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                                                                   EXHIBIT 10.10

                              MMC NETWORKS, INC.

                         LOAN  AND SECURITY AGREEMENT

                              DATED APRIL 21, 1997
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     This LOAN AND SECURITY AGREEMENT is entered into as of April 21, 1997, by
and between SILICON VALLEY BANK ("Bank") and MMC NETWORKS, INC. ("Borrower").

                                   RECITALS

     Borrower wishes to obtain credit from time to time from Bank, and Bank
desires to extend credit to Borrower. This Agreement sets forth the terms on
which Bank will advance credit to Borrower, and Borrower will repay the amounts
owing to Bank.

                                   AGREEMENT

     The parties agree as follows:

     1.    DEFINITIONS AND CONSTRUCTION

           1.1   DEFINITIONS. As used in this Agreement, the following terms
shall have the following definitions:

                 "ACCOUNTS" means all presently existing and hereafter arising
accounts, contract rights, and all other forms of obligations owing to Borrower
arising out of the sale or lease of goods (including, without limitation, the
licensing of software and other 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 and Borrower's Books relating to any of the
foregoing.

                 "ADVANCE" OR "ADVANCES" means a loan advance under Sections 2.1
and 2.2 hereof.

                 "AFFILIATE" means, with respect to any Person, any Person that
owns or controls directly or indirectly such Person, any Person that controls or
is controlled by or is under common control with such Person, and each of such
Person's senior executive officers, directors, partners and, for any Person that
is a limited liability company, such Persons, managers and members.

                 "BANK EXPENSES" means all reasonable costs or expenses
(including reasonable attorneys' fees and expenses) incurred in connection with
the preparation, negotiation, administration, and enforcement of the Loan
Documents; and Bank's reasonable attorneys' fees and expenses incurred in
amending, enforcing or defending the Loan Documents, (including fees and
expenses of appeal or review, or those incurred in any Insolvency Proceeding)
whether or not suit is brought.

                 "BORROWER'S BOOKS" means all of Borrower's books and records
including, without limitation: ledgers; records concerning Borrower's assets or
liabilities, the Collateral, business operations or financial condition; and all
computer programs, or tape files, and the equipment, containing such
information.

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                 "BUSINESS DAY" means any day that is not a Saturday, Sunday. or
other day on which banks in the State of California are authorized or required
to close.

                 "CLOSING DATE" means the date of this Agreement

                 "CODE" means the California Uniform Commercial Code.

                 "COLLATERAL" means the property described on Exhibit A attached
hereto.

                 "COMMITTED REVOLVING LINE" means a Credit Extension of up to
Ten Million Dollars ($10,000,000).

                 "COMMITTED EQUIPMENT LINE" means a Credit Extension of up to
Three Million Dollars ($3,000,000).

                 "CONTINGENT OBLIGATION" means, as applied to any Person, any
direct or indirect liability, contingent or otherwise, of that Person with
respect to (i) any indebtedness, lease, dividend, letter of credit or other
obligation of another, including, without limitation, any such obligation
directly or indirectly guaranteed, endorsed, co-made or discounted or sold with
recourse by that Person, or in respect of which that Person is otherwise
directly or indirectly liable; (ii) any obligations with respect to undrawn
letters of credit issued for the account of that Person; and (iii) all
obligations arising under any interest rate, currency or commodity swap
agreement, interest rate cap agreement, interest rate collar agreement, or other
agreement or arrangement designated to protect a Person against fluctuation in
interest rates, currency exchange rates or commodity prices; provided, however,
that the term "Contingent Obligation" shall not include endorsements for
collection or deposit in the ordinary course of business. The amount of any
Contingent Obligation shall be deemed to be an amount equal to the stated or
determined amount of the primary obligation in respect of which such Contingent
Obligation is made or, if not stated or determinable, the maximum reasonably
anticipated liability in respect thereof as determined by such Person in good
faith; provided, however, that such amount shall not in any event exceed the
maximum amount of the obligations under the guarantee or other support
arrangement.

                 "CREDIT EXTENSION" means each Advance, Equipment Advance,
Letter of Credit, or any other extension of credit by Bank for the benefit of
Borrower hereunder.

                 "CURRENT LIABILITIES" means, as of any applicable date, all
amounts that should, in accordance with GAAP, be included as current liabilities
on the consolidated balance sheet of Borrower and its Subsidiaries, as at such
date, plus, to the extent not already included therein, all outstanding Advances
made under this Agreement, including all Indebtedness that is payable upon
demand or within one year from the date of determination thereof unless such
Indebtedness is renewable or extendable at the option of Borrower or any
Subsidiary to a date more than one year from the date of determination, but
excluding Subordinated Debt.

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                 "EQUIPMENT" means all present and future machinery, equipment,
tenant improvements, furniture, fixtures, vehicles, tools, parts and attachments
in which Borrower has any interest.

                 "EQUIPMENT ADVANCE" has the meaning set forth in Section 2.1.4.

                 "EQUIPMENT AVAILABILITY DATE" has the meaning set forth in
Section 2.1.4.

                 "EQUIPMENT MATURITY DATE" means April 21, 2001.

                 "ERISA" means the Employment Retirement Income Security Act of
1974, as amended, and the regulations thereunder.

                 "GAAP" means generally accepted accounting principles as in
effect in the United States from time to time.

                 "INDEBTEDNESS" means (a) all indebtedness for borrowed money or
the deferred purchase price of property or services, including without
limitation reimbursement and other obligations with respect to surety bonds and
letters of credit, (b) all obligations evidenced by notes, bonds, debentures or
similar instruments, (c) all capital lease obligations and (d) all Contingent
Obligations.

                 "INITIAL PUBLIC OFFERING" means the closing of an initial
public offering of the Borrower's shares of common stock in a publicly traded
market with aggregate cash proceeds satisfactory to the Bank.

                 "INSOLVENCY PROCEEDING" means any proceeding commenced by or
against any person or entity under any provision of the United States Bankruptcy
Code, as amended, or under any other bankruptcy or insolvency law, including
assignments for the benefit of creditors, formal or informal moratoria,
compositions, extension generally with its creditors, or proceedings seeking
reorganization, arrangement, or other relief.

                 "INVENTORY" means all 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 at any time hereafter owned by or in the
custody or possession, actual or constructive, of Borrower, including such
inventory as is temporarily out of its custody or possession or in transit and
including any returns 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.

                 "INVESTMENT" means any beneficial ownership of (including
stock, partnership interest or other securities) any Person, or any loan,
advance or capital contribution to any Person.

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                 "IRC" means the Internal Revenue Code of 1986, as amended, and
the regulations thereunder.

                 "LETTER OF CREDIT" means a letter of credit or similar
undertaking issued by Bank pursuant to SECTION 2.1.2.

                 "LETTER OF CREDIT RESERVE" has the meaning set forth in Section
2.1.2.

                 "LIEN" means any mortgage, lien, deed of trust, charge, pledge,
security interest or other encumbrance.

                 "LOAN DOCUMENTS" means, collectively, this Agreement, any note
or notes executed by Borrower, the Negative Pledge Agreement, and any other
present or future agreement entered into between Borrower and/or for the benefit
of Bank in connection with this Agreement, all as amended, extended or restated
from time to time.

                 "MATERIAL ADVERSE EFFECT" means a material adverse effect on
(i) the business operations or condition (financial or otherwise) of Borrower
and its Subsidiaries taken as a whole or (ii) the ability of Borrower to repay
the Obligations or otherwise perform its obligations under the Loan Documents.

                 "NEGOTIABLE COLLATERAL" means all of Borrower's present and
future letters of credit of which it is a beneficiary, notes, drafts,
instruments, securities, documents of title, and chattel paper.

                 "OBLIGATIONS" means all debt, principal, interest, Bank
Expenses and other amounts owed to Bank by Borrower pursuant to this Agreement
or any other agreement, whether absolute or contingent, due or to become due,
now existing or hereafter arising, including any interest that accrues after the
commencement of an Insolvency Proceeding and including any debt, liability, or
obligation owing from Borrower to others that Bank may have obtained by
assignment or otherwise.

                 "PAYMENT DATE" means the twenty-first calendar day of each
month commencing on the first such date after the Closing Date and ending on the
later of Revolving Maturity Date or the Equipment Maturity Date.

                 "PERMITTED INDEBTEDNESS" means:

                 (a) Indebtedness of Borrower in favor of Bank arising under
this Agreement or any other Loan Document;

                 (b) Indebtedness existing on the Closing Date and disclosed in
the Schedule;

                 (c) Subordinated Debt;

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

                 (e) Indebtedness secured by Permitted Liens.

                 "PERMITTED INVESTMENT" MEANS:

                 (a) Investments existing on the Closing Date disclosed in the
Schedule;

                 (b) (i)    marketable direct obligations issued or
unconditionally guaranteed by the United States of America or any agency or any
State thereof maturing within one (1) year from the date of acquisition thereof,
(ii) commercial paper maturing no more than one (1) year from the date of
creation thereof and currently having the highest rating obtainable from either
Standard & Poor's Corporation or Moody's Investors Service, Inc., and (iii)
certificates of deposit maturing no more than one (1) year from the date of
investment therein issued by Bank;

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

                 (d) Investments consisting of receivables owing to Borrower or
its Subsidiaries by Persons and advances to customers or suppliers, in each
case, if created, acquired or made in the ordinary course of business; provided
that this paragraph (d) shall not apply to Investments owing by Subsidiaries to
Borrower;

                 (e) Investments consisting of (i) compensation of employees,
officers and directors of Borrower or its Subsidiaries so long as the Board of
Directors of Borrower determines that such compensation is in the best interests
of Borrower, (ii) travel advances, employee relocation loans and other employee
loans and advances in the ordinary course of business, (iii) loans to employees,
officers or directors relating to the purchase of equity securities of Borrower
or its Subsidiaries pursuant to employee stock purchase plans approved by
Borrower's board of directors, (iv) other loans to officers and employees
approved by the Board of Directors in an aggregate amount not in excess of Five
Hundred Thousand Dollars ($500,000) outstanding at any time;

                 (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 pursuant to or arising under currency
agreements or interest rate agreements entered into in the ordinary course of
business;

                 (h) Investments consisting of prepaid royalties and other
credit extensions to, customers and suppliers who are not Affiliates, in the
ordinary course of business;

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                 (i) Investments constituting acquisitions permitted under
SECTION 7.3;

                 (j) Deposit accounts of Borrower in which Bank has a Lien prior
to any other Lien;

                 (k) Deposit accounts of any Subsidiaries maintained in the
ordinary course of business;

                 (1) Investments accepted in connection with transfers permitted
by Section 7.1; and

                 (m) Other Investments aggregating not in excess of Two Hundred
and Fifty Thousand Dollars ($250,000) at any time.

                 "PERMITTED LIENS" means the following:

                 (a) Any Liens existing on the Closing Date and disclosed in the
Schedule or arising under this Agreement or the other Loan Documents;

                 (b) Liens for taxes, fees, assessments or other governmental
charges or levies, either not delinquent or being contested in good faith by
appropriate proceedings and as to which adequate reserves are maintained on
Borrower's Books in accordance with GAAP, provided the same have no priority
over any of Bank's security interests;

                 (c) Liens (i) upon or in any Equipment acquired or held by
Borrower or any of its Subsidiaries to secure the purchase price of such
Equipment or indebtedness incurred solely for the purpose of financing the
acquisition of such Equipment, or (ii) existing on such equipment at the time of
its acquisition, provided that the Lien is confined solely to the property so
acquired and improvements thereon, and the proceeds of such equipment;

                 (d) Leases or subleases and non-exclusive licenses and
sublicenses granted to others in the ordinary course of Borrower's business not
interfering in any material respect with the business of Borrower and its
Subsidiaries taken as a whole, and any interest or title of a lessor, licensor
or under any lease or license;

                 (e) Liens arising from judgments, decrees or attachments in
circumstances not constituting an Event of Default under SECTION 8.8;

                 (f) Easements, reservations rights-of-way, restrictions, minor
defects or irregularities in title and other similar charges or encumbrances
affecting real property not constituting a Material Adverse Effect;

                 (g) Liens that are not prior to the Lien of Bank which
constitute rights of set-off of a customary nature or bankers' Liens with
respect to amounts of deposit, whether

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arising by operation of law or by contract, in connection with arrangements
entered into with banks in the ordinary course of business;

                 (i) Earn-out and royalty obligations existing on the date
hereof or entered into in connection with an acquisition permitted by SECTION
7.3; and

                 (j) Liens incurred in connection with the extension, renewal or
refinancing of the indebtedness secured by Liens of the type described in
clauses (a), (c), and (d) above, provided that any extension, renewal or
replacement Lien shall be limited to the property encumbered by the existing
Lien and the principal amount of the indebtedness being extended, renewed or
refinanced does not increase.

                 "PERSON" means any individual, sole proprietorship,
partnership, limited liability company, joint venture, trust, unincorporated
organization, association, corporation, institution, public benefit corporation,
firm, joint stock company, estate, entity or governmental agency.

