EXHIBIT 10.12

Silicon ValleyBank*Amendmentto Loan Documents

Borrower:	Sigma Designs, Inc.		

Address:	355 Fairview Way

		Milpitas, California  95035

Date:		September 7, 2001
**THIS AMENDMENTTO LOAN DOCUMENTS is entered into between SILICON VALLEY BANK("Silicon") and the borrower named above (the "Borrower"),with reference to the various loan and security agreements and other documents,instruments and agreements between them, including but not limited to thatcertain Amended and Restated Loan and Security Agreement dated October 26,1998(as amended, the "Existing Loan Agreement"; the Existing LoanAgreement and all related documents, instruments and agreements may be referredto collectively herein as the "Existing Loan Documents").

The Parties agree to amend the Existing Loan Documents, asfollows:
***1.	*Present Loan Balance*.  Borroweracknowledges that the present unpaid principal balance of the Borrower'sindebtedness, liabilities and obligations to Silicon under the Existing LoanDocuments, including interest accrued through September 7, 2001 is$12,008,516.69 (the "Present Loan Balance"), and that said sum is dueand owing without any defense, offset, or counterclaim of any kind.
***2.	Amendment to Existing Loan Documents. The Existing Loan Documents are hereby amended in their entirety to read as setforth in the Loan and Security Agreement, and related documents, being executedconcurrently (collectively, the "New Loan Documents"); provided that thefinancial covenants set forth in Section 5 of the Schedule to the Loan andSecurity Agreement shall be effective as of July 31, 2001, and as of July 31,2001 shall replace the financial covenants set forth in the Existing LoanAgreement. The Borrower acknowledges that the Present Loan Balance shall be theopening balance of the Loans pursuant to the New Loan Documents as of the datehereof, and shall, for all purposes, be deemed to be Loans made by Silicon tothe Borrower pursuant to the New Loan Documents.  Notwithstanding the executionof the New Loan Documents, the following Existing Loan Documents shall continuein full force and effect and shall continue to secure all present and futureindebtedness, liabilities, guarantees and other Obligations (as defined in theNew Loan Documents): All standard documents of Silicon entered into by theBorrower in connection with Letters of Credit and/or Foreign Exchange Contracts;all security agreements, collateral assignments and mortgages, including but notlimited to those relating to patents, trademarks, copyrights and otherintellectual property; all lockbox agreements and/or blocked account agreements;and all UCC-1 financing statements and other documents filed with governmentaloffices which perfect liens or security interests in favor of Silicon.  Inaddition, in the event the Borrower has previously issued any stock options,stock purchase warrants or securities to Silicon, the same and all documents andagreements relating thereto shall also continue in full force and effect.  
***3.	General Provisions.  This Amendment andthe New Loan Documents set forth in full all of the representations andagreements of the parties with respect to the subject matter hereof andsupersede all prior discussions, representations, agreements and understandingsbetween the parties with respect to the subject hereof.   
**Borrower:

SIGMA DESIGNS, INC.

 

By_______________________________

	President or Vice President

By_______________________________

	Secretary or Ass'tSecretary**Silicon:

SILICON VALLEY BANK

 

By_______________________________

Title______________________________

 ** 

 
**Silicon Valley Bank*Loan and Security Agreement

Borrower:	Sigma Designs, Inc.		

