Document:

Exhibit 10.2

                             Summary of Compensation
                        Arrangements with Certain Persons

     The   Company's   executive   officers   and   Mr.   Scott   Gerardin,   an
employee-director,  do not have employment  agreements  with the Company.  Their
salaries as of February 28, 2005 were as follows:

                                          Tri City     Tri City
                             Tri City       Nat'l      Capital
      Name                  Bankshares      Bank         Corp      Total
Henry Karbiner, Jr           $ 70,000     $395,000     $  1,500     $466,590
Ronald K. Puetz              $ 15,000     $265,000     $  1,000     $281,000
Robert W. Orth               $ 10,000     $223,100                  $233,000
Scott A. Wilson              $ 10,000     $215,300     $  1,000     $226,300
Scott D. Gerardin            $128,400                               $128,400

     In  addition,   executive   officers  and  Mr.  Gerardin  are  eligible  to
participate in the Company's bonus plan and 2003 stock purchase plan.Exhibit 10.3

                              Summary of Bonus Plan

Tri City Bankshares Corporation and its subsidiary, Tri City National Bank offer
a defined  benefit annual profit sharing cash bonus program which is tied to the
return on average assets of Tri City Bankshares Cororation.  All officers of the
corporation participate in the bonus on a pro rata basis.

Based upon the following  formula the bonus is paid annually during the month of
December for the 12 month period beginning December 1, and ending November 30 of
each year.  The bonus  percentage  is  multiplied  times the based salary of the
officer for determining the dollar amount of the bonus.

                           Return on Assets                         Bonus
                           ----------------                         -----
                                1.25%                                0%
                                1.30%                                2%
                                1.35%                                4%
                                1.40%                                6%
                                1.45%                                8%
                                1.50%                                10%
                                1.55%                                11%
                                1.60%                                12%
                                1.65%                                13%
                                1.70%                                14%
                                1.75%                                15%
                                1.80%                                16%
                                1.90%                                17%
                                1.95%                                19%
                                2.00%                                20%

The bonus program is reviewed annually for appropriateness and consideration for
continued participation. All officers are employed at will.Exhibit 10.4

                                         Summary of Director Compensation

Attached is Schedule B which  details  Board of Director  and  Committee  Member
compensation. Directors that are salaried officers of the corporation receive no
director or committee compensation. Schedule B is approved annually by the Board
of Directors.

<PAGE>

                                                         Exhibit 10.4 Continued

                                   SCHEDULE B
                                 JANUARY 6, 2005

DIRECTORS' COMPENSATION:                 Non-employee  Directors  $12,000 annual
-----------------------                  retainer  plus  $1,000  per  meeting
                                         attended of Tri  City National Bank and
                                         $300  per  meeting  of  attended of Tri
                                         City Bankshares Corp, payable quarterly

EXECUTIVE COMMITTEE:                     Annual compensation, payable quarterly:
--------------------

   Henry Karbiner, Jr., Chairman         Henry Karbiner, Jr. - no compensation
   Ronald K. Puetz                       Ronald K. Puetz - no compensation
   William Gravitter                     William Gravitter      $17,900
   Sanford Fedderly                      Sanford Fedderly       $12,150
   Christ Krantz                         Christ Krantz          $ 5,600

LOAN COMMITTEE:                          Non-employee Directors:
---------------

     William Werry, Chairman             Chairman $750 per meeting attended
     Robert W. Orth                      Other member $500 per meeting attended
     Sanford Fedderly                    Payable quarterly
     William Gravitter
     Henry Karbiner, Jr.
     Christ Krantz
     Ronald K. Puetz
     Scott A. Wilson

AUDIT COMMITTEE:                         Chairman $8,000 per annum, payable
----------------                         quarterly.  Non-employee members $250
                                         per meeting attended-Payable quarterly

CRA/COMPLIANCE COMMITTEE:                Non-employee Directors:
-------------------------
                                         $250 per meeting attended,
                                         payable quarterlyExhibit 10.5

                  Description of Consulting Arrangement Between
                       Registrant and Mr. William J. Werry

William  J.  Werry,  a retired  unit bank  President,  has been  retained  as an
independent  consultant  advising  Chairman  Karbiner on a range of matter.  His
annual  compensation is approved  annually by the Board of Directors of Tri City
National Bank. His current  annual  compensation  for these services is $16,800,
payable monthly, and is in addition to his compensation as director.FY2004 10K Exhibit 10.2

EXHIBIT 10.2

CREDIT AGREEMENT 

(LINE OF CREDIT)

(EQUIPMENT PURCHASE)

(LETTER OF CREDIT SUB-FACILITY) 

(FOREIGN EXCHANGE SUB-FACILITY) 

This Agreement (the "Agreement") is made and entered into
as of June 30, 2004, by and between BANK OF THE WEST (the "Bank") and SCIENTIFIC
TECHNOLOGIES INCORPORATED, WHICH WILL DO BUSINESS IN CALIFORNIA AS OREGON
SCIENTIFIC TECHNOLOGIES (the "Borrower"), on the terms and conditions that
follow: 

SECTION 

1

DEFINITIONS 

1.1 Certain Defined Terms: Unless elsewhere
defined in this Agreement, the following terms shall have the following meanings
(such meanings to be generally applicable to the singular and plural forms of
the terms defined):

1.1.1 "Advance": shall mean an advance to the
Borrower under the credit facility (ies) described in Section 2. 

1.1.2 "Business Day": shall mean a day, other than
a Saturday or Sunday, on which commercial banks are open for business in
California. 

1.1.3 "Close-Out Date": shall mean the Business
Day on which the Bank closes out and liquidates an FX Transaction. 

1.1.4 "Closing Value": has the meaning given to it
in Section 8.5(i) hereof. 

1.1.5 "Closing Gain" and "Closing Loss"
:shall mean the amount determined in accordance with Section 8.5(ii) hereof.

1.1.6 "Collateral": shall mean the property
described in Section 3, together with any other personal or real property in
which the Bank may be granted a lien or security interest to secure payment of
the Obligations. 

1.1.7 "Credit Percentage": shall mean 10%.

1.1.8 "Current Liabilities": shall mean current
liabilities as determined in accordance with generally accepted accounting
principles, including any negative cash balance on the Borrower's financial
statement and Indebtedness for borrowed money under lines of credit with the
Bank used by the Borrower for working capital purposes. 

1.1.9 "Debt": shall mean all liabilities of the
Borrower less Subordinated Debt, if any. 

1.1.10 "Effective Tangible Net Worth": shall mean
the Borrower's stated net worth plus Subordinated Debt but less all intangible
assets of the Borrower (i.e., goodwill, trademarks, patents, copyrights,
organization expense, and similar intangible items including, but not limited
to, investments in and all amounts due from parent companies, affiliates,
officers or employees). 

1.1.11 "Environmental Claims": shall mean all
claims, however asserted, by any governmental authority or other person alleging
potential liability or responsibility for violation of any Environmental Law or
for Discharge or injury to the environment or threat to public health, personal
injury (including sickness, disease or death), property damage, natural
resources damage, or otherwise alleging liability or responsibility for damages
(punitive or otherwise), cleanup, removal, remedial or response costs,
restitution, civil or criminal penalties, injunctive relief, or other type of
relief, resulting from or based upon (a) the presence, placement, discharge,
emission or release (including intentional and unintentional, negligent and non-
negligent, sudden or non-sudden, accidental or non-accidental placement, spills,
leaks, Discharges, emissions or releases) of any Hazardous Material at, in, or
from property, whether or not owned by the Borrower, or (b) any other
circumstances forming the basis of any violation, or alleged violation, of any
Environmental Law. 

1.1.12 "Environmental Laws": shall mean all
federal, state or local laws, statutes, common law duties, rules, regulations,
ordinances and codes, together with all administrative orders, directed duties,
requests, licenses, authorizations and permits of, and agreements with, any
governmental authorities, in each case relating to environmental, health, safety
and land use matters; including the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 ("CERCLA"), the Clean Air Act, the
Federal Water Pollution Control Act of 1972, the Solid Waste Disposal Act, the
Federal Resource Conservation and Recovery Act, the Toxic Substances Control
Act, the Emergency Planning and Community Right-to-Know Act, the California
Hazardous Waste Control Law, the California Solid Waste Management, Resource,
Recovery and Recycling Act, the California Water Code and the California Health
and Safety Code. 

1.1.13 "Environmental Permits": shall have the
meaning provided in Section 5.11 hereof. 

1.1.14 "Equipment": shall mean equipment as
defined in the Uniform Commercial Code. 

1.1.15 "Equipment Purchase Facility": shall mean
the credit facility described as such in Section 2. 

1.1.16 "Equipment Value": shall mean the lesser
of: the invoice cost of the equipment (excluding taxes, license fees,
transportation costs, insurance premiums, and installation and connection
expenses, fees and costs); or the book value of the equipment; or the
liquidation value of the equipment as determined by the Bank. 

1.1.17 "ERISA": shall mean the Employee Retirement
Income Security Act of 1974, as amended from time to time, including (unless the
context otherwise requires) any rules or regulations promulgated thereunder.

