Document:

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                                  EXHIBIT 10.2

                               AGREEMENT OF LEASE

      This lease dated this 29th day of March, 2002 is by and between
PEMCO Mutual Insurance Company, a Washington corporation, hereinafter called
"Owner," and EvergreenBank, hereinafter called "Tenant."

      1. PREMISES The Owner hereby leases to the Tenant and the Tenant hereby
leases of the Owner upon the terms and conditions hereinafter set forth certain
premises described in Exhibit 1 (Basic Lease Information) hereto attached and
herein incorporated by reference in that certain building known as "PEMCO
Financial Center," situate in the City of Lynnwood, County of Snohomish, State
of Washington, and located at 2502 196th SW, hereinafter referred to as
"building" and located on a portion of the following described real property
situate in the City of Lynnwood, County of Snohomish, State of Washington:

      SEC 23 TWP 27 RGE 04 N1/2 NE1/4 NW1/4 NW1/4 EXC FD T-BEG INT S MGN 196TH
      ST SW (40FT R/W) & W MGN 2 4TH AVE W (40FT R/W) TH S 120FT TH W 170FT TH N
      12 OFT TO S MGN 196TH ST SW TH E ALG SD S MGN 170FT T

      2. TERM The term of this lease shall be for a period of one (1) year
and shall commence on April 1, 2002 and end on March 31, 2003 inclusive. _

      3. RENT The Tenant shall pay the Owner monthly rent on the Rentable
square feet as stated in Exhibit 1 (Basic Lease Information) on the first day of
each calendar month of the lease term or any period prior or subsequent thereto
while Tenant is in possession of the premises. Rent for partial months shall be
prorated. Said rental is exclusive of any sales, franchise, business,
occupation, or other tax based on rents. Should any such taxes apply during the
life of this lease, rent shall be increased by such amount. Said rental is for
office and storage space in the square footage indicated in the Exhibit 1 (Basic
Lease Information).

      4. OPTION Owner grants to Tenant an option to renew the lease for two,
one (1) year terms immediately following the expiration of the initial term on
the same provisions that are in said lease, except with regard to the rental
rate, which will be mutually agreed upon but in any event no less than the
current rent being paid under said lease at the time of exercising this option
and no less than the then market rate in the area for comparable buildings, and
provided that the Tenant is in full and satisfactory compliance with the
provisions of this lease at the time that the notice of exercise of option is
given and that such notice is given in writing not less than six (6) months
prior to the end of the lease period.

      5. USE The premises may be used and occupied only for the purpose as
set forth in Exhibit 1 (Basic Lease Information) and for no other purpose
without the written consent of the Owner. No use shall be made of the premises
nor act done in or about the premises which is illegal or unlawful, nor which
will result in any public or private nuisance. The Tenant shall observe such
reasonable rules and regulations as may be adopted by the Owner for the safety,
care, and cleanliness of the premises or building and the preservation of good
order therein,
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including regulations relating to the use of any apparatus, machinery, or device
in the premises which shall cause any substantial noise or vibration.

            Owner leases the Premises to Tenant and Tenant leases the Premises
from Owner, together with the rights in common with others to use any portions
of the Property that are designated by Owner for the common use of tenants and
others.

            Tenant shall not use or store any hazardous material on or about the
premises or the building without Owners approval which approval will be at
Owners sole discretion. The term "hazardous material" means any hazardous or
toxic substance, material or waste which is or becomes regulated by any federal,
state or other local governmental authority including, without limitation, any
material or substance which is designated as a "hazardous substance". Tenant
shall also comply with all rules and regulations for use, storage, and disposal
of any hazardous material.

      6. CAPITALIZED COST Owner may choose to charge as additional rent any
amortized cost of capital improvements (as distinguished from replacement parts
or components installed in the ordinary course of business) made to the Property
which are: (1) performed primarily to reduce operating expense costs or
otherwise improve the operating efficiency of the Property; or (2) required to
comply with any Laws that become effective, or first interpreted to apply to the
Property, after the date of this lease. The cost of capital improvements shall
be amortized by Owner over the lesser of the Payback Period or five (5) years.

      7. OWNER SERVICES Owner and Tenant recognize that this Agreement to Lease
is a "Full Service Lease" (Gross Lease). Owner agrees to furnish Tenant with the
following services: (1) Water service for use in the lavatories on each floor on
which the Premises are located; (2) Heat and Air conditioning in season during
normal business hours, at such temperatures and in such amounts as are standard
for comparable building or as required by governmental authority. Tenant, upon
such advance notice as is reasonably required by Owner, shall have the right to
receive HVAC service during hours other than normal business hours. Owner will
have option to charge for the additional service; (3) Maintenance and repair of
the Property as described below; (4) Janitor service on Business Days. If
Tenant's use, floor covering or other improvements require special services in
excess of the standard service for the Building, Tenant shall pay the additional
cost attributable to the special services; (5) Elevator service; (6) Electricity
to the Premises for general office use, in accordance with and subject to the
terms and conditions as stated below; and (7) Such other services as Owner
reasonably determines are necessary or appropriate for the Property.

            Tenant's use of electrical service shall not exceed, either in
voltage, rated capacity, use beyond Normal Business Hours or overall load, that
which Owner deems to be standard for the Building. If Tenant requests permission
to consume excess electrical service, Owner may (1) grant consent; (2) refuse to
consent; or (3) may condition consent upon conditions that Owner reasonably
elects (including, without limitation, the installation of utility service
upgrades, meters, submeters, air handlers or cooling units), and the additional
usage (to the extent permitted by Law), installation and maintenance costs shall
be paid by Tenant. Owner shall have the right, to, but not obligated to,
separately meter electrical usage for the Premises and to measure electrical
usage by survey or other commonly accepted methods.

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            All repairs necessary as a result of acts or negligence by Tenant,
its agents or invitees, to restore the premises, including public and common
areas of the building (such as lobby, stairs, landscaping, garage, corridors and
restroom) to a tenantable condition shall be done by or under the direction of
the Owner at the Tenant's expense.

            Neither personal property nor material belonging to Tenant shall be
placed, stored, or deposited in or around hallways, corridors, washrooms, or
other facilities used in common by all Tenants of the building. Such common
areas shall be under the sole jurisdiction and control of Owner.

      8. POSSESSION The Tenant agrees by taking possession of the premises that
such premises are tenantable and good condition and that the Tenant will take
good care of the premises and the same will not be changed without the written
consent of the Owner. Tenant shall not make any alterations, additions, or
improvements to anything attached to the building without prior written approval
from the Owner, which approval shall be at the Owners sole discretion (this
includes changes to locks, plumbing, cabling or wiring). All Tenant improvements
including moves, additions or changes shall be made at the Tenant's sole cost
and expense. The Owner may make any improvements that it deems necessary for the
preservation, safety, or improvement of the premises or building. All
alterations, additions, and improvements except fixtures installed by the Tenant
that are removable without damage to the building shall become the property of
the Owner. The Tenant shall, upon termination of this lease, surrender and
deliver up the premises to the Owner in as good of condition as when received by
the Tenant from the Owner, reasonable use and wear excepted.