                 "PRIME RATE" means the variable rate of interest, per annum,
most recently announced by Bank, as its "prime rate," whether or not such
announced rate is the lowest rate available from Bank.

                 "QUICK ASSETS" means, as of any applicable date, the
consolidated cash, cash equivalents, accounts receivable and investments with
maturities of fewer than 90 days of Borrower determined in accordance with GAAP.

                 "RESPONSIBLE OFFICER" means each of the Chief Executive
Officer, the President, the Chief Financial Officer and the Controller of
Borrower.

                 "REVOLVING MATURITY DATE" means April 20, 1998.

                 "SCHEDULE" means the schedule of exceptions attached hereto, if
any.

                 "SUBORDINATED DEBT" means any debt incurred by Borrower that is
subordinated to the debt owing by Borrower to Bank on terms acceptable to Bank
(and identified as being such by Borrower and Bank).

                 "SUBSIDIARY" means with respect to any Person, corporation,
partnership, company association, joint venture, or any other business entity of
which more than fifty percent (50%) of the voting stock or other equity
interests is owned or controlled, directly or indirectly, by such Person or one
or more Affiliates of such Person.

                 "TANGIBLE NET WORTH" means as of any applicable date, the
consolidated total assets of Borrower and its Subsidiaries minus, without
duplication, (i) the sum of any amounts attributable to (a) goodwill, (b)
intangible items such as unamortized debt discount and expense, patents, trade
and service marks and names, copyrights and research and development

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expenses except prepaid expenses, and (c) all reserves not already deducted from
assets, and (ii) Total Liabilities.

                 "TOTAL LIABILITIES" means as of any applicable date, any date
as of which the amount thereof shall be determined, all obligations that should,
in accordance with GAAP be classified as liabilities on the consolidated balance
sheet of Borrower, including in any event all Indebtedness, but specifically
excluding Subordinated Debt.

          1.2    ACCOUNTING AND OTHER TERMS.  All accounting terms not
specifically defined herein shall be construed in accordance with GAAP and all
calculations and determinations made hereunder shall be made in accordance with
GAAP. When used herein, the term "financial statements" shall include the notes
and schedules thereto.  The terms "including"/ "includes" shall always be read
as meaning "including (or includes) without limitation", when used herein or in
any other Loan Document.

     2.   LOAN AND TERMS OF PAYMENT

          2.1    REVOLVING ADVANCES. Borrower promises to pay to the order of
Bank, in lawful money of the United States of America, the aggregate unpaid
principal amount of all Advances made by Bank to Borrower hereunder. Borrower
shall also pay interest on the unpaid principal amount of such Advances at rates
in accordance with the terms hereof.

                      (a) Subject to and upon the terms and conditions of this
Agreement, Bank agrees to make Advances to Borrower in an aggregate outstanding
amount not to exceed (a) until the Initial Public Offering: (i) Five Million
Dollars ($5,000,000) minus (ii) the face amount of all outstanding Letters of
Credit (including drawn but unreimbursed Letters of Credit), and (b) from and
after the Initial Public Offering and subject to Section 3.3: (i) the Committed
Revolving Line minus (ii) the face amount of all outstanding Letters of Credit
(including drawn but unreimbursed Letters of Credit). Subject to the terms and
conditions of this Agreement, amounts borrowed pursuant to this Section 2.1 may
be repaid and reborrowed at any time during the term of this Agreement.

                      (b) Whenever Borrower desires an Advance, Borrower will
notify Bank by facsimile transmission or telephone no later than 3:00 p.m.
Pacific time, on the Business Day that the Advance is to be made. Each such
notification shall be promptly confirmed by a Payment/Advance Form in
substantially the form of EXHIBIT B hereto. Bank is authorized to make Advances
under this Agreement, based upon instructions received from a Responsible
Officer or a designee of a Responsible Officer, or without instructions if in
Bank's discretion such Advances are necessary to meet Obligations which have
become due and remain unpaid. Bank shall be entitled to rely on any telephonic
notice given by a person who Bank reasonably believes to be a Responsible
Officer or a designee thereof, and Borrower shall indemnify and hold Bank
harmless for any damages or loss suffered by Bank as a result of such reliance.
Bank will credit the amount of Advances made under this SECTION 2.1 to
Borrower's deposit account.

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                       (c) The Committed Revolving Line shall terminate on the
Revolving Maturity Date, at which time all Advances under this SECTION 2.1 and
other amounts due under this Agreement (except as otherwise expressly specified
herein) shall be immediately due and payable.

               2.1.1   LETTERS OF CREDIT.

                      (a) Subject to the terms and conditions of this Agreement,
Bank agrees to issue or cause to be issued Letters of Credit for the account of
Borrower in an aggregate outstanding face amount not to exceed (i) the lesser of
the Committed Revolving Line or the Borrowing Base, whichever is less, minus
(ii) the then outstanding principal balance of the Advances; provided that the
face amount of outstanding Letters of Credit (including drawn but unreimbursed
Letters of Credit and any Letter of Credit Reserve) shall not in any case exceed
(i) Five Million Dollars ($5,000,000) or (ii) from and after the Initial Public
Offering, Ten Million Dollars ($10,000,000). Each Letter of Credit shall have an
expiry date no later than one hundred eighty (180) days after the Revolving
Maturity Date provided that Borrower's Letter of Credit reimbursement obligation
shall 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.
All Letters of Credit shall be, in form and substance, acceptable to Bank in its
sole discretion and shall be subject to the terms and conditions of Bank's form
of standard Application and Letter of Credit Agreement.

                      (b) The obligation of Borrower to immediately reimburse
Bank for drawings made under Letters of Credit shall be absolute, unconditional
and irrevocable, and shall be performed strictly in accordance with the terms of
this Agreement and such Letters of Credit, under all circumstances whatsoever.
Borrower shall indemnify, defend, protect, and hold Bank harmless from any loss,
cost, expense or liability, including, without limitation, reasonable attorneys'
fees, arising out of or in connection with any Letters of Credit.

                      (c) Borrower may request that Bank issue a Letter of
Credit payable in a currency other than United States Dollars. If a demand for
payment is made under any such Letter of Credit, Bank shall treat such demand as
an Advance to Borrower of the equivalent of the amount thereof (plus cable
charges) in United States currency at the then prevailing rate of exchange in
San Francisco, California, for sales of that other currency for cable transfer
to the country of which it is the currency.

                      (d) Upon the issuance of any letter of credit payable in a
currency other than United States Dollars, Bank shall create a reserve under the
Committed Revolving Line for letters of credit against fluctuations in currency
exchange rates, in an amount equal to ten percent (10%) of the face amount of
such letter of credit. The amount of such reserve may be amended by Bank from
time to time to account for fluctuations in the exchange rate. The availability
of funds under the Committed Revolving Line shall be reduced by the amount of
such reserve for so long as such letter of credit remains outstanding.

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          2.2    EQUIPMENT ADVANCES.

                 (a) Subject to and upon the terms and conditions of this
Agreement, at any time from the date hereof through April 21, 1998 (the
"Equipment Availability End Date"), Bank agrees to make advances (each an
"Equipment Advance" and collectively, the "Equipment Advances") to Borrower in
an aggregate outstanding amount not to exceed the Committed Equipment Line. To
evidence the Equipment Advance or Equipment Advances, Borrower shall deliver to
Bank, at the time of each Equipment Advance request, an invoice for the
Equipment, software and leaseholds to be purchased. The Equipment Advances shall
be used only to purchase Equipment, software and leaseholds and shall not exceed
One Hundred Percent (100%) of the invoice amount of such equipment, software and
leaseholds approved from time to time by Bank, excluding taxes, shipping,
warranty charges, freight discounts and installation expense.

                 (b) Interest shall accrue from the date of each Equipment
Advance at the rate specified in SECTION 2.3(A)(ii), and shall be payable
monthly for each month through the month in which the Equipment Availability End
Date falls. Any Equipment Advances that are outstanding on the Equipment
Availability End Date will be payable in thirty-six (36) equal monthly
installments of principal, and all accrued interest, beginning on the Payment
Date of each month following the Equipment Availability End Date and ending no
later than the Equipment Maturity Date. Equipment Advances, once repaid, may not
be reborrowed.

                 (c) When Borrower desires to obtain an Equipment Advance,
Borrower shall notify Bank (which notice shall be irrevocable) by facsimile
transmission to be received no later than 3:00 p.m. Pacific time one (1)
Business Day before the day on which the Equipment Advance is to be made. Such
notice shall be substantially in the form of EXHIBIT B. The notice shall be
signed by a Responsible Officer or its designee and include a copy of the
invoice for the Equipment to be financed.

Borrower promises to pay to the order of Bank, in lawful money of the United
States of America, the aggregate unpaid principal amount of all Advances made by
Bank to Borrower hereunder. Borrower shall also pay interest on the unpaid
principal amount of such Advances at rates in accordance with the terms hereof.

          2.3    INTEREST RATES, PAYMENTS, AND CALCULATIONS.

                 (a) INTEREST RATE.  Except as set forth in SECTION 2.3(B), (i)
any Advances under the Committed Revolving Line shall bear interest, on the
average daily balance thereof, at a per annum rate equal to the Prime Rate, and
(ii) any Advances under the Committed Equipment Line shall bear interest, on the
average daily balance thereof, at a per annum rate equal to one-half of one
(0.5) percentage point above the Prime Rate.

                 (b) DEFAULT RATE.  All Obligations shall bear interest, from
and after the occurrence of an Event of Default, at a rate equal to five (5)
percentage points above the interest rate applicable immediately prior to the
occurrence of the Event of Default.

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                 (c) PAYMENTS.  Interest hereunder shall be due and payable on
each Payment Date.. Borrower hereby authorizes Bank to debit any accounts with
Bank, including, without limitation, Account Number 3300051545 for payments of
principal and interest due on the Obligations and any other amounts owing by
Borrower to Bank. Bank will notify Borrower of all debits which Bank has made
against Borrower's accounts. Any such debits against Borrower's accounts in no
way shall be deemed a set-off. Any interest not paid when due shall be
compounded by becoming a part of the Obligations, and such interest shall
thereafter accrue interest at the rate then applicable hereunder.

                 (d) COMPUTATION.  In the event the Prime Rate is changed from
time to time hereafter, the applicable rate of interest hereunder shall be
increased or decreased effective as of 12:01 a.m. on the day the Prime Rate is
changed, by an amount equal to such change in the Prime Rate. All interest
chargeable under the Loan Documents shall be computed on the basis of a three
hundred sixty (360) day year for the actual number of days elapsed.

          2.4    CREDITING PAYMENTS.  Prior to the occurrence of an Event of
Default, Bank shall credit a wire transfer of funds, check or other item of
payment to such deposit account or Obligation as Borrower specifies. After the
occurrence of an Event of Default, the receipt by Bank of any wire transfer of
funds, check, or other item of payment, whether directed to Borrower's deposit
account with Bank or to the Obligations or otherwise,  shall be immediately
applied to conditionally reduce Obligations, but shall not be considered a
payment in respect of the Obligations unless such payment is of immediately
available federal funds or unless and until such check or other item of payment
is honored when presented for payment. Notwithstanding anything to the contrary
contained herein, any wire transfer or payment (other than a wire transfer of
immediately available funds) received by Bank after 12:00 noon Pacific time
shall be deemed to have been received by Bank as of the opening of business on
the immediately following Business Day.  Whenever any payment to Bank under the
Loan Documents would otherwise be due (except by reason of acceleration) on a
date that is not a Business Day, such payment shall instead be due on the next
Business Day, and additional fees or interest, as the case may be, shall accrue
and be payable for the period of such extension.

          2.5    FEES.  Borrower shall pay to Bank the following:

                 (a) FACILITY FEE. (i) A Facility Fee for the Committed
Revolving Line equal to Sixteen Thousand Two Hundred and Fifty Dollars
($16,250.00), of which Ten Thousand Dollars ($10,000.00) has been paid and Six
Thousand Two Hundred and Fifty Dollars ($6,250.00) shall be due subject to
Section 3.3 and is fully earned and non-refundable and (ii) A Facility Fee for
the Committed Equipment Line equal to Seven Thousand Five Hundred Dollars
($7,500.00), which fee has been paid and is fully earned and non-refundable;

                 (b) FINANCIAL EXAMINATION AND APPRAISAL FEES. Bank's customary
fees and out-of-pocket expenses for Bank's audits of Borrower's Accounts, and
for each appraisal of Collateral and financial analysis and examination of
Borrower performed from time to time by Bank or its agents;

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                 (c) BANK EXPENSES.  Upon demand from Bank, including, without
limitation, upon the date hereof, all Bank Expenses incurred through the date
hereof, including reasonable attorneys' fees and expenses, and, after the date
hereof, all Bank Expenses, including reasonable attorneys' fees and expenses, as
and when they become due.

