Document:

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                                                                     Exhibit 4.2

                  UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY TO THE COMPANY OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS
REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (AND ANY PAYMENT
HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY), ANY TRANSFER, PLEDGE
OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE
THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. THIS NOTE IS A
GLOBAL NOTE WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS
REGISTERED IN THE NAME OF A DEPOSITARY OR A NOMINEE THEREOF. THIS NOTE IS
EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER THAN THE
DEPOSITARY OR ITS NOMINEE ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE
INDENTURE AND, UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR
SECURITIES IN DEFINITIVE FORM, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT AS A
WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE
DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE
DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH
SUCCESSOR DEPOSITARY.

                  THIS NOTE (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A
TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF
1933 (THE "SECURITIES ACT"), AND THIS NOTE AND THE COMMON STOCK ISSUABLE UPON
CONVERSION THEREOF MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH
PURCHASER OF THIS NOTE IS HEREBY NOTIFIED THAT THE SELLER OF THIS NOTE MAY BE
RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT
PROVIDED BY RULE 144A THEREUNDER.

                  THE HOLDER OF THIS NOTE AGREES FOR THE BENEFIT OF THE COMPANY
THAT (A) THIS NOTE AND THE NOTE COMMON STOCK ISSUABLE UPON CONVERSION THEREOF
MAY BE OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (I) IN THE UNITED
STATES TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED
INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (II) OUTSIDE THE UNITED
STATES IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 904 UNDER THE
SECURITIES ACT, (III) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE) OR (IV) PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH OF
CASES (I) THROUGH (IV) IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY
STATE OF THE UNITED STATES, AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER
IS REQUIRED TO, NOTIFY ANY PURCHASER OF THIS NOTE FROM IT OF THE RESALE
RESTRICTIONS REFERRED TO IN (A) ABOVE. IN ANY CASE, THE HOLDER HEREOF WILL NOT,
DIRECTLY OR INDIRECTLY, ENGAGE IN ANY HEDGING TRANSACTIONS WITH REGARD TO THE
NOTES EXCEPT AS PERMITTED UNDER THE SECURITIES ACT.

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                  THE HOLDER OF THIS NOTE IS ENTITLED TO THE BENEFITS OF A
REGISTRATION RIGHTS AGREEMENT (AS SUCH TERM IS DEFINED IN THE INDENTURE REFERRED
TO ON THE REVERSE HEREOF) AND, BY ITS ACCEPTANCE HEREOF, AGREES TO BE BOUND BY
AND TO COMPLY WITH THE PROVISIONS OF SUCH REGISTRATION RIGHTS AGREEMENT.

                  THIS NOTE MAY NOT BE SOLD OR TRANSFERRED TO, AND EACH
PURCHASER BY ITS PURCHASE OF THIS SECURITY SHALL BE DEEMED TO HAVE REPRESENTED
AND COVENANTED THAT IT IS NOT ACQUIRING THIS SECURITY FOR OR ON BEHALF OF, AND
WILL NOT TRANSFER THIS SECURITY TO, ANY PENSION OR WELFARE PLAN AS DEFINED IN
SECTION 3 OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED
("ERISA") EXCEPT THAT SUCH PURCHASE FOR OR ON BEHALF OF A PENSION OR WELFARE
PLAN SHALL BE PERMITTED:

                  (1) TO THE EXTENT SUCH PURCHASE IS MADE BY OR ON BEHALF OF A
         BANK COLLECTIVE INVESTMENT FUND MAINTAINED BY THE PURCHASER IN WHICH NO
         PLAN (TOGETHER WITH ANY OTHER PLANS MAINTAINED BY THE SAME EMPLOYER OR
         EMPLOYEE ORGANIZATION) HAS AN INTEREST IN EXCESS OF 10% OF THE TOTAL
         ASSETS IN SUCH COLLECTIVE INVESTMENT FUND, AND THE OTHER APPLICABLE
         CONDITIONS OF PROHIBITED TRANSACTION CLASS EXEMPTION 91-38 ISSUED BY
         THE DEPARTMENT OF LABOR ARE SATISFIED;

                  (2) TO THE EXTENT SUCH PURCHASE IS MADE BY OR ON BEHALF OF AN
         INSURANCE COMPANY POOLED SEPARATE ACCOUNT MAINTAINED BY THE PURCHASER
         IN WHICH, AT ANY TIME WHILE THESE SECURITIES ARE OUTSTANDING, NO PLAN
         (TOGETHER WITH ANY OTHER PLANS MAINTAINED BY THE SAME EMPLOYER OR
         EMPLOYEE ORGANIZATION) HAS AN INTEREST IN EXCESS OF 10% OF THE TOTAL OF
         ALL ASSETS IN SUCH POOLED SEPARATE ACCOUNT, AND THE OTHER APPLICABLE
         CONDITIONS OF PROHIBITED TRANSACTION CLASS EXEMPTION 90-1 ISSUED BY THE
         DEPARTMENT OF LABOR ARE SATISFIED;

                  (3) TO THE EXTENT SUCH PURCHASE IS MADE ON BEHALF OF A PLAN BY
         (A) AN INVESTMENT ADVISER REGISTERED UNDER THE INVESTMENT ADVISERS ACT
         OF 1940, AS AMENDED (THE "1940 ACT"), THAT HAD AS OF THE LAST DAY OF
         ITS MOST RECENT FISCAL YEAR TOTAL ASSETS UNDER ITS MANAGEMENT AND
         CONTROL IN EXCESS OF $50.0 MILLION AND HAD STOCKHOLDERS' OR PARTNERS'
         EQUITY IN EXCESS OF $750,000, AS SHOWN IN ITS MOST RECENT BALANCE SHEET
         PREPARED IN ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES,
         OR (B) A BANK AS DEFINED IN SECTION 202(A)(2) OF THE 1940 ACT WITH
         EQUITY CAPITAL IN EXCESS OF $1.0 MILLION AS OF THE LAST DAY OF ITS MOST
         RECENT FISCAL YEAR, OR (C) AN INSURANCE COMPANY WHICH IS QUALIFIED
         UNDER THE LAWS OF MORE THAN ONE STATE TO MANAGE, ACQUIRE OR DISPOSE OF
         ANY ASSETS OF A PENSION OR WELFARE PLAN, WHICH INSURANCE COMPANY HAS AS
         OF THE LAST DAY OF ITS MOST RECENT FISCAL YEAR, NET WORTH IN EXCESS OF
         $1.0 MILLION AND WHICH IS SUBJECT TO SUPERVISION AND EXAMINATION BY A
         STATE AUTHORITY HAVING SUPERVISION OVER INSURANCE COMPANIES AND, IN ANY
         CASE, SUCH INVESTMENT ADVISER, BANK OR INSURANCE COMPANY IS OTHERWISE A
         QUALIFIED PROFESSIONAL

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         ASSET MANAGER, AS SUCH TERM IS USED IN PROHIBITED TRANSACTION CLASS
         EXEMPTION 84-14 ISSUED BY THE DEPARTMENT OF LABOR, AND THE ASSETS OF
         SUCH PLAN WHEN COMBINED WITH THE ASSETS OF OTHER PLANS ESTABLISHED OR
         MAINTAINED BY THE SAME EMPLOYER (OR AFFILIATE THEREOF) OR EMPLOYEE
         ORGANIZATION AND MANAGED BY SUCH INVESTMENT ADVISER, BANK OR INSURANCE
         COMPANY, DO NOT REPRESENT MORE THAN 20% OF THE TOTAL CLIENT ASSETS
         MANAGED BY SUCH INVESTMENT ADVISER, BANK OR INSURANCE COMPANY AT THE
         TIME OF THE TRANSACTION, AND THE OTHER APPLICABLE CONDITIONS OF SUCH
         EXEMPTION ARE OTHERWISE SATISFIED;

                  (4) TO THE EXTENT SUCH PLAN IS A GOVERNMENTAL PLAN (AS DEFINED
         AS SECTION 3 OF ERISA) WHICH IS NOT SUBJECT TO THE PROVISIONS OF TITLE
         1 OF ERISA OR SECTION 401 OF THE INTERNAL REVENUE CODE OF 1986, AS
         AMENDED (THE "CODE");

                  (5) TO THE EXTENT SUCH PURCHASE IS MADE BY OR ON BEHALF OF AN
         INSURANCE COMPANY USING THE ASSETS OF ITS GENERAL ACCOUNT, THE RESERVES
         AND LIABILITIES FOR THE GENERAL ACCOUNT CONTRACTS HELD BY OR ON BEHALF
         OF ANY PLAN, TOGETHER WITH ANY OTHER PLANS MAINTAINED BY THE SAME
         EMPLOYER (OR ITS AFFILIATES) OR EMPLOYEE ORGANIZATION, DO NOT EXCEED
         10% OF THE TOTAL RESERVES AND LIABILITIES OF THE INSURANCE COMPANY
         GENERAL ACCOUNT (EXCLUSIVE OF SEPARATE ACCOUNT LIABILITIES), PLUS
         SURPLUS AS SET FORTH IN THE NATIONAL ASSOCIATION OF INSURANCE
         COMMISSIONERS ANNUAL STATEMENT FILED WITH THE STATE OF DOMICILE OF THE
         INSURER, IN ACCORDANCE WITH PROHIBITED TRANSACTION CLASS EXEMPTION
         95-60, AND THE OTHER APPLICABLE CONDITIONS OF SUCH EXEMPTION ARE
         OTHERWISE SATISFIED;

                  (6) TO THE EXTENT PURCHASE IS MADE BY AN IN-HOUSE ASSET
         MANAGER WITHIN THE MEANING OF PART IV(A) OF PROHIBITED TRANSACTION
         CLASS EXEMPTION 96-23, SUCH MANAGER HAS MADE OR PROPERLY AUTHORIZED THE
         DECISION FOR SUCH PLAN TO PURCHASE THIS SECURITY, UNDER CIRCUMSTANCES
         SUCH THAT PROHIBITED TRANSACTION CLASS EXEMPTION 96-23 IS APPLICABLE TO
         THE PURCHASE AND HOLDING OF THIS SECURITY; OR

                  (7) TO THE EXTENT SUCH PURCHASE WILL NOT OTHERWISE GIVE RISE
         TO A TRANSACTION DESCRIBED IN SECTION 406 OR SECTION 4975(C)(1) OF THE
         CODE FOR WHICH A STATUTORY OR ADMINISTRATIVE EXEMPTION IS UNAVAILABLE.

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<PAGE>   4

                               EMCORE CORPORATION

CUSIP: 290846 AA2                                                            R-1

                   5% CONVERTIBLE SUBORDINATED NOTES DUE 2006

                  EMCORE Corporation, a New Jersey corporation (the "Company",
which term shall include any successor corporation under the Indenture referred
to on the reverse hereof), promises to pay to Cede & Co., or registered assigns,
the principal sum of One Hundred Seventy-Five Million Dollars ($175,000,000) on
May 15, 2006 or such greater or lesser amount as is indicated on the Schedule of
Exchanges of Notes on the other side of this Note.

                  Interest Payment Dates:  May 15 and November 15

                  Record Dates:  May 1 and November 1

                  This Note is convertible as specified on the other side of
this Note. Additional provisions of this Note are set forth on the other side of
this Note.

                  IN WITNESS WHEREOF, the Company has caused this instrument to
be duly executed.

                                             EMCORE Corporation

                                             By: /s/ Howard Brodie
                                                --------------------------------
                                             Name: Howard Brodie
                                             Title: Vice President

Attest:

By: /s/ Michael O'Sullivan
   ------------------------------------
Name: Michael O'Sullivan
Title: Assistant General Counsel

Dated:  May 7, 2001
      ---------------------------------

Trustee's Certificate of Authentication: This is one of the Notes referred to in
the within-mentioned Indenture.

WILMINGTON TRUST COMPANY,
as Trustee

By: /s/ James D. Nesci
   -----------------------------------
Name: James D. Nesci
Title: Authorized Signer

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                           [REVERSE SIDE OF SECURITY]

                               EMCORE CORPORATION
                   5% CONVERTIBLE SUBORDINATED NOTES DUE 2006

1. INTEREST

                  EMCORE Corporation, a New Jersey corporation (the "Company",
which term shall include any successor corporation under the Indenture
hereinafter referred to), promises to pay interest on the principal amount of
this Note at the rate of 5% per annum. The Company shall pay interest
semiannually on May 15 and November 15 of each year, commencing November 15,
2001, unless such date is not a business day, in which case, we shall pay
interest on the next succeeding business day and such payment shall be deemed to
have been paid on such interest payment date and no interest shall accrue during
the additional period of time. Interest on the Notes shall accrue from the most
recent date to which interest has been paid or, if no interest has been paid,
from May 7, 2001; provided, however, that if there is not an existing default in
the payment of interest and if this Note is authenticated between a record date
referred to on the face hereof and the next succeeding interest payment date,
interest shall accrue from such interest payment date. Interest will be computed
on the basis of a 360-day year of twelve 30-day months. Any reference herein to
interest accrued or payable as of any date shall include any Additional Interest
accrued or payable on such date as provided in the Registration Rights
Agreement.

2. METHOD OF PAYMENT

                  The Company shall pay interest on this Note (except defaulted
interest) to the person who is the Holder of this Note at the close of business
on May 1 or November 1, as the case may be, next preceding the related interest
payment date. The Holder must surrender this Note to a Paying Agent to collect
payment of principal. The Company will pay principal and interest in money of
the United States that at the time of payment is legal tender for payment of
public and private debts. The Company may, however, pay principal and interest
in respect of any Definitive Note by check or wire payable in such money;
provided, however, that a Holder with an aggregate principal amount in excess of
$2,000,000 will be paid by wire transfer in immediately available funds at the
election of such Holder. The Company may mail an interest check to the Holder's
registered address. Notwithstanding the foregoing, so long as this Note is
registered in the name of a Depositary or its nominee, all payments hereon shall
be made by wire transfer of immediately available funds to the account of the
Depositary or its nominee.

3. PAYING AGENT, REGISTRAR AND CONVERSION AGENT

                  Initially, Wilmington Trust Company, (the "Trustee," which
term shall include any successor trustee under the Indenture hereinafter
referred to) will act as Paying Agent, Registrar and Conversion Agent. The
Company may change any Paying Agent, Registrar or Conversion Agent without
notice to the Holder. The Company or any of its Subsidiaries may, subject to
certain limitations set forth in the Indenture, act as Paying Agent or
Registrar.

4. INDENTURE, LIMITATIONS

                  This Note is one of a duly authorized issue of Notes of the
Company designated as its 5% Convertible Subordinated Notes due 2006 (the
"Notes"), issued under an Indenture dated as of May 7, 2001 (together with any
supplemental indentures thereto, the "Indenture"), between the Company and

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the Trustee. The terms of this Note include those stated in the Indenture and
those required by or made part of the Indenture by reference to the Trust
Indenture Act of 1939, as amended, as in effect on the date of the Indenture.
This Note is subject to all such terms, and the Holder of this Note is referred
to the Indenture and said Act for a statement of them. All capitalized terms
used but not defined herein shall have the meaning ascribed to such term in the
Indenture.

                  The Notes are subordinated unsecured obligations of the
Company limited to $175,000,000 aggregate principal amount, subject to Section
2.2 of the Indenture. The Indenture does not limit other debt of the Company,
secured or unsecured, including Senior Indebtedness.

5. PROVISIONAL AND OPTIONAL REDEMPTION

                  The Notes may be redeemed at the election of the Company, as a
whole or in part from time to time, at any time prior to May 20, 2004 (a
"PROVISIONAL REDEMPTION"), upon at least 20 and not more than 60 days' notice by
mail to the Holders of the Notes at a redemption price equal to $1,000 per
$1,000 principal amount of the Notes redeemed plus accrued and unpaid interest,
if any (such amount, together with the Make-Whole Payment described below, the
"PROVISIONAL REDEMPTION PRICE"), to but excluding the date of redemption (the
"PROVISIONAL REDEMPTION DATE") if (1) the Closing Sale Price of the Common Stock
has exceeded 150% of the Conversion Price for at least 20 Trading Days within a
period of any 30 consecutive Trading Days ending on the Trading Day prior to the
date of mailing of the notice of Provisional Redemption (the "NOTICE DATE"), and
(2) a shelf registration statement covering resales of the Notes and the Common
Stock issuable upon conversion thereof is effective and available for use and is
expected to remain effective and available for use for the 30 days following the
Provisional Redemption Date unless registration is no longer required.

                  Upon any such Provisional Redemption, the Company, shall make
an additional payment, at its option, in cash or Common Stock or a combination
of cash and Common Stock (the "MAKE-WHOLE PAYMENT") with respect to the Notes
called for redemption to holders on the Notice Date in an amount equal to
$150.00 per $1,000 principal amount of the Notes, less the amount of any
interest actually paid (including, if the Provisional Redemption Date occurs
after a record date but before an interest payment date, any interest paid or
payable in connection with such interest payment date) on such Notes prior to
the Provisional Redemption Date. Payments made in Common Stock will be valued at
97% of the average closing sales prices of Common Stock for the five Trading
Days ending on the day prior to the Redemption Date. The Company shall make the
Make-Whole Payment on all Notes called for Provisional Redemption, including
those Notes converted into Common Stock between the Notice Date and the
Provisional Redemption Date.

                  Except as set forth above, the Notes are subject to
redemption, at any time on or after May 20, 2004, on at least 20 days and no
more than 60 days notice, in whole or in part, at the election of the Company.
The Redemption Prices (expressed as percentages of the principal amount) are as
follows for Notes redeemed during the periods set forth below:

             Period                                      Redemption Price
             ------                                      ----------------

May 20, 2004 through May 14, 2005........................     101.25%
May 15, 2005 and thereafter..............................     100.00%

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in each case together with accrued interest up to but not including the
Redemption Date; provided that if the redemption date is an interest payment
date, interest will be payable to the Holders in whose names the Notes are
registered at the close of business on the relevant record dates.

6. NOTICE OF REDEMPTION

                  Notice of redemption will be mailed by first-class mail at
least 20 days but not more than 60 days before the Redemption Date to each
Holder of Notes to be redeemed at its registered address. Notes in denominations
larger than $1,000 may be redeemed in part, but only in whole multiples of
$1,000. On and after the Redemption Date, subject to the deposit with the Paying
Agent of funds sufficient to pay the Redemption Price plus accrued interest, if
any, accrued to, but not including, the Redemption Date, interest shall cease to
accrue on Notes or portions of them called for redemption.

