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                                                                     EXHIBIT 4.2

                                     WARRANT

THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR WITH THE
SECURITIES COMMISSION OF ANY APPLICABLE STATE UNDER SUCH STATE'S SECURITIES OR
BLUE SKY LAWS. THESE SECURITIES MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS
PERMITTED UNDER SUCH SECURITIES ACT AND THE APPLICABLE STATE SECURITIES OR BLUE
SKY LAWS, PURSUANT TO REGISTRATION OR AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THOSE SECURITIES OR BLUE SKY LAWS.

                            WARRANT TO PURCHASE STOCK
                                       OF
                              COMPUTER MOTION, INC.

WARRANT NO.:  AC-1                                             FEBRUARY 13, 2003

         This Warrant certifies that, as a material inducement for Agility
Capital, LLC, the original Holder (as defined below) to enter into that certain
Loan and Security Agreement (the "Loan Agreement"), dated February 13, 2003, by
and between Holder and Computer Motion, Inc., a Delaware corporation (the
"Company"), the Holder is entitled, subject to the terms and conditions of this
Warrant, to purchase from the Company at any time prior to 5:00 p.m. Pacific
time on or before February 13, 2010 (the "Expiration Date") shares of Warrant
Stock (as defined below) equal to the Exercise Quantity (as defined below) at a
price per share equal to the Exercise Price (as defined below), upon surrender
of this Warrant at the principal offices of the Company, together with a duly
executed subscription form substantially in the form attached hereto as Exhibit
1 and, if applicable, payment of the full Warrant Price for the shares of
Warrant Stock so purchased in lawful money of the United States. The Exercise
Price and the number and character of shares of Warrant Stock purchasable under
this Warrant are subject to adjustment as provided herein.

         1.       Definitions. The following definitions shall apply for
purposes of this Warrant:

                  1.1      "Common Stock Equivalents" means collectively any
rights, options or warrants to subscribe for or to purchase or otherwise acquire
common stock or other securities or rights convertible into or exercisable or
exchangeable for shares of the Company's common stock.

                  1.2      "Company" means the "Company" as defined above and
includes any Person (other than an individual) which shall succeed to or assume
the obligations of the Company under and in accordance this Warrant.

                  1.3      "Exercise Price" means: $0.97 per Warrant Share.

                  1.4      "Exercise Quantity" means 500,000 of Warrant Stock
which amount shall be increased as follows: (i) upon the occurrence an Event of
Default under the Loan Agreement
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by 50,000 shares of Warrant Stock, and (ii) on the first day of each thirty (30)
day period after such Event of Default until (x) the Secured Obligations (as
defined in the Loan Agreement) are paid in full indefeasibly or (y) the written
waiver by the Lender, if any, of such Event of Default, by an additional 25,000
shares of Warrant Stock.

                  1.5      "Fair Market Value" means, on any given date, if the
items to be valued are securities traded on a United States public market, the
closing price of such securities (or the securities into which such securities
are convertible) last reported sales price regular way or, in the case no
reported sales take place on such date, the average of the reported closing bid
and asked prices regular way on the principal U.S. securities exchange on which
such security is listed or, if not so listed, on the Nasdaq Stock Market or, if
not so quoted, the average of the closing bid and asked prices on the
over-the-counter market. If the items to be valued are securities not so traded
or are other property, assets or evidences of indebtedness, the "Fair Market
Value" means, on any given day, the fair market value of the securities or other
property, assets or evidences of indebtedness as reasonably determined in good
faith by the Board of Directors of the Company; provided, that if the Holder
advises the Company's Board of Directors in writing that the Holder disagrees
with such determination, then the Company and the Holder shall promptly agree
upon a nationally recognized investment banking firm to undertake such
valuation. If the valuation of such investment banking firm is greater than that
so determined by the Company's Board of Directors, then all fees and expenses of
such investment banking firm shall be paid by the Company. In all other
circumstances, such fees and expenses shall be paid by Holder.

                  1.6      "Holder" means any Person who shall at the time be
the registered holder of this Warrant.

                  1.7      "Person" means a natural person, a partnership, a
corporation, a limited liability company, an association, a joint stock company,
a trust, a joint venture, an unincorporated organization or other entity, or a
governmental entity or any department, agency or political subdivision thereof.

                  1.8      "SEC" means the Securities and Exchange Commission
and any successor thereto.

                  1.9      "Securities Act" means the Securities Exchange Act of
1933, as amended, and the rules and regulations promulgated thereunder.

                  1.10     "Termination Date" has the meaning set forth in
Section 4.5.

                  1.11     "Warrant" means this Warrant and any warrant(s)
delivered in substitution or exchange therefor, as provided herein.

                  1.12     "Warrant Stock" means the Company's common stock, par
value $0.001 per share. The number and character of shares of Warrant Stock are
subject to adjustment as provided herein and the term "Warrant Stock" shall
include stock and other securities, property and/or assets at any time
receivable or issuable upon exercise of this Warrant in accordance with its
terms.

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         2.       EXERCISE.

                  2.1      Exercise Quantity. Subject to the terms and
conditions set forth below (including, without limitation, the adjustment
provided for herein), this Warrant entitles the Holder to purchase from the
Company up to that number of shares of Warrant Stock equal to the Exercise
Quantity.

                  2.2      Vesting. The shares underlying this Warrant shall
vest and become exercisable immediately on the date hereof.

                  2.3      Method of Exercise. Subject to the terms and
conditions of this Warrant, the Holder may exercise this Warrant in whole or in
part, at any time or from time to time, on any business day beginning on the
date of this Warrant through and including the Expiration Date by surrendering
this Warrant at the principal offices of the Company, with the subscription form
attached hereto duly executed by the Holder, and payment, as applicable, of an
amount equal to the product obtained by multiplying (i) the number of shares of
Warrant Stock to be purchased by the Holder by (ii) the Exercise Price as
determined in accordance with the terms hereof.

                  2.4      Form of Payment. Payment of the aggregate Exercise
Price, as required, may be made, as determined in the sole discretion of Holder,
by (i) a check payable to the Company's order, (ii) wire transfer of funds to
the Company, (iii) transfer of the Company's capital stock held by the Holder to
the Company (valued at the then Fair Market Value of such stock), (iv)
cancellation of undisputed indebtedness of the Company to Holder (if any) or (v)
any combination of the foregoing.

                  2.5      Partial Exercise. Upon a partial exercise of this
Warrant, this Warrant shall be surrendered by the Holder and replaced with a new
Warrant of like tenor in which the maximum number of shares of Warrant Stock
purchasable by the Holder shall be the maximum number of shares of Warrant Stock
purchasable under the original Warrant minus the amount of shares of Warrant
Stock purchased in such partial exercise.

                  2.6      No Fractional Shares. No fractional shares may be
issued upon any exercise of this Warrant, and any fractions shall be rounded
down to the nearest whole number of shares to determine the number of shares to
be issued upon such exercise. If upon any exercise of this Warrant a fraction of
a share would otherwise result but for the prior sentence, the Company will pay
the cash value of any such fractional share, calculated on the basis of the Fair
Market Value of a share.

                  2.7      Net Exercise Election. The Holder may elect to
convert all or a portion of this Warrant, without the payment by the Holder of
the Exercise Price or of any other consideration, by the surrender of this
Warrant or such portion to the Company, with the net exercise election selected
in the subscription form attached hereto duly executed by the Holder, into up to
the number of shares of Warrant Stock that is obtained under the following
formula:

                                       Y (A-B)
                                   X = -------
                                          A

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where             X  =     the number of shares of Warrant Stock to be issued to
                           the Holder pursuant to this Section 2.7.

                  Y  =     the number of shares of Warrant Stock that could be
                           acquired upon a cash exercise of the portion of this
                           Warrant being surrendered at the time the net
                           exercise election is made pursuant to this Section
                           2.7.

                  A  =     the Fair Market Value of one share of Warrant Stock
                           at the time the net exercise election is made
                           pursuant to this Section 2.7.

                  B  =     the Exercise Price at the time the net exercise
                           election is made pursuant to this Section 2.7.

         The Company will promptly respond in writing to an inquiry by the
Holder as to the then current Fair Market Value of one share of Warrant Stock.

         3.       ISSUANCE OF STOCK. This Warrant shall be deemed to have been
exercised immediately prior to the close of business on the date of its
surrender for exercise as provided above, and the Person entitled to receive the
shares of Warrant Stock issuable upon such exercise shall be treated for all
purposes as the holder of record of such shares as of the close of business on
such date. As soon as practicable on or after such date, but in no event less
than three business days thereafter, the Company shall issue and deliver to the
Person or Persons entitled to receive the same a certificate or certificates for
the number of whole shares of Warrant Stock issuable upon such exercise.

         4.       ADJUSTMENT PROVISIONS. The Exercise Quantity, character of the
Warrant Stock issuable upon exercise of this Warrant (or any other securities,
property or assets at the time receivable or issuable upon exercise of this
Warrant or the exercise, exchange or conversion of any security receivable or
issuable upon exercise of this Warrant) and the Exercise Price therefor, are
subject to adjustment upon the occurrence of the following events during the
period beginning on the date this Warrant is issued and ending on the date this
Warrant is exercised:

                  4.1      ADJUSTMENT FOR STOCK SPLITS. The Exercise Price, and
the Exercise Quantity shall each be proportionally adjusted to reflect any stock
split, or other subdivision, reverse stock split, combination of shares, or
other similar event affecting the number of outstanding shares of Warrant Stock
(or such other securities) immediately prior to such event.

                  4.2      Adjustment for Dividends and Distributions.

                  (a)      If the Company shall make, issue, declare, pay,
distribute or set aside, or shall fix a record date for the determination of
eligible holders entitled to receive, a dividend or other distribution payable
with respect to the common stock or any Common Stock Equivalents that is payable
in (i) common stock or Common Stock Equivalents (other than issuances with
respect to which adjustment is made under Section 4.1), (ii) property or assets
or (iii) evidences of its indebtedness, then, and in each such case; (A) the
Exercise Price shall be adjusted so that the same shall equal the price
determined by multiplying the Exercise Price in effect immediately prior to the
record date mentioned above by (if there is no such date, then the date
immediately prior to the date the Company makes, issues, pays, distributes or
sets aside such dividend or

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distribution) a fraction, the numerator of which shall be equal to the sum of
(x) the total number of shares of common stock then outstanding multiplied by
the Fair Market Value per share of the common stock on the record date mentioned
below, minus (y) the Fair Market Value as of such record date of said shares of
common stock or Common Stock Equivalents, properties, assets or evidences of
indebtedness so made, issued, paid, distributed, declared or set aside, plus (z)
in the case of the issuance or distribution of Common Stock Equivalents, the
minimum aggregate amount of additional consideration, if any, payable to the
Company upon the conversion, exercise or exchange of such Common Stock
Equivalents, and the denominator of which shall be the total number of shares of
common stock then outstanding multiplied by the Fair Market Value per share of
common stock on the record date mentioned above (but in no event shall such
fraction be greater than 1.0) and (B) the Exercise Quantity shall be adjusted to
equal the number obtained by dividing (x) the Exercise Price in effect
immediately prior to such dividend or distribution multiplied by the Exercise
Quantity immediately prior to such dividend or distribution by (y) the Exercise
Price resulting from the adjustment made pursuant to clause (A) above. Such
adjustments shall be made whenever any such dividend or distribution is (or if
there is no such record date, immediately prior to the date the Company makes,
issues, pays, distributes or sets aside such dividend or distribution) and shall
become effective immediately after the record date for the determination of
stockholders entitled to receive such dividend or distribution (or if there is
no such record date, immediately prior to the date the Company makes, issues,
pays, distributes or sets aside such dividend or distribution).

                  (b)      In the event of a distribution by the Company of
stock or other securities of a subsidiary or securities convertible or
exchangeable into or exercisable for such stock, then in lieu of an adjustment
in the Exercise Price, the Holder of this Warrant, upon the exercise thereof at
any time after such distribution, shall be entitled to receive from the Company,
such subsidiary or both, the stock or other securities to which such Holder
would have been entitled if such Holder had exercised such Warrant immediately
prior to the record date set for such dividend or distribution, all subject to
further adjustment as provided in this Warrant (or if there is no such record
date, immediately prior to the date the Company makes, issues, pays, distributes
or sets aside such dividend or distribution).

                  4.3      Adjustment for Reorganization, Consolidation or
Merger. In case of any reorganization, reclassification, recapitalization or
similar transaction involving the stock of the Company (or of any other entity,
the stock or other securities of which are at the time receivable upon the
exercise of this Warrant), after the date of this Warrant, or in case, after
such date, the Company (or any such corporation) shall consolidate with or merge
into another corporation, convey all or substantially all of its assets or stock
to another entity or undertake a similar transaction (a "Corporate
Transaction"), then, and in each such case, the Holder, upon the exercise of
this Warrant at any time after the record date for the holders of stock entitled
to participate in such Corporate Transaction (or if there is no such record
date, immediately after the consummation of the Corporate Transaction) shall be
entitled to receive, in lieu of the stock or other securities, property, assets,
evidences of indebtedness, or other rights, warrants or options receivable upon
the exercise of this Warrant prior to the consummation of such Corporate
Transaction, the stock or other securities, property, assets, evidence of
indebtedness, or other rights, warrants or options to which the Holder would
have been entitled upon the consummation of such Corporate Transaction if the
Holder had exercised this Warrant immediately prior thereto and assuming that
any adjustment under this Section 4 that would

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otherwise be made in connection with the consummation of such Corporate
Transaction had been made, all subject to further adjustment as provided in this
Warrant, as applicable, and the successor or purchasing entity in such Corporate
Transaction, (if other than the Company) shall duly execute and deliver to the
Holder a supplement hereto acknowledging such entity's obligations under this
Warrant; and in each such case, the terms of this Warrant shall be applicable to
the shares of stock or other securities, property, assets, evidences of
indebtedness, or other rights, warrants or options receivable upon the exercise
of this Warrant after the consummation of such Corporate Transaction.

                  4.4      Price Adjustment.

                  (a)      In each case where the Company, after the date of
this Warrant, sells, issues or grants or becomes obligated to sell, issue or
grant (x) shares of its common stock at a price per share less than the then
applicable Exercise Price or (y) any Common Stock Equivalents that are
convertible into or exercisable or exchangeable for common stock at a price per
share less than the then applicable Exercise Price, then (A) the Exercise Price
in effect immediately prior to such sale, issuance, grant or obligation shall be
adjusted by multiplying such Exercise Price by a fraction, the numerator of
which is equal to the lowest such price per share and the denominator of which
is equal to the Exercise Price per share of common stock immediately prior to
such sale, issuance, grant or obligation and (B) the Exercise Quantity shall be
adjusted to equal the number obtained by dividing (x) the Exercise Price in
effect immediately prior to such sale, issuance, grant or obligation multiplied
by the Exercise Quantity in effect immediately prior to such sale, issuance,
grant or obligation by (y) the Exercise Price resulting from the adjustment made
pursuant to clause (A).

                  (b)      The provisions of Section 4.4(a) shall not apply to
(i) the issuance of shares of the Company's common stock upon exercise of this
Warrant, (ii) the issuance of shares of the Company's common stock upon the
conversion or exercise of convertible or exercisable securities issued and
outstanding on the date hereof as set forth on Schedule 4.5(a) of the Loan
Agreement and (iii) the issuance by the Company of options to acquire common
stock issued to employees, officers, directors, consultants and advisors
pursuant to any stock option plan or other restricted stock plan designated and
approved by the Company's board of directors; provided that such options do not
represent the right to acquire more than shares of common stock representing ten
percent (10%) of the Company's capital stock on a fully diluted basis, subject
to adjustment as provided in Section 4.1.

                  4.5      Exchange of Stock. In case all the authorized Warrant
Stock of the Company is exchanged into other securities or property, assets,
evidence of indebtedness or other rights, warrants, or options, or the Warrant
Stock otherwise ceases to exist as a result of conversion, exchange, redemption
or otherwise, then, in such case, the Holder, upon exercise of this Warrant at
any time after the date on which the Warrant Stock is so exchanged or ceases to
exist (the "Termination Date"), shall receive, in lieu of the Exercise Quantity
immediately prior to the Termination Date (the "Former Number of Shares of
Warrant Stock"), the stock and other securities and property to which the Holder
would have been entitled to receive upon the Termination Date if the Holder had
exercised this Warrant with respect to the Former Number of Shares of Warrant
Stock immediately prior to the Termination Date and assuming that any

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adjustment under this Section 4 that would otherwise be made in connection with
such exchange has been made, all subject to further adjustment as provided in
this Warrant.

                  4.6      Notice of Adjustments. The Company shall promptly
give written notice of each adjustment or readjustment of the Exercise Price,
the Exercise Quantity or the Warrant Stock or other securities issuable upon
exercise of this Warrant. The notice shall describe the adjustment or
readjustment and show in reasonable detail the facts on which the adjustment or
readjustment is based.

                  4.7      No Change Necessary. The form of this Warrant need
not be changed because of any adjustment in or change to the Exercise Price, the
Exercise Quantity or in the Warrant Stock issuable upon its exercise whether
pursuant to this Section 4, Section 1.4 or otherwise.

                  4.8      Reservation of Stock. The Company shall at all times
reserve for issuance that number of shares of Warrant Stock then issuable
hereunder. If at any time the number of shares of Warrant Stock or other
securities issuable upon exercise of this Warrant shall not be sufficient to
effect the exercise of this Warrant, the Company will take such corporate action
as may be necessary to reserve such Warrant Stock, including, without
limitation, if necessary increasing its authorized but unissued shares of
Warrant Stock or other securities issuable upon exercise of this Warrant as
shall be sufficient for such purpose.

                  4.9      Statement of Shares. Upon the receipt by the Company
of Holder's request, the Company shall as promptly as reasonably practicable
prepare and deliver to the Holder a statement setting forth the Company's
calculation of the number of shares of Warrant Stock issuable upon exercise of
this Warrant.

                  4.10     Reissue of Warrants. Holder may, at its sole option,
surrender this Warrant to the Company and require that the Company execute and
deliver new Warrants containing identical terms and provisions to Holder and to
its participants in amounts that reflect their respective interests hereunder,
as provided to the Company by the Holder.