          2.6    ADDITIONAL COSTS.  In case any change in any law, regulation,
treaty or official directive or the interpretation or application thereof by any
court or any governmental authority charged with the administration thereof or
the compliance with any guideline or request of any central bank or other
governmental authority (whether or not having the force of law), in each case
after the date of this Agreement:

                 (a) subjects Bank to any tax with respect to payments of
principal or interest or any other amounts payable hereunder by Borrower or
otherwise with respect to the transactions contemplated hereby (except for taxes
on the overall net income of Bank imposed by the United States of America or any
political subdivision thereof);

                 (b) imposes, modifies or deems applicable any deposit
insurance, reserve, special deposit or similar requirement against assets held
by, or deposits in or for the account of, or loans by, Bank; or

                 (c) imposes upon Bank any other condition with respect to its
performance under this Agreement,

and the result of any of the foregoing is to increase the cost to Bank, reduce
the income receivable by Bank or impose any expense upon Bank with respect to
any loans, Bank shall notify Borrower thereof. Borrower agrees to pay to Bank
the amount of such increase in cost, reduction in income or additional expense
as and when such cost, reduction or expense is incurred or determined, upon
presentation by Bank of a statement of the amount and setting forth Bank's
calculation thereof, all in reasonable detail, which statement shall be deemed
true and correct absent manifest error; provided, however, that the Borrower
shall not be liable for any such amount attributable to any period prior to the
date one hundred eighty (180) days prior to the date of such statement. Bank
agrees that it will allocate all such increased costs among its customers
similarly affected in good faith and in a manner consistent with Bank's
customary practice.

          2.7    TERM.  Except as otherwise set forth herein, this Agreement
shall become effective on the Closing Date and, subject to Section 12.7, shall
continue in full force and effect for a term ending on the later of the
Revolving Maturity Date or the Equipment Maturity Date. Notwithstanding the
foregoing, Bank shall have the right to terminate its obligation to make
Advances under this Agreement immediately and without notice upon the occurrence
and during the continuance of an Event of Default. Notwithstanding termination
of this Agreement, Bank's lien on the Collateral shall remain in effect for so
long as any Obligations (excluding Obligations under Sections 2.6 and 12.2 to
the extent they remain inchoate at the time outstanding payment Obligations are
paid in full) are outstanding.

                                     -12-
<PAGE>
 
     3.   CONDITIONS OF LOANS

          3.1    CONDITIONS PRECEDENT TO INITIAL ADVANCE.  The obligation of
Bank to make the initial Advance is subject to the condition precedent that Bank
shall have received, in form and substance satisfactory to Bank, the following:

                 (a) this Agreement;

                 (b) a certificate of the Secretary of Borrower with respect to
articles, bylaws, incumbency and resolutions authorizing the execution and
delivery of this Agreement;

                 (c) a negative pledge agreement covering intellectual property;

                 (d) financing statements (Forms UCC-1);

                 (e) insurance certificate;

                 (f) payment of the fees and Bank Expenses then due specified in
SECTION 2.5 hereof; and

                 (g) such other documents, and completion of such other matters,
as Bank may reasonably deem necessary or appropriate.

          3.2    CONDITIONS PRECEDENT TO REVOLVING ADVANCES UP TO $5,000,000.
The obligation of Bank to make Revolving Advances under the Committed Revolving
Line up to Five Million Dollars ($5,000,000), is further subject to the
following conditions:

                 (a) completion of an accounts receivable audit satisfactory to
Bank.

          3.3    CONDITIONS PRECEDENT TO INCREASE THE AMOUNT AVAILABLE UNDER THE
COMMITTED REVOLVING LINE TO $10,000,000. The obligation of Bank to increase the
amount available under the Committed Revolving Line to Ten Million Dollars
($10,000,000), is further subject to the following conditions:

                 (a) closing of the Initial Public Offering; and

                 (b) receipt by Bank of the Facility Fee in the amount of Six
Thousand Two Hundred and Fifty Dollars ($6,250.00).

          3.4    CONDITIONS PRECEDENT TO ALL ADVANCES. The obligation of Bank to
make each Advance, including the initial Advance, is further subject to the
following conditions:

                 (a) timely receipt by Bank of the Payment/Advance Form as
provided in SECTION 2.1; and

                                     -13-
<PAGE>
 
                 (b) the representations and warranties contained in Section 5
shall be true and correct in all material respects on and as of the dare of such
Payment/Advance Form and on the effective date of each Advance as though made at
and as of each such date, (except to the extent they relate specifically to an
earlier date, in which case such representations and warranties shall continue
to have been true and accurate as of such date) and no Event of Default shall
have occurred and be continuing, or would result from such Advance. The making
of each Advance shall be deemed to be a representation and warranty by Borrower
on the date of such Advance as to the accuracy of the facts referred to in this
Section 3.4(b).

     4.   CREATION OF SECURITY INTEREST

          4.1    GRANT OF SECURITY INTEREST.  Borrower grants and pledges to
Bank a continuing security interest in all presently existing and hereafter
acquired or arising Collateral in order to secure prompt payment of any and all
Obligations and in order to secure prompt performance by Borrower of each of its
covenants and duties under the Loan Documents. Except as set forth in the
Schedule, such security interest constitutes a valid, first priority security
interest in the presently existing Collateral, and will constitute a valid,
first priority security interest in Collateral acquired after the date hereof.
Borrower acknowledges that Bank may place a "hold" on any Deposit Account
pledged as Collateral to secure the Obligations. Notwithstanding termination of
this Agreement, Bank's Lien on the Collateral shall remain in effect for so long
as any Obligations are outstanding, in each case, to the extent a security
interest in the Collateral can be perfected by a filing, or, in the case of
Collateral consisting of instruments, documents, chattel paper, or certificated
securities, to the extent the Bank takes possession of such Collateral.

          4.2    DELIVERY OF ADDITIONAL DOCUMENTATION REQUIRED. Borrower shall
from time to time execute and deliver to Bank, at the request of Bank, all
Negotiable Collateral, all financing statements and other documents that flank
may reasonably request, in form satisfactory to Bank, to perfect and continue
perfected Bank's security interests in the Collateral and in order to fully
consummate all of the transactions contemplated under the Loan Documents.

          4.3    RIGHT TO INSPECT. Bank (through any of its officers, employees,
or agents) shall have the right, upon reasonable prior notice, from time to time
during Borrower's usual business hours, to inspect Borrower's Books and to make
copies thereof and to check, test, and appraise the Collateral in order to
verify Borrower's financial condition or the amount, condition of, or any other
matter relating to, the Collateral.

     5.   REPRESENTATIONS AND WARRANTIES

     Borrower represents and warrants as follows:

          5.1    DUE ORGANIZATION AND QUALIFICATION.  Borrower and each
Subsidiary is a corporation duly existing and in good standing under the laws of
its state of incorporation and qualified and licensed to do business in, and is
in good standing in, any state in which the

                                     -14-
<PAGE>
 
conduct of its business or its ownership of property requires that it be so
qualified (except for states as to which any failure so to qualify would not
have a Material Adverse Effect).

          5.2    DUE AUTHORIZATION; NO CONFLICT.  The execution, delivery, and
performance of the Loan Documents are within Borrower's powers, have been duly
authorized, and are not in conflict with nor constitute a breach of any
provision contained in Borrower's Articles of Incorporation or Bylaws, nor will
they constitute an event of default under any material agreement to which
Borrower is a party or by which Borrower is bound. Borrower is not in default
under any agreement to which it is a party or by which it is bound, which
default would reasonably be expected to have a Material Adverse Effect.

          5.3    NO PRIOR ENCUMBRANCES.  Borrower has good and indefeasible
title to the Collateral, free and clear of Liens, except for Permitted Liens.

          5.4    MERCHANTABLE INVENTORY.  All Inventory is in all material
respects of good and marketable quality, free from all material defects.

          5.5    NAME; LOCATION OF CHIEF EXECUTIVE OFFICE.  Except as disclosed
in the Schedule, Borrower has not done business and will not without at least
thirty (30) days prior written notice to Bank do business under any name other
than that specified on the signature page hereof. The chief executive office of
Borrower is located at the address indicated in Section 10 hereof.

          5.6    LITIGATION.  Except as set forth in the Schedule, there are no
actions or proceedings pending, or, to Borrower's knowledge, threatened by or
against Borrower or any Subsidiary before any court or administrative agency in
which a likely adverse decision would reasonably be expected to have a Material
Adverse Effect or a material adverse effect on Borrower's interest or Bank's
security interest in the Collateral

          5.7    NO MATERIAL ADVERSE CHANGE IN FINANCIAL STATEMENTS.  All
consolidated financial statements related to Borrower and any Subsidiary that
have been delivered by Borrower to Bank fairly present in all material respects
Borrower's consolidated financial condition as of the date thereof and
Borrower's consolidated results of operations for the period then ended. There
has not been a material adverse change in the consolidated financial condition
of Borrower since the date of the most recent of such financial statements
submitted to Bank on or about the Closing Date.

          5.8    SOLVENCY.  Borrower is able to pay its debts (including trade
debts) as they mature.

          5.9    REGULATORY COMPLIANCE.  Borrower and each Subsidiary has met
the minimum funding requirements of ERISA with respect to any employee benefit
plans subject to ERISA. No event has occurred resulting from Borrower's failure
to comply with ERISA that is reasonably likely to result in Borrower's incurring
any liability that would reasonably be expected to have a Material Adverse
Effect. Borrower is not an "investment company" or a

                                     -15-
<PAGE>
 
company "controlled" by an "investment company" within the meaning of the
Investment Company Act of 1940.  Borrower is not engaged principally, or as one
of its important activities, in the business of extending credit for the purpose
of purchasing or carrying margin stock (within the meaning of Regulations G, T
and U of the Board of Governors of the Federal Reserve System). Borrower has
complied with all the provisions of the Federal Fair Labor Standards Act.
Borrower has not violated any statutes, laws, ordinances or rules applicable to
it, violation of which could have a Material Adverse Effect.

          5.10   ENVIRONMENTAL CONDITION.  None of Borrower's or any
Subsidiary's properties or assets has ever been used by Borrower or any
Subsidiary or, to the best of Borrower's knowledge, by previous owners or
operators, in the disposal of, or to produce, store, handle, treat, release, or
transport, any hazardous waste or hazardous substance other than in accordance
with applicable law; to the best of Borrower's knowledge, none of Borrower's
properties or assets has ever been designated or identified in any manner
pursuant to any environmental protection statute as a hazardous waste or
hazardous substance disposal site, or a candidate for closure pursuant to any
environmental protection statute; no lien arising under any environmental
protection statute has attached to any revenues or to any real or personal
property owned by Borrower or any Subsidiary; and neither Borrower nor any
Subsidiary has received a summons, citation, notice, or directive from the
Environmental Protection Agency or any other federal, state or other
governmental agency concerning any action or omission by Borrower or any
Subsidiary resulting in the release, or other disposition of hazardous waste or
hazardous substances into the environment.

          5.11   TAXES.  Borrower and each Subsidiary has filed or caused to be
filed all tax returns required to be filed on a timely basis, and has paid, or
has made adequate provision for the payment of, all taxes reflected therein.

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

          5.13   GOVERNMENT CONSENTS.  Borrower and each Subsidiary has obtained
all consents, approvals and authorizations of, made all declarations or filings
with, and given all notices to, all governmental authorities that are necessary
for the continued operation of Borrower's business as currently conducted,
except where the failure to obtain such consent, approval or authorization, to
make any such declaration or filing or to give any such notice would not
reasonably be expected to have a Material Adverse Effect.

          5.14   FULL DISCLOSURE.  No representation, warranty or other
statement made by Borrower in any certificate or written statement furnished to
Bank by Borrower in connection with the transaction contemplated by this
Agreement, taken as a whole contains any untrue statement of a material fact or
omits to state a material fact necessary in order to make the statements
contained in such certificates or statements not misleading (it being recognized
by the Bank that the projections and forecasts provided by Borrower are not to
be viewed as facts and that actual results during the period or periods covered
by any such projections and forecasts may differ from the projected or
forecasted results).

                                     -16-
<PAGE>
 
     6.   Affirmative Covenants

          Borrower covenants and agrees that, until payment in full of all
outstanding Obligations, and for so long as Bank may have any commitment to make
a Credit Extension hereunder, Borrower shall do all of the following:

          6.1    GOOD STANDING.  Borrower shall maintain or cause to be
maintained its and each of its Subsidiaries' corporate existence and good
standing in its jurisdiction of incorporation and maintain qualification in each
jurisdiction in which the failure to so qualify would be expected to have a
Material Adverse Effect. Borrower shall maintain, and shall cause each of its
Subsidiaries to maintain, to the extent consistent with prudent management of
Borrower's business, in force all licenses, approvals and agreements, the loss
of which would reasonably be expected to have a Material Adverse Effect.

