EXHIBIT 10.34

                             MODIFICATION AGREEMENT

         This Modification  Agreement  ("Modification") is made as of August 29,
1997, by and among NETWORK PERIPHERALS INC. a Delaware corporation ("Borrower"),
having  its  chief  executive  office  at  1371  McCarthy  Boulevard,  Milpitas,
California   95035,   SUMITOMO  BANK  OF  CALIFORNIA,   a  banking   association
("Sumitomo"),  having its head office at 320 California  Street,  San Francisco,
California,  and each other  lender which may  hereafter  execute and deliver an
instrument  of  assignment  with respect to this  Agreement  (individually,  the
"Bank," and collectively, the "Banks") and Sumitomo, as Agent.

                                    RECITALS

         A. Pursuant to a Credit Agreement,  dated October 2, 1996,  executed by
Borrower  and  Sumitomo  ("Agreement"),  Sumitomo  extended a revolving  line of
credit to Borrower up to $10,000,000.00  ("Line of Credit") with a $5,000,000.00
letter of credit subline. Borrower's obligation to repay advances on the Line of
Credit was evidenced by a Promissory Note, dated the same date as the Agreement,
executed by Borrower,  in the principal amount of  $10,000,000.00  ("Note").  To
secure  the  indebtedness  of  Borrower  under the  Credit  Agreement  and Note,
Borrower executed a Security  Agreement,  dated as of October 2, 1996 ("Security
Agreement").

         A. As used  herein,  the term  "Loan  Documents"  means  all  documents
described in these Recitals and those documents  executed pursuant thereto or in
conjunction therewith.

         A.  Borrower  seeks a  modification  of the  Agreement  and Sumitomo is
agreeable on the terms set forth below.

                                     TERMS

NOW, THEREFORE, Borrower and Sumitomo agree as follows:

         1.  Capitalized  Terms.  Unless otherwise  defined herein,  capitalized
terms shall have the meanings set forth in the Agreement.

         1. Adoption of Recitals.  Borrower hereby  represents and warrants that
each of the Recitals set forth above are true, accurate and complete.

         1.  Acknowledgement  of Debt.  Borrower  acknowledges that there are no
claims,  demands,  offsets or defenses at law or in equity that would  defeat or
diminish Sumitomo's right to collect the

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indebtedness  evidenced by the Note and  Agreement and to proceed to enforce the
rights and remedies  available to Lender as provided in the Loan Documents or by
law.

         1.  Modification  of Loan  Documents.  The Loan  Documents  are  hereby
supplemented,  amended and modified as follows,  which terms shall supersede and
prevail over any existing and conflicting provisions thereof:

                  (a) The following new  definitions are added to Section 1.1 of
the Agreement:


         Account Obligor. Means the obligor on any Accounts Receivable.

         Accounts Receivable. Means open accounts arising in the ordinary course
of Borrower's business from services performed or goods sold by Borrower.

         Borrowing Base. Means, as determined by Sumitomo from time to time, the
lesser of  (a) eighty  percent  (80.0%)  of the net face  amount  on  Borrower's
Eligible  Accounts after  deduction of such reserves as Bank deems necessary and
proper, or (b) the sum of $10,000,000.00.

         Collateral.  Means and includes,  without limitation,  all property and
assets  granted as collateral  security for Borrower's  indebtedness  hereunder,
whether  real or personal  property,  whether  granted  directly or  indirectly,
whether  granted  now or in the  future  and  whether  granted  in the form of a
security  interest,  mortgage,  deed  of  trust,  assignment,   pledge,  chattel
mortgage, chattel trust, factor's lien, equipment trust, conditional sale, trust
receipt,  lien, charge, lien or title retention  contract,  lease or consignment
intended  as  a  security  device,  or  any  other  security  or  lien  interest
whatsoever,   whether  created  by  law,  contract,   or  otherwise.   The  word
"Collateral" includes without limitation all collateral described in the section
of this Agreement titled "Collateral."

         Eligible Accounts. Means Accounts Receivable excluding the following:

         A. Accounts  Receivable which remain  uncollected more than ninety (90)
         days from the date they are first  invoiced;  any exceptions will be at
         the sole discretion of Sumitomo.