1.1.18 "Event of Default": shall have the meaning
set forth in Section 7. 

1.1.19 "Expiration Date": shall mean June 30,
2005, or the date of termination of the Bank's commitment to lend under this
Agreement pursuant to Section 8, whichever shall occur first. 

1.1.20 "Foreign Currency": shall mean any legally
traded currency other than US dollars and which may be transferred by paperless
wire transfer or cash and in which the Bank regularly trades. 

1.1.21 "Foreign Exchange Facility": shall mean the
credit facility described as such in Section 2. 

1.1.22 "FX Risk Liability": shall mean the product
of (a) the Credit Percentage, times (b) the aggregate of the Notional Values of
all FX Transactions outstanding, net of any Offsetting Transactions. 

1.1.23 "FX Limit": shall mean $1,000,000.00.

1.1.24 "FX Transaction": shall mean any
transaction between the Bank and the Borrower pursuant to which the Bank has
agreed to sell to or to purchase from the Borrower a Foreign Currency of an
agreed amount at an agreed price in US dollars or such other agreed upon Foreign
Currency, deliverable and payable on an agreed date. 

1.1.25 "Hazardous Materials": shall mean all those
substances which are regulated by, or which may form the basis of liability
under, any Environmental Law, including all substances identified under any
Environmental Law as a pollutant, contaminant, hazardous waste, hazardous
constituent, special waste, hazardous substance, hazardous material, or toxic
substance, or petroleum or petroleum derived substance or waste. 

1.1.26 "Indebtedness": shall mean, with respect to
the Borrower, (i) all indebtedness for borrowed money or for the deferred
purchase price of property or services in respect of which the Borrower is
liable, contingently or otherwise, as obligor, guarantor or otherwise, or in
respect of which the Borrower otherwise assures a creditor against loss and (ii)
obligations under leases which shall have been or should be, in accordance with
generally accepted accounting principles, reported as capital leases in respect
of which the Borrower is liable, contingently or otherwise, or in respect of
which the Borrower otherwise assures a creditor against loss. 

1.1.27 "Letter of Credit Facility": shall mean the
credit facility described as such in Section 2. 

1.1.28 "Line Account": shall have the meaning
provided in Section 2.5 hereof. 

1.1.29 "Line of Credit": shall mean the credit
facility described as such in Section 2. 

1.1.30 "Notional Value": shall mean the US Dollar
equivalent of the price at which the Bank agreed to purchase or sell to the
Borrower a Foreign Currency. 

1.1.31 "Obligations": shall mean all amounts owing
by the Borrower to the Bank pursuant to this Agreement including, but not
limited to, the unpaid principal amount of any loans or advances. 

1.1.32 "Offsetting Transaction": shall mean a FX
Transaction to purchase a Foreign Currency and a FX Transaction to sell the same
Foreign Currency , each with the same Settlement Date and designated as an
Offsetting Transaction at the time of entering into the FX Transaction.

1.1.33 "Ordinary Course of Business": shall mean,
with respect to any transaction involving the Borrower or any of its
subsidiaries or affiliates, the ordinary course of the Borrower's business, as
conducted by the Borrower in accordance with past practice and undertaken by the
Borrower in good faith and not for the purpose of evading any covenant or
restriction in this Agreement or in any other document, instrument or agreement
executed in connection herewith. 

1.1.34 "Permitted Liens": shall mean: (i) liens
and security interests securing indebtedness owed by the Borrower to the Bank;
(ii) liens for taxes, assessments or similar charges not yet due; (iii) liens of
materialmen, mechanics, warehousemen, or carriers or other like liens arising in
the Ordinary Course of Business and securing obligations which are not yet
delinquent; (iv) purchase money liens or purchase money security interests upon
or in any property acquired or held by the Borrower in the Ordinary Course of
Business to secure Indebtedness outstanding on the date hereof or permitted to
be incurred herein; (v) liens and security interests which, as of the date
hereof, have been disclosed to and approved by the Bank in writing; and (vi)
those liens and security interests which in the aggregate constitute an
immaterial and insignificant monetary amount with respect to the net value of
the Borrower's assets. 

1.1.35 "Prime Rate": shall mean an index for a
variable interest rate which is quoted, published or announced by Bank as its
prime rate and as to which loans may be made by Bank at, above or below such
rate. 

1.1.36 "Settlement Date": shall mean the Business
Day on which the Borrower has agreed to (a) deliver the required amount of
Foreign Currency, or (b) pay in US dollars the agreed upon purchase price of the
Foreign Currency. 

1.1.37 "Subordinated Debt": shall mean such
liabilities of the Borrower which have been subordinated to those owed to the
Bank in a manner acceptable to the Bank. 

1.1.38 "Variable Rate Advance": shall have the
respective meaning as it is defined for each facility under Section 2, hereof.

1.1.39 "Variable Rate": shall have the respective
meaning as it is defined for each facility under Section 2, hereof.

1.2 Accounting Terms: All references to financial
statements, assets, liabilities, and similar accounting items not specifically
defined herein shall mean such financial statements or such items prepared or
determined in accordance with generally accepted accounting principles
consistently applied and, except where otherwise specified, all financial data
submitted pursuant to this Agreement shall be prepared in accordance with such
principles. 

1.3 Other Terms: Other terms not otherwise defined
shall have the meanings attributed to such terms in the Uniform Commercial Code
as in effect on July 1, 2001 and from time to time thereafter. 

 

SECTION 

2 

CREDIT FACILITIES 

2.1 THE LINE OF CREDIT 

2.1.1 The Line of Credit: On terms and
conditions as set forth herein, the Bank agrees to make Advances to the Borrower
from time to time from the date hereof to the Expiration Date, provided the
aggregate amount of such Advances outstanding at any time does not exceed
$5,000,000.00 (the "Line of Credit"). Within the foregoing limits, the Borrower
may borrow, partially or wholly prepay, and reborrow under this Section 2.1.
Proceeds of the Line of Credit shall be used to provide funds for working
capital requirements.  

2.1.2 Making Line Advances: Each Advance shall be
conclusively deemed to have been made at the request of and for the benefit of
the Borrower (i) when credited to any deposit account of the Borrower maintained
with the Bank or (ii) when paid in accordance with the Borrower's written
instructions. Subject to the requirements of Section 4 and provided such request
is made in a timely manner as provided in Section 2.1.5 below, Advances shall be
made by the Bank under the Line of Credit.  

2.1.3 Repayment: On the Expiration Date, the
Borrower hereby promises and agrees to pay to the Bank in full the aggregate
unpaid principal amount of all Advances then outstanding, together with all
accrued and unpaid interest thereon.  

2.1.4 Interest on Advances: Interest shall accrue
from the date of each Advance under the Line of Credit at a variable rate per
annum equivalent to the Prime Rate (the "Variable Rate"). Interest shall be
adjusted concurrently with any change in the Prime Rate. An Advance based upon
the Variable Rate is hereinafter referred to as a "Variable Rate Advance".
 

Interest shall be computed on the basis of 360 days per year,
but charged on the actual number of days elapsed. The Borrower hereby promises
and agrees to pay interest in arrears on the last day of each month. 

If interest is not paid as and when it is due, it shall be
added to the principal, become and be treated as a part thereof, and shall
thereafter bear like interest. 

2.1.5 Notice of Borrowing: Upon written or
telephonic notice which shall be received by the Bank at or before 2:00 p.m.
(California time) on a Business Day, the Borrower may borrow under the Line of
Credit by requesting a Variable Rate Advance. A Variable Rate Advance may be
made on the day notice is received by the Bank, provided however, that if the
Bank shall not have received notice at or before 2:00 p.m. on the day such
Advance is requested to be made, such Variable Rate Advance may, at the Bank's
option, be made on the next Business Day.  

2.2 EQUIPMENT PURCHASE FACILITY

2.2.1 Equipment Purchase Facility: The Bank
hereby agrees to make loans and advances ("Advances") to assist the Borrower in
purchasing items of equipment, upon a request therefor made by the Borrower to
the Bank prior to the Expiration Date (the "Equipment Purchase Facility"). Each
Advance made hereunder shall be in an amount not to exceed 100% of the Equipment
Value of the item(s) of new and used Equipment being purchased; provided,
however, that at no time shall the total aggregate outstanding principal amount
of Advances made hereunder exceed the sum of $1,000,000.00; and provided further
that the amount of any Advance which is repaid, in whole or in part, may not be
reborrowed.  

2.2.2 Equipment Account: The Bank shall maintain
on its books a record of account in which the Bank shall make entries for each
Advance and such other debits and credits as shall be appropriate in connection
with the Equipment Purchase Facility (the "Equipment Account").  

2.2.3 Security Interest in Equipment. The
Borrower, shall execute and deliver to the Bank, security agreements, financing
statements, disbursement instructions and such other documents and instruments
which the Bank may require with respect to such Advance and the perfection of
the Bank's security interest in the Equipment pertaining to such Advance.
 