          6.2    GOVERNMENT COMPLIANCE.  Borrower shall meet, and shall cause
each Subsidiary to meet, the minimum funding requirements of ERISA with respect
to any employee benefit plans subject to ERISA. Borrower shall comply, and shall
cause each Subsidiary to comply, with all statutes, laws, ordinances and
government rules and regulations to which it is subject, noncompliance with
which could have a Material Adverse Effect or a material adverse effect on the
Collateral or the priority of Bank's Lien on the Collateral.

          6.3    FINANCIAL STATEMENTS, REPORTS, CERTIFICATES.  Borrower shall
deliver to Bank: (a) when there are Advances outstanding under the Committed
Revolving Line or the Committed Equipment Line, as soon as available, but in any
event within fifteen (15) days after the end of each month, a company prepared
consolidated balance sheet and income statement covering Borrower's consolidated
operations during such period, in a form and certified by an officer of Borrower
reasonably acceptable to Bank; (b) when there are no Advances outstanding under
the Committed Revolving Line or the Committed Equipment Line, as soon as
available, but in any event within thirty (30) days after the end of each
quarter, a company prepared consolidated balance sheet and income statement
covering Borrower's consolidated operations during such period, in a form and
certified by an officer of Borrower reasonably acceptable to Bank; (c) as soon
as available, but in any event within ninety (90) days after the end of
Borrower's fiscal year, audited consolidated financial statements of Borrower
prepared in accordance with GAAP), consistently applied, together with an
unqualified opinion on such financial statements of an independent certified
public accounting firm reasonably acceptable to Bank; (d) from and after the
Initial Public Offering, within five (5) days of filing, copies of all
statements, reports and notices sent or made available generally by Borrower to
its 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; (e)
promptly upon receipt of notice thereof, a report of any legal actions pending
or threatened against Borrower or any Subsidiary that could result in damages or
costs to Borrower or any Subsidiary of One Hundred Thousand Dollars ($100,000)
or more; and (f) such budgets, sales projections, operating plans or other
financial information as Bank may reasonably request from time to time.

                                     -17-
<PAGE>
 
     When there are Advances outstanding under the Committed Revolving Line or
the Committed Equipment Line, within fifteen (15) days after the last day of
each month, Borrower shall deliver to Bank with the monthly financial statements
a Compliance Certificate signed by a Responsible Officer in substantially the
form of EXHIBIT C hereto.  When there are no Advances outstanding under the
Committed Revolving Line or the Committed Equipment Line, within thirty (30)
days after the last day of each quarter, Borrower shall deliver to Bank with the
quarterly financial statements a Compliance Certificate signed by a Responsible
Officer in substantially the form of EXHIBIT C hereto.

     Prior to the initial Advance under the Committed Revolving Line, an audit
of Borrower's Accounts shall be completed, with results satisfactory to Bank.
When there are Advances outstanding under the Committed Revolving Line, Bank
shall have a right from time to time hereafter to audit Borrower's Accounts at
Borrower's expense, provided that such audits will be conducted no more often
than every six (6) months unless an Event of Default has occurred and is
continuing.

          6.4    INVENTORY; RETURNS.  Borrower shall keep all Inventory in good
and marketable condition, free from all material defects. Returns and
allowances, if any, as between Borrower and its account debtors shall be on the
same basis and in accordance with the usual customary practices of Borrower, as
they exist at the time of the execution and delivery of this Agreement. Borrower
shall promptly notify Bank of all returns and recoveries and of all disputes and
claims, where the return, recovery, dispute or claim involves more than Fifty
Thousand Dollars ($50,000).

          6.5    TAXES.  Borrower shall make, and shall cause each Subsidiary to
make, due and timely payment or deposit of all material federal, state, and
local taxes, assessments, or contributions required of it by law, and will
execute and deliver to Bank, on demand, appropriate certificates attesting to
the payment or deposit thereof; and Borrower will make, and will cause each
Subsidiary to make, timely payment or deposit of all material tax payments and
withholding taxes required of it by applicable laws, including, but not limited
to, those laws concerning F.I.C.A., F.U.T.A., state disability, and local,
state, and federal income taxes, and will, upon request, furnish Bank with proof
satisfactory to Bank indicating that Borrower or a Subsidiary has made such
payments or deposits; provided that Borrower or a Subsidiary need not make any
payment if the amount or validity of such payment is (i) contested in good faith
by appropriate proceedings , (ii) is reserved against (to the extent required by
GAAP) by Borrower and (iii) no lien other than a Permitted Lien results.

          6.6    INSURANCE.

                 (a)  Borrower, at its expense, shall keep the Collateral
insured against loss or damage by fire, theft, explosion, sprinklers, and all
other hazards and risks, and in such amounts, as ordinarily insured against by
other owners in similar businesses conducted in the locations where Borrower's
business is conducted on the date hereof. Borrower shall also maintain insurance
relating to Borrower's ownership and use of the Collateral in amounts and of a
type that are customary to businesses similar to Borrower's.

                                     -18-
<PAGE>
 
                 (b) All such policies of insurance shall be in such form, with
such companies, and in such amounts as are reasonably satisfactory to Bank. All
such policies of property insurance shall contain a lender's loss payable
endorsement, in a form satisfactory to Bank, showing Bank as an additional loss
payee thereof and all liability insurance policies shall show the Bank as an
additional insured, and shall specify that the insurer must give at least twenty
(20) days notice to Bank before canceling its policy for any reason. At Bank's
request, Borrower shall deliver to Bank certified copies of such policies of
insurance and evidence of the payments of all premiums therefor. All proceeds
payable under any such policy shall, at the option of Bank, be payable to Bank
to be applied on account of the Obligations.

          6.7    PRINCIPAL DEPOSITORY.  Borrower shall maintain its principal
depository and operating accounts with Bank.

          6.8    QUICK RATIO.  (i) When there are Advances outstanding under the
Committed Revolving Line or the Committed Equipment Line, Borrower shall
maintain, as of the last day of each calendar month, a ratio of Quick Assets to
Current Liabilities of at least 1.75 to 1.00; or (ii) when there are no Advances
outstanding under the Committed Revolving Line or the Committed Equipment Line,
Borrower shall maintain, as of the last day of each calendar quarter, a ratio of
Quick Assets to Current Liabilities of at least 1.75 to 1.00

          6.9    DEBT-NET WORTH RATIO.  (i) When there are Advances outstanding
under the Committed Revolving Line or the Committed Equipment Line, Borrower
shall maintain, as of the last day of each calendar month; a ratio of Total
Liabilities to Tangible Net Worth of not more than 1.25 to 1.00; or (ii) when
there are no Advances outstanding under the Committed Revolving Line or the
Committed Equipment Line, Borrower shall maintain, as of the last day of each
calendar quarter, a ratio of Total Liabilities to Tangible Net Worth of not more
than 1.25 to 1.00.

          6.10   PROFITABILITY.  Borrower shall be profitable for each fiscal
quarter, except Borrower may suffer a loss for one fiscal quarter in any fiscal
year not to exceed Five Hundred Thousand Dollars ($500,000).

          6.11   MINIMUM DEBT SERVICE.  Borrower shall maintain, as of the last
calendar day of each quarter, a Debt Service ratio of at least 1.50 to 1.00,
provided, however, that Borrower may report a Debt Service ratio of less then
1.50 to 1.00 for one fiscal quarter in any fiscal year. "DEBT SERVICE" is
defined as earnings after taxes plus interest plus depreciation, divided by the
current portion of long term debt plus interest.

          6.12   FURTHER ASSURANCES.  At any time and from time to time Borrower
shall execute and deliver such further instruments and take such further action
as may reasonably be requested by Bank to effect the purposes of this Agreement.

                                     -19-
<PAGE>
 
     7.   NEGATIVE COVENANTS

          Borrower covenants and agrees that, so long as any Credit Extension
hereunder shall be available and until payment in full of the outstanding
Obligations or for so long as Bank may have any commitment to make any Advances,
Borrower will not do any of the following:

          7.1    DISPOSITIONS.  Convey, sell, lease, transfer or otherwise
dispose of (collectively, a "Transfer"), or permit any of its Subsidiaries to
Transfer, all or any part of its business or property, other than Transfers: (i)
of inventory 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) that constitute payment
of normal and usual operating expenses in the ordinary course of business;; or
(iii) of worn-out or obsolete Equipment.

          7.2    CHANGES IN BUSINESS, OWNERSHIP, OR MANAGEMENT, BUSINESS
LOCATIONS.  Engage in any business, or permit any of its Subsidiaries to engage
in any business, other than the businesses currently engaged in by Borrower and
any business substantially similar or related thereto (or incidental thereto),
or suffer a change in Borrower's ownership other than the sale by Borrower of
equity securities of Borrower. Borrower will not, without at least thirty (30)
days prior written notification to Bank, relocate its chief executive office or
add any new offices or business locations.

          7.3    MERGERS OR ACQUISITIONS.  Merge or consolidate, or permit any
of its Subsidiaries to merge or consolidate, with or into any other business
organization, or acquire, or permit any of its Subsidiaries to acquire, all or
substantially all of the capital stock or property of another Person.

          7.4    INDEBTEDNESS.  Create, incur, assume or be or remain liable
with respect to any Indebtedness, or permit any Subsidiary so to do, other than
Permitted Indebtedness.

          7.5    ENCUMBRANCES.  Create, incur, assume or suffer to exist any
Lien with respect to any of its property, or assign or otherwise convey any
right to receive income, including the sale of any Accounts, or permit any of
its Subsidiaries so to do, except for Permitted Liens.

          7.6    DISTRIBUTIONS.  Pay any dividends or make any other
distribution or payment on account of or in redemption, retirement or purchase
of any capital stock, except for repurchases of stock from former employees of
Borrower in accordance with the terms of repurchased or similar agreements
between Borrower and such employees in an aggregate amount not to exceed Two
Hundred and Fifty Thousand Dollars ($250,000), provided, however, that
immediately prior to and following such repurchases there exists no Event of
Default under the Loan Documents.

                                     -20-
<PAGE>
 
          7.7    INVESTMENTS.  Directly or indirectly acquire or own, or make
any Investment in or to any Person, or permit any of its Subsidiaries so to do,
other than Permitted Investments.

          7.8    TRANSACTIONS WITH AFFILIATES.  Directly or indirectly enter
into or permit to exist any material transaction with any Affiliate of Borrower
except for transactions that are in the ordinary course of Borrower's business,
upon fair and reasonable terms that are no less favorable to Borrower than would
be obtained in an arm's length transaction with a nonaffiliated Person.

          7.9    SUBORDINATED DEBT.  Make any payment in respect of any
Subordinated Debt, or permit any of its Subsidiaries to make any such payment,
except in compliance with the terms of such Subordinated Debt, or amend any
provision contained in any documentation relating to the Subordinated Debt
without Bank's prior written consent.

          7.10   INVENTORY.  Store the Inventory with a bailee, warehouseman, or
similar party unless Bank has received a pledge of any warehouse receipt
covering such Inventory. Except for Inventory sold in the ordinary course of
business and except for such other locations as Bank may approve in writing,
Borrower shall keep the Inventory only at the location set forth in Section 10
hereof and such other locations of which Borrower gives Bank prior written
notice and as to which Borrower signs and files a financing statement where
needed to perfect Bank's security interest.

          7.11   COMPLIANCE.  Become an "investment company" or a company
controlled by an "investment company," within the meaning of the Investment
Company Act of 1940, or become principally engaged in, or undertake as one of
its important activities, the business of extending credit for the purpose of
purchasing or carrying margin stock, or use the proceeds of any Advance for such
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, which violation could have a Material Adverse Effect or a material
adverse effect on the Collateral or the priority of Bank's Lien on the
Collateral; or permit any of its Subsidiaries to do any of the foregoing.

