EXHIBIT 10.12

Silicon Valley Bank

Amendment to Loan Documents

Borrower: Sigma Designs, Inc.

Address: 355 Fairview Way

Milpitas, California 95035

Date: September 7, 2001

THIS AMENDMENT TO LOAN DOCUMENTS

is entered into between SILICON VALLEY BANK ("Silicon") and the borrower named
above (the "Borrower"), with reference to the various loan and security
agreements and other documents, instruments and agreements between them,
including but not limited to that certain Amended and Restated Loan and Security
Agreement dated October 26,1998 (as amended, the "Existing Loan Agreement"; the
Existing Loan Agreement and all related documents, instruments and agreements
may be referred to collectively herein as the "Existing Loan Documents").

The Parties agree to amend the Existing Loan Documents, as follows:

1.

Present Loan Balance. Borrower acknowledges that the present unpaid principal
balance of the Borrower's indebtedness, liabilities and obligations to Silicon
under the Existing Loan Documents, including interest accrued through September
7, 2001 is $12,008,516.69 (the "Present Loan Balance"), and that said sum is due
and owing without any defense, offset, or counterclaim of any kind.

2. Amendment to Existing Loan Documents

. The Existing Loan Documents are hereby amended in their entirety to read as
set forth in the Loan and Security Agreement, and related documents, being
executed concurrently (collectively, the "New Loan Documents"); provided that
the financial covenants set forth in Section 5 of the Schedule to the Loan and
Security Agreement shall be effective as of July 31, 2001, and as of July 31,
2001 shall replace the financial covenants set forth in the Existing Loan
Agreement. The Borrower acknowledges that the Present Loan Balance shall be the
opening balance of the Loans pursuant to the New Loan Documents as of the date
hereof, and shall, for all purposes, be deemed to be Loans made by Silicon to
the Borrower pursuant to the New Loan Documents. Notwithstanding the execution
of the New Loan Documents, the following Existing Loan Documents shall continue
in full force and effect and shall continue to secure all present and future
indebtedness, liabilities, guarantees and other Obligations (as defined in the
New Loan Documents): All standard documents of Silicon entered into by the
Borrower in connection with Letters of Credit and/or Foreign Exchange Contracts;
all security agreements, collateral assignments and mortgages, including but not
limited to those relating to patents, trademarks, copyrights and other
intellectual property; all lockbox agreements and/or blocked account agreements;
and all UCC-1 financing statements and other documents filed with governmental
offices which perfect liens or security interests in favor of Silicon. In
addition, in the event the Borrower has previously issued any stock options,
stock purchase warrants or securities to Silicon, the same and all documents and
agreements relating thereto shall also continue in full force and effect.

3. General Provisions.

This Amendment and the New Loan Documents set forth in full all of the
representations and agreements of the parties with respect to the subject matter
hereof and supersede all prior discussions, representations, agreements and
understandings between the parties with respect to the subject hereof.

Borrower:

SIGMA DESIGNS, INC.

 

By_______________________________

President or Vice President

By_______________________________

Secretary or Ass't Secretary

Silicon:

SILICON VALLEY BANK

 

By_______________________________

Title______________________________

 

 

 

Silicon Valley Bank

Loan and Security Agreement

Borrower: Sigma Designs, Inc.

Address: 355 Fairview Way

Milpitas, California 95035

Date: September 7, 2001

THIS LOAN AND SECURITY AGREEMENT

is entered into on the above date between SILICON VALLEY BANK, COMMERCIAL
FINANCE DIVISION ("Silicon"), whose address is 3003 Tasman Drive, Santa Clara,
California 95054 and the borrower(s) named above (jointly and severally, the
"Borrower"), whose chief executive office is located at the above address
("Borrower's Address"). The Schedule to this Agreement (the "Schedule") shall
for all purposes be deemed to be a part of this Agreement, and the same is an
integral part of this Agreement. (Definitions of certain terms used in this
Agreement are set forth in Section 8 below.)

1. LOANS.

1.1 Loans.

Silicon will make loans to Borrower (the "Loans"), in amounts determined by
Silicon in its sole discretion, 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.

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, 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, charge interest to Borrower's Deposit Accounts
maintained with Silicon. Regardless of the amount of Obligations that may be
outstanding from time to time, Borrower shall pay Silicon minimum monthly
interest during the term of this Agreement in the amount set forth on the
Schedule (the "Minimum Monthly Interest").

1.3 Overadvances.

If at any time or for any reason the total of all outstanding Loans and all
other 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 on demand the amount
of any Overadvance, Borrower agrees to pay Silicon interest on the outstanding
amount of any Overadvance, on demand, at a rate equal to the interest rate which
would otherwise be applicable to the Overadvance, plus an additional 2% per
annum.

1.4 Fees.

Borrower shall pay Silicon the fee(s) shown on the Schedule, which are in
addition to all interest and other sums payable to Silicon and are not
refundable.

1.5 Letters of Credit.

At the request of Borrower, Silicon may, in its sole discretion, 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
outstanding Letters of Credit from time to time 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. 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 Loan Agreement, as it pertains to Letters of Credit, and any
other present or future documents or agreements between Borrower and Silicon
relating to Letters of Credit are cumulative.

2. SECURITY INTEREST.

2.1 Security Interest.

To secure the payment and performance of all of the Obligations when due,
Borrower hereby grants to Silicon a security interest in all of Borrower's
interest in the following, whether now owned or hereafter acquired, and wherever
located: All Inventory, Equipment, Receivables, and General Intangibles,
including, without limitation, all of Borrower's Deposit Accounts, and all
money, and all property 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").

