Document:

EXHIBIT C

THESE  SECURITIES  HAVE NOT BEEN  REGISTERED  WITH THE  SECURITIES  AND EXCHANGE
COMMISSION  OR THE  SECURITIES  COMMISSION  OF ANY  STATE  IN  RELIANCE  UPON AN
EXEMPTION  FROM  REGISTRATION  UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND, ACCORDINGLY,  MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT
TO AN EFFECTIVE  REGISTRATION  STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO
AN  AVAILABLE   EXEMPTION  FROM,  OR  IN  A  TRANSACTION  NOT  SUBJECT  TO,  THE
REGISTRATION   REQUIREMENTS  OF  THE  SECURITIES  ACT  AND  IN  ACCORDANCE  WITH
APPLICABLE  STATE  SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO
THE  TRANSFEROR  TO SUCH  EFFECT,  THE  SUBSTANCE  OF WHICH SHALL BE  REASONABLY
ACCEPTABLE TO THE COMPANY.  THESE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A
BONA FIDE MARGIN  ACCOUNT WITH A REGISTERED  BROKER-DEALER  OR OTHER LOAN WITH A
FINANCIAL INSTITUTION THAT IS AN "ACCREDITED INVESTOR" AS DEFINED IN RULE 501(a)
UNDER THE SECURITIES ACT.

                             STOCK PURCHASE WARRANT

                To Purchase __________ Shares of Common Stock of

                                SpatiaLight, Inc.

     THIS  STOCK  PURCHASE   WARRANT   CERTIFIES   that,  for  value   received,
_____________  (the  "Holder"),  is entitled,  upon the terms and subject to the
limitations on exercise and the conditions hereinafter set forth, at any time on
or after May __, 2003 (the "Initial Exercise Date") and on or prior to the close
of business on the  five-year  anniversary  of the  Initial  Exercise  Date (the
"Termination  Date") but not  thereafter,  to subscribe  for and  purchase  from
SpatiaLight,  Inc.,  a  corporation  incorporated  in the State of New York (the
"Company"),  up to ____________  shares (the "Warrant  Shares") of Common Stock,
par value $0.01 per share,  of the Company  (the "Common  Stock").  The purchase
price of one share of Common  Stock (the  "Exercise  Price")  under this Warrant
shall be $_____/1/,  subject to adjustment hereunder. The Exercise Price and the
number of Warrant Shares for which the Warrant is  exercisable  shall be subject
to  adjustment  as provided  herein.  Capitalized  terms used and not  otherwise
defined  herein shall have the  meanings  set forth in that  certain  Securities
Purchase Agreement (the "Purchase  Agreement"),  dated May __, 2003, between the
Company and the investors signatory thereto.

--------
/1/  115% of the  average  of the 30  Closing  Prices  immediately  prior to the
     Closing.

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     1.  Title  to  Warrant.  Prior  to the  Termination  Date  and  subject  to
compliance with applicable laws and Section 7 of this Warrant,  this Warrant and
all rights  hereunder  are  transferable,  in whole or in part, at the office or
agency of the  Company by the Holder in person or by duly  authorized  attorney,
upon surrender of this Warrant  together with the Assignment Form annexed hereto
properly  endorsed.  The transferee shall sign an investment  letter in form and
substance reasonably satisfactory to the Company.

     2.  Authorization of Shares.  The Company covenants that all Warrant Shares
which may be issued upon the exercise of the purchase rights represented by this
Warrant will, upon exercise of the purchase rights  represented by this Warrant,
be duly authorized,  validly issued,  fully paid and nonassessable and free from
all taxes,  liens and charges in respect of the issue thereof  (other than taxes
in respect of any transfer occurring contemporaneously with such issue).

     3. Exercise of Warrant.

          (a) Except as provided in Section 4 herein,  exercise of the  purchase
     rights  represented  by this Warrant may be made at any time or times on or
     after the Initial  Exercise Date and on or before the  Termination  Date by
     the  surrender  of this  Warrant  and the Notice of Exercise  Form  annexed
     hereto duly executed, at the office of the Company (or such other office or
     agency of the  Company  as it may  designate  by notice in  writing  to the
     registered  Holder at the address of such Holder  appearing on the books of
     the Company) and upon payment of the Exercise  Price of the shares  thereby
     purchased  by wire  transfer or  cashier's  check drawn on a United  States
     bank.  Upon such  exercise,  the  Holder  shall be  entitled  to  receive a
     certificate for the number of Warrant Shares so purchased. Certificates for
     shares  purchased  hereunder  shall be delivered to the Holder  within nine
     Trading Days after the date on which this Warrant shall have been exercised
     as aforesaid.  Notwithstanding  anything herein to the contrary, in lieu of
     issuing certificates for shares purchased hereunder,  upon mutual agreement
     of the Company and the Holder, the Company may authorize its transfer agent
     to issue shares  through  electronic  transactions.  This Warrant  shall be
     deemed to have been exercised and such certificate or certificates shall be
     deemed to have been issued, and Holder or any other person so designated to
     be named  therein shall be deemed to have become a holder of record of such
     shares for all purposes,  as of the date the Warrant has been  exercised by
     payment to the Company of the Exercise  Price and all taxes  required to be
     paid by the Holder,  if any, pursuant to Section 5 prior to the issuance of
     such shares,  have been paid. If the Company fails to deliver to the Holder
     a certificate or certificates  representing  the Warrant Shares pursuant to
     this Section 3(a) by the ninth Trading Day after the date of exercise, then
     the Holder will have the right to rescind such exercise. In addition to any
     other rights  available to the Holder,  if the Company  fails to deliver to
     the Holder a certificate or  certificates  representing  the Warrant Shares
     pursuant  to an  exercise  by the  ninth  Trading  Day  after  the  date of
     exercise, and if after such ninth Trading Day the Holder is required by its
     broker to purchase (in an open market  transaction or otherwise)  shares of
     Common  Stock to  deliver  in  satisfaction  of a sale by the Holder of the
     Warrant Shares which the Holder anticipated receiving upon such exercise (a
     "Buy-In"),  then the

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<PAGE>

     Company  shall (1) pay in cash to the  Holder  the  amount by which (x) the
     Holder's total purchase price (including brokerage commissions, if any) for
     the shares of Common Stock so purchased  exceeds (y) the amount obtained by
     multiplying  (A) the number of Warrant Shares that the Company was required
     to deliver to the Holder in connection with the exercise at issue times (B)
     the price at which the sell order giving rise to such  purchase  obligation
     was  executed,  and (2) at the option of the Holder,  either  reinstate the
     portion of the Warrant and  equivalent  number of Warrant  Shares for which
     such exercise was not honored or deliver to the Holder the number of shares
     of Common Stock that would have been issued had the Company timely complied
     with its exercise and delivery obligations  hereunder.  For example, if the
     Holder  purchases  Common Stock having a total purchase price of $11,000 to
     cover a Buy-In with  respect to an  attempted  exercise of shares of Common
     Stock with an aggregate sale price giving rise to such purchase  obligation
     of $10,000,  under  clause (1) of the  immediately  preceding  sentence the
     Company  shall be  required  to pay the Holder  $1,000.  The  Holder  shall
     provide the Company  written notice  indicating the amounts  payable to the
     Holder in respect of the Buy-In, together with applicable confirmations and
     other evidence  reasonably  requested by the Company.  Nothing herein shall
     limit a  Holder's  right to  pursue  any  other  remedies  available  to it
     hereunder, at law or in equity including,  without limitation,  a decree of
     specific performance and/or injunctive relief with respect to the Company's
     failure to timely deliver certificates  representing shares of Common Stock
     upon exercise of the Warrant as required pursuant to the terms hereof.

          (b) If this Warrant  shall have been  exercised  in part,  the Company
     shall,  at  the  time  of  delivery  of  the  certificate  or  certificates
     representing Warrant Shares, deliver to Holder a new Warrant evidencing the
     rights of Holder to purchase the  unpurchased  Warrant Shares called for by
     this Warrant,  which new Warrant  shall in all other  respects be identical
     with this Warrant.

          (c) Notwithstanding anything herein to the contrary, in no event shall
     the Holder be permitted to exercise this Warrant for Warrant  Shares to the
     extent that (i) the number of shares of Common Stock  beneficially owned by
     such Holder, together with any affiliate thereof (other than Warrant Shares
     issuable  upon  exercise of this  Warrant)  plus (ii) the number of Warrant
     Shares issuable upon exercise of this Warrant,  would be equal to or exceed
     4.9999%  of  the  number  of  shares  of  Common   Stock  then  issued  and
     outstanding,  including  shares issuable upon exercise of this Warrant held
     by such Holder  after  application  of this Section  3(c).  As used herein,
     beneficial  ownership  shall be determined in accordance with Section 13(d)
     of the Exchange  Act and the rules  promulgated  thereunder.  To the extent
     that  the   limitation   contained  in  this  Section  3(c)  applies,   the
     determination  of whether this Warrant is exercisable (in relation to other
     securities  owned by the Holder) and of which a portion of this  Warrant is
     exercisable  shall  be in the  sole  discretion  of  such  Holder,  and the
     submission  of a Notice of  Exercise  shall be  deemed to be such  Holder's
     determination  of whether this Warrant is exercisable (in relation to other
     securities  owned by such  Holder) and of which  portion of this Warrant is
     exercisable,  in each case subject to such aggregate percentage limitation,
     and the Company  shall have no obligation to verify or confirm the accuracy
     of such determination. Nothing contained herein shall be deemed to restrict
     the right of a Holder to exercise this Warrant into Warrant  Shares at such
     time as such exercise will not violate

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<PAGE>

     the  provisions of this Section 3(c).  The  provisions of this Section 3(c)
     may be waived by the Holder upon,  at the election of the Holder,  not less
     than 61 days'  prior  notice to the  Company,  and the  provisions  of this
     Section  3(c) shall  continue  to apply  until such 61st day (or such later
     date, as  determined  by the Holder,  as may be specified in such notice of
     waiver).  No exercise of this Warrant in violation of this Section 3(c) but
     otherwise in  accordance  with this Warrant  shall affect the status of the
     Warrant Shares as validly issued, fully-paid and nonassessable.

          (d) If at any time  after one year from the date of  issuance  of this
     Warrant there is no effective Registration Statement registering the resale
     of the Warrant Shares by the Holder,  this Warrant may also be exercised at
     such time by means of a "cashless  exercise"  in which the Holder  shall be
     entitled to receive a certificate for the number of Warrant Shares equal to
     the quotient obtained by dividing [(A-B) (X)] by (A), where:

             (A)  = the Closing Price on the Trading Day preceding the date of
                    such election;

             (B)  = the Exercise Price of the Warrants, as adjusted; and

             (X)  = the number of Warrant Shares issuable upon exercise of the
                    Warrants in accordance with the terms of this Warrant.

          (e)  Subject  to the  provisions  of  this  Section  3, if  after  the
     Effective Date the Closing Price (the "Measurement  Price") exceeds 250% of
     the then Exercise  Price  (subject to adjustment  herein)("Threshold  Price
     Date") and the daily average  trading volume of the Common Stock for the 10
     Trading  Days  including  and prior to such  Threshold  Price Date  exceeds
     100,000  shares,  then the Company  may,  within five  Trading Days of such
     date, call for the exercise of all or any portion of this Warrant for which
     a Notice of Exercise has not yet been delivered (such right, a "Call").  To
     exercise this right,  the Company must deliver to the Holder an irrevocable
     written  notice  (a "Call  Notice"),  indicating  therein  the  portion  of
     unexercised  portion of this  Warrant to which such  notice  applies  (such
     date,  the "Call Date").  Within three  Trading Days of the Call Date,  the
     Holder shall pay to the Company by wire transfer of  immediately  available
     funds the exercise  price for the Warrant Shares to be issued in connection
     with the Call Notice. Any unexercised  portion of this Warrant to which the
     Call  Notice  does not  pertain  will be  unaffected  by such Call  Notice.
     Notwithstanding  anything to the  contrary set forth in this  Warrant,  the
     Company may not deliver a Call Notice or require the  cancellation  of this
     Warrant (and any Call Notice will be void),  unless, at the time of sending
     such Call Notice,  the Registration  Statement shall be effective as to all
     Warrant  Shares  and the  prospectus  thereunder  available  for use by the
     Holder for the resale all such Warrant Shares and the Common Stock shall be
     listed  or  quoted  for  trading  on the  Trading  Market.  Subject  to the
     preceding  sentence,  the Holder's obligation to pay the exercise price for
     the Warrant Shares to be issued in connection with the Call Notice shall be
     absolute and unconditional at the time of sending of the Call Notice.

     4.  No  Fractional   Shares  or  Scrip.  No  fractional   shares  or  scrip
representing  fractional  shares  shall  be  issued  upon the  exercise  of this
Warrant.  As to any fraction of a share which Holder would otherwise be entitled
to purchase  upon such  exercise,  the Company  shall

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<PAGE>

pay a cash  adjustment  in respect of such final  fraction in an amount equal to
such fraction multiplied by the Exercise Price.

     5. Charges, Taxes and Expenses. Issuance of certificates for Warrant Shares
shall be made  without  charge to the  Holder for any issue or  transfer  tax or
other incidental expense in respect of the issuance of such certificate,  all of
which taxes and  expenses  shall be paid by the Company,  and such  certificates
shall be  issued  in the name of the  Holder  or in such name or names as may be
directed by the Holder;  provided,  however,  that in the event certificates for
Warrant  Shares are to be issued in a name  other  than the name of the  Holder,
this  Warrant  when  surrendered  for  exercise  shall  be  accompanied  by  the
Assignment Form attached hereto duly executed by the Holder; and the Company may
require, as a condition thereto, the payment of a sum sufficient to reimburse it
for any transfer tax incidental thereto.

     6. Closing of Books.  The Company will not close its  stockholder  books or
records in any  manner  which  prevents  the timely  exercise  of this  Warrant,
pursuant to the terms hereof.

     7. Transfer, Division and Combination.

          (a) Subject to compliance with any applicable  securities laws and the
     conditions set forth in Sections 1 and 7(f) hereof and to the provisions of
     Section  4.1 of  the  Purchase  Agreement,  this  Warrant  and  all  rights
     hereunder are  transferable,  in whole or in part,  upon  surrender of this
     Warrant at the  principal  office of the Company,  together  with a written
     assignment of this Warrant  substantially  in the form attached hereto duly
     executed by the Holder or its agent or attorney and funds sufficient to pay
     any  transfer  taxes  payable upon the making of such  transfer.  Upon such
     surrender  and, if required,  such  payment,  the Company shall execute and
     deliver a new Warrant or Warrants in the name of the  assignee or assignees
     and in the  denomination or  denominations  specified in such instrument of
     assignment,  and shall issue to the assignor a new Warrant  evidencing  the
     portion of this Warrant not so assigned, and this Warrant shall promptly be
     cancelled.  A Warrant,  if properly  assigned,  may be  exercised  by a new
     holder for the  purchase  of Warrant  Shares  without  having a new Warrant
     issued.

          (b) This  Warrant  may be divided or combined  with other  Warrants of
     like tenor and terms upon  presentation  hereof at the aforesaid  office of
     the  Company,  together  with a  written  notice  specifying  the names and
     denominations in which new Warrants are to be issued,  signed by the Holder
     or its agent or attorney.  Subject to  compliance  with Section 7(a), as to
     any transfer  which may be involved in such  division or  combination,  the
     Company shall execute and deliver a new Warrant or Warrants in exchange for
     the Warrant or Warrants to be divided or combined in  accordance  with such
     notice.

          (c) The Company  shall  prepare,  issue and deliver at its own expense
     (other than transfer  taxes) the new Warrant or Warrants under this Section
     7.

          (d) The Company agrees to maintain, at its aforesaid office, books for
     the registration and the registration of transfer of the Warrants.

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<PAGE>

          (e) If, at the time of the  surrender  of this  Warrant in  connection
     with any transfer of this  Warrant,  the transfer of this Warrant shall not
     be registered  pursuant to an effective  registration  statement  under the
     Securities Act and under  applicable state securities or blue sky laws, the
     Company may require,  as a condition of allowing such transfer (i) that the
     Holder or transferee of this  Warrant,  as the case may be,  furnish to the
     Company a written  opinion  of  counsel  (which  opinion  shall be in form,
     substance  and scope  customary  for  opinions  of  counsel  in  comparable
     transactions)  to  the  effect  that  such  transfer  may be  made  without
     registration under the Securities Act and under applicable state securities
     or blue sky laws, (ii) that the holder or transferee execute and deliver to
     the Company an investment  letter in form and  substance  acceptable to the
     Company  and (iii)  that the  transferee  be an  "accredited  investor"  as
     defined in Rule 501(a) promulgated under the Securities Act.

