**EXHIBIT 10.1**

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**LOAN MODIFICATION AGREEMENT**

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This Loan ModificationAgreement is entered into as of June 27, 2005, by and between QuicklogicCorporation (the “Borrower”) and Silicon Valley Bank (“Bank”).

 

1.                                       DESCRIPTIONOF EXISTING OBLIGATIONS:  Among otherObligations which may be owing by Borrower to Bank, Borrower is indebted toBank pursuant to, among other documents, an Amended and Restated Loan andSecurity Agreement, dated June 20, 2003 (as may be amended, restated, orotherwise modified from time to time, the “Loan Agreement”). The Loan Agreementprovides for, among other things, a CommittedEquipment Line in the original principal amount of Two Million OneHundred Sixty Seven Thousand Nine Hundred Twenty Five and 83/100 Dollars($2,167,925.83) and a Committed Non-Formula Line and Committed Formula Line inthe original principal amount not to exceed Eight Million Dollars ($8,000,000)in the aggregate.  The Loan Agreement has been modified pursuantto, among other documents, a Loan Modification Agreement dated June 28, 2004,pursuant to which, among other things, a Committed Equipment Line 2 wasincorporated in the original principal amount of Two Million Dollars($2,000,000).  Defined terms usedbut not otherwise defined herein shall have the same meanings as set forth inthe Loan Agreement.

 

Hereinafter, all indebtedness owing by Borrower to Bank shall bereferred to as the “Obligations.”

 

2.                                       DESCRIPTIONOF COLLATERAL. Repayment of the Obligations is secured by the Collateral asdescribed in the Loan Agreement.

 

Hereinafter, theabove-described security documents and guaranties, together with all otherdocuments securing repayment of the Obligations shall be referred to as the “SecurityDocuments”.  Hereinafter, the SecurityDocuments, together with all other documents evidencing or securing theObligations shall be referred to as the “Existing Loan Documents”.

 

3.**                                      **DESCRIPTIONOF CHANGE IN TERMS.

 

A.                                   Modification(s) to Loan Agreement.

 

#### 1.                                       Sub letter(b) under Section 2.1.1 entitled “Formula Revolving Advances” is hereby bydeleted in its entirety and replaced with “Intentionally Omitted”.

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2.                                       Subletter (a) of Section 2.1.3 entitled “Letters of Credit” is hereby amended toread as follows:

 

(a)            Bankwill issue Letters of Credit for Borrower’s account not to exceed theAvailability.

 

3.                                       Section2.1.4 entitled “Foreign Exchange Sublimit” is hereby amended in part to providethat the FX Reserve may not exceed the Availability.

 

4.                                       Section2.1.5 entitled “Cash Management Services Sublimit” is hereby amended in part toprovide that Borrower may use for Bank’s Cash Management Services up to anamount equal to the Availability.

 

#### 5.                                       Section2.1.12 entitled “Equipment Advance 3” is hereby incorporated to read asfollows:

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(a)            Through June 26, 2006 (the “EquipmentAvailability End Date 3”), Bank will make advances (“Equipment Soft CostAdvance 3” and, collectively “Equipment Soft Cost Advances 3”) not to exceed

 

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$2,250,00of the Committed Equipment Line 3.  TheEquipment Soft Cost Advance 3 may only be used to finance software licenses(including approximately $1,500,000 related to the licensing of Cadence Designtools), mask sets, foreign domiciled equipment, leasehold improvements and mayinclude sale tax, freight discounts, warranty charges, shipping and installationexpenses (“Soft Costs”).  Through theEquipment Availability End Date 3, Bank will make advances (“Equipment HardwareAdvance 3” and, collectively, “Equipment Hardware Advances 3”; together withEquipment Soft Cost Advances 3 are referred to as “Equipment Advances 3”) notto exceed the Committed Equipment Line 3 (reduced by the amount of anyEquipment Soft Cost Advance 3). Equipment Hardware Advances 3 may only be used to finance eligibleEquipment and shall exclude Soft Costs. Equipment Hardware Advance 3 and Equipment Soft Cost Advance 3 shall belimited to equipment purchased within 90 days of the date of the requestedEquipment Advances 3 and may not exceed 100% of the equipment invoice.  Each Equipment Advance 3 must be greater than$50,000 and is limited to one Equipment Advance 3 per month.