         B.  Accounts  Receivable  due from an Account  Obligor  which  suspends
         business,  suffers  a  business  failure  or  the  termination  of  its
         existence,  or makes an assignment for the benefit of creditors,  or as
         to which a dissolution,

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         insolvency or bankruptcy proceeding has been commenced,  or as to whose
         property a trustee, receiver or conservator has been appointed.

         C.  Accounts  Receivable  due from an  Account  Obligor  in any  manner
         affiliated,   directly  or  indirectly,   with  Borrower,   such  as  a
         stockholder,  owner, parent,  subsidiary,  officer,  director, agent or
         employee of Borrower.

         D.  Accounts  Receivable  due from an Account  Obligor  which is also a
         Borrower hereunder.

         E.  Accounts  Receivable  with  respect  to which  payment is or may be
         contingent or conditional.

         F.  Accounts  Receivable  due  from  an  Account  Obligor  who is not a
         resident or citizen of, located in, or subject to service of process in
         the  United  States of  America,  except to the  extent  such  Accounts
         Receivable  are  supported  by  insurance,  bonds or  other  assurances
         satisfactory to Bank.

         G.  Accounts  Receivable  subject  to  existing  or  alleged  defenses,
         counterclaims, discounts or setoffs.

         H.  Accounts  Receivable  due  from an  Account  Obligor  which  is any
         national,  state, county or municipal  government,  including,  without
         limitation,  any instrumentality,  division, agency, body or department
         thereof.

         I.  Accounts  Receivable  with respect to which the goods have not been
         shipped or  delivered,  or the services  have not been  rendered to the
         Account Obligor subject to any repurchase or return agreement, or which
         relate  to  goods  on   consignment  or  on  approval  or  any  similar
         arrangement.

         J. Accounts  Receivable  relating to an Account Obligor with respect to
         which  twenty-five  percent  (25.0%)  or  more  of the  total  Accounts
         Receivable  owing by such  Account  Obligor are  outstanding  more than
         ninety (90) days from the date they are first invoiced.

         K.  Accounts  Receivable  due from an  Account  Obligor  which,  in the
         aggregate, exceed twenty percent (20.0%) of the aggregate amount of all
         Eligible Accounts.

         L. Accounts  Receivable as to which Borrower is or may become liable to
         an Account Obligor for services rendered or sales made or for any other
         reason, except to the extent


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         that such Accounts Receivable exceed the amount of such liability.

         M. Accounts  Receivable which are not owned by Borrower or are not free
         of all liens,  encumbrances,  charges, rights or interests of any kind,
         except in favor of Bank.

         N.  Accounts  Receivable  which are  evidenced  by chattel  paper or an
         instrument of any kind.

         O. Accounts  Receivable  which are not evidenced by an invoice or other
         documentation   acceptable   to   Sumitomo   or  which  are   otherwise
         unacceptable to Sumitomo.

                  (b) The  definition  of "Letter of Credit  Maturity  Date," as
defined  in  Section  1.1 of the  Agreement  is deleted  and  replaced  with the
following: "Means November 30, 1998."

                  (c) The  definition of "Maturity  Date," as defined in Section
1.1 of the Agreement is deleted and replaced with the following: "Means July 31,
1998."

                  (d) The following new Section 2.17 is added to the Agreement:

                           2.17  Collateral.  All  obligations of Borrower under
this Agreement shall be secured by the following:

                                    a. Personal Property. Borrower's obligations
to Bank under this Agreement are secured by, and Borrower hereby grants to Bank,
a first lien security  interest in all business  personal  property Borrower now
owns  or  will  own in the  future,  including  without  limitation,  Borrower's
Accounts Receivable,  equipment, chattel paper, general intangibles,  Inventory,
any money deposit accounts or other assets of Borrower which hereafter come into
the possession,  custody or control of Bank and all products and proceeds of the
above-described  collateral,  including,  but not  limited  to,  money,  deposit
accounts,  goods,  insurance proceeds and other property.  The Collateral may be
further described in the Security Agreement executed by Borrower.

