayment by the undersigned or prepayment agreement results (or would, if
complied with, result) in the undersigned having paid, contracted for or being
charged for any interest in excess of that permitted by law, then it is the
express intent of the undersigned and Bank that this Note and the other Loan
Documents shall be limited to the extent necessary to prevent such result and
all excess amounts theretofore collected by Bank shall be credited on the
principal balance of this Note or, if fully paid, upon such other Indebtedness
as shall then remaining outstanding (or, if this Note and all other Indebtedness
have been paid in full, refunded to the undersigned), and the provisions of this
Note and the other Loan Documents shall immediately be deemed reformed and the
amounts thereafter collectable hereunder and thereunder reduced, without the
necessity of the execution of any new document, so as to comply with the then
applicable law, but so as to permit the recovery of the fullest amount otherwise
called for hereunder or thereunder. All sums paid, or agreed to be paid, by the
undersigned for the use, forbearance, detention, taking, charging, receiving or
reserving of the indebtedness of the undersigned to Bank under this Note or
arising under or pursuant to the other Loan Documents shall, to the maximum
extent permitted by applicable law, be amortized, prorated, allocated and spread
throughout the full term of such indebtedness until payment in full so that the
rate or amount of interest on account of such indebtedness does not exceed the
usury ceiling from time to time in effect and applicable to such indebtedness
for so long as such indebtedness is outstanding. To the extent federal law
permits Bank to contract for, charge or receive a greater amount of interest,
Bank will rely on federal law instead of the Texas Finance Code for the purpose
of determining the Maximum Rate. Additionally, to the maximum extent permitted
by applicable law now or hereafter in effect, Bank may, at its option and from
time to time, implement any other method of computing the Maximum Rate under the
Texas Finance Code or under other applicable law, by giving notice, if required,
to the undersigned as provided by applicable law now or hereafter in effect.
Notwithstanding anything to the contrary contained herein or in any of the other
Loan Documents, it is not the intention of Bank to accelerate the maturity of
any interest that has not accrued at the time of such acceleration or to collect
unearned interest at the time of such acceleration.

THE UNDERSIGNED AND THE BANK, BY ACCEPTANCE OF THIS NOTE, ACKNOWLEDGE THAT THE
RIGHT TO TRIAL BY JURY IS A CONSTITUTIONAL ONE, BUT THAT IT MAY BE WAIVED. EACH
PARTY, AFTER CONSULTING (OR HAVING HAD THE OPPORTUNITY TO CONSULT) WITH COUNSEL
OF THEIR CHOICE, KNOWINGLY AND VOLUNTARILY, AND FOR THEIR MUTUAL

                                        4
<PAGE>

BENEFIT, WAIVES ANY RIGHT TO TRIAL BY JURY IN THE EVENT OF LITIGATION REGARDING
THE PERFORMANCE OR ENFORCEMENT OF, OR IN ANY WAY RELATED TO, THIS NOTE OR THE
INDEBTEDNESS.

THIS WRITTEN LOAN AGREEMENT (AS DEFINED BY SECTION 26.02 OF THE TEXAS BUSINESS
AND COMMERCE CODE) REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY
NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE
PARTIES.

                             BORROWER:

                             INTERPHASE CORPORATION,
                             a Texas corporation

                             By:/s/ Steve Kovac
                                -----------------------------------------
                                Steve Kovac, Chief Financial Officer

2901 Dallas Parkway                 Plano        Texas                75093
-------------------                 -----        -----              --------
  STREET ADDRESS                    CITY         STATE              ZIP CODE

<TABLE>
<CAPTION>
                                  FOR BANK USE ONLY                          CCAR #
-------------------------------------------------------------------------------------------------------
<S>                      <C>                 <C>                 <C>                      <C>
LOAN OFFICER INITIALS    LOAN GROUP NAME     OBLIGOR NAME
   RLR                   MIDDLE MARKET       INTERPHASE CORPORATION, A TEXAS CORPORATION
                         NORTH
-------------------------------------------------------------------------------------------------------
LOAN OFFICER ID. NO.     LOAN GROUP NO.      OBLIGOR NO.         NOTE NO.                 AMOUNT
43527                    90029                                                            $5,000,000.00
-------------------------------------------------------------------------------------------------------
 </TABLE>

                                        5
<PAGE>

[COMERICA - BANK LOGO]        CREDIT AGREEMENT

THIS CREDIT AGREEMENT is made and delivered to be effective as of JULY 25, 2003,
by and between INTERPHASE CORPORATION, a Texas corporation (herein referred to
with all successors, assigns and/or personal representatives as the "Borrower"),
and COMERICA BANK-TEXAS (herein referred to with its successors and assigns as
the "Bank"). For and in consideration of the mutual promises herein contained
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, Borrower and Bank agree as follows:

SECTION 1. DEFINITIONS

1.1   Defined Terms. The following terms, as used in this Agreement, shall have
      the meanings set forth below. The singular number shall be deemed to
      include the plural, the masculine gender shall include the feminine and
      neuter genders, and vice versa.

      "AFFILIATE" shall mean, when used with respect to any Person, any other
      Person which, directly or indirectly, controls or is controlled by or is
      under common control with such Person. For purposes of this definition,
      "control" (including, with correlative meanings, the terms "controlled by"
      and "under common control with"), with respect to any Person, shall mean
      possession, directly or indirectly, of the power to direct or cause the
      direction of the management and policies of such Person, whether through
      the ownership of voting securities, by contract or otherwise.

      "AGREEMENT" shall mean this Credit Agreement, including all addenda,
      exhibits and schedules now or hereafter made a part hereof, as the same
      may be amended from time to time.

      "APPLICABLE INTEREST RATE" shall mean, with respect to the Indebtedness
      from time to time outstanding under any promissory note or other Loan
      Document evidencing the Indebtedness, the rate or rates provided in such
      note as the applicable interest rate.

      "COLLATERAL" shall mean all property, assets and rights in which a Lien or
      other encumbrance in favor of or for the benefit of Bank is or has been
      granted or arises or has arisen, or may hereafter be granted or arise,
      under or in connection with any Loan Document, or otherwise, to secure the
      payment or performance of any portion of the Indebtedness.

      "DEBT" shall mean, as of any applicable date of determination thereof, all
      liabilities of a Person that should be classified as liabilities in
      accordance with GAAP. In the case of Borrower, the term "Debt" shall
      include, without limitation, the Indebtedness.

      "DEFAULT" shall mean, any condition or event which, with the giving of
      notice or the passage of time, or both, would constitute an Event of
      Default.

      "ENVIRONMENTAL LAW(s)" shall mean all laws, codes, ordinances, rules,
      regulations, orders, decrees and directives issued by any federal, state,
      local, foreign or other governmental or quasi governmental authority or
      body (or any agency, instrumentality or political subdivision thereof)
      pertaining to Hazardous Materials or otherwise intended to regulate or
      improve health, safety or the environment, including, without limitation,
      any hazardous materials or wastes, toxic substances, flammable, explosive
      or radioactive materials, asbestos, and/or other similar materials; any
      so-called "superfund" or "superlien" law, pertaining to Hazardous
      Materials on or about any of the Collateral, or any other property at any
      time owned, leased or otherwise used by any Loan Party, or any portion
      thereof, including, without limitation, those relating to soil, surface,
      subsurface ground water conditions and the condition of the ambient air;
      and any other federal, state, foreign or local statute, law, ordinance,
      code, rule, regulation, order or decree regulating, relating to, or
      imposing liability or standards of conduct concerning, any hazardous,
      toxic, radioactive, flammable or dangerous waste, substance or material,
      as now or at anytime hereafter in effect.

      "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
      amended, or any successor act or code.

      "EVENT OF DEFAULT" shall mean any of those conditions or events listed in
      Section 6.1 of this Agreement.

      "GAAP" shall mean generally accepted accounting principles consistently
      applied.