Address:	355 Fairview Way

		Milpitas, California  95035

Date:		September 7, 2001
**THIS LOAN AND SECURITY AGREEMENTis entered into on the above date between SILICON VALLEY BANK, COMMERCIALFINANCE DIVISION ("Silicon"), whose address is 3003 Tasman Drive,Santa Clara, California  95054 and the borrower(s) named above (jointly andseverally, the "Borrower"), whose chief executive office is located atthe above address ("Borrower's Address").  The Schedule to thisAgreement (the "Schedule") shall for all purposes be deemed to be apart of this Agreement, and the same is an integral part of this Agreement.(Definitions of certain terms used in this Agreement are set forth in Section 8below.)
**1. LOANS.
*1.1  Loans.  Silicon will make loans to Borrower(the "Loans"), in amounts determined by Silicon in its solediscretion, up to the amounts (the "Credit Limit") shown on theSchedule, provided no Default or Event of Default has occurred and iscontinuing, and subject to deduction of any Reserves for accrued interest andsuch other Reserves as Silicon deems proper from time to time.    
***1.2  Interest.  All Loans and all othermonetary Obligations shall bear interest at the rate shown on the Schedule,except where expressly set forth to the contrary in this Agreement.  Interestshall be payable monthly, on the last day of the month.  Interest may, inSilicon's discretion, be charged to Borrower's loan account, and the same shallthereafter bear interest at the same rate as the other Loans.  Silicon may, inits discretion, charge interest to Borrower's Deposit Accounts maintained withSilicon.  Regardless of the amount of Obligations that may be outstanding fromtime to time, Borrower shall pay Silicon minimum monthly interest during theterm of this Agreement in the amount set forth on the Schedule (the"Minimum Monthly Interest").
***1.3  Overadvances.  If at any time or for anyreason the total of all outstanding Loans and all other Obligations exceeds theCredit Limit (an "Overadvance"), Borrower shall immediately pay theamount of the excess to Silicon, without notice or demand.  Without limitingBorrower's obligation to repay to Silicon on demand the amount of anyOveradvance, Borrower agrees to pay Silicon interest on the outstanding amountof any Overadvance, on demand, at a rate equal to the interest rate which wouldotherwise be applicable to the Overadvance, plus an additional 2% per annum.
***1.4  Fees.  Borrower shall pay Silicon thefee(s) shown on the Schedule, which are in addition to all interest and othersums payable to Silicon and are not refundable.
***1.5  Letters of Credit.  At the request ofBorrower, Silicon may, in its sole discretion, issue or arrange for the issuanceof letters of credit for the account of Borrower, in each case in form andsubstance satisfactory to Silicon in its sole discretion (collectively,"Letters of Credit").  The aggregate face amount of all outstandingLetters of Credit from time to time shall not exceed the amount shown on theSchedule (the "Letter of Credit Sublimit"), and shall be reservedagainst Loans which would otherwise be available hereunder.  Borrower shall payall bank charges (including charges of Silicon) for the issuance of Letters ofCredit, together with such additional fee as Silicon's letter of creditdepartment shall charge in connection with the issuance of the Letters ofCredit.  Any payment by Silicon under or in connection with a Letter of Creditshall constitute a Loan hereunder on the date such payment is made.  Each Letterof Credit shall have an expiry date no later than thirty days prior to theMaturity Date.  Borrower hereby agrees to indemnify, save, and hold Siliconharmless from any loss, cost, expense, or liability, including payments made bySilicon, expenses, and reasonable attorneys' fees incurred by Silicon arisingout of or in connection with any Letters of Credit.  Borrower agrees to be boundby the regulations and interpretations of the issuer of any Letters of Creditguarantied by Silicon and opened for Borrower's account or by Silicon'sinterpretations of any Letter of Credit issued by Silicon for Borrower'saccount, and Borrower understands and agrees that Silicon shall not be liablefor any error, negligence, or mistake, whether of omission or commission, infollowing Borrower's instructions or those contained in the Letters of Credit orany modifications, amendments, or supplements thereto.  Borrower understandsthat Letters of Credit may require Silicon to indemnify the issuing bank forcertain costs or liabilities arising out of claims by Borrower against suchissuing bank.  Borrower hereby agrees to indemnify and hold Silicon harmlesswith respect to any loss, cost, expense, or liability incurred by Silicon underany Letter of Credit as a result of Silicon's indemnification of any suchissuing bank.  The provisions of this Loan Agreement, as it pertains to Lettersof Credit, and any other present or future documents or agreements betweenBorrower and Silicon relating to Letters of Credit are cumulative.
**2. SECURITY INTEREST.
*2.1  Security Interest.  To secure the payment andperformance of all of the Obligations when due, Borrower hereby grants toSilicon a security interest in all of Borrower's interest in the following,whether now owned or hereafter acquired, and wherever located:  All Inventory,Equipment, Receivables, and General Intangibles, including, without limitation,all of Borrower's Deposit Accounts, and all money, and all property now or atany time in the future in Silicon's possession (including claims and creditbalances), and all proceeds (including proceeds of any insurance policies,proceeds of proceeds and claims against third parties), all products and allbooks and records related to any of the foregoing (all of the foregoing,together with all other property in which Silicon may now or in the future begranted a lien or security interest, is referred to herein, collectively, as the"Collateral").
**3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF BORROWER.**
In order to induce Silicon to enter into this Agreementand to make Loans, Borrower represents and warrants to Silicon as follows, andBorrower covenants that the following representations will continue to be true,and that Borrower will at all times comply with all of the followingcovenants:
***3.1  Corporate Existence and Authority.Borrower, if a corporation, is and will continue to be, duly organized, validlyexisting and in good standing under the laws of the jurisdiction of itsincorporation.  Borrower is and will continue to be qualified and licensed to dobusiness in all jurisdictions in which any failure to do so would have amaterial adverse effect on Borrower.  The execution, delivery and performance byBorrower of this Agreement, and all other documents contemplated hereby (i) havebeen duly and validly authorized, (ii) are enforceable against Borrower inaccordance with their terms (except as enforcement may be limited by equitableprinciples and by bankruptcy, insolvency, reorganization, moratorium or similarlaws relating to creditors' rights generally), and (iii) do not violateBorrower's articles or certificate of incorporation, or Borrower's by-laws, orany law or any  material agreement or instrument which is binding upon Borroweror its property, and (iv) do not constitute grounds for acceleration of anymaterial indebtedness or obligation under any material agreement or instrumentwhich is binding upon Borrower or its property.
***3.2  Name; Trade Names and Styles.  The name ofBorrower set forth in the heading to this Agreement is its correct name.  Listedon the Schedule are all prior names of Borrower and all of Borrower's presentand prior trade names.  Borrower shall give Silicon 30 days' prior writtennotice before changing its name or doing business under any other name.Borrower has complied, and will in the future comply, with all laws relating tothe conduct of business under a fictitious business name.
***3.3  Place of Business; Location of Collateral. The address set forth in the heading to this Agreement is Borrower'schief executive office.  In addition, Borrower has places of business andCollateral is located only at the locations set forth on the Schedule.  Borrowerwill give Silicon at least 30 days prior written notice before opening anyadditional place of business, changing its chief executive office, or moving anyof the Collateral to a location other than Borrower's Address or one of thelocations set forth on the Schedule.
***3.4  Title to Collateral; Permitted Liens.Borrower is now, and will at all times in the future be, the sole owner of allthe Collateral, except for items of Equipment which are leased by Borrower.  TheCollateral now is and will remain free and clear of any and all liens, charges,security interests, encumbrances and adverse claims, except for Permitted Liens.Silicon now has, and will continue to have, a first-priority perfected andenforceable security interest in all of the Collateral, subject only to thePermitted Liens, and Borrower will at all times defend Silicon and theCollateral against all claims of others.  None of the Collateral now is or willbe affixed to any real property in such a manner, or with such intent, as tobecome a fixture.  Borrower is not and will not become a lessee under any realproperty lease pursuant to which the lessor may obtain any rights in any of theCollateral and no such lease now prohibits, restrains, impairs or will prohibit,restrain or impair Borrower's right to remove any Collateral from the leasedpremises.  Whenever any Collateral is located upon premises in which any thirdparty has an interest (whether as owner, mortgagee, beneficiary under a deed oftrust, lien or otherwise), Borrower shall, whenever requested by Silicon, useits best efforts to cause such third party to execute and deliver to Silicon, inform acceptable to Silicon, such waivers and subordinations as Silicon shallspecify, so as to ensure that Silicon's rights in the Collateral are, and willcontinue to be, superior to the rights of any such third party.  Borrower willkeep in full force and effect, and will comply with all the terms of, any leaseof real property where any of the Collateral now or in the future may belocated.
***3.5  Maintenance of Collateral.  Borrower willmaintain the Collateral in good working condition, and Borrower will not use theCollateral for any unlawful purpose.  Borrower will immediately advise Siliconin writing of any material loss or damage to the Collateral.
***3.6  Books and Records.  Borrower hasmaintained and will maintain at Borrower's Address complete and accurate booksand records, comprising an accounting system in accordance with generallyaccepted accounting principles.
***3.7  Financial Condition, Statements andReports.  All financial statements now or in the future delivered toSilicon have been, and will be, prepared in conformity with generally acceptedaccounting principles and now and in the future will completely and accuratelyreflect the financial condition of Borrower, at the times and for the periodstherein stated.  Between the last date covered by any such statement provided toSilicon and the date hereof, there has been no material adverse change in thefinancial condition or business of Borrower.  Borrower is now and will continueto be solvent.     
***3.8  Tax Returns and Payments; PensionContributions.  Borrower has timely filed, and will timely file, all taxreturns and reports required by foreign, federal, state and local law, andBorrower has timely paid, and will timely pay, all foreign, federal, state andlocal taxes, assessments, deposits and contributions now or in the future owedby Borrower.  