                  (e) The following new Section 2.18 is added to the Agreement:

                           2.18 Security Interest Perfection.  Agent may file or
record the Financing  Statements,  the Intellectual Property Security Agreements
and all other documents required to perfect the first priority security interest
in  favor of Agent  and the  Banks in all  assets  of  Borrower  created  by the
Security


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Agreement and the Intellectual Property Security Agreements, and Borrower shall,
and shall require its Subsidiaries and any other necessary  parties to, executed
all other documents  required to perfect a first priority  security  interest in
favor of Agent  and the Banks in all  assets of  Borrower;  such  documents  may
include, without limitation, security agreements and UCC financing statements.

                  (f) The following new Section 2.19 is added to the Agreement:

                           2.19  Collection  of  Accounts  Receivable.  Borrower
shall have the privilege,  subject to revocation at the sole discretion of Bank,
to collect, at Borrower's expense, the payments due on Accounts Receivable, upon
the express condition that all such collections shall be received by Borrower in
trust  for  Bank.  Upon  demand  by Bank,  whether  before  or after an Event of
Default,  Borrower shall promptly deliver to Bank, at the location  specified in
this  Agreement,  in kind,  all  remittances  received  by  Borrower on Accounts
Receivable, or if sales are made  for cash, the identical checks, cash, or other
form of payment. The receipt of any check or other item of payment by Bank shall
not be considered a payment in reduction of the outstanding  balance of the Line
of Credit until such check or other item of payment is honored and finally paid.
At any time, Bank in its sole  discretion,  may, but is not obligated to, notify
any Account  Obligor to make payment  directly to Bank, and exercise any and all
of Borrower's rights regarding any Accounts Receivable or any Account Obligors.

                  (g) Section  5.1(d) of the  Agreement  is deleted and replaced
with the following:

                           (d) as soon as  available,  but in any  event  within
ninety  (90) days  after  the end of each of its  fiscal  years,  a one (1) year
operating plan for the new fiscal year, which operating plan shall detail,  on a
quarterly basis for the  then-current  fiscal year,  Borrower's best estimate of
revenue, expenses and balance sheet categories,  presented in the customary form
of balance sheets, income statements and cash flow statements.

                  (h) Section  5.1(1) of the  Agreement  is deleted and replaced
with the following:

                           (l) from time to time,  such other financial data and
information, including projections, about Borrower or its Subsidiaries as any of
the Banks may reasonably request;


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                  (i)  The  following  new  Section   5.1(o)  is  added  to  the
Agreement:

                           (o) in the event any Loan,  Letter of Credit or other
Obligation  hereunder,  except those  Obligations  arising under Section 9.3, is
outstanding  or  unreimbursed,  as soon as  available,  and in any event  within
twenty-one  (21) days of the end of each month, a monthly  detailed aging of the
Accounts  Receivable and accounts payable, a monthly inventory aging report, and
a borrowing base certificate,  duly executed by an authorized  corporate officer
of Borrower, in form acceptable to Bank.

                  (j) Section 5.7 (a) of the  Agreement  is deleted and replaced
with the following:

                           (a) Quick  Ratio.  Borrower  shall  maintain  a quick
ratio  (the  applicable  ratio  to be  calculated  as (i) the  sum of  cash  and
marketable  securities plus Accounts  Receivable on a consolidated basis to (ii)
Consolidated  Current  Liabilities  plus, to the extent not already  included as
Consolidated  Current  Liabilities,  the  principal  amount of the Loans and the
principal  amount undrawn under Letters of Credit then  outstanding) of not less
than 2.00: 1.

                  (k) Section  5.7(b) of the  Agreement  is deleted and replaced
with the following:

                           (b) Profitability. Borrower shall be profitable on an
annual basis and shall not have a net loss on a consolidated basis in any fiscal
quarter as measured quarterly for that fiscal quarter;  provided,  however, that
for the fiscal quarter ending  September 30, 1997,  Borrower may have a net loss
on a consolidated basis of not more than $1,500,000.00;  and that for the fiscal
quarter ending December 31, 1997, Borrower may have a net loss on a consolidated
basis of not more than $500,000.00.

                  (1) Section 5.7 (d) of the  Agreement  is deleted and replaced
with the following:

                           (d) Consolidated  Tangible Net Worth.  Borrower shall
maintain Consolidated Tangible Net Worth of at least $48,000,000.00.

                  (m)  The  following  new  Section   5.7(f)  is  added  to  the
Agreement:

                           (f) Cash Position.  Borrower shall maintain a minimum
balance sheet cash position of $20,000,000.00.