      "GOVERNMENTAL AUTHORITY" shall mean the United States, each state, each
      county, each city, and each other political subdivision in which all or
      any portion of the Collateral is located, and each other political
      subdivision, agency, or instrumentality exercising jurisdiction over Bank,
      any Loan Party, any of the Indebtedness or any Collateral.

      "GOVERNMENTAL REQUIREMENTS" shall mean all laws, ordinances, rules, and
      regulations of any Governmental Authority applicable to any Loan Party,
      any of the Indebtedness or any Collateral.

      "GUARANTOR(s)" shall mean, as the context dictates, any Person(s) (other
      than the Borrower) who shall, at any time, guarantee or otherwise be or
      become obligated for the repayment of all or any part of the Indebtedness.

      "HAZARDOUS MATERIAL" shall mean and include any hazardous, toxic or
      dangerous waste, substance or material defined as such in, or for purposes
      of, any Environmental Law(s).

      "INDEBTEDNESS" shall mean all obligations and liabilities of any Loan
      Party to Bank under any Loan Document, together with all other
      indebtedness, obligations and liabilities whatsoever of Borrower to Bank,
      whether matured or unmatured, liquidated or unliquidated, direct or
      indirect, absolute or contingent, joint or several, due or to become due,
      now existing or hereafter arising, voluntary or involuntary, known or
      unknown, or originally payable to Bank or to a third party and
      subsequently acquired by Bank including, without limitation, any: late
      charges; loan fees or charges; overdraft indebtedness; costs incurred by
      Bank in establishing, determining, continuing or defending the validity or
      priority of any Lien or in pursuing any of its rights or remedies under
      any Loan Document or in connection with any proceeding involving Bank as a
      result of any financial accommodation to Borrower; debts, obligations and
      liabilities for which Borrower would otherwise be liable to the Bank were
      it not for the invalidity or enforceability of them by reason of any
      bankruptcy, insolvency or other law or for any other reason; and
      reasonable costs and expenses of attorneys and paralegals, whether any
      suit or other action is instituted, and to court costs if suit or action
      is instituted, and whether any such fees, costs or expenses are incurred
      at the trial court level or on appeal, in bankruptcy, in administrative
      proceedings, in probate proceedings or otherwise; provided, however, that
      the term Indebtedness shall not include any consumer loan to the extent
      treatment of such loan as part of the Indebtedness would violate any
      Governmental Requirement.

      "LETTER OF CREDIT" shall mean a letter of credit issued by the Bank for
      the account of and/or upon the application of the Borrower in accordance
      with this Agreement, as such Letter of Credit may be amended,
      supplemented, extended or confirmed from time to time.

      "LETTER OF CREDIT LIABILITIES" shall mean, at any time and in respect of
      all Letters of Credit, the sum of (a) the aggregate amount available to be
      drawn under all such Letters of Credit plus (b) the aggregate unpaid
      amount of all Reimbursement Obligations then due and payable in respect of
      previous drawings under such Letters of Credit.

                                       1
<PAGE>

      "LIEN" shall mean any valid and enforceable interest in any property,
      whether real, personal or mixed, securing an indebtedness, obligation or
      liability owed to or claimed by any Person other than the owner of such
      property, whether such indebtedness is based on the common law or any
      statute or contract and including, but not limited to, a security
      interest, pledge, mortgage, assignment, conditional sale, trust receipt,
      lease, consignment or bailment for security purposes.

      "LOAN DOCUMENTS" shall mean collectively, this Agreement, any promissory
      notes evidencing Indebtedness, any approved subordination agreement, any
      reimbursement agreement or other documentation executed in connection with
      any Letter of Credit, and any other documents, instruments or agreements
      evidencing, governing, securing, guaranteeing or otherwise relating to or
      executed pursuant to or in connection with any of the Indebtedness or any
      Loan Document (whether executed and delivered prior to, concurrently with
      or subsequent to this Agreement), as such documents may have been or may
      hereafter be amended from time to time.

      "LOAN PARTY" shall mean Borrower, each of its Subsidiaries (whether or not
      a party to any Loan Document) and each other Person who or which shall be
      liable for the payment or performance of all or any portion of the
      Indebtedness or who or which shall own any property that is subject to (or
      purported to be subject to) a Lien which secures all or any portion of the
      Indebtedness.

      "MATERIAL ADVERSE EFFECT" shall mean any act, event, condition or
      circumstance which could materially and adversely affect the business,
      operations, condition (financial or otherwise), performance or assets of
      any Loan Party, the ability of any Loan Party to perform its obligations
      under any Loan Document to which it is a party or by which it is bound or
      the enforceability of any Loan Document.

      "MAXIMUM LEGAL RATE" shall mean the maximum rate of nonusurious interest
      per annum permitted to be paid by Borrower or, if applicable, another Loan
      Party or received by Bank with respect to the applicable portion of the
      Indebtedness from time to time under applicable state or federal law as
      now or as may be hereafter in effect, including Chapter 1 D of Title 79
      Vernon's Texas Civil Statutes (and as the same may be incorporated by
      reference in other Texas statutes), but otherwise without limitation, that
      rate based upon the "weekly ceiling rate" (as defined in Section 303 of
      the Texas Finance Code).

      "PBGC" shall mean the Pension Benefit Guaranty Corporation, or any Person
      succeeding to the present powers and functions of the Pension Benefit
      Guaranty Corporation.

      "PENSION PLAN(s)" shall mean any and all employee benefit pension plans of
      Borrower and/or any of its Subsidiaries in effect from time to time, as
      such term is defined in ERISA.

      "PERMITTED ENCUMBRANCES" shall mean: (a) Liens in favor of the Bank; (b)
      Liens for taxes, assessments or other governmental charges which are not
      yet due and payable, incurred in the ordinary course of business and for
      which no interest, late charge or penalty is attaching or which are being
      contested in good faith by appropriate proceedings and, if requested by
      Bank, bonded in an amount and manner satisfactory to Bank; (c) Liens, not
      delinquent, arising in the ordinary course of business and created by
      statute in connection with worker's compensation, unemployment insurance,
      social security and similar statutory obligations; and (d) Liens of
      mechanics, materialmen, carriers, warehousemen or other like statutory or
      common law Liens securing obligations incurred in good faith in the
      ordinary course of business without violation of any Loan Document that
      are not yet due and payable.

      "PERSON" or "PERSON" shall mean any individual, corporation, partnership,
      joint venture, limited liability company, association, trust,
      unincorporated association, joint stock company, government, municipality,
      political subdivision or agency, or other entity.

      "REIMBURSEMENT OBLIGATIONS" shall mean, at any time and in respect of all
      Letters of Credit, the aggregate obligations of the Borrower, then
      outstanding or which may thereafter arise, to reimburse the Bank for any
      amount paid or incurred by the Bank in respect of any and all drawings
      under such Letters of Credit, together with any and all other
      Indebtedness, obligations and liabilities of any Loan Party to Bank
      related to such Letters of Credit arising under this Agreement, any Letter
      of Credit application or any other Loan Document.

      "REVOLVING CREDIT MATURITY DATE" shall mean July 30, 2005 or such earlier
      date on which the entire unpaid principal amount of all Revolving Loans
      becomes due and payable whether by the lapse of time, demand for payment,
      acceleration or otherwise; provided, however, if any such date is not a
      business day, then the Revolving Credit Maturity Date shall be the next
      succeeding business day.

      "REVOLVING CREDIT MAXIMUM AMOUNT" shall mean the lesser of (a)
      $5,000,000.00 , or (b) the maximum amount permitted by an advance formula
      agreement, if applicable.

      "REVOLVING CREDIT NOTE" shall mean the Revolving Credit Note dated July
      25, 2003 in the maximum original principal amount of $5,000,000.00 made by
      Borrower payable to the order of the Bank, as the same may be renewed,
      extended, modified, increased or restated from time to time.