Borrower may, however, defer payment of any contested taxes,provided that Borrower (i) in good faith contests Borrower's obligation to paythe taxes by appropriate proceedings promptly and diligently instituted andconducted, (ii) notifies Silicon in writing of the commencement of, and anymaterial development in, the proceedings, and (iii) posts bonds or takes anyother steps required to keep the contested taxes from becoming a lien upon anyof the Collateral.  Borrower is unaware of any claims or adjustments proposedfor any of Borrower's prior tax years which could result in additional taxesbecoming due and payable by Borrower.  Borrower has paid, and shall continue topay all amounts necessary to fund all present and future pension, profit sharingand deferred compensation plans in accordance with their terms, and Borrower hasnot and will not withdraw from participation in, permit partial or completetermination of, or permit the occurrence of any other event with respect to, anysuch plan which could result in any liability of Borrower, including anyliability to the Pension Benefit Guaranty Corporation or its successors or anyother governmental agency.  Borrower shall, at all times, utilize the servicesof an outside payroll service providing for the automatic deposit of all payrolltaxes payable by Borrower.  
***3.9  Compliance with Law.  Borrower hascomplied, and will comply, in all material respects, with all provisions of allforeign, federal, state and local laws and regulations relating to Borrower,including, but not limited to, those relating to Borrower's ownership of real orpersonal property, the conduct and licensing of Borrower's business, and allenvironmental matters.
***3.10  Litigation.  Except as disclosed in theSchedule, there is no claim, suit, litigation, proceeding or investigationpending or (to best of Borrower's knowledge) threatened by or against oraffecting Borrower in any court or before any governmental agency (or any basistherefor known to Borrower) which may result, either separately or in theaggregate, in any material adverse change in the financial condition or businessof Borrower, or in any material impairment in the ability of Borrower to carryon its business in substantially the same manner as it is now being conducted.Borrower will promptly inform Silicon in writing of any claim, proceeding,litigation or investigation in the future threatened or instituted by or againstBorrower involving any single claim of $50,000 or more, or involving $100,000or more in the aggregate.
***3.11  Use of Proceeds.  All proceeds of allLoans shall be used solely for lawful business purposes.  Borrower is notpurchasing or carrying any "margin stock" (as defined in Regulation U of theBoard of Governors of the Federal Reserve System) and no part of the proceeds ofany Loan will be used to purchase or carry any "margin stock" or to extendcredit to others for the purpose of purchasing or carrying any "margin stock."
**4.  Receivables.
*4.1  Representations Relating to Receivables. Borrower represents and warrants to Silicon as follows:  Each Receivablewith respect to which Loans are requested by Borrower shall, on the date eachLoan is requested and made, (i) represent an undisputed bona fide existingunconditional obligation of the Account Debtor created by the sale, delivery,and acceptance of goods or the rendition of services in the ordinary course ofBorrower's business, and (ii) meet the Minimum Eligibility Requirements setforth in  Section 8 below.
***4.2  Representations Relating to Documents and LegalCompliance.  Borrower represents and warrants to Silicon as follows:All statements made and all unpaid balances appearing in all invoices,instruments and other documents evidencing the Receivables are and shall be trueand correct and all such invoices, instruments and other documents and all ofBorrower's books and records are and shall be genuine and in all respects whatthey purport to be, and all signatories and endorsers have the capacity tocontract.  All sales and other transactions underlying or giving rise to eachReceivable shall fully comply with all applicable laws and governmental rulesand regulations.  All signatures and endorsements on all documents, instruments,and agreements relating to all Receivables are and shall be genuine, and allsuch documents, instruments and agreements are and shall be legally enforceablein accordance with their terms.
***4.3  Schedules and Documents relating to Receivables.Borrower shall deliver to Silicon transaction reports and loanrequests, schedules and assignments of all Receivables, and schedules ofcollections, all on Silicon's standard forms; provided, however, that Borrower'sfailure to execute and deliver the same shall not affect or limit Silicon'ssecurity interest and other rights in all of Borrower's Receivables, nor shallSilicon's failure to advance or lend against a specific Receivable affect orlimit Silicon's security interest and other rights therein.  Loan requestsreceived after 12:00 Noon will not be considered by Silicon until the nextBusiness Day.  Together with each such schedule and assignment, or later ifrequested by Silicon, Borrower shall furnish Silicon with copies (or, atSilicon's request, originals) of all contracts, orders, invoices, and othersimilar documents, and all original shipping instructions, delivery receipts,bills of lading, and other evidence of delivery, for any goods the sale ordisposition of which gave rise to such Receivables, and Borrower warrants thegenuineness of all of the foregoing.  Borrower shall also furnish to Silicon anaged accounts receivable trial balance in such form and at such intervals asSilicon shall  request.  In addition, Borrower shall deliver to Silicon theoriginals of all instruments, chattel paper, security agreements, guarantees andother documents and property evidencing or securing any Receivables, immediatelyupon receipt thereof and in the same form as received, with all necessaryindorsements, all of which shall be with recourse.  Borrower shall also provideSilicon with copies of all credit memos within two days after the dateissued.
***4.4  Collection of Receivables.  Borrower shallhave the right to collect all Receivables, unless and until a Default or anEvent of Default has occurred.  Borrower shall hold all payments on, andproceeds of, Receivables in trust for Silicon, and Borrower shall immediatelydeliver all such payments and proceeds to Silicon in their original form, dulyendorsed in blank, to be applied to the Obligations in such order as Siliconshall determine.  Silicon may, in its discretion, require that all proceeds ofCollateral be deposited by Borrower into a lockbox account, or such other"blocked account" as Silicon may specify, pursuant to a blocked accountagreement in such form as Silicon may specify.  Silicon or its designee may, atany time, notify Account Debtors that the Receivables have been assigned toSilicon.      
***4.5.  Remittance of Proceeds. All proceedsarising from the disposition of any Collateral shall be delivered, in kind, byBorrower to Silicon in the original form in which received by Borrower not laterthan the following Business Day after receipt by Borrower, to be applied to theObligations in such order as Silicon shall determine; provided that, if noDefault or Event of Default has occurred, Borrower shall not be obligated toremit to Silicon the proceeds of the sale of worn out or obsolete equipmentdisposed of by Borrower in good faith in an arm's length transaction for anaggregate purchase price of $25,000 or less (for all such transactions in anyfiscal year).  Borrower agrees that it will not commingle proceeds of Collateralwith any of Borrower's other funds or property, but will hold such proceedsseparate and apart from such other funds and property and in an express trustfor Silicon.  Nothing in this Section limits the restrictions on disposition ofCollateral set forth elsewhere in this Agreement.
***4.6  Disputes.  Borrower shall notify Siliconpromptly of all disputes or claims relating to Receivables.  Borrower shall notforgive (completely or partially), compromise or settle any Receivable for lessthan payment in full, or agree to do any of the foregoing, except that Borrowermay do so, provided that: (i) Borrower does so in good faith, in a commerciallyreasonable manner, in the ordinary course of business, and in arm's lengthtransactions, which are reported to Silicon on the regular reports provided toSilicon; (ii) no Default or Event of Default has occurred and is continuing; and(iii) taking into account all such discounts settlements and forgiveness, thetotal outstanding Loans will not exceed the Credit Limit.  Silicon may, at anytime after the occurrence of an Event of Default, settle or adjust disputes orclaims directly with Account Debtors for amounts and upon terms which Siliconconsiders advisable in its reasonable credit judgment and, in all cases, Siliconshall credit Borrower's Loan account with only the net amounts received bySilicon in payment of any Receivables.
***4.7  Returns.  Provided no Event of Default hasoccurred and is continuing, if any Account Debtor returns any Inventory toBorrower in the ordinary course of its business, Borrower shall promptlydetermine the reason for such return and promptly issue a credit memorandum tothe Account Debtor in the appropriate amount (sending a copy to Silicon).  Inthe event any attempted return occurs after the occurrence of any Event ofDefault, Borrower shall (i) hold the returned Inventory in trust forSilicon, (ii) segregate all returned Inventory from all of Borrower's otherproperty, (iii) conspicuously label the returned Inventory as Silicon'sproperty, and (iv) immediately notify Silicon of the return of anyInventory, specifying the reason for such return, the location and condition ofthe returned Inventory, and on Silicon's request deliver such returned Inventoryto Silicon.  
***4.8  Verification.  Silicon may, from time totime, verify directly with the respective Account Debtors the validity, amountand other matters relating to the Receivables, by means of mail, telephone orotherwise, either in the name of Borrower or Silicon or such other name asSilicon may choose. 
***4.9  No Liability. Silicon shall not under anycircumstances be responsible or liable for any shortage or discrepancy in,damage to, or loss or destruction of, any goods, the sale or other dispositionof which gives rise to a Receivable, or for any error, act, omission, or delayof any kind occurring in the settlement, failure to settle, collection orfailure to collect any Receivable, or for settling any Receivable in good faithfor less than the full amount thereof, nor shall Silicon be deemed to beresponsible for any of Borrower's obligations under any contract or agreementgiving rise to a Receivable.  Nothing herein shall, however, relieve Siliconfrom liability for its own gross negligence or willful misconduct.
**5.  ADDITIONAL DUTIES OF BORROWER.
*5.1  Financial and Other Covenants.  Borrowershall at all times comply with the financial and other covenants set forth inthe Schedule.