7. PURCHASE OF NOTES AT OPTION OF HOLDER UPON A CHANGE IN CONTROL

                  At the option of the Holder and subject to the terms and
conditions of the Indenture, the Company shall become obligated to purchase all
or any part specified by the Holder (so long as the principal amount of such
part is $1,000 or an integral multiple of $1,000 in excess thereof) of the Notes
held by such Holder on the date that is 30 Business Days after the occurrence of
a Change in Control, at a purchase price equal to 100% of the principal amount
thereof together with accrued interest up to, but excluding, the Change in
Control Purchase Date. The Holder shall have the right to withdraw any Change in
Control Purchase Notice (in whole or in a portion thereof that is $1,000 or an
integral multiple of $1,000 in excess thereof) at any time prior to the close of
business on the Business Day next preceding the Change in Control Purchase Date
by delivering a written notice of withdrawal to the Paying Agent in accordance
with the terms of the Indenture.

8. CONVERSION

                  A Holder of a Note may convert the principal amount of such
Note (or any portion thereof equal to $1,000 or any integral multiple of $1,000
in excess thereof) into shares of Common Stock at any time prior to the close of
business on May 15, 2006; provided, however, that if the Note is called for
redemption or subject to purchase upon a Change in Control, the conversion right
will terminate at the close of business on the Business Day immediately
preceding the redemption date or the Change in Control Purchase Date, as the
case may be, for such Note or such earlier date as the Holder presents such Note
for redemption or purchase (unless the Company shall default in making the
redemption payment or Change in Control Purchase Price, as the case may be, when
due, in which case the conversion right shall terminate at the close of business
on the date such default is cured and such Note is redeemed or purchased).

                  The initial Conversion Price is $48.7629 per share, subject to
adjustment under certain circumstances. The number of shares of Common Stock
issuable upon conversion of a Note is determined by dividing the principal
amount of the Note or portion thereof converted by the Conversion Price in
effect on the Conversion Date. No fractional shares will be issued upon
conversion; in lieu thereof, an amount will be paid in cash based upon the
closing price (as defined in the Indenture) of the Common Stock on the Trading
Day immediately prior to the Conversion Date.

                  To convert a Note, a Holder must (a) complete and manually
sign the conversion notice set forth below and deliver such notice to a
Conversion Agent, (b) surrender the Note to a Conversion Agent, (c) furnish
appropriate endorsements and transfer documents if required by a Registrar or a

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Conversion Agent, and (d) pay any transfer or similar tax, if required. Notes so
surrendered for conversion (in whole or in part) during the period from the
close of business on any regular record date to the opening of business on the
next succeeding interest payment date (excluding Notes or portions thereof
called for redemption or subject to purchase upon a Change in Control on a
Redemption Date or Change in Control Purchase Date, as the case may be, during
the period beginning at the close of business on a regular record date and
ending at the opening of business on the first Business Day after the next
succeeding interest payment date, or if such interest payment date is not a
Business Day, the second such Business Day) shall also be accompanied by payment
in funds acceptable to the Company of an amount equal to the interest payable on
such interest payment date on the principal amount of such Note then being
converted, and such interest shall be payable to such registered Holder
notwithstanding the conversion of such Note, subject to the provisions of this
Indenture relating to the payment of defaulted interest by the Company. If the
Company defaults in the payment of interest payable on such interest payment
date, the Company shall promptly repay such funds to such Holder. A Holder may
convert a portion of a Note equal to $1,000 or any integral multiple thereof.

                  A Note in respect of which a Holder had delivered a Change in
Control Purchase Notice exercising the option of such Holder to require the
Company to purchase such Note may be converted only if the Change in Control
Purchase Notice is withdrawn in accordance with the terms of the Indenture.

9. SUBORDINATION

                  The indebtedness evidenced by the Notes is, to the extent and
in the manner provided in the Indenture, subordinate and junior in right of
payment to the prior payment in full in cash of all Senior Indebtedness. Any
Holder by accepting this Note agrees to and shall be bound by such subordination
provisions and authorizes the Trustee to give them effect. In addition to all
other rights of Senior Indebtedness described in the Indenture, the Senior
Indebtedness shall continue to be Senior Indebtedness and entitled to the
benefits of the subordination provisions irrespective of any amendment,
modification or waiver of any terms of any instrument relating to the Senior
Indebtedness or any extension or renewal of the Senior Indebtedness.

10. DENOMINATIONS, TRANSFER, EXCHANGE

                  The Notes are in registered form without coupons in
denominations of $1,000 and integral multiples of $1,000. A Holder may register
the transfer of or exchange Notes in accordance with the Indenture. The
Registrar may require a Holder, among other things, to furnish appropriate
endorsements and transfer documents and to pay any taxes or other governmental
charges that may be imposed in relation thereto by law or permitted by the
Indenture.

11. PERSONS DEEMED OWNERS

                  The Holder of a Note may be treated as the owner of it for all
purposes.

12. UNCLAIMED MONEY

                  If money for the payment of principal or interest remains
unclaimed for two years, the Trustee or Paying Agent will pay the money back to
the Company at its written request. After that, Holders entitled to money must
look to the Company for payment.

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13. AMENDMENT, SUPPLEMENT AND WAIVER

                  Subject to certain exceptions, the Indenture or the Notes may
be amended or supplemented with the consent of the Holders of at least a
majority in principal amount of the Notes then outstanding, and an existing
default or Event of Default and its consequence or compliance with any provision
of the Indenture or the Notes may be waived in a particular instance with the
consent of the Holders of a majority in principal amount of the Notes then
outstanding. Without the consent of or notice to any Holder, the Company and the
Trustee may amend or supplement the Indenture or the Notes to, among other
things, cure any ambiguity, defect or inconsistency or make any other change
that does not adversely affect the rights of any Holder.

14. SUCCESSOR CORPORATION

                  When a successor corporation assumes all the obligations of
its predecessor under the Notes and the Indenture in accordance with the terms
and conditions of the Indenture, the predecessor corporation will (except in
certain circumstances specified in the Indenture) be released from those
obligations.

15. DEFAULTS AND REMEDIES

                  Under the Indenture, an Event of Default includes: (i) default
for 30 days in payment of any interest on any Notes; (ii) default in payment of
any principal (including, without limitation, any premium, if any) on the Notes
when due; (iii) failure by the Company for 60 days after notice to it to comply
with any of its other agreements contained in the Indenture or the Notes; (iv)
we fail to comply with any of the provisions of Section 6.09 of the Indenture;
(v) we fail to provide timely notice of a change in control; and (vi) certain
events of bankruptcy, insolvency or reorganization of the Company. If an Event
of Default (other than as a result of certain events of bankruptcy, insolvency
or reorganization of the Company) occurs and is continuing, the Trustee or the
Holders of at least 25% in principal amount of the Notes then outstanding may
declare all unpaid principal to the date of acceleration on the Notes then
outstanding to be due and payable immediately, all as and to the extent provided
in the Indenture. If an Event of Default occurs as a result of certain events of
bankruptcy, insolvency or reorganization of the Company, unpaid principal of the
Notes then outstanding shall become due and payable immediately without any
declaration or other act on the part of the Trustee or any Holder, all as and to
the extent provided in the Indenture. Holders may not enforce the Indenture or
the Notes except as provided in the Indenture. The Trustee may require indemnity
satisfactory to it before it enforces the Indenture or the Notes. Subject to
certain limitations, Holders of a majority in principal amount of the Notes then
outstanding may direct the Trustee in its exercise of any trust or power. The
Trustee may withhold from Holders notice of any continuing default (except a
default in payment of principal or interest) if it determines that withholding
notice is in their interests. The Company is required to file periodic reports
with the Trustee as to the absence of default.

16. TRUSTEE DEALINGS WITH THE COMPANY

                  Wilmington Trust Company, the Trustee under the Indenture, in
its individual or any other capacity, may make loans to, accept deposits from
and perform services for the Company or an Affiliate of the Company, and may
otherwise deal with the Company or an Affiliate of the Company, as if it were
not the Trustee.

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<PAGE>   10

17. NO RECOURSE AGAINST OTHERS

                  A director, officer, employee or shareholder, as such, of the
Company shall not have any liability for any obligations of the Company under
the Notes or the Indenture nor for any claim based on, in respect of or by
reason of such obligations or their creation. The Holder of this Note by
accepting this Note waives and releases all such liability. The waiver and
release are part of the consideration for the issuance of this Note.

18. AUTHENTICATION

                  This Note shall not be valid until the Trustee or an
authenticating agent manually signs the certificate of authentication on the
other side of this Note.

19. ABBREVIATIONS AND DEFINITIONS

                  Customary abbreviations may be used in the name of the Holder
or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by
the entireties), JT TEN (= joint tenants with right of survivorship and not as
tenants in common), CUST (= Custodian) and UGMA (= Uniform Gifts to Minors Act).

                  All terms defined in the Indenture and used in this Note but
not specifically defined herein are defined in the Indenture and are used herein
as so defined.

20. INDENTURE TO CONTROL; GOVERNING LAW

                  In the case of any conflict between the provisions of this
Note and the Indenture, the provisions of the Indenture shall control. This Note
shall be governed by, and construed in accordance with, the laws of the State of
New York, without regard to principles of conflicts of law.

                  The Company will furnish to any Holder, upon written request
and without charge, a copy of the Indenture. Requests may be made to: EMCORE
Corporation, 145 Belmont Drive, Somerset, New Jersey 08873, Attention: Chief
Financial Officer.

                                       10
<PAGE>   11
                                 ASSIGNMENT FORM

To assign this Note, fill in the form below:

I or we assign and transfer this Note to

--------------------------------------------------------------------------------
                  (Insert assignee's soc. sec. or tax I.D. no.)

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
              (Print or type assignee's name, address and zip code)

and irrevocably appoint

--------------------------------------------------------------------------------

agent to transfer this Note on the books of the Company. The agent may
substitute another to act for him or her.

                                           Your Signature:

Date:
     -------------------------------       -------------------------------------
                                           (Sign exactly as your name appears
                                           on the other side of this Note)

*Signature guaranteed by:

By:
   -------------------------------------

*        The signature must be guaranteed by an institution which is a member of
         one of the following recognized signature guaranty programs: (i) the
         Securities Transfer Agent Medallion Program (STAMP); (ii) the New York
         Stock Exchange Medallion Program (MSP); (iii) the Stock Exchange
         Medallion Program (SEMP); or (iv) such other guaranty program
         acceptable to the Trustee.

                                       11
<PAGE>   12
                                CONVERSION NOTICE

To convert this Note into Common Stock of the Company, check the box: [ ]

To convert only part of this Note, state the principal amount to be converted
(must be $1,000 or a multiple of $1,000):
$____________ .

If you want the stock certificate made out in another person's name, fill in the
form below:

--------------------------------------------------------------------------------
                  (Insert assignee's soc. sec. or tax I.D. no.)

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
              (Print or type assignee's name, address and zip code)

                                           Your Signature:

Date:
     -------------------------------       -------------------------------------
                                           (Sign exactly as your name appears
                                           on the other side of this Note)

*Signature guaranteed by:

By:
   -------------------------------------

*        The signature must be guaranteed by an institution which is a member of
         one of the following recognized signature guaranty programs: (i) the
         Securities Transfer Agent Medallion Program (STAMP); (ii) the New York
         Stock Exchange Medallion Program (MSP); (iii) the Stock Exchange
         Medallion Program (SEMP); or (iv) such other guaranty program
         acceptable to the Trustee.

                                       12
<PAGE>   13
               OPTION TO ELECT REPURCHASE UPON A CHANGE OF CONTROL

To: EMCORE Corporation

         The undersigned registered owner of this Note hereby irrevocably
acknowledges receipt of a notice from EMCORE Corporation (the "Company") as to
the occurrence of a Change in Control with respect to the Company and requests
and instructs the Company to redeem the entire principal amount of this Note, or
the portion thereof (which is $1,000 or an integral multiple thereof) below
designated, in accordance with the terms of the Indenture referred to in this
Note at the Change in Control Purchase Price, together with accrued interest to,
but excluding, such date.

Dated:
      ----------------------------             ---------------------------------

                                               ---------------------------------
                                               Signature(s)

                                               Signature(s) must be guaranteed
                                               by a qualified guarantor
                                               institution with membership in an
                                               approved signature guarantee
                                               program pursuant to Rule 17Ad-15
                                               under the Securities Exchange Act
                                               of 1934.

                                               ---------------------------------
                                               Signature Guaranty

Principal amount to be redeemed
(in an integral multiple of $1,000, if less than all):

------------------------------
NOTICE: The signature to the foregoing Election must correspond to the Name as
written upon the face of this Note in every particular, without alteration or
any change whatsoever.

                                       13
<PAGE>   14

                         SCHEDULE OF EXCHANGES OF NOTES

         The following exchanges, redemptions, repurchases or conversions of a
part of this global Note have been made:

<TABLE>
<CAPTION>
 Principal Amount of
  this Global Note
    Following Such
  Decrease Date of                                    Amount of Decrease in         Amount of Increase in
    Exchange (or            Authorized Signatory       Principal Amount of           Principal Amount of
     Increase)                 of Custodian              this Global Note              this Global Note
 -------------------        --------------------      ---------------------         ---------------------
<S>                         <C>                       <C>                           <C>

</TABLE>

                                       14
<PAGE>   15

            CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR REGISTRATION
                  OF TRANSFER OF TRANSFER RESTRICTED SECURITIES

Re:      5% Convertible Subordinated Notes due 2006 (the "Notes") of
         EMCORE Corporation.

         This certificate relates to $_______ principal amount of Notes owned
         in (check applicable box)

         [ ] book-entry or  [ ] definitive form by _________________________
         (the "Transferor").

         The Transferor has requested a Registrar or the Trustee to exchange or
register the transfer of such Notes.

         In connection with such request and in respect of each such Note, the
Transferor does hereby certify that the Transferor is familiar with transfer
restrictions relating to the Notes as provided in Section 2.12 of the Indenture
dated as of May 7, 2001 between EMCORE Corporation and Wilmington Trust Company,
(the "Indenture"), and the transfer of such Note is being made pursuant to an
effective registration statement under the Securities Act of 1933, as amended
(the "Securities Act") (check applicable box) or the transfer or exchange, as
the case may be, of such Note does not require registration under the Securities
Act because (check applicable box):

[ ]      Such Note is being transferred pursuant to an effective registration
         statement under the Securities Act.

[ ]      Such Note is being acquired for the Transferor's own account, without
         transfer.

[ ]      Such Note is being transferred to the Company or a Subsidiary (as
         defined in the Indenture) of the Company.

[ ]      Such Note is being transferred to a person the Transferor reasonably
         believes is a "qualified institutional buyer" (as defined in Rule 144A
         or any successor provision thereto ("Rule 144A") under the Securities
         Act) that is purchasing for its own account or for the account of a
         "qualified institutional buyer", in each case to whom notice has been
         given that the transfer is being made in reliance on such Rule 144A,
         and in each case in reliance on Rule 144A.

[ ]      Such Note is being transferred pursuant to and in accordance with Rule
         903 or Rule 904 under the Securities Act and, accordingly, the
         Transferor hereby further certifies that (i) the transfer is not being
         made to a person in the United States and (x) at the time the buy order
         was originated, the transferee was outside the United States or such
         Transferor and any Person acting on its behalf reasonably believed and
         believes that the transferee was outside the United States or (y) the
         transaction was executed in, on or through the facilities of a
         designated offshore securities market and neither such Transferor nor
         any Person acting on its behalf knows that the transaction was
         prearranged with a buyer in the United States, (ii) no directed selling
         efforts have been made in contravention of the requirements of Rule
         903(b) or Rule 904(b) of Regulation S under the Securities Act and
         (iii) the transaction is not part of a plan or scheme to evade the
         registration requirements of the Securities Act and (iv) if the
         proposed transfer is being made prior to the expiration of the
         Restricted Period, the transfer is not being made to a U.S. Person or
         for the account or benefit of a U.S. Person (other than an Initial
         Purchaser).

[ ]      Such Note is being transferred pursuant to and in compliance with an
         exemption from the registration requirements under the Securities Act
         in accordance with Rule 144 (or any successor thereto) ("Rule 144")
         under the Securities Act.

[ ]      Such Note is being transferred pursuant to and in compliance with an
         exemption from the registration requirements of the Securities Act
         (other than an exemption referred to above) and as a result of which

                                       15
<PAGE>   16

         such Note will, upon such transfer, cease to be a "restricted security"
         within the meaning of Rule 144 under the Securities Act.

         The Transferor acknowledges and agrees that, if the transferee will
hold any such Notes in the form of beneficial interests in a global Note which
is a "restricted security" within the meaning of Rule 144 under the Securities
Act, then such transfer can only be made pursuant to Rule 144A under the
Securities Act and such transferee must be a "qualified institutional buyer" (as
defined in Rule 144A).