                  4.11     Most Favored Rights. The provisions of this Section 4
shall be modified as necessary so that the Holder shall have the additional
benefits, if any, of the most favored provision of any other equity security, on
a security by security basis, as determined by the Holder from time to time.

         5.       REQUIRED NOTICES. The Company will give the Holder notice at
least twenty(20)days prior to the earlier of the effective date of or any
applicable record date with respect to any Corporate Transaction, or other
record date for any other transaction or action by the Company which could
trigger any adjustment under Section 4 herein or that could result in the
conversion or exchange of all outstanding shares of Warrant Stock into or for
cash, any other security or other property or assets.

         6.       REGISTRATION RIGHTS. The Holder shall have, with respect to
the Warrant Stock, registration rights set forth below and such rights shall be
as favorable as those granted to holders of any class of the Company's equity
securities from time to time. The rights granted to the Holder hereunder (and
for the issuance of security into which the Warrant Stock of other securities
into which the Warrant Stock or other

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security may be exercisable, exchangeable or convertible) shall be transferable
with this Warrant and/or the Warrant Stock.

                  6.1      Definitions. For purposes of this Section 6:

                  (a)      Registration. The terms "register," "registered," and
"registration" refer to a registration effected by preparing and filing a
registration statement in compliance with the Securities Act, and the
declaration or ordering of effectiveness of such registration statement.

                  (b)      Registrable Securities. The term "Registrable
Securities" means: (x) the Warrant Stock and any securities of the Company
issued as a dividend or other distribution with respect to, or in exchange for
or in replacement of the Warrant Stock. The term "Registrable Securities" shall
include the securities, if any, that the Holder would be entitled to receive in
exchange for Registrable Securities in any merger, consolidation, reorganization
or similar transaction.

                  (c)      Registrable Securities Then Outstanding. The number
of shares of "Registrable Securities then outstanding" shall mean the number of
Warrant Stock and other securities that are Registrable Securities and are then
issued and outstanding.

                  (d)      Form S-3. The term "Form S-3" means such form under
the Securities Act as is in effect on the date hereof or any successor
registration form under the Securities Act subsequently adopted by the SEC that
permits inclusion or incorporation of substantial information by reference to
other documents filed by the Company with the SEC after the effective date of
such registration;

                  6.2      Automatic Registration. The Company agrees to cause
the Registrable Securities issuable to the Holder to be registered under the
Securities Act on an effective and current shelf registration on Form S-3, or
any successor (the "Automatic Registration Statement"), by filing a registration
statement with the SEC within thirty (30) days of the date of this Warrant and
as soon as reasonably practicable after the date of this Warrant but in no event
later than ninety (90) days after the date of this Warrant, shall cause the
Automatic Registration Statement to be declared effective. The Company shall
keep such shelf registration statement effective and current until such time as
all of the Registrable Securities have been sold or otherwise disposed of.

                  (a)      Expenses. All expenses incurred in connection with a
registration pursuant to this Section 6.2 (excluding underwriters' discounts and
commissions relating to shares sold by the Holder, which shall be borne by the
Holder), including, without limitation, all federal, state and "blue sky"
registration, filing and qualification fees, printers' and accounting fees, fees
and disbursements of one counsel for the Holder, and fees and disbursements of
counsel for the Company, shall be borne by the Company.

                  (b)      Not Demand Registration. Registration pursuant to
this Section 6.2 shall not be deemed to be a demand registration as described in
Section 6.3.

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                  6.3      Demand Registration.

                  (a)      Request by Holder. If at any time after the Automatic
Registration Statement has been suspended or is otherwise no longer effective,
the Company shall receive a written request from the Holder that the Company
file a registration statement under the Securities Act on Form S-3, or any
successor or other available form if Form S-3 shall not be available, covering
the registration of the Registrable Securities held by Holder, then the Company
shall, as soon as practicable, but in no event more than thirty (30) days after
such request, file such a registration statement for the registration under the
Securities Act of all Registrable Securities that the Holder requests to be
registered and included in such registration, as soon as reasonably practicable
thereafter, but in no event later than sixty (60) days after such filing shall
cause such registration statement to be declared effective and to obtain and
maintain in full force and effect all related qualifications, registrations or
other compliances that may be necessary under the laws of any applicable
jurisdiction, including, without limitation, state securities or "blue sky"
laws.

                  (b)      Expenses. All expenses incurred in connection with
any registration pursuant to this Section 6.3 (excluding underwriters' discounts
and commissions relating to shares sold by the Holder which shall be borne by
the Holder) including, without limitation, all federal, state and "blue sky"
registration, filing and qualification fees, printer's and accounting fees, fees
and disbursements of one counsel for the Holder, and fees and disbursements of
counsel for the Company.

                  (c)      Maintenance. The Company shall maintain the
effectiveness of any registration statement filed under this Section 6.3 until
such time as all of the Registrable Securities held by the Holder have been sold
in accordance therewith.

                  6.4      Piggyback Registrations. At any time that a
registration statement is not in effect under Section 6.2 or 6.3 hereof, and the
Holder owns Registrable Securities, the Company shall notify the Holder in
writing at least twenty (20) days prior to filing any registration statement
under the Securities Act for purposes of effecting a public offering of
securities of the Company (including registration statements relating to
secondary offerings of securities of the Company, but excluding registration
statements on Form S-8 relating to any employee benefit plan or on Form S-4
relating to any merger or other corporate reorganization) and will afford the
Holder an opportunity to include in such registration statement all or any part
of the Registrable Securities then held by the Holder. If the Holder desires to
include in any such registration statement all or any part of the Registrable
Securities the Holder shall, within ten (10) business days after receipt of the
above-described notice from the Company, so notify the Company in writing, and
in such notice shall inform the Company of the number of Registrable Securities
the Holder wishes to include in such registration statement. If the Holder
decides not to include all of its Registrable Securities in any registration
statement thereafter filed by the Company, the Holder shall nevertheless
continue to have the right to include any Registrable Securities in any
subsequent registration statement or registration statements as may be filed by
the Company with respect to offerings of its securities, all upon the terms and
conditions set forth herein and, in any event, the Holder shall have all of its
rights under Section 6.1 and 6.2 hereof.

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                  (a)      Underwriting. If a registration statement under which
the Company gives notice under this Section 6.4 is for an underwritten offering,
then the Company shall so advise the Holder. In such event, the right of the
Registrable Securities to be included in such a registration shall be
conditioned upon such Holder's participation in such underwriting and the
inclusion of the Holder's Registrable Securities in the underwriting to the
extent provided herein. The Holder proposes to distribute the Registrable
Securities through such underwriting the Holder shall enter into an underwriting
agreement in customary form with the managing underwriter or underwriters
selected for such underwriting; provided, however, that it shall not be
considered customary to require any of the Holder to provide representations and
warranties regarding the Company or indemnification of the underwriters for
material misstatements or omissions regarding the Company in the registration
statement, prospectus or prospectus supplement for such offering.

                  (b)      Expenses. All expenses incurred in connection with a
registration pursuant to this Section 6.4 (excluding underwriters' discounts and
commissions relating to shares sold by the Holder, which shall be borne by the
Holder), including, without limitation, all federal, state and "blue sky"
registration, filing and qualification fees, printers' and accounting fees, fees
and disbursements of one counsel for the Holder, and fees and disbursements of
counsel for the Company, shall be borne by the Company.

                  (c)      Not Demand Registration. Registration pursuant to
this Section 6.4 shall not be deemed to be a demand registration as described in
Section 6.3.

                  6.5      Obligations of the Company. Whenever required to
effect the registration of any Registrable Securities under this Agreement, the
Company shall, as expeditiously as reasonably possible:

                  (a)      Registration Statement. Prepare and file with the SEC
a registration statement with respect to such Registrable Securities and shall
cause such registration statement to become effective.

                  (b)      Amendments and Supplements. Prepare and file with the
SEC such amendments and supplements to such registration statement and the
prospectus used in connection with such registration statement as may be
necessary to comply with the provisions of the Securities Act with respect to
the disposition of all securities covered by such registration statement.

                  (c)      Prospectuses. Furnish to the Holder such number of
copies of a prospectus, including, without limitation, a preliminary prospectus
and any applicable prospectus supplement, in conformity with the requirements of
the Securities Act, and such other documents as they may reasonably request in
order to facilitate the disposition of the Registrable Securities owned by the
Holder that are included in such registration in accordance with the plan of
distribution described in the related prospectus or prospectus supplement.

                  (d)      Effectiveness; Qualification. The Company shall avoid
the issuance of, or if issued, obtain the prompt withdrawal of, (i) any order
suspending the effectiveness or use of any registration statement covering
Registrable Securities or (ii) any suspension of the

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qualification or registration for sale (or exemption from qualification or
registration for sale) of any of the Registrable Securities as soon as
practicable.

                  (e)      Blue Sky. Register and qualify the securities covered
by such registration statement as required under such other securities or blue
sky laws of such jurisdictions as shall be reasonably requested by the Holder,
provided that the Company shall not be required in connection therewith or as a
condition thereto to qualify to do business or to file a general consent to
service of process in any such states or jurisdictions.

                  (f)      Underwriting. In the event of any underwritten public
offering, enter into and perform its obligations under an underwriting
agreement, which agreement shall be in usual and customary form (including,
without limitation, customary indemnification of the underwriters by the
Company), with the managing underwriter(s) of such offering. The Holder shall
also enter into and perform its obligations under such an agreement.

                  (g)      Notification. Notify the Holder with respect to the
Registrable Securities covered by such registration statement at any time when a
prospectus relating thereto is required to be delivered under the Securities Act
of the happening of any event as a result of which the prospectus included in
such registration statement, as then in effect, includes an untrue statement of
a material fact or omits to state a material fact required to be stated therein
or necessary to make the statements therein not misleading in the light of the
circumstances then existing, in which event the Holder shall not use such
prospectus in connection with any offer or sale of the Registrable Securities
until such prospectus has been appropriately amended (which the Company shall do
promptly under the circumstances and deliver new prospectuses to the Holder
promptly thereafter).

                  (h)      Opinion and Comfort Letter. If such securities are
being sold through underwriters, furnish, at the request of the Holder, on the
date that the Registrable Securities are delivered to the underwriters for sale,
(1) an opinion, dated as of such date, of the counsel representing the Company
for the purposes of such registration, in form and substance as is customarily
given to underwriters in an underwritten public offering and in the same form
and substance as that provided to the underwriters of such offering, addressed
to the underwriters and to the Holder requesting registration of Registrable
Securities and (2) a "comfort" letter dated as of such date, from the
independent certified public accountants of the Company, in form and substance
as is customarily given by independent certified public accountants to
underwriters in an underwritten public offering and in the same form and
substance as that provided to the underwriters of such offering, addressed to
the underwriters and to the Holder requesting registration of Registrable
Securities.

                  (i)      Company's Right to Delay If the Company provides to
the Holder a certified resolution duly adopted by the Company's Board of
Directors stating that, in it reasonable business judgment, it would be
materially disadvantageous to the Company to disclose certain information
because such disclosure would materially interfere with or otherwise adversely
affect in any material respect any existing or reasonably likely acquisition,
financing, corporate reorganization or other material transaction or development
(a "Disadvantageous Condition"), then the Company may refrain from maintaining
the current prospectus contained in the applicable registration statement (and
suspend sales of Registrable Securities) until such

                                       11
<PAGE>
Disadvantageous Condition no longer exists. Any notice of a Disadvantageous
Condition shall set forth in general terms the reason for such determination.
The Company shall promptly notify the Holder when such Disadvantageous Condition
no longer exists. The Company may use its delay right under this Section 6.5(i)
only once in any twelve month period for a period of time not to exceed sixty
(60) days. Notwithstanding the foregoing, the Company can only delay maintaining
current of such prospectus (and such suspension of sales of Registrable
Securities) only if the Company shall concurrently prohibit sales by other
security holders under all other registration statements then outstanding and by
all of the members of the Company's Board of Directors, all of the officers of
the Company and all of the stockholders of the Company that own five percent
(5%) or more (including options, warrants and other exchangeable, exercisable or
convertible securities ultimately exchangeable or exercisable for or convertible
into common stock of the Company) of the Company's common stock.

                  6.6      Indemnification. In the event any Registrable
Securities are included in a registration statement under Section 6.2, 6.3 or
6.4:

                  (a)      By the Company. To the extent permitted by law, the
Company will indemnify and hold harmless the Holder, the partners, officers,
shareholders, employees, representatives and directors of the Holder, any
underwriter (as determined under the Securities Act) for the Holder and each
person, if any, who controls the Holder or such underwriter within the meaning
of the Securities Act or the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), against any losses, claims, damages, or liabilities (joint or
several) to which they may become subject under the Securities Act, the Exchange
Act or other federal or state securities or blue sky laws, insofar as such
losses, claims, damages, or liabilities (or actions in respect thereof) arise
out of or are based upon any of the following statements, omissions or
violations (collectively a "Violation"):

                           (x) any untrue statement or alleged untrue statement
of a material fact contained in such registration statement, including any
preliminary prospectus or final prospectus contained therein, or any amendments
or supplements thereto;

                           (y) the omission or alleged omission to state therein
a material fact required to be stated therein, or necessary to make the
statements therein not misleading; or

                           (z) any violation or alleged violation by the Company
of the Securities Act, the Exchange Act, any federal or state securities or blue
sky law or any rule or regulation promulgated under the Securities Act, the
Exchange Act or any federal or state securities or blue sky law in connection
with the offering covered by such registration statement;

and the Company will reimburse the Holder, and each partner, officer,
shareholder, employee, representative, director, underwriter and controlling
person of the Holder for any legal or other expenses reasonably incurred by
them, as incurred, in connection with investigating or defending any such loss,
claim, damage, liability or action; provided, however, that the indemnity
agreement contained in this paragraph shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Company (which consent shall
not be unreasonably withheld or delayed), nor shall the Company be liable in any
such case for any such loss, claim, damage, liability or action to the extent
that it

                                       12
<PAGE>
arises out of or is based upon a Violation that occurs in reliance upon and in
conformity with written information furnished expressly for use in connection
with such registration by the Holder, or any partner, officer, shareholder,
employee, representative, director, underwriter or controlling person of the
Holder.

                  (b)      By the Holder. To the extent permitted by law, the
Holder will indemnify and hold harmless the Company, each of its directors, each
of its officers who have signed the registration statement, each person, if any,
who controls the Company within the meaning of the Securities Act, and any
underwriter and any other person or entity, selling securities under such
registration statement or such person's or entity's partners, officers,
shareholders, employees, representatives and directors and any person or entity
who controls such person or entity within the meaning of the Securities Act or
the Exchange Act, against any losses, claims, damages or liabilities (joint or
several) to which the Company or any such officer or director, controlling
person, underwriter or other such person or entity, partner, officer,
shareholder, employee, representative, director or controlling person of such
person or entity may become subject under the Securities Act, the Exchange Act
or other federal or state securities or blue sky law, insofar as such losses,
claims, damages or liabilities (or actions in respect thereto) arise out of or
are based upon any Violation, in each case to the extent (and only to the
extent) that such Violation occurs in reliance upon and in conformity with
written information furnished by the Holder expressly for use in connection with
such registration; and the Holder will reimburse any legal or other expenses
reasonably incurred by the Company or any such officer or director, controlling
person, underwriter or other person or entity, partner, officer, shareholder,
employee, representative, director or controlling person of such person or
entity in connection with investigating or defending any such loss, claim,
damage, liability or action; provided, however, that the indemnity agreement
contained in this paragraph shall not apply to amounts paid in settlement of any
such loss, claim, damage, liability or action if such settlement is effected
without the consent of the Holder, which consent shall not be unreasonably
withheld or delayed; and provided further, that the total amounts payable in
indemnity by the Holder under this subsection, subsection (d) of this Section
6.7 or otherwise in respect of any and all Violations shall not exceed in the
aggregate the net proceeds received by the Holder in the registered offering out
of which such Violations arise.

                  (c)      Notice. Promptly after receipt by an indemnified
party of notice of the commencement of any action (including any governmental
action), such indemnified party will, if a claim in respect thereof is to be
made against any indemnifying party under this section, deliver to the
indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain its own counsel, with the fees and expenses to be paid
by the indemnifying party, to the extent that representation of such indemnified
party by the counsel retained by the indemnifying party would be inappropriate
due to actual or potential conflict of interests between such indemnified party
and any other party represented by such counsel in such proceeding. The failure
to deliver written notice to the indemnifying party within a reasonable time of
the commencement of any such action shall not relieve such indemnifying party of
liability except to the extent the indemnifying party is prejudiced as a result
thereof.

                                       13
<PAGE>
                  (d)      Contribution. In order to provide for just and
equitable contribution to joint liability under the Securities Act in any case
in which either (1) the Holder exercising rights under this Agreement, or any
controlling person of the Holder, makes a claim for indemnification pursuant to
this section, but it is judicially determined (by the entry of a final judgment
or decree by a court of competent jurisdiction and the expiration of time to
appeal or the denial of the last right of appeal) that such indemnification may
not be enforced in full in such case notwithstanding the fact that this section
provides for indemnification in such case, or (2) contribution under the
Securities Act may be required on the part of the Holder or any such controlling
person in circumstances for which indemnification is provided under this
section; then, and in each such case, the Company and the Holder will contribute
to the aggregate losses, claims, damages or liabilities to which they may be
subject (after contribution from others) in such proportion so that the Holder
is responsible for the portion represented by the percentage that the public
offering price of the Registrable Securities offered by and sold by the Holder
under the registration statement bears to the public offering price of all
securities offered by and sold under such registration statement, and the
Company is responsible for the remaining portion. If, however, the allocation
provided by the immediately preceding sentence is not permitted by applicable
law, if the registration statement in question does not register thereon at
least a majority of securities other than the Registrable Securities or if the
indemnified party failed to give the notice required under subsection (c) above,
then each indemnifying party shall contribute to the amount paid or payable by
such indemnified party in such proportion as is appropriate to reflect not only
the relative benefits received (as described in the previous sentence of this
subsection (d)) but also the relative fault of the Company on the one hand and
the Holder on the other in connection with the applicable Violation or action
taken or not taken, as well as any other relevant equitable considerations. The
relative benefits received by the Company on the one hand and the Holder on the
other shall be deemed to be in the same proportion as the total net proceeds
from the offering (before deducting expenses) received by the Company on the one
hand and the Holder on the other hand. The relative fault shall be determined by
reference to, among other things, whether the applicable Violation relates to
information supplied by or action taken or not taken by the Company on the one
hand or the Holder on the other and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such Violation or to
take or not to take such action. The Company and the Holder agree that it would
not be just and equitable if contribution pursuant to this subsection (d) were
determined by pro rata allocation or by any other method of allocation which
does not take account of the equitable considerations referred to above in this
subsection (d). In any such case: (x) the Holder will not be required to
contribute any amount in excess of the net proceeds received by the Holder from
the public offering price of all the Registrable Securities offered and sold by
the Holder pursuant to such registration statement; and (y) no person or entity
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) will be entitled to contribution from any person or entity
who was not guilty of such fraudulent misrepresentation.