***5.2  Insurance.  Borrower shall, at all timesinsure all of the tangible personal property Collateral and carry such otherbusiness insurance, with insurers reasonably acceptable to Silicon, in such formand amounts as Silicon may reasonably require, and Borrower shall provideevidence of such insurance to Silicon, so that Silicon is satisfied that suchinsurance is, at all times, in full force and effect.  All such insurancepolicies shall name Silicon as an additional loss payee, and shall contain alenders loss payee endorsement in form reasonably acceptable to Silicon.  Uponreceipt of the proceeds of any such insurance, Silicon shall apply such proceedsin reduction of the Obligations as Silicon shall determine in its solediscretion, except that, provided no Default or Event of Default has occurredand is continuing, Silicon shall release to Borrower insurance proceeds withrespect to Equipment totaling less than $100,000, which shall be utilized byBorrower for the replacement of the Equipment with respect to which theinsurance proceeds were paid.  Silicon may require reasonable assurance that theinsurance proceeds so released will be so used.  If Borrower fails to provide orpay for any insurance, Silicon may, but is not obligated to, obtain the same atBorrower's expense.  Borrower shall promptly deliver to Silicon copies of allreports made to insurance companies.
***5.3  Reports.  Borrower, at its expense, shallprovide Silicon with the written reports set forth in the Schedule, and suchother written reports with respect to Borrower (including budgets, salesprojections, operating plans and other financial documentation), as Siliconshall from time to time reasonably specify.
***5.4  Access to Collateral, Books and Records.At reasonable times, and on one Business Day's notice, Silicon, or its agents,shall have the right to inspect the Collateral, and the right to audit and copyBorrower's books and records.  Silicon shall take reasonable steps to keepconfidential all information obtained in any such inspection or audit, butSilicon shall have the right to disclose any such information to its auditors,regulatory agencies, and attorneys, and pursuant to any subpoena or other legalprocess.  The foregoing inspections and audits shall be at Borrower's expenseand the charge therefor shall be $650 per person per day (or such higher amountas shall represent Silicon's then current standard charge for the same), plusreasonable out of pocket expenses.  Borrower will not enter into any agreementwith any accounting firm, service bureau or third party to store Borrower'sbooks or records at any location other than Borrower's Address, without firstobtaining Silicon's written consent, which may be conditioned upon suchaccounting firm, service bureau or other third party agreeing to give Siliconthe same rights with respect to access to books and records and related rightsas Silicon has under  this Loan Agreement.  Borrower waives the benefit of anyaccountant-client privilege or other evidentiary privilege precluding orlimiting the disclosure, divulgence or delivery of any of its books and records(except that Borrower does not waive any attorney-client privilege).  
***5.5  Negative Covenants.  Except as may bepermitted in the Schedule, Borrower shall not, without Silicon's prior writtenconsent, do any of the following:  (i) merge or consolidate with anothercorporation or entity; (ii) acquire any assets, except in the ordinary course ofbusiness; (iii) enter into any other transaction outside the ordinary course ofbusiness; (iv) sell or transfer any Collateral, except for the sale of finishedInventory in the ordinary course of Borrower's business, and except for the saleof obsolete or unneeded Equipment in the ordinary course of business; (v) storeany Inventory or other Collateral with any warehouseman or other third party;(vi) sell any Inventory on a sale-or-return, guaranteed sale, consignment, orother contingent basis; (vii) make any loans of any money or other assets;(viii) incur any debts, outside the ordinary course of business, which wouldhave a material, adverse effect on Borrower or on the prospect of repayment ofthe Obligations; (ix) guarantee or otherwise become liable with respect to theobligations of another party or entity; (x) pay or declare any dividends onBorrower's stock (except for dividends payable solely in stock of Borrower);(xi) redeem, retire, purchase or otherwise acquire, directly or indirectly, anyof Borrower's stock; (xii) make any change in Borrower's capital structure whichwould have a material adverse effect on Borrower or on the prospect of repaymentof the Obligations; or (xiii) pay total compensation, including salaries, fees,bonuses, commissions, and all other payments, whether directly or indirectly, inmoney or otherwise, to Borrower's executives, officers and directors (or anyrelative thereof) in an amount in excess of the amount set forth on theSchedule; or (xiv) dissolve or elect to dissolve.  Transactions permitted by theforegoing provisions of this Section are only permitted if no Default or Eventof Default would occur as a result of such transaction.  
***5.6  Litigation Cooperation.  Should any third-party suit or proceeding be instituted by or against Silicon with respect to anyCollateral or in any manner relating to Borrower, Borrower shall, withoutexpense to Silicon, make available Borrower and its officers, employees andagents and Borrower's books and records, to the extent that Silicon may deemthem reasonably necessary in order to prosecute or defend any such suit orproceeding.
***5.7  Further Assurances.  Borrower agrees, atits expense, on request by Silicon, to execute all documents and take allactions, as Silicon, may deem reasonably necessary or useful in order to perfectand maintain Silicon's perfected security interest in the Collateral, and inorder to fully consummate the transactions contemplated by this Agreement.
**6. TERM.
*6.1  Maturity Date.  This Agreement shall continuein effect until the maturity date set forth on the Schedule (the "e;MaturityDate"), subject to Section 6.3 below.
***6.2  Early Termination.  This Agreement may beterminated prior to the Maturity Date as follows:  (i) by Borrower, effectivethree Business Days after written notice of termination is given to Silicon; or(ii) by Silicon at any time after the occurrence of an Event of Default, withoutnotice, effective immediately.  If this Agreement is terminated by Borrower orby Silicon under this Section 6.2, Borrower shall pay to Silicon a terminationfee in an amount equal to two percent (2.0%) of the Maximum Credit Limit,provided that no termination fee shall be charged if the credit facilityhereunder is replaced with a new facility from another division of SiliconValley Bank.  The termination fee shall be due and payable on the effective dateof termination and thereafter shall bear interest at a rate equal to the highestrate applicable to any of the Obligations.
***6.3  Payment of Obligations.  On the MaturityDate or on any earlier effective date of termination, Borrower shall pay andperform in full all Obligations, whether evidenced by installment notes orotherwise, and whether or not all or any part of such Obligations are otherwisethen due and payable.  Without limiting the generality of the foregoing, if onthe Maturity Date,  or on any earlier effective date of termination, there areany outstanding Letters of Credit issued by Silicon or issued by anotherinstitution based upon an application, guarantee, indemnity or similar agreementon the part of Silicon, then on such date Borrower shall provide to Silicon cashcollateral in an amount equal to the face amount of all such Letters of Creditplus all interest, fees and cost due or to become due in connection therewith,to secure all of the Obligations relating to said Letters of Credit, pursuant toSilicon's then standard form cash pledge agreement.  Notwithstanding anytermination of this Agreement, all of Silicon's security interests in all of theCollateral and all of the terms and provisions of this Agreement shall continuein full force and effect until all Obligations have been paid and performed infull; provided that, without limiting the fact that Loans are subject to thediscretion of Silicon, Silicon may, in its sole discretion, refuse to make anyfurther Loans after termination.  No termination shall in any way affect orimpair any right or remedy of Silicon, nor shall any such termination relieveBorrower of any Obligation to Silicon, until all of the Obligations have beenpaid and performed in full.  Upon payment and performance in full of all theObligations and termination of this Agreement, Silicon shall promptly deliver toBorrower termination statements, requests for reconveyances and such otherdocuments as may be required to fully terminate Silicon's securityinterests.
**7. EVENTS OF DEFAULT AND REMEDIES.
*7.1  Events of Default.  The  occurrence of any ofthe following events shall constitute an "Event of Default" under thisAgreement, and Borrower shall give Silicon immediate written notice thereof: (a)Any warranty, representation, statement, report or certificate made or deliveredto Silicon by Borrower or any of Borrower's officers, employees or agents, nowor in the future, shall be untrue or misleading in a material respect; or (b)Borrower shall fail to pay when due any Loan or any interest thereon or anyother monetary Obligation; or (c) the total Loans and other Obligationsoutstanding at any time shall exceed the Credit Limit; or (d) Borrower shallfail to comply with any of the financial covenants set forth in the Schedule orshall fail to perform any other non-monetary Obligation which by its naturecannot be cured; or (e) Borrower shall fail to perform any other non-monetaryObligation, which failure is not cured within 5 Business Days after the datedue; or (f) any levy, assessment, attachment, seizure, lien or encumbrance(other than a Permitted Lien) is made on all or any part of the Collateral whichis not cured within 10 days after the occurrence of the same; or (g) any defaultor event of default occurs under any obligation secured by a Permitted Lien,which is not cured within any applicable cure period or waived in writing by theholder of the Permitted Lien; or (h) Borrower breaches any material contract orobligation, which has or may reasonably be expected to have a material adverseeffect on Borrower's business or financial condition; or (i) Dissolution,termination of existence, insolvency or business failure of Borrower; orappointment of a receiver, trustee or custodian, for all or any part of theproperty of, assignment for the benefit of creditors by, or the commencement ofany proceeding by Borrower under any reorganization, bankruptcy, insolvency,arrangement, readjustment of debt, dissolution or liquidation law or statute ofany jurisdiction, now or in the future in effect; or (j) the commencement of anyproceeding against Borrower or any guarantor of any of the Obligations under anyreorganization, bankruptcy, insolvency, arrangement, readjustment of debt,dissolution or liquidation law or statute of any jurisdiction, now or in thefuture in effect, which is not cured by the dismissal thereof within 30 daysafter the date commenced; or (k) revocation or termination of, or limitation ordenial of liability upon, any guaranty of the Obligations or any attempt to doany of the foregoing, or commencement of proceedings by any guarantor of any ofthe Obligations under any bankruptcy or insolvency law; or (l) revocation ortermination of, or limitation or denial of liability upon, any pledge of anycertificate of deposit, securities or other property or asset of any kindpledged by any third party to secure any or all of the Obligations, or anyattempt to do any of the foregoing, or commencement of proceedings by or againstany such third party under any bankruptcy or insolvency law; or (m) Borrowermakes any payment on account of any indebtedness or obligation which has beensubordinated to the Obligations other than as permitted in the applicablesubordination agreement, or if any Person who has subordinated such indebtednessor obligations terminates or in any way limits his subordination agreement; or(n) there shall be a change in the record or beneficial ownership of anaggregate of more than 20% of the outstanding shares of stock of Borrower, inone or more transactions, compared to the ownership of outstanding shares ofstock of Borrower in effect on the date hereof, without the prior writtenconsent of Silicon; or (o) Borrower shall generally not pay its debts as theybecome due, or Borrower shall conceal, remove or transfer any part of itsproperty, with intent to hinder, delay or defraud its creditors, or make orsuffer any transfer of any of its property which may be fraudulent under anybankruptcy, fraudulent conveyance or similar law; or (p) there shall be amaterial adverse change in Borrower's business or financial condition; or (q)Silicon, acting in good faith and in a commercially reasonable manner, deemsitself insecure because of the occurrence of an event prior to the effectivedate hereof of which Silicon had no knowledge on the effective date or becauseof the occurrence of an event on or subsequent to the effective date.  Siliconmay cease making any Loans hereunder during any of the above cure periods, andthereafter if an Event of Default has occurred.  
