Document:

exv10w2

 

Exhibit 10.2

AMENDMENT TO

EMPLOYMENT AGREEMENT

          THIS AMENDMENT to Employment Agreement (“Amendment”) is entered into as of this 14th day of
September, 2005 by and between Wilsons The Leather Experts Inc. (the “Company”), and Michael M.
Searles (“Searles”).

RECITALS

          A.       Searles is employed by the Company as its Chief Executive Officer, pursuant to an
Employment Agreement dated November 22, 2004 and as modified by the Waiver and Modification under
the Employment Agreement dated March 2, 2005 (as so modified, the “Employment Agreement”).

          B.       Searles has requested, and the Company has agreed to provide, additional relocation
assistance to allow him up to six (6) additional months to move his permanent residence from
California to Minnesota.

AGREEMENT

          NOW, THEREFORE, in consideration of the premises and mutual covenants and agreements contained
in this Amendment, the Company and Searles agree as follows:

          1.       Subject to all other provisions of Section 4(h) of the Employment Agreement, the Company shall
provide to Searles temporary furnished housing and travel reimbursement pursuant to Section 4(h)(i)
and (ii) of the Employment Agreement, until such time that Searles relocates his residence to the
Minneapolis-St. Paul metropolitan area, but not longer than 18 months following the commencement of
Searles’ employment with the Company.

          2.       Other than as expressly amended in this Amendment, the Employment Agreement shall continue in
full force and effect as so amended.

          IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the date stated
above.

	 	 	 	 	 	 
	 	 	WILSONS THE LEATHER EXPERTS INC.
	 
	
 	 	 	 
	/s/ Michael M. Searles

	 	By:
	 	/s/ Bradley K. Johnson
	 

	 	 	 	 
	Michael M. Searles

	 	 	 	Its Chair, Compensation CommitteeSILICON
VALLEY BANK

AMENDED AND RESTATED
 LOAN
AND SECURITY AGREEMENT

		
	Borrower: 	AXS-ONE
INC.

		
	Address: 	301 Route 17
North
Rutherford, New Jersey 07070

		
	Date: 	September 13, 2005

THIS
LOAN AND SECURITY AGREEMENT (this
"Agreement") is entered into on the above
date between SILICON VALLEY BANK, a California-chartered bank, with its
principal place of business at 3003 Tasman Drive, Santa Clara,
California 95054 and with a loan production office located at One
Newton Executive Park, Suite 200, 2221 Washington Street, Newton,
Massachusetts 02462 ("Silicon") and the
borrower named above (the "Borrower"), whose
chief executive office is located at the above address
("Borrower's Address"). The Schedule
and Exhibits to this Agreement (the
"Schedule" and the
"Exhibits," respectively) shall for all
purposes be deemed to be part of this Agreement, and the same are
integral parts of this Agreement. (Definitions of certain terms used in
this Agreement are set forth in Section 8 below.)

Section 1    LOANS.

1.1    Loans.    Silicon will make loans to Borrower
(the "Loans") up to the amounts (the
"Credit Limit") shown on the Schedule,
provided no Default or Event of Default has occurred and is continuing,
and subject to deduction of any Reserves for accrued interest and such
other Reserves as Silicon deems proper from time to time in its good
faith business judgment. Amounts borrowed may be repaid and reborrowed
during the term of this Agreement. Notwithstanding the foregoing, upon
the occurrence of the Transition Event, this Agreement and the Loans to
be made hereunder shall be transitioned to Silicon's Commercial
Finance Division and the making of each Loan thereafter shall be made
on a discretionary basis, in Silicon's good faith business
judgment.

1.2    Interest.    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's discretion and with notice to
Borrower, be charged to Borrower's loan account, and the same
shall thereafter bear interest at the same rate as the other Loans.
Silicon may, in its discretion and with notice to Borrower, charge
interest to Borrower's Deposit Accounts maintained with Silicon.
Regardless of the amount of Obligations that may be outstanding from
time to time, after the occurrence of the Transition Event, Borrower
shall pay Silicon minimum monthly interest during the balance of the
term of this Agreement in the amount set forth on the Schedule (the
"Minimum Monthly Interest").

1.3    Overadvances.    If at any time or for any
reason the total of all outstanding Loans and all other monetary
Obligations exceeds the Credit Limit (an
"Overadvance"), Borrower shall immediately
pay the amount of the excess to Silicon, without notice or demand.
Without limiting Borrower'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.

1.4    Fees.    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.

1.5    Loan Requests.    To obtain a Loan, Borrower
shall make a request to Silicon by facsimile or telephone. Loan
requests received after 2:00 P.M. Eastern time 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. After the occurrence of the Transition Event, in the event
Borrower has elected to be on "non-borrowing reporting
status" (see Section  6 of the Schedule), Borrower
shall furnish Silicon with a Loan request at least thirty (30) days
prior to the requested funding date.

1.6    Letters of
Credit.    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,
"Letters of Credit"). The aggregate face
amount of all Letters of Credit outstanding from time to time (plus all
Silicon exposure under any foreign exchange contracts and Cash
Management Services) shall not exceed the amount shown on the Schedule
(the "Letter of Credit Sublimit"), 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's letter of credit department shall
charge in connection with the issuance of the Letters of Credit. Any
payment by Silicon 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, save,
and hold Silicon harmless from any loss, cost, expense, or liability,
including payments made by Silicon, expenses, and reasonable
attorneys' 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's account or
by Silicon's interpretations of any Letter of Credit issued by
Silicon for Borrower'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'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's indemnification of any such issuing bank.
The provisions of this Agreement, as it pertains to Letters of Credit,
and any other Loan Documents relating to Letters of Credit are
cumulative.

1.7    Foreign Exchange Sublimit.    In
addition to Section 1.6 and Section 1.8, Borrower may use up to the
amount set forth on the Schedule for foreign exchange forward contracts
with Silicon 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 "FX Forward
Contract"). Silicon shall subtract 10% of each
outstanding FX Forward Contract from the foreign exchange sublimit.
Silicon may terminate the FX Forward Contracts if an Event of Default
exists.

1.8    Cash Management Services
Sublimit.    In addition to Section 1.6 and Section 1.7 above,
Borrower may also use up to the amount set forth on the Schedule for
Cash Management Services. Such aggregate amounts utilized under the
Cash Management Services Sublimit shall at all times reduce the amount
otherwise available for Loans, letters of credit, foreign exchange
contracts or other credit accommodations hereunder. Any amounts Silicon
pays on behalf of Borrower or any amounts that are not paid by Borrower
for any Cash Management Services will be treated as Loans hereunder and
will accrue interest at the interest rate applicable to Loans.