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:

3.1 Corporate Existence and Authority.

Borrower, if a corporation, is and will continue to be, duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation. Borrower is and will continue to be qualified and licensed to do
business in all jurisdictions in which any failure to do so would 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), and (iii) do not violate
Borrower's articles or certificate of incorporation, or Borrower's by-laws, or
any law or any material agreement or instrument which is binding upon Borrower
or its property, and (iv) do not constitute grounds for acceleration of any
material indebtedness or obligation under any material agreement or instrument
which is binding upon Borrower or its property.

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 Schedule 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, and will in the future comply, 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 Schedule. Borrower will give
Silicon at least 30 days prior written notice before opening any additional
place of business, changing its chief executive office, or moving any of the
Collateral to a location other than Borrower's Address or one of the locations
set forth on the Schedule.

3.4 Title to Collateral; Permitted Liens.

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 by Borrower. The
Collateral now is and will remain free and clear of any and all liens, charges,
security interests, encumbrances and adverse claims, except for Permitted Liens.
Silicon now has, and will continue to have, a first-priority perfected and
enforceable security interest in all of the Collateral, subject only to the
Permitted Liens, and Borrower will at all times defend Silicon and the
Collateral against all claims of others. 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 (whether as owner, mortgagee, beneficiary under a deed of
trust, lien or otherwise), 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, so as to ensure that Silicon's rights in the Collateral are, and will
continue to be, superior to the rights of any such third party. Borrower will
keep in full force and effect, and will comply with all the terms of, any lease
of real property where any of the Collateral now or in the future may be
located.

3.5 Maintenance of Collateral.

Borrower will maintain the Collateral in good working condition, 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
generally accepted accounting principles.

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 generally accepted accounting
principles and now and in the future will completely and accurately reflect the
financial condition of Borrower, 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 tax returns and reports
required by foreign, federal, state and local law, 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 result
in any liability of Borrower, including any liability to the Pension Benefit
Guaranty Corporation or its successors or any other governmental agency.
Borrower shall, at all times, utilize the services of an outside payroll service
providing for the automatic deposit of all payroll taxes payable by Borrower.

3.9 Compliance with Law.

Borrower has complied, and will comply, in all material respects, with all
provisions of all foreign, federal, state and local laws and regulations
relating 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. 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."

4. Receivables.

4.1 Representations Relating to Receivables.

Borrower represents and warrants to Silicon as follows: Each Receivable 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 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 Receivables are and shall be true and correct 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,
and all signatories and endorsers have the capacity to contract. All sales and
other transactions underlying or giving rise to each Receivable shall fully
comply with all applicable laws and governmental rules and regulations. All
signatures and endorsements on all documents, instruments, and agreements
relating to all Receivables 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 Receivables.

Borrower shall deliver to Silicon transaction reports and loan requests,
schedules and assignments of all Receivables, and schedules of collections, all
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 Receivables, nor shall Silicon's
failure to advance or lend against a specific Receivable affect or limit
Silicon's security interest and other rights therein. Loan requests received
after 12:00 Noon 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 Receivables, and Borrower warrants the genuineness of all of the
foregoing. 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 the originals of all instruments,
chattel paper, security agreements, guarantees and other documents and property
evidencing or securing any Receivables, immediately upon receipt thereof and in
the same form as received, with all necessary indorsements, all of which shall
be with recourse. Borrower shall also provide Silicon with copies of all credit
memos within two days after the date issued.

4.4 Collection of Receivables.

Borrower shall have the right to collect all Receivables, unless and until a
Default or an Event of Default has occurred. Borrower shall hold all payments
on, and proceeds of, Receivables in trust for Silicon, and Borrower shall
immediately deliver all such payments and proceeds to Silicon in their original
form, duly endorsed in blank, to be applied to the Obligations in such order as
Silicon shall determine. Silicon may, in its discretion, require that all
proceeds of Collateral be deposited by Borrower into 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. Silicon or its designee may, at
any time, notify Account Debtors that the Receivables have been assigned to
Silicon.

4.5. Remittance of Proceeds.

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, 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 such transactions in
any fiscal year). 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 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
Receivables. Borrower shall not forgive (completely or partially), compromise or
settle any Receivable 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 Receivables.

4.7 Returns.

Provided no Event of Default has occurred and is continuing, if any Account
Debtor returns any Inventory to Borrower in the ordinary course of its business,
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
of any Event of Default, Borrower shall (i) hold the returned Inventory in trust
for Silicon, (ii) segregate all returned Inventory from all of Borrower's other
property, (iii) conspicuously label the returned Inventory as Silicon's
property, and (iv) 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 Receivables, 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 under any circumstances 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 a Receivable, or for any error,
act, omission, or delay of any kind occurring in the settlement, failure to
settle, collection or failure to collect any Receivable, or for settling any
Receivable 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 a Receivable. Nothing herein shall,
however, relieve Silicon from liability for its own gross negligence or willful
misconduct.

5. ADDITIONAL DUTIES OF 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 Borrower shall provide evidence of such insurance to Silicon, so
that Silicon is satisfied that such insurance is, at all times, in full force
and effect. 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 sole discretion, except that, provided no Default or
Event of Default has occurred and is continuing, Silicon shall release to
Borrower insurance proceeds with respect to Equipment totaling less than
$100,000, which shall be utilized by Borrower for the replacement of the
Equipment with respect to which the insurance proceeds were paid. Silicon may
require reasonable assurance that the insurance proceeds so released will be so
used. If Borrower fails to provide or pay for any insurance, Silicon may, but is
not obligated to, obtain the same at Borrower's expense. Borrower shall promptly
deliver to Silicon copies of all 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 reasonably specify.