      9. RIGHT OF ENTRY The Owner or its agent shall have the right to enter the
premises at all reasonable times for the purpose of inspection and for the
purpose of cleaning, repairing, or improving the premises or the building; and
when reasonably necessary for such purpose, may close entrances, doors,
corridors, or other facilities without liability to the Tenant. The Owner shall
have the right to enter the premises for the purpose of showing the premises to
prospective tenants for a period of one hundred eighty (180) days prior to the
expiration of the lease term.

      10. DESTRUCTION A total destruction of the building shall terminate this
lease. In the event of a partial destruction by fire or other casualty, the
Owner shall make repairs if they can be completed within sixty (60) days after
the occurrence of such damage. Until such repairs are completed, rent shall be
abated to the extent the premises are unusable by the Tenant. If repairs cannot
be made within sixty (60) days, the Owner may, at its option, make them within a
reasonable time. Notice of such election shall be given by written notice to the
Tenant within thirty (30) days after occurrence of the damage. Upon receipt of
such notice, Tenant may elect either to continue tenancy at an abated rate or to
cancel this lease. If such notice is not given, then either party may, by
written notice to the other, cancel this lease.

      11. SIGNAGE The Tenant shall not display any sign, notice, picture,
poster, or advertising matter whatsoever in or about the premises or building at
places visible from anywhere outside the premises without first obtaining the
Owner's written consent thereto.

      12. INDEMNIFICATION Tenant shall defend and indemnify Owner and save it
harmless from and against any and all liability, damages, costs, or expenses,
including attorneys'

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fees, arising from negligent act or omission of Tenant, or of the officers,
contractors, licensees, agents, servants, employees, guests, invitees, or
visitors of Tenant in or about the premises, to any person or property,
occurring in or about the premises, provided that the foregoing provision shall
not be construed to make Tenant responsible for loss, damage, liability, or
expense resulting from injuries to third parties caused by the negligence of
Owner, or of any officer, contractor, licensees, agent, servant, employee,
guest, invitee, or visitor of Owner. Owner and Tenant each release the other
from responsibility for, and waive their entire claim of recovery for (1) any
loss or damage to the real or personal property of either located anywhere in
the building and including the building itself, arising out of or incident to
the occurrence of any of the perils which may be covered by the fire and
lightning insurance policy, with extended coverage endorsement, in common use in
the Seattle locality, and policies covering any loss by theft or water damage,
or (2) loss resulting from business interruption at premises or loss of rental
income from the building, arising out of or incident to the occurrence of any of
the perils which may be covered by the business interruption insurance policy
and by the loss of rental income insurance policy in common use in the Seattle
locality; to the extent that such risks under (1) and (2) are in fact covered by
insurance, each party shall cause its insurance carriers to consent to such
waiver and to waive all rights of subrogation against the other party.

      13. LIENS Tenant shall keep premises and the building free from any liens
or encumbrances arising out of any work performed by Tenant, materials furnished
by Tenant, or obligations incurred by Tenant. Upon the occurrence of any of the
following events, Owner may terminate this lease by giving Tenant notice of its
election to do so: (1) if Tenant files a voluntary petition in bankruptcy, or
for reorganization under the bankruptcy laws, or is adjudged bankrupt by a court
of competent jurisdiction; (2) if Tenant makes an assignment for the benefit of
creditors; or (3) if a receiver is appointed by a court of competent
jurisdiction for Tenant's business and it be established in the receivership
proceedings that Tenant is insolvent.

      14. DEFAULT Except for a default under the preceding paragraph for which
immediate right of termination is given to Owner, if Tenant fails to pay any
installment of rent within ten (10) days after written notice, or to perform any
other covenant under this lease within thirty (30) days after written notice
from Owner stating the nature of the default, Owner may cancel this lease and
reenter and take possession of the premises using all necessary force to do so;
provided, however, that if the nature of such default other than for nonpayment
of rent is such that the same cannot reasonably be cured within such thirty (30)
day period, Tenant shall not be deemed to be in default if Tenant shall within
such period commence such cure and thereafter diligently prosecute the same to
completion. Notwithstanding such retaking of possession by Owner, Tenant's
liability for the rent provided herein shall not be extinguished for the balance
of the term of this lease. Upon such reentry, Owner may elect either (1) to
terminate this lease, in which event Tenant shall immediately pay to Owner a sum
equal to that by which the then cash value of the total rent reserved under this
lease for the balance of the lease term exceeds the then reasonable rental value
of the premises for the balance of the lease term; or (2) without terminating
this lease, to relet all or any part of the premises as the agent of and for the
account of Tenant upon such terms and conditions as Owner may deem advisable, in
which event the rents received on such reletting shall be applied first to the
expenses of reletting and collection, including attorney's fees and real estate
commissions paid, and thereafter to pay of all sums due or to become due Owner
hereunder. If a sufficient sum shall not be thus realized to pay such

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sums and other charges, Tenant shall pay Owner any deficiency monthly, and Owner
may bring an action therefor as such monthly deficiency shall arise.

           In the event of any such retaking of possession of the premises by
the Owner as herein provided, Tenant shall remove all personal property located
thereon and, upon failure to do so upon demand of Owner, Owner may remove and
store the same in any place selected by Owner, including but not limited to a
public warehouse, at the expense and risk of Tenant. If Tenant shall fail to pay
any sums due hereunder or the cost of storing any such property after it has
been stored for a period of thirty (30) days or more, Owner may sell any or all
of such property at public or private sale and shall apply the proceeds of such
sale first, to the cost of such sale; second, to the payment of the charges for
storage, if any; and third, to the payment of any other sums of money which may
be due from Tenant to Owner under the terms of this lease, and the balance, if
any, to Tenant.

            Tenant hereby waives all claims for damages that may be caused by
Owner's lawfully reentering and taking possession of the premises or lawfully
removing and storing the property of Tenant as herein provided, and will save
Owner harmless from loss, costs, or damages occasioned by Owner thereby, and no
such lawful reentry shall be considered or construed to be a forcible entry.

      15. ATTORNEYS' FEES If either the Tenant or the Owner shall commence any
legal action involving matters arising out of this lease, including suit by the
Owner for recovery of rent or possession of the premises, the losing party shall
pay the successful party attorneys' fees and cost reasonably incurred by the
successful party in connection with such suit or action.