2.2.4 Repayment: Unless sooner due in accordance
with the terms of the Agreement, on the Expiration Date, the Borrower hereby
promises and agrees to pay to the Bank in full the aggregate unpaid principal
amount of all Advances then outstanding hereunder, together with all accrued and
unpaid interest thereon.  

2.2.5 Interest on Advances: Interest shall accrue
from the date of each Advance under the Equipment Purchase Facility at a
variable rate per annum equivalent to the Prime Rate (the "Variable Rate").
Interest shall be adjusted concurrently with any change in the Prime Rate. An
Advance based upon the Variable Rate is hereinafter referred to as a "Variable
Rate Advance".  

Interest shall be computed on the basis of 360 days per year,
but charged on the actual number of days elapsed. The Borrower hereby promises
and agrees to pay interest in arrears on the last day of each month. 

If interest is not paid as and when it is due, it shall be
added to the principal, become and be treated as a part thereof, and shall
thereafter bear like interest. 

2.2.6 Notice of Borrowing: Upon written notice
which shall be received by the Bank at or before 2:00 p.m. (California time) on
a Business Day, the Borrower may borrow under the Equipment Purchase Facility by
requesting a Variable Rate Advance. A Variable Rate Advance may be made on the
day notice is received by the Bank, provided however, that if the Bank shall not
have received notice at or before 2:00 p.m. on the day such Advance is requested
to be made, such Variable Rate Advance may, at the Bank's option, be made on the
next Business Day.  

2.2.7 Term Loan Conversion: The Borrower may, by
giving written notice to the Bank at least 30 day(s) prior to the Expiration
Date, convert the principal balance outstanding under the Equipment Purchase
Facility as of the Expiration Date of Equipment Purchase Facility to be payable
on a term loan basis. The term loan (the "Term Loan") shall be in the amount of
such outstanding principal balance and shall be evidenced by a promissory note
or credit agreement in form and substance satisfactory to the Bank (the "Term
Note"). Accrued and unpaid interest under the Equipment Purchase Facility shall
be paid to the Bank concurrently with the Borrower's execution of the Term Note.
Interest shall accrue and principal and interest shall be paid in accordance
with the terms and provisions of the Term Note.  

2.3 LETTER OF CREDIT SUB-FACILITY

2.3.1 Letter of Credit Sub-Facility: The Bank
agrees to issue commercial and/or standby letters of credit (each a "Letter of
Credit") on behalf of the Borrower of up to $1,000,000.00. At no time, however,
shall the total principal amount of all Advances outstanding under the FX
Facility, together with the total face amount of all Letters of Credit
outstanding, less any partial draws paid by the Bank, exceed the Line of Credit.
 

For the purposes hereof, any Letters of Credit issued and
outstanding for the account of the Borrower as of the date hereof shall be
deemed to be issued hereunder. 

(i) Upon the Bank's request, the Borrower shall promptly
pay to the Bank issuance fees and such other fees, commissions, costs and any
out-of-pocket expenses charged or incurred by the Bank with respect to any
Letter of Credit.  

(ii) The commitment by the Bank to issue Letters of
Credit shall, unless earlier terminated in accordance with the terms of the
Agreement, automatically terminate on the Expiration Date of the Line of Credit
and no commercial letter of credit shall expire on a date which is more than 90
days after the Expiration Date and no standby letter of credit shall expire on a
date which is more than twelve (12) months after the Expiration Date.  

(iii) Each Letter of Credit shall be in form and
substance satisfactory to the Bank and in favor of beneficiaries satisfactory to
the Bank, provided that the Bank may refuse to issue a Letter of Credit due to
the nature of the transaction or its terms or in connection with any transaction
where the Bank, due to the beneficiary or the nationality or residence of the
beneficiary, would be prohibited by any applicable law, regulation or order from
issuing such Letter of Credit.  

(iv) Prior to the issuance of each Letter of Credit, but
in no event later than 10:00 a.m. (California time) on the day such Letter of
Credit is to be issued (which shall be a Business Day), the Borrower shall
deliver to the Bank a duly executed form of the Bank's standard form of
application for issuance of a Letter of Credit with proper insertions.  

(v) The Borrower shall, upon the Bank's request, promptly
pay to and reimburse the Bank for all costs incurred and payments made by the
Bank by reason of any future assessment, reserve, deposit or similar requirement
or any surcharge, tax or fee imposed upon the Bank or as a result of the Bank's
compliance with any directive or requirement of any regulatory authority
pertaining or relating to any Letter of Credit.  

 In the event that the Borrower fails to pay any drawing under
any Letter of Credit or the balances in the depository account or accounts
maintained by the Borrower with Bank are insufficient to pay such drawing,
without limiting the rights of Bank hereunder or waiving any Event of Default
caused thereby, Bank may, and Borrower hereby authorizes Bank to create an
Advance bearing interest at the rate or rates provided in Section 9.2 hereof to
pay such drawing. 

2.4 FOREIGN EXCHANGE SUB-FACILITY

2.4.1 Foreign Exchange Sub-Facility: The Bank
agrees to enter into FX Transactions with the Borrower, at the Borrower's
request therefor made prior to the Expiration Date, provided however, that at no
time shall the aggregate FX Risk Liability of the Borrower exceed the FX Limit,
and together with the total principal amount of all outstanding Advances, exceed
the Line of Credit. Each FX Transaction shall be used to hedge the Borrower's
foreign exchange exposure.  

(i) Requests. Each request for a FX Transaction
shall be made by telephone to the Bank's Treasury Department ("Request"), shall
specify the Foreign Currency to be purchased or sold, the amount of such Foreign
Currency and the Settlement Date. Each Request shall be communicated to the Bank
no later than 3:00 p.m. California time on the Business Day on which the FX
Transaction is requested.  

(ii) Tenor. No FX Transaction shall have a
Settlement Date which is more than 365 days after the date of entry into such FX
Transaction, and provided further, no FX Transaction shall expire on a date
which is more than 90 days after the Expiration Date.  

(iii) Availability. Bank may refuse to enter into
a FX Transaction with the Borrower where the Bank, at its sole discretion,
determines that (1) the requested Foreign Currency is unavailable, or (2) the
Bank is not then dealing in the requested Foreign Currency, or (3) the Bank
would be prohibited by any applicable law, rule, regulation or order from
purchasing such Foreign Currency.  

(iv) Payment. Payment is due on the Settlement
Date of the relevant FX Transaction. The Bank is hereby authorized by the
Borrower to charge the full settlement price of any FX Transaction against the
depository account or accounts maintained by the Borrower with the Bank on the
Settlement Date. In the event that the Borrower fails to pay the settlement
price of any FX Transaction on the Settlement Date or the balances in the
depository account or accounts maintained with Bank are insufficient to pay the
settlement price, without limiting the rights of Bank hereunder or waiving any
Event of Default caused thereby, Bank may , and Borrower hereby authorizes Bank
to, create an Advance bearing interest at the Variable Rate to pay the
settlement price on the Settlement Date.  

(v) Increased Costs. Borrower shall promptly pay
to and reimburse the Bank for all costs incurred and payments made by the Bank
by reason of any assessment, reserve, deposit, capital maintenance or similar
requirement or any surcharge, tax or fee imposed upon the Bank or as a result of
the Bank's compliance with any directive or requirement of any regulatory
authority pertaining or relating to any FX Transaction.  

(vi) Impossibility of Performance. In the event
that the Borrower or the Bank cannot perform under a FX Transaction due to force
majeure or an act of State or it becomes unlawful or impossible to perform, all
in the good faith judgement of the Borrower or the Bank, then upon notice to the
other party, the Borrower or the Bank may require the close-out and liquidation
of the affected FX Transaction in accordance with the provisions of this
Agreement.  

2.5 Line Account: The Bank shall maintain on its
books a record of account in which the Bank shall make entries for each Advance
and such other debits and credits as shall be appropriate in connection with the
credit facilities granted hereunder (the "Line Account"). The Bank shall provide
the Borrower with a statement of the Borrower's Line Account, which statement
shall be considered to be correct and conclusively binding on the Borrower
unless the Borrower notifies the Bank to the contrary within 30 days after the
Borrower's receipt of any such statement which it deems to be incorrect.
 

2.6 Authorization to Charge Account(s): The
Borrower hereby authorizes the Bank to charge, from time to time, against any or
all of the Borrower's deposit accounts with the Bank any amount so due under
this Agreement, including, but not limited to, account # 054-004049 maintained
with the Bank.  

2.7 Payments: If any payment required to be made
by the Borrower hereunder becomes due and payable on a day other than a Business
Day, the due date thereof shall be extended to the next succeeding Business Day
and interest thereon shall be payable at the then applicable rate during such
extension. All payments required to be made hereunder shall be made to the
office of the Bank designated for the receipt of notices herein or such other
office as Bank shall from time to time designate.  

2.8 Late Payment: In addition to any other rights
the Bank may have hereunder, if any payment of principal or interest or any
portion thereof, under this Agreement is not paid within 5 days of when due, a
late payment charge equal to five percent (5%) of such past due payment may be
assessed and shall be immediately payable.  