     8.   EVENTS OF DEFAULT

     Any one or more of the following events shall constitute an Event of
Default by Borrower under this Agreement:

          8.1    PAYMENT DEFAULT.  If Borrower fails to pay, when due, any of
the Obligations.

                                     -21-
<PAGE>
 
          8.2    COVENANT DEFAULT.

                 (a) If Borrower fails to perform any obligation under Sections
6.3, 6.6, 6.7, 6.8, 6.9, 6.10, or 6.11 or violates any of the covenants
contained in Article 7 of this Agreement, or

                 (b) If Borrower fails or neglects to perform, keep, or observe 
any other material term, provision, condition, covenant, or agreement contained
in this Agreement, in any of the Loan Documents, or in any other present or
future agreement between Borrower and Bank and as to any default under such
other term, provision, condition, covenant or agreement that can be cured, has
failed to cure such default within ten (10) days after the occurrence thereof;
provided, however, that if the default cannot by its nature be cured within the
ten (10) day period or cannot after diligent attempts by Borrower be cured
within such ten (10) day period, and such default is likely to be cured within a
reasonable time, then Borrower shall have an additional reasonable period (which
shall not in any case exceed thirty (30) days) to attempt to cure such default,
and within such reasonable time period the failure to have cured such default
shall not be deemed an Event of Default (provided that no Advances will be
required to be made during such cure period);

          8.3    MATERIAL ADVERSE CHANGE.  If there (i) occurs a material
adverse change in the business, operations, or condition (financial or
otherwise) of the Borrower, or (ii) is a material impairment of the prospect of
repayment of any portion of the Obligations or (iii) is a material impairment of
the value or priority of Bank's security interests in the Collateral;

          8.4    ATTACHMENT.  If any material portion of Borrower's assets is
attached, seized, subjected to a writ or distress warrant, or is levied upon, or
comes into the possession of any trustee, receiver or person acting in a similar
capacity and such attachment, seizure, writ or distress warrant or levy has not
been removed, discharged or rescinded within ten (10) days, or if Borrower is
enjoined, restrained, or in any way prevented by court order from continuing to
conduct all or any material part of its business affairs, or if a judgment or
other claim becomes a lien or encumbrance upon any material portion of
Borrower's assets, or if a notice of lien, levy, or assessment is filed of
record with respect to any of Borrower's assets by the United States Government,
or any department, agency, or instrumentality thereof, or by any state, county,
municipal, or governmental agency, and the same is not paid within ten (10) days
after Borrower receives notice thereof, provided that none of the foregoing
shall constitute an Event of Default where such action or event is stayed or an
adequate bond has been posted pending a good faith contest by Borrower (provided
that no Advances will be required to be made during such cure period);

          8.5    INSOLVENCY.  If Borrower becomes insolvent, or if an Insolvency
Proceeding is commenced by Borrower, or if an Insolvency Proceeding is commenced
against Borrower and is not dismissed or stayed within 30 days (provided that no
Advances will be made prior to the dismissal of such Insolvency Proceeding);

                                     -22-
<PAGE>
 
          8.6    OTHER AGREEMENTS.  If there is a default in any agreement to
which Borrower is a party with a third party or parties resulting in a right by
such third party or parties, whether or not exercised, to accelerate the
maturity of any Indebtedness in an amount in excess of One Hundred Thousand
Dollars ($100,000) or that could have a Material Adverse Effect;

          8.7    SUBORDINATED DEBT.  If Borrower makes any payment on account of
Subordinated Debt, except to the extent such payment is allowed under any
subordination agreement entered into with Bank;

          8.8    JUDGMENTS.  If a judgment or judgments for the payment of money
in an amount, individually or in the aggregate, of at least Fifty Thousand
Dollars ($50,000) shall be rendered against Borrower and shall remain
unsatisfied and unstayed for a period of ten (10) days (provided that no
Advances will be made prior to the satisfaction or stay of such judgment); or

          8.9    MISREPRESENTATIONS.  If any material misrepresentation or
material misstatement exists now or hereafter in any warranty or representation
set forth herein or in any certificate or writing delivered to Bank by Borrower
or any Person acting on Borrower's behalf pursuant to this Agreement or to
induce Bank to enter into this Agreement or any other Loan Document.

     9.   Bank's Rights And Remedies

          9.1    RIGHTS AND REMEDIES.  Upon the occurrence and during the
continuance of an Event of Default, Bank may, at its election, without notice of
its election and without demand, do any one or more of the following, all of
which are authorized by Borrower:

                 (a) Declare all Obligations, whether evidenced by this
Agreement, by any of the other Loan Documents, or otherwise, immediately due and
payable (provided that upon the occurrence of an Event of Default described in
Section 8.5 all Obligations shall become immediately due and payable without any
action by Bank);

                 (b) Cease advancing money or extending credit to or for the
benefit of Borrower under this Agreement or under any other agreement between
Borrower and Bank;

                 (c) Demand that Borrower (i) deposit cash with Bank in an
amount equal to the amount of any Letters of Credit remaining undrawn, as
collateral security for the repayment of any future drawings under such Letters
of Credit, and Borrower shall forthwith deposit and pay such amounts, and (ii)
pay in advance all Letters of Credit fees scheduled to be paid or payable over
the remaining term of the Letters of Credit;

                 (d) Settle or adjust disputes and claims directly with account
debtors for amounts, upon terms and in whatever order that Bank reasonably
considers advisable;

                                     -23-
<PAGE>
 
                 (e) Without notice to or demand upon Borrower, make such
payments and do such acts as Bank considers necessary or reasonable to protect
its security interest in the Collateral. Borrower agrees to assemble the
Collateral if Bank so requires, and to make the Collateral available to Bank as
Bank may designate. Borrower authorizes Bank to enter the premises where the
Collateral is located, to take and maintain possession of the Collateral, or any
part of it, and to pay, purchase, contest, or compromise any encumbrance,
charge, or lien which in Bank's determination appears to be prior or superior to
its security interest and to pay all expenses incurred in connection therewith.
With respect to any of Borrower's premises, Borrower hereby grants Bank a
license to enter such premises and to occupy the same, without charge in order
to exercise any of Bank's rights or remedies provided herein, at law, in equity,
or otherwise;

                 (f) Without notice to Borrower set off and apply to the
Obligations any and all (i) balances and deposits of Borrower held by Bank, or
(ii) indebtedness at any time owing to or for the credit or the account of
Borrower held by Bank;

                 (g) Ship, reclaim, recover, store, finish, maintain, repair,
prepare for sale, advertise for sale, and sell (in the manner provided for
herein) the Collateral. Bank is hereby granted a non-exclusive, royalty-free
license or other right, solely pursuant to the provisions of this Section 9.1,
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 property of a similar nature, 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 9.1, Borrower's rights under all licenses and all franchise
agreements shall inure to Bank's benefit;

                 (h) Sell the Collateral at either a public or private sale, or
both, by way of one or more contracts or transactions, for cash or on terms, in
such manner and at such places (including Borrower's premises) as Bank
determines is commercially reasonable, and apply the proceeds thereof to the
Obligations in whatever manner or order it deems appropriate;

                 (i) Bank may credit bid and purchase at any public sale, or at
any private sale as permitted by law; and

                 (j) Any deficiency that exists after disposition of the
Collateral as provided above will be paid immediately by Borrower.

          9.2    POWER OF ATTORNEY.  Effective only upon the occurrence and
during the continuance of an Event of Default, Borrower hereby irrevocably
appoints Bank (and any of Bank's designated officers, or employees) as
Borrower's true and lawful attorney to: (a) send requests for verification of
Accounts or notify account debtors of Bank's security interest in the Accounts;
(b) endorse Borrower's name on any checks or other forms of payment or security
that may come into Bank's possession; (c) sign Borrower's name on any invoice or
bill of lading relating to any Account, drafts against account debtors,
schedules and assignments of Accounts, verifications of Accounts, and notices to
account debtors; (d) make, settle, and adjust all claims

                                     -24-
<PAGE>
 
under and decisions with respect to Borrower's policies of insurance; and (e)
settle and adjust disputes and claims respecting the accounts directly with
account debtors, for amounts and upon terms which Bank determines to be
reasonable; provided Bank may exercise such power of attorney to sign the name
of Borrower on any of the documents described in Section 4.2 regardless of
whether an Event of Default has occurred.  The appointment of Bank as Borrower's
attorney in fact, and each and every one of Bank's rights and powers, being
coupled with an interest, is irrevocable until all of the Obligations have been
fully repaid and performed and Bank's obligation to provide advances hereunder
is terminated.

          9.3    ACCOUNTS COLLECTION.  Upon the occurrence and during the
continuance of an Event of Default, Bank may notify any Person owing funds to
Borrower of Bank's security interest in such funds and verify the amount of such
Account. Borrower shall collect all amounts owing to Borrower for Bank, receive
in trust all payments as Bank's trustee, and if requested or required by Bank,
immediately deliver such payments to Bank in their original form as received
from the account debtor, with proper endorsements for deposit.

          9.4    BANK EXPENSES.  If Borrower fails to pay any amounts or furnish
any required proof of payment due to third persons or entities, as required
under the terms of this Agreement, then Bank may do any or all of the following:
(a) make payment of the same or any part thereof; (b) set up such reserves under
the Committed Revolving Line or the Committed Equipment Line as Bank deems
necessary to protect Bank from the exposure created by such failure; or (c)
obtain and maintain insurance policies of the type discussed in Section 6.6 of
this Agreement, and take any action with respect to such policies as Bank deems
prudent. Any amounts so paid or deposited by Bank shall constitute Bank
Expenses, shall be immediately due and payable, and shall bear interest at the
then applicable rate hereinabove provided, and shall be secured by the
Collateral. Any payments made by Bank shall not constitute an agreement by Bank
to make similar payments in the future or a waiver by Bank of any Event of
Default under this Agreement.

          9.5    BANK'S LIABILITY FOR COLLATERAL.  So long as Bank complies with
reasonable banking practices, Bank shall not in any way or manner be liable or
responsible for: (a) the safekeeping of the Collateral; (b)any loss or damage
thereto occurring or arising in any manner or fashion from any cause; (c) any
diminution in the value thereof; or (d) any act or default of any carrier,
warehouseman, bailee, forwarding agency, or other person whomsoever. All risk of
loss, damage or destruction of the Collateral shall be borne by Borrower.

          9.6    REMEDIES CUMULATIVE.  Bank's rights and remedies under this
Agreement, the Loan Documents, and all other agreements shall be cumulative.
Bank shall have all other rights and remedies not expressly set forth herein as
provided under the Code, by law, or in equity. No exercise by Bank of one right
or remedy shall be deemed an election, and no waiver by Bank of any Event of
Default on Borrower's part shall be deemed a continuing waiver. No delay by Bank
shall constitute a waiver, election, or acquiescence by it. No waiver by Bank
shall be effective unless made in a written document signed on behalf of Bank
and then shall be effective only in the specific instance and for the specific
purpose for which it was given.

                                     -25-
<PAGE>
 
          9.7    DEMAND; PROTEST;  Borrower waives demand, protest, notice of
protest, 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 at any time held by Bank on which Borrower may in any way be liable.

     10.  NOTICES

     Unless otherwise provided in this Agreement, all notices or demands by any
party relating to this Agreement or any other agreement entered into in
connection herewith shall be in writing and (except for financial statements and
other informational documents which may be sent by first-class mail, postage
prepaid) shall be personally delivered or sent by a recognized overnight
delivery service, by certified mail, postage prepaid, return receipt requested,
or by telefacsimile to Borrower or to Bank, as the case may be, at its addresses
set forth below:


     If to Borrower: MMC Networks, Inc.
                     1134 E. Arques Avenue
                     Sunnyvale, CA 94086
                     Attn:  William R. Walker
                     FAX: 408/731-1660

     If to Bank:     Silicon Valley Bank
                     3003 Tasman Drive
                     Santa Clara, CA 95054
                     Attn: Mike Rose
                     FAX: 408/748-9478

     The parties hereto may change the address at which they are to receive
notices hereunder, by notice in writing in the foregoing manner given to the
other.

     11.  CHOICE OF LAW AND VENUE

          The Loan Documents shall be governed by, and construed in accordance
with, the internal laws of the State of California, without regard to principles
of conflicts of law. Each of Borrower and Bank hereby submits to the exclusive
jurisdiction of the state and Federal courts located in the County of Santa
Clara, State of California. BORROWER AND BANK EACH HEREBY WAIVE THEIR RESPECTIVE
RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT
OF ANY OF THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN,
INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER
COMMON LAW OR STATUTORY CLAIMS. EACH PARTY RECOGNIZES AND AGREES THAT THE
FOREGOING WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR IT TO ENTER INTO THIS
AGREEMENT.  EACH PARTY REPRESENTS AND WARRANTS THAT IT HAS REVIEWED THIS WAIVER
WITH ITS

                                     -26-
<PAGE>
 
LEGAL COUNSEL AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS
FOLLOWING CONSULTATION WITH LEGAL COUNSEL.

     12.  GENERAL PROVISIONS

          12.1  SUCCESSORS AND ASSIGNS.  This Agreement shall bind and inure to
the benefit of the respective successors and permitted assigns of each of the
parties; provided, however, that neither this Agreement nor any rights hereunder
may be assigned by Borrower without Bank's prior written consent, which consent
may be granted or withheld in Bank's sole discretion.  Bank shall have 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 hereunder.

          12.2   INDEMNIFICATION.  Borrower shall, indemnify, defend, protect
and hold harmless Bank and its officers, employees, and agents against: (a) all
obligations, demands, claims, and liabilities claimed or asserted by any other
party in connection with the transactions contemplated by the Loan Documents;
and (b)all losses or Bank Expenses in any way suffered, incurred, or paid by
Bank as a result of or in any way arising out of, following, or consequential to
transactions between Bank and Borrower whether under the Loan Documents, or
otherwise (including without limitation reasonable attorneys fees and expenses),
except for losses caused by Bank's gross negligence or willful misconduct.

          12.3   TIME OF ESSENCE.  Time is of the essence for the performance of
all obligations set forth in this Agreement.

          12.4   SEVERABILITY OF PROVISIONS.  Each provision of this Agreement
shall be severable from every other provision of this Agreement for the purpose
of determining the legal enforceability of any specific provision.