     8. No Rights as Shareholder  until Exercise.  This Warrant does not entitle
the Holder to any voting rights or other rights as a shareholder  of the Company
prior to the exercise hereof. Upon the surrender of this Warrant and the payment
of the aggregate Exercise Price, the Warrant Shares so purchased shall be and be
deemed to be issued to such Holder as the record  owner of such shares as of the
close of business on the later of the date of such surrender or payment.

     9. Loss, Theft, Destruction or Mutilation of Warrant. The Company covenants
that upon receipt by the Company of evidence  reasonably  satisfactory  to it of
the  loss,  theft,  destruction  or  mutilation  of this  Warrant  or any  stock
certificate  relating  to the  Warrant  Shares,  and in case of  loss,  theft or
destruction,  of indemnity or security reasonably  satisfactory to it (which, in
the case of the  Warrant,  shall not include the posting of any bond),  and upon
surrender and cancellation of such Warrant or stock  certificate,  if mutilated,
the Company  will make and deliver a new  Warrant or stock  certificate  of like
tenor  and  dated  as of such  cancellation,  in lieu of such  Warrant  or stock
certificate.

     10. Saturdays, Sundays, Holidays, etc. If the last or appointed day for the
taking of any action or the  expiration of any right  required or granted herein
shall be a Saturday, Sunday or a legal holiday, then such action may be taken or
such right may be exercised on the next succeeding day not a Saturday, Sunday or
legal holiday.

     11. Adjustments of Exercise Price and Number of Warrant Shares;

          (a) Stock Splits,  etc. The number and kind of securities  purchasable
     upon the exercise of this  Warrant and the Exercise  Price shall be subject
     to adjustment from time to time upon the happening of any of the following.
     In case the Company  shall (i) pay a dividend in shares of Common  Stock or
     make a distribution in shares of Common Stock to holders of its outstanding
     Common Stock, (ii) subdivide its outstanding  shares of Common Stock into a
     greater number of shares,  (iii) combine its  outstanding  shares of Common
     Stock into a smaller  number of shares of Common  Stock,  or (iv) issue any
     shares of its capital stock in a reclassification of the Common Stock, then
     the number of Warrant  Shares  purchasable  upon  exercise of this  Warrant
     immediately  prior  thereto  shall be adjusted so that the Holder  shall be
     entitled  to  receive  the kind  and  number  of  Warrant  Shares  or other
     securities  of the Company  which it would have owned or have been

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     entitled to receive had such  Warrant been  exercised  in advance  thereof.
     Upon each such adjustment of the kind and number of Warrant Shares or other
     securities of the Company which are purchasable hereunder, the Holder shall
     thereafter  be entitled to purchase  the number of Warrant  Shares or other
     securities  resulting from such adjustment at an Exercise Price per Warrant
     Share or other  security  obtained by  multiplying  the  Exercise  Price in
     effect immediately prior to such adjustment by the number of Warrant Shares
     purchasable  pursuant  hereto  immediately  prior  to such  adjustment  and
     dividing by the number of Warrant Shares or other securities of the Company
     resulting  from  such  adjustment.  An  adjustment  made  pursuant  to this
     paragraph shall become  effective  immediately  after the effective date of
     such event retroactive to the record date, if any, for such event.

          (b)  Adjustment  at  One  Year  Anniversary.   If,  on  the  one  year
     anniversary  date  of  the  Purchase  Agreement,  the  Company's  aggregate
     revenues  (including account  receivables)  during the period commencing on
     the Closing Date and ending on the one-year  anniversary  of the Closing is
     less than $15 million,  then the  Exercise  Price shall be reduced to equal
     $_____/2/,  subject to  adjustment  for reverse and forward  stock  splits,
     stock dividends,  stock combinations and other similar  transactions of the
     Common Stock that occur after the date of the Purchase Agreement.

     12. Reorganization,  Reclassification, Merger, Consolidation or Disposition
of Assets.  In case the Company shall  reorganize  its capital,  reclassify  its
capital stock,  consolidate or merge with or into another corporation (where the
Company  is not the  surviving  corporation  or where  there  is a change  in or
distribution with respect to the Common Stock of the Company), or sell, transfer
or  otherwise  dispose  of all or  substantially  all its  property,  assets  or
business   to  another   corporation   and,   pursuant  to  the  terms  of  such
reorganization,   reclassification,  merger,  consolidation  or  disposition  of
assets, shares of common stock of the successor or acquiring corporation, or any
cash,  shares of stock or other securities or property of any nature  whatsoever
(including  warrants or other subscription or purchase rights) in addition to or
in lieu of  common  stock of the  successor  or  acquiring  corporation  ("Other
Property"),  are to be received by or distributed to the holders of Common Stock
of the Company,  then the Holder shall have the right thereafter to receive upon
exercise of this Warrant,  the number of shares of Common Stock of the successor
or acquiring corporation or of the Company, if it is the surviving  corporation,
and  Other  Property  receivable  upon or as a  result  of such  reorganization,
reclassification,  merger, consolidation or disposition of assets by a Holder of
the  number of shares of Common  Stock for which  this  Warrant  is  exercisable
immediately   prior  to  such  event.  In  case  of  any  such   reorganization,
reclassification,  merger, consolidation or disposition of assets, the successor
or acquiring  corporation (if other than the Company) shall expressly assume the
due and  punctual  observance  and  performance  of each and every  covenant and
condition of this  Warrant to be  performed  and observed by the Company and all
the obligations and liabilities hereunder,  subject to such modifications as may
be deemed appropriate (as determined in good faith by resolution of the Board of
Directors of the Company) in order to provide for  adjustments of Warrant Shares
for which this Warrant is  exercisable  which shall be as nearly  equivalent  as
practicable to the adjustments  provided for in this Section 12. For purposes of
this Section 12, "common stock of the successor or acquiring  corporation" shall
include  stock of such  corporation  of any class which is not  preferred  as to
dividends or assets over any other class of stock of such  corporation

/2/ The Per Share Purchase Price.

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<PAGE>

and which is not subject to  redemption  and shall also include any evidences of
indebtedness,  shares of stock or other securities which are convertible into or
exchangeable  for any such stock,  either  immediately  or upon the arrival of a
specified  date or the happening of a specified  event and any warrants or other
rights to subscribe for or purchase any such stock. The foregoing  provisions of
this  Section  12  shall   similarly   apply  to   successive   reorganizations,
reclassifications, mergers, consolidations or disposition of assets.

     13. Voluntary Adjustment by the Company. The Company may at any time during
the term of this Warrant  reduce the then current  Exercise  Price to any amount
and for any period of time deemed  appropriate  by the Board of Directors of the
Company.

     14. Notice of  Adjustment.  Whenever the number of Warrant Shares or number
or kind of securities or other  property  purchasable  upon the exercise of this
Warrant or the Exercise Price is adjusted, as herein provided, the Company shall
give  notice  thereof to the  Holder,  which  notice  shall  state the number of
Warrant Shares (and other securities or property)  purchasable upon the exercise
of this  Warrant  and the  Exercise  Price of such  Warrant  Shares  (and  other
securities or property) after such  adjustment,  setting forth a brief statement
of the facts  requiring  such  adjustment  and setting forth the  computation by
which such adjustment was made.

     15. Notice of Corporate Action. If at any time:

          (a) the Company shall take a record of the holders of its Common Stock
     for  the  purpose  of  entitling  them  to  receive  a  dividend  or  other
     distribution,  or any right to subscribe  for or purchase any  evidences of
     its indebtedness,  any shares of stock of any class or any other securities
     or property, or to receive any other right, or

          (b) there  shall be any capital  reorganization  of the  Company,  any
     reclassification or recapitalization of the capital stock of the Company or
     any  consolidation or merger of the Company with, or any sale,  transfer or
     other  disposition  of all or  substantially  all the  property,  assets or
     business of the Company to, another corporation or,

          (c) there shall be a voluntary or involuntary dissolution, liquidation
     or winding up of the Company;

then, in any one or more of such cases,  the Company shall give to Holder (i) at
least 20 days' prior written  notice of the date on which a record date shall be
selected for such dividend,  distribution or right or for determining  rights to
vote  in  respect  of  any  such   reorganization,   reclassification,   merger,
consolidation, sale, transfer, disposition,  liquidation or winding up, and (ii)
in the case of any such reorganization, reclassification, merger, consolidation,
sale, transfer, disposition, dissolution, liquidation or winding up, at least 20
days'  prior  written  notice of the date when the same shall take  place.  Such
notice in accordance  with the foregoing  clause also shall specify (i) the date
on which  any such  record  is to be taken  for the  purpose  of such  dividend,
distribution  or right,  the date on which the holders of Common  Stock shall be
entitled  to any such  dividend,  distribution  or  right,  and the  amount  and
character  thereof,  and  (ii)  the  date  on  which  any  such  reorganization,
reclassification,    merger,   consolidation,   sale,   transfer,   disposition,
dissolution,  liquidation  or winding  up is to take place and the time,  if any
such  time

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<PAGE>

is to be fixed,  as of which the  holders of Common  Stock  shall be entitled to
exchange their Warrant Shares for securities or other property  deliverable upon
such  disposition,  dissolution,  liquidation  or winding up. Each such  written
notice shall be sufficiently given if addressed to Holder at the last address of
Holder  appearing on the books of the Company and delivered in  accordance  with
Section 17(d).

     16.  Authorized  Shares.  The Company  covenants that during the period the
Warrant is outstanding,  it will reserve from its authorized and unissued Common
Stock a  sufficient  number of shares to provide for the issuance of the Warrant
Shares upon the exercise of any purchase rights under this Warrant.  The Company
further  covenants  that its  issuance of this  Warrant  shall  constitute  full
authority  to its  officers  who are charged  with the duty of  executing  stock
certificates  to execute and issue the  necessary  certificates  for the Warrant
Shares upon the exercise of the purchase rights under this Warrant.  The Company
will take all such  reasonable  action as may be  necessary  to assure that such
Warrant  Shares  may be issued  as  provided  herein  without  violation  of any
applicable law or regulation,  or of any requirements of the Trading Market upon
which the Common Stock may be listed.

     Except  and to the  extent as waived or  consented  to by the  Holder,  the
Company shall not by any action,  including,  without  limitation,  amending its
certificate of incorporation or through any reorganization,  transfer of assets,
consolidation,  merger,  dissolution,  issue or sale of  securities or any other
voluntary action, 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 such terms and in the taking of all such  actions as may be
necessary  or  appropriate  to protect the rights of Holder as set forth in this
Warrant against  impairment.  Without  limiting the generality of the foregoing,
the Company will (a) not increase the par value of any Warrant  Shares above the
amount payable therefor upon such exercise immediately prior to such increase in
par value,  (b) take all such action as may be necessary or appropriate in order
that the Company may  validly  and  legally  issue fully paid and  nonassessable
Warrant  Shares upon the  exercise  of this  Warrant,  and (c) use  commercially
reasonable  efforts to obtain all such  authorizations,  exemptions  or consents
from any public regulatory body having jurisdiction  thereof as may be necessary
to enable the Company to perform its obligations under this Warrant.

     Before  taking any action which would result in an adjustment in the number
of Warrant  Shares for which this  Warrant  is  exercisable  or in the  Exercise
Price, the Company shall obtain all such  authorizations or exemptions  thereof,
or consents  thereto,  as may be necessary  from any public  regulatory  body or
bodies having jurisdiction thereof.

     17. Miscellaneous.

          (a)  Jurisdiction.  This Warrant shall constitute a contract under the
     laws of New York,  without  regard to its  conflict of law,  principles  or
     rules.

          (b)  Restrictions.  The Holder  acknowledges  that the Warrant  Shares
     acquired upon the exercise of this Warrant,  if not  registered,  will have
     restrictions upon resale imposed by state and federal securities laws.

                                       9
<PAGE>

          (c)  Nonwaiver  and  Expenses.  No course of  dealing  or any delay or
     failure to exercise any right hereunder on the part of Holder shall operate
     as a waiver of such right or otherwise prejudice Holder's rights, powers or
     remedies, notwithstanding all rights hereunder terminate on the Termination
     Date.  If the  Company  willfully  and  knowingly  fails to comply with any
     provision of this  Warrant,  which  results in any material  damages to the
     Holder, the Company shall pay to Holder such amounts as shall be sufficient
     to cover any costs and expenses  including,  but not limited to, reasonable
     attorneys'  fees,  including  those of appellate  proceedings,  incurred by
     Holder in  collecting  any  amounts  due  pursuant  hereto or in  otherwise
     enforcing any of its rights, powers or remedies hereunder.

          (d)  Notices.  Any  notice,  request  or other  document  required  or
     permitted to be given or  delivered  to the Holder by the Company  shall be
     delivered  in  accordance  with  the  notice  provisions  of  the  Purchase
     Agreement.

          (e) Successors  and Assigns.  Subject to applicable  securities  laws,
     this Warrant and the rights and obligations evidenced hereby shall inure to
     the benefit of and be binding  upon the  successors  of the Company and the
     successors and permitted assigns of Holder.  The provisions of this Warrant
     are intended to be for the benefit of all Holders from time to time of this
     Warrant  and shall be  enforceable  by any such Holder or holder of Warrant
     Shares.

          (f)  Amendment.  This  Warrant  may  be  modified  or  amended  or the
     provisions  hereof  waived with the written  consent of the Company and the
     Holder.

          (g) Severability.  Wherever  possible,  each provision of this Warrant
     shall be  interpreted  in such  manner as to be  effective  and valid under
     applicable law, but if any provision of this Warrant shall be prohibited by
     or invalid under applicable law, such provision shall be ineffective to the
     extent  of  such  prohibition  or  invalidity,   without  invalidating  the
     remainder of such provisions or the remaining provisions of this Warrant.

          (h)  Headings.   The  headings  used  in  this  Warrant  are  for  the
     convenience of reference  only and shall not, for any purpose,  be deemed a
     part of this Warrant.

                              ********************

                                       10
<PAGE>

     IN WITNESS  WHEREOF,  the Company has caused this Warrant to be executed by
its officer thereunto duly authorized.

Dated:  May __, 2003
                                        SPATIALIGHT, INC.

                                        By:
                                            ---------------------------------
                                            Name:
                                            Title:

                                       11
<PAGE>

                               NOTICE OF EXERCISE

To: SpatiaLight, Inc.

     (1) The undersigned  hereby elects to purchase  ________  Warrant Shares of
SpatiaLight,  Inc.  pursuant to the terms of the attached  Warrant,  and tenders
herewith such Warrant and payment of the exercise  price in full,  together with
all applicable transfer taxes, if any.

     (2) Please issue a certificate or  certificates  representing  said Warrant
Shares in the name of the  undersigned  or in such  other  name as is  specified
below:

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

The Warrant Shares shall be delivered to the following:

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

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

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

     (3) Accredited  Investor.  The  undersigned is an "accredited  investor" as
defined  in  Regulation  D  promulgated  under the  Securities  Act of 1933,  as
amended.

                                        [PURCHASER]

                                        By:
                                            -----------------------------------
                                            Name:
                                            Title:

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

<PAGE>

                                 ASSIGNMENT FORM

               (To assign the foregoing warrant, execute this form
                        and supply required information.
                 Do not use this form to exercise the warrant.)