SECTION 

3 

COLLATERAL 

3.1 The Collateral: To secure payment and
performance of all the Borrower's Obligations under this Agreement and all other
liabilities, loans, guarantees, covenants and duties owed by the Borrower to the
Bank, whether or not evidenced by this or by any other agreement, absolute or
contingent, due or to become due, now existing or hereafter and howsoever
created, the Borrower hereby grants the Bank a security interest in and to all
of the following property ("Collateral"): 

(i) Equipment. All goods now owned or hereafter
acquired by the Borrower or in which the Borrower now has or may hereafter
acquire any interest, including, but not limited to, all machinery, equipment,
furniture, furnishings, fixtures, tools, supplies and motor vehicles of every
kind and description, and all additions, accessions, improvements, replacements
and substitutions thereto and thereof (the "Equipment").  

(ii) Inventory. All inventory now owned or
hereafter acquired by the Borrower, including, but not limited to, all raw
materials, work in process, finished goods, inventory leased to others or held
for lease, merchandise, parts and supplies of every kind and description,
including inventory temporarily out of the Borrower's custody or possession,
together with all returns on accounts (the "Inventory").  

(iii) Accounts. All accounts, letter of credit
rights, commercial tort claims, contract rights and general intangibles,
including software and payment intangibles, now owned or hereafter created or
acquired by the Borrower, including, but not limited to, all receivables,
including as-extracted receivables, credit card receivables, health care
receivables, insurance receivables, software receivables and license fees,
goodwill, trademarks, trademark applications, trade styles, trade names,
patents, patent applications, copyrights and copyright applications, customer
lists, business records and computer programs, tapes, disks and related data
processing software that at any time evidence or contain information relating to
any of the Collateral.  

(iv) Documents. All documents, instruments and
chattel paper, whether electronic or tangible, now owned or hereafter acquired
by the Borrower, including, but not limited to, warehouse and other receipts,
bills of sale, promissory notes and bills of lading.  

(v) Monies. All monies, deposit accounts,
certificates of deposit, investment property and securities of the Borrower now
or hereafter in the Bank's or its agents' possession.  

(vi) Assets. All assets of the Borrower, whether
now existing or hereafter acquired, and the products and proceeds thereof.

The Bank's security interest in the Collateral shall be a
continuing lien and shall include the proceeds and products of the Collateral
including, but not limited to, the proceeds of any insurance thereon. 

Borrower hereby consents to and instructs Bank to file
financing statements in all locations deemed appropriate by the Bank from time
to time. 

The security interest granted to Bank in the Collateral shall
not secure or be deemed to secure any Indebtedness of the Borrower to the Bank
which is, at the time of its creation, subject to the provisions of any state or
federal consumer credit or truth-in-lending disclosure statutes. 

SECTION 

4 

 

CONDITIONS PRECEDENT 

4.1 Conditions Precedent to the Initial Extension
of Credit: The obligation of the Bank to make the initial Advance or the
first extension of credit to or on account of the Borrower hereunder is subject
to the conditions precedent that the Bank shall have received before the date of
such initial Advance or such first extension of credit all of the following, in
form and substance satisfactory to the Bank:  

(i) Authority to Borrow. Evidence that the
execution, delivery and performance by the Borrower of this Agreement and any
document, instrument or agreement required hereunder have been duly authorized.
 

(ii) Fees. A fee of $15,000.00, such fee to be
deemed to be fully earned upon payment.  

(iii) Fees. Payment of all of the Bank's out-of-
pocket expenses in connection with the preparation and negotiation of this
Agreement.  

(iv) Financing Statements. UCC-1 financing
statement(s) describing the Collateral, which have been filed with the Secretary
of State or the county recorder as a lien of first priority.  

(v) Miscellaneous. Such other evidence as the Bank
may request to establish the consummation of the transaction contemplated
hereunder and compliance with the conditions of this Agreement.  

4.2 Conditions Precedent to All Extensions of
Credit: The obligation of the Bank to make each Advance or each other
extension of credit, as the case may be, to or on account of the Borrower
(including the initial Advance or the first extension of credit) shall be
subject to the further conditions precedent that, on the date of each Advance or
each extension of credit and after the making of such Advance or extension of
credit:  

(i) Reporting Requirements. The Bank shall have
received the documents set forth in Section 6.1.  

(ii) Subsequent Approvals. The Bank shall have
received such supplemental approvals, opinions or documents as the Bank may
reasonably request.  

(iii) Representations and Warranties. The
representations contained in Section 5 and in any other document, instrument or
certificate delivered to the Bank hereunder are true, correct and complete.
 

(iv) Event of Default. No event has occurred and
is continuing which constitutes, or with the lapse of time or giving of notice
or both, would constitute an Event of Default.  

(v) Collateral. The security interest in the
Collateral has been duly authorized, created and perfected with first priority
and is in full force and effect.  

The Borrower's acceptance of the proceeds of any loan,
Advance or extension of credit, or the Borrower's applying for any Letter of
Credit, or the Borrower's execution of any document or instrument evidencing or
creating any Obligation hereunder shall be deemed to constitute the Borrower's
representation and warranty that all of the above statements are true and
correct. 

SECTION 

5  

REPRESENTATIONS AND WARRANTIES 

The Borrower hereby makes the following representations
and warranties to the Bank, which representations and warranties are continuing:

5.1 Status: The Borrower's correct legal name is
as stated in this Agreement and the Borrower is a corporation duly organized and
validly existing under the laws of the state of Oregon and with its chief
executive office in the state of Oregon and is properly licensed and is
qualified to do business and in good standing in, and, where necessary to
maintain the Borrower's rights and privileges, has complied with the fictitious
name statute of every jurisdiction in which the Borrower is doing business.
 

5.2 Authority: The execution, delivery and
performance by the Borrower of this Agreement and any instrument, document or
agreement required hereunder have been duly authorized and do not and will not:
(i) violate any provision of any law, rule, regulation, order, writ, judgment,
injunction, decree, determination or award presently in effect having
application to the Borrower; (ii) result in a breach of or constitute a default
under any material indenture or loan or credit agreement or other material
agreement, lease or instrument to which the Borrower is a party or by which it
or its properties may be bound or affected; or (iii) require any consent or
approval of its stockholders or violate any provision of its articles of
incorporation or by-laws.  

5.3 Legal Effect: This Agreement constitutes, and
any instrument, document or agreement required hereunder when delivered
hereunder will constitute, legal, valid and binding obligations of the Borrower
enforceable against the Borrower in accordance with their respective terms.
 

5.4 Fictitious Trade Styles: There are no
fictitious trade styles used by the Borrower in connection with its business
operations. The Borrower shall notify the Bank not less than 30 days prior to
effecting any change in the matters described herein or prior to using any other
fictitious trade style at any future date, indicating the trade style and
state(s) of its use.  

5.5 Financial Statements: All financial
statements, information and other data which may have been or which may
hereafter be submitted by the Borrower to the Bank are true, accurate and
correct and have been or will be prepared in accordance with generally accepted
accounting principles consistently applied and accurately represent the
financial condition or, as applicable, the other information disclosed therein.
Since the most recent submission of such financial information or data to the
Bank, the Borrower represents and warrants that no material adverse change in
the Borrower's financial condition or operations has occurred which has not been
fully disclosed to the Bank in writing.  

5.6 Litigation: Except as have been disclosed to
the Bank in writing, there are no actions, suits or proceedings pending or, to
the knowledge of the Borrower, threatened against or affecting the Borrower or
the Borrower's properties before any court or administrative agency which, if
determined adversely to the Borrower, would have a material adverse effect on
the Borrower's financial condition or operations or on the Collateral.  

5.7 Title to Assets: The Borrower has good and
marketable title to all of its assets (including, but not limited to, the
Collateral) and the same are not subject to any security interest, encumbrance,
lien or claim of any third person except for Permitted Liens.  

5.8 ERISA: If the Borrower has a pension, profit
sharing or retirement plan subject to ERISA, such plan has been and will
continue to be funded in accordance with its terms and otherwise complies with
and continues to comply with the requirements of ERISA.  

5.9 Taxes: The Borrower has filed all tax returns
required to be filed and paid all taxes shown thereon to be due, including
interest and penalties, other than such taxes which are currently payable
without penalty or interest or those which are being duly contested in good
faith.  

5.10 Margin Stock. The proceeds of any loan or
advance hereunder will not be used to purchase or carry margin stock as such
term is defined under Regulation U of the Board of Governors of the Federal
Reserve System.  

5.11 Environmental Compliance. The operations of
the Borrower comply, and during the term of this Agreement will at all times
comply, in all respects with all Environmental Laws; the Borrower has obtained
all licenses, permits, authorizations and registrations required under any
Environmental Law ("Environmental Permits") and necessary for its
ordinary course operations, all such Environmental Permits are in good standing,
and the Borrower is in compliance with all material terms and conditions of such
Environmental Permits; neither the Borrower nor any of its present property or
operations is subject to any outstanding written order from or agreement with
any governmental authority nor subject to any judicial or docketed
administrative proceeding, respecting any Environmental Law, Environmental Claim
or Hazardous Material; there are no Hazardous Materials or other conditions or
circumstances existing, or arising from operations prior to the date of this
Agreement, with respect to any property of the Borrower that would reasonably be
expected to give rise to Environmental Claims; provided, however, that
with respect to property leased from an unrelated third party, the foregoing
representation is made to the best knowledge of the Borrower. In addition, (i)
the Borrower does not have any underground storage tanks that are not properly
registered or permitted under applicable Environmental Laws, or that are leaking
or disposing of Hazardous Materials off-site, and (ii) the Borrower has notified
all of their employees of the existence, if any, of any health hazard arising
from the conditions of their employment and have met all notification
requirements under Title III of CERCLA and all other Environmental Laws.
 