                  6.7      Survival. The obligations of the Company and the
Holder under this Section 6.7 shall survive until the expiration of any statutes
of limitation including extensions thereof.

                                       14
<PAGE>
         7.       CERTAIN COMPANY REPRESENTATIONS, WARRANTIES AND COVENANTS.

                  7.1      The Company represents, warrants and covenants that:

                  (a)      it will at all times reserve and set apart and have,
free from preemptive or stock purchase rights, a sufficient number of shares of
authorized but unissued common stock and the Warrant Stock, if applicable, to
provide for the issuance of the Warrant Stock upon the exercise of this Warrant
(and for the issuance of any security into which the Warrant Stock or other
securities into which the Warrant Stock or other security may be exercisable,
exchangeable or convertible) and will take any and all actions, including
without limitation, amending its Certificate of Incorporation, necessary to
comply herewith;

                  (b)      before taking any action that would cause an
adjustment reducing the Exercise Price below the then par value of the shares
issuable upon exercise of this Warrant, the Company will take any corporate
action that may be necessary in order that the Company may validly and legally
issue fully paid and nonassessable shares of such Warrant Stock or common stock
at such adjusted Exercise Price;

                  (c)      the issuance of this Warrant shall constitute full
authority to the Company's officers who are charged with the duty of executing
stock certificates to execute and issue the necessary certificates for the
shares of Warrant Stock issuable upon exercise of this Warrant;

                  (d)      the Company has all requisite legal and corporate
power to execute and deliver this Warrant, to sell and issue the Warrant Stock
issuable upon exercise of this Warrant and to carry out and perform its
obligations under the terms of this Warrant;

                  (e)      all corporate action on the part of the Company, its
directors and stockholders necessary for the authorization, execution, delivery
and performance of this Warrant by the Company, the authorization, sale,
issuance and delivery of the Warrant Stock issuable upon exercise of this
Warrant, and the performance of the Company's obligations hereunder has been
taken; and

                  (f)      the Warrant Stock issuable upon exercise of this
Warrant, when issued in compliance with the provisions of this Warrant, will be
legally and validly issued, fully paid and nonassessable, and free of any
preemptive or stock purchase rights, liens, claims or any other encumbrances
whatsoever, and will be issued in compliance with all applicable federal and
state securities and blue sky laws;

                  7.2      So long as the Holder holds this Warrant and/or any
of the Warrant Stock, the Company shall deliver to the Holder: (a) promptly
after mailing, copies of all notices or other written communications to the
stockholders of the Company, (b) at such time, if any, as the Company is no
longer timely making filings with the SEC that are available on the World Wide
Web, within ninety (90) days after the end of each fiscal year of the Company,
full year end financial statement audited by a certified independent accounting
firm reasonably acceptable to Holder, (c) at such time, if any, as the Company
is no longer timely making filings with the SEC that are available on the World
Wide Web, within forty-five (45) days after the end of each fiscal

                                       15
<PAGE>
quarter, quarterly, full quarterly financial statements and (d) within thirty
(30) days after the end of each month, Company-prepared full monthly financial
statements.

                  7.3      No Stockholder Rights. This Warrant, by itself, as
distinguished from any Warrant Stock acquired hereunder, shall not entitle the
Holder to any rights of a stockholder of the Company, including, without
limitation, the right to vote or consent as a stockholder of the Company;
provided that nothing herein shall impair any rights granted to the Holder under
the Loan Agreement or in this Agreement (including, without limitation, in
Section 7.2 hereof).

         8.       NO IMPAIRMENT. The Company will not, by amendment of its
Certificate of Incorporation or Bylaws, or through reorganization,
recapitalization, reclassification, consolidation, merger, dissolution, issue or
sale of securities, conveyance of assets or similar transaction or any other
voluntary action, willfully avoid or seek to avoid the observance or performance
of any of the terms of this Warrant, but will at all times in good faith assist
in the carrying out of all of the terms hereof and in the taking of all such
action as may be necessary or appropriate in order to protect the rights of the
Holder against impairment. Without limiting the generality of the foregoing, the
Company will take all such action as may be necessary or appropriate in order
that the Company may duly and validly issue fully paid and nonassessable shares
of Warrant Stock upon the exercise of this Warrant. Further, the Company will
take all actions to apply the protections provided to Lender under Section 4 to
the Warrant Stock which is not common stock of the Company or Common Stock
Equivalents to prevent the dilution of Lender's ownership interest or impairment
of the Lender's rights or interest hereunder. The Company shall not effect any
reorganization, recapitalization, reclassification, consolidation, merger,
dissolution, issue or sale of securities, conveyance of assets or similar
transactions unless prior to or simultaneously with the consummation thereof the
survivor or successor entity (if other than the Company) resulting from such
transaction or the entity purchasing such assets or receiving such conveyance or
otherwise succeeding to the rights and/or assets of the Company shall assume by
written instrument satisfactory to the Holder executed and sent to such Holder,
the obligation to deliver to such Holder such shares of stock, securities,
assets (including cash), property, evidences of indebtedness or other rights,
warrants or options as such Holder may be entitled to receive hereunder, and
containing the express assumption by such successor entity of the due and
punctual performance and observance of every provision of this Warrant to be
performed and observed by the Company and of all liabilities and obligations of
the Company hereunder.

         9.       ATTORNEYS' FEES. In the event any party engages the services
of any attorneys for the purpose of enforcing this Warrant, or any provision
thereof, the prevailing party shall be entitled to recover its reasonable
expenses and costs in enforcing this Warrant, including reasonable attorneys'
fees and expenses.

         10.      GOVERNING LAW. This Warrant shall be governed by and construed
under the internal laws of the State of California, without reference to
principles of conflict of laws thereof.

         11.      HEADINGS. The headings and captions used in this Warrant are
used for convenience only and are not to be considered in construing or
interpreting this Warrant. All references in this Warrant to sections and
exhibits shall, unless otherwise provided, refer to

                                       16
<PAGE>
sections hereof and exhibits attached hereto, all of which exhibits are
incorporated herein by this reference.

         12.      NOTICES. Any notice required or permitted under this Warrant
shall be given in accordance with the terms of Section 9.5 of the Loan Agreement
and such terms are herein incorporated by reference.

         13.      AMENDMENT; WAIVER. Any term of this Warrant may be amended,
and the observance of any term of this Warrant may be waived (either generally
or in a particular instance and either retroactively or prospectively) only with
the written consent of the Company and the Holder. Any amendment or waiver
effected in accordance with this Section 13 shall be binding upon the Holder,
each future holder of such securities, the Company and the Company's successor
and permitted assigns.

         14.      SEVERABILITY. In case any provision of this Warrant shall be
held to be invalid, illegal or unenforceable, it shall, to the extent possible,
be modified in such manner as to be valid, legal and enforceable but so as to
most nearly retain the intent of the parties, and if such modification is not
possible, such provision shall be severed from this Warrant, and in either case
the validity, legality and enforceability of the remaining provisions of this
Warrant and the future application of such provision shall not in any way be
affected or impaired thereby.

                                       17
<PAGE>
         15.      SUCCESSORS AND ASSIGNS. This Warrant may not be assigned or
otherwise transferred by the Company without the written consent of the Holder.
The terms and provisions of this Warrant shall inure to the benefit of, and be
binding upon, the Company and the Holder hereof and their respective successors
and permitted assigns.

COMPUTER MOTION, INC.

By:
    --------------------
    Name: Robert W. Duggan
    Title: Chief Executive Officer

Facsimile:        (805) 968-4920
Attention:        Robert W. Duggan

AGILITY CAPITAL, LLC

By:_______________________________
    Name:    Robert L. Skinner
    Title:   Chief Executive Officer

Facsimile:   (805) 568-0427
Attention:   Robert L. Skinner

                                       18
<PAGE>
                                    Exhibit 1

                              FORM OF SUBSCRIPTION
                  (To be signed only upon exercise of Warrant)

To:  Computer Motion, Inc.

         (1)      The undersigned Holder hereby elects to purchase ____________
shares of Warrant Stock, pursuant to the terms of the attached Warrant, and
tenders herewith payment of the purchase price for such shares in full.

                                     - OR -

                  Net Exercise Election. The undersigned Holder elects to
convert the Warrant into ___________ shares of Warrant Stock by net exercise
election pursuant to Section 2.7 of the Warrant.

                      [CHECK PARAGRAPH ABOVE THAT APPLIES]

         (2)      Please issue a certificate representing _______________ shares
of Warrant Stock in the name of specified below:

_____________________________________
(Name)

_____________________________________
(Address)

_____________________________________
(City, State, Zip Code)

_____________________________________
(Federal Tax Identification Number)

_____________________________________
(Date)

_____________________________________
(Signature of Holder)

                                       19<PAGE>

                                                                    EXHIBIT 10.1

                       LOAN AND SECURITY AGREEMENT

                                       BY

                                   AND BETWEEN

                             COMPUTER MOTION, INC.,

                                       AND

                              AGILITY CAPITAL, LLC

                          DATED AS OF FEBRUARY 13, 2003
<PAGE>
                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                         Page
                                                                                         ----
<S>          <C>                                                                         <C>
SECTION 1.   DEFINITIONS...............................................................   1
    1.1      DEFINED TERMS.............................................................   1
    1.2      OTHER DEFINITIONAL PROVISIONS.............................................   7

SECTION 2.   AMOUNT OF LOAN............................................................   8
    2.1      LOAN......................................................................   8
    2.2      NOTES.....................................................................   8
    2.3      MAKING OF LOAN............................................................   8
    2.4      REPAYMENT OF LOAN.........................................................   8
    2.5      COLLATERAL................................................................   8

SECTION 3.   GENERAL PROVISIONS APPLICABLE TO LOAN.....................................   9
    3.1      INTEREST RATE AND PAYMENTS................................................   9
    3.2      PREPAYMENT................................................................   9
    3.3      ISSUANCE OF WARRANT.......................................................  10

SECTION 4.   COMPANY REPRESENTATIONS, WARRANTIES AND COVENANTS.........................  10
    4.1      EXISTENCE.................................................................  10
    4.2      POWER; AUTHORIZATION; ENFORCEABLE OBLIGATIONS.............................  10
    4.3      NO LEGAL BAR..............................................................  11
    4.4      SUBSIDIARIES..............................................................  11
    4.5      CAPITALIZATION............................................................  11
    4.6      MATERIAL ADVERSE FACTS....................................................  11
    4.7      PURPOSE OF LOAN...........................................................  12
    4.8      LIABILITIES...............................................................  12
    4.9      TITLE TO PROPERTY AND ASSETS..............................................  12
    4.10     INTELLECTUAL PROPERTY.....................................................  12
    4.11     ERISA.....................................................................  12
    4.12     BROKERS...................................................................  13
    4.13     USE OF CREDIT.............................................................  13
    4.14     INDEBTEDNESS..............................................................  13
    4.15     LITIGATION................................................................  13
    4.16     FINANCIAL CONDITION; UNKNOWN LIABILITIES..................................  13
    4.17     TAXES.....................................................................  14
    4.18     CERTAIN REGULATIONS.......................................................  14
    4.19     ENVIRONMENTAL MATTERS.....................................................  14
    4.20     ACCOUNTS RECEIVABLE.......................................................  14
    4.21     SEC DOCUMENTS; FINANCIAL STATEMENTS AND NO MATERIAL CHANGES...............  14
    4.22     OWNERSHIP OF CMI.HERMES, INC..............................................  15
    4.23     DISCLOSURE................................................................  15
</TABLE>

                                        i
<PAGE>
<TABLE>
<S>          <C>                                                                         <C>
SECTION 5.   CONDITIONS OF LENDING.....................................................  16
    5.1      LOAN DOCUMENTS............................................................  16
    5.2      PROCEEDINGS...............................................................  16
    5.3      INCUMBENCY CERTIFICATES...................................................  16
    5.4      ORGANIZATION DOCUMENTS....................................................  16
    5.5      REPRESENTATIONS AND WARRANTIES; NO DEFAULT................................  16
    5.6      SECURITY INTEREST.........................................................  17
    5.7      INTELLECTUAL PROPERTY SECURITY INTEREST...................................  17
    5.8      DUE DILIGENCE.............................................................  17
    5.9      LOCK BOX AGREEMENT........................................................  17
    5.10     DEPOSIT ACCOUNT CONTROL AGREEMENTS........................................  17
    5.11     ISSUANCE OF WARRANT.......................................................  17

SECTION 6.   AFFIRMATIVE COVENANTS.....................................................  17
    6.1      PAYMENT OF OBLIGATIONS....................................................  17
    6.2      MAINTENANCE OF ACCOUNTS RECEIVABLE........................................  18
    6.3      CONDUCT OF BUSINESS; MAINTENANCE OF EXISTENCE; AND COMPLIANCE WITH LAWS...  18
    6.4      MAINTENANCE OF INSURANCE..................................................  18
    6.5      TAXES.....................................................................  18
    6.6      MAINTENANCE OF PROPERTIES.................................................  18
    6.7      INFORMATION RIGHTS........................................................  18
    6.8      BOARD OBSERVATION RIGHTS..................................................  19
    6.9      EVENT OF PREPAYMENT.......................................................  19
    6.10     LOCK BOX INSTRUCTIONS.....................................................  19

SECTION 7.   NEGATIVE COVENANTS........................................................  20
    7.1      LIMITATION ON INDEBTEDNESS................................................  20
    7.2      LIMITATION ON LIENS.......................................................  21
    7.3      LIMITATIONS ON TRANSACTIONS WITH AFFILIATES...............................  21
    7.4      RESTRICTIONS ON TRANSACTIONS AND FUNDAMENTAL CHANGES......................  22
    7.5      SALE OF ASSETS; TRANSFER TO SUBSIDIARY....................................  22
    7.6      REPURCHASE OF SECURITIES..................................................  22
    7.7      CORPORATE GOVERNANCE......................................................  23
    7.8      BANK ACCOUNTS.............................................................  23

SECTION 8.   EVENTS OF DEFAULT.........................................................  23
    8.1      EVENT OF DEFAULT..........................................................  23
    8.2      USE OF COLLATERAL.........................................................  25
    8.3      CREDIT PARTIES TO HOLD IN TRUST...........................................  25
    8.4      COLLECTIONS, ETC..........................................................  25
    8.5      POSSESSION, SALE OF COLLATERAL, ETC.......................................  26
    8.6      APPLICATION OF PROCEEDS ON DEFAULT........................................  27
    8.7      POWER OF ATTORNEY.........................................................  27
    8.8      TERMINATION AND RELEASE...................................................  28
    8.9      REMEDIES NOT EXCLUSIVE....................................................  28
</TABLE>

                                       ii
<PAGE>
<TABLE>
<S>          <C>                                                                         <C>
SECTION 9.   MISCELLANEOUS.............................................................  28
    9.1      PROMOTIONAL MATERIALS.....................................................  28
    9.2      INDEMNIFICATION...........................................................  28
    9.3      ENTIRE AGREEMENT; AMENDMENTS..............................................  29
    9.4      WAIVERS...................................................................  29
    9.5      NOTICES...................................................................  29
    9.6      SUCCESSORS AND ASSIGNS....................................................  30
    9.7      INTEREST DEFICIT..........................................................  30
    9.8      CONFIDENTIALITY...........................................................  30
    9.9      PAYMENT OF EXPENSES.......................................................  31
    9.10     CAPTIONS..................................................................  31
    9.11     COUNTERPARTS..............................................................  31
    9.12     SEVERABILITY; REFORMATION.................................................  31
    9.13     WAIVER OF JURY TRIAL......................................................  31
    9.14     GOVERNING LAW.............................................................  32
</TABLE>

<TABLE>
<CAPTION>
SCHEDULES
---------
<S>                   <C>
Schedule 4.1          State of Incorporation
Schedule 4.4          Subsidiaries
Schedule 4.5          Capitalization
Schedule 4.10         Intellectual Property
Schedule 4.15         Litigation
Schedule 4.16         Financial Statements
Schedule 7.1(b)       Limitation on Indebtedness
Schedule 7.2(f)       Limitation on Liens
Schedule 7.8          Bank Accounts
</TABLE>

<TABLE>
<CAPTION>
EXHIBITS
--------
<S>                   <C>
Exhibit A             Description of Collateral
Exhibit B             Form of Intellectual Property Security Agreement
Exhibit C             Form of Note
Exhibit D             Form of Warrant
Exhibit E             Form of Accounts Receivable Certificate
</TABLE>

                                       iii
<PAGE>
         LOAN AND SECURITY AGREEMENT, dated as of February 13, 2003, by and
between Computer Motion, Inc., a Delaware corporation (the "Borrower") and
Agility Capital, LLC, a California limited liability company (the "Lender").