     FOR VALUE  RECEIVED,  subject  to  receipt of the  Company's  consent,  the
foregoing Warrant and all rights evidenced thereby are hereby assigned to

_______________________________________________ whose address is

                                                                .
---------------------------------------------------------------

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

                                                Dated:  ______________, _______

                           Holder's Signature:
                                              ---------------------------------

                           Holder's Address:
                                              ---------------------------------

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

Signature Guaranteed:
                      ---------------------------------

NOTE: The signature to this  Assignment Form must correspond with the name as it
appears on the face of the Warrant,  without  alteration or  enlargement  or any
change whatsoever,  and must be guaranteed by a bank or trust company.  Officers
of corporations and those acting in a fiduciary or other representative capacity
should file proper evidence of authority to assign the foregoing Warrant.<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->
<A NAME=A001></A>
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=4><SUP>Silicon Valley Bank</SUP> </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold 1" FSL="Default" -->
<A NAME=A002></A>
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=3>Loan and Security
Agreement</FONT><FONT FACE="Times New Roman, Times, Serif" SIZE=4> </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->
<A NAME=A003></A>
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Borrower: Tegal
Corporation <br>
Address:&nbsp;&nbsp;&nbsp;&nbsp;2201 South McDowell Blvd. <br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Petaluma, CA 94954 </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->
<A NAME=A005><font size="2"></font></A>
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Date: June 26, 2002 </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>THIS LOAN AND SECURITY
AGREEMENT</B> is entered into on the above date between SILICON VALLEY BANK
(&#147;Silicon&#148;), whose address is 3003 Tasman Drive, Santa Clara, California 95054
and the borrower(s) named above (jointly and severally, the &#147;Borrower&#148;), whose
chief executive office is located at the above address (&#147;Borrower&#146;s
Address&#148;). The Schedule to this Agreement (the &#147;Schedule&#148;) shall for all
purposes be deemed to be a part of this Agreement, and the same is an integral part of
this Agreement. (Definitions of certain terms used in this Agreement are set forth in
Section 8 below.) </FONT></P>

<!-- MARKER PAGE="sheet: 1; page: 1" -->

<!-- MARKER FORMAT-SHEET="Head Major Center Bold 1" FSL="Default" -->
<A NAME=A006></A>
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=3><SUP>Silicon Valley
Bank</SUP> <SUP>Loan and Security Agreement</SUP> </FONT></H1>

<!-- MARKER FORMAT-SHEET="Page Rule Single" FSL="Default" -->
<P ALIGN=LEFT><b><i><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1. LOANS. </FONT>
</i></b></P>

<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>1.1
Loans. </I></B><I></I>Silicon will make loans to Borrower (the &#147;Loans&#148;), in
amounts determined by Silicon in its good faith business judgment, up to the amounts (the
&#147;Credit Limit&#148;) shown on the Schedule, provided no Default or Event of Default
has occurred and is continuing, and subject to deduction of Reserves for accrued interest
and such other Reserves as Silicon deems proper from time to time in its good faith
business judgment. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>1.2
Interest.</I></B><I></I> All Loans and all other monetary Obligations shall bear interest
at the rate shown on the Schedule, except where expressly set forth to the contrary in
this Agreement. Interest shall be payable monthly, on the last day of the month. Interest
may, in Silicon&#146;s discretion, be charged to Borrower&#146;s loan account, and the
same shall thereafter bear interest at the same rate as the other Loans. Silicon may, in
its discretion, charge interest to Borrower&#146;s Deposit Accounts maintained with
Silicon. Regardless of the amount of Obligations that may be outstanding from time to
time, Borrower shall pay Silicon minimum monthly interest during the term of this
Agreement in the amount set forth on the Schedule (the &#147;Minimum Monthly
Interest&#148;). </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>1.3
Overadvances. </I></B><I></I>If at any time or for any reason the total of all outstanding
Loans and all other monetary Obligations exceeds the Credit Limit (an
&#147;Overadvance&#148;), Borrower shall immediately pay the amount of the excess to
Silicon, without notice or demand. Without limiting Borrower&#146;s obligation to repay to
Silicon the amount of any Overadvance, Borrower agrees to pay Silicon interest on the
outstanding amount of any Overadvance, on demand, at the Default Rate. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>1.4
Fees.</I></B><I></I> Borrower shall pay Silicon the fees shown on the Schedule, which are
in addition to all interest and other sums payable to Silicon and are not refundable. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>1.5
Loan Requests.</I></B><I></I> To obtain a Loan, Borrower shall make a request to Silicon
by facsimile or telephone. Loan requests received after 12:00 Noon will not be considered
by Silicon until the next Business Day. Silicon may rely on any telephone request for a
Loan given by a person whom Silicon believes is an authorized representative of Borrower,
and Borrower will indemnify Silicon for any loss Silicon suffers as a result of that
reliance. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>1.6
Letters of Credit.</I></B><I></I> At the request of Borrower, Silicon may, in its good
faith business judgment, issue or arrange for the issuance of letters of credit for the
account of Borrower, in each case in form and substance satisfactory to Silicon in its
sole discretion (collectively, &#147;Letters of Credit&#148;). The aggregate face amount
of all Letters of Credit from time to time outstanding shall not exceed the amount shown
on the Schedule (the &#147;Letter of Credit Sublimit#148;), and shall be reserved
against Loans which would otherwise be available hereunder, and in the event at
any time there are insufficient Loans available to Borrower for such reserve,
Borrower shall deposit and maintain with Silicon cash collateral in an amount at
all times equal to such deficiency, which shall be held as Collateral for all
purposes of this Agreement. Borrower shall pay all bank charges (including
charges of Silicon) for the issuance of Letters of Credit, together with such
additional fee as Silicon&#146;s letter of credit department shall charge in
connection with the issuance of the Letters of Credit. Any payment by Silicon </FONT></P>

<hr STYLE="page-break-after:always">

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>under or in connection with
a Letter of Credit shall constitute a Loan hereunder on the date such payment is
made. Each Letter of Credit shall have an expiry date no later than thirty days
prior to the Maturity Date. Borrower hereby agrees to indemnify and hold Silicon
harmless from any loss, cost, expense, or liability, including payments made by
Silicon, expenses, and reasonable attorneys&#146; fees incurred by Silicon arising
out of or in connection with any Letters of Credit. Borrower agrees to be bound
by the regulations and interpretations of the issuer of any Letters of Credit
guarantied by Silicon and opened for Borrower&#146;s account or by Silicon&#146;s
interpretations of any Letter of Credit issued by Silicon for Borrower&#146;s
account, and Borrower understands and agrees that Silicon shall not be liable
for any error, negligence, or mistake, whether of omission or commission, in
following Borrower&#146;s instructions or those contained in the Letters of Credit or
any modifications, amendments, or supplements thereto. Borrower understands that
Letters of Credit may require Silicon to indemnify the issuing bank for certain
costs or liabilities arising out of claims by Borrower against such issuing
bank. Borrower hereby agrees to indemnify and hold Silicon harmless with respect
to any loss, cost, expense, or liability incurred by Silicon under any Letter of
Credit as a result of Silicon&#146;s indemnification of any such issuing bank. The
provisions of this Loan Agreement, as it pertains to Letters of Credit, and any
other Loan Documents relating to Letters of Credit are cumulative. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Flush" FSL="Default" -->
     <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><I>2.&nbsp;&nbsp;&nbsp;&nbsp;
          SECURITY INTEREST. </I></B><I></I>To secure the payment and performance of all
          of the Obligations when due, Borrower hereby grants to Silicon a security
          interest in all of the following (collectively, the &#147;Collateral&#148;): all
          right, title and interest of Borrower in and to all of the following, whether
          now owned or hereafter arising or acquired and wherever located: all Accounts;
          all Inventory; all Equipment; all Deposit Accounts; all General Intangibles
          (including without limitation all Intellectual Property); all Investment
          Property; all Other Property; and any and all claims, rights and interests in
          any of the above, and all guaranties and security for any of the above, and all
          substitutions and replacements for, additions, accessions, attachments,
          accessories, and improvements to, and proceeds (including proceeds of any
          insurance policies, proceeds of proceeds and claims against third parties) of,
          any and all of the above, and all Borrower&#146;s books relating to any and all
          of the above. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->
<A NAME=A008></A>
<P ALIGN=LEFT><i><b><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3. REPRESENTATIONS,
WARRANTIES AND COVENANTS OF BORROWER. </FONT></b></i></P>

<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
order to induce Silicon to enter into this Agreement and to make Loans, Borrower
represents and warrants to Silicon as follows, and Borrower covenants that the following
representations will continue to be true, and that Borrower will at all times comply with
all of the following covenants, throughout the term of this Agreement and until all
Obligations have been paid and performed in full: </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>3.1
Corporate Existence and Authority.</I></B><I></I> Borrower is and will continue to be,
duly organized, validly existing and in good standing under the laws of the jurisdiction
of its incorporation. Borrower is and will continue to be qualified and licensed to do
business in all jurisdictions in which any failure to do so would result in a Material
Adverse Change. The execution, delivery and performance by Borrower of this Agreement, and
all other documents contemplated hereby (i) have been duly and validly authorized, (ii)
are enforceable against Borrower in accordance with their terms (except as enforcement may
be limited by equitable principles and by bankruptcy, insolvency, reorganization,
moratorium or similar laws relating to creditors&#146; rights generally), and (iii) do not
violate Borrower&#146;s articles or certificate of incorporation, or Borrower&#146;s
by-laws, or any law or any material agreement or instrument which is binding upon Borrower
or its property, and (iv) do not constitute grounds for acceleration of any material
indebtedness or obligation under any agreement or instrument which is binding upon
Borrower or its property. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>3.2
Name; Trade Names and Styles.</I></B><I></I> The name of Borrower set forth in the heading
to this Agreement is its correct name. Listed in the Representations are all prior names
of Borrower and all of Borrower&#146;s present and prior trade names. Borrower shall give
Silicon 30 days&#146; prior written notice before changing its name or doing business
under any other name. Borrower has complied, and will in the future comply, in all
material respects, with all laws relating to the conduct of business under a fictitious
business name, except where the failure to so comply would not reasonably be expected to
result in a Material Adverse Change. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>3.3
Place of Business; Location of Collateral. </I></B><I></I>The address set forth in the
heading to this Agreement is Borrower&#146;s chief executive office. In addition, Borrower
has places of business and Collateral is located only at the locations set forth in the
Representations. Borrower will give Silicon at least 30 days prior written notice before
opening any additional place of business, changing its chief executive office, or moving
any of the Collateral to a location other than Borrower&#146;s Address or one of the
locations set forth in the Representations, except that Borrower may maintain sales
offices in the ordinary course of business at which not more than a total of $10,000 fair
market value of Equipment is located. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Sub 2 Left" FSL="Default" -->
<A NAME=A009></A>
<P ALIGN=LEFT><b><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.4
Title to Collateral; Perfection; Permitted Liens.</I> </FONT></b></P>

<!-- MARKER FORMAT-SHEET="Para (List) Indent" FSL="Default" -->
     <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) Borrower is now, and will at all times in the future be, the sole owner of all
          the Collateral, except for items of Equipment which are leased to Borrower. The
          Collateral now is and will remain free and clear of any and all liens, charges,
          security interests, encumbrances and adverse claims, except for Permitted Liens.
          Silicon now has, and will continue to have, a first-priority perfected and
          enforceable security interest in all of the Collateral, subject only to the
          Permitted Liens, and Borrower will at all times defend Silicon and the
          Collateral against all claims of others. </FONT></P>

<hr STYLE="page-break-after:always">

<!-- MARKER FORMAT-SHEET="Para (List) Indent" FSL="Default" -->
     <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)
     Borrower has set forth in the Representations all of Borrower&#146;s Deposit
     Accounts, and Borrower will give Silicon five Business Days advance written
     notice before establishing any new Deposit Accounts and will cause the
     institution where any such new Deposit Account is maintained to execute and
     deliver to Silicon a control agreement in form sufficient to perfect
     Silicon&#146;s security interest in the Deposit Account and otherwise
     satisfactory to Silicon in its good faith business judgment. Nothing herein
     limits any requirements which may be set forth in the Schedule as to where
     Deposit Accounts will be maintained. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Indent" FSL="Default" -->
     <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) In the event that Borrower shall at any time after the date hereof have any
          commercial tort claims against others, which it is asserting or intends to
          assert, and in which the potential recovery exceeds $100,000, Borrower shall
          promptly notify Silicon thereof in writing and provide Silicon with such
          information regarding the same as Silicon shall request (unless providing such
          information would waive the Borrower&#146;s attorney-client privilege). Such
          notification to Silicon shall constitute a grant of a security interest in the
          commercial tort claim and all proceeds thereof to Silicon, and Borrower shall
          execute and deliver all such documents and take all such actions as Silicon
          shall request in connection therewith. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Indent" FSL="Default" -->
     <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) None of the Collateral now is or will be affixed to any real property in such a
          manner, or with such intent, as to become a fixture. Borrower is not and will
          not become a lessee under any real property lease pursuant to which the lessor
          may obtain any rights in any of the Collateral and no such lease now prohibits,
          restrains, impairs or will prohibit, restrain or impair Borrower&#146;s right to
          remove any Collateral from the leased premises. Whenever any Collateral is
          located upon premises in which any third party has an interest, Borrower shall,
          whenever requested by Silicon, use its best efforts to cause such third party to
          execute and deliver to Silicon, in form acceptable to Silicon, such waivers and
          subordinations as Silicon shall specify in its good faith business judgment.
          Borrower will keep in full force and effect, and will comply with all material
          terms of, any lease of real property where any of the Collateral now or in the
          future may be located. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>3.5
Maintenance of Collateral. </I></B><I></I>Borrower will maintain the Collateral in good
working condition (ordinary wear and tear excepted), and Borrower will not use the
Collateral for any unlawful purpose. Borrower will immediately advise Silicon in writing
of any material loss or damage to the Collateral. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>3.6
Books and Records.</I></B><I></I> Borrower has maintained and will maintain at
Borrower&#146;s Address complete and accurate books and records, comprising an accounting
system in accordance with GAAP. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>3.7
Financial Condition, Statements and Reports.</I></B><I></I> All financial statements now
or in the future delivered to Silicon have been, and will be, prepared in conformity with
GAAP and now and in the future will fairly present the results of operations and financial
condition of Borrower, in accordance with GAAP, at the times and for the periods therein
stated. Between the last date covered by any such statement provided to Silicon and the
date hereof, there has been no Material Adverse Change. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>3.8
Tax Returns and Payments; Pension Contributions.</I></B><I></I> Borrower has timely filed,
and will timely file, all required tax returns and reports, and Borrower has timely paid,
and will timely pay, all foreign, federal, state and local taxes, assessments, deposits
and contributions now or in the future owed by Borrower. Borrower may, however, defer
payment of any contested taxes, provided that Borrower (i) in good faith contests
Borrower&#146;s obligation to pay the taxes by appropriate proceedings promptly and
diligently instituted and conducted, (ii) notifies Silicon in writing of the commencement
of, and any material development in, the proceedings, and (iii) posts bonds or takes any
other steps required to keep the contested taxes from becoming a lien upon any of the
Collateral. Borrower is unaware of any claims or adjustments proposed for any of
Borrower&#146;s prior tax years which could result in additional taxes becoming due and
payable by Borrower. Borrower has paid, and shall continue to pay all amounts necessary to
fund all present and future pension, profit sharing and deferred compensation plans in
accordance with their terms, and Borrower has not and will not withdraw from participation
in, permit partial or complete termination of, or permit the occurrence of any other event
with respect to, any such plan which could reasonably be expected to result in any
liability of Borrower, including any liability to the Pension Benefit Guaranty Corporation
or its successors or any other governmental agency. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>3.9
Compliance with Law.</I></B><I></I> Borrower has, to the best of its knowledge, complied,
and will comply, in all material respects, with all provisions of all foreign, federal,
state and local laws and regulations applicable to Borrower, including, but not limited
to, those relating to Borrower&#146;s ownership of real or personal property, the conduct
and licensing of Borrower&#146;s business, and all environmental matters. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>3.10
Litigation.</I></B><I></I> There is no claim, suit, litigation, proceeding or
investigation pending or (to best of Borrower&#146;s knowledge) threatened against or
affecting Borrower in any court or before any governmental agency (or any basis therefor
known to Borrower) which could reasonably be expected to result, either separately or in
the aggregate, in any Material Adverse Change. Borrower will promptly inform Silicon in
writing of any claim, proceeding, litigation or investigation in the future threatened or
instituted against Borrower involving any single claim of $50,000 or more, or involving
$100,000 or more in the aggregate. </FONT></P>

<hr STYLE="page-break-after:always">

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>3.11
Use of Proceeds.</I></B><I></I> All proceeds of all Loans shall be used solely for lawful
business purposes. Borrower is not purchasing or carrying any &#147;margin stock&#148; (as
defined in Regulation U of the Board of Governors of the Federal Reserve System) and no
part of the proceeds of any Loan will be used to purchase or carry any &#147;margin
stock&#148; or to extend credit to others for the purpose of purchasing or carrying any
&#147;margin stock.&#148; </FONT></P>