5.12 Inventory:  

(i) The Borrower keeps correct and accurate records.
(itemizing and describing the kind, type, quality and quantity of inventory, the
Borrower's cost therefor and selling price thereof, and the daily withdrawals
therefrom and additions thereto).  

(ii) All inventory is of good and merchantable quality,
free from defects.  

(iii) The inventory is not stored with a bailee,
warehouseman or similar party.  

SECTION 

6  

COVENANTS 

The Borrower covenants and agrees that, during the term
of this Agreement, and so long thereafter as the Borrower is indebted to the
Bank under this Agreement, the Borrower will, unless the Bank shall otherwise
consent in writing: 

6.1 Reporting and Certification Requirements:
Deliver or cause to be delivered to the Bank in form and detail satisfactory to
the Bank:  

(i) Not later than 90 days after the end of each of the
Borrower's fiscal years, a copy of the annual audited financial report of the
Borrower for such year, prepared by a firm of certified public accountants
acceptable to Bank and accompanied by an unqualified opinion of such firm.
 

(ii) Not later than 45 days after the end of each
quarter, a copy of the Borrower's financial statement as of the end of such
period.  

(iii) Promptly upon the Bank's request, such other
information pertaining to the Borrower, the Collateral or any guarantor
hereunder as the Bank may reasonably request.  

6.2 Financial Condition: The Borrower promises and
agrees, during the term of this Agreement and until payment in full of all of
the Borrower's Obligations, the Borrower will maintain at all times:
 

(i) A minimum Effective Tangible Net Worth of at least
$18,000,000.00.  

(ii) A ratio of Debt to Effective Tangible Net Worth of
not more than 1.00 to 1.  

(iii) A ratio of the sum of cash, cash equivalents and
accounts receivable to Current Liabilities of not less than 1.10 to 1.  

(iv) Not allow any losses exceeding $1,000,000.00 in any
one fiscal year.  

6.3 Preservation of Existence; Compliance with
Applicable Laws: Maintain and preserve its existence and all rights and
privileges now enjoyed; and conduct its business and operations in accordance
with all applicable laws, rules and regulations.  

6.4 Merge or Consolidate: Not liquidate or
dissolve, merge or consolidate with or into, or acquire any other business
organization.  

6.5 Maintenance of Insurance: Keep and maintain
the Collateral insured for not less than its full replacement value against all
risks of loss and damage and maintain insurance in such amounts and covering
such risks as is usually carried by companies engaged in similar businesses and
owning similar properties in the same general areas in which the Borrower
operates and maintain such other insurance and coverages as may be required by
the Bank. All such insurance shall be in form and amount and with companies
satisfactory to the Bank.  

With respect to insurance covering properties in which the
Bank maintains a security interest or lien, such insurance shall name the Bank
as loss payee pursuant to a loss payable endorsement satisfactory to the Bank
and shall not be altered or canceled except upon 10 days' prior written notice
to the Bank. Upon the Bank's request, the Borrower shall furnish the Bank with
the original policy or binder of all such insurance. 

6.6 Maintenance of Collateral and Other
Properties: Except for Permitted Liens, keep and maintain the Collateral
free and clear of all levies, liens, encumbrances and security interests
(including, but not limited to, any lien of attachment, judgment or execution)
and defend the Collateral against any such levy, lien, encumbrance or security
interest; comply with all laws, statutes and regulations pertaining to the
Collateral and its use and operation; execute, file and record such statements,
notices and agreements, take such actions and obtain such certificates and other
documents as necessary to perfect, evidence and continue the Bank's security
interest in the Collateral and the priority thereof; maintain accurate and
complete records of the Collateral which show all sales, claims and allowances;
and properly care for, house, store and maintain the Collateral in good
condition, free of misuse, abuse and deterioration, other than normal wear and
tear. The Borrower shall also maintain and preserve all its properties in good
working order and condition in accordance with the general practice of other
businesses of similar character and size, ordinary wear and tear excepted.
 

6.7 Payment of Obligations and Taxes: Make timely
payment of all assessments and taxes and all of its liabilities and obligations
including, but not limited to, trade payables, unless the same are being
contested in good faith by appropriate proceedings with the appropriate court or
regulatory agency. For purposes hereof, the Borrower's issuance of a check,
draft or similar instrument without delivery to the intended payee shall not
constitute payment.  

6.8 Depository Relationships: Except for permitted
investments, maintain its primary business depository relationship with Bank,
including general, operating and administrative deposit accounts and cash
management services.  

6.9 Inspection Rights and Accounting Records: The
Borrower will maintain adequate books and records in accordance with generally
accepted accounting principles consistently applied and in a manner otherwise
acceptable to Bank, and, at any reasonable time and from time to time, permit
the Bank or any representative thereof to examine and make copies of the records
and visit the properties of the Borrower and discuss the business and operations
of the Borrower with any employee or representative thereof. If the Borrower
shall maintain any records (including, but not limited to, computer generated
records or computer programs for the generation of such records) in the
possession of a third party, the Borrower hereby agrees to notify such third
party to permit the Bank free access to such records at all reasonable times and
to provide the Bank with copies of any records which it may request, all at the
Borrower's expense, the amount of which shall be payable immediately upon
demand.  

6.10 Additional Indebtedness: Not, after the date
hereof, create, incur or assume, directly or indirectly, any additional
Indebtedness other than (i) Indebtedness owed or to be owed to the Bank or (ii)
Indebtedness to trade creditors incurred in the Ordinary Course of Business.
 

6.11 Loans: Not make any loans or advances or
extend credit to any third person, including, but not limited to, directors,
officers, shareholders, partners, employees, affiliated entities and
subsidiaries of the Borrower, except for credit extended in the Ordinary Course
of Business as presently conducted, loans to any parent corporation holding at
least 75% of the capital stock of the Borrower and except up to $100,000.00 in
the aggregate.  

6.12 Liens and Encumbrances: Not create, assume or
permit to exist any security interest, encumbrance, mortgage, deed of trust, or
other lien (including, but not limited to, a lien of attachment, judgment or
execution) affecting any of the Borrower's properties, or execute or allow to be
filed any financing statement or continuation thereof affecting any of such
properties, except for Permitted Liens or as otherwise provided in this
Agreement.  

6.13 Transfer Assets: Not, after the date hereof,
sell, contract for sale, convey, transfer, assign, lease or sublet, any of its
assets (including, but not limited to, the Collateral) except in the Ordinary
Course of Business and, then, only for full, fair and reasonable consideration.
 

6.14 Change in Nature of Business: Not make any
material change in its financial structure or the nature of its business as
existing or conducted as of the date hereof.  

6.15 Maintenance of Jurisdiction: Borrower shall
maintain the jurisdiction of its organization and chief executive office, or if
applicable, principal residence, as set forth herein and not change such
jurisdiction name or form of organization without 30 days prior written notice
to Bank.  

6.16 Compensation of Employees: Compensate its
employees for services rendered at an hourly rate at least equal to the minimum
hourly rate prescribed by any applicable federal or state law or regulation.
 

6.17 Notice: Give the Bank prompt written notice
of any and all (i) Events of Default; (ii) litigation, arbitration or
administrative proceedings to which the Borrower is a party or which affects the
Collateral; (iii) other matters which have resulted in, or might result in a
material adverse change in the Collateral or the financial condition or business
operations of the Borrower, and (iv) any enforcement, cleanup, removal or other
governmental or regulatory actions instituted, completed or threatened against
the Borrower or any of its properties.  

6.18 Environmental Compliance: The Borrower shall
conduct its operations and keep and maintain all of its property in compliance
with all Environmental Laws and, upon the written request of the Bank, the
Borrower shall submit to the Bank, at the Borrower's sole cost and expense, at
reasonable intervals, a report providing the status of any environmental, health
or safety compliance, hazard or liability.  

6.19 Inventory:  

(i) Except as provided herein below, the Borrower's
inventory shall, at all times, be in the Borrower's physical possession, shall
not be held by others on consignment, sale on approval, or sale or return.
 

(ii) The Borrower shall keep correct and accurate
records.  

(iii) All inventory shall be of good and merchantable
quality, free from defects.  

(iv) The inventory shall not at any time or times
hereafter be stored with a bailee, warehouseman or similar party without the
Bank's prior written consent and, in such event, the Borrower will concurrently
therewith cause any such bailee, warehouseman or similar party to issue and
deliver to the Bank, in form acceptable to the Bank, warehouse receipts in the
Bank's name evidencing the storage of inventory.  