          12.5   AMENDMENTS IN WRITING, INTEGRATION.  This Agreement cannot be
amended or terminated except by a writing signed by Borrower and Bank. All prior
agreements, understandings, representations, warranties, and negotiations
between the parties hereto with respect to the subject matter of this Agreement,
if any, are merged into this Agreement and the Loan Documents.

          12.6   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, shall be deemed to be an original, and all of
which, when taken together, shall constitute but one and the same Agreement.

          12.7   SURVIVAL.  All covenants, representations and warranties made
in this Agreement shall continue in full force and effect so long as any
Obligations remain outstanding. The obligations of Borrower to indemnify Bank
with respect to the expenses, damages, losses, costs and liabilities described
in Section 12.2 shall survive until all applicable statute of limitations
periods with respect to actions that may be brought against Bank have run;
provided

                                     -27-
<PAGE>
 
that so long as the obligations referred to in the first sentence of this
Section 12.7 have been satisfied, and Bank has no commitment to make any
Advances or to make any other loans to Borrower, Bank shall release all security
interests granted hereunder and redeliver all Collateral held by it in
accordance with applicable law.

          12.8   CONFIDENTIALITY.  In handling any confidential information Bank
shall exercise the same degree of care that it exercises with respect to its own
proprietary information of the same types to maintain the confidentiality of any
non-public information thereby received or received pursuant to this Agreement
except that disclosure of such information may be made (i) to the subsidiaries
or affiliates of Bank in connection with their present or prospective business
relations with Borrower, (ii) to prospective transferees or purchasers of any
interest in the Loans, provided that they have entered into a comparable
confidentiality agreement in favor of Borrower and have delivered a copy to
Borrower, (iii) as required by law, regulations, rule or order, subpoena,
judicial order or similar order, (iv) as may be required in connection with the
examination, audit or similar investigation of Bank, and (v) as Bank may deem
appropriate in connection with the exercise of any remedies hereunder.
Confidential information hereunder shall not include information that either:
(a) is in the public domain or in the knowledge or possession of Bank when
disclosed to Bank, or becomes part of the public domain after disclosure to Bank
through no fault of Bank; or (b) is disclosed to Bank by a third party, provided
Bank does not have actual knowledge that such third party is prohibited from
disclosing such information.

                                     -28-
<PAGE>
 
     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.



                                    MMC NETWORKS, INC.


                                    By: /s/ William R. Walker
                                       --------------------------------

                                    Title:  Secretary
                                          -----------------------------


                                    SILICON VALLEY BANK


                                    By: /s/ Michael J. Rose
                                       --------------------------------

                                    Title:  Vice President
                                          -----------------------------

                                     -29-
<PAGE>
 
                                   EXHIBIT A

     The Collateral shall consist of all right, title and interest of Borrower
in and to the following:

     (a) 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;

     (b) 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 temporarily out of Borrower's custody or possession or in
transit and including any returns 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;

     (c) All contract rights and general intangibles now owned or hereafter
acquired, including, without limitation, goodwill, trademarks, servicemarks,
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 and rights to payment of any kind;

     (d) All now existing and hereafter arising accounts, 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;

     (e) All documents, cash, deposit accounts, securities, investment property,
letters of credit, certificates of deposit, instruments and chattel paper now
owned or hereafter acquired and Borrower's Books relating to the foregoing;

     (f) 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

                                      -1-
<PAGE>
 
     (g) All Borrower's Books relating to the foregoing and any and all claims,
rights and interests in any of the above and all substitutions for, additions
and accessions to and proceeds thereof.

                                      -2-
<PAGE>
 
                                   EXHIBIT B

                  LOAN PAYMENT/ADVANCE TELEPHONE REQUEST FORM
             DEADLINE FOR SAME DAY PROCESSING IS 3:00 P.M., P.S.T.

TO: CENTRAL CLIENT SERVICE DIVISION     DATE:___________________________________
FAX: (408) ________________             TIME:___________________________________

FROM:   MMC NETWORKS. INC.
        ------------------------------------------------------------------------
          BORROWER'S NAME

FROM:___________________________________________________________________________
          AUTHORIZED SIGNER'S NAME

________________________________________________________________________________
          AUTHORIZED SIGNATURE

PHONE:__________________________________________________________________________

FROM ACCOUNT # __________ TO ACCOUNT #


--------------------------------------------------------------------------------
REQUESTED TRANSACTION TYPE                 REQUEST DOLLAR AMOUNT
--------------------------                 ---------------------

PRINCIPAL INCREASE (ADVANCE)               $____________________________________
PRINCIPAL PAYMENT (ONLY)                   $____________________________________
INTEREST PAYMENT (ONLY)                    $____________________________________
PRINCIPAL AND INTEREST (PAYMENT)           $____________________________________

OTHER INSTRUCTIONS: ____________________________________________________________
--------------------------------------------------------------------------------

     All representations and warranties of Borrower stated in the Loan and
Security Agreement are true, correct and complete in all material respects as of
the date of the telephone request for and Advance confirmed by this Advance
Request; provided, however, that those representations and warranties expressly
referring to another date shall be true, correct and complete in all material
respects as of such 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

                              __________________________________
                              Authorized Signature (Bank)
                              Phone #___________________________
--------------------------------------------------------------------------------

                                      -3-
<PAGE>
 
                                   EXHIBIT C
                            COMPLIANCE CERTIFICATE


TO:    SILICON VALLEY BANK
FROM:  MMC NETWORKS, INC.

          The undersigned authorized officer of MMC Networks, Inc. hereby
certifies that in accordance with 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 of
Borrower stated in the Agreement are true and correct in all material respects
as of the date hereof. Attached herewith are the required documents supporting
the above certification.  The Officer further certifies that these are prepared
in accordance with Generally Accepted Accounting Principles (GAAP) and are
consistently applied from one period to the next except as explained in an
accompanying letter or footnotes. The Officer expressly acknowledges that no
borrowings may be requested by the Borrower at any time or date of determination
that Borrower is not in compliance with any of the terms of the Agreement. and
that such compliance is determined not just at the date this certificate is
delivered.

          PLEASE INDICATE COMPLIANCE STATUS BY CIRCLING YES/NO UNDER "COMPLIES"
COLUMN.

<TABLE> 
<CAPTION> 
REPORTING COVENANT              REQUIRED                                   COMPLIES
------------------              --------                                   --------
<S>                             <C>                                        <C>   
Monthly financial statements    Monthly within 15 days*                    Yes   No
Annual (CPA Audited)            FYE within 90 days                         Yes   No
10Q and 10K                     Within 5 days after filing with the SEC**  Yes   No
A/R Audit                       Initial and Semi-Annual***                 Yes   No
</TABLE>

*When there are Advances outstanding under the Committed Revolving line or the
Committed Equipment line, otherwise, quarterly within 30 days.
**From and after the Initial Public Offering.
***When there are Advances outstanding under the Committed Revolving Line.

<TABLE> 
<CAPTION> 
FINANCIAL COVENANT                      REQUIRED          ACTUAL                   COMPLIES
------------------                      --------          ------                   --------
<S>                                     <C>               <C>                      <C> 
Maintain on a Quarterly Basis:
Minimum Quick Ratio****                   1.75:1.0       _____:1.0                   Yes  No
Maximum Debt/Tangible Net Worth****       1.25:1.0       _____:1.0                   Yes  No
Minimum Debt Service                      1.50:1.0*****  _____:1.0                   Yes  No
Profitability:   Quarterly******          $________      $________                   Yes  No
</TABLE>

****Measured on a monthly basis when there are Advances outstanding under the
Committed Revolving Line or the Committed Equipment Line.
*****May fall below 1.5 to 1.0 for one fiscal quarter in any fiscal year,
measured for the Equipment Line only.
******May suffer a maximum loss of $500,000 for one fiscal quarter in any fiscal
year.


                                  ==============================================
                                                  BANK USE ONLY
                                     RECEIVED BY:____________________
                                     DATE:___________________
                                     REVIEWED BY:____________________

                                     COMPLIANCE STATUS: YES / NO
                                  ==============================================

Comments Regarding Exceptions:

Sincerely,

_______________________
SIGNATURE

_______________________
TITLE

                                      -1-
<PAGE>
 
                           NEGATIVE PLEDGE AGREEMENT

     This Negative Pledge Agreement is made as of April 21, 1997, by MMC
Networks, Inc. ("Borrower") in favor of Silicon Valley Bank ("Bank") in
connection with the Loan and Security Agreement ("Loan Agreement") between
Borrower and Bank dated of even date herewith.

Borrower hereby agrees as follows:

     1.   Unless otherwise defined herein the following terms shall have the
following meanings (such meanings being equally applicable to both the singular
and plural forms of the terms defined):

          "Copyrights" mean all of the following in which Borrower now holds or
hereafter acquires any interest: (a) all copyrights, whether registered or
unregistered, held pursuant to the laws of the United States, any State thereof
or any other country; (b) registrations, applications and proceedings in the
United States Copyright Office or in any similar office or agency of the United
States, any state thereof or any other country; (c) any continuations, renewals
or extensions thereof; and (d) any registrations to be issued in any pending
applications.

          "Patents" means all of the following in which Borrower now holds or
hereafter acquires any interest: (a) letters patent of the United States or any
other country, all registrations and recordings thereof, and all applications
for letters patent of the United States or any other country and all rights
corresponding thereto, including, without limitation, registrations, recordings
and applications in the United States Patent and Trademark Office or in any
similar office or agency of the United States, any State thereof or any other
country or political subdivision thereof and (b) all reissues, divisions,
continuations, renewals, continuations-in-part or extensions thereof.

          "Trademarks" means any of the following now owned or hereafter
acquired by Borrower: (a) any trademarks, tradenames, corporate names, business
names, trade styles, service marks, logos, other source or business identifiers,
prints and labels on which any of the foregoing have appeared or appear, designs
and general intangibles of like nature, now existing or hereafter adopted or
acquired, all registrations and recordings thereof, and any applications in
connection therewith, including, without limitation, registrations, recordings
and applications in the United States Patent and Trademark Office or in any
similar office or agency of the United States, any State thereof or any other
country or any political subdivision thereof and (b) any reissues, extensions or
renewals thereof.

     2.   Other than granting non-exclusive licenses in the normal course of
business, Borrower shall not sell, transfer, assign, mortgage, pledge, lease,
grant a security interest in, or encumber any of Borrower's intellectual
property, including, without limitation, the following:

                                       1
<PAGE>
 
          a.  Any and all trade secrets, and any and all intellectual property
rights in computer software and computer software products now or hereafter
existing, created, acquired or held;

          b.  Any and all design rights which may be available to Borrower now
or hereafter existing, created, acquired or held;

          c.  All Patents;

          d.  All Copyrights;

          e.  Any Trademarks or servicemark rights, whether registered or not,
applications to register and registrations of the same and like protections, and
the entire goodwill of the business of Borrower connected with and symbolized by
such Trademarks;

          f.  Any and all claims for damages by way of past, present and future
infringements of any of the rights included above, with the right, but not the
obligation, to sue for and collect such damages for said use or infringement of
the intellectual property rights identified above;

          g.  All licenses or other rights to use any of the Copyrights, Patents
or Trademarks, and all license fees and royalties arising from such use to the
extent permitted by such license or rights; and

          h.  All proceeds and products of the foregoing, including without
limitation all payments under insurance or any indemnity or warranty payable in
respect of any of the foregoing.

     3.   It shall be an event of default under the Loan Agreement if there is a
breach of any term of this Negative Pledge Agreement.



                                         MMC NETWORKS, INC.


                                         By: /s/ William R. Walker
                                            ------------------------------------
                                         Name:   William R. Walker
                                              ----------------------------------
                                         Title:  Secretary
                                               ---------------------------------


                                         Accepted and acknowledged By:

                                         SILICON VALLEY BANK


                                         By: /s/ Michael J. Rose
                                            ------------------------------------
                                         Name:   Michael J. Rose
                                              ----------------------------------
                                         Title:  Vice President
                                               ---------------------------------

                                       2
<PAGE>
 
 
IMPORTANT - READ INSTRUCTIONS ON BACK BEFORE FILING OUT FORM - DO NOT DETACH 
STUB
--------------------------------------------------------------------------------

================================================================================

                     THIS SPACE FOR USE OF FILING OFFICER

FINANCING STATEMENT- FOLLOW INSTRUCTIONS CAREFULLY
This Financing Statement is presented for filing pursuant to the Uniform 
Commercial Code and will remain effective, with certain executions, for 5 years 
from date of filing.