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<A NAME=A010></A>
<P ALIGN=LEFT><i><b><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4. ACCOUNTS. </FONT>
</b></i></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>4.1
Representations Relating to Accounts. </I></B><I></I>Borrower represents and warrants to
Silicon as follows: Each Account with respect to which Loans are requested by Borrower
shall, on the date each Loan is requested and made, (i) represent an undisputed bona fide
existing unconditional obligation of the Account Debtor created by the sale, delivery, and
acceptance of goods or the rendition of services, or the non-exclusive licensing of
Intellectual Property, in the ordinary course of Borrower&#146;s business, and (ii) meet
the Minimum Eligibility Requirements set forth in Section 8 below. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>4.2
Representations Relating to Documents and Legal Compliance. </I></B><I></I>Borrower
represents and warrants to Silicon as follows: All statements made and all unpaid balances
appearing in all invoices, instruments and other documents evidencing the Accounts are and
shall be true and correct and all such invoices, instruments and other documents and all
of Borrower&#146;s books and records are and shall be genuine and in all respects what
they purport to be. All sales and other transactions underlying or giving rise to each
Account shall comply in all material respects with all applicable laws and governmental
rules and regulations. To the best of Borrower&#146;s knowledge, all signatures and
endorsements on all documents, instruments, and agreements relating to all Accounts are
and shall be genuine, and all such documents, instruments and agreements are and shall be
legally enforceable in accordance with their terms. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>4.3
Schedules and Documents relating to Accounts. </I></B><I></I>Borrower shall deliver to
Silicon transaction reports and schedules of collections, as provided in the Schedule, on
Silicon&#146;s standard forms; provided, however, that Borrower&#146;s failure to execute
and deliver the same shall not affect or limit Silicon&#146;s security interest and other
rights in all of Borrower&#146;s Accounts, nor shall Silicon&#146;s failure to advance or
lend against a specific Account affect or limit Silicon&#146;s security interest and other
rights therein. If requested by Silicon, Borrower shall furnish Silicon with copies (or,
at Silicon&#146;s request, originals) of all contracts, orders, invoices, and other
similar documents, and all shipping instructions, delivery receipts, bills of lading, and
other evidence of delivery, for any goods the sale or disposition of which gave rise to
such Accounts, and Borrower warrants the genuineness of all of the foregoing. Borrower
shall also furnish to Silicon an aged accounts receivable trial balance as provided in the
Schedule. In addition, Borrower shall deliver to Silicon, on its request, the originals of
all instruments, chattel paper, security agreements, guarantees and other documents and
property evidencing or securing any Accounts, in the same form as received, with all
necessary endorsements, and copies of all credit memos. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>4.4
Collection of Accounts. </I></B><I></I>Borrower shall have the right to collect all
Accounts, unless and until a Default or an Event of Default has occurred and is
continuing. Whether or not an Event of Default has occurred and is continuing, Borrower
shall hold all payments on, and proceeds of, Accounts in trust for Silicon, and Borrower
shall immediately deliver all such payments and proceeds to Silicon in their original
form, duly endorsed, to be applied to the Obligations in such order as Silicon shall
determine. Silicon may, in its good faith business judgment, require that all proceeds of
Collateral be deposited by Borrower into a lockbox account, or such other &#147;blocked
account&#148; as Silicon may specify, pursuant to a blocked account agreement in such form
as Silicon may specify in its good faith business judgment. </FONT></P>

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     <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>4.5. Remittance of Proceeds. </I></B><I></I>All proceeds arising from the disposition
          of any Collateral shall be delivered, in kind, by Borrower to Silicon in the
          original form in which received by Borrower not later than the following
          Business Day after receipt by Borrower, to be applied to the Obligations in such
          order as Silicon shall determine; provided that, if no Default or Event of
          Default has occurred and is continuing, Borrower shall not be obligated to remit
          to Silicon the proceeds of the sale of worn out or obsolete Equipment disposed
          of by Borrower in good faith in an arm&#146;s length transaction for an
          aggregate purchase price of $25,000 or less (for all such transactions in any
          fiscal year). Borrower agrees that it will not commingle proceeds of Collateral
          with any of Borrower&#146;s other funds or property, but will hold such proceeds
          separate and apart from such other funds and property and in an express trust
          for Silicon. Nothing in this Section limits the restrictions on disposition of
          Collateral set forth elsewhere in this Agreement. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>4.6
Disputes. </I></B><I></I>Borrower shall notify Silicon promptly of all disputes or claims
relating to Accounts. Borrower shall not forgive (completely or partially), compromise or
settle any Account for less than payment in full, or agree to do any of the foregoing,
except that Borrower may do so, provided that: (i) Borrower does so in good faith, in a
commercially reasonable manner, in the ordinary course of business, and in arm&#146;s
length transactions, which are reported to Silicon on the regular reports provided to
Silicon; (ii) no Default or Event of Default has occurred and is continuing; and (iii)
taking into account all such discounts, settlements and forgiveness, the total outstanding
Loans will not exceed the Credit Limit. </FONT></P>

<hr STYLE="page-break-after:always">

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>4.7
Returns.</I></B><I></I> Provided no Event of Default has occurred and is continuing, if
any Account Debtor returns any Inventory to Borrower, Borrower shall promptly determine
the reason for such return and promptly issue a credit memorandum to the Account Debtor in
the appropriate amount. In the event any attempted return occurs after the occurrence and
during the continuance of any Event of Default, Borrower shall hold the returned Inventory
in trust for Silicon, and&nbsp;immediately notify Silicon of the return of the Inventory. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>4.8
Verification.</I></B><I></I> Silicon may, from time to time, verify directly with the
respective Account Debtors the validity, amount and other matters relating to the
Accounts, by means of mail, telephone or otherwise, either in the name of Borrower or
Silicon or such other name as Silicon may choose. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>4.9
No Liability. </I></B><I></I>Silicon shall not be responsible or liable for any shortage
or discrepancy in, damage to, or loss or destruction of, any goods, the sale or other
disposition of which gives rise to an Account, or for any error, act, omission, or delay
of any kind occurring in the settlement, failure to settle, collection or failure to
collect any Account, or for settling any Account in good faith for less than the full
amount thereof, nor shall Silicon be deemed to be responsible for any of Borrower&#146;s
obligations under any contract or agreement giving rise to an Account. Nothing herein
shall, however, relieve Silicon from liability for its own gross negligence or willful
misconduct. </FONT></P>

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<A NAME=A011></A>
<P ALIGN=LEFT><i><b><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5. ADDITIONAL DUTIES OF
BORROWER. </FONT></b></i></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>5.1
Financial and Other Covenants.</I></B><I></I> Borrower shall at all times comply with the
financial and other covenants set forth in the Schedule. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>5.2
Insurance.</I></B><I></I> Borrower shall, at all times insure all of the tangible personal
property Collateral and carry such other business insurance, with insurers reasonably
acceptable to Silicon, in such form and amounts as Silicon may reasonably require and that
are customary and in accordance with standard practices for Borrower&#146;s industry and
locations, and Borrower shall provide evidence of such insurance to Silicon. All such
insurance policies shall name Silicon as an additional loss payee, and shall contain a
lenders loss payee endorsement in form reasonably acceptable to Silicon. Upon receipt of
the proceeds of any such insurance, Silicon shall apply such proceeds in reduction of the
Obligations as Silicon shall determine in its good faith business judgment, except that,
provided no Default or Event of Default has occurred and is continuing, Silicon shall
release to Borrower insurance proceeds with respect to Equipment totaling less than
$100,000, which shall be utilized by Borrower for the replacement of the Equipment with
respect to which the insurance proceeds were paid. Silicon may require reasonable
assurance that the insurance proceeds so released will be so used. If Borrower fails to
provide or pay for any insurance, Silicon may, but is not obligated to, obtain the same at
Borrower&#146;s expense. Borrower shall promptly deliver to Silicon copies of all material
reports made to insurance companies. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>5.3
Reports.</I></B><I></I> Borrower, at its expense, shall provide Silicon with the written
reports set forth in the Schedule, and such other written reports with respect to Borrower
(including budgets, sales projections, operating plans and other financial documentation),
as Silicon shall from time to time specify in its good faith business judgment. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>5.4
Access to Collateral, Books and Records.</I></B><I></I> At reasonable times, and on one
Business Day&#146;s notice, Silicon, or its agents, shall have the right to inspect the
Collateral, and the right to audit and copy Borrower&#146;s books and records. Silicon
shall take reasonable steps to keep confidential all information obtained in any such
inspection or audit, but Silicon shall have the right to disclose any such information to
its auditors, regulatory agencies, and attorneys, and pursuant to any subpoena or other
legal process. The foregoing inspections and audits shall be at Borrower&#146;s expense
and the charge therefor shall be $700 per person per day (or such higher amount as shall
represent Silicon&#146;s then current standard charge for the same), plus reasonable
out-of-pocket expenses. In the event Borrower and Silicon schedule an audit more than 10
days in advance, and Borrower seeks to reschedule the audit with less than 10 days written
notice to Silicon, then (without limiting any of Silicon&#146;s rights or remedies),
Borrower shall pay Silicon a cancellation fee of $1,000 plus any out-of-pocket expenses
incurred by Silicon, to compensate Silicon for the anticipated costs and expenses of the
cancellation. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>5.5
Negative Covenants.</I></B><I></I> Except as may be permitted in the Schedule, Borrower
shall not, without Silicon&#146;s prior written consent (which shall be a matter of its
good faith business judgment), do any of the following: (i) merge or consolidate with
another corporation or entity; (ii) acquire any assets, except in the ordinary course of
business; (iii) enter into any other transaction outside the ordinary course of business;
(iv) sell or transfer any Collateral, except for the sale of finished Inventory in the
ordinary course of Borrower&#146;s business, and except for the sale of obsolete or
unneeded Equipment in the ordinary course of business; (v) store any Inventory or other
Collateral with any warehouseman or other third party; (vi) sell any Inventory on a
sale-or-return, guaranteed sale, consignment, or other contingent basis; (vii) make any
loans of any money or other assets<B>*</B>; (viii) incur any debts, outside the ordinary
course of business, which would result in a Material Adverse Change; (ix) guarantee or
otherwise become liable with respect to the obligations of another party or entity; (x)
pay or declare any dividends on Borrower&#146;s stock (except for dividends payable solely
in stock of Borrower); (xi) redeem, retire, purchase or otherwise acquire, directly or
indirectly, any of Borrower&#146;s stock; (xii) make any change in Borrower&#146;s capital
structure which would result in a Material Adverse Change; or (xiii) engage, directly or
indirectly, in any business other than the businesses currently engaged in by Borrower or
reasonably related thereto; or (xiv) dissolve or elect to dissolve. Transactions permitted
by the foregoing provisions of this Section are only permitted if no Default or Event of
Default would occur as a result of such transaction. </FONT></P>

<hr STYLE="page-break-after:always">

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>*, except that, provided
that no Default or Event of Default has occurred and is continuing, Borrower
make loans to employees of Borrower in an aggregate amount not exceeding
$150,000 outstanding at any time</B> </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>5.6
Litigation Cooperation.</I></B><I></I> Should any third-party suit or proceeding be
instituted by or against Silicon with respect to any Collateral or relating to Borrower,
Borrower shall, without expense to Silicon, make available Borrower and its officers,
employees and agents and Borrower&#146;s books and records, to the extent that Silicon may
deem them reasonably necessary in order to prosecute or defend any such suit or
proceeding. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>5.7
Further Assurances.</I></B><I></I> Borrower agrees, at its expense, on request by Silicon,
to execute all documents and take all actions, as Silicon, may, in its good faith business
judgment, deem necessary or useful in order to perfect and maintain Silicon&#146;s
perfected first-priority security interest in the Collateral (subject to Permitted Liens),
and in order to fully consummate the transactions contemplated by this Agreement. </FONT></P>

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<A NAME=A012></A>
<P ALIGN=LEFT><i><b><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6. TERM. </FONT>
</b></i></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>6.1
Maturity Date.</I></B><I></I> This Agreement shall continue in effect until the maturity
date set forth on the Schedule (the &#147;Maturity Date&#148;), subject to Section 6.3
below. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>6.2
Early Termination.</I></B><I></I> This Agreement may be terminated prior to the Maturity
Date as follows: (i) by Borrower, effective three Business Days after written notice of
termination is given to Silicon; or (ii) by Silicon at any time after the occurrence and
during the continuance of an Event of Default, without notice, effective immediately. If
this Agreement is terminated by Borrower or by Silicon under this Section 6.2, Borrower
shall pay to Silicon a termination fee in an amount equal to* provided that no termination
fee shall be charged if the credit facility hereunder is replaced with a new facility from
another division of Silicon Valley Bank. The termination fee shall be due and payable on
the effective date of termination and thereafter shall bear interest at a rate equal to
the highest rate applicable to any of the Obligations. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>*one
percent (1%) of the Overall Credit Limit (as defined in the Schedule), provided that the
total termination fee under this Loan Agreement and under the Exim Agreement (as defined
in the Schedule) shall not exceed one percent (1%) of the Overall Credit Limit, and</B> </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>6.3
Payment of Obligations.</I></B><I></I> On the Maturity Date or on any earlier effective
date of termination, Borrower shall pay and perform in full all Obligations, whether
evidenced by installment notes or otherwise, and whether or not all or any part of such
Obligations are otherwise then due and payable. Without limiting the generality of the
foregoing, if on the Maturity Date, or on any earlier effective date of termination, there
are any outstanding Letters of Credit issued by Silicon or issued by another institution
based upon an application, guarantee, indemnity or similar agreement on the part of
Silicon, then on such date Borrower shall provide to Silicon cash collateral in an amount
equal to 105% of the face amount of all such Letters of Credit plus all interest, fees and
cost due or to become due in connection therewith (as estimated by Silicon in its good
faith business judgment), to secure all of the Obligations relating to said Letters of
Credit, pursuant to Silicon&#146;s then standard form cash pledge agreement.
Notwithstanding any termination of this Agreement, all of Silicon&#146;s security
interests in all of the Collateral and all of the terms and provisions of this Agreement
shall continue in full force and effect until all Obligations have been paid and performed
in full; provided that Silicon may, in its sole discretion, refuse to make any further
Loans after termination. No termination shall in any way affect or impair any right or
remedy of Silicon, nor shall any such termination relieve Borrower of any Obligation to
Silicon, until all of the Obligations have been paid and performed in full. Upon payment
and performance in full of all the Obligations and termination of this Agreement, Silicon
shall promptly terminate its financing statements with respect to the Borrower and deliver
to Borrower such other documents as may be required to fully terminate Silicon&#146;s
security interests. </FONT></P>

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<A NAME=A013></A>
<P ALIGN=LEFT><i><b><FONT FACE="Times New Roman, Times, Serif" SIZE=2>7. EVENTS OF DEFAULT AND
REMEDIES. </FONT></b></i></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>7.1
Events of Default.</I></B><I></I> The occurrence of any of the following events shall
constitute an &#147;Event of Default&#148; under this Agreement, and Borrower shall give
Silicon immediate written notice thereof: (a) Any warranty, representation, statement,
report or certificate made or delivered to Silicon by Borrower or any of Borrower&#146;s
officers, employees or agents, now or in the future, shall be untrue or misleading in a
material respect when made or deemed to be made; or (b) Borrower shall fail to pay when
due any Loan or any interest thereon or any other monetary Obligation; or (c) the total
Loans and other Obligations outstanding at any time shall exceed the Credit Limit; or (d)
Borrower shall fail to comply with any of the financial covenants set forth in the
Schedule, or shall fail to perform any other non-monetary Obligation which by its nature
cannot be cured, or</FONT></P>