(v) At any reasonable time and from time to time, allow
Bank to have the right, upon demand, to inspect and examine inventory and to
check and test the same as to quality, quantity, value and condition and the
Borrower agrees to reimburse the Bank for the Bank's reasonable costs and
expenses in so doing.  

6.20 Location and Maintenance of Equipment.:
 

(i) The Equipment shall at all times be in the Borrower's
physical possession, shall not be held for sale or lease.  

The Borrower shall not secrete, abandon or remove, or permit
the removal of, the Equipment, or any part thereof, from the location(s) shown
above or remove or permit to be removed any accessories now or hereafter placed
upon the Equipment. 

(ii) Upon the Bank's demand, the Borrower shall
immediately provide the Bank with a complete and accurate description of the
Equipment including, as applicable, the make, model, identification number and
serial number of each item of Equipment. In addition, the Borrower shall
immediately notify the Bank of the acquisition of any new or additional
Equipment or the replacement of any existing Equipment and shall supply the Bank
with a complete description of any such additional or replacement Equipment.
 

(iii) The Borrower shall, at the Borrower's sole cost and
expense, keep and maintain the Equipment in a good state of repair and shall not
destroy, misuse, abuse, illegally use or be negligent in the care of the
Equipment or any part thereof. The Borrower shall not remove, destroy,
obliterate, change, cover, paint, deface or alter the name plates, serial
numbers, labels or other distinguishing numbers or identification marks placed
upon the Equipment or any part thereof by or on behalf of the manufacturer, any
dealer or rebuilder thereof, or the Bank. The Borrower shall not be released
from any liability to the Bank hereunder because of any injury to or loss or
destruction of the Equipment. The Borrower shall allow the Bank and its
representatives free access to and the right to inspect the Equipment at all
times and shall comply with the terms and conditions of any leases covering the
real property on which the Equipment is located and any orders, ordinances,
laws, regulations or rules of any federal, state or municipal agency or
authority having jurisdiction of such real property or the conduct of the
business of the persons having control or possession of the Equipment.  

(iv) The Equipment is not now and shall not at any time
hereafter be so affixed to the real property on which it is located as to become
a fixture or a part thereof. The Equipment is now and shall at all times
hereafter be and remain personal property of the Borrower.  

SECTION 

7  

EVENTS OF DEFAULT 

Any one or more of the following described events shall
constitute an event of default (an "Event of Default") under this Agreement:

7.1 Non-Payment: Any Borrower shall fail to pay
the principal amount of any Obligations when due or interest on the Obligations
within 5 days of when due.  

7.2 Performance Under This Agreement: The
Borrowers shall fail in any material respect to perform or observe any term,
covenant or agreement contained in this Agreement or in any document, instrument
or agreement relating to this Agreement or any other document or agreement
executed by the Borrowers with or in favor of Bank and any such failure shall
continue unremedied for more than 30 days after the occurrence thereof.
 

7.3 Representations and Warranties; Financial
Statements: Any representation or warranty made by the Borrower under or in
connection with this Agreement or any financial statement given by the Borrower
or any guarantor shall prove to have been incorrect in any material respect when
made or given or when deemed to have been made or given.  

7.4 Other Agreements: If there is a default under
any agreement to which Borrower is a party with Bank or with a third party or
parties resulting in a right by the Bank or by such third party or parties,
whether or not exercised, to accelerate the maturity of any Indebtedness.
 

7.5 Insolvency: The Borrower or any guarantor
shall: (i) become insolvent or be unable to pay its debts as they mature; (ii)
make an assignment for the benefit of creditors or to an agent authorized to
liquidate any substantial amount of its properties and assets; (iii) file a
voluntary petition in bankruptcy or seeking reorganization or to effect a plan
or other arrangement with creditors; (iv) file an answer admitting the material
allegations of an involuntary petition relating to bankruptcy or reorganization
or join in any such petition; (v) become or be adjudicated a bankrupt; (vi)
apply for or consent to the appointment of, or consent that an order be made,
appointing any receiver, custodian or trustee, for itself or any of its
properties, assets or businesses; or (vii) in an involuntary proceeding, any
receiver, custodian or trustee shall have been appointed for all or substantial
part of the Borrower's or guarantor's properties, assets or businesses and shall
not be discharged within 30 days after the date of such appointment.  

7.6 Execution: Any writ of execution or attachment
or any judgment lien shall be issued against any property of the Borrower and
shall not be discharged or bonded against or released within 30 days after the
issuance or attachment of such writ or lien.  

7.7 Suspension: The Borrower shall voluntarily
suspend the transaction of business or allow to be suspended, terminated,
revoked or expired any permit, license or approval of any governmental body
necessary to conduct the Borrower's business as now conducted.  

7.8 Material Adverse Change: If there occurs a
material adverse change in the Borrower's business or financial condition, or if
there is a material impairment of the prospect of repayment of any portion of
the Obligations or there is a material impairment of the value or priority of
the Bank's security interest in the Collateral, or if a Borrower who is a
natural person shall die.  

7.9 Change in Ownership: There shall occur a sale,
transfer, disposition or encumbrance (whether voluntary or involuntary), or an
agreement shall be entered into to do so, with respect to more than 10% of the
issued and outstanding capital stock of the Borrower.  

7.10 Impairment of Collateral. There shall occur
any injury or damage to all or any part of the Collateral or all or any part of
the Collateral shall be lost, stolen or destroyed.  

SECTION 

8  

REMEDIES ON DEFAULT 

Upon the occurrence of any Event of Default, the Bank
may, at its sole and absolute election, without demand and only upon such notice
as may be required by law: 

8.1 Acceleration: Declare any or all of the
Borrower's indebtedness owing to the Bank, whether under this Agreement or any
other document, instrument or agreement, immediately due and payable, whether or
not otherwise due and payable.  

8.2 Cease Extending Credit: Cease making Advances
or otherwise extending credit to or for the account of the Borrower under this
Agreement or under any other agreement now existing or hereafter entered into
between the Borrower and the Bank.  

8.3 Termination: Terminate this Agreement as to
any future obligation of the Bank without affecting the Borrower's obligations
to the Bank or the Bank's rights and remedies under this Agreement or under any
other document, instrument or agreement.  

8.4 Letters of Credit: Require the Borrower to pay
immediately to the Bank, for application against drawings under any outstanding
Letters of Credit, the outstanding principal amount of any such Letters of
Credit which have not expired. Any portion of the amount so paid to the Bank
which is not applied to satisfy draws under any such Letters of Credit or any
other obligations of the Borrower to the Bank shall be repaid to the Borrower
without interest.  

8.5 Close-Out and Liquidation: Close-out and
liquidate each outstanding FX Transaction so that each FX Transaction is
canceled in accordance with the following:  

(i) Closing Value. The Bank shall calculate value
of such canceled FX Transaction by converting (1) in the case of a FX
Transaction whose Settlement Date is the same as or later than the Close-Out
Date, the amount of Foreign Currency into US dollars at a rate of exchange at
which the Bank can buy or sell US dollars with or against the Foreign Currency
for delivery on the Settlement Date of the relevant FX Transaction; or (2) in
the case of a FX Transaction whose Settlement Date precedes the Close-Out Date,
the amount of the Foreign Currency adjusted by adding interest with respect
thereto at the Variable Rate from the Settlement Date to the Close-Out Date,
into US Dollars at a rate of exchange at which the Bank can buy or sell US
dollars with or against the Foreign Currency for delivery on the Close-Out Date.
 

(ii) Closing Gain or Loss. (1) For a FX
Transaction for which the Bank agreed to purchase a Foreign Currency, the amount
by which the Closing Value exceeds the Notional Value shall be a Closing Loss
and the amount by which the Closing Value is less than the Notional Value shall
be a Closing Gain; and (2) For a FX Transaction for which the Bank agreed to
sell a Foreign Currency, the amount by which the Closing Value exceeds the
Notional Value shall be a Closing Gain and the amount by which the Closing Value
is less than the Notional Value shall be a Closing Loss.  

(iii) Net Present Value. The Closing Gain or
Closing Loss for each Settlement Date falling after the Close-out Date will be
discounted by the Bank to it net present value.  

(iv) Payment. To the extent that the net amount of
the aggregate Closing Gains exceeds the Closing Losses, such amount shall be
payable by the Bank to the Borrower. To the extent that the aggregate net amount
of the Closing Losses exceeds the Closing Gains, such amount shall be payable by
the Borrower to the Bank.  

8.6 Protection of Security Interest: Make such
payments and do such acts as the Bank, in its sole judgment, considers necessary
and reasonable to protect its security interest or lien in the Collateral. The
Borrower hereby irrevocably authorizes the Bank to pay, purchase, contest or
compromise any encumbrance, lien or claim which the Bank, in its sole judgment,
deems to be prior or superior to its security interest. Further, the Borrower
hereby agrees to pay to the Bank, upon demand therefor, all expenses and
expenditures (including attorneys' fees) incurred in connection with the
foregoing.  