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 $650 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. Borrower will not enter into any agreement
with any accounting firm, service bureau or third party to store Borrower's
books or records at any location other than Borrower's Address, without first
obtaining Silicon's written consent, which may be conditioned upon such
accounting firm, service bureau or other third party agreeing to give Silicon
the same rights with respect to access to books and records and related rights
as Silicon has under this Loan Agreement. Borrower waives the benefit of any
accountant-client privilege or other evidentiary privilege precluding or
limiting the disclosure, divulgence or delivery of any of its books and records
(except that Borrower does not waive any attorney-client privilege).

5.5 Negative Covenants.

Except as may be permitted in the Schedule, Borrower shall not, without
Silicon's prior written consent, do any of the following: (i) merge or
consolidate with another corporation or entity; (ii) acquire any assets, except
in the ordinary course of business; (iii) enter into any other transaction
outside the ordinary course of business; (iv) sell or transfer any Collateral,
except for the sale of finished Inventory in the ordinary course of Borrower's
business, and except for the sale of obsolete or unneeded Equipment in the
ordinary course of business; (v) store any Inventory or other Collateral with
any warehouseman or other third party; (vi) sell any Inventory on a
sale-or-return, guaranteed sale, consignment, or other contingent basis; (vii)
make any loans of any money or other assets; (viii) incur any debts, outside the
ordinary course of business, which would have a material, adverse effect on
Borrower or on the prospect of repayment of the Obligations; (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; or (xiii)
pay total compensation, including salaries, fees, bonuses, commissions, and all
other payments, whether directly or indirectly, in money or otherwise, to
Borrower's executives, officers and directors (or any relative thereof) in an
amount in excess of the amount set forth on the Schedule; 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 in any manner 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.

5.7 Further Assurances.

Borrower agrees, at its expense, on request by Silicon, to execute all documents
and take all actions, as Silicon, may deem reasonably necessary or useful in
order to perfect and maintain Silicon's perfected security interest in the
Collateral, and in order to fully consummate the transactions contemplated by
this Agreement.

6. TERM.

6.1 Maturity Date.

This Agreement shall continue in effect until the maturity date set forth on the
Schedule (the "e;Maturity Date"), subject to Section 6.3 below.

6.2 Early Termination.

This Agreement may be terminated prior to the Maturity Date as follows: (i) by
Borrower, effective three Business Days after written notice of termination is
given to Silicon; or (ii) by Silicon at any time after the occurrence of an
Event of Default, without notice, effective immediately. If this Agreement is
terminated by Borrower or by Silicon under this Section 6.2, Borrower shall pay
to Silicon a termination fee in an amount equal to two percent (2.0%) of the
Maximum Credit Limit, provided that no termination fee shall be charged if the
credit facility hereunder is replaced with a new facility from another division
of Silicon Valley Bank. The termination fee shall be due and payable on the
effective date of termination and thereafter shall bear interest at a rate equal
to the highest rate applicable to any of the Obligations.

6.3 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 the face amount of all
such Letters of Credit plus all interest, fees and cost due or to become due in
connection therewith, 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, without limiting the fact that
Loans are subject to the discretion of Silicon, Silicon may, in its sole
discretion, refuse to make any further Loans after termination. No termination
shall in any way affect or impair any right or remedy of Silicon, nor shall any
such termination relieve Borrower of any Obligation to Silicon, until all of the
Obligations have been paid and performed in full. Upon payment and performance
in full of all the Obligations and termination of this Agreement, Silicon shall
promptly deliver to Borrower termination statements, requests for reconveyances
and such other documents as may be required to fully terminate Silicon's
security interests.

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 (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 (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, or
the commencement of any proceeding by Borrower under any reorganization,
bankruptcy, insolvency, arrangement, readjustment of debt, dissolution or
liquidation law or statute of any jurisdiction, now or in the future in effect;
or (j) the commencement of any proceeding against Borrower or any guarantor of
any of the Obligations under any reorganization, bankruptcy, insolvency,
arrangement, readjustment of debt, dissolution or liquidation law or statute of
any jurisdiction, now or in the future in effect, which is not cured by the
dismissal thereof within 30 days after the date commenced; or (k) revocation or
termination of, or limitation or denial of liability upon, any guaranty of the
Obligations or any attempt to do any of the foregoing, or commencement of
proceedings by any guarantor of any of the Obligations under any bankruptcy or
insolvency law; or (l) revocation or termination of, or limitation or denial of
liability upon, any pledge of any certificate of deposit, securities or other
property or asset of any kind pledged by any third party to secure any or all of
the Obligations, or any attempt to do any of the foregoing, or commencement of
proceedings by or against any such third party under any bankruptcy or
insolvency law; or (m) Borrower makes any payment on account of any indebtedness
or obligation which has been subordinated to the Obligations other than as
permitted in the applicable subordination agreement, or if any Person who has
subordinated such indebtedness or obligations terminates or in any way limits
his subordination agreement; or (n) there shall be a change in the record or
beneficial ownership of 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 (o) Borrower shall generally not pay
its debts as they become due, or Borrower shall conceal, remove or transfer any
part of its property, with intent to hinder, delay or defraud its creditors, or
make or suffer any transfer of any of its property which may be fraudulent under
any bankruptcy, fraudulent conveyance or similar law; or (p) there shall be a
material adverse change in Borrower's business or financial condition; or (q)
Silicon, acting in good faith and in a commercially reasonable manner, deems
itself insecure because of the occurrence of an event prior to the effective
date hereof of which Silicon had no knowledge on the effective date or because
of the occurrence of an event on or subsequent to the effective date. Silicon
may cease making any Loans hereunder during any of the above cure periods, and
thereafter if an Event of Default has occurred.