Date:
     -------------------------------           ---------------------------------
                                                   (Insert Name of Transferor)

                                       16<PAGE>   1
                                                                     Exhibit 4.3

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

                                   $20,000,000

                              AMENDED AND RESTATED

                      REVOLVING LOAN AND SECURITY AGREEMENT

                                 By and Between

                               EMCORE CORPORATION

                                       And

                            FIRST UNION NATIONAL BANK

                            Dated as of March 1, 2001

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

<PAGE>   2

                                TABLE OF CONTENTS

SECTION 1.        DEFINITIONS................................................1
SECTION 2.        TERMS OF REVOLVING LOANS...................................7
         2.1.     Revolving Loan Commitment; Maximum Credit..................7
         2.2.     Borrowing and Renewal Procedures...........................8
         2.3.     Borrowing Warranty.........................................8
         2.4.     Borrowing Conditions.......................................8
         2.5.     Procedures for Letters of Credit...........................8
         2.6.     Issuance Warranty..........................................9
         2.7.     Issuance Conditions........................................9
SECTION 3.        NOTE EVIDENCING REVOLVING LOANS............................9
         3.1.     Promissory Note............................................9
         3.2.     Recordkeeping..............................................9
SECTION 4.        INTEREST; ADMINISTRATION OF REVOLVING LOANS...............10
         4.1.     Interest Rate.............................................10
         4.2.     Payment of Interest.......................................10
         4.3.     Late Payment..............................................10
         4.4.     Maximum Interest..........................................10
         4.5.     Computation of Interest...................................10
SECTION 5.        PREPAYMENTS...............................................10
         5.1.     Voluntary Prepayments.....................................10
         5.2.     Mandatory Prepayments.....................................10
SECTION 6.        PAYMENTS AND FEES.........................................10
         6.1.     Making of Payments........................................10
         6.2.     Commitment Fee............................................10
         6.3.     Origination Fee...........................................10
         6.4.     Due Date..................................................10
         6.5.     Payments in Respect of Increased Costs....................11
SECTION 7.        SECURITY; INSPECTIONS.....................................11
         7.1.     Security Interests........................................11
         7.2.     Trademarks and Licenses...................................11
         7.3.     Maintenance; Right of Inspection..........................12
         7.4.     Right of Set off..........................................12
         7.5.     Additional Collateral.....................................12
SECTION 8.        REPRESENTATIONS AND WARRANTIES............................12
         8.1.     Capacity..................................................12
         8.2.     No Conflict...............................................12
         8.3.     Title; No Other Liens.....................................12
         8.4.     Accounts..................................................12
         8.5.     Inventory and Equipment...................................12
         8.6.     Validity and Binding Nature...............................13
         8.7.     Litigation................................................13
         8.8.     Environmental Matters.....................................13
         8.9.     Employee and Other Loans..................................13
         8.10.    ERISA.....................................................13
         8.11.    Tradenames................................................13
         8.12.    Subsidiaries..............................................14
         8.13.    Financial Statements......................................14
         8.14.    Tax Matters...............................................14
         8.15.    Ownership of Property; Liens..............................14
         8.16.    Compliance With Requirements of Law.......................14
         8.17.    Investment Company Act....................................15
         8.18.    Margin Stock..............................................15
         8.19.    General Collateral Representation.........................15
         8.20.    Accounts..................................................15
SECTION 9.        CONDITIONS TO EFFECTIVENESS...............................15
SECTION 10.       COVENANTS OF BORROWER.....................................16
         10.1.    Financial Statements and Other Information................16
         10.2.    Use of Proceeds...........................................17
         10.3.    Other Agreements..........................................17
         10.4.    Indebtedness for Borrowed Money...........................17
         10.5.    Liens.....................................................17
         10.6.    Accounts..................................................17
         10.7.    Insurance.................................................18
         10.8.    Taxes.....................................................18
         10.9.    ERISA.....................................................18
         10.10.   Compliance with Laws......................................18
         10.11.   Sale or Change of Business................................18
         10.12.   Further Documentation.....................................18
         10.13.   Maintenance of a Bank Account.............................19
         10.14.   Financial Covenants.......................................19
         10.15.   Limitations on Modifications, Waivers and Extensions of
                    Agreements Giving Rise to Accounts......................19

<PAGE>   3

         10.16.   Limitation on Discounts, Compromises and Extensions of
                    Accounts................................................19
         10.17.   Limitation on Investments.................................19
         10.18.   Fiscal Year...............................................19
         10.19.   Limitation on Contingent Obligations......................20
         10.20.   Limitation on Creation or Acquisition of Subsidiaries.....20
         10.21.   Dividends.................................................20
         10.22.   Environmental Liabilities.................................20
         10.23.   Lease Payments............................................20
         10.24.   Landlord's Waivers........................................20
         10.25.   Prepayment of Indebtedness................................20
         10.26.   Loans and Advances........................................20
         10.27.   Consigned Equipment.......................................20
SECTION 11.       EVENTS OF DEFAULT AND REMEDIES............................20
         11.1.    Events of Default.........................................20
         11.2.    Effect of Event of Default................................22
         11.3.    Remedies..................................................22
         11.4.    Limitation on Duties Regarding Preservation of Collateral.22
         11.5.    Cash Collateral for Letter of Credit Obligation...........23
SECTION 12.       GENERAL...................................................23
         12.1.    Waiver; Amendments........................................23
         12.2.    WAIVER OF TRIAL BY JURY...................................23
         12.3.    Arbitration...............................................23
         12.4.    Notices...................................................23
         12.5.    Appointment as Attorney-in-Fact...........................24
         12.6.    Costs, Expenses and Taxes.................................25
         12.7.    Captions..................................................25
         12.8.    Venue; Governing Law......................................25
         12.9.    Remedies..................................................25
         12.10.   Successors and Assigns....................................25
         12.11.   Counterparts..............................................25
         12.12.   Survival..................................................25
         12.13.   Executed Certification....................................25

<PAGE>   4

                              AMENDED AND RESTATED
                      REVOLVING LOAN AND SECURITY AGREEMENT

          This AMENDED AND RESTATED REVOLVING LOAN AND SECURITY AGREEMENT dated
as of March 1, 2001 is between EMCORE Corporation, a corporation organized under
the laws of the State of New Jersey (the "Borrower"), with its principal place
of business at 145 Belmont Drive, Somerset, New Jersey 08873 and First Union
National Bank (the "Bank"), having an office at 1889 Highway 27, Edison, NJ
08817.

                                   BACKGROUND

          A. The Borrower and the Bank are parties to a certain Revolving Loan
and Security Agreement, dated as of March 31, 1997, as amended by a certain
Consent and Amendment Agreement, dated as of December 5, 1997 (the "First
Amendment"), as further modified pursuant to a certain Extension Letter dated
September 29, 1998 issued by the Bank and accepted by the Borrower (the "First
Extension Letter"), as further amended pursuant to a certain Second Amendment to
Revolving Loan and Security Agreement dated as of November 30, 1998 (the "Second
Amendment"), as further amended pursuant to a certain Waiver and Amendment
Letter Agreement dated as March 8, 1999 (the "First Amendment Letter"), as
further amended pursuant to a certain Acknowledgment, Consent and Amendment
Letter dated as of May 26, 1999 (the "Second Amendment Letter") and as further
modified pursuant to a certain letter of the Bank dated September 22, 1999 (the
"Second Extension Letter") and as further amended pursuant to a certain Third
Amendment to Revolving Loan and Security Agreement dated as December 1, 1999
(the "Third Amendment"). Said loan agreement, as amended by the First Amendment,
the First Extension Letter, the Second Amendment, First Amendment Letter, the
Second Amendment Letter, the Second Extension Letter and the Third Amendment is
hereinafter referred to as the "Existing Agreement".

          B. The Borrower has requested an increase in the Maximum Credit
available under the Existing Agreement to an amount not to exceed $20,000,000,
together with certain other modifications to the terms and conditions set forth
therein. Furthermore, for administrative convenience and to assure proper
reflection of the terms and conditions of all prior amendments and modifications
to the Existing Agreement, as well as the above requested increase and
modifications, the parties desire to amend and restate the terms and conditions
of the Existing Agreement in their entirety with the terms and conditions set
forth herein.

          NOW THEREFORE, in consideration of the mutual promises contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the Bank and Borrower hereby agree that the
Existing Agreement shall be amended and restated in its entirety to read as
follows:

                             SECTION 1. DEFINITIONS

          When used herein, the following terms shall have the following
meanings (such definitions to be equally applicable to both singular and plural
forms):

          "Accounts" means all existing and hereafter arising or acquired
accounts, accounts receivable, notes, drafts, acceptances, chattel paper,
instruments, documents and other forms of obligations held by or payable to
Borrower relating to or arising from the sale of Inventory or the rendering of
services by Borrower, including, without limitation, the right to payment of
interest or finance charges, all rights of Borrower as an unpaid vendor, and all
pledged assets, credit insurance, guaranties, letters of credit and security
interests relating thereto. This definition includes, without limitation, the
definition of an "Account" as set forth in the Uniform Commercial Code.

<PAGE>   5

          "Affiliate" of any Person means any other Person who, directly or
indirectly, controls or is controlled by or is under common control with such
Person. A Person shall be deemed to be "controlled by" any other Person who
possesses, directly or indirectly, power: (a) to vote 10% or more of the
securities having ordinary voting power for the election of directors of such
Person; or (b) to direct or cause the direction of the management and policies
of such Person, whether by contract or otherwise.

          "Agreement" means this Amended and Restated Revolving Loan and
Security Agreement as the same may from time to time be amended, modified,
supplemented, renewed or restated.

          "ASI" means Analytical Solutions, Inc., a New Mexico corporation and a
wholly-owned Subsidiary of the Borrower.

          "Available Commitment" means, at any time, the Revolving Loan
Commitment minus the sum of (i) the aggregate principal amount of Revolving
Credit Loans then outstanding plus (ii) the Letter of Credit Obligations.

          "Borrowing Base" means at any time the aggregate of:

          (i) 85% of the value of the Net Amount of Eligible Accounts; plus

          (ii) 25% of the value of Eligible Inventory; plus

          (iii) 30% of the net book value of the Borrower's production Equipment
(excluding, however, any Consigned Equipment); plus

          (iv) 25% of the net book value of the real property and improvements
encumbered by the NM Facility Mortgage or any other mortgage of the Borrower
granting to the Bank a first priority mortgage lien and security interest in and
to the real property and improvements encumbered thereby, in each case to secure
the Obligations.

For purposes of determining the Inventory component of the Borrowing Base, the
term "value" of Eligible Inventory shall mean the lower of cost or fair market
value determined by the Bank in its sole discretion, with cost determined on a
first in, first out basis.

          "Borrowing Base Certificate" shall mean a certificate substantially in
the form of Exhibit 10.1(f) hereto.

          "Business Day" means any day on which the Bank is open for business.

          "Borrowing Notice" means a written, telecopied or telephonic notice to
the Bank by the Borrower in form and substance satisfactory to the Bank.

          "Capital Expenditures" means any amounts paid or incurred in
connection with the purchase of plant, machinery, equipment or similar
expenditures (including any lease of any of the foregoing) which would be
required to be capitalized and shown on a balance sheet in accordance with GAAP.

          "Capitalized Lease" means any lease of property, real or personal, the
obligations of the lessee in respect of which are required in accordance with
GAAP to be capitalized on a balance sheet of the lessee.

          "Cash Equivalents and Marketable Securities" means (i) direct
obligations of, or obligations unconditionally guaranteed by, the United States
or any agency thereof maturing in less than one year from the date of purchase;
(ii) commercial paper bearing one of the two highest investment grades by
Moody's Investor's Service, Inc. and/or Standard and Poors Rating Service, a
division of McGraw-Hill Companies, Inc. (iii) certificates of deposit due within
one year from the date of purchase, issued by any commercial bank, organized and
doing business under the laws of the United States or any state thereof having
capital surplus and undivided profits aggregating more than $100,000,000 and
otherwise meeting the applicable minimum risk capital levels required by the
applicable bank regulatory authority; and (iv) investments in money market funds
maintained by the Bank or any other entities reasonably satisfactory to the
Bank.

          "Code" means the Internal Revenue Code of 1986, as amended from time
to time.

          "Collateral" is defined in Section 7, as supplemented by Section 7.5.

          "Commitment Expiration Date" means January 31, 2003.

          "Consigned Equipment" means the Equipment of the Borrower that is,
from time to time, subject to the consignment arrangements described in Schedule
8.5.1, or any other Equipment of the Borrower held from time to time by third
parties under similar arrangements.

          "Contingent Obligation" means, as to any Person, any obligation of
such Person guaranteeing or in effect guaranteeing any Indebtedness, lease,
dividend or other obligation (the "primary obligations") of any other Person

                                       2
<PAGE>   6

(the "primary obligor") in any manner, whether directly or indirectly,
including, without limitation, any obligation of such Person, whether or not
contingent (a) to purchase any such primary obligation or any property
constituting direct or indirect security therefor, (b) to advance or supply
funds (i) for the purchase or payment of any such primary obligation or (ii) to
maintain working capital or equity capital of the primary obligor or otherwise
to maintain the net worth or solvency of the primary obligor or to permit the
primary obligor to meet financial covenants, (c) to purchase property,
securities or services primarily for the purpose of assuring the owner of any
such primary obligation of the ability of the primary obligor to make payment of
such primary obligation or (d) otherwise to assure or hold harmless the owner of
any such primary obligation against loss in respect thereof; provided, however,
that the term Contingent Obligation shall not include endorsements of
instruments for deposit or collection in the ordinary course of business. The
amount of any Contingent Obligation shall be deemed to be an amount equal to the
stated or determinable amount of the primary obligation in respect of which such
Contingent Obligation is made or, if not stated or determinable, the maximum
reasonably anticipated liability in respect thereof as determined by the
Borrower in good faith.

          "Core EBITDA" means, with respect to the Borrower, EBITDA, exclusive
of any gains or losses attributable to operations of any Unconsolidated
Affiliates.

          "Default Rate" means a per annum rate of interest equal to the Prime
Rate plus an additional five percent (5%) per annum.

          "Dollars" and "$" means dollars in lawful currency of the United
States of America.

          "EBITDA" means, with respect to the Borrower, for any period, the sum
of (i) Net Income, (ii) Interest Expense, (iii) depreciation and amortization,
and (iv) provisions for Federal, state and local income taxes of the Borrower
based on income, computed in accordance with GAAP on a consolidated basis.

          "Effective Net Worth" means, with respect to the Borrower, total
assets minus total liabilities, in each case determined in accordance with GAAP
on a consolidated basis.

          "Eligible Accounts" means, without limiting the Bank's sole discretion
to determine Eligible Accounts, those Accounts created by the Borrower or any
Guarantor:

          (i)  which are genuine and not fraudulent;

          (ii) which arise from undisputed, bona fide sales of goods and/or
          services in the ordinary course of business completed in accordance
          with the terms and provisions contained in any documents related
          thereto;

          (iii) as to which the amounts of such Accounts shown on any schedule
          of Accounts provided to the Bank are actually and absolutely owing to
          Borrower or the Guarantor, are not contingent for any reason and have
          not remained unpaid for more than 90 days after the invoice date
          thereof;

          (iv) which do not arise from sales on consignment, guaranteed sale or
          other terms under which payment by the Account debtor may be
          conditional;

          (v) which, in the case of Accounts where the Account debtor is a
          non-resident of the United States or Canada, are secured by a letter
          of credit issued by a bank that is reasonably acceptable to Bank,
          provided, however, that Accounts where the Account debtor is any one
          of Hakuto Co., Ltd., Hakuto Enterprises, Ltd., a wholly-owned
          subsidiary of Hakuto Co., Ltd., Siemens AG, D.I. Systems, Philips AG,
          Thomson, L.M. Ericsson AB, Samsung Co., L.G. Semiconductor
          Corporation, Hyundai Electronics, Daewoo Co. or Azea, Brown and Bavari
          (ABB) need not be secured by a letter of credit;

          (vi)    which do not  consist of "bill and hold"  invoices  or against
          which deposits are held by the Account debtor thereunder;

          (vii) with respect to which there are no set-offs, counterclaims or
          disputes existing and there are no facts, events or occurrences which
          in any manner would impair the validity or enforceability or
          collectibility of such Accounts or reduce the amount payable or delay
          payment thereunder;

          (viii) as to which goods giving rise thereto are not, and were not, at
          the time of the sale thereof, subject to any Liens except those
          permitted by the Bank under this Agreement;

          (ix) which are not Accounts with respect to which the Account debtor
          is:

                                       3
<PAGE>   7

               i.   an officer, employer or agent of the Borrower;

              ii.   the United States or any of its departments or
                    instrumentalities unless the Assignment of Claims Act has
                    been complied with;

             iii.   a Subsidiary or an Affiliate of the Borrower;

              iv.   a division of the Borrower; or

               v.   an Unconsolidated Affiliate;

          (x) as to which there are no proceedings or actions which are
          threatened or pending against the Account debtor of any such Account
          which is reasonably likely to result in any material adverse change in
          the Account debtor's financial condition;

          (xi)    which are owed by  Account  debtors  deemed  creditworthy  and
          acceptable  at all  times by the Bank in  exercise  of its  reasonable
          discretion; and

          (xii) which otherwise constitute Collateral acceptable for lending
          purposes in the sole discretion of the Bank.

          "Eligible Inventory" means Inventory located at Borrower's facilities
at 394 Elizabeth Avenue, Somerset, New Jersey, and the NM Facility and
comprising only of raw materials. Specifically excluded from the term "Eligible
Inventory" shall be work-in-process, finished goods, supplies, packing
materials, Inventory in transit, Inventory located in any location other than
the locations specified above (unless the Bank is satisfied it has a perfected
first priority security interest in such Inventory).

          "Environmental Law" is defined in Section 8.8.

          "ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time.

          "ERISA Affiliate" means each trade or business (whether or not
incorporated) which together with the Borrower would be deemed to be a single
employer under Section 414 of the Code.

          "Equipment" means all equipment as such term in defined in the Uniform
Commercial Code and all accessories and parts that become part of the equipment
by accession, and all supplies used or to be used in connection therewith.

          "Event of Default" means any of the events described in Section 11.1
of this Agreement.

          "Existing Agreement" is defined in the Background Section of this
Agreement.

          "Fiscal Year" means the fiscal year of the Borrower commencing October
1 of any calendar year and ending September 30 of the immediately succeeding
calendar year.

          "GAAP" means generally accepted accounting principles in the United
States of America in effect from time to time, applied on a consistent basis.

          "Governmental Authority" means any sovereign state, nation or
government, any state or other political subdivision thereof and any authority
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.

          "Guarantor" shall be the collective reference to MODE, ASI and TSI.

          "Guaranty" shall be the collective reference to the Guaranty dated
December 3, 1997 made by MODE and the Guaranty of ASI and TSI dated as of even
date herewith, in each case in favor of the Bank with respect to the Obligations
of the Borrower to the Bank, as the same may be affirmed, modified, amended, or
supplemented from time to time.

          "Imputed Warrant Interest Expense" means, for any period of
determination, the non-cash interest expense of the Borrower in respect of the
Warrants determined in accordance with GAAP.

          "Indebtedness" of any Person, means, at a particular date, the sum
(without duplication and in conformity with GAAP) at such date of (a) all
indebtedness of such Person for borrowed money or for the deferred purchase
price of property or services (including, without limitation, all notes payable
and all obligations evidenced by bonds, debentures, notes or other similar
instruments but excluding trade payables incurred in the ordinary course of
business), (b) obligations with respect to any installment sale or conditional
sale agreement or title retention agreement, (c) indebtedness arising under
acceptance facilities, (d) unpaid reimbursement obligations arising in
connection with surety, performance or other similar bonds and in connection
with standby letters of credit issued in lieu of such bonds, (e) the outstanding

                                       4
<PAGE>   8

amount of all other letters of credit (other than those referred to in clause
(d)) issued for the account of such Person and, without duplication, all unpaid
reimbursement obligations thereunder, (f) any lease obligation which is
capitalized on a balance sheet of the Borrower prepared in accordance with GAAP,
(g) net liabilities of such Person under interest rate cap agreements, interest
rate swap agreements, foreign currency exchange agreements and other hedging
agreements or arrangements, (h) Contingent Obligations of such Person and (h)
withdrawal liabilities of such Person or any Commonly Controlled Group (as such
term is defined in the Code) under a Plan.