8.7 Foreclosure: Enforce any security interest or
lien given or provided for under this Agreement or under any security agreement,
mortgage, deed of trust or other document, in such manner and such order, as to
all or any part of the properties subject to such security interest or lien, as
the Bank, in its sole judgment, deems to be necessary or appropriate and the
Borrower hereby waives any and all rights, obligations or defenses now or
hereafter established by law relating to the foregoing. In the enforcement of
its security interest or lien, the Bank is authorized to enter upon the premises
where any Collateral is located and take possession of the Collateral or any
part thereof, together with the Borrower's records pertaining thereto, or the
Bank may require the Borrower to assemble the Collateral and records pertaining
thereto and make such Collateral and records available to the Bank at a place
designated by the Bank. The Bank may sell the Collateral or any portions
thereof, together with all additions, accessions and accessories thereto, giving
only such notices and following only such procedures as are required by law, at
either a public or private sale, or both, with or without having the Collateral
present at the time of the sale, which sale shall be on such terms and
conditions and conducted in such manner as the Bank determines in its sole
judgment to be commercially reasonable. The Collateral may be disposed of in its
then condition without any preparation or processing. In connection with any
disposition of the Collateral, the Bank may disclaim any warranty relating to
title, possession or quiet enjoyment. Any deficiency which exists after the
disposition or liquidation of the Collateral shall be a continuing liability of
the Borrower to the Bank and shall be immediately paid by the Borrower to the
Bank.  

8.8 Non-Exclusivity of Remedies: Exercise one or
more of the Bank's rights set forth herein or seek such other rights or pursue
such other remedies as may be provided by law, in equity or in any other
agreement now existing or hereafter entered into between the Borrower and the
Bank, or otherwise.  

8.9 Application of Proceeds: All amounts received
by the Bank as proceeds from the disposition or liquidation of the Collateral
shall be applied to the Borrower's indebtedness to the Bank as follows: first,
to the costs and expenses of collection, enforcement, protection and
preservation of the Bank's lien in the Collateral, including court costs and
reasonable attorneys' fees, whether or not suit is commenced by the Bank; next,
to those costs and expenses incurred by the Bank in protecting, preserving,
enforcing, collecting, liquidating, selling or disposing of the Collateral;
next, to the payment of accrued and unpaid interest on all of the Obligations;
next, to the payment of the outstanding principal balance of the Obligations;
and last, to the payment of any other indebtedness owed by the Borrower to the
Bank. Any excess Collateral or excess proceeds existing after the disposition or
liquidation of the Collateral will be returned or paid by the Bank to the
Borrower.  

If any non-cash proceeds are received in connection with any
sale of Collateral, the Bank shall not apply such non-cash proceeds to the
Obligations unless and until such proceeds are converted to such; provided,
however, that if such non-cash proceeds are not expected on the date of receipt
thereof to be converted to cash within one year after such date, the Bank shall
use commercially reasonable efforts to convert such non-cash proceeds to cash
within such one year period. 

SECTION 

9  

MISCELLANEOUS 

9.1 Amounts Payable on Demand: If the Borrower
shall fail to pay on demand any amount so payable under this Agreement, the Bank
may, at its option and without any obligation to do so and without waiving any
default occasioned by the Borrower having so failed to pay such amount, create
an Advance under this Agreement in an amount equal to the amount so payable,
which Advance shall thereafter bear interest as provided hereunder.  

9.2 Default Interest Rate: If an Event of Default,
or an event which, with notice or passage of time could become an Event of
Default, has occurred or is continuing, the Borrower shall pay to the Bank
interest on any Indebtedness or amount payable under this Agreement at a rate
which is 3% in excess of the rate or rates then in effect under this Agreement.
 

9.3 Reliance and Further Assurances: Each
warranty, representation, covenant, obligation and agreement contained in this
Agreement shall be conclusively presumed to have been relied upon by the Bank
regardless of any investigation made or information possessed by the Bank and
shall be cumulative and in addition to any other warranties, representations,
covenants and agreements which the Borrower now or hereafter shall give, or
cause to be given, to the Bank. Borrower agrees to execute all documents and
instruments and to perform such acts as the Bank may reasonably deem necessary
to confirm and secure to the Bank all rights and remedies conferred upon the
Bank by this agreement and all other documents related thereto.  

9.4 Attorneys' Fees: Borrower shall pay to the
Bank all costs and expenses, including but not limited to reasonable attorneys
fees, incurred by Bank in connection with the administration, enforcement,
including any bankruptcy, appeal or the enforcement of any judgment or any
refinancing or restructuring of this Agreement or any document, instrument or
agreement executed with respect to, evidencing or securing the indebtedness
hereunder.  

9.5 Notices: All notices, payments, requests,
information and demands which either party hereto may desire, or may be required
to give or make to the other party hereto, shall be given or made to such party
by hand delivery or through deposit in the United States mail, postage prepaid,
or by facsimile delivery, or to such other address as may be specified from time
to time in writing by either party to the other.  

	
	

	

To the Borrower:

   SCIENTIFIC TECHNOLOGIES INCORPORATED, WHICH WILL DO BUSINESS IN CALIFORNIA AS
OREGON SCIENTIFIC TECHNOLOGIES

                   6550 Dumbarton Circle

                   Fremont, CA 94555

                   Attn: Joseph Lazzara

                   President & CEO

                   FAX: ( ) -

	
To the Bank:

   BANK OF THE WEST

   Bay Area CBC

                   180 Montgomery Street

                   San Francisco, CA 94104

   Attn: Christopher Golec

   Assistant Vice President

   FAX: (415) 799-7208 

9.6 Waiver: Neither the failure nor delay by the
Bank in exercising any right hereunder or under any document, instrument or
agreement mentioned herein shall operate as a waiver thereof, nor shall any
single or partial exercise of any right hereunder or under any other document,
instrument or agreement mentioned herein preclude other or further exercise
thereof or the exercise of any other right; nor shall any waiver of any right or
default hereunder, or under any other document, instrument or agreement
mentioned herein, constitute a waiver of any other right or default or
constitute a waiver of any other default of the same or any other term or
provision.  

9.7 Conflicting Provisions: To the extent the
provisions contained in this Agreement are inconsistent with those contained in
any other document, instrument or agreement executed pursuant hereto, the terms
and provisions contained herein shall control. Otherwise, such provisions shall
be considered cumulative.  

9.8 Binding Effect; Assignment: This Agreement
shall be binding upon and inure to the benefit of the Borrower and the Bank and
their respective successors and assigns, except that the Borrower shall not have
the right to assign its rights hereunder or any interest herein without the
prior written consent of the Bank. The Bank may sell, assign or grant
participation in all or any portion of its rights and benefits hereunder. The
Borrower agrees that, in connection with any such sale, grant or assignment, the
Bank may deliver to the prospective buyer, participant or assignee financial
statements and other relevant information relating to the Borrower and any
guarantor.  

9.9 Jurisdiction: This Agreement, any notes issued
hereunder, the rights of the parties hereunder to and concerning the Collateral,
and any documents, instruments or agreements mentioned or referred to herein
shall be governed by and construed according to the laws of the State of
California without regard to conflict of law principles, to the jurisdiction of
whose courts the parties hereby submit.  

9.10 Waiver of Jury Trial: THE BORROWER AND THE
BANK EACH WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE
OF ACTION BASED UPON OR ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE OTHER
LOAN DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY
ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES
AGAINST ANY OTHER PARTY OR PARTIES, WHETHER WITH RESPECT TO CONTRACT CLAIMS,
TORT CLAIMS, OR OTHERWISE. THE BORROWER AND THE BANK EACH AGREE THAT ANY SUCH
CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT
LIMITING THE FOREGOING, THE PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO
A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION,
COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE
THE VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS OR
ANY PROVISION HEREOF OR THEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT
AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT AND THE
OTHER LOAN DOCUMENTS.  

9.11 Telephone Recording: The Borrower agrees that
the Bank may electronically record all telephone conversations between the
Borrower and the Bank with respect to any FX Transaction and that any such
recording may be submitted in evidence in any arbitration or other legal
proceeding. Such recording shall be deemed to be conclusive evidence as to the
terms of any FX Transaction in the event of a dispute.  

9.12 Counterparts: This Agreement may be executed
in any number of counterparts and all such counterparts taken together shall be
deemed to constitute one and the same instrument.  

9.13 Headings: The headings herein set forth are
solely for the purpose of identification and have no legal significance.
 

9.14 Entire Agreement and Amendments: This
Agreement and all documents, instruments and agreements mentioned herein
constitute the entire and complete understanding of the parties with respect to
the transactions contemplated hereunder. All previous conversations, memoranda
and writings between the parties pertaining to the transactions contemplated
hereunder not incorporated or referenced in this Agreement or in such documents,
instruments and agreements are superseded hereby. This Agreement may be amended
only by an instrument in writing signed by the Borrower and the Bank.
 

 

IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the date first hereinabove written. 