         WHEREAS, the Borrower has requested a short-term secured bridge loan
from the Lender in an aggregate principal amount not to exceed $2,300,000;

         WHEREAS, the Borrower has agreed to issue to the Lender a warrant to
acquire shares of Stock (as defined below); and

         WHEREAS, the Lender is willing to make such loan to the Borrower upon
the terms and subject to the conditions hereinafter set forth;

         NOW, THEREFORE, in consideration of the premises and the mutual
agreements contained herein and for other good and valuable consideration the
receipt and sufficiency of which is hereby acknowledged, the parties hereto
agree as follows:

                             SECTION 1. DEFINITIONS

         1.1      Defined Terms. As used in this Agreement, the following terms
shall have the following meanings:

                  "Acceptable Accounts" shall mean accounts receivable of the
         Borrower that originate in the United States or Canada: (i) which
         constitute legal, valid and binding obligations arising from bona fide
         transactions in the ordinary course of business consistent with past
         practices of the Borrower, (ii) against which there are no contests,
         claims, counterclaims, defenses, contra accounts or other rights of
         set-off, other than returns in the ordinary course consistent with past
         practices of the Borrower, (iii) not to exceed one hundred twenty (120)
         days in age from the applicable invoice date, and (iv) with
         creditworthiness acceptable to Lender in its discretion.
         Creditworthiness may include, without limitation, the following
         factors: customer creditworthiness, credit concentrations, credit
         cross-agings, contra accounts and dilution. Accounts receivable that
         originate outside of the United States or Canada may be considered
         Acceptable Accounts as determined on a case-by-case basis by Lender in
         its sole discretion.

                  "Affiliate" shall mean any other Person controlling or
         controlled by or under common control with such specified Person.

                  "Agreement" shall mean this Loan and Security Agreement, as
         amended, supplemented, waived or otherwise modified from time to time
         pursuant to the terms hereof.

                  "Borrower" shall have the meaning set forth in the preamble
         hereto.

                  "Business Day" shall mean a day other than a Saturday, Sunday
         or other day on which commercial banks in Santa Barbara, California are
         authorized or required by law to close.
<PAGE>
                  "Closing Date" shall mean the date on which all the conditions
         precedent set forth in Section 5 shall be satisfied or waived pursuant
         to the terms hereof. The original Closing Date shall occur on such
         date, on or prior to February 13, 2003, as the Borrower and the Lender
         agree, failing which this Agreement shall be of no further force or
         effect.

                  "Collateral" shall have the meaning set forth in Exhibit A
         hereto.

                  "Common Stock" shall mean shares of the Borrower's common
         stock, par value $0.001 per share.

                  "Contractual Obligation" shall mean, as to any Person, any
         provision of any security issued by such Person or of any agreement,
         instrument, document or other undertaking to which such Person is a
         party or by which it or any of its property is bound.

                  "Control" (including, with correlative meaning, the terms
         "controlling", "controlled by," "under common control with" and similar
         phrases) shall mean with respect to any Person, the possession,
         directly or indirectly, of the power to direct, or cause the direction
         of, the management or policies of a Person, whether through the
         ownership of voting securities, by contract or otherwise.

                  "Default" shall mean any event, act or condition which with or
         without notice or lapse of time, or both, could constitute an Event of
         Default.

                  "Deposit Account Control Agreements" shall mean deposit
         account control agreements on commercially reasonable terms and
         conditions in which all of the Borrower's accounts with any financial
         institution shall be subject to Lender's right upon the occurrence and
         during the continuance of an Event of Default to restrict the use of
         such accounts and to turn over the proceeds from such accounts to
         Lender, in form and substance reasonably satisfactory to the Lender;
         provided that the Borrower shall be required to enter into a Deposit
         Account Control Agreement with respect to accounts maintained at
         Salomon Smith Barney but such agreement shall not be implemented unless
         and until there has occurred an Event of Default.

                  "Exchange Act" shall mean the Securities Exchange Act of 1934,
         as amended, or any successor or similar statute and the rules and
         regulations of the SEC promulgated thereunder as in effect from time to
         time.

                  "Event of Default" shall mean the occurrence of any of the
         events specified in Section 8.

                  "Event of Prepayment" shall mean (i) the sale, lease, license,
         exchange, transfer or similar transaction involving all or
         substantially all of the assets of the Borrower, other than inventory
         in the ordinary course of business, in one or more transactions after
         the Closing Date; (ii) the closing date of a recapitalization,
         reorganization, merger, consolidation or other transaction or
         transactions (whether

                                        2
<PAGE>
         by sale, gift or other transfer or disposition), which transaction or
         transactions result in the transfer of control of the Borrower
         excluding any securities under any option plan of the Borrower (which
         plan, type of securities and amount of securities are approved by
         Lender in writing) which have not been granted, or which have been
         granted but have not yet vested, in each case on or prior to the date
         in question) on a fully-diluted basis; (iii) any action (voluntary or
         involuntary) to liquidate, dissolve and/or wind down the Business of
         the Borrower, (iv) the sale, lease, license, exchange, transfer or
         similar transaction of any division or business of the Borrower in one
         or more transactions after the Closing Date in which the aggregate
         gross proceeds to the Borrower in connection with such transactions
         are at least $2,500,000 (or, in the event of a transaction in which
         the Borrower receives or is deemed to receive consideration other than
         cash, the Borrower receives, or is deemed to have received, value (as
         determined by the Lender) in the form of cash, marketable securities,
         assets, contract rights, otherwise or a combination thereof of at
         least $2,500,000) or (v) the sale, issuance, exchange, Transfer or
         similar transaction involving any debt (other than Subordinated Debt
         otherwise permitted in accordance with Section 7.1(f)) and the
         securitization of receivables in one or more transactions in which the
         aggregate gross proceeds received by the Borrower in connection with
         such transaction are at least $2,500,000 (or, in the event of a
         transaction in which the Borrower receives or is deemed to receive
         consideration other than cash, the Borrower receives, or is deemed to
         have received, value (as determined by the Lender) in the form of
         cash, marketable securities, assets, contract rights, otherwise or a
         combination thereof of at least $2,500,000). Notwithstanding anything
         to the contrary in the foregoing, in the event the Borrower sells or
         otherwise disposes of its "Hermes" line of business in one or more
         transactions, Borrower shall pay to Lender: (i) in the event the
         proceeds (whether cash or other consideration) of such sale or other
         disposition are $2,500,000 or less, 100% of such proceeds (up to the
         amount of the Secured Obligations), (ii) in the event the proceeds
         (whether cash or other consideration) of such sale or other
         disposition are greater than $2,500,000 but less that $6,000,000, 50%
         of such proceeds (up to the amount of the Secured Obligations) and
         (iii) in the event the proceeds (whether cash or other consideration)
         of such sale or other disposition are greater than $6,000,000, 15% of
         such proceeds (up to the amount of the Secured Obligations).

                  "GAAP" shall mean the generally accepted accounting principles
         in the United States of America in effect from time to time.

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

                  "Indebtedness" shall mean (without double counting), at any
         time and with respect to any Person, (i) indebtedness of such Person
         for borrowed money (whether by loan or the issuance and sale of debt
         securities) or for the deferred purchase price of property or services
         purchased (other than amounts constituting

                                        3
<PAGE>
         trade payables (payable within 45 days) arising in the ordinary course
         of business); (ii) obligations of such Person in respect of letters of
         credit, acceptance facilities, or drafts or similar instruments issued
         or accepted by banks and other financial institutions for the account
         of such Person; (iii) obligations of such Person under capital leases
         and any financing lease involving substantially the same economic
         effect; (iv) deferred payment obligations of such Person resulting
         from the adjudication or settlement of any litigation or claim to the
         extent not already reflected as a current liability on the balance
         sheet of such Person; (v) trade debt not incurred in the ordinary
         course of business or trade debt in excess of $150,000 as to any
         single creditor or in excess of $150,000 in the aggregate; or (vi)
         indebtedness of others of the type described in clauses (i) through
         (v) which such Person has (a) directly or indirectly assumed or
         guaranteed in connection with a guaranty, or (b) secured by a Lien on
         any of the assets of such Person whether or not such Person has
         assumed or guaranteed such indebtedness.

                  "Intellectual Property" shall have the meaning set forth in
         Section 4.10.

                  "Intellectual Property Security Agreement" shall mean the
         Intellectual Property Security Agreement, dated as of the date hereof,
         by and between the Lender and the Borrower, in substantially the form
         attached hereto as Exhibit B.

                  "Interest Rate" shall have the meaning set forth in Section
         3.1.

                  "Interest Deficit" shall have the meaning set forth in Section
         9.7.

                  "Lender" shall have the meaning set forth in the preamble
         hereto.

                  "Lien" shall mean any mortgage, deed of trust, pledge,
         security interest, hypothecation, assignment, encroachment, lien
         (statutory or otherwise), claim, option, reservation, priority,
         preferential arrangement, easement or other encumbrance of any kind.

                  "Loan" or "Loans" shall have the meaning set forth in Section
         2.1.

                  "Loan Availability" shall mean $2,300,000, fully available
         upon Closing.

                  "Loan Documents" shall mean this Agreement, the Note, the
         Intellectual Property Security Agreement, the Warrant, the Deposit
         Account Control Agreement and any and all other agreements,
         certificates, instruments or documents made, given or delivered in
         connection with the consummation of any transaction contemplated by a
         Loan Document.

                  "Lock Box Account" shall mean any checking or other demand
         depository account maintained by the Borrower into which the contents
         of any other checking, demand or other depository account of the
         Borrower is transferred pursuant to the applicable Lock Box Agreement.

                                        4
<PAGE>
                  "Lock Box Agreements" shall mean each of the Lock Box
         Agreements on commercially reasonable terms and conditions, by and
         among the Lender, the Borrower and the applicable financial institution
         that recognizes the Lender's security interest in the contents of the
         checking, demand or other depository account which is the subject of
         such agreement and provides that such contents shall be transferred
         only to the applicable Lock Box Account or as otherwise instructed by
         Lender.

                  "Material Adverse Change" shall mean an event, act, condition
         or change which had, has or could have a material adverse effect on (a)
         the business, operations, results of operations, properties, assets,
         condition (financial or otherwise) or prospects of the Borrower or (b)
         any right or remedy of the Lender under any Loan Document.

                  "Maturity Date" shall mean November 12, 2003.

                  "Note" shall have the meaning set forth in Section 2.2.

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

                  "Proceeds" shall mean whatever is received when Collateral or
         Proceeds are sold, exchanged, collected or otherwise disposed of, both
         cash and non-cash, including the proceeds of insurance payable by
         reason of loss of or damage to Collateral or Proceeds and any license
         fees, royalties and other similar items received in connection with
         Collateral.

                  "Requirement of Law" shall mean as to any Person, the articles
         or certificate of incorporation and by-laws or other organizational or
         governing documents of such Person, and any law, statute, treaty,
         ordinance, 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.

                  "SEC" shall mean the Securities and Exchange Commission or any
         successor thereto.

                  "Secured Obligations" shall mean all money, debts, obligations
         and liabilities which now are or have been or at any time hereafter may
         be or become due, owing or incurred by the Borrower to the Lender,
         whether direct or indirect, absolute or contingent, due or to become
         due, or now existing or hereafter incurred, which may arise under, out
         of, or in connection with any Loan Document or any transaction
         contemplated by any Loan Document, whether on account of principal,
         interest (including, without limitation, interest accruing after the
         Maturity Date on the Note and interest accruing after the filing of any
         petition in bankruptcy, or the commencement of any insolvency,
         reorganization or like

                                        5
<PAGE>
         proceeding, relating to the Borrower, whether or not a claim for
         post-filing or post-petition interest is allowed in such proceeding),
         royalties, reimbursement obligations, fees, indemnities, costs,
         expenses or otherwise.

                  "Securities Act" shall mean the Securities Act of 1933, as
         amended, or any successor or similar statute and the rules and
         regulations of the SEC promulgated thereunder as in effect from time to
         time.

                  "Stock" shall mean shares of Common Stock.

                  "Subordinated Debt" shall mean unsecured Indebtedness
         subordinated to the Loan on terms and conditions satisfactory to
         lender, evidenced by a subordination agreement in form and substance
         satisfactory to lender which by its terms does not permit the payment
         of all or any portion of any principal, interest or any other amounts
         until the indefeasible payment in full of all Secured Obligations.

                  "Subsidiary" shall have the meaning set forth in Section 4.4.

                  "Tax Return" shall mean any return, declaration, report, claim
         for refund, information return or statement, estimated return or
         statement or other document (including, without limitation, any related
         or supporting estimates, elections, schedules, statements or
         information) filed or required to be filed in connection with the
         determination, assessment or collection of any Tax or the
         administration of any laws, statutes, treaties, regulations or
         administrative requirements relating to any Tax.

                  "Tax" or "Taxes" shall mean (i) any and all taxes (whether
         federal, state and local, domestic or foreign) including, without
         limitation, income, gross receipts, profits, property, sales, use,
         capital stock, net worth, occupation, value added, ad valorem,
         transfer, franchise, recapture, excise, windfall, withholding, payroll,
         social security, workers' compensation, unemployment compensation or
         employment taxes, tariffs, imposts, duties, levies, fees or
         governmental charges of any nature whatsoever, together with any
         interest, penalties or additions to tax imposed with respect to any of
         the foregoing, and (ii) any obligations under any agreements or
         arrangements with respect to any tax or taxes described in clause (i)
         above.

                  "UCC" shall mean the Uniform Commercial Code of the State of
         California as in effect on the date hereof and as amended from time to
         time hereafter or, when used in relation to a specific filing or
         termination, the Uniform Commercial Code of the State wherein such
         filing or termination statement is made.

                  "Warrant" shall have the meaning set forth in Section 3.3 (a).

                  "Warrant Shares" shall have the meaning set forth in Section
         3.3 (b).

                                        6
<PAGE>
         1.2      Other Definitional Provisions.

                  (a)      Unless otherwise specified therein, all terms defined
in this Agreement shall have the defined meanings when used in the Note or any
agreement, instrument, certificate or other document made, given or delivered
pursuant hereto.

                  (b)      Unless the context of this Agreement clearly requires
otherwise, references to the plural include the singular, references to the
singular include the plural, the part includes the whole, the terms "include"
and "including" are not limiting, and the term "or" has the inclusive meaning
represented by the phrase "and/or."

                  (c)      The words "hereof," "herein" and "hereunder" and
words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this Agreement, and
Section, subsection, Exhibit and Schedule references are to this Agreement
unless otherwise specified.

                  (d)      The meanings given to terms defined herein shall be
equally applicable to both the singular and plural forms of such terms.

                  (e)      Any reference in this Agreement to any of the Loan
Documents includes any and all alterations, amendments, extensions,
modifications, renewals, restatements, or supplements thereto or thereof, as
applicable.

                  (f)      Neither this Agreement nor any uncertainty or
ambiguity herein shall be construed or resolved against the Lender or the
Borrower, whether under any rule of construction or otherwise. On the contrary,
this Agreement has been reviewed by the Borrower, the Lender, and their
respective counsel, and shall be construed and interpreted according to the
ordinary meaning of the words used so as to fairly accomplish the purposes and
intentions of the Lender and the Borrower.

                           SECTION 2. AMOUNT OF LOAN

         2.1      Loan. Subject to the terms and conditions hereof, the Lender
agrees to make a Loan to the Borrower in a single draw on the Closing Date in an
aggregate principal amount which shall not exceed the Loan Availability.
Concurrently with the Closing, the Borrower shall pay to Lender the Loan fee of
$46,000 plus an amount (provided by Lender to Borrower as soon as reasonably
practicable before the Closing) sufficient to pay costs, fees and expenses
(including, without limitation, legal fees and expenses) of the Lender. As used
herein, the term "Loan" shall mean the loan made by the Lender in accordance
with this Section 2.1.

         2.2      Notes. In order to evidence the Loan, the Borrower will
execute and deliver to the Lender on the initial Closing Date a secured
promissory note substantially in the form of Exhibit C attached hereto, payable
to the order of the Lender and in a principal amount equal to $2,300,000. The
Note: (a) shall be dated the Closing Date; (b) shall be payable as provided in
Section 2.4; (c) shall provide for the payment of interest in accordance with
Section 3.1; and (d) shall be subject to mandatory prepayment in accordance with
Section 3.2(b).

                                        7
<PAGE>
         2.3      Making of Loan. The Lender shall have no obligation to make
the Loan hereunder unless the Lender, in its sole discretion, determines that
the Loan Documents are in full force and effect, and the Borrower is in full
compliance with all the terms of this Agreement, the Note, the Intellectual
Property Security Agreement and the other Loan Documents.

         2.4      Repayment of Loan.

                  (a)      Except as set forth below, the aggregate amount of
the Loan shall be payable, together with all accrued and unpaid interest thereon
and all other Secured Obligations, on the Maturity Date.

                  (b)      The Borrower shall not be obligated to make any
principal payments on the Loan other than upon the Maturity Date or as otherwise
required pursuant to the provisions of Section 3.2(b).

         2.5      Collateral.

                  (a)      Security Interest. This Agreement constitutes a
"security agreement" within the meaning of the UCC. In order to secure payment
and performance of all present and future Secured Obligations, the Borrower
hereby grants, assigns, transfers, pledges, and sets over to the Lender a
first-priority security interest in and Lien on all of the Collateral (subject
to Liens expressly permitted under Sections 7.2(a) and (e) hereof and those
other Liens set forth in Section 7.2 required as a matter of law to have
priority over the Secured Obligations; provided that, with respect to such other
security interests and other Liens, such security interests and Liens shall not
be with respect to claimed amounts in excess of $100,000 in the aggregate).
Lender agrees to execute and deliver to the Borrower, at the sole cost of the
Borrower, from time to time such Lien releases as the Borrower may reasonably
request and as are necessary to give to other lenders which finance equipment
for the Borrower a first priority security interest in the equipment financed so
long as the Indebtedness and Liens incurred with respect to such equipment
financing are expressly permitted under Sections 7.1(d) and (e) and 7.2(a) and
(e) hereto, respectively.