      "REVOLVING LOAN" shall mean an advance made, or to be made, under the
      revolving credit facility to or for the credit of Borrower by the Bank
      pursuant to this Agreement.

      "SUBORDINATED DEBT" shall mean any Debt of Borrower (other than the
      Indebtedness) which has been subordinated to the Indebtedness pursuant to
      a subordination agreement in form and content satisfactory to the Bank.

      "SUBSIDIARY" shall mean as to any particular parent entity, any
      corporation, partnership, limited liability company or other entity
      (whether now existing or hereafter organized or acquired) in which more
      than fifty percent (50%) of the outstanding equity ownership interests
      having voting rights as of any applicable date of determination, shall be
      owned directly, or indirectly through one or more Subsidiaries, by such
      parent entity.

      "UCC" shall mean the Uniform Commercial Code as adopted and in force in
      the State of Texas, as amended.

1.2   Accounting Terms. All accounting terms not specifically defined in this
      Agreement shall be determined and construed in accordance with GAAP.

SECTION 2.  FUNDING LOANS, PAYMENTS, RECOVERIES AND COLLECTIONS

2.1   Funding Loans. Subject to the terms, conditions and procedures of this
      Agreement and each other Loan Document and to the satisfaction of all
      conditions precedent to the making and funding of any loan as set forth in
      any Loan Document, Bank shall make the proceeds of any such loan available
      to Borrower on the disbursement date agreed upon by Bank and Borrower by
      depositing such proceeds into an account maintained by Borrower with Bank
      or as otherwise agreed to in writing by Borrower and Bank.

2.2   Revolving Loans. Subject to the terms and conditions of the Loan Documents
      and to the satisfaction of all conditions precedent to the making and
      funding of any loan as set forth in any Loan Document, the Bank agrees to
      make Revolving Loans to Borrower

                                       2
<PAGE>

      at any time and from time to time from the effective date hereof until
      (but not including) the Revolving Credit Maturity Date. The proceeds of
      Revolving Loans shall be used solely for any purpose and other working
      capital needs of Borrower.

      Except as hereinafter provided, Borrower may request a Revolving Loan by
      submitting to Bank a request for advance by an authorized officer or other
      representative of Borrower, subject to the following: (a) each such
      request for advance shall include, without limitation, the proposed amount
      of such revolving loan and the proposed disbursement date, which date must
      be a business day; (b) each such request for advance shall be communicated
      to Bank by 4 p.m. (Dallas, Texas time) on the proposed disbursement date;
      (c) a request for advance, once communicated to Bank, shall not be
      revocable by Borrower; and (d) each request for advance, once communicated
      to Bank, shall constitute a representation, warranty and certification by
      Borrower as of the date thereof that: (i) both before and after the making
      of such Revolving Loan, the obligations set forth in the Loan Documents
      are and shall be valid, binding and enforceable obligations of each Loan
      Party, as applicable; (ii) all terms and conditions precedent to the
      making of such Revolving Loan have been satisfied, and shall remain
      satisfied through the date of such Revolving Loan; (iii) the making of
      such Revolving Loan will not cause the aggregate outstanding principal
      amount of all Revolving Loans plus the Letter of Credit Liabilities, if
      applicable, to exceed the Revolving Credit Maximum Amount; (iv) no Default
      or Event of Default shall have occurred or be in existence, and none will
      exist or arise upon the making of such Revolving Loan; (v) the
      representations and warranties contained in the Loan Documents are true
      and correct in all material respects and shall be true and correct in all
      material respects as of the making of such Revolving Loan; and (vi) the
      request for advance will not violate the terms or conditions of any
      contract, indenture, agreement or other borrowing of any Loan Party.

      Bank may elect (but without any obligation to do so) to make a Revolving
      Loan upon the telephonic or facsimile request of Borrower, provided that
      Borrower has first executed and delivered to Bank a telephone notice
      authorization in form and content satisfactory to Bank. If any such
      Revolving Loan based upon a telephonic or facsimile request is made by
      Borrower, Bank may require Borrower to confirm said telephonic or
      facsimile request in writing by delivering to Bank, on or before 11:00
      a.m. (Dallas, Texas time) on the next business day following the
      disbursement date of such Revolving Loan, a duly executed written request
      for advance, and all other provisions of this Section 2.2 shall be
      applicable with respect to such Revolving Loan. In addition, Borrower may
      authorize the Bank to automatically make revolving loans pursuant to such
      other written agreements as may be entered into by Bank and Borrower.

      Notwithstanding anything contained in this Agreement to the contrary, the
      aggregate principal amount of all Revolving Loans at any time outstanding
      plus the Letter of Credit Liabilities, if applicable, and any amounts owed
      by Borrower to Bank under Borrower's foreign exchange authority, shall not
      exceed the Revolving Credit Maximum Amount. If said limitations are
      exceeded at anytime, Borrower shall immediately, without demand by Bank,
      pay to Bank an amount not less than such excess, or, if Bank, in its sole
      discretion, shall so agree, Borrower shall provide Bank cash collateral in
      an amount not less than such excess, and Borrower hereby pledges and
      grants to Bank a security interest in such cash collateral so provided to
      Bank. Unless otherwise expressly provided in a Loan Document, all sums
      payable by Borrower to Bank under or pursuant to any Loan Document,
      whether principal, interest, or otherwise, shall be paid, when due,
      directly to Bank at any office of Bank located in the State of Texas in
      immediately available United States funds, and without setoff, deduction
      or counterclaim. Bank may, in its discretion, charge any and all deposit
      or other accounts (including, without limitation, any account evidenced by
      a certificate of deposit or time deposit) of Borrower maintained with Bank
      for all or any part of any Indebtedness then due and payable; provided,
      however, that such authorization shall not affect Borrower's obligations
      to pay all Indebtedness, when due, whether or not any such account
      balances maintained by Borrower with Bank are insufficient to pay any
      amounts then due.

      Borrower shall pay to Bank an unused commitment fee in an amount equal to
      the product of (a) .25% multiplied by (b) the difference between (i) the
      maximum face amount of the Revolving Credit Note and (ii) the average
      daily aggregate principal balance of all Revolving Loans outstanding
      during each of Borrower's fiscal quarters. Such fee shall be computed and
      shall be payable quarterly in arrears as of the end of each of Borrower's
      fiscal quarters. Bank shall invoice Borrower for such fees, which invoice
      shall be due and payable within fifteen (15) days after receipt.

      The provisions of Chapter 346 of the Texas Finance Code are specifically
      declared by the parties not to be applicable to any of the Loan Documents
      or the transactions contemplated thereby.

2.3   Letters of Credit. Subject to the terms and conditions of this Agreement
      and the other Loan Documents, the Bank shall, upon request from Borrower
      from time to time prior to the Revolving Credit Maturity Date, issue one
      or more Letters of Credit. The Letter of Credit Liabilities shall not
      exceed $500,000.00; and the sum of (a) the outstanding principal balance
      of all Revolving Loans plus (b) the Letter of Credit Liabilities shall not
      exceed the Revolving Credit Maximum Amount. Letters of Credit may be
      issued solely as commercial letters of credit related to trade financing.
      Each Letter of Credit issued pursuant to this Agreement shall be in a
      minimum amount of $1,000.00. No Letter of Credit shall have a stated
      expiration date later than the Revolving Credit Maturity Date.