          "Interest Expense" means, for any period, the total interest expense
for such period (including, without limitation, that attributable to Capitalized
Leases in accordance with GAAP) of Borrower with respect to all outstanding
Indebtedness of Borrower including Imputed Warrant Interest Expense.

          "Inventory" means all inventory of Borrower of every kind and
description, including, without limitation, all merchandise, raw materials,
parts, supplies, work-in-process and finished goods, together with all
accessions, attachments and other additions to, substitute for, replacements
for, improvements to and returns of such inventory, all accounts arising from
the disposition of inventory, containers, packing, packaging, shipping and
similar materials relating thereto.

          "Lending Rate" means, with respect to each Revolving Loan, the lower
of (A) Prime Rate and (B) LIBOR Market Index Rate plus 150 basis points (1.50%).
Changes in the rate of interest charged hereunder shall become effective as of
the opening of business on the day on which such change in the Prime Rate or the
LIBOR Market Index Rate, as the case may be, is established.

          "Letter(s) of Credit" means the one or more irrevocable standby
letters of credit issued from time to time by Bank at the request and for the
account of the Borrower in accordance with the terms hereof.

          "Letter of Credit Agreement" means the Bank's standard form of
Application and Agreement for Irrevocable Standby Letters of Credit, as the same
may change from time to time.

          "Letter of Credit Obligations" means, without duplication, the
aggregated stated amount of all Letters of Credit outstanding at any time and
all obligations of the Borrower to reimburse the Bank for any payments by the
Bank under any Letters of Credit in each case, at the time of determination of
said obligations.

          "LIBOR Market Index Rate" means for any day, the rate for one (1)
month U.S. dollar deposits as reported on Telerate page 3750 as of 11:00 a.m.,
London time, on such day, or if such day is not a London business day, then the
immediately preceding London business day (or if not so reported, then as
determined by Bank from another recognized source or interbank quotation).

          "Lien" means any mortgage, pledge, security interest, hypothecation,
assignment, deposit arrangement, encumbrance, or preference, priority or other
security agreement or preferential arrangement of any kind or nature whatsoever
(including, without limitation, any conditional sale or other title retention
agreement, any financing lease having substantially the same economic effect as
any of the foregoing, and the filing of any financing statement under the
Uniform Commercial Code or comparable law of any jurisdiction).

          "Liquidity" means the sum of cash (in the form of Dollars) and Cash
Equivalents and Marketable Securities that is, in all cases, under the absolute
dominion and control of the Borrower and not subject to any Lien or any other
form of restriction as to use to satisfy the current liabilities of the
Borrower.

          "Loan Documents" means, collectively, this Agreement, the Revolving
Note, each Letter of Credit Agreement, the Guaranty, the Security Agreement, the
NM Facility Mortgage, the NM Bond Pledge, and all other documents, instruments
and agreements delivered in connection herewith and therewith, as the same from
time to time may be amended, renewed, restated, supplemented or otherwise
modified.

          "Material Adverse Effect" means any event or condition which is likely
to have a material adverse effect on the business operations, properties or
overall financial condition of the Borrower and its Subsidiaries, taken as a
whole, or the ability of the Borrower or any Guarantor to perform or comply with
any of their respective obligations under any of the Loan Documents.

          "Maximum Credit" is defined in Section 2.1.

          "MODE" means MicroOptical Devices,  Inc., a Delaware corporation and a
wholly-owned Subsidiary of the Borrower.

          "Multiemployer Plan" means a multiemployer plan as defined in Section
4001(a)(3) of ERISA contributed to by Borrower or an ERISA Affiliate or to which
the Borrower or an ERISA Affiliate has any obligation or liability.

          "Net Amount of Eligible Accounts" means the gross amount of Eligible

                                       5
<PAGE>   9

Accounts less sales, excise or similar taxes, and less returns, discounts,
claims, credits and allowances of any nature, at any time issued, owing,
granted, outstanding, available or claimed.

          "Net Income" for any period means the net income (or net loss) of
Borrower for such period, determined in accordance with GAAP on a consolidated
basis.

          "Net Loss In Unconsolidated Affiliates" means, with respect to the
Borrower, for the relevant period the net loss appearing as an expense on an
income statement of the Borrower prepared in accordance with GAAP, consistently
applied, attributable to its investment in Unconsolidated Affiliates.

          "NM Facility" means that certain real property and improvements
located in the City of Albuquerque, County of Bernalillo, State of New Mexico,
as more fully described in the NM Facility Mortgage, which is occupied by the
Borrower pursuant to a certain long term lease dated June 1, 1998, by and
between the Borrower and the City of Albuquerque, New Mexico.

          "NM Facility Bond Pledge" means that certain Bond Pledge Agreement,
dated as of November 30, 1999, given by EMCORE IRB Company, Inc. in favor of the
Bank with respect to the pledge of certain New Mexico taxable industrial revenue
bonds issued by the City of Albuquerque, New Mexico in connection with the
development of the NM Facility.

          "NM Facility Mortgage" means that certain Mortgage and Security
Agreement, dated as of November 30, 1999, given by the Borrower in favor of the
Bank with respect to the Bank's first priority mortgage lien upon the NM
Facility.

          "Obligations" means all of Borrower's liabilities, obligations and
Indebtedness to the Bank of any and every kind and nature (including, without
limitation, any and all reimbursement obligations owing to the Bank in respect
of this Agreement, the other Loan Documents, the Revolving Note, overadvances,
interest, commitment fees, charges, expenses, attorneys' fees and other sums
chargeable to Borrower by the Bank and future advances made to or for the
benefit of Borrower), including swap agreements (as defined in 11 U.S.C. ss.101)
whether arising hereunder or under the other Loan Documents or otherwise,
whether heretofore, now or hereafter owing, arising, due, or payable from
Borrower to the Bank and howsoever evidenced, created, incurred, acquired or
owing, whether primary, secondary, direct, contingent, fixed, or otherwise,
including obligations of performance.

          "PBGC" shall mean the Pension Benefit Guaranty Corporation.

          "Permitted Encumbrance" is defined in Section 10.5.

          "Person" means an individual, partnership, corporation, business
trust, joint stock company, trust, unincorporated association, joint venture,
Governmental Authority or other entity of whatever nature.

          "Plan" shall mean any employee benefit plan as defined in Section 3(3)
of ERISA which covers the employees or former employees of the Borrower or an
ERISA Affiliate, under which the Borrower or an ERISA Affiliate has any
obligation or liability or under which the Borrower or an ERISA Affiliate has
made contributions within the preceding five years, other than a Multiemployer
Plan.

          "Prime Rate" means, on any date and with respect to all Obligations,
the rate of interest established by the Bank as its reference rate in making
loans, and is not tied to any external rate of interest or index. The rate of
interest charged hereunder in respect of the Prime Rate shall change
automatically and immediately as of the date of any change in the Prime Rate
without notice to the Borrower. The Prime Rate does not reflect the rate of
interest charged to any particular class of borrower nor is it necessarily
intended to be the lowest rate of interest determined by the Bank in connection
with extensions of credit. The Bank may make loans based on rates other than the
Prime Rate to any person, and these rates may be higher, lower or equal to the
prime rate or other reference rates used by the Bank as the Bank, shall from
time to time, in its sole discretion determine.

          "Proceeds" means whatever is received when Collateral is sold,
exchanged, collected or otherwise disposed of, including, without limitation,
insurance proceeds.

          "Quick Ratio" means with respect of the Borrower, for any period of
determination the ratio of (i) the sum of the Liquidity plus trade and non-trade
receivables (less any bad debt reserves) that are classified as current in
accordance with GAAP, whether or not evidenced by a promissory note to (ii) the
sum all of the Borrower's liabilities that are classified as current in
accordance with GAAP plus the long term portion of any debt due from the
Borrower to any of the Borrower's officers, employees, stockholders,
Subsidiaries or other Affiliates, which, in each case, are included in the
Borrower's current liabilities.

          "Related Parties" has the meaning set forth in Section 8.9 hereof.

                                       6
<PAGE>   10

          "Reportable Event" shall mean any event set forth in Section 4043(b)
of ERISA or the regulations thereunder.

          "Requirement of Law" means as to any Person, the certificate of
incorporation and bylaws or other organizational or governing documents of such
Person, and any law, treaty, rule or regulation or determination of an
arbitrator or a court or other Governmental Authority, in each case applicable
to or binding upon such Person or any of its property or to which such Person or
any of its property is subject.

          "Revolving Loan Commitment" means, for the Bank, for the period from
and including the date hereof to but excluding the Commitment Expiration Date,
$20,000,000.

          "Revolving Loan" has the meaning set forth in Section 2.1 hereof.

          "Revolving Loan Maturity Date" means the earlier of (i) the day the
Loans are accelerated pursuant to Section 11.2, or (ii) the Commitment
Expiration Date.

          "Revolving Note" is defined in Section 3.1.

          "Security Agreement" shall be the collective reference to the Security
Agreement dated December 3, 1997 made by the MODE and the Security Agreement
dated even date herewith made by ASI and TSI, in each case in favor of the Bank,
as the same may be modified, amended or supplemented from time to time.

          "Subordinated Debt" means any Indebtedness the terms (including,
without limitation, interest rate, equity participation, principal amount,
amortization, collateralization, covenants, events of default and subordination
and lien priority) of which are in form and substance acceptable to the Bank in
its sole discretion, do not affect the rights or Liens granted to the Bank
pursuant to this Agreement or any of the other Loan Documents and in respect of
which the Bank has received a Subordination Agreement in form and substance
satisfactory to the Bank duly executed by the holder of such Indebtedness.

          "Subsidiary" means any Person in which more than fifty (50%) percent
of the voting power or equity ownership shall, at the time as of which such
determination is being made, be owned or controlled directly by Borrower or one
or more Subsidiaries.

          "TSI" means Training  Solutions,  Inc., a New Mexico corporation and a
wholly-owned Subsidiary of the Borrower.

          "Unconsolidated Affiliates" means UMcore LLC, the Borrower's joint
venture with Union Miniere Inc., GELcore LLC, the Borrower's joint venture with
General Electric Company, and Uniroyal Optoelectronics LLC, the Borrower's joint
venture with Uniroyal Technology Corporation, in each case so long as the
Borrower's investment in each such joint venture can be accounted for using the
equity method of accounting as a result of the Borrower's inability to directly
or indirectly control economic and voting interests in said joint ventures.

          "Unmatured Event of Default" means any event which, if it continues
uncured will, with lapse of time or the giving of notice, or both, constitute an
Event of Default.

          "Warrants" means the warrants listed on Schedule 1.1 attached hereto.

                       SECTION 2. TERMS OF REVOLVING LOANS

          2.1. Revolving Loan Commitment; Maximum Credit. (a) Subject to the
terms and conditions of this Agreement, the Bank agrees (i) to make revolving
loans to Borrower (hereinafter collectively referred to as "Revolving Loans" and
individually as a "Revolving Loan") and (ii) issue Letters of Credit, up to the
Revolving Loan Commitment at any time during the period commencing the date
hereof to, but excluding, the Revolving Loan Maturity Date, in such amounts as
Borrower may from time to time request; provided, however, that the sum of the
aggregate outstanding principal amount of the Revolving Loans, plus the Letter
of Credit Obligations, when added to any requested Revolving Loans or Letter of
Credit, as the case may, be shall at no time exceed the lesser of (A) the
Available Commitment or (B) the Borrowing Base (the "Maximum Credit"); provided,
further that in no event shall the Letter of Credit Obligations, when added to
any requested Letter of Credit, exceed at any time $1,000,000. Subject to the
terms hereof, the Borrower may borrow, prepay and reborrow until the Revolving
Loan Maturity Date when all Revolving Loans shall be due and payable. The Bank
has no obligation to make any Revolving Loan or issue any Letter of Credit on or
after the Revolving Loan Maturity Date.

          (b) Amendment and Restatement of Revolving Loan Commitment Under
Existing Agreement. The Revolving Loan Commitment herein provided shall amend
and restate the revolving loan commitment set forth in the Existing Agreement.
Accordingly, as of the effective date of this Agreement (i) the revolving loan
commitment set forth in the Existing Agreement shall be terminated and of no
further force and effect, (ii) the revolving loans outstanding under the

                                       7
<PAGE>   11

Existing Agreement shall be refinanced with Revolving Loans incurred hereunder,
and (iii) the obligations of the Borrower with respect to such existing
revolving loans evidenced by the Revolving Note issued under the Existing
Agreement shall be deemed to be evidenced by the Revolving Note issued
hereunder. It is the intention of the parties hereto that the amendment,
restatement and refinancing of the existing revolving loan commitment under the
Existing Agreement with the Revolving Loan Commitment herein provided shall be
deemed to be a modification of the Borrower's obligations thereunder and not an
extinguishment or novation thereof.

          2.2. Borrowing and Renewal Procedures. With respect to any proposed
Revolving Loan, the Borrower shall deliver a Borrowing Notice to the Bank by
2:00 p.m. on the date of such proposed borrowing. Subject to the satisfaction of
the conditions set forth in Sections 2.1 and 2.4, the Bank shall lend to
Borrower the amount specified in such Borrowing Notice, provided, however, that
each Revolving Loan shall be made only on a Business Day. In the event that any
Borrowing Notice is given to the Bank by telephone, such notice must be
confirmed by the Borrower via same day facsimile. All Revolving Loans shall be
credited to an account of the Borrower maintained by the Bank.

          2.3. Borrowing Warranty. Each Borrowing Notice delivered to the Bank
pursuant to Section 2.2 shall constitute a warranty and representation to the
Bank that, as of the date of such Borrowing Notice and the date of the borrowing
proposed in such Borrowing Notice, all of the following are true and correct:
(a) the representations and warranties of the Borrower set forth in Section 8
below are true and correct, (b) the covenants of the Borrower set forth in
Section 10 below have been complied with and are true and correct, and (c) no
Event of Default or Unmatured Event of Default shall have occurred or will
result from the Revolving Loan described in or the transaction contemplated by
such Borrowing Notice.

          2.4. Borrowing Conditions. Notwithstanding anything contained in this
Agreement to the contrary, the Bank shall have no obligation to make any
Revolving Loan if an Event of Default or Unmatured Event of Default (a) shall
exist on the date of such proposed borrowing or (b) shall result from the making
of such Revolving Loan.

          2.5. Procedures for Letters of Credit.

               (A) Issuance of Letters of Credit. Within the Available
          Commitment, until the Commitment Expiration Date, and provided that no
          Event of Default shall have occurred and be continuing or would result
          from the issuance of a Letter of Credit and subject to the limitations
          of Section 2.1, the Bank may issue Letters of Credit for the account
          of Borrower on the terms hereinafter set forth. No Letter of Credit
          shall have a term in excess of 365 days and, in any event, an expiry
          date beyond the Commitment Expiration Date. Each of the Letters of
          Credit shall be issued in a form satisfactory to the Bank and pursuant
          to a Letter of Credit Agreement duly executed by the Borrower. The
          terms and conditions of the Letter of Credit Agreement(s) are hereby
          incorporated herein by reference as if fully set forth at length. The
          Borrower shall pay to the Bank any and all fees imposed by Bank in
          connection with the issuance of Letters of Credit.

               (B) Payments under Letters of Credit and Reimbursement by
          Borrower. In the event of a drawing under any Letter of Credit and
          payment by the Bank, the Borrower shall immediately reimburse the Bank
          therefor, together with any fees in connection therewith, which may be
          made by a charge against any of the Borrower's accounts with the Bank.
          If the Borrower shall not so reimburse the Bank as provided above,
          such failure shall be an Event of Default and the Borrower shall pay
          to the Bank interest on the amount of such payment from the date of
          such payment by the Bank or the failure of the Borrower to so
          reimburse the Bank, as applicable, through and including the date of
          such reimbursement by the Borrower at the Default Rate.

               (C) Letter of Credit Obligations Absolute. The Borrower's
          obligations to make payments to the Bank in order to reimburse
          payments by the Bank on Letters of Credit as provided in Subsection
          2.5(B) above shall be absolute, unconditional and irrevocable, and
          shall be performed strictly in accordance with the terms of this
          Agreement and the Letter of Credit Agreement(s), under any and all
          circumstances whatsoever, and irrespective of:

          (i) any lack of validity or enforceability of any Letter of Credit or
          any Loan Document, or any term or provision therein;

          (ii) any amendment or waiver of or any consent to departure from all
          or any of the provisions of any Letter of Credit or any Loan Document
          to which the Bank is not a party;

          (iii) the existence of any claim, setoff, defense or other right that
          the Borrower, the Guarantor, any other party guaranteeing, or
          otherwise obligated with, the Borrower, any Affiliate thereof or any
          other Person may at any time have against the beneficiary under any

                                       8
<PAGE>   12

          Letter of Credit, the Bank or any other Person, whether in connection
          with this Agreement, any other Loan Document or any other related or
          unrelated agreement or transaction;

          (iv) any draft or other document presented under a Letter of Credit
          proving to be forged, fraudulent, invalid or insufficient in any
          respect or any statement therein being untrue or inaccurate in any
          respect;

          (v) payment by the Bank under a Letter of Credit against presentation
          of a draft or other document that does not comply with the terms of
          such Letter of Credit; and

          (vi) any other act or omission to act or delay of any kind of the
          Bank, or any other person or any other event or circumstance
          whatsoever, whether or not similar to any of the foregoing, that
          might, but for the provisions of this section, constitute a legal or
          equitable discharge of the Borrower's obligations hereunder.

          It is understood that the Bank may accept documents that appear on
          their face to be in order, without responsibility for further
          investigation, regardless of any notices or information to the
          contrary and, in making any payment under any Letter of Credit (i) the
          Bank's exclusive reliance on the documents presented to it under such
          Letter of Credit as to any and all matters set forth therein,
          including reliance on the amount of any drafts presented under such
          Letter of Credit, whether or not the amount due to the beneficiary
          thereunder equals (but does not exceed) the amount of such draft and
          whether or not any document presented pursuant to such Letter of
          Credit proves to be forged or invalid or any statement therein proves
          to be inaccurate or untrue in any respect whatsoever and (ii) any
          noncompliance in any immaterial respect of the documents presented
          under such Letter of Credit with the terms thereof shall, in each
          case, be deemed not to constitute willful misconduct or gross
          negligence of the Bank.