***7.2  Remedies.  Upon the occurrence of anyEvent of Default, and at any time thereafter, Silicon, at its option, andwithout notice or demand of any kind (all of which are hereby expressly waivedby Borrower), may do any one or more of the following: (a) Cease making Loans orotherwise extending credit to Borrower under this Agreement or any otherdocument or agreement; (b) Accelerate and declare all or any part of theObligations to be immediately due, payable, and performable, notwithstanding anydeferred or installment payments allowed by any instrument evidencing orrelating to any Obligation; (c) Take possession of any or all of the Collateralwherever it may be found, and for that purpose Borrower hereby authorizesSilicon without judicial process to enter onto any of Borrower's premiseswithout interference to search for, take possession of, keep, store, or removeany of the Collateral, and remain on the premises or cause a custodian to remainon the premises in exclusive control thereof, without charge for so long asSilicon deems it reasonably necessary in order to complete the enforcement ofits rights under this Agreement or any other agreement; provided, however, thatshould Silicon seek to take possession of any of the Collateral by Courtprocess, Borrower hereby irrevocably waives: (i) any bond and any surety orsecurity relating thereto required by any statute, court rule or otherwise as anincident to such possession; (ii) any demand for possession prior to thecommencement of any suit or action to recover possession thereof; and (iii) anyrequirement that Silicon retain possession of, and not dispose of, any suchCollateral until after trial or final judgment; (d) Require Borrower to assembleany or all of the Collateral and make it available to Silicon at placesdesignated by Silicon which are reasonably convenient to Silicon and Borrower,and to remove the Collateral to such locations as Silicon may deem advisable;(e) Complete the processing, manufacturing or repair of any Collateral prior toa disposition thereof and, for such purpose and for the purpose of removal,Silicon shall have the right to use Borrower's premises, vehicles, hoists,lifts, cranes, equipment and all other property without charge; (f) Sell, leaseor otherwise dispose of any of the Collateral, in its condition at the timeSilicon obtains possession of it or after further manufacturing, processing orrepair, at one or more public and/or private sales, in lots or in bulk, forcash, exchange or other property, or on credit, and to adjourn any such salefrom time to time without notice other than oral announcement at the timescheduled for sale.  Silicon shall have the right to conduct such disposition onBorrower's premises without charge, for such time or times as Silicon deemsreasonable, or on Silicon's premises, or elsewhere and the Collateral need notbe located at the place of disposition.  Silicon may directly or through anyaffiliated company purchase or lease any Collateral at any such publicdisposition, and if permissible under applicable law, at any privatedisposition.  Any sale or other disposition of Collateral shall not relieveBorrower of any liability Borrower may have if any Collateral is defective as totitle or physical condition or otherwise at the time of sale; (g) Demand paymentof, and collect any Receivables and General Intangibles comprising Collateraland, in connection therewith, Borrower irrevocably authorizes Silicon to endorseor sign Borrower's name on all collections, receipts, instruments and otherdocuments, to take possession of and open mail addressed to Borrower and removetherefrom payments made with respect to any item of the Collateral or proceedsthereof, and, in Silicon's sole discretion, to grant extensions of time to pay,compromise claims and settle Receivables and the like for less than face value;(h) Offset against any sums in any of Borrower's general, special or otherDeposit Accounts with Silicon; and (i) Demand and receive possession of any ofBorrower's federal and state income tax returns and the books and recordsutilized in the preparation thereof or referring thereto.  All reasonableattorneys' fees, expenses, costs, liabilities and obligations incurred bySilicon with respect to the foregoing shall be added to and become part of theObligations, shall be due on demand, and shall bear interest at a rate equal tothe highest interest rate applicable to any of the Obligations.  Withoutlimiting any of Silicon's rights and remedies, from and after the occurrence ofany Event of Default, the interest rate applicable to the Obligations shall beincreased by an additional four percent per annum.
***7.3  Standards for Determining CommercialReasonableness.  Borrower and Silicon agree that a sale or otherdisposition (collectively, "sale") of any Collateral which complieswith the following standards will conclusively be deemed to be commerciallyreasonable:  (i) Notice of the sale is given to Borrower at least seven daysprior to the sale, and, in the case of a public sale, notice of the sale ispublished at least seven days before the sale in a newspaper of generalcirculation in the county where the sale is to be conducted; (ii) Notice of thesale describes the collateral in general, non-specific terms; (iii) The sale isconducted at a place designated by Silicon, with or without the Collateral beingpresent; (iv) The sale commences at any time between 8:00 a.m. and 6:00 p.m;(v) Payment of the purchase price in cash or by cashier's check or wire transferis required; (vi) With respect to any sale of any of the Collateral, Silicon may(but is not obligated to) direct any prospective purchaser to ascertain directlyfrom Borrower any and all information concerning the same.  Silicon shall befree to employ other methods of noticing and selling the Collateral, in itsdiscretion, if they are commercially reasonable.
***7.4  Power of Attorney.  Upon the occurrence ofany Event of Default, without limiting Silicon's other rights and remedies,Borrower grants to Silicon an irrevocable power of attorney coupled with aninterest, authorizing and permitting Silicon (acting through any of itsemployees, attorneys or agents) at any time, at its option, but withoutobligation, with or without notice to Borrower, and at Borrower's expense, to doany or all of the following, in Borrower's name or otherwise, but Silicon agreesto exercise the following powers in a commercially reasonable manner:  (a)Execute on behalf of Borrower any documents that Silicon may, in its solediscretion, deem advisable in order to perfect and maintain Silicon's securityinterest in the Collateral, or in order to exercise a right of Borrower orSilicon, or in order to fully consummate all the transactions contemplated underthis Agreement, and all other present and future agreements; (b) Execute onbehalf of Borrower any document exercising, transferring or assigning any optionto purchase, sell or otherwise dispose of or to lease (as lessor or lessee) anyreal or personal property which is part of Silicon's Collateral or in whichSilicon has an interest; (c) Execute on behalf of Borrower, any invoicesrelating to any Receivable, any draft against any Account Debtor and any noticeto any Account Debtor, any proof of claim in bankruptcy, any Notice of Lien,claim of mechanic's, materialman's or other lien, or assignment or satisfactionof mechanic's, materialman's or other lien; (d) Take control in any manner ofany cash or non-cash items of payment or proceeds of Collateral; endorse thename of Borrower upon any instruments, or documents, evidence of payment orCollateral that may come into Silicon's possession; (e) Endorse all checks andother forms of remittances received by Silicon; (f) Pay, contest or settle anylien, charge, encumbrance, security interest and adverse claim in or to any ofthe Collateral, or any judgment based thereon, or otherwise take any action toterminate or discharge the same; (g) Grant extensions of time to pay, compromiseclaims and settle Receivables and General Intangibles for less than face valueand execute all releases and other documents in connection therewith; (h) Payany sums required on account of Borrower's taxes or to secure the release of anyliens therefor, or both; (i) Settle and adjust, and give releases of, anyinsurance claim that relates to any of the Collateral and obtain paymenttherefor; (j) Instruct any third party having custody or control of any books orrecords belonging to, or relating to, Borrower to give Silicon the same rightsof access and other rights with respect thereto as Silicon has under thisAgreement; and (k) Take any action or pay any sum required of Borrower pursuantto this Agreement and any other present or future agreements.  Any and allreasonable sums paid and any and all reasonable costs, expenses, liabilities,obligations and attorneys' fees incurred by Silicon with respect to theforegoing shall be added to and become part of the Obligations, shall be payableon demand, and shall bear interest at a rate equal to the highest interest rateapplicable to any of the Obligations.  In no event shall Silicon's rights underthe foregoing power of attorney or any of Silicon's other rights under thisAgreement be deemed to indicate that Silicon is in control of the business,management or properties of Borrower.
***7.5  Application of Proceeds.  All proceedsrealized as the result of any sale of the Collateral shall be applied by Siliconfirst to the reasonable costs, expenses, liabilities, obligations and attorneys'fees incurred by Silicon in the exercise of its rights under this Agreement,second to the interest due upon any of the Obligations, and third to theprincipal of the Obligations, in such order as Silicon shall determine in itssole discretion.  Any surplus shall be paid to Borrower or other persons legallyentitled thereto; Borrower shall remain liable to Silicon for any deficiency.If, Silicon, in its sole discretion, directly or indirectly enters into adeferred payment or other credit transaction with any purchaser at any sale ofCollateral, Silicon shall have the option, exercisable at any time, in its solediscretion, of either reducing the Obligations by the principal amount ofpurchase price or deferring the reduction of the Obligations until the actualreceipt by Silicon of the cash therefor.
***7.6  Remedies Cumulative.  In addition to therights and remedies set forth in this Agreement, Silicon shall have all theother rights and remedies accorded a secured party under the California UniformCommercial Code and under all other applicable laws, and under any otherinstrument or agreement now or in the future entered into between Silicon andBorrower, and all of such rights and remedies are cumulative and none isexclusive.  Exercise or partial exercise by Silicon of one or more of its rightsor remedies shall not be deemed an election, nor bar Silicon from subsequentexercise or partial exercise of any other rights or remedies.  The failure ordelay of Silicon to exercise any rights or remedies shall not operate as awaiver thereof, but all rights and remedies shall continue in full force andeffect until all of the Obligations have been fully paid and performed.
**8. Definitions.  *As used in this Agreement, the following termshave the following meanings:*
"Account Debtor" means the obligor on aReceivable.