7.2 Remedies.

Upon the occurrence 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 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, 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 Receivables 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 Receivables 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; 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 of any Event of Default, the interest rate applicable to
the Obligations shall be increased by an additional four percent per annum.

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 seven days prior to the sale, and, in the case of a
public sale, notice of the sale is published at least seven 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 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 sole
discretion, deem advisable in order to perfect and maintain Silicon's security
interest in the Collateral, or in order to exercise a right of Borrower or
Silicon, or in order to fully consummate all the transactions contemplated under
this Agreement, and all other 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 Receivable, 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 Receivables 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 sole discretion, 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 sole discretion, 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
California Uniform Commercial Code and under all other applicable laws, and
under any other instrument or agreement now or in the future entered into
between Silicon and Borrower, and all of such rights and remedies are cumulative
and none is exclusive. Exercise or partial exercise by Silicon of one or more of
its rights or remedies shall not be deemed an election, nor bar Silicon from
subsequent exercise or partial exercise of any other rights or remedies. The
failure or delay of Silicon to exercise any rights or remedies shall not operate
as a waiver thereof, but all rights and remedies shall continue in full force
and effect until all of the Obligations have been fully paid and performed.

8. Definitions.

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

"Account Debtor" means the obligor on a Receivable.

"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.

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

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

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

"Deposit Account" has the meaning set forth in Section 9102 of the Code.

"Eligible Receivables" means Receivables arising in the ordinary course of
Borrower's business from the sale of goods or rendition of services, which
Silicon, in its sole judgment, shall deem eligible for borrowing, based on such
considerations as Silicon may from time to time deem appropriate. Without
limiting the fact that the determination of which Receivables are eligible for
borrowing is a matter of Silicon's discretion, the following (the "Minimum
Eligibility Requirements") are the minimum requirements for a Receivable to be
an Eligible Receivable: (i) the Receivable must not be outstanding for more than
90 days from its invoice date, (ii) the Receivable must not represent progress
billings, or be due under a fulfillment or requirements contract with the
Account Debtor, (iii) the Receivable must not be subject to any contingencies
(including Receivables arising from sales on consignment, guaranteed sale or
other terms pursuant to which payment by the Account Debtor may be conditional),
(iv) the Receivable must not be owing from an Account Debtor with whom Borrower
has any dispute (whether or not relating to the particular Receivable), (v) the
Receivable must not be owing from an Affiliate of Borrower, (vi) the Receivable
must not be owing from an Account Debtor which is subject to any insolvency or
bankruptcy proceeding, or whose financial condition is not acceptable to
Silicon, or which, fails or goes out of a material portion of its business,
(vii) the Receivable 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), (viii)
the Receivable must not be owing from an Account Debtor located outside the
United States or Canada (unless pre-approved by Silicon in its discretion in
writing, or backed by a letter of credit satisfactory to Silicon, or FCIA
insured satisfactory to Silicon), (ix) the Receivable 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. Receivables owing from one Account Debtor will
not be deemed Eligible Receivables to the extent they exceed 25% of the total
Receivables outstanding. In addition, if more than 50% of the Receivables 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 Receivables,
then all Receivables owing from that Account Debtor will be deemed ineligible
for borrowing. Silicon may, from time to time, in its discretion, revise the
Minimum Eligibility Requirements, upon written notice to 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.

"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, causes of action, corporate or other business
records, 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 Receivables).

"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.

"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, whether arising from an extension of credit, opening of
a letter of credit, banker's acceptance, loan, guaranty, indemnification or
otherwise, whether direct or indirect (including, without limitation, those
acquired by assignment and any participation by Silicon in Borrower'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.

"Permitted Liens" means the following: (i) purchase money security interests in
specific items of Equipment; (ii) leases of specific items of Equipment; (iii)
liens for taxes not yet payable; (iv) additional security interests and liens
consented to in writing by Silicon, which consent 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; (viii)
Liens in favor of customs and revenue authorities which secure payment of
customs duties in connection with the importation of goods. Silicon will have
the right to require, as a condition to its consent under subparagraph (iv)
above, that the holder of the additional security interest or lien sign an
intercreditor agreement on Silicon'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.

"Receivables" means all of Borrower's now owned and hereafter acquired accounts
(whether or not earned by performance), 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.

"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 Receivables), (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 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.

Other Terms

. All accounting terms used in this Agreement, unless otherwise indicated, shall
have the meanings given to such terms in accordance with generally accepted
accounting principles, consistently applied. All other terms contained in this
Agreement, unless otherwise indicated, shall have the meanings provided by the
Code, to the extent such terms are defined therein.

9. GENERAL PROVISIONS.

9.1 Interest Computation.

In computing interest on the Obligations, all checks, wire transfers and other
items of payment received by Silicon (including proceeds of Receivables and
payment of the Obligations in full) shall be deemed applied by Silicon on
account of the Obligations three Business Days after receipt by Silicon of
immediately available funds, and, for purposes of the foregoing, any such funds
received after 12:00 Noon on any day shall be deemed received on the next
Business Day. Silicon shall not, however, be required to credit Borrower's
account for the amount of any item of payment which is unsatisfactory to Silicon
in its sole discretion, 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
sole discretion reversed and re-applied, to the Obligations, in such order and
manner as Silicon shall determine in its sole discretion.