      Borrower shall give the Bank written notice requesting each issuance of a
      Letter of Credit hereunder not less than five business days prior to the
      requested issuance date and shall furnish such additional information
      regarding such transaction as Bank may request. The issuance by Bank of
      each Letter of Credit shall, in addition to the conditions precedent set
      forth elsewhere in this Agreement, be subject to the conditions precedent
      that (i) such Letter of Credit shall be in form and substance satisfactory
      to Bank, (ii) Borrower shall have executed and delivered such applications
      and other instruments and agreements relating to such Letter of Credit as
      Bank shall have requested and are not inconsistent with the terms of this
      Agreement (iii) each of the statements in Section 2.2 (d) above are true
      as of the date of issuance of such Letter of Credit with respect to
      issuance of such Letter of Credit (as opposed to making a Revolving Loan),
      and the submission of an application for issuance of a Letter of Credit
      shall constitute a representation, warranty and certification of Borrower
      to that effect, and (iv) no Letter of Credit may be issued if after giving
      effect thereto, the sum of the aggregate outstanding principal balance of
      all Revolving Loans plus the Letter of Credit Liabilities would exceed the
      Revolving Credit Maximum Amount. With respect to the issuance or renewal
      of each Letter of Credit, Borrower shall pay to Bank such letter of credit
      fees and other expenses customarily charged by Bank in connection with the
      issuance or renewals of letters of credit.

      Borrower shall be irrevocably and unconditionally obligated forthwith to
      reimburse Bank for any amount paid by Bank upon any drawing under any
      Letter of Credit, without presentment, demand, protest or other
      formalities of any kind, all of which are hereby waived. Unless Borrower
      shall elect to otherwise satisfy such Reimbursement Obligation, such
      reimbursement shall, subject to satisfaction of any conditions provided
      herein for the making of Revolving Loans and to the Revolving Credit
      Maximum Amount, automatically be made by advancing to Borrower a Revolving
      Loan in the amount of such Reimbursement Obligation.

2.4   Intentionally omitted.

2.5   Intentionally omitted.

2.6   Maximum Interest Rate. At no time shall any Applicable Interest Rate or
      default rate in respect of any Indebtedness hereunder, exceed the Maximum
      Legal Rate. In the event that any interest is charged or otherwise
      received by Bank in excess of the Maximum Legal Rate, Borrower hereby
      acknowledges and agrees that any such excess interest shall be the result
      of an accidental and bona fide error, and any such excess shall be deemed
      to have been payment of principal, and not of interest, and shall be
      applied, first, to reduce the principal Indebtedness then outstanding,
      second, any remaining excess, if any, shall be applied to reduce any other
      Indebtedness, and third, any remaining excess, if any, shall be returned
      to Borrower. Notwithstanding the

                                        3
<PAGE>

      foregoing or anything to the contrary contained in this Agreement or any
      other Loan Document, but subject to all limitations contained in this
      Section, if at anytime any Applicable Interest Rate or default rate or
      other rate of interest applicable to any portion of the Indebtedness is
      computed on the basis of the Maximum Legal Rate, any subsequent reduction
      in the Applicable Interest Rate, default rate or such other rate of
      interest shall not reduce such interest rate thereafter payable below the
      Maximum Legal Rate until the aggregate amount of interest accrued equals
      the total amount of interest that would have accrued if interest had, at
      all times, been computed solely on the basis of the Applicable Interest
      Rate, default rate or such other interest rate. This Section shall control
      all agreements between the Borrower and the Bank.

2.7   Receipt of Payments by Bank. Any payment by Borrower of any of the
      Indebtedness made by mail will be deemed tendered and received by Bank
      only upon actual receipt thereof by Bank at the address designated for
      such payment, whether or not Bank has authorized payment by mail or in any
      other manner, and such payment shall not be deemed to have been made in a
      timely manner unless actually received by Bank on or before the date due
      for such payment, time being of the essence. Borrower expressly assumes
      all risks of loss or liability resulting from non-delivery or delay of
      delivery of any item of payment transmitted by mail or in any other
      manner. Acceptance by Bank of any payment in an amount less than the
      amount then due shall be deemed an acceptance on account only, and any
      failure to pay the entire amount then due shall constitute and continue to
      be an Event of Default. Prior to the occurrence of any Default, Borrower
      shall have the right to direct the application of any and all payments
      made to Bank hereunder to the Indebtedness evidenced by the respective
      notes evidencing the Indebtedness. Borrower waives the right to direct the
      application of any and all payments received by Bank hereunder at any time
      or times after the occurrence and during the continuance of any Default.
      Borrower further agrees that after the occurrence and during the
      continuance of any Default, or prior to the occurrence of any Default if
      Borrower has failed to direct such application, Bank shall have the
      continuing exclusive right to apply and to reapply any and all payments
      received by Bank at any time or times, whether as voluntary payments,
      proceeds from any Collateral, offsets, or otherwise, against the
      Indebtedness in such order and in such manner as Bank may, in its sole
      discretion, deem advisable, notwithstanding any entry by Bank upon any of
      its books and records. Borrower hereby expressly agrees that, to the
      extent that Bank receives any payment or benefit of or otherwise upon any
      of the Indebtedness, and such payment or benefit, or any part thereof, is
      subsequently invalidated, declared to be fraudulent or preferential, set
      aside, or required to be repaid to a trustee, receiver, or any other
      Person under any bankruptcy act, state or federal law, common law,
      equitable cause or otherwise, then to the extent of such payment or
      benefit, the Indebtedness, or part thereof, intended to be satisfied shall
      be revived and continued in full force and effect as if such payment or
      benefit had not been made or received by Bank, and, further, any such
      repayment by Bank shall be added to and be deemed to be additional
      Indebtedness.

2.8   Conditions Precedent to Loans and Letters of Credit. The obligation of the
      Bank to issue any Letter of Credit, if applicable, or to make any loan
      under or pursuant to this Agreement shall be subject to the following
      conditions precedent:

      a.    Borrower shall have executed and delivered to Bank, or caused to
            have been executed and delivered to Bank, all such instruments,
            agreements, certificates, opinions, financial statements,
            appraisals, evidence of title, evidence of insurance, environmental
            audits, and other information and other documents as the Bank shall
            require, and all of the foregoing shall be in form and content
            acceptable to Bank and all instruments and agreements shall be in
            full force and effect and binding and enforceable obligations of
            Borrower and, to the extent that it is a party thereto or otherwise
            bound thereby, of each other Person who may be a party thereto or
            bound thereby including without limitation: (i) evidence of
            existence, good standing, qualification to conduct business and
            authority for each Loan Party and signatory on behalf of each Loan
            Party; (ii) all notes, guaranties, security agreements, mortgages,
            deeds of trust, pledge agreements, assignments, financing statements
            and other documents requested by Bank to evidence the Indebtedness
            or to create, protect or perfect Liens upon the Collateral required
            by Bank as security for the Indebtedness and to accord Bank a
            perfected security position in the Collateral, subject only to
            Permitted Encumbrances;; (iii) a guaranty agreement from each
            Guarantor required by Bank; (iv) such other documents or agreements
            of security, assurances of Loan Document validity, legality and
            enforceability, and appropriate assurances of validity, perfection
            and priority of Lien as Bank may request, and Bank shall have
            received proof that appropriate security agreements, financing
            statements, mortgages, deeds of trust, collateral and other
            documents covering the Collateral shall have been executed and
            delivered by the appropriate Persons and recorded or filed in such
            jurisdictions and such other steps shall have been taken as
            necessary to perfect and protect, subject only to Permitted
            Encumbrances, the Liens granted thereby.

      b.    All actions, proceedings, instruments and documents required to
            carry out the borrowings and transactions contemplated by this
            Agreement or any other Loan Document or incidental thereto, and all
            other related legal matters, shall have been satisfactory to and
            approved by Bank.

      c.    Each Loan Party shall have performed and complied with all
            agreements and conditions contained in the Loan Documents applicable
            to it and which are then in effect.

      d.    Each of the representations and warranties of each Loan Party under
            any Loan Document shall be true and correct in all material respects
            as if made on each loan disbursement date.

      e.    No Default or Event of Default shall have occurred and be
            continuing; there shall have been no material adverse change in the
            condition (financial or otherwise), properties, business, or
            operations of any Loan Party since the date of the financial
            statements most recently delivered to Bank prior to the date of this
            Agreement; and no provision of law, any order of any Governmental
            Authority, or any regulation, rule or interpretation thereof, shall
            have had any Material Adverse Effect on the validity or
            enforceability of any Loan Document.