Section 2    SECURITY
INTEREST.

2.1    Security Interest.    To secure
the payment and performance of all of the Obligations when due, and the
performance of each of the Borrower's duties under this Agreement
and all documents executed in connection herewith, Borrower hereby
grants to Silicon a continuing security interest in all of
Borrower's interest in the following, whether now owned or
hereafter acquired, and wherever located: All Inventory, Equipment,
Payment Intangibles, Letter-of-Credit Rights, Supporting Obligations,
Accounts, and General Intangibles, Deposit Accounts, and all money, and
all property 

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now or at any time in the future in
Silicon's possession (including claims and credit balances), and
all proceeds (including proceeds of any insurance policies, proceeds of
proceeds and claims against third parties), all products and all books
and records related to any of the foregoing (all of the foregoing,
together with all other property in which Silicon may now or in the
future be granted a lien or security interest, is referred to herein,
collectively, as the "Collateral").
Notwithstanding the foregoing, upon the occurrence of the Transition
Event, the Collateral shall be deemed to include all of
Borrower's Intellectual Property. The security interest granted
herein shall be a first priority security interest in the Collateral.
After the occurrence and during the continuance of an Event of Default,
Silicon may place a "hold" on any Deposit
Account pledged as collateral. Except as noted on the Perfection
Certificate, Borrower is not a party to, nor is bound by, any material
license (other than over the counter software that is commercially
available to the public) or other material agreement with respect to
which Borrower is the licensee that prohibits or otherwise restricts
Borrower from granting a security interest in Borrower's interest
in such license or agreement or any other property. Borrower shall
provide written notice to Silicon within ten (10) days of entering or
becoming bound by, any such license or agreement which is reasonably
likely to have a material impact on Borrower's business or
financial condition. Borrower shall take such steps as Silicon requests
to obtain the consent of, authorization by, or waiver by, any person
whose consent or waiver is necessary for all such licenses or contract
rights to be deemed "Collateral" and for
Silicon to have a security interest in it that might otherwise be
restricted or prohibited by law or by the terms of any such license or
agreement (such consent or authorization may include a licensor's
agreement to a contingent assignment of the license to Silicon if the
Silicon determines that is necessary in its good faith judgment),
whether now existing or entered into in the future.

Notwithstanding the foregoing, prior to the occurrence of the
Transition Event, the Collateral does not include: any copyright
rights, copyright applications, copyright registrations, and like
protections in each work of authorship and derivative work, whether
published or unpublished, now owned or later acquired; any patents,
trademarks, service marks, and applications therefor; any trade secret
rights, including any rights to unpatented inventions, now owned or
hereafter acquired (the "Intellectual
Property"). Notwithstanding the foregoing, at all times,
the Collateral shall include all accounts, license and royalty fees,
and other revenues, proceeds, or income arising out of or relating to
any of the foregoing Intellectual Property. To the extent a court of
competent jurisdiction holds that a security interest in any
Intellectual Property is necessary to have a security interest in any
accounts, license and royalty fees, and other revenues, proceeds, or
income arising out of or relating to any of the foregoing Intellectual
Property, then the Collateral shall, effective as of the date hereof,
include the Intellectual Property, to the extent necessary to permit
perfection of Silicon's security interest in such accounts,
license and royalty fees, and other revenues, proceeds, or income
arising out of or relating to any of the Intellectual Property.

Section 3    REPRESENTATIONS,
WARRANTIES AND COVENANTS OF BORROWER.

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:

3.1    Corporate
Existence and Authority.    Borrower is and will continue to be,
duly organized, validly existing and in good standing under the laws of
the jurisdiction of its organization. Borrower is and will continue to
be qualified and licensed to do business in all jurisdictions in which
any failure to do so would have a material adverse effect on Borrower.
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' rights generally), (iii) do
not violate Borrower's organizational documents, 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
material agreement or instrument which is binding upon Borrower or its
property.

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3.2    Name; Trade Names and
Styles.    The name of Borrower set forth in the heading to this
Agreement is its correct name. Listed on the Perfection Certificate are
all prior names of Borrower and all of Borrower's present and
prior trade names. Borrower shall give Silicon 30 days' prior
written notice before changing its name or doing business under any
other name. Borrower has complied in all material respects, and will in
the future comply in all material respects, with all laws relating to
the conduct of business under a fictitious business name.

3.3    Place of Business; Location of
Collateral.    The address set forth in the heading to this
Agreement is Borrower's chief executive office. In addition,
Borrower has places of business and Collateral is located only at the
locations set forth on the Perfection Certificate. Borrower will give
Silicon at least 30 days prior written notice before opening any
additional place of business, changing its chief executive office,
changing its state of formation or moving any of the Collateral to a
location other than Borrower's Address or one of the locations
set forth on the Perfection Certificate, 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.

3.4    Title to Collateral; Perfection; Permitted
Liens.    

(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.
All of the Borrower's assets (including the Collateral and the
Intellectual Property) 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.

(b)    Borrower has set
forth in the Perfection Certificate all of Borrower'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's security interest in the Deposit
Account and otherwise reasonably 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.

(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'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.

(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'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.

(e)    Borrower hereby authorizes Silicon to file
financing statements, without notice to Borrower, with all appropriate
jurisdictions in order to perfect or protect Silicon's interest
or 

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rights hereunder, which financing statements
may indicate the Collateral as "all assets of the
Debtor" or words of similar effect, or as being of an
equal or lesser scope, or with greater detail, all in Silicon's
discretion.

3.5    Maintenance of
Collateral.    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.

3.6    Books and
Records.    Borrower has maintained and will maintain at
Borrower's Address complete and accurate books and records,
comprising an accounting system in accordance with GAAP.

3.7    Financial Condition, Statements and
Reports.    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 in the financial
condition or business of Borrower. Borrower is now and will continue to
be solvent.

3.8    Tax Returns and Payments; Pension
Contributions.    Borrower has timely filed, and will timely
file, all required tax returns and reports (including extensions), 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'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'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.

3.9    Compliance with Law.    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's ownership of real or personal
property, the conduct and licensing of Borrower's business, and
all environmental matters.