                  (b)      Further Assurances. The Borrower agrees that at any
time and from time to time, at its expense, the Borrower will promptly execute
and deliver all further agreements, certificates, instruments and documents
(including, without limitation, financing statements and continuation
statements), and take all further action that the Lender may reasonably request
(including obtaining any control agreements or bailee acknowledgments required
by Lender), in order to perfect and protect the security interests granted or
purported to be granted hereby and to enable the Lender to exercise and enforce
its rights and remedies hereunder with respect to any Collateral. The Borrower
agrees that it will not take any action intended or reasonably likely to
negatively impact or question the security interest granted herein. Without
limiting any rights of the Lender under the UCC, the Borrower authorizes the
Lender to file UCC financing statements with any filing office deemed
appropriate by the Lender designating the Collateral as "all present and future
assets" of the Borrower.

                                        8
<PAGE>
                SECTION 3. GENERAL PROVISIONS APPLICABLE TO LOAN

         3.1      Interest Rate and Payments. The outstanding principal of the
Loan shall accrue interest from the date such Loan is disbursed pursuant to the
terms hereunder until and including the date paid in full at a rate per annum
(computed on the basis of a 360-day year of twelve 30-day months, provided,
however, that per diem interest shall be calculated on the basis of the actual
number of days elapsed over a year of 365 days) of nine percent (9%) per annum
(the "Interest Rate"). Interest on the Loan shall be payable monthly in arrears
on the first day of each calendar month following the Closing Date, with all
interest due and payable on the Maturity Date or such earlier date upon which
the Loan shall be due and payable in accordance with the terms hereof, in each
case with interest to accrue and be due and payable through and including the
applicable date of payment. Without duplication of any interest payable under
this Section 3.1, the Borrower hereby unconditionally promises to pay to the
Lender interest on any Secured Obligations payable by the Borrower under any
Loan Document that shall not be paid in full when due (whether at stated
maturity, by acceleration or otherwise), for the period from and including the
due date of such payment to and including the date the same is paid in full, at
a rate per annum equal to the Interest Rate plus 600 basis points, which
interest shall be payable from time to time on demand of the Lender.

         3.2      Prepayment.

                  (a)      Optional. The Borrower shall be permitted to prepay
the Loan, or any portion thereof, at any time without penalty or premium; in
each case all payments shall be applied first against any Secured Obligation
(other than interest and principal), then against accrued and unpaid interest
through and including the date of payment and then against principal.

                  (b)      Mandatory. Upon an Event of Prepayment all Secured
Obligations (or the portion thereof described in the definition of "Event of
Prepayment" contained in Section 1.1 hereof) shall immediately become due and
payable; provided that upon a sale, lease, license, exchange, transfer or other
disposition of the Borrower's Hermes line of business such mandatory prepayment
shall be at Lender's sole discretion.

         3.3      Issuance of Warrant.

         As part of execution of this Agreement by the Borrower, the Borrower
shall issue and deliver to the Lender a duly and validly issued, fully paid and
nonassessable warrant to purchase Stock in substantially the form attached
hereto as Exhibit D (the "Warrant").

          SECTION 4. COMPANY REPRESENTATIONS, WARRANTIES AND COVENANTS

         The Borrower represents, warrants and covenants, as of the Closing
Date, that:

         4.1      Existence. The Borrower (a) is duly organized and validly
existing under the laws of the State of Delaware, (b) is duly qualified to do
business and is in good standing in all other jurisdictions in which the nature
of its business or the ownership or leasing of its properties makes such
authorization or qualification necessary except for such jurisdictions where the
failure to be so authorized or qualified could not result in a Material Adverse
Change and (c) has

                                        9
<PAGE>
the power and authority, and the legal right, to own and operate its property,
to lease the property it operates as lessee or lessor and to conduct the
business in which it is presently engaged and presently proposes to engage.

         4.2      Power; Authorization; Enforceable Obligations. The Borrower
has the power and authority, and the legal right, to make, execute, deliver and
perform the Loan Documents, borrow the Loan hereunder, and to issue and deliver
the Warrant and the Warrant Shares, and to consummate the transactions
contemplated hereby and thereby and the Borrower has taken all necessary action
to authorize the execution, delivery and performance of the Loan Documents, the
borrowing of the Loan on the terms and conditions of this Agreement, and the
issuance and delivery of the Warrant and the reservation for issuance, issuance
and delivery of the Warrant Shares, and the consummation of the transactions
contemplated hereby and thereby. No consent or authorization of, filing with,
notice to or other similar act by or in respect of, any Governmental Authority
or any other Person is required to be obtained or made by or on behalf of the
Borrower in connection with the execution, delivery, performance, validity or
enforceability of the Loan Documents to which it is a party, the borrowing of
the Loan hereunder, the issuance and delivery of the Warrant, the reservation
for issuance and the issuance and delivery of the Warrant Shares, or the
consummation of the transactions contemplated hereby and thereby. Each of the
Loan Documents has been duly executed and delivered by the Borrower. Each of the
Loan Documents constitutes a legal, valid and binding obligation of the Borrower
enforceable against the Borrower in accordance with its respective terms.

         4.3      No Legal Bar. The execution, delivery and performance of the
Loan Documents by the Borrower, the borrowing of the Loan hereunder, the use of
the proceeds thereof, and the issuance and delivery of the Warrant and the
reservation for issuance, issuance and delivery of the Warrant Shares, (a) will
not violate any Requirement of Law, which violation could result in a Material
Adverse Change, or Contractual Obligation of the Borrower and (b) will not
result in, or require, the creation or imposition of any Lien on any of its
properties, assets or revenues pursuant to any such Requirement of Law, which
violation could result in a Material Adverse Change or the default or breach of
any Contractual Obligation.

         4.4      Subsidiaries. Except as set forth on Schedule 4.4 hereto, the
Borrower has no, and never has had any, Subsidiaries. For purposes hereof,
"Subsidiary" shall mean, for any Person, any corporation, partnership, limited
liability company or other entity of which at least a majority of the securities
or other ownership interests having by their terms ordinary voting power (or
otherwise) to elect a majority of the board of directors or other Persons
performing similar functions of such corporation, partnership, limited liability
company or other entity (irrespective of whether or not at the time securities
or other ownership interests of any other class or classes of such corporation,
partnership, limited liability company or other entity shall have or might have
voting power by reason of the happening of any contingency) are at the time
directly or indirectly owned or controlled by such Person or one or more
Subsidiaries of such Person.

         4.5      Capitalization. The authorized capital stock of the Borrower
is as set forth on Schedule 4.5 hereto: All such issued and outstanding shares
and warrants have been duly authorized and validly issued, are fully paid and
nonassessable and were issued in compliance with all applicable state and
federal laws concerning issuance of securities. Other than as set

                                       10
<PAGE>
forth on Schedule 4.5(a) hereto, there are no other rights, plans, options,
warrants, agreements or other rights of any Person to purchase or acquire from
the Borrower or any owner of any such item any shares of its capital stock. The
Borrower has no obligation to repurchase, redeem or otherwise acquire any
security or other right of the Borrower. The Warrant and the Warrant Shares will
be, when issued in accordance with the terms and conditions hereof and the
Warrant, duly and validly issued, fully paid and nonassessable and free and
clear from all Liens, stock purchase rights and preemptive rights.

         4.6      Material Adverse Facts. The Borrower has no knowledge of any
fact that could materially adversely affect the ability of the Borrower to
perform its obligations under this Agreement, the Note or the other Loan
Documents or which could result in a Material Adverse Change.

         4.7      Purpose of Loan. The proceeds of the Loan shall be used by the
Borrower to provide funds for the issuance of a letter of credit to support the
issuance of a bond as required by the court order described on Schedule 4.15
hereto.

         4.8      Liabilities. Other than with respect to the Loan and
Indebtedness expressly permitted under Section 7.1 and described in Schedule
7.1(b) hereto, the Borrower does not have any Indebtedness in excess of $50,000
in the aggregate that the Borrower has directly or indirectly created, incurred,
assumed, or guaranteed, or with respect to which the Borrower has otherwise
become directly or indirectly liable. Schedule 7.1(b) sets forth a true,
complete and correct description of all Indebtedness of the Borrower on the
Closing Date.

         4.9      Title to Property and Assets. The Borrower has good and
marketable title to, or a valid leasehold in, all of the Borrower's tangible and
intangible properties and assets (including, without limitation, Intellectual
Property), in each case free and clear of all Liens other than (a) Liens for
taxes not yet due or other statutory liens relating to obligations to any
Governmental Authority which are not yet due, (b) statutory Liens arising in the
ordinary course of business, in each case, which do not interfere with the use
of the properties and assets to which they relate for the purposes for which
those properties and assets were acquired and (c) Liens in favor of the Lender
and other Liens expressly permitted under Section 7.2 hereof. Schedule 7.2(f)
sets forth a true, complete and correct description of all Liens on the Borrower
or its properties or assets on the Closing Date.

         4.10     Intellectual Property. The Borrower possesses all licenses,
permits, franchises, authorizations, patents, copyrights, trademarks, trade
secrets and trade names and any other tangible, intangible or intellectual
property rights, or rights thereto, required to conduct its business as
presently conducted and as presently proposed to be conducted, without any known
conflict with the rights of others. A true, correct and complete list of the
Borrower's licenses, permits, franchises, authorizations, patents, copyrights,
trademarks, trade secrets, trade names, inventions, discoveries, designs,
patentable technology and art, methodologies, trade secrets, know how, service
marks, Internet domain names and any other tangible, intangible or intellectual
property rights (the "Intellectual Property") is attached as Schedule 4.10
hereto. No claim of infringement has been made or threatened in writing or
otherwise with respect to any such Intellectual Property. Except as set forth on
Schedule 4.15, the Borrower has not directly or indirectly created, incurred,
assumed or permitted to exist any Lien on any such Intellectual

                                       11
<PAGE>
Property, other than Liens granted to the Lender to secure the Secured
Obligations and liens expressly permitted under Section 7.2 hereof.

         4.11     ERISA. No employee benefit plan established or maintained by
the Borrower or to which the Borrower has made contributions or is liable is
subject to Part 3 of Subtitle B of Title 1 of the Employee Retirement Income
Security Act of 1974, as amended, or Section 412 of the Internal Revenue Code of
1954, as amended.

         4.12     Brokers. No broker or finder has acted for the Borrower in
connection with the Loan Documents or the transactions contemplated hereby or
thereby, and no broker finder or other Person is entitled to any brokerage or
finder's fees or other commission or payment in respect of such transaction
based in any way on agreements, arrangements or understandings made by or on
behalf of the Borrower.

         4.13     Use of Credit. No part of the proceeds from the Loan extended
hereunder will be used, directly or indirectly, for the purpose of buying or
carrying any "margin stock" within the meaning of Regulation G of the Board of
Governors of the Federal Reserve System (12 CFR 207), or for the purpose of
buying or carrying or trading in any securities under such circumstances as to
involve the Borrower in a violation of Regulation X of said Board (12 CFR 224)
or to involve any broker or dealer in a violation of Regulation T of said Board
(12 CFR 220). The assets of the Borrower do not include any margin stock, and
the Borrower does not have any present intention of acquiring any margin stock.

         4.14     Indebtedness. The Note will be the senior obligation of the
Borrower, and will be secured by first priority liens on all of the Collateral
subject to Liens expressly permitted under Sections 7.2(a) and (e) hereof and
those other Liens set forth in Section 7.2 required as a matter of law to have
priority over the Secured Obligations; provided that, with respect to such other
security interests and other Liens, such security interests and Liens shall not
be with respect to claimed amounts in excess of $100,000 in the aggregate.

         4.15     Litigation. Except as set forth on Schedule 4.15 hereto, there
are no (i) actions, suits or legal, equitable, arbitrative or administrative
proceedings pending, or, to the best knowledge of the Borrower after reasonable
review and due inquiry, threatened against the Borrower or any of its properties
or assets or (ii) judgments, injunctions, writs, rulings or orders by any
Governmental Authority against the Borrower or applicable to any of its
properties or assets.

         4.16     Financial Condition; Unknown Liabilities. The Borrower has
previously furnished to the Lender the unaudited pro forma balance sheet of the
Borrower as of the Closing Date and the related unaudited financial statements
for the period from the date of the Borrower's audited financial statements for
the fiscal year ended December 31, 2001 attached hereto as Schedule 4.16. There
are no liabilities, obligations or commitments of any nature (whether accrued,
absolute, contingent or otherwise) matured or unmatured of the Borrower, except
as provided for in unaudited proforma the balance sheet referred to above as of
the Closing Date. Since January 1, 2002, there has been no Material Adverse
Change as to the Borrower.

                                       12
<PAGE>
         4.17     Taxes. The Borrower has filed all federal, state and local,
domestic or foreign Tax Returns and all other Tax Returns that are required to
be filed by it and it has paid all Taxes due pursuant to such returns or
pursuant to any deficiency, notice of proposed assessment, audit, assessment or
other similar notice received by it in writing other than those being contested
in good faith in appropriate proceedings and for which reserves have been
established in the financial statements described in Section 4.16. There are no
audits, assessments or claim for assessments, and no basis upon which such a
claim can be made to the best knowledge of the Borrower after reasonable review
and due inquiry. The charges, accrual and reserves on its books and records in
respect of Taxes are adequate. The Borrower has not given or been requested to
give a waiver of the statute of limitations relating to the payment of Federal
or other taxes or the audit of any tax period.

         4.18     Certain Regulations. The Borrower is not (a) an "investment
company," or a company "controlled" by an "investment company," within the
meaning of the Investment Company Act of 1940; (b) a "holding company," or an
"affiliate" of a "holding company" or a "Subsidiary company" of a "holding
company," within the meaning of the Public Utility Holding Company Act of 1935;
or (c) to the knowledge of the Borrower, subject to any other Requirement of
Law, restricting its ability to incur debt or to grant Liens.

         4.19     Environmental Matters. The Borrower has obtained all approvals
required by any Governmental Authority to carry on its business as presently
being conducted or as presently proposed to be conducted. Each of such approvals
is in full force and effect and the Borrower is in compliance in all respects
with the terms and conditions of such approvals, and is also in compliance in
all respects with all other provisions of any applicable environmental law, rule
or regulation.

         4.20     Accounts Receivable. The accounts receivable set forth in the
unaudited balance sheet delivered to the Lender pursuant to Section 4.16 and set
forth in reasonable detail on Schedule 4.20, net of applicable reserves set
forth in such unaudited balance sheet and on such schedule, are collectible in
the amounts shown therein. All such accounts receivable represent legal, valid
and binding obligations arising from bona fide business transactions in the
ordinary course of business consistent with past practices of the Borrower.
There is no contest, claim, counterclaim, defense, contra account or other right
of set-off, other than returns in the ordinary course consistent with the past
practices of the Borrower.

         4.21     SEC Documents; Financial Statements and No Material Changes.
Borrower has made available to Lender through the SEC's EDGAR database ("EDGAR")
a true, complete and correct copy of each publicly available statement, report,
registration statement (with the prospectus in the form filed pursuant to Rule
424(b) of the Securities Act), definitive proxy statement, and other filing
filed with the SEC by Borrower since December 31, 2001, and, prior to the
Closing Date, Borrower will have made available to Lender true, complete and
correct copies of any additional publicly available documents filed with the SEC
by Borrower after the date hereof but prior to the Closing Date (collectively,
the "Borrower SEC Documents"). All documents required to be filed as exhibits to
the Borrower SEC Documents have been so filed, and all Borrower Material
Contracts (as defined below) so filed as exhibits are in full force and effect
as of the date hereof, except those that have expired in accordance with their
terms and those that failure to be in full force and effect would not have a
Material Adverse Change. As

                                       13
<PAGE>
used in this Agreement, "Borrower Material Contracts" means all contracts
required to be filed as exhibits to the Borrower SEC Documents pursuant to Item
601 of Regulation S-K. As of their respective filing dates, the Borrower SEC
Documents complied in all material respects with the applicable requirements of
the Exchange Act and the Securities Act, and none of the Borrower SEC Documents
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein, in light of the circumstance under which
they were made or necessary to make the statements made therein not misleading,
except to the extent corrected by a subsequently filed Borrower SEC Document.
The consolidated financial statements of Borrower, including the notes thereto,
included in the Borrower SEC Documents (the "Borrower SEC Financial Statements")
fairly present (or will fairly present) the consolidated financial condition and
the related consolidated statements of operations, of stockholder's equity, and
of cash flows of Borrower at the dates and during the periods indicated therein
in accordance with GAAP (subject, in the case of unaudited statements, to
normal, recurring year-end adjustments), complied (or will comply) as to form in
all material respects with applicable accounting requirements and with the
published rules and regulations of the SEC with respect thereto as of their
respective dates, and have been prepared (or will be prepared) in accordance
with generally accepted accounting principles applied on a basis consistent
throughout the periods indicated and consistent with each other (except as may
be expressly indicated in the notes thereto or, in the case of unaudited
statements included in Quarterly Reports on Forms 10-Q, as permitted by Form
10-Q of the SEC).

         4.22     Ownership of CMI.HERMES, Inc. CMI.HERMES, Inc. was formed
solely for the purpose of engaging in the transactions contemplated by Schedule
4.4. CMI.HERMES, Inc. (i) has not conducted, and will not prior to the date
thereof conduct, any business and (ii) has no, and prior to the date thereof
will have no, assets or liabilities. As of the date hereof, only shares of
CMI.HERMES, Inc. common stock will be issued and outstanding and all of such
shares shall be owned directly by Borrower.

         4.23     Disclosure. No representation or warranty by the Borrower in
this Agreement or any of the other Loan Documents contains or will contain any
untrue statement of a material fact or omits or will omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances in which they are made, not misleading.
If, prior to the Closing Date, the Borrower becomes aware of any fact or
circumstance that could change a representation or warranty of the Borrower in
this Agreement, then the Borrower shall immediately give notice of such fact or
circumstance to the Lender.

                        SECTION 5. CONDITIONS OF LENDING

         The obligation of the Lender to make the Loan hereunder is subject to
the following conditions precedent:

         5.1      Loan Documents. Lender shall have received (a) this Agreement,
(b) the Note, (c) the Intellectual Property Security Agreement, (d) the Warrant,
(e) the Lock Box Agreement, the Deposit Account Control Agreements and (f) each
of the other Loan Documents to which the Borrower is a party, in each case
executed and delivered by duly authorized officers of the Borrower.