               (D) Outstanding Letter of Credit Obligations. In addition to the
          provisions of this Section 2.5 (B), upon an Event of Default, the full
          amount of all Letter of Credit Obligations shall be deemed to increase
          the principal amount deemed outstanding under as Revolving Loans (and
          any unpaid interest thereon and on unpaid letter of credit fees shall
          be deemed principal of a Revolving Loan), for purposes of (x)
          distribution of payments hereunder and (y) application of proceeds
          realized upon the exercise of remedies hereunder or under any Loan
          Document; provided, however, if any such Letter of Credit thereafter
          expires without being drawn upon, the amount thereof shall reduce the
          principal amount deemed outstanding under the Revolving Loans (as
          previously increased pursuant to this subsection (D)) and the
          distributions of payments and proceeds to the Bank shall be adjusted
          accordingly.

          2.6. Issuance Warranty. Each request for a Letter of Credit pursuant
to Section 2.5(A) shall constitute a warranty and representation to the Bank
that, as of the date of such request and the date of the issuance of any such
Letter of Credit, all of the following are true and correct: (a) the
representations and warranties of the Borrower set forth in Section 8 below are
true and correct, (b) the covenants of the Borrower set forth in Section 10
below have been complied with and are true and correct, and (c) no Event of
Default or Unmatured Event of Default shall have occurred or will result from
the issuance of any such Letter of Credit described in or the transaction for
which such Letter of Credit is being issued.

          2.7. Issuance Conditions. Notwithstanding anything contained in this
Agreement to the contrary, the Bank shall have no obligation to issue any Letter
of Credit if an Event of Default or Unmatured Event of Default (a) shall exist
on the date of such proposed issuance or (b) shall result from the issuance of
such Letter of Credit.

                   SECTION 3. NOTE EVIDENCING REVOLVING LOANS

          3.1. Promissory Note. The Revolving Loans shall be evidenced by an
Amended and Restated Secured Revolving Note (the "Revolving Note"), executed on
and dated the date hereof, in the principal amount of up to $20,000,000 made by
the Borrower in favor of the Bank. The outstanding principal balance of the
Revolving Note plus all accrued and unpaid interest shall be due and payable on
the Revolving Loan Maturity Date.

          3.2. Recordkeeping. The Bank shall record, in accordance with its
usual and customary practices, the date and amount of each Revolving Loan, and
the interest rate. The Bank may, at its option, record such information on the
schedule attached to the Revolving Note. The Bank's records (including such
schedule) shall be presumptive evidence of the subject matter thereof. The
Bank's failure to so record any such amount or any error in so recording any
such amount shall not limit or otherwise affect the Obligations or any part
thereof.

                                       9
<PAGE>   13

             SECTION 4. INTEREST; ADMINISTRATION OF REVOLVING LOANS

          4.1. Interest Rate. With respect to each Revolving Loan, the Borrower
promises to pay interest on the unpaid principal amount thereof for the period
commencing on the date of such Revolving Loan until such Revolving Loan is paid
in full at a rate per annum equal to the Lending Rate. Notwithstanding anything
contained in this Agreement or the Revolving Note to the contrary, with respect
to each Revolving Loan, after the Revolving Loan Maturity Date on upon the
occurrence and during the continuance of an Event of Default, the Borrower shall
pay interest to the Bank at a rate per annum equal to the Default Rate.

          4.2. Payment of Interest. Interest on each of the Revolving Loans
shall be payable monthly, in arrears, on the first Business Day of each calendar
month and on the Revolving Loan Maturity Date. After the Revolving Loan Maturity
Date (whether by acceleration or otherwise) or upon the occurrence and during
the continuance of an Event of Default, accrued interest on all Revolving Loans
shall be payable on demand.

          4.3. Late  Payment.  Any payment of principal or interest not received
within ten days of its due date shall be  accompanied  by a late charge of three
percent (3%) of the amount of such payment.

          4.4. Maximum Interest. In no event shall any interest to be paid
hereunder exceed the maximum rate permitted by law. In the event the interest
rate paid hereunder exceeds the maximum rate permitted by law, the Loan
Documents (including the Revolving Note) shall automatically be deemed amended
to permit interest charges at an amount equal to, but no greater than the
maximum permitted by law.

          4.5. Computation of Interest. The interest chargeable hereunder shall
be computed on the basis of a 360-day year for the actual number of days in the
interest period ("Actual/360 Computation"). The Actual/360 Computation
determines the annual effective interest yield by taking the stated (nominal)
interest rate for a year's period and then dividing said rate by 360 to
determine the daily periodic rate to be applied for each day in the interest
period. Accordingly, the Borrower acknowledges that the application of the
Actual/360 Computation produces an annualized effective interest rate exceeding
that of the nominal rate.

                             SECTION 5. PREPAYMENTS

          5.1. Voluntary Prepayments. Borrower may, from time to time, prepay
the Revolving Loans in whole or in part, provided that each partial prepayment
shall be in a minimum principal amount of $100,000 (or any integral multiple of
$50,000 in excess thereof), and any prepayment of the entire principal amount of
all Revolving Loans shall include accrued interest to the date of prepayment.

          5.2. Mandatory Prepayments. The sum of the outstanding aggregate
principal amount of the Revolving Loans plus the Letter of Credit Obligations
shall not exceed the Maximum Credit at any time. Without limiting the Bank's
rights to demand payment of the Obligations in accordance with the terms of this
Agreement, in the event that at any time the sum of the aggregate amount of the
outstanding Revolving Loans plus the Letter of Credit Obligation exceed the
Maximum Amount (such excess is referred to herein as an "Overadvance"), such
Overadvance shall be payable and the Borrower shall pay to the Bank the entire
amount of such Overadvance (plus interest thereon) immediately upon the Bank's
demand for such amounts.

                          SECTION 6. PAYMENTS AND FEES

          6.1. Making of Payments. All payments (including prepayments pursuant
to Section 5 above) of principal of, or interest on, the Revolving Loans,
together with all other Obligations, shall be made without set off, deduction or
counterclaim in Dollars when stated to be due by the Borrower to the Bank in
immediately available funds. All payments in respect of Obligations required to
be made hereunder and under the other Loan Documents shall be debited by the
Bank from a demand deposit account maintained by the Borrower with the Bank. The
Borrower agrees that in addition to any other rights of setoff granted to the
Bank in the Loan Documents, at the Bank's option, all principal, interest, fees,
costs or other charges with respect to the Revolving Loans and the Loan
Documents and the proceeds of any and all Revolving Loans made by the Bank to
the Borrower may be charged directly to the Borrower's account maintained by the
Bank; provided, that the foregoing shall not limit the recourse of the Bank to
any source of funds.

          6.2. Commitment Fee. [INTENTIONALLY DELETED]

          6.3.  Origination Fee. In consideration of the renewal and increase of
the Maximum Credit  contemplated  herein,  the Borrower shall pay to the Bank an
origination fee in the amount of $50,000.00, said fee to be due and payable upon
the execution and delivery of this Agreement.

          6.4. Due Date. If any payment of principal or interest with respect to
any Revolving Loans falls due on a day which is not a Business Day, then such
date shall be extended to the next Business Day and additional interest shall

                                       10
<PAGE>   14

accrue and be payable for the period of such extension.

          6.5. Payments in Respect of Increased Costs. In the event that the
Bank shall have determined that any Requirement of Law regarding reserves,
capital adequacy, special deposit or other similar requirement(s) or any change
therein or in the interpretation or application thereof or compliance by the
Bank with any request or directive regarding any such requirements (whether or
not having the force of law, so long as the Bank reasonably believes that
compliance therewith is necessary) from any central bank or Governmental
Authority, does or shall have the effect of reducing the rate of return on the
Bank's capital as a consequence of its Commitment or any of its obligations
hereunder to a level below that which the Bank could have achieved but for such
law or change or compliance (taking into consideration such Bank's policies with
respect to capital adequacy or other similar requirements) by an amount deemed
by the Bank in the exercise of reasonable discretion to be material, then from
time to time, upon submission by the Bank to the Borrower of a written demand
therefor which sets forth in reasonable detail the basis for such request and
the computation of the amount requested (the amounts set forth in any such
demand shall be presumptive evidence thereof, absent manifest error), the
Borrower shall pay to the Bank such additional amount or amounts as will
compensate the Bank for such increased cost relating to this Agreement from the
date of such event, together with any late charge applicable thereto as provided
in Section 4.3 hereof and thereafter such similar payments requested by the Bank
on the basis set forth above.

                              SECTION 7.  SECURITY; INSPECTIONS

          7.1. Security Interests. To secure to the Bank the prompt and full
payment of all of the Obligations, the Borrower hereby grants the Bank a
continuing first priority and only security interest in and lien upon the
following of Borrower's described property, wherever the same may now or
hereafter be located, now existing or owned and hereafter arising or acquired:
(i) all Accounts; (ii) all Chattel Paper; (iii) all contract rights; (iv) all
Documents; (v) all General Intangibles but only as they relate to the Accounts,
Inventory and Equipment of Borrower (including, without limitation, all trade
secrets, trade names, copyrights, copyright applications, patent applications,
patents, trademarks, trademark registrations and applications therefor); (vi)
all Instruments but only as they relate to Accounts, Inventory and Equipment of
Borrower; (vii) all Equipment; (viii) all Inventory; (ix) to the extent not
otherwise included in clause (vii) above, all other machinery, apparatus,
equipment, fittings, furniture and furnishings now or hereafter located upon the
real property of the Borrower, or any part thereof, and used or usable in
connection with any future occupancy or use of such property; (x) any and all
deposits (general or special, including, but not limited to, indebtedness
evidenced by certificates of deposit, whether matured or unmatured but not
including trust accounts) and any other indebtedness at any time held or owing
by the Bank to or for the credit or the account of the Borrower; (xi) any and
all claims or payments made under any insurance policy; (xii) all interest of
the Borrower in any goods, the sale or lease of which shall have given or shall
give rise to, and in all guaranties and other property securing the payment of
or performance under, any Accounts, contracts, General Intangibles or any
Chattel Paper or Instruments referred to above; (xiii) all replacements,
substitutions, additions or accessions to or for any of the foregoing; (xiv) to
the extent related to the property described above, all books, correspondence,
credit files, records, invoices and other papers and documents, including,
without limitation, to the extent so related, all tapes, cards, computer runs,
computer programs and other papers and documents in the possession or control of
the Borrower or any computer bureau from time to time acting for the Borrower;
and (xv) all property or interests in property of the Borrower which now may be
owned or hereafter may come into the possession, custody or control of the Bank,
or any agent or affiliate of the Bank (whether for safekeeping, deposit,
custody, pledge, transmission, collection or otherwise), including, without
limitation, all rights and interests of the Borrower in respect of any and all
(a) notes, drafts, letters of credit, stocks, bonds, and debt and equity
securities, whether or not certificates, and warrants, options, puts, calls and
other rights to acquire or otherwise relating to the same, (b) cash, and (c)
proceeds of loans, advances and other financial accommodations, including,
without limitation, loans, advances and other financial accommodations made or
extended by the Bank; and (xviii) to the extent not otherwise included, all
Proceeds and products of any and all of the foregoing (collectively, the
"Collateral"). The Borrower shall make appropriate entries upon its financial
statements and books and records disclosing Bank's security interest in the
Collateral. The Bank shall file, and Borrower consents to such filing, the
appropriate forms to perfect its security interest in the Collateral in
accordance with the New Jersey Uniform Commercial Code. All capitalized terms
used in this Section 7.1 and not otherwise defined herein shall have the
meanings set forth in the New Jersey Uniform Commercial Code; provided, however,
that the Bank shall not file a UCC-1 Financing Statement evidencing its security
interest in the Collateral in any jurisdiction other than the State of New
Jersey unless the dollar value of the Collateral in such other jurisdiction
exceeds $500,000 at anytime.

          7.2. Trademarks and Licenses. The Borrower further grants to the Bank,
an irrevocable, non-exclusive license at no charge to use the trademarks,
patents, copyrights and licenses used in connection with the sale of its goods
including, without limitation, those listed on Schedule 7.2 annexed hereto (the

                                       11
<PAGE>   15

latter, the "Trademarks") associated with the Collateral in connection with any
foreclosure or liquidation together with the right to grant a non-exclusive
sublicense, without charge, to any buyer of such Collateral for the purpose of
resale. As used herein, the term "Trademarks" includes all computer programs,
and other Collateral used in connection with such Trademarks.

          7.3. Maintenance; Right of Inspection. The Borrower shall maintain at
its own cost and expense, reasonably satisfactory and complete records of the
Collateral, including, without limitation, a record of all payments received and
all credits granted with respect to the Collateral. The Borrower shall mark its
books and records pertaining to the Collateral to evidence the security
interests granted hereunder. The Bank shall have the right (exercisable with
reasonable frequency), at any time during normal business hours on reasonable
notice to inspect the Collateral and all related records.

          7.4. Right of Set off. The Borrower hereby grants to the Bank a
contractual possessory security interest in and hereby assigns, conveys,
delivers, pledges and transfers to the Bank all of the Borrower's right, title
and interest in and to, the Borrower's accounts with the Bank whether existing
now or hereafter arising, including, without limitation all accounts held
jointly with a third party. The Borrower authorizes the Bank to charge or set
off any Obligations against any such accounts.

          7.5. Additional Collateral. Without limiting the generality of Section
7.1 above, the defined term "Collateral" shall also include, but is not limited
to, all of the real and personal property encumbered by the Lien created by the
NM Facility Mortgage, the NM Facility Bond Pledge and the Security Agreement.

                   SECTION 8. REPRESENTATIONS AND WARRANTIES

          To induce the Bank to enter into this Agreement and to make the
Revolving Loans herein provided for, the Borrower makes the following
representations and warranties to the Bank:

          8.1. Capacity. The Borrower is a corporation duly organized, validly
existing and in good standing under the laws of the State of New Jersey and has
obtained all necessary governmental and corporate authorizations and consents
necessary to execute and deliver the Loan Documents and has full power and
capacity to execute and deliver the Loan Documents and to perform all
Obligations thereunder.

          8.2. No Conflict. The execution and delivery of the Loan Documents and
the performance by the Borrower of all obligations under the Loan Documents do
not and will not contravene or conflict with any Requirements of Law applicable
to Borrower or of any other agreement binding upon the Borrower or any of its
assets, except for such contraventions or conflicts that will not cause a
Material Adverse Effect.

          8.3. Title; No Other Liens. The Borrower has good and marketable title
to the Collateral subject only to Permitted Encumbrances. Other than with
respect to Permitted Encumbrances, no security agreement, financing statement or
other public notice with respect to all or any part of the Collateral is on file
or of record in any public office except as to which UCC-3 termination
statements have been received or which have expired and not been renewed. The
appropriate financing statements have been filed by the Bank in the
jurisdictions listed on Schedule A hereto against the Borrower, and the Liens
granted pursuant to this Agreement constitute perfected first priority liens (to
the extent such liens can be perfected by filing) on the Collateral in favor of
the Bank, which are prior to all other liens on the Collateral created by the
Borrower (other than certain Permitted Encumbrances that, by operation of law,
are prior to the Lien of the Bank in the specific Collateral in question) and
which are enforceable as such against all creditors of the Borrower.

          8.4.  Accounts.  All Accounts of the Borrower  represent  sums due for
services rendered or goods provided and are enforceable  obligations collectible
by the Borrower in the normal course of business.

          8.5. Inventory and Equipment. All Inventory and Equipment of the
Borrower is kept at the locations set forth on Schedule 8.5 hereof and at no
other locations (all premises listed on Schedule 8.5 which are leased and/or are
warehouses are hereinafter referred to as the "Leased Premises"); provided,
however, that some Inventory may, upon purchase by the Borrower, be in transit
and in all such cases, all actions necessary to perfect the Bank's security
interest in such Inventory shall be taken by the Borrower, including, without
limitation, delivery to the Bank (with any necessary endorsements) of all
documents of title, bills of lading and warehouse receipts in respect thereof.
All Eligible Inventory of the Borrower is and will be of good and merchantable
quality, free from defects. No Inventory or Equipment is subject to any Lien
except for the security interest of Bank hereunder or Permitted Encumbrances.
Borrower hereby agrees that to the extent Inventory or Equipment is now, and at
any time hereafter be, stored with a bailee, warehouseman or similar party
without Bank's prior written consent and, if Bank gives such consent, Borrower
will concurrently therewith cause any such bailee, warehouseman or similar party
to issue and deliver to Bank, in form and substance acceptable to Bank,
warehouse receipts therefor in Bank's name. No Inventory or Equipment, to the

                                       12
<PAGE>   16

extent Borrower wishes it to be included in the calculation of the Borrowing
Base, is now and nor shall be located at leased premises by the Borrower unless
the Bank receives a Landlord's Waiver and Consent, in form and substance
satisfactory to the Bank. No Equipment is under consignment to or from any
Person other than in accordance with the arrangements described is Schedule
8.5.1 or under similar arrangements in compliance with Section 10.27 hereof. All
Equipment is currently usable or currently saleable in the Borrowers' business
other than obsolete Equipment not reflected in the Financial Statements.

          8.6. Validity and Binding Nature. The Loan Documents constitute legal,
valid and binding  obligations of the Borrower  enforceable against the Borrower
in accordance with their respective terms.

          8.7. Litigation. Except as set forth on Schedule 8.7, no litigation,
arbitration proceedings or governmental proceedings are pending or known to be
threatened against the Borrower and no material development not so disclosed has
occurred in any litigation, arbitration proceedings or governmental proceedings
so disclosed, which would, if adversely determined as to the Borrower, cause a
Material Adverse Effect.

          8.8. Environmental Matters. The Borrower, including its tenants, users
and uses of its property, is in full compliance with all federal, state, county
and municipal environmental laws, ordinances, rules, regulations and
requirements ("Environmental Law"), except where non-compliance with such
Environmental Laws would not have a Material Adverse Effect. There are no liens
or threatened liens against Borrower, its property or its tenants, users and
uses pursuant to any Environmental Law. If it is revealed that the Borrower or
its property, tenants, users or uses, are not in full compliance with any
Environmental Law the non-compliance with which would have a Material Adverse
Effect or that conditions exist, or may exist, at the property which are not
reasonably satisfactory to the Bank in its sole discretion, Borrower will
undertake, at its sole cost and expense, whatever actions are necessary to bring
Borrower, its property, tenants, users and uses into compliance with
Environmental Law and to correct any environmental condition unsatisfactory to
the Bank to the satisfaction of the Bank in its sole discretion and to the
satisfaction of federal, state, county and local environmental authorities.

          8.9. Employee and Other Loans. Schedule 8.9 attached hereto lists (i)
all loans made by the Borrower to its partners, agents, directors, officers and
employees, Affiliates and other related parties (the "Related Parties"), and
(ii) the loans made by Related Parties to the Borrower, the principal balance of
the loans and the interest payable thereon and the amount of each monthly
payment required to be made thereon. All of the loans referred to in clause (ii)
have been subordinated to the Obligations on terms satisfactory to the Bank.