3.10    Litigation.    Except as disclosed in the
Schedule, there is no claim, suit, litigation, proceeding or
investigation pending or (to best of Borrower's knowledge)
threatened by or against or affecting Borrower in any court or before
any governmental agency (or any basis therefor known to Borrower) which
may result, either separately or in the aggregate, in any material
adverse change in the financial condition or business of Borrower, or
in any material impairment in the ability of Borrower to carry on its
business in substantially the same manner as it is now being conducted.
In addition to matters set forth on the Schedule, Borrower will
promptly inform Silicon in writing of any claim, proceeding, litigation
or investigation in the future threatened or instituted by or against
Borrower involving any single claim of $50,000 or more, or involving
$100,000 or more in the aggregate.

3.11    Use of
Proceeds.    All proceeds of all Loans shall be used solely for
lawful business purposes. Borrower is not purchasing or carrying any
"margin stock" (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
"margin stock" or to extend credit to others
for the purpose of purchasing or carrying any "margin
stock."

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Section
4    ACCOUNTS.

4.1    Representations Relating to
Accounts.    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's
business, and (ii) meet the Minimum Eligibility Requirements set forth
in Section  8 below.

4.2    Representations Relating
to Documents and Legal Compliance.    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 in all
material respects and all such invoices, instruments and other
documents and all of Borrower'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
fully comply in all material respects with all applicable laws and
governmental rules and regulations. To the best of Borrower'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.

4.3    Schedules and Documents relating to
Accounts.    Borrower shall deliver to Silicon transaction
reports and schedules of collections, as provided in the Schedule, on
Silicon's standard forms; provided, however, that
Borrower's failure to execute and deliver the same shall not
affect or limit Silicon's security interest and other rights in
all of Borrower's Accounts, nor shall Silicon's failure to
advance or lend against a specific Account affect or limit
Silicon's security interest and other rights therein. Loan
requests received after 2:00 P.M. Eastern time will not be considered
by Silicon until the next Business Day. Together with each such
schedule and assignment, or later if requested by Silicon, Borrower
shall furnish Silicon with copies (or, at Silicon's request,
originals) of all contracts, orders, invoices, and other similar
documents, and all original 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 in all material
respects. Borrower shall also furnish to Silicon an aged accounts
receivable trial balance in such form and at such intervals as Silicon
shall request. 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
indorsements and copies of all credit memos. Notwithstanding the
foregoing, after the occurrence of the Transition Event, in the event
Borrower has elected to be on "non-borrowing reporting
status" (see Section 6 of the Schedule), Borrower shall
furnish Silicon with a Loan request at least thirty (30) days prior to
the requested funding date.

4.4    Collection of
Accounts.    Upon the occurrence of the Transition Event,
Borrower shall cause the Account Debtors to remit all Accounts to
Silicon and Silicon shall hold all payments on, and proceeds of,
Accounts in a lockbox account, or such other "blocked
account" as Silicon may specify, pursuant to a blocked
account agreement in such form as Silicon may specify. Unless Borrower
has outstanding Advances and other extensions of credit hereunder
aggregating $1,000,000.00 or less, and unrestricted cash at Silicon,
and/or the ability to request Advances hereunder of at least
$2,000,000.00, all such payments on, and proceeds of, Accounts shall be
applied to the Obligations in such order as Silicon shall determine.
Silicon or its designee may, at any time, notify Account Debtors that
the Accounts have been assigned to Silicon.

4.5    Remittance of Proceeds.    Upon the occurrence
of the Transition Event, 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's length transaction for an aggregate purchase price of
$25,000 or less (for all 

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such transactions in any fiscal year). Upon
the occurrence of the Transition Event, Borrower agrees that it will
not commingle proceeds of Collateral with any of Borrower'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 4.5 limits the restrictions on disposition of
Collateral set forth elsewhere in this Agreement.

4.6    Disputes.    Borrower shall notify Silicon
promptly of all disputes or claims relating to Accounts in an aggregate
amount of One Hundred Thousand Dollars ($100,000.00). 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'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. Silicon may, at any
time after the occurrence of an Event of Default, settle or adjust
disputes or claims directly with Account Debtors for amounts and upon
terms which Silicon considers advisable in its reasonable credit
judgment and, in all cases, Silicon shall credit Borrower's Loan
account with only the net amounts received by Silicon in payment of any
Accounts.

4.7    Returns.    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 (sending a copy to Silicon). 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  immediately notify Silicon of
the return of any Inventory, specifying the reason for such return, the
location and condition of the returned Inventory, and on
Silicon's request deliver such returned Inventory to Silicon.

4.8    Verification.    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.

4.9    No
Liability.    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'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.

Section
5    ADDITIONAL DUTIES OF THE BORROWER.

5.1    Financial and Other Covenants.    Borrower shall
at all times comply with the financial and other covenants set forth in
the Schedule.

5.2    Insurance.    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'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. 

7

If Borrower fails to provide or pay for any
insurance, Silicon may, but is not obligated to, obtain the same at
Borrower's expense. Borrower shall promptly deliver to Silicon
copies of all material reports made to insurance companies.

5.3    Reports.    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.

5.4    Access to Collateral, Books and
Records.    At reasonable times, and on one Business Day's
notice, Silicon, or its agents, shall have the right to inspect the
Collateral, and the right to audit and copy Borrower'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's expense and the charge therefor shall be $750 per
person per day (or such higher amount as shall represent
Silicon'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'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.
Notwithstanding the foregoing, (i) prior to the occurrence of the
Transition Event, Borrower shall only be obligated to pay for one (1)
such audit in any twelve month period, the first such audit to be
completed on or before sixty (60) days of the date hereof and (ii)
after the occurrence of the Transition Event, Borrower shall only be
obligated to pay for two (2) such audits in any twelve month period.
After the occurrence of an Event of Default, Silicon may conduct such
audits and inspections at Borrower's expense from time to time
and at Silicon's sole and exclusive discretion and without
notification and authorization from Borrower.

