Exhibit 10.1

 

 

 

SECOND AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT

between

SILICON VALLEY BANK

and

QUICKLOGIC CORPORATION

June 30, 2006

 

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TABLE OF CONTENTS

 

 

 

Page

 

 

 

 

 

1.

 

ACCOUNTING AND OTHER TERMS

 

1

 

 

 

 

 

2.

 

LOAN AND TERMS OF PAYMENT

 

2

 

 

 

 

 

3.

 

CONDITIONS OF LOANS

 

5

 

 

 

 

 

4.

 

CREATION OF SECURITY INTEREST

 

6

 

 

 

 

 

5.

 

REPRESENTATIONS AND WARRANTIES

 

6

 

 

 

 

 

6.

 

AFFIRMATIVE COVENANTS

 

9

 

 

 

 

 

7.

 

NEGATIVE COVENANTS

 

11

 

 

 

 

 

8.

 

EVENTS OF DEFAULT

 

13

 

 

 

 

 

9.

 

BANK’S RIGHTS AND REMEDIES

 

15

 

 

 

 

 

10.

 

NOTICES

 

17

 

 

 

 

 

11.

 

CHOICE OF LAW, VENUE, JURY TRIAL WAIVER AND JUDICIAL REFERENCE

 

17

 

 

 

 

 

12.

 

GENERAL PROVISIONS

 

18

 

 

 

 

 

13.

 

DEFINITIONS

 

20

 

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This SECOND AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT (the “Agreement”)
dated June 30, 2006, between SILICON VALLEY BANK (“Bank”), whose address is 3003
Tasman Drive, Santa Clara, California 95054 and QUICKLOGIC CORPORATION, a
Delaware corporation (“Borrower”), whose address is 1277 New Orleans Drive,
Sunnyvale, CA  94089-1138, provides the terms on which Bank will lend to
Borrower and Borrower will repay Bank.

RECITALS

A.            Borrower and Bank have previously entered into that certain Loan
and Security Agreement dated as of June 28, 2002, as amended and restated by
that certain Amended and Restated Loan and Security Agreement dated June 20,
2003, and as further amended by that certain Loan Modification Agreement dated
as of June 28, 2004, and as further amended by that certain Loan Modification
Agreement dated as of June 27, 2005 (collectively, the “Original Agreement”).

B.            Borrower and Bank desire to amend and restate the Original
Agreement, as modified, as set forth herein.

C.            Immediately prior to the amendment and restatement of the Original
Agreement in accordance with the terms and conditions hereof, certain loans and
advances remain outstanding under the Original Agreement, as modified
(collectively, the “Outstanding Debt”).

D.            In connection with the Outstanding Debt, Bank made equipment
advances in the amount of $4,500,000, of which (i) $148,928.62 is currently
outstanding as of the Closing Date for the equipment line “B” advances; (ii)
$648,279.25 is currently outstanding as of the Closing Date for the equipment
line “C” advances; and (iii) $877,303.26 is outstanding as of the Closing Date
for the equipment line “D” advances (collectively, the “Outstanding Equipment
Advances”).  The Outstanding Equipment Advances are payable in accordance with
the terms and amortization schedules currently governing such Outstanding
Equipment Advances, and no other advances thereunder may be made.

E.             It is not the intention of the Bank or the Borrower that this
Agreement constitute a novation of the indebtedness governed by the Original
Agreement, as modified, and from and after the effective date of this Agreement,
the Outstanding Debt and the Outstanding Equipment Advances shall remain owing
to Bank on terms set forth under the Original Agreement, as modified, and the
Original Agreement shall be further amended and restated in accordance with the
terms and provisions hereof.

NOW, THEREFORE, Borrower and Bank hereby agree as follows:

1.             ACCOUNTING AND OTHER TERMS.

Accounting terms not defined in this Agreement will be construed following GAAP.
Calculations and determinations must be made following GAAP.  The term
“financial statements” includes the notes and schedules.  The terms “including”
and “includes” always mean “including (or includes) without limitation,” in this
or any Loan Document.

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2.             LOAN AND TERMS OF PAYMENT.

2.1           Promise to Pay.

Borrower will pay Bank the unpaid principal amount of all Credit Extensions and
interest due on the unpaid principal amount of the Credit Extensions.

2.1.1                                        Non-Formula Revolving Advances.

(a)           Availability.  Subject to the terms and conditions of this
Agreement, Bank will make Advances on a non-formula basis (the “Non-Formula
Advances”) in an aggregate amount not to exceed the amount calculated as the
Committed Non-Formula Revolving Line minus the sum of: (x) FX Reserve, plus, (y)
the aggregate amounts deemed outstanding under the sublimit described in Section
2.1.5, plus, (z) the amount of all outstanding Letters of Credit (including
drawn but unreimbursed Letters of Credit). Amounts borrowed under this Section
may be repaid and reborrowed during the term of this Agreement.

(b)           Termination.  The Committed Non-Formula Revolving Line terminates
on the Revolving Maturity Date, when all outstanding Advances are immediately
payable.

2.1.2                                        Requesting Advances.

To obtain an Advance, Borrower must notify Bank by facsimile or telephone by
12:00 noon Pacific time on the Business Day the Advance is to be made.  Borrower
must promptly confirm the notification by delivering to Bank the Payment/Advance
Form attached as Exhibit B.  Bank will credit Advances to Borrower’s deposit
account.  Bank may make Advances under this Agreement based on instructions from
a Responsible Officer or his or her designee or without instructions if the
Advances are necessary to meet Obligations which have become due.  Bank may rely
on any telephone notice given by a person whom Bank believes is a Responsible
Officer or designee. Borrower will indemnify Bank for any loss Bank suffers due
to such reliance unless such loss is due to Bank’s gross negligence or willful
misconduct.

2.1.3                                        Letters of Credit Sublimit.

(a)           Bank will issue letters of credit for Borrower’s account not
exceeding the Availability (“Letters of Credit”).

(b)           Each Letter of Credit will have an expiry date of no later than
one hundred eighty (180) days after the Revolving Maturity Date, but Borrower’s
reimbursement obligation will be secured by cash on terms acceptable to Bank at
any time after the Revolving Maturity Date if the term of this Agreement is not
extended by Bank.  Borrower agrees to execute any further documentation in
connection with the Letters of Credit as Bank may reasonably request.

2.1.4                                        Foreign Exchange Sublimit.

Subject to the limits set forth below in this Section 2.1.4, Borrower may enter
into foreign exchange forward contracts with the Bank under which Borrower
commits to purchase from or sell to Bank a set amount of foreign currency more
than one business day after the contract date (the “FX Forward Contract”) (the
amount equal to 10% of the aggregate outstanding FX Forward

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Contracts is hereinafter referred to as the “FX Reserve”).  The FX Reserve may
not exceed the Availability.  The total FX Forward Contracts at any one time may
not exceed the amount calculated as 10 multiplied by the FX Reserve.  Bank may
terminate the FX Forward Contracts if an Event of Default occurs and continues.

2.1.5                                        Cash Management Services Sublimit.

Borrower may use for Bank’s Cash Management Services up to an amount equal to
the Availability (“Cash Management Services Sublimit”).  Such services may
include merchant services, direct deposit of payroll, business credit card,
clearing house services, control disbursement accounts and check cashing
services identified in various cash management services agreements related to
such services (the “Cash Management Services”).  The aggregate amount of the
credit limits under all such agreements with respect to Cash Management Services
shall be deemed to be the amount of the Cash Management Services for the
purposes of calculating the Cash Management Services Sublimit.  All amounts Bank
pays for any Cash Management Services will be treated as Advances under Section
2.1.1.  Bank will advise Borrower of any amounts that would affect the Cash
Management Services Sublimit.

2.1.6                                        Prepayment.

Borrower may prepay any or all amounts owing under the Committed Non-Formula
Revolving Line, without penalty or premium, by paying all principal and accrued
interest as of the date of prepayment.

2.1.7                                        Equipment Advances.

(a)           Availability.  Between the effective date of this Agreement and
June 28, 2007 (the “Equipment Availability End Date”), Bank will make advances
(“Equipment Advance” and, collectively, “Equipment Advances”) not to exceed the
Committed Equipment Line.  The Equipment Advances may only be used to finance
the acquisition of Eligible Equipment.  Lender shall advance to Borrower 100% of
the documented cost of Eligible Equipment.  Unless otherwise agreed to by Bank,
not more than 75% of the Committed Equipment Line may be used to finance
Eligible Equipment comprised of software licenses, mask sets, foreign domiciled
equipment, leasehold improvements, sales tax, shipping, warranty charges,
freight, and installation expenses (“Soft Costs”).  Unless otherwise agreed to
by Bank, not less than 25% of the proceeds of the Committed Equipment Line shall
be used to finance Eligible Equipment other than Soft Costs (“Hard Costs”). 
Eligible Equipment may include new and/or used equipment and furniture,
purchased within 90 days (determined based upon the applicable invoice date of
such Eligible Equipment) before the date of each Equipment Advance and may not
exceed 100% of the Equipment invoice.  Each Equipment Advance must be for a
minimum of $50,000 and only one Equipment Advance per month shall be available.

(b)           Repayment.  Interest accrues from the date of each Equipment
Advance at the rate in Section 2.3(a).  Each Equipment Advance for Soft Costs
shall immediately amortize and be payable in 30 equal monthly installments of
principal, plus accrued interest, beginning on the first day of each month
following the date of the Equipment Advance of such Soft Costs.  Each Equipment
Advance for Hard Costs shall immediately amortize and be payable in 36 equal
monthly installments of principal, plus accrued interest, beginning on the first
day of each month following the date of the Equipment Advance for such Hard
Costs.  After repayment, no Equipment Advance may be reborrowed.