<hr STYLE="page-break-after:always">

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;shall fail to permit Silicon to conduct an inspection or audit as
specified in Section 5.4 hereof; or (e) Borrower shall fail to perform any other
non-monetary Obligation, which failure is not cured within five Business Days after the
date due; or (f) any levy, assessment, attachment, seizure, lien or encumbrance (other
than a Permitted Lien) is made on all or any part of the Collateral which is not cured
within 10 days after the occurrence of the same; or (g) any default or event of default
occurs under any obligation secured by a Permitted Lien, which is not cured within any
applicable cure period or waived in writing by the holder of the Permitted Lien; or (h)
Borrower breaches any material contract or obligation, which has resulted or may
reasonably be expected to result in a Material Adverse Change; or (i) Dissolution,
termination of existence, insolvency or business failure of Borrower; or appointment of a
receiver, trustee or custodian, for all or any part of the property of, assignment for the
benefit of creditors by, or the commencement of any proceeding by Borrower under any
reorganization, bankruptcy, insolvency, arrangement, readjustment of debt, dissolution or
liquidation law or statute of any jurisdiction, now or in the future in effect; or (j) the
commencement of any proceeding against Borrower or any guarantor of any of the Obligations
under any reorganization, bankruptcy, insolvency, arrangement, readjustment of debt,
dissolution or liquidation law or statute of any jurisdiction, now or in the future in
effect, which is not cured by the dismissal thereof within 30 days after the date
commenced; or (k) revocation or termination of, or limitation or denial of liability upon,
any guaranty of the Obligations or any attempt to do any of the foregoing, or commencement
of proceedings by any guarantor of any of the Obligations under any bankruptcy or
insolvency law; or (l) revocation or termination of, or limitation or denial of liability
upon, any pledge of any certificate of deposit, securities or other property or asset of
any kind pledged by any third party to secure any or all of the Obligations, or any
attempt to do any of the foregoing, or commencement of proceedings by or against any such
third party under any bankruptcy or insolvency law; or (m) Borrower makes any payment on
account of any indebtedness or obligation which has been subordinated to the Obligations
other than as permitted in the applicable subordination agreement, or if any Person who
has subordinated such indebtedness or obligations terminates or in any way limits his
subordination agreement; or (n) there shall be a change in the record or beneficial
ownership of the outstanding shares of stock of Borrower, in one or more
transactions,* without the prior written consent of Silicon; or (o) Borrower shall generally
not pay its debts as they become due, or Borrower shall conceal, remove or transfer any
part of its property, with intent to hinder, delay or defraud its creditors, or make or
suffer any transfer of any of its property which may be fraudulent under any bankruptcy,
fraudulent conveyance or similar law; or (p) a Material Adverse Change shall occur; or (q)
Silicon, acting in good faith and in a commercially reasonable manner, deems itself
insecure because of the occurrence of an event prior to the effective date hereof of which
Silicon had no knowledge on the effective date or because of the occurrence of an event on
or subsequent to the effective date. Silicon may cease making any Loans hereunder during
any of the above cure periods, and thereafter if an Event of Default has occurred and is
continuing. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>*the
result of which is that any one Person owns at least 50% of the outstanding stock of
Borrower,</B> </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>7.2
Remedies.</I></B><I></I> Upon the occurrence and during the continuance of any Event of
Default, and at any time thereafter, Silicon, at its option, and without notice or demand
of any kind (all of which are hereby expressly waived by Borrower), may do any one or more
of the following: (a) Cease making Loans or otherwise extending credit to Borrower under
this Agreement or any other Loan Document; (b) Accelerate and declare all or any part of
the Obligations to be immediately due, payable, and performable, notwithstanding any
deferred or installment payments allowed by any instrument evidencing or relating to any
Obligation; (c) Take possession of any or all of the Collateral wherever it may be found,
and for that purpose Borrower hereby authorizes Silicon without judicial process to enter
onto any of Borrower&#146;s premises without interference to search for, take possession
of, keep, store, or remove any of the Collateral, and remain on the premises or cause a
custodian to remain on the premises in exclusive control thereof, without charge for so
long as Silicon deems it necessary, in its good faith business judgment, in order to
complete the enforcement of its rights under this Agreement or any other agreement;
provided, however, that should Silicon seek to take possession of any of the Collateral by
court process, Borrower hereby irrevocably waives: (i) any bond and any surety or security
relating thereto required by any statute, court rule or otherwise as an incident to such
possession; (ii) any demand for possession prior to the commencement of any suit or action
to recover possession thereof; and (iii) any requirement that Silicon retain possession
of, and not dispose of, any such Collateral until after trial or final judgment; (d)
Require Borrower to assemble any or all of the Collateral and make it available to Silicon
at places designated by Silicon which are reasonably convenient to Silicon and Borrower,
and to remove the Collateral to such locations as Silicon may deem advisable; (e) Complete
the processing, manufacturing or repair of any Collateral prior to a disposition thereof
and, for such purpose and for the purpose of removal, Silicon shall have the right to use
Borrower&#146;s premises, vehicles, hoists, lifts, cranes, and other Equipment and all
other property without charge; (f) Sell, lease or otherwise dispose of any of the
Collateral, in its condition at the time Silicon obtains possession of it or after further
manufacturing, processing or repair, at one or more public and/or private sales, in lots
or in bulk, for cash, exchange or other property, or on credit, and to adjourn any such
sale from time to time without notice other than oral announcement at the time scheduled
for sale. Silicon shall have the right to conduct such disposition on Borrower&#146;s
premises without charge, for such time or times as Silicon deems reasonable, or on
Silicon&#146;s premises, or elsewhere and the Collateral need not be located at the place
of disposition. Silicon </FONT></P>

<hr STYLE="page-break-after:always">

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>may directly or through any affiliated company purchase or lease
any Collateral at any such public disposition, and if permissible under applicable law, at
any private disposition. Any sale or other disposition of Collateral shall not relieve
Borrower of any liability Borrower may have if any Collateral is defective as to title or
physical condition or otherwise at the time of sale; (g) Demand payment of, and collect
any Accounts and General Intangibles comprising Collateral and, in connection therewith,
Borrower irrevocably authorizes Silicon to endorse or sign Borrower&#146;s name on all
collections, receipts, instruments and other documents, to take possession of and open
mail addressed to Borrower and remove therefrom payments made with respect to any item of
the Collateral or proceeds thereof, and, in Silicon&#146;s good faith business judgment,
to grant extensions of time to pay, compromise claims and settle Accounts and the like for
less than face value; (h) Offset against any sums in any of Borrower&#146;s general,
special or other Deposit Accounts with Silicon against any or all of the Obligations; and
(i) Demand and receive possession of any of Borrower&#146;s federal and state income tax
returns and the books and records utilized in the preparation thereof or referring
thereto. All reasonable attorneys&#146; fees, expenses, costs, liabilities and obligations
incurred by Silicon with respect to the foregoing shall be added to and become part of the
Obligations, shall be due on demand, and shall bear interest at a rate equal to the
highest interest rate applicable to any of the Obligations. Without limiting any of
Silicon&#146;s rights and remedies, from and after the occurrence and during the
continuance of any Event of Default, the interest rate applicable to the Obligations shall
be increased by an additional four percent per annum (the &#147;Default Rate&#148;). </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>7.3
Standards for Determining Commercial Reasonableness.</I></B><I></I> Borrower and Silicon
agree that a sale or other disposition (collectively, &#147;sale&#148;) of any Collateral
which complies with the following standards will conclusively be deemed to be commercially
reasonable: (i) Notice of the sale is given to Borrower at least ten days prior to the
sale, and, in the case of a public sale, notice of the sale is published at least five
days before the sale in a newspaper of general circulation in the county where the sale is
to be conducted; (ii) Notice of the sale describes the collateral in general, non-specific
terms; (iii) The sale is conducted at a place designated by Silicon, with or without the
Collateral being present; (iv) The sale commences at any time between 8:00 a.m. and 6:00
p.m; (v) Payment of the purchase price in cash or by cashier&#146;s check or wire transfer
is required; (vi) With respect to any sale of any of the Collateral, Silicon may (but is
not obligated to) direct any prospective purchaser to ascertain directly from Borrower any
and all information concerning the same. Silicon shall be free to employ other methods of
noticing and selling the Collateral, in its discretion, if they are commercially
reasonable. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>7.4
Power of Attorney.</I></B><I></I> Upon the occurrence and during the continuance of any
Event of Default, without limiting Silicon&#146;s other rights and remedies, Borrower
grants to Silicon an irrevocable power of attorney coupled with an interest, authorizing
and permitting Silicon (acting through any of its employees, attorneys or agents) at any
time, at its option, but without obligation, with or without notice to Borrower, and at
Borrower&#146;s expense, to do any or all of the following, in Borrower&#146;s name or
otherwise, but Silicon agrees that if it exercises any right hereunder, it will do so in
good faith and in a commercially reasonable manner: (a) Execute on behalf of Borrower any
documents that Silicon may, in its good faith business judgment, deem advisable in order
to perfect and maintain Silicon&#146;s security interest in the Collateral, or in order to
exercise a right of Borrower or Silicon, or in order to fully consummate all the
transactions contemplated under this Agreement, and all other Loan Documents; (b) Execute
on behalf of Borrower, any invoices relating to any Account, any draft against any Account
Debtor and any notice to any Account Debtor, any proof of claim in bankruptcy, any Notice
of Lien, claim of mechanic&#146;s, materialman&#146;s or other lien, or assignment or
satisfaction of mechanic&#146;s, materialman&#146;s or other lien; (c) Take control in any
manner of any cash or non-cash items of payment or proceeds of Collateral; endorse the
name of Borrower upon any instruments, or documents, evidence of payment or Collateral
that may come into Silicon&#146;s possession; (d) Endorse all checks and other forms of
remittances received by Silicon; (e) Pay, contest or settle any lien, charge, encumbrance,
security interest and adverse claim in or to any of the Collateral, or any judgment based
thereon, or otherwise take any action to terminate or discharge the same; (f) Grant
extensions of time to pay, compromise claims and settle Accounts and General Intangibles
for less than face value and execute all releases and other documents in connection
therewith; (g) Pay any sums required on account of Borrower&#146;s taxes or to secure the
release of any liens therefor, or both; (h) Settle and adjust, and give releases of, any
insurance claim that relates to any of the Collateral and obtain payment therefor; (i)
Instruct any third party having custody or control of any books or records belonging to,
or relating to, Borrower to give Silicon the same rights of access and other rights with
respect thereto as Silicon has under this Agreement; and (j) Take any action or pay any
sum required of Borrower pursuant to this Agreement and any other Loan Documents. Any and
all reasonable sums paid and any and all reasonable costs, expenses, liabilities,
obligations and attorneys&#146; fees incurred by Silicon with respect to the foregoing
shall be added to and become part of the Obligations, shall be payable on demand, and
shall bear interest at a rate equal to the highest interest rate applicable to any of the
Obligations. In no event shall Silicon&#146;s rights under the foregoing power of attorney
or any of Silicon&#146;s other rights under this Agreement be deemed to indicate that
Silicon is in control of the business, management or properties of Borrower. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>7.5
Application of Proceeds.</I></B><I></I> All proceeds realized as the result of any sale of
the Collateral shall be applied by Silicon first to the reasonable costs, expenses,
liabilities, obligations and attorneys&#146; fees incurred by Silicon in the exercise of
its</FONT></P>

<hr STYLE="page-break-after:always">

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>rights under this Agreement, second to the interest due upon any of the Obligations,
and third to the principal of the Obligations, in such order as Silicon shall determine in
its sole discretion. Any surplus shall be paid to Borrower or other persons legally
entitled thereto; Borrower shall remain liable to Silicon for any deficiency. If, Silicon,
in its good faith business judgment, directly or indirectly enters into a deferred payment
or other credit transaction with any purchaser at any sale of Collateral, Silicon shall
have the option, exercisable at any time, in its good faith business judgment, of either
reducing the Obligations by the principal amount of purchase price or deferring the
reduction of the Obligations until the actual receipt by Silicon of the cash therefor. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>7.6
Remedies Cumulative.</I></B><I></I> In addition to the rights and remedies set forth in
this Agreement, Silicon shall have all the other rights and remedies accorded a secured
party under the California Uniform Commercial Code and under all other applicable laws,
and under any other instrument or agreement now or in the future entered into between
Silicon and Borrower, and all of such rights and remedies are cumulative and none is
exclusive. Exercise or partial exercise by Silicon of one or more of its rights or
remedies shall not be deemed an election, nor bar Silicon from subsequent exercise or
partial exercise of any other rights or remedies. The failure or delay of Silicon to
exercise any rights or remedies shall not operate as a waiver thereof, but all rights and
remedies shall continue in full force and effect until all of the Obligations have been
fully paid and performed. </FONT></P>

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     <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><I>8.</I></B><I></I>&nbsp;&nbsp;&nbsp;&nbsp;
          <B><I>DEFINITIONS. </I></B><I></I>As used in this Agreement, the following terms
          have the following meanings: </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Account
Debtor</U>&#148; means the obligor on an Account. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Accounts</U>&#148;
means all present and future &#147;accounts&#148; as defined in the California Uniform
Commercial Code in effect on the date hereof with such additions to such term as may
hereafter be made, and includes without limitation all accounts receivable and other sums
owing to Borrower. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Affiliate</U>&#148;
means, with respect to any Person, a relative, partner, shareholder, director, officer, or
employee of such Person, or any parent or subsidiary of such Person, or any Person
controlling, controlled by or under common control with such Person. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Business
Day</U>&#148; means a day on which Silicon is open for business. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Code</U>&#148;
means the Uniform Commercial Code as adopted and in effect in the State of California from
time to time. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Collateral</U>&#148;
has the meaning set forth in Section 2 above. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>continuing</U>&#148; and
&#147;<U>during the continuance of</U>&#148; when used with reference to a Default or
Event of Default means that the Default or Event of Default has occurred and has not been
either waived in writing by Silicon or cured within any applicable cure period. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Default</U>&#148;
means any event which with notice or passage of time or both, would constitute an Event of
Default. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Default
Rate</U>&#148; has the meaning set forth in Section 7.2 above. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Deposit Accounts</U>&#148;
means all present and future &#147;deposit accounts&#148; as defined in the California
Uniform Commercial Code in effect on the date hereof with such additions to such term as
may hereafter be made, and includes without limitation all general and special bank
accounts, demand accounts, checking accounts, savings accounts and certificates of
deposit. </FONT></P>

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<A NAME=A014></A>
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<u>Eligible
Inventory</u>&#148;<I> [Not Applicable]</I> </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Eligible
Accounts</U>&#148; means Accounts and General Intangibles arising in the ordinary course
of Borrower&#146;s business from the sale of goods or the rendition of services, or the
non-exclusive licensing of Intellectual Property, which Silicon, in its good faith
business judgment, shall deem eligible for borrowing. Without limiting the fact that the
determination of which Accounts are eligible for borrowing is a matter of Silicon&#146;s
good faith business judgment, the following (the <U>&#147;Minimum Eligibility
Requirements</U>&#148;) are the minimum requirements for a Account to be an Eligible
Account: (i) the Account must not be outstanding for more than 90 days from its invoice
date (the &#147;<U>Eligibility Period</U>&#148;), (ii) the Account must not represent
progress billings, or be due under a fulfillment or requirements contract with the Account
Debtor, (iii) the Account must not be subject to any contingencies (including Accounts
arising from sales on consignment, guaranteed sale or other terms pursuant to which
payment by the Account Debtor may be conditional), (iv) the Account must not be owing from
an Account Debtor with whom Borrower has any dispute (whether or not relating to the
particular Account), (v) the Account must not be owing from an Affiliate of Borrower, (vi)
the Account must not be owing from an Account Debtor which is subject to any insolvency or
bankruptcy proceeding, or whose financial condition is not acceptable to Silicon, or
which, fails or goes out of a material portion of its business, (vii) the Account must not
be owing from the United States or any department, agency or instrumentality thereof
(unless there has been compliance, to Silicon&#146;s satisfaction, with the United States
Assignment of Claims Act), (viii) the Account must not be owing from an Account Debtor
located outside the United States or Canada</FONT></P>

<hr STYLE="page-break-after:always">

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;(unless pre-approved by Silicon in its
discretion in writing, or backed by a letter of credit satisfactory to Silicon, or FCIA
insured satisfactory to Silicon), (ix) the Account must not be owing from an Account
Debtor to whom Borrower is or may be liable for goods purchased from such Account Debtor
or otherwise (but, in such case, the Account will be deemed not eligible only to the
extent of any amounts owed by Borrower to such Account Debtor). Accounts owing from one
Account Debtor will not be deemed Eligible Accounts to the extent they exceed 25% of the
total Accounts outstanding. In addition, if more than 50% of the Accounts owing from an
Account Debtor are outstanding for a period longer than their Eligibility Period (without
regard to unapplied credits) or are otherwise not eligible Accounts, then all Accounts
owing from that Account Debtor will be deemed ineligible for borrowing. Silicon may, from
time to time, in its good faith business judgment, revise the Minimum Eligibility
Requirements, upon written notice to Borrower. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Equipment</U>&#148;
means all present and future &#147;equipment&#148; as defined in the California Uniform
Commercial Code in effect on the date hereof with such additions to such term as may
hereafter be made, and includes without limitation all machinery, fixtures, goods,
vehicles (including motor vehicles and trailers), and any interest in any of the
foregoing. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Event
of Default</U>&#148; means any of the events set forth in Section&nbsp;7.1 of this
Agreement. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>GAAP</U>&#148;
means generally accepted accounting principles consistently applied. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>General
Intangibles</U>&#148; means all present and future &#147;general intangibles&#148; as
defined in the California Uniform Commercial Code in effect on the date hereof with such
additions to such term as may hereafter be made, and includes without limitation all
Intellectual Property, payment intangibles, royalties, contract rights, goodwill,
franchise agreements, purchase orders, customer lists, route lists, telephone numbers,
domain names, claims, income tax refunds, security and other deposits, options to purchase
or sell real or personal property, rights in all litigation presently or hereafter pending
(whether in contract, tort or otherwise), insurance policies (including without limitation
key man, property damage, and business interruption insurance), payments of insurance and
rights to payment of any kind. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>good
faith business judgment</U>&#148; means honesty in fact and good faith (as defined in
Section 1201 of the Code) in the exercise of Silicon&#146;s business judgment. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>including</U>&#148;
means including (but not limited to). </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Intellectual
Property</U>&#148; means all present and future (a) copyrights, copyright rights,
copyright applications, copyright registrations and like protections in each work of
authorship and derivative work thereof, whether published or unpublished, (b) trade secret
rights, including all rights to unpatented inventions and know-how, and confidential
information; (c) mask work or similar rights available for the protection of semiconductor
chips; (d) patents, patent applications and like protections including without limitation
improvements, divisions, continuations, renewals, reissues, extensions and
continuations-in-part of the same; (e) trademarks, servicemarks, trade styles, and trade
names, whether or not any of the foregoing are registered, and all applications to
register and registrations of the same and like protections, and the entire goodwill of
the business of Borrower connected with and symbolized by any such trademarks; (f)
computer software and computer software products; (g) designs and design rights; (h)
technology; (i) all claims for damages by way of past, present and future infringement of
any of the rights included above; (j) all licenses or other rights to use any property or
rights of a type described above. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Inventory</U>&#148;
means all present and future &#147;inventory&#148; as defined in the California Uniform
Commercial Code in effect on the date hereof with such additions to such term as may
hereafter be made, and includes without limitation all merchandise, raw materials, parts,
supplies, packing and shipping materials, work in process and finished products, including
without limitation such inventory as is temporarily out of Borrower&#146;s custody or
possession or in transit and including any returned goods and any documents of title
representing any of the above. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Investment
Property</U>&#148; means all present and future investment property, securities, stocks,
bonds, debentures, debt securities, partnership interests, limited liability company
interests, options, security entitlements, securities accounts, commodity contracts,
commodity accounts, and all financial assets held in any securities account or otherwise,
and all options and warrants to purchase any of the foregoing, wherever located, and all
other securities of every kind, whether certificated or uncertificated. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Loan
Documents</U>&#148; means, collectively, this Agreement, the Representations, and all
other present and future documents, instruments and agreements between Silicon and
Borrower, including, but not limited to those relating to this Agreement, and all
amendments and modifications thereto and replacements therefor. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Material
Adverse Change</U>&#148; means any of the following: (i) a material adverse change in the
business, operations, or financial or other condition of the Borrower, or (ii) a material
impairment of the prospect of repayment of any portion of the Obligations; or (iii) a
material impairment of the value or priority of Silicon&#146;s security interests in the
Collateral. </FONT></P>