SECTION 3.  REPRESENTATIONS AND WARRANTIES

Borrower represents and warrants, and such representations and warranties shall
be deemed to be continuing representations and warranties during the entire life
of this Agreement, and so long as Bank shall have any commitment or obligation
to make any loans or issue any Letters of Credit, if applicable and so long as
any Indebtedness remains unpaid and outstanding under any Loan Document, as
follows:

3.1   Authority. Each Loan Party and, if applicable, each of its partners and
      members who is not a natural Person is duly organized, validly existing
      and in good standing under the laws of the jurisdiction of its
      organization and is duly qualified and authorized to do business in each
      other jurisdiction in which the character of its assets or the nature of
      its business makes such qualification necessary.

3.2   Due Authorization. Each Loan Party has all requisite power and authority
      to execute, deliver and perform its obligations under each Loan Document
      to which it is a party or is otherwise bound, all of which have been duly
      authorized by all necessary action, and are not in contravention of law or
      the terms of any Loan Party's organizational or other governing documents.

3.3   Title to Property. Each Loan Party has good title to all property and
      assets purported to be owned by it, including those assets identified on
      the financial statements most recently delivered to Bank.

3.4   Encumbrances. There are no security interests or other Liens or
      encumbrances on, and no financing statements on file with respect to, any
      of the property or assets of any Loan Party, except for Permitted
      Encumbrances.

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3.5   Subsidiaries. Borrower has no Subsidiaries except those specifically
      disclosed in the Defined Terms.

3.6   Taxes. Each Loan Party has filed, on or before their respective due dates,
      all federal, state, local and foreign tax returns which are required to be
      filed, or has obtained extensions for filing such tax returns, and is not
      delinquent in filing such returns in accordance with such extensions, and
      has paid all taxes which have become due pursuant to those returns or
      pursuant to any assessments received by any such party, as the case may
      be, to the extent such taxes have become due, except to the extent such
      tax payments are being actively and diligently contested in good faith by
      appropriate proceedings, and if requested by Bank, have been bonded or
      reserved in an amount and manner satisfactory to Bank.

3.7   No-Defaults. There exists no default (or event which, with the giving of
      notice or passage of time, or both, would result in a default) under the
      provisions of any instrument or agreement evidencing, governing, securing
      or otherwise relating to any Debt of any Loan Party or pertaining to any
      of the Permitted Encumbrances.

3.8   Enforceability of Agreement and Loan Documents. Each Loan Document has
      been duly executed and delivered by duly authorized officer(s) or other
      representative(s) of each Loan Party and constitutes the valid and binding
      obligation of each Loan Party, enforceable in accordance with its terms,
      except to the extent that enforcement thereof may be limited by applicable
      bankruptcy, reorganization, insolvency, moratorium or similar laws
      affecting the enforcement of creditors' rights generally at the time in
      effect.

3.9   Non-contravention. The execution, delivery and performance by each Loan
      Party of the Loan Documents to which such Loan Party is a party or
      otherwise bound, are not in contravention of the terms of any indenture,
      agreement or undertaking to which any such Loan Party is a party or by
      which it is bound, except to the extent that such terms have been waived
      or that failure to comply with any such terms would not have a Material
      Adverse Effect.

3.10  Actions, Suits, Litigation or Proceedings. There are no actions, suits,
      litigation or proceedings, at law or in equity, and no proceedings before
      any arbitrator or by or before any Governmental Authority, pending, or, to
      the best knowledge of Borrower, threatened against or affecting any Loan
      Party, which, if adversely determined, could materially impair the right
      of any Loan Party to carry on its business substantially as now conducted
      or could have a Material Adverse Effect. No Loan Party is under
      investigation by, or is operating under any restrictions imposed by, any
      Governmental Authority.

3.11  Compliance with Laws. Each Loan Party has complied with all Governmental
      Requirements, including, without limitation, Environmental Laws, to the
      extent that failure to so comply could have a Material Adverse Effect.

3.12  Consents, Approvals and Filings, Etc. Except as have been previously
      obtained or as otherwise expressly provided in this Agreement, no
      authorization, consent, approval, license, qualification or formal
      exemption from, or any filing, declaration or registration with, any
      Governmental Authority and no material authorization, consent or approval
      from any other Person, is required in connection with the execution,
      delivery and performance by any Loan Party of any Loan Document to which
      it is a party. All such authorizations, consents, approvals, licenses,
      qualifications, exemptions, filings, declarations and registrations which
      have previously been obtained or made, as the case may be, are in full
      force and effect and are not the subject of any attack, or to the
      knowledge of Borrower, any threatened attack, in any material respect, by
      appeal, direct proceeding or otherwise

3.13  Environmental Representations. No Loan Party has used Hazardous Materials
      on, in, under or otherwise affecting any real or personal property now or
      at any time owned, occupied or operated by such Person or upon which such
      Person has a place of business which, in any manner, violates any
      Environmental Law, to the extent any such violation could result in a
      Material Adverse Effect, and to the best of Borrower's knowledge, no prior
      or current owner, occupant or operator of any of such property does or has
      used any Hazardous Materials on or affecting such property in any manner
      which violates any Environmental Law to the extent that any such violation
      could result in a Material Adverse Effect. No Loan Party has received any
      notice of any violation of any Environmental Law, and to the best
      knowledge of the Borrower, there have been no actions commenced or
      threatened by any Person against any such property or against any Loan
      Party for non-compliance with any Environmental Law which could result in
      a Material Adverse Effect.

3.14  Accuracy of Information. All financial statements previously furnished to
      Bank have been prepared in accordance with GAAP and fairly present the
      financial condition of Borrower and, as applicable, the consolidated
      financial condition of Borrower and such other Person(s) as such financial
      statements purport to present, and the results of their respective
      operations as of the dates and for the periods covered thereby; and since
      the date(s) of said financial statements, there has been no material
      adverse change in the financial condition of Borrower or any other Person
      covered by such financial statements. Each Loan Party is solvent, able to
      pay its debts as they mature, has capital sufficient to carry on its
      business and has assets the fair market value of which exceed its
      liabilities, and no Loan Party will be rendered insolvent,
      under-capitalized or unable to pay debts generally as they become due by
      the execution or performance of any Loan Document to which it is a party
      or by which it is otherwise bound.

SECTION 4. AFFIRMATIVE COVENANTS

Borrower covenants and agrees that, until all instruments and agreements
evidencing each and every loan, Letter of Credit and other financial
accommodation by the Bank to the Borrower or any Loan Party are fully discharged
and terminated, and thereafter, so long as any Indebtedness remains outstanding,
it will, and, as applicable, it will cause each Loan Party within its control or
under common control to:

4.1   Preservation of Existence, Etc. Preserve and maintain its existence and
      preserve and maintain such of its rights, licenses, and privileges as are
      material to the business and operations conducted by it; qualify and
      remain qualified to do business in each jurisdiction in which such
      qualification is material to its business and operations or ownership of
      its properties, continue to conduct and operate its business substantially
      as conducted and operated during the present and preceding calendar year;
      at all times maintain, preserve and protect all of its franchises and
      trade names and preserve all the remainder of its property and keep the
      same in good repair, working order and condition; and from time to time
      make, or cause to be made, all needed and proper repairs, renewals,
      replacements, betterments and improvements thereto.

4.2   Keeping of Books; Audits of Collateral; Fees. Keep proper books of record
      and account in which full and correct entries shall be made of all of its
      financial transactions and its assets and businesses so as to permit the
      presentation of financial statements prepared in accordance with GAAP; and
      permit Bank, or its representatives, at reasonable times and intervals, at
      Borrower's cost and expense, to examine its books and records and to
      discuss its financial matters with its officers, employees and independent
      certified public accountants; and permit Bank from time to time to audit
      Borrower's accounts, inventory, or other Collateral, provided that such
      audits will be conducted upon reasonable notice. Borrower agrees to
      reimburse Bank, on demand, for customary and reasonable fees and costs
      incurred by Bank for such audits, and for each appraisal of Collateral and
      financial analysis and examination of Borrower performed from time to time
      by its agents.