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(c)           To obtain an Equipment Advance, Borrower must notify Bank (the
notice is irrevocable) by facsimile no later than 12:00 noon Pacific time 1
Business Day before the day on which the Equipment Advance is to be made.  The
notice in the form of Exhibit B (Payment/Advance Form) must be signed by a
Responsible Officer or designee and include a copy of the invoice for the
Equipment being financed.

(d)           Prepayment.  Borrower may prepay any or all amounts owing under
any Equipment Advance; provided that prepayments for any Fixed Rate Advances
after the Closing Date are subject to a prepayment fee of 1% of the aggregate
amount of principal outstanding on any such Equipment Advance.

(e)           Prepayment Upon an Event of Loss.  Borrower shall bear the risk of
any loss, theft, destruction, or damage of or to the Financed Equipment.  If,
during the term of this Agreement, any item of Financed Equipment becomes
obsolete or is lost, stolen, destroyed, damaged beyond repair, rendered
permanently unfit for use, or seized by a governmental authority for any reason
for a period equal to at least the remainder of the term of this Agreement (an
“Event of Loss”), then, if no Event of Default has occurred or is continuing,
within ten (10) days following such Event of Loss, at Borrower’s option,
Borrower shall (i) pay to Bank on account of the Obligations all accrued
interest to the date of the prepayment, plus all outstanding principal owing
with respect to the Financed Equipment subject to the Event of Loss; or (ii)
repair or replace any Financed Equipment subject to an Event of Loss provided
the repaired or replaced Financed Equipment is of equal or like value to the
Financed Equipment subject to an Event of Loss and provided further that Bank
has a first priority perfected security interest in such repaired or replaced
Financed Equipment.

2.2           Overadvances.

If Borrower’s Obligations under Section 2.1.1, 2.1.2, 2.1.3, 2.1.4 and 2.1.5 at
any time exceed the Committed Non-Formula Revolving Line, Borrower must
immediately pay Bank the excess.

2.3           Interest Rate, Payments.

(a)           Interest Rate.

(i)            Non-Formula Advances accrue interest on the outstanding principal
balance at a per annum rate equal to the greater of (A) 50 basis points (.5%)
above the Prime Rate or (B) 8.5%.

(ii)           Equipment Advances after the Closing Date accrue interest on the
outstanding principal balance at (y) a per annum rate of 100 basis points
(1.00%) above the Prime Rate or (z) a fixed rate equal to 400 basis points (4%)
above the Treasury Rate.  After an Event of Default, Obligations accrue interest
at 5% above the rate effective immediately before the Event of Default. The
interest rate increases or decreases when the Prime Rate changes.  Interest is
computed on a 360 day year for the actual number of days elapsed.

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(b)           Payments.  Interest due on the Committed Non-Formula Revolving
Line is payable on the first day of each month.  Interest due on the Equipment
Advances is payable on the first day of each month.  Bank may debit any of
Borrower’s deposit accounts for principal and interest payments owing under this
Agreement or any amounts Borrower owes Bank.  Bank will promptly notify Borrower
when it debits Borrower’s accounts.  These debits are not a set-off.  Payments
received after 12:00 noon Pacific time are considered received at the opening of
business on the next Business Day.  When a payment is due on a day that is not a
Business Day, the payment is due the next Business Day and additional fees or
interest accrue, however solely making such payment on the next Business Day
shall not result in an Event of Default.

2.4           Fees.

Borrower will pay:

(a)           Bank Expenses. All Bank Expenses (including reasonable attorneys’
fees and reasonable expenses) incurred through and after the date of this
Agreement, payable when due.

(b)           Revolving Line of Credit Fee.  On or before the Closing Date, a
Committed Non-Formula Revolving Line fee equal to $25,000 due, payable and fully
earned on the Closing Date; and on the one year anniversary of the Closing Date,
a fee equal to $17,500 due, payable and fully earned on the such date.

(c)           Equipment Line Fee.  On or before the Closing Date, an equipment
line fee (the “Equipment Line Fee”) equal to $5,000 due, payable and fully
earned on the Closing Date; provided that the Equipment Line Fee shall be waived
if 50% of the Committed Equipment Line is drawn on the Closing Date.

3.             CONDITIONS OF LOANS.

3.1           Conditions Precedent to Initial Credit Extension.

Bank’s obligation to make the initial Credit Extension is subject to the
condition precedent that it receive, in form and substance satisfactory to Bank,
such documents, and completion of such other matters, as Bank may reasonably
deem necessary or appropriate, including, without limitation:

(a)           Borrower shall have delivered duly executed original signatures to
the Loan Documents to which it is a party;

(b)           Borrower shall have delivered its Operating Documents and a good
standing certificate of Borrower certified by the Secretary of State of the
State of California as of a date no later than thirty (30) days after the
effective date of this Agreement, unless waived by Bank; and

(c)           Borrower shall have delivered duly executed original signatures to
the completed Borrowing Resolutions for Borrower.

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3.2           Conditions Precedent to all Credit Extensions.

Bank’s obligations to make each Credit Extension, including the initial Credit
Extension, is subject to the following:

(a)           timely receipt of any Payment/Advance Form; and

(b)           the representations and warranties in Section 5 must be materially
true on the date of the Payment/Advance Form and on the effective date of each
Credit Extension except for representations and warranties made as of a
specified earlier date, which must be materially true as of such earlier date
and no Event of Default may have occurred and be continuing, or result from the
Credit Extension. Each Credit Extension is Borrower’s representation and
warranty on that date that the representations and warranties of Section 5
remain true except for representations and warranties made as of a specified
earlier date, which must be materially true as of such earlier date.

4.             CREATION OF SECURITY INTEREST.

4.1           Grant of Security Interest.

Borrower grants Bank a continuing security interest in all presently existing
and later acquired Collateral to secure all Obligations and performance of each
of Borrower’s duties under the Loan Documents.  Except for Permitted Liens, any
security interest will be a first priority security interest in the Collateral. 
Bank may place a “hold” on any deposit account pledged as Collateral. 
Notwithstanding the foregoing, the security interest granted herein does not
extend to and the term “Collateral” does not include: (A) any license or
contract rights to the extent (i) the granting of a security interest in it
would be contrary to applicable law, or (ii) that such rights are nonassignable
by their terms (but only to the extent such prohibition is enforceable under
applicable law) without the consent of the licensor or other party (but only to
the extent such consent has not been obtained) and (B) pledges of more than 65%
of foreign subsidiaries’ stock.  If this Agreement is terminated, Bank’s lien
and security interest in the Collateral will continue until Borrower fully
satisfies its Obligations.

5.             REPRESENTATIONS AND WARRANTIES.

Borrower represents and warrants as follows:

5.1           Due Organization and Authorization.

Borrower and each material Subsidiary is duly existing and in good standing in
its state of formation and qualified and licensed to do business in, and in good
standing in, any state in which the conduct of its business or its ownership of
property requires that it be qualified, except where the failure to do so could
not reasonably be expected to cause a Material Adverse Change.

The execution, delivery and performance of the Loan Documents have been duly
authorized, and do not conflict with Borrower’s formation documents, nor
constitute an event of default under any material agreement by which Borrower is
bound.  Borrower is not in default under any agreement to which or by which it
is bound in which the default could reasonably be expected to cause a Material
Adverse Change.

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5.2           Collateral.

Borrower has good title to the Collateral, free of Liens except Permitted
Liens.  The Accounts are bona fide, existing obligations, and the service or
property has been performed or delivered to the account debtor or its agent for
immediate shipment to and unconditional acceptance by the account debtor.  All
Inventory, net of inventory reserves, is in all material respects of good and
marketable quality, free from material defects.  To the best of Borrower’s
knowledge, Borrower is the sole owner of the Intellectual Property, except for
non-exclusive licenses granted to its customers in the ordinary course of
business. To the best of Borrower’s knowledge, each Patent is valid and
enforceable and no part of the Intellectual Property has been judged invalid or
unenforceable, in whole or in part, and no claim has been made that any part of
the Intellectual Property violates the rights of any third party, except to the
extent such claim could not reasonably be expected to cause a Material Adverse
Change.

5.3           Litigation.

Except as shown in the Disclosure Letter, there are no actions or proceedings
pending or, to the knowledge of Borrower’s Responsible Officers, threatened by
or against Borrower or any material Subsidiary  in which a likely adverse
decision could reasonably be expected to cause a Material Adverse Change.

5.4           No Material Adverse Change in Financial Statements.

All consolidated financial statements for Borrower delivered to Bank fairly
present in all material respects Borrower’s consolidated financial condition and
Borrower’s consolidated results of operations as of the date of such financial
statements.  There has not been any material adverse change in Borrower’s
consolidated financial condition since the date of the most recent financial
statements submitted to Bank.

5.5           Solvency.

The fair salable value of Borrower’s assets (including goodwill minus
disposition costs) exceeds the fair value of its liabilities; the Borrower is
not left with unreasonably small capital after the transactions in this
Agreement; and Borrower is able to pay its debts (including trade debts) as they
mature.

5.6           Regulatory Compliance.

Borrower is not an “investment company” or a company “controlled” by an
“investment company” under the Investment Company Act.  Borrower is not engaged
as one of its important activities in extending credit for margin stock (under
Regulations T and U of the Federal Reserve Board of Governors).  Borrower has
complied in all material respects with the Federal Fair Labor Standards Act. 
Borrower has not violated any laws, ordinances or rules, the violation of which
could reasonably be expected to cause a Material Adverse Change.  None of
Borrower’s or any Subsidiary’s properties or assets has been used by Borrower or
any Subsidiary or, to the best of Borrower’s knowledge, by previous Persons, in
disposing, producing, storing, treating, or transporting any hazardous substance
other than legally.  Borrower and each Subsidiary has timely filed all required
tax returns and paid, or made adequate provision to pay, all material

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taxes, except those being contested in good faith with adequate reserves under
GAAP.  Borrower and each Subsidiary has obtained all consents, approvals and
authorizations of, made all declarations or filings with, and given all notices
to, all government authorities that are necessary to continue its business as
currently conducted, except where the failure to do so could not reasonably be
expected to cause a Material Adverse Change.