<hr STYLE="page-break-after:always">

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Obligations</U>&#148;
means all present and future Loans, advances, debts, liabilities, obligations, guaranties,
covenants, duties and indebtedness at any time owing by Borrower to Silicon, whether
evidenced by this Agreement or any note or other instrument or document, or otherwise,
whether arising from an extension of credit, opening of a letter of credit, banker&#146;s
acceptance, loan, guaranty, indemnification or otherwise, whether direct or indirect
(including, without limitation, those acquired by assignment and any participation by
Silicon in Borrower&#146;s debts owing to others), absolute or contingent, due or to
become due, including, without limitation, all interest, charges, expenses, fees,
attorney&#146;s fees, expert witness fees, audit fees, letter of credit fees, collateral
monitoring fees, closing fees, facility fees, termination fees, minimum interest charges
and any other sums chargeable to Borrower under this Agreement or under any other Loan
Documents. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Other
Property</U>&#148; means the following as defined in the California Uniform Commercial
Code in effect on the date hereof with such additions to such term as may hereafter be
made, and all rights relating thereto: all present and future &#147;commercial tort
claims&#148; (including without limitation any commercial tort claims identified in the
Representations), &#147;documents&#148;, &#147;instruments&#148;, &#147;promissory
notes&#148;, &#147;chattel paper&#148;, &#147;letters of credit&#148;,
&#147;letter-of-credit rights&#148;, &#147;fixtures&#148;, &#147;farm products&#148; and
&#147;money&#148;; and all other goods and personal property of every kind, tangible and
intangible, whether or not governed by the California Uniform Commercial Code. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Permitted
Liens</U>&#148; means the following: (i) purchase money security interests in specific
items of Equipment; (ii) leases of specific items of Equipment; (iii) liens for taxes not
yet payable; (iv) additional security interests and liens consented to in writing by
Silicon, which consent may be withheld in its good faith business judgment; (v) security
interests being terminated substantially concurrently with this Agreement; (vi)&nbsp;liens
of materialmen, mechanics, warehousemen, carriers, or other similar liens arising in the
ordinary course of business and securing obligations which are not delinquent;
(vii)&nbsp;liens incurred in connection with the extension, renewal or refinancing of the
indebtedness secured by liens of the type described above in clauses (i) or (ii) above,
provided that any extension, renewal or replacement lien is limited to the property
encumbered by the existing lien and the principal amount of the indebtedness being
extended, renewed or refinanced does not increase; (viii) Liens in favor of customs and
revenue authorities which secure payment of customs duties in connection with the
importation of goods. Silicon will have the right to require, as a condition to its
consent under subparagraph (iv) above, that the holder of the additional security interest
or lien sign an intercreditor agreement on Silicon&#146;s then standard form, acknowledge
that the security interest is subordinate to the security interest in favor of Silicon,
and agree not to take any action to enforce its subordinate security interest so long as
any Obligations remain outstanding, and that Borrower agree that any uncured default in
any obligation secured by the subordinate security interest shall also constitute an Event
of Default under this Agreement. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Person</U>&#148;
means any individual, sole proprietorship, partnership, joint venture, trust,
unincorporated organization, association, corporation, government, or any agency or
political division thereof, or any other entity. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Representations</U>&#148;
means the written Representations and Warranties provided by Borrower to Silicon referred
to in the Schedule. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Reserves</U>&#148;
means, as of any date of determination, such amounts as Silicon may from time to time
establish and revise in its good faith business judgment, reducing the amount of Loans,
Letters of Credit and other financial accommodations which would otherwise be available to
Borrower under the lending formula(s) provided in the Schedule: (a) to reflect events,
conditions, contingencies or risks which, as determined by Silicon in its good faith
business judgment, do or may adversely affect (i) the Collateral or any other property
which is security for the Obligations or its value (including without limitation any
increase in delinquencies of Accounts), (ii) the assets, business or prospects of Borrower
or any Guarantor, or (iii) the security interests and other rights of Silicon in the
Collateral (including the enforceability, perfection and priority thereof); or (b) to
reflect Silicon&#146;s good faith belief that any collateral report or financial
information furnished by or on behalf of Borrower or any Guarantor to Silicon is or may
have been incomplete, inaccurate or misleading in any material respect; or (c) in respect
of any state of facts which Silicon determines in good faith constitutes an Event of
Default or may, with notice or passage of time or both, constitute an Event of Default. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Other
Terms</U>. All accounting terms used in this Agreement, unless otherwise indicated, shall
have the meanings given to such terms in accordance with GAAP, consistently applied. All
other terms contained in this Agreement, unless otherwise indicated, shall have the
meanings provided by the Code, to the extent such terms are defined therein. </FONT></P>

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<A NAME=A015></A>
<P ALIGN=LEFT><i><b><FONT FACE="Times New Roman, Times, Serif" SIZE=2>9. GENERAL PROVISIONS. </FONT>
</b></i></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>9.1
Interest Computation. </I></B><I></I>In computing interest on the Obligations,
all checks, wire transfers and other items of payment received by Silicon
(including proceeds of Accounts and payment of the Obligations in full) shall be
deemed applied by Silicon on account of the Obligations three Business Days
after receipt by Silicon of immediately available funds, and, for purposes of
the foregoing, any such funds received after 12:00 Noon on any day shall be
deemed received on the next Business Day. Silicon shall not, however, be
required to credit Borrower&#146;s account for the amount of any item of payment</FONT></P>

<hr STYLE="page-break-after:always">

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;which is
unsatisfactory to Silicon in its good faith business judgment, and Silicon may
charge Borrower&#146;s loan account for the amount of any item of payment which is
returned to Silicon unpaid. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>9.2
Application of Payments. </I></B><I></I>All payments with respect to the Obligations may
be applied, and in Silicon&#146;s good faith business judgment reversed and re-applied, to
the Obligations, in such order and manner as Silicon shall determine in its good faith
business judgment. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>9.3
Charges to Accounts. </I></B><I></I>Silicon may, in its discretion, require that Borrower
pay monetary Obligations in cash to Silicon, or charge them to Borrower&#146;s Loan
account, in which event they will bear interest at the same rate applicable to the Loans.
Silicon may also, in its discretion, charge any monetary Obligations to Borrower&#146;s
Deposit Accounts maintained with Silicon. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>9.4
Monthly Accountings.</I></B><I></I> Silicon shall provide Borrower monthly with an account
of advances, charges, expenses and payments made pursuant to this Agreement. Such account
shall be deemed correct, accurate and binding on Borrower and an account stated (except
for reverses and reapplications of payments made and corrections of errors discovered by
Silicon), unless Borrower notifies Silicon in writing to the contrary within 60 days after
such account is rendered, describing the nature of any alleged errors or omissions. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>9.5
Notices.</I></B><I></I> All notices to be given under this Agreement shall be in writing
and shall be given either personally or by reputable private delivery service or by
regular first-class mail, or certified mail return receipt requested, addressed to Silicon
or Borrower at the addresses shown in the heading to this Agreement, or at any other
address designated in writing by one party to the other party. Notices to Silicon shall be
directed to the Commercial Finance Division, to the attention of the Division Manager or
the Division Credit Manager. All notices shall be deemed to have been given upon delivery
in the case of notices personally delivered, or at the expiration of one Business Day
following delivery to the private delivery service, or two Business Days following the
deposit thereof in the United States mail, with postage prepaid. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>9.6
Severability.</I></B><I></I> Should any provision of this Agreement be held by any court
of competent jurisdiction to be void or unenforceable, such defect shall not affect the
remainder of this Agreement, which shall continue in full force and effect. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>9.7
Integration.</I></B><I></I> This Agreement and such other written agreements, documents
and instruments as may be executed in connection herewith are the final, entire and
complete agreement between Borrower and Silicon and supersede all prior and
contemporaneous negotiations and oral representations and agreements, all of which are
merged and integrated in this Agreement. <U>There are no oral understandings,
representations or agreements between the parties which are not set forth in this
Agreement or in other written agreements signed by the parties in connection herewith.</U> </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>9.8
Waivers; Indemnity.</I></B><I></I> The failure of Silicon at any time or times to require
Borrower to strictly comply with any of the provisions of this Agreement or any other Loan
Document shall not waive or diminish any right of Silicon later to demand and receive
strict compliance therewith. Any waiver of any default shall not waive or affect any other
default, whether prior or subsequent, and whether or not similar. None of the provisions
of this Agreement or any other Loan Document shall be deemed to have been waived by any
act or knowledge of Silicon or its agents or employees, but only by a specific written
waiver signed by an authorized officer of Silicon and delivered to Borrower. Borrower
waives the benefit of all statutes of limitations relating to any of the Obligations or
this Agreement or any other Loan Document, and Borrower waives demand, protest, notice of
protest and notice of default or dishonor, notice of payment and nonpayment, release,
compromise, settlement, extension or renewal of any commercial paper, instrument, account,
General Intangible, document or guaranty at any time held by Silicon on which Borrower is
or may in any way be liable, and notice of any action taken by Silicon, unless expressly
required by this Agreement. Borrower hereby agrees to indemnify Silicon and its
affiliates, subsidiaries, parent, directors, officers, employees, agents, and attorneys,
and to hold them harmless from and against any and all claims, debts, liabilities,
demands, obligations, actions, causes of action, penalties, costs and expenses (including
reasonable attorneys&#146; fees), of every kind, which they may sustain or incur based
upon or arising out of any of the Obligations, or any relationship or agreement between
Silicon and Borrower, or any other matter, relating to Borrower or the Obligations;
provided that this indemnity shall not extend to damages proximately caused by the
indemnitee&#146;s own gross negligence or willful misconduct. Notwithstanding any
provision in this Agreement to the contrary, the indemnity agreement set forth in this
Section shall survive any termination of this Agreement and shall for all purposes
continue in full force and effect. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>9.9
No Liability for Ordinary Negligence.</I></B><I></I> Neither Silicon, nor any of its
directors, officers, employees, agents, attorneys or any other Person affiliated with or
representing Silicon shall be liable for any claims, demands, losses or damages, of any
kind whatsoever, made, claimed, incurred or suffered by Borrower or any other party
through the ordinary negligence of Silicon, or any of its directors, officers, employees,
agents, attorneys or any other Person affiliated with or representing Silicon, but nothing
herein shall relieve Silicon from liability for its own gross negligence or willful
misconduct. </FONT></P>

<hr STYLE="page-break-after:always">

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>9.10
Amendment.</I></B><I></I> The terms and provisions of this Agreement may not be waived or
amended, except in a writing executed by Borrower and a duly authorized officer of
Silicon. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>9.11
Time of Essence.</I></B><I></I> Time is of the essence in the performance by Borrower of
each and every obligation under this Agreement. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>9.12
Attorneys Fees and Costs.</I></B><I></I> Borrower shall reimburse Silicon for all
reasonable attorneys&#146; fees and all filing, recording, search, title insurance,
appraisal, audit, and other reasonable costs incurred by Silicon, pursuant to, or in
connection with, or relating to this Agreement (whether or not a lawsuit is filed),
including, but not limited to, any reasonable attorneys&#146; fees and costs Silicon
incurs in order to do the following: prepare and negotiate this Agreement and all present
and future documents relating to this Agreement; obtain legal advice in connection with
this Agreement or Borrower; enforce, or seek to enforce, any of its rights; prosecute
actions against, or defend actions by, Account Debtors; commence, intervene in, or defend
any action or proceeding; initiate any complaint to be relieved of the automatic stay in
bankruptcy; file or prosecute any probate claim, bankruptcy claim, third-party claim, or
other claim; examine, audit, copy, and inspect any of the Collateral or any of
Borrower&#146;s books and records; protect, obtain possession of, lease, dispose of, or
otherwise enforce Silicon&#146;s security interest in, the Collateral; and otherwise
represent Silicon in any litigation relating to Borrower. In satisfying Borrower&#146;s
obligation hereunder to reimburse Silicon for attorneys fees, Borrower may, for
convenience, issue checks directly to Silicon&#146;s attorneys, Levy, Small &amp; Lallas,
but Borrower acknowledges and agrees that Levy, Small &amp; Lallas is representing only
Silicon and not Borrower in connection with this Agreement. If either Silicon or Borrower
files any lawsuit against the other predicated on a breach of this Agreement, the
prevailing party in such action shall be entitled to recover its reasonable costs and
attorneys&#146; fees, including (but not limited to) reasonable attorneys&#146; fees and
costs incurred in the enforcement of, execution upon or defense of any order, decree,
award or judgment. All attorneys&#146; fees and costs to which Silicon may be entitled
pursuant to this Paragraph shall immediately become part of Borrower&#146;s Obligations,
shall be due on demand, and shall bear interest at a rate equal to the highest interest
rate applicable to any of the Obligations. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>9.13
Benefit of Agreement.</I></B><I></I> The provisions of this Agreement shall be binding
upon and inure to the benefit of the respective successors, assigns, heirs, beneficiaries
and representatives of Borrower and Silicon; provided, however, that Borrower may not
assign or transfer any of its rights under this Agreement without the prior written
consent of Silicon, and any prohibited assignment shall be void. No consent by Silicon to
any assignment shall release Borrower from its liability for the Obligations. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>9.14
Joint and Several Liability.</I></B><I></I> If Borrower consists of more than one Person,
their liability shall be joint and several, and the compromise of any claim with, or the
release of, any Borrower shall not constitute a compromise with, or a release of, any
other Borrower. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>9.15
Limitation of Actions.</I></B><I> </I>Any claim or cause of action by Borrower against
Silicon, its directors, officers, employees, agents, accountants or attorneys, based upon,
arising from, or relating to this Loan Agreement, or any other Loan Document, or any other
transaction contemplated hereby or thereby or relating hereto or thereto, or any other
matter, cause or thing whatsoever, occurred, done, omitted or suffered to be done by
Silicon, its directors, officers, employees, agents, accountants or attorneys, shall be
barred unless asserted by Borrower by the commencement of an action or proceeding in a
court of competent jurisdiction by the filing of a complaint within one year after the
first act, occurrence or omission upon which such claim or cause of action, or any part
thereof, is based, and the service of a summons and complaint on an officer of Silicon, or
on any other person authorized to accept service on behalf of Silicon, within thirty (30)
days thereafter. Borrower agrees that such one-year period is a reasonable and sufficient
time for Borrower to investigate and act upon any such claim or cause of action. The
one-year period provided herein shall not be waived, tolled, or extended except by the
written consent of Silicon in its sole discretion. This provision shall survive any
termination of this Loan Agreement or any other Loan Document. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>9.16
Paragraph Headings; Construction.</I></B><I></I> Paragraph headings are only used in this
Agreement for convenience. Borrower and Silicon acknowledge that the headings may not
describe completely the subject matter of the applicable paragraph, and the headings shall
not be used in any manner to construe, limit, define or interpret any term or provision of
this Agreement. This Agreement has been fully reviewed and negotiated between the parties
and no uncertainty or ambiguity in any term or provision of this Agreement shall be
construed strictly against Silicon or Borrower under any rule of construction or
otherwise. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>9.17
Governing Law; Jurisdiction; Venue.</I></B><I></I> This Agreement and all acts and
transactions hereunder and all rights and obligations of Silicon and Borrower shall be
governed by the laws of the State of California. As a material part of the consideration
to Silicon to enter into this Agreement, Borrower (i) agrees that all actions and
proceedings relating directly or indirectly to this Agreement shall, at Silicon&#146;s
option, be litigated in courts located within California, and that the exclusive venue
therefor shall be Santa Clara County; (ii) consents to the jurisdiction and venue of any
such court and consents to service of process in any such action or proceeding by personal
delivery or any other method permitted by law; and (iii) waives any and all rights
Borrower may have to object to the jurisdiction of any such court, or to transfer or
change the venue of any such action or proceeding. </FONT></P>