          8.10.  ERISA.  (a) Compliance with ERISA. The Borrower and each of its
ERISA  Affiliates is in compliance in all material  respects with the applicable
provisions of ERISA and the Code with respect to each Plan.

          (b) Prohibited Transactions. The Borrower has not engaged in a
transaction in connection with which the Borrower or the ERISA Affiliate could
be subject to a material liability for either a civil penalty assessed pursuant
to Section 502(i) of ERISA or a tax imposed by Section 4975 of the Code.

          (c) Plan Termination. There has been no termination of a Multiemployer
Plan or trust created under any Multiemployer Plan that would give rise to
liability to the PBGC on the part of the Borrower or an ERISA Affiliate. No
liability to the PBGC has been or is expected to be incurred with respect to any
Multiemployer Plan by the Borrower or an ERISA Affiliate. The PBGC has not
instituted proceedings to terminate any Multiemployer Plan. There exists no
condition or set of circumstances which presents a material risk of termination
of any Multiemployer Plan by the PBGC.

          (d) Employee Pension Benefit Plans. Neither the Borrower nor any ERISA
Affiliate has any obligation or liability under, or contributed within the
preceding five years to, an employee pension benefit plan with the meaning of
Section 3(2) of ERISA.

          (e) Withdrawal Liability. Neither the Borrower nor any ERISA Affiliate
has made a complete or partial withdrawal from a Multiemployer Plan. To the best
knowledge of the Borrower, the aggregate liability to which the Borrower or any
ERISA Affiliate would become subject under ERISA if the Borrower and all ERISA
Affiliates were to withdraw completely from all Multiemployer Plans as of the
most recent valuation date, together with any secondary liability for withdrawal
liability the Borrower and any ERISA Affiliate may have as of the date hereof,
would not have a material adverse effect on the business, operations, property
or financial or other condition of the Borrower and its ERISA Affiliates, taken
as a whole. To the best knowledge of the Borrower, no such Multiemployer Plan is
in reorganization (as such term is defined in Section 4241 of ERISA) or is
insolvent (as such term is defined in Section 4245 of ERISA).

          (f)  Retiree   Welfare   Benefits.   The  Borrower  does  not  provide
post-retirement health, medical and other welfare benefits for retired employees
of the Borrower.

          8.11. Tradenames. Certain Accounts may be and/or certain of the

                                       13
<PAGE>   17

Borrower's invoices may be, from time to time, rendered to customers under the
trade names listed on Schedule 8.11 (which together with any new trade names
used after the date hereof are referred to collectively, as the "Trade Names"
and individually, as a "Trade Name"). As to such Trade Names and the related
Accounts, the Borrower hereby warrants and agrees that:

          (i)  each Trade Name is a trade name and style (and not the name of an
               independent corporation or other legal entity) by which the
               Borrower may identify and sell certain of its goods or services
               and conduct a portion of its business and Borrower has filed or
               made all public or other notices in any jurisdiction required to
               lawfully operate under such Trade Names except in those
               jurisdictions, if any, where the failure to file would not have a
               Material Adverse Effect;

         (ii)  all Accounts, Chattel Paper and proceeds thereof and returned
               merchandise which arise from the sale of goods invoiced under the
               Trade Names are and shall be (x) owned solely by the Borrower and
               (y) subject to the security interest and other terms of this
               Agreement and the other Loan Documents;

         (iii) new Trade Names may only be used by the Borrower after the Bank
               is given fifteen (15) days prior written notice of the use of any
               such new Trade Name, which notice shall set forth the name of
               such new Trade Name; and

         (iv)  the Borrower does not use any Trade Name other than the Trade
               Names listed on Schedule 8.11 hereto.

          8.12. Subsidiaries. As of the date hereof, the Borrower has no
Subsidiaries except for Guarantor, EMCORE IRB Company, Inc. ("IRB") and EMCORE
Real Estate Holding Corp. ("Holdings"). Holdings is a wholly-owned Subsidiary of
the Borrower organized and existing solely for the purpose of owning the
Borrower's facility located at 394 Elizabeth Avenue, Somerset, New Jersey. IRB
is a wholly-owned Subsidiary of the Borrower organized and existing solely to
purchase and fund certain taxable industrial revenue bonds issued by the City of
Albuquerque, New Mexico in connection with the development of the NM Facility
and certain other related facilities occupied and operated by the Borrower. No
other business activities are conducted, and no other material assets are held
or possessed, directly or indirectly in or through Holdings or IRB.

          8.13. Financial Statements. The audited annual financial statements
for the fiscal year ended September 30, 2000 (the "Financial Statements") that
have been delivered by the Borrower to the Bank were prepared in conformity with
GAAP, consistently maintained throughout the period involved and are correct and
complete and fairly present the financial condition and the results of
operations of the Borrower as of the dates and for the periods thereof. The
Borrower does not have any direct liabilities or Contingent Liabilities not
disclosed in such statements. Since September 30, 2000, there has been no
material adverse change in the Financial Statements.

          Neither the Financial Statements referred to above nor any other
statement or report furnished or made available to the Bank by or on Borrower's
behalf in connection with the negotiation or confirmation of the transactions
contemplated herein contain, as at the time such statements were furnished, any
untrue statement of a material fact or any omission of a material fact necessary
to make the statements contained therein not misleading, and all such statements
and reports, taken as a whole together with this Agreement, do not contain any
untrue statement of a material fact or omit a material fact necessary to make
the statements contained herein or therein not misleading.

          8.14. Tax Matters. The Borrower has filed all tax returns and reports
required to be filed by it with all federal, state or municipal authorities and
has paid in full or made adequate provision for the payment of all taxes,
interest, penalties, assessments or deficiencies shown to be due or claimed to
be due on or in respect of such tax returns and reports, except such amounts as
Borrower is contesting in good faith and against which Borrower has established
and maintains adequate reserves in accordance with GAAP.

          8.15.  Ownership  of  Property;  Liens.  The  Borrower  has  good  and
marketable  title to its all of its  property  and assets both real and personal
and assets free and clear of any Liens other than Permitted Encumbrances.

          8.16. Compliance With Requirements of Law. The Borrower is in
compliance with all Requirements of Law, except where such instances of
non-compliance are consistent with its normal operations and past practices and
in any event could not reasonably be expected to have a Material Adverse Effect.
The Borrower has all permits, certificates, licenses, approvals and other
authorizations required in connection with the operation of its business. No
notice has been issued and no investigation or review is pending or threatened
by any Governmental Authority (i) with respect to any alleged violation by
Borrower of any law, ordinance, regulation, order, policy or guideline of any
Governmental Authority, (ii) with respect to any alleged failure to have all
permits, certificates, licenses, approvals and other authorizations required in
connection with the operation of the business of the Borrower which will have a
Material Adverse Effect.

                                       14
<PAGE>   18

          8.17.  Investment  Company  Act.  The  Borrower is not an  "investment
company" within the meaning of the Investment Company Act of 1940, as amended.

          8.18. Margin Stock. The Borrower does not own nor presently intends to
acquire any Margin Stock. Neither the Borrower, nor any agent acting on behalf
of the Borrower has taken any action which might cause this Agreement or any of
the other Loan Documents or any of the transactions contemplated hereby or
thereby to violate Regulation U or any other regulation of the Board of
Governors of the Federal Reserve System.

          8.19. General Collateral Representation. (a) With respect to the
Collateral, at the time the Collateral becomes subject to the Bank's security
interest, the Borrower is and at all times will be the sole owner of and have
good and marketable title to the Collateral, free from all Liens, in favor of
any Person other than the Bank except Permitted Encumbrances, and has full right
and power to grant the Bank a security interest therein. All information
furnished to the Bank concerning the Collateral is and will be complete,
accurate and correct in all material respects when furnished;

          (b) No security agreement, financing statement, equivalent security or
Lien instrument or continuation statement covering all or any part of the
Collateral is on file or of record in any public office, except such as may have
been filed (i) by such Borrower in favor of Bank pursuant to this Agreement, or
(ii) in respect of the items of Collateral subject to the Permitted
Encumbrances;

          (c) The Agreement and the other Loan Documents constitute, as of the
date hereof, a valid and continuing first lien on and first security interest in
the Collateral in favor of Bank, prior to all other Liens in favor of others and
rights of others (except the Permitted Encumbrances) which are enforceable as
such as against creditors of and purchasers from Borrower and as against any
owner of the real property where any of the Equipment is located and as against
any purchaser of such real property and any present or future creditor obtaining
a Lien on such real property. All action necessary to protect and perfect such
security interest in each item of the Collateral has been duly taken, provided
that the Bank has filed the UCC financing statements in the offices listed on
Schedule A hereto; and

          (d) No person now having possession or control of any of the
Collateral consisting of Inventory or Equipment has issued, in receipt therefor,
a negotiable bill of lading, warehouse receipt or other document of title.

          8.20. Accounts.

          (a) As to each and every Eligible Account of Borrower is a bona fide
existing obligation, valid and enforceable against the Account debtor for a sum
certain for sales of goods shipped or delivered, or goods leased, or services
rendered in the ordinary course of business;

          (b) all supporting documents, instruments, chattel paper and other
evidence of Indebtedness, if any, delivered to the Bank are complete and correct
and valid and enforceable in accordance with their terms, and all signatures and
endorsements that appear thereon are genuine, and all signatories and endorsers
have full capacity to contract;

          (c) the Account  debtor is liable for and is obligated to make payment
of the amount expressed in such Account according to its terms;

          (d) it will be subject to no discount,  allowance or special  terms of
payment without the prior approval of the Bank;

          (e) it is subject to no dispute, defense or offset, real or claimed;

          (f)  it  is  not  subject  to  any   prohibition  or  limitation  upon
assignment; and

          (g) Borrower has full right and power to grant the Bank a security
interest therein and the security interest granted in such Account to the Bank
in Section 7 hereof, when perfected, will be a valid first priority and only
security interest which will inure to the benefit of the Bank without further
action.

                     SECTION 9. CONDITIONS TO EFFECTIVENESS

          This Agreement, and the increase in the Maximum Credit herein
contemplated, shall be deemed effect upon satisfaction of the following
conditions precedent, as determined by the Bank in its sole discretion:

          (a) No Default. (i) No Event of Default or Unmatured Event of Default
has occurred or will result from the making of such Revolving Loan, (ii) the
representations and warranties of the Borrower contained in Section 8 are true
and correct as of the date of such requested Revolving Loan, with the same
effect as though made on the date of such Revolving Loan, and (iii) the
covenants of the Borrower contained in Section 10 have been complied with as of
the date of the requested Revolving Loan.

                                       15
<PAGE>   19

          (b) Other  Loan  Documents.  The Bank  shall  have  received  executed
counterparts  of this  Agreement by the Borrower  and the  following  additional
documents prior to the execution hereunder:

          (1)  Revolving Note and the other Loan Documents to be executed and
               delivered in connection with this Agreement to which Borrower is
               a party, duly executed and delivered by the Borrower;

          (2)  Certificates of insurance with acceptable lender's loss payee,
               lender's loss payable and additional insured endorsements;

          (3)  A Guaranty and Security Agreement of ASI and TSI, in the form
               proposed by the Bank, together with related UCC financing
               statements in proper form for filing in the State of New Mexico,
               in each case duly executed and delivered by ASI and TSI;

          (4)  Opinion  of  Counsel  for  the  Borrower  in form  and  substance
               satisfactory to the Bank;

          (5)  UCC, judgment, and federal and state tax lien search report on
               the Borrower and each Guarantor from the Department of Treasury
               of New Jersey, Somerset County, New Jersey and the Secretary of
               State of New Mexico;

          (6)  Title search reports of the real estate records of City of
               Albuquerque, New Mexico with respect to the NM Facility;

          (7)  Good Standing Certificates of the Borrower from the Secretary of
               State of New Jersey and Good Standing Certificates of each
               Guarantor from the Secretary of State of Delaware and New Mexico,
               as applicable;

          (8)  Secretary's  Certificate  of Borrower  attaching  Certificate  of
               Incorporation,  by-laws and resolutions of the Board of Directors
               authorizing the transaction;  and

          (9)  Secretary's Certificate of each Guarantor attaching Certificate
               of Incorporation, by-laws and resolutions of its Board of
               Directors authorizing the transaction; and

          (10) Such other documents as may be requested by the Bank.

          (c) Payment of Fees and Expenses. The Bank shall have received
evidence of payment of (i) the origination fee as described in Section 6.3
hereof, (ii) payment of all fees and expenses of Bank's counsel, Windels Marx
Lane & Mittendorf, LLP for legal services rendered in connection with the
transactions contemplated herein, as well as fees and expenses incurred in
connection with the administration of the Existing Agreement and other related
matters from and after January 2, 2000, and (iii) any and all other expenses or
reimbursable items incurred by the Bank in connection with the transactions
contemplated herein.

                       SECTION 10. COVENANTS OF BORROWER

          The Borrower covenants and agrees that so long as the Revolving Loan
Commitment remains in effect, there are any Revolving Loans outstanding, or any
other Obligation remains unpaid, the Borrower shall and shall cause each of its
Subsidiaries to:

          10.1.  Financial  Statements  and  Other  Information.  Borrower  will
furnish to the Bank:

          (a) Financial Statements. Copies of (i) Borrower's annual financial
statements reflecting its operations during such fiscal year, including, without
limitation, a balance sheet, profit and loss statement and statement of cash
flow, with supporting schedules (if any), all in reasonable detail, prepared in
conformity with GAAP, applied on a basis consistent with that of the preceding
year prepared and audited (without qualifications) by an independent certified
public accountant reasonably acceptable to the Bank, within ninety (90) days
after the end of each Fiscal Year, and (ii) Borrower's management prepared
fiscal quarter financial statements reflecting its operations through such
fiscal quarter end, including, without limitation, a balance sheet, profit and
loss statement and statement of cash flow, with supporting schedules (if any),
all in reasonable detail, prepared in conformity with GAAP, applied on a basis
consistent with that of the preceding year within sixty (60) days after the end
of each such fiscal quarter.

          (b) Budgets. (i) On or prior to the effective date of this Agreement,
copies of Borrower's management prepared expenditure budget and revenue
forecasts for the fiscal year commencing October 1, 2000, together with any and
all amendments or modifications thereto through said effective date, and (ii) by
no later than September 30, 2001, copies of Borrower's management prepared
expenditure budget and revenue forecast to the fiscal year commencing October 1,
2001. Each such budget and forecast to be in reasonable detail, with schedules
supporting any substantial assumptions utilized in the preparation thereof,

                                       16
<PAGE>   20

prepared in conformity under GAAP, applied on a consistent basis, and otherwise
in form and substance satisfactory to the Bank.

          (c) Notice of Default. Promptly upon discovery thereof, written notice
of any Event of Default or Unmatured Event of Default describing such Event of
Default or Unmatured Event of Default in reasonable detail and describing the
steps being taken by the Borrower to cure the same if the same may be cured.

          (d) Financial Covenant Compliance. Concurrently with the delivery of
the financial statements referred to in Section 10.1(a)(i) and (ii) above, a
certificate of the Chief Financial Officer or President of the Borrower stating
that such officer has obtained no knowledge of any Unmatured Event of Default or
Event of Default except as specified in such certificate and showing in detail
the calculations supporting such statement in respect of Section 10.14.

          (e) Monthly Reports, Borrowing Base Certificate. Concurrently with the
initial Revolving Loan or Letter of Credit requested hereunder and on the 15th
day of each calendar month in which there is any Obligations outstanding
hereunder, a completed Borrowing Base Certificate (in the form annexed hereto as
Exhibit 10.1(f)) for the month most recently then ended, signed by the Chief
Financial Officer of the Borrower, detailing the Borrower's availability under
the Borrowing Base, together with a complete accounts receivable aging report
(including a detailed agings of accounts by total (including original date of
each invoice), a summary of aging of accounts by customer and a reconciliation
statement), and a report of the aggregate dollar value of all Inventory held by
the Borrower for the month just ended (showing individual values for raw
materials, work-in-process, finished goods inventory and any inventory
obsolescence), each of such reports to be in form and substance reasonably
satisfactory to the Bank.

          (f) Other Public Statements and Report. Promptly, after the same are
sent copies of all financial statements and reports and proxy statements which
the Borrower sends to its public stockholders, if any, and promptly after the
same are filed, copies of all financial statements and reports which the Company
may make to, or file with, the Securities and Exchange Commission or any
successor or analogous Governmental Authority.

          (g) Other Information. From time to time such other information
concerning the Borrower as the Bank may reasonably request, including, without
limitation, accounts receivable agings, accounts payable agings, contracts in
progress and lease copies.

          All financial statements delivered by the borrower shall include
financial statements of its Subsidiaries on a consolidating basis.

          10.2. Use of Proceeds. The Borrower shall use the proceeds of the
Revolving Loans and Letters of Credit for working capital and other lawful
general corporate purposes. In no event shall any Revolving Credit Loan or
Letter of Credit be used directly or indirectly to acquire or carry and "margin
stock" as such term is defined in Regulation U promulgated by The Board of
Governors of Federal Reserve Board, as in effect from time to time.

          10.3. Other Agreements. The Borrower and each of its Subsidiaries will
not enter into any agreement containing any provision which would be violated or
breached by the  performance  of the  Borrower's  and each of its  Subsidiaries'
obligations hereunder.

          10.4. Indebtedness for Borrowed Money. The Borrower and each of its
Subsidiaries shall not incur, or permit to exist, any Indebtedness for borrowed
money except (i) Indebtedness incurred pursuant to borrowings hereunder, (ii)
Indebtedness incurred in respect of any other loans or other financial
accommodations made by the Bank in its discretion to the Borrower and each of
its Subsidiaries, (iii) Indebtedness existing on the date hereof and reflected
in the Financial Statements (other than Subordinated Debt), (iv) purchase money
Indebtedness incurred in the acquisition of fixed assets and (v) Subordinated
Debt; provided, that the Indebtedness permitted pursuant to clauses (ii)-(iv)
shall not exceed $4,000,000 in the aggregate at any time outstanding and
provided, further, that the financial accommodations to the Guarantor permitted
under Section 10.26 shall not be deemed to be in violation of this covenant.