<TABLE> 
---------------------------------------------------------------------------------------------
  A. NAME & TEL # OF CONTACT AT FILER (optional)     B. FILING OFFICE ACCT. # (optional)

---------------------------------------------------------------------------------------------
  C. RETURN COPY TO: (Name and Mailing Address)

          Silicon Valley Bank
          Attn: Loan Services
          3003 Tasman Drive
          Santa Clara, CA 95054

----------------------------------------------------------------------------------------------
  D. OPTIONAL DESIGNATION (If applicable):  LESSOR/LESSEE  CONSIGNOR/CONSIGNEE  NON-UCC FILING
------------------------------------------------------------------------------------------------------------------------------------
1.   DEBTOR'S EXACT FULL LEGAL NAME - insert only one debtor name (1a or 1b)
    --------------------------------------------------------------------------------------------------------------------------------
<S>                                                              <C>                     <C>                          <C> 
      1a. ENTITY'S NAME

                  MMC Networks, Inc.
OR  --------------------------------------------------------------------------------------------------------------------------------
      1b. INDIVIDUAL'S LAST NAME                                 FIRST NAME              MIDDLE NAME                    SUFFIX

------------------------------------------------------------------------------------------------------------------------------------
 1c. MAILING ADDRESS                                             CITY                    STATE   COUNTRY   POSTAL CODE
 
         1134 E. Arques Avenue                                      Sunnyvale              CA      USA           94086
------------------------------------------------------------------------------------------------------------------------------------
 1d. S.S. OR TAX I.D.#      OPTIONAL      1e. TYPE OF ENTITY     1f. ENTITY'S STATE      1g. ENTITY'S ORGANIZATIONAL I.D. #, if any
                           ADD'NL INFO RE                        OR COUNTRY OF 
                           ENTITY DEBTOR                         ORGANIZATION                                               [_] NONE
------------------------------------------------------------------------------------------------------------------------------------
2.   ADDITIONAL DEBTOR'S EXACT FULL LEGAL NAME -insert only one debtor name (2a or 2b)
   ---------------------------------------------------------------------------------------------------------------------------------
      2a. ENTITY'S NAME

                  
OR  --------------------------------------------------------------------------------------------------------------------------------
      2b. INDIVIDUAL'S LAST NAME                                 FIRST NAME              MIDDLE NAME                    SUFFIX

------------------------------------------------------------------------------------------------------------------------------------
2c.  MAILING ADDRESS                                             CITY                    STATE   COUNTRY   POSTAL CODE
 
------------------------------------------------------------------------------------------------------------------------------------
 2d. S.S. OR TAX I.D.#      OPTIONAL      2e. TYPE OF ENTITY     2f. ENTITY'S STATE      2g. ENTITY'S ORGANIZATIONAL I.D. #, if any
                           ADD'NL INFO RE                        OR COUNTRY OF 
                           ENTITY DEBTOR                         ORGANIZATION                                               [_] NONE
------------------------------------------------------------------------------------------------------------------------------------
3.   SECURED PARTY'S (ORIGINAL S/P or ITS TOTAL ASSIGNED EXACT FULL LEGAL NAME - insert only one secured party name (3a or 3b) 
------------------------------------------------------------------------------------------------------------------------------------
      3a. ENTITY'S NAME

                  Silicon Valley Bank
OR   -------------------------------------------------------------------------------------------------------------------------------
      3b. INDIVIDUAL'S LAST NAME                                 FIRST NAME              MIDDLE NAME                    SUFFIX

------------------------------------------------------------------------------------------------------------------------------------
 3c. MAILING ADDRESS                                             CITY                    STATE   COUNTRY   POSTAL CODE
 
         3003 Tasman Drive                                          Santa Clara            CA      USA           95054
------------------------------------------------------------------------------------------------------------------------------------
4. This FINANCING STATEMENT covers the following types or items of property:

          All rights, title and interest of Debtor in, to and under the personal
          property set forth in Exhibit A attached hereto and incorporated
          herein by reference.





------------------------------------------------------------------------------------------------------------------------------------
5. CHECK     [_]  THIS FINANCING STATEMENT is signed by the Secured Party          7. If filed in Florida (check one)
   BOX            instead of the Debtor to perfect a security                         [_] Documentary       [_] Documentary stamp
                  interest (a) in collateral already subject to a security interest       stamp tax paid        tax not applicable
  (if applicable) in another jurisdiction when it was brought into this state, or         
                  when the debtor's location was charged to this state, or (b) in
                  accordance with other statutory provisions (additional date may
                  be required)
------------------------------------------------------------------------------------------------------------------------------------
                 6. REQUIRED SIGNATURE(S)  MMC Networks Inc.          8.[_] This FINANCING STATEMENT is to be filled (for record)
                                                                            (or recorded) in the REAL ESTATE RECORDS
                         /s/ William R. Walker                              Attach Addendum                          (if applicable)
------------------------------------------------------------------------------------------------------------------------------------
       Silicon Valley Bank                                            9.    Check to REQUEST SEARCH CERTIFICATE(S) on Debtor(s)
                                                                            [ADDITIONAL FEE]
                                                                            [optional]
                                                                                        [_] All Debtors   [_] Debtor 1  [_] Debtor 2
------------------------------------------------------------------------------------------------------------------------------------
</TABLE> 

<PAGE>
 
                                   EXHIBIT A



                              FINANCING STATEMENT
                                    Between
                             SILICON VALLEY BANK,
                               as Secured Party
                                      AND
                              MMC NETWORKS, INC.,
                                   as Debtor

________________________________________________________________________________

     The Collateral shall consist of all right, title and interest of Debtor in
and to the following:

     (A) 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;

     (B) 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 temporarily out of Debtor's custody or possession or in transit
and including any returns 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;

     (C) All contract rights and general intangibles now owned or hereafter
acquired, including, without limitation, goodwill, trademarks, servicemarks,
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 and rights to payment of any kind;

     (D) All now existing and hereafter arising accounts, contract rights,
royalties, license rights and all other forms of obligations owing to Debtor
arising out of the sale or lease of goods, the licensing of technology or the
rendering of services by Debtor, 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 Debtor;

     (E) All documents, cash, deposit accounts, securities, investment property,
letters of credit, certificates of deposit, instruments and chattel paper now
owned or hereafter acquired and Debtor's books relating to the foregoing;

                                      1.
<PAGE>
 
     (F) 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

     (G) All Debtor's books relating to the foregoing and any and all claims,
rights and interests in any of the above and all substitutions for, additions
and accessions to and proceeds thereof.

                                      2.
<PAGE>
 
IMPORTANT - READ INSTRUCTIONS ON BACK BEFORE FILLING OUT FORM - DO NOT DETACH 
STUB
--------------------------------------------------------------------------------

================================================================================

                     THIS SPACE FOR USE OF FILING OFFICER

FINANCING STATEMENT- FOLLOW INSTRUCTIONS CAREFULLY
This Financing Statement is presented for filing pursuant to the Uniform 
Commercial Code and will remain effective, with certain executions, for 5 years 
from date of filing.

<TABLE> 
---------------------------------------------------------------------------------------------
A. NAME & TEL # OF CONTACT AT FILER (optional)     B. FILING OFFICE ACCT. # (optional)

---------------------------------------------------------------------------------------------
C. RETURN COPY TO: (Name and Mailing Address)

          Silicon Valley Bank
          Attn: Loan Services
          3003 Tasman Drive
          Santa Clara, CA 95054

---------------------------------------------------------------------------------------------
D. OPTIONAL DESIGNATION (If applicable):  LESSOR/LESSEE  CONSIGNOR/CONSIGNEE  NON-UCC FILING
------------------------------------------------------------------------------------------------------------------------------------
1.   DEBTOR'S EXACT FULL LEGAL NAME - insert only one debtor name (1a or 1b)
    --------------------------------------------------------------------------------------------------------------------------------
<S>                                                              <C>                     <C>                          <C> 
       1a. ENTITY'S NAME

                  MMC Networks, Inc.
OR  --------------------------------------------------------------------------------------------------------------------------------
      1b. INDIVIDUAL'S LAST NAME                                 FIRST NAME              MIDDLE NAME                    SUFFIX

------------------------------------------------------------------------------------------------------------------------------------
1c. MAILING ADDRESS                                              CITY                    STATE   COUNTRY   POSTAL CODE
 
         1134 E. Arques Avenue                                      Sunnyvale              CA      USA         94086
------------------------------------------------------------------------------------------------------------------------------------
1d. S.S. OR TAX I.D.#       OPTIONAL        1e. TYPE OF ENTITY   1f. ENTITY'S STATE      1g. ENTITY'S ORGANIZATIONAL I.D. #. if any
                           ADD'NL INFO RE                        OR COUNTRY OF 
                           ENTITY DEBTOR                         ORGANIZATION                                               [_] NONE
------------------------------------------------------------------------------------------------------------------------------------
2.   ADDITIONAL DEBTOR'S EXACT FULL LEGAL NAME -insert only debtor name (2a or 2b)
   ---------------------------------------------------------------------------------------------------------------------------------
      2a. ENTITY'S NAME

                  MMC Networks, Inc.
OR  --------------------------------------------------------------------------------------------------------------------------------
      2b. INDIVIDUAL'S LAST NAME                                 FIRST NAME              MIDDLE NAME                    SUFFIX

------------------------------------------------------------------------------------------------------------------------------------
2c.  MAILING ADDRESS                                             CITY                    STATE   COUNTRY   POSTAL CODE
 
         1134 E. Arques Avenue                                    
------------------------------------------------------------------------------------------------------------------------------------
2d. S.S. OR TAX I.D.#       OPTIONAL         2e.  TYPE OF ENTITY 2f. ENTITY'S STATE      2g. ENTITY'S ORGANIZATIONAL I.D. #. if any
                           ADD'NL INFO PE                        OR COUNTRY OF 
                           ENTITY DEBTOR                         ORGANIZATION                                               [_] NONE
------------------------------------------------------------------------------------------------------------------------------------
3.   SECURED PARTY'S (ORIGINAL S/P or ITS TOTAL ASSIGNEE) EXACT FULL LEGAL NAME - insert only one secured party name (3a or 3b)
------------------------------------------------------------------------------------------------------------------------------------
      3a. ENTITY'S NAME

                  SILICON VALLEY BANK
OR   -------------------------------------------------------------------------------------------------------------------------------
      3b. INDIVIDUAL'S LAST NAME                                 FIRST NAME              MIDDLE NAME                    SUFFIX

------------------------------------------------------------------------------------------------------------------------------------
3c. MAILING ADDRESS                                              CITY                    STATE   COUNTRY   POSTAL CODE
 
         3003 Tasman Drive                                          Santa Clara            CA      USA         95054
------------------------------------------------------------------------------------------------------------------------------------
4. This FINANCING STATEMENT covers the following types of items of property:

          See attached exhibit A





------------------------------------------------------------------------------------------------------------------------------------
5. CHECK     [_]  THIS FINANCING STATEMENT is required by the Secured Party         7. If filed in Florida (check one)
   BOX            instead of the Debtor to perfect a security interest (s)       [_] Documentary       [_] Documentary stamp
   if applicable  in collateral already subject to a security interest in            stamp tax paid        tax not applicable
                  another jurisdiction when it was brought into this state, or  
                  when the debtor's location was changed to this state, or (b) in
                  accordance with other statutory provisions [additional date may
                  be required]

                
                  
------------------------------------------------------------------------------------------------------------------------------------
6. REQUIRED SIGNATURE(S)  MMC NETWORKS INC.                   8.[_] This FINANCING STATEMENT is to be filed (for record)
                                                                            (or recorded) in the REAL ESTATE RECORDS
   /s/ William R. Walker                                                    Attach Addendum                          (if applicable)
------------------------------------------------------------------------------------------------------------------------------------
       Silicon Valley Bank                                            9.    Check to REQUEST SEARCH CERTIFICATE(S) on Debtor(s)
                                                                            [ADDITIONAL FEE]
                                                                            [optional]
                                                                                        [_] All Debtors   [_] Debtor 1  [_] Debtor 2
------------------------------------------------------------------------------------------------------------------------------------
</TABLE> 
<PAGE>
 
                           NEGATIVE PLEDGE AGREEMENT

     This Negative Pledge Agreement is made as of April 21, 1997, by MMC
Networks, Inc. ("Borrower") in favor of Silicon Valley Bank ("Bank") in
connection with the Loan and Security Agreement ("Loan Agreement") between
Borrower and Bank dated of even date herewith.

Borrower hereby agrees as follows:

     1.  Unless otherwise defined herein the following terms shall have the
following meanings (such meanings being equally applicable to both the singular
and plural forms of the terms defined):

          "COPYRIGHTS" mean all of the following in which Borrower now holds or
hereafter acquires any interest: (a) all copyrights, whether registered or
unregistered, held pursuant to the laws of the United States, any State thereof
or any other country; (b)registrations, applications and proceedings in the
United States Copyright Office or in any similar office or agency of the United
States, any state thereof or any other country; (c) any continuations, renewals
or extensions thereof; and (d) any registrations to be issued in any pending
applications.

          "PATENTS" means all of the following in which Borrower now holds or
hereafter acquires any interest: (a) letters patent of the United States or any
other country, all registrations and recordings thereof, and all applications
for letters patent of the United States or any other country and all rights
corresponding thereto, including, without limitation, registrations, recordings
and applications in the United States Patent and Trademark Office or in any
similar office or agency of the United States, any State thereof or any other
country or political subdivision thereof and (b) all reissues, divisions,
continuations, renewals, continuations-in-part or extensions thereof.