9.3 Charges to Accounts.

Silicon may, in its discretion, 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, 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 thirty days after each account is rendered, describing the
nature of any alleged errors or admissions.

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.

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.

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 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.

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 the documents
relating to this Agreement; obtain legal advice in connection with this
Agreement or Borrower; enforce, or seek to enforce, any of its rights; prosecute
actions against, or defend actions by, Account Debtors; commence, intervene in,
or defend any action or proceeding; initiate any complaint to be relieved of the
automatic stay in bankruptcy; file or prosecute any probate claim, bankruptcy
claim, third-party claim, or other claim; examine, audit, copy, and inspect any
of the Collateral or any of Borrower'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, Levy, Small & Lallas, but Borrower acknowledges and
agrees that Levy, Small & Lallas is representing only Silicon and not Borrower
in connection with this Agreement. If either Silicon or Borrower files any
lawsuit against the other predicated on a breach of this Agreement, the
prevailing party in such action shall be entitled to recover its reasonable
costs and attorneys' 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 Paragraph 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 Loan 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 Loan Agreement or any other present or future agreement.

9.16 Paragraph Headings; Construction.

Paragraph headings are only used in this Agreement for convenience. Borrower and
Silicon acknowledge that the headings may not describe completely the subject
matter of the applicable paragraph, and the headings shall not be used in any
manner to construe, limit, define or interpret any term or provision of this
Agreement. 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.

9.17 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 State
of California. As a material part of the consideration to Silicon to enter into
this Agreement, Borrower (i) agrees that all actions and proceedings relating
directly or indirectly to this Agreement shall, at Silicon's option, be
litigated in courts located within California, and that the exclusive venue
therefor shall be Santa Clara County; (ii) consents to the jurisdiction and
venue of any such court and consents to service of process in any such action or
proceeding by personal delivery or any other method permitted by law; and (iii)
waives any and all rights Borrower may have to object to the jurisdiction of any
such court, or to transfer or change the venue of any such action or proceeding.

9.18 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.

Borrower:

Sigma Designs, Inc.

 

By _________________________

President or Vice President

By _________________________

Secretary or Ass't Secretary

Silicon:

SILICON VALLEY BANK

 

By _________________________

Title _______________________

Form 3/24/99

Version -1

 

 

 

Silicon Valley Bank

Schedule to

Loan and Security Agreement

Borrower: Sigma Designs, Inc.

Address: 355 Fairview Way

Milpitas, California 95035

Date: September 7, 2001

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

 

1. 

CREDIT LIMIT
(Section 1.1):

An amount not to exceed the lesser of: $18,000,000 at any one time outstanding
(the "Maximum Credit Limit"); or the sum of (a) and (b) below:

(a) Receivable Line. Loans (the "Receivable Loans") in an amount not to exceed
the lesser of (i) $6,000,000, or (ii) 80% (the "Advance Rate") of the amount of
Borrower's Eligible Receivables (as defined in Section 8 above), provided that
the Advance Rate with respect to Eligible Receivables owing from Ingram Micro
shall be 25%; plus

(b) Securities Secured Line. Loans (the "Securities Secured Loans") in an amount
not to exceed the lesser of (i) $12,000,000, or (ii) 100% of the purchase price
of the following (the "Credit Support Securities"): (A) three-month United
States Treasury Bills purchased through and maintained with Silicon's Treasury
Department or (B) 90- day commercial paper acceptable to Silicon in its good
faith business judgment and purchased through and maintained with Silicon's
Treasury Department. Borrower may elect whether to provide Credit Support
Securities under clause (A) or (B) above, but only one or the other may be
utilized at any one time.

All Loans will be made first under the Securities Secured Line until the total
of the Securities Secured Loans outstanding is $12,000,000, and thereafter, to
the extent available, Loans will be made under the Receivable Line. All payments
and principal reductions in Loans shall be applied first to the outstanding
balance of the Receivable Loans until they have been paid in full, and then to
the outstanding balance of the Securities Secured Loans, provided that, after
the occurrence of an Event of Default payments and principal reductions may be
applied in such manner as Silicon shall determine in its discretion.

Letter of Credit Sublimit
(Section 1.5):

$1,000,000

Cash Management
Services and Reserves:

Borrower may use up to $75,000 of Loans available hereunder for Silicon's Cash
Management Services (as defined below), including, merchant services, business
credit card, ACH and other services identified in the cash management services
agreement related to such service (the "Cash Management Services"). Silicon may,
in its sole discretion, reserve against Loans which would otherwise be available
hereunder such sums as Silicon shall determine in connection with the Cash
Management Services, and Silicon may charge to Borrower's Loan account, any
amounts that may become due or owing to Silicon in connection with the Cash
Management Services. Borrower agrees to execute and deliver to Silicon all
standard form applications and agreements of Silicon in connection with the Cash
Management Services, and, without limiting any of the terms of such applications
and agreements, Borrower will pay all standard fees and charges of Silicon in
connection with the Cash Management Services. The Cash Management Services shall
terminate on the Maturity Date.

2.

INTEREST.
Interest Rate

(Section 1.2):

The Receivable Loans and all other monetary Obligations (other than the
Securities Secured Loans) shall bear interest at a rate equal to the "Prime
Rate" in effect from time to time, plus 2% per annum.