5.7           Subsidiaries.

Borrower does not own any stock, partnership interest or other equity securities
except for Permitted Investments.

5.8           Tax Returns and Payments; Pension Contributions.

To the best of Borrower’s knowledge, Borrower has timely filed all required tax
returns and reports, and Borrower has timely paid all federal, state and local
taxes, assessments, deposits and contributions owed by Borrower.  Borrower may
defer payment of any contested taxes, provided that Borrower (a) in good faith
contests its obligation to pay the taxes by appropriate proceedings promptly and
diligently instituted and conducted, (b) notifies Bank in writing of the
commencement of, and any material development in, the proceedings, (c) posts
bonds or takes any other steps required to prevent the governmental authority
levying such contested taxes from obtaining a Lien upon any of the Collateral
that is other than a “Permitted Lien”.  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.  To the best of
Borrower’s knowledge, Borrower has paid all amounts necessary to fund all
present pension, profit sharing and deferred compensation plans in accordance
with their terms, and Borrower has not withdrawn from participation in, and has
not permitted partial or complete termination of, or permitted the occurrence of
any other event with respect to, any such plan which could reasonably be
expected to result in any liability of Borrower, including any liability to the
Pension Benefit Guaranty Corporation or its successors or any other governmental
agency.

5.9           Use of Proceeds.

Borrower shall use the proceeds of the Credit Extensions to fund its equipment
purchases and for general corporate purposes, and not for personal, family,
household or agricultural purposes.

5.10         Full Disclosure.

No written representation, warranty or other statement of Borrower in any
certificate or written statement given to Bank (taken together with all such
written certificates and written statements to Bank and Borrower’s filings with
the Securities & Exchange Commission) contains any untrue statement of a
material fact or omits to state a material fact necessary to make the statements
contained in the certificates or statements not misleading.  It being recognized
by Bank that the projections and forecasts provided by Borrower in good faith
and based upon reasonable assumptions are not viewed as facts and that actual
results during the period or periods covered by such projections and forecasts
may differ from the projected and forecasted results.

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6.             AFFIRMATIVE COVENANTS.

Borrower will do all of the following:

6.1           Government Compliance.

Borrower will maintain its and all Subsidiaries’ legal existence and good
standing in its jurisdiction of formation and maintain qualification in each
jurisdiction in which the failure to so qualify would reasonably be expected to
cause a material adverse effect on Borrower’s business or operations.  Borrower
will comply, and have each Subsidiary comply, with all laws, ordinances and
regulations to which it is subject, noncompliance with which could have a
material adverse effect on Borrower’s business or operations or would reasonably
be expected to cause a Material Adverse Change.

6.2           Financial Statements, Reports, Certificates.

(a)           Borrower will deliver to Bank:  (i) as soon as available, but no
later than 45 days after the last day of each month, a company prepared
consolidated balance sheet and income statement, prepared under GAAP,
consistently applied, without footnotes and subject to year-end adjustments,
covering Borrower’s consolidated operations during the period, in a form and
certified by a Responsible Officer acceptable to Bank; (ii) as soon as
available, but no later than 120 days after the last day of Borrower’s fiscal
year, audited consolidated financial statements prepared under GAAP,
consistently applied, together with an opinion which is unqualified or as is
otherwise consented to by Bank on the financial statements from an independent
certified public accounting firm reasonably acceptable to Bank; (iii) within 5
days of filing, notice to Bank of the filing of all statements, reports and
notices made available to Borrower’s security holders or to any holders of
Subordinated Debt and all reports on Form 10-K, 10-Q and 8-K filed with the
Securities and Exchange Commission (“SEC”) unless such 10-K, 10-Q, and 8-K
reports are available in the SEC’s EDGAR database in which case Borrower shall
not be required to deliver the same; (iv) as soon as available but in no event
after December 20 of every year, Borrower’s budget and financial projections as
approved by the Borrower’s Board of Directors; (v) such other financial
information Bank reasonably requests; and (vi) prompt notice of any material
change in the composition of the Intellectual Property, including any subsequent
ownership right of Borrower in or to any Copyright, Patent or Trademark not
shown in any intellectual property security agreement between Borrower and Bank
or knowledge of an event that materially adversely affects the value of the
Intellectual Property.

(b)           Within 45 days after the last day of each month, Borrower will
deliver to Bank with the monthly financial statements a Compliance Certificate
signed by a Responsible Officer in the form of Exhibit C.

(c)           Bank has the right to audit Borrower’s Collateral at Borrower’s
expense, but the audits will be conducted no more often than every year unless
an Event of Default has occurred and is continuing.

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6.3           Inventory; Returns.

Borrower will keep all Inventory in good and marketable condition, free from
material defects.  Returns and allowances between Borrower and its account
debtors will follow Borrower’s customary practices as they exist at execution of
this Agreement.  Borrower must promptly notify Bank of all returns, recoveries,
disputes older than 30 days and claims, that  involve more than $200,000,
excluding “ship from stock and debit transactions” and any returns from
distributors of unprogrammed Inventory which involve less than $500,000.

6.4           Taxes.

Borrower will make, and cause each Subsidiary to make, timely payment of all
material federal, state, and local taxes or assessments and will deliver to
Bank, on demand, appropriate certificates attesting to the payment.

6.5           Access to Collateral; Books and Records.

At reasonable times, on one Business Day’s notice (provided no notice is
required if an Event of Default has occurred and is continuing), Bank, or its
agents, shall have the right, upon one week’s notice to Borrower, to inspect the
Collateral and the right to audit and copy Borrower’s Books.

6.6           Insurance.

Borrower will keep its business and the Collateral insured for risks and in
amounts, as Bank may reasonably request.  Insurance policies will be in a form,
with companies, and in amounts that are satisfactory to Bank in Bank’s
reasonable discretion.  All property policies will have a lender’s loss payable
endorsement showing Bank as an additional loss payee and all liability policies
will show the Bank as an additional insured and provide that the insurer must
give Bank at least 20 days notice before canceling its policy.  At Bank’s
request, Borrower will deliver certified copies of policies and evidence of all
premium payments.  If no Event of Default has occurred and is continuing,
proceeds payable under any casualty policy will, at Borrower’s option, be
payable to Borrower to replace the property subject to the claim, provided that
any such replacement property shall be deemed Collateral in which Bank has been
granted a first priority security interest.  If an Event of Default has occurred
and is continuing, then, at Bank’s option, proceeds payable under any policy
will be payable to Bank on account of the Obligations.

6.7           Deposit and Investment Accounts.

Borrower will maintain 60% of its cash and cash equivalents in depository,
investment and operating accounts with Bank and Bank’s affiliates which shall be
held in the form of cash and such other investments as are consistent with
Borrower’s investment policy as approved by its Board of Directors.

6.8           Financial Covenants.

Borrower will maintain as of the last day of each month:

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(i)            Tangible Net Worth.  A Tangible Net Worth of at least
$31,000,000.

(ii)           Quick Ratio (Adjusted).  A ratio of Quick Assets to Current
Liabilities minus Deferred Revenue of at least 1.55 to 1.00.

6.9           Protection of Intellectual Property Right.

Borrower shall:  (a) protect, defend and maintain the validity and
enforceability of its material intellectual property; (b) promptly advise Bank
in writing of material infringements of its intellectual property; and (c) not
allow any intellectual property material to Borrower’s business to be abandoned,
forfeited or dedicated to the public without Bank’s written consent. 
Notwithstanding anything to the contrary contained in this section, Borrower
confirms that on June 28, 2004, Bank and Borrower entered into (i) a Negative
Pledge Agreement in which Borrower agreed, subject to certain exceptions, not to
encumber its Intellectual Property and (ii) a Loan Modification Agreement dated
June 28, 2004 in which the definition of Collateral was amended to reflect that
Intellectual Property created, modified acquired or obtained on or after June
28, 2004 (but not before such date) shall not be deemed as part of the
Collateral.

 

6.10         Control Agreements.

With respect to deposit accounts or investment accounts maintained at domestic
financial institutions other than Bank, within 10 Business Days of the opening
of any such deposit account or investment account, Borrower will execute and
deliver to Bank, control agreements in form satisfactory to Bank in order for
Bank to perfect its security interest in Borrower’s deposit accounts or
investment accounts; provided that with respect to deposit accounts existing as
of the Closing Date, Borrower shall provide such control agreements with respect
to all such accounts as are reasonably deemed material by Bank on or before
July 30, 2003.

6.11         Further Assurances.

Borrower will execute any further instruments and take further action as Bank
reasonably requests to perfect or continue Bank’s security interest in the
Collateral or to effect the purposes of this Agreement.

7.             NEGATIVE COVENANTS.

Borrower will not do any of the following without Bank’s prior written consent,
which will not be unreasonably withheld:

7.1           Dispositions.

Convey, sell, lease, transfer or otherwise dispose of (collectively “Transfer”),
or permit any of its Subsidiaries to Transfer, all or any part of its business
or property, other than Transfers (i) of Inventory and Equipment in the ordinary
course of business; (ii) of non-exclusive licenses and similar arrangements for
the use of the property of Borrower or its Subsidiaries in the ordinary course
of business; (iii) of worn-out or obsolete Equipment; (iv) other Transfers which
in the aggregate do not exceed $200,000 in any fiscal year; or (v) other
Transfers otherwise permitted pursuant to Section 7 hereof.

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7.2           Changes in Business, Ownership, Management or Business Locations.