4.3   Reporting Requirements. Furnish to Bank, or cause to be furnished to Bank,
      the following:

      a.    as soon as possible, and in any event within three (3) calendar days
            after becoming aware of the occurrence or existence of each
            Default or Event of Default hereunder or any material adverse change
            in the financial condition of any Loan Party, a written statement of
            the chief financial officer of Borrower (or in his or her absence, a
            responsible senior officer

                                        5

<PAGE>

            of Borrower), setting forth details of such Default, Event of
            Default or change, and the action which Borrower has taken, or has
            caused to be taken, or proposes to take, or to cause to be taken,
            with respect thereto;

      b.    as soon as available, and in any event within 120 days after and as
            of the end of each fiscal year of Borrower, audited financial
            statements of Borrower and such other of the Loan Parties as may be
            required by the Bank, consolidated, as applicable, including a
            balance sheet, income statement, statement of profit and loss,
            surplus reconciliation statement and statement of cash flows, for
            and as of such fiscal year then ending and including such other
            comments and financial details as are usually included in similar
            reports. Such financial statements shall be prepared in accordance
            with GAAP by independent certified public accountants of recognized
            standing selected by Borrower and approved by Bank and containing
            unqualified opinions as to the fairness of the statements therein
            contained;

      c.    as soon as available, and in any event, simultaneously with the
            financial statements to be delivered to Borrower in accordance with
            section 4.3 (b) above, a copy of Borrower's Form 10-K Annual Report
            filed with the Securities and Exchange Commission;

      d.    as soon as available, and in any event within 45 days after and as
            of the end of each calendar month, including the last such reporting
            period of each of Borrower's fiscal years, compiled financial
            statements of Borrower and such of the other Loan Parties as may be
            required by the Bank, consolidated, as applicable, for and as of
            such reporting period, including a balance sheet, income statement,
            statement of profit and loss, surplus reconciliation statement and
            statement of cash flows for and as of such reporting period then
            ending and for and as of that portion of the fiscal year then
            ending, in each case, prepared and certified by the chief financial
            officer of Borrower (or in his or her absence, a responsible senior
            officer of Borrower) and, as applicable, each other Loan Party as to
            consistency with prior financial reports and accounting periods,
            accuracy and fairness of presentation;

      e.    as soon as available, and in any event, simultaneously with the
            financial statements to be delivered to Borrower in accordance with
            section 4.3 (d) above, a copy of Borrower's Form 10-Q Quarterly
            Report filed with the Securities and Exchange Commission;

      f.    as soon as available, and in any event, simultaneously with the
            financial statements to be delivered to Bank in accordance with
            section 4.3(d) above;

      g.    simultaneously with each request for a Revolving Loan, a Borrowing
            Base Certificate (in the form of the attached Exhibit "A"), each
            dated as of the end of such month or year, as the case may be;

4.4   Intentionally omitted.

4.5   Further Assurances; Financing Statements. Furnish Bank, at Borrower's cost
      and expense, upon Bank's request and in form satisfactory to Bank (and
      execute and deliver or cause to be executed and delivered), such
      additional pledges, assignments, mortgages, Lien instruments or other
      security instruments, consents, acknowledgments, subordinations and
      financing statements covering any or all of the Collateral required by
      Bank to secure any Indebtedness together with such other documents or
      instruments as Bank may require to effectuate more fully the purposes of
      any Loan Document.

4.6   Insurance. Maintain insurance coverage by insurers acceptable to Bank on
      its physical assets and against other business risks in such amounts and
      of such types as are customarily carried by companies similar in size and
      nature or as may otherwise be required by Bank, and in the event of
      acquisition of additional property, real or personal, or of the incurrence
      of additional risks of any nature, increase such insurance coverage in
      such manner and to such extent as prudent business judgment and present
      practice would dictate; and in the case of all policies covering property
      subject to any Loan Document or property in which the Bank shall have a
      Lien of any kind whatsoever, other than those policies protecting against
      casualty liabilities to strangers, all such insurance policies shall
      provide that the loss payable thereunder shall be payable to Borrower (or
      other Person providing Collateral) and Bank, with mortgagee's clauses in
      favor of and satisfactory to Bank for all such policies, and such policies
      shall also provide that they may not be canceled or changed without thirty
      (30) days' prior written notice to Bank. Upon the request of Bank, all of
      said policies, or copies thereof, including all endorsements thereon and
      those required hereunder, shall be deposited with Bank.

4.7   Compliance with ERISA. In the event that any Loan Party or any of its
      Subsidiaries maintain(s) or establish(es) a Pension Plan subject to ERISA,
      (a) comply in all material respects with all requirements imposed by ERISA
      as presently in effect or hereafter promulgated, including, but not
      limited to, the minimum funding requirements thereof; (b) promptly notify
      Bank upon the occurrence of a "reportable event" or "prohibited
      transaction" within the meaning of ERISA, or that the PBGC or any Loan
      Party has instituted or will institute proceedings to terminate any
      Pension Plan, together with a copy of any proposed notice of such event
      which may be required to be filed with the PBGC; and (c) furnish to Bank
      (or cause the plan administrator to furnish Bank) a copy of the annual
      return (including all schedules and attachments) for each Pension Plan
      covered by ERISA, and filed with the Internal Revenue Service by any Loan
      Party not later than ten (10) days after such report has been so filed.

4.8   Environmental Covenants. Comply with all applicable Environmental Laws,
      and maintain all permits, licenses and approvals required under applicable
      Environmental Laws, where the failure to do so could have a Material
      Adverse Effect. Promptly notify Bank, in writing, as soon as Borrower
      becomes aware of any condition or circumstance which makes any of the
      environmental representations or warranties set forth in this Agreement
      incomplete, incorrect or inaccurate in any material respect as of any
      date; and promptly provide to Bank, immediately upon receipt thereof,
      copies of any material correspondence, notice, pleading, citation,
      indictment, complaint, order, decree, or other document from any source
      asserting or alleging a violation of any Environmental Law by any Loan
      Party, or of any circumstance or condition which requires or may require,
      a financial contribution by any Loan Party, or a clean-up, removal,
      remedial action or other response by or on behalf of any Loan Party, under
      applicable Environmental Law, or which seeks damages or civil, criminal or
      punitive penalties from any Loan Party or any violation or alleged
      violation of any Environmental Law. Borrower hereby agrees to indemnify,
      defend and hold Bank, and any of Bank's past, present and future officers,
      directors, shareholders, employees, representatives and consultants,
      harmless from any and all claims, losses, damages, suits, penalties,
      costs, liabilities, obligations and expenses (including, without
      limitation, reasonable legal expenses and attorneys' fees, whether inside
      or outside counsel is used) incurred or arising out of any claim, loss or
      damage of any property, injuries to or death of any persons, contamination
      of or adverse effects on the environment, or other violation of any
      applicable Environmental Law, in any case, caused by any Loan Party or in
      any way related to any property owned or operated by any Loan Party or due
      to any acts of any Loan Party or any of its officers, directors,
      shareholders, employees, consultants and/or representatives INCLUDING ANY
      CLAIMS, LOSSES, DAMAGES, SUITS, PENALTIES, COSTS, LIABILITIES, OBLIGATIONS
      OR EXPENSES, RESULTING FROM BANK'S OWN NEGLIGENCE; provided however, that
      the foregoing indemnification shall not be applicable, and Borrower shall
      not be liable for any such claims, losses, damages, suits, penalties,
      costs, liabilities, obligations or expenses, to the extent (but only to
      the extent) the same arise or result from any gross negligence or willful
      misconduct of Bank or any of its agents or employees.