The Securities Secured Loans shall bear interest at a rate equal to the interest
rate on the applicable Credit Support Securities plus 0.85% 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
based on the Prime Rate shall change on each date there is a change in the Prime
Rate.

Minimum Monthly Interest

(Section 1.2):

None.

  3.

FEES

(Section 1.4):
loan Fee:

$30,000, payable concurrently herewith, plus (i) an additional loan fee of
$10,000 if the Borrower does not have net income (determined in accordance with
generally accepted accounting principles) for the fiscal quarter ending October
31, 2001, which fee shall be payable on or before November 30, 2001, plus (ii)
an additional loan fee of $15,000 if the Borrower does not have net income
(determined in accordance with generally accepted accounting principles) for the
fiscal quarter ending January 31, 2002, which fee shall be payable on or before
February 28, 2002.

Collateral Monitoring Fee:

$1,000 per month, per month, payable in arrears (prorated for any partial month
at the beginning and at termination of this Agreement).

  4. MATURITY DATE
(Section 6.1):
October 31, 2002.   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:

Minimum Tangible
Net Worth:

Borrower shall maintain a Tangible Net Worth of not less than

(i) $13,000,000 commencing July 31, 2001 and continuing as of the end of each
succeeding month to and including December 31, 2001; and

(ii) $15,000,000 commencing January 31, 2002 and continuing as of the end of
each succeeding month thereafter.

The foregoing Tangible Net Worth amounts set forth in clauses (i) and (ii) above
shall be increased by an amount equal to 50% of the total consideration received
by Borrower after July 31, 2001, in consideration for the issuance by the
Borrower of its equity securities and subordinated debt securities, effective on
the date such consideration is received.

Definitions.

For purposes of the foregoing financial covenants, the following term shall have
the following meaning: "Tangible Net Worth" shall mean the excess of total
assets over total liabilities, determined in accordance with generally accepted
accounting principles, with the following adjustments:

(A) there shall be excluded from assets: (i) notes, accounts receivable and
other obligations owing to Borrower from its officers or other Affiliates, and
(ii) all assets which would be classified as intangible assets under generally
accepted accounting principles, including without limitation goodwill, licenses,
patents, trademarks, trade names, copyrights, capitalized software and
organizational costs, licenses and franchises

(B) there shall be excluded from liabilities: all indebtedness which is
subordinated to the Obligations under a subordination agreement in form
specified by Silicon or by language in the instrument evidencing the
indebtedness which is acceptable to Silicon in its discretion.

  6.

REPORTING.
(Section 5.3):

Borrower shall provide Silicon with the following:

 1. Monthly Receivable agings, aged by invoice date, within fifteen days after
    the end of each month.

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

 3. Monthly reconciliations of Receivable agings (aged by invoice date),
    transaction reports, and general ledger, within fifteen days after the end
    of each month.

 4. Monthly perpetual inventory reports for the Inventory valued on a first-in,
    first-out basis at the lower of cost or market (in accordance with generally
    accepted accounting principles) or such other inventory reports as are
    reasonably requested by Silicon, all within fifteen days after the end of
    each month.

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

 6. 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.

 7. Quarterly unaudited financial statements, as soon as available, and in any
    event within forty-five days after the end of each fiscal quarter of
    Borrower.

 8. Annual operating budgets (including income statements, balance sheets and
    cash flow statements, by month) for the upcoming fiscal year of Borrower
    within thirty days prior to the end of each fiscal year of Borrower.

 9. Annual financial statements, as soon as available, and in any event within
    120 days following the end of Borrower's fiscal year, certified by
    independent certified public accountants acceptable to Silicon.

  7.

COMPENSATION

(Section 5.5):

Without Silicon's prior written consent, Borrower shall not pay total
compensation, including salaries, withdrawals, fees, bonuses, commissions,
drawing accounts and other payments, whether directly or indirectly, in money or
otherwise, during any fiscal year to all of Borrower's executives, officers and
directors (or any relative thereof) as a group in excess of 115% of the total
amount thereof in the prior fiscal year.

  8.

BORROWER INFORMATION:

Prior Names of
Borrower

(Section 3.2): None

Prior Trade
Names of Borrower

(Section 3.2): None

Existing Trade
Names of Borrower

(Section 3.2): None

Other Locations and

Addresses (Section 3.3):

See Exhibit A hereto

Material Adverse

Litigation (Section 3.10):

None

  9. OTHER COVENANTS
(Section 5.1):

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

(1) Banking Relationship.

Borrower shall at all times maintain its primary banking relationship with
Silicon. Without limiting the generality of the foregoing, Borrower shall, at
all times, maintain not less than 70% of its total cash and investments on
deposit with Silicon. As to any Deposit Accounts and investment accounts
maintained with another institution, Borrower shall cause such institution,
within 10 days after the date of this Loan Agreement, to enter into a control
agreement in form acceptable to Silicon in its good faith business judgment in
order to perfect Silicon's security interest in said Deposit Accounts and
investment accounts.

(2)

Subordination of Inside Debt. All present and future indebtedness of 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.

 

Borrower:

Sigma Designs, Inc.

 

By_______________________________

President or Vice President

By_______________________________

Secretary or Ass's Secretary

Silicon:

SILICON VALLEY BANK

 

By_______________________________

Title_____________________________

 

 

 

 

 

 

Silicon Valley Bank

Amendment to Loan Documents

Borrower: Sigma Designs, Inc.