"Affiliate" means, with respect to anyPerson, a relative, partner, shareholder, director, officer, or employee of suchPerson, or any parent or subsidiary of such Person, or any Person controlling,controlled by or under common control with such Person.

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

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

"Collateral" has the meaning set forth inSection 2.1 above.

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

"Deposit Account" has the meaning set forth in Section9102 of the Code.

 "Eligible Receivables" means Receivablesarising in the ordinary course of Borrower's business from the sale of goods orrendition of services, which Silicon, in its sole judgment, shall deem eligiblefor borrowing, based on such considerations as Silicon may from time to timedeem appropriate.  Without limiting the fact that the determination of whichReceivables are eligible for borrowing is a matter of Silicon's discretion, thefollowing (the "Minimum Eligibility Requirements") are theminimum requirements for a Receivable to be  an Eligible Receivable:  (i) theReceivable must not be outstanding for more than 90 days from its invoice date,(ii) the Receivable must not represent progress billings, or be due under afulfillment or requirements contract with the Account Debtor, (iii) theReceivable must not be subject to any contingencies (including Receivablesarising from sales on consignment, guaranteed sale or other terms pursuant towhich payment by the Account Debtor may be conditional), (iv) the Receivablemust not be owing from an Account Debtor with whom Borrower has any dispute(whether or not relating to the particular Receivable), (v) the Receivable mustnot be owing from an Affiliate of Borrower, (vi) the Receivable must not beowing from an Account Debtor which is subject to any insolvency or bankruptcyproceeding, or whose financial condition is not acceptable to Silicon, or which,fails or goes out of a material portion of its business, (vii) the Receivablemust not be owing from the United States or any department, agency orinstrumentality thereof (unless there has been compliance, to Silicon'ssatisfaction, with the United States Assignment of Claims Act), (viii) theReceivable must not be owing from an Account Debtor located outside the UnitedStates or Canada (unless pre-approved by Silicon in its discretion in writing,or backed by a letter of credit satisfactory to Silicon, or FCIA insuredsatisfactory to Silicon),  (ix) the Receivable must not be owing from an AccountDebtor to whom Borrower is or may be liable for goods purchased from suchAccount Debtor or otherwise. Receivables owing from one Account Debtor will notbe deemed Eligible Receivables to the extent they exceed 25% of the totalReceivables outstanding.  In addition, if more than 50% of the Receivables owingfrom an Account Debtor are outstanding more than 90****days from theirinvoice date (without regard to unapplied credits) or are otherwise not eligibleReceivables, then all Receivables owing from that Account Debtor will be deemedineligible for borrowing.  Silicon may, from time to time, in its discretion,revise the Minimum Eligibility Requirements, upon written notice toBorrower.