SECTION 5. NEGATIVE COVENANTS

Borrower covenants and agrees that, until all instruments and agreements
evidencing each and every loan, Letter of Credit and other financial
accommodation by the Bank to the Borrower or any Loan Party are fully discharged
and terminated, and thereafter, so long as

                                        6

<PAGE>

any Indebtedness remains outstanding, it with not, and it will not allow any
Loan Party within its control or under common control to, without the prior
written consent of the Bank:

5.1   Capital Structure; Business Objects or Purpose; Mergers; Asset
      Disposition; Acquisitions. Purchase, acquire or redeem any of its equity
      ownership interests; or enter into any reorganization or recapitalization;
      or reclassify its equity ownership interests; or make any material change
      in its capital structure or general business objects or purpose; or change
      its name, or enter into any merger or consolidation, unless Borrower is
      the surviving entity thereunder.

5.2   Subordinate Indebtedness. Subordinate any indebtedness due to it from any
      Person to indebtedness of other creditors of such Person.

SECTION 6. EVENTS OF DEFAULT

6.1   Events of Default. The occurrence or existence of any of the following
      conditions or events shall constitute an "Event of Default" hereunder: (a)
      non-payment of any principal, interest or other sums due upon the
      Indebtedness at such time the same becomes due or, if applicable, upon
      expiration of the grace period, if any; (b) default in the observance or
      performance of any of the other conditions, covenants or agreements of any
      Loan Party set forth in this Agreement or any other Loan Document; (c) any
      representation or warranty made by any Loan Party in any Loan Document
      shall be untrue or incorrect in any material respect; (d) any default or
      event of default, as the case may be, shall occur under any other Loan
      Document and shall continue beyond the applicable grace period, if any;
      and (e) any change in the management, ownership or control of Borrower,
      whether by reason of incapacity, death, resignation, termination or
      otherwise which, in Bank's sole judgment, could become a Material Adverse
      Effect;

6.2   Remedies Upon Event of Default. Upon the occurrence and at any time during
      the existence or continuance of any Event of Default, but without
      impairing or otherwise limiting the Bank's right to demand payment of all
      or any portion of the Indebtedness which is payable on demand, at Bank's
      option, Bank may give notice to Borrower declaring all or any portion of
      the Indebtedness remaining unpaid and outstanding, whether under the notes
      evidencing the Indebtedness or otherwise, to be due and payable in full
      without presentation, demand, protest, notice of dishonor, notice of
      intent to accelerate, notice of acceleration or other notice of any kind,
      all of which are hereby expressly waived, whereupon all such Indebtedness
      shall immediately become due and payable. Furthermore, upon the occurrence
      of a Default or Event of Default and at any time during the existence or
      continuance of any Default or Event of Default, but without impairing or
      otherwise limiting the right of Bank, if reserved under any Loan Document,
      to make or withhold financial accommodations at its discretion, to the
      extent not yet disbursed, any commitment by Bank to make any further loans
      or, if applicable, issue any further Letters of Credit shall automatically
      terminate. The foregoing rights and remedies are in addition to any other
      rights, remedies and privileges Bank may otherwise have or which may be
      available to it, whether under this Agreement, any other Loan Document, by
      law, or otherwise.

6.3   Waiver of Defaults. No Default or Event of Default shall be waived by Bank
      except in a written instrument specifying the scope and terms of such
      waiver and signed by an authorized officer of Bank, and such waiver and
      shall be effective only for the specific time(s) and purpose(s) given. No
      single or partial exercise of any right, power or privilege hereunder, or
      any delay in the exercise thereof, shall preclude other or further
      exercise of Bank's rights. No waiver of any Default or Event of Default
      shall extend to any other or further Default or Event of Default. No
      forbearance on the part of Bank in enforcing any of Bank's rights or
      remedies under any Loan Document shall constitute a waiver of any of its
      rights or remedies. Borrower expressly agrees that this Section may not be
      waived or modified by Bank by course of performance, estoppel or
      otherwise.

6.4   Discretionary Credit and Credit Payable Upon Demand. TO THE EXTENT THAT
      ANY OF THE INDEBTEDNESS SHALL, AT ANYTIME, BE PAYABLE UPON DEMAND, NOTHING
      CONTAINED IN THIS AGREEMENT, OR ANY OTHER LOAN DOCUMENT, SHALL BE
      CONSTRUED TO PREVENT BANK FROM MAKING DEMAND, WITHOUT NOTICE AND WITH OR
      WITHOUT REASON, FOR IMMEDIATE PAYMENT OF ALL OR ANY PART OF SUCH
      INDEBTEDNESS AT ANY TIME OR TIMES, WHETHER OR NOT A DEFAULT OR EVENT OF
      DEFAULT HAS OCCURRED OR EXISTS. IN THE EVENT THAT SUCH DEMAND IS MADE UPON
      ANY PORTION OF THE INDEBTEDNESS, THE BANK, AT ITS ELECTION, MAY TERMINATE
      ANY COMMITMENT TO MAKE ANY FURTHER LOANS OR, IF APPLICABLE, ISSUE ANY
      FURTHER LETTERS OF CREDIT UNDER THIS AGREEMENT OR OTHERWISE. FURTHERMORE,
      TO THE EXTENT ANY LOAN DOCUMENT AUTHORIZES THE BANK, AT ITS DISCRETION, TO
      MAKE OR TO DECLINE TO MAKE FINANCIAL ACCOMMODATIONS TO THE BORROWER,
      NOTHING CONTAINED IN THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT SHALL BE
      CONSTRUED TO LIMIT OR IMPAIR SUCH DISCRETION OR TO COMMIT OR OTHERWISE
      OBLIGATE THE BANK TO MAKE ANY SUCH FINANCIAL ACCOMMODATION.

SECTION 7. MISCELLANEOUS

7.1   Governing Law. Each Loan Document shall be deemed to have been delivered
      in and shall be governed by and construed and enforced in accordance with
      the laws of the State of Texas, except to the extent that the UCC, other
      personal property law or real property law of another jurisdiction where
      Collateral is located is applicable, and except to the extent expressed to
      the contrary in any Loan Document.

7.2   Costs and Expenses. Borrower shall pay Bank, on demand, all costs and
      expenses, including, without limitation, reasonable attorneys' fees and
      legal expenses (whether inside or outside counsel is used), incurred by
      Bank in perfecting, revising, protecting or enforcing any of its rights or
      remedies against any Loan Party or any Collateral, or otherwise incurred
      by Bank in connection with any Default or Event of Default or the
      enforcement of the Loan Documents or the Indebtedness. Following Bank's
      demand upon Borrower for the payment of any such costs and expenses, and
      until the same are paid in full, the unpaid amount of such costs and
      expenses shall constitute Indebtedness and shall bear interest at the
      highest default rate of interest provided in any Loan Document.

7.3   Successors and Assigns; Participation. This Agreement shall be binding
      upon and shall inure to the benefit of Borrower and Bank and their
      respective successors and assigns. The foregoing shall not authorize any
      assignment or transfer by Borrower of any of its respective rights, duties
      or obligations hereunder, such assignments or transfers being expressly
      prohibited. Bank, however, may freely assign, whether by assignment,
      participation or otherwise, its rights and obligations hereunder, and is
      hereby authorized to disclose to any such assignee or participant (or
      proposed assignee or participant) any financial or other information in
      its knowledge or possession regarding any Loan Party or the Indebtedness.

7.4   Reliance on and Survival of Various Provisions. All terms, covenants,
      agreements, representations and warranties of any Loan Party made in any
      Loan Document, or in any certificate, report, financial statement or other
      document furnished by or on behalf of any Loan Party in connection with
      any Loan Document, shall be deemed to have been relied upon by Bank,
      notwithstanding any investigation heretofore or hereafter made by Bank or
      on Bank's behalf, and those covenants and agreements of Borrower set forth
      in Section 4.8 hereof (together with any other indemnities of Borrower
      contained elsewhere in any Loan Document) shall survive the termination of
      this Agreement and the repayment in full of the Indebtedness.