          "TRADEMARKS" means any of the following now owned or hereafter
acquired by Borrower: (a) any trademarks, tradenames, corporate names, business
names, trade styles, service marks, logos, other source or business
identifiers, prints and labels on which any of the foregoing have appeared or
appear, designs and general intangibles of like nature, now existing or
hereafter adopted or acquired, all registrations and recordings thereof, and any
applications in connection therewith, including, without limitation,
registrations, recordings and applications in the United States Patent and
Trademark Office or in any similar office or agency of the United States, any
State thereof or any other country or any political subdivision thereof and (b)
any reissues, extensions or renewals thereof.

     2.   Other than granting non-exclusive licenses in the normal course of
business, Borrower shall not sell, transfer, assign, mortgage, pledge, lease,
grant a security interest in, or encumber any of Borrower's intellectual
property, including, without limitation, the following:
<PAGE>
 
          A.  Any and all trade secrets, and any and all intellectual property
rights in computer software and computer software products now or hereafter
existing, created, acquired or held;

          B.  Any and all design rights which may be available to Borrower now
or hereafter existing, created, acquired or held;

          C.  All Patents;

          D.  All Copyrights;

          E.  Any Trademarks or servicemark rights, whether registered or not,
applications to register and registrations of the same and like protections, and
the entire goodwill of the business of Borrower connected with and symbolized by
such Trademarks;

          F.  Any and all claims for damages by way of past, present and future
infringements of any of the rights included above, with the right, but not the
obligation, to sue for and collect such damages for said use or infringement of
the intellectual property rights identified above;

          G.  All licenses or other rights to use any of the Copyrights, Patents
or Trademarks, and all license fees and royalties arising from such use to the
extent permitted by such license or rights; and

          H.  All proceeds and products of the foregoing, including without
limitation all payments under insurance or any indemnity or warranty payable in
respect of any of the foregoing.


     3.  It shall be an event of default under the Loan Agreement if there is a
breach of any term of this Negative Pledge Agreement.

                                         MMC NETWORKS, INC.



                                         By: /s/ William Walker
                                            --------------------------
                                         Name: William R. Walker
                                              ------------------------
                                         Title: Secretary
                                               -----------------------


                                         Accepted and acknowledged By:

                                         SILICON VALLEY BANK



                                         By: /s/ Michael J. Rose
                                            --------------------------
                                         Name: Michael J. Rose
                                              ------------------------
                                         Title: Vice President
                                               -----------------------

                                       2
<PAGE>
 
                    DISBURSEMENT REQUEST AND AUTHORIZATION

Borrower:       MMC Networks, Inc.        Bank:  Silicon Valley Bank

LOAN TYPE. This is a Variable Rate, Revolving Line of Credit of a principal
amount up to $10,000.000, and a Variable Rate, Equipment Loan of a principal
amount up to $3,000,000.

PRIMARY PURPOSE OF LOAN. The primary purpose of this loan is for business.

SPECIFIC PURPOSE. The specific purpose of this loan is: working capital and
purchase of equipment.

DISBURSEMENT INSTRUCTIONS. Borrower understands that no loan proceeds will be
disbursed until all of Bank's conditions for making the loan have been
satisfied. Please disburse the loan proceeds as follows:

                                            Revolving Line
                                            --------------

Amount paid to Borrower directly:           $________
Undisbursed Funds                           $________

Principal                                   $________


CHARGES PAID IN CASH. Borrower has paid or will pay in cash as agreed the
following charges:


     Prepaid Finance Charges Paid in Cash:  $________

         $________        Loan Fee
         $________        Accounts Receivables Audit

     Other Charges Paid in Cash:            $________

         $________        UCC Search Fees                  
         $________        UCC Filing Fees                  
         $________        Patent Filing Fees               
         $________        Trademark Filing Fees            
         $________        Copyright Filing Fees            
         $________        Outside Counsel Fees and Expenses 


     Total Charges Paid in Cash             $________

AUTOMATIC PAYMENTS. Borrower hereby authorizes Bank automatically to deduct from
Borrower's account numbered ________________________ the amount of any loan
payment. If the funds in the account are insufficient to cover any payment,
Bank shall not be obligated to advance funds to cover the payment.

FINANCIAL CONDITION.  BY SIGNING THIS AUTHORIZATION, BORROWER REPRESENTS AND
WARRANTS TO BANK THAT THE INFORMATION PROVIDED ABOVE IS TRUE AND CORRECT AND
THAT THERE HAS BEEN NO ADVERSE CHANGE IN BORROWER'S FINANCIAL CONDITION AS
DISCLOSED IN BORROWER'S MOST RECENT FINANCIAL STATEMENT TO BANK.  THIS
AUTHORIZATION IS DATED AS OF APRIL 21, 1997.

BORROWER:

/s/ William R. Walker
-------------------------
Authorized Officer

                                      -2-
<PAGE>
 
                        AGREEMENT TO PROVIDE INSURANCE

Grantor:   MMC Networks, Inc.            Bank: Silicon Valley Bank

     INSURANCE REQUIREMENTS. MMC Networks, Inc. ("Grantor") understands that
insurance coverage is required in connection with the extending of a loan or the
providing of other financial accommodations to Grantor by Bank. These
requirements are set forth in the Loan Documents. The following minimum
insurance coverages must be provided on the following described collateral (the
"Collateral"):

          Collateral:     All Inventory. Equipment and Fixtures.
          Type:           All risks, including fire, theft and liability.
          Amount:         Full insurable value.
          Basis:          Replacement value.
          Endorsements:   Loss payable clause to Bank with stipulation that
                          coverage will not be canceled or diminished without a
                          minimum of twenty (20) days' prior written notice to
                          Bank.


     INSURANCE COMPANY. Grantor may obtain insurance from any insurance company
Grantor may choose that is reasonably acceptable to Bank. Grantor understands
that credit may not be denied solely because insurance was not purchased through
Bank.

     FAILURE TO PROVIDE INSURANCE. Grantor agrees to deliver to Bank, on or
before closing, evidence of the required insurance as provided above, with an
effective date of April 21, 1997, or earlier. Grantor acknowledges and agrees
that if Grantor fails to provide any required insurance or fails to continue
such insurance in force, Bank may do so at Grantor's expense as provided in the
Loan and Security Agreement. The cost of such insurance, at the option of Bank,
shall be payable on demand or shall be added to the indebtedness as provided in
the security document. GRANTOR ACKNOWLEDGES THAT IF BANK SO PURCHASES ANY SUCH
INSURANCE, THE INSURANCE WILL PROVIDE LIMITED PROTECTION AGAINST PHYSICAL DAMAGE
TO THE COLLATERAL, UP TO THE BALANCE OF THE LOAN; HOWEVER, GRANTOR'S EQUITY IN
THE COLLATERAL MAY NOT BE INSURED. IN ADDITION, THE INSURANCE MAY NOT PROVIDE
ANY PUBLIC LIABILITY OR PROPERTY DAMAGE INDEMNIFICATION AND MAY NOT MEET THE
REQUIREMENTS OF ANY FINANCIAL RESPONSIBILITY LAWS.

     AUTHORIZATION. For purposes of insurance coverage on the Collateral,
Grantor authorizes Bank to provide to any person (including any insurance agent
or company) all information Bank deems appropriate, whether regarding the
Collateral, the loan or other financial accommodations" or both.

     GRANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS AGREEMENT TO
PROVIDE INSURANCE AND AGREES TO ITS TERMS. THIS AGREEMENT IS DATED APRIL 21,
1997.


GRANTOR:

X /s/ William R. Walker
 -------------------------
 Authorized Officer
================================================================================
                               FOR BANK USE ONLY
                            INSURANCE VERIFICATION

 DATE:                                                    PHONE:
 AGENT'S NAME:
 INSURANCE COMPANY:
 POLICY NUMBER:
 EFFECTIVE DATES:
 COMMENTS:
================================================================================

                                      -3-
<PAGE>
 
                        CORPORATE BORROWING RESOLUTION

Borrower:  MMC Networks, Inc.         Bank:     Silicon Valley Bank
           1134 E. Arques Avenue                3003 Tasman Drive
           Sunnyvale, CA 94086                  Santa Clara, CA 95054

     I, the undersigned Secretary or Assistant Secretary of MMC Networks, Inc.
("Borrower"), hereby certify that Borrower is a corporation duly organized and
existing under and by virtue of the laws of the State of California.

     I FURTHER CERTIFY that at a meeting of the Directors of Borrower (or by
other duly authorized corporate action in lieu of a meeting), duly called and
held, at which a quorum was present and voting, the following resolutions were
adopted.

     BE IT RESOLVED, that any one (1) of the following named officers,
employees, or agents of Borrower, whose actual signatures are shown below:

   NAMES                  POSITIONS                ACTUAL SIGNATURES
   -----                  ---------                -----------------
   William R. Walker      Chief Financial Officer  /s/ William R. Walker
                                                   ----------------------
   Prabhat K. Dubey       Chief Executive          /s/ Prabhat K. Dubey
                                                   ----------------------
--------------------     ------------------------- ----------------------

acting for and on behalf of Borrower and as its act and deed be, and they hereby
are, authorized and empowered:

     BORROW MONEY. To borrow from time to time from Silicon Valley Bank
("Bank"), on such terms as may be agreed upon between the officers of Borrower
and Bank, such sum or sums of money as in their judgment should be borrowed.

     EXECUTE LOAN DOCUMENTS. To execute and deliver to Bank the loan documents
of Borrower, on Bank's forms, at such rates of interest and on such terms as may
be agreed upon, evidencing the sums of money so borrowed or any indebtedness of
Borrower to Bank, and also to execute and deliver to Bank one or more renewals,
extensions, modifications, refinancings; consolidations, or substitutions for
one or more of the loan documents, or any portion of the loan documents.

     GRANT SECURITY. To grant a security interest to Bank in any of Borrower's
assets, which security interest shall secure all of Borrower's obligations to
Bank

     NEGOTIATE ITEMS.  To draw, endorse, and discount with Bank all drafts,
trade acceptances, promissory notes, or other evidences of indebtedness payable
to or belonging to Borrower or in which Borrower may have an interest, and
either to receive cash for the same

                                      -1-
<PAGE>
 
or to cause such proceeds to be credited to the account of Borrower with Bank,
or to cause such other disposition of the proceeds derived therefrom as they may
deem advisable.

     LETTERS OF CREDIT. To execute letter of credit applications and other
related documents pertaining to Bank's issuance of letters of credit.

     FURTHER ACTS.  In the case of lines of credit, to designate additional or
alternate individuals as being authorized to request advances thereunder, and in
all cases, to do and perform such other acts and things, to pay any and all fees
and costs, and to execute and deliver such other documents and agreements,
including agreements waiving the right to a trial by jury, as they may in their
discretion deem reasonably necessary or proper in order to carry into effect the
provisions of these Resolutions.

     BE IT FURTHER RESOLVED, that any and all acts authorized pursuant to these
Resolutions and performed prior to the passage of these resolutions are hereby
ratified and approved, that these Resolutions shall remain in full force and
effect and Bank may rely on these Resolutions until written notice of their
revocation shall have been delivered to and received by Bank. Any such notice
shall not affect any of Borrower's agreements or commitments in effect at the
time notice is given.

     I FURTHER CERTIFY that the persons named above are principal officers of
the Corporation and occupy the positions set opposite their respective names;
that the foregoing Resolutions now stand of record on the books of the
Corporation; and that they are in full force and effect and have not been
modified or revoked in any manner whatsoever.

     IN WITNESS WHEREOF, I have hereunto set my hand on April 21, 1997 and
attest that the signatures set opposite the names listed above are their genuine
signatures.


CERTIFIED TO AND ATTESTED BY:

X /s/ William R. Walker
 ---------------------------------------
*Secretary or Assistant Secretary


X /s/ Prabhat K. Dubey
 ---------------------------------------

*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.

                                      -2-
<PAGE>
 
                              SILICON VALLEY BANK
                            Documentation Checklist


Borrower:  MMC Networks, Inc.

--------------------------------------------------------------------------------
                                               Required        Executed
                                               --------        --------

  Loan and Security Agreement with Exhibits      [X]              [X]

  Negative Pledge Agreement                      [X]              [X]

  Financing Statement (Form UCC-1)               [X]              [X]

  Initial Disbursement Request and               [X]              [X]

  Authorization                                  [X]              [X]

  Agreement to Provide Insurance                 [X]              [X]

  Borrowing Resolutions                          [X]              [X]
================================================================================

If you have questions concerning any of these documents, please contact:

                         Christine E. Ewing
                         Cooley Godward LLP
                         Five Palo Alto Square
                         3000 El Camino
                         Palo Alto, CA 94306-2155
                         Phone:  415/843-5194
                         Fax:  415/857-0663