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                  (n) Section  7.2(a) of the  Agreement  is deleted and replaced
with the following:

                           (a)  Agent or the  Banks may  reduce  the  Commitment
Amount to the Borrowing Base and/or the Letter of Credit Sublimit to one-half of
the Borrowing Base.

                  (o) The definition of "Effective Date" as defined in Section 1
of the Security Agreement is deleted and replaced with the following: "Effective
Date" means August 29, 1997.

                  (p)  The  Loan  Documents   which  recite  they  are  security
instruments shall secure, in addition to any other obligations  secured thereby,
the payment and performance by Borrower of all obligations  under the Agreement,
the Note and the other Loan Documents, as amended by this Modification,  and any
amendments,  modifications,  extensions  or  renewals  of  the  same  which  are
hereafter agreed to in writing by the parties.

         1.  Conditions  Precedent.  Sumitomo's  obligation  to extend credit to
Borrower  pursuant to this  Modification  is subject to the condition  precedent
that Borrower  strictly  complies with the requirement  that Borrower deliver to
Sumitomo,  in  form  and  substance  satisfactory  to  Sumitomo,  the  following
documents and other things, duly executed by Borrower or as specified below:

                  (a) This Agreement.

                  (b) A renewal fee of $20,000.00.

                  (c) Such other  evidence as Lender may  require,  to establish
the  consummation of the  transactions  contemplated  hereby,  the taking of all
proceedings in connection therewith and compliance with the conditions set forth
in this Modification.

         1.  Representations  and  Warranties.  Borrower  hereby  represents and
warrants that no default,  Event of Default,  breach or failure of condition has
occurred or exists,  or would exist with notice or lapse of time, or both, under
any  of the  Loan  Documents.  Borrower  agrees  that  all  representations  and
warranties of Borrower in the  Agreement  and the other Loan  Documents are true
and correct as of the date of this Modification, and shall survive the execution
of this Modification.

         1. Governing Law. This  Modification  shall be construed,  governed and
enforced in accordance with the laws of the State of California.


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         1. Interpretation.  No  provision  of  this   Modification   is  to  be
interpreted  for or against either  Borrower or Sumitomo  because that party, or
that party's representative, drafted such provision.

         1. Full Force and Effect.  Except as set forth  herein, all other terms
and  conditions  of the Loan  Documents  shall  remain in full force and effect,
including provisions on prepayment, late charges, default interest and attorneys
fees.

         1. Reaffirmation.  Borrower hereby acknowledges, reaffirms and confirms
its  obligations  under the Loan  Documents,  as amended  and  modified  by this
Modification.

         1.  Entire  Aqreement.  This  Modification  (and all  documents  herein
mentioned) and the Loan Documents constitute the entire,  complete and exclusive
understanding  between  the  parties  regarding  the  Line  of  Credit  and  the
Collateral and may not be modified,  amended,  or terminated except by a written
agreement  signed  by  the  party  against  whom   enforcement  is  sought.   No
modification,  change or supplement of the Loan Documents,  this Modification or
related  agreements  shall be binding on Sumitomo  unless in writing signed by a
Corporate  Officer  and Manager of  Sumitomo.  No waiver or any event of default
shall be construed to be a waiver, acquiescence,  or consent to any preceding or
subsequent event of default.

         1.  Documentation.   In  addition  to  the  instruments  and  documents
mentioned  or referred to herein,  Borrower  will,  at its own cost and expense,
supply Sumitomo with such other instruments,  documents, information and data as
are reasonably  necessary for the purposes hereof, all of which shall be in form
and content as reasonably required by Sumitomo.

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         1.  Counterparts.   This  Modification  may  be  executed  in  multiple
counterparts,  each of which shall be deemed an original  but all of which shall
constitute one and the same instrument.

IN WITNESS  WHEREOF,  the parties have executed this  Modification as of the day
and year first above written.

SUMITOMO:

SUMITOMO BANK OF CALIFORNIA,
a California banking corporation

By: /s/ ARNE F. OLSON
----------------------------------
    ARNE F. OLSON,
    Vice President

BORROWER:

NETWORK PERIPHERAL, INC.,
a Delaware corporation

By: /s/ ROBERT HERSH
----------------------------------
    ROBERT HERSH,
    Vice President and Chief Financial Officer