      16. BREACH The acceptance of rent by the Owner shall not be a waiver of
any breach by the Tenant or any term or condition of this lease other than
failure of the Tenant to pay the particular rental so accepted, regardless of
Owner's knowledge of the breach, and the waiver of the Owner of any breach of
any condition herein shall not be deemed to be a waiver of such condition or any
subsequent breach thereof.

      17. ASSIGNMENT AND SUBLET Tenant shall not assign this lease or sublet the
premises or any part thereof without the prior written consent of the Owner,
which shall be at the sole discretion of the Owner.

      18. SUBORDINATION This lease shall be subordinated to any first mortgage
or deed of trust heretofore or hereafter placed upon the building to any and all
advances made or to be made thereunder and to all renewals, replacements, and
extensions thereof. The Tenant shall attorn to the purchaser of the building at
any foreclosure sale under such encumbrance, provided the rights of the Tenant
hereunder are recognized by such purchaser. Within fifteen (15) days of
presentation, the Tenant shall execute and deliver any subordination or
nondisturbance agreement and any estoppel certificate requested by the Owner
certifying, if such be true, that the Tenant is in occupancy, the nature of the
modification to the lease, if any, and the dates to which rents and other
charges have been paid.

      19. CONDEMNATION AND EMINENT DOMAIN If the whole of the premises, or if
such portion of either the premises or the facilities in the building as may be
required for the reasonable use of the premises, shall be taken by virtue of any
condemnation or eminent domain

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proceeding, this lease shall automatically terminate as of the date of such
condemnation, or as of the date possession is taken by the condemning authority,
whichever is earlier. Current rent shall be apportioned as of the date of such
termination. In case of a taking of a part of the premises or a portion of the
facilities in the building not required for the reasonable use of the premises,
then this lease shall continue in full force and effect, and the rental shall be
equitably reduced based on the proportion by which the rentable area of the
premises is reduced, such rent reduction to be effective on the date of such
partial taking. No award for any partial or entire taking shall be apportioned,
and Tenant hereby assigns to the Owner any award which may be made in such
taking or condemnation together with any and all rights of Tenant now or
hereafter arising in or to the same or any part thereof; provided, however, that
nothing herein shall be deemed to give Owner any interest in or to require
Tenant to assign to Owner any award made to the Tenant for the taking of
personal property or fixtures belonging to Tenant, for the interruption of or
damage to Tenant's business, or for Tenant's moving expenses.

      20. NOTICE All notices required under this lease shall be in writing to
the addresses below stated or such other place as may be designated by either
party in writing.

      21. PREMISES NAME The Owner intends to use the name "PEMCO Financial
Center" for the building but reserves the right, in its sole discretion, to
change such name.

      22. OWNER RIGHTS TO TERMINATE The Owner herein reserves the right to
terminate and cancel this Lease Agreement should it decide to develop or sell
said premises. If the Owner exercises this right, the Owner agrees to give the
Tenant one hundred twenty (120) days written notice of its intent to develop or
sell said premises.

      23. PREMISES SPACE ADJUSTMENT The Tenant and Owner herein understand that
from time to time it may be the desire to adjust the amount of square feet
(space) in said premises. The Tenant and Owner herein mutually agree to work
together to make any desired adjustments to the amount of space in said premises
providing that; 1) any request for additional space is subject to availability,
which shall be determined by the Owner; and 2) any request for a reduction of
space is subject to another user, acceptable to the Owner, assuming the
obligation of said space. Any adjustments will be in writing and all terms and
conditions of said Lease Agreement will remain in full force and effect.

      25. OWNER STAFF USEAGE Tenant recognizes that the Owner has staff within
its Real Estate Department that provides various building maintenance,
construction, space design, vendor contracting and other facility related
services. It is agreed that any services and/or work to be performed in or about
the premises shall go through and be performed by the Owners Real Estate
Department, unless mutually agreed otherwise. The Owners Real Estate Department
will act in the best interest of both the Tenant and Owner.

      27. BUILDING AGREEMENT This agreement shall be binding upon the Owner and
Tenant and their respective heirs and successors.

      28. EXHIBITS All Exhibits referenced herein are a part of this "Agreement
to Lease" as if contained within the above terms and conditions. Exhibit 1 and
Exhibit 2 are attached hereto and made a part hereof.

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      IN WITNESS WHEREOF, the parties have set their hands and seals the year,
month, and day above written.

PEMCO MUTUAL INSURANCE COMPANY         EVERGREENBANK

BY:  /s/ Stan W. McNaughton            BY:   /s/ Gerald O. Hatler
     -------------------------------         ---------------------------------
Title: President/CEO                   Title:  President/CEO

Address:                               Address:

325 Eastlake Avenue East               325 Eastlake Avenue East
Seattle, Washington 98109              Seattle, Washington 98109

STATE OF WASHINGTON     )
                        :ss.
COUNTY OF KING          )

      On this day personally appeared before me, a Notary Public in and for the
State of Washington duly commissioned and sworn, personally appeared Gerald
Hatler, to me known to be the President of EvergreenBank, the corporation that
executed the within and foregoing Agreement of Lease, and acknowledged the said
instrument to be the free and voluntary act and deed of said corporation, for
the uses and purposes therein mentioned, and on oath stated that he was
authorized to execute the said instrument on behalf of said corporation.

      GIVEN under my hand and official seal this 29th day of March, 2002.

                                       /s/ Susan J. Mecklenberg
                                       ---------------------------------------
                                       NOTARY PUBLIC in and for the State of
                                       Washington, residing at Seattle
                                       My commission expires: 5/29/05

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STATE OF WASHINGTON     )
                        :ss.
COUNTY OF KING          )

      On this day personally appeared before me, a Notary Public in and for the
State of Washington duly commissioned and sworn, personally appeared Steven A.
Ricco, to me known to be the Vice-President/CFO of PEMCO Mutual Insurance
Company, the corporation that executed the within and foregoing Agreement of
Lease, and acknowledged the said instrument to be the free and voluntary act and
deed of said corporation, for the uses and purposes therein mentioned, and on
oath stated that he was authorized to execute the said instrument on behalf of
said corporation.

      GIVEN under my hand and official seal this 29th day of March, 2002.