(i)            Engage in or permit any of its Subsidiaries to engage in any
business other than the businesses currently engaged in by Borrower or
reasonably related thereto, (ii) direct or indirect acquisition by any persons
(as such term is used in Section 13(d) and Section 14(d) (2) of the Exchange
Act) or related persons constituting a group (as such term is used in Rule 13d-5
under the Exchange Act), of beneficial ownership of the issued and outstanding
shares of voting stock of the Borrower, the result of which acquisition is that
such person or group possesses in excess of 35% of the combined voting power of
all then issued and outstanding stock of the Borrower,  (iii) without
contemporaneous written notice, relocate its chief executive office, or add any
new offices or business locations, or (iv) without at least 30 days written
notice, change the jurisdiction of its incorporation.

7.3           Mergers or Acquisitions.

Merge or consolidate, or permit any of its Subsidiaries to merge or consolidate,
with any other Person, or acquire, or permit any of its Subsidiaries to acquire,
all or substantially all of the capital stock or property of another Person,
except where (i) such transactions do not in the aggregate result in a decrease
of more than 25% of Tangible Net Worth and (ii) no Event of Default has
occurred, is continuing or would exist after giving effect to the transactions. 
A Subsidiary may merge or consolidate into another Subsidiary or into Borrower.

7.4           Indebtedness.

Create, incur, assume, or be liable for any Indebtedness, including guaranties
of non-Borrower obligations, or permit any Subsidiary to do so, other than
Permitted Indebtedness.

7.5           Encumbrance.

Create, incur, or allow any Lien on any of its property, or assign or convey any
right to receive income, including the sale of any Accounts, or permit any of
its Subsidiaries to do so, except for Permitted Liens, or permit any Collateral
not to be subject to the first priority security interest granted here, subject
to Permitted Liens.

7.6           Distributions; Investments.

Directly or indirectly acquire or own any Person, or make any Investment in any
Person, other than Permitted Investments, or permit any of its Subsidiaries to
do so; pay any dividends or make any distribution or payment or redeem, retire
or purchase any capital stock, except for (A) repurchases of stock from former
employees, consultants or directors of Borrower provided no Default or Event of
Default has occurred and is continuing, or would be caused by such repurchase,
and provided that the aggregate amount of such repurchases shall not exceed
$100,000 in the aggregate in any fiscal year, (B) distributions payable solely
in Borrower’s capital stock, or (C) conversion of any convertible debt into
capital stock of Borrower.

7.7           Transactions with Affiliates.

Directly or indirectly enter into or permit any material transaction with any
Affiliate except transactions that are in the ordinary course of Borrower’s
business, on terms less favorable to Borrower than would be obtained in an arm’s
length transaction with a non-affiliated Person.

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7.8           Subordinated Debt.

Make or permit any payment on any Subordinated Debt, except under the terms of
the Subordinated Debt, or amend any provision in any document relating to the
Subordinated Debt without Bank’s prior written consent.

7.9           Compliance.

Become an “investment company” or a company controlled by an “investment
company,” under the Investment Company Act of 1940 or undertake as one of its
important activities extending credit to purchase or carry margin stock, or use
the proceeds of any Credit Extension for that purpose; fail to meet the minimum
funding requirements of ERISA, permit a Reportable Event or Prohibited
Transaction, as defined in ERISA, to occur; fail to comply with the Federal Fair
Labor Standards Act or violate any other law or regulation, if the violation
could reasonably be expected to have a material adverse effect on Borrower’s
business or operations or would reasonably be expected to cause a Material
Adverse Change, or permit any of its Subsidiaries to do so.

8.             EVENTS OF DEFAULT.

Any one of the following is an Event of Default:

8.1           Payment Default.

If Borrower fails to pay any of the Obligations within 3 days after their due
date.  During the additional period the failure to cure the default is not an
Event of Default (but no Credit Extension will be made during the cure period);

8.2           Covenant Default.

If Borrower does not perform any obligation in Section 6 or violates any
covenant in Section 7 or does not perform or observe any other material term,
condition or covenant in this Agreement, any Loan Documents, or in any agreement
between Borrower and Bank and as to any default under a term, condition or
covenant that can be cured, has not cured the default within 10 business days
after it occurs, or if the default cannot be cured within 10 business days or
cannot be cured after Borrower’s attempts within 10 business day period, and the
default may be cured within a reasonable time, then Borrower has an additional
period (of not more than 30 days) to attempt to cure the default.  During the
additional time, the failure to cure the default is not an Event of Default (but
no Credit Extensions will be made during the cure period);

8.3           Material Adverse Change.

(i)            A material impairment in the perfection or priority of Bank’s
security interest in the Collateral or in the value of such Collateral other
than normal depreciation which is not covered by adequate insurance occurs; or
(ii) Bank determines, based upon information available to it and in its
reasonable judgment, that there is a reasonable likelihood that Borrower will
fail to comply with one or more of the financial covenants in Section 6 during
the next succeeding financial reporting period.

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8.4           Attachment.

If any material portion of Borrower’s assets is attached, seized, levied on, or
comes into possession of a trustee or receiver and the attachment, seizure or
levy is not removed in 10 business days, or if Borrower is enjoined, restrained,
or prevented by court order from conducting a material part of its business or
if a judgment or other claim becomes a Lien on a material portion of Borrower’s
assets, or if a notice of lien, levy, or assessment is filed against any of
Borrower’s assets by any government agency and not paid within 10 business days
after Borrower receives notice.  These are not Events of Default if stayed or if
a bond is posted pending contest by Borrower (but no Credit Extensions will be
made during the cure period);

8.5           Insolvency.

If Borrower becomes insolvent or if Borrower begins an Insolvency Proceeding or
an Insolvency Proceeding is begun against Borrower and not dismissed or stayed
within 45 days (but no Credit Extensions will be made before any Insolvency
Proceeding is dismissed);

8.6           Other Agreements.

If there is a default in any agreement between Borrower and a third party that
gives the third party the right to accelerate any Indebtedness exceeding
$250,000 or that could reasonably be expected to cause a Material Adverse
Change;

8.7           Judgments.

If a money judgment(s) in the aggregate of at least $250,000 is rendered against
Borrower and is unsatisfied and unstayed for 10 Business Days (but no Credit
Extensions will be made before the judgment is stayed or satisfied);

8.8           Misrepresentations.

If Borrower or any Responsible Officer of Borrower makes any material
misrepresentation or material misstatement (when taken together with Borrower’s
filings with the Securities & Exchange Commission) now or later in any warranty
or representation in this Agreement or in any communication delivered to Bank or
to induce Bank to enter this Agreement or any Loan Document; or

8.9           Subordinated Debt.

A default or breach occurs under any agreement between Borrower and any creditor
of Borrower that signed a subordination, intercreditor, or other similar
agreement with Bank, or any creditor that has signed such an agreement with Bank
breaches any terms of such agreement.

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8.10         Guaranty.

Any guaranty of any Obligations ceases for any reason to be in full force or any
Guarantor does not perform any obligation under any guaranty of the Obligations,
or any material misrepresentation or material misstatement exists now or later
in any warranty or representation in any guaranty of the Obligations or in any
certificate delivered to Bank in connection with the guaranty, or any
circumstance described in Sections 8.4, 8.5 or 8.7 occurs to any Guarantor.

9.             BANK’S RIGHTS AND REMEDIES.

9.1           Rights and Remedies.

When an Event of Default occurs and continues Bank may, without notice or
demand, do any or all of the following:

(a)           Declare all Obligations immediately due and payable (but if an
Event of Default described in Section 8.5 occurs all Obligations are immediately
due and payable without any action by Bank);

(b)           Stop advancing money or extending credit for Borrower’s benefit
under this Agreement or under any other agreement between Borrower and Bank;

(c)           Settle or adjust disputes and claims directly with account debtors
for amounts, on terms and in any order that Bank considers advisable;

(d)           Make any payments and do any acts it considers necessary and
reasonable to protect its security interest in the Collateral.  Borrower will
assemble the Collateral if Bank requires and make it available as Bank
designates.  Bank may enter premises where the Collateral is located, take and
maintain possession of any part of the Collateral, and pay, purchase, contest,
or compromise any Lien which appears to be prior or superior to its security
interest and pay all expenses incurred. Borrower grants Bank a license to enter
and occupy any of its premises, without charge, to exercise any of Bank’s rights
or remedies;

(e)           Apply to the Obligations any (i) balances and deposits of Borrower
it holds, or (ii) any amount held by Bank owing to or for the credit or the
account of Borrower;

(f)            Ship, reclaim, recover, store, finish, maintain, repair, prepare
for sale, advertise for sale, and sell the Collateral.  Bank is granted a
non-exclusive, royalty-free license or other right to use, without charge,
Borrower’s labels, Patents, Copyrights, Mask Works, rights of use of any name,
trade secrets, trade names, Trademarks, service marks, and advertising matter,
or any similar property as it pertains to the Collateral, in completing
production of, advertising for sale, and selling any Collateral and, in
connection with Bank’s exercise of its rights under this Section, Borrower’s
rights under all licenses and all franchise agreements inure to Bank’s benefit;
and

(g)           Dispose of the Collateral according to the Code.

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9.2           Power of Attorney.

Effective only when an Event of Default occurs and continues until Borrower pays
the Obligations in full, Borrower irrevocably appoints Bank as its lawful
attorney to:  (i) endorse Borrower’s name on any checks or other forms of
payment or security; (ii) sign Borrower’s name on any invoice or bill of lading
for any Account or drafts against account debtors, (iii) make, settle, and
adjust all claims under Borrower’s insurance policies; (iv) settle and adjust
disputes and claims about the Accounts directly with account debtors, for
amounts and on terms Bank determines reasonable; and (v) transfer the Collateral
into the name of Bank or a third party as the Code permits.  Bank may exercise
the power of attorney to sign Borrower’s name on any documents necessary to
perfect or continue the perfection of any security interest regardless of
whether an Event of Default has occurred.  Bank’s appointment as Borrower’s
attorney in fact, and all of Bank’s rights and powers, coupled with an interest,
are irrevocable until all Obligations have been fully repaid and performed and
Bank’s obligation to provide Credit Extensions terminates.