5.5    Negative Covenants.    Except as may be
permitted in the Schedule, Borrower shall not, without Silicon's
prior written consent which shall be a matter of its good faith
business judgment and shall not be unreasonably delayed, 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 its assets or property (including
the Collateral and the Intellectual Property), except for the sale of
finished Inventory in the ordinary course of Borrower'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 without giving
Silicon thirty (30) days prior written notice and delivering to Silicon
an acknowledgment in writing that such bailee is holding such Inventory
or other Collateral for the benefit of Silicon; (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; (viii) incur
any debts outside the ordinary course of business; (ix) guarantee or
otherwise become liable with respect to the obligations of another
party or entity; (x) pay or declare any dividends on Borrower's
stock (except for dividends payable solely in stock of Borrower); (xi)
redeem, retire, purchase or otherwise acquire, directly or indirectly,
any of Borrower's stock; (xii) make any change in
Borrower's capital structure which would have a material adverse
effect on Borrower or on the prospect of repayment of the Obligations;
(xiii) engage, directly or indirectly, in any business other than the
business 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.

5.6    Litigation
Cooperation.    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'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.

8

5.7    Further
Assurances.    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'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.

Section
6    TERM.

6.1    Maturity Date.    This
Agreement shall continue in effect until the maturity date set forth on
the Schedule (the "Maturity Date") subject to
Section  6.2 below.

6.2    Payment of
Obligations.    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's then standard form cash pledge agreement.
Notwithstanding any termination of this Agreement, all of
Silicon'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. If this Agreement is terminated,
Silicon's lien and security interest in the Collateral shall
continue until Borrower fully satisfies the Obligations. 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
written termination of this Agreement by Silicon, Silicon shall
promptly deliver to Borrower termination statements, requests for
reconveyances and such other documents as may be required to fully
terminate Silicon's security interests.

Section 7    EVENTS OF DEFAULT
AND REMEDIES.

7.1    Events of Default.    The
occurrence of any of the following events shall constitute an
"Event of Default" 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's officers,
employees or agents, now or in the future, shall be untrue or
misleading in a material respect; 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 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 5 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 immediately upon the service of process upon Silicon
seeking to attach by trustee or other process, any of Borrower's
funds on deposit with, or assets of the Borrower in the possession of,
Silicon; 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 or may reasonably be expected to have a material
adverse effect on Borrower's business or financial condition; 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, 

9

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 defaults under any
agreement evidencing any indebtedness to any third party; or (n)
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 a default occurs under
any instrument evidencing such subordinated indebtedness, or the holder
of any such subordinated indebtedness accelerates all or any portion of
such subordinated indebtedness or if any Person who has subordinated
such indebtedness or obligations terminates or in any way limits his
subordination agreement; or (o) there shall be a change in the record
or beneficial ownership of an aggregate of more than 20% of the
outstanding shares of stock of Borrower, in one or more transactions,
compared to the ownership of outstanding shares of stock of Borrower in
effect on the date hereof, without the prior written consent of
Silicon; or (p) 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 (q) there shall be (i) a material impairment in the perfection or
priority of Silicon's security interest in the Collateral or in
the value of such Collateral; (ii) a material adverse change in the
business, operations or condition (financial or otherwise) of the
Borrower; (iii) a material impairment of the prospect of repayment of
any portion of the Obligations; or (iv) Silicon determines, based upon
information available to it and in its reasonable judgment, that there
is substantial likelihood that Borrower shall fail to comply with one
or more of the financial covenants in Section  5.1 during the
next succeeding financial reporting period; or (r) 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
(s) Borrower shall breach any term of the Warrant granted by the
Borrower to Silicon. 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.

7.2    Remedies.    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 document or
agreement; (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'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 reasonably necessary 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 

10

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'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's premises
without charge, for such time or times as Silicon deems reasonable, or
on Silicon's premises, or elsewhere and the Collateral need not
be located at the place of disposition. Silicon 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'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's sole
discretion, 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's general, special or other
Deposit Accounts with Silicon against any or all the Obligations; and
(i) Demand and receive possession of any of Borrower's federal
and state income tax returns and the books and records utilized in the
preparation thereof or referring thereto. All reasonable
attorneys' 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'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 (4%) per annum
(the "Default Rate").

7.3    Standards for Determining Commercial
Reasonableness.    Borrower and Silicon agree that a sale or
other disposition (collectively, "sale") 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 (10) days prior to the sale,
and, in the case of a public sale, notice of the sale is published at
least five (5) 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'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.

7.4    Power of Attorney.    Upon the
occurrence and during the continuance of any Event of Default, without
limiting Silicon'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's
expense, to do any or all of the following, in Borrower's name or
otherwise, but Silicon agrees to exercise the following powers 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's security
interest in the Collateral, 

11

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 present and future
agreements; (b) Execute on behalf of Borrower any document exercising,
transferring or assigning any option to purchase, sell or otherwise
dispose of or to lease (as lessor or lessee) any real or personal
property which is part of Silicon's Collateral or in which
Silicon has an interest; (c) 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's, materialman's or
other lien, or assignment or satisfaction of mechanic's,
materialman's or other lien; (d) 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's
possession; (e) Endorse all checks and other forms of remittances
received by Silicon; (f) 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; (g) 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; (h) Pay any sums required on account of
Borrower's taxes or to secure the release of any liens therefor,
or both; (i) Settle and adjust, and give releases of, any insurance
claim that relates to any of the Collateral and obtain payment
therefor; (j) 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 (k) Take any action or pay any
sum required of Borrower pursuant to this Agreement and any other
present or future agreements. Any and all reasonable sums paid and any
and all reasonable costs, expenses, liabilities, obligations and
attorneys' 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's rights under the foregoing power of attorney or any of
Silicon's other rights under this Agreement be deemed to indicate
that Silicon is in control of the business, management or properties of
Borrower.

7.5    Application of Proceeds.    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' fees incurred by Silicon
in the exercise of its 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.

7.6    Remedies Cumulative.    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
Massachusetts 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.

Section
8    DEFINITIONS.

As used in this Agreement, the
following terms have the following meanings:

"Accounts" means all of
Borrower's now owned and hereafter acquired accounts (whether or
not earned by performance), accounts receivable, health-care insurance
receivables, rights to payment, 

12

letters of credit, contract rights, chattel
paper, instruments, securities, securities accounts, investment
property, documents and all other forms of obligations at any time
owing to Borrower, all guaranties and other security therefor, all
merchandise returned to or repossessed by Borrower, and all rights of
stoppage in transit and all other rights or remedies of an unpaid
vendor, lienor or secured party.

"Account
Debtor" means the obligor on an Account.

"Adjusted Quick Ratio" is the
ratio of (i) Quick Assets to (ii) Current Liabilities minus Deferred
Revenue.