 

(b)           Each (a) Equipment Soft Cost Advance 3shall amortize immediately and be payable in 30 equal monthly installments ofprincipal plus accrued interest and (b) Equipment Hard Cost Advance 3 shallamortize immediately and be payable in 36 equal monthly installments ofprincipal plus accrued interest beginning 30 days following the date of suchEquipment Advance 3 and continuing on the same day of each monththereafter.  The final payment on theapplicable Equipment Advance 3 Maturity Date shall include all outstandingprincipal and all accrued unpaid interest. Equipment Advances 3 when repaid may not be reborrowed.

 

(c)            To obtain an Equipment Advance 3,Borrower must notify Bank (the notice is irrevocable) by facsimile no laterthan 12:00 p.m. Pacific time 1 Business Day before the day on which theEquipment Advance 3 is to be made.  Thenotice in the form of Exhibit B (Payment/Advance Form) must be signed by aResponsible Officer or designee and include a copy of the invoice for theEquipment being financed.

 

6.                                       Effectiveas of the date hereof, sub sections (i) and (ii) under sub letter (a) underSection 2.3 entitled “Interest Rate, Payments” is hereby amended to read asfollows:

 

(i) Formula Advances accrue interest on theoutstanding principal balance at a per annum rate equal to the greater of (a)one half of one percentage point (0.50%) above the Prime Rate or (b) 5.00%;(ii) Non-Formula Advances accrue interest on the outstanding principal balanceat a per annum rate equal to the greater of (c) one and one half percentagepoints (1.50%) above the Prime Rate or (d) 5.00%;

 

7.                                       Effectiveas of the date hereof, sub letter (a) (vi) under Section 2.3 entitled “InterestRate, Payments” is hereby incorporated to read as follows:

 

(vi)                              EquipmentAdvances 3 accrue interest on the outstanding principal balance at a per annumrate of one and three quarter percentage points (1.75%) above the Prime Rate.

 

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8.             Subletter (b) of Section 2.3 entitled “Interest Rate, Payments” is hereby amendedin part to provide that interest due on the Committed Formula Revolving Lineand the Committed-Non Formula Line is payable on the 26th of eachmonth.

 

9.             Subletter (c) of Section 6.2 entitled “Financial Statements, Reports, Certificates”is hereby amended to read as follows:

 

(c)          Within45 days after the last day of each month, Borrower will deliver to Bank aBorrowing Base Certificate signed by a Responsible Officer in the form ofExhibit D, with aged listings of accounts receivable and accounts payable.

 

10.           Subletter (i) entitled “Tangible Net Worth” under Section 6.7 entitled “FinancialCovenants” hereby amended to read as follows:

 

(i)             TangibleNet Worth.  A Tangible Net Worth of atleast $31,000,000.

 

11.           Forclarification purposes, Section 6.8 entitled “Intentionally Omitted” is herebyamended and replaced with “Protection of Intellectual Property Right” and is toread as follows:

 

Borrower will (i) protect, defend andmaintain the validity and enforceability of the material Intellectual Propertyand promptly advise Bank in writing of material infringements and (ii) notallow any material Intellectual Property to be abandoned, forfeited ordedicated to the public without Bank’s written consent.

 

Notwithstanding anything to the contrarycontained in this section, Borrower confirms that on June 28, 2004, Bank andBorrower 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 definitionof Collateral was amended to reflect that Intellectual Property created,modified acquired or obtained on or after June 28, 2004 (but not before suchdate) shall not be deemed as part of the Collateral.