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

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

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

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

"Obligations" means all present and future Loans,advances, debts, liabilities, obligations, guaranties, covenants, duties andindebtedness at any time owing by Borrower to Silicon, whether evidenced by thisAgreement or any note or other instrument or document, whether arising from anextension of credit, opening of a letter of credit, banker's acceptance, loan,guaranty, indemnification or otherwise, whether direct or indirect (including,without limitation, those acquired by assignment and any participation bySilicon in Borrower's debts owing to others), absolute or contingent, due or tobecome due, including, without limitation, all interest, charges, expenses,fees, attorney's fees, expert witness fees, audit fees, letter of credit fees,collateral monitoring fees, closing fees, facility fees, termination fees,minimum interest charges and any other sums chargeable to Borrower under thisAgreement or under any other present or future instrument or agreement betweenBorrower and Silicon.

"Permitted Liens" means the following:  (i) purchasemoney security interests in specific items of Equipment; (ii) leases of specificitems of Equipment; (iii) liens for taxes not yet payable; (iv) additionalsecurity interests and liens consented to in writing by Silicon, which consentshall not be unreasonably withheld; (v) security interests being terminatedsubstantially concurrently with this Agreement; (vi) liens of materialmen,mechanics, warehousemen, carriers, or other similar liens arising in theordinary course of business and securing obligations which are not delinquent;(vii) liens incurred in connection with the extension, renewal orrefinancing of the indebtedness secured by liens of the type described above inclauses (i) or (ii) above, provided that any extension, renewal or replacementlien is limited to the property encumbered by the existing lien and theprincipal amount of the indebtedness being extended, renewed or refinanced doesnot increase; (viii) Liens in favor of customs and revenue authorities whichsecure payment of customs duties in connection with the importation of goods.Silicon will have the right to require, as a condition to its consent undersubparagraph (iv) above, that the holder of the additional security interest orlien sign an intercreditor agreement on Silicon's then standard form,acknowledge that the security interest is subordinate to the security interestin favor of Silicon, and agree not to take any action to enforce its subordinatesecurity interest so long as any Obligations remain outstanding, and thatBorrower agree that any uncured default in any obligation secured by thesubordinate security interest shall also constitute an Event of Default underthis Agreement.  

"Person" means any individual, sole proprietorship,partnership, joint venture, trust, unincorporated organization, association,corporation, government, or any agency or political division thereof, or anyother entity.

"Receivables" means all of Borrower's now owned andhereafter acquired accounts (whether or not earned by performance), letters ofcredit, contract rights, chattel paper, instruments, securities, securitiesaccounts, investment property, documents and all other forms of obligations atany time owing to Borrower, all guaranties and other security therefor, allmerchandise returned to or repossessed by Borrower, and all rights of stoppagein transit and all other rights or remedies of an unpaid vendor, lienor orsecured party.

"Reserves" means, as of any date of determination,such amounts as Silicon may from time to time establish and revise in good faithreducing the amount of Loans, Letters of Credit and other financialaccommodations which would otherwise be available to Borrower under the lendingformula(s) provided in the Schedule:  (a) to reflect events, conditions,contingencies or risks which, as determined by Silicon in good faith, do or mayaffect (i) the Collateral or any other property which is security for theObligations or its value (including without limitation any increase indelinquencies of Receivables), (ii) the assets, business or prospects ofBorrower or any Guarantor, or (iii) the security interests and other rights ofSilicon in the Collateral (including the enforceability, perfection and prioritythereof); or (b) to reflect Silicon's good faith belief that any collateralreport or financial information furnished by or on behalf of Borrower or anyGuarantor to Silicon is or may have been incomplete, inaccurate or misleading inany material respect; or (c) in respect of any state of facts which Silicondetermines in good faith constitutes an Event of Default or may, with notice orpassage of time or both, constitute an Event of Default.