"Affiliate" 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.

"Business
Day" means a day on which Silicon is open for
business.

"Cash Management
Services" means Silicon's cash management
services, direct deposit of payroll, business credit card, and check
cashing services as may be further identified in the various cash
management services agreements related to such Cash Management
Services.

"Code" means the
Uniform Commercial Code as adopted and in effect in the Commonwealth of
Massachusetts from time to time.

"Collateral" has the meaning set
forth in Section 2.1 above.

"Current
Liabilities" are all obligations and liabilities of
Borrower to Bank, plus, without duplication, the aggregate amount of
Borrower' s Total Liabilities which mature within one (1)
year.

"Default" means any
event which with notice or passage of time or both, would constitute an
Event of Default.

"Default
Rate" has the meaning set forth in Section  7.2
above.

"Deferred Revenue" is
all amounts received in advance of performance under contracts and not
yet recognized as revenue.

"Deposit
Account" has the meaning set forth in Section 9-102
of the Code.

"Eligible
Accounts" means Accounts, General Intangibles, and
Payment Intangibles arising in the ordinary course of Borrower'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's discretion, the
following (the "Minimum Eligibility
Requirements") are the minimum requirements for an
Account to be an Eligible Account: (i) the Account must not be
outstanding for more than 90 days from its invoice date (except that
after the occurrence of the Transition Event, such amount shall be 120
days with respect to Accounts for which the Account Debtor is Sun
Microsystems), (ii) 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, except as may otherwise be acceptable to
Silicon in its discretion), (iii) the Account must not be owing from an
Account Debtor with whom the Borrower has any dispute (whether or not
relating to the particular Account), (iv) the Account must not be owing
from an Affiliate of Borrower, (v) 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, (vi)
the Account must not be owing from the United States or any department,
agency or instrumentality thereof (unless there has been compliance, to
Silicon's satisfaction, with the United States Assignment of
Claims Act), (vii) the Account must not be owing from an Account Debtor
located outside the United States (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), and (viii) 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. Accounts owing from one Account Debtor will not be deemed

13

Eligible Accounts to the extent they exceed
30% (40% with respect to Accounts for which the Account
Debtor is Sun Microsystems) of the total Accounts outstanding. In
addition, if more than 50% of the Accounts owing from an Account
Debtor are outstanding more than 90 days from their invoice date
(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 the Borrower.

"Equipment" means all of
Borrower's present and hereafter acquired machinery, molds,
machine tools, motors, furniture, equipment, furnishings, fixtures,
trade fixtures, motor vehicles, tools, parts, dyes, jigs, goods and
other tangible personal property (other than Inventory) of every kind
and description used in Borrower's operations or owned by
Borrower and any interest in any of the foregoing, and all attachments,
accessories, accessions, replacements, substitutions, additions or
improvements to any of the foregoing, wherever located.

"Event of Default" means any of
the events set forth in Section 7.1 of this Agreement.

"GAAP" means generally accepted
accounting principles, consistently applied.

"General Intangibles" means all
general intangibles of Borrower, whether now owned or hereafter created
or acquired by Borrower, including, without limitation, all choses in
action, rights to payment for credit extended, amounts due to Borrower,
credit memoranda in favor of Borrower, warranty claims, causes of
action, corporate or other business records, deposits, Deposit
Accounts, inventions, designs, drawings, blueprints, patents, patent
applications, trademarks and the goodwill of the business symbolized
thereby, names, trade names, trade secrets, goodwill, copyrights,
registrations, licenses, franchises, customer lists, security and other
deposits, rights in all litigation presently or hereafter pending for
any cause or claim (whether in contract, tort or otherwise), and all
judgments now or hereafter arising therefrom, all claims of Borrower
against Silicon, rights to purchase or sell real or personal property,
rights as a licensor or licensee of any kind, royalties, telephone
numbers, proprietary information, purchase orders, and all insurance
policies and claims (including without limitation life insurance, key
man insurance, credit insurance, liability insurance, property
insurance and other insurance), tax refunds and claims, computer
programs, discs, tapes and tape files, claims under guaranties,
security interests or other security held by or granted to Borrower,
all rights to indemnification and all other intangible property of
every kind and nature (other than Accounts).

"Intellectual Property" has the
meaning set forth in Section  2.1 above.

"Inventory" means all of
Borrower's now owned and hereafter acquired goods, merchandise or
other personal property, wherever located, to be furnished under any
contract of service or held for sale or lease (including without
limitation all raw materials, work in process, finished goods and goods
in transit), and all materials and supplies of every kind, nature and
description which are or might be used or consumed in Borrower's
business or used in connection with the manufacture, packing, shipping,
advertising, selling or finishing of such goods, merchandise or other
personal property, and all warehouse receipts, documents of title and
other documents representing any of the foregoing.

"Letter-of-Credit Rights" means
all letter-of-credit rights including, without limitation,
"letter-of-credit rights" as defined in the
Code and also any right to payment or performance under a letter of
credit, whether or not the beneficiary has demanded or is at the time
entitled to demand payment or performance.

"Loan Documents" means,
collectively, this Agreement, the Perfection Certificate, 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.

"Obligations" 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, including, without limitation, the
Borrower's obligations pursuant to the Warrant, whether arising
from an extension of 

14

credit, opening of a letter of credit,
banker's acceptance, foreign exchange contracts, loan, Cash
Management Services, guaranty, indemnification or otherwise, whether
direct or indirect (including, without limitation, those acquired by
assignment and any participation by Silicon in Borrower's debts
owing to others), absolute or contingent, due or to become due,
including, without limitation, all interest, charges, expenses, fees,
attorney'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 present
or future instrument or agreement between Borrower and Silicon.

"Payment" means all checks, wire
transfers and other items of payment received by Silicon (including
proceeds of Accounts and payment of the Obligations in full) for credit
to Borrower's outstanding Loans or, if the balance of the Loans
have been reduced to zero, for credit to its Deposit Accounts.

"Payment Intangibles" means all
payment intangibles including, without limitation,
"payment intangibles" as defined in the Code
and also any general intangible under which the Account Debtor's
primary obligation is a monetary obligation.

"Perfection Certificate" means
that certain Perfection Certificate dated as of August 11, 2004
executed by Borrower in favor of Silicon.