 

12.           Thefollowing defined terms under Section 13.1 entitled “Definitions” are hereby amended and/or incorporatedto read as follows:

 

**“Committed EquipmentLine 3”**is aCredit Extension of up to $3,000,000.

 

**“Credit Extension”**is each Advance, Equipment Advance, EquipmentAdvance 2, Equipment Advance 3, Letter of Credit, Exchange Contract, Term LoanA, Term Loan B, Term Loan C and Term Loan D, or any other extension of creditby Bank for Borrower’s benefit.

 

**“Equipment Advance 3”**is defined under Section2.1.12.

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**“EquipmentAdvance 3 Maturity Date”**is as to any Equipment Soft Cost Advances 3, a datewhich is 30 months from such Equipment Soft Cost Advance 3, however, no longerthan December 26, 2008 and as to any Equipment Hard Cost Advance 3, 36 monthsfrom such Equipment Hard Cost Advance 3, however, no longer than June 26, 2009.

 

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**“Equipment Availability End Date 3”**is defined under Section2.1.12.

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**“Equipment Hardware Advance 3”**is defined under Section2.1.12.

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**“Equipment Soft Cost Advance 3”**is defined under Section2.1.12.

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**“PrimeRate”**is Bank’s most recently announced “prime rate” even if it is not Bank’slowest rate.

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**“Revolving Maturity Date”**is June 26, 2006.

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4.                                       CONSISTENTCHANGES.  The Existing Loan Documentsare hereby amended wherever necessary to reflect the changes described above.

 

5.                                       NODEFENSES OF BORROWER.  Borrower (andeach guarantor and pledgor signing below) agrees that, as of the date hereof,it has no defenses against paying any of the Obligations.

 

6.                                       PAYMENTOF LOAN FEE.  Borrower shall pay Bankfees in the amount Forty Thousand Dollars ($40,000) (the “Revolving LineRenewal Fee”) and Fifteen Thousand Dollars ($15,000) (the “Equipment Fee”) (theRevolving Line Renewal Fee and the Equipment Fee are collectively referred toas the “Loan Fee”) plus all out-of-pocket expenses.

 

7.                                       CONTINUINGVALIDITY.  Borrower (and eachguarantor and pledgor signing below) understands and agrees that in modifyingthe existing Indebtedness, Bank is relying upon Borrower’s representations,warranties, and agreements, as set forth in the Existing Loan Documents.  Except as expressly modified pursuant to thisLoan Modification Agreement, the terms of the Existing Loan Documents remainunchanged and in full force and effect. Bank’s agreement to modifications to the existing Obligations pursuantto this Loan Modification Agreement in no way shall obligate Bank to make anyfuture modifications to the Obligations. Nothing in this Loan Modification Agreement shall constitute asatisfaction of the Obligations.  It isthe intention of Bank and Borrower to retain as liable parties all makers andendorsers of Existing Loan Documents, unless the party is expressly released byBank in writing.  Unless expresslyreleased herein, no maker, endorser, or guarantor will be released by virtue ofthis Loan Modification Agreement.  Theterms of this paragraph apply not only to this Loan Modification Agreement, butalso to all subsequent loan modification agreements.

 

8.                                       CONDITIONS.  The effectiveness of this Loan ModificationAgreement is conditioned upon payment of the Loan Fee.

 

This Loan Modification Agreement is executedas of the date first written above.

 
| **BORROWER:**               | **BANK:**                   |
|-----------------------------|-----------------------------|
|                        |                        |
| **QUICKLOGIC  CORPORATION** | **SILICON VALLEY  BANK**    |
| ** **                  | ** **                  |
| ** **                  | ** **                  |
| By:                         |  /s/ Carl M. Mills     |   | By: | /s/ Matthew Maloney |   |
|                        |                        |
| Name: Carl M. Mills         | Name: Matthew Maloney       |
|                        |                        |
| Title:                      | Vice President, Finance and | Title: Senior Vice-President |
|                        | Chief Financial Officer     |   |
|                             |                             |  |  |  |  |  |

 

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