Address: 355 Fairview Way

Milpitas, California 95035

Date: September 13, 2001

THIS AMENDMENT TO LOAN DOCUMENTS

is entered into between Silicon Valley Bank ("Silicon") and the borrower named
above ("Borrower").

The Parties agree to amend the Loan and Security Agreement between them, dated
September 7, 2001 (the "Loan Agreement"), as follows, effective as of the date
hereof. (Capitalized terms used but not defined in this Amendment, shall have
the meanings set forth in the Loan Agreement.)

1. Collections.

The portion of Section 1 of the Schedule, which presently reads as follows:

"All payments and principal reductions in Loans shall be applied first to the
outstanding balance of the Receivable Loans until they have been paid in full,
and then to the outstanding balance of the Securities Secured Loans, provided
that, after the occurrence of an Event of Default payments and principal
reductions may be applied in such manner as Silicon shall determine in its
discretion."

is hereby amended in its entirety to read as follows:

"All payments and principal reductions in Loans shall be applied first to the
outstanding balance of the Receivable Loans until they have been paid in full,
and then to the outstanding balance of the Securities Secured Loans, provided
that: (i) payments on, and proceeds of, Receivables remitted by Borrower to
Silicon pursuant to Section 4.4 of this Loan Agreement shall be applied first to
the outstanding balance of the Receivable Loans until they have been paid in
full, and thereafter shall be released to the Borrower, provided at the time of
such release no Event of Default and no event which, with notice or time or
both, would constitute an Event of Default has occurred and is continuing; and
(ii) after the occurrence of an Event of Default or an event which, with notice
or time or both, would constitute an Event of Default, payments and principal
reductions may be applied in such manner as Silicon shall determine in its
discretion."

2. Representations True.

Borrower represents and warrants to Silicon that all representations and
warranties set forth in the Loan Agreement, as amended hereby, are true and
correct.

3. General Provisions.

This Amendment, the Loan Agreement, any prior written amendments to the Loan
Agreement signed by Silicon and Borrower, and the other written documents and
agreements between Silicon and Borrower set forth in full all of the
representations and agreements of the parties with respect to the subject matter
hereof and supersede all prior discussions, representations, agreements and
understandings between the parties with respect to the subject hereof. Except as
herein expressly amended, all of the terms and provisions of the Loan Agreement,
and all other documents and agreements between Silicon and Borrower shall
continue in full force and effect and the same are hereby ratified and
confirmed.

Borrower:

SIGMA DESIGNS, INC.

 

By____________________________

President or Vice President

By____________________________

Secretary or Ass't Secretary

Silicon:

SILICON VALLEY BANK

 

By____________________________

Title__________________________

 

 

 

Silicon Valley Bank

Amendment to Loan Documents

Borrower: Sigma Designs, Inc.

Address: 355 Fairview Way

Milpitas, California 95035

Date: January 22, 2002

THIS AMENDMENT TO LOAN DOCUMENTS

is entered into between Silicon Valley Bank ("Silicon") and the borrower named
above ("Borrower").

The Parties agree to amend the Loan and Security Agreement between them, dated
September 7, 2001 (the "Loan Agreement"), as follows, effective as of the date
hereof. (Capitalized terms used but not defined in this Amendment, shall have
the meanings set forth in the Loan Agreement.)

1. Receivable Line.

Subsection (a) - "Receivable Line" - of Section 1 - "Credit Limit" of the
Schedule to the Loan Agreement is hereby amended in its entirety to read as
follows:

(a) Receivable Line. Loans (the "Receivable Loans") in an amount not to exceed
the lesser of (i) $6,000,000, or (ii) 70% (the "Advance Rate") of the amount of
Borrower's Eligible Receivables (as defined in Section 8 above); plus

2. Eligible Ingram Micro Receivables.

The definition of "Eligible Receivables" contained in Section 8 of the Loan
Agreement is hereby amended to add a clause "x" to the end of the second
sentence of said definition, which clause shall read as follows:

. . ., (x) Receivables owing from Ingram Micro will not be deemed Eligible
Receivables to the extent they exceed the lesser of $1,000,000 or 35% of the
total amount of Borrower's Eligible Receivables.

3. Minimum Tangible Net Worth

. The "Minimum Tangible Net Worth" portion of Section 5 of the Schedule to the
Loan Agreement is hereby amended in its entirety to read as follows:

Borrower shall maintain a Tangible Net Worth of not less than

(i) $11,500,000 as of January 31, 2002; and

(ii) $10,500,000 commencing February 28, 2002 and continuing as of the end of
each succeeding month to and including April 30, 2002; and

(iii) $9,500,000 commencing May 31, 2002 and continuing as of the end of each
succeeding month to and including July 31, 2002; and

(iv) $8,500,000 commencing August 31, 2002 and continuing as of the end of each
succeeding month thereafter.

4. Additional Reporting Requirement.

Section 6 - Reporting - of the Schedule to the Loan Agreement is hereby amended
to add an additional item 10 thereto, which shall read as follows:

Within 30 days following the end of each month, Borrower shall cause Ingram
Micro and such other Account Debtors as Silicon shall from time to time request,
to provide Silicon with a Sell-Through Report, in form satisfactory to Silicon.

5. Fee.

In consideration for Silicon entering into this Amendment, Borrower shall
concurrently pay Silicon a fee in the amount of $3,000, which shall be
non-refundable and in addition to all interest and other fees payable to Silicon
under the Loan Agreement and any other agreements executed in connection
therewith. Silicon is authorized to charge said fee to Borrower's loan account.