                                       /s/ Denice M. Town
                                       --------------------------------------
                                       NOTARY PUBLIC in and for the State of
                                       Washington, residing at Seattle
                                       My commission expires:     2/18/03

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                                                                    Exhibit 10.1

                                 FIRST AMENDMENT
                         TO LOAN AND SECURITY AGREEMENT

                THIS FIRST AMENDMENT TO LOAN AND SECURITY AGREEMENT (this "First
Amendment") is made as of March 20, 2002, by and among FOOTHILL CAPITAL
CORPORATION, a California corporation ("Lender"), and CRAY INC., a Washington
corporation ("Parent"), and CRAY FEDERAL INC., a Washington corporation ("Cray
Federal," and together with Parent, collectively, "Borrowers"), with reference
to the following facts:

        A. The parties hereto have entered into that certain Loan and Security
Agreement, dated as of March 28, 2001, as amended (the "Loan Agreement"), and
other Loan Documents. (Capitalized terms, which are used herein but not defined
herein, shall have the meanings ascribed to them in the Loan Agreement.)

        B. On or about November 6, 2001, Parent issued $9,300,000 in debentures.

        C. The parties wish to make certain modifications to the Loan Documents,
all on the terms and conditions set forth herein.

                NOW, THEREFORE, the parties hereto agree as follows:

        1. Amendments to Loan Agreement. Effective as of the Effective Date (as
hereinafter defined), the Loan Agreement shall be amended as follows:

                1.1 The following definitions are added to Section 1.1 of the
Loan Agreement:

        "'Debenture Documents' means, collectively, the following:

                (a) The Debentures Purchase Agreement;

                (b) The Debentures;

                (c) the Warrants issued pursuant to the Debentures Purchase
                Agreement; and

                (d) the Registration Rights Agreement."

        "'Debentures' means the 5% Convertible Subordinate Debentures issued by
        Parent pursuant to the Debentures Purchase Agreement."

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        "'Debentures Purchase Agreement' means that certain Convertible
        Subordinated Debentures and Warrant Purchase Agreement, dated November
        6, 2001, between Parent and the investors signatory thereto."

        "'Eligible Domestic Accounts' means those Accounts created by one of
        Borrowers in the ordinary course of its business, that arise out of its
        sale of goods (and that do not arise out of the rendition of services
        that lead to Service/Maintenance Revenues) that comply with each of the
        representations and warranties respecting Eligible Domestic Accounts
        made by Borrowers under the Loan Documents, and that are not excluded as
        ineligible by virtue of one or more of the criteria set forth below;
        provided, however, that such criteria may be fixed and revised from time
        to time by Lender in Lender's Permitted Discretion to address the
        results of any audit performed by Lender from time to time after the
        Closing Date. In determining the amount to be included, Eligible
        Domestic Accounts shall be calculated net of customer deposits and
        unapplied cash remitted to Borrowers. Eligible Domestic Accounts shall
        not include the following:

                        (a) Accounts that the Account Debtor has failed to pay
                within 75 days of original invoice date or within 45 days of the
                date the payment was due under the original invoice,

                        (b) Accounts owed by an Account Debtor (or its
                Affiliates) where 50% or more of all Accounts owed by that
                Account Debtor (or its Affiliates) are deemed ineligible under
                clause (a) above,

                        (c) Accounts with respect to which the Account Debtor is
                an employee or Affiliate of any Borrower,

                        (d) Accounts arising in a transaction wherein goods are
                placed on consignment or are sold pursuant to a guaranteed sale,
                a sale or return, a sale on approval, a bill and hold, or any
                other terms by reason of which the payment by the Account Debtor
                may be conditional,

                        (e) Accounts that are not payable in Dollars,

                        (f) Accounts with respect to which the Account Debtor
                either (i) does not maintain its chief executive office in the
                United States or Canada, or (ii) is not organized under the laws
                of the United States or any state thereof or Canada or any
                Canadian province thereof, or (iii) is the government of any
                foreign country or sovereign state, or of any state, province,
                municipality, or other political subdivision thereof, or of any
                department, agency, public corporation, or other instrumentality
                thereof, unless (y) the Account is supported by an irrevocable
                letter of credit satisfactory to Lender (as to form, substance,
                and issuer or domestic confirming

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                bank) that has been delivered to Lender and is directly drawable
                by Lender, or (z) the Account is covered by credit insurance in
                form, substance, and amount, and by an insurer, satisfactory to
                Lender,

                        (g) [INTENTIONALLY OMITTED],

                        (h) Accounts with respect to which the Account Debtor is
                a creditor of any Borrower, has or has asserted a right of
                setoff, has disputed its liability, or has made any claim with
                respect to its obligation to pay the Account, to the extent of
                such claim, right of setoff, or dispute,

                        (i) [INTENTIONALLY OMITTED],

                        (j) Accounts with respect to which the Account Debtor is
                subject to an Insolvency Proceeding, is not Solvent, has gone
                out of business, or as to which a Borrower has received notice
                of an imminent Insolvency Proceeding or a material impairment of
                the financial condition of such Account Debtor,

                        (k) [INTENTIONALLY OMITTED],

                        (l) Accounts, the collection of which, Lender, in its
                Permitted Discretion, believes to be doubtful by reason of the
                Account Debtor's financial condition,

                        (m) Accounts that are not subject to a valid and
                perfected first priority Lender's Lien,

                        (n) Accounts with respect to which (i) the goods giving
                rise to such Account have not been shipped and billed to the
                Account Debtor, or (ii) the services giving rise to such Account
                have not been performed and billed to the Account Debtor, or

                        (o) Accounts that represent the right to receive
                progress payments or other advance billings that are due prior
                to the completion of performance by the applicable Borrower of
                the subject contract for goods or services."

        "'Eligible Foreign Accounts' means Accounts of a Borrower: (I)
        acceptable to Lender in its Permitted Discretion, and (II) as to which
        each of the following is applicable: (a) such Account does not qualify
        as an Eligible Domestic Account solely because the Account Debtor with
        respect to such Account maintains its chief executive office in a
        jurisdiction other than the United States or is organized under the laws
        of a jurisdiction (or a political subdivision thereof) other than the
        United States, and (b) Lender has a valid and perfected first priority
        security interest in such Account."

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        "'Eligible Government Accounts' means Accounts of a Borrower: (I)
        acceptable to Lender in its sole and absolute discretion, and (II) as to
        which each of the following is applicable: (a) the Account Debtor with
        respect to such Account is the United States or any department, agency
        or instrumentality of the United States, (b) such Account does not
        qualify as an Eligible Domestic Account solely because services give
        rise to the Account and such services are research and development
        services rendered in the ordinary course of such Borrower's business;
        and (c) Lender has a valid and perfected first priority security
        interest in such Account."

        "'Eligible Professional Services Accounts' means Accounts of a Borrower:
        (I) acceptable to Lender in its sole and absolute discretion, (II) if
        otherwise qualifying as an Eligible Professional Services Account, shall
        be included in the Borrowing Base commencing August 1, 2002, and (III)
        as to which each of the following is applicable: (a) such Account does
        not qualify as an Eligible Domestic Account solely because services give
        rise to the Account and such services are Professional Services rendered
        in the ordinary course of such Borrower's business, and (b) Lender has a
        valid and perfected first priority security interest in such Account."