9.3           Accounts Collection.

When an Event of Default occurs and continues, Bank may notify any Person owing
Borrower money of Bank’s security interest in the funds and verify the amount of
the Account.  Borrower must collect all payments in trust for Bank and, if
requested by Bank, immediately deliver the payments to Bank in the form received
from the account debtor, with proper endorsements for deposit.

9.4           Bank Expenses.

If Borrower fails to pay any amount or furnish any required proof of payment to
third persons, Bank may make all or part of the payment or obtain insurance
policies required in Section 6.5, and take any action under the policies Bank
deems prudent.  Any amounts paid by Bank are Bank Expenses and due and payable
within 10 Business Days of written notice to Borrower, bearing interest at the
then applicable rate and secured by the Collateral.  No payments by Bank are
deemed an agreement to make similar payments in the future or Bank’s waiver of
any Event of Default.

9.5           Bank’s Liability for Collateral.

If Bank complies with reasonable banking practices and Section 9-207 of the
Code, it is not liable for: (a) the safekeeping of the Collateral; (b) any loss
or damage to the Collateral; (c) any diminution in the value of the Collateral;
or (d) any act or default of any carrier, warehouseman, bailee, or other
person.  Borrower bears all risk of loss, damage or destruction of the
Collateral.

9.6           Remedies Cumulative.

Bank’s rights and remedies under this Agreement, the Loan Documents, and all
other agreements are cumulative.  Bank has all rights and remedies provided
under the Code, by law, or in equity. Bank’s exercise of one right or remedy is
not an election, and Bank’s waiver of any Event of Default is not a continuing
waiver. Bank’s delay is not a waiver, election, or acquiescence. No waiver is
effective unless signed by Bank and then is only effective for the specific
instance and purpose for which it was given.

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9.7           Demand Waiver.

Borrower waives demand, notice of default or dishonor, notice of payment and
nonpayment, notice of any default, nonpayment at maturity, release, compromise,
settlement, extension, or renewal of accounts, documents, instruments, chattel
paper, and guarantees held by Bank on which Borrower is liable.

10.           NOTICES

All notices or demands by any party about this Agreement or any other related
agreement must be in writing and be personally delivered or sent by an overnight
delivery service, by certified mail, postage prepaid, return receipt requested,
or by telefacsimile to the addresses set forth at the beginning of this
Agreement.  A party may change its notice address by giving the other party
written notice.

11.           CHOICE OF LAW, VENUE, JURY TRIAL WAIVER AND JUDICIAL REFERENCE.

California law governs the Loan Documents without regard to principles of
conflicts of law.  Borrower and Bank each submit to the exclusive jurisdiction
of the State and Federal courts in Santa Clara County, California; provided,
however, that nothing in this Agreement shall be deemed to operate to preclude
Bank from bringing suit or taking other legal action in any other jurisdiction
to realize on the Collateral or any other security for the Obligations, or to
enforce a judgment or other court order in favor of Bank.  Borrower expressly
submits and consents in advance to such jurisdiction in any action or suit
commenced in any such court, and Borrower hereby waives any objection that it
may have based upon lack of personal jurisdiction, improper venue, or forum non
conveniens and hereby consents to the granting of such legal or equitable relief
as is deemed appropriate by such court.  Borrower hereby waives personal service
of the summons, complaints, and other process issued in such action or suit and
agrees that service of such summons, complaints, and other process may be made
by registered or certified mail addressed to Borrower at the address set forth
in Section 10 of this Agreement and that service so made shall be deemed
completed upon the earlier to occur of Borrower’s actual receipt thereof or
three (3) days after deposit in the U.S. mails, proper postage prepaid.

TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, BORROWER AND BANK EACH WAIVE
THEIR RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION ARISING OUT OF OR
BASED UPON THIS AGREEMENT, THE LOAN DOCUMENTS OR ANY CONTEMPLATED TRANSACTION,
INCLUDING CONTRACT, TORT, BREACH OF DUTY AND ALL OTHER CLAIMS. THIS WAIVER IS A
MATERIAL INDUCEMENT FOR BOTH PARTIES TO ENTER INTO THIS AGREEMENT.  EACH PARTY
HAS REVIEWED THIS WAIVER WITH ITS COUNSEL.

WITHOUT INTENDING IN ANY WAY TO LIMIT THE PARTIES’ AGREEMENT TO WAIVE THEIR
RESPECTIVE RIGHT TO A TRIAL BY JURY, if the above waiver of the right to a trial
by jury is not enforceable, the parties hereto agree that any and all disputes
or

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controversies of any nature between them arising at any time shall be decided by
a reference to a private judge, mutually selected by the parties (or, if they
cannot agree, by the Presiding Judge of the Santa Clara County, California
Superior Court) appointed in accordance with California Code of Civil Procedure
Section 638 (or pursuant to comparable provisions of federal law if the dispute
falls within the exclusive jurisdiction of the federal courts), sitting without
a jury, in Santa Clara County, California; and the parties hereby submit to the
jurisdiction of such court.  The reference proceedings shall be conducted
pursuant to and in accordance with the provisions of California Code of Civil
Procedure §§ 638 through 645.1, inclusive.  The private judge shall have the
power, among others, to grant provisional relief, including without limitation,
entering temporary restraining orders, issuing preliminary and permanent
injunctions and appointing receivers.  All such proceedings shall be closed to
the public and confidential and all records relating thereto shall be
permanently sealed.  If during the course of any dispute, a party desires to
seek provisional relief, but a judge has not been appointed at that point
pursuant to the judicial reference procedures, then such party may apply to the
Santa Clara County, California Superior Court for such relief.  The proceeding
before the private judge shall be conducted in the same manner as it would be
before a court under the rules of evidence applicable to judicial proceedings. 
The parties shall be entitled to discovery which shall be conducted in the same
manner as it would be before a court under the rules of discovery applicable to
judicial proceedings.  The private judge shall oversee discovery and may enforce
all discovery rules and order applicable to judicial proceedings in the same
manner as a trial court judge.  The parties agree that the selected or appointed
private judge shall have the power to decide all issues in the action or
proceeding, whether of fact or of law, and shall report a statement of decision
thereon pursuant to the California Code of Civil Procedure § 644(a).  Nothing in
this paragraph shall limit the right of any party at any time to exercise
self-help remedies, foreclose against collateral, or obtain provisional
remedies.  The private judge shall also determine all issues relating to the
applicability, interpretation, and enforceability of this paragraph.

12.           GENERAL PROVISIONS.

12.1         Successors and Assigns.

This Agreement binds and is for the benefit of the successors and permitted
assigns of each party.  Borrower may not assign this Agreement or any rights
under it without Bank’s prior written consent which may be granted or withheld
in Bank’s discretion.  Bank has the right, without the consent of or notice to
Borrower, to sell, transfer, negotiate, or grant participation in all or any
part of, or any interest in, Bank’s obligations, rights and benefits under this
Agreement.

12.2         Indemnification.

Borrower will indemnify, defend and hold harmless Bank and its officers,
employees, and agents against:  (a) all obligations, demands, claims, and
liabilities asserted by any other party in connection with the transactions
contemplated by the Loan Documents; and (b) all losses or Bank Expenses
incurred, or paid by Bank from, following, or consequential to transactions
between Bank and Borrower (including reasonable attorneys fees and expenses),
and in each case of (a) and (b) above, except for any such obligations, claims,
liabilities and losses caused by Bank’s gross negligence or willful misconduct.

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12.3         Limitation of Actions.

Any claim or cause of action by Borrower against Bank, its directors, officers,
employees, agents, accountants, attorneys, or any other Person affiliated with
or representing Bank based upon, arising from, or relating to this Loan
Agreement or any other Loan Document, or any other transaction contemplated
hereby or thereby or relating hereto or thereto, or any other matter, cause or
thing whatsoever, occurred, done, omitted or suffered to be done by Bank, 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 (a) the filing of a complaint
within one year from the earlier of (i) the date any of Borrower’s officers or
directors had knowledge of the first act, the occurrence or omission upon which
such claim or cause of action, or any part thereof, is based, or (ii) the date
this Agreement is terminated, and (b) the service of a summons and complaint on
an officer of Bank, or on any other person authorized to accept service on
behalf of Bank, 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
Bank in its sole discretion.  This provision shall survive any termination of
this Loan Agreement or any other Loan Document.

12.4         Time of Essence.

Time is of the essence for the performance of all obligations in this Agreement.

12.5         Severability of Provision.

Each provision of this Agreement is severable from every other provision in
determining the enforceability of any provision.

12.6         Amendments in Writing, Integration.

All amendments to this Agreement must be in writing and signed by Borrower and
Bank.  This Agreement represents the entire agreement about this subject matter,
and supersedes prior negotiations or agreements.  All prior agreements,
understandings, representations, warranties, and negotiations between the
parties about the subject matter of this Agreement merge into this Agreement and
the Loan Documents.

12.7         Counterparts.

This Agreement may be executed in any number of counterparts and by different
parties on separate counterparts, each of which, when executed and delivered,
are an original, and all taken together, constitute one Agreement.

12.8         Survival.

All covenants, representations and warranties made in this Agreement continue in
full force while any Obligations remain outstanding.  The obligations of
Borrower in Section 12.2 to indemnify Bank will survive until all statutes of
limitations for actions that may be brought against Bank have run.

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12.9         Confidentiality.