Other Terms.  All accounting terms used in thisAgreement, unless otherwise indicated, shall have the meanings given to suchterms in accordance with generally accepted accounting principles, consistentlyapplied.  All other terms contained in this Agreement, unless otherwiseindicated, shall have the meanings provided by the Code, to the extent suchterms are defined therein. 
**9. GENERAL PROVISIONS.
*9.1  Interest Computation.  In computing intereston the Obligations, all checks, wire transfers and other items of paymentreceived by Silicon (including proceeds of Receivables and payment of theObligations in full) shall be deemed applied by Silicon on account of theObligations three Business Days after receipt by Silicon of immediatelyavailable funds, and, for purposes of the foregoing, any such funds receivedafter 12:00 Noon on any day shall be deemed received on the next Business Day.Silicon shall not, however, be required to credit Borrower's account for theamount of any item of payment which is unsatisfactory to Silicon in its solediscretion, and Silicon may charge Borrower's loan account for the amount of anyitem of payment which is returned to Silicon unpaid.  
***9.2  Application of Payments.  All paymentswith respect to the Obligations may be applied, and in Silicon's sole discretionreversed and re-applied, to the Obligations, in such order and manner as Siliconshall determine in its sole discretion.
***9.3  Charges to Accounts.  Silicon may, in itsdiscretion, require that Borrower pay monetary Obligations in cash to Silicon,or charge them to Borrower's Loan account, in which event they will bearinterest at the same rate applicable to the Loans.  Silicon may also, in itsdiscretion, charge any monetary Obligations to Borrower's Deposit Accountsmaintained with Silicon.
***9.4  Monthly Accountings.  Silicon shallprovide Borrower monthly with an account of advances, charges, expenses andpayments made pursuant to this Agreement.  Such account shall be deemed correct,accurate and binding on Borrower and an account stated (except for reverses andreapplications of payments made and corrections of errors discovered bySilicon), unless Borrower notifies Silicon in writing to the contrary withinthirty days after each account is rendered, describing the nature of any allegederrors or admissions.
***9.5  Notices.  All notices to be given underthis Agreement shall be in writing and shall be given either personally or byreputable private delivery service or by regular first-class mail, or certifiedmail return receipt requested, addressed to Silicon or Borrower at the addressesshown in the heading to this Agreement, or at any other address designated inwriting by one party to the other party.  Notices to Silicon shall be directedto the Commercial Finance Division, to the attention of the Division Manager orthe Division Credit Manager.  All notices shall be deemed to have been givenupon delivery in the case of notices personally delivered, or at the expirationof one Business Day following delivery to the private delivery service, or twoBusiness Days following the deposit thereof in the United States mail, withpostage prepaid.  
***9.6  Severability.  Should any provision ofthis Agreement be held by any court of competent jurisdiction to be void orunenforceable, such defect shall not affect the remainder of this Agreement,which shall continue in full force and effect.
***9.7  Integration.  This Agreement and suchother written agreements, documents and instruments as may be executed inconnection herewith are the final, entire and complete agreement betweenBorrower and Silicon and supersede all prior and contemporaneous negotiationsand oral representations and agreements, all of which are merged and integratedin this Agreement.  There are no oral understandings, representations oragreements between the parties which are not set forth in this Agreement or inother written agreements signed by the parties in connection herewith.***9.8  Waivers.  The failure of Silicon atany time or times to require Borrower to strictly comply with any of theprovisions of this Agreement or any other present or future agreement betweenBorrower and Silicon shall not waive or diminish any right of Silicon later todemand and receive strict compliance therewith.  Any waiver of any default shallnot waive or affect any other default, whether prior or subsequent, and whetheror not similar.  None of the provisions of this Agreement or any other agreementnow or in the future executed by Borrower and delivered to Silicon shall bedeemed to have been waived by any act or knowledge of Silicon or its agents oremployees, but only by a specific written waiver signed by an authorized officerof Silicon and delivered to Borrower.  Borrower waives demand, protest, noticeof protest and notice of default or dishonor, notice of payment and nonpayment,release, compromise, settlement, extension or renewal of any commercial paper,instrument, account, General Intangible, document or guaranty at any time heldby Silicon on which Borrower is or may in any way be liable, and notice of anyaction taken by Silicon, unless expressly required by this Agreement.  
***9.9  No Liability for Ordinary Negligence.Neither Silicon, nor any of its directors, officers, employees, agents,attorneys or any other Person affiliated with or representing Silicon shall beliable for any claims, demands, losses or damages, of any kind whatsoever, made,claimed, incurred or suffered by Borrower or any other party through theordinary negligence of Silicon, or any of its directors, officers, employees,agents, attorneys or any other Person affiliated with or representing Silicon,but nothing herein shall relieve Silicon from liability for its own grossnegligence or willful misconduct.
***9.10  Amendment.  The terms and provisions ofthis Agreement may not be waived or amended, except in a writing executed byBorrower and a duly authorized officer of Silicon.
***9.11  Time of Essence.  Time is of the essencein the performance by Borrower of each and every obligation under thisAgreement.
***9.12  Attorneys Fees and Costs.  Borrower shallreimburse Silicon for all reasonable attorneys' fees and all filing, recording,search, title insurance, appraisal, audit, and other reasonable costs incurredby Silicon, pursuant to, or in connection with, or relating to this Agreement(whether or not a lawsuit is filed), including, but not limited to, anyreasonable attorneys' fees and costs Silicon incurs in order to do thefollowing: prepare and negotiate this Agreement and the documents relating tothis Agreement; obtain legal advice in connection with this Agreement orBorrower; enforce, or seek to enforce, any of its rights; prosecute actionsagainst, or defend actions by, Account Debtors; commence, intervene in, ordefend any action or proceeding; initiate any complaint to be relieved of theautomatic stay in bankruptcy; file or prosecute any probate claim, bankruptcyclaim, third-party claim, or other claim; examine, audit, copy, and inspect anyof the Collateral or any of Borrower's books and records; protect, obtainpossession of, lease, dispose of, or otherwise enforce Silicon's securityinterest in, the Collateral; and otherwise represent Silicon in any litigationrelating to Borrower.  In satisfying Borrower's obligation hereunder toreimburse Silicon for attorneys fees, Borrower may, for convenience, issuechecks directly to Silicon's attorneys, Levy, Small & Lallas, but Borroweracknowledges and agrees that Levy, Small & Lallas is representing onlySilicon and not Borrower in connection with this Agreement.  If eitherSilicon or Borrower files any lawsuit against the other predicated on a breachof this Agreement, the prevailing party in such action shall be entitled torecover its reasonable costs and attorneys' fees, including (but not limited to)reasonable attorneys' fees and costs incurred in the enforcement of, executionupon or defense of any order, decree, award or judgment.  All attorneys' feesand costs to which Silicon may be entitled pursuant to this Paragraph shallimmediately become part of Borrower's Obligations, shall be due on demand, andshall bear interest at a rate equal to the highest interest rate applicable toany of the Obligations.
***9.13  Benefit of Agreement.  The provisions ofthis Agreement shall be binding upon and inure to the benefit of the respectivesuccessors, assigns, heirs, beneficiaries and representatives of Borrower andSilicon; provided, however, that Borrower may not assign or transfer any of itsrights under this Agreement without the prior written consent of Silicon, andany prohibited assignment shall be void.  No consent by Silicon to anyassignment shall release Borrower from its liability for the Obligations.
***9.14  Joint and Several Liability.  If Borrowerconsists of more than one Person, their liability shall be joint and several,and the compromise of any claim with, or the release of, any Borrower shall notconstitute a compromise with, or a release of, any other Borrower.
***9.15  Limitation of Actions.Any claim orcause of action by Borrower against Silicon, its directors, officers, employees,agents, accountants or attorneys, based upon, arising from, or relating to thisLoan Agreement, or any other present or future document or agreement, or anyother transaction contemplated hereby or thereby or relating hereto or thereto,or any other matter, cause or thing whatsoever, occurred, done, omitted orsuffered to be done by Silicon, its directors, officers, employees, agents,accountants or attorneys, shall be barred unless asserted by Borrower by thecommencement of an action or proceeding in a court of competent jurisdiction bythe filing of a complaint within one year after the first act, occurrence oromission upon which such claim or cause of action, or any part thereof, isbased, and the service of a summons and complaint on an officer of Silicon, oron any other person authorized to accept service on behalf of Silicon, withinthirty (30) days thereafter.  Borrower agrees that such one-year period is areasonable and sufficient time for Borrower to investigate and act upon any suchclaim or cause of action.  The one-year period provided herein shall not bewaived, tolled, or extended except by the written consent of Silicon in its solediscretion.  This provision shall survive any termination of this Loan Agreementor any other present or future agreement.
***9.16  Paragraph Headings; Construction.Paragraph headings are only used in this Agreement for convenience.  Borrowerand Silicon acknowledge that the headings may not describe completely thesubject matter of the applicable paragraph, and the headings shall not be usedin any manner to construe, limit, define or interpret any term or provision ofthis Agreement.  The term "including", whenever used in thisAgreement, shall mean "including (but not limited to)".  ThisAgreement has been fully reviewed and negotiated between the parties and nouncertainty or ambiguity in any term or provision of this Agreement shall beconstrued strictly against Silicon or Borrower under any rule of construction orotherwise.
***9.17  Governing Law; Jurisdiction; Venue.  ThisAgreement and all acts and transactions hereunder and all rights and obligationsof Silicon and Borrower shall be governed by the laws of the State ofCalifornia.  As a material part of the consideration to Silicon to enter intothis Agreement, Borrower (i) agrees that all actions and proceedings relatingdirectly or indirectly to this Agreement shall, at Silicon's option, belitigated in courts located within California, and that the exclusive venuetherefor shall be Santa Clara County; (ii) consents to the jurisdiction andvenue of any such court and consents to service of process in any such action orproceeding by personal delivery or any other method permitted by law; and (iii)waives any and all rights Borrower may have to object to the jurisdiction of anysuch court, or to transfer or change the venue of any such action orproceeding.
***9.18  Mutual Waiver of Jury Trial.  Borrower andSilicon each hereby waive the right to trial by jury in any action or proceedingbased upon, arising out of, or in any way relating to, this Agreement or anyother present or future instrument or agreement between Silicon and Borrower, orany conduct, acts or omissions of Silicon or Borrower or any of their directors,officers, employees, agents, attorneys or any other persons affiliated withSilicon or Borrower, in all of the foregoing cases, whether sounding in contractor tort or otherwise.

Borrower:

Sigma Designs, Inc.

 

By _________________________

	President or Vice President

By _________________________

	Secretary or Ass't Secretary

Silicon:

SILICON VALLEY BANK

 

By _________________________

Title _______________________

Form 3/24/99

Version -1
** 

 

 

Silicon Valley Bank*Schedule to 

Loan and Security Agreement

Borrower:	Sigma Designs, Inc.		

Address:	355 Fairview Way

		Milpitas, California  95035

Date:		September 7, 2001

This Schedule forms an integral part of the Loan andSecurity Agreement between Silicon Valley Bank and the above-borrower of evendate.  

 
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