        "Excess Availability' means the amount, as of the date any determination
        thereof is to be made, equal to the Availability minus the aggregate
        amount, if any, of all trade payables of Borrowers in excess of 60 days
        past the payment due date with respect thereto and all book overdrafts,
        in each case as determined by Lender in its Permitted Discretion."

        "'Holder' shall have the meaning set forth in the Debenture."

        "'Professional Services' means fee-based services on a defined project
        pursuant to which the applicable Account Debtor has entered into a
        written professional services agreement, acceptable to Lender, that
        specifies specific deliverables to be provided by one of the Borrowers
        in the related statement of work."

        "'Registration Rights Agreement' means that certain Registration Rights
        Agreement, dated November 6, 2001, between Parent and the investors
        signatory thereto."

                1.2 The following definitions in Section 1.1 of the Loan
Agreement are hereby deleted and replaced by the following:

        "'Eligible Accounts' means, collectively, Eligible Domestic Accounts,
        Eligible Professional Services Accounts, Eligible Foreign Accounts and
        Eligible Government Accounts."

        "'Tangible Net Worth' means, as of any date of determination, the result
        of (a) the total consolidated stockholder's equity of Parent and its
        Subsidiaries, minus (b) the sum of (i) all

                                       4
<PAGE>

        Intangible Assets of Parent and its Subsidiaries, (ii) all of Parent's
        prepaid expenses, and (iii) other assets which are classified as "other
        assets" on Borrowers' financial statements, plus (c) the aggregate
        outstanding principal balance of the Debentures."

                1.3 Section 2.1(a)(y) of the Loan Agreement is deleted and
replaced by the following:

        "(y) 80% of the difference between (i) the amount of Eligible Accounts,
        and (ii) the amount, if any, of the Dilution Reserve, minus"

                1.4 Section 2.1(b) of the Loan Agreement is deleted and replaced
by the following:

        "(b) Anything to the contrary in this Section 2.1 notwithstanding,
        Lender shall have the right to establish reserves in such amounts, and
        with respect to such matters, as Lender in its Permitted Discretion
        shall deem necessary or appropriate, against the Borrowing Base,
        including reserves with respect to (i) sums that Borrowers are required
        to pay (such as taxes, assessments, insurance premiums, or, in the case
        of leased assets, rents or other amounts payable under such leases) and
        has failed to pay under any Section of this Agreement or any other Loan
        Document, (ii) amounts owing by Borrowers to any Person to the extent
        secured by a Lien on, or trust over, any of the Collateral (other than
        any existing Permitted Lien set forth on Schedule P-1 which is
        specifically identified thereon as entitled to have priority over the
        Lender's Liens), which Lien or trust, in the Permitted Discretion of
        Lender likely would have a priority superior to the Lender's Liens (such
        as Liens or trusts in favor of landlords, warehousemen, carriers,
        mechanics, materialmen, laborers, or suppliers, or Liens or trusts for
        ad valorem, excise, sales, or other taxes where given priority under
        applicable law) in and to such item of the Collateral, and (iii) and in
        an amount equal to all late charges and liquidated damages payable by
        Parent pursuant to the Debenture Documents."

                1.5 The following is added as a new subsection (e) to Section
2.11 of the Loan Agreement:

        "(e) FEES ARISING FROM CHARGES UNDER DEBENTURE DOCUMENTS. Fees equal to
        all late charges and liquidated damages payable by Parent pursuant to
        the Debenture Documents, which fees shall be fully earned and payable
        when the applicable late charges and liquidated damages are payable by
        Parent pursuant to the Debenture Documents."

                1.6 The first sentence and the beginning of the second sentence
of Section 5.2(b) of the Loan Agreement are hereby deleted and replaced by the
following:

        "(b) The Eligible Accounts are bona fide existing payment obligations of
        Account Debtors created by the sale and delivery of Inventory or the
        rendition of services to such Account

                                       5
<PAGE>

        Debtors in the ordinary course of Borrowers' business, owed to Borrowers
        without defenses, disputes, offsets, counterclaims, or rights of return
        or cancellation. As to each Eligible Account, such Account is not:"

                1.7 Schedule 5.8(b) is deleted and replaced by Schedule 5.8.(b)
attached to this First Amendment.

                1.8 Schedule 5.20 is deleted and replaced by Schedule 5.20
attached to this First Amendment.

                1.9 Schedule C-1 is deleted and replaced by Schedule C-1
attached to this First Amendment.

                1.10 Schedule P-1 is deleted and replaced by Schedule P-1
attached to this First Amendment.

                1.11 Section 6.3 of the Loan Agreement is deleted and replaced
by the following:

        "6.3 FINANCIAL STATEMENTS, REPORTS, CERTIFICATES. Deliver to Lender:

                (a) as soon as available, but in any event within 30 days (50
                days in the case of a month that is the end of one of the first
                3 fiscal quarters in a fiscal year) after the end of each month
                during each of Parent's fiscal years,

                        (i) a company prepared consolidated balance sheet,
                        income statement, and statement of cash flow covering
                        Parent's and its Subsidiaries' operations during such
                        period,

                        (ii) a certificate signed by the chief financial officer
                        of Parent to the effect that:

                                A. the financial statements delivered hereunder
                                have been prepared in accordance with GAAP
                                (except for the lack of footnotes and being
                                subject to year-end audit adjustments) and
                                fairly present in all material respects the
                                financial condition of Parent and its
                                Subsidiaries,

                                B. the representations and warranties of
                                Borrowers contained in this Agreement and the
                                other Loan Documents are true and correct in all
                                material respects on and as of the date of such
                                certificate, as though

                                       6
<PAGE>

                                made on and as of such date (except to the
                                extent that such representations and warranties
                                relate solely to an earlier date), and

                                C. there does not exist any condition or event
                                that constitutes a Default or Event of Default
                                (or, to the extent of any non-compliance,
                                describing such non-compliance as to which he or
                                she may have knowledge and what action Borrowers
                                have taken, are taking, or propose to take with
                                respect thereto), and

                        (iii) for each month that is the date on which a
                        financial covenant in Section 7.20 is to be tested, a
                        Compliance Certificate demonstrating, in reasonable
                        detail, compliance at the end of such period with the
                        applicable financial covenants contained in Section
                        7.20; and

                (b) as soon as available, but in any event within 90 days after
                the end of each of Parent's fiscal years,

                        (i) financial statements of Parent and its Subsidiaries
                        for each such fiscal year, audited by independent
                        certified public accountants reasonably acceptable to
                        Lender and certified, without any qualifications, by
                        such accountants to have been prepared in accordance
                        with GAAP (such audited financial statements to include
                        a balance sheet, income statement, and statement of cash
                        flow and, if prepared, such accountants' letter to
                        management),