                                       14
<PAGE>
         5.2      Proceedings. The Lender shall have received a copy of the
resolutions, in form and substance reasonably satisfactory to it, of the board
of directors of the Borrower authorizing (i) the execution, delivery and
performance of this Agreement and the other Loan Documents, (ii) the Loan
contemplated hereunder, (iii) the issuance and delivery of the Warrant, and the
reservation for issuance, issuance and delivery of the Warrant Shares and (iv)
the other transactions contemplated hereby and thereby, certified by the
Secretary or an Assistant Secretary of the Borrower as of the Closing Date,
which certificate shall be in form and substance reasonably satisfactory to the
Lender and shall state that the resolutions thereby certified have not been
amended, modified, revoked or rescinded and are in full force and effect.

         5.3      Incumbency Certificates. The Lender shall have received a
certificate of the Borrower, dated the Closing Date, as to the incumbency and
signature of the officers of the Borrower executing any Loan Document,
reasonably satisfactory in form and substance to the Lender, executed by the
Secretary or any Assistant Secretary of the Borrower.

         5.4      Organization Documents. The Lender shall have received copies
of the articles of incorporation and bylaws of the Borrower, certified as of the
Closing Date as true, complete and correct copies thereof by the Secretary or an
Assistant Secretary of the Borrower.

         5.5      Representations and Warranties; No Default. Each of the
representations and warranties made by the Borrower pursuant to this Agreement
or any other Loan Document (or in any amendment, modification or supplement
hereto or thereto) and each of the representations and warranties contained in
any certificate or statement furnished at any time by or on behalf of the
Borrower pursuant to this Agreement or any other Loan Document or certificate or
other document delivered herewith or therewith, shall, except to the extent that
they relate to a particular date, be true, complete and correct in all respects
on and as of the date it was made and on and as of such date as if made on and
as of such date. The Borrower shall have complied with each and every covenant
and agreement contained herein, no Default or Event of Default shall have
occurred and be continuing on such date or after giving effect to the Loan, and
no Material Adverse Change shall have occurred. The Borrower shall have
delivered a certificate of the Chief Executive Officer or President of the
Borrower, dated as of the applicable Closing Date hereunder, to the foregoing
effect.

         5.6      Security Interest. The Lender shall have received evidence
satisfactory to it of a valid and perfected first priority Lien and security
interest in the Collateral and no other Liens on the Collateral exist, except as
expressly permitted hereunder.

         5.7      Intellectual Property Security Interest. The Lender shall have
received evidence satisfactory to it of a valid and perfected first priority
Lien and security interest in the Intellectual Property.

         5.8      Due Diligence. With respect to the Closing Date only, the
Lender shall have completed a due diligence investigation of the Borrower
satisfactory to the Lender.

         5.9      Lock Box Agreement. The Lender shall have received
satisfactory evidence that the Lock Box Agreement is in full force and effect.

                                       15
<PAGE>
         5.10     Deposit Account Control Agreements. The Lender shall have
received satisfactory evidence that each Deposit Account Control Agreement is in
full force and effect.

         5.11     Issuance of Warrant. The Lender shall have received the
Warrant in accordance with the provisions of Section 3.3.

                        SECTION 6. AFFIRMATIVE COVENANTS

         The Borrower hereby agrees that, from and after the original Closing
Date and through the indefeasible payment in full of the Loan and the Secured
Obligations then due and owing to the Lender hereunder, the Borrower shall:

         6.1      Payment of Obligations. Pay, discharge or otherwise satisfy at
or before maturity or before they become delinquent, as the case may be, all its
obligations of whatever nature, except where the amount or validity thereof is
currently being contested in good faith by appropriate proceedings diligently
conducted and which are reserved against on the Borrower's books and records.

         6.2      Maintenance of Accounts Receivable. The Borrower shall
maintain at least $3,500,000 of Acceptable Accounts, net of any applicable
reserves and net of the amount of any Subordinated Debt, all of which Acceptable
Accounts shall be timely paid in accordance with their respective terms.

         6.3      Conduct of Business; Maintenance of Existence; and Compliance
with Laws. Continue to engage in business of the same general type as conducted
by the Borrower on the Closing Date, and preserve, renew and keep in full force
and effect its corporate existence and take all reasonable action to maintain
all rights, privileges and franchises necessary or desirable in the normal
conduct of the business of the Borrower. The Borrower shall do or cause to be
done all things necessary to ensure compliance by the Borrower in all material
respects with all Requirements of Law and all applicable restrictions imposed by
any Governmental Authority.

         6.4      Maintenance of Insurance. Maintain insurance with responsible
and reputable insurance companies or associations in such amounts and covering
such risks as is usually carried by companies of similar size engaged in similar
businesses and owning similar properties and assets in the same general areas in
which the Borrower operates and reasonably acceptable to the Lender, including,
without limitation, primary, all risk, physical damage, property damage, and
bodily injury with appropriate loss payee and additional insured endorsements in
favor of the Lender.

         6.5      Taxes. Timely pay all Taxes except Taxes being contested in
good faith by appropriate proceedings (which shall be reserved against on the
Borrower's books and records); provided that it shall pay any contested Taxes
upon commencement of proceedings to foreclose upon any property or assets of the
Borrower to pay such Taxes.

         6.6      Maintenance of Properties. Maintain, preserve, protect and
keep its properties in good repair, working order and condition (ordinary wear
and tear excepted), and make reasonable, necessary and proper repairs, renewals
and replacements so that its business carried

                                       16
<PAGE>
on in connection therewith may be properly conducted at all times consistent
with past practices of the Borrower.

         6.7      Information Rights. The Borrower shall deliver the following
to the Lender:

                  (a)      as soon as practicable, but in any event within
ninety (90) days after the end of each calendar year (i) consolidated income
statement and statement of cash flows for such year and a balance sheet as of
the end of such year, prepared in accordance with GAAP, and audited and
certified by independent public accountants of nationally recognized standing
selected by the Borrower and reasonably acceptable to the Lender and (ii) annual
sales forecasts and budgets for the then next two years in form and substance
reasonably satisfactory to the Lender;

                  (b)      as soon as practicable, (i) but in any event within
thirty (30) days after the end of each calendar month an unaudited income
statement and statement of cash flows for such month and an unaudited balance
sheet as of the end of such month, (ii) but in any event within thirty (30) days
after the end of each calendar month, monthly sales forecasts, (iii) but in any
event within fifteen (15) days of the end of such month, accounts payable and
accounts receivable agings together with an Accounts Receivable Certificate in
substantially the form of Exhibit E hereto signed by the Borrower's Chief
Financing Officer, and (iv) but in any event within thirty (30) days, monthly,
quarterly and annual budgets (including variance reports) in form and substance
reasonably satisfactory to the Lender; and

                  (c)      as soon as reasonably practicable after requested by
Lender, such other reports as Lender may request in connection with the
Borrower.

         6.8      Board Observation Rights. Until the later of such time as all
Secured Obligations are indefeasibly repaid in full and the Commitment
Termination Date, the Lender shall have the right to have a representative
attend all meetings of the Borrower's Board of Directors or any such committee
thereof, in a nonvoting, observer capacity, the cost of which attendance shall
be paid by the Borrower, including travel and related costs and expenses. The
Borrower shall provide the Lender notice of such meetings at the same time and
in the same manner as such notice is provided to the Board of Directors and the
Borrower shall provide the Lender copies of all minutes, consents, and other
materials the Borrower provides to its directors in conjunction with said
meetings.

         6.9      Event of Prepayment. Except as otherwise provided in the
definition of "Event of Prepayment," upon any Event of Prepayment of the
Borrower, then in connection therewith, the Lender shall be entitled to one
hundred percent (100%) of the proceeds from the sale of the Borrower and/or its
assets in an orderly liquidation (after deducting the reasonable, non-operating
out-of-pocket costs of sale paid to an independent third Person) until such time
as all Secured Obligations are repaid indefeasibly in full, including, without
limitation, the Loan, all accrued interest due thereon, fees and other costs.

         6.10     Lock Box Instructions. Upon the occurrence of an Event of
Default, permit Lender, in Lender's sole discretion, to instruct each of the
Borrower's customers and any other

                                       17
<PAGE>
Persons with amounts owing to the Borrower to send all future payments to a
designated Lock Box Account pursuant to instructions determined by the Lender in
its sole discretion.

                         SECTION 7. NEGATIVE COVENANTS

         The Borrower hereby agrees that, from and after the original Closing
Date and thereafter until payment in full of all Secured Obligations, the
Borrower shall not, without the Lender's prior written consent:

         7.1      Limitation on Indebtedness. Create, incur, assume or suffer to
exist any Indebtedness, except:

                  (a)      Indebtedness of the Borrower under this Agreement;

                  (b)      other Indebtedness (including accrued interest
thereon) outstanding on the original Closing Date and listed on Schedule 7.1(b)
(none of which is secured) and any refinancings, refundings, renewals or
extensions thereof, provided that the amount of such Indebtedness is not
increased at the time of such refinancing, refunding, renewal or extension over
the amount thereof outstanding on the original Closing Date and the due date of
such Indebtedness is not shortened;

                  (c)      unsecured Indebtedness of any Person acquired by the
Borrower after the date hereof, provided that such Indebtedness was not incurred
in contemplation of such acquisition and provided that, at the time of such
acquisition, the aggregate amount of such Indebtedness does not exceed the fair
market value of the assets of such Person, and any refinancings, refundings,
renewals or extensions thereof, provided that the amount of such Indebtedness is
not increased at the time of such refinancing, refunding, renewal or extension
over the amount thereof outstanding at the time of such acquisition and the due
date of such Indebtedness is not shortened;

                  (d)      Indebtedness of up to $100,000 in the aggregate
(including all Indebtedness incurred under Section 7.1(e) below) in respect of
any lease of any property by the Borrower as lessee which, in accordance with
GAAP, is accounted for as a capital lease on the Borrower's balance sheet,
provided that, at the time of the inception of such lease, the aggregate amount
of such Indebtedness does not exceed the fair market value of such property;

                  (e)      Indebtedness of up to $100,000 in the aggregate
(including all Indebtedness incurred under Section 7.1(d) above) in respect of
purchase money financing, provided that, at the time the Borrower becomes
obligated with respect to such financing, the aggregate amount of such
Indebtedness does not exceed the fair market value of the property financed with
such Indebtedness; and

                  (f)      Subordinated Debt on terms and conditions
substantially similar to those that the Borrower would have received in an
"arm's length" transaction with an independent third party, in an aggregate
amount not to exceed $2,500,000 in the aggregate; provided that prior to or
concurrently with the Borrower incurring such indebtedness, the Person providing
or issuing such Indebtedness to the Borrower shall enter into a subordination
agreement satisfactory

                                       18
<PAGE>
in form and substance to the Lender, an executed copy of which shall be
delivered to the Lender at such time.

         7.2      Limitation on Liens. Create, incur, assume or suffer to exist
any Liens on any properties or assets of the Borrower other than:

                  (a)      Liens incurred in connection with Indebtedness
permitted to be incurred or permitted to exist pursuant to Section 7.1(a), (d)
or (e); provided that, with respect to Indebtedness permitted under Sections
7.1(d) or (e), the Liens cover only the assets of the property leased or
purchased (including proceeds thereof and accessions thereto), as applicable;

                  (b)      deposits under worker's compensation, unemployment
insurance and Social Security laws or to secure statutory obligations or surety
or appeal bonds or performance or other similar bonds in the ordinary course of
business consistent with past practice;

                  (c)      Liens for taxes, assessments or other governmental
charges or levies due and payable, the validity or amount of which is currently
being contested in good faith by appropriate proceedings and which have been
reserved for on the Borrower's books and records;

                  (d)      Except as set forth on Schedule 4.15, Liens arising
out of attachments, judgments or awards as to which an appeal or other
appropriate proceedings for contest or review are promptly commenced (and as to
which foreclosure and other enforcement proceedings shall not have been
commenced (unless fully bonded or otherwise effectively stayed)) and as to which
reserves have been established, provided that the assets or property subject to
such lien do not have a value in the aggregate greater than $50,000; or

                  (e)      Liens upon property, which property was acquired
after the Closing Date (by purchase or otherwise) by the Borrower, each of which
Liens existed on such property before the time of its acquisition and was not
created in anticipation thereof; provided, however, that no such Lien shall
extend to or cover any property of the Borrower other than the respective
property so acquired.

                  (f)      Liens existing on the Closing Date and described on
Schedule 7.2(f);

                  (g)      Easements, reservations, rights-of-way, restrictions,
minor defects or irregularities in title and other similar charges or
encumbrances affecting real property not constituting, or not possible of
resulting in, a Material Adverse Change;

                  (h)      Liens incurred in connection with the extension,
renewal or refinancing of the Indebtedness secured by Liens permitted pursuant
to clauses (a) through (g) above, provided that any extension, renewal or
replacement Lien shall be limited to the property encumbered by the Lien prior
to such extension, renewal or refinancing and the Indebtedness being extended,
renewed or refinanced is permitted pursuant to Section 7.1.

         7.3      Limitations on Transactions with Affiliates. Make any payment
to or investment in, or enter into any transaction with, any Affiliate,
including, without limitation, the purchase, sale or exchange of property or
assets or the rendering of any service, except transactions entered into with
Affiliates (a) in the ordinary course of business consistent with past practice,
(b) on

                                       19
<PAGE>
terms and conditions substantially similar to those that the Borrower
would have received in an "arm's length" transaction with an independent third
party and (c) related to the Borrower's principal activities; provided, however,
that no payments shall be made (i) to pay any deferred compensation to any
officer, director, employee, insider or Affiliate or (ii) to reduce, retire or
otherwise repay any note, Indebtedness or other debt or obligation of any
officer, director, employee, insider or Affiliate (including, without
limitation, any Subordinated Debt) or (iii) to reduce any single account payable
of the Borrower by more than $50,000 or more than $150,000 in the aggregate, in
each case, without the prior written approval of the Lender.

         7.4      Restrictions on Transactions and Fundamental Changes. Alter
the Borrower's capital or legal structure, or enter into any transaction of
merger, recapitalization, restructuring, consolidation or similar transaction,
or liquidate, wind-up or dissolve the Borrower (or suffer any liquidation or
dissolution), or convey, sell, lease, sub-lease, license, transfer or otherwise
dispose of, in one transaction or a series of transactions, all or any part of
the Borrower's business, property or assets, whether now owned or hereafter
acquired, or enter into any management contract permitting third-party
management rights with respect to the Borrower's business, or declare or pay any
dividends or make any other distribution to its shareholders, or make any
investments, or make any loans, advances or other extensions of credit to any
Person; provided, that (i) the Borrower may declare and make any dividend
payment or other distribution payable in its equity securities; and (ii) the
Borrower may make travel advances in the ordinary course of business consistent
with past practice in an aggregate amount of up to $25,000 per month, with an
aggregate amount per employee of up to $3,000 per month.

         7.5      Sale of Assets; Transfer to Subsidiary. Sell, lease,
sub-lease, license, transfer or otherwise dispose of any of the Borrower's
interest in its respective properties or assets, whether real, personal or
mixed, or tangible or intangible, other than inventory in the ordinary course of
business consistent with past practice. Borrower shall not sell, lease,
sublease, license, transfer or otherwise dispose of any properties or assets to
any subsidiary, including, without limitation, the sale, lease, sublease,
license, transfer or other disposition of the Hermes line to CMI.HERMES, Inc.
without Lender's prior written consent, which consent shall not be unreasonably
withheld in the event that Lender has a first priority security interest in all
such properties and assets and such transaction is undertaken as part of the
closing of a sale of the Hermes line. Borrower shall, however, have the right to
sell its Hermes line of business; provided that the proceeds of any such sale
are applied in accordance with the definition of "Event of Prepayment" contained
in Section 1.1 hereof; provided further that Borrower complies with the
immediately preceding sentence.

         7.6      Repurchase of Securities. Repurchase, redeem or otherwise
acquire or retire any of the Borrower's securities or obligation evidencing the
right of any holder thereof to purchase any of the Borrower's securities without
the prior written consent of the Lender, other than under the terms and
conditions of stock option, stock purchase, profit sharing or similar plans
approved by the Borrower's Board of Directors; provided that: (i) the shares of
common stock or other securities of the Borrower issued or issuable pursuant
thereto do not constitute in the aggregate more than ten percent (10%) of the
Borrower's total outstanding capital stock on a fully diluted basis; (ii) in no
event shall the Borrower repurchase, redeem or otherwise acquire or retire
shares that constitute in the aggregate more than (A) ten percent (10%) of the
Borrower's total outstanding capital stock on a fully diluted basis or (B) more
than two percent (2%) of the

                                       20
<PAGE>
Borrower's total outstanding capital stock on a fully diluted basis from any
Person or their respective Affiliates (the securities of which Affiliates shall
be deemed aggregated with such Person for such purpose); and (iii) any
repurchase, redemption or other acquisition or retirement by the Borrower of
securities acquired by an employee pursuant to any such plan shall be at a price
not greater than the actual, cash price that such employee paid to acquire such
securities.

         7.7      Corporate Governance. Enter into one or more mortgage,
indenture, agreement, contract, commitment, lease, plan, or other instrument,
document or understanding, oral or written, with any Person in which (i) the
Borrower is obligated to pay in excess of $50,000 in the aggregate within 12
months of the date hereof without obtaining the approval of the Board of
Directors of the Borrower, and (ii) the Lender does not have a first-priority
security interest as to payment or liquidation or otherwise.

         7.8      Bank Accounts. Attached hereto as Schedule 7.8 is a list of
all of the Borrower's present accounts at any bank or other financial
institution which includes, (i) the name and address of the applicable bank or
financial institution, (ii) the account number and (iii) a contact person at
such bank or financial institution responsible for the operation of such account
(collectively, the "Bank Accounts"). The Borrower shall not establish any
accounts other than the Bank Accounts, except upon not less than fifteen (15)
days' prior written notice to Lender and delivery to Lender of an appropriate
deposit account control agreement in form and substance satisfactory to the
Lender. The borrower shall not maintain or permit to exist any deposits or other
funds of whatever nature outside of Montecito Bank & Trust in excess of the
amounts and in the Bank Accounts set forth on Schedule 7.8.