In handling any confidential information, Bank will exercise the same degree of
care that it exercises for its own proprietary information, but disclosure of
information may be made (i) to Bank’s subsidiaries or affiliates in connection
with their present or prospective business relations with Borrower, (ii) to
prospective transferees or purchasers of any interest in the loans so long as
such transfer or purchase is subject to a confidentiality agreement reasonably
acceptable to Borrower, (iii) as required by law, regulation, subpoena, or other
order, (iv) as required in connection with Bank’s examination or audit and
(v) as Bank considers appropriate in exercising remedies under this Agreement. 
Confidential information does not include information that either: (a) is in the
public domain or in Bank’s possession when disclosed to Bank, or becomes part of
the public domain after disclosure to Bank; or (b) is disclosed to Bank by a
third party, if Bank does not know that the third party is prohibited from
disclosing the information.

12.10       Attorneys’ Fees, Costs and Expenses.

In any action or proceeding between Borrower and Bank arising out of the Loan
Documents, the prevailing party will be entitled to recover its reasonable
attorneys’ fees and other reasonable costs and expenses incurred, in addition to
any other relief to which it may be entitled.

13.           DEFINITIONS

13.1         Definitions.

In this Agreement:

“Accounts” are all existing and later arising accounts, contract rights, and
other obligations owed Borrower in connection with its sale or lease of goods
(including licensing software and other technology) or provision of services,
all credit insurance, guaranties, other security and all merchandise returned or
reclaimed by Borrower and Borrower’s Books relating to any of the foregoing.

“Advance” or “Advances” is any Non-Formula Advance.

“Affiliate” of a Person is a Person that owns or controls directly or indirectly
the Person, any Person that controls or is controlled by or is under common
control with the Person, and each of that Person’s senior executive officers,
directors, partners and, for any Person that is a limited liability company,
that Person’s managers and members.

“Availability” means, as of any date of determination, the amount that Borrower
is entitled to borrow as Advances under Section 2.1.1 (after giving effect to
all then outstanding Advances and all sublimit reserves applicable thereunder).

“Bank Expenses” are all audit fees and expenses and reasonable costs and
reasonable expenses (including reasonable attorneys’ fees and expenses) for
preparing, negotiating, administering, defending and enforcing the Loan
Documents (including appeals or Insolvency Proceedings).

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“Borrower’s Books” are all Borrower’s books and records including ledgers,
records regarding Borrower’s assets or liabilities, the Collateral, business
operations or financial condition and all computer programs or discs or any
equipment containing the information.

“Borrowing Resolutions” of the Borrower shall be in substantially the form set
forth as Exhibit D hereto.

“Business Day” is any day that is not a Saturday, Sunday or a day on which the
Bank is closed.

“Cash Management Services” are defined in Section 2.1.5.

“Closing Date” is the date of this Agreement.

“Code” is the California Uniform Commercial Code.

“Collateral” is the property described on Exhibit A.

“Committed Equipment Line” is a Credit Extension of up to $2,000,000.

“Committed Non-Formula Revolving Line” is Non-Formula Advances of up to
$5,000,000.

“Contingent Obligation” is, for any Person, any direct or indirect liability,
contingent or not, of that Person for (i) any indebtedness, lease, dividend,
letter of credit or other obligation of another such as an obligation directly
or indirectly guaranteed, endorsed, co-made, discounted or sold with recourse by
that Person, or for which that Person is directly or indirectly liable; (ii) any
obligations for undrawn letters of credit for the account of that Person; and
(iii) all obligations from any interest rate, currency or commodity swap
agreement, interest rate cap or collar agreement, or other agreement or
arrangement designated to protect a Person against fluctuation in interest
rates, currency exchange rates or commodity prices;  but “Contingent Obligation”
does not include endorsements in the ordinary course of business.  The amount of
a Contingent Obligation is the stated or determined amount of the primary
obligation for which the Contingent Obligation is made or, if not determinable,
the maximum reasonably anticipated liability for it determined by the Person in
good faith; but the amount may not exceed the maximum of the obligations under
the guarantee or other support arrangement.

“Copyrights” are all copyright rights, applications or registrations and like
protections in each work or authorship or derivative work, whether published or
not (whether or not it is a trade secret) now or later existing, created,
acquired or held.

“Credit Extension” is each Non-Formula Advance, Equipment Advance, Letter of
Credit, Exchange Contract, or any other extension of credit by Bank for
Borrower’s benefit.

“Current Liabilities” are the aggregate amount of Borrower’s Total Liabilities
which mature within one (1) year, including Letters of Credit (including drawn
but unreimbursed Letters of Credit).

“Deferred Revenue” means deferred revenue as defined by GAAP.

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“Disclosure Letter” means the disclosure letter from Borrower to Bank of even
date herewith.

“Eligible Equipment” is all present and future machinery, equipment, tenant
improvements, furniture, fixtures, vehicles, tools, parts and attachments in
which Lender has a valid security interest and Soft Costs.

“Equipment” is all present and future machinery, equipment, tenant improvements,
furniture, fixtures, vehicles, tools, parts and attachments in which Borrower
has any interest.

“Equipment Advance” is defined in Section 2.1.7.

“Equipment Availability End Date” is defined in Section 2.1.7.

“Equipment Advance(s)” is defined in Section 2.1.7.

“Equipment Line Fee” is defined in Section 2.4(c).

“ERISA” is the Employment Retirement Income Security Act of 1974, and its
regulations.

“Event of Loss” is defined in Section 2.1.7(e).

“Financed Equipment” is all present and future Eligible Equipment in which
Borrower has any interest, the purchase of which is financed by an Equipment
Advance.

“Fixed Rate Advance” is any Equipment Advance subject to interest under the
fixed Treasury Rate.

“FX Forward Contract” is defined in Section 2.1.4.

“FX Reserve “ is defined in Section 2.1.4.

“GAAP” is generally accepted accounting principles.

“Guarantor” is any present or future guarantor of the Obligations.

“Hard Costs” is defined in Section 2.1.7(a).

“Indebtedness” is (a) indebtedness for borrowed money or the deferred price of
property or services, such as reimbursement and other obligations for surety
bonds and letters of credit, (b) obligations evidenced by notes, bonds,
debentures or similar instruments, (c) capital lease obligations and (d)
Contingent Obligations.

“Insolvency Proceeding” are proceedings by or against any Person under the
United States Bankruptcy Code, or any other bankruptcy or insolvency law,
including assignments for the benefit of creditors, compositions, extensions
generally with its creditors, or proceedings seeking reorganization,
arrangement, or other relief.

22

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“Intellectual Property” is:

(a)           Copyrights, Trademarks, Patents, and Mask Works including
amendments, renewals, extensions, and all licenses or other rights to use and
all license fees and royalties from the use;

(b)           Any trade secrets and any intellectual property rights in computer
software and computer software products now or later existing, created, acquired
or held;

(c)           All design rights which may be available to Borrower now or later
created, acquired or held;

(d)           Any claims for damages (past, present or future) for infringement
of any of the rights above, with the right, but not the obligation, to sue and
collect damages for use or infringement of the intellectual property rights
above;

(e)           All proceeds and products of the foregoing, including all
insurance, indemnity or warranty payments.

“Inventory” is present and future inventory in which Borrower has any interest,
including merchandise, raw materials, parts, supplies, packing and shipping
materials, work in process and finished products intended for sale or lease or
to be furnished under a contract of service, of every kind and description now
or later owned by or in the custody or possession, actual or constructive, of
Borrower, including inventory temporarily out of its custody or possession or in
transit and including returns on any accounts or other proceeds (including
insurance proceeds) from the sale or disposition of any of the foregoing and any
documents of title.

“Investment” is any beneficial ownership of (including stock, partnership
interest or other securities) any Person, or any loan, advance or capital
contribution to any Person.

“Letter of Credit” is defined in Section 2.1.3.

“Lien” is a mortgage, lien, deed of trust, charge, pledge, security interest or
other encumbrance.

“Loan Documents” are, collectively, this Agreement, any note, or notes or
guaranties executed by Borrower or Guarantor, and any other present or future
agreement between Borrower and/or for the benefit of Bank in connection with
this Agreement, all as amended, extended or restated.

“Mask Works” are all mask works or similar rights available for the protection
of semiconductor chips, now owned or later acquired.

“Material Adverse Change” is defined in Section 8.3.

“Non-Formula Advance” or “Non-Formula Advances” is a loan advance (or advances)
under the Committed Non-Formula Revolving Line.

23

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

“Obligations” are debts, principal, interest, Bank Expenses and other amounts
Borrower owes Bank now or later, including cash management services, letters of
credit and foreign exchange contracts, if any and including interest accruing
after Insolvency Proceedings begin and debts, liabilities, or obligations of
Borrower assigned to Bank.

“Patents” are patents, patent applications and like protections, including
improvements, divisions, continuations, renewals, reissues, extensions and
continuations-in-part of the same.

“Permitted Indebtedness” is:

(f)            Borrower’s indebtedness to Bank under this Agreement or any other
Loan Document;

(g)           Indebtedness existing on the Closing Date and shown on the
Disclosure Letter;

(h)           Subordinated Debt including, but not limited to Subordinated Debt
associated with Borrower’s future investment of up to $3,666,900 in Tower
Semiconductor;

(i)            Indebtedness to trade creditors incurred in the ordinary course
of business;

(j)            Indebtedness secured by Permitted Liens;

(k)           Indebtedness of Borrower to any Subsidiary and Contingent
Obligations of any Subsidiary with respect to obligations of Borrower (provided
that the primary obligations are not prohibited hereby), and Indebtedness of any
Subsidiary to any other Subsidiary and Contingent Obligations of any Subsidiary
with respect to obligations of any other Subsidiary (provided that the primary
obligations are not prohibited hereby);

(l)            Other Indebtedness not otherwise permitted by Section 7.4 not
exceeding $250,000 in the aggregate outstanding at any time;

(m)          Extensions, refinancings, modifications, amendments and
restatements of any items of Permitted Indebtedness (a) through (f) above,
provided that the principal amount thereof is not increased or the terms thereof
are not modified to impose more burdensome terms upon Borrower or its
Subsidiary, as the case may be; and

(g)           Indebtedness of Borrower to (i) finance directors’ and officers’
liability insurance and (ii) to finance Borrower’s “Cadence” and “Mentor
Graphics” software licensing.