                        (ii) a certificate of such accountants addressed to
                        Lender stating that such accountants do not have
                        knowledge of the existence of any Default or Event of
                        Default under Section 7.20,

                (c) as soon as available, but in any event within 30 days prior
                to the start of each of Parent's fiscal years,

                        (i) copies of Borrowers' Projections, in form and
                        substance (including as to scope and underlying
                        assumptions) satisfactory to Lender, in its sole
                        discretion, for the forthcoming 3 years, year by year,
                        and for the forthcoming fiscal year, month by month,
                        certified by the chief financial officer of Parent as
                        being such officer's good faith best estimate of the
                        financial performance of Parent and its Subsidiaries
                        during the period covered thereby,

                (d) if and within 5 days of the date filed by any Borrower,

                                       7
<PAGE>

                        (i) Form 10-Q quarterly reports, Form 10-K annual
                        reports, and Form 8-K current reports,

                        (ii) any other filings made by any Borrower with the
                        SEC,

                        (iii) copies of Borrowers' federal income tax returns,
                        and any amendments thereto, filed with the Internal
                        Revenue Service, and

                        (iv) any other information that is provided by Parent to
                        its shareholders generally,

                (e) if and when filed by any Borrower and as requested by
                Lender, satisfactory evidence of payment of applicable excise
                taxes in each jurisdictions in which (i) any Borrower conducts
                business or is required to pay any such excise tax, (ii) where
                any Borrower's failure to pay any such applicable excise tax
                would result in a Lien on the properties or assets of any
                Borrower, or (iii) where any Borrower's failure to pay any such
                applicable excise tax reasonably could be expected to result in
                a Material Adverse Change

                (f) as soon as a Borrower has knowledge of any event or
                condition that constitutes a Default or an Event of Default,
                notice thereof and a statement of the curative action that
                Borrowers propose to take with respect thereto,

                (g) no later than 5 days prior to payment of each semi-annual
                interest payment required under the Debentures, a certificate
                signed by the chief financial officer of Parent indicating
                Parent's election as to whether to pay such interest in cash or
                Stock of Parent, and if Parent elects to pay in cash, that,
                after making and giving effect to such payment, Borrowers shall
                be in compliance with the covenant set forth in section (c) of
                Schedule 7.20, and

                (h) upon the request of Lender, any other report reasonably
                requested relating to the financial condition of Borrowers.

                        "In addition to the financial statements referred to
                        above, Borrowers agree to deliver financial statements
                        prepared on both a consolidated and consolidating basis
                        and that no Borrower, or any Subsidiary of a Borrower,
                        will have a fiscal year different from that of Parent.
                        Borrowers agree that their independent certified public
                        accountants are authorized to communicate with Lender
                        and to release to Lender whatever financial information
                        concerning Borrowers that Lender reasonably may request.
                        Each Borrower waives the right to assert a confidential
                        relationship, if any, it may have with any accounting
                        firm or service bureau in connection with any
                        information

                                       8
<PAGE>

                        requested by Lender pursuant to or in accordance with
                        this Agreement, and agree that Lender may contact
                        directly any such accounting firm or service bureau in
                        order to obtain such information.

                (i) as soon as Borrower receives notice of conversion for the
                Debentures or a request to register the shares underlying the
                Debentures by the holders thereof pursuant to the Debenture
                Documents, notice thereof and a statement of the dates when
                conversion of such Debentures or registration of the shares
                underlying such Debentures are due."

                1.12 The following is added as a new Section 6.16:

        "6.16 DEBENTURE DOCUMENTS. At all times comply with its obligations
        under the Debenture Documents, including the following:

                (a) Maintain the effectiveness under the Securities Act of 1933,
        as amended, of its Registration Statement on Form S-3 (Reg. No.
        333-74100) for the time periods required pursuant to the Registration
        Rights Agreement; and

                (b) If required under Section 2(b) of the Registration Rights
        Agreement, promptly file and prosecute to effectiveness such further
        registration statements within the time limits set forth in Section 2(b)
        thereof."

                1.13 Schedule 7.20 is deleted and replaced by Schedule 7.20
attached to this First Amendment.

                1.14 Section 8.2 of the Loan Agreement is deleted and replaced
by the following:

        "8.2 (a) If Borrowers fail or neglect to perform, keep, or observe any
        covenant or other provision contained in Sections 6.2, 6.3 or 6.16
        hereof and such failure or neglect continues for a period of 5 days
        after the date on which such failure or neglect first occurs, or (b) if
        Borrower fails or neglects to perform, keep, or observe any covenant or
        other provision contained in Sections 6.1, 6.7 or 6.11 hereof and such
        failure or neglect is not cured within 15 days after the date on which
        such failure or neglect first occurs, or (c) if Borrower fails or
        neglects to perform, keep, or observe any other covenant or other
        provision contained in any Section of this Agreement (other than a
        Section that is expressly dealt with elsewhere in this Section 8) or the
        other Loan Documents (other than a Section of such other Loan Document
        dealt with elsewhere in this Section 8); provided that, during any
        period of time that any such failure or neglect of Borrower referred to
        in this paragraph exists, even if such failure or neglect is not yet an
        Event of Default by virtue of the existence of a grace or

                                       9
<PAGE>

        cure period or the pre-condition of the giving of a notice, Lender shall
        be relieved of its obligation to extend credit hereunder;"

        2. Limited One-Time Waivers.

                2.1 Pursuant to section (a)(i) of Schedule 7.20 of the Loan
Agreement, Borrowers have failed to maintain minimum EBITDA of each Borrower and
its Subsidiaries, determined on a consolidated basis, of no less than (i)
$3,000,000 for the 12-month period ending September 30, 2001, and (ii)
$10,000,000 for the 12-month period ending December 31, 2001.

                2.2 Pursuant to section (a)(ii) of Schedule 7.20 of the Loan
Agreement, Borrower has failed to maintain minimum Tangible Net Worth of each
Borrower and its Subsidiaries, determined on a consolidated basis, of no less
than $29,000,000 as of September 30, 2001 and December 31, 2001.

                2.3 Lender waives any Event of Default arising from (i)
Borrower's failure to maintain minimum EBITDA in an amount equal to or greater
than the amounts and for the periods described in Section 2.1 hereof and (ii)
Borrower's failure to maintain Tangible Net Worth in an amount equal to or
greater than $29,000,000 for the periods described in Section 2.2 hereof.

                2.4 This First Amendment does not constitute a waiver of any
other provision of the Loan Documents or of the provisions of the Loan Agreement
referenced in Sections 2.1 and 2.2 hereof in any other instance.