                          SECTION 8. EVENTS OF DEFAULT

         8.1      Event of Default. If any of the following events shall occur
and be continuing:

                  (a)      the Borrower shall fail to pay any principal of or
any interest on the Loan or any other amount payable hereunder when due in
accordance with the terms hereof; or

                  (b)      the Borrower shall default in the observance or
performance of any covenant, agreement or other obligation contained in this
Agreement or any other Loan Document, and such default continues for five (5)
Business Days; or

                  (c)      default shall be made with respect to any payment of
any Indebtedness of the Borrower in excess of $25,000 when due or the
performance of any covenant, agreement or other obligation incurred in
connection with any such Indebtedness, if the effect of such default is to
permit the acceleration of the maturity of such Indebtedness and such default
shall not be remedied, cured, waived or consented to by the holder of such
Indebtedness within the applicable grace period, or any other circumstance arise
(other than the mere passage of time) by reason of which the Borrower is
required to repurchase or offer to holders of Indebtedness of any such Person,
the opportunity to have purchased, any such Indebtedness; or

                  (d)      (i) the Borrower shall commence any case, proceeding
or other action (A) under any existing or future law or statute of any
jurisdiction, domestic or foreign, relating to bankruptcy, insolvency,
reorganization or relief of debtors, seeking to have an order for relief entered
with respect to it, or seeking to adjudicate it a bankrupt or insolvent, or
seeking

                                       21
<PAGE>
reorganization, arrangement, adjustment, winding-up, liquidation, dissolution,
composition or other relief with respect to it or its debts, or (B) seeking
appointment of a receiver, trustee, custodian, conservator or other similar
official for it or for all or any substantial part of its assets, or the
Borrower shall make a general assignment for the benefit of its creditors; (ii)
there shall be commenced against the Borrower any case, proceeding or other
action of a nature referred to in clause (i) above which (A) results in the
entry of an order for relief or any such adjudication or appointment or (B)
remains undismissed, undischarged, unstayed or unbonded for a period of 30 days;
(iii) there shall be commenced against the Borrower any case, proceeding or
other action seeking issuance of a warrant or writ of attachment, execution,
distraint or similar process against all or any substantial part of its assets
which results in the entry of an order for such relief which shall not have been
vacated, discharged, stayed or bonded pending appeal within 30 days from the
entry thereof; (iv) the Borrower shall take any corporate action in furtherance
of, or indicating its consent to, approval of or acquiescence in, any of the
acts set forth in clause (i), (ii), or (iii) above; or (v) the Borrower shall be
generally unable to, or shall admit its general inability to, pay its debts as
they become due; or

                  (e)      final judgment for the payment of money shall be
rendered by a court of competent jurisdiction against the Borrower and the
Borrower shall not discharge the same or provide for its discharge in accordance
with its terms, or procure a stay of execution thereof within ten (10) calendar
days from the date of entry thereof and within a period of thirty (30) days, or
such longer period during which execution of such judgment shall have been
stayed, appeal therefrom and cause the execution thereof to be stayed during
such appeal, and such judgment together with all other such judgments of the
Borrower shall exceed in the aggregate $50,000; or

                  (f)      any representation or warranty made by the Borrower
in this Agreement, or any other Loan Document shall be false or incorrect on any
date on which such representation or warranty was made; or

                  (g)      any Loan Document shall cease for any reason to be in
full force and effect (other than pursuant to the express terms hereof or
thereof), the Loan Documents shall, for any reason, not give or shall cease to
give the Lender a perfected Lien in all of the Collateral with the priority
contemplated by such Loan Documents and subject to no other Liens (except to the
extent expressly permitted herein or therein) other than by actions of the
Lender, or the Borrower shall so assert; or

                  (h)      any Material Adverse Change shall have occurred; or

                  (i)      at any time there shall fail to be a current and
effective registration statement in accordance with the provisions of Section 6
of the Warrant with respect to all of the Registrable Securities (as defined in
the Warrant);

then, and in each such event, (A) if such event is an Event of Default specified
in clauses (i) or (ii) of paragraph (d) above with respect to the Borrower
automatically the Loan hereunder (with accrued interest thereon) and all other
Secured Obligations shall immediately become due and payable, and (B) if such
event is any other Event of Default, the Lender may, by notice to the Borrower,
declare the Loan hereunder (with accrued but unpaid interest thereon including
such

                                       22
<PAGE>
interest accruing at the Default Rate) and all other Secured Obligations to be
due and payable forthwith, whereupon the same shall immediately become due and
payable.

         8.2      Use of Collateral. So long as no Event of Default shall have
occurred and be continuing, and subject to the various provisions of this
Agreement and the other Loan Documents, the Borrower may use the Collateral in
any lawful manner except as otherwise prohibited hereunder or thereunder.

         8.3      Credit Parties to Hold in Trust. Upon the occurrence and
during the continuance of an Event of Default, the Borrower will, upon receipt
by it of any revenue, income, profits or other sums in which a security interest
is granted hereunder, payable pursuant to any agreement or otherwise, or of any
check, draft, note, trade acceptance or other instrument evidencing an
obligation to pay any such sum, hold the sum or instrument in trust for the
Lender, segregate such sum or instrument from their own assets and forthwith,
without any notice, demand or other action whatsoever (all notices, demands, or
other actions on the part of the Lender being expressly waived), endorse,
transfer and deliver any such sums or instruments or both, to the Lender to be
applied to the repayment of the Loan in accordance with the provisions of this
Agreement.

         8.4      Collections, etc. Upon the occurrence and during the
continuance of an Event of Default, the Lender may, in its sole discretion, sue
for, collect or receive any money or property at any time payable or receivable
on account of or in exchange for, or make any commercially reasonable compromise
or settlement deemed desirable with respect to, any of the Collateral, but shall
be under no obligation so to do, or the Lender may extend the time of payment,
arrange for payment in installments, or otherwise modify the terms of, or
release, any of the Collateral, without thereby incurring responsibility to, or
discharging or otherwise affecting any liability of the Borrower. The Lender
will not be required to take any steps to preserve any rights against prior
parties to the Collateral. If the Borrower fails to make any payment or take any
action required hereunder, the Lender may make such payments and take all such
actions as the Lender reasonably deems necessary to protect the Lender's
security interests in the Collateral and/or the value thereof, and the Lender is
hereby authorized (without limiting the general nature of the authority
hereinabove conferred) to pay, purchase, contest and/or compromise any Liens
that in the judgment of the Lender appear to be equal to, prior to or superior
to the security interests of the Lender in the Collateral (other than those
permitted hereunder) and any Liens not expressly permitted by this Agreement.

         8.5      Possession, Sale of Collateral, etc. Upon the occurrence and
during the continuance of an Event of Default, the Lender may enter upon the
premises of the Borrower or wherever the Collateral may be, and take possession
of the Collateral, and may demand and receive such possession from any Person
who has possession thereof, and the Lender may take such measures as it deems
necessary or proper for the care or protection thereof, including the right to
remove all or any portion of the Collateral, and with or without taking such
possession may sell or cause to be sold, whenever the Lender shall decide, in
one or more sales or parcels, at such prices as the Lender may deem appropriate,
and for cash or on credit or for future delivery, without assumption of any
credit risk, all or any portion of the Collateral, at any broker's board or at
public or private sale, without demand of performance but within 10 days'
written notice to the Borrower of the time and place of any such public sale or
sales (which notice the Borrower

                                       23
<PAGE>
hereby agrees is reasonable) and with such other notices as may be required by
applicable law and cannot be waived, and the Lender shall have no liability
should the proceeds resulting from a private sale be less than the proceeds
realizable from a public sale, and the Lender or any other Person may be the
purchaser of all or any portion of the Collateral so sold and thereafter hold
the same absolutely, free (to the fullest extent permitted by applicable law)
from any claim or right of whatever kind, including any equity of redemption, of
the Borrower, any such demand, notice, claim, right or equity being hereby
expressly waived and released by the Borrower. At any sale or sales made
pursuant to this Section 8, the Lender may bid for or purchase, free (to the
fullest extent permitted by applicable law) from any claim or right of whatever
kind, including any equity of redemption, without demand therefore or notice to
the Borrower, any such demand, notice, claim, right or equity being hereby
expressly waived and released, any part of or all of the Collateral offered for
sale, and may make any payment on account thereof by using any claim for moneys
then due and payable to the Lender by the Borrower hereunder as a credit against
the purchase price. The Lender shall in any such sale make no representations or
warranties with respect to the Collateral or any part thereof, and the Lender
shall not be chargeable with any of the obligations or liabilities of the
Borrower. The Borrower hereby agrees (i) that it will indemnify and hold the
Lender harmless from and against any and all claims with respect to the
Collateral asserted before the taking of actual possession or control of the
relevant Collateral by the Lender pursuant to this Section 8, or arising out of
any act of, or omission to act on the part of, any Person prior to such taking
of actual possession or control by the Lender (whether asserted before or after
such taking of possession or control), or arising out of any act on the part of
the Borrower or its Affiliates or agents before or after the commencement of
such actual possession or control by the Lender, but excluding therefrom all
claims with respect to the Collateral resulting from the gross negligence or
willful misconduct of the Lender; and (ii) the Lender shall not have liability
or obligation to the Borrower arising out of any such claim except for acts of
gross negligence or willful misconduct of the Lender. Subject only to the lawful
rights of third parties, any Person that has possession of any of the Collateral
is hereby constituted and appointed by the Borrower as pledgeholder for the
Lender and, upon the occurrence of an Event of Default, each such pledgeholder
is hereby authorized (to the fullest extent permitted by applicable law) to sell
all or any portion of the Collateral upon the order and direction of the Lender,
and the Borrower hereby waives any and all claims, for damages or otherwise, for
any action taken by such pledgeholder in accordance with the terms of the UCC
not otherwise waived hereunder. In any action hereunder, the Lender shall be
entitled, if permitted by applicable law, to the appointment of a receiver
without notice, to take possession of all or any portion of the Collateral and
to exercise such powers as the court shall confer upon the receiver.
Notwithstanding the foregoing, upon the occurrence of an Event of Default, and
during the continuation of such Event of Default, the Lender shall be entitled
to apply, without prior notice to the Borrower, any cash or cash items
constituting Collateral in the possession of the Lender to payment of the
Secured Obligations.

         8.6      Application of Proceeds on Default. Upon the occurrence and
during the continuance of an Event of Default, the balances in any account of
the Borrower which constitutes part of the Collateral, all other income on the
Collateral, and all proceeds from any sale of the Collateral pursuant hereto
shall be applied first toward payment of the costs and expenses paid or incurred
by the Lender in enforcing this Agreement, in realizing on or protecting any
Collateral and in enforcing or collecting any Secured Obligations, including,
without limitation, court costs and the attorney's fees and expenses incurred by
the Lender, then

                                       24
<PAGE>
to satisfy or provide cash Collateral for all obligations relating to Secured
Obligations, and then the indefeasible payment in full of the Secured
Obligations in accordance with this Agreement. Any amounts remaining after such
indefeasible payment in full shall be remitted to the Borrower or as a court of
competent jurisdiction may otherwise direct.

         8.7      Power of Attorney. Upon the occurrence and during the
continuance of an Event of Default which is not waived in writing by the Lender,
(a) the Borrower does hereby irrevocably make, constitute and appoint the Lender
or any of its officers or designees the Borrower's true and lawful
attorney-in-fact with full power in the name of the Lender or such other Person
to receive, open and dispose of all mail addressed to the Borrower, and to
endorse any notes, checks, drafts, money orders or other evidences of payment
relating to the Collateral that may come into the possession of the Lender with
full power and right to cause the mail of such Persons to be transferred to the
Lender's own offices or otherwise, and to do any and all other acts necessary or
proper to carry out the intent of this Agreement and the grant of the security
interests hereunder and under the Loan Documents, and the Borrower hereby
ratifies and confirms all that the Lender or its substitutes shall properly do
by virtue hereof; (b) the Borrower does hereby further irrevocably make,
constitute and appoint the Lender or any of its officers or designees its true
and lawful attorney-in-fact in the name of the Lender or the Borrower (i) to
enforce all of the Borrower's rights under and pursuant to all agreements with
respect to the Collateral, all for the sole benefit of the Lender and to enter
into such other agreements (as may be lawful and without breach of contract) as
may be necessary, desirable or appropriate in the judgment of the Lender to
complete the production, distribution or exploitation of any Collateral, (ii) to
enter into and perform such agreements as may be necessary, desirable or
appropriate in the judgment of the Lender in order to carry out the terms,
covenants and conditions of the Loan Documents that are required to be observed
or performed by the Borrower, (iii) to execute such other and further mortgages,
pledges and assignments of the Collateral, and related instruments or
agreements, as the Lender may reasonably require for the purpose of perfecting,
protecting, maintaining or enforcing the security interests granted to the
Lender hereunder, and under the other Loan Documents, and (iv) to do any and all
other things necessary, desirable or appropriate in the judgment of the Lender
to carry out the intention of this Agreement and the grant of the security
interests hereunder and under the other Loan Documents. The Borrower hereby
ratifies and confirms in advance all that the Lender as such attorney-in-fact or
its substitutes shall properly do by virtue of this power of attorney.

         8.8      Termination and Release. The security interests granted under
this Agreement shall terminate when all the Secured Obligations have been
indefeasibly paid in full and performed and the commitments pursuant to this
Agreement shall have terminated. Upon request by the Borrower (and at the sole
expense of the Borrower) after such termination, the Lender will take all
reasonable action and do all things reasonably necessary, including executing
UCC termination statements, termination letters to account debtors and copyright
and trademark releases, to terminate the security interest granted to it
hereunder.

         8.9      Remedies Not Exclusive. The remedies conferred upon or
reserved to the Lender in this Section 8 are intended to be in addition to, and
not in limitation of, any other remedy or remedies available to the Lender.
Without limiting the generality of the foregoing, the Lender shall have all
rights and remedies of a secured creditor under Article 9 of the UCC and other
applicable law.

                                       25
<PAGE>
                            SECTION 9. MISCELLANEOUS

         9.1      Promotional Materials. The Borrower agrees to provide
camera-ready artwork of its typestyles and logos for use in promotional material
by the Lender, which use shall be subject to the Borrower's prior approval, not
to be unreasonably withheld or delayed.

         9.2      Indemnification. The Borrower agrees to indemnify, defend and
hold harmless the Lender and each of its successors, assigns, heirs,
Subsidiaries, Affiliates and all of the officers, directors, employees,
partners, members, representatives, advisors and agents (including, without
limitation, attorneys and accountants) of each of the aforementioned Persons,
and each of them, from and against any and all losses, claims, damages,
liabilities, expenses, demands, causes of action, suits, debts, obligations,
rights, promises, acts, agreements and damages of any kind or nature whatsoever,
whether at law or in equity, whether known or unknown, foreseen or unforeseen,
heretofore or hereafter arising out of, relating to, connected with or
incidental to the failure of any representation or warranty made by the Borrower
in this Agreement, the other Loan Documents or in any other documents or
agreements contemplated hereby or thereby or the failure of the Borrower to
comply with the covenants, agreements or other obligations contained in this
Agreement or the other Loan Documents (but excluding (i) any such losses,
claims, damages, liabilities, expenses, demands, causes of action, suits, debts,
obligations, rights, promises, acts, agreements and damages of the Lender to the
extent incurred solely by reason of the gross negligence or willful misconduct
of the Lender or (ii) litigation solely between the Borrower, on the one hand,
and the Lender, on the other hand, in connection with this Agreement or the
other Loan Documents or relating to the transactions contemplated hereby or
thereby if, after final non-appealable judgment, the Lender is not the
prevailing party in such litigation). The agreements in this Section 9.2 shall
survive the execution and delivery of this Agreement and the other Loan
Documents and the consummation of the transactions contemplated hereby or
thereby.

         9.3      Entire Agreement; Amendments. This Agreement and the other
Loan Documents constitute the entire agreement between the Lender and the
Borrower pertaining to the subject matter contained herein and therein. Neither
this Agreement nor any other Loan Document, nor any terms hereof or thereof, may
be amended, supplemented or modified, nor may the obligations of the parties
hereto or thereto be waived, except pursuant to a writing signed by both the
Lender and the Borrower.

         9.4      Waivers. The Lender shall not be deemed, by any act or
omission, to have waived any of its rights or remedies hereunder unless such
waiver is in writing and signed by the Lender and then only to the extent
specifically set forth in such writing. A waiver with reference to one event
shall not be construed as continuing or as a bar to or waiver of any right or
remedy as to a subsequent event. No delay or omission of the Lender to exercise
any right, whether before or after a default hereunder, shall impair any such
right or shall be construed to be a waiver of any right or default, and the
acceptance at any time by the Lender of any past-due amount shall not be deemed
to be a waiver of the right to require prompt payment when due of any other
amounts then or thereafter due and payable.

         9.5      Notices. All notices, requests and demands to or upon the
respective parties hereto to be effective shall be in writing (including by
telecopy), and, unless otherwise expressly

                                       26
<PAGE>
provided herein, shall be deemed to have been duly given or made when delivered
by hand, or three days after being deposited in the mail, postage prepaid, or,
in the case of a telecopy notice, when received (provided an original copy of
such notice is mailed, postage pre-paid within the next business day after such
notice is sent by telecopy), or, in the case of delivery by a nationally
recognized overnight courier, when received, addressed as follows, or to such
other address as may be hereafter notified by the respective parties hereto:

         The Borrower:         Computer Motion, Inc.
                               130-B Cremona Drive
                               Santa Barbara, California  93117
                               Attn: Robert Duggan, Chief Executive Officer
                               Fax: (805) 968-4920

         with a copy to:       Stradling, Yocca, Carlson & Rauth
                               302 Olive Street
                               Santa Barbara, California  93101
                               Attn: David Lafitte, Esq.
                               Fax: (805) 564-1044

         The Lender:           Agility Capital, LLC
                               226 East Canon Perdido, Suite F
                               Santa Barbara, California  93101
                               Attn: Robert L. Skinner, Esq. and Jeffrey Carmody
                               Fax: (805) 568-0427

         with a copy to:       Kaye Scholer LLP
                               1999 Avenue of the Stars, Suite 1700
                               Los Angeles, California  90067
                               Attn: Russ A. Cashdan, Esq.
                               Fax: (310) 788-1200

         9.6      Successors and Assigns. The Borrower may not assign its rights
or obligations under this Agreement or the Note without the written consent of
the Lender. This Agreement shall be binding upon and inure to the benefit of the
Borrower and the Lender and their respective successors and permitted assigns.