<hr STYLE="page-break-after:always">

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>9.18
Mutual Waiver of Jury Trial.</I> BORROWER AND SILICON EACH HEREBY WAIVE THE RIGHT TO TRIAL
BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, ARISING OUT OF, OR IN ANY WAY RELATING TO,
THIS AGREEMENT OR ANY OTHER PRESENT OR FUTURE INSTRUMENT OR AGREEMENT BETWEEN SILICON AND
BORROWER, OR ANY CONDUCT, ACTS OR OMISSIONS OF SILICON OR BORROWER OR ANY OF THEIR
DIRECTORS, OFFICERS, EMPLOYEES, AGENTS, ATTORNEYS OR ANY OTHER PERSONS AFFILIATED WITH
SILICON OR BORROWER, IN ALL OF THE FOREGOING CASES, WHETHER SOUNDING IN CONTRACT OR TORT
OR OTHERWISE.</B> </FONT></P>

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<A NAME=A016></A>
<table border="0" cellpadding="0" cellspacing="0" style="border-collapse: collapse" bordercolor="#111111" width="100%" id="AutoNumber1">
  <tr>
    <td width="50%"><b><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
    Borrower:</FONT></b></td>
    <td width="50%"><b><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
    Silicon: </FONT></b></td>
  </tr>
  <tr>
    <td width="50%"><b><FONT FACE="Times New Roman, Times, Serif" SIZE=2><br>
    TEGAL CORPORATION </FONT></b></td>
    <td width="50%"><b><FONT FACE="Times New Roman, Times, Serif" SIZE=2><br>
    SILICON VALLEY BANK </FONT></b></td>
  </tr>
  <tr>
    <td width="50%">&nbsp;</td>
    <td width="50%">&nbsp;</td>
  </tr>
  <tr>
    <td width="50%"><b><font size="2">
    BY <u>/s/ Michael&nbsp;L&nbsp;Parodi&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</u></font></b></td>
    <td width="50%"><b><font size="2">
    BY <u>/s/ Patrick J. O'Donnell&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</u></font></b></td>
  </tr>
  <tr>
    <td width="50%"><b><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;President or Vice President</font></b></td>
    <td width="50%"><b><font size="2">
    Title <u>Vice President&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</u></font></b></td>
  </tr>
  <tr>
    <td width="50%">&nbsp;</td>
    <td width="50%">&nbsp;</td>
  </tr>
  <tr>
    <td width="50%"><b><font size="2">
    BY <u>/s/ Kathy Petrini&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</u></font></b></td>
    <td width="50%">&nbsp;</td>
  </tr>
  <tr>
    <td width="50%"><b><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Secretary or
    Ass't Secretary </font>
    </b></td>
    <td width="50%">&nbsp;</td>
  </tr>
  <tr>
    <td width="50%">&nbsp;</td>
    <td width="50%">&nbsp;</td>
  </tr>
</table>

<hr STYLE="page-break-after:always">

<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=4><SUP>Silicon Valley Bank</SUP> </FONT></H1>

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<A NAME=A021></A>
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Schedule to<br>
Loan and
Security Agreement </FONT></H1>

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<A NAME=A022></A>
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Borrower: Tegal
Corporation<br>
Address: &nbsp;&nbsp;&nbsp;2201 South McDowell Blvd. <br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Petaluma, CA 94954 </FONT></H1>

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<A NAME=A024><font size="2"></font></A>
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Date: June 26, 2002 </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>This Schedule forms an integral part
of the Loan and Security Agreement between Silicon Valley Bank and the above-borrower of
even date. </FONT></P>

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<HR ALIGN=LEFT WIDTH=100% SIZE=4 NOSHADE>

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<A NAME=A025></A>
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=3>&nbsp;</FONT></H1>

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<TABLE WIDTH=900 CELLPADDING=0 CELLSPACING=0 height="215">
<TR VALIGN=TOP>
<TD WIDTH=147 height="45"><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b>1. CREDIT LIMIT</b><br>
&nbsp;&nbsp;&nbsp;&nbsp;(Section 1.1): </FONT></TD>
<TD width="14" height="45"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=739 height="45"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
An amount not to exceed the lesser of: (i) <B>$10,000,000</B> at any one time
outstanding (the &#147;Maximum Credit Limit&#148;); or (ii) 85% (the &#147;Advance
Rate&#148;) of the amount of Borrower&#146;s Eligible Accounts (as defined in Section 8
above); provided that the total outstanding Obligations under this Loan Agreement and
under the Exim Agreement (as defined below) shall not at any time exceed
<B>$10,000,000</B> (the &#147;Overall Credit Limit&#148;). </FONT></TD>
</TR>
<TR VALIGN=TOP>
<TD WIDTH=147 height="19">&nbsp;</TD>
<TD width="14" height="19">&nbsp;</TD>
<TD WIDTH=739 height="19"><font face="Times New Roman, Times, Serif" size="2">&nbsp;&nbsp;</font></TD>
</TR>
<TR VALIGN=TOP>
<TD WIDTH=147 height="30">&nbsp;</TD>
<TD width="14" height="30">&nbsp;</TD>
<TD WIDTH=739 height="30"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Silicon
may, from time to time, modify the Advance Rate, in its good faith business judgment, upon
notice to the Borrower, based on changes in collection experience with respect to Accounts
or other issues or factors relating to the Accounts or other Collateral. </FONT></TD>
</TR>
<TR VALIGN=TOP>
<TD WIDTH=147 height="19">&nbsp;</TD>
<TD width="14" height="19">&nbsp;</TD>
<TD WIDTH=739 height="19">&nbsp;</TD>
</TR>
<TR VALIGN=TOP>
<TD WIDTH=147 height="45">
<P ALIGN=LEFT><b><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Letter of
Credit Sublimit <br>
</FONT></b><font size="2" face="Times New Roman, Times, Serif">(Section 1.6):</font></P>

     <p>&nbsp;</TD>
<TD width="14" height="45">&nbsp;</TD>
<TD WIDTH=739 height="45"><b><font size="2">&nbsp;$5,000,000.</font></b></TD>
</TR>
<TR VALIGN=TOP>
<TD WIDTH=147 height="19">&nbsp;</TD>
<TD width="14" height="19">&nbsp;</TD>
<TD WIDTH=739 height="19">&nbsp;</TD>
</TR>
<TR VALIGN=TOP>
<TD WIDTH=147 height="19"><FONT FACE="Times New Roman, Times, Serif" SIZE=2><U>Cash Management<br>
Services
and Reserves</U>: <U>&nbsp;</U></FONT></TD>
<TD width="14" height="19">&nbsp;</TD>
<TD WIDTH=739 height="19"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Borrower may use up to $5,000,000 of Loans available hereunder for Silicon&#146;s
Cash Management Services (as defined below), including, merchant services,
business credit card, ACH and other services identified in the cash management
services agreement related to such service (the &#147;Cash Management Services&#148;).
Silicon may, in its sole discretion, reserve against Loans which would otherwise
be available hereunder such sums as Silicon shall determine in its good faith
business judgment in connection with the Cash Management Services, and Silicon
may charge to Borrower&#146;s Loan account, any amounts that may become due or owing
to Silicon in connection with the Cash Management Services. Borrower agrees to
execute and deliver to Silicon all standard form applications and agreements of
Silicon in connection with the Cash Management Services, and, without limiting
any of the terms of such applications and agreements, Borrower will pay all
standard fees and charges of Silicon in connection with the Cash Management
Services. The Cash Management Services shall terminate on the Maturity Date. </FONT></TD>
</TR>
<TR VALIGN=TOP>
<TD WIDTH=147 height="19">&nbsp;</TD>
<TD width="14" height="19">&nbsp;</TD>
<TD WIDTH=739 height="19">&nbsp;</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><U>Foreign Exchange
<br>

         Contract Sublimit: </U> </FONT></TD>
<TD WIDTH=75%><b><font size="2"><br>
$5,000,000.

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</font></b></TD>
</TR>
<TR VALIGN=TOP>
<TD WIDTH=25%><font face="Times New Roman, Times, Serif" size="2">&nbsp;&nbsp;&nbsp;</font></TD>
<TD WIDTH=75%>&nbsp;</TD>
</TR>
<TR VALIGN=TOP>
<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=75%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Borrower
may enter into foreign exchange forward contracts with Silicon, on its standard forms,
under which Borrower commits to purchase from or sell to Silicon a set amount of foreign
currency more than one business day after the contract date (the &#147;FX Forward
Contracts&#148;); provided that (1) at the time the FX Forward Contract is entered into
Borrower has Loans available to it under this Agreement in an amount at least equal to 10%
of the amount of the FX Forward Contract; (2) the total FX Forward Contracts at any one
time outstanding may not exceed 10 times the amount of the Foreign Exchange Contract
Sublimit set forth above. Silicon shall have the right to withhold, from the Loans
otherwise available to Borrower under this Agreement, a reserve (which shall be in
addition to all other reserves) in an amount equal to 10% of the total FX Forward
Contracts from time to time outstanding, and in the event at any time there are
insufficient Loans available to Borrower for such reserve, Borrower shall deposit and
maintain with Silicon cash collateral in an amount at all times equal to such deficiency,
which shall be held as Collateral for all purposes of this Agreement. Silicon may, in its
discretion, terminate the FX Forward Contracts at any time&nbsp;that an Event of Default
occurs and is continuing. Borrower shall execute all standard form applications and
agreements of Silicon in connection with the FX Forward Contracts, and without limiting
any of the terms of such applications and agreements, Borrower shall pay all standard fees
and charges of Silicon in connection with the FX Forward Contracts. </FONT></TD>
</TR>
<TR VALIGN=TOP>
<TD WIDTH=25%>&nbsp;</TD>
<TD WIDTH=75%>&nbsp;</TD>
</TR>
<TR VALIGN=TOP>
<TD WIDTH=25%><b><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Exim
Agreement;<br>
Cross-Collateralization; <br>
Cross-Default: </FONT></b></TD>
<TD WIDTH=75%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
</B> Silicon and the Borrower are parties to that certain Loan and Security Agreement
(Exim Program) of even date (the &#147;Exim Agreement&#148;). Both this Agreement and the
Exim Agreement shall continue in full force and effect, and all rights and remedies under
this Agreement and the Exim Agreement are cumulative. The term &#147;Obligations&#148; as
used in this Agreement and in the Exim Agreement shall include without limitation the
obligation to pay when due all Loans made pursuant to this Agreement (the &#147;Non-Exim
Loans&#148;) and all interest thereon and the obligation to pay when due all Loans made
pursuant to the Exim Agreement (the &#147;Exim Loans&#148;) and all interest thereon.
Without limiting the generality of the foregoing, all &#147;Collateral&#148; as defined in
this Agreement and as defined in the Exim Agreement shall secure all Exim Loans and all
Non-Exim Loans and all interest thereon, and all other Obligations. Any Event of Default
under this Agreement shall also constitute an Event of Default under the Exim Agreement,
and any Event of Default under the Exim Agreement shall also constitute an Event of
Default under this Agreement. In the event Silicon assigns its rights under the Exim
Agreement and/or under any Note evidencing Exim Loans and/or its rights under this
Agreement and/or under any Note evidencing Non-Exim Loans, to any third party, including
without limitation the Export-Import Bank of the United States (&#147;Exim Bank&#148;),
whether before or after the occurrence of any Event of Default, Silicon shall have the
right (but not any obligation), in its sole discretion, to allocate and apportion
Collateral to the Agreement and/or Note assigned and to specify the priorities of the
respective security interests in such Collateral between itself and the assignee, all
without notice to or consent of the Borrower. </FONT>
<p>&nbsp;</TD>
</TR>
<TR VALIGN=TOP>
<TD WIDTH=25%>&nbsp;</TD>
<TD WIDTH=75%>&nbsp;</TD>
</TR>
</TABLE>
<BR>

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<p>

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</p>

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<A NAME=A030></A>
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=3>2. INTEREST. </FONT></H1>

<HR ALIGN=LEFT WIDTH=100% SIZE=4 NOSHADE>

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<TR VALIGN=TOP>
<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b>Interest Rate</b> (Section
1.2): </FONT></TD>
<TD WIDTH=75%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
A
rate equal to the &#147;Prime Rate&#148; in effect from time to time, plus <B>1.0%</B> per
annum. Interest shall be calculated on the basis of a 360-day year for the actual number
of days elapsed. &#147;Prime Rate&#148; means the rate announced from time to time by
Silicon as its &#147;prime rate;&#148; it is a base rate upon which other rates charged by
Silicon are based, and it is not necessarily the best rate available at Silicon. The
interest rate applicable to the Obligations shall change on each date there is a change in
the Prime Rate. </FONT></TD>
</TR>
<TR VALIGN=TOP>
<TD WIDTH=25%><font face="Times New Roman, Times, Serif" size="2">&nbsp;</font></TD>
<TD WIDTH=75%>&nbsp;</TD>
</TR>
<TR VALIGN=TOP>
<TD WIDTH=25%><b><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Minimum Monthly<br>
</FONT><font size="2">Interest</font><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT>
</b><font size="2">(Section 1.2): </font></TD>
<TD WIDTH=75%><br>
<font size="2">&nbsp;Not Applicable.

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</TR>
<TR VALIGN=TOP>
<TD WIDTH=25%>&nbsp;</TD>
<TD WIDTH=75%>&nbsp;</TD>
</TR>
</TABLE>
&nbsp;<HR ALIGN=LEFT WIDTH=100% SIZE=4 NOSHADE>

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     <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>3.&nbsp;
          FEES</B> (Section 1.4): </FONT></P>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=25%><font size="2">Loan Fee: </font></TD>
<TD WIDTH=75%><font size="2">$250,000, payable as follows: (i) $125,000, payable
concurrently herewith (subject to the Early Acceptance Reduction as set forth
below), and (ii) $125,000, payable on or before the first anniversary of the
date of this Agreement. </font></TD>
</TR>
<TR VALIGN=TOP>
<TD WIDTH=25%>&nbsp;</TD>
<TD WIDTH=75%>&nbsp;</TD>
</TR>
<TR VALIGN=TOP>
<TD WIDTH=25%><font size="2">Early Acceptance
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<br>
</font><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Reduction:</FONT></TD>
<TD WIDTH=75%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
If this Agreement and the Loan Documents related to this Agreement have been
executed by each of the parties by June 25, 2002, Silicon will reduce the amount
of the Loan Fee payable concurrently herewith from $125,000 to $105,000. </FONT></TD>
</TR>
</TABLE>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=75%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
If
this Agreement and the Loan Documents related to this Agreement have been executed by each
of the parties by July 2, 2002, Silicon will reduce the amount of the Loan Fee payable
concurrently herewith from $125,000 to $110,000. </FONT></TD>
</TR>
</TABLE>
&nbsp;<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 height="226">
<TR VALIGN=TOP>
<TD WIDTH=25% height="30"><font size="2">Collateral Monitoring Fee:</font></TD>
<TD WIDTH=75% height="30"><font size="2">$1,000,  per  month  in the  aggregate  as  between  this  Agreement  and the Exim
                                        Agreement,  payable in arrears (prorated for any partial month at the beginning and
                                        at termination of this Agreement).