          10.5. Liens. The Borrower and all of its Subsidiaries shall not
create, assume or permit to exist, any Lien on any of its property or assets now
owned or hereafter acquired except (i) Liens in favor of the Bank; (ii) other
Liens incidental to the conduct of its business or the ownership of its property
and assets which were not incurred in connection with the borrowing of money or
the obtaining of advances or credit and which do not materially impair the use
thereof in the operation of its business; (iii) Liens for taxes or other
governmental charges which are not delinquent or which are being contested in
good faith and for which a reserve shall have been established in accordance
with generally accepted accounting principles; and (iv) purchase money Liens
granted to secure the unpaid purchase price of any fixed assets within the
limits imposed by Section 10.4 hereof. The Liens described in clauses (i)
through (iv) above are referred to herein as "Permitted Encumbrances".

          10.6. Accounts. The Borrower and each of its Subsidiaries shall
observe and perform all obligations arising under all Accounts. In the event any

                                       17
<PAGE>   21

of Borrower's and each of its Subsidiaries' Accounts is or becomes evidenced by
a promissory note, a trade acceptance or any other instrument for the payment of
money, Borrower and each of its Subsidiaries will promptly deliver such
instrument to the Bank appropriately endorsed to the Bank's order. Regardless of
the form of such endorsement, Borrower and each of its Subsidiaries hereby
waives presentment, demand, notice of dishonor, protest and notice of protest
and all other notices with respect thereto. After an occurrence of an Event of
Default and during the continuance thereof, upon the request of the Bank at any
time, the Borrower and each of its Subsidiaries shall notify Account debtors
that the Accounts have been assigned to the Bank and that payments in respect
thereof shall be made directly to the Bank. The Bank may at any time communicate
with account debtors to verify to its satisfaction the existence, amount and
terms of Accounts.

          10.7. Insurance. The Borrower and each of its Subsidiaries shall
maintain insurance (including, without limitation, all risk, casualty and
liability and business interruption insurance on a full replacement cost basis
(with no co-insurance)) for the full insurable value of the Collateral of such
types, in such amounts as is customary in the case of companies engaged in a
similar business with insurers, and in form and substance reasonably
satisfactory to the Bank, which policy shall name the Bank as loss payee and
additional insured pursuant to a long form secured party endorsement and include
a 30 day notice of modification and cancellation clause. Borrower shall furnish
to the Bank, upon request of the Bank a copy of such policy and proof that all
premiums theretofore owing have been paid in full.

          10.8. Taxes. The Borrower and each of its Subsidiaries shall pay when
due all federal, state or local or foreign taxes, levies, assessments, charges
or claims except when the amount or validity thereof is currently being
contested in good faith and reserves in conformity with GAAP with respect
thereto have been provided for on the books of the Borrower.

          10.9. ERISA. (a) The Borrower shall notify Bank of the following
events, as soon as possible and in any event within thirty days after the
Borrower knows or has reason to know thereof: (i) the occurrence of a prohibited
transaction (as defined in Section 406 of ERISA or Section 4975 of the Code)
with respect to any Plan, or (ii) the institution of proceedings or the taking
or expected taking of any other action by the PBGC or the Borrower or any ERISA
Affiliate to terminate or withdraw or partially withdraw from any Multiemployer
Plan and the Reorganization or Insolvency of such Multiemployer Plan (as such
terms are defined in ERISA), and in addition to such notice, delivery to the
Bank of a certificate of a Responsible Officer setting forth details relating
thereto, and the action that the Borrower and the ERISA Affiliate propose to
take with respect thereto and when known, any action taken or threatened by the
Internal Revenue Service or the PBGC, together with a copy of any notice to the
PBGC or the Internal Revenue Service or any notice delivered by the PBGC or the
Internal Revenue Service.

          (b) The Borrower and any ERISA Affiliate will not:

          (i) knowingly engage in any transaction in connection with which the
     Borrower could be subject to either a material civil penalty assessed
     pursuant to Section 502(i) of ERISA or a tax imposed by Section 4975 of the
     Code; or

          (ii) fail to make any payments when due to any Multiemployer Plan
     which the Borrower or any ERISA Affiliate may be required to make under any
     agreement relating to such Multiemployer Plan or any law pertaining
     thereto. The Borrower agrees (x) upon the request of the Bank to obtain a
     current statement of withdrawal liability from each Multiemployer Plan to
     which the Borrower or an ERISA Affiliate contributes or to which the
     Borrower or an ERISA Affiliate has an obligation to contribute and (y) to
     transmit a copy of such statement to the Bank, so long as the Bank or its
     nominee shall be the holder of the Revolving Note, within 15 days after the
     Borrower receives the same.

          10.10. Compliance with Laws. The Borrower and each of its Subsidiaries
shall remain in good standing in the laws of the state of their respective
organization and shall at all times comply in all material respects with all
Requirements of Law applicable to its business, including all Environmental
Laws. The Borrower and each of its Subsidiaries shall remain in good standing as
a foreign corporation in each jurisdiction wherein the failure to so qualify
will have a Material Adverse Effect.

          10.11. Sale or Change of Business. The Borrower and each of its
Subsidiaries shall not (i) without the Bank's prior written consent (which shall
not be unreasonably withheld), enter into any merger or consolidation or
liquidate, windup or dissolve itself or sell, transfer or lease or otherwise
dispose of all or any substantial part of its assets (other than sales of
inventory and obsolescent equipment in the ordinary course of business) or
acquire by purchase or otherwise the business or assets of, or stock of, another
business entity or (ii) except upon 30 days prior written notice to the Bank (x)
change the name or location of its business or (y) move Inventory and Equipment
to any location other than at its locations set forth in Section 8.5 hereof.

          10.12. Further Documentation. At any time and from time to time, upon

                                       18
<PAGE>   22

the request of the Bank and at the sole expense of the Borrower and each of its
Subsidiaries, the Borrower and each of its Subsidiaries shall promptly and duly
execute and deliver such further instruments and documents and take such further
action as the Bank may reasonably request for the purpose of obtaining or
preserving the security interest granted to the Bank hereunder and of the rights
and powers granted herein, including, without limitation, the filing of any
financing, amendment or continuation statements under the Uniform Commercial
Code. The Borrower and each of its Subsidiaries hereby irrevocably constitutes
and appoints the Bank with full power of substitution, as its true and lawful
attorney-in-fact with full irrevocable power and authority in the place and
stead of the Borrower and each of its Subsidiaries and in the name of the
Borrower and each of its Subsidiaries or in their own name, from time to time in
the Bank's discretion, to execute and file, in Borrower's and each of its
Subsidiaries' name and on its behalf, any Uniform Commercial Code financing,
amendment or continuation statement. The Borrower and each of its Subsidiaries
hereby ratify all that said attorney shall lawfully do or cause to be done by
virtue hereof. This power of attorney is a power coupled with an interest and
shall be irrevocable.

          10.13.  Maintenance of a Bank Account. The Borrower shall maintain its
primary  operating  accounts and one or more demand  deposit  accounts  with the
Bank.

          10.14. Financial Covenants

          (a) Core EBITDA. The Borrower and its Subsidiaries, on a consolidated
basis, shall maintain a Core EBITDA of not less than the amounts set forth below
as of the end of the fiscal quarters set forth below:

            Fiscal Quarter Ending              Minimum Core EBITDA

            March 31, 2001                        $ 2,500,000
            June 30, 2001                         $ 5,000,000
            September 30, 2001                    $ 6,500,000
            December 31, 2001                     $ 8,500,000
            March 31, 2002 and each               $10,000,000
            Fiscal year end thereafter
            Said ratio to be tested no less frequently than quarterly.

          (b) The Borrower shall maintain a Liquidity of not less than
$10,000,000 at all times, said requirement to be tested no less frequently than
quarterly.

          (c) Effective Net Worth. The Borrower and its Subsidiaries, on a
consolidated basis, shall maintain an Effective Net Worth all times of not less
than $180,000,000, said requirement to be tested no less frequently than
quarterly.

          (d) Quick Ratio. The Borrower and its Subsidiaries, on a consolidated
basis, shall maintain a Quick Ratio at all times of not less than 1.10 to 1.00,
said ratio to be tested no less frequently than quarterly.

          10.15. Limitations on Modifications, Waivers and Extensions of
Agreements Giving Rise to Accounts. The Borrower will not (i) amend, modify,
terminate or waive any provision of any material agreement giving rise to an
Account in any manner which could reasonably be expected to materially adversely
affect the value of such material Account as Collateral as the value of such
account is calculated by the Bank in accordance with determination of the
Borrowing Base, (ii) fail to exercise promptly and diligently each and every
material right which it may have under each agreement giving rise to an Account
or (iii) fail to deliver to the Bank a copy of each material demand, notice or
document received by it relating in any way to any agreement giving rise to a
material Account.

          10.16. Limitation on Discounts, Compromises and Extensions of
Accounts. Upon the occurrence and during the continuance of an Event of Default,
the Borrower will not grant any extension of the time of payment of any of the
Accounts or compromise, compound or settle the same for less than the full
amount thereof, release, wholly or partially, any Person liable for the payment
thereof, or allow any credit or discount whatsoever thereon.

          10.17. Limitation on Investments. The Borrower and each of its
Subsidiaries shall not purchase any stock, bonds, notes, debentures or other
securities of or any assets constituting a business unit of any Person, except
(i) investments in direct obligations of the United States government and
certificates of deposit of United States commercial banks having a tier 1
capital ratio of not less than 6%, and then in an amount not to exceed 10% of
the issuing bank's unimpaired capital and surplus and (ii) investments in the
form of capital contributions to Uniroyal Optoelectronics LLC, UMCORE LLC and/or
GELcore LLC. The foregoing shall not, however, be construed as an express or
implied consent by the Bank to any transaction otherwise prohibited or
restricted by this Agreement undertaken by the Borrower and each of its
Subsidiaries to obtain the funds for any such investment.

          10.18. Fiscal Year. The Borrower shall not change its Fiscal Year.

                                       19
<PAGE>   23

          10.19. Limitation on Contingent  Obligations.  Subject to Section 10.4
hereof,  the  Borrower  and each of its  Subsidiaries  shall not create,  incur,
assume or suffer to exist any Contingent  Obligation(s) in excess of $100,000 in
the aggregate in any Fiscal Year.

          10.20.  Limitation on Creation or  Acquisition  of  Subsidiaries.  The
Borrower  and each of its  Subsidiaries  shall  not  create,  make  any  capital
contributions  to or  acquire  any  Subsidiary  or  transfer  any  assets to any
Subsidiary.

          10.21. Dividends. The Borrower and each of its Subsidiaries shall not
declare any dividends (other than dividends payable solely in stock of Borrower)
on, or make any payment on account of, any shares of any class of stock of the
Borrower and each of its Subsidiaries, whether now or hereafter outstanding, or
make any other distribution in respect thereof, either directly or indirectly,
whether in cash or property or in obligations of the Borrower and each of its
Subsidiaries, or make any payment on account of, or purchase or otherwise
acquire, any securities of the Borrowers from any Person.

          10.22. Environmental Liabilities. The Borrower and each of its
Subsidiaries shall not violate any Requirement of Law, rule or regulation
regarding Hazardous Material; and, without limiting the foregoing, dispose of
(or permit any Person to dispose of) any Hazardous Material into or onto, or
(except in accordance with applicable law) from, any real property owned or
operated by the Borrower or any of its Subsidiaries, nor allow any Lien imposed
pursuant to any Requirement of Law relating to Hazardous Materials or the
disposal thereof to be imposed or to remain on such real property, which
violation or Lien would have a Material Adverse Effect.

          10.23. Lease Payments. The Borrower and each of its Subsidiaries shall
not expend in the aggregate, either directly or indirectly, in excess of
$2,000,000 in any Fiscal Year for the lease, rental or hire of real or personal
property pursuant to any rental agreement therefor, whether an operating lease,
or otherwise (but excluding Capitalized Leases).

          10.24. Landlord's Waivers. The Borrower shall obtain with respect to
all of its leased premises, a Landlord's Waiver of Lien from each landlord in
form and substance satisfactory to the Bank to the extent Borrower wishes to
include Inventory (to the extent it would otherwise be considered Eligible
Inventory) located at such premises in the Borrowing Base.

          10.25. Prepayment of Indebtedness. The Borrower shall not pay,
discharge or satisfy (either in whole or in part), at or before maturity any
long term Indebtedness (as determined in accordance with GAAP), except the
foregoing shall not be construct to prohibit the prepayment of any of the
Obligations or any non-cash retirement of debt relating to the exercise of the
Warrants.

          10.26. Loans and Advances. The Borrower and each of its Subsidiaries
shall not, during any Fiscal Year, make loans or advances to any Person
(excluding ordinary course of business travel and expense advances) other than
(i) the existing loans to Related Parties listed on Schedule 8.9 hereof (the
"Existing Loans") and (ii) loans to Related Parties made after the date hereof,
provided, that the aggregate principal amount of all such loans does not exceed
$100,000 at any time outstanding except that the Borrower may (i) make financial
accommodations to the Guarantor, however characterized, whether as loans, notes
payable, accounts receivable, advances or otherwise, in an amount not to exceed
$2,000,000 at any time outstanding, and (ii) accept the notes secured by Stock
Pledge Agreements dated on or about December 4, 1997 made in its favor by (1)
Thomas J. Russell (in the principal amount of $3,127,560.72), (2) Gallium
Enterprises Inc. (in the principal amount of $2,632,338.48), (3) Howard R. Curd
(in the principal amount of $556,067.36), (4) Howard F. Curd (in the principal
amount of $556,067.36) and (5) Reuben F. Richards, Jr. (in the principal amount
of $556,067.36). The Borrower and each of its Subsidiaries agrees that all
payments made in respect of the Existing Loans shall permanently reduce the
permitted amount of such loans for purposes of determining compliance with this
covenant. The Borrower and each of its Subsidiaries shall deliver the
instruments evidencing such loans and advances promptly to the Bank.

          10.27. Consigned Equipment.  The Borrower and each of its Subsidiaries
shall  not  permit  Equipment  with a value  (in the  aggregate  as to all  such
Equipment) in excess of $4,000,000 to become Consigned Equipment.

                   SECTION 11. EVENTS OF DEFAULT AND REMEDIES

          11.1.  Events of Default.  Each of the following  shall  constitute an
Event of Default under this Agreement and the other Loan Documents.

          (a) Non-Payment of Principal or Interest.  Non-payment when due of any
principal  of or interest due on the  Revolving  Note or  non-payment  of any of
Borrower's  other  Obligations when due and payable or declared due and payable;
or

          (b) Bankruptcy or Insolvency. Either Borrower or Guarantor becomes
insolvent or generally fails to pay, or admits in writing its inability to pay
debts as they become due; or applies for, consents to, or acquiesces in the

                                       20
<PAGE>   24

appointment of, a trustee, receiver, guardian, conservator or other custodian
for the Borrower or Guarantor or any of their respective property, or the
Borrower or Guarantor makes a general assignment for the benefit of creditors;
or, in the absence of such application, consent or acquiescence, a trustee,
receiver, guardian, conservator or other custodian is appointed for the Borrower
or Guarantor or for a substantial part of any of their respective property and
is not discharged within 30 days; or any bankruptcy, reorganization, debt
arrangement or other case or proceeding under any bankruptcy or insolvency law,
or any liquidation proceeding, is commenced in respect of the Borrower or
Guarantor and if such case or proceeding is not commenced by the Borrower or
Guarantor, it is consented to or acquiesced in by the Borrower or Guarantor or
remains undismissed for thirty (30) days; or

          (c) Non-Compliance with Certain Covenants. Borrower shall fail in the
observance or performance of any covenant or agreement set forth in Sections
10.1, 10.3, 10.4, 10.5, 10.7, 10.10, 10.11, 10.13, 10.14, 10.16, 10.17, 10.18,
10.19, 10.20, 10.21, 10.22, 10.23, 10.25, 10.26, or 10.27; or

          (d) Non-Compliance with Other Terms of this Agreement or any of the
other Loan Documents or any other Agreements. (i) Failure by either Borrower or
Guarantor to comply with or to perform any provision of this Agreement or the
other Loan Documents (and not constituting an Event of Default under any of the
preceding or following provisions of this Section 11 or under any specific
provision set forth in the other Loan Documents) and continuance of such failure
for 15 days after notice thereof to the Borrower from the Bank or (ii) a breach
by the either Borrower or Guarantor or any Subsidiary or Affiliate of Borrower
or Guarantor of any term, obligation, provision, covenant, representation or
warranty, arising under any present or future agreement, including swap
agreements (as defined in 11 U.S.C. ss.101), with or in favor of the Bank and/or
any Affiliate, including the failure to make any payment when due; or

          (e) Guarantor. If (i) Guarantor fails to comply with any payment
obligation set forth in the Guaranty or if Guarantor fails to comply with any of
the covenants or other agreements set forth in the Guaranty or any other Loan
Document to which it is a party beyond any applicable grace period provided for
therein, or (ii) any representation or warranty made or deemed made by Guarantor
in the Guaranty or any other Loan Document to which it is a party or which is
contained in any exhibit, schedule or any other document or other statement
furnished at any time under or in connection with the Guaranty or any of the
other Loan Documents shall prove to have been incorrect in any material respect
on or as of the date made or deemed made, or (iii) if Guarantor shall terminate,
purport to terminate or take any steps which have the effect of decreasing its
liability under the Guaranty; or

          (f) Warranties. Any representation or warranty made by the Borrower
herein is breached or is false or misleading in any material respect or omits to
state a material fact, or any schedule, certificate, financial statement,
report, notice, or other writing furnished by the Borrower to the Bank is false
or misleading in any material respect or omits to state a material fact on the
date as of which the facts therein set forth are stated or certified; or

          (g) Defaults under other Loans. Borrower or Guarantor defaults under
(i) any Contingent Obligation, loan, extension of credit, security agreement,
mortgage or other agreement with respect to Indebtedness for borrowed money with
the Bank or any other Person, or (ii) any material contract with any Person and
such default is declared and is not cured within the time, if any, specified
therefor in any agreement covering same; or

          (h) Collateral. If any portion of the Collateral or any other assets
of Borrower or Guarantor having a value singly or in the aggregate in excess of
$100,000 are attached, seized, subjected to a writ or distress or warrant, or
are levied upon or come within the possession of any receiver, trustee,
custodian or assignee for the benefit of creditors and the same is not
terminated or dismissed within thirty (30) days or if a notice of lien, levy or
assessment of record is filed against the Collateral; or

          (i) Judgements. One or more judgements, decrees, arbitration awards or
rulings shall be entered against the Borrower or Guarantor involving in the
aggregate a liability of $100,000 or more and all such judgements, decrees,
awards and rulings shall not have been vacated, paid, discharged, stayed or
bonded pending appeal within thirty (30) days from the entry thereof; or

          (j) ERISA. (i) if any Person shall engage in any "prohibited
transaction" (as defined in Section 406 of ERISA or Section 4975 of the Code)
involving any Plan, (ii) a Reportable Event shall occur with respect to, or
proceedings shall commence to have a trustee appointed, or a trustee shall be
appointed, to administer or to terminate, any Multiemployer Plan, which
Reportable Event or institution of proceedings or appointment of a trustee is
likely to result in the termination of such Multiemployer Plan for purposes of
Title IV of ERISA, and, in the case of a Reportable Event, the continuance of
such Reportable Event unremedied for ten days after notice of such Reportable
Event pursuant to Section 4043(a), (c) or (d) of ERISA is given and, in the case
of the institution of proceedings, the continuance of such proceedings for ten
days after commencement thereof, (iii) the Borrower or an ERISA Affiliate incurs
a partial or complete withdrawal from a Multiemployer Plan or (iv) any other
event or condition shall occur or exist, with respect to a Plan or Multiemployer

                                       21
<PAGE>   25

Plan; and in each case in clauses (i) through (iv) above, such event or
condition, together with all other such events or conditions, if any, could
subject the Borrower or any of its Subsidiaries to any tax, penalty or other
liabilities in the aggregate material in relation to the business, operations,
property or financial or other condition of the Borrower taken as a whole; or

          (k) Change of Control. There shall occur a Change of Control (as
defined below). As used herein, "Change of Control" means the acquisition by any
person or group of persons (within the meaning of the Securities Exchange Act of
1934, as amended, and the rules and regulation promulgated thereunder, the
"Exchange Act") of beneficial ownership (within the meaning of Rule 13d-3
promulgated by the Securities and Exchange Commission, or any successor thereto,
under the Exchange Act) of 50.1% or more of the issued and outstanding shares of
common stock of the Borrower.