         9.7      Interest Deficit. If the provisions of this Agreement or the
Note would at any time require payment by the Borrower to the Lender of any
amount of interest in excess of the maximum amount then permitted by applicable
law, the interest payments to the Lender shall be reduced but only to the extent
necessary so that the Lender shall not receive interest in excess of such
maximum amount. If, as a result of the foregoing, the Lender shall receive
interest payments under the Note in an amount less than the amount otherwise
provided hereunder, such deficit (hereinafter called the "Interest Deficit")
will, to the fullest extent permitted by applicable law, cumulate and will be
carried forward (without interest) until the payment in full of the Note or such
earlier time as it may be paid. Interest otherwise payable to the Lender for any
subsequent period shall be increased by the maximum amount of the Interest
Deficit that may be so added without causing the Lender to receive interest in
excess of the maximum amount then

                                       27
<PAGE>
permitted by the law applicable thereto. The amount of any Interest Deficit
shall be treated as a prepayment penalty and shall, to the fullest extent
permitted by applicable law, be paid in full at the time of any prepayment by
the Borrower to the Lender. The amount of any Interest Deficit at the time of
any complete payment of the Loan (if any) (other than an optional prepayment
thereof) shall, except to the full extent then permitted to be paid under
applicable law, be canceled and not paid.

         9.8      Confidentiality. In handling any confidential information of
the Borrower, the Lender shall exercise the same degree of care that it
exercises with respect to its own proprietary information of the same types to
maintain the confidentiality of any non-public information thereby received or
received pursuant to this Agreement, except that disclosure of such information
may be made (i) to the Subsidiaries or Affiliates of the Lender in connection
with their present or prospective business relations with the Borrower, (ii) to
prospective transferees or purchasers of any interest in the Loan, provided that
they have entered into a comparable confidentiality agreement in favor of the
Borrower and have delivered a copy to the Borrower, (iii) under any Requirement
of Law, (iv) as may be required in connection with the examination, audit or
similar investigation of the Lender, and (v) as the Lender may deem appropriate
in connection with the exercise of any remedies hereunder. Confidential
information hereunder shall not include information that either (a) is in the
public domain or in the knowledge or possession of the Lender when disclosed to
the Lender by the Borrower, or becomes part of the public domain after
disclosure to the Lender through no fault of the Lender; or (b) is disclosed to
the Lender by a third party, provided the Lender does not have actual knowledge
that such third party is prohibited from disclosing such information.

         9.9      Payment of Expenses. The Borrower agrees to pay or reimburse
the Lender for all of its out-of-pocket costs and expenses incurred in
connection with its due diligence with respect to the Loan, the preparation,
execution, delivery and performance of this Agreement and the other Loan
Documents, the consummation of the transactions contemplated hereby and thereby
and the enforcement of its rights hereunder or thereunder, including, without
limitation, the fees and disbursements of Kaye Scholer LLP.

         9.10     Captions. The captions of the Sections of this Agreement have
been inserted for convenience only and shall have no substantive effect.

         9.11     Counterparts. This Agreement may be executed in any number of
counterparts (including by telecopy), each of which when so executed shall be
deemed to be an original and all of which counterparts together shall constitute
one and the same instrument. A set of the copies of this Agreement signed by all
the parties shall be delivered to the Borrower and the Lender.

         9.12     Severability; Reformation. In case any provision of this
Agreement shall be held to be invalid, illegal or unenforceable, it shall, to
the extent possible, be modified in such manner as to be valid, legal and
enforceable but so as to most nearly retain the intent of the parties, and if
such modification is not possible, such provision shall be severed from this
Agreement, and in either case the validity, legality and enforceability of the
remaining provisions of this Agreement and the future application of such
provision shall not in any way be affected or impaired thereby.

                                       28
<PAGE>
         9.13     WAIVER OF JURY TRIAL. TO THE EXTENT NOT PROHIBITED BY
APPLICABLE LAW WHICH CANNOT BE WAIVED, EACH OF THE BORROWER AND THE LENDER
HEREBY WAIVES, AND COVENANTS THAT IT WILL NOT ASSERT (WHETHER AS PLAINTIFF,
DEFENDANT OR OTHERWISE), ANY RIGHT TO TRIAL BY JURY IN ANY FORUM IN RESPECT OF
ANY ISSUE, CLAIM, DEMAND, ACTION, OR CAUSE OF ACTION ARISING OUT OF OR BASED
UPON THIS AGREEMENT, THE SUBJECT MATTER HEREOF, ANY OTHER LOAN DOCUMENT OR THE
SUBJECT MATTER THEREOF, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING
AND WHETHER IN CONTRACT OR TORT OR OTHERWISE. EACH OF THE BORROWER AND THE
LENDER ACKNOWLEDGES THAT IT HAS BEEN INFORMED BY THE OTHER PARTY HERETO THAT THE
PROVISIONS OF THIS SECTION CONSTITUTE A MATERIAL INDUCEMENT UPON WHICH SUCH
OTHER PARTY HAS RELIED, IS RELYING AND WILL RELY IN ENTERING INTO THIS AGREEMENT
AND THE OTHER LOAN DOCUMENTS. ANY PARTY MAY FILE AN ORIGINAL COUNTERPART OR A
COPY OF THIS SECTION 9.13 WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF
THE COMPANY AND THE LENDER TO THE WAIVER OF ITS RIGHTS TO TRIAL BY JURY.

         9.14     GOVERNING LAW. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS AND
THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT AND THE OTHER
LOAN DOCUMENTS SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE
WITH, THE INTERNAL LAWS OF THE STATE OF CALIFORNIA WITHOUT GIVING EFFECT TO ANY
CONFLICT OF LAW PROVISIONS.

                  REMAINDER OF PAGE INTENTIONALLY LEFT BLANK

                                       29
<PAGE>
         IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered on their behalf as of the date first above written.

                                          COMPUTER MOTION, INC.

                                          By:
                                             -----------------------------------
                                             Name:    Robert W. Duggan
                                             Title:   Chief Executive Officer

                                          AGILITY CAPITAL, LLC

                                          By:
                                             -----------------------------------
                                             Name:    Robert L. Skinner
                                             Title:   Chief Executive Officer

                                       30
<PAGE>
                                  SCHEDULE 4.1

                             STATE OF INCORPORATION

                                  See Attached.
<PAGE>
                                  SCHEDULE 4.4

                                  SUBSIDIARIES

                                  See Attached.
<PAGE>
                                  SCHEDULE 4.5

                                 CAPITALIZATION

                                  See Attached.
<PAGE>
                                 SCHEDULE 4.5(a)

                         RIGHTS TO ACQUIRE CAPITAL STOCK

                                  See Attached.
<PAGE>
                                  SCHEDULE 4.10

                              INTELLECTUAL PROPERTY

                                  See Attached.
<PAGE>
                                  SCHEDULE 4.15

                                   LITIGATION

                                  See Attached.
<PAGE>
                                  SCHEDULE 4.16

                              FINANCIAL STATEMENTS

                                  See Attached.
<PAGE>
                                 SCHEDULE 7.1(b)

                           LIMITATION ON INDEBTEDNESS

                                  See Attached.
<PAGE>
                                 SCHEDULE 7.2(f)

                               LIMITATION ON LIENS

                                  See Attached.
<PAGE>
                                  SCHEDULE 7.8

                                  BANK ACCOUNTS

                                  See Attached.

                                        1
<PAGE>
                                    EXHIBIT A
                             COLLATERAL OF BORROWER

The Collateral shall consist of all right, title and interest of Borrower in and
to the following, in each case whether now owned or hereafter acquired by
Borrower:

         (a)      All present and future accounts, general intangibles and other
         rights of Borrower to the payment of money no matter how evidenced, all
         chattel paper, instruments and other writings evidencing any such
         right, and all goods repossessed or returned in connection therewith;

         (b)      All inventory of Borrower, now owned or hereafter acquired,
         and all raw materials, work in process, materials used or consumed in
         Borrower's business and finished goods, together with all additions and
         accessions thereto and replacements therefor, and products thereof;

         (c)      All equipment of Borrower, now owned or hereafter acquired,
         including, without limitation, all vehicles (including motor vehicles
         and trailers) machinery, tools, dies, blueprints, catalogues, computer
         hardware and software, furniture, furnishings and fixtures and all
         attachments, accessories, replacements, substitutions, additions, and
         improvements to any of the foregoing;

         (d)      All documents, letters of credit and rights to proceeds of
         letters of credit, instruments and investment property of Borrower, now
         owned or hereafter acquired, and all new, substituted and additional
         documents, securities and instruments issued with respect thereto, all
         voting or other rights now or hereafter exercisable and all cash and
         noncash dividends, interest and other property now or hereafter
         receivable with respect to any of the foregoing, whether such
         certificates, documents and instruments are in the possession of
         Borrower or a financial intermediary on behalf of Borrower;

         (e)      All patents and patent applications of Borrower and all rights
         corresponding thereto throughout the world, and all unpatented or
         unpatentable developments and inventions and all license fees,
         royalties and other similar items received in connection therewith;

         (f)      All trademarks, service marks and logos of Borrower, and all
         United States, state and/or foreign applications for registration
         thereof, all trade names, trade styles, designs, and the like, all
         elements of package or trade dress of goods, the goodwill of Borrower's
         business connected with the use of, and symbolized by any of the above,
         and all property of Borrower necessary to produce any products sold
         under any of the above;

         (g)      All copyrights and copyrighted works in which Borrower has any
         right, title, or interest throughout the world, all derivative works
         thereof, all copyright registrations and all applications therefor, and
         United States and/or foreign applications for registration and
         registrations thereof, and all accounts, accounts receivable and
         contracts receivable generated by such copyrights;

                                      A-1
<PAGE>
         (h)      All computer software programs developed or to be developed by
         Borrower or in which Borrower asserts or could assert a proprietary
         interest; all personal property, including but not limited to source
         codes, object codes or similar information, which is necessary to the
         practical utilization of such programs; and all tangible property of
         Borrower embodying or incorporating any such programs;

         (i)      All trade secrets, proprietary information, customer lists,
         instructional materials, working drawings, manufacturing techniques,
         process technology documentation, and product formulations of Borrower
         and all property and assets of Borrower, whether tangible or
         intangible, which are or a person may deem to be intellectual property
         of Borrower;

         (j)      All rights under any agreement granting any right to use any
         patent, trademark, copyright, computer software program or any other
         property or right to property specified in paragraphs (e), (f), (g),
         (h) or (i) above, whether Borrower is the grantor or the grantee under
         such agreement;

         (k)      All rights to damages or profits due or accrued arising out of
         past, present or future infringement of the Collateral or injury to
         Borrower's good will connected with the use of the Collateral and the
         right to sue therefor;

         (l)      All renewals, modifications, amendments, re-issues, divisions,
         continuations in whole or part, and extensions of any Collateral;

         (m)      All right, title and interest of Borrower in, to and under
         each contract entered into or to be entered into by Borrower, together
         with any purchase orders or other supplements thereto, as any such
         contract may be modified, amended or restated from time to time, and
         all right, title and interest of Borrower in and to all moneys and
         claims for moneys due or to become due to Borrower under or arising out
         of any such contract;

         (n)      All now existing and hereafter acquired books and records
         relating to the foregoing Collateral and all equipment containing such
         books and records; and

         (o)      All Proceeds of the foregoing Collateral; and

         (p)      Any and all claims, rights and interests in any of the
         foregoing of the above and all substitutions for, additions and
         accessions to and proceeds thereof.

                                      A-2
<PAGE>
                                    EXHIBIT B
                FORM OF INTELLECTUAL PROPERTY SECURITY AGREEMENT

                                      B-1
<PAGE>
                                    EXHIBIT C
                                  FORM OF NOTE

THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR WITH THE SECURITIES COMMISSION OF ANY APPLICABLE STATE UNDER SUCH STATE'S
SECURITIES OR BLUE SKY LAWS, AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS
PERMITTED UNDER SUCH SECURITIES ACT AND THE APPLICABLE STATE SECURITIES OR BLUE
SKY LAWS, PURSUANT TO REGISTRATION OR AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THOSE LAWS.

$2,300,000                                                     February 13, 2003

                  Computer Motion, Inc., a Delaware corporation ("Borrower"),
         for value received, hereby promises to pay to the order of Agility
         Capital, LLC (the "Lender"), the aggregate principal amount of Two
         Million Three Hundred Thousand Dollars ($2,300,000), or the aggregate
         outstanding principal amount of all Loan made by the Lender to Borrower
         pursuant to the Loan and Security Agreement (as defined below),
         whichever is less (the "Principal Amount"), together with accrued and
         unpaid interest on the Principal Amount, on Maturity Date, in such coin
         or currency of the United States of America as at the time of payment
         shall be legal tender therein for the payment of public and private
         debts. Capitalized terms used herein and not otherwise defined shall
         have the meanings given to such terms in that certain Loan and Security
         Agreement of even date herewith, between Borrower and the Lender (the
         "Loan Agreement").

                  This Note shall accrue interest at a fixed rate per annum of
         nine percent (9%) (the "Interest Rate") with respect to the outstanding
         unpaid Principal Amount plus any accrued but unpaid interest thereon
         and on any other Secured Obligations compounding annually (the
         "Interest") until and including the date the Principal Amount, such
         interest and the other Secured Obligations are paid in full. Such
         Interest shall accrue and be payable monthly in arrears, with all
         accrued and unpaid interest due and payable, together with all
         outstanding Principal Amount, on the Maturity Date (or such earlier
         date as required under the Loan Agreement), in each case with interest
         to accrue and be due and payable through and including the applicable
         payment date. Interest shall be calculated on the basis of a 360-day
         year of twelve 30-day months, provided, however, that per diem interest
         shall be calculated on the basis of the actual number of days elapsed
         over a year of 365 days. The Secured Obligations under this Note are
         secured by the Collateral of Borrower pursuant to the Loan and Security
         Agreement. Without duplication of any interest payable hereunder,
         Borrower hereby unconditionally promises to pay to the Lender interest
         on any principal, interest and any other Secured Obligations payable by
         Borrower under this Loan that shall not be paid in full when due
         (whether at the Maturity Date, by acceleration or otherwise), for the
         period from and including the due date of such payment to and including
         the date the same is paid in full, at a rate per annum equal to the
         Interest Rate plus 600 basis points, which interest shall be payable
         from time to time on demand of the Lender.

                                      C-1
<PAGE>
                  Borrower hereby waives presentment, demand, protest, notice of
         dishonor, diligence and all other notices, any release or discharge
         arising from any extension of time, discharge of a prior party, release
         of any or all of any security given from time to time for this Note, or
         other cause of release or discharge other than actual payment in full
         hereof.

                  The Lender may, but is not obligated to, enter the amount of
         each Loan and the amount of each payment or prepayment of principal or
         interest thereon on the appropriate spaces on the last page of this
         Note; provided, however, that the failure of the Lender to set forth
         such Loan, principal payments, interest payments or other information
         shall not in any manner affect the obligations of Borrower to repay
         such Loan or any Secured Obligations.

                  The Lender shall not be deemed, by any act or omission, to
         have waived any of its rights or remedies hereunder unless such waiver
         is in writing and signed by the Lender and then only to the extent
         specifically set forth in such writing. A waiver with reference to one
         event shall not be construed as continuing or as a bar to or waiver of
         any right or remedy as to a subsequent event. No delay or omission of
         the Lender to exercise any right, whether before or after a default
         hereunder, shall impair any such right or shall be construed to be a
         waiver of any right or default, and the acceptance at any time by the
         Lender of any past-due amount shall not be deemed to be a waiver of the
         right to require prompt payment when due of any other amounts then or
         thereafter due and payable.

                  Time is of the essence hereof. Upon any default hereunder, the
         Lender may exercise all rights and remedies provided for herein and by
         law or equity, including, without limitation, the right to immediate
         payment in full of this Note.

                  The remedies of the Lender as provided herein or in law or in
         equity, or any one or more of them, shall be cumulative and concurrent,
         and may be pursued singularly, successively or together at Lender's
         sole discretion, and may be exercised as often as occasion therefor
         shall occur.

                  It is expressly agreed that if this Note is referred to an
         attorney or if suit is brought to collect or interpret this Note or any
         part hereof or to enforce or protect any rights conferred upon the
         Lender by this Note or any other Document, then Borrower promises and
         agrees to pay all costs, including, without limitation, attorneys'
         fees, incurred by the Lender.

                  This Note and the rights and obligations of the parties
         hereunder shall be governed by, and construed and interpreted in
         accordance with, the internal laws of the State of California without
         giving effect to any conflict of law provisions.

                  This is the Note referred to in the Loan and Security
         Agreement and is subject to and entitled to the benefits of said
         agreement, including, without limitation, acceleration and the right in
         certain circumstances to require that this Note be prepaid prior to the
         Maturity Date.

                                      C-2
<PAGE>
         IN WITNESS WHEREOF, Borrower has duly executed and delivered this Note
as of the date first written above.

                                    COMPUTER MOTION, INC.

                                    By:___________________________________
                                       Name:
                                       Title:

                                      C-3
<PAGE>
                                LAST PAGE OF NOTE

                                    Payments
<TABLE>
<CAPTION>
         Amount                                  Unpaid Principal      Name of Person
Date    of Loan     Principal     Interest       Balance of Note       Making Notation
----    -------     ---------     --------       ---------------       ---------------
<S>     <C>         <C>           <C>            <C>                   <C>
</TABLE>

                                      C-4
<PAGE>
                                    EXHIBIT D
                                 FORM OF WARRANT

                                      D-1

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