6. Representations True.

Borrower represents and warrants to Silicon that all representations and
warranties set forth in the Loan Agreement, as amended hereby, are true and
correct.

7. General Provisions.

This Amendment, the Loan Agreement, any prior written amendments to the Loan
Agreement signed by Silicon and Borrower, and the other written documents and
agreements between Silicon and Borrower set forth in full all of the
representations and agreements of the parties with respect to the subject matter
hereof and supersede all prior discussions, representations, agreements and
understandings between the parties with respect to the subject hereof. Except as
herein expressly amended, all of the terms and provisions of the Loan Agreement,
and all other documents and agreements between Silicon and Borrower shall
continue in full force and effect and the same are hereby ratified and
confirmed.

Borrower:

SIGMA DESIGNS, INC.

 

By____________________________

President or Vice President

By____________________________

Secretary or Ass't Secretary

Silicon:

SILICON VALLEY BANK

 

By____________________________

Title__________________________

 

 

 

Silicon Valley Bank

Amendment to Loan Documents

Borrower: Sigma Designs, Inc.

Address: 355 Fairview Way

Milpitas, California 95035

Date: April 17, 2002

THIS AMENDMENT TO LOAN DOCUMENTS

is entered into between Silicon Valley Bank ("Silicon") and the borrower named
above ("Borrower").

The Parties agree to amend the Loan and Security Agreement between them, dated
September 7, 2001 (as previously amended from time to time, the "Loan
Agreement"), as follows, effective as of the date hereof (unless an amendment
set forth below is expressly made effective as of another date). (Capitalized
terms used but not defined in this Amendment, shall have the meanings set forth
in the Loan Agreement.)

1. Amendment to Credit Limit.

Section 1 - "Credit Limit" of the Schedule to the Loan Agreement is hereby
amended in its entirety to read as follows:

An amount not to exceed the lesser of: $18,000,000 at any one time outstanding
(the "Maximum Credit Limit"); or the sum of (a) and (b) below:

(a) Receivable Line. Loans (the "Receivable Loans") in an amount not to exceed
the lesser of (i) $6,000,000, or (ii) 70% (the "Advance Rate") of the amount of
Borrower's Eligible Receivables (as defined in Section 8 above); plus

(b) Securities Secured Line. Loans (the "Securities Secured Loans") in an amount
not to exceed the lesser of (i) $12,000,000, or (ii) 100% of the principal
amount of certificates of deposit (the "Credit Support Securities") from Silicon
which are maintained with Silicon and in which Silicon has a first priority
security interest perfected in a manner acceptable to Silicon.

 

2. Minimum Tangible Net Worth

. Effective as of January 31, 2002, the "Minimum Tangible Net Worth" portion of
Section 5 of the Schedule to the Loan Agreement is hereby amended in its
entirety to read as follows:

Borrower shall maintain a Tangible Net Worth of not less than

(i) $10,500,000 as of January 31, 2002 and as of February 28, 2002; and

(ii) $8,000,000 as of March 31, 2002; and

(iii) $9,000,000 as of April 30, 2002; and

(iv) $6,000,000 as of May 31, 2002 and as of June 30, 2002; and

(v) $6,500,000 as of July 31, 2002; and

(vi) $5,250,000 as of August 31, 2002 and as of September 30, 2002; and

(vii) $6,000,000 commencing October 31, 2002 and continuing as of the end of
each succeeding month thereafter.

The foregoing Tangible Net Worth amounts set forth in clauses (i) through (vii)
above shall be increased by an amount equal to 50% of the total consideration
received by Borrower after March 31, 2002, in consideration for the issuance by
the Borrower of its equity securities and/or subordinated debt securities,
effective on the date such consideration is received.

Notwithstanding the fact the foregoing change to the Minimum Tangible Net Worth
covenant was made effective prior to the date of this Amendment, Borrower
acknowledges that Silicon requires the Borrower's strict compliance with such
covenant in the future.

3. Amendment to Audit Fee.

The third sentence of Section 5.4 of the Loan Agreement reads: "The foregoing
inspections and audits shall be at Borrower's expense and the charge therefor
shall be $650 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." The reference to "$650" set forth therein is hereby amended to
read "$700."

4. Fee.

In consideration for Silicon entering into this Amendment, Borrower shall
concurrently pay Silicon a fee in the amount of $3,000, which shall be
non-refundable and in addition to all interest and other fees payable to Silicon
under the Loan Agreement and any other agreements executed in connection
therewith. Silicon is authorized to charge said fee to Borrower's loan account.

5. Representations True.

Borrower represents and warrants to Silicon that all representations and
warranties set forth in the Loan Agreement, as amended hereby, are true and
correct.

6. General Provisions.

This Amendment, the Loan Agreement, any prior written amendments to the Loan
Agreement signed by Silicon and Borrower, and the other written documents and
agreements between Silicon and Borrower set forth in full all of the
representations and agreements of the parties with respect to the subject matter
hereof and supersede all prior discussions, representations, agreements and
understandings between the parties with respect to the subject hereof. Except as
herein expressly amended, all of the terms and provisions of the Loan Agreement,
and all other documents and agreements between Silicon and Borrower shall
continue in full force and effect and the same are hereby ratified and
confirmed.

Borrower:

SIGMA DESIGNS, INC.

 

By____________________________

President or Vice President

By____________________________

Secretary or Ass't Secretary

Silicon:

SILICON VALLEY BANK

 

By____________________________

Title__________________________