          11.2. Effect of Event of Default. If any Event of Default described in
Section 11.1(b) shall occur, the Revolving Loan Commitment (if not theretofore
terminated) shall automatically and immediately terminate and the Revolving Note
and the other Obligations and all other amounts payable under the Loan Documents
shall become automatically and immediately due and payable, all without
presentment, demand, protest or notice of any kind. Upon the occurrence of any
Event of Default and during the continuance thereof (other than the event
described in Section 11.1(b)), the Bank may declare the Commitment (if not
theretofore terminated) to be terminated and may also declare the Revolving
Note, the other Obligations and all other amounts payable under the Loan
Documents to be due and payable, whereupon the Revolving Loan Commitment shall
immediately terminate and the Revolving Note and the other Obligations shall
become immediately due and payable, all without presentment, demand, protest or
other notice of any kind. The Bank shall promptly advise the Borrower of any
such declaration, but failure to do so shall not impair the effect of such
declaration. Except as expressly provided above in this Section presentment,
demand, protest and all other notices of any kind are hereby expressly waived by
the Borrower. Upon the occurrence of any Event of Default and during the
continuance thereof, the Bank, may, at its option, exercise any of its rights
under this Agreement, the other Loan Documents or any rights and remedies of a
secured party under the Uniform Commercial Code.

          11.3. Remedies. Without limiting the generality of the remedies
available to the Bank may, without demand of performance or other demand,
presentment, protest, advertisement or notice of any kind (except any notice
required by law referred to below) to or upon the Borrower (all and each of
which demands, presentments, protests, advertisements and notices are hereby
waived), upon the occurrence and during the continuance of an Event of Default,
collect, receive, appropriate and realize upon the Collateral, or any part
thereof, and/or may forthwith sell, lease, assign, give option or options to
purchase, or otherwise dispose of and deliver the Collateral or any part thereof
(or contract to do any of the foregoing) in one or more parcels at public or
private sale or sales, at any exchange, broker's board or office of the Bank or
elsewhere upon such terms and conditions as it may deem advisable and at such
prices as it may deem best, for cash or on credit or for future delivery without
assumption of any credit risk. The Bank shall have the right upon any such
public sale or sales, and, to the extent permitted by law, upon any such private
sale or sales, to purchase the whole or any part of the Collateral so sold. The
Borrower further agrees, at the Bank's request, to assemble the Collateral and
make it available to the Bank at places which the Bank shall reasonably select,
whether at the Borrower's premises or elsewhere. The Bank shall apply the net
proceeds of any such collection, recovery, receipt, appropriation, realization
or sale, after deducting all reasonable costs and expenses of every kind
incurred therein or incidental to the care or safekeeping of any of the
Collateral or in any way relating to the Collateral or the rights of the Bank
hereunder, including, without limitation, reasonable attorneys' fees and
disbursements, to the payment in whole or in part of the Obligations, in such
order as the Bank may elect; and only after such application and after the
payment by the Bank of any other amount required by any provision of law,
including, without limitation, any provision of the Uniform Commercial Code,
need the Bank account for the surplus, if any, to the Borrower. To the extent
permitted by applicable law, the Borrower waives all claims, damages and demands
it may acquire against the Bank arising out of the exercise by the Bank of any
of its rights hereunder. If any notice of a proposed sale or other disposition
of Collateral shall be required by law, such notice shall be deemed reasonable
and proper if given at least 10 days before such sale or other disposition. The
Borrower shall remain liable for any deficiency if the proceeds of any sale or
other disposition of the Collateral are insufficient to pay the Obligations and
the reasonable fees and disbursements of any attorneys employed by the Bank to
collect such deficiency.

          11.4. Limitation on Duties Regarding Preservation of Collateral. The
Bank's sole duty with respect to the custody, safekeeping and physical
preservation of the Collateral in its possession, under the Uniform Commercial
Code or otherwise, shall be to deal with it in the same manner as the Bank deals
with similar property for its own account. Neither the Bank nor any of its
directors, officers, employees or agents shall be liable for failure to demand,
collect or realize upon all or any part of the Collateral or for any delay in
doing so or shall be under any obligation to sell or otherwise dispose of any
Collateral upon the request of the Borrower or otherwise.

                                       22
<PAGE>   26

          11.5. Cash Collateral for Letter of Credit Obligation. Without
limiting the generality of any right or remedy granted to the Bank hereunder or
under any other Loan Document, upon the occurrence, and during the continuance
of an Event of Default; the Bank may demand that the Borrower deposit with the
Bank cash collateral for the undrawn amount of any Letter of Credit then in
effect pursuant to such terms as the Bank may require. In connection therewith,
the Borrower shall execute and deliver such agreements, assignments,
instruments, financing statement or other documentation as the Bank may deem
necessary or appropriate.

                              SECTION 12. GENERAL

          12.1. Waiver; Amendments. No delay on the part of the Bank in the
exercise of any right, power or remedy shall operate as a waiver thereof, nor
shall any single or partial exercise by the Bank of any right, power or remedy
preclude other or further exercise thereof, or the exercise of any other right,
power or remedy. No amendment, modification or waiver of, or consent with
respect to, any provision of the Loan Documents shall in any event be effective
unless the same shall be in writing and signed and delivered by the Bank and the
Borrower (in the case of a document to which the Borrower is a party) and then
any such amendment, modification, waiver or consent shall be effective only in
the specific instance and for the specific purpose for which given.

          12.2. WAIVER OF TRIAL BY JURY. THE BORROWER WAIVES TRIAL BY JURY IN
ANY ACTION, PROCEEDING, CLAIM, OR COUNTERCLAIM, WHETHER IN CONTRACT OR TORT, AT
LAW OR IN EQUITY, WITH RESPECT TO, IN CONNECTION WITH OR ARISING OUT OF OR IN
ANY WAY RELATED TO THIS AGREEMENT OR THE LOAN DOCUMENTS OR THE VALIDITY,
PROTECTION, INTERPRETATION, ADMINISTRATION, COLLECTION OR ENFORCEMENT HEREOF OR
THEREOF, OR ANY CLAIM OR DISPUTE HEREUNDER OR THEREUNDER. NO OFFICER OF THE BANK
HAS AUTHORITY TO WAIVE, CONDITION OR MODIFY THIS PROVISION.

          12.3. Arbitration. (a) Upon demand of any party hereto, whether made
before or after institution of any judicial proceeding, any dispute, claim or
controversy arising out of, connected with or relating to this Agreement and the
other Loan Documents ("Disputes") between or among parties to this Agreement and
other Loan Documents shall be resolved by binding arbitration as provided
herein. Institution of a judicial proceeding by a party does not waive the right
of that party to demand arbitration hereunder. Disputes may include, without
limitation, tort claims, counterclaims, disputes as to whether a matter is
subject to arbitration, claims bought as class actions, claims arising from Loan
Documents executed in the future, or claims arising out of or connected with the
transaction reflected by this Agreement and other Loan Documents.

          (b) Arbitration shall be conducted under and governed by the
Commercial Financial Disputes Arbitration Rules (the "Arbitration Rules") of the
American Arbitration Association (the "AAA") and Title 9 of the U.S. Code. All
arbitration hearings shall be conducted in the city in which the office of the
Bank first stated above is located. The expedited procedure set forth in Rule 51
et seq. of the Arbitration Rules shall be applicable to claims of less that
$1,000,000. All applicable statutes of limitation shall apply to any Dispute. A
judgment upon the award may be entered in any court having jurisdiction. The
panel from which all arbitrators are selected shall be comprised of licensed
attorneys. The single arbitrator selected for expedited procedure shall be a
retired judge from the highest court of general jurisdiction, state or federal,
of the state where the hearing will be conducted or if such person is not
available to serve, the single arbitrator may be licensed attorney.
Notwithstanding the foregoing, this arbitration provision does not apply to
Disputes under or related to swap agreements.

          (c) Notwithstanding the preceding binding arbitration provisions, Bank
and Borrower agree to preserve, without diminution, certain remedies that any
party hereto may employ or exercise freely, independently or in connection with
an arbitration proceeding or after an arbitration action is brought. Bank and
Borrower shall have the right to proceed in any court of proper jurisdiction or
by self-help or exercise or prosecute the following remedies, as applicable: (i)
all rights to foreclose against any real or personal property or other security
by exercising a power of sale granted under Loan Documents or under applicable
law or by judicial foreclosure and sale, including a proceeding to confirm the
sale; (ii) all rights of self-help including peaceful occupation of real
property and collection of rents, set-off, and peaceful possession of personal
property; (iii) obtaining provisional or ancillary remedies including injunctive
relief, sequestration, garnishment, attachment, appointment of receiver and
filing an involuntary bankruptcy proceeding; and (iv) when applicable, a
judgment by confession of judgment. Preservation of these remedies does not
limit the power of an arbitrator to grant similar remedies that may be requested
by a party in a Dispute.

         Borrower and Bank agree that they shall not have a remedy of punitive
or exemplary damages against the other in any Dispute and hereby waive any right
or claim to punitive or exemplary damages they have now or which may arise in
the future in connection with any Dispute whether the Dispute is resolved by
arbitration or judicially.

          12.4. Notices. Except as otherwise expressly provided herein, all
notices hereunder shall be in writing and shall be delivered by telecopier,
hand, overnight delivery or by mail. Notices given by mail shall be deemed to

                                       23
<PAGE>   27

have been given three (3) days after the date sent if sent by registered or
certified mail, postage prepaid, and:

          (i) if to the Borrower, to:

                EMCORE Corporation
                145 Belmont Avenue
                Somerset, New Jersey 08873
                Attn:  Mr. Reuben F. Richards, Jr., President

          (ii) if to the Bank, to:

                First Union National Bank
                1889 Highway 27
                Edison, New Jersey 08817
                Attn:  Mr. Robert G. Murphy, Jr.

or in the case of either party, such other address as such party may, by written
notice, received by the other party to this Agreement, have designated as its
address for notices. Notices given by (i) telecopier shall be deemed to have
been given when sent, (ii) hand shall be deemed to have been given the same day
they have been sent and (iii) overnight delivery shall be deemed to have been
given the day after they have been sent, in each case if properly addressed to
the party to whom sent, at its address, as aforesaid. The Bank shall be entitled
to reasonably rely upon any telephonic notices purportedly given pursuant to the
terms of this Agreement and the Borrower shall hold the Bank harmless from any
loss, cost or expense ensuing from any such reliance (other than that which
results from the Bank's gross negligence or willful misconduct).

          12.5. Appointment as Attorney-in-Fact.

          (a) Powers. The Borrower hereby irrevocably constitutes and appoints
the Bank with full power of substitution, as its true and lawful
attorney-in-fact with full irrevocable power and authority in the place and
stead of the Borrower and in the name of the Borrower or in its own name, from
time to time in the Bank's discretion, for the purpose of carrying out the terms
of this Agreement and, upon the occurrence and during the continuance of any
Event of Default to take any and all appropriate action and to execute any and
all documents and instruments which may be necessary or desirable to accomplish
the purposes of this Agreement and the security interests granted herein, and
without limiting the generality of the foregoing, the Borrower hereby gives the
Bank the power and right (but not the obligation), on behalf of the Borrower,
without notice to or assent by the Borrower, to do the following:

          (i) in the case of any Account, upon the occurrence and during the
     continuance of an Event of Default, or in the case of any other Collateral,
     at any time when any Event of Default shall have occurred and be
     continuing, in the name of the Borrower or its own name, or otherwise, to
     open mail addressed to the Borrower, to take possession of and endorse and
     collect any checks, drafts, notes, acceptances or other instruments for the
     payment of moneys due under any Account, Instrument, General Intangible or
     contract right or with respect to any other Collateral and to file any
     claim or to take any other action or proceeding in any court of law or
     equity or otherwise deemed appropriate by the Bank for the purpose of
     collecting any and all such moneys due under any such Account, Instrument,
     General Intangible or contract right or with respect to any other
     Collateral whenever payable;

          (ii) to pay or discharge taxes and liens levied or placed on or
     threatened against the Collateral, to effect any repairs or any insurance
     called for by the terms of this Security Agreement and to pay all or any
     part of the premiums therefor and the costs thereof; and

          (iii) upon the occurrence and during the continuance of any Event of
     Default, (A) to direct any party liable for any payment under any of the
     Collateral to make payment of any and all moneys due or to become due
     thereunder directly to the Bank or as the Bank shall direct; (B) to ask or
     demand for, collect, receive payment of and receipt for, any and all
     moneys, claims and other amounts due or to become due at any time in
     respect of or arising out of any Collateral; (c) to sign and endorse any
     invoices, freight or express bills, bills of lading, storage or warehouse
     receipts, drafts against debtors, assignments, verifications, notices and
     other documents in connection with any of the Collateral; (D) to commence
     and prosecute any suits, actions or proceedings at law or in equity in any
     court of competent jurisdiction to collect the Collateral or any thereof
     and to enforce any other right in respect of any Collateral; (E) to defend
     any suit, action or proceeding brought against the Borrower with respect to
     any Collateral; (F) to settle, compromise or adjust any suit, action or
     proceeding described in clause (E) above and in connection therewith, to
     give such discharges or releases as the Bank may deem appropriate; and (G)
     generally, to sell, transfer, pledge and make any agreement with respect to
     or otherwise deal with any of the Collateral as fully and completely as
     though the Bank was the absolute owner thereof for all purposes, and to do
     at the Bank's option and the Borrower's expense, at any time, or from time
     to time, all acts and things which the Bank deems necessary to protect,
     preserve or realize upon the Collateral and the liens granted hereunder and

                                       24
<PAGE>   28

     to effect the intent of this Agreement, all as fully and effectively as the
     Borrower might do.

The Borrower hereby ratifies all that said attorney shall lawfully do or cause
to be done by virtue hereof. This power of attorney is a power coupled with an
interest and shall be irrevocable.

          (b) Other Powers. The Borrower also authorizes the Bank, at any time
and from time to time, to execute, in connection with the sale provided for in
Section 13.4 hereof, any endorsements, assignments or other instruments of
conveyance or transfer with respect to the Collateral.

          (c) No Duty on Bank's Part. The powers conferred on the Bank hereunder
are solely to protect its interests in the Collateral and shall not impose any
duty upon the Bank to exercise any such powers. Neither the Bank nor any of its
officers, directors, employees or agents shall be responsible to the Borrower
for any act or failure to act hereunder, except for their own gross negligence
or willful misconduct.

          12.6. Costs, Expenses and Taxes. The Borrower agrees to pay on demand
all out-of-pocket costs and expenses of the Bank (including the reasonable fees
and out-of-pocket expenses of legal counsel for the Bank) in connection with the
incurred by the Bank in connection with the administration of this Agreement and
the other Loan Documents, any amendments thereto and the enforcement of the Loan
Documents or any Collateral for any of the foregoing. All obligations provided
for in this Section 12.6 shall survive any termination of this Agreement.

          12.7.  Captions.  Section  captions  used  in this  Agreement  are for
convenience only, and shall not be deemed to be a part of this Agreement.

          12.8. Venue; Governing Law. The Loan Documents have been delivered to
the Bank, accepted by the Bank and executed in New Jersey and the Loan Documents
shall be governed by and construed by the laws of the State of New Jersey. The
Borrower hereby irrevocably consents and agrees to the jurisdiction of the
courts of New Jersey, and further waives any and all obligations the Borrower
may have to the venue of any action, claim, proceeding or counterclaim in
connection with the Loan being paid in the Courts of New Jersey. The Borrower
further agrees that any such suit, claim or other legal proceeding shall be
brought in the courts of the State of New Jersey. The provisions of this
paragraph are a material inducement for the Bank entering into this Agreement.

          12.9. Remedies. All obligations of the Borrower and rights of the Bank
expressed herein, and in the Loan Documents,  shall be in addition to and not in
limitation of those provided by applicable law.

          12.10. Successors and Assigns. This Agreement shall be binding upon
the Borrower, its successors, and assigns, and upon the Bank and its successors
and assigns, and shall inure to the benefit of the Borrower, the Bank and their
respective successors and assigns. However, the Borrower may not assign its
rights or obligations under the Loan Documents and no third party shall have any
interest therein.

          12.11.  Counterparts.  This  Agreement may be signed in  counterparts,
each of which shall be an  original,  with the same effect as if the  signatures
thereto and hereto were upon the same instrument.

          12.12.  Survival. All representations and warranties of Borrower shall
survive the execution and delivery of this Agreement.

          12.13.  Executed  Certification.  This  Agreement  was executed by the
Borrower and delivered to the Bank in the State of New Jersey.

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

                                       EMCORE CORPORATION,
                                       a New Jersey corporation

                                       By:/s/ Tom Werthan
                                          --------------------------------------
                                           Name: Tom Werthan
                                           Title: CFO

                                       FIRST UNION NATIONAL BANK

                                       By:/s/ Robert G. Murphy, Jr.
                                          --------------------------------------
                                           Name: Robert G. Murphy, Jr.
                                           Title: VP

                                       25

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