        3. Conditions to Effectiveness. The effectiveness of this First
Amendment is subject to the receipt by Lender or the completion by Borrower of
the following, and the date on which Lender receives or Borrower completes all
of the following shall be the "Effective Date:"

                3.1 Counterparts of this First Amendment, executed by each of
the parties hereto; and

                3.2 Borrower has paid Lender a waiver and consent fee of $60,000
and all of Lender's attorneys' fees and costs as described in Section 4.8
hereof.

        4. Miscellaneous.

                4.1 Loan Documents Confirmed. Except as expressly amended
hereby, the Loan Agreement and the other Loan Documents shall remain unchanged
and in full force and effect. This First Amendment is hereby incorporated into
the Loan Agreement.

                                       10
<PAGE>

                4.2 Choice of Law. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED, THIS
FIRST AMENDMENT AND ALL OTHER DOCUMENTS BEING EXECUTED CONCURRENTLY HEREWITH
SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
CALIFORNIA, WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES.

                4.3 Sole Parties. This First Amendment is made exclusively for
the benefit of and solely for the protection of the parties hereto, and no other
person or persons shall have the right to enforce the provisions hereof by
action or legal proceedings or otherwise.

                4.4 Interpretation. Whenever the context so requires, all words
used in the singular will be construed to have been used in the plural, and vice
versa, and each gender will include any other gender. The headings used in this
First Amendment are inserted solely for the convenience of reference and are not
part of, nor intended to govern, limit or aid in the construction of, any term
or provision hereof.

                4.5 Counterparts. This First Amendment may be executed in one or
more counterparts, each of which shall be an original but all of which shall
constitute one and the same instrument.

                4.6 Further Assurances. From time to time, each party will
execute and deliver in recordable form, if necessary, such further instruments
and will take such other action as the other party reasonably may request in
order to discharge and perform their obligations and agreements under this First
Amendment.

                4.7 Time of Essence. Time is of the essence in this First
Amendment.

                4.8 Attorneys' Fees and Costs. The Borrower agrees that all of
Lender's attorneys' fees and costs in drafting and negotiating this First
Amendment are part of the Obligations and are payable on demand.

                                       11
<PAGE>

IN WITNESS WHEREOF, the parties have executed this First Amendment as of the
date first written above.

                                CRAY INC.,
                                a Washington corporation
                                /s/ Kenneth W. Johnson
                                By: Kenneth W. Johnson
                                Title: Vice President - Legal and
                                       General Counsel

                                CRAY FEDERAL, INC.
                                a Washington corporation
                                /s/ Charles A. Weidenfeller, Jr.
                                By: Charles A. Weidenfeller, Jr.
                                Title: President

                                FOOTHILL CAPITAL CORPORATION,
                                a California corporation
                                /s/ Kurt Duerfeldt
                                By: Kurt Duerfeldt
                                Title: Senior Vice President

                                       12
<PAGE>

                             EXHIBITS AND SCHEDULES

Exhibit C-1           Form of Compliance Exhibit
Schedule P-1          Permitted Liens
Schedule 5.8(b)       Capitalization of Borrowers
Schedule 5.20         Permitted Indebtedness
Schedule 7.20         Financial Covenants

                                       13
<PAGE>

                                   EXHIBIT C-1

                         FORM OF COMPLIANCE CERTIFICATE

                           [on Borrower's letterhead]

To:     Foothill Capital Corporation
        2450 Colorado Avenue, Suite 3000 West
        Santa Monica, California  90404
        Attn: Business Finance Division Manager

                Re: Compliance Certificate dated

Ladies and Gentlemen:

                Reference is made to that certain Loan and Security Agreement,
dated as of March 28, 2001, as amended (the "Loan Agreement") among Cray Inc., a
Washington corporation ("Administrative Borrower"), Cray Federal Inc., a
Washington corporation (together with Administrative Borrower, "Borrowers"), and
Foothill Capital Corporation, a California corporation ("Lender"). Capitalized
terms used in this Compliance Certificate have the meanings set forth in the
Loan Agreement unless specifically defined herein.

                Pursuant to Section 6.3 of the Loan Agreement, the undersigned
officer of Administrative Borrower hereby certifies that:

                1. The financial information of Borrowers furnished in Schedule
1 attached hereto has been prepared in accordance with GAAP (except for year-end
adjustments and the lack of footnotes, in the case of financial statements
delivered under Section 6.3(a) of the Loan Agreement) and fairly presents the
financial condition of Borrowers.

                2. Such officer has reviewed the terms of the Loan Agreement and
has made, or caused to be made under his/her supervision, a review in reasonable
detail of the transactions and condition of Borrowers during the accounting
period covered by the financial statements delivered pursuant to Section 6.3 of
the Loan Agreement.

                3. Such review has not disclosed the existence on and as of the
date hereof, and the undersigned does not have knowledge of the existence as of
the date hereof, of any event or condition that constitutes a Default or Event
of Default, except for such conditions or events listed on Schedule 2 attached
hereto, specifying the nature and period of existence thereof and what action
Borrowers have taken, are taking, or propose to take with respect thereto.

<PAGE>

                4. Borrowers are in timely compliance with all representations,
warranties, and covenants set forth in the Loan Agreement and the other Loan
Documents, except as set forth on Schedule 2 attached hereto. Without limiting
the generality of the foregoing, Borrowers are in compliance with the covenants
contained in Schedule 7.20 of the Loan Agreement as demonstrated on Schedule 3
hereof.

                IN WITNESS WHEREOF, this Compliance Certificate is executed by
the undersigned this _____ day of ____________, 200_.

                                CRAY INC., a Washington corporation,
                                as Administrative Borrower

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

<PAGE>

                                   SCHEDULE 1

<PAGE>

                                   SCHEDULE 2

<PAGE>

                                   SCHEDULE 3

1. MINIMUM EBITDA.

        Borrowers' EBITDA for the _________ ending _________, ________ is
$______________, which amount [IS/IS NOT] greater than or equal to the amount
set forth in Section (a)(i) of Schedule 7.20 to the Loan Agreement for the
corresponding period.

2. MINIMUM TANGIBLE NET WORTH.

        Borrowers' Tangible Net Worth as of __________ was $__________, which
amount [IS/IS NOT] greater than or equal to the amount set forth in Section
(a)(ii) of Schedule 7.20 to the Loan Agreement for the corresponding date.

3. MINIMUM DOMESTIC SERVICE/MAINTENANCE REVENUES.

        Borrowers' Domestic Service/Maintenance Revenues for the twelve-month
period ending __________, 200___ was $_____, which amount [IS/IS NOT] greater
than or equal to the amount set forth in Section (a)(iii) of Schedule 7.20 to
the Loan Agreement for the corresponding period.