“Permitted Investments” are:

Investments shown on the Disclosure Letter and existing on the Closing Date; and

(a)           (i) marketable direct obligations issued or unconditionally
guaranteed by the United States or its agency or any state maturing within one
year from its acquisition, (ii) commercial paper maturing no more than 1 year
after its creation and having the highest rating from either Standard & Poor’s
Corporation or Moody’s Investors Service, Inc., and (iii)  certificates of
deposit issued maturing no more than one year after issue.

24

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(b)           Investments consisting of the endorsement of negotiable
instruments for deposit or collection or similar transactions in the ordinary
course of Borrower;

(c)           Investments accepted in connection with Transfers permitted by
Section 7.1, 7.3 and 7.6;

(d)           Investments by Borrower in Subsidiaries in the form of:
(A) capital stock of Subsidiaries not to exceed $500,000 in the aggregate in any
fiscal year and (B) all other advancements, so long as any such investment is
made for the purpose of funding operational requirements of the relevant
Subsidiary and so long as no Subsidiary maintains cash and cash equivalents at
any time in excess of: (i) $250,000 for Quicklogic India; (ii) $750,000 for
Quicklogic Canada; and (iii) $75,000 for each subsidiary other than Quicklogic
India and Quicklogic Canada.  In the event that any Subsidiary does maintain
cash and cash equivalents in excess of the aforementioned limitation, any
transfer of cash by Borrower to any Subsidiary shall not be permitted under the
terms of this Agreement.

(e)           Investments consisting of (i) travel advances and employee
relocation loans and other employee loans and advances in the ordinary course of
business, and (ii) loans to employees, officers or directors relating to the
purchase of equity securities of Borrower or its Subsidiaries pursuant to
employee stock purchase plans or agreements approved by Borrower’s Board of
Directors;

(f)            Investments (including debt obligations) received in connection
with the bankruptcy or reorganization of customers or suppliers and in
settlement of delinquent obligations of, and other disputes with, customers or
suppliers arising in the ordinary course of business;

(g)           Investments consisting of notes receivable of, or prepaid
royalties and other credit extensions, to customers and suppliers who are not
Affiliates, in the ordinary course of business; provided that this paragraph (h)
shall not apply to Investments of Borrower in any Subsidiary;

(h)           Investments made pursuant to Borrower’s investment policy, as
approved by Bank from time to time;

(i)            Joint ventures or strategic alliances in the ordinary course of
Borrower’s business consisting of the non-exclusive licensing of technology, the
development of technology or the providing of technical support, provided that
any cash investments by Borrower do not exceed $250,000 in the aggregate in any
fiscal year; and

(j)            Investments in Tower Semiconductor (Israel) of $3,666,900 in
October of 2002 and of $3,666,900 on or after May 2003.

“Permitted Liens” are:

(a)           Liens existing on the Closing Date and shown on the Disclosure
Letter or arising under this Agreement or other Loan Documents;

25

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

(b)           Liens for taxes, fees, assessments or other government charges or
levies, either not delinquent or being contested in good faith and for which
Borrower maintains adequate reserves on its Books, if they have no priority over
any of Bank’s security interests;

(c)           Purchase money Liens (i) on Equipment or software acquired or held
by Borrower or its Subsidiaries incurred for financing the acquisition of the
Equipment (including Liens arising in connection with capital leases), or
(ii) existing on equipment when acquired, if the Lien is confined to the
property, attachments and improvements and the proceeds of the equipment;

(d)           Licenses or sublicenses granted in the ordinary course of
Borrower’s business and any interest or title of a licensor or under any license
or sublicense, if the licenses and sublicenses permit granting Bank a security
interest;

(e)           Leases or subleases granted in the ordinary course of Borrower’s
business, including in connection with Borrower’s leased premises or leased
property and capital leases of Equipment or software;

(f)            Liens incurred in the extension, renewal or refinancing of the
indebtedness secured by Liens described in (a) through (c), but any extension,
renewal or replacement Lien must be limited to the property encumbered by the
existing Lien and the principal amount of the indebtedness may not increase;

(g)           Liens arising from judgments, decrees or attachments in
circumstances not constituting an Event of Default under Section 8.4 or 8.7;

(h)           Liens approved by Bank in writing, granted to lenders to secure
Permitted Indebtedness;

(i)            Liens in favor of other financial institutions arising in
connection with Borrower’s deposit accounts held at such institutions, provided
that Bank has a perfected security interest in the amounts held in such deposit
accounts;

(j)            Liens arising from Indebtedness of Borrower in connection with
financing Borrower’s directors’ and officers’ liability insurance and Borrower’s
“Cadence” or “Mentor Graphics” software licensing.

(k)           Liens on insurance proceeds securing the payment of financed
insurance premiums;

(k)           Other Liens not described above arising in the ordinary course of
business and not having or not reasonably likely to have a material adverse
effect on Borrower and its Subsidiaries taken as a whole.

“Person” is any individual, sole proprietorship, partnership, limited liability
company, joint venture, company association, trust, unincorporated organization,
association, corporation, institution, public benefit corporation, firm, joint
stock company, estate, entity or government agency.

26

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“Prime Rate” is Bank’s most recently announced “prime rate,” even if it is not
Bank’s lowest rate.

“Quick Assets” is, on any date, the Borrower’s consolidated, unrestricted and
cash and cash equivalents, accounts receivable, investments with maturities of
fewer than 12 months and long-term investments with maturities of more than 12
months held at Bank or its affiliates, determined according to GAAP.

“Quicklogic Canada” means QuickLogic Canada Company.

“Quicklogic India” means QuickLogic (India) Private Limited.

“Responsible Officer” is each of the Chief Executive Officer, the President, the
Chief Financial Officer, the Controller and the in-house general counsel of
Borrower.

“Revolving Maturity Date” is June 28, 2008.

“Revolving Obligations” is the sum of : (i) any amounts deemed outstanding under
the Cash Management Services Sublimit, plus (ii) the amount of all outstanding
Letters of Credit (including drawn but unreimbursed Letters of Credit), plus
(iii) the FX Reserve, plus (iv) outstanding Advances.

“Soft Costs” is defined in Section 2.1.7(a).

“Subordinated Debt” is debt incurred by Borrower subordinated to Borrower’s
indebtedness owed to Bank and which is reflected in a written agreement in a
manner and form reasonably acceptable to Bank and approved by Bank in writing.

“Subsidiary” is for any Person, or any other business entity of which more than
50% of the voting stock or other equity interests is owned or controlled,
directly or indirectly, by the Person or one or more Affiliates of the Person.

“Tangible Net Worth” is, on any date, the consolidated total assets of Borrower
and its Subsidiaries minus, (i) any amounts attributable to (a) goodwill, (b)
intangible items such as unamortized debt discount and expense, Patents, trade
and service marks and names, and Copyrights,  (ii) Total Liabilities; plus
realized or unrealized write downs relating to Borrower’s investment in Tower
Semiconductor that are charged on or after January 1, 2003.

“Total Liabilities” is on any day, obligations that should, under GAAP, be
classified as liabilities on Borrower’s consolidated balance sheet, including
all Indebtedness, and current portion Subordinated Debt allowed to be paid, but
excluding all other Subordinated Debt.

“Trademarks” are trademark and service mark rights, registered or not,
applications to register and registrations and like protections, and the entire
goodwill of the business of Assignor connected with the trademarks.

“Treasury Rate” is the per annum rate of interest (based on a year of 360- days)
equal to the sum of the U.S. Treasury note yield to maturity for a term equal to
the Treasury Note Maturity date as quoted in The Wall Street Journal on the date
of the applicable Advance.

“Treasury Note Maturity” is the term of 36 months.

[Signature Page to Follow]

27

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IN WITNESS WHEREOF, the undersigned parties have executed this Second Amended
and Restated Loan and Security Agreement as of the date first set forth above.

BORROWER:

 

 

 

 

 

QUICKLOGIC CORPORATION

 

 

 

 

 

 

 

 

By:

/s/ Carl M. Mills

 

 

 

 

 

Title:

VP Finance and CFO

 

 

 

 

 

 

 

 

BANK:

 

 

 

 

 

SILICON VALLEY BANK

 

 

 

 

 

 

 

 

By:

/s/ Rick Freeman

 

 

 

 

 

Title:

Relationship Manager

 

 

28

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EXHIBIT A

The Collateral consists of all of Borrower’s right, title and interest in and to
the following:

All goods and equipment now owned or hereafter acquired, including, without
limitation, all machinery, fixtures, vehicles (including motor vehicles and
trailers), and any interest in any of the foregoing, and all attachments,
accessories, accessions, replacements, substitutions, additions, and
improvements to any of the foregoing, wherever located;

All inventory, now owned or hereafter acquired, including, without limitation,
all merchandise, raw materials, parts, supplies, packing and shipping materials,
work in process and finished products including such inventory as is held for
sale or lease, or to be furnished under a contract of service or is temporarily
out of Borrower’s custody or possession or in transit and including any returns
or repossession upon any accounts or other proceeds, including insurance
proceeds, resulting from the sale or disposition of any of the foregoing and any
documents of title representing any of the above;

All contract rights and general intangibles now owned or hereafter acquired,
including, without limitation, goodwill, trademarks, service marks, trade
styles, trade names, patents, patent applications, leases, license agreements,
franchise agreements, blueprints, drawings, purchase orders, customer lists,
route lists, infringements, claims, computer programs, computer discs, computer
tapes, literature, reports, catalogs, design rights, income tax refunds,
payments of insurance, payment intangibles, and rights to payment of any kind;

All now existing and hereafter arising accounts (including health-care insurance
receivables), contract rights, royalties, license rights and all other forms of
obligations owing to Borrower arising out of the sale or lease of goods, the
licensing of technology or the rendering of services by Borrower, whether or not
earned by performance, and any and all credit insurance, guaranties, and other
security therefor, as well as all merchandise returned to or reclaimed by
Borrower;

All documents (including negotiable documents), cash, deposit accounts,
securities, securities entitlements, securities accounts, investment property,
financial assets, letters of credit, letter of credit rights, money,
certificates of deposit, instruments (including promissory notes) and chattel
paper (including tangible and electronic chattel paper) now owned or hereafter
acquired and Borrower’s Books relating to the foregoing;

All copyright rights, copyright applications, copyright registrations and like
protections in each work of authorship and derivative work thereof, whether
published or unpublished, now owned or hereafter acquired; all trade secret
rights, including all rights to unpatented inventions, know-how, operating
manuals, license rights and agreements and confidential information, now owned
or hereafter acquired; all mask work or similar rights available for the
protection of semiconductor chips, now owned or hereafter acquired; all claims
for damages by way of any past, present and future infringement of any of the
foregoing; and

All Borrower’s Books relating to the foregoing, and the computers and equipment
containing said books and records, and any and all claims, rights and interests
in any of the above and all substitutions for, additions and accessions to and
proceeds thereof.