"Permitted Liens" means the
following: (i) purchase money security interests in specific items of
Equipment in an amount not to exceed $250,000.00 in the aggregate at
any time during the term of this Agreement; (ii) leases of specific
items of Equipment in an amount not to exceed $250,000.00 in the
aggregate at any time during the term of this Agreement; (iii) liens
for taxes not yet payable; (iv) additional security interests and liens
consented to in writing by Silicon, which consent shall not be
unreasonably withheld; (v) security interests being terminated
substantially concurrently with this Agreement; (vi)  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)  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; and (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 subsection (iv) above, that the holder
of the additional security interest or lien sign an intercreditor
agreement on Silicon'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.

"Person" 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.

"Quick Assets" is, on any date,
the Borrower's unrestricted cash and net billed accounts
receivable.

"Reserves" means,
as of any date of determination, such amounts as Silicon may from time
to time establish and revise in good faith 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 good faith,
do or may 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's good faith belief that any collateral report or
financial 

15

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.

"Supporting
Obligations" means all supporting obligations
including, without limitation, "supporting
obligations" as defined in the Code and also any
letter-of-credit right or secondary obligation which supports the
payment or performance of an account, chattel paper, a document, a
general intangible, an instrument, or investment property.

"Transition Event" means
Borrower's failure to maintain, at any time, to be tested as of
the last day of each month, an Adjusted Quick Ratio of greater than or
equal to 1.6 to 1.0. The subsequent reporting of an Adjusted Quick
Ratio of greater than or equal to 1.6 to 1.0 shall not have any effect
hereunder.

Other Terms. All accounting terms used in
this Agreement, unless otherwise indicated, shall have the meanings
given to such terms in accordance with GAAP. 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.

Section 9    GENERAL
PROVISIONS.

9.1    Interest Computation; Float
Charge.    In computing interest on the Obligations, all
Payments received after 2:00 P.M. Eastern time on any day shall be
deemed received on the next Business Day. In addition, after the
occurrence of a Transition Event, Silicon shall be entitled to charge
Borrower a "float" charge in an amount equal
to three (3) Business Days interest, at the interest rate applicable to
the Loans, on all Payments received by Silicon. Said float charge is
not included in interest for purposes of computing Minimum Monthly
Interest (if any) under this Agreement. When due hereunder, the float
charge for each month shall be payable on the last day of the month.
Silicon shall not, however, be required to credit Borrower's
account for the amount of any item of payment which is unsatisfactory
to Silicon in its good faith business judgment, and Silicon may charge
Borrower's loan account for the amount of any item of payment
which is returned to Silicon unpaid.

9.2    Application of
Payments.    All payments with respect to the Obligations may be
applied, and in Silicon'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.

9.3    Charges to Accounts.    Silicon may, in its
discretion and with notice to Borrower, require that Borrower pay
monetary Obligations in cash to Silicon, or charge them to
Borrower's Loan account, in which event they will bear interest
at the same rate applicable to the Loans. Silicon may also, in its
discretion and with notice to Borrower, charge any monetary Obligations
to Borrower's Deposit Accounts maintained with Silicon.

9.4    Monthly Accountings.    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 sixty (60) days after each account is
rendered, describing the nature of any alleged errors or omissions.

9.5    Notices.    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.

16

9.6    Severability.    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.

9.7    Integration.    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. 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.

9.8     Waivers; Indemnity.    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 present or future
agreement between Borrower and Silicon 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 agreement now or
in the future executed by Borrower and delivered to Silicon 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 limitation relating to any of the
Obligations or this Agreement or any document related hereto, 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' 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'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.

9.9    No Liability for Ordinary
Negligence.    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.

9.10    Amendment.    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.

9.11    Time of Essence.    Time is of the essence in
the performance by Borrower of each and every obligation under this
Agreement.

9.12    Attorneys Fees and
Costs.    Borrower shall reimburse Silicon for all reasonable
attorneys' 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' 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 

17

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's books and records;
protect, obtain possession of, lease, dispose of, or otherwise enforce
Silicon's security interest in, the Collateral; and otherwise
represent Silicon in any litigation relating to Borrower. In satisfying
Borrower's obligation hereunder to reimburse Silicon for
attorneys fees, Borrower may, for convenience, issue checks directly to
Silicon's attorneys, Riemer & Braunstein, LLP, but Borrower
acknowledges and agrees that Riemer & Braunstein, LLP 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, Silicon shall be
entitled to recover its reasonable costs and attorneys' fees,
including (but not limited to) reasonable attorneys'
fees and costs incurred in the enforcement of, execution upon or
defense of any order, decree, award or judgment. All attorneys'
fees and costs to which Silicon may be entitled pursuant to this
Section 9.12 shall immediately become part of Borrower'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.

9.13    Benefit of Agreement.    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.

9.14    Joint and Several
Liability.    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.

9.15    Limitation of Actions.    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 Agreement, or any other present or future document or
agreement, 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
Agreement or any other present or future agreement.

9.16    Right of Set-Off.    Borrower and any guarantor
hereby grant to Silicon a lien, security interest, and right of setoff
as security for all Obligations to Silicon, whether now existing or
hereafter arising upon and against all deposits, credits, collateral
and property, now or hereafter in the possession, custody, safekeeping,
or control of Silicon or any entity under the control of Silicon Valley
Bank or in transit to any of them. At any time after the occurrence and
during the continuance of an Event of Default, without demand or
notice, Silicon may set off the same or any part thereof and apply the
same to any liability or obligation of Borrower and any guarantor then
due and regardless of the adequacy of any other collateral securing the
loan. ANY AND ALL RIGHTS TO REQUIRE SILICON TO EXERCISE ITS RIGHTS OR
REMEDIES WITH RESPECT TO ANY OTHER COLLATERAL WHICH SECURES THE LOAN,
PRIOR TO EXERCISING ITS RIGHT OF SETOFF WITH RESPECT TO SUCH DEPOSITS,
CREDITS, OR OTHER PROPERTY OF THE BORROWER OR ANY GUARANTOR, ARE HEREBY
KNOWINGLY, VOLUNTARILY, AND IRREVOCABLY WAIVED.

9.17    Section Headings; Construction.    Section
headings are only used in this Agreement for convenience. Borrower and
Silicon acknowledge that the headings may not describe completely the

18

subject matter of the applicable section,
and the headings shall not be used in any manner to construe, limit,
define or interpret any term or provision of this Agreement. The term
"including", whenever used in this Agreement,
shall mean "including (but not limited to)".
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.