	
	

	
BANK:

          BANK OF THE WEST

BY:________________________________

   NAME: Christopher Golec, Assistant Vice President 
	
BORROWER:

   SCIENTIFIC TECHNOLOGIES INCORPORATED, WHICH WILL DO BUSINESS IN CALIFORNIA AS
OREGON SCIENTIFIC TECHNOLOGIES

BY:________________________________

                   NAME: Joseph J. Lazzara, President & CEO 

 

CERTIFIED CORPORATE RESOLUTION TO BORROW 

WHEREAS, SCIENTIFIC TECHNOLOGIES INCORPORATED, WHICH WILL
DO BUSINESS IN CALIFORNIA AS OREGON SCIENTIFIC TECHNOLOGIES (the "Corporation")
has made application to BANK OF THE WEST (the "Bank") for credit accommodations
which may consist of but shall in no way be limited to the following: the
renewal, continuation or extension of an existing obligation; the extension of a
new loan, line of credit or commitment; the issuance of letters of credit or
banker's acceptances; or the purchase or sale through Bank of foreign
currencies. 

RESOLVED, that: any one of the following officers: ANTHONY R.
LAZZARA, as the CHAIRMAN of the Corporation, or JOSEPH J. LAZZARA, as the
PRESIDENT & CEO of the Corporation, or JAMES A. LAZZARA, as the SENIOR VP
AND SECRETARY of the Corporation, or JAMES A. ASHFORD, as the SENIOR VICE
PRESIDENT of the Corporation, are authorized, in the name of and on behalf of
the Corporation to: 

(a) Borrow money from the Bank in such amounts and upon
such terms and conditions as are agreed upon by the officers of the Corporation
and the Bank; and execute and deliver or endorse such evidences of indebtedness
or renewals thereof or agreements therefor as may be required by the Bank, all
in such form and content as the officers of the Corporation executing such
documents shall approve (which approval shall be evidenced by the execution and
delivery of such documents); provided, however, that the maximum amount of such
indebtedness shall not exceed the principal sum of $6,100,000.00 exclusive of
any interest, fees, attorneys' fees and other costs and expenses related to the
indebtedness.  

(b) Execute such evidences of indebtedness, agreements,
security instruments and other documents and to take such other actions as are
herein authorized.  

(c) Sell to or discount or re-discount with the Bank any
and all negotiable instruments, contracts or instruments or evidences of
indebtedness at any time held by the Corporation; and endorse, transfer and
deliver the same, together with guaranties of payment or repurchase thereof, to
the Bank (for which the Bank is hereby authorized and directed to pay the
proceeds of such sale, discount or re-discount as directed by such endorsement
without inquiring into the circumstances of its issue or endorsement or the
disposition of such proceeds).  

(d) Withdraw, receive and execute receipts for deposits
and withdrawals on accounts of the Corporation maintained with the Bank.
 

(e) Grant security interests and liens in any real,
personal or other property belonging to or under the control of the Corporation
as security for any indebtedness of the Corporation to the Bank; and execute and
deliver to the Bank any and all security agreements, pledges, mortgages, deeds
of trust and other security instruments and any other documents to effectuate
the grant of such security interests and liens, which security instruments and
other documents shall be in such form and content as the officers of the
Corporation executing such security instruments and other documents shall
approve and which approval shall be evidenced by the execution and delivery of
such security instruments and other documents.  

(f) Apply for letters of credit or seek the issuance of
banker's acceptances under which the Corporation shall be liable to the Bank for
repayment.  

(g) Purchase and sell foreign currencies, on behalf of
the Corporation, whether for immediate or future delivery, in such amounts and
upon such terms and conditions as the officer(s) authorized herein may deem
appropriate, and give any instructions for transfers or deposits of monies by
check, drafts, cable, letter or otherwise for any purpose incidental to the
foregoing, and authorize or direct charges to the depository account or accounts
of the Corporation for the cost of any foreign currencies so purchased through
the Bank.  

(h) To designate in writing to the Bank in accordance
with the terms of any agreement or other document executed by the above-named
individuals one or more individuals who shall have the authority to as provided
herein, to:  

(1) request advances under lines of credit extended by
the Bank to the Corporation;  

(2) apply for letters of credit or seek the issuance of
banker's acceptances under which the Corporation shall be liable to the Bank for
repayment;  

(3) make deposits and receive and execute receipts for
deposits on accounts of the Corporation maintained with the Bank;  

(4) make withdrawals and receive and execute receipts for
withdrawals on account of the Corporation maintained with the Bank;  

(5) purchase and sell foreign currencies.  

(i) Enter into derivative transactions, including but not
limited to, interest rate swaps, caps, floors, collars, swaptions, and forwards.
 

(j) Transact any other business with the Bank incidental
to the powers hereinabove stated.  

RESOLVED FURTHER, that all such evidences of indebtedness,
agreements, security instruments and other documents executed in the name of and
on behalf of the Corporation and all such actions taken on behalf of the
Corporation in connection with the matters described herein are hereby ratified
and approved. 

RESOLVED FURTHER, that the Bank is authorized to act upon
these resolutions until written notice of their revocation is delivered to the
Bank. 

RESOLVED FURTHER, that any resolution set forth herein is in
addition to and does not supersede any resolutions previously given by the
Corporation to the Bank. 

RESOLVED FURTHER, that the Secretary of the Corporation be,
and hereby is, authorized and directed to prepare, execute and deliver to the
Bank a certified copy of the foregoing resolutions. 

I do hereby certify that I am James A. Lazzara, the Secretary
of SCIENTIFIC TECHNOLOGIES INCORPORATED, WHICH WILL DO BUSINESS IN CALIFORNIA AS
OREGON SCIENTIFIC TECHNOLOGIES, a Oregon corporation, and I do hereby further
certify that the foregoing is a true copy of the resolutions of the Board of
Directors of the Corporation adopted and approved at a meeting which was duly
called and held in accordance with all applicable provisions of law and the
Articles and By-Laws of the Corporation, on the ________ day of _______________,
________, at which meeting a majority of the Board of Directors of the
Corporation was present and voted in favor of the resolutions. 

I hereby further certify that such resolutions are presently
in full force and effect and have not been amended or revoked. I do further
certify that the following persons have been duly elected and qualified as and,
this day are, officers of the Corporation, holding their respective offices
appearing below their names, and that the signatures appearing opposite their
names are the genuine signatures of such persons. 

	
NAME OF OFFICER: ANTHONY R. LAZZARA 

TITLE: CHAIRMAN 
	
_________________________________________ 

(SIGNATURE) 

 

	
NAME OF OFFICER: JOSEPH J. LAZZARA 

TITLE: PRESIDENT & CEO 
	
________________________________________ 

(SIGNATURE) 

 

	
NAME OF OFFICER: JAMES A. LAZZARA 

TITLE: SENIOR VP AND SECRETARY 
	
________________________________________ 

(SIGNATURE) 

 

	
NAME OF OFFICER: JAMES A. ASHFORD 

TITLE: SENIOR VICE PRESIDENT 
	
________________________________________ 

(SIGNATURE) 

 

IN WITNESS WHEREOF, this document is executed as of June 30,
2004. 

NAME OF CORPORATION: SCIENTIFIC TECHNOLOGIES INCORPORATED,
WHICH WILL DO BUSINESS IN CALIFORNIA AS OREGON SCIENTIFIC TECHNOLOGIES 

BY:__________________________________________ 

NAME: JAMES A. LAZZARA, SECRETARY 

LOAN DISBURSEMENT INSTRUCTIONS 

Line of Credit 

Date: June 30, 2004 

The undersigned hereby instructs BANK OF THE WEST to disburse
the proceeds of this loan as shown below: 

	
DISBURSEMENT 
	
AMOUNT 

	
Credited to the following account: Any and all future
Advances shall be deposited into checking account #054-004049 upon the request
of the Borrower. 
	
$________ 

	
TOTAL:
	
============ 

$________ 

(Authorizing signatures appear on attached page entitled
"AUTHORIZING SIGNATURES FOR LOAN DISBURSEMENT INSTRUCTIONS") 

	
	

 

LOAN DISBURSEMENT INSTRUCTIONS 

Equipment Purchase 

Date: June 30, 2004 

The undersigned hereby instructs BANK OF THE WEST to disburse
the proceeds of this loan as shown below: 

	
DISBURSEMENT 
	
AMOUNT 

	
Credited to the following account: Any and all future
Advances shall be deposited into checking account #054-004049 upon the request
of the Borrower. 
	
$________ 

	
TOTAL:
	
============ 

$________ 

 

(Authorizing signatures appear on attached page entitled
"AUTHORIZING SIGNATURES FOR LOAN DISBURSEMENT INSTRUCTIONS") 

	
	

 

AUTHORIZING SIGNATURES FOR LOAN DISBURSEMENT
INSTRUCTIONS 

The following signature(s) authorize disbursement of loan
proceeds as set forth in the preceding instructions consisting of 2 page(s).

	
	
BORROWER: 

SCIENTIFIC TECHNOLOGIES INCORPORATED, WHICH WILL DO BUSINESS IN CALIFORNIA AS
OREGON SCIENTIFIC TECHNOLOGIES 

BY:_____________________________________ 

NAME: Joseph J. Lazzara, President & CEO

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