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</font></TD>
</TR>
<TR VALIGN=TOP>
<TD WIDTH=25% height="19"><font face="Times New Roman, Times, Serif" size="2">
&nbsp;&nbsp;&nbsp;</font></TD>
<TD WIDTH=75% height="19">&nbsp;</TD>
</TR>
<TR VALIGN=TOP>
<TD WIDTH=25% height="90"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Unused Line Fee:</FONT></TD>
<TD WIDTH=75% height="90"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
&nbsp;In the event, in any calendar month (or portion thereof at the beginning and end
of the term hereof), the average daily principal balance of the aggregate Loans
outstanding during the month under this Agreement and the Exim Agreement is less than the
amount of the Maximum Credit Limit, Borrower shall pay Silicon an unused line fee in an
amount equal to 0.25% per annum on the difference between the amount of the Maximum Credit
Limit and such average daily principal balance of the Loans outstanding during the month,
which unused line fee shall be computed and paid monthly, in arrears, on the first day of
the following month. </FONT></TD>
</TR>
<TR VALIGN=TOP>
<TD WIDTH=25% height="19"><font face="Times New Roman, Times, Serif" size="2">
&nbsp;&nbsp;&nbsp;</font></TD>
<TD WIDTH=75% height="19">&nbsp;</TD>
</TR>
<TR VALIGN=TOP>
<TD WIDTH=25% height="1">
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4. MATURITY DATE
<br>
&nbsp;&nbsp;&nbsp;&nbsp;</FONT><font size="2">(Section 6.1):</font></H1>

     </TD>
<TD WIDTH=75% height="1"><font size="2"><br>
Two years from the date of this Agreement.

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</font></TD>
</TR>
<TR VALIGN=TOP>
<TD WIDTH=25% height="19"><font face="Times New Roman, Times, Serif" size="2">
&nbsp;&nbsp;&nbsp;</font></TD>
<TD WIDTH=75% height="19">&nbsp;</TD>
</TR>
<TR VALIGN=TOP>
<TD WIDTH=25% height="19"><b><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
5. FINANCIAL COVENANTS <br>
&nbsp;&nbsp;&nbsp;&nbsp;</FONT></b><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(Section 5.1):</FONT></TD>
<TD WIDTH=75% height="19"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<br>
Borrower shall comply with each of the following covenants. Compliance shall be
determined as of the end of each month, except as otherwise specifically
provided below: </FONT></TD>
</TR>
<TR VALIGN=TOP>
<TD WIDTH=25% height="19">&nbsp;&nbsp;&nbsp;</TD>
<TD WIDTH=75% height="19">&nbsp;</TD>
</TR>
<TR VALIGN=TOP>
<TD WIDTH=25% height="19"><b><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Minimum Tangible
<br>
</FONT></b><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<B>Net
Worth:</B></FONT></TD>
<TD WIDTH=75% height="19"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Borrower shall maintain a Tangible Net Worth of not less than $16,000,000
<U>plus</U> 50% of the total consideration received by Borrower after the date hereof, in
consideration for the issuance by the Borrower of its equity securities and subordinated
debt securities, effective on the date such consideration is received. </FONT></TD>
</TR>
<TR VALIGN=TOP>
<TD WIDTH=25% height="19"><font face="Times New Roman, Times, Serif" size="2">
&nbsp;&nbsp;&nbsp;</font></TD>
<TD WIDTH=75% height="19">&nbsp;</TD>
</TR>
<TR VALIGN=TOP>
<TD WIDTH=25% height="19"><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Definitions.</B> </FONT></TD>
<TD WIDTH=75% height="19"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>For
purposes of the foregoing financial covenants, the following term shall have the
following meaning: </FONT></TD>
</TR>
<TR VALIGN=TOP>
<TD WIDTH=25% height="19"><font face="Times New Roman, Times, Serif" size="2">
&nbsp;&nbsp;&nbsp;</font></TD>
<TD WIDTH=75% height="19">&nbsp;</TD>
</TR>
<TR VALIGN=TOP>
<TD WIDTH=25% height="19">&nbsp;</TD>
<TD WIDTH=75% height="19"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
&#147;Current
assets&#148;, &#147;current liabilities&#148; and &#147;liabilities&#148; shall have the
meaning ascribed thereto by GAAP. </FONT></TD>
</TR>
</TABLE>

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<A NAME=A034><font size="2"></font></A>

<hr STYLE="page-break-after:always">

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=75%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
&#147;Tangible
Net Worth&#148; shall mean the excess of total assets over total liabilities, determined
in accordance with GAAP, with the following adjustments: </FONT></TD>
</TR>
<TR VALIGN=TOP>
<TD WIDTH=25%>&nbsp;</TD>
<TD WIDTH=75%>&nbsp;</TD>
</TR>
<TR VALIGN=TOP>
<TD WIDTH=25%>&nbsp;</TD>
<TD WIDTH=75%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(A)&nbsp;

           there shall be excluded from assets: (i) notes, accounts receivable and other
          obligations owing to Borrower from its officers or other Affiliates, and (ii)
          all assets which would be classified as intangible assets under GAAP, including
          without limitation goodwill, licenses, patents, trademarks, trade names,
          copyrights, capitalized software and organizational costs, licenses and
          franchises </FONT></TD>
</TR>
<TR VALIGN=TOP>
<TD WIDTH=25%><font face="Times New Roman, Times, Serif" size="2">&nbsp;&nbsp;&nbsp;</font></TD>
<TD WIDTH=75%>&nbsp;</TD>
</TR>
<TR VALIGN=TOP>
<TD WIDTH=25%>&nbsp;</TD>
<TD WIDTH=75%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(B)&nbsp;there shall be excluded from liabilities: all indebtedness which is
          subordinated to the Obligations under a subordination agreement in form
          specified by Silicon or by language in the instrument evidencing the
          indebtedness which Silicon agrees in writing is acceptable to Silicon in its
          good faith business judgment. </FONT></TD>
</TR>
<TR VALIGN=TOP>
<TD WIDTH=25%>&nbsp;</TD>
<TD WIDTH=75%>&nbsp;</TD>
</TR>
</TABLE>
&nbsp;<HR ALIGN=LEFT WIDTH=100% SIZE=4 NOSHADE>

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          <TR VALIGN=TOP>
          <TD ALIGN=RIGHT WIDTH=9%>
          <p align="left"><B><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6.&nbsp;</FONT></b><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b>REPORTING.
          </b> </B> (Section 5.3): </FONT></TD>
          <TD ALIGN=LEFT WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
          <TD WIDTH=88%>&nbsp;</TD>
          </TR>
          </TABLE>

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<FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><!-- MARKER FORMAT-SHEET="Para (List) Hang Level 4" FSL="Default" --><TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
               <TR VALIGN=TOP>
               <TD ALIGN=RIGHT WIDTH=12%>&nbsp;</TD>
               <TD ALIGN=LEFT WIDTH="88%" colspan="2"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
               Borrower shall provide Silicon with the following: <br>
&nbsp;</FONT></TD>
               </TR>
               <TR VALIGN=TOP>
               <TD ALIGN=RIGHT WIDTH=12%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1. </FONT></TD>
               <TD ALIGN=LEFT WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
               <TD WIDTH=85%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
               With each request for a Loan and on a minimum weekly basis, transaction reports
               and schedules of collections, on Silicon&#146;s standard form. </FONT></P></TD>
               </TR>
               </TABLE>
               <BR>

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               <TR VALIGN=TOP>
               <TD ALIGN=RIGHT WIDTH=12%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2. </FONT></TD>
               <TD ALIGN=LEFT WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
               <TD WIDTH=85%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
               Monthly accounts receivable agings, aged by invoice date, within fifteen days
               after the end of each month. </FONT></P></TD>
               </TR>
               </TABLE>
               <BR>

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               <TR VALIGN=TOP>
               <TD ALIGN=RIGHT WIDTH=12%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3. </FONT></TD>
               <TD ALIGN=LEFT WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
               <TD WIDTH=85%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
               Monthly accounts payable agings, aged by invoice date, and outstanding or held
               check registers, if any, within fifteen days after the end of each month. </FONT></P></TD>
               </TR>
               </TABLE>
               <BR>

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               <TR VALIGN=TOP>
               <TD ALIGN=RIGHT WIDTH=12%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4. </FONT></TD>
               <TD ALIGN=LEFT WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
               <TD WIDTH=85%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
               Monthly reconciliations of accounts receivable agings (aged by invoice date),
               transaction reports, and general ledger, within fifteen days after the end of
               each month. </FONT></P></TD>
               </TR>
               </TABLE>
               <BR>

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               <TR VALIGN=TOP>
               <TD ALIGN=RIGHT WIDTH=12%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6. </FONT></TD>
               <TD ALIGN=LEFT WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
               <TD WIDTH=85%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
               Monthly unaudited financial statements, as soon as available, and in any event
               within thirty days after the end of each month. </FONT></P></TD>
               </TR>
               </TABLE>
               <BR>

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               <TR VALIGN=TOP>
               <TD ALIGN=RIGHT WIDTH=12%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>7. </FONT></TD>
               <TD ALIGN=LEFT WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
               <TD WIDTH=85%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
               Monthly Compliance Certificates, within thirty days after the end of each month,
               in such form as Silicon shall reasonably specify, signed by the Chief Financial
               Officer of Borrower, certifying that as of the end of such month Borrower was in
               full compliance with all of the terms and conditions of this Agreement, and
               setting forth calculations showing compliance with the financial covenants set
               forth in this Agreement and such other information as Silicon shall reasonably
               request, including, without limitation, a statement that at the end of such
               month there were no held checks. </FONT></P></TD>
               </TR>
               </TABLE>
               <BR>

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<hr STYLE="page-break-after:always">

          <TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
               <TR VALIGN=TOP>
               <TD ALIGN=RIGHT WIDTH=12%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>8. </FONT></TD>
               <TD ALIGN=LEFT WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
               <TD WIDTH=85%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
               Quarterly unaudited financial statements, as soon as available, and in any event
               within forty-five days after the end of each fiscal quarter of Borrower. </FONT></P></TD>
               </TR>
               </TABLE>
               <BR>

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               <TR VALIGN=TOP>
               <TD ALIGN=RIGHT WIDTH=12%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>9. </FONT></TD>
               <TD ALIGN=LEFT WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
               <TD WIDTH=85%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
               Annual operating budgets (including income statements, balance sheets and cash
               flow statements, by month) for the upcoming fiscal year of Borrower within
               thirty days prior to the end of each fiscal year of Borrower. </FONT></P></TD>
               </TR>
               </TABLE>
               <BR>

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               <TR VALIGN=TOP>
               <TD ALIGN=RIGHT WIDTH=12%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10. </FONT></TD>
               <TD ALIGN=LEFT WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
               <TD WIDTH=85%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
               Annual financial statements, as soon as available, and in any event within 120
               days following the end of Borrower&#146;s fiscal year, certified by, and with an
               unqualified opinion of, independent certified public accountants acceptable to
               Silicon. </FONT></P></TD>
               </TR>
               </TABLE>
               <BR>

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<A NAME=A036></A>
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>7. BORROWER INFORMATION: </FONT></H1>

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<TR VALIGN=TOP>
<TD WIDTH="11%"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH="89%"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Borrower
represents and warrants that the information set forth in the Representations and
Warranties of the Borrower dated June 25, 2002, previously submitted to Silicon (the
&#147;Representations&#148;) is true and correct as of the date hereof. </FONT></TD>
</TR>
</TABLE>
<BR>

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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>8. ADDITIONAL PROVISIONS </FONT></H1>

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          <TD ALIGN=RIGHT WIDTH=15%><B><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(1)
          &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
          <TD ALIGN=LEFT WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>

           </B> <B>Banking Relationship. </B>Borrower shall at all times maintain its
          primary banking relationship with Silicon. Without limiting the generality of
          the foregoing, Borrower shall, at all times, maintain not less than 80% of its
          total cash and investments on deposit with Silicon. As to any Deposit Accounts
          and investment accounts maintained with another institution, Borrower shall
          cause such institution, within 30 days after the date of this Agreement, to
          enter into a control agreement in form acceptable to Silicon in its good faith
          business judgment in order to perfect Silicon&#146;s first-priority security
          interest in said Deposit Accounts and investment accounts. </FONT></TD>
          </TR>
          </TABLE>
          <BR>

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               <TD ALIGN=RIGHT WIDTH=12%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>(2)</B> </FONT></TD>
               <TD ALIGN=LEFT WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
               <TD WIDTH=85%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
               <B>Subordination of Inside Debt</B>. All present and future indebtedness of
               Borrower to its officers, directors and shareholders (&#147;Inside Debt&#148;)
               shall, at all times, be subordinated to the Obligations pursuant to a
               subordination agreement on Silicon&#146;s standard form. Borrower represents and
               warrants that there is no Inside Debt presently outstanding, except for the
               following: - $0 -. Prior to incurring any Inside Debt in the future,
               Borrower shall cause the person to whom such Inside Debt will be owed to execute
               and deliver to Silicon a subordination agreement on Silicon&#146;s standard
               form. </FONT></P></TD>
               </TR>
               </TABLE>

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               <TR VALIGN=TOP>
               <TD ALIGN=RIGHT WIDTH=12%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>(3)</B> </FONT></TD>
               <TD ALIGN=LEFT WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
               <TD WIDTH=85%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
               <B>Warrants. </B>Concurrently herewith, Borrower shall provide Silicon with
               seven-year warrants to purchase a number of shares of common stock of Borrower
               equal to $250,000 divided by the Initial Exercise Price which will be the
               greater of (i) $2.00 per share and (ii) a price per share equal to the average
               closing price per share of the common stock of the Borrower for the 7 trading
               days immediately preceding the Issue Date of the Warrant to Purchase Stock, all
               on terms acceptable to Silicon, as set forth in the Warrant to Purchase Stock
               and related documents. Said warrants shall be deemed fully earned on the date
               hereof, shall be in addition to all interest and other fees, and shall be
               non-refundable. </FONT></P></TD>
               </TR>
               </TABLE>
               <BR>

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               <TD ALIGN=RIGHT WIDTH=12%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>(4)</B> </FONT></TD>
               <TD ALIGN=LEFT WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
               <TD WIDTH=85%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
               <B>Copyright Filings</B>. Concurrently, Borrower is executing and delivering to
               Silicon an Intellectual Property Security Agreement (the &#147;Intellectual
               Property Agreement&#148;). Within 60 days after the date hereof, Borrower shall
               (i) cause all of its computer software, the licensing of which results in
               Accounts, or which is material to its business to be registered with the United
               States Copyright Office, (ii) complete the Exhibits to the Intellectual Property
               Agreement with all of the information called for with respect to such software,
               (iii) cause the Intellectual Property Agreement to be recorded in the United
               States Copyright Office, and (iv) provide evidence of such recordation to
               Silicon. </FONT></P></TD>
               </TR>
               </TABLE>
               <BR>

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               <TD ALIGN=RIGHT WIDTH=12%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>(5)</B> </FONT></TD>
               <TD ALIGN=LEFT WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
               <TD WIDTH=85%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
               <B>Landlord Waivers. </B>Borrower shall, within thirty days of the date hereof,
               cause any third party who has an interest in any premises where Collateral is
               located, to execute and deliver to Silicon, in form acceptable to Silicon, such
               waivers and subordinations as Silicon shall specify in order to confirm
               Silicon&#146;s priority security interest in the Collateral and to assure
               Silicon of access to the Collateral. </FONT></P></TD>
               </TR>
               </TABLE>
               <BR>

&nbsp;<table border="0" cellpadding="0" cellspacing="0" style="border-collapse: collapse" bordercolor="#111111" width="100%" id="AutoNumber2">
  <tr>
    <td width="50%"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
    Borrower:</FONT></td>
    <td width="50%"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
    Silicon: </FONT></td>
  </tr>
  <tr>
    <td width="50%"><FONT FACE="Times New Roman, Times, Serif" SIZE=2><br>
    TEGAL CORPORATION </FONT></td>
    <td width="50%"><FONT FACE="Times New Roman, Times, Serif" SIZE=2><br>
    SILICON VALLEY BANK </FONT></td>
  </tr>
  <tr>
    <td width="50%">&nbsp;</td>
    <td width="50%">&nbsp;</td>
  </tr>
  <tr>
    <td width="50%"><font size="2">
    BY /s/ Michael L Parodi</font></td>
    <td width="50%"><font size="2">
    BY <u>/s/ Patrick J. O'Donnell&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</u></font></td>
  </tr>
  <tr>
    <td width="50%"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;President or Vice President</font></td>
    <td width="50%"><font size="2">
    Title <u>Vice President&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</u></font></td>
  </tr>
  <tr>
    <td width="50%">&nbsp;</td>
    <td width="50%">&nbsp;</td>
  </tr>
  <tr>
    <td width="50%"><font size="2">
    BY <u>/s/ Kathy Petrini&nbsp;&nbsp;
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</u></font></td>
    <td width="50%">&nbsp;</td>
  </tr>
  <tr>
    <td width="50%"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Secretary or
    Ass't Secretary </font>
    </td>
    <td width="50%">&nbsp;</td>
  </tr>
  <tr>
    <td width="50%">&nbsp;</td>
    <td width="50%">&nbsp;</td>
  </tr>
</table>

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00053-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00053-of-00352.parquet"}]]