9.18    Governing Law; Jurisdiction; Venue.    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 Commonwealth of Massachusetts. 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's option, be litigated in
state or federal courts located within Massachusetts; (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,
provided, however, that if for any reason Silicon cannot avail itself
of such courts in the Commonwealth of Massachusetts, Borrower accepts
jurisdiction of the courts and venue in Santa Clara, California.

9.19    Mutual Waiver of Jury Trial.    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.

9.20    Confidentiality.    In handling any
confidential information, Silicon will exercise the same degree of care
that it exercises for its own proprietary information, but disclosure
of information may be made (i) to Silicon's subsidiaries or
affiliates, (ii) to prospective transferees or purchasers of any
interest in the loans (provided, however, Silicon shall use
commercially reasonable efforts in obtaining such prospective
transferee or purchasers agreement of the terms of this provision),
(iii) as required by law, regulation, subpoena, or other order, (iv) as
required in connection with Silicon's examination or audit and
(v) as Silicon considers appropriate exercising remedies under this
Agreement. Confidential information does not include information that
either: (a) is in the public domain or in Silicon's possession
when disclosed to Silicon, or becomes part of the public domain after
disclosure to Silicon; or (b) is disclosed to Silicon by a third party,
if Silicon does not know that the third party is prohibited from
disclosing the information.

9.21    Perfection
Certificate.    Borrower hereby ratifies, confirms and
reaffirms, all and singular, the terms and disclosures contained in the
Perfection Certificate, and acknowledges, confirms and agrees the
disclosures and information above Borrower provided to Silicon in the
Perfection Certificate has not changed, as of the date hereof.

9.22    Amended and Restated Agreement.    This
Agreement amends and restates, in its entirety, a certain Loan and
Security Agreement dated August 11, 2004 by and between Silicon and
Borrower, as amended from time to time.

9.23    Waiver.    Silicon hereby waives
Borrower's existing default under the Loan and Security Agreement
dated August 11, 2004 by and between Silicon and Borrower by virtue of
Borrower's failure to comply with the financial covenant set
forth in Section 6.6(b) thereof as of the quarter ended June 30, 2005.
Silicon's waiver of Borrower's compliance of said
affirmative covenant shall apply only to the foregoing specific
period.

19

IN WITNESS WHEREOF, the parties hereto
have caused this Agreement to be executed as a sealed instrument under
the laws of the Commonwealth of Massachusetts as of the date first
above written.

											
	 		BORROWER:
	 		AXS-ONE
INC.
	 		By		/s/
	 		Name:
	 		Title:
	 		SILICON:
	 		SILICON VALLEY
BANK
	 		By		/s/
	 		Name:
	 		Title:
	

Section
1

20

SILICON VALLEY
BANK
SCHEDULE TO
 LOAN AND SECURITY AGREEMENT

		
	Borrower: 	AXS-ONE INC.

		
	Address: 	301 Route 17
North
Rutherford, New Jersey 07070

		
	Date: 	September 13, 2005

This Schedule forms an integral part of the Loan and Security
Agreement between Silicon Valley Bank and the above-borrower of even
date.

SECTION 1    CREDIT
LIMIT

(Section 1.1):    An amount not
to exceed the lesser of (A) or (B), below:

			
		(A)   (i)  	$4,000,000.00
(the "Maximum Credit Limit");
minus

			
		(ii) 	the
aggregate amounts then undrawn on all outstanding letters of credit,
foreign exchange contracts, or any other accommodations issued or
incurred, or caused to be issued or incurred by Silicon for the account
and/or benefit of the Borrower.

			
		(B)   (i) 	80.0% of
the amount of the Borrower's Eligible Accounts;
minus

			
		(ii) 	the
aggregate amounts then undrawn on all outstanding letters of credit,
foreign exchange contracts, or any other accommodations issued or
incurred, or caused to be issued or incurred by Silicon for the account
and/or benefit of the Borrower.

Silicon may, from time to
time, modify the advance rate(s) set forth herein in its good faith
business judgment upon notice to Borrower based on changes in
collection experience with respect to the Accounts or other issues or
factors relating to the Accounts or the Collateral.

Letter of Credit/Foreign Exchange Contract/Cash
Management Services Sublimit
 (Section 1.6, 1.7,
1.8):    $1,000,000.00

SECTION
2    INTEREST.

Interest Rate    (Section 1.2):

Prior to the occurrence of the Transition Event, a rate equal to the
Prime Rate in effect from time to time, plus 1.50% per
annum.

Upon the occurrence of the Transition Event and
thereafter, a rate equal to the Prime Rate plus 2.50% per
annum.

Interest shall be calculated on the basis of a 360-day
year for the actual number of days elapsed. "Prime
Rate" means the rate announced from time to time by
Silicon as its "prime rate;" 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.

Minimum Monthly
Interest    (Section 1.2):     $7,500.00.

SECTION
3    FEES

(Section 1.4):

Loan Fee:    $40,000.00 payable concurrently herewith.

Warrant Waiver Fee:    $40,000.00 earned as of the date hereof and
payable as follows: (a) $20,000.00 is payable concurrently herewith,
and (b) $20,000.00 shall be payable on the earlier to occur of (i) the
Transition Event, (ii) the occurrence of an Event of Default or (iii)
the early termination of this Agreement.

21

Collateral Handling Fee:    Upon the
occurrence of a Transition Event, Borrower shall pay Silicon a
collateral handling fee of $1,000.00 per month, payable in arrears on
the last day of each month, commencing with the month in which the
Transition Event occurs.

Unused Line Fee:    Prior to the
occurrence of the Transition Event, 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 Loans outstanding during the
month is less than the amount of the Maximum Credit Limit, Borrower
shall pay Silicon an unused line fee in an amount equal to
0.375% per annum on the difference between the amount of the
Maximum Credit Limit and the 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 last day of each
month.

Early Termination Fee:    If the Obligations are
voluntarily or involuntarily prepaid or if this Agreement is otherwise
terminated prior to its maturity, the Borrower shall pay to Silicon a
termination fee in the amount equal to $40,000.00, provided that no
such termination fee shall be charged if the credit facility hereunder
is replaced or transferred to another division of Silicon. The
termination fee shall be due and payable upon prepayment by the
Borrower in the case of voluntary prepayments or upon demand by Silicon
in the event of involuntary prepayment, and if not paid immediately
shall bear interest at a rate equal to the highest rate applicable to
any of the Obligations.