4. MAXIMUM CAPITAL EXPENDITURES.

                (a) The aggregate amount of capital expenditures made or
committed to be made to date in the current fiscal year is $________________.

                (b) The aggregate amount set forth above [IS/IS NOT] less than
or equal to the amount set forth in Section (b)(i) of Schedule 7.20 to the Loan
Agreement for the current fiscal year.

5. PAYMENTS UNDER THE DEBENTURE DOCUMENTS.

                (a) Check applicable line:

                        (i) ____ Administrative Borrower proposes to make a
                payment (other than in stock of Administrative Borrower) on the
                Indebtedness evidenced by the Debenture Documents.

                        (ii) ____ Administrative Borrower does not propose to
                make a payment (other than in stock of Administrative Borrower)
                on the Indebtedness evidenced by the Debenture Documents.

<PAGE>

                (b) The payment set forth in Section 5(a)(i) above [WOULD/WOULD
NOT] breach section (c) of Schedule 7.20 to the Loan Agreement because:
______________________________________.

<PAGE>

                                  Schedule P-1

                                 Permitted Liens

1.      The Borrower owes U.S. Bank N.A., as of February 28, 2002, the sum of
        $198,332. This loan is secured by (i) a certificate of deposit, dated as
        of February 28, 2002, in the amount of $353,000 and (ii) specific
        computer equipment financed by such loan.

2.      The Borrower owes Presidential Bank, as of February 28, 2002, the sum of
        $409,292. Presidential Bank is the assignee of DRKB, Inc. This loan is
        secured by specific computer equipment financed by this loan.

<PAGE>

                                Schedule 5.8(b)

                           Capitalization of Borrowers

Cray Inc. has authorized capital of 100,000,000 shares of Common Stock, $.01 par
value, and 5,000,000 shares of Preferred Stock, $.01 par value.

As of March 12, 2002, Cray Inc. had outstanding: (i) 45,096,820 shares of Common
Stock, (ii) warrants exercisable for 14,111,441 shares of Common Stock, (iii)
$9,300,000 convertible subordinated debentures convertible into a minimum of
3,957,447 shares, and (iv) stock options exercisable for 10,441,771 shares of
Common Stock. Cray Inc. has reserved 4,000,000 shares for issuance pursuant to
an employee stock purchase plan. In addition, Cray Inc. has issued to NEC
Corporation 3,125,000 shares of Series A Convertible Preferred Stock, $.01 par
value, which are convertible into 3,136,763 shares of Common Stock.

Cray Federal Inc. has authorized capital of 1,000 shares of Common Stock, $1.00
par value. All shares of Common Stock are issued and outstanding and are held by
Cray Inc.

<PAGE>

                                  Schedule 5.20

                             Permitted Indebtedness

1.      The Borrower owes $9,300,000, plus accrued interest, on its convertible
        subordinated debentures.

2.      As of February 28, 2002, the Borrower owes U.S. Bank the sum of
        $198,332.38 which is secured by a certificate of deposit and by
        equipment purchased with the loan. See Schedule P-1.

3.      As of February 28, 2002, the Borrower owes Presidential Bank the sum of
        $409,292.13, which is secured by equipment purchased with this loan.
        Presidential Bank is the assignee of DRKB Inc. See Schedule P-1.

4.      The Borrower has various capital leases outstanding. At December 31,
        2001, the principal balance of capital leases outstanding was $768,000,
        including interest.

<PAGE>

                                  SCHEDULE 7.20

                               FINANCIAL COVENANTS

                (a) Fail to maintain:

                (i) MINIMUM EBITDA. EBITDA, measured on a fiscal quarter-end
                basis, of not less than the required amount set forth in the
                following table for the applicable period set forth opposite
                thereto;

<TABLE>
<CAPTION>
        Applicable Amount                                 Applicable Period
        -----------------                                 -----------------
<S>                                                    <C>
         -$5,000,000                                    For the 12-month period
                                                          ending June 30, 2001

         $3,000,000                                     For the 12-month period
                                                       ending September 30, 2001

         -$12,000,000                                   For the 12-month period
                                                        ending December 31, 2001

         -$24,000,000                                   For the 12-month period
                                                         ending March 31, 2002

         -$10,000,000                                   For the 12-month period
                                                          ending June 30, 2002

         $0                                             For the 12-month period
                                                       ending September 30, 2002

         $15,000,000                                    For the 12-month period
                                                 ending each fiscal quarter thereafter
</TABLE>

<PAGE>

                (ii) TANGIBLE NET WORTH. Tangible Net Worth of at least the
                required amount set forth in the following table as of the
                applicable date set forth opposite thereto:

<TABLE>
<CAPTION>
               Applicable Amount                            Applicable Date
               -----------------                            ---------------
<S>                                        <C>
                  $23,000,000                                June 30, 2001
                  $29,000,000                              September 30, 2001
                  $18,000,000                              December 31, 2001
                  $11,200,000                                March 31, 2002
                  $17,900,000                                June 30, 2002
                  $15,900,000                              September 30, 2002
                  $14,700,000                              December 31, 2002
                  $23,800,000              the first date of each calendar quarter thereafter
</TABLE>

                (iii) MINIMUM DOMESTIC SERVICE/MAINTENANCE REVENUES. Domestic
                Service/Maintenance Revenues of no less than $34,000,000 for the
                immediately preceding 12 calendar months, tested quarterly.

                (b) Make:

                (i) CAPITAL EXPENDITURES. Capital expenditures in any fiscal
                year in excess of $10,000,000.

                (c) PAYMENTS UNDER THE DEBENTURE DOCUMENTS. If an Event of
                Default has occurred and is continuing or if there is Excess
                Availability of less than $1,000,000 after giving effect to any
                payment made in respect of the Indebtedness evidenced by the
                Debentures, make any payment (other than in stock of Parent) by
                the Parent or any application of funds with respect to the
                principal of or interest on the Indebtedness evidenced by the
                Debenture Documents, or any other payment of funds under the
                Debentures or under any of the Debenture Documents; provided,
                however, that any Holder may demand and the Parent may pay at
                any time and from time to time, liquidated damages and late fees
                pursuant to Sections 4(a)(iii), 4(c)(iii) and 4(c)(iv) of the
                Debentures and Section 2(f) of the Registration Rights Agreement
                even if an Event of Default has occurred and is continuing
                and/or there is Excess Availability of less than $1,000,000 at
                the time of such payments, but only so long as, of the date of
                such payment by the Parent, the Holder has not declared that an
                event of default exists under Section 3 of Holder's Debenture or
                such other Debenture Documents, and provided, further, that
                Lender has not declared the Obligations immediately due and
                payable.

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