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

Notwithstanding the foregoing, the Collateral shall not include any of the
following created, modified or amended (to the extent of the modification or
amendment), acquired or obtained on or after June 28, 2004: Any copyrights,
copyright applications, copyright registration and like protection in each work
of authorship and derivative work thereof, whether published or unpublished, now
owned or hereafter acquired; any patents, patent applications and like
protections including without limitation improvements, divisions, continuations,
renewals, reissues, extensions and continuations-in-part of the same,
trademarks, servicemarks and applications therefor, whether registered or not,
and the goodwill of the business of Borrower connected with and symbolized by
such trademarks, any trade secret rights, including any rights to unpatented
inventions, know-how, operating manuals, license rights and agreements and
confidential information, now owned or hereafter acquired; or any claims for
damage by way of any past, present and future infringement of any of the
foregoing (collectively, the “Intellectual Property”), except that the
Collateral shall include the proceeds of all the Intellectual Property that are
accounts, (i.e. accounts receivable) of Borrower, or general intangibles
consisting of rights to payment, if a judicial authority (including a U.S.
Bankruptcy Court) holds that a security interest in the underlying Intellectual
Property is necessary to have a security interest in such accounts and general
intangibles of Borrower that are proceeds of the Intellectual Property, then the
Collateral shall automatically, and effective as of the Closing Date, include
the Intellectual Property to the extent necessary to permit perfection of Bank’s
security interest in such accounts and general intangibles of Borrower that are
proceeds of the Intellectual Property.

Notwithstanding the foregoing, the collateral does not include any license or
contract rights to the extent (i) the granting of a security interest in it
would be contrary to applicable law, or (ii) that such rights are nonassignable
by their terms (but only to the extent such prohibition is enforceable under
applicable law) without the consent of the licensor or other party (but only to
the extent such consent has not been obtained).

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

EXHIBIT B

LOAN PAYMENT/ADVANCE TELEPHONE REQUEST FORM
DEADLINE FOR PROCESSING IS 12 NOON, P.S.T.

TO: CENTRAL CLIENT SERVICE DIVISION

DATE:

 

 

 

 

 

FAX #: (408) 496-2426

TIME:

 

 

 

FROM:

QuickLogic Corporation

 

 

 

CLIENT NAME (BORROWER)

 

REQUESTED BY:

 

AUTHORIZED SIGNER’S NAME

 

 

 

AUTHORIZED SIGNATURE:

 

 

 

 

 

 

PHONE NUMBER:

 

 

 

 

FROM ACCOUNT #

 

    TO ACCOUNT #

 

 

 

REQUESTED TRANSACTION TYPE

 

REQUESTED DOLLAR AMOUNT

 

PRINCIPAL INCREASE (ADVANCE)

 

$

 

 

PRINCIPAL PAYMENT (ONLY)

 

$

 

 

INTEREST PAYMENT (ONLY)

 

$

 

 

PRINCIPAL AND INTEREST (PAYMENT)

 

$

 

 

 

OTHER INSTRUCTIONS:

 

 

 

All Borrower’s representations and warranties in the Loan and Security Agreement
are true, correct and complete in all material respects on the date of the
telephone request for and Advance confirmed by this Borrowing Certificate; but
those representations and warranties expressly referring to another date shall
be true, correct and complete in all material respects as of that date.

BANK USE ONLY

TELEPHONE REQUEST:

The following person is authorized to request the loan payment transfer/loan
advance on the advance designated account and is known to me.

 

 

 

Authorized Requester

 

 

Phone #

 

 

 

 

 

 

Received By (Bank)

 

 

Phone #

 

 

 

 

 

 

Authorized Signature (Bank)

 

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

EXHIBIT C

COMPLIANCE CERTIFICATE

TO:

SILICON VALLEY BANK

 

3003 Tasman Drive

 

Santa Clara, CA 95054

 

 

FROM:

QUICKLOGIC CORPORATION

 

1227 Orleans Drive

 

Sunnyvale, CA 94089-1138

 

The undersigned authorized officer of QuickLogic Corporation (“Borrower”)
certifies that under the terms and conditions of the Loan and Security Agreement
between Borrower and Bank (the “Agreement”), (i) Borrower is in complete
compliance for the period ending                                    with all
required covenants except as noted below and (ii) all representations and
warranties in the Agreement are true and correct in all material respects on
this date, except for representations and warranties made as of a specific
earlier date, which are to be true and correct in all material respects as of
such earlier date.  Attached are the required documents supporting the
certification.  The Officer certifies that these are prepared in accordance with
Generally Accepted Accounting Principles (GAAP) consistently applied from one
period to the next except as explained in an accompanying letter, footnotes or
year end adjustments.  The Officer acknowledges that no borrowings may be
requested at any time or date of determination that Borrower is not in
compliance with any of the terms of the Agreement, and that compliance is
determined not just at the date this certificate is delivered.

Please indicate compliance status by circling Yes/No under “Complies” column.

Reporting and Financial Covenants

 

Required

 

Complies

 

 

 

 

 

 

 

Monthly financial statements + CC

 

Monthly within 45 days

 

Yes

 

No

Annual (Audited)

 

Annual within 120 of FYE

 

Yes

 

No

Board Approved Projections

 

Prior to December 20th

 

Yes

 

No

Accounts Payable and Accounts Receivable Listings

 

Within 30 days of the end of each month

 

Yes

 

No

10-Q, 10-K and 8-K

 

Within 5 days after filing with SEC

 

Yes

 

No

Minimum Tangible Net Worth

 

Monthly; $31,000,000

 

Yes

 

No

Quick Ratio (Adjusted)

 

1.55to 1.00

 

Yes

 

No

 

Have there been updates to Borrower’s intellectual property, if appropriate?

Yes

No

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

Comments Regarding Exceptions: See Attached.

 

Sincerely,

 

QuickLogic Corporation

 

 

 

Signature

 

 

 

Title

 

 

 

Date

 

 

BANK USE ONLY

 

 

 

Received by:

 

 

 

 

authorized signer

 

 

 

 

 

 

Date:

 

 

 

 

 

 

 

Verified:

 

 

 

 

authorized signer

 

 

 

 

 

 

Date:

 

 

 

 

 

 

 

Compliance Status:

Yes

No

 

 

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

EXHIBIT D

 

CORPORATE BORROWING RESOLUTION

Borrower:

QuickLogic Corporation
1227 Orleans Drive
Sunnyvale, CA 94089-1138

Bank:

Silicon Valley Bank
3003 Tasman Drive
Santa Clara, CA 95054-1191

 

I, the Secretary or Assistant Secretary of QuickLogic Corporation (“Borrower”),
CERTIFY that Borrower is a corporation duly organized and existing under the
laws of the State of Delaware.

I certify that at a meeting of Borrower’s Board of Directors (or by other
authorized corporate action) duly held, the following resolutions were adopted:

It is resolved that any one of the following officers of Borrower, whose name,
title and signature is below:

NAMES

 

POSITIONS

 

ACTUAL SIGNATURES

 

E. Thomas Hart

 

Chairman, President & CEO

 

 

 

Carl M. Mills

 

Vice President, Finance & CFO

 

 

 

David F. Peterson

 

Corporate Controller

 

 

 

Timothy Saxe

 

Vice President, Engineering

 

 

 

 

may act for Borrower, and:

Borrow Money.  Borrow money from Silicon Valley Bank (“Bank”).

Execute Loan Documents.  Execute any loan documents Bank requires.

Grant Security.  Grant Bank a security interest in any of Borrower’s assets.

Negotiate Items.  Negotiate or discount all drafts, trade acceptances,
promissory notes, or other indebtedness in which Borrower has an interest and
receive cash or otherwise use the proceeds.

Letters of Credit.  Apply for letters of credit from Bank.

Foreign Exchange Contracts.  Execute spot or forward foreign exchange contracts.

Further Acts.  Designate other individuals to request advances, pay fees and
costs and execute other documents or agreements (including documents or
agreement that waive Borrowers right to a jury trial) they think necessary to
effectuate these Resolutions.

Further resolved that all acts authorized by these Resolutions and performed
before they were adopted are ratified. These Resolutions remain in effect and
Bank may rely on them until Bank receives written notice of their revocation.

I certify that the persons listed above are Borrower’s officers with the titles
and signatures shown following their names and that these resolutions have not
been modified are currently effective.

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

CERTIFIED TO AND ATTESTED BY:

X

 

 

 

 

*Secretary or Assistant Secretary

 

 

 

 

 

 

X

 

 

 

 

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

*NOTE: In case the Secretary or other certifying officer is designated by the
foregoing resolutions as one of the signing officers, this resolution should
also be signed by a second Officer or Director of Borrower.

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