SECTION
4    MATURITY DATE

(Section
6.1):    August 9, 2006.

SECTION
5    FINANCIAL COVENANTS

(Section
5.1):    Borrower shall comply with each of the following
covenant(s).

Compliance shall be determined as of the end of
each month, except as otherwise specifically provided below:

a.    Adjusted Quick Ratio:

Borrower shall maintain,
at all times, to be tested monthly, an Adjusted Quick Ratio of at least
1.35 to 1.00 as of the last day of each month during the term of this
Agreement.

b.    EBITDAS.    Borrower shall have, to
be tested as of the last day of each quarter, EBITDAS of at least:

			
		(i) 	($4,133,999) for the
quarter ending September 30, 2005; and

			
		(ii) 	for the quarter ending
December 31, 2005 and for each subsequent quarter ending, either (A) at
least $1.00 greater than Borrower's EBITDAS for the immediately
preceding quarter, or (B) EBITDAS of at least $1.00.

Definitions.    For purposes of the foregoing financial
covenants, the following term shall have the following meaning:

"Adjusted Quick Ratio" is the ratio of (i)
Quick Assets to (ii) Current Liabilities minus Deferred Revenue.

"Current Liabilities" are all obligations
and liabilities of Borrower to Bank, plus, without duplication, the
aggregate amount of Borrower' s Total Liabilities which mature
within one (1) year.

"EBITDAS" means
earnings before interest expense (excluding interest income), taxes,
depreciation, amortization and stock compensation expense in accordance
with GAAP.

"Quick Assets" is, on any
date, the Borrower's unrestricted cash and net billed accounts
receivable.

22

SECTION
6    REPORTING.

(Section
5.3):

Borrower shall provide Silicon with the following:

(a)    Prior to the occurrence of the Transition
Event, Borrower shall provide to Silicon a borrowing base certificate
in form satisfactory to Silicon, on or before thirty (30) days after
the end of each month.

(b)    After the
occurrence of the Transition Event, weekly (bi-weekly if
Borrower's unrestricted cash plus amounts available to be
borrowed hereunder exceeds $1,000,000.00, and monthly if
Borrower's unrestricted cash plus amounts available to be
borrowed hereunder exceeds $5,000,000.00, and monthly, if no amounts
are outstanding under this Agreement and Borrower has advised Silicon
in writing that it has elected to be on "non-borrowing
reporting status", provided Borrower has provided
sufficient advance notification to Silicon to perform a field
examination), and upon each loan request, borrowing base certificates
and transaction reports.

(c)    Monthly
accounts payable agings, aged by invoice date, and outstanding or held
check registers, if any, within thirty days after the end of each
month.

(d)    Monthly accounts receivable
agings, aged by invoice date, and receivable reconciliations, within
thirty days after the end of each month.

(e)    Monthly unaudited financial statements, as
soon as available, and in any event within thirty days after the end of
each month.

(f)    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.

(g)    Annual audited financial
statements, as soon as available, and in any event within 120 days
following the end of Borrower's fiscal year, prepared under GAAP,
consistently applied, together with an unqualified opinion on the
financial statements from an independent certified public accounting
firm reasonably acceptable to Silicon.

(h)    Board-approved financial projections with
respect to Borrower's 2006 fiscal year on or prior to January 15,
2006.

(i)    Such additional reports and
information as Silicon may from time to time specify.

After the occurrence of the Transition Event, Borrower may
elect to be on "non-borrowing reporting
status" if Borrower notifies Silicon in writing that it so
elects and there are no Loans or other Obligations outstanding
hereunder (including, without limitation, any issued Letters of
Credit). After Borrower has notified Silicon of its intention to be on
"non-borrower reporting status", as further
set forth in Section 4.3 of this Agreement, Borrower must provide
Silicon at least 30 days prior written notice of its intention to
borrow.

SECTION
7    OTHER COVENANTS

Borrower
shall at all times comply with all of the following additional
covenants:

(a)    Banking
Relationship.    In order to permit Silicon to monitor the
Borrower's financial performance and condition, Borrower shall
maintain Borrower's primary depository, operating and securities
accounts with Silicon (or its affiliate, SVB Securities, with respect
to securities accounts) and all of Borrower's cash or securities
in excess of that amount used for Borrower's operations shall be
maintained or administered through Silicon. Borrower shall identify to
Silicon, in writing, any bank or securities account opened by Borrower
with any institution other than 

23

Silicon. In addition, for each such account
that Borrower at any time opens or maintains, Borrower shall, at
Silicon's request and option, pursuant to an agreement in form
and substance acceptable to Silicon, cause the depository bank or
securities intermediary to agree that such account is the collateral of
Silicon, and enter into a "control agreement"
pursuant to the terms hereunder.

(b)    Subordination of Inside
Debt.    All present and future indebtedness of the Borrower to
its officers, directors and shareholders ("Inside
Debt") shall, at all times, be subordinated to the
Obligations pursuant to a subordination agreement on Silicon's
standard form. Borrower represents and warrants that there is no Inside
Debt presently outstanding. 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's standard form.

(c)    Negative Pledge Regarding Intellectual
Property.    Except for the granting of non-exclusive licenses or
sublicenses by Borrower in the ordinary course of business, Borrower
has not, and shall not, sell, transfer, assign, mortgage, pledge,
lease, grant a security interest in, or encumber any of
Borrower's Intellectual Property. Borrower has not, and shall
not, enter into a negative pledge agreement, or similar agreement,
affecting the rights of the Intellectual Property with any other
party.

SECTION
8    LITIGATION

(Section
3.10)    Borrower received a letter from a former employee requesting
payment of $88,000 representing amounts allegedly owed to him relating
to his company stock options. Borrower has responded to the former
employee in writing denying that any amounts are owed, and Borrower
believes that no amounts are due to such person either contractually or
otherwise.

24

IN WITNESS WHEREOF, the parties hereto
have caused this Schedule to Loan and Security Agreement to be executed
as a sealed instrument under the laws of the Commonwealth of
Massachusetts as of the date first above written.

											
	 		BORROWER:
	 		AXS-ONE
INC.
	 		By		/s/
	 		Name:
	 		Title:
	 		SILICON:
	 		SILICON VALLEY
BANK
	 		By		/s/
	 		Name:
	 		Title:
	

25

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