7.5   Complete Agreement; Conflicts. This Agreement, the other Loan Documents,
      and any commitment letter previously issued by Bank with respect thereto
      (provided that in the event of any inconsistency or conflict between this
      Agreement and the other Loan

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<PAGE>

      Documents, on one hand, and such commitment letter, on the other hand,
      this Agreement and the Loan Documents shall control), contain the entire
      agreement of the parties thereto and supercede all prior agreements and
      understandings related to the subject matter hereof, and none of the
      parties shall be bound by anything not expressed in writing. In the event
      that, and to the extent that, any of the terms, conditions or provisions
      of any of the other Loan Documents are inconsistent with or in conflict
      with any of the terms, conditions or provisions of this Agreement, the
      applicable terms, conditions and provisions of this Agreement shall govern
      and control. Any amendments or modifications hereto shall be in writing
      signed by all parties.

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

7.7   WAIVER OF JURY TRIAL. BANK AND BORROWER EACH ACKNOWLEDGE THAT THE RIGHT TO
      TRIAL BY JURY IS A CONSTITUTIONAL ONE, BUT THAT IT MAY BE WAIVED. EACH OF
      THEM, AFTER CONSULTING OR HAVING HAD THE OPPORTUNITY TO CONSULT, WITH
      COUNSEL OF THEIR CHOICE, KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES
      ANY RIGHT EITHER OF THEM MAY HAVE TO A TRIAL BY JURY IN ANY LITIGATION
      BASED UPON OR ARISING OUT OF ANY LOAN DOCUMENT OR ANY OF THE TRANSACTIONS
      CONTEMPLATED BY THE LOAN DOCUMENTS OR ANY COURSE OF CONDUCT, DEALING,
      STATEMENTS (WHETHER ORAL OR WRITTEN), OR ACTION OF EITHER OF THEM. THESE
      PROVISIONS SHALL NOT BE DEEMED TO HAVE BEEN MODIFIED IN ANY RESPECT OR
      RELINQUISHED BY BANK OR BORROWER, EXCEPT BY A WRITTEN INSTRUMENT EXECUTED
      BY EACH OF THEM.

7.8   ORAL AGREEMENTS INEFFECTIVE. THIS AGREEMENT AND THE OTHER "LOAN
      AGREEMENTS" (AS DEFINED IN SECTION 26.02(A)(2) OF THE TEXAS BUSINESS &
      COMMERCE CODE, AS AMENDED) REPRESENT THE FINAL AGREEMENT BETWEEN THE
      PARTIES, AND THIS AGREEMENT AND THE OTHER WRITTEN LOAN AGREEMENTS MAY NOT
      BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
      AGREEMENTS BETWEEN THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS
      BETWEEN THE PARTIES.

WITNESS the due execution hereof as of the day and year first above written.

BANK:                                           BORROWER:

COMERICA BANK-TEXAS                             INTERPHASE CORPORATION,
                                                a Texas corporation

 By: /s/ Richard L. Rogers                      By: /s/ Steve Kovac
     ---------------------------------------        -------------------------
         Richard L. Rogers, Vice President              Steve Kovac, Chief
         Texas Division                                 Financial Officer

                                        8

<PAGE>

[COMERICA BANK LOGO] AMENDMENT NOTE AND CREDIT AGREEMENT

This Amendment to Note and Credit Agreement ("Amendment"), is made, delivered,
and effective as of November 5, 2004, by and between INTERPHASE CORPORATION, a
Texas corporation("Borrower") and COMERICA BANK, successor by merger with
Comerica Bank - Texas ("Bank").

WHEREAS, Bank has made a revolving loan to Borrower evidenced by that certain
Master Revolving Note made by Borrower to the order of Bank in the original
principal amount of $5,000,000.00 dated June 25, 2003 ("Note"); and

WHEREAS, the indebtedness evidenced by the Note is subject to the terms and
conditions of that certain Credit Agreement ("Credit Agreement") by and between
Borrower dated as of even date with the Note; and

WHEREAS, Bank and Borrower desire to amend the Note and Credit Agreement as set
forth below;

NOW, THEREFORE, in consideration of the premises and the mutual promises
contained in this Amendment, Borrower and Bank agree as follows:

1.    The Maturity Date of the Note is now July 31, 2007 (the "Maturity Date").

2.    The term "Applicable Margin", as used in the Note, shall now mean 0% for
      the Prime Rate Balance and one percent (1%) for each LIBOR Balance.

3.    The Credit Agreement is hereby amended such that the term "Revolving
      Credit Maturity Date", contained in Section 1.1 of the Credit Agreement,
      shall now have the following definition:

            "REVOLVING CREDIT MATURITY DATE" shall now mean July 31, 2007 or
            such earlier date on which the entire unpaid principal amount of all
            Revolving Loans becomes due and payable whether by the lapse of
            time, demand for payment, acceleration or otherwise; provided,
            however, if any such date is not a business day, then the Revolving
            Credit Maturity Date shall be the next succeeding business day.

4.    Borrower is responsible for all costs incurred by Bank, including without
      limit reasonable attorneys' fees (whether inside or outside counsel is
      used), with regard to the preparation and execution of this Amendment.

5.    The execution of this Amendment shall not be deemed to be a waiver of any
      Default or Event of Default.

6.    All the terms used in this Amendment which are defined in the Note and/or
      Credit Agreement shall have the same meaning as used in the Note and/or
      Credit Agreement, unless otherwise defined in this Amendment.

7.    Borrower waives, discharges, and forever releases Bank, Bank's employees,
      officers, directors, attorneys, stockholders, and their successors and
      assigns, from and of any and all claims, causes of action, allegations or
      assertions that Borrower has or may have had at any time up through and
      including the date of this Amendment, against any or all of the foregoing,
      regardless of whether any such claims, causes of action, allegations or
      assertions are known to Borrower or whether any such claims, causes of
      action, allegations or assertions arose as result of Bank's actions or
      omissions in connection with the Note or Credit Agreement, or any
      amendments, extensions or modifications thereof, or Bank's administration
      of the Indebtedness or otherwise, INCLUDING ANY CLAIMS, CAUSES OF ACTION,
      ALLEGATIONS OR ASSERTIONS RESULTING FROM BANK'S OWN NEGLIGENCE, except and
      to the extent (but only to the extent) caused by Bank's gross negligence
      or willful misconduct.

8.    This Amendment is not an agreement to any further or other amendment of
      the Note or Credit Agreement.

9.    Borrower expressly acknowledges and agrees that except as expressly
      amended in this Amendment, the Note and Credit Agreement, as amended,
      remain in full force and effect and are ratified, confirmed and restated.
      This Amendment shall neither extinguish nor constitute a novation of the
      Note or indebtedness evidenced thereby.

10.   THIS AMENDMENT AND THE OTHER "LOAN AGREEMENTS" (AS DEFINED IN SECTION
      26.02(A)(2) OF THE TEXAS BUSINESS & COMMERCE CODE, AS AMENDED) REPRESENT
      THE FINAL AGREEMENT BETWEEN THE PARTIES, AND THIS AGREEMENT AND THE OTHER
      WRITTEN LOAN AGREEMENTS MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
      CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS BETWEEN THE PARTIES. THERE
      ARE NO UNWRITTEN AGREEMENTS BETWEEN THE PARTIES.]

      IN WITNESS WHEREOF, the parties have executed and delivered this Amendment
      on the date set forth above.

      BORROWER:                                       BANK:

      INTERPHASE CORPORATION,                   COMERICA BANK
      a Texas corporation

      By: /s/ Steve Kovac                             By: /s/ Richard Rogers
          ------------------------------------            ----------------------
          Steve Kovac, Chief Financial Officer            Richard Rogers, Senior
                                                          Vice President, Texas
                                                          Division

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00081-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00081